Business News
Metsos Interim Review, January 1-March 31, 2009: Cash flow improved. Market outlook unchanged
Tuesday 28. April 2009 - New orders worth EUR 942 million were received in January-March (EUR 1,509 million in Q1/08), i.e. 38 percent less than in the comparison period.
Highlights of the first quarter of 2009
New orders worth EUR 942 million were received in January-March (EUR 1,509 million in Q1/08), i.e. 38 percent less than in the comparison period.
At the end of March, the order backlog was 4 percent lower than at the end of December 2008, amounting to EUR 3,934 million (EUR 4,088 million at December 31, 2008).
Net sales decreased by 13 percent, standing at EUR 1,220 million (EUR 1,400 million in Q1/08).
Earnings before interest, tax and amortization (EBITA) were EUR 68.8 million, i.e. 5.6 percent of net sales (EUR 133.7 million and 9.6% in Q1/08).
Operating profit (EBIT) was EUR 58.6 million, i.e. 4.8 percent of net sales (EUR 119.6 million and 8.5% in Q1/08).
Earnings before interest, tax and amortization (EBITA) and operating profit (EBIT) include EUR 22 million of non-recurring expenses relating to capacity adjustment measures.
Earnings per share were EUR 0.18 (EUR 0.55 in Q1/08).
Free cash flow was EUR 120 million positive (EUR 99 million negative in Q1/08).
Return on capital employed (ROCE) before taxes was 9.0 percent (20.9% in Q1/08).
“The overall market sentiment in our customer industries continues to be cautious. There have been some weak positive signals, but it is too early to say if this is enough to improve confidence levels and to start gradual recovery,” says Jorma Eloranta, President and CEO of Metso Corporation. “In the continuing demanding market situation, it is important for Metso to be prepared should the situation change – for better or for worse. Our delivery capability is good and we are continuing several long-term initiatives to enhance our competitiveness. At the same time, we are prepared to launch additional capacity adjustment measures quickly should the situation demand it.”
Eloranta notes that the order intake in the first quarter was low, in line with the levels reached towards year end. “Our services business net sales were on par with the corresponding period last year, which I consider positive for Metso. I am also pleased that our efforts to improve cash flow and release net working capital are showing positive results”, says Eloranta.
Metsos key figures
EUR million
Q1/09
Q1/08
Change %
2008
Net sales
1,220
1,400
-13
6,400
Net sales of services business
506
501
1
2,343
% of net sales
42
36
37
EBITA before non-recurring capacity adjustment expenses
90.8
133.7
-32
680.9
% of net sales
7.4
9.6
10.6
Earnings before interest, tax and amortization (EBITA)
68.8
133.7
-49
680.9
% of net sales
5.6
9.6
10.6
Operating profit
58.6
119.6
-51
637.2
% of net sales
4.8
8.5
10.0
Earnings per share, EUR
0.18
0.55
-67
2.75
Orders received
942
1,509
-38
6,384
Order backlog at end of period
3,934
4,340
-9
4,088
Free cash flow
120
-99
n/a
29
Return on capital employed (ROCE) before taxes, annualized, %
9.0
20.9
23.2
Equity to assets ratio at end of period, %
30.3
36.8
30.9
Gearing at end of period, %
72.6
39.1
75.7
Short-term outlook
Based on the global economic recession and uncertain financial markets, we estimate that our business environment will be demanding this year. Our customers are being cautious in their investment decisions, which affects our new equipment sales and project business in particular.
Several mining companies are making substantial cuts in their investment plans compared with the peak investment levels of recent years and limit their production during the year. Due to our strong product and service offering, as well as our large installed equipment base which has further grown significantly over the last few years, the demand for our mining equipment and services are expected to be satisfactory in 2009. In the construction industry, we estimate that the demand for equipment relating to aggregates production will be weak. Many countries have introduced stimulus measures relating to infrastructure development, which we expect to have a positive effect on the demand for our construction industry products on longer term. We estimate that the demand for our services offering in the construction industry will be satisfactory.
We estimate that the demand for power plants utilizing renewable energy sources will be satisfactory in Europe and North America in 2009. Many countries have initiated plans to increase the use of renewable energy sources. This is expected to support the demand for power plants based on biomass and waste utilization. We estimate that the demand for our automation products will be satisfactory in 2009. The demand for metals recycling equipment is expected to be weak, owing to the low price of scrap metal and decline in steel production. We expect that the demand for the services offering of Energy and Environmental Technology will be satisfactory.
We estimate that the demand for paper, pulp and fiber lines will be weak in 2009. The delivery schedules of some of the major paper and board machine and fiber line projects in our order backlog have been prolonged. We estimate that the low capacity utilization rates in the pulp and paper industry will have a negative impact on the demand for our services business, particularly in North America and Europe.
We estimate that our net sales will exceed EUR 5 billion in 2009. Our order backlog stands at EUR 3.9 billion, of which EUR 2.3 billion consists of deliveries for 2009. We expect our services business to remain satisfactory in 2009.
We expect our profitability level to be satisfactory in 2009. We also expect our free cash flow to improve considerably on 2008 owing to the measures aimed at releasing net working capital.
The net sales and profitability estimates are based on our current market outlook and business scope.
Metsos Financial Reporting in 2009
The 2009 Interim Review for January – June 2009 on July 24 and Interim Review for January – September 2009 on October 29 respectively.