investor presentation - metso.com industry profitability and investment willingness, expectations...

© Metso

Investor presentationJune 2018

Investor presentation June 20181

© Metso2

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 competitors3) the company’s own operating conditions, such as the success of production, product development and

project management and their continuous development and improvement4) the success of pending and future acquisitions and restructuring.


© Metso3

Metso as an investment


4

Best choice for sustainable processing and flow of natural resources

Minerals Flow Control

Valves, pumps and related services for oil & gas and chemical industries, mines, pulp and paper and other process industries.

Minerals processing equipment, solutions and services for mining customers.Crushing and screening products for aggregates customers.

Organic growth focus, complemented with acquisitionsInvestor presentation June 2018

© Metso© Metso

2017 key financials

5

Adjusted EBITA EUR million

244

Orders received EUR million

2,982

ROCE Return on capital employed

10.3%

SalesEUR million

2,706

Adjusted EBITA% of sales

9.0%

Europe 25%North America 20%South and Central America 20%Asia-Pacific 25%Africa and Middle East 10%

Minerals 76%Flow Control 24%

Services salesEUR million

1,595Services share of sales

~60%

Sales by Market Area

Sales by segment


© Metso

Profitable growth with asset light and agile organization

6

50 countries

80service centres

12,000professionals

€2,706MSALESin 2017

Financial targets

ADJUSTED EBITAin 2017 9.0%

ROCEin 2017 10.3%

ORDERS RECEIVEDin 2017 €2,982M

Financials Business areas

Tel. +358 20 484 [email protected]

Segments

Flow ControlValves, pumps and related services7 global

businessesbuilt around

similar customer,

competitive and business

dynamics

Mining Equipment

Aggregates Equipment

Minerals Services

Minerals Consumables

Recycling

Valves

~60% services

Pumps>15%

Adjusted EBITA

>30%ROCE

Good margin business model

Improving capital efficiency

Growing faster than the market by implementing own initiatives

> MarketGROWTH

• Customer centricity

• - Decision-making close to the customer- Technologies to address future needs

• Service leadership

• - Increased penetration on installed base- Advanced services solutions

• Innovation

• - Differentiation- Digitalization- In-built captive aftermarket- Standardization

• Operational excellence

• - Process and product quality- Asset-light supply chain- Optimized footprint

• People and leadership

• - Competent people with right capabilities- Strong performance culture- Agility & speed

Strategic fundamentals driving growth and performance

76 % of sales

24 %of sales

MineralsEquipment for minerals processing,

crushing and screening as well as related services.


© Metso7

Seven business areas with clear accountabilities

President and CEO

Digital Development

CFO’s Office

Human Resources

ValvesPumpsMining Equipment

Minerals Consu-mables

MineralsServices

Aggregates Equipment

Recycling

Business areas are fully responsible for their profit and loss and balance sheet.

Focused and agile approach.


© Metso88

In demolition and recycling of asphalt and construction materials

In quarries for productionof aggregates

In petrochemical plantsto control the flow of materials and fluids

In pulp and paper millsto control the flow of pulpand other liquid media

In scrapyards and recycling facilities to process metal scrap and waste

In mines to process minerals


Customers use our industry-leading solutions to process various raw materials

© Metso

High services proportion, good geographical split

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• Leading technology and services provider for end-to-end minerals processing

• Leading flow control provider for oil & gas, mining and process industries

12,000 employees worldwide

Sales by industry Sales by type Sales by region


© Metso Investor presentation June 201810

Our view into 2018

Market outlookGrowth in demand to remain stable for Minerals equipment and services.Growth in demand to remain stable for Flow Control equipment and services.

