Business News
Metsos Interim Review, January 1-September 30, 2009: Despite the demanding operating environment, our Q3 profitability was good
Friday 30. October 2009 - New orders worth EUR 1,031 million were received in July-September i.e. 54 percent less than in the previous year (EUR 2,246 million in Q3/08).
Highlights of the third quarter of 2009
New orders worth EUR 1,031 million were received in July-September i.e. 54 percent less than in the previous year (EUR 2,246 million in Q3/08).
At the end of September, the order backlog was 18 percent lower than at the end of December 2008, amounting to EUR 3,340 million (EUR 4,088 million at December 31, 2008).
Net sales decreased by 22 percent, and were at EUR 1,196 million (EUR 1,528 million in Q3/08).
Earnings before interest, tax and amortization (EBITA) were EUR 124.6 million, i.e. 10.4 percent of net sales (EUR 180.7 million and 11.8% in Q3/2008).
Operating profit (EBIT) was EUR 114.1 million, i.e. 9.5 percent of net sales (EUR 172.3 million and 11.3% in Q3/08).
EBITA and EBIT includes EUR 17 million in non-recurring expenses relating to capacity adjustment measures. EBITA margin before them was 11.9 percent.
Earnings per share were EUR 0.44 (EUR 0.69 in Q3/08).
Free cash flow was EUR 249 million (EUR 91 million in Q3/08).
Return on capital employed (ROCE) before taxes was 11.1 percent (23.3% in Q3/08).
“I am very pleased to report good profitability and strong free cash flow during the third quarter despite the demanding operating environment. It confirms that Metso’s cost structure and way of operating are a lot more flexible today than during the previous down turn. Our good performance was also supported by savings from the capacity and cost base adjustment actions that we already started a year ago”, says Jorma Eloranta, President and CEO of Metso Corporation
“Our operating environment continues to be demanding. While we are seeing first signs of gradual recovery in the global economy, and believe that we have now reached the lowest point in market demand, the world economy is far from stable, and there remains uncertainty about the timing and strength of the recovery. Although we estimate that our 2010 net sales will be lower than this year, we expect our profitability to be satisfactory. We have kept this year’s guidance intact”, Eloranta notes.
“During the past year we have considerably strengthened our long-term competitiveness by introducing new ways to operate across Metso. We believe that we have now taken the majority of the actions required to adjust our cost base and capacity to the demand environment in the near term. We continue to be alert in case further actions are required. We are now shifting focus to sales efforts and to strengthen our product and services offering. Through these actions we ensure that Metso will emerge as a winner from this downturn”, concludes Eloranta.
Metsos key figures
EUR million
Q3/09
Q3/08
Change %
Q1-Q3/ 2009
Q1-Q3/ 2008
Change %
2008
Net sales
1,196
1,528
-22
3,663
4,561
-20
6,400
Net sales of services business
499
586
-15
1,527
1,693
-10
2,343
% of net sales
42
39
42
38
37
EBITA before non-recurring capacity adjustment expenses
141.9
180.7
-21
311.7
480.9
-35
680.9
% of net sales
11.9
11.8
8.5
10.5
10.6
Earnings before interest, tax and amortization (EBITA)
124.6
180.7
-31
268.1
480.9
-44
680.9
% of net sales
10.4
11.8
7.3
10.5
10.6
Operating profit
114.1
172.3
-34
238.6
447.1
-47
637.2
% of net sales
9.5
11.3
6.5
9.8
10.0
Earnings per share, EUR
0.44
0.69
-36
0.88
1.96
-55
2.75
Orders received
1,031
2,246
-54
2,993
5,495
-46
6,384
Order backlog at end of period
3,340
5,244
-36
4,088
Free cash flow
249
91
174
449
51
780
29
Return on capital employed (ROCE) before taxes, annualized, %
11.1
23.3
23.2
Equity to assets ratio at end of period, %
33.2
31.5
30.9
Gearing at end of period, %
51.1
72.2
75.7
Short-term outlook
Although there are signs of gradual economic recovery, we estimate that our business environment will continue to be demanding during the rest of the year and first half of 2010.
Our customers are still being cautious in their investment decisions, which particularly affects our equipment sales and project business. We estimate that our customers capacity utilization rates are slowly improving assuming that the overall positive momentum in the global economy will continue. We estimate that this will have positive, gradual impact first in our services business.
Mining companies have made substantial cuts in their investment plans over the year compared with recent years and are still ready to curtail their production if needed. However, some mining companies have upgraded their investment plans for 2010, but it remains to be seen when this will start to have an impact on new equipment market. Due to our strong product and services offering, as well as our large installed equipment base, which has grown significantly over the last few years, the demand for our mining replacement and services business is expected to continue satisfactory. 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 in the long term, but which, for the present, have had little effect. 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. Many countries have initiated plans to increase the use of renewable energy sources. This is expected to support the demand for power plants utilizing biomass and waste. However, limited availability of financing may delay decision-making in projects. We estimate that the demand for our automation and flow control products will be satisfactory. The demand for metals recycling equipment is expected to be weak, owing to the low price of scrap metal and reduction in steel production. Demand for the services business in Energy and Environmental Technology is expected to be satisfactory.
We estimate that the demand for fiber lines will remain weak and that for paper and board lines will be satisfactory. Several paper and board machine projects have materialized in China during the past months, partly thanks to local stimulus measures. 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 continue to 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. During the first nine months we have generated net sales of EUR 3.7 billion and our order backlog stands at EUR 3.3 billion, of which about EUR 1.2 billion consists of deliveries for 2009. We expect our profitability level to be satisfactory in 2009. We also expect our free cash flow to improve considerably on 2008.
Although we estimate that our 2010 net sales will be lower than this year, we expect our profitability to be satisfactory.
The net sales and profitability estimates are based on our current market outlook and business scope.