Metso Financial Statements Review 2012 presentation

Fourth quarter and full year 2012
Matti Kähkönen, President and CEO
Harri Nikunen, CFO

February 7, 2013

Forward looking statements

It should be noted that certain statements herein which are not historical facts, including, without
limitation, those regarding expectations for general economic development and the market situation,
expectations for customer industry profitability and investment willingness, expectations for company
growth, development and profitability and the realization of synergy benefits and cost savings, and
statements preceded by ”expects”, ”estimates”, ”forecasts” or similar expressions, are forward-looking
statements. These statements are based on current decisions and plans and currently known factors.
They involve risks and uncertainties which may cause the actual results to materially differ from the
results currently expected by the company.
Such factors include, but are not limited to:
1) general economic conditions, including fluctuations in exchange rates and interest levels which
influence the operating environment and profitability of customers and thereby the orders
received by the company and their margins
2) the competitive situation, especially significant technological solutions
developed by competitors
3) the company’s own operating conditions, such as the success of production, product
development and project management and their continuous development and improvement
4) the success of pending and future acquisitions and restructuring.

2 © Metso February 7, 2013

Presentation contents

1. Highlights

2. Strategic priorities

3. Financial performance

4. Outlook and guidance


Highlights
Matti Kähkönen
President and CEO

Highlights
Continued growth and an improved result in 2012
Full year 2012
• Strategic priorities developed well

• Good order intake

• Strong net sales growth in both capital and services

• EBITA improved, whereas margin was slightly lower

• Return on capital employed increased

• Board proposes a dividend of EUR 1.85 (2011: 1.70)

Fourth quarter 2012
• Strong order growth year-on-year

• All-time high net sales and second highest EBITA

• Restructuring had an impact on EBIT and EPS


Good order intake continued
EUR million 7,961
8,000
6,865
7,000
5,944
6,000

5,000
4,358
4,000
2,883
3,000
1,847 1,918 1,920 1,735
2,000 1,365 1,366
1,671
1,409 1,498 1,313 1,511 1,699
942 1,020 1,031
1,000

0
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY

2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012

Services orders Capital orders Exceptionally large orders

FY 2012 Q4/2012
• Good underlying activity • Strong growth of 29% year-on-year
• No exceptionally large orders • Both capital and services orders increased
• Services orders increased 5% • 1%-point positive currency impact
• 2%-point positive currency impact

Net sales growth proceeded steadily
EUR million
8,000 7,504

7,000 6,646

6,000 5,552
5,016
5,000

4,000

3,000
2,074 2098
1,687 1,755 1,897 1,754
2,000 1,444 1,567 1,561
1,220 1,247 1,196 1,353 1,170 1,370 1,325
1,000

0

2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012

Services net sales Capital net sales

FY 2012 Q4/2012
• 13% growth overall, 11% in services • All-time high level
• US, Brazil and China were the biggest • Services grew 5%
countries
• No currency impact
• 3%-point positive currency impact

EBITA* improved 9% to EUR 684 million
EUR million %
700 14

600 11.2 12
10.4
9.7 9.7 9.5 9.4 9.7
500 9.1 8.9 8.8 8.9 9.3 9.1 10
8.6
8.0 8.0
7.5 7.5
400 6.8 8
6.5
684
300 629 6
491
200 399 4

100 202 177 171 196 2
134 129 150 140 163 140
92 125 124
85 88 88
0 0

2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012
EBITA * EBITA% *

Q4/2012 Q4/2011 2012 2011 Target range
Mining and Construction 12.8% 12.9% 12.0% 10.9% 10-15%
Automation 13.4% 14.9% 12.0% 13.5% 11-16%
Pulp, Paper and Power 6.0% 5.7% 6.6% 8.1% 6-9%
Metso total 9.3% 9.7% 9.1% 9.5%

