Metso and profitable growth

Transcription

1 Metso and profitable growth Roadshow in Vienna November, 20, 2012 Juha Rouhiainen, VP, Investor Relations Marja Mäkinen, Investor Relations Manager

2 Forward looking statements 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. 2

3 Presentation contents 1. Metso at a glance 2. Strategic focus 3. Financial performance 4. Order backlog, market outlook and guidance 5. Summary 3

4 Metso at a glance

5 Metso is a global supplier of sustainable technologies and services Global player with leading market positions Well positioned on global megatrends and to benefit faster than global GDP growth Global reach with strong presence in the fast growing emerging markets Large installed base and solid revenue and profit stream from services business Strong focus on environmental solutions and sustainable technologies Solid financial performance and strong balance sheet Net sales and EBITA-%* EUR million % Net sales EBITA-%* *before non-recurring items 5

6 Metso investor proposition Why to invest in Metso? Leverage to economic growth by exposure to key industries Mining has strong outlook and is prioritized in our capital allocation Energy, Oil and Gas offer growth potential in our selected niche areas Technological leadership in Pulp and Paper Significant exposure to service business growth Close to half of net sales currently coming from services Large installed base in all core businesses Ambitious target to grow the services business further Expanding offering to maintenance, process improvements, expert services, etc. Significant exposure to emerging markets growth 50% of the current net sales and majority of the future growth from emerging markets Long-standing presence in most growing markets Strong financial position Relatively asset-light operating model yields strong cash flow Competitive dividend payout 6

7 A balanced business portfolio with strong market positions By customer industry By type By market area 5% 6% 6% 26% 30% 20% 45% 25% 23% 10% 3% 7% 11% 13% 35% 17% 18% Mining Construction Power Oil and gas Recycling Pulp Paper Service business Project business Product business Based on management estimate. Finland Other Nordic countries Other European countries North America South and Central America Asia-Pacific Africa and Middle East Splits based on 2011 net sales of EUR 6.6 billion. 7

8 Metso businesses Strong positions already, aspiring more growth Mining and Construction Automation Pulp, Paper and Power Strong market position and global market leadership in number of areas Long and deep exposure to the fast growing industry Selective M&A growth Strong in emerging markets Large share of services Predominantly supplying big mining players Improving supply chain management Niche player with strong positions Very strong megatrends driving long-term growth Room for M&A growth Europe and North America focused; building capabilities in Europe and selectively exploiting opportunities in North America and in the emerging markets Very strong global market position Potential for good near-tomedium term growth in China and Latin America Predominantly organic growth Growing services business Further margin improvement Ongoing transfer of resources to China and Brazil 8

9 Our global presence Developed markets Emerging markets Metso s operating countries Net sales, EUR million (2001) Net sales, EUR million (2011) Share of Metso s net sales, % Share of the total amount of personnel 2001, % Share of the total amount of personnel 2011, % 9

10 Health, safety and environment (HSE) is an essential element in all Metso s activities We are committed to taking personal responsibility for our own safety and for the safety of others, and we believe that all incidents can be prevented. We always emphasize our high HSE standards of conduct when dealing with customers, suppliers and other stakeholders. We aspire to minimize our environmental footprint throughout the whole value chain. 10

11 Strategic focus

12 Good development in services Orders by type in Q1-Q3/2012 Services orders by segment EUR million 3,000 Strategic priority #1 Services business 2,000 49% 51% Product and project business 1,000 Services net sales EUR million 3,500 3,000 2,500 2,000 1,500 1,000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q Services net sales, rolling 12 months 12 0 Q1-Q3 Q1-Q Mining and Construction Automation Pulp, Paper and Power Services development in Q3/2012 Mining and Construction: orders up by 24%, net sales up by 17% Automation: orders up by 20%, net sales by 13% Pulp, Paper and Power: orders increased by 10%, net sales by 4% Net sales growth during the last 12 months: 14% (annual target >10%)

13 Extended presence in emerging markets Net sales in emerging markets Orders received in Q1-Q3/2012 EUR million 4,000 Strategic priority #2 3,500 3,000 2,500 2,000 54% 46% Emerging markets Developed markets 1,500 1, Q Q Q Q Q Q Q Q Q Net sales in EM, rolling 12 months Services in emerging markets EUR million 1,400 1,300 1,200 1,100 1, Q Q Q Services net sales in EM, rolling 12 months All BRIC countries were among the top 10 in Q3 orders received Eastern Europe was strong in Mining and Construction Services in emerging markets have grown by 14%* through larger installed base and extended presence Share of emerging markets in services orders was 40% in Q3/2012 *) last 12 months

