Metso investor presentation Carnegie Nordic Large Cap Seminar Stockholm, March 10, 2010 Johanna Henttonen, Vice President, IR Forward looking statements It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for customer industry profitability and investment willingness, expectations for company growth, development and profitability and the realization of synergy benefits and cost savings, and statements preceded by expects, estimates, forecasts or similar expressions, are forward-looking statements. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties which may cause the actual results to materially differ from the results currently expected by the company. Such factors include, but are not limited to: (1) general economic conditions, including fluctuations in exchange rates and interest levels which influence the operating environment and profitability of customers and thereby the orders received by the company and their margins (2) the competitive situation, especially significant technological solutions developed by competitors (3) the company s own operating conditions, such as the success of production, product development and project management and their continuous development and improvement (4) the success of pending and future acquisitions and restructuring. 2 1
Presentation contents Metso at glance Strategic focus Financials and outlook 3 Metso at glance 2
Metso is a global supplier of sustainable technology and services Serving customers in several industries Wide geographical reach via 300 units in over 50 countries Balanced portfolio of project, product and services businesses Large installed base and strong contribution from services business Strong focus on sustainable technologies Competitive and flexible operating model Net sales and operating profit Eur million Eur million 7,000 6,250 6,400 700 6,000 600 4,955 5,016 5,000 4,221 580 637 500 4,000 400 457 3,000 300 335 2,000 294 200 1,000 100 0 0 2005 2006 2007 2008 2009 Net sales Operating profit 5 Balanced portfolio 2009 net sales 5.0 billion Net sales by customer industry Net sales by type 27% Mining 14% Construction 13% Power 8% Oil and gas 4% Recycling 35% Project business 25% Product business 35% Spare and wear parts 5% Maintenance and process improvements 34% Pulp and paper 6 3
Strong global presence Orders received by market area Personnel by area Orders received in 2009 EUR 4.4 billion About 27,000 employees 7% Finland 7% Other Nordic countries 22% Other European countries 18% North America 12% South and Central America 28% Asia-Pacific 6% Rest of the world 32% Finland 11% Other Nordic countries 13% Other European countries 13% North America 10% South and Central America 16% Asia-Pacific 5% Rest of the world 7 Strategic focus 4
Global megatrends supporting Metso s growth Globalizing economy Redistribution of economic power New players in global markets Supply chains in change Rise of emerging economies New superpowers in the global economy Growing affluence of the middle class Local, cost-efficient solutions Demographic change Urbanization Aging workforce in traditional markets Knowledge transfer and training Sustainability and climate change New eco-efficient technologies New energy solutions and energy efficiency Increasing regulation 9 Good progress in our key strategic areas The importance of emerging markets increased significantly Orders received 1999: 16% 2009: 48% Services business 1999: EUR 1.1 billion 2009: EUR 2.1 billion Environmental business 1999: not an issue 2009: some 60% of our business 10 5
Stable growth in services business Platform for continued growth Services net sales EUR million 2,500 2,000 1,500 1,000 500 0 1,407 1,829 1,685 2,343 2,163 2,052 2004 2005 2006 2007 2008 2009 Targeting growth and profitability in services Services market size about EUR 16 million, fragmented market Services account for a clearly bigger share of our operating profit than capital equipment and systems together. Currently ~9,000 employees in the services business Global service center network 11 Transition from equipment supplier to life-cycle service provider continues Majority of our services net sales comes currently from spare and wear parts Metso Process agreements Driven by customer production volumes High potential in maintenance and expert services due to large own installed base Wear & spare parts Service agreements Solution provider Performance provider Increasing market share We are actively expanding our services business scope towards service and process agreements. Equipment Machine supplier Expanding offering, lifecycle approach New equipment business 12 6
