- Email: [email protected]
Metso Oyj, Finland
September 2006
Pump Industry Analyst
Metso Oyj, Finland Profile Metso Oyj is a global engineering and technology corporation headquartered in Helsinki, Finland, that operates primarily in the pulp and paper, rock and minerals processing and energy industries. Metso has four business areas: Metso Paper, Metso Minerals, Metso Automation and Metso Ventures. Metso Minerals supplies rock and minerals processing systems to its customers in mining, aggregates production, quarries and construction. Metso Minerals’ business lines include crushing and screening; minerals processing; wear protection and conveying; and recycling. Metso Minerals’ slurry pumps are heavy and robust centrifugal pumps, capable of handling tough and abrasive duties. Pump brands include Metso, Svedala, Denver, Sala, Orion and Thomas.
COMMENT Thanks to efficiency improvement measures, outsourcing and the development of a subcontractor network during the past few years, Metso has made its cost structure more competitive and flexible. Building on these stronger foundations, in the 2006–2008 strategy period, Metso is targeting a 10% annual increase in net sales. Around half of this figure is expected to come through organic growth, and the rest through complementary acquisitions. The profitability target is a 9% operating profit margin at the end of the strategy period. In terms of the individual business areas, targets for operating profit margins towards the end of the current strategy period have been set at 8% for Metso Paper, 11% for Metso Minerals and 12% for Metso Automation. These strategic and financial targets will be reached through hundreds of operational measures and programmes. At present, quality costs account for 3–4% of net sales. Metso believes the formation of a separate service business line from the beginning of 2006 will enable a more focused range of aftermarket products and services to be developed. The aim is to increase net sales of the aftermarket business by more than 100 million in 2006– 2008. For 2006, the market outlook in the majority of Metso’s key markets is expected to continue to be favourable. Based on these positive conditions and a strong order backlog, Metso forecasts that its net sales will grow by more than 10% and its operating income will increase on the 2005 figure. ■
million) Key Figures ( Metso Oyj
Year ended 30.9 2005
2004
2003*
2002*
2001*
4221
3602
4250
4691
4343
1702 1735 584
1559 1366 535
n/a n/a n/a
n/a n/a n/a
n/a n/a n/a
EBITDA
437
314
159
364
395
Operating Profit
335
199
(229)
167
246
Profit/(Loss) Attributable to Shareholders
236
143
(258)
65
141
Net Sales Of Which: Metso Paper Metso Minerals Metso Automation
* Different accounting basis - FAS rather than IFRS
Contact Details Chairman: President and CEO: Address:
Matti Kavetvuo Jorma Eloranta PO Box 1220 Helsinki FI-00101 Finland
Tel: +358 20 484 100 Fax: +358 20 484 3123 Email: [email protected] Web: www.metso.com
5
COMPANY PROFILE
Analysis Metso enjoyed a considerable upturn in financial performance during 2005, reflecting the successful implementation of efficiency improvement programmes introduced a year earlier. Metso’s net sales grew by 17% on the 2004 figure to reach 4221 million, with the growth almost entirely organic. Sales increased in all of Metso’s business areas. Growth was strongest at Metso Minerals (27%). The company attributed the stronger performance to a combination of better market conditions and its enhanced competitiveness, including a more focussed customer orientation, after its restructuring efforts. An example of Metso’s efficiency improvement initiatives was its MP50 programme. Started in September 2004, this programme was aimed at renewing Metso Paper’s business model and streamlining its cost structure. Measures carried out under the MP50 programme in 2005 were mainly targeted at improving the profitability of its tissue business line. The annual savings generated by the programme have been estimated at more than 43 million, with three-quarters of these already materialised in 2005. Metso’s operating profit improved substantially to 335 million, up 68% on the 2004 result. The improvement was attributed to increased delivery volumes, a streamlined cost structure and improved productivity. The operating margin was 7.9%, clearly exceeding the 6% target set for the year. Apart from MetsoVentures, all business areas achieved their operating profit targets. Metso’s return on capital employed (ROCE) was 18.8% for the year, significantly in front of its target of 12%. Return on equity (ROE) was 20.9%.
