Metso Corporation's Interim Review January 1 - September 30, 2011
Metso's strong performance continued
Metso Corporation's stock exchange release on October 27, 2011 at 12:00 a.m. local time
Metso will hold two news conferences in Helsinki today, on Thursday, October 27, 2011. The press conference for media in Finnish will be arranged at 1:30 p.m. - 2:15 p.m. Finnish time. The news conference with live webcast and conference call for investors and analysts in English will be arranged at 03:00 p.m. Finnish time. Both events will take place at Metso Group Head Office, Fabianinkatu 9 A, Helsinki, Finland (details at the end of this release).
This is a summary of Metso's January - September 2011 Interim Review and the complete report is attached as a pdf-file to this release and is also available on our website at www.metso.com/investors.
Figures in brackets, unless otherwise stated, refer to the comparison period, i.e. the same period in the previous year.
Highlights of the third quarter of 2011
Strong performance continued in all our businesses and all financial key measurements improved.
New orders worth EUR 1,918 million were received in July-September, i.e. 36 percent more than in the comparison period (EUR 1,409 million). Orders received by the services business increased and were EUR 717 million, i.e. 39 percent of all orders received (EUR 672 million and 48%).
Net sales increased 18 percent on the comparison period, and were EUR 1,561 million (EUR 1,325 million). Our services business net sales totaled EUR 711 million and accounted for 48 percent of total net sales (EUR 615 million and 47%).
Earnings before interest, tax and amortization (EBITA), before non-recurring items increased 27 percent and were EUR 163.0 million, i.e. 10.4 percent of net sales (EUR 128.6 million and 9.7%).
Earnings per share were EUR 0.63 (EUR 0.45).
Free cash flow was EUR 213 million (EUR 122 million).
Metso's President and CEO Matti Kähkönen comments on the third quarter:
All of our reporting segments received a higher number of new orders for equipment and services than in the comparison period, and the share of net sales for our services business was greater than ever before. The global economic turmoil was not evident in the operations of our customer industries in the third quarter; rather the general demand continued to be positive in both emerging and developed markets. Nevertheless, we are carefully monitoring the development of our market environment.
Our net sales grew organically 18 percent in July-September on the comparison period, and our profitability was solid thanks to the high delivery volumes and our good capacity utilization rates. Despite the high volume of deliveries, our net working capital was kept well under control. We can also be pleased with our good cash flow for the quarter. In addition, our earnings per share increased 40 percent from the comparison period and were EUR 0.63.
We keep our guidance for this year unchanged and estimate that our net sales in 2011 will grow by around 15 percent and that our profitability (EBITA margin before non-recurring items) will improve compared to 2010. Assuming that the growth in the global economy will not be disturbed and the development in our customer industries remains at current levels, we are confident that our record-high order backlog, which contains approximately EUR 2.8 billion in orders for delivery in 2012 and our strong balance sheet give us a solid starting point for the year ahead.
Metso's key figures
|EUR million|| Q3/|
|Q3/2010||Change %||Q1-Q3/2011||Q1-Q3/ 2010||Change %||2010|
|Net sales of services business||711||615||16||2,042||1,738||17||2,453|
|% of net sales||48||47||47||46||45|
|Earnings before interest, tax and amortization (EBITA) and non-recurring items||163.0||128.6||27||426.4||341.2||25||491.0|
|% of net sales||10.4||9.7||9.3||8.8||8.8|
|% of net sales||9.6||7.8||8.4||8.1||8.0|
|Earnings per share, EUR||0.63||0.45||40||1.57||1.21||30||1.71|
|Orders received of services business||717||672||7||2,431||2,000||22||2,637|
|Order backlog at end of period||5,926||4,144||43||4,023|
|Free cash flow||213||122||75||330||321||3||435|
|Return on capital employed (ROCE) before taxes, annualized, %||16.6||13.0||13.5|
|Equity to assets ratio at end of period, %||38.4||37.2||38.1|
|Gearing at end of period, %||13.8||21.3||15.0|
During July-September, the demand was healthy in most of our customer industries with certain variability by customer industry and geographic area. We estimate that in the emerging markets the operating environment continues to be good. The uncertainty in the euro zone, the budget deficit in the United States, the availability of financing and fluctuations in the exchange rates may, however, slow down market activity during the rest of 2011 and in the early part of 2012. We anticipate that even in a case of a slowdown in western economies, most of our customer industries will continue to utilize their capacity at a good or satisfactory level supporting our services business.
