on the way forward - neles

On the way forwardPerttu Louhiluoto

President, Automation

Capital Markets Day

December 11, 2012

Vantaa, Finland

© Metso December 11, 20122 Capital Markets Day, Vantaa Finland

Content

1. Automation is an attractive

industry

2. Megatrends support our

growth

3. We have strong position and

capabilities to grow our

business

4. We have ambitious targets

5. Conclusions

© Metso Capital Markets Day, Vantaa Finland

Key messages a year ago and developments

since

• “Automation is an attractive

business, both in terms of

growth and profitability”

very much so

• “We have strong platforms to

build on”

• “We will grow organically as

well as through acquisitions”

3 December 11, 2012


Automation industry is very large and diverse

in scope

December 11, 20124

Source: ARC, Frost & Sullivan, metso own estimates

Automation market:

EUR 25 billion

Flow

Control

market:

EUR 44

billion

Centrifugal

pumps

Positive

dis-

placement

pumps

Valve

autom.

Comp.

Manual

Valves

IT: Operations

Management

Automated

on-off valves

Measurement and

analyzers

Specialty systems

Automation systems

Electrification

Control

Valves

Market

size: EUR

70 billion


Globalizing economy

Rise of emerging economies

Sustainability and climate

change

Automation growth is driven by megatrends

December 11, 20125

Automation helps

process industries

generate more output

from less input, while

generating less waste

and pollution


Growth is expected in all segments

6

Automation industry CAGR 2011-2016, %

0 2 4 6 8 10

O&G up- and midstream

O&Gdownstream

Power

Mining &Metal

Chemical

P&P

Source: ARC, Frost & Sullivan

0 2 4 6 8

Controlvalves

Automationsystems

Specialtysystems

Centrifugalpumps (F&S)

Valve automationcomponents

Automated on-off valves

December 11, 2012



since


business both in terms of

growth and profitability”

very much so

• “We have strong platforms to

build on”

we have integrated and

strengthened our platform

during 2012

• “We will grow organically as

well as through acquisitions”

December 11, 20127


41%

49%

10%

December 11, 20128

AutomationOverview

• Automation segment was established beginning of 2012

• Metso sees lots of opportunities for growing and expanding

Automation as an independent business

• Our core is to improve availability, performance, and risk

control for our customers in process industries so that they

can extract maximum value from their assets

• Our products and services include automation systems,

control and automated valves, and measurement & control

products

• Our current position is strong in selected niches

• Focus on the energy and pulp & paper industries and other

selected industry sub-segments

Pulp & Paper

Energy, oil and gas

Approx. 3,800

employees

Power

Net sales in 1-9/2012EUR 626 million

44%

33%

23%

ServicesFlow control capitalProcess Automation Systems capital


We have strong position on the global markets

Process Automation Systems

• Market size

- Total global market: EUR 25 billion

- Market for current offering:

EUR 5 billion

• Market position

- Pulp & paper control systems #3

- Power control systems #9

- Strong in selected niches

Flow Control

• Market size

- Total global market: EUR 44 billion

- Market for current offering:

EUR 10 billion

• Market position

- Pulp & paper control valves #1

- Oil & gas control valves #4

- Refining control valves #4

- Chemical control valves #6

December 11, 20129


Actions taken to integrate and consolidate our

platform during 2012

• Reorganization from three independent business lines into an

integrated Automation business

• Establisment of a services business line

• Significant operational improvements in our biggest valve facility

(Metso Valve Technology Center, Vantaa, Finland)

• Program to improve GP% and our overall cost position

• Defending our traditional areas of strength

- PAS orders outside Metso packages highest ever

- Global #1 in QCS* (first time ever)

