Business News
Metsos Interim Review, January 1 – March 31, 2010: Market recovery gaining momentum
Friday 30. April 2010 - Summary of Metso Corporations company release on April 29, 2010 at 12:00
Highlights of the first quarter of 2010
New orders worth EUR 1,366 million were received in January-March, i.e. 45 percent more than in the comparison period (EUR 942 million in Q1/2009).
At the end of March, the order backlog was up by 9 percent on the end of December 2009, and totalled EUR 3,720 million (EUR 3,415 million at December 31, 2009).
Net sales decreased by 4 percent on the comparison period, and were at EUR 1,170 million (EUR 1,220 million in Q1/2009).
Earnings before interest, tax and amortization (EBITA) were EUR 83.8 million, i.e. 7.2 percent of net sales (EUR 68.8 million and 5.6% in Q1/2009).
Operating profit (EBIT) was EUR 69.5 million, i.e. 5.9 percent of net sales (EUR 58.6 million and 4.8% in Q1/2009).
EBITA and EBIT include EUR 4.7 million in non-recurring expenses relating to capacity adjustment measures (EUR 22.0 million in Q1/2009).
Earnings per share were EUR 0.20 (EUR 0.18 in Q1/2009).
Free cash flow was EUR 35 million (EUR 120 million in Q1/2009).
Return on capital employed (ROCE) before taxes was 8.1 percent (9.0% in Q1/2009).
Metsos President and CEO Jorma Eloranta comments: “In the first quarter most of our markets and customer industries continued to recover. It seems that the recovery is gaining momentum, and is today broader based than during the past six months. Our customers’ higher capacity utilization rates have boosted the activity level of our services business and since our customers are regaining their confidence the demand for new capital equipment and project business has also improved. Price competition in the markets seems to be easing up as the trading environment is getting stronger.
The measures we have carried out in the past few years to develop our operating models and to adjust our cost structures have supported our first-quarter profitability although net sales were still relatively low following modest order intake levels in 2009. Assuming that we continue to win new, profitable orders, net sales for the coming quarters should also be picking up. The first quarter confirmed that due to our decisive and quick response to the market turmoil in the second half of 2008 through 2009, Metso is today a more competitive company than before.
We have gradually started ramping up the engineering and manufacturing capacity to match the improved demand but there seems to be some slowness in our component supplier and subcontractor base to ramp up their capacity. Likewise we are also continuing to further develop our services business and global presence as well as our solutions based on environmental business.
Based on the recovery in order intake during the past 6 months and the current market outlook we are somewhat raising our net sales guidance for 2010. We estimate that our net sales will be over EUR 5 billion. We expect our 2010 profitability to be satisfactory.”
Metsos key figures
EUR million
Q1/2010
Q1/2009
Change %
2009
Net sales
1,170
1,220
-4
5,016
Net sales of services business
512
519
-1
2,102
% of net sales
44
43
42
EBITA before non-recurring capacity adjustment expenses
88.5
90.8
-3
409.0
% of net sales
7.6
7.4
8.2
Earnings before interest, tax and amortization (EBITA)
83.8
68.8
22
334.3
% of net sales
7.2
5.6
6.7
Operating profit
69.5
58.6
19
293.6
% of net sales
5.9
4.8
5.9
Earnings per share, EUR
0.20
0.18
11
1.06
Orders received
1,366
942
45
4,358
Order backlog at end of period
3,720
3,934
-5
3,415
Free cash flow
35
120
-71
717
Return on capital employed (ROCE) before taxes, annualized, %
8.1
9.0
10.0
Equity to assets ratio at end of period, %
34.0
30.3
35.7
Gearing at end of period, %
32.8
72.6
32.5
Short-term outlook
Global economic recovery is strengthening and there are positive signs in demand in most of our customer industries. The improving capacity utilization rates are supporting our services business and most of our customers are gradually regaining their confidence to increase the level of their investments.
The number of quotations for equipment and projects from mining companies has clearly increased. This has already had a positive impact on our orders and we expect this to continue during the rest of 2010, contributing to an overall satisfactory trading environment. Due to the strengthening demand and price level for minerals as well as our large installed equipment base, we expect demand for our mining services to continue to improve.
We anticipate that demand for equipment used in aggregates production by the construction industry will be satisfactory in Europe and weak in North America during the year. In the Asia-Pacific region and Brazil, infrastructure construction projects are maintaining good demand thanks to economic growth and stimulus packages. 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. Several countries 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. Demand for the power plant services business is expected to be satisfactory.
We estimate that demand for our automation products will be satisfactory during this year, as the oil, gas and petrochemical industries increase their investments due to the improvement in energy prices and demand. Demand for our services business for automation is expected to be satisfactory.
We expect the demand for metal recycling equipments to improve due to the increasing production volumes of steel, resulting from the strengthening of the global economy. The demand for solid-waste recycling equipment is estimated to be satisfactory. Demand for recycling equipment services is expected to improve in 2010 as the capacity utilization rates of our customers plants and equipment improve.
We estimate that demand for new fiber lines will recover to a satisfactory level, and demand for rebuilds and services will strengthen during the year. Demand for paper, board and tissue lines is expected to be satisfactory. We expect the capacity utilization rates of the paper and board industry to improve during the year, which should increase the demand for our services business.
We estimate that our net sales in 2010 will exceed the EUR 5 billion level of 2009, and that our profitability will be satisfactory. Our estimate is based on our order backlog, which contains about EUR 2.6 billion worth of deliveries for 2010, and on the expectation that the recovery of the global economy will continue.
The net sales and profitability estimates are based on Metsos current market outlook and business scope as well as foreign exchange rates similar to the first quarter.
Previous guidance (from Financial Statements Review 2009, published on February 8, 2010):
“We estimate our net sales in 2010 to remain at about the same EUR 5 billion level as in 2009, and profitability to remain satisfactory. Our estimate is based on our order backlog, which contains about EUR 2.7 billion worth of deliveries for 2010, and on the expectation of continued gradual recovery of global economy. The net sales and profitability estimates are based on Metsos current market outlook and business scope.”