14 Growth in the mining business Strategic priority #3 Mining order intake EUR million Q3/2012 mining orders by market area 1,200 1,000 18% % % Q Q Q Q Q Q Q Q % Mining, services Mining, capital Exceptionally large orders Mining order backlog EMEA North America South and Central America Asia Pacific EUR million 2,000 Some softening in capital demand experienced towards the end of the quarter 1,600 1, Q Q Q Q Q Q Q Q Strong development in services: - three-year extension of services contract with Boliden in Sweden - more service hubs to be opened - investment in mill linings manufacturing capacity More smaller orders than last year Services backlog Capital backlog 14

15 Management incentive plans Annual bonus Plan consists of a) funding pool (Group EBITA and ROCE or working capital parameter) b) individual performance targets Long-term share-based incentive plan One-year performance period (2012) followed by a two-year vesting period (2013 and 2014) Reward is based on the net sales growth of the services business, return on capital empolyed (ROCE) before taxes, and earnings per share (EPS) The maximum reward for 2012 will correspond to approximately 450,000 Metso shares, of which a maximum of approximately 95,000 to the Metso Executive Team No diluting effect 15

16 Financial performance

17 Services orders strong, capital orders moderate EUR million 3,000 2,883 2,500 2,000 1,500 1,365 1,366 1,671 1,409 1,498 1,847 1,918 1,313 1,920 1,735 1,511 1, ,020 1, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Services orders Capital orders Exceptionally large orders Order level was reasonable, given the lack of large project orders in Pulp, Paper and Power Services orders increased 16% year-on-year Positive 4%-point benefit from currency rates 17

18 Net sales increased by 12% EUR million 2,500 2,000 1,500 1,220 1,247 1,196 1,353 1,170 1,370 1,325 1,687 1,444 1,567 1,561 2,074 1,755 1,897 1,754 1, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Services net sales Capital net sales All segments grew, Mining and Construction in particular Capital net sales increased by 14% and services by 11% Positive 5%-point benefit from currency rates Growth during the last 12 months was 20% (annual CAGR target >10%) 18

19 Consistent EBITA* development EUR million % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Mining and Construction performed well Automation good but slightly down y-o-y Pulp, Paper and Power well in line with targets Metso excl. non-core businesses EBITA * EBITA% * Q3/2012 Q3/2011 Target range % % % *) before non-recurring items

20 EBITA* and margin by segment EUR million Q Q Change,% 2011 Mining and Construction % of net sales Automation % of net sales Pulp, Paper and Power % of net sales Metso total % of net sales % of net sales excluding non-core businesses** *) before non-recurring items **) Recycling and Valmet Automotive

21 Mining and Construction supported EBITA* growth Q1-Q3/2012 vs. Q1-Q3/2011 EUR million Q1-Q Mining and Construction Automation Pulp, Paper and Power Others Q1-Q *) before non-recurring items

22 Mining and Construction continues to improve EUR million 3,500 3,000 2,500 2,000 1,500 1, % Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Services net sales, rolling 12 months Capital net sales, rolling 12 months EBITA% *, rolling 12 months 0 Mining has grown rapidly; construction has been stable Strong growth in services EBITA% * target range 22 *) before non-recurring items

23 Mining and Construction continues to improve EUR million Q3/2012 Q3/2011 Change % Q1-Q3/2012 Q1-Q3/2011 Change % 2011 Orders received ,512 2, ,464 Services orders received ,293 1, ,497 Net sales ,424 1, ,760 Services net sales , ,378 % of net sales EBITA* % of net sales Return on capital employed** Q3/2012 vs. Q3/2011 Strong sales growth in both services and capital businesses Gross margins were stable, volumes supported EBITA% growth to 12.3% Solid backlog with no cancellations or exceptional postponements ROCE increased to 30.0% 23 *) before non-recurring items **) excluding cash and other non-operative balance sheet items, annualized

24 Automation stable development EUR million % Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Services net sales, rolling 12 months Capital net sales, rolling 12 months EBITA% *, rolling 12 months 0 Improved performance at Flow Control, driven by growth in oil & gas and stronger operations 2011 was exceptionally strong for Process Automation Systems EBITA% * target range 24 *) before non-recurring items

