Metso and profitable growth and profitable growth ... Metso’s current business scope, order...
Transcript of Metso and profitable growth and profitable growth ... Metso’s current business scope, order...
Metso and profitable growth
Metso Breakfast Meeting in HelsinkiOctober 29, 2007
Jorma ElorantaPresident and CEO
2 © Metso Corporation 2007 October 29, 2007
Forward looking statements
It should be noted that certain statements herein which are not historical facts, including, withoutlimitation, those regarding expectations for general economic development and the market situation,expectations for customer industry profitability and investment willingness, expectations for companygrowth, development and profitability and the realization of synergy benefits and cost savings, andstatements preceded by ”expects”, ”estimates”, ”forecasts” or similar expressions, are forward-looking statements. These statements are based on current decisions and plans and currentlyknown factors. They involve risks and uncertainties which may cause the actual results to materiallydiffer from the results currently expected by the company.Such factors include, but are not limited to:(1) general economic conditions, including fluctuations in exchange rates and interest levels whichinfluence the operating environment and profitability of customers and thereby the orders receivedby the company and their margins(2) the competitive situation, especially significant technological solutionsdeveloped by competitors(3) the company’s own operating conditions, such as the success of production, productdevelopment and project management and their continuous development and improvement(4) the success of pending and future acquisitions and restructuring.
4 © Metso Corporation 2007 October 29, 2007
Highlights of the third quarter
10.610.8EBITA margin, %
22.222.124.5ROCE annualized, %
18113133Free cash flow, EUR million
120.66EPS, EUR10.39.9Operating profit margin, %
19120.4143.4Operating profit, EUR million
26124.4157.3EBITA, EUR million
241,1691,452Net sales, EUR million
503,0224,519Order backlog, EUR million91,3211,440Orders received, EUR million
Change %Q3/06Q3/07
0.59
5 © Metso Corporation 2007 October 29, 2007
Good/ExcellentPower, oil & gasSatisfactory/GoodPulp & Paper
Metso AutomationExcellentMetal recyclingExcellentMining
Good/ExcellentConstructionMetso Minerals
ExcellentPowerSatisfactoryTissue
Satisfactory/GoodPaper & BoardSatisfactory/GoodPulp
Metso Paper
Market outlook 2007–2008
6 © Metso Corporation 2007 October 29, 2007
Short-term financial outlook
The estimates concerning Metso’s financial performance are based onMetso’s current business scope, order backlog and market outlook.
2007
• It is estimated that Metso’s netsales for 2007 will grow by about25% on 2006 and that theoperating profit will clearlyimprove.
• The EBITA margin is estimatedto improve to about 10% andoperating profit margin to beabout 9%.
2008
• Metso’s profitable growth set tocontinue.
8 © Metso Corporation 2007 October 29, 2007
We operate in growth businesses
Growing demandin our customer
industries
Importance of process andunit machine automation
Minerals consumption up forseveral years - mining movesto South and/or East
Investments in transportationand infrastructure development
Energy consumption growingworldwide
New pulp capacityin Southern Hemisphere
Demand for upgrades, rebuildsand service in developed countries
Rapid growth of paper and boardconsumption in emerging economies
Mining super-cycle, driven bycontinued growth of emergingeconomies
Development of newmining assets,especially in South & East
Increasing demand for newpower generation solutions
Recycling, renewable fuelsand other environmentalissues. Increasing demandfor ”clean technogy”products and services in,which Metso is wellestablished.
9 © Metso Corporation 2007 October 29, 2007
Resources and technology•Labor and talent markets globalizing•Ageing population in developed economies >>pressure for knowledge retention•Faster pace of economicinnovation•Constraints on supply orusage of natural resources
Customers and markets•Strong economic growth inemerging markets continues•Consumer landscape changesand expands significantly;new demand trends in emergingmarkets•Shifting economic activitybetween and within regions
Main drivers in the business developmentsupport our continuing profitable growth
Competitors and peers•Low-cost country (LCC) sourcing•R&D and support functions ingrowth markets•Geopolitical instability•Increased regulatory burden
Regulatory and macro environment•Non-traditional, global industry structures•Role and behavior of big businessunder sharp scrutiny•Increased regulatory burden•Geopolitical instability•Climate change impact onlegislation
10 © Metso Corporation 2007 October 29, 2007
Demand trends for Metso’s products
100
120
140
160
180
200
220
2006e 2007e 2008e 2009e 2010e 2011e 2013e 2014e
Mining 9.0%
Metal recycling5.0%
DCS 6.6%
Paper & Board3.5%
CAGR 06-14Indexed
Power 7.0%
Kraft pulp 3.6%
ConstructionMining Recycling Distributed control system (DCS)Kraft pulpValves Paper & Board Power
Construction5.0%
Valves5.4%
Market, EUR billion
Including aftermarket. All figures nominal, including inflation.Sources: Freedonia, ARC, Pöyry, European Renewable Energy Council, Metso estimates
11 © Metso Corporation 2007 October 29, 2007
We continue to target over 10%annual growth and a double-digit OP-margin
N/A
N/A
about 9%
about 25%
2007guidance
> 50%
Solid
> 10%
> 10%Target
52%83%Dividend
YesNoInvestment grade
9.2%7.9%Operating profit margin
17%17%Net sales growth
2006actual
2005actual
13 © Metso Corporation 2007 October 29, 2007
Key value driversfor profitable growth
Global operationsfootprintimplementation
- Sales excellence
- Quality
Environmentalbusiness
Continued operationalexcellence improvement
