Metso Automation Metso Capital Markets Day 2005 Matti Kähkönen, President
2 © Metso Corporation 2005 Metso CMD 200531.8.2005
Forward looking statements
• It should be noted that certain statements herein which are not historical facts,including, without limitation, those regarding expectations for general economicdevelopment and the market situation, expectations for customer industryprofitability and investment willingness, expectations for company growth,development and profitability and the realization of synergy benefits and costsavings, and statements preceded by ”expects”, ”estimates”, ”forecasts” or similarexpressions, are forward-looking statements. These statements are based oncurrent decisions and plans and currently known factors. They involve risks anduncertainties which may cause the actual results to materially differ from the resultscurrently expected by the company.
• Such factors include, but are not limited to:(1) general economic conditions, including fluctuations in exchange rates andinterest levels which influence the operating environment and profitability ofcustomers and thereby the orders received by the company and their margins(2) the competitive situation, especially significant technological solutionsdeveloped by competitors(3) the company’s own operating conditions, such as the success of production,product development and project management and their continuous developmentand improvement(4) the success of pending and future acquisitions and restructuring.
Presentation content
Metso Automation todayRecent performanceCompetitive positionRoadmaps for growthSummary
5 © Metso Corporation 2005 Metso CMD 200531.8.2005
Metso Automation businesses
Pulp & Paper Energy & Process
Process automationand informationmanagement, specialityanalyzers andmeasurements, conditionmonitoring, qualitymeasurements, profilersand controls, machineand drive controls, valves
Process automationand informationmanagement and life cycleservices
Automated-, control-,ESD-, and manual valves,solutions and intelligentcondition monitoring
Valves
6 © Metso Corporation 2005 Metso CMD 200531.8.2005
Solutions from field systems to informationmanagement
Control andAutomated Valves
Quality Measurementsand ControlsProcess Automation
Systems
Transmitters(E+H) -Flowmeters
Analyzers
SpecialtyTransmitters
7 © Metso Corporation 2005 Metso CMD 200531.8.2005
Metso Automation’s promise - MatchingvisionsOur aim is to continuously create value by improving the quality,production, environmental aspects and cost-efficiency of ourcustomers’ processes…… by offering innovative automation solutions and value addingservices covering the entire life cycle of our customers’ processes.Our customers• Pulp and paper producers
worldwide- full range of offering
• Power producers worldwide- systems and services
• Hydrocarbon processingworldwide- valves and services
• Process industry chosenkey customers- systems, valves and services
ValuePartner
Performancepartner
Maintenancepartner
Solutionprovider
Technologysupplier
Business
Processes
Functions
Engineering
Parts andequipment
8 © Metso Corporation 2005 Metso CMD 200531.8.2005
Management Agenda 2006-2008 in a nutshell
• Secure strong profitability- Continuous operational excellence improvement- Productivity programs
• Ensure 5-10% organic growth per annum- Organic growth programs based on the current business and
new products, service and business concept innovations• Strengthen market presence in emerging markets• Accelerate further growth
- Complementary acquisitions• Accelerate development of the Energy & Process business
- Focused investments and resources• Establish solid platform for future growth and new efficient
global business processes- E.g. new ERP system
10 © Metso Corporation 2005 Metso CMD 200531.8.2005
Highlights of recent activities and resultsachieved
• Restructuring measures completed; competitive coststructure
• Continuous improvement process established• Significant reduction of quality costs• Continuous reduction of net working capital
Profit making culture establishedGood basis for profitable growth
11 © Metso Corporation 2005 Metso CMD 200531.8.2005
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Financial performance
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Capital employed (MEUR) ROCE-%
EBIT-% bef. non-recurring items and goodwill amortizationNote: Figures for 2001-2003 according to FAS and as of 2004 IFRS2004 excl. reversal of Finnish pension liability
12 © Metso Corporation 2005 Metso CMD 200531.8.2005
Geographic distribution of net sales
Europe50%
Asia-Pacific14%
Middle East andAfrica 4%
North America28%
South America4%
Net sales EUR 535 million
in 2004
13 © Metso Corporation 2005 Metso CMD 200531.8.2005
Orders received by industry andaftermarket businessOrders received by industry 2004 Share of aftermarket business
Orders receivedEUR 570 million
in 2004
After-market24%
Pulp & Paper52%
Energy &Process
48%
Net sales EUR 535 million
in 2004
15 © Metso Corporation 2005 Metso CMD 200531.8.2005
Metso Automation - Unique player
Pulp & Paper automation• The best and most unique pulp&paper automation offering in
the world.Valve business• Known for solid, reliable and state-of-the-art valves that
sustain performance with intelligent tools and solutions to getthe best out of customers’ flow controls.
