Download - Strengthening our investment proposition
Strengthening our investment proposition Matti Kähkönen
President and CEO
November 27, 2013 London, UK
Overview 1
Investment highlights 2
Market outlook and guidance 3
Concluding remarks 4
Overview
© Metso © Metso 4
• We are committed to taking personal responsibility for our own safety and for the safety of others • We believe that all incidents can be
prevented • Our safety performance has
improved steadily • We always emphasize our high HSE
standards of conduct when dealing with customers, suppliers, and other stakeholders • We aim to minimize our
environmental footprint throughout the entire value chain
HSE (Health, Safety & Environment)
0 2 4 6 8
10 12 14 16
Q4/09 01/11 06/11 11/11 04/12 09/12 02/13 07/13
Lost time incident frequency
Capital Markets Day 2013
An essential element in all our activities
© Metso © Metso
30%
19% 22%
22%
7%
5 Source: Management estimates 1) Figures are unaudited and illustrative. Accounting principles are presented in a stock exchange release published on September 23, 2013 2) EBITA before non-recurring items
Becoming a more focused and integrated group
Key figures 2012 (1)(2)
Net sales: EUR 4,499 million • 48% of sales from services • 52% of sales from emerging markets
EBITA before NRI: EUR 495 million EBITA-% before NRI: 11.0% Personnel: 17,665
Market positions Services #1 Mining crushing and grinding #1 Construction crushing and screening #1-2 Pulp & Paper automation #1 Oil & Gas control valves #5
55% 18%
12%
7% 8%
2012 sales by end-market(1) 2012 sales by geographic area(1)
€4.50 bn
52% Emerging markets
Construction Mining
Oil & Gas
Other Pulp & Paper €4.50 bn
North America Europe
South and Central America
Africa and Middle East
Asia-Pacific
© Metso © Metso
Our businesses have a strong services component
6 Capital Markets Day 2013
1,530 1,823
2,072
2010 2011 2012 1-9/13
1-9/12 1,522
650 770
859
626 605
11.1%
13.5%
11.8%
11.2%
13.0%
2010 2011 2012 1-9/12 1-9/13
2,419
2,967
3,492
2,568 2,286
11.2% 10.9%
12.0% 11.7% 12.6%
2010 2011 2012 1-9/2012 1-9/2013
Mining and Construction (80% of sales(1)(2)) Net sales and EBITA margin(3)
Automation (20% of sales(1)(2)) Net sales and EBITA margin(3)
Of which services (~50% of sales)
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1,470
Average EBITA margin: 17-19% Services business net sales
Maintenance Performance services
Spare and wear parts
Life-cycle services
Flow control Process automation
Crushing and screening
Grinding solutions
Minerals processing solutions
Source: Company information 1) 2012. Includes services and intra-Metso net sales 2) 2012. Excludes Valmet Automotive, Group Head Office, and others 3) EBITA before non-recurring items
Investment highlights
© Metso © Metso
Our strong assets and strategic must-wins
1) Return on capital employed (ROCE) before taxes
Services
Technology offering
Growth countries
Operational excellence
Continued growth through an excellent offering
Develop competitive cost-efficient, market-driven technology
Embed intelligence in machines, services, and processes
Increase presence in growth countries
Improve cost-competitiveness and increase productivity
Develop common global platforms, processes, and operating models
Develop a working environment that will drive our business success
People and leadership
Well-positioned to benefit from long-term growth trends
Global footprint, with leading positions in all the markets we serve
Services-driven business model
Competitive advantage through unique combined offering
Strong financial track record to support superior performance
Our assets Our strategic must-wins Our targets
≥30%
ROCE %(1)
11-16%
EBITA margin
>10% p.a.
Services sales
>Market growth
Sales growth
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An attractive investment proposition
© Metso © Metso
Our assets offer a strong investment case
Well-positioned to benefit from solid long-term growth trends
Leading positions in all the markets we serve and a global footprint
Services-driven business model
Competitive advantage through a unique combined offering of equipment, services, and intelligence
Strong financial track record to reach the next level of performance
1
2
3
4
5
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© Metso © Metso
General input efficiency and scarcity Reduced people intensity at work sites
Yield improvement Waste handling
Environmental impact Health and safety
We are well-positioned for growth Helping customers deal with increasingly scarce resources and improve their operational efficiency
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1 2 Growth trends
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Globalization Urbanization Emerging markets growth
Sustainability and climate
change
Geological inflation
Intelligence Product life-cycle solutions
Performance improvements
Maintenance, wears and spares
Equipment and systems
3 4 5
Metso’s differentia-ted solutions
Customer challenges
Megatrends
© Metso © Metso
Capitalizing on long-term growth prospects in all our end-markets
11 Source: Management estimates, industry experts 1) Refers to energy and hydrocarbons
~45% 12% • Growth in energy consumption • Environmental concerns and
compliance • Safety demands
6-8%
~55% 55%
• Demand for metals and minerals • Growth of emerging markets • Urbanization, infrastructure
investments • Need for higher utilization and
process efficiency at mines
5-8%
~40% 18% • Infrastructure expansion in
growth countries • Urbanization 4-6%
Mining
Construction
Oil & Gas1
Market drivers Share of services
% of net sales, 2012
Long-term market growth, p.a.
