Metso Capital Markets Day 2013 presentations: Harri Nikunen, CFO
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Metso has a strong financial foundation built on steady growth, improving profitability, and high returns. While orders from large mining projects have declined since 2012, Metso has a healthy order backlog and its services business is growing. Metso aims to maintain its investment grade rating through solid cash flows and balance sheet management. It has launched a EUR 100 million efficiency program to further improve performance.
Metso Capital Markets Day 2013 presentations: Harri Nikunen, CFO
- 1. Building on a strong financial foundation Harri Nikunen CFO November 27, 2013 London, UK
- 2. 1 Main financials 2 Balance sheet, cash flow & financing 3 Other topics Financial information for Metso’s continuing operations is unaudited and illustrative. Accounting principles are presented in a stock exchange release published on September 23, 2013
- 3. Metso by business type in 2012 EUR million • Project business operates with a 216 flexible business model and a light balance sheet • Equipment and product business ties 1,483 2,072 up more capital employed, but good margins secure good returns • Services business is central to building strong customer relationships and offers good profitability and returns 728 Service business Equipment and product business Project business Valmet Automotive 3 © Metso Capital Markets Day 2013
- 4. Big mining orders have been missing since 2012 Orders received for continuing operations,12-month rolling EUR Million Mining orders at an all time high 6,000 5,000 4,000 3,000 2,000 Services 4 © Metso Capital Markets Day 2013 Capital equipment 08/13 06/13 04/13 02/13 12/12 10/12 08/12 06/12 04/12 02/12 12/11 10/11 08/11 06/11 04/11 02/11 12/10 10/10 08/10 06/10 04/10 02/10 0 12/09 1,000
- 5. Orders by quarter Continuing operations EUR million 2,000 1,800 1 533 1,600 1,400 1 185 1,200 1,000 800 650 778 842 871 1 245 1 125 1 151 1 011 904 874 1 025 1 078 1 025 869 564 570 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2009 600 579 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 400 200 0 Services orders received, ext. 5 © Metso Capital Markets Day 2013 Capital orders received, ext.
- 6. Annual orders received Continuing operations EUR million 2009 2010 2011 2012 1-9/2013 Mining and Construction capital 737 1,313 2,103 1,658 905 Automation capital 270 337 407 404 339 1,035 1,322 1,604 1,771 1,255 265 309 352 382 326 56 84 281 216 148 2,363 3,365 4,747 4,432 2,972 344 745 1,416 1,102 519 Mining and Construction services Automation services Valmet Automotive Total Mining equipment 6 © Metso Capital Markets Day 2013
- 7. Healthy order backlog of EUR 2.1 billion – services backlog higher than ever EUR million EUR million, September 2013 3,000 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 2009 2010 2011 Mining and Construction 7 Around 45% of deliveries for 2013 consist of services orders © Metso Capital Markets Day 2013 2012 Automation 2013 0 Deliveries in 2013 Deliveries after 2013
- 8. Net sales for continuing operations Rolling 12 months EUR Million 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Services 8 © Metso Capital Markets Day 2013 Capital equipment 08/13 06/13 04/13 02/13 12/12 10/12 08/12 06/12 04/12 02/12 12/11 10/11 08/11 06/11 04/11 02/11 12/10 10/10 08/10 06/10 04/10 02/10 0 12/09 500
- 9. Profit & loss statement Continuing operations EUR million 2012 1-9/2013 Net sales 4,499 2,989 Operating profit 463 299 Net financial income and expenses -59 -43 Profit before taxes 404 256 Amortization of intangible assets -20 -16 Depreciation of tangible assets -57 -46 -11.9 0 0 -1 Other NRE -0,4 -20.7 Operating profit 463 299 10.3% 10.0% EBITA, before non-recurring items 495.3 336.7 EBITA-%, before non-recurring items 11.0% 11.3% 540 361 12.0% 12.1% Non-recurring items Capacity adjustment expenses Cost related to demerger process Operating profit -% EBITDA EBITDA-% 9 © Metso Capital Markets Day 2013
- 10. EBITA before NRE Continuing operations % EUR Million 5,000 11.0 11.2 11.3 4,500 10 4,000 3,500 8 3,000 2,500 6 2,000 4 1,500 1,000 2 500 0 2012 Net sales 10 © Metso 12 Capital Markets Day 2013 Q2 / 2013 Q3 / 2013 EBITA % before non-recurring items 0
- 11. Return on capital employed targeted to exceed 30% (excl. impact of major acquisitions) Continuing operations % 19.5 19.2 19 18.5 18 17.6 17.5 16.9 17 16.5 16 15.5 11 2012 © Metso Capital Markets Day 2013 1-6/2013 1-9/2013