Metal prices have come down from the peak levels of the early part of the year, but remain still relatively high. The activity level for quotations for equipment and projects from mining companies has been excellent. We expect the mining market to be at a good level for the rest of the year and in the early part of 2012. However, a potential further tightening of availability of financing and a continued decline in metal prices may have a negative impact on the demand for new equipment. Due to the expected high utilization rates of mines and our large installed equipment base, we expect demand for our mining services to continue excellent.
In the Asia-Pacific region and Brazil, economic growth continues and infrastructure construction projects are maintaining demand for construction equipment at a good level. We anticipate that demand for equipment used in aggregates processing by the construction industry in Europe and in North America will stay at the current relatively low level going forward. We estimate that demand for our services for the construction industry will remain satisfactory.
Demand for power plants that utilize renewable energy sources is expected to continue satisfactory in 2011 and in the early part of 2012. There is continuous need to replace old energy sources and build new capacity. Several European countries and the United States have published targets to increase the use of renewable energy and this is expected to support demand for our power plant solutions fuelled by biomass and recycled waste. However, the pending policies over subsidy mechanisms for renewable energy are estimated to have a key impact on investment decisions. Demand for the power plant services business is expected to be good.
We estimate that demand for our automation products will continue to be good this year and early next year, while we anticipate the activity from the pulp and paper industry to somewhat slow down. We expect the demand for our automation solution services to continue excellent.
Demand for paper, board and tissue lines is expected to be satisfactory in 2011 and in the early part of 2012. Capacity utilization rates in the paper and board industry may fall somewhat, yet keep the demand for our services at a good level.
We expect the market for pulp mills to slow down after recent large project orders. The demand for rebuilds and services is expected to continue good even though lower pulp prices and lower capacity utilization rates may stabilize the demand.
We expect the demand for metal and solid waste recycling equipment to be satisfactory. Demand for recycling equipment services is expected to stabilize as the production utilization rates in the steel industry have started to slow down.
As earlier, we estimate that our net sales in 2011 will grow by around 15 percent and that our profitability (EBITA margin before non-recurring items) will improve compared to 2010. Our estimate is based on Metso's development in January-September and on our order backlog, which contains orders worth about EUR 1.8 billion for delivery in 2011.
Assuming that the growth in the global economy will not be disturbed and the development in our customer industries remains at current levels, we are confident that our record-high order backlog, which contains approximately EUR 2.8 billion in orders for delivery in 2012, and our strong balance sheet give us a solid starting point for the year ahead.
The estimates for our financial performance in 2011 and 2012 are based on Metso's current market outlook and business scope as well as on foreign exchange rates similar to those of September 2011.
Helsinki, October 27, 2011
Metso Corporation's Board of Directors
Metso is a global supplier of sustainable technology and services for mining, construction, power generation, automation, recycling and the pulp and paper industries. We have about 29,000 employees in more than 50 countries. www.metso.com
Further information, please contact:
Matti Kähkönen, President and CEO, Metso Corporation, tel. +358 20 484 3000
Harri Nikunen, CFO, Metso Corporation, tel. +358 20 484 3010
Juha Rouhiainen, VP, Investor Relations, Metso Corporation, tel. +358 20 484 3253
Invitation to news conferences
Metso will hold two news conferences in Helsinki on Thursday, October 27, 2011
The press conference for media in Finnish will be arranged at 1:30 p.m. - 2:15 p.m. Finnish time
The news conference with live webcast and conference call for investors and analysts in English will be arranged at the following local times:
03:00 p.m. EEST (Helsinki)
01:00 p.m. BST (London)
02:00 p.m. CEST (Paris)
08:00 a.m. EDT (New York)
Both events will take place at Metso Group Head Office, Fabianinkatu 9 A, Helsinki, Finland.
The news conference in English can also be followed through a live webcast at www.metso.com/investors or through a simultaneously arranged conference call. Due the live webcast, we are kindly asking those attending the news conference starting at 3:00 p.m. EEST, to be present 5 minutes prior the start of the event.
Conference call details
Conference call participants are requested to dial in a few minutes prior to the start of the teleconference
US: +1 334 323 6201
other countries: +44 20 7162 0025 or
+44 20 7162 0077.
access code: 885200
A replay will be available for 14 days until November 10, 2011 on the following phone numbers:
US: +1 954 334 0342
other countries: +44 20 7031 4064
access code 885200
After the news conference there will be an audio file (mp3) available for downloading and at the latest on Friday, October 28, a transcript of the event at www.metso.com/investors. The presentation material will be available after the publishing of the Interim Review at www.metso.com/Investors.
You are most welcome to participate in these events.
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.
VP, Investor Relations
NASDAQ OMX Helsinki Ltd