Energy & Process systems• Industry expertise in Industrial boiler plants, Combined Heat
and Power plants (CHP) and Utility power plants. Potentialfor further leverage in emerging markets.
16 © Metso Corporation 2005 Metso CMD 200531.8.2005
Customer perceptions
• Agile – big enough to operate globallybut small enough to be adapting to the market changes
• Focused – industry and customer specific partnering• Excellent in execution – project management skills and tools• High level of innovations• Strong heritage and history – well known trademarks
- Over 80 years of measurement experience- Over 50 years of pulp & paper automation- Over 50 years of power automation- Over 50 years in valves business
17 © Metso Corporation 2005 Metso CMD 200531.8.2005
Process automation markets by productTotal USD 49.9 billion in 2003, CAGR 5.1% in 2003-2008
DCS 20%
Source: ARC 2004
Process PLCs 6%
SCADA 4%Safety Systems 1%
AC Drives 6%General Motion Control 2%
Software 8%Control Valves 6%
On/Off Valves 8%
Transmitters 4%
Flowmeters 5%
Analytical 5%
3rd Party Services14%
Other 11%
18 © Metso Corporation 2005 Metso CMD 200531.8.2005
Process automation business by industry
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Power Oil&G EP Pulp &Paper
Chemical Refining Pharma-ceutical
Water &Waste
Food &Beverage
Metals &Mining
Other
2003 2008e % CAGR
Source: ARC 2004
+4.4%
+4.5%
+2.3%+5.2%
+4.8%+8.1%
+7.1%
+6.8%
+4.1%
+4.1%
USD million
19 © Metso Corporation 2005 Metso CMD 200531.8.2005
Markets for Metso Automation
Pulp & Paper Energy & Process
Market size:EUR 3.7 billionTarget market:EUR 2 billionMarket growth: 3.0%Net sales: EUR 300million*Competition: ABB,Honeywell
Market size:EUR 7.1 billionTarget market:EUR 2.2 billionMarket growth: 3.8%Net sales: EUR 60 millionCompetition: ABB, Siemens,Emerson, Invensys,Honeywell, Yokogawa
Market size:EUR 17.3 billionTarget market:EUR 5.7 billionMarket growth: 3.2%Net sales: EUR 270 millionCompetition: Emerson,Flowserve, Dresser,Samson
Valves
*Includes valves
20 © Metso Corporation 2005 Metso CMD 200531.8.2005
Process automation to pulp & paper industryCAGR 2.3 % in 2003-2008
DCS 27%
Source: ARC 2004, Metso
Process PLCs 5%
AC Drives 9%
Software Products 8% (MES etc.)
Control Valves6%
On/Off Valves 12%
Transmitters 4% (pressure, level, temp)
Flow 5%
Analytical 5%(online&offline)
3rd Party Services8%
Other 11%
ConsistencyTransmitters 1%
21 © Metso Corporation 2005 Metso CMD 200531.8.2005
Global industrial valve marketTotal USD 20,251 million in 2003, CAGR 3.7% in 2003-2006
Oil & Gas16.5%
Other industries37.4%
Water & Sewerage16.0%
Chemicals and Paper18.8%
Source: EIF 2002
Power generation11.3%
22 © Metso Corporation 2005 Metso CMD 200531.8.2005
Control valves and on/off valvesAll industries
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Control valves On/Off Valves
2003 2008e % CAGR
Source: ARC 2004
+3.3%
+3.1%
USD million
23 © Metso Corporation 2005 Metso CMD 200531.8.2005
Global markets for distributed controlsystems by industry Total CAGR 3.7%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Power P&P Oil&Gas Chemical Refining Pharma-ceutical
Water &Waste
Metals &Mining
Food &Beverage
Cement &Glass
Other
2003 2008e % CAGR
Source: ARC 2004
+3.8%
+3.8%
+3.8%
+3.8%
+3.5%+4.6%
+3.9% +2.7%+2.8%
+1.6%
USD billion
+5.1%
25 © Metso Corporation 2005 Metso CMD 200531.8.2005
Building-Controlled risk
Leveraging-Controlled risk
Existing business-”Easiest” growth
Transformation-High risk
Framework for organic growth andcomplementary acquisitions
Distinctive competencies
Mark
ets
Source: IMD
In place Need to add
Est
ablis
hed
New
Build
ing
Leveraging
26 © Metso Corporation 2005 Metso CMD 200531.8.2005
The cornerstones for profitable growth
• Competitive cost structure• Customer and industry focus to add value and provide
results and intelligent reliability - unique value proposition• Emerging markets