Metal and oil price development Top 20 miners’ capex and guidance

Focus areasGrowth and margin improvementOperational excellenceR&D and digitalization

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Estimate / Forecasts

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190

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Iron Ore Domestic Index 62% LME-Copper Grade A Cash

Gold Bullion LBM Brent Oil

© Metso11

Latest financials


© Metso12

Q1/2018 in brief

Healthy market activity in all businesses

Strong order intake

Significant profitability improvement

New operating model up and running

Implementation of the profitable growth strategy continued


© Metso

Group quarterly financials

13

Orders received up 17% (+27% in constant currencies) to EUR 859 million

Sales grew 10% (+19% in constant currencies) to EUR 714 million

Adjusted EBITA was EUR 85 million or 11.9% of sales (66 million or 10.2%)

Operating profit was EUR 80 million or 11.3% of sales (59 million or 9.2%)

Earnings per share were EUR 0.33 (0.23)

Free cash flow totaled EUR 2 million (39 million)

Orders, sales and profitability

Quarterly and full-year figures for 2017 have been restated to reflect the adoption of the IFRS 15 standard and the revision in the reporting of the Flow Control segment’s services business.The figures in brackets refer to the corresponding period in 2017, unless otherwise stated.

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Orders received, EUR million Sales, EUR million Adjusted EBITA %


© Metso

Minerals quarterly financials

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Orders, sales and profitabilityOrders up 17% (+26% in constant currencies)

- Orders up in all businesses, supported by shift in orders from Q4/2017

- Aggregates equipment growth driven by India, China and North America

- Mining equipment grew on small and medium-sized orders

- Services up in spares, wears and professional services

- Recycling up thanks to metal recycling

Sales grew 13% (+22% in constant currencies)- Both equipment and services sales increased

Adjusted EBITA margin was 11.4% (8.9%)- Sales growth and good mix within services- Improved operational efficiency 0

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© Metso

Flow Control quarterly financials

15

Orders, sales and profitabilityOrders increased 18% (+29% in constant currencies)

- Record-high orders; double-digit growth in both valves and pumps

- Increase in project orders and healthy distributor market activity

Sales grew 1% (+10% in constant currencies)- North America represents ~30% of sales

Adjusted EBITA margin was 15.8% (15.6%)- Good operational performance

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© Metso

Income statement

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EUR million Q1/2018 Q1/2017 Change % 2017

Orders received 859 733 17 2,982

Services business orders received 490 451 9 1,717

Sales 714 647 10 2,699

Services business sales 422 383 10 1,595

Adjusted EBITA 85 66 28 244

% of sales 11.9 10.2 9.0

Operating profit 80 59 36 218

% of sales 11.3 9.2 8.1

Profit for the period 50 34 47 102

Earnings per share, EUR 0.33 0.23 43 0.68


© Metso

Balance sheet

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EUR million Mar 31, 2018 % of total Dec 31, 2017 % of total

Tangible assets 283 8.5% 287 8.7%

Intangible assets 538 16.1% 545 16.6%

Financial and other assets 126 3.8% 130 4.0%

Inventories 792 23.8% 750 22.8%

Receivables 644 19.3% 631 19.2%

Current financial assets 255 7.7% 271 8.2%

Cash and cash equivalents 694 20.8% 673 20.5%

TOTAL ASSETS 3,332 3,287

Total equity 1,240 37.2% 1,351 41.1%

Interest-bearing liabilities 851 25.5% 854 26.0%

Non interest-bearing liabilities 1,241 37.2% 1,082 32.9%

TOTAL EQUITY AND LIABILITIES 3,332 3,287


© Metso

Cash flow

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EUR million Q1/2018 Q1/2017 2017

Profit 50 34 102

Adjustments 45 45 192

Change in net working capital -44 -21 -23

Financial items, paid -2 -4 -21

Taxes paid -38 -12 -64

Net cash provided by operating activities 11 42 185

Capital expenditure on fixed assets -13 -6 -38

Other 1 2 -28

Net cash from investments -11 -5 -66

Free cash flow 2 39 158


© Metso

124 120129

83

59

103 103

127

5846

78 87

51

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EUR million

Cash flow from operations Cash flow from operations, rolling 12 months

Cash flow, indebtness, gross margin and SG&A


126 130 125 135 126 127 128 129 130

20.919.4 19.6 20.0 19.5 18.8 19.1 18.1 18.2

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SGA SGA %

%

176196

181 184 184 187171

189209

29.2 29.2 28.4 27.2 28.4 27.725.4 26.6

29.3

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Gross profit Gross margin

%

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240 207153

91

174

70

-25 -63

10051 24 28

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EUR million

Net debt Net debt/EBITDA

© Metso

Financial position

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March 31, 2018 December 31, 2017

