Business News
Metsos Interim Review, January 1-June 30, 2009: Profitability satisfactory. Guidance for 2009 intact
Friday 24. July 2009 - New orders worth EUR 1,020 million were received in April-June, i.e. 41 percent less than in the previous year (EUR 1,740 million in Q2/08).
Highlights of the second quarter of 2009
New orders worth EUR 1,020 million were received in April-June, i.e. 41 percent less than in the previous year (EUR 1,740 million in Q2/08).
At the end of June, the order backlog was 14 percent lower than at the end of December 2008, amounting to EUR 3,512 million (EUR 4,088 million at December 31, 2008).
Net sales decreased by 24 percent, standing at EUR 1,247 million (EUR 1,633 million in Q2/08).
Earnings before interest, tax and amortization (EBITA) were EUR 74.7 million, i.e. 6.0 percent of net sales (EUR 166.5 million and 10.2% in Q2/08).
Operating profit (EBIT) was EUR 65.9 million, i.e. 5.3 percent of net sales (EUR 155.2 million and 9.5% in Q2/08).
Earnings before interest, tax and amortization (EBITA) and operating profit (EBIT) in April-June, include some EUR 4 million in non-recurring expenses relating to capacity adjustment measures.
Earnings per share were EUR 0.26 (EUR 0.72 in Q2/08).
Free cash flow was EUR 80 million (EUR 59 million in Q2/08).
Return on capital employed (ROCE) before taxes was 9.3 percent (23.4% in Q2/08).
“The overall cautious market sentiment in our customer industries has continued – with the positive exception of the paper and board industry in Asia, where we have seen improvement in the past few months. The recovery in China is partly due to the implemented stimulus measures. So far it has resulted in several sizable orders for us, one of which has been included in our second quarter orders received and the rest are to be included later this year,” says Jorma Eloranta, President and CEO of Metso Corporation.
“The order intake for our equipment and project business in the first half of the year was low, while the services demand remained reasonably stable and satisfactory. Our profitability also remained satisfactory. Our overall financial development for January-June as well as our updated estimates for the second half of the year support our earlier guidance for this year. Our financial position is also solid.”
Eloranta notes that the overall market visibility for 2010 is weak. “We are prepared to take additional capacity adjustment measures when needed. Our Board has today decided not to pay any additional dividend for 2008. This is mainly due to the continuing general uncertainty on the markets. Our financial performance and financial position are stable and have developed according to our expectations. The importance of strong balance sheet increases in an uncertain economic climate.”
Metsos key figures
EUR million
Q2/09
Q2/08
Change %
Q1-Q2/
2009
Q1-Q2/
2008
Change %
2008
Net sales
1,247
1,633
-24
2,467
3,033
-19
6,400
Net sales of services business
522
606
-14
1,029
1,107
-7
2,343
% of net sales
42
38
42
37
37
EBITA before non-recurring capacity adjustment expenses
79.0
166.5
-53
169.8
300.2
-43
680.9
% of net sales
6.3
10.2
6.9
9.9
10.6
Earnings before interest, tax and amortization (EBITA)
74.7
166.5
-55
143.5
300.2
-52
680.9
% of net sales
6.0
10.2
5.8
9.9
10.6
Operating profit
65.9
155.2
-58
124.5
274.8
-55
637.2
% of net sales
5.3
9.5
5.0
9.1
10.0
Earnings per share, EUR
0.26
0.72
-64
0.44
1.27
-65
2.75
Orders received
1,020
1,740
-41
1,962
3,249
-40
6,384
Order backlog at end of period
3,512
4,494
-22
4,088
Free cash flow
80
59
36
200
-40
n/a
29
Return on capital employed (ROCE) before taxes, annualized, %
9.3
23.4
23.2
Equity to assets ratio at end of period, %
31.7
28.9
30.9
Gearing at end of period, %
70.2
79.5
75.7
Short-term outlook
Based on the global economic recession and uncertain financial markets, we estimate that our business environment will continue to be demanding during the rest of the year. Our customers are being cautious in their investment decisions, which particularly affects our equipment sales and project business. Our customers capacity utilization rates have decreased which has had some negative impact on our services net sales, too.
Several mining companies are making substantial cuts in their investment plans compared with the recent years and are limiting their production. Due to our strong product and services offering, as well as our large installed equipment base, which has further grown significantly over the last few years, the demand for our mining equipment and services is expected to be satisfactory in 2009. In the construction industry, we estimate that the demand for equipment relating to aggregates production will be weak. Many countries have introduced stimulus measures relating to infrastructure development, which we expect to have a positive effect on the demand for our construction industry products in the long term. We estimate that the demand for our services offering in the construction industry will be satisfactory.
We estimate that the demand for power plants utilizing renewable energy sources will be satisfactory in Europe and North America in 2009. Many countries have initiated plans to increase the use of renewable energy sources. This is expected to support the demand for power plants utilizing biomass and waste. However, limited availability of financing may delay decision making in these projects. We estimate that the demand for our automation and flow control products will be satisfactory in 2009. The demand for metals recycling equipment is expected to be weak, owing to the low price of scrap metal and decline in steel production. We expect that the demand for the services offering of Energy and Environmental Technology will be satisfactory.
We estimate that the demand for fiber lines will be weak and for paper and board lines satisfactory in 2009. In the short-term, a number of paper and board machine projects in China are expected to materialize, partly thanks to the local stimulus measures. The delivery schedules of some of the major paper and board machine and fiber line projects in our order backlog have been prolonged. We estimate that the low capacity utilization rates in the pulp and paper industry will have a negative impact on the demand for our services business, particularly in North America and Europe.
We estimate that our net sales will exceed EUR 5 billion in 2009. Our order backlog stands at EUR 3.5 billion, of which EUR 2.0 billion consists of deliveries for 2009. We expect our services business to remain satisfactory in 2009.
We expect our profitability level to be satisfactory in 2009. We also expect our free cash flow to improve considerably on 2008 owing mainly to the measures aimed at releasing net working capital.
The net sales and profitability estimates are based on our current market outlook and business scope.