- 12. Earnings per share Continuing operations EUR 2.0 1.82 1.8 1.6 1.4 1.21 1.2 1.0 0.8 0.71 0.6 0.4 0.2 0.0 12 2012 © Metso Capital Markets Day 2013 1-6/2013 1-9/2013
- 13. EBITA-% before NRE and ROCE-% Mining and Construction & Automation EBITA-% before NRE % Operational ROCE-% 45.0 16.0 13.5 14.0 12.0 12.0 11.2 13.0 12.6 11.1 10.9 11.8 39.0 40.0 35.3 35.0 31.8 28.9 30.0 10.0 25.0 24.3 25.3 28.7 25.2 8.0 20.0 6.0 15.0 4.0 10.0 2.0 0.0 5.0 0.0 Mining and Construction 2010 13 © Metso 2011 Automation 2012 Capital Markets Day 2013 1-9/2013 Mining and Construction 2010 2011 Automation 2012 1-9/2013
- 14. We have a strong financial foundation Net sales1 EBITA before NRI1 Operational ROCE1 EUR billion EUR million Percentage CAGR (2006-12) 7.5% 1.2 1.2 1.2 3.3 2.8 12.4% 1.1 3.7 1.0 2.9 4.4 3.7 1.0 Average margin (2006-12) 14.1% 13.9% 12.0% 11.2% 11.5% 14.0% 10.3% 3.1 463 0.8 -06 -07 Equipment 14 © Metso -09 390 -10 -11 35.1% 34.9% 31.3% 30.2% 24.0% 25.0% 20.2% 428 344 Strong return on capital Improving profitability Services CAGR 9.0% -08 Average (2006-12) 521 517 305 Services 28.7% -12 Book-to-bill ratio Capital Markets Day 2013 -06 -07 -08 EBITA -09 -10 -11 -12 -06 -07 EBITA-% 1) Combined Mining and Construction and Automation figures unless otherwise noted -08 -09 -10 ROCE-% -11 -12
- 15. Balance sheet Continuing operations EUR million 2012 Dec 2013 Sep Balance sheet total 4,000 3,915 Total non-current assets 1,110 1,261 Goodwill 442 448 Other intangible assets 120 117 Property, plant and equipment 392 478 Financial and other non-current assets 156 218 Total current assets 2,890 2,654 Equity 1,359 1,232 Interest-bearing liabilities 1,094 1,107 Net debt 385 491 Gearing 28.3% 39.9% ROCE before taxes 19.2% 17.6% ROCE after taxes 13.8% 12.9% n/a 36.5% Equity to assets ratio 15 © Metso Capital Markets Day 2013
- 16. Balance sheet structure as of September 30, 2013 Continuing operations EUR million 4,500 3,915 4,000 3,000 448 Goodwill 3,500 813 Fixed assets 2,500 Inventories 2,000 1,500 1,000 Other receivables* Capital Markets Day 2013 616 Equity 1,070 Other liabilities Net working capital 112 394 1,004 0 © Metso 1,232 1,034 Bank and cash 500 and interestbearing receivables 16 3,915 Net interest bearing loans 1,107 Provisions Advances received Interestbearing debt
- 17. Capital employed Continuing operations MEUR 20% 3,000 2,500 19% 2,000 18% 1,500 17% 1,000 16% 500 0 2012 Net working capital 17 © Metso Q2/2013 Fixed assets Capital Markets Day 2013 Goodwill Interest bearing and non-operative items Q3/2013 ROCE-% before taxes 15%
- 18. Net debt and net working capital Continuing operations Net debt and gearing Net working capital and NWC to net sales EUR million 1200 % 60 48.0 1000 39.9 800 50 EUR million 800 700 692 16 15.2 14.4 580 600 40 13.7 630 14 12 565 600 491 385 400 20 200 10 0 0 Net Debt 18 30 © Metso Capital Markets Day 2013 Gearing 500 10 400 8 300 6 200 28.3 4 100 2 0 0 Net working capital, EUR NWC, as % of net sales %
- 19. Net working capital Mining and Construction & Automation MEUR 900 25% 800 20% 700 600 15% 500 400 10% 300 200 5% 100 0 2008 2009 2010 NWC 19 © Metso Capital Markets Day 2013 2011 NWC/NS -% 2012 Q3 / 2013 0%
- 20. Gross capital expenditure Continuing operations MEUR 160 250% 140 200% 120 100 150% 80 100% 60 40 50% 20 0 A2005 A2006 A2007 Gross capex 20 © Metso Capital Markets Day 2013 A2008 Capex acquisitions A2009 A2010 A2011 A2012 Q3 A2013 Gross capex / depreciations and amortizations -% 0%
- 21. Free cash flow Continuing operations 500 125% 450 140% 114% 120% 400 100% 350 300 80% 250 60% 200 150 40% 100 20% 50 0 2008 2009 2010 Free cash flow 21 © Metso Capital Markets Day 2013 2011 2012 Cash conversion -% From 2006 onwards only maintenance investments are included in FCF. 1-9/2013 0%
- 22. Capital structure ratios Continuing operations % 90 80 70 60 48.0 50 36.1 40 36.5 39.9 28.3 30 20 10 0 2012 Equity to assets ratio -% 22 © Metso Capital Markets Day 2013 Q2/2013 Gearing -% Q3/2013 Debt to capital -%