Return on capital employed before taxes, %, annualized 15.2 10.3

Return on equity (ROE), %, annualized 15.4 7.3

Net gearing at the end of the period, % 2.2 1.8

Cash conversion, % 4 155

Equity-to-assets ratio at the end of the period, % 40.9 44.5

Debt to capital, % 40.7 38.7

Net debt / EBITDA 0.1 0.1

Interest cover (EBITDA) 10.2 8.0


© Metso

Executing the profitable growth strategy with expansioninvestment in India and two acquisitions

21 Note: Acquisitions were made public after the reporting period on April 4 and April 9. They are expected to be closed during the third quarter of 2018

Capacity investment at the Metso Park plant (India)- EUR 8 million in total- Production capacity increase of 35%- Improves the availability of the crushing and screening

equipment in India as well as for export market

Acquisition of P.J. Jonsson och Söner (Sweden)- Strengthens our product and services offering for the

aggregates industry in the Nordics- Sales of EUR 33 million- 40 employees

Acquisition of Rotex Manufacturers and Engineers (India)- Complements and broadens existing offering and introduces

new products to our Flow Control portfolio- Sales of EUR 19 million- 275 employees


© Metso22

Market outlook

The outlook represents expected sequential market development with a rolling six-month view. Our market conditions are expected to develop as follows:

Growth in demand to remain stable for Minerals equipment and services.Growth in demand to remain stable for Flow Control equipment and services.


© Metso23

Our businesses: MineralsMining and aggregates equipmentMinerals Sevices and ConsumablesRecycling


© Metso

We are the leader in comminution

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Exploration Development Extraction Materials handling Comminution Separation Refining

Sandvik

Epiroc (Atlas Copco)

Boart Longyear

Furukawa

Joy / Komatsu

Caterpillar

MetsoFLSmidth

Outotec

Citic Heavy Industries

Weir

Sigdo-Coppers

One Steel

Market value > EUR 14 billion

Terex


Exploration for mineral resources:‒ Remote sensing‒ Geophysical

/geochemical tests‒ Samples‒ Feasibility studies

‒ Drilling and modeling of the ore body

‒ Selection of appropriate mining technique

‒ Capital investment in mine infrastructure.

‒ Mining of the ore body‒ Rock breaking‒ Surface mining‒ Underground mining

‒ Mined minerals transported to processing site

‒ Use of loaders, trucks, trains, at the face mining systems and conveyors

‒ Materials are crushed and ground to achieve finer particles

‒ Particles sized for optimum recovery of minerals species

Flotation, leaching, sedimentation, and filtration are used to increase mineral content to an economic level

Refining to increase mineral concentration e.g. through pyro-metallurgy and electro-winning

© Metso

Products and systems for mining customers

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Grinding mills Pyro processing

Bulk material handling Process equipment

Mining crushers Mining systems


© Metso

Products and systems for aggregates customers

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Crushers Portable plants

Screens and feeders Mid-market products

Lokotrack Aggregates systems


© Metso

We have a full scope services offering

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• Mill linings and trommels• Grinding media• Crusher wear parts• Screening media• Wear lining• Conveyor wear parts • Slurry pump wear parts• Chamber optimization• Training

• Spare parts for crushers, screens, feeders, conveyors, grinding mills, pyro processing equipment, bulk handling equipment, slurry pumps, process equipment, VPA filter cloths

• Training

• Supervision, maintenance and repairs

• Diagnostic and planning• Shutdown services• Emergency services• Audit and inspection• Installation & Commissioning• Training

• Rebuilds• Refurbishments• Upgrades • Training

• Scheduled inspections • Shutdown and wear parts

optimization• Shutdown and process

optimization• Maintenance and process

optimization• Process and Control Optimization

Services

Economic performance as key buying factor

Maintenance deficit and restocking

Process and mine-to-mill optimization

Expert services to optimize performance of operationsProduction essentials to ensure availability and quality of operations

Wear parts

~35% of sales

Spare parts

~25% of sales

Field service and repairs

~10% of sales

Refurbishments and upgrades~15% of sales

Life Cycle Services

~15% of sales


© Metso

Products and systems for the recycling customers

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Metal shredders PreShredder stationary and mobile units

Crushers Metal balers and briquetters

Metal shears N series for scrap industry


© Metso

Services for metal recycling

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Parts services Performance services Field services

