Metso Capital markets day 2015: CFO Harri Nikunen

© Metso © Metso Capital Markets Day 2015

Strong financial position to act Harri Nikunen

CFO, EVP


• Solid cash generation supported by:

• Steady EBITDAs due to high services share

• Low capital expenditure needs in near term

• Strong net working capital management

• Healthy maturity structure of gross debt

• Funding readily available from multiple

sources

• Investment-grade rating from S&P (BBB;

stable outlook)

Funds available for growth and shareholder remuneration Strong balance sheet and solid funding position

2 Financial update by Harri Nikunen


0%

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140%

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A2009 A2010 A2011 A2012 A2013 A2014 Q2 A2015

Gross capex Capex acquisitions Gross capex / depreciation and amortization -%

EUR Million

Assets in good shape – limited capex requirements

Capex in

2015 appr.

40-50

million



We are generating a healthy cash flow

EUR million Q1-Q2/15 Q1-Q2/14

EBITDA 447 215

Adjustments (255) 19

Change in net working capital 52 (14)

Financial items and taxes, paid (69) (110)

NET CASH FROM OPERATIONS

(CFFO) 175 110

Capex on fixed assets (23) (25)

Acquisitions and divestments 242 (14)

NET CASH FROM INVESTING

ACTIVITIES (CFFI) 219 (39)

CFFO + CFFI 394 71



Growth and resilience supported by the balance sheet and high EBITDA business model EUR million June 30, 2015 June 30, 2014 Dec 31, 2014

Return on equity (ROE), % * 32.5 16.4 15.7

Return on capital employed (ROCE) before taxes, %* 26.2/17.1** 16.6 16.4

Gearing at the end of the period, % 16.6 53.4 45.6

Cash conversion, % 186 100 108

Debt to capital, % 36.4 45.6 41.2

Net debt / EBITDA * 0.5 2.8 1.3

Interest cover (EBITDA) * 22.8 5.8 6.2

Tähän joku pyöristettyreunainen kuva

*Annualized

* *Excluding initial gain on PAS



Strong liquidity position


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1,000

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08/13 11/13 02/14 05/14 08/14 11/14 02/15 05/15

Committed undrawn facilities

Cash assets

Financial investments

EUR million


Maturity profile: no short-term refinancing needs

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01/2014 9/2014 06/2015 03/2016 12/2016 09/2017 06/2018 03/2019 12/2019 09/2020

YTD Monthly Maturities monthly >

June 2015

Euro Bond 2019

Euro Bond 2014 Private Placements

Other long-term Debt Short-term Debt

Undrawn Committed Facilities


Syndicated Term Loan

EUR million


• 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 loan: EUR 215 million

• Committed EUR 500 million 5-year syndicated

revolving credit facility available until 2020 with an

extension option 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

Funding is well in place Corporate level funding facilities

8

Financial update by Harri Nikunen


Successful implementation of capital efficiency culture

• Capital efficiency program was started in Q1/2014 with the 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

• Program moved to the execution phase in late Q3/2014 and has yielded visible results:

• Significant capital release from net working capital and fixed assets. However reaching turnover target of 2

requires further improvement and also top-line growth

• Process and operational improvements supporting also the EBITA improvement

• Capital efficiency is embedded in:

• Management and reporting systems

• Management agendas at all levels

• Incentive systems at all levels



Implementation of capital efficiency culture 2014 – 2015 (examples)

10

Culture

Visibility through communication

Capital efficiency reporting and reviews at business reviews at all levels

Capital efficiency included extensively in incentive programs

Clarified responsibility for the different capital employed items

Capital efficiency as an integrated part of Metso’s training programs

New improved processes / roles / guidelines / inventory

New global inventory planned role (PRIME)

PRIME tool and process

Sales & operations planning

Sales office inventory review process

Factory acceptance testing process review

Finished goods inventory review

Global excess inventory activation

New improved processes / roles / guidelines / Accounts receivable

AR accountability defined

Country AR coordinator role defined and nominations done

Payment term guidelines defined and implemented

Credit management guidelines defined and implemented

Global collection process defined and implemented

Global dispute management process defined and the implementation is ongoing

New SAP functionalities taken into use



EUR million 2013 2014 Q2/2015 Change % Inventories 910 797 756 -16.9%

Project net -225 -116 -147 -35.0%

Trade receivables 642 577 555 -13.5%

Trade payables -342 -309 -304 -11.2%

OPERATIONAL NWC 984 950 861 -12.5%

Non-operational NWC -350 -285 -244 -30.2%

NET WORKING CAPITAL 634 665 617 -2.8%

Total NWC -% of rolling 12 months net sales 17.2% 18.8% 19.0%

Operational NWC -% of rolling 12 months net sales 27.6% 28.2% 26.5%

Intangible assets 569 559 557 -2.1%

Tangible assets 400 375 358 -10.4%

Financial assets 224 187 190 -15.2%

FIXED AND FINANCIAL ASSETS 1,193 1,121 1,105 -7.4%

CASH & OTHER 465 277 281 -39.5%

TOTAL CAPITAL EMPLOYED 2,292 2,063 2,003 -12.6%

Capital employed turnover 1.61 1.71 1.62

Net sales 3,561 3,365 3,210 -10.0%

Visible results in capital efficiency Excluding PAS



Key cost actions in 2013 - 2016

• Cost cutting and structural action to support

strategic targets 2013

• Streamlining after demerger

• Adaptation to lower mining capital demand 2014

• Radical restructuring to increase flexibility and

lower break-even point in mining capital

• Cost action also in Services and Flow Control

to maintain competitiveness

2015

• Finalize mining capital structure and continue

to streamline the overall cost structure to

support the target setting 2016



Tarkistettava Harrilta

Key cost actions in 2013 - 2016

Headcount reduced by ~2,100 persons since the end of 2013.

Further reductions expected both 2015 and 2016.

Significant number of large locations closed and non-core low

margin businesses sold; further action expected in 2016.

The number of legal entities will be reduced by 40% by 1Q

2016 (100->60). Support function headcount reduced by >20%.

The structural action will continue in 2016.

Purchasing savings around EUR 30 million a year and the

hunt for low material and component costs will continue

All discretionary spending under very close control

GP 2013

29.0%

GP 2014

28.6%

GP 2015

30.7%



Headcount (Dec 31, 2013)

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

Headcount reduced by more than 2,000*

Headcount (Dec 31, 2012) 14,947

14,774

Reduction in developed markets -1,733

Increase in emerging markets -250

Headcount (Dec 31, 2014) 14,072

Headcount (Aug 31, 2015) 12,864

-173

-702

-1,208

Reduction of 2,083 persons corresponds with an annual personnel cost

reduction of EUR 130 – 140 million (gross).

*Excluding PAS 14 Financial update by Harri Nikunen


Strong financial position to act

15

• Financial capacity for strategy implementation • Strong balance sheet

• Adequate funding available

• No major refinancing needs

• High focus on cost and capital efficiency management

actions to support cash flows and EBITDA’s • Major ongoing cost action in all business areas and in all

support functions

• Capital management culture successfully launched and

key capital employed items under rigorous management



Date post:	12-Apr-2017
Category:	Investor Relations
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Metso Capital markets day 2015: CFO Harri Nikunen

Investor Relations