News

Highlights of the third quarter of 2010
 

• New orders worth EUR 1,409 million were received in July–September, i.e. 37 percent more than in the comparison period (EUR 1,031 million in Q3/2009).
• At the end of September, the order backlog was up by 21 percent on the end of December 2009, and totaled EUR 4,144 million (EUR 3,415 million at December 31, 2009).
• Net sales increased by 11 percent on the comparison period, and were EUR 1,325 million (EUR 1,196 million in Q3/2009).
• Earnings before interest, tax and amortization (EBITA), before non-recurring items, were EUR 128.6 million in July–September, i.e. 9.7 percent of net sales (EUR 134.3 million and 11.2% in Q3/2009).
• Operating profit (EBIT) was EUR 103.5 million, i.e. 7.8 percent of net sales (EUR 114.1 million and 9.5% in Q3/2009).
• The EBIT includes as a whole EUR 10.5 million in negative non-recurring items (EUR 9.7 million in negative non-recurring items in Q3/2009).
• Earnings per share were EUR 0.45 (EUR 0.44 in Q3/2009).
• Free cash flow was EUR 122 million (EUR 249 million in Q3/2009).
• Return on capital employed (ROCE) before taxes was 13.0 percent (11.1% in Q3/2009).

”I am pleased with our solid performance. Our underlying operational performance has improved quarter on quarter this year; underlying EBITA margin was 7.5 percent in the first quarter, 9.1 percent in the second quarter and now 9.7 percent in this quarter. Another strong area is our services business which continues to develop strongly: orders have grown this year about 38 percent. I am also pleased with our good free cash flow for the quarter. Our strong balance sheet gives us a solid base to develop Metso further”, comments Metso’s President and CEO Jorma Eloranta.

“We anticipate that the gradual recovery will continue in most of our customer industries, but the picture is mixed. Out of our new orders 56 percent came from the emerging markets in the third quarter and the outlook remains strong. In Europe and North America demand outlook is more uncertain. There are also differences between customer industries: for example demand in the mining industry continues strong while in the power market final decision-making in new projects is taking quite a long time despite the favorable long-term demand outlook for renewable energy.

Our guidance for 2010 is intact. We have also given our estimate of 2011 development. Our orders received for the first nine months of this year exceed the net sales for the same period by 15 percent. Based on this and assuming that the gradual recovery of the global economy will continue we estimate that in 2011 our net sales will grow about 10 percent compared to this year and EBITA before non-recurring items will improve.“

Metso’s key figures

EUR million	Q3/ 2010	Q3/ 2009	Change %	Q1-Q3/ 2010	Q1-Q3/ 2009	Change %	2009
Net sales	1,325	1,196	11	3,865	3,663	6	5,016
Net sales of services business	615	511	20	1,738	1,565	11	2,102
% of net sales	47	43		46	43		42
Earnings before interest, tax and amortization (EBITA) and non-recurring items	128.6	134.3	-4	341.2	311.0	10	399.0
% of net sales	9.7	11.2		8.8	8.5		8.0
Operating profit	103.5	114.1	-9	313.0	238.6	31	293.6
% of net sales	7.8	9.5		8.1	6.5		5.9
Earnings per share, EUR	0.45	0.44	2	1.21	0.88	38	1.06
Orders received	1,409	1,031	37	4,446	2,993	49	4,358
Orders received of services business	672	456	47	2,000	1,450	38	1,937
Order backlog at end of period				4,144	3,340	24	3,415
Free cash flow	122	249	-51	321	449	-29	717
Return on capital employed (ROCE) before taxes, annualized, %				13.0	11.1		10.0
Equity to assets ratio at end of period, %				37.2	33.2		35.7
Gearing at end of period, %				21.3	51.1		32.5

Short-term outlook

We anticipate that the gradual recovery will continue in most of our customer industries. The growing budget deficits in several European countries and the United States and the uncertainty caused by fluctuations in the exchange rates may, however, slow down the recovery of the markets particularly in Europe and North America. In the emerging markets the outlook continues strong. The improving capacity utilization rates of our customer industries are supporting our services business, and most of our customers are expected to gradually regain their confidence to increase the level of investments in new and existing capacity.

The number of quotations for equipment and projects from mining companies has strongly increased since the beginning of this year. This has had a clear positive impact on our orders and we expect this to continue during the rest of 2010 and first half of 2011. Due to the strengthening demand for minerals and our large installed equipment base, we expect demand for our mining services to continue strong.

We anticipate that demand for equipment used in aggregates production by the construction industry will continue to be weak in Europe and in North America during the rest of 2010 and the first half of 2011. In the Asia-Pacific region and Brazil, infrastructure construction projects are maintaining good demand thanks to continuing strong economic growth. We estimate that demand for our services business for the construction industry will remain satisfactory.

Demand for power plants that utilize renewable energy sources is expected to be good in Europe and North America in 2010 and first half of 2011. Several European countries and the United States have published targets to increase the use of renewable energy and this is expected to support demand for our power plant solutions fuelled by biomass and waste. However, uncertainty in the financial markets and pending policies over support mechanisms for renewable energy may delay final decisions in some of the projects under negotiations. Demand for the power plant services business is expected to be good.

We estimate that demand for our automation products will continue to get stronger during this year and first half of 2011, as the oil, gas and petrochemical industries increase their investments due to the improvement in energy prices and demand. Demand for automation products in the pulp and paper customer industry is also expected to develop favorably. Demand for our services business for automation solutions is expected to be good.

We expect the demand for metal and solid waste recycling equipment to be satisfactory. Demand for recycling equipment services is expected to continue improving over the coming quarters as the capacity utilization rates of our customers’ plants and equipment improve.

Demand for new fiber lines, rebuilds and pulp mill services has clearly recovered from the low levels of the past few years, and we expect the fiber equipment market to continue to be active this year and into 2011. Demand for paper and board lines is expected to be satisfactory and for tissue lines good in 2010 and first half of 2011. We expect the improved capacity utilization rates of the paper and board industry to boost the demand for our services business.

As earlier, we estimate that our net sales in 2010 will grow about 10 percent from the EUR 5 billion level of 2009, and that our profitability will be satisfactory. Our estimate is based on our net sales of EUR 3.9 billion for the first nine months and on the order backlog at the end of September, out of which about EUR 1.6 billion is estimated to be recognized as net sales during 2010, as well as on the expectation that the recovery of the global economy will continue.

Our orders received for the first nine months of this year exceed the net sales for the same period by 15 percent. Based on this and assuming that the gradual recovery of global economy will continue we estimate that in 2011 our net sales will grow about 10 percent compared to this year and EBITA before non-recurring items will improve.

The estimates for our financial performance in 2010 and 2011 are based on Metso’s current market outlook and business scope as well as foreign exchange rates similar to September 2010.


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