25 Automation stable development EUR million Q3/2012 Q3/2011 Change % Q1-Q3/2012 Q1-Q3/2011 Change % 2011 Orders received Services orders received Net sales Services net sales % of net sales EBITA* % of net sales Return on capital employed** Q3/2012 vs. Q3/2011 Solid sales growth in both services (13%) and capital (19%) businesses EBITA% was 13.8%, somewhat down from Q3/2011 Performance of the Flow Control business is continuing to improve ROCE remains good at 30.5% 25 *) before non-recurring items **) excluding cash and other non-operative balance sheet items, annualized

26 Pulp, Paper and Power in the target range EUR million 3,500 3,000 2,500 2,000 1,500 1, % Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Services net sales, rolling 12 months Capital net sales, rolling 12 months EBITA% *, rolling 12 months 0 Services business has grown steadily Business mix is impacting performance Paper has weakened during the last 12 months EBITA% * target range 26 *) before non-recurring items

27 Pulp, Paper and Power in the target range EUR million Q3/2012 Q3/2011 Change % Q1-Q3/2012 Q1-Q3/2011 Change % 2011 Orders received ,767 2, ,225 Services orders received ,145 Net sales ,089 1, ,703 Services net sales ,048 % of net sales EBITA* % of net sales Return on capital employed** Q3/2012 vs. Q3/2011 Services orders and net sales increased EBITA% was 7.0%, down from the strong figure seen in Q3/2011 Under-absorption and project performance had a negative impact ROCE good at 27.5% 27 *) before non-recurring items **) excluding cash and other non-operative balance sheet items, annualized

28 Strong capital structure and liquidity position Q1-Q3/2012 Q1-Q3/2011 Net working capital / net sales, % Free cash flow, EUR million Cash conversion, % Net interest-bearing liabilities, EUR million Gearing at the end of the period, % Return on capital employed (ROCE) before taxes, annualized, % Equity to assets ratio at the end of the period, %

29 Net debt and net working capital Net debt and gearing Net working capital and NWC to net sales EUR million % 80 EUR million 800 % , Q Net debt Gearing 2011 Q Q Q Net working capital NWC / Net sales 0 29

30 Order backlog, market outlook and guidance

31 Healthy order backlog of EUR 5.0 billion EUR million 7, , , , ,000 2,000 1, Around 42% of deliveries for 2012 consist of services orders Q Q Mining and Construction Automation Pulp, Paper and Power Other Total backlog Deliveries in 2012 Deliveries after

32 Market outlook Relatively stable demand, but increasing uncertainties Long-term Positive for capital and services Positive in emerging markets; developed markets flat Short-term Mining 32% of net sales 50% service intensity Good demand in capital business but somewhat softer quarters expected. Services excellent. Construction 11% of net sales 40% service intensity Satisfactory demand for capital and services. Automation 11% of net sales 45% service intensity Positive for oil & gas customers; pulp & paper flat Good demand in oil & gas, softer in pulp & paper. Services good. Power 11% of net sales 30% service intensity Paper, board, tissue 21% of net sales 50% service intensity Pulp 9% of net sales 40% service intensity Long-term Positive, partly subject to legislation Demand for board and tissue growing; other grades flat or down Positive due to demand for. packaging board, tissue and new applications Short-term Satisfactory demand for projects and services. Weak demand for paper and board machines. Services good. Good demand for rebuilds and services. Pulp mill market activity satisfactory. 32 N.B. Shares of Metso s net sales in January - September 2012

33 Guidance for 2012 In line with our earlier statement, we estimate that: Our net sales for 2012 will grow compared to 2011, and that Our result (EBITA before nonrecurring items) for 2012 will improve compared to 2011 The estimates for our financial performance in 2012 are based on Metso s current market outlook, strong order backlog for 2012 and current business scope, as well as on foreign exchange rates remaining similar to those in September

34 Financial targets to drive shareholder value Target Sales growth Profitability Segment profitability Mining and Construction Automation Pulp, Paper and Power Capital efficiency Capital structure Description >10% average annual growth (CAGR) >10% services business net sales growth annually EPS growth higher than sales growth EBITA-% (before non-recurring items) 10% - 15% 11% - 16% 6% - 9% >20% ROCE before tax (excl. impact of major acquisitions) At least 50% of EPS as annual dividend or in other forms of capital distribution Credit rating: solid investment grade Targets established on November 15,

35 Summary

36 Fit for the future Q3 summary: - satisfactory order intake - strong services orders - consistent net sales growth and overall performance Healthy backlog, with EUR 3.2 billion to be delivered after 2012 Strong balance sheet Good strategy for driving profitable growth Strategic priorities: services, emerging markets and mining 36

