Accelerating financial excellence - Harri Nikunen

© Metso © Metso

Accelerating financial excellence

Harri Nikunen CFO

© Metso © Metso

Content

1. Financing needs and financing capacity

2. Capital employed efficiency

3. Cost savings

Metso Capital Markets Day 2014: FInancials by Harri Nikunen 2 © Metso

Financing needs and financing

capacity

© Metso © Metso

Our operations have limited needs for financing Funds available for growth opportunities

• Our global presence and global operational assets are in good shape after years of active development. • Gross capital expenditure to remain below depreciation and

amortization in the near term. • Net working capital offers clear improvement potential and opportunities

to release capital in the near term. • Our businesses generate stable cash flow even in low cycle due to high

share of services business. • The maturity structure of our gross debt is healthy. •We have maintained solid investment grade rating throughout 2013

and 2014 (despite the demerger and weakening mining cycle).

Metso Capital Markets Day 2014: FInancials by Harri Nikunen 4

© Metso © Metso Metso Capital Markets Day 2014: FInancials by Harri Nikunen

Investments to remain below depreciation Gross capital expenditure

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140%

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A2009 A2010 A2011 A2012 A2013 Q3 A2014

Gross capex Capex acquisitions Gross capex / depreciations and amortizations -%

EUR Million

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© Metso © Metso

436 526 487

343 352 289 283 281 272

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01/14 02/14 03/14 04/14 05/14 06/14 07/14 08/14 09/14

Metso Capital Markets Day 2014: FInancials by Harri Nikunen

Adequate funding available Cash policy has been renewed

Revolving credit facility, EUR 500 Million Cash and cash equivalent

Liquidity profile

EUR million

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© Metso © Metso

0

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Bonds

Subs.short term debt

Subs. long term debt

Commercial paper

Term and other loans


Favorable debt profile

570 Bonds 73 Subsidiary short term debt 30 Subsidiary LT debt 30 Commercial Papers 228 Term and other loans 931 Total

EUR million as per Q3/2014

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© Metso © Metso

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Our maturity profile is healthy No major refinancing needs short term


YTD Monthly Maturities monthly >

EUR Million September 2014

Debt and maturity structure

Undrawn Committed Facilities

Other long-term Debt

Syndicated term Loan

Private Placements Euro Bond 2014

Euro Bond 2019

8


Funding is well in place Corporate level funding facilities

• EUR 1.5 billion EMTN program • EUR 400 million 2.75% bond due in 2019 • EUR 170 million private placements due in

2018 – 2022 • Syndicated long-term loans: EUR 215 million • Committed EUR 500 million 5-year syndicated

revolving credit facility available until 2019 with two extension options for one year

- Currently undrawn

• EUR 500 million domestic CP program • Uncommitted lines of credit • Stable credit outlook and rating maintained:

- Standard & Poor’s: BBB - Moody’s: Baa2

9

Capital employed efficiency

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Capital Efficiency Program (CEP) under way

Feb Mar Apr May Jun Jul Aug Sep Oct

Diagnosis Design Implementation launch Execution

Q1/2014: Phase 1 Q3-Q4/2014: Phase 3

• The program was launched in Q1/2014 with following targets: • Strengthen the balance sheet management culture • Support strategic ROCE target (increase turns to >2) • Support the move to asset light operating model in cyclical businesses

• The program was moved to execution phase in late Q3/2014 • One of the core items in management teams • Clear responsibilities and targets

Q2/2014: Phase 2

Metso Capital Markets Day 2014: FInancials by Harri Nikunen 11


Capital Efficiency Program (CEP) targets Capital employed components

Dec 31, 2013 (base, EUR million)

Improvement potential

Comments

Inventories 921 12-16% Inventory management

Project net -262

Trade receivables 665 10-15% Payment terms, collection

Trade payables -342 6-10% Payment terms

Non operational net working capital

-355

NET WORKING CAPITAL 627

Intangible assets 569 Including goodwill of EUR 456 milion

Tangible assets 376 15-20% Capex policy, asset divestments

Financial assets 227

FIXED AND FINANCIAL ASSETS

1,172

CASH & OTHER 431 50% Financial policy

TOTAL CAPITAL EMPLOYED

2,230 15-20% Capital employed was EUR 2,089 million at the end of Q3/2014

12

Savings program 2013 - 2014


• The current program scope encompasses gross headcount reduction of 1,300 – 1,400 • Net reduction depends on personnel needs in well

performing businesses

• Targeted gross savings are EUR 120-130 million • Including purchasing savings

• Completion rate 75%, full completion by the end of 2014 • Net personnel cost savings in Q1-Q3/2014

vs. Q1-Q3/2013 are about EUR 50 million (down by 8%), which is in line with targets

• S,G&A costs are down by 8% in Q3/2014 vs. Q3/2013 • The total year-to-date savings are EUR 75 million

including procurement • 100% savings run-rate to be achieved in H1/2015

Profit improvement program (PIP) update

14


• Program will be finalized during Q4/2014 • Completion rate will be 85-100% depending on

the success of last open action

• Continued work to improve both the short and long term cost position with following ongoing and planned actions: • Corporate actions: includes support functions

and legal structure simplification • Business area actions • Capital efficiency program

Profit improvement program (PIP) next steps

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Note: Over the months we have approx. 180-200 trainees and seasonal workers in average.

PIP - Major structural changes in headcount during 2013 and Q3/2014 Headcount (December 31, 2012) 16,612

Acquisitions + 623

Divestments - 326

Headcount after structural changes 16,909

Comparable net reduction - 970

Headcount (September 31, 2014) 15,939

Reduction in Europe and North America ~1,100

Increase in emerging markets ~500

16

© Metso © Metso Metso Capital Markets Day 2014: FInancials by Harri Nikunen 17

Conclusions

• Financial capacity for strategy implementation • Strong balance sheet • Adequate funding available • No major refinancing needs

• Capital efficiency and cost actions

under way • Solid program designed to capital

release • Ongoing actions in both corporate level

and business areas

Accelerating financial excellence - Harri Nikunen

Economy & Finance