Creating performance and success
Perttu Louhiluoto President, Automation
November 27, 2013 London, UK
Our development for the past 12 months has been very good 1
Automation is a growth business and we serve diversified industries
2
We have solid growth opportunities in all our focus industries
3
We are ready to execute on our ambitious targets 4
© Metso © Metso
Metso in O&G – safety valves practically invulnerable for sabotage
“The facility's hundreds of control valves (officially known as ESDs; or emergency shutdown devices),… ,were virtually invulnerable, having been recently refitted with something called a Neles ValvGuard system”
(Extract from Dead or Alive by Tom Clancy, page 566)
Petrobras Paulinia’s (REPLAN) oil refinery is a terrorist target, but Metso’s intelligent safety valves provide a high level of protection.
Capital Markets Day 2013 3
© Metso © Metso
Our Automation business today
Flow control solutions, automation and information management networks and systems, combined with life cycle performance services
Flow Control Flow Control solutions covering control, automated on-off and safety valves, as well as intelligent positioners and instrumentation
32% of net sales
Services Services to maximize our customers’ profitability, ranging from process optimization to intelligent maintenance and upgrades
45% of net sales
Process Automation Systems Complete process automation solutions covering control systems, specialty systems, measurements, analyzers, and other applications
23% of net sales
Net sales 2012: EUR 859 million Personnel ~ 4,100
Our customers: O&G, P&P, Power, Mining, and other process industries
Capital Markets Day 2013 4
© Metso © Metso
Share of personnel in emerging markets has increased
Capital Markets Day 2013 5
61 % 26 %
8 %
3 % 2 %
December 2005 Total number of employees: 3,169
September 2013 Total number of employees: 4,250
Europe and CIS South and Central America
Asia-Pacific
North America
54 %
20 %
19 %
6 % 2 %
Africa and Middle East
Europe and CIS South and Central America
Asia-Pacific
North America
Africa and Middle East
Transactions 2005 - 2013 Acquisition of Kemotron (conductivity measurements), Mapag (high-performance valves), Viconsys (Machine vision), Valstone (Globe valves), ExperTune (Performance services) : ~200 people
© Metso © Metso
Major achievements during this year
Capital Markets Day 2013 6 *before non-recurring items
Driving services growth by acquiring ExperTune (performance services)
Investing in a direct presence in emerging markets by in-housing our valve production from the SNJ joint venture in China (divesting 50% holding of joint venture)
Significant GP-% improvement in Flow Control
Realized procurement savings of EUR ~5 million
Acquisitions Operational improvements
Operative ROCE-%
EBITA-%*
EBITA*, EUR million
Orders received, EUR million
Change from 1-9/2012 1-9/2013
+8% 693
+12% 79
+1.8-points 13.0%
+5.4 % -points 35.3%
© Metso © Metso
Strong profitability improvement in Flow Control
Capital Markets Day 2013 7
Jan 2008 Sep 2013
Multiple percentage points
Main sources Improved supply chain
management and procurement savings
Reduced fixed costs Volume leverage Price management
Flow Control GP-% development
Our development for the past 12 months has been very good 1
Automation is a growth business and we serve diversified industries
2
We have solid growth opportunities in all our focus industries
3
We are ready to execute on the ambitious targets
4
© Metso © Metso
We are in a market strongly driven by megatrends
Capital Markets Day 2013 9 Source: J.P: Morgan Global Industrial Automation research Sep 2013, data from VDMA.
