Metso's CFO Harri Nikunen's presentation at the Capital Markets Day in Amsterdam on November 26, 2014. Metso has a solid financial position to drive growth

1. © Metso
Accelerating financial excellence
Harri Nikunen
CFO

2. © Metso
Content
1.
Financing needs and financing capacity
2.
Capital employed efficiency
3.
Cost savings Metso Capital Markets Day 2014:
2 FInancials by Harri Nikunen
© Metso

3. Financing needs and financing capacity

4. © Metso
Our operations have limited needs for financing
Funds available for growth opportunities
•
Our global presence and global operational assets are in good shape after years of active development.
•
Gross capital expenditure to remain below depreciation and amortization in the near term.
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Net working capital offers clear improvement potential and opportunities to release capital in the near term.
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Our businesses generate stable cash flow even in low cycle due to high share of services business.
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The maturity structure of our gross debt is healthy.
•
We have maintained solid investment grade rating throughout 2013 and 2014 (despite the demerger and weakening mining cycle). Metso Capital Markets Day 2014:
4 FInancials by Harri Nikunen

5. © Metso Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
Investments to remain below depreciation
Gross capital expenditure
0%
20%
40%
60%
80%
100%
120%
140%
0
20
40
60
80
100
120
A2009
A2010
A2011
A2012
A2013
Q3 A2014
Gross capex
Capex acquisitions
Gross capex / depreciations and amortizations -%
EUR Million 5

6. © Metso
436
526
487
343
352
289
283
281
272
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
01/14
02/14
03/14
04/14
05/14
06/14
07/14
08/14
09/14
Metso Capital Markets Day 2014: FInancials by Harri Nikunen
Adequate funding available
Cash policy has been renewed
Revolving credit facility, EUR 500 Million Cash and cash equivalent
Liquidity profile
EUR million 6

7. © Metso
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
01/14
02/14
03/14
04/14
05/14
06/14
07/14
08/14
09/14
Bonds
Subs.short term debt
Subs. long term debt
Commercial paper
Term and other loans Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
Favorable debt profile
570 Bonds
73 Subsidiary short term debt
30 Subsidiary LT debt
30 Commercial Papers
228 Term and other loans
931 Total EUR million as per Q3/2014
7

8. © Metso
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Our maturity profile is healthy
No major refinancing needs short term Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
YTD Monthly
Maturities monthly >
EUR Million
September 2014
Debt and maturity structure
Undrawn Committed Facilities
Other long-term Debt
Syndicated term Loan
Private Placements
Euro Bond 2014
Euro Bond 2019 8

9. © Metso Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
Funding is well in place
Corporate level funding facilities
•EUR 1.5 billion EMTN program
•EUR 400 million 2.75% bond due in 2019
•EUR 170 million private placements due in 2018 – 2022
•Syndicated long-term loans: EUR 215 million
•Committed EUR 500 million 5-year syndicated revolving credit facility available until 2019 with two extension options for one year
-Currently undrawn
•EUR 500 million domestic CP program
•Uncommitted lines of credit
•Stable credit outlook and rating maintained:
-Standard & Poor’s: BBB
-Moody’s: Baa2 9

10. Capital employed efficiency

11. © Metso
Capital Efficiency Program (CEP) under way
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Diagnosis
Design
Implementation launch
Execution
Q1/2014: Phase 1
Q3-Q4/2014: Phase 3
•
The program was launched in Q1/2014 with following targets:
•Strengthen the balance sheet management culture
•Support strategic ROCE target (increase turns to >2)
•Support the move to asset light operating model in cyclical businesses
•The program was moved to execution phase in late Q3/2014
• One of the core items in management teams
• Clear responsibilities and targets Q2/2014: Phase 2
Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
11

12. © Metso Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
Capital Efficiency Program (CEP) targets
Capital employed components
Dec 31, 2013 (base, EUR million)
Improvement potential
Comments
Inventories
921
12-16%
Inventory management
Project net
-262
Trade receivables
665
10-15%
Payment terms, collection
Trade payables
-342
6-10%
Payment terms
Non operational net working capital
-355
NET WORKING CAPITAL
627
Intangible assets
569
Including goodwill of EUR 456 milion
Tangible assets
376
15-20%
Capex policy, asset divestments
Financial assets
227
FIXED AND FINANCIAL ASSETS
1,172
CASH & OTHER
431
50%
Financial policy
TOTAL CAPITAL EMPLOYED
2,230
15-20%
Capital employed was EUR 2,089 million at the end of Q3/2014 12

13. Savings program 2013 - 2014

14. © Metso Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
•
The current program scope encompasses gross headcount reduction of 1,300 – 1,400
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Net reduction depends on personnel needs in well performing businesses
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Targeted gross savings are EUR 120-130 million
•
Including purchasing savings
•
Completion rate 75%, full completion by the end of 2014
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Net personnel cost savings in Q1-Q3/2014 vs. Q1-Q3/2013 are about EUR 50 million (down by 8%), which is in line with targets
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S,G&A costs are down by 8% in Q3/2014 vs. Q3/2013
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The total year-to-date savings are EUR 75 million including procurement
•
100% savings run-rate to be achieved in H1/2015
Profit improvement program (PIP) update 14

15. © Metso Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
•
Program will be finalized during Q4/2014
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Completion rate will be 85-100% depending on the success of last open action
•Continued work to improve both the short and long term cost position with following ongoing and planned actions:
•Corporate actions: includes support functions and legal structure simplification
•Business area actions
•Capital efficiency program
Profit improvement program (PIP) next steps 15

16. © Metso Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
Note: Over the months we have approx. 180-200 trainees and seasonal workers in average.
PIP - Major structural changes in headcount during 2013 and Q3/2014
Headcount (December 31, 2012)
16,612
Acquisitions
+ 623
Divestments
- 326
Headcount after structural changes
16,909
Comparable net reduction
- 970
Headcount (September 31, 2014)
15,939
Reduction in Europe and North America
~1,100
Increase in emerging markets
~500 16

17. © Metso Metso Capital Markets Day 2014:
FInancials by Harri Nikunen
17
Conclusions
•
Financial capacity for strategy implementation
•
Strong balance sheet
•
Adequate funding available
•
No major refinancing needs
•
Capital efficiency and cost actions under way
•
Solid program designed to capital release
•
Ongoing actions in both corporate level and business areas