Business News
Interim Review, January 1-June 30, 2010: Metsos positive development continued
Thursday 29. July 2010 - New orders worth EUR 1,671 million were received in April-June, i.e. 64 percent more than in the comparison period (EUR 1,020 million in Q2/2009).
Highlights of the second quarter of 2010
New orders worth EUR 1,671 million were received in April-June, i.e. 64 percent more than in the comparison period (EUR 1,020 million in Q2/2009).
At the end of June, the order backlog was up by 22 percent on the end of December 2009, and totaled EUR 4,176 million (EUR 3,415 million at December 31, 2009).
Net sales increased by 10 percent on the comparison period, and were EUR 1,370 million (EUR 1,247 million in Q2/2009).
Earnings before interest, tax and amortization (EBITA) were EUR 154.2 million, i.e. 11.3 percent of net sales (EUR 74.7 million and 6.0% in Q2/2009).
Operating profit (EBIT) was EUR 140.0 million, i.e. 10.2 percent of net sales (EUR 65.9 million and 5.3% in Q2/2009).
From Q2/2010 onwards, Metso will replace EBITA with EBITA before non-recurring items in order to improve comparability and to give a better view of the underlying operational performance. EBITA before non-recurring items in the second quarter was EUR 125.0 million, i.e. 9.1 percent of net sales (EUR 84.9 million and 6.8% in Q2/2009).
EBITA and EBIT include as a whole EUR 29.2 million of positive non-recurring items (EUR 10.2 million negative non-recurring items in Q2/2009).
Earnings per share were EUR 0.56 (EUR 0.26 in Q2/2009).
Free cash flow was EUR 164 million (EUR 80 million in Q2/2009).
Return on capital employed (ROCE) before taxes was 12.6 percent (9.3% in Q2/2009).
“As we have previously estimated Metsos positive development continued in the second quarter. The overall positive tone in the global economy and the recovery of demand remains in most of our customer industries, especially in the emerging economies”, says Metsos President and CEO Jorma Eloranta.
“I am happy that all our key figures improved, not only compared to the second quarter of 2009 but also from the first quarter of this year. The improvement was thanks to steadily recovering demand, our improved competitiveness and continuously strengthening global presence. I am particularly pleased with the significant profitability improvement in our Paper and Fiber Technology segment.
We estimate that the overall positive mood in the global markets will continue despite some restlessness in the European financial markets. We are closely monitoring the situation and have so far not seen material impact on our global trading environment as evidenced by our strong order intake during the second quarter.
We have revised our net sales guidance based on positive developments, such as, our increased order backlog and the expectation that the recovery of the global economy will continue. We now estimate that our net sales in 2010 will grow about 10 percent from the EUR 5 billion level of 2009. Our profitability guidance is intact: we expect our profitability to be satisfactory.”
Key figures
EUR million
Q2
2010
Q2
2009
Change %
Q1-Q2/ 2010
Q1-Q2/ 2009
Change %
2009
Net sales
1,370
1,247
10
2,540
2,467
3
5,016
Net sales of services business
612
535
14
1,123
1,054
7
2,102
% of net sales
45
43
45
43
42
Earnings before interest, tax and amortization (EBITA) and non-recurring items *)
125.0
84.9
47
212.6
176.7
20
399.0
% of net sales
9.1
6.8
8.4
7.2
8.0
EBITA
154.2
74.7
106
238.0
143.5
66
334.3
% of net sales
11.3
6.0
9.4
5.8
6.7
Operating profit
140.0
65.9
112
209.5
124.5
68
293.6
% of net sales
10.2
5.3
8.2
5.0
5.9
Earnings per share, EUR
0.56
0.26
115
0.76
0.44
73
1.06
Orders received
1,671
1,020
64
3,037
1,962
55
4,358
Order backlog at end of period
4,176
3,512
19
3,415
Free cash flow
164
80
105
199
200
-1
717
Return on capital employed (ROCE) before taxes, annualized, %
12.6
9.3
10.0
Equity to assets ratio at end of period, %
35.6
31.7
35.7
Gearing at end of period, %
28.5
70.2
32.5
*) From the second quarter 2010 onwards, Metso will in its financial reporting replace earnings before interest, tax and amortization (EBITA) with EBITA before non-recurring items as a financial indicator in order to improve comparability and to give a better view of the underlying operational performance.
As we define it at Metso, non-recurring items typically consist of material one-time items related to the business operations. These items can include, but are not limited to, capital gains and losses related to sale of business assets, one-time restructuring expenses and other items Metso management has deemed as material non-recurring items. Historical comparison figures can be found in the tables presented in this Interim Review and quarterly comparison data from Q1/2009 onwards at www.metso.com/investors.
Short-term outlook
We anticipate that the recovery will continue in most of our customer industries. The uncertainty in the financial markets caused by the growing budget deficits in many European countries may, however, slow down the recovery in the markets. 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 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 clearly positive impact on our orders and we expect this to continue during the rest of 2010, contributing to a good trading environment. Due to the strengthening demand for minerals and our large installed equipment base, we expect demand for our mining services to further improve.
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 year. In the Asia-Pacific region and Brazil, infrastructure construction projects are maintaining good demand thanks to 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. 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. The uncertainty in the financial markets may, however, delay final decisions on some of these projects. Demand for the power plant services business is expected to be satisfactory.
We estimate that demand for our automation products will continue to get stronger during this year, as the oil, gas and petrochemical industries increase their investments due to the improvement in energy prices and demand. Also business prospects in the pulp and paper customer industry for our automation solutions are expected to develop favorably. Demand for our services business for automation is expected to be satisfactory.
We expect the demand for metal recycling equipment to continue to improve due to the increasing production volumes of steel. 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.
Demand for new fiber lines, rebuilds and pulp mill services has clearly recovered from the low levels of 2008 and 2009 and we expect the fiber line equipment market to continue to be active during the year. Demand for paper, board and tissue lines is expected to be satisfactory. We expect the improved capacity utilization rates of the paper and board industry to boost the demand of our services business.
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 order backlog at the end of June, which contains about EUR 2.4 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 half of 2009.
Previous guidance (from January-March 2010 Interim Review, published on April 29, 2010):
“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.”
Metsos financial reporting during the rest of 2010 and in 2011
The Interim Review for January-September 2010 will be published on October 28, 2010.
Metsos Financial Statement Review for 2010 will be published on February 3, 2011. The Annual Report will be published in the week starting on March 7, 2011 (week 10). The Interim Review for January – March 2011 will be published on April 29, 2011, the Interim Review for January – June 2011 on July 28, 2011 and the Interim Review for January – September 2011 on October 27, 2011.