Automation helps process industries: generate more output
from less input (labor, materials, energy)
generate less waste and pollution
optimize yields improve environmental
management and compliance
maximize uptime
Automation industry net sales growth vs overall machinery sector
© Metso © Metso
We serve a diversified mix of industries Approximate net sales split
Capital Markets Day 2013 10
Mining and other
Power
Oil & gas
Pulp & Paper
#1 Automation provider in P&P
75% of the world's pulp flows through Metso valves
40% of the world’s polyolefin flow through Metso’s valves
60% of all LNG flows through Metso’s valves
Nearly
1,000 power plants worldwide feature Metso’s process automation
>100 Minerals processing systems delivered
1st Industry’s first mobile crushing plant automation system
40%
40%
10%
10%
© Metso © Metso
Markets are expected to continue to grow
Capital Markets Day 2013 11 Source: EIF, ARC, Frost & Sullivan and Metso estimates
Pulp & Paper
Power
Mining
Up- and midstream
Downstream
Chemical and Petrochemical
Industrial Gas
Oil
& G
as
Total market size, USD bn
Short-term outlook
Long-term outlook
Automation CAGR-%, 2012-17
3
4
25
13
14
3
6
6
6
6
Our development for the past 12 months has been very good 1
Automation is a growth business and we serve diversified industries
2
We have solid growth opportunities in all our focus industries
3
We are ready to execute on the ambitious targets 4
© Metso © Metso Capital Markets Day 2013 13 Source: EIF, ARC, Frost & Sullivan and Metso estimates
Automation market: USD 38 billion Addressable market: USD 5 billion Market growth rate: 6% Metso market position: Established niche position Main competitors: Emerson, Flowserve, Samson
• Automation has grown its oil & gas business consistently over time
- 10-year CAGR: ~10%
• We have established strong direct sales channels and a presence with major end-customers and engineering, procurement and construction companies (EPCs)
• Very fragmented business with a large number of players
• Strong and growing services business
Oil & Gas is a highly lucrative automation market with the biggest potential for Automation
40%
Net sales split (Approximate)
O&G
Opportunities for profitable growth for Metso
© Metso © Metso © Metso © Metso Capital Markets Day 2013 14
Lot of opportunities globally – including in frontier markets
North America • Shale/Tight oil • Shale gas • Oil sands • Petrochemical
South America • Brazil Pre-salt • Shale gas
in Argentina
China: • Refining • Shale gas
reserves • Pipelines
Asia-Pacific: • Conventional
oil & gas • Refining
EMEA: • Conventional oil & gas in: • Middle East, Africa
and Russia • Russia refinery
modernizations
O&G
Regional share of Automation’s oil & gas sales
%
35%
10%
20% 5%
30%
© Metso © Metso
Metso can solve customers’ challenges
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Customer challenges 1. Improved profitability 2. Environmental concerns and
compliance needs 3. Safety concerns 4. Maximized uptime
Metso solutions Maximize the profitability of our customers’ businesses with the most reliable and cost-efficient solutions Services: • Intelligent maintenance and shutdown
solutions • Process and control optimization • Replacement products and spare parts • Upgrades and extensions
Flow Control: • Control and automated on-off valves • Emergency shut-down (ESD) valves
Process Automation: • Process Control systems
O&G
© Metso © Metso Capital Markets Day 2013 16
• Solutions for improving customers’ plant operation • Flexible solutions enhansing
production, efficiency, quality, or other business objectives • Can be applied to greenfield or
brownfield sites • Can be sold
- as a service and as software - through direct and partner
channels
Focus on optimizing performance ExperTune
O&G
#8,000 installations globally
© Metso © Metso Capital Markets Day 2013 17 Source: EIF, ARC, Frost & Sullivan and Metso estimates
Automation market: USD 3 billion Addressable market: USD 3 billion Market growth rate: 3% Metso market position: #1 Main competitors: ABB, Honeywell, Flowserve
• Globally a niche segment, where Metso is the #1 player
• Some segments are growing, and growth is projected for pulp & paper automation overall
• Limited number of new entrants expected and competitors defocusing
Pulp & Paper provides profitable growth opportunities for Automation
P&P
40%
Net sales split (Approximate)
Opportunities for profitable growth for Metso
© Metso © Metso Capital Markets Day 2013 18
• Metso’s automation offering for pulp, paper, and power has brought strong results - World’s leading process automation, flow
control solutions and related services provider for pulp and paper
- Widest range of automation-solutions for pulp and paper • Unique automation technology
and product development - Close cooperation with equipment vendor
and plant suppliers in projects and in sales
• Close cooperation with Metso and Valmet will continue benefitting both companies and on customers
Metso and Valmet will continue to work closely together
P&P
© Metso © Metso Capital Markets Day 2013 19 Source: EIF, ARC, Frost & Sullivan and Metso estimates
Automation market: USD 14 billion Addressable market: USD 5 billion Market growth rate: 6% Metso market position: Established niche position Main competitors: ABB, Siemens, Emerson
• We have consistently developed the power automation system business for many years
• Our technology is installed in over 1,000 power plants globally
- Niche position in bio and waste-to-energy and in selected countries
- Partners utilizing our technology • Entered the indian fossil fuel power
generation with Bharat Heavy Electricals Limited (BHEL) - >80% market share in Indian Distributed Control System (DCS) market in power
• Entered the Chinese fossil fuel power market with SAC JV
Automation is looking to grow in the power industry with partners
