Stock Exchange release July 26, 2007 11:00:00 AM CET

Metso's Interim Review for January 1 - June 30, 2007

Another strong quarter for Metso
 
 
Highlights of the second quarter
  •         New orders worth EUR 2,090 million were received in April - June, i.e. 50 percent more than in the corresponding period of last year (EUR 1,390 million in Q2/06).
  •         The order backlog grew by 22 percent from the end of December 2006 and was EUR 4,574 million at the end of June 2007 (EUR 3,737 million on Dec. 31, 2006).
  •         Net sales increased by 31 percent and totaled EUR 1,536 million (EUR 1,170 million in Q2/06).
  •         Earnings before interest, tax and amortization (EBITA) were EUR 162.3 million, i.e. 10.6 percent of net sales (EUR 120.7 million and 10.3% in Q2/06).
  •         Operating profit (EBIT) was EUR 148.3 million, i.e. 9.7 percent of net sales (EUR 116.4 million and 10.0% in Q2/06).
  •         Earnings per share were EUR 0.68 (EUR 0.97 in Q2/06).
  •         Free cash flow was EUR 67 million negative (EUR 26 million in Q2/06).
  •  
    "The second quarter was another strong quarter for Metso. We saw brisk order intake in all our main businesses and our order backlog strengthened to an all-time-high level. This, together with the continuing favorable market outlook gives us exceptionally good visibility not only for the current year but also for 2008," says Jorma Eloranta, President and CEO, Metso Corporation.
     
    Eloranta says that Metso's second-quarter financial performance was a substantial improvement on the seasonally low first quarter. "The growth in net sales was healthy both in Metso Minerals and Metso Automation, which delivered strong organic growth of more than 20 percent. I am also pleased with our second-quarter operating profit driven by strong volumes, which set a new quarterly record for Metso. Our free cash flow during the second quarter was negative mainly because of volume driven increase in receivables at the end of June. I consider this to be primarily a timing issue related to project deliveries," explains Eloranta.
     
    Eloranta says that Metso's main operational priority is to ensure that the delivery capability continues to meet robust demand and healthy growth rates and competitiveness are sustained. "We are implementing various expansion programs to enhance our delivery capability and have increased our capital expenditure plans for 2007 to this end. We are also continuing our concerted efforts to develop our aftermarket operations, strengthen our global presence and to evaluate complementary acquisition candidates to accelerate Metso's growth even further," concludes Eloranta.
     
     
    Metso's key figures
     

     
     
    Metso's second quarter 2007 review
     
     
    Operating environment and demand for products in April-June
     
    The market situation for Metso's products and services continued to be favorable during the second quarter.
     
    Metso Paper's market situation was similar to that of the first quarter. The demand for new paper, board and tissue machines remained good in China, where continuing strong economic growth is fuelling the demand for various paper and board grades. The demand for fiber lines was good in South America and Asia, where pulp production capacity continues to increase rapidly due to good availability of cost competitive raw materials. In Europe and North America, the demand focused mainly on machine rebuilds and aftermarket services. Demand for power plants that use renewable energy sources was excellent and resulted from worldwide industry attempts to increase energy self-sufficiency and reduce climatic impacts.
     
    The demand for Metso Minerals' mining products, metal recycling equipment and aftermarket services remained excellent, as in the first quarter. The continuing high level of investment in industrial and commercial facilities, infrastructure, services and housing, particularly in emerging countries, has maintained lively demand for various metals. As a result, mining industry investments have continued at an excellent level globally. In the construction industry, the demand for Metso Minerals' aggregates production-related equipment remained excellent in Europe and good in other markets. Demand is driven especially by projects to develop road networks and other transportation infrastructure in various parts of the world.
     
    Metso Automation's market situation was good in the fiber and paper industry. In the power, oil and gas industry, the demand for process automation systems was good and the demand for flow control systems was excellent. Energy industry investments are driven by the increased consumption of energy and high oil prices due to global economic growth. 
     
     
    Orders received in April-June
     
    Metso's order intake during the second quarter was at an all time high, EUR 2,090 million, which is 50 percent more than during the same period a year before. About one third of the growth was organic and the rest was due to the acquisition of the Pulping and Power businesses that was completed at the end of 2006.
     
