Stock Exchange release September 23, 2013 11:40:00 AM CET

Metso publishes a demerger prospectus for Valmet Corporation

Metso Corporation's stock exchange release on September 23, 2013 at 12:40  p.m. local time

Metso Corporation will publish a demerger prospectus today that has been prepared on behalf of Valmet Corporation in order to carry out the partial demerger of Metso and to apply for the listing of Valmet's shares on the official list of NASDAQ OMX Helsinki Ltd.

Metso's Board of Directors unanimously approved a demerger plan on May 31, 2013 under which all the assets, debts, and liabilities relating to Metso's Pulp, Paper and Power businesses will transfer, without liquidation, from Metso to Valmet. On August 15, 2013, the Board unanimously decided to propose the approval of the partial demerger and the demerger plan to the Extraordinary General Meeting of Metso shareholders scheduled for October 1, 2013. The completion of the partial demerger is expected to be registered in the Finnish Trade Register on or about December 31, 2013.

Metso's Board of Directors approved the strategy and financial targets for Valmet Corporation on September 3, 2013.

Publication of the Demerger Prospectus

The Finnish demerger prospectus approved by the Finnish Financial Supervisory Authority, together with an unofficial English translation, are available on Metso's website, www.metso.com/demerger, as of today.

This release also contains certain other previously unpublished information described in the demerger prospectus. This information includes the short-term outlook for Valmet and the carve-out and pro forma historical financial information for Valmet. The terms used below are explained in detail in the demerger prospectus.

Valmet's Strategy

Valmet will focus on delivering technology and services globally to industries that use bio-based raw materials. Valmet's vision is to become the global champion in serving its customers, and its mission is to convert renewable resources into sustainable results.

Valmet's main customer industries are pulp, paper, and energy. All of these are major global industries that offer growth potential for the future. Valmet will complement its core business by applying its technology and know-how to industries beyond biomass, particularly in the energy sector.

Valmet's product and service portfolio consists of productivity-enhancing services, plant upgrades and rebuilds, new cost-efficient equipment and solutions for optimizing energy and raw material usage, and technologies for increasing the value of its customers' end-products.

Financial Targets

Metso's Board of Directors has set the following financial targets for Valmet:

  • Net sales growth to exceed market growth; 
  • EBITA margin before non-recurring items: 6 to 9 percent; 
  • Return on capital employed ("ROCE") (pre-tax): minimum of 15 percent; and 
  • Dividend payout of at least 40% of net profit. 

Valmet's Must-Win Initiatives to Achieve its Strategic Targets

Valmet will seek to achieve its strategic goals by pursuing the following Must-Win initiatives:

1)   Customer excellence

Strengthen key account management to enhance customer    growth

Drive service growth through long-term agreements and an expanded customer base


2)   Leader in technology and innovation

Develop more cost-competitive and less capital-intensive products 

Create new revenue from biotechnology solutions and a new offering


3)   Excellence in processes

Improve health and safety

Reduce quality costs

Increase savings from procurement initiatives


4)  Winning team

Strengthen high-performance culture 

Continue further globalization of our capabilities to be closer to customers


Valmet Short-term Outlook

In the Pulp and Energy business line, management expects the demand for pulp mills and rebuilds to remain satisfactory while demand for power plants based on renewable energy sources is expected by management to remain weak. In the Paper business line, management believes that structural changes in the paper industry are likely to continue and expects demand for papermaking lines to remain weak. In the Services business line, management expects demand to be satisfactory. A global cost efficiency program is being implemented to improve Valmet's competitiveness.

Valmet Carve-out Financial Information

The demerger prospectus includes Valmet's (i) audited carve-out financial statements as at and for the years ended December 31, 2012, 2011, and 2010, together with (ii) unaudited interim carve-out financial information as at and for the six months ended June 30, 2013, including unaudited comparative interim carve-out financial information as at and for the six months ended June 30, 2012.

The carve-out financial information for Valmet has been derived from Metso's audited consolidated financial statements as at and for the years ended December 31, 2012, 2011, and 2010 and unaudited consolidated interim reports as at and for the six months ended June 30, 2013 and 2012. The audited carve-out financial statements for Valmet as at and for the years ended December 31, 2012, 2011, and 2010 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union in respect of the principles for determining which assets and liabilities, income, and expenses, as well as cash flows, are to be assigned to Valmet as described in the notes to the carve-out financial statements. The unaudited interim carve-out financial information for Valmet as at and for the six months ended June 30, 2013, including unaudited comparative interim carve-out financial information as at and for the six months ended June 30, 2012, has been prepared in accordance with "IAS 34 - Interim Financial Reporting" under the same considerations as described above.

