Stock Exchange release February 7, 2007 11:07:11 AM CET
METSO CORPORATION'S FINANCIAL STATEMENTS RELEASE 2006: A record year for Metso; Strong volume growth estimated to continue in 2007
A news conference will be held today on February 7, 2007 at 1:30 p.m. in Finnish and at 3:00 p.m. in English at Metso's Corporate Office, Fabianinkatu 9 A, Helsinki, Finland.
The English-language news conference can be followed on the Internet at www.metso.com.
METSO CORPORATION'S FINANCIAL STATEMENTS RELEASE 2006
A record year for Metso; Strong volume growth estimated to continue in 2007
Highlights of 2006
In 2006, new orders worth EUR 5,705 million were received (EUR 4,745 million in 2005).
At year's end, the order backlog was EUR 3,737 million (EUR 2,350 million at December 31, 2005). This includes EUR 727 million order backlog of the Pulping and Power businesses acquired from Aker Kvaerner. The acquired businesses were consolidated into Metso's balance sheet on December 31, 2006.
Net sales increased by 17 percent and totaled EUR 4,955 million (EUR 4,221 million).
Operating profit was EUR 457.2 million, i.e. 9.2 percent of net sales (EUR 335.0 million and 7.9%).
Nonrecurring deferred tax assets of EUR 87 million were recognized through the income statement.
Earnings per share from continuing operations were EUR 2.89 (EUR 1.57).
Free cash flow was EUR 327 million (EUR 106 million).
Return on capital employed (ROCE) was 22.2 percent (18.8%).
The Board proposes a dividend of EUR 1.50 per share.
Highlights of the last quarter of 2006
New orders worth EUR 1,557 million were received in October-December (EUR 1,537 million in Q4/05).
Net sales increased by 23 percent and totaled EUR 1,538 million (EUR 1,254 million in Q4/05).
Operating profit was EUR 125.0 million, i.e. 8.1 percent of net sales (EUR 101.5 million and 8.1% in Q4/05).
In the final quarter, a nonrecurring deferred tax asset of EUR 30 million was recognized in the income statement.
Earnings per share from continuing operations were EUR 0.86 (EUR 0.47 in Q4/05).
"Year 2006 was a year of consistent profitable growth for Metso. The favorable market situation prompted brisk order intake throughout our businesses. Our net sales clearly exceeded our over 10 percent growth target for a second year in a row, and our operating profit improved substantially," says Jorma Eloranta, President and CEO of Metso Corporation.
Also the outlook for 2007 is positive: "We have started the year with a very solid order backlog out of which over 80 percent is scheduled to be delivered this year. Furthermore, we expect the overall favorable demand for our products to continue, which give us confidence that our net sales growth will remain strong," Eloranta notes.
"Of course, we still see opportunities to improve our performance. Aftermarket development, continuous improvement of productivity and further cutting of non-quality costs remain on our agenda as means to further boost our profitability. In addition, we will be investing in supply chain management and in securing our delivery capability to respond to the growth especially in Metso Minerals and Metso Automation. We continue to strengthen our presence in the emerging markets to secure Metso's longer-term development."
According to Eloranta, the integration of Pulping and Power businesses, acquired from Aker Kvaerner in the end of 2006, is proceeding according to plans. "The acquisition will significantly improve our capabilities as a full-scope supplier to the pulp and paper industries. Furthermore, we see very promising business opportunities in the power industry and biomass technology."
The overall market situation for Metso is expected to remain favorable in 2007.
The overall market outlook for Metso Paper is expected to be satisfactory in 2007. The demand for new fiber and tissue lines as well as related rebuilds and aftermarket services is expected to slightly soften from the good level in 2006, except for South America and Asia where the markets for new fiber lines are expected to remain good. The demand for new paper and board machines, as well as rebuilds and aftermarket services is expected to remain satisfactory also in 2007. The strong demand is expected to continue in Asia. The demand for power production solutions, especially related to biomass utilization, is expected to remain excellent.
Metso Minerals' markets for both new equipment and aftermarket services are expected to remain excellent in mining and metal recycling. In the mining industry, the trend is towards large equipment and projects. The demand for Metso Minerals' new equipment for the construction industry is expected to soften from excellent to good in 2007. This is mainly due to the leveling-off of North American aggregates demand. On the other hand, the demand for aftermarket services within construction segment is expected to continue excellent thanks to the active spare and wear part markets for the installed base.
The demand for Metso Automation's process automation systems for the pulp and paper industry is estimated to get slightly stronger. The demand for flow control systems is expected to continue good in the pulp and paper industry and excellent in the power, oil and gas industry. The markets for process automation systems in the power industry are expected to continue to be good.
Thanks to the strong order backlog, continuing favorable market situation and the expanded business scope, Metso's net sales in 2007 are estimated to grow by more than 20 percent on 2006, and the operating profit is estimated to clearly improve. At present, it is estimated that the operating profit margin in 2007 will be slightly below Metso's over 10 percent target. This is primarily due to the high first-year amortization of intangible assets, integration costs and only partially materializing synergy benefits related to the acquisition of the Pulping and Power businesses.
The estimates concerning Metso's net sales and operating profit do not include changes resulting from any future acquisitions or divestitures.
Metso is a global engineering and technology corporation with 2006 net sales of approximately EUR 5 billion. Its 25,500 employees in more than 50 countries serve customers in the pulp and paper industry, rock and minerals processing, the energy industry and selected other industries.
Metso's Interim Review for January-March will be published on April 27, 2007, Interim Review for January-June on July 26, 2007, and Interim Review for January-September on October 25, 2007. The printed Annual Report for 2006 will be published during the week starting on March 12, 2007.
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
Johanna Sintonen, Vice President, Investor Relations, Metso Corporation, 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.