    At Metso Paper, the growth in new orders came through the acquired businesses, especially the Power business line, which had a strong quarter with new orders worth EUR 480 million. Metso Paper's largest orders for April-June included pulp mill equipment for Votorantim Celulose e Papel in Brazil and for Celulose Beira Industrial in Portugal, and an order received for a printing paper line for Henan Puyang Longfeng Paper in China. Metso Paper also received an order for two biomass-fired power boilers for EDP Producão - Bioeléctrica S.A. in Portugal.
     
    Metso Minerals' order intake continued to grow at the healthy 27 percent pace. Orders increased strongly in all business lines and in all geographical regions except Asia-Pacific, where no major orders were received due to timing reasons. Metso Minerals' largest orders were a materials handling solution for Companhia Brasileira de Alumínio to Brazil and minerals processing equipment for Gold Reserve for its gold-copper project in Venezuela.
     
    Metso Automation's new orders in the second quarter were on par with the same period a year earlier. Metso Automation's largest orders were a process automation system for Henan Puyang Longfeng Paper in China and an automationsystem modernization project for an oil refinery in Brazil.
     

     
    Financial performance in April-June
     
    Metso's net sales in the second quarter grew 31 percent compared with the corresponding period last year and were EUR 1,536 million. In Metso Paper, the growth came from the acquired Pulping and Power businesses. Metso Minerals and Metso Automation delivered strong organic growth.
     
    As expected, Metso's second-quarter financial performance improved substantially on the first quarter. Earnings before interest, tax and amortization (EBITA) were EUR 162.3 million or 10.6 percent of net sales compared with EUR 120.7 million or 10.3 percent of net sales for the corresponding period last year. EBITA and EBITA margin improved for both Metso Paper and Metso Minerals, while Metso Automation's EBITA improved but EBITA margin decreased slightly. Metso's second-quarter operating profit was EUR 148.3 million or 9.7 percent of net sales compared with EUR 116.4 million or 10.0 percent of net sales a year earlier.
     

     
    Metso's January-June 2007 Interim Review
     
     
    Orders received and order backlog
     
    In the first half of the year, Metso's orders received grew by 33 percent on the comparison period, and were EUR 3,754 million. Orders received grew in all business areas. The increase in orders was proportionally strongest in Metso Paper's Power business line, Metso Minerals' Recycling business line and Metso Automation's Flow Control business line. Two thirds of the new orders increase was attributable to the acquisition of the Pulping and Power businesses. Metso's order backlog increased by 22 percent on the end of 2006 and was EUR 4,574 million at the end of June.
     
    Orders received by business area
     

     
    Orders received by market area
     

     
     
    Net sales
     
    Metso's net sales for January-June grew by 29 percent on the comparison period and totaled EUR 2,902 million. The increase would have been 3 percentage points higher without the effect of exchange rate translation. Excluding the effect of the Pulping and Power businesses acquired at the end of 2006, the increase in net sales was approximately 14 percent. The main drivers for organic growth were the continuing good market situation and strengthened competitiveness. Aftermarket operations accounted for 33 percent (37% in Q1-Q2/06) of Metso's net sales. Decrease in the share of aftermarket operations was mainly due to the acquired Pulping and Power businesses, where the share of aftermarket business is below Metso's average. Measured in euros, the net sales of aftermarket operations increased by 17 percent.
     
    Net sales by business area

     
    Net sales by market area

     
     
    Financial result
     
    Metso's earnings before interest, tax and amortization (EBITA) during the first half of 2007 were EUR 284.2 million or 9.8 percent of net sales (EUR 220.6 million or 9.8 percent in Q1-Q2/06). EBITA in euros improved clearly in all business areas primarily due to strong volume growth. EBITA margin improved both for Metso Paper and Metso Minerals, while it decreased slightly for Metso Automation. At Metso Paper, improvement came from all business lines. Metso Paper's profitability was negatively affected during the first half by about EUR 10 million because of a steep increase in stainless steel price. Metso Minerals' profitability improved in all business lines, with the greatest improvement recorded for the Mining business line. Metso Automation's EBITA margin was negatively affected by the rise in raw material and subcontracting prices and due to large share of project deliveries.
     
