Business News
Metso to accelerate its profitable growth strategy execution; announces new operating structure and upgrades financial targets
Friday 22. August 2008 - Metsos strategic focus in 2008-2012 continues to be on sustainable profitable growth. To accelerate the strategy execution, Metsos businesses will be reorganized as of January 1, 2009 with energy and environment technology introduced as a new platform for growth.
Metso is also upgrading its financial targets and initiating a study with Goldman Sachs as adviser to assess further value-enhancing opportunities, including structural options.
“Metsos profitable growth strategy was launched in August 2005. Our progress has been strong, and we are reaching the financial targets set in October 2006 one year earlier than we estimated at the time,” says Jorma Eloranta, President and CEO of Metso Corporation. “Now it is time to accelerate the strategy execution by introducing a new operating structure and more ambitious financial targets.”
As of January 1, 2009, Metsos businesses will be reorganized into three reporting segments:
Mining and Construction Technology, consisting of the current Mining and Construction businesses. The reporting segment will be headed by Matti Kähkönen, currently President of Metso Minerals.
Energy and Environment Technology, consisting of the current Metso Automation and the Power and Recycling businesses, with Metso Automations current President Pasi Laine on lead.
Paper and Fiber Technology, consisting of the current Paper and Board, Tissue and Fiber businesses, will be headed by Bertel Langenskiöld, currently President of Metso Paper.
In 2008-2012, Metsos mining and construction businesses will continue to focus on fully exploiting the strong market demand. In the paper and fiber businesses the focus will be on enhancing Metsos presence close to its growing customer base in emerging markets and on a strong transformation to services business. The energy and environment businesses offer interesting new growth opportunities based on Metsos current know-how and technologies in the power, recycling and automation businesses, complemented by value-enhancing acquisitions.
“Simultaneously with enhancing our focus on the energy and environment segment, Automation and Power businesses will naturally continue to work in close cooperation with Paper and Fiber segment to develop our product and service offering towards the pulp and paper industry,” Eloranta notes.
Preliminary pro forma figures for the new reporting segments will be published in conjunction with Metsos Capital Markets Day on September 2, 2008.
New financial targets
Metso is upgrading its long-term financial targets for 2009-2012. The following new financial targets replace the previous targets set in October 2006:
Growth: An average annual net sales growth of more than 10 percent. The growth will be attained both organically and through complementary add-on acquisitions. Should Metso make major acquisitions with a significant impact on its business scope, these come on top of the 10 percent growth target.
Profitability: Metsos new target is to improve EBITA annually and to exceed a 12-percent EBITA-margin during 2009-2012.
Return on capital employed (ROCE-%) before tax is introduced as a new target and it should exceed 25 percent during 2009-2012.
Metso will continue striving to improve its profitability through operational excellence programs. Metso will also continue its actions to maintain strong profitability over the business cycle and to reduce earnings volatility with increased flexibility in its operating model and by maintaining a good balance between project, product and services business.
Cash flow: In order to secure a strong operating cash flow, Metso is establishing a new target for annual cash conversion. The target is measured by Free Cash Flow/ Net Income. The ratio should be on average 100 percent during 2009-2012 (excluding the NWC impact of acquisitions).
Efficient use of capital continues to be an important long-term value driver for Metso. Operating cash flows in 2009-2012 are expected to be strong, thus enabling further growth through complimentary acquisitions while maintaining an active dividend policy.
Capital structure: Metsos target is that its key financial indicators, capital structure and cash flows support a solid investment grade in credit rating.
Dividend policy: Metsos target is to distribute at least 50% of annual earnings per share as a dividend or in the other forms of repatriation of capital (share buybacks, redemptions, etc).
“The decision to accelerate the strategy execution and to introduce more ambitious financial target setting shows that there is a lot of further value-creation potential in Metso. In addition, Metsos Board of Directors and management have decided to seek other value-enhancing opportunities, including structural options, with assistance from Goldman Sachs,” says Jorma Eloranta.