Maximizing value with the right parts at the right time

Wear parts, spare parts, packages, replacements

Improving performance of installed equipment as a true partner

Engineered solutions, upgrades, process optimization, process monitoring

Dependable and skilled service team always close to customers

Inspection and maintenance, repairs, troubleshooting, training, plant relocation


© Metso30

Waste recycling solutions for various customer needs

Biomass plant

Mechanical biological treatment (MBT)

Refuse-derived fuel (RDF)

Recycling plant

Waste-to-energy plant

Landfill sites


© Metso31

Examples of our latest innovations and service offering development for minerals customers

Metso MX™ Multi-Action Industry-changing cone crusher technology combining piston and bowl into one machine: increased uptime and lower operational costs

Life Cycle ServicesComprehensive LCS programswith value-adding digital tools to improve production, total cost of ownership and reliability of operations. Available for aggregates and mining industries

Lokotrack®

Urban SeriesCommunity-friendlymobile crushing plants for sustainable aggregates operations in urban environments

Megaliner™Advanced mill lining solution for reduced downtime and increased safety


© Metso© Metso

The intelligent MX crusher: Giant leap in profitability

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Selective production

More uptime

+10%

Safe and simple

Operational costs

-10%

Multi-Action technology

Wear partutilization

up to70%Patented technologywith dynamic setting and automatic optimization

Higher production rate with extended maintenance intervals

Brings down cost per ton in quarry and mining applications


© Metso© Metso

Lokotrack Urban: Maximizes crushing potential in urban environments

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Cuts dust emissions remarkably

Safe and sustainable solution

Cost benefit for the customer

Noise reduction

up to60%Water spraying system absorbs most dust particles from the air

Significant protection as the required protection distance drops significantly

Minimizes the impact for urban people living and working around construction sites

No transfers between sites

Reduced emissions


+=

© Metso34

Our businesses: Flow ControlValvesPumps


© Metso

Wide and innovative valve product portfolioStrong expertise to meet customers’ requirements

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Standard and severe

service control valves

Emergency shutdown

valves

Extensive ball and butterfly

valves offering

Automated on-off valves

Intelligent valve

controllers


© Metso36

Focused product innovation in valves

Severe service materials

• We are ramping up our additive manufacturing capabilities • Novel solutions that were earlier impossible to manufacture• On-demand spares• Several patents pending

Additive manufacturing

• Solutions for very demanding applications with superior performance• Own and collaborative development with partners• Potential for patented solutions

Focused innovation strategy allows fast time to market


© Metso

Flow control solutions for the mining industry

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Slurry pumps Competitive valve solutions Neles® – Jamesbury®

Complementary products and applications Metso’s Performance Solutions

Control valves On/off valves Special valves

PlantTriage, PID Loop Optimizer, and Control Performance


© Metso

Serving a wide range of slurry applications with pumps, slurry hoses, and slurry valves

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Hard metal and rubber-lined horizontal

slurry pumps

Hard metal and rubber-lined

vertical pumps, tank

and froth pumps

Slurry valvesRubber-lined pipe, slurry hoses and

fittings

Tailored life-cycle solution

service packages


© Metso

Neles NDX®

Unique valve controller with accurate, safe and reliable performance for virtually all valves

Metso MD series MDM mill discharge slurry pumps offer sustained performance withmaximum time between mill shutdowns

Neles BWX Unique metal-seated butterfly valve design meets requirements of various process industries

Examples of our latest innovations and service offering development for flow control customers

Installed Base Management ServicesImprove availability and reliability for field devices in the oil and gas industry


© Metso© Metso

Digital program to accelerate business growth

41

Solving customer challenges with digital solutions

Helping customersunderstand and improve their comminution assets and processes with the use of the Internet of Things (IoT) and analytics

Revamping online capabilities and providing an engaging digital customer journey for the entire equipment lifecycle

Building new digital tools to better respondand deliver on the changing customer requirements in the project business