    Metso's operating profit was EUR 256.7 million or 8.8 percent of net sales in January-June (EUR 211.8 million or 9.4 percent in Q1-Q2/06). Operating profit includes a EUR 18 million amortization of intangible assets related to the acquisition of the Pulping and Power businesses and a EUR 3 million credit loss in Metso Paper.
     
    Metso's net financial expenses were EUR 18 million in January-June (EUR 18 million).
     
    Metso's profit from continuing operations before taxes in the first half-year was EUR 238 million (EUR 194 million). The profit attributable to shareholders was EUR 167 million (EUR 204 million) in January-June, corresponding to earnings per share (EPS) of EUR 1.18 (EUR 1.44 per share). In the comparison period, Metso recognized in the income statement a nonrecurring deferred tax asset of EUR 57 million related to its U.S. operations, which lowered the tax rate for 2006 and improved EPS by EUR 0.40. Metso's tax rate for 2007 is estimated to be about 30 percent.
     
    The return on capital employed (ROCE) was 24.0 percent (21.7%) and the return on equity (ROE) was 23.5 percent (32.5%).
     
     
    Cash flow and financing
     
    Metso's net cash generated by operating activities during the first six months was EUR 95 million (EUR 225 million). As a result of the strong growth of the order backlog and net sales, both inventories and receivables increased strongly in all business areas during the second quarter. Growth in inventories was offset by growth in advances received and accounts payable, but strong growth in receivables, especially in June, had a negative impact on net working capital, which increased by EUR 176 million in the second quarter. Mainly because of timing and the volume-driven increase in receivables in June, Metso's free cash flow was EUR 67 million negative during the second quarter. Free cash flow for the first six months was EUR 30 million (EUR 178 million).
     
    Net interest-bearing liabilities totaled EUR 623 million at the end of June. Gearing was 42.6 percent. Metso's equity to assets ratio was 34.9 percent. In April, Metso paid dividends of EUR 212 million for 2006.
     
    In May, Standard & Poor's Ratings Services upgraded the long-term credit rating of Metso Corporation to BBB from BBB- and the short-term rating to A-2 from A-3. The rating on Metso's senior unsecured debt was upgraded to BBB- from BB+. The outlook on rating is considered stable.
     
    The current Moody's Investor Service rating for Metso's long-term credit is Baa3. The outlook on rating is considered stable.
     
     
    Capital expenditure
     
    Metso's gross capital expenditure in the first half-year was EUR 74 million excluding acquisitions (EUR 57 million). About one third of the capital expenditure was related to capacity increasing investments necessitated by strong volume growth.
     
    In the second quarter, Metso decided to establish a service center for Metso Paper at Guangzhou, China. The service center will start its operations in 2008. Also in China, Metso Paper's Service Center in Wuxi and Metso Automation's valve production plant in Shanghai are being expanded.
     
    In India, Metso is expanding mobile crusher assembly capacity in Bawal. The capacity of the Brazilian crusher manufacturing plant is also being expanded.
     
    In Finland, Metso is expanding its power boiler production facilities at Lapua and increasing the capacity in the paper machine roll production line in Jyväskylä. A new assembly line for mobile crushers was introduced in Tampere early in the year, and a crusher pilot plant and test laboratory are still under construction.
     
    Metso has also decided to invest in an enterprise resource planning (ERP) solution covering the entire supply chain within Metso Automation. The investment is due to be completed by the turn of 2009-2010. Similar investment is underway in Metso Minerals.
     
    Metso estimates that the gross capital expenditure in 2007 will be about 30 percent higher than in 2006. The growth will be due to capacity increasing investments, as well as the ERP investments of Metso Minerals and Metso Automation.
     
    Metso's research and development expenditure totaled EUR 57 million (EUR 54 million) during January-June, i.e. 2.0 percent of Metso's net sales.
     