- Asia-Pacific- Russia- Latin America
• Continuous high investment level into new products andtechnology
• Installed base markets, new services• Complementary acquisitions
27 © Metso Corporation 2005 Metso CMD 200531.8.2005
Pulp & paper – Strengths
• Customer knowledge• Process, automation and machinery know-how, strong
product portfolio• Unified automation network approach• Good reputation and image as a reliable partner• Execution of large scale projects• Global flexible team of experts• Metso, Kajaani, Neles, PaperIQ, Sensodec and Jamesbury
trademarks
28 © Metso Corporation 2005 Metso CMD 200531.8.2005
• Link products and Metso’s knowledge• Provide a roadmap to help managing changes• Create immediate and cumulative ROI• Keep future options open• Scalable• Logically grouped to match operation
Performance suitesImproved quality, increased production, reduced costs
Pulp production
Energy production
Paper and board production
29 © Metso Corporation 2005 Metso CMD 200531.8.2005
Case: WISA800: The world'slargest single-line recoveryline
• Metso Automation has suppliedcomplete automation andoptimization for- Recovery boiler and
turbogenerator- New evaporation plant- Tall oil plant- Causticising department- Lime kiln- Upgrade and extension
for the existing fiber line
30 © Metso Corporation 2005 Metso CMD 200531.8.2005
Pulp & paper – Markettrends
• In Europe upgrades for large existingproduction capacity.
• Bigger share of virgin fibers from LatinAmerica.
• Continuous growth of Asia-Pacificpaper production.
• North America will utilize mostlyexisting machines; investmentsoutside North America.
• Capital expenditure down.• Demand for high return investments
increasing.• Importance of automation increasing.• Maintenance outsourcing.
31 © Metso Corporation 2005 Metso CMD 200531.8.2005
Pulp & paper – Growth opportunitiesand actions
• Ageing installed base in North America and Europe- Optimization, performance and life cycle services- Utilize full scope of our offering- Upgrade programs and Metso rebuilds
• Emerging markets- China, Russia, Brazil- Strengthen local resources in sales, service and projects- Metso packages in new machines
• New products and services- Advanced analyzers and sensors- Predictive maintenance and availability services
• One totally open and scalable platform- Embedded automation solutions- Integrate operations and maintenance
32 © Metso Corporation 2005 Metso CMD 200531.8.2005
Valves – Strengths
• Our customers are world leaders - Shell, BP, UPM,SaudiAramco, APP, IP, Technip, Chiyoda etc.
• Global, flexible sales & service and supply chain network• Huge installed base - deliveries since 1950’s• New intelligent products for condition monitoring and
information management• High-end and demanding application technology
33 © Metso Corporation 2005 Metso CMD 200531.8.2005
Case: Shell Nanhai, China
• Annual production of 2.3 million tonsincluding glycols, polyolefins, LDPE,HDPE, PP and MPG
• CNOOC and SHELL joint venturein Guangdong, China
• 3,500 pcs Neles ND9000® intelligentFOUNDATION Fieldbus valvecontrollers
• 3,000 pcs Neles rotary control valves• 1,000 Jamesbury automated and
manual valves• Large installation of Finetrol™ and
ball segment valves• 150 pcs Neles ValvGuard™,
TÜV approved safety devices• Local Metso Automation service
personnel
34 © Metso Corporation 2005 Metso CMD 200531.8.2005
Valves – Market trends
• Global valve markets in energy and hydrocarbon growing.• Global valve industry still fragmented.• Major customers moving production to low cost locations in
Eastern Europe, Latin America and Asia.• High demand for oil and gas products keeps exploration and
production investments high.• Focus on providing additional ancillary services, such as
valve maintenance and repair.• New intelligent monitoring technology.