As Valmet does not comprise a group of entities under the control of a parent as defined by "IAS 27 - Consolidated and Separate Financial Statements", it has not historically prepared consolidated financial information for internal or external reporting purposes. The carve-out financial information for Valmet included in the demerger prospectus has been prepared by combining the statements of income, statements of comprehensive income, balance sheets, and cash flows of the legal entities and operating units attributable to the Pulp, Paper and Power businesses in Metso's historical consolidated financial statements and that will be carved out from Metso to form Valmet, including certain of Metso Corporation's and Metso's foreign holding companies' income and expenses, assets and liabilities, and cash flows that will either be transferred to Valmet or that have been allocated to Valmet for the purpose of the preparation of the carve-out financial information. As a result, the carve-out financial information for Valmet does not necessarily reflect what Valmet's financial status or operational result would have been had Valmet operated as an independent company and had it presented stand-alone financial information during the periods concerned. The carve-out financial information for Valmet also does not take into account any transactions that have been made or will be made in connection with the demerger or otherwise, to the extent that such transactions have been entered into after the periods covered in the carve-out financial information. Moreover, the carve-out financial information for Valmet may not be indicative of Valmet's future operational result, financial status, or cash flows.

The following table details certain carve-out information for Valmet derived from the demerger prospectus:

As at and for the six
months ended
June 30,

As at and for
 the year ended
 December 31,

2013 2012 2012 2012 2011 2010
   (restated)(1)    (restated)(1) (not restated)
(unaudited) (unaudited) (audited, unless otherwise indicated)
(EUR in millions, unless otherwise indicated)
Net sales, total 1,345 1,453 3,014 3,014 2,703 2,453
Operating profit 24.0 79.7 138.3 134.7 174.2 106.5
Profit 14 46 76 77 109 47
EBITA before non-recurring items(2)
(unaudited)
48.2 94.2 192.0 188.4 204.5 159.3
percent of net sales 3.6 6.5 6.4 6.3 7.6 6.5
Orders received (unaudited) 1,372 1,263 n/a 2,445 3,225 2,584
Order backlog (unaudited) 1,883 2,663 n/a 2,249 2,863 2,347

__________
____________
(1)   Restated due to the adoption of the revised "IAS 19 - Employee Benefits" on January 1, 2013. The restatement did not have an impact to the combined balance sheet or the combined cash flow statement.
(2)   EBITA before non-recurring items = operating profit + amortization + non-recurring items

Valmet Pro forma Financial Information

The demerger prospectus includes unaudited pro forma financial information illustrating the effects of the demerger and certain transactions related to the formation of Valmet on Valmet's operational result and financial position. The pro forma financial information has been presented as if the demerger and the transactions related to the formation of Valmet had been executed on (i) January 1, 2012, for the pro forma statements of income and pro forma statements of comprehensive income and (ii) June 30, 2013, for the pro forma balance sheet.

The unaudited pro forma financial information has been prepared for illustrative purposes only, and, because of its nature, addresses a hypothetical situation. The unaudited pro forma financial information illustrates what the hypothetical impact would have been if the demerger and certain transactions related to the formation of Valmet had been consummated at the dates assumed in the pro forma financial information and, therefore, does not represent the actual results of Valmet's operations or financial position. The unaudited pro forma financial information is not intended to provide a projection of Valmet's operational results or financial position for any future period or as at any future date.

The pro forma financial information has been compiled on a basis consistent with the IFRS standards applied by Valmet in the audited carve-out financial statements as at and for the years ended December 31, 2012, 2011, and 2010, and the unaudited carve-out financial information as at and for the six months ended June 30, 2013. The pro forma financial information is based on Valmet's unaudited carve-out financial information as at and for the six months ended June 30, 2013, and the audited carve-out financial statements as at and for the year ended December 31, 2012, restated to take account of the effect of the revised "IAS 19 - Employee Benefits" standard adopted on January 1, 2013. Furthermore, certain adjustments related to the demerger and the formation of Valmet have been made to the pro forma financial information as described in more detail in "Pro Forma Financial Information" in the demerger prospectus. The pro forma adjustments are based on available information and assumptions, and their factual effects may differ from what has been presented in the demerger prospectus. As a result, the operational results and/or financial status presented in the unaudited pro forma financial information may differ from Valmet's actual operational result and/or financial status. In addition, it should be noted that the corporate headquarters costs allocated to Valmet for the purpose of presenting the historical carve-out financial information may not necessarily represent what these costs would have been if Valmet had operated as an independent legal entity. Additional costs may be incurred by Valmet following the effective date in order for it to operate as an independent listed company, as well as from reorganizing administrative and headquarter functions.