     
    Holding in Talvivaara Mining Company Ltd
     
    Metso has an approximate 4 percent holding in Talvivaara Mining Company Ltd, which was listed on the London Stock Exchange in May 2007. Metso's holding, which is classified in the balance sheet as an available-for-sale investment, was valued at approximately EUR 29 million at the end of June. In connection with the listing, Metso has undertaken to retain its Talvivaara shares for at least 6 months. Metso's holding relates to joint R&D project with Talvivaara Mining Company in the development of rock processing and bulk materials handling processes.
     
     
    Acquisitions and divestments
     
    In June 2007, Metso strengthened Metso Paper's maintenance service business by acquiring Mecanique et Depannage Industries s.a.r.l. (MDI) from France. MDI employs 30 people.
     
    In March 2007, Metso acquired the North American metal recycling technology provider, Bulk Equipment Systems and Technologies Inc. (B.E.S.T. Inc), located in Cleveland, Ohio. The acquisition price, approximately EUR 9 million, was paid in April. The company's net sales in 2006 were EUR 8 million and it employs approximately 40 people. The company is integrated in Metso Minerals' Recycling business line.
     
    In March 2007, Metso sold the majority of Metso Paper AG in Delémont, Switzerland. Metso Paper remained as a minority shareholder in the company. Metso Paper AG is a supplier of roll logistic systems, solutions and services. The company has about 70 employees and annual net sales of approximately EUR 10 million.
     
     
    Acquisition and integration of the Pulping and Power businesses
     
    Metso closed the acquisition of Aker Kvaerner's Pulping and Power businesses on December 29, 2006. The parties have reached an agreement on the balance sheet value of the acquired businesses and the earlier estimated acquisition price (EUR 341 million) was revised to EUR 336 million, including EUR 6 million in expenses related to the acquisition and EUR 53 million in net cash.
     
    Metso estimates that the annual cost savings achievable through synergies will amount to EUR 20-25 million after integration. About one third of these are expected to be realized during 2007. During the first half-year about EUR 6 million of synergy benefits were realized. The nonrecurring expenses resulting from integration of the acquired businesses are estimated to be less than EUR 10 million, of which EUR 3 million was recognized in the first half and the rest are expected to be recorded in the remaining two quarters in 2007.
     
    Integration of the acquired businesses into Metso Paper has proceeded according to plan. During the first half-year, the global customer interface organization was restructured and employee negotiations were completed regarding the pruning of overlapping activities in Sweden and Finland. By the end of June these measures resulted into the reduction of about 100 employees.
     
    The amortization of intangible assets resulting from the transaction is estimated to be EUR 37 million in 2007, EUR 20 million in 2008 and after that EUR 13 million annually until the intangible assets have been fully amortized. The rest of the transaction price exceeding the balance sheet value will remain as goodwill, which is not amortized. In the first half-year, the amortization of intangible assets amounted to EUR 18 million.
     
     
    Personnel
     
    Metso had 26,609 employees at the end of June, about 300 of who were seasonal workers. This was 993 employees more than at the end of the first quarter (25,616 employees). In the first half-year, Metso had an average of 25,968 employees.

     
    Personnel by area

     
     
    BUSINESSES
     
    Metso Paper
     

     
    Aker Kvaerner's Pulping and Power businesses were acquired as of December 29, 2006, and the acquired balance sheet was consolidated to Metso on December 31, 2006. The acquired businesses had no effect to Metso's income statement for 2006 and are therefore not included in the comparative segment information except for order backlog and personnel as at December 31, 2006.
     
    In January-June, Metso Paper's net sales increased by 55 percent on the comparison period and totaled EUR 1,374 million.
     
    About two thirds of the net sales growth was attributable to the Pulping and Power businesses acquired at the end of 2006. The aftermarket business accounted for 28 percent of net sales (35% in Q1-Q2/06). The decline in the share of aftermarket business was due to the acquired Pulping and Power businesses, where the share of aftermarket business is below Metso Paper's average. Measured in euros, the volume of aftermarket business increased by 26 percent, and the growth was attributable mainly to the acquired Pulping and Power businesses.
     
