Measures to improve profitability
Several programs aiming at streamlining the cost structure and improving profitability were underway in Metso in 2003. These were a Corporation-wide efficiency improvement program, a materials management development program, and projects for integrating administrative functions.
The efficiency improvement program aims to reduce fixed costs and improve the annual profit by over EUR 100 million. Of this Metso Paper will account for almost EUR 40 million, and Metso Minerals for just over EUR 50 million. Metso Automation will account for EUR 10 million and Metso Ventures for EUR 5 million. The re-evaluation of the role of Metso's Corporate Headquarters is expected to result in savings of around EUR 10 million.
The efficiency improvement program proceeded as planned in the second half of 2003. In 2003 Metso Paper decided to reduce jobs in Europe and North America by about 630. In certain units in Finland, outsourcing of components' manufacturing has either been decided on or is being reviewed. These arrangements will affect some 350 jobs. An organization previously oriented for new equipment production is being adapted for the prevailing market by emphasizing the aftermarket and maintenance business.
Metso Minerals commenced measures to reduce costs and over-capacity in Europe and the USA. The manufacture of some products will be relocated to China and Brazil, while the manufacture of other products will be discontinued. The global sales and service network was reorganized for more efficiency. In Metso Minerals these arrangements are estimated to affect approximately 600-670 jobs.
Metso Automation decided to reduce about 140 jobs in Finland, North America and in its global sales network.
Metso Panelboard, which is a part of Metso Ventures, will combine the operations of its two German units.
In June 2003, Metso launched a materials management development program aimed at creating substantial cost savings in the next few years by rationalizing purchasing. Purchases amount to EUR 2.5 billion annually, which is more than half of Metso's net sales. Cost savings are targeted by taking advantage of volume benefits in the global markets, improving efficiency, increasing cooperation and transparency between businesses, and including purchasing in each business area's strategy and target setting.
The measures commenced in 2002 to reduce Metso's administrative costs were continued in 2003 by integrating back office-related functions. As a result, the Jyväskylä and Tampere service centers were opened in Finland in September. A North American financial administration service center in Montreal, Canada, is due to start in 2004.