* before non-recurring items

Our financial targets
KPI Targets 2012 2011
Net sales growth >10% average annual growth (CAGR)
+13% +20%

Services net sales >10% services business net sales growth annually
growth +11% +17%

EPS EPS growth higher than sales growth +5%/ +39%/
(EPS growth-% / NS growth-%) +13% +20%
ROCE-% >20% ROCE
19.6% 18.4%

Segment Mining and Construction: 10-15% **
EBITA%* 12.0% 10.9%

Automation: 11-16%
12.0% 13.5%

Pulp, Paper and Power: 6-9%
6.6% 8.1%

Dividend >50% of EPS
74% 71%

** includes Recycling

Strategic
Driving growth of services business priority #1

Group net sales 2012 Group EBITA *) 2012

• Services net sales were approx. EUR 3.2
32% billion in 2012
44% • Net sales increased in all segments
56%
• Our target is to grow services to around
68%
EUR 4.5 billion by 2016 and increase
services EBITA margin

Capital Services
• Four new service hubs were established
Capital Services
in 2012
EUR million • Good progress in contract-based services
3,500 business
3,000
• Services profitability varies between
2,500 different segments and product categories
2,000

1,500

1,000
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2007 2008 2009 2010 2011 2012
Services net sales, rolling 12 months

Strategic
Expanding presence in emerging markets priority #2

Net sales in emerging markets Net sales in top 10 growth countries
EUR million (EUR million)
4,000

3,500 Country 2012 2011 Change %
3,000 Brazil 873 645 35
2,500
China 669 777 -15
2,000
Russia 297 259 15
1,500
Chile 255 222 15
1,000
2007 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 India 209 239 -13
2008 2008 2009 2009 2010 2010 2011 2011 2012 2012
South Africa 198 153 29
Net sales in EM, rolling 12 months

Services in emerging markets Mexico 159 111 42
EUR million Peru 119 70 69
1,400
Turkey 110 78 41
1,300
Indonesia 90 70 29
1,200

1,100

1,000 • Emerging markets accounted for
900
50% (49%) of net sales
800
2010 Q2 Q4 Q2 Q4 • 35% (34%) of the personnel was in
2011 2011 2012 2012
emerging markets
Services net sales in EM, rolling 12 months

Strategic
Mining activity remained good priority #3

Mining order intake Q4/2012 mining orders by market area
EUR million
1,200

1,000 23%
800
38%
600

400

200 23%

0 16%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2009 2009 2010 2010 2011 2011 2012 2012

Mining, services Mining, capital Exceptionally large orders EMEA North America South and Central America Asia Pacific

Mining order backlog
EUR million
2,000 • Investment cut-backs have impacted
1,600
mining capital business
1,200 • Underlying demand was higher in 2012 vs.
800
2011, as there were no exceptionally large
orders
400

0
• Services backlog was 13% higher
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 compared to the end of 2011
2009 2009 2010 2010 2011 2011 2012 2012
Services backlog Capital backlog

Financial
performance
Harri Nikunen, CFO

Group key figures
EUR million Q4/2012 Q4/2011 Change % 2012 2011 Change %
Orders received 1,699 1,313 29 6,865 7,961 -14
Services orders received 741 669 11 3,264 3,100 5
Net sales 2,098 2,074 1 7,504 6,646 13
Services net sales 870 829 5 3,174 2,871 11
% of net sales 42 41 44 45
EBITA * 196 202 -3 684 629 9
% of net sales 9.3 9.7 9.1 9.5
EBIT ** 150 189 -21 599 572 5
Earnings per share, EUR 0.49 0.81 -40 2.49 2.38 5
Return on equity (ROE), % 17.5 17.8
Return on capital employed (ROCE)
19.6 18.4
before taxes, %
Free cash flow 69 45 53 257 375 -31

Cash conversion, % 69 105

Gearing at the end of period, % 14.2 12.2

** Includes non-recurring items of EUR -34 million in Q4/2012, EUR -0.4 million in
Q4/2011, EUR -36 million in FY 2012 and EUR -5 million in FY 2011