    Metso Paper's EBITA was EUR 84.8 million, i.e. 6.2 percent of net sales (EUR 51.2 million or 5.8% in Q1-Q2/06). The operating profit was EUR 61.1 million, i.e. 4.4 percent of net sales (EUR 46.6 million or 5.3% in Q1-Q2/06). The operating profit for the first half-year includes a EUR 18 million amortization of intangible assets related to the acquisition of the Pulping and Power businesses and a EUR 3 million credit loss. The estimated negative impact of the steep rise in stainless steel price during the first half-year was about EUR 10 million.
     
    The value of orders received by Metso Paper increased by 58 percent on the comparison period and totaled EUR 1,756 million. The order intake of the Power business line almost doubled and the order intake of the Paper and Board business lines grew by about one fourth. On the other hand, in the Panelboard and Tissue business lines, order intake declined clearly. Excluding the effect of the Pulping and Power businesses, Metso Paper's volume of new orders grew by 3 percent. Among the most significant orders in January-June were orders received from Oji Paper for a paper making line in Japan, from Henan Puyang Longfeng Paper for a printing paper line in China, and for pulp mill equipment from VCP in Brazil and Celbi in Portugal. A long-term maintenance agreement was signed in the review period with Plattling Papier's mill in Germany. This is Metso Paper's first extensive service agreement for a production plant still under construction.
     
    The end-of-June order backlog, EUR 2,584 million, was 16 percent higher than the order backlog at the end of 2006.
     
     
    Metso Minerals
     

     
    In January-June, Metso Minerals' net sales increased by 14 percent on the comparison period and totaled EUR 1,188 million. The majority of the growth was derived from the Mining business line. The net sales of the Construction business line were also up on the comparison period. The Recycling business line's net sales were on par with the comparison period. Metso Minerals' aftermarket business accounted for 42 percent of net sales (43% in Q1-Q2/06). Measured in euros, the volume of the aftermarket business grew by 12 percent.
     
    The operating profit of Metso Minerals was EUR 163.5 million, or 13.8 percent of net sales. All business lines improved profitability, with the Mining business line recording the strongest improvement as a result of robust volume growth.
     
    The value of orders received by Metso Minerals was up by 19 percent and totaled EUR 1,569 million. Order intake grew strongly in all business lines. Among the largest orders in January-June were orders received for a grinding system from Boliden in Sweden, for bulk materials handling equipment from Alcoa in Brazil, for minerals processing equipment to Gold Reserve Inc. in Venezuela and grinding equipment from Osisko Exploration in Canada. The order backlog increased by 31 percent on the end of 2006 and was EUR 1,673 million at the end of June.
     
     
    Metso Automation
     

     
    Metso Automation's net sales increased by 17 percent in January-June and totaled EUR 320 million. The increase derived almost entirely from deliveries of flow control systems to the energy industry. The aftermarket business accounted for 21 percent of net sales (23% in Q1-Q2/06). Measured in euros, the volume of the aftermarket business grew by 7 percent.
     
    Metso Automation's operating profit amounted to EUR 38.8 million or 12.1 percent of net sales. The slight decrease in operating profit margin was primarily due to a rise in raw material and subcontracting prices and an increase in the share of project deliveries.
     
    The value of orders received by Metso Automation increased by 11 percent on the comparison period and was EUR 413 million. The increase came mainly from orders of the Flow Control business line for the power, oil and gas industries. Major orders during January-June were valve order from the Chiyoda-Technip Joint Venture to Qatar, process automation system to Henan Puyang Longfeng Paper to China and automation system modernization project to an oil refinery in Brazil. Due to the strong order intake in the first half-year, Metso Automation's order backlog was substantially strongerthan in the comparison period. The order backlog increased by 32 percent on the end of 2006 and was EUR 365 million at the end of June.
     
     

    Valmet Automotive
     
    Valmet Automotive's net sales in January-June were EUR 47 million. Operating profit was EUR 5.4 million, or 11.5 percent of net sales. In the first half-year, Valmet Automotive manufactured an average of 114 cars per day. Valmet Automotive's number of personnel has been adjusted to correspond with the current production level.
     
     
    Short-term risks of business operations
     
    China is the primary market for new paper and board machines and thus any substantial changes in demand on the Chinese market may have a material adverse effect on Metso Paper's profitability. Metso seeks to mitigate these risks by developing its global aftermarket operations and increasing the flexibility of its delivery chain.
     