- 23. Funding facilities Corporate-level funding facilities as of October 10, 2013, excluding loans to be transferred to Valmet • EUR 1.5 billion EMTN program - EUR 200 million 7.25% bond due in 2014 EUR 400 million 2.75% bond due in 2019 EUR 174 million private placements due in 2018 – 2022 • Bilateral long-term loans: EUR 5 million maturing in January 2014 • Syndicated long-term loan: USD 287 million maturing in 2018 • Committed EUR 500 million 5-year syndicated revolving credit facility available until 2015 (currently undrawn) • • EUR 500 million domestic CP program 23 Uncommitted lines of credit © Metso Capital Markets Day 2013
- 24. Debt and maturity structure Excluding loans to be transferred to Valmet MEUR October 10, 2013 2000 1800 1600 Undrawn committed facilities 1400 1200 Short-term debt 1000 Other long-term debt Syndicated long-term debt 800 Private placements 600 400 Euro Bond 2014 Euro Bond 2011 200 Euro Bond 2019 0 1.1.2011 09/2011 06/2012 03/2013 10/2013 06/2014 03/2015 12/2015 09/2016 06/2017 03/2018 12/2018 YTD Monthly 24 © Metso Capital Markets Day 2013 Maturities monthly >
- 25. Balance sheet & financing • Metso’s capital allocation policy is based on a commitment to maintain the Group investment grade rating and honor Metso’s dividend policy • Metso’s business portfolio and business model generate solid cash flows both good and less good times • All balance sheet key indicators indicate solid capital management, and improvement of net working capital management remain high on the agenda • Financial measures and the balance sheet impact are seen as key M&A criteria 25 © Metso Capital Markets Day 2013
- 26. EUR 100 million global efficiency program under way Announced on October 24, 2013 Two phases – fast track and structural / development projects • Fast track = project identified and ongoing at different stages - 26 Projects announced Large number of other ongoing but unannounced projects • Divestment of parts of the industrial conveyor belt business in Europe • Restructuring of the metal recycling business • Union negotiations related to Finnish foundry operations • Restructuring of the EMEA sales and services organization • Transfer or closure of small operations in various countries • Resizing of Metso’s headquarters • Restructuring of Process Automation Systems Most of the decisions will be taken in 2013, leading to one time costs in 2013 Decisions and costs will also affect 2014 The identified gross savings are EUR 60 – 80 million and we expect to have the full run rate during late 3Q/2014 © Metso Capital Markets Day 2013
- 27. EUR 100 million global efficiency program under way Announced October 24, 2013 Two phases – fast track and structural / development pojects • Structural and development projects = projects in the planning pipeline (2014 decisions) - Streamlining of support functions Streamlining of legal structure New projects derived from cost structure studies Capacity adjustment needs related to unexpected demand changes The improvement impact is neing assessed and not part of the EUR 60 – 80 million fast track project referred to before • Global effeciency program also includes our global procurement development activitities. We are targeting annual savings between EUR 30 – 50 million - 27 In 2013, we expect to save EUR 20 – 30 million © Metso Capital Markets Day 2013
- 28. Guidance & market outlook terms Guidance: Market outlook: At around = +/- 0 - 5% on EUR-based net sales and EBITA Excellent = Demand exceeding supply and excellent pricing environment At around = +/- 0 - 0.5% on EBITA -% Good = Demand and supply in balance Somewhat = +/- 5 - 10% on EUR-based and healthy pricing environment net sales and EBITA Satisfactory = Supply exceeds demand and more work is needed to fill capacity. OR Pricing is becoming more volatile Somewhat = +/- 0.5 –1.0% on EBITA -% Weak = Buyers market! Suppliers have Significant = +/- > 10% on EUR-based overcapacity and pricing may become net sales and EBITA unhealthy OR Significant = +/- > 1.0% on EBITA -% 28 © Metso Capital Markets Day 2013
- 29. Backlog coverage & delivery times Automation Mining and Construction Flow control = Normal backlog covers 5-6 months of net sales Minerals processing systems = High project content; coverage ~1 year Process automation system = High project content; coverage ~1 year Construction equipment = Normal backlog covers 3-4 months Services = Coverage 2-3 months on average Services = Coverage 3-4 months on average In general, when delivery times (backlog coverage) get longer the better the market conditions are. Largest change takes place in major build-to-order equipment. 29 © Metso Capital Markets Day 2013