Metso to continue its transformation by adopting a new strategy focusing on growth in its higher-margin businesses
Metso Corporation's stock exchange release on July 31, 2014 at 12:00 noon local time
Metso Corporation has decided on a new strategy and a new operating model, designed to drive growth in the company's core businesses and strengthen its financial performance and value creation. This will also help Metso continue its transformation into a services and products-focused industrial player with attractive structural growth and high margin opportunities across its portfolio of services, products, and system deliveries.
Under the new strategy, Metso's core customer industries will be mining, oil & gas, and aggregates. Metso's goal is to strengthen its position as the leading technology and services provider for end-to-end minerals processing and to become a leader in flow control within the oil & gas and mining industries.
As part of its new strategy, Metso will study strategic alternatives, including potential divestment, for its current Process Automation Systems business, which primarily serves the pulp, paper, and power industries.
Metso's new strategy and operating model will underpin its transformation into a focused company with businesses that are largely driven by its customers' production activities. Metso's goal is a business model, where more than 50% of activities consists of services, products account for a sizable proportion of net sales, and system deliveries concentrate on proprietary technology that supports its future services business. This type of portfolio will offer the opportunity for positive long-term profitability and resilience to the cyclicality typical of Metso's customer industries.
Increased ambition level
Metso's higher level of ambition is also reflected in the company's the new financial targets:
- net sales growth exceeding market growth
- EBITA margin (before non-recurring items) exceeding 15% within the next three years,
- return on capital employed (ROCE) before taxes of at least 30%
Metso's growth over the short term will be driven by opportunities in services, flow control, and aggregates, which together represent about 80% of the company's total net sales. Longer-term growth is also anticipated in the mining equipment business.
Services growth will be achieved through new products, both in spare and wear parts, as well as in performance services. Metso will also continue to expand its offering and develop an ever-stronger presence close to its customers.
In flow control, the best opportunities are seen in continued expansion of the addressable market in oil & gas, as well as in mining flow control. Metso's current valve and pump offering offers a good position to grow in both of these markets.
In aggregates, we will continue to leverage our strong position in the global market and the ongoing growth being driven by a variety of megatrends. Our initiatives will prioritize developing our footprint, improving profitability, as well as developing our mid-market offering and global distribution.
The mining capital business faces lower demand over the short term, while its mid- and long-term prospects are supported by megatrends that are set to increase demand for more efficient technologies and process know-how. Metso's short-term focus here will be to further improve the competitiveness of its offering and to develop its operating model for higher operational and capital efficiency. Development work on intelligent solutions aimed at improving customers' process efficiency in selected areas of the minerals processing offering will also be accelerated.
Metso will continue to develop leaner operating models with an even stronger customer focus, achieve cost savings, improve its business model by growing its higher-margin products and services businesses, and improve its capital efficiency across the board. In addition, operational excellence will be driven by developing common global platforms, processes, and operational approaches in sales and support functions.
Metso's policy of paying at least 50% of annual earnings per share as dividend will remain unchanged. Metso will also aim to maintain a balance sheet structure that supports its current investment grade credit rating.
To ensure efficient execution of the new strategy, Metso will update its operating model to include three business areas:
- Services: providing primarily minerals customers with full-scope services solutions, ranging from spare and wear parts all the way to high-value adding performance services
- Flow Control: responsible for developing and growing both the valve offering mainly for oil & gas customers as well as pumps for mining customers by pursuing new opportunities in these markets
- Minerals: responsible for providing minerals processing solutions for mining customers and crushing and screening products for aggregates customers, as well as system deliveries
The new operating model will enable a clear improvement in management focus in each business, all of which have distinct opportunities and challenges, as well as different business models. In addition, it will enable Metso to react more rapidly to market demand and execute its plans more effectively, ultimately supporting profitable growth.
Metso will report its financial performance externally in two segments: Minerals and Flow Control.
The new operating model and organization will be effective as of October 1, 2014, after which the Metso Executive Team will consist of Matti Kähkönen, President and CEO; Harri Nikunen, EVP & CFO, Deputy to the CEO; João Ney Colagrossi, President, Minerals; Juha Silvennoinen, President, Services; Perttu Louhiluoto, President, Flow Control; Merja Kamppari, SVP, HR; and Simo Sääskilahti, SVP, Strategy and Business Development.
President and CEO Matti Kähkönen:
"Our new strategy, together with our new operating model, marks the beginning of a new era for Metso. In essence, we will continue to move ahead with our transformation into a focused company, with businesses that offer growth potential with higher margins. This will translate into higher profitability and better returns - and ultimately greater value for our shareholders. Our customers will also benefit from a closer relationship with us and better access to our full-scope services offering, delivery capability, and market-leading process and application know-how. They will also be able to rely on us for reliable, leading technologies and a competitive offering - all delivered by highly competent and committed industry professionals worldwide every day."
Metso is a leading process performance provider, with customers in the mining, oil and gas, and aggregates industries. Metso's cutting-edge services and solutions improve the availability and reliability in minerals processing and flow control, providing sustainable process and profit improvements. Metso is listed on the NASDAQ OMX Helsinki, Finland. In 2013, Metso's net sales totaled EUR 3.8 billion. Metso employs approximately 16,000 industry experts in 50 countries. Expect results.
Further information, please contact:
Matti Kähkönen, President and CEO, Metso Corporation, tel +358 20 484 3001
VP, Investor Relations
NASDAQ OMX Helsinki Ltd