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1 2 Growth trends 3 4 5
© Metso © Metso
Leading market position in all our businesses
Mining services
Construction services
Services in automation
Grinding mills
Mining crushers
Crushing and screening
A strong position in selected niches
O&G control valves
P&P control valves
P&P automation sy
Services >2.1 bn
Mining equipment >1.2 bn
Construction equipment ~500 m
Automation equipment ~500 m
Total addressable services market >20 bn
Mining equipment 11 bn Construction equipment 8 bn Flow control 10 bn Systems 5 bn
#1
#1
niche
#1
#1
#1 #5
#1
#1
Services Mining Construction Automation
Addressable market (EUR)
Global market positions
Contribution (EUR)
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1 2 Leading market positions & global presence 3 4 5
© Metso © Metso
We leverage our global presence to capture growth everywhere
Capital Markets Day 2013 13 At the end of 2012.
2,997 of which 62% in Services €m
South and
Central America
2,833 of which 33% in Services €m
North America
8,310 of which 38% in Services €m
Europe
1,174 of which 92% in Services €m
Africa and
Middle East
2,737 of which 39% Services €m
Asia Pacific
968
830
997
333
1,371
Metso location
1 2 Leading market positions & global presence 3 4 5
Net sales
Net sales
Net sales
Net sales
Net sales
© Metso © Metso
-40%
-30%
-20%
-10%
0%
10%
20%
30%
2007 2008 2009 2010 2011 2012 2013 Services sales growth Equipment sales growth
50
75
100
125
150
175
200
2007 2008 2009 2010 2011 2012 2013
Mining capex Metso services
Services business offers growth and stability
~50% of Group revenues
Our services provision to customers requires: • Deep domain/application expertise • Network infrastructure • Exceptional logistics capabilities • The ability to scope and price new
services • Highly localized organization
Our services organization provides: • Proximity to customers • Enhanced visibility on earnings
Our services offering is becoming increasingly intelligent to meet our customers’ challenges
Source: Company information and McKinsey Basic Materials Institutes – March 2013 1) Includes services sales relative to the Mining and Construction business 2) Based on LTM as of September 30, 2013
1
Services provide stability Indexed
2
Services also provide profitable growth
CAGR ’06-’13: 3.8% CAGR ’06-’13: 7.6%
2
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1 2 Services driven business model 3 4 5
© Metso © Metso
We operate a unique global services network
15
The most extensive services hub network in the industry: More than 70 hubs close to our customers
Global distribution and logistics network for wears and spares
Structured knowledge sharing across our network
Service centers
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1 2 Services driven business model 3 4 5
© Metso © Metso
Increasingly intelligent services offering Differentiating ourselves by embedding intelligence in our portfolio
16
Capital equipment
Spare parts
Wear parts
Standard services
Multi-year contracts
Process technology
Engineered services solutions
Performance services solutions
Embed intelligent in our machines, services, and processes Intelligent solutions
Spare and wear parts solutions
1 2 Services driven business model 3 4 5
Transition from being an equipment and transactional services supplier to a intelligent solutions provider is ongoing across the Group
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© Metso © Metso
We have a unique combination of equipment, services, and intelligence
Traditional
Equipment Services Intelligence + +
Strategic direction
Intelligence Capability to embed intelligence in machines, services, and processes
Equipment Cost-competitive and market-driven technology offering
Services Excellent services, know-how, network, and services culture
Intelligence
Services
Equipment Growing
end markets
Oil & Gas
Mining
Construction
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1 2 Unique combination of equipment, services and intelligence 3 4 5
© Metso © Metso
Examples of intelligent solutions
Products that help customers control or design their processes more intelligently
Features or subsystems that help customers run their equipment more intelligently
Combination of Metso equipment, intelligent products, and services that provide business benefits in terms of greater effiency, higher output etc.