10%
Net sales split (Approximate)
Power
Opportunities to grow through our partners
© Metso © Metso Capital Markets Day 2013 20
• JV established with Guodian Nanjing Automation Co., Ltd (SAC) in 2011 (Metso 33% / SAC 67%) - SAC is a public company owned 58% by Huadian Power
International Corporation Limited, one of the five largest power generating companies in China
• Our Distributed Control System (DCS) technology complements SAC’s digital power plant offering in turnkey deliveries for Huadian Corp’s power plant projects
• Fast business start-up, with numerous projects won, commissioned, or being commissioned
• SAC JV's first project with DCS and turbine controls for an ultra-supercritical 1,000 MW plant successfully commissioned at Huadian's Jurong plant
Success through partnerships: Case SAC JV
Power
© Metso © Metso Capital Markets Day 2013 21 Source: EIF, ARC, Frost & Sullivan and Metso estimates
Automation market: USD 4 billion Addressable market: < USD 1 billion Market growth rate: 6% Metso market position: Established niche position Main competitors: ABB, Honeywell, Rockwell
• We have gained a foothold in mining automation
• Market is developing rapidly – large demand for intelligent solutions to solve major industry challenges
- Increasing HSE standards - Decreasing ore grade quality - More remote mine sites and
scarcity of talent - Rising energy and water costs
• Our offering includes complementary slurry pump and valve solutions
Mining provides lucrative growth opportunities for us
10%
Net sales split (Approximate)
Mining and other
Excellent opportunity for us to develop intelligent solutions by combining our process, equipment and automation know- how
© Metso © Metso
Customer World’s third largest hydroelectric plant Contractor: Consorcio Construtor Belo Monte – CCBM
Delivering intelligent solutions: Case Belo Monte
Capital Markets Day 2013 22
Engineering, Procurement and Construction (EPC) for crushing plants Mining and Construction
3 fixed, fully automated crushing plants Mining and Construction
3 mobile crushing plants featuring remote monitoring Mining and Construction
Process automation and info systems for all six plants Automation
Mining and other
Intelligence
Equipment
Solutions
Remote monitoring system for mobile equipment Automation
Our development for the past 12 months has been very good 1
Automation is a growth business and we serve diversified industries
2
We have solid growth opportunities in all our focus industries
3
We are ready to execute on the ambitious targets 4
© Metso © Metso © Metso © Metso Capital Markets Day 2013 24
We have set ourselves ambitious targets in Automation
Become a leading provider of advanced
automation solutions for mining and construction
customers
Become one of the industry leaders
(profitability, scope, and size) in the flow control space
Become one of the top 3 flow control companies in oil & gas,
refining, and petrochemicals
Achieve a significant and growing PAS
business outside pulp & paper
Maintain market
leadership in pulp & paper automation
Achieve significant growth in services
© Metso © Metso
We are focusing on prioritized must-win initiatives to reach our targets
Capital Markets Day 2013 25
Services
Technology
Growth countries
Operating model
People
Developing new businesses
• Expand service business offering and competencies • Strengthen our network
Must-win Initiative
• Strengthen the role of regions • Increase growth in China, Brazil, India, Russia, and the Middle East
• Develop and expand our valve offering • Develop Metso DNA as a growth platform
• Strengthen cost-competitiveness and operational excellence, sourcing in particular
• Ensure that we capture the true value of acquisitions
• Strengthen our safety culture • Upgrade critical core competencies
• Grow in mining and construction automation • Grow in analyzers
© Metso © Metso Capital Markets Day 2013 26
Conclusions
Automation’s organic development for the past 12 months has been very good
We have solid growth opportunities in all our target industries Oil & Gas Pulp & Paper Power Mining
We have set ourselves ambitious targets: Become one of the top
3 flow control companies in oil & gas, refining, and petrochemicals
Achieve significant growth in services
Achieve a significant and growing business outside pulp & paper
Become a leading provider of advanced automation solutions for mining and construction customers
We will achieve our targets by: Strengthening our cost-
competitiveness and operational excellence
Strengthening the role of regions
Expanding our service business
Developing our technology leadership and new business models
© Metso © Metso
Automation
28
Business model
Services Mix of Flow Control and Process Automation system clientele
Metso direct sales and service network
>90%
A few agents in selected markets and distributor network in North America
<10%
In-house spare parts operations. Knowledge based services and OEM maintenance.
70%
Spare parts components and sub-contracted basic services
30%
Customer base
Sales & service
Product supply
Capital Markets Day 2013
Flow Control Global large end customers and EPCs. Number of regional and local players. Long-term focus.
Metso direct sales and service network
80%
A few agents in selected markets and distributor network in North America
20%
In-house order engineering, production of key components and assembly
50%
Externally purchased materials, castings and components
50%
Process Automation systems A few global corporations and a number of regional and local players. Long-term focus.
Metso direct sales and service network
>90%
<10%
In-house assembly and final testing, in-house project management and engineering
40%
Externally purchased components, sub-assemblies, engineering and services
60%
A few agents for selected products and markets. Role of strategic partners increasing