- Productivity
Active acquisitionapproach
Service businessgrowth
Innovation andstrategic R&D
Talent andcompetencedevelopment
Sufficient investments development
Improving profitability
Drivi
nggr
owth
- Cost optimization
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Global operational footprint”The world is flat”
Global resources, competencies, skills
Sales
ServiceManufacturing
EngineeringR&DSourcing
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76 7369
63 6661
2427
3137
3439
0
10
20
30
40
50
60
70
80
2001 2002 2003 2004 2005 2006
Stronger presence in emerging markets
Net sales (%) Personnel (%)
Developedmarkets
Emergingmarkets
83 82 80 80 78 76
17 18 20 20 22 24
0
10
20
30
40
50
60
70
80
90
2001 2002 2003 2004 2005 2006
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Strengthening global delivery capabilityMetso Paper
- Expansion of power boiler facilities in Lapua, Finland(operational in Q1/2008)
- Expansion of paper roll manufacturing in Jyväskylä, Finland(operational in Q4/07)
- Paper machinery facility in Shanghai, China (operationalsince 2006)
- Expansion of service center in Wuxi, China (operational inQ3/07)
- Service center in Guangzhou, China (operational in 2008)- Service center for Metso Power in Charlotte, the US
(operational in Q3/08)Metso Minerals
- Expansion of mobile crusher assembly capacity in Bawal,India (operational in Q4/08)
- Expansion of the foundry in Ahmedabad, India (operationalin Q4/08)
- Expansion of crusher manufacturing in Brazil (operational inQ3/07)
- Expansion of mobile crushing production in Tampere,Finland (operational in Q2/07)
- Start of track mounted crushing equipment manufacturing inthe United States (operational since 2006)
- More than doubling of manufacturing and foundry capacityin India (operational since 2006)
Metso Automation- Expansion of valve production in Shanghai, China (ongoing)
17 © Metso Corporation 2007 October 29, 2007
Performanceprovider
Processagreement
Solutionprovider
Serviceagreement
Machinesupplier
Wears &Spares
Equipment
• The strong basis forservice in Metso is thewear&spare partsbusiness
• The business scope hasbeen expanded further incertain areas to includethe maintenanceagreements
• We are currentlyexpanding the scope tocover also processagreements throughconsulting the customersin the best use of theirequipment
Much potential in service business
Transformation from equipment supplierto lifecycle service provider
18 © Metso Corporation 2007 October 29, 2007
51%
49%
Metso is already a major environmentaltechnology provider
45%
55% ofNet Sales
25%
75%44%
Metso 2006
MetsoPaper
56%
MetsoMinerals
MetsoAutomation
Over 50% of our net sales can be classified as environmentalbusiness (OECD definition)
19 © Metso Corporation 2007 October 29, 2007
RenewableEnergy
TechnologyBioenergy
Our solutions portfolio serves our customers’environmental challenges
CleanTechnology
Energy-efficiency
Wastemanagementand recycling
Watermanagement
Processoptimization
Environmentalconsulting andmeasurements
Materialsefficiency
Metso EnvironmentalTechnology
20 © Metso Corporation 2007 October 29, 2007
Metso’s power opportunity• Environmentally sound, biomass and waste
based power generation solutions provideexciting new growth opportunities for Metso.
Metso Power• A forerunner in fluidized bed combustion of
biomass, coal and other fuels to power plants• A global leader in chemical recovery systems to
pulp and paper mills• Products:
Fluidized bed boilers and recovery boilers, oiland gas boilers, evaporators, environmentalsystems and services
• Annual net sales ~ EUR 500 million- 70% derived from the pulp industry- 30% from independent power producers
21 © Metso Corporation 2007 October 29, 2007
Continuous improvement of operationalexcellence
Productivity
Quality
Supply chainmanagement
Global sourcing andmanufacturing
Operationalexcellence
22 © Metso Corporation 2007 October 29, 2007
2005 2006 2007 20082008
Growth through acquisitionsMetso acquisition process
•Complement product/service offering•Stronger presencein emerging markets•Aftermarket potential•Closing geographicalgaps
Strategic fit
•Target businessto be shortlyearnings-enhancing
Financial fit
• Availability• Anti-trust requirements• Environmental liabilities• Unusual risks
Feasibility
Texas Shredder, Inc. (August 2005)Shanghai-Chenming Paper Machinery Co. Ltd (September 2006)
Aker Kvaerner Pulping & Power (December 2006)Svensk Gruvteknik AB and Svensk Pappersteknik AB (October 2006)
Bulk Equipment Systems and Technologies Inc. (March 2007)Mecanique et Depannage Industries s.a.r.l. (June 2007)
Bender Holdings Limited (July 2007)
23 © Metso Corporation 2007 October 29, 2007
Metso’s profitable growth continuesFast growth, strong profits and more value
- Strengthening globalpresence close to ourcustomers
- Further growth in theaftermarket business
- Making most of the trendsthat drive demand for ourenvironmental solutions
- Continuing efforts to furtherboost our operationalperformance
- Evaluating complementaryacquisitions
25 © Metso Corporation 2007 October 29, 2007
Metso’s financial statements and other financial information areavailable on Metso’s website at: www.metso.com/investors
Metso Corporation - Investor RelationsFabianinkatu 9 A, P.O. Box 1220, FIN-00101 Helsinki, FinlandTel. +358 20484 100 Fax +358 20 484 3236
Johanna Sintonen, Vice President, Investor RelationsTel. +358 20 484 [email protected]
Marja Kortesalo, Financial Communicator, Investor RelationsTel. +358 20 484 [email protected]
Lilli Riikonen, Financial Communicator, Investor RelationsTel. +358 20 484 [email protected]
Anne-Mari Ylikulppi, Assistant, Investor RelationsTel. +358 20 484 [email protected]
North America:Mike Phillips, Senior Vice President, Finance and Administration, Metso USA Inc.Tel. +1 770 246 [email protected]