Business News
Metsos Financial Statements Review, January 1 – December 31, 2008
Wednesday 04. February 2009 - Profitability good in 2008, estimated to be satisfactory in 2009
Highlights of 2008
New orders worth EUR 6,384 million were received in 2008 (EUR 6,965 million in 2007), i.e. 8 percent less than in the previous year.
At year-end, the order backlog was 6 percent lower than at the end of December 2007, amounting to EUR 4,088 million (EUR 4,341 million at December 31, 2007).
Net sales grew 2 percent (6 percent at comparable exchange rates) on the comparison period and were EUR 6,400 million (EUR 6,250 million in 2007).
Earnings before interest, tax and amortization (EBITA) were EUR 680.9 million, i.e. 10.6 percent of net sales (EUR 635.4 million and 10.2% in 2007).
Operating profit (EBIT) was EUR 637.2 million, i.e. 10.0 percent of net sales (EUR 579.8 million and 9.3% in 2007).
Earnings per share were EUR 2.75 (EUR 2.69 in 2007).
Free cash flow was EUR 29 million (EUR 198 million in 2007).
Return on capital employed (ROCE) before taxes was 23.2 percent (26.1% in 2007).
The Board proposes a dividend of EUR 0.70 per share. The Board is further proposing the Annual General Meeting to authorize it to pay at its discretion an additional dividend later in the year 2009 in the amount not exceeding EUR 0.68 per share, should the Metsos financial position support the distribution of such additional dividend (in 2007, an ordinary dividend of EUR 1.65 per share and an extra dividend of EUR 1.35 was paid).
Highlights of the last quarter of 2008
New orders worth EUR 1,040 million were received in October-December (EUR 1,771 million in Q4/07). At the same time, EUR 151 million of previously received orders were cancelled, so the net order intake for October-December was EUR 889 million.
Net sales decreased by 3 percent on the comparison period and totaled EUR 1,839 million (EUR 1,896 million in Q4/07).
Earnings before interest, tax and amortization (EBITA) were EUR 200.0 million, i.e. 10.9 percent of net sales (EUR 193.9 million and 10.2% in Q4/07).
Operating profit (EBIT) was EUR 190.1 million, i.e. 10.3 percent of net sales (EUR 179.7 million and 9.5% in Q4/07).
Earnings per share were EUR 0.79 (EUR 0.85 in Q4/07).
Jorma Eloranta, President and CEO of Metso Corporation comments year 2008: “I am satisfied with the development of our operating profit – our persistent work to improve profitability is yielding results. Our financial position continues to be satisfactory but our cash flow has a lot to improve. The dividend proposal takes into account our dividend policy as well as the uncertainty resulting from the world economy.”
Eloranta says that the year 2009 will be demanding for Metso because of the market situation. This will, in turn, mean decline of net sales and operating profit. “We estimate that our 2009 net sales will, nevertheless, exceed EUR 5 billion and our profitability will be satisfactory. Furthermore, we expect our cash flow to clearly improve on 2008. We are taking actions to improve and secure competitiveness and profitability. We have already initiated measures to adjust our capacity and cost structure to an extended period of weak demand in several product areas. Unfortunately the actions will also mean reductions in the number of employees.”
Eloranta emphasizes that Metso has changed in the past few years: “We are clearly more flexible and agile than during the previous downturn. Our services business today is overall strong – last year about 35 percent of our net sales and a significantly larger proportion of our profits derived from services. We are truly global in our operations: nearly half of the orders received came from emerging markets. Energy and Environmental Technology offers significant new business potential for us. We are building Metso on a long-term on these and other strengths. We are also continuing several ongoing development programs, for example in R&D and in talent and leadership development.”
Metsos key figures
EUR million
Q4/08
Q4/07
Change %
2008
2007
Change %
Net sales
1,839
1,896
-3
6,400
6,250
2
Net sales of services business
616
559
10
2,199
2,024
9
% of net sales
34
30
35
33
Earnings before interest, tax and amortization (EBITA)
200.0
193.9
3
680.9
635.4
7
% of net sales
10.9
10.2
10.6
10.2
Operating profit
190.1
179.7
6
637.2
579.8
10
% of net sales
10.3
9.5
10.0
9.3
Earnings per share, EUR
0.79
0.85
-7
2.75
2.69
2
Orders received
889
1,771
-50
6,384
6,965
-8
Order backlog at end of period
4,088
4,341
-6
Free cash flow
-22
0
n/a
29
198
-85
Return on capital employed (ROCE) before taxes, %
23.2
26.1
Equity to assets ratio at end of period, %
30.9
37.7
Gearing at end of period, %
75.7
33.4
Short-term outlook
As a result of the uncertainty in the financial markets and the slowdown of global economic growth, Metso’s operating environment is expected to be demanding in 2009. Metsos customers are cautious in their decisions to invest, which will especially affect the demand for Metso’s new equipment and project business.
Mining companies are expected to make substantial cuts in their investment plans compared with the peak investment levels of recent years and further limit their production during the year. Based on the strong product and services offering, the demand for Metsos mining equipment is expected to be satisfactory in 2009. In the construction industry, the demand for equipment relating to aggregates production is estimated to be weak at least during the first half of the year. Many countries have introduced stimulus measures relating to infrastructure development, which, at some point, are expected to have a positive effect on the demand for construction industry products. The demand for Mining and Construction Technology’s services business is expected to be satisfactory.
The demand for power plants utilizing renewable energy sources is expected to be satisfactory in Europe and North America in 2009. The goals set for the use of renewable energy sources and the efforts to secure and increase energy self-sufficiency are expected to boost the demand for these power plants. The demand for Metsos automation products is expected to be satisfactory in 2009. The demand for metals recycling equipment is expected to be weak, owing to the low demand of scrap metal and reduction in steel production. Demand for services business in Energy and Environmental Technology is expected to be satisfactory.
The demand for paper, pulp and fiber lines is expected to be weak in 2009. The delivery schedules of some large paper and board machine and fiber line projects in the order backlog have been prolonged. In the pulp and paper industry, low capacity utilization rates are expected to weaken the demand for Metsos services business, particularly in North America and Europe.
Metsos total net sales in 2009 are estimated to exceed EUR 5 billion. Metsos order backlog is over EUR 4 billion, out of which about EUR 3 billion is scheduled for 2009. Metsos services business volumes are expected to remain satisfactory in 2009.
The focus of Metso’s management has shifted from growth to profitability and cash flow. The aim is to quickly adjust the capacity and the cost structure to correspond with the demand. Metso’s profitability is expected to be satisfactory in 2009. Free cash flow is expected to improve considerably on 2008 owing to the measures aimed at releasing working capital.
The net sales and profitability estimates are based on Metsos current market outlook and business scope.
Metsos Financial Reporting in 2009
The 2009 Interim Review for January – March 2009 will be published on April 28, Interim Review for January – June 2009 on July 24 and Interim Review for January – September 2009 on October 29 respectively.