Results in environmental business Some 60% of our net sales in 2009 (OECD definition) Solutions for sustainable development important in all customer segments Reduce, Reuse, Recycle Environmental business as a new growth area First year for EET segment Two acquisitions Healthy order intake in biomass and waste to energy solutions Growing R&D effort in all businesses for environmental technology Several joint development projects in bioenergy 13 World s largest biomass boilers come from us Renewable fuel boiler capacity Since 2000 Metso has sold almost 5 GW e boiler capacity fuelled with renewables equal to 6 average nuclear reactors Solver effect Replaces over 140 000 rail car loads of coal annually Solver effect CO 2 emissions to the equivalent of over 24 million cars are avoided annually when above boiler capacity is fuelled with renewables instead of coal 14 7
Strengthened presence in emerging markets Platform for continued growth 15 Financials and outlook 8
Financial highlights EUR million 2009 2008 Change, % Q4 2009 Q4 2008 Change, % Net sales 5,016 6,400-22% 1,353 1,839-26% EBITA before non-recurring capacity adjustment expenses 409.0 680.9-40% 97.3 200.0-51% EBITA % of net sales 8.2 10.6 7.2 10.9 334.3 680.9-51% 66.2 200.0-67% % of net sales 6.7 10.6 4.9 10.9 EPS, EUR 1.06 2.75-61% 0.18 0.79-77% Orders received 4,358 6,384-32% 1,365 889 54% Free cash flow 717 29-268 -22 - Gearing at end of period, % 32.5 75.7 17 Order backlog EUR 3.4 billion -13% decline on comparable basis* Delivery of order backlog EUR million 5,000 3,737 4,000 4,341 4,088 3,415 3,000 2,350 2,000 1,000 0 31.12.2005 31.12.2006 31.12.2007 31.12.2008 31.12.2009 Mining and Construction Technology Energy and Environmental Technology Paper and Fiber Technology Total order backlog EUR million 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Delivery after 2010 Delivery in 2010 *Comparable basis: excluding cancellations and acquired businesses. 18 9
Short-term market outlook Some markets recovering in 2010 some on par with 2009. Mining Construction Power - Market recovery expected during 2010 - Asian and Brasilian markets expected to be active in 2010, no quick recovery elsewhere - Market expected to be good in 2010 with increasing investments in renewable energy Automation Recycling -Market Paper expected to continue weak in 2010 due to Fiber - Market expected to start to recover in 2010 - Demand to stay weak for metal recycling and satisfactory for solid waste recycling - Low visibility in 2010, satisfactory demand expected - Low visibility; improving demand for rebuilds, weak demand for greenfield projects 19 Guidance for 2010 Signs of gradual recovery in the global economy and in demand of some of our customer industries. We estimate that our operating environment will continue to be demanding at least in the first half of 2010. We estimate our net sales to remain at about the same EUR 5 billion level as in 2009, and profitability to remain satisfactory. 21 20 10
Long-term financial targets Target Description Financial development 2009 Net sales growth >10% Average annual net sales growth >10%. Growth achieved both organically and through value-enhancing complementary acquisitions. Net sales decreased by 22%. Growth in EBITA* Target is to improve EBITA annually. EBITA decreased to EUR 409 million. EBITA %* >12% Target is to exceed 12% EBITA margin. EBITA margin was 8.2%. ROCE %* >25% Target is to exceed 25% ROCE (before tax) ROCE % was 12.4%. Cash conversion >100% Cash conversion to exceed 100%. Cash conversion was 475%. Annual dividend at least 50% of EPS. Target is to pay at least 50% of annual EPS as a dividend or in other forms of repatriation of capital. Metso Board proposes a dividend of 0.70 euros per share for 2009, corresponding to 66% of EPS. Credit rating: solid Target is to maintain a solid investment grade credit rating. The key financial indicators, capital structure and cash flow, support a solid investment grade in credit rating. Credit rating: solid. Moody s: Nov. 16, 2009: Baa2 Outlook: Negative S&P: Feb. 13, 2009: BBB Outlook: Negative 21 * Before non-recurring capacity adjustment expenses 2010 priorities Winning new orders Profitability and cash flow Securing the future 22 11
23 Metso s financial statements and other financial information available on Metso s website at: www.metso.com/investors Metso Corporation - Investor Relations Fabianinkatu 9 A, P.O. Box 1220, FIN-00101 Helsinki, Finland Tel. +358 20484 100 Fax +358 20 484 3236 Johanna Henttonen, Vice President, Investor Relations Tel. +358 20 484 3253 johanna.henttonen@metso.com Marja Kortesalo, Investor Relations Manager Tel. +358 20 484 3211 marja.kortesalo@metso.com Elina Lehtinen, Financial Communicator, Investor Relations Tel. +358 20 484 3215 elina.lehtinen@metso.com Anne-Mari Ylikulppi, Assistant, Investor Relations Tel. +358 20 484 3117 anne-mari.ylikulppi@metso.com North America: Mike Phillips, Senior Vice President, Finance and Administration, Metso USA Inc. Tel. +1 770 246 7237 mike.phillips@metso.com 24 12