    The delivery times for Metso products have been lengthened because of strong growth in order intake and backlog. Therefore, there is a risk that material and other costs may rise significantly during the delivery time and have a greater impact on Metso's profitability than currently anticipated. In the current strong demand situation, the scarcity of certain components and subcontractor resources, particularly at Metso Minerals and Metso Automation, may also lengthen delivery times.
     
    Metso strives to manage and limit the potential adverse effects of these and other risks. However, if the risks materialize, they could have a significant adverse effect on Metso's business, financial position and results of operations or on the price of the Metso share.
     
     
    Events after the review period
     
     
    Metso has acquired Bender Holdings Limited in United Kingdom
     
    In July 2007, Metso acquired Bender Holdings Limited and its subsidiary companies in United Kingdom to further strengthen Metso Paper's aftermarket business. The company employs 97 persons and its net sales in 2006 amounted to approximately EUR 24 million. With the acquisition, Metso Paper becomes the global market leader in Yankee cylinder grinding and coating services for tissue machines.
     
     
    Metso has agreed to divests its German panelboard press business
     
    In July 2007, Metso has agreed to divest Metso panelboard GmbH, Hannover, Germany-based supplier of continuous press and energy plants for the panelboard industry, to G. Siempelkamp GmbH & Co. KG of Germany. The transaction is estimated to be closed by the end of September 2007. Metso Panelboard GmbH employs approximately 65 people. In connection with the divestment, the parties have agreed to pursue cooperation where Metso's front-end, forming and panelhandling technologies will be combined with Siempelkamp's continuous press technology.
     
     
    Metso seeks to delist and deregister from the United States
     
    On July 26, 2007, Metso decided to apply for delisting of its American Depositary Shares from the New York Stock Exchange in the United States, and deregister from the U.S. Securities and Exchange Commission and terminate Metso's reporting obligations under the Exchange Act. However, Metso plans to maintain its ADR facility, and following the delisting Metso's ADSs are expected to be traded over-the-counter in the United States. Metso believes that the reasons why the New York Stock Exchange listing was originally sought in mid 1990's are no longer valid since the capital markets have become more global. Metso's ordinary shares will continue to trade on the Helsinki Stock Exchange.
     
    Metso's intention to delist from the New York Stock Exchange does not imply a reduced focus on its international shareholders or on its international or U.S. markets. Metso intends to continue its high standard of corporate governance, transparency in financial reporting and internal controls subsequent to effectiveness of the NYSE delisting and SEC deregistration. Metso expects to complete the delisting and deregistering process during 2007.
     
     
    Short-term outlook
     
    The favorable market outlook for Metso's products and services is expected to continue for the rest of 2007. Metso's record-high order backlog also provides exceptionally good visibility for 2008, which is estimated to be another solid growth year for Metso.
     
    Metso Paper's market situation is estimated to continue much the same as in the year's first half. The demand for new paper and board machines is expected to be good in Asia and satisfactory elsewhere. The demand for new fiber lines is expected to be good in South America and satisfactory elsewhere. The demand for tissue machines is estimated to be satisfactory. The demand for power plants is estimated to be excellent. The demand for Metso Paper's aftermarket services is expected to remain satisfactory.
     
    Metso Minerals' favorable market outlook is expected to continue. Demand is anticipated to remain excellent in the mining and metals recycling industries, and at a good level in the construction industry. The demand for aftermarket services is expected to remain excellent.
     
    Metso Automation's market outlook in the pulp and paper industry is estimated to be good. In the power, oil and gas industries, demand is expected to be good in process automation systems and excellent in flow control systems.
     
    Thanks to the strong order backlog, continuing favorable market situation and expanded business scope, it is estimated that Metso's net sales for 2007 will grow by more than 20 percent on 2006 and that the operating profit will clearly improve. It is estimated that the operating profit margin in 2007 will be slightly below Metso's target of over 10 percent. This is primarily due to factors related to the acquisition of the Pulping and Power businesses - namely the high first-year amortization of intangible assets, the costs of integration and the fact that synergy benefits will not fully materialize in the first year.
     