35 © Metso Corporation 2005 Metso CMD 200531.8.2005
Valves – Growth opportunitiesand actions• Valve business still fragmented
- Active player in industry consolidation• Valves an integral part of our offering
in pulp & paper- One-stop-shop approach and higher service levels
• New products and new applications- Condition monitoring and asset management- Strengthen portfolio by RTD
• Emerging markets- Local assembly and service capabilities- New energy sources - Hydrogen
• Strong key account focus- TOP20 program
• Open architecture- Integrate to any control system
36 © Metso Corporation 2005 Metso CMD 200531.8.2005
Energy & process – Strengths
• Process and application knowledge- Industral boilers, CHP, coal fired,biofuel, waste to energy
• Best experts in pulp & paperpower plants
• Same technology platformas in pulp & paper- Distributed control systems volume
higher in energy & processthan in pulp & paper
• Customer centric focus• Good reference base in India
and China• Execution of large scale projects• Life cycle concept
37 © Metso Corporation 2005 Metso CMD 200531.8.2005
AnHui PB, TianJiaAn
LiuLiHe Cement Cogen, Beijing
LiuLiHe Cement, Hebei
AnHui PB, HuaBei
MeiShan Iron&Steel, JiangSuYiZheng Chemical,JiangsuFortum Eng. Ltd, Jiangsu
LuNan Cement,ShanDong
DaLian Chemical,LiaoNingProvince Electricity
Company, Xiaguan
Anhui PB, Tongling
Hebei Power Bureau,Qing Huang Dao
JiangXi Power Bureau, Feng Cheng
Shanxi Power Bureau,ShenTou
North China Power Group, San HeNorth China Power Group, Sha Ling Zi
GuiZhou PB, JinSha
GuiZhou PB, ZhunYi
JiangSu PB, HuaYin
JiangSu PB, XuTang
JiangSu PB, YangZhou
JiangSu PB,Peng Cheng
Shanghai PB, MinHang
SicHuan PB, ChongQing
YiBin Power Co., YiBin
Yunan Power Bureau,QuQing
Shanghai Electric PowerBureau, Wai Gao QiaoYuNan Power Bureau,
Yang Zhong Hai
Shanxi Power Bureau,ZhaoYang
YuNan Power Bureau, YangZhong Hai
Energy Autom
ation
References in China
PowerCogenerationFlue gas desulfurization
38 © Metso Corporation 2005 Metso CMD 200531.8.2005
References in India & subcontinent
Atul Glass, AurangabadCentury Cement, Aurangabad
Combustion Engineering,Ramagundam
NHPC, Salal Hydroelectric
MPEB Jabalpur, Korba
MPEB Jabalpur, Satpura
NHPC, Moga Switchyard Uttar Pradesh, AnparaUttar Pradesh, Parichha
UP Rajya Vidyut UtpadanNigram Ltd., Feroze Ghandi Unit
Narmada Valley FertilizerPower
Neyveli Lignite Corp., TPS
U.P. Power - Lucknow, Unchahar
GMR, Vasavi Basin Bridge
AES, HaripurAES,Maghnaghat
GMR, Tanir Bavi Barge Plant
PowerCogeneration
39 © Metso Corporation 2005 Metso CMD 200531.8.2005
Energy & process– Market trends
• Global, deregulation, open competitionand privatization
• Increased price of gas and oil improvingthe outlook for coal-fired power plants
• Environmental regulations willpromote waste to energy power plants
• Rapidly growing markets in China, Indiaand the rest of Asia, market growth alsoin Russia and Latin America
• Continuous high profitability forecast• Continuous outsourcing
40 © Metso Corporation 2005 Metso CMD 200531.8.2005
Energy & process – Growthopportunities and actions
• Expansion to emerging markets- Geographical - China, Russia,
India, Brazil- Pulp & paper power plants- Localization- Increase industry specific
competencies- Partnerships and potential acquisitions
• Expand with our existing customers- Customer relationship management- Life cycle services- New products and services
• Plant management and optimizationapplications- Use as differentiation factor
• Environmental applications- Tools for environmental reporting
42 © Metso Corporation 2005 Metso CMD 200531.8.2005
Summary
• Restructuring measures completed; competitive coststructure.
• Maintain sustainable, strong profit level through continuousproductivity improvement.
• Ensure 5-10% organic growth per annum.• Customer and industry focus.• Complementary acquisitions.• Strengthen market presence in emerging markets.• Energy & process share of total business volume to
grow faster than in pulp & paper.