Stock Exchange release July 27, 2005 11:03:59 AM CET
Metso Corporation's interim review, January-June 2005: STRONG PERFORMANCE CONTINUED; FINANCIAL TARGETS FOR 2005 TO BE EXCEEDED
This interim review is prepared in accordance with IFRS. Metso adopted IFRS at the beginning of 2005.
"In 2004 and 2005, Metso has focused on improving its profitability and strengthening its balance sheet. The new business concepts and restructuring measures are now yielding good results. This provides a solid foundation for the further evolution of Metso," says Jorma Eloranta, President and CEO of Metso Corporation.
"We will continue efforts toward operational excellence in all business areas, in particular in Metso Paper. At the same time, the management agenda will be increasingly shifted toward profitable growth, starting from Metso Automation and Metso Minerals. We primarily target organic growth, notably in the emerging markets. We will also be investigating complementary add-on acquisitions to strengthen our competitiveness as well as our product and service offering. Overall we are pleased with the progress made this year. We feel that there remains a lot of opportunity in Metso for growth and further improvement," says Eloranta.
The demand for Metso's main products was good in the second quarter. The good capacity utilization rates of the pulp and paper industry contributed to a positive demand for Metso Paper's rebuilds and aftermarket operations. Also the markets for new paper machine became more active, and Metso booked two new paper machine orders in the second quarter.
In the construction and civil engineering industry, demand for aggregates and consequently for Metso Minerals' crushing and screening equipment and aftermarket services was good in Europe and Asia and excellent in North America. Demand for Metso Minerals' mining products remained good.
Demand for the products and services of Metso Automation continued to be good in the power, oil and gas industry, and satisfactory in the pulp and paper industry.
Metso's operating profit improved significantly on the comparison period and was EUR 138.0 million, or 7.2 percent of net sales. Metso Minerals' profitability continued to improve. Also Metso Paper's profitability improved clearly on the comparison period, due to improved efficiency and capacity utilization. Metso Automation's profitability remained good.
The demand for rebuilds and aftermarket services in the pulp and paper industry are expected to remain good. Also investments in new production lines are anticipated to gradually pick up, mostly in China and South America. Comprehensive road network development projects are estimated to maintain the demand for aggregates production equipment on a good level. The demand in the mining industry is estimated to remain strong, though the investment activity is anticipated to somewhat level out due to the general shortage of experienced management and other resources.
The good market outlook, the measures aimed at streamlining the cost structure, the strengthened order backlog and the first half-year result will support a continuation of the favorable profit trend. Metso Minerals and Metso Automation are expected to clearly surpass the operating profit targets set for 2005. Metso Paper's operating profit target is challenging because profit is burdened by the weak profitability and restructuring costs in the Tissue business. It is estimated that Metso Ventures' operating profit will be slightly lower than its target due mainly to structural changes.
The financial targets set for Metso Corporation in 2005 are an operating margin that is 6 percent of net sales and a 12 percent return on capital employed. It is estimated that the Corporation's net sales for 2005 will increase to approximately EUR 4.1 billion and that the financial targets set for 2005 will be exceeded.
Metso's strategic objectives and financial targets will be discussed in more detail in the Capital Markets Day at the end of August.
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.