Other selected digital innovation areas

Mining Aggregates Flow Control


© Metso42

Maintenance crewMetso on-site crew

Customer crewShutdown planning

Metso Performance Center24/7 first-line support

Support from Metso’s equipment and process experts

Metso Metrics CloudPredictive capabilities based on IoT technology

AssetsSensors and gateways, edge analytics, automation

4

5

2

3

Metso

LifecycleServices

1

Building analytics capabilities for mining comminution


© Metso

Benefits of analytics to minerals processing plants are numerous

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Shorter, safer and less frequent planned shutdown

Condition-based maintenancePredictive maintenancePreventive maintenanceMaintenance schedulingRemote supportEquipment performance monitoringProcess optimization

Elimination of unplanned downtime

Optimization of circuit and operating parameters


© Metso

New eCommerce platforms for aggregates

44

Next generation B2B eCommerceFor aggregates spares, wears and equipmentLaunched for pilot distributors in November 2017To be expanded to full aggregates distributor space in 2018

Distributor community collaboration toolfor a more liquid preowned marketReleased in October 2017


45

Aiming to be the preferred partner to our valve customers

Digital front end EPC data exchange automization

Faster response and better quality of quotationsIncreased internal efficiency at Metso and customerPilot done 2017 and implementing with selected EPCs during 2018

Transitions Metso Valves from catalog to mass-customized salesBeing globally rolled out and already in use in +30 countries and several channel partners

We are developing innovative digital solutions that make it easy to co-operate with Metso Investor presentation June 2018


Sustainability at Metso

Our sustainability model provides support and knowledge to transform strategic business targets into sustainable business results.

Metso is included in the following sustainability indices:

- CDP Leadership level- RobecoSAM Sustainability

yearbook 2017- FTSE4GOOD index- Ethibel Sustainability Index- OMX GES Sustainability

Finland Index- Vigeo Rating- STOXX Global ESG Leaders

Indices

© Metso© Metso

Our sustainability agenda includes four focus areas with measurable targets

48

Environmentalefficiency and safetyinnovation targets:

Building customer success

Responsiblesupply chain

Performingtogether

Contributing to the environment

Long-termtarget:

LTIF*<1Energy consumptionand CO2 emissions:

–20%by 2020

Mid-term safety target:

100%of new R&D projects

with set targets

100%of new suppliers in

high-risk areas screened

Investor presentation June 2018 * LTIF = Lost time incident frequency.

Long-term target zero

© Metso

Sustainability targets and recent achievements

49

We work closely with our customers to solve their challenges.We offer sustainable solutions to help them improve their performance.

Our customers’ sustainability challenges are Metso’s business opportunities.We create value and well-being for our stakeholders.



Sustainable value creation: Non-financial contribution to Metso’s value creation

Metso’s Code of Conduct is our key corporate standard and commitment to integrity

We have defined sustainability criteria and evaluation processes for our suppliers.

Employee safety, risk observations, safety discussions and safety training hours are continuously measured at Metso.

Increased stakeholder dialogue, identifying sales opportunities, effective and customer-centric operational processes support innovation, safety and a minimized environmental footprint, as well as build reputation and brand.

Value is created by improved internal and customer processes, procurement efficiencies and decreased risk of misconduct. More about value creation available online at www.metso.com/2017

Customer relationshipsProduct responsibilityComplianceSupply chainPeople

Extending equipment life cycle

Prolonging maintenance cycles

Maintaining and improving customer safety

Mitigating the environmental load

http://www.metso.com/2017

© Metso

Examples of Metso’s sustainable products

51

Total emissions reduction in 2017 through the use of Metso Lokotrack™ and Vertimill™ technologies:

- 613,100 metric tonnes of CO2 emissions

Metso Lokotrack Urban TL160- simplifies crushing operations

- significant noise protection (the required protection distance drops up to 60%)

- cuts dust emissions remarkably (water spraying system absorbs most dust particles from the air)

- minimizes the impact for urban people living and working around construction sites

Metso Vertimill- lower total cost of ownership

with reduced media consumption, lower installation cost and high availability

- can substantially improve the profitability of a concentrator

- 35% more energy efficient than a ball mill


24,664,000 liters of diesel and 66,100 tonnes of CO2 -emissions saved through use of Metso Lokotracks™ in 2017

924,000 MWh of energy and 547,000 tonnes of CO2 -emissions saved through use of Metso Vertimill™ in 2017

investor presentation - metso.com industry profitability and investment willingness, expectations...

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