Mining and Construction Technology Net sales in 2009 EUR 2,075 million Products and services Know-how and maintenance services Complete systems, wear and spare parts and service solutions Process technology and process optimization services Grinding mills, crushing and materials-handling equipment, process equipment Stationary and mobile crushers, screens and conveyors Customers Mining and construction industry (quarries and contractors) Competitors Mining industry: FLSmidth, Outotec,ThyssenKrupp Construction industry: Terex, Sandvik, Astec By customer industry 66% Mining 34% Construction Services as % of net sales 47% 25 Energy and Environmental Technology Products and services Boiler plants, biomass power plants and environmental protection e equipment Energy and process industry automation and information management application networks and systems Production process measurement systems and analyzers Control valves and smart shut-off valves Metal and solid waste recycling equipment Knowledge based service Customers Power generation industry Oil and gas industry Pulp and paper industry Recycling industry Competitors Power generations (incl. pulp and paper industry): Foster Wheeler, Austrian Energy and Environment, Andritz, Babcock & Wilcox Automation systems: ABB, Honeywell, BTG Valves: Emerson Process Management, Dresser, Flowserve Recycling: Lefort, Akros Henschol, Harris, The Shredder Company (Newel) Net sales in 2009 EUR 1,523 million By customer industry 43% Power generation 26% Oil and gas 13% Recycling 18% Pulp and paper Services as % of net sales Solid waste recycling: Komptech, Lindner, SID 35 % 26 13
Paper and Fiber Technology Net sales in 2009: EUR 1,408 million* Products and services Production lines, machinery and equipment for paper, tissue and board production and finishing for mechanical and chemical pulp production Know-how and maintenance services paper and board machine clothing Customers Paper, tissue and board producers Mechanical and chemical pulp producers Competitors Paper and board: Voith Pulp: Andritz By customer industry 76% Paper 24% Pulp Services as % of net sales 41% 27 (excluding Tamfelt, acquired in December 2009, EUR 130 million) Our target markets in 2009 EUR 35 billion Including services target market of EUR 16 billion. Mining & Construction EUR 11 billion (Metso market share ~18%) Mining EUR 8 billion Construction EUR 3 billion Energy & Environment EUR 13 billion (Metso market share ~5%) Oil & Gas (valves) EUR 5 billion Power generation EUR 2.5 billion Energy & process automation (& valves) EUR 4 billion Recycling (including solid waste) EUR 1.5 billion Pulp & Paper EUR 10.5 billion (Metso market share ~15%) Paper & board EUR 5 billion Fiber EUR 2.5 billion Paper machine clothing EUR 1.5 billion Pulp & paper automation (& valves) EUR 1.5 billion 28 14
Market overview Mining Rising standard of living drives the demand Implications of megatrends Capex estimates for global mining (incl. exploration) (USD bn), real terms (2008) 120-130 120 110 110-120 Rapid economic growth and urbanization in emerging markets will increase the demand for almost all minerals in the coming years Market environment Grow-the-business Sustain-the-business 43 71 60 60-70 85-95 China and India will be driving demand, 2009-2010 capex levels around 50% of previous boom years, returning to pre-crisis capex levels 2012 onwards -> bigger projects will emerge In the meanwhile, just to stay in and sustain the business requires investments into capacity expansions, replacement equipment and services Implications to Metso Stay-in-business Exploration 50% of our mining net sales comes from services 2003 2004 2007 08 09E 10E 11E 12E 2015E Services demand driven by capacity utilization rates Source: McKinsey Basic Materials Institute, 2009 More material processed in less rich ore bodies, more spare parts/consumables needed Customers looking for productivity of assets and outsourcing opportunities 29 Market overview - Construction Emerging markets driving the demand Non-building construction spend 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Urban population 70 60 50 40 30 20 10 0 (USD bn) 1998 2003 2008 2013 2018 Urban population share of total population China India 1970 1980 1990 2000 2010 2020 2030 Implications of megatrends Global movement of goods and services as well as urbanization create a significant need for infrastructure development both new and replacement GDP growth in emerging markets calls for investments in transportation infrastructure Market environment Transportation maintenance in developed countries, expansion in emerging areas Increased demand for solutions where energy consumption, waste, noise and dust are minimized Stimulus measures have not yet kicked in Implications to Metso In services Metso is well positioned because of large installed base, strong services offering and global presence Sources: Freedonia 2009, UN World Urbanization Prospects 2007 Revision 30 15