- Orders for Pulp and paper valves up year-on-year

December 11, 201210

*QCS= Quality Control System; one of our main products for the paper industry



since


business both in terms of growth

and profitability”

very much so

• “We have strong platforms to build

on”

we have integrated and

solidified our platform during the

year 2012

• “We will grow organically as well

as through acquisitions”

satisfactory/good progress

considering the actions we have

taken to consolidate our platform

December 11, 201211


Volume is growing, despite quarterly

fluctuations

0

50

100

150

200

250

Q1

20

09

Q2

20

09

Q3

20

09

Q4

20

09

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

11

Q1

20

12

Q2

20

12

Q3

20

12

Service Capital

0

50

100

150

200

250

300

Q1

20

09

Q2

20

09

Q3

20

09

Q4

20

09

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

11

Q1

20

12

Q2

20

12

Q3

20

12

Service Capital

December 11, 201212

Orders received development Net sales developmentEUR million EUR million


Profitability in 2012 is within our target range

December 11, 201213

*) before non-recurring items

0

2

4

6

8

10

12

14

16

18

0

100

200

300

400

500

600

700

800

900

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

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

%EUR million

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

EBITA% * target range

Target

EBITA

11%-16%


Three main factors had a negative impact on

profitability in 2012

• Issues in operational

performance of our main valve

operations

• Low level of business through

Metso pulp and paper

packages (Process Automation

Systems)

• Higher capacity costs through

investments in growth

December 11, 201214


We are pulling multiple levers to get to the

higher end of our target profitability

• Volume leverage in Flow

Control

• Improved operational

performance of Flow Control

• Actions already taken, and to

be taken, to strengthen GP%

• Tight screening of general

administrational costs (actions

ongoing)

December 11, 201215


We have taken several steps to further support

our growth globally

• Establishment of a joint venture between Metso Automation and

SAC, Guodian Nanjing Automation Co., Ltd. Covering control

systems for thermal power customers in China

• Acquisition of Valstone Inc. in South Korea

- first step into globe valves, which will increase our addressable market

significantly

• Consolidation of our North American valve operations into new

facilities in Massachusetts

• New service and supply center in Vadodara, India

December 11, 201216

We are ready for

ambitious targets


We have set ourselves ambitious targets in

Automation

December 11, 201218

Achieve

significant

growth in

services

Become a leading

provider of advanced

automation solutions

for mining and

construction

customers

Become one of the

industry leaders

(profitability, scope

and size) in the

flow control space

Become one of the

top 3 flow control

companies in oil &

gas, refining, and

petrochemical

Achieve

significant and

growing PAS

business

outside

pulp & paper

Maintain market

leadership in

pulp & paper

automation


We are focusing on prioritized must-win

initiatives to reach our targets

December 11, 201219

Must-win

Services

Technology

Growth countries

Operating model

People

Developing new businesses

Initiative

• Expand service business offering and competencies

• Strengthen our network

• Strengthen the role of regions

• Actions to grow in China, Brazil, India, Russia and the Middle East

• Strengthen cost competitiveness and operational excellence,

sourcing in particular

• Ensure that we can capture the true value of acquisitions

• Strengthen our safety culture

• Upgrade critical core competencies

• Grow in mining and construction automation

• Grow in analyzers

• Develop and expand our valve offering

• Develop Metso DNA as a growth platform


We are targeting mining and construction

customers with a unique portfolio

• Mining and construction

customers are increasingly

looking for automation

solutions to improve their

operational performance

• We have a unique combination

of equipment and solutions to

improve process efficiency and

safety

December 11, 201220


We will continue to grow during 2013, despite

the mixed outlook

• Global economic uncertainty

• Challenges in the pulp and

paper industry

• Oil price holding up well

• Underlying growth drivers in

place for the automation

industry

December 11, 201221

© Metso

Conclusions

December 11, 201222 Capital Markets Day, Vantaa Finland

Mega trends

support automation growth

and we have a strong position

and the right capabilities to grow

our business:

We are a truly global organization,

with excellent service and

delivery capabilities

We have made good progress

in serving our customers

and enabling growth

We have set ourselves

ambitious targets:

Become one of the top 3 flow control

companies in oil & gas, refining

and petrochemical

Achieve significant growth in services

Achieve significant and growing

business also outside pulp & paper

Become a leading provider of advanced

automation solutions for mining

and construction customers

We will achieve our

targets by:

Strengthening our cost

competitiveness and

operational excellence

Strengthening the role of

regions

Expanding our service

business offering and

competencies

on the way forward - neles

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