Pump Industry Analyst
Metso Oyj, Finland Profile Metso Oyj is a global engineering and technology corporation headquartered in Helsinki, Finland, that operates primarily in the pulp and paper, rock and minerals processing and energy industries. Metso has four business areas: Metso Paper, Metso Minerals, Metso Automation and Metso Ventures. Metso Minerals supplies rock and minerals processing systems to its customers in mining, aggregates production, quarries and construction. Metso Minerals’ business lines include crushing and screening; minerals processing; wear protection and conveying; and recycling. Metso Minerals’ slurry pumps are heavy and robust centrifugal pumps, capable of handling tough and abrasive duties. Pump brands include Metso, Svedala, Denver, Sala, Orion and Thomas.
COMMENT Thanks to efficiency improvement measures, outsourcing and the development of a subcontractor network during the past few years, Metso has made its cost structure more competitive and flexible. Building on these stronger foundations, in the 2006–2008 strategy period, Metso is targeting a 10% annual increase in net sales. Around half of this figure is expected to come through organic growth, and the rest through complementary acquisitions. The profitability target is a 9% operating profit margin at the end of the strategy period. In terms of the individual business areas, targets for operating profit margins towards the end of the current strategy period have been set at 8% for Metso Paper, 11% for Metso Minerals and 12% for Metso Automation. These strategic and financial targets will be reached through hundreds of operational measures and programmes. At present, quality costs account for 3–4% of net sales. Metso believes the formation of a separate service business line from the beginning of 2006 will enable a more focused range of aftermarket products and services to be developed. The aim is to increase net sales of the aftermarket business by more than 100 million in 2006– 2008. For 2006, the market outlook in the majority of Metso’s key markets is expected to continue to be favourable. Based on these positive conditions and a strong order backlog, Metso forecasts that its net sales will grow by more than 10% and its operating income will increase on the 2005 figure. ■
million) Key Figures ( Metso Oyj
Year ended 30.9 2005
2004
2003*
2002*
2001*
4221
3602
4250
4691
4343
1702 1735 584
1559 1366 535
n/a n/a n/a
n/a n/a n/a
n/a n/a n/a
EBITDA
437
314
159
364
395
Operating Profit
335
199
(229)
167
246
Profit/(Loss) Attributable to Shareholders
236
143
(258)
65
141
Net Sales Of Which: Metso Paper Metso Minerals Metso Automation
* Different accounting basis - FAS rather than IFRS
Contact Details Chairman: President and CEO: Address:
Matti Kavetvuo Jorma Eloranta PO Box 1220 Helsinki FI-00101 Finland
Tel: +358 20 484 100 Fax: +358 20 484 3123 Email: [email protected] Web: www.metso.com
5
COMPANY PROFILE
Analysis Metso enjoyed a considerable upturn in financial performance during 2005, reflecting the successful implementation of efficiency improvement programmes introduced a year earlier. Metso’s net sales grew by 17% on the 2004 figure to reach 4221 million, with the growth almost entirely organic. Sales increased in all of Metso’s business areas. Growth was strongest at Metso Minerals (27%). The company attributed the stronger performance to a combination of better market conditions and its enhanced competitiveness, including a more focussed customer orientation, after its restructuring efforts. An example of Metso’s efficiency improvement initiatives was its MP50 programme. Started in September 2004, this programme was aimed at renewing Metso Paper’s business model and streamlining its cost structure. Measures carried out under the MP50 programme in 2005 were mainly targeted at improving the profitability of its tissue business line. The annual savings generated by the programme have been estimated at more than 43 million, with three-quarters of these already materialised in 2005. Metso’s operating profit improved substantially to 335 million, up 68% on the 2004 result. The improvement was attributed to increased delivery volumes, a streamlined cost structure and improved productivity. The operating margin was 7.9%, clearly exceeding the 6% target set for the year. Apart from MetsoVentures, all business areas achieved their operating profit targets. Metso’s return on capital employed (ROCE) was 18.8% for the year, significantly in front of its target of 12%. Return on equity (ROE) was 20.9%.