Services that enable customers to gain from Metso’s expertise in technologies and processes
Products
Embedded
Solutions
Category Examples
Metso Intelligence enables customers to improve their processes and achieve higher efficiency, greater output, improved sustainability and safety, and reduce operational cost
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Services
Valve controls Analyzers DCS ExperTune
Machine automation Remote monitoring and
control Asset management
Automated crushing plants Paper Quality Management
Advanced process control
consulting services Life-Cycle Services Crushing and grinding
process optimization consulting service
1 2 Unique combination of equipment, services and intelligence 3 4 5
© Metso © Metso
2.8
3.3 3.7
2.9 3.1
3.7
4.4 1.2 1.2
1.0
0.8
1.1
1.2
1.0
-06 -07 -08 -09 -10 -11 -12
Equipment Book-to-bill ratio
390 463
517
305 344
428
521
13.9%
14.0%
14.1%
10.3% 11.2% 11.5% 12.0%
-06 -07 -08 -09 -10 -11 -12
EBITA EBITA-%
35.1% 34.9% 31.3%
20.2%
24.0% 25.0%
30.2%
-06 -07 -08 -09 -10 -11 -12
ROCE-%
Capital Markets Day 2013 1) Combined Mining and Construction and Automation figures unless otherwise noted
Net sales1
EUR billion EBITA before NRI1
EUR million Operational ROCE1
%
We have a strong financial foundation
CAGR (2006-12) 7.5%
Services CAGR 9.0%
Average margin (2006-12) 12.4% Average (2006-12) 28.7%
Improving profitability
Strong return on capital
Services
19
1 2 Strong financial foundation 3 4 5
© Metso © Metso 20
Targeting the next level of financial excellence
>10% annual growth on average Services net sales +14%
To grow faster than net sales Earnings per share n/a
11-16% before NRI Profitability (EBITA %) 11.0%
At least 30% (before taxes) Return on capital employed (ROCE) 19.2%
Supporting a solid investment-grade credit rating Capital structure BBB,
Baa2
At least 50% of annual earnings per share Dividend payout n/a
Growth to exceed market growth Net sales +14%
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2012
1 2 Strong financial foundation 3 4 5
© Metso © Metso
• The program is designed to improve our cost structure and operational efficiency
• Maintain competitiveness and increase productivity
• A combination of both on-going and new initiatives
• Target to achieve a high run rate of savings by late 2014
Global efficiency program under way Targeting annual cost-savings of around EUR 100 million by the end of 2015
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1 2 Strong financial foundation 3 4 5
© Metso © Metso
Our capital allocation policy
Services in all businesses
Intelligent offering
Flow Control Mining
Services
According to Metso’s strategic growth priorities
1. Organic growth 2. M&A 3. Return excess cash to shareholders
Use of available capital
As a top priority, we will maintain a capital structure and liquidity position that secures: • Investment-grade credit rating • ability to execute our dividend policy (>50% of EPS)
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1 2 3 4 5 Strong financial foundation
Market outlook and guidance
© Metso © Metso
Market outlook
55% of net sales 55% service intensity Current demand:
Satisfactory in capital business. Services good.
Mining
18% of net sales 40% service intensity Current demand:
Satisfactory for equipment and services.
19% of net sales 45% service intensity Current demand:
Good in oil & gas; satisfactory in pulp & paper. Services good.
Construction Automation
3-6 months market outlook ( )
Equipment Services
Equipment Services
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Equipment Services
© Metso © Metso Capital Markets Day 2013 25
Our net sales and EBITA before non-recurring items in 2013 will be significantly lower compared to 2012.
Additional information:
• Mining and Construction segment: Net sales are expected to be somewhat lower and EBITA before non-recurring items at around the same level compared to 2012
• Automation segment: Net sales are expected to be at around the same level and EBITA before non-recurring items is expected to improve significantly compared to 2012
• Valmet Automotive is expected to book a substantial loss for 2013
The estimates for our financial performance in 2013 are based on the current market outlook, order backlog for 2013, and foreign exchange rates in September 2013.
Guidance for 2013
Conclusions
© Metso © Metso
years at Metso
Strong and experienced management team
Capital Markets Day 2013
1) Mr. Colagrossi, currently President, Services Business Line, Mining and Construction, will be responsible for the development of the Metso Group’s overall services business until he takes over as the head of Mining and Construction. His successor in Services position will be nominated later.
Merja Kamppari Senior Vice President HR Prev.: Nokia HR for 15 years Born: 1958 Share ownership: 5,284
Matti Kähkönen President and CEO Born: 1956 Share ownership: 20,507
Harri Nikunen Executive Vice President and CFO Born: 1955 Share ownership: 8,115
Andrew Benko President Mining and Construction (until Dec 31, 2013) Born: 1949 Share ownership: 15,003
João Ney Colagrossi President Mining and Construction (Jan 1, 2014 onwards)1
Born: 1955 Share ownership: 14,029
Perttu Louhiluoto President Automation Prev.: McKinsey for 17 years Born: 1964 Share ownership: 2,753
Simo Sääskilahti Senior Vice President Strategy and Business Development Prev.: Comptel and McKinsey Born: 1971 Share ownership: 0
33 years at Metso
27 years at Metso
41 years at Metso
34
years at Metso
5 years at Metso
4 years at Metso
2
27
© Metso © Metso
We are uniquely positioned to create value for shareholders across the economic cycle
Capital Markets Day 2013 28
Margin expansion
+ Productivity
Resilience
Stability +
Faster than market >10% for services
Growth = Increased value
Track record Strong competitive positions Strategic focus High proportion of services with defensive characteristics Geographical diversity
Group integration Productivity enhancing plan Economies of scope Economies of scale
Megatrends Growth markets Services Intelligent solutions Group integration External growth opportunities
Value-enhancing returns on capital
EPS growth greater than sales growth
Strong cash generation
Solid financial position
Competitive shareholder returns