37 Metso s financial statements and other financial information available on Metso s website at: Metso Corporation - Investor Relations Fabianinkatu 9 A, P.O. Box 1220, FIN Helsinki, Finland metso.ir@metso.com Tel Mr. Juha Rouhiainen, VP, Investor Relations Tel juha.rouhiainen@metso.com Ms. Marja Mäkinen, Investor Relations Manager Tel marja.makinen@metso.com Ms. Emilia Peltola, Financial Communicator Tel emilia.peltola@metso.com Ms. Tanja Mäkinen, IR Coordinator Tel tanja.makinen@metso.com Follow us at Annual Report online LinkedIn Twitter: Mobile: m.metso.com 37

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39 Mining and Construction Products and services Full-scope solutions for mining industry Grinding mills, grinding solutions Crushers, crushing solutions Process equipment, like pumps, filters, thickeners, separation equipment Mobile crushers and screens Bulk materials handling solutions, conveyors Expert and maintenance services Spare and wear parts Customers Mining and construction industry (quarries and contractors) Main competitors Mining industry: FLSmidth, Outotec, ThyssenKrupp, Sandvik, Weir, Citic Construction industry: Terex, Sandvik, Astec Services business: Many local and regional competitors 50% Services, % of net sales Net sales in 2011, by customer industry: EUR 2,760 million Mining: 71% Construction: 29% Appr. 11,000 employees 39

40 Mining and Construction Business model Customer base Mining Geographically defined, several major and dozens of big players; long-term focus Construction Fragmented segment, few large and thousands of small players; short-term focus Sales & service 90% Metso direct sales and service network 70% Metso direct sales and service network 10% Dealers in commodity products and certain markets 30% Authorized dealers in contractor segment Manufacturing 30% Metso production of belts, pumps and core components 70% Metso production of equipment, parts and components 70% Outsourcing of Metso-engineered equipment and component manufacturing 30% Subcontracting components, castings and assembly, outsourcing some Metsoengineered components 40

41 Automation Products and services Process automation and information management application networks and systems Process measurement systems and analyzers Control, on-off and emergency shutdown (ESD) valves and intelligent positioners and condition monitoring Expert and maintenance services, spare and wear parts Customers Oil and gas industry, pulp and paper industry Main competitors Automation systems: ABB, Honeywell, Invensys Valves: Emerson Process Management, GE, Flowserve 48% Services, % of net sales Net sales in 2011, by customer industry: EUR 770 million Oil and gas: 60% Pulp and paper: 40% Appr. 3,800 employees 41

42 Automation Business model Customer base Automation Global large corporations and regional players. Long-term focus. Sales & service >90% Metso direct sales and service network <10% A few agents in small markets Product supply 70% In-house production in key components and assemblies 30% Externally purchased materials, components, engineering, services 42

43 Pulp, Paper and Power Products and services Chemical pulp industry equipment and production lines Mechanical pulp industry equipment and production lines Paper and board machines, comprehensive production lines Tissue machines, comprehensive production lines Power boiler plants and chemical recovery boilers, evaporators, flue gas cleaning and environmental systems, power boiler rebuilds Paper, pulp, energy and mining industry fabrics and filter fabrics Expert and maintenance services Spare and wear parts Customers Mechanical and chemical pulp producers Paper, tissue and board producers Power generation industry Main competitors Pulp: Andritz, GL&W Paper and board: Voith, Andritz Tissue: Andritz, Voith, Celli, Kawanoe Suki and several smaller companies Energy industry and pulp and paper industry: Foster Wheeler, Andritz, Babcock & Wilcox Fabrics: Albany, Xerium, Voith, AstenJohnson Services business: Local and regional companies 39% Services, % of net sales Net sales in 2011, by customer industry: EUR 2,703 million Pulp: 23% Paper: 51%, Power: 26% Appr. 12,500 employees 43

44 Pulp, Paper and Power Business model Customer base Fiber Geographically defined, several major and dozens of big players; long-term focus Paper & Board Fragmented segment, few large and thousands of small players; short-term focus Power Some large corporations and hundreds of regional players. Long-term focus. Sales & service >95% Metso direct sales and service network >95% Metso direct sales and service network 100% Metso direct sales and service network <5% A few agents in smalll markets <5% A few agents in small markets Product supply 20% In-house production in key components and assemblies 30% In-house production in key components and assemblies 10% In-house production in key components and assemblies 80% Externally purchased materials, components, engineering, services 70% Externally purchased materials, components, engineering, services 90% Externally purchased materials, components, engineering, services 44