    The estimates concerning financial performance are based on Metso's current business scope, order backlog and market outlook.
     
    Helsinki, July 26, 2007
     
    Metso Corporation's Board of Directors
     

     
    CONSOLIDATED BALANCE SHEETS

     

     
    CONDENSED CONSOLIDATED CASH FLOW STATEMENT
     

     
     
     
     
    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'  EQUITY
     

     
     
     

     

     

     

     
     

     

     
     
     

     
     

     
     

     

     
    QUARTERLY INFORMATION
     
    NET SALES
     

     
     

     
     

    Notes to the Interim Review
     
    This interim review has been prepared in accordance with IAS 34 'Interim Financial Reporting'. The same accounting principles have been applied as in the annual financial statements.
     
     
    New accounting standards
     
    IFRS 7
    In August 2005, IASB issued IFRS 7 'Financial Instruments: Disclosures' which requires the company to disclose information enabling users of its financial statements to evaluate the significance of financial instruments to its financial position and performance. Metso adopted the standard and the related amendments to IAS 1 'Presentation of Financial Statements' from January 1, 2007.
     
    IFRS 8
    In November 2006, the IASB issued IFRS 8 'Operating segments' which requires the application of the 'management approach' in segment reporting. This would result in uniformity between the disclosed information and the principles for evaluating the financial performance of segments followed internally by the management. Metso will evaluate the effects of IFRS 8 on the consolidated financial statements. The standard will come into force in the financial years beginning after January 1, 2009, but may already be applied in earlier financial years.
     
     
    Subpoena from U.S. Department of Justice requiring Metso to produce documents
     
    In November 2006, Metso Minerals Industries, Inc., which is Metso Minerals' U.S. subsidiary, received a subpoena from the Antitrust Division of the United States Department of Justice calling for Metso Minerals Industries, Inc. to produce certain documents. The subpoena relates to an investigation of potential antitrust violations in the rock crushing and screening equipment industry. Metso is cooperating fully with the Department of Justice.
     
     
    Decisions of the Annual General Meeting
     
    On April 3, 2007 the Annual General Meeting of Metso Corporation approved the accounts for 2006 as presented by the Board of Directors and discharged the members of the Board of Directors and the President and CEO from liability for the 2006 financial year. In addition, the Annual General Meeting approved the proposals of the Board of Directors to amend the Articles of Association and to authorize the Board of Directors to resolve on a repurchase of the Corporation's own shares and on a share issue.
     
    The Annual General Meeting decided to establish a Nomination Committee of the Annual General Meeting to prepare proposals for the following Annual General Meeting in respect of the composition of the Board of Directors and the remuneration of directors. The Nomination Committee consists of representatives appointed by the four biggest shareholders along with the Chairman of the Board of Directors as an expert member.
     
    Matti Kavetvuo was re-elected as the Chairman of the Board and Jaakko Rauramo was re-elected as the Vice Chairman of the Board. Eva Liljeblom, Professor at the Swedish School of Economics and Business Administration, Helsinki, Finland, was elected as a new member of the Board. The Board members re-elected were Svante Adde, Maija-Liisa Friman, Christer Gardell and Yrjö Neuvo. The term of office of Board members lasts until the end of the following Annual General Meeting.
     
    The Annual General Meeting decided that the annual remuneration of Board members would be EUR 80,000 for the Chairman, EUR 50,000 for the Vice Chairman and the Chairman of the Audit Committee and EUR 40,000 for the members, and that the meeting fee, including committee meetings, would be EUR 500 per meeting.
     
    PricewaterhouseCoopers Oy, Authorized Public Accountants, was re-elected to act as the Auditor of the Corporation until the end of the next Annual General Meeting.
     
    The Annual General Meeting decided to pay a dividend of EUR 1.50 per share for the financial year which ended on December 31, 2006. The dividend was paid to shareholders who were entered in the company's shareholder register maintained by the Finnish Central Securities Depository on the record date for dividend payment, April 10, 2007. The dividend was paid on April 17, 2007.
     
     
    Board committees
     
    At its assembly meeting the Board of Directors elected from its midst the members of the Audit Committee and Compensation Committee.
     