Mining and Construction
Orders received 794 651 22 3,436 3,714 -7
Services orders received 409 364 12 1,771 1,603 10
Net sales 924 928 0 3,492 2,967 18
% of net sales 48 44 49 50

EBITA * 118.7 120.1 -1 418.5 324.4 29

% of net sales 12.8 12.9 12.0 10.9
Return on capital
28.8 25.3
employed **

Q4/2012 vs. Q4/2011 2012 vs. 2011
• High net sales, services grew 9% • Mining equipment net sales up almost
30%, services increased 14%
• EBITA on a good level
• Good EBITA development driven by
volume; margins were stable
• ROCE improved also due to lower working
capital
15 © Metso February 7, 2013 ** excluding cash and other non-operative balance sheet items
Note: Figures include recycling

Mining and Construction
EUR million %

4,000 16

3,500 14

3,000 12

2,500 10

2,000 8

1,500 6

1,000 4

500 2

0 0
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012

Services net sales, rolling 12 months Capital net sales, rolling 12 months EBITA % *, rolling 12 months

EBITA % * target range

Note: Figures include Recycling

Automation
Orders received 206 197 5 845 822 3
Services orders received 85 75 13 382 352 9
Net sales 233 244 -5 859 770 12
Services net sales 105 107 -2 380 345 10
% of net sales 50 46 48 48

EBITA * 31.2 36.4 -14 103.1 103.9 -1

% of net sales 13.4 14.9 12.0 13.5
Return on capital
32.5 39.0
employed **

Q4/2012 vs. Q4/2011 2012 vs. 2011
• Flow Control business improved • Performance was good after weak Q1
performance
• Flow Control business improved
• Process Automation Systems business
• Good working capital management
weaker
• Services on a good level

** excluding cash and other non-operative balance sheet items

Automation
EUR million %

1,000 18

900 16

800
14
700
12
600
10
500
8
400
6
300
4
200

100 2

0 0

2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012




Pulp, Paper and Power
Orders received 677 412 64 2,444 3,225 -24
Services orders received 247 230 7 1,111 1,145 -3
Net sales 925 844 10 3,014 2,703 12
% of net sales 35 37 37 39

EBITA * 55.9 48.4 15 200.3 218.8 -8

% of net sales 6.0 5.7 6.6 8.1
Return on capital
23.2 27.2
employed **

Q4/2012 vs. Q4/2011 2012 vs. 2011
• Very strong net sales related to large • Deliveries of large projects boosted net
projects sales
• Performance of the Fiber business • Business mix, project performance and
improved, other businesses unchanged under-absorption had an impact on EBITA

** excluding cash and other non-operative balance sheet items

Pulp, Paper and Power
EUR million %
3,500 9

8
3,000
7
2,500
6

2,000 5

1,500 4

3
1,000
2
500
1

0 0

2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012




Cost actions to improve profitability
Over 1,000 positions were reduced in 2012

I. Reduction of under-absorption and increased competitiveness (ongoing
and planned action)
I. Capacity adjustment in paper/board capital business in Finland and China, in high-cost foundries,
and in Mining and Construction equipment activity, and in Automation operations
II. Increased flexibility through outsourcing
III. In addition, temporary lay-offs are used to reduce under-absorption where loads are low

II. Structural action in all three segments
I. Personnel and fixed-cost reduction due to closure or combination of units, changes in
organizational structures, etc

III. Procurement lifted as a global development focus area (total volume
about EUR 4.5 billion)
IV. Strict S,G&A cost control in all Metso units

Targeted personnel and S,G&A cost reduction is EUR 50 – 60 million from the above
measures as calculated at 2012 cost levels. The work to further improve our cost
position will continue in 2013 with new programs.


