Stock Exchange release April 27, 2005 11:17:54 AM CET

Metso Corporation's interim review, January-March 2005:FAVORABLE DEVELOPMENT IN THE FIRST QUARTER SUPPORTS ACHIEVEMENT OF FINANCIAL OBJECTIVES FOR 2005

  •         In January-March 2005, Metso Corporation's net sales increased by 13 percent and totaled EUR 894 million (1-3/2004: EUR 793 million).
  •         Operating profit (EBIT) was EUR 54.7 million (EUR -7.2 million). All Metso's business areas improved their financial performance compared with the first quarter of 2004.
  •         Earnings per share from continuing operations were EUR 0.26 (EUR 0.15 negative).
  •         New orders were received worth EUR 1,089 million (EUR 971 million), an increase of 12 percent. The Corporation's order backlog at the end of March was 13 percent higher than at the end of 2004, and was EUR 1,919 million (Dec. 31, 2004: EUR 1,705 million).
  •         Net cash provided by operating activities was EUR 129 million, and gearing was 36.2 percent at the end of March (Dec. 31, 2004: 49.7%).
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    This interim review is prepared in accordance with the IFRS recognition and measurement principles. Metso adopted IFRS at the beginning of 2005.
     
    Capacity utilization strengthened in the paper industry, which had a positive effect on demand for Metso Paper's pulp and paper technology rebuilds and aftermarket services. Demand for Metso Minerals' products and services was strong in the construction, civil engineering and mining industries. The demand for metals recycling equipment was excellent. Investment decisions concerning new mining projects were made primarily in South America. Demand for the products and services of Metso Automation remained good in the power, oil and gas industry, and was satisfactory in the pulp and paper industry.
     
    The value of orders received by Metso increased by 12 percent compared with the first quarter of 2004, and the order backlog increased by 13 percent from the end of 2004. Aftermarket operations accounted for 38 percent of the Corporation's net sales, about the same proportion as in the first quarter of last year.
     
    The Corporation's operating profit improved significantly on the comparison period and was EUR 54.7 million, or 6.1 percent of net sales. The profitability of Metso Minerals continued to improve due to increased delivery volumes and improved productivity. Metso Automation's profitability also remained good. Metso Paper's profitability improved on the comparison period, due to improved efficiency and capacity utilization. The measures aimed at renewing the business concept at Metso Paper are continuing, particularly in the Tissue business line, which still recorded a loss in the first quarter of 2005.
     
    "In the first months of the year, Metso's markets and the demand for its products and services have developed in line with our expectations. I am pleased to note that all our business areas improved their performance in the first quarter of 2005 on the comparison period," says Jorma Eloranta, Metso's President and CEO. "The main factors contributing to the improvement of profitability include the continuing good market situation for Metso Minerals' products and the enhanced productivity in all business areas."
     
    Net cash provided by operating activities was very strong, EUR 129 million. Return on capital employed (ROCE) was 12.4 percent (1.8% negative). Metso Corporation's return on equity (ROE) has also improved, and was 15.0 percent for the review period (10.5% negative).
     
    Short-term outlook
     
    Metso Minerals and Metso Automation are expected to surpass the operating margin targets set for 2005. However, the targets set for Metso Paper in 2005 are challenging. After the sale of Metso Drives, the targets set for Metso Ventures are especially challenging.
     
    In total, Metso Corporation's measures streamlining the cost structure, the strengthened order backlog and the first quarter result will support a continuation of favorable profitability development and will help attain the financial targets set for Metso Corporation for 2005, i.e. an operating margin that is 6 percent of net sales and a 12-percent return on capital employed. Should the favorable development continue, these targets could be exceeded.
     
    Metso is a global technology corporation serving customers in the pulp and paper industry, rock and minerals processing, the energy industry and selected other industries. In 2004, the net sales of Metso Corporation were approx. EUR 4 billion, and it has some 22,000 employees in more than 50 countries. Metso's shares are listed on the Helsinki and New York Stock Exchanges.
     
    For further information, please contact:
     
    Jorma Eloranta, President and CEO, Metso Corporation, tel. +358 204 84 3000
    Olli Vaartimo, Executive Vice President and CFO, Metso Corporation, tel. + 358 204 84 3010
    Mike Phillips, Senior Vice President, Finance and Administration, Metso USA,
    tel. +358 204 84 3253
     
    It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for customer industry profitability and investment willingness, expectations for company growth, development and profitability and the realization of synergy benefits and cost savings, and statements preceded by "expects", "estimates", "forecasts" or similar expressions, are forward-looking statements. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties which may cause the actual results to materially differ 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 which influence the operating environment and profitability of customers and thereby the orders received by the company and their margins
    (2) the competitive situation, especially significant technological solutions developed by competitors
    (3) the company's own operating conditions, such as the success of production, product development and project management and their continuous development and improvement
    (4) the success of pending and future acquisitions and restructuring.