    The Board's Audit Committee consists of Maija-Liisa Friman (Chairman), Svante Adde and Eva Liljeblom. The Board of Directors assigned Svante Adde as the financial expert of the Audit Committee.
     
    The Board's Compensation Committee consists of Matti Kavetvuo (Chairman), Jaakko Rauramo, Christer Gardell and Yrjö Neuvo.
     
     
    Shares, options and share capital
     
    A total of 35,000 shares were subscribed with Metso Corporation's 2003A stock options during the period February 8 - March 15, 2007. The resulting increase in share capital of EUR 59,500.00 was entered in the Finnish Trade Register on March 29, 2007. The shares became subject to trading on the Helsinki Stock Exchange together with the existing shares on March 30, 2007. The right to receive dividends and other shareholder rights of the new shares commenced on the registration date.
     
    At the end of June, the parent company held 60,841 Metso shares, in addition to which a partnership included in Metso's consolidated financial statements held 200,039 Metso shares. Together these shares represent 0.18 percent of all the shares and votes.
     
    After cancellations and exercised options there remains a total of 100,000 year 2003A options in Metso's stock options program, all of them held by Metso's subsidiary, Metso Capital Ltd.
     
    Metso's market capitalization excluding the own shares was EUR 6,200 million on June 30, 2007.
     
     
    Share ownership plan
     
    Metso has a share ownership plan for 2006-2008. The maximum number of shares to be allocated to the 2006-2008 incentive plan is 360,000 Metso Corporation shares.
     
    The share ownership plan for the year 2006 was directed to 60 Metso managers. Based on the 2006 earnings period, 99,961 shares corresponding to 0.07 percent of Metso shares were distributed at the end of March 2007. Members of Metso's Executive Team received 25,815 shares.
     
    Metso's Board of Directors decided in February to direct the 2007 share ownership plan to a total of 84 Metso managers. The potential reward from the plan will be based on the operating profit for 2007 of Metso Corporation and its business areas. The share ownership plan will cover a maximum of 125,500 Metso shares in 2007. Members of the Metso Executive Team will be allocated a maximum of 26,500 shares of this total. If the average trade-weighted price of the Metso share during the first two full weeks of March 2008 exceeds EUR 48, the number of shares to be granted under the 2007 plan will be decreased by a corresponding ratio. Payment of the potential rewards will be decided during the first quarter of 2008.
     
    The maximum number of shares to be allocated for the 2008 earnings period as well as the share value limit will be decided by Metso's Board of Directors at the beginning of 2008.
     
     

    Shares traded on the Helsinki and New York Stock Exchanges
     
    The number of Metso Corporation shares traded on the Helsinki Stock Exchange in January-June was 196 million, equivalent to a turnover of EUR 7,826 million. The share price on June 30, 2007 was EUR 43.82. The highest quotation was EUR 44.80 and the lowest EUR 34.79.
     
    The number of Metso ADRs (American Depository Receipts) traded on the New York Stock Exchange was 3.8 million, equivalent to a turnover of USD 209 million. The price of an ADR on June 30, 2007 was USD 58.94. The highest quotation was USD 61.90 and the lowest USD 44.37.
     
     
    Disclosures of changes in holdings
     
    The following is a brief account of the shareholders' disclosures received by Metso with respect to changes in holdings in the company.
     
    J.P. Morgan Chase & Co. announced that the funds they managed held 6,996,732 Metso shares/ADRs on February 12, 2007 corresponding to 4.94 percent of the paid up share capital of Metso Corporation.
     
    No disclosures of changes in holdings were received during the second quarter of 2007.
     
     
    Publication dates for Metso's Interim Reviews in 2007
     
    Interim Review for January - September on October 25, 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.
     
     
    Metso Corporation
     
     
    Olli Vaartimo                         
    Executive Vice President and CFO
     
     
     
    Kati Renvall
    Vice President,
    Corporate Communications                                                                       
     
    Metso is a global engineering and technology corporation with 2006 net sales of approximately EUR 5 billion. Its 26,000 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.
    www.metso.com
     
     
    Distribution:
    Helsinki Stock Exchange
    New York Stock Exchange
    The media
    www.metso.com