Balance sheet structure as at Dec 31, 2012
EUR million
7,000 6,642 6,642
Goodwill
6,000 887

Fixed assets 5,000 1,109 NWC 2,227 Equity

4,000
Other liabilities
Inventories
1,529
3,000 1,732
256 Provisions
Other receivables *)
2,000
1,137 Advances
2,143 received
1,000
Bank and cash, interest NIBL Interest bearing
bearing receivables 974 1,290 debt
0

* Incl. ”Costs and earnings of projects under construction in excess of
advanced billings”

Net debt and net working capital
Net debt and gearing Net working capital
EUR million % EUR million %
1200 80 800 12
75.7
10.5
70 700
1000 10

60 600

800 8
50 500
6.0
672 6.0
33.4 32.5
600 40 400 6
1,099 4.8 452
4.5
4.2
30 300 375
400 540 4
583 15.0 14.2 281
20 200 242 247
12.2
200 316 2
310 10 100
260

0 0 0 0
2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012

Net debt Gearing Net working capital, EUR NWC, % of net sales


Cash flow
2012 2011
EUR million EUR million
700 700
638
600 586 600

500 500
254

400 400 232

300 300
188 122
200 200

100 100 179
161

0 0
Sources Uses Sources Uses

Cash from operations Capex & acquisitions Income taxes paid Dividend


Dividend proposal of EUR 1.85* for 2012
EUR
3.5
3.00
3.0 2.89
2.69 2.75
2.49
2.5 2.38

2.0 1.85
1.71 1.70
1.50 1.55
1.5
1.06
1.0
0.70 0.70

0.5

0.0
2006 2007 2008 2009 2010 2011 2012 *)
EPS (Earnings per share) DPS (Dividend per share) Dividend policy ( at lest 50% of EPS)

* Board of Director’s proposal to the AGM

Outlook and guidance
Matti Kähkönen
President and CEO

Market outlook
Uncertainties might impact timing of large projects

Mining Construction Automation
32% of net sales 11% of net sales 11% of net sales
50% service intensity 40% service intensity 45% service intensity
 Positive for capital and services  Positive in emerging markets; flat  Positive for oil & gas customers;
 Good in capital business with in developed markets flat in pulp & paper
volatility expected to continue.  Satisfactory for capital and  Good in oil & gas; softer in pulp &
Services excellent. services paper. Services good.

Power Paper, Board, Tissue Pulp
11% of net sales 21% of net sales 9% of net sales
30% service intensity 50% service intensity 40% service intensity
 Positive, partly subject to  Demand for board and tissue  Positive, mainly due to packaging
legislation growing; other grades flat or down board and tissue
 Satisfactory for projects and  Weak for paper and board  Good for rebuilds and services.
services machines. Services good. Pulp mill market activity
satisfactory.

Long-term demand Short-term demand

27 © Metso February 7, 2013 Share of Metso net sales in January – December 2012

Order backlog* of EUR 4.5 billion
EUR billion EUR billion
6,000 6000

5,000 5000
Deliveries
after 2012
Deliveries
4,000 4000 after 2013

3,000 3000

2,000 2000
Deliveries in Deliveries in
2012 2013
1,000 1000
Services orders: 24%
Services orders: 28%

0 0
2008 2009 2010 2011 2012 Order backlog 2011 Order backlog 2012

Mining and Construction Automation Pulp, Paper and Power

28 © Metso February 7, 2013 * At the end of December

Guidance for 2013

We estimate that
• Our EBITA before non-recurring
items will be at around 2012 level
and our net sales will be at 2012
level or slightly below.

The estimates for our financial performance in 2013 are
based on Metso’s current market outlook, order backlog
for 2013 and foreign exchange rates in December 2012.


Summary

• 2012 was a good year in
challenging market
environment

• We will continue to focus
on growth opportunities
and driving shareholder
value


Metso Financial Statements Review 2012 presentation

Metso Financial Statements Review 2012 presentation

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