The pro forma adjustments made to reflect the effects of the demerger and certain transactions related to the formation of Valmet are based on Valmet's unaudited interim carve-out financial information as at and for the six months ended June 30, 2013 and unaudited carve-out financial information as at and for the year ended December 31, 2012 and Management's estimate of the transactions that have been completed or are to be completed to effect the demerger and form Valmet in accordance with the Demerger Plan. The final amounts of assets and liabilities transferred to Valmet in the demerger may materially differ from those presented in the pro forma financial information, as such balances will be determined on the effective date. This could result in a significant variation compared to the operational results and financial status of Valmet presented in the pro forma financial information.

The unaudited pro forma financial information does not include all of the information required for financial statements under IFRS, and should be read in conjunction with Valmet's historical carve-out financial statements and interim carve-out financial information included in the demerger prospectus.

The following table details certain pro forma financial information for Valmet derived from the demerger prospectus:

As at and for the six
months ended June 30,
2013

As at and for the year
ended December
31, 2012

(unaudited)
(EUR in millions, unless otherwise indicated)
Net sales, total 1,345 3,014
Operating profit 27 128
Income before taxes 26 124
Amortization of intangible assets (14) (30)
Depreciation of tangible assets (28) (60)
Non-recurring items:
Capacity adjustment expenses (8) (24)
Costs related to the Demerger 0 (11)
EBITA before non-recurring items(1) 48 192
percent of net sales 3.6 6.4
Earnings per share,(2) EUR 0.12 0.55
Profit 18 82
Shares
(outstanding shares in Metso as at June 30, 2013)
149,864,206 149,864,206
Balance sheet total 2,493 n/a
Equity 847 n/a
Interest-bearing liabilities 215 n/a
Net debt (15) n/a
Gearing,(3) percent (1.7) n/a
ROCE before taxes,(4) percent 6.5 n/a
ROCE after taxes,(5) percent 4.9 n/a
Equity to asset ratio,(6) percent 37.0 n/a

(1)        EBITA before non-recurring items = operating profit + amortization + non-recurring items

(2) Earnings per share = Profit
Number of outstanding shares in Metso
(3) Gearing = Net interest-bearing liabilities x 100
Total equity
(4) Return on capital employed (ROCE) before taxes = Profit before taxes + interest and other financial expenses x 100
Balance sheet total - non-interest-bearing liabilities
(5) Return on capital employed (ROCE) after taxes = Profit + interest and other financial expenses x 100
Balance sheet total - non-interest-bearing liabilities
(6) Equity to asset ratio = Total equity x 100
Balance sheet total - advances received

Disclaimer

This release does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction. In particular, no securities are being offered or sold, directly or indirectly, in or into the United States pursuant to this release and no shares or other securities of Valmet have been, or will be, registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state of the United States and, accordingly, may not be offered or sold, directly or indirectly, in or into the United States, unless registered under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act and in compliance with any applicable state securities laws of the United States.

The distribution of this release may, in certain jurisdictions, be restricted by law. This release may not be sent to any jurisdiction in which it would not be permissible to do so.

This release includes forward-looking statements within the meaning of the securities laws of certain applicable jurisdictions. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this release, including, without limitation, those regarding the demerger plan and its execution. By their nature, forward looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. Metso cautions you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions and that Valmet's actual results of operations, including its financial condition and liquidity and the development of the industries in which Valmet and the members of its group operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this release.

Metso's pulp, paper and power professionals specialize in processes, machinery, equipment, services, paper machine clothing and filter fabrics. Our offering and experience cover the entire process life cycle, including new production lines, rebuilds, and services.

As of January 2014, Metso's Pulp, Paper and Power business will serve its customers with an even more focused and competitive approach as an independent, listed company, Valmet Corporation.*

*Pending the approval of the Metso EGM to be held on October 1, 2013, and registration of the demerger.

www.metso.com/pulpandpaper, www.metso.com/energy
www.twitter.com/metsopulppaper, www.twitter.com/metsoenergy


Metso is a global supplier of technology and services to customers in the process industries, including mining, construction, pulp and paper, power, and oil and gas. Our 30,000 professionals based in over 50 countries contribute to sustainability and deliver profitability to customers worldwide. Metso's shares are listed on the NASDAQ OMX Helsinki Ltd.

www.metso.com, www.twitter.com/metsogroup

Further information, please contact:

Pasi Laine, President and CEO, Valmet Coporation*, tel. +358 20 484 3200

Harri Nikunen, CFO, Metso Corporation, tel. +358 20 484 3010

Metso Corporation

Harri Nikunen

CFO

Juha Rouhiainen

VP, Investor Relations

Distribution:

NASDAQ OMX Helsinki Ltd

Media

www.metso.com