Metso Corporation's efficiency improvement program is proceeding in all businesses, and a part of the efficiency improvement measures are already at the implementation stage. The target is to streamline the long term cost structure and accelerate profitability improvement. The program aims at an annual result improvement of approximately EUR 100 million, of which Metso Paper will account for EUR 30-40 million, Metso Minerals for EUR 50-60 million and Metso Automation for EUR 10 million.
In response to the changes in its business environment, Metso is renewing its operating model. In Europe and North America its operations will focus more clearly to maintenance and aftermarket services, process improvements and machine rebuilds. At the same time, operations will be strengthened on new, growing markets, such as China and South America. It is estimated that in the next few years the majority of the new pulp and paper making as well as minerals processing capacity will be built in these areas. The measures also target increased flexibility to respond to fluctuations in demand through reductions of Metso's in-house manufacturing capacity and closer manufacturing cooperation with external partners.
Metso Paper initiated negotiations to reduce approximately 300 employees in the Nordic countries in the beginning of June 2003. The negotiations have mostly been concluded, resulting in the reduction of approximately 200 employees in Finland through dismissals and other measures by June 2004. In Sweden, negotiations resulted in a reduction of approximately 100 employees by June 2004. These measures target an approximately EUR 11 million annual cost saving with an estimated nonrecurring cost of EUR 6 million.
In addition, Metso Paper has initiated an analysis of measures, such as outsourcing, to decrease its in-house manufacturing capacity in Europe to correspond to the long term demand outlook. Metso Paper estimates that it will need significantly less in-house manufacturing capacity in Europe in the future due to fluctuations in demand and changes in the focus of the customers' investment activity.
In North America the preparations initiated by Metso Paper in June to reduce approximately 300 employees from various parts of the organization are proceeding. The first decisions on personnel reductions will be made by mid September.
At Metso Minerals, the measures targeting a streamlined cost structure and improved operational efficiency will mainly focus on crushing and screening and minerals processing businesses, in which markets are suffering from over-capacity. The goal is to improve the operational efficiency in the United States and Europe through reorganizing production, closing down inefficient units and concentrating operations into more cost-efficient units. First decisions concerning these plans will be made by mid September.
The program also aims to streamline the cost structure of the administration, as well as the sales and service network, especially in North America and certain European countries.
In addition to the personnel reductions carried out in 2002, Metso Automation has decided to further streamline its operations, initiating measures to reduce approximately 140 employees in Finland, North America and its global sales network. The nonrecurring cost of these reductions is estimated at EUR 5 million while the annual savings generated will be approximately 10 million.
Metso Paper's foundries in Jyväskylä, Finland, and Karlstadt, Sweden, and Metso Minerals' foundry in Tampere, Finland, will be merged and operationally transferred to the Metso Ventures business area as of October 1, 2003. Metso Ventures is a development unit for businesses that serve the Corporation's other businesses. It includes units under strategic development and potential future businesses.
The goal is to investigate future development options for the foundries in Jyväskylä, Karlstad and Tampere. The annual combined invoicing of these foundries is approximately EUR 70 million, of which approximately 60 percent derives from customers outside Metso. The foundries employ approximately 600 people.
The expenses resulting from the efficiency improvement program
The efficiency improvement program is estimated to result in nonrecurring expenses of approximately EUR 80 million. They will be booked during the second half of 2003, and therefore the Corporation's result will be significantly lower than in 2002. In accordance with the interim review for January-June 2003, due to the booking of these nonrecurring expenses Metso Corporation's full year income before extraordinary items and taxes is estimated to be negative.
Metso Corporation is a global supplier of process industry machinery and systems, as well as know-how and aftermarket services. The corporation's core businesses are fiber and paper technology (Metso Paper), rock and mineral processing (Metso Minerals) and automation and control technology (Metso Automation). In 2002, the net sales of Metso Corporation were EUR 4.7 billion and the personnel totaled approximately 28,500. Metso Corporation is listed on the Helsinki and New York Stock Exchanges.