Market overview Power generation Strong growth anticipated in power generation Future global power generation capacity GW 8000 7000 6000 5000 4000 3000 2000 1000 0 2030 capacity yet to be built Existing capacity 2006 2015 2020 2025 2030 Global biomass installed capacity (GWe) 160 120 80 40 2006 2010 2014 2018 2022 2026 2030 North America South America 77% 23% Implications of megatrends Growing population combined with higher per capita income, accelerating urbanization and higher resource consumption, are all drivers for power generation Renewable energy options growing slowly Market environment Huge replacement needs in Europe / USA due to aging installed base GDP growth in emerging markets driving energy investments Strong push on renewables Implications to Metso Metso s advanced boiler technology for biomass, waste and other solid renewable fuels Replacement and refurbishment of aging installed base United Kingdom France Rest of Europe (incl Russia, former USSR) India 31 Germany Italy China Rest of the World Source: IEA World Energy Outlook 2008, McKinsey Analysis, New Energy Finance 2009 Market overview Paper and board Paper consumption expected to grow >25% over the coming 15 years Paper and board demand growth by region through 2025 Global market expected to grow from 390 > 500Mtons Implications of megatrends Global movement of goods and services means considerable need for board consumption Paper consumption in emerging markets growing with the standards of living Market environment The market predicted to recover to the 2007 level in 2012-2013. Graphic paper consumption estimated to grow slightly, whereas the growth in board is expected to be strong Graphic paper consumption to decrease in the developed countries. Board and tissue consumption is projected keep its growth Source: Pöyry 2009 (Medium Scenario) Implications to Metso In services Metso is well positioned because of large installed base, strong services offering and global presence Developed markets mostly services driven Recently installed base i.e. in China also requiring services 32 16
Market overview Pulp Expansion in the Southern Hemisphere expected to continue after a breather Forecasted fiber supply increase M tonnes 5000 Implications of megatrends Paper and board consumption growth in Asia driving global growth in pulp 3000 1000-1000 -3000-5000 -7000-9000 2008A-2015E 2015E-2020E 2020E-2025E North America Western Europe China incl. Hong Kong Latin America Other Asia excl. China & Japan ROW Eastern Europe, Russia & CIS Market environment The global pulp production estimated to grow by 9 million tons in 2009 2020, 10 million tons in Latin America. During the following 10 years a big number of uncompetitive pulp plants will be shut down in Europe and North America The closed capacity will be replace with new capacity from the Southern Hemisphere, For example, production cost in Brazil is about 50% of the costs in Europe and North America Implications to Metso Large installed base Sources: Pöyry 2009 (Medium Scenario), Metso estimates 33 Mining and Construction Technology Business model Customer base Construction Fragmented segment, few large and thousands of small players; short-term focus Mining Geographically defined, several major and dozens of big players; long-term focus Sales & service 50% Metso direct sales and service network 90% Metso direct sales and service network 50% Authorized dealers in contractor segment 10% Dealers in commodity products and certain markets Manufacturing 70% Metso production of equipment, parts and components 30% Metso production of belts, pumps and certain core components 30% Subcontracting components, castings and assembly, outsourcing some Metso engineered components 70% Outsourcing of Metsoengineered equipment and component manufacturing 34 17
Energy and Environmental Technology Business model Customer base Power Regionally driven and fragmented segment; follows regional players Automation Power & process industries, pulp & paper, energy & hydrocarbon industries Recycling Regionally driven and fragmented segment; follows regional players Sales & service 100% Metso direct sales and service network >90% Metso direct sales and service network ~95% Metso direct sales and service network <10% A few agents in small markets <5% Dealers in countries with limited Metso presence Product supply 10% In-house production in key components and assemblies 70% In-house production in key components and assemblies 65% Metso production of equipment, parts and components 90% Externally purchased materials, components, engineering, services 30% Externally purchased materials, components, engineering, services 35% Outsourcing of US-based shredder manufacturing, parts and machine bodies 35 Paper and Fiber Technology Business model Customer base Paper & Board Fragmented segment, few large and thousands of small players; short-term focus Fiber Geographically defined, several major and dozens of big players; long-term focus Sales & service >95% Metso direct sales and service network >95% Metso direct sales and service network <5% A few agents in small markets <5% A few agents in smalll markets Product supply 30% In-house production in key components and assemblies 20% In-house production in key components and assemblies 70% Externally purchased materials, components, engineering, services 80% Externally purchased materials, components, engineering, services 36 18