Metso 2017 H1 Half-year Review presentation

H1Half-Year Financial

Review 2017

January 1 – June 30, 2017

© 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 competitors

3) the company’s own operating conditions, such as the success of production, product development and project management and their continuous development and improvement

4) the success of pending and future acquisitions and restructuring.

Half-Year Financial Review 2017

© Metso© Metso

50

150

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750

0

2

4

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8

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12

14

Lost time incident frequency (LTIF) Risk observation frequency

3

Safety is a key driver throughout our value chain

Demand from customers: License to operate

PeopleEncourages employee commitment and motivation

ProductivityImproves productivity and lowers qualitycosts

PartnershipImproves stakeholder recognition as a sustainable partner


LTIF2.5 *

* Rolling 12 months as of June 30, 2017

© Metso© Metso

Quarterly highlightsMatti KähkönenPresident and CEO

4 Half-Year Financial Review 2017

© Metso Half-Year Financial Review 20175

Q2/2017 in brief

Healthy market activity continued with improvement in mining equipment

Sales are not yet reflecting the growth in orders

Profitability was affected mainly by low sales and mix

Good progress in strategic initiatives

© Metso

433 444 423 441496 480

1.06 1.01 1.02 1.001.17

1.08

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0.8

1.2

1.6

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400

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Services sales Services orders received Services book-to-bill

56

77 77

64 66 70

9.311.5 12.1

9.4 10.2 10.4

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Adjusted EBITA Adjusted EBITA %

%

601671 638 676 648 675

-20-15-10-505101520

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600

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Sales Sales growth y-on-y

%

663761

628 672733 749

1.10 1.130.98 0.99

1.13 1.11

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Orders received Book-to-bill

Q2/2017 financial highlights

Profitability slightly disappointing

Services orders grew 8%; positive book-to-bill continued

6

Good order intake without large orders

Sales are not yet reflecting the order growth

-11%-18% -10%-6% +8% +1%


Incl. large mining order of MEUR 90

No large mining orders


Short-term market outlook for 2017

Mining45% of sales

80% services *

Aggregates25% of sales

45% services *

Flow Control25% of sales

60% services *

satisfactory good good good good

Equipment Equipment Equipment ServicesServicesServices

Previously: weak

* Based on 12 months rolling sales

good


Current topics in the second quarter

Good progress in growth initiatives− Investments in assembly capacity of Lokotracks in Finland, and in the manufacturing of crusher wear parts in

South Africa totaling EUR 4.5 million− Continued expansion of distribution network in Flow Control and Aggregates

Digital strategy proceeding according to plan− Platform was chosen to create new industry-leading IoT solutions for mining and aggregates customers

New President and CEO and changes in management team− Nico Delvaux will start as the new President and CEO on August 1− Victor Tapia started as President of Minerals Capital on June 1

© Metso© Metso

Financial performanceEeva SipiläCFO


© Metso© Metso

169 168

136 136

173 174

1.141.01

0.84 0.881.09 1.14

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0.4

0.8

1.2

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494

593

492536 560 575

1.091.18

1.03 1.031.14 1.10

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0.4

0.8

1.2

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Orders were healthy in both segmentsOrders increased 12%, adjusting for the big order in the comparison period

Mining supported by customers’ focus on productivity

Aggregates equipment orders increased

Pump orders up in Flow Control

10

Minerals: Productivity focus of customers supports growth in replacement and services orders

Flow Control: Healthy order intake in valves while pumps improved significantly


Incl. large mining order of MEUR 90

No large mining orders

© Metso© Metso

37

54 5247

43

55

8.210.8 10.8

9.1 8.910.5

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%

453504 477

522 489523

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EUR million

Minerals Services sales Minerals Equipment salesSales growth y-on-y

%

Minerals: Aggregates’ improvement offset by miningSales driven by double-digit growth in aggregates equipment; other businesses flat

Mining services margins affected by higher raw material prices and sales mix

-10%-20% -9%-5% +8%

11

+4%


© Metso© Metso

1922

2826 25

1612.8 13.2

17.5 16.6 15.6

10.8

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%

148167 161 155 159 152

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Flow Control Services sales Flow Control Equipment salesSales growth y-on-y

%

Flow Control: H1 performance flat with positive book-to-billSales reflecting H2/16 order intake

Low sales and related under-absorption as well as sales mix impacted profitability

-14%-13% -14%-10% +7%

12

-9%


© Metso© Metso

176196

181 184 184 187

29.2 29.2 28.4 27.2 28.4 27.7

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Gross profit Gross margin

%

126 130 125 135 126 127

20.919.4 19.6 20.0 19.5 18.8

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SGA SGA %

%

Differing trending in Q2 marginsGross margin in the second quarter reflected :

- the mix in both segments,

- raw material pressure in Minerals and

- under-absorption in Flow Control.

SG&A costs were stable and as % of sales trending downwards


© Metso© Metso

480

240 207153

91

174

70

-25 -63

100

-0.3

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0.3

0.6

0.9

1.2

1.5

-100

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300

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EUR million

Net debt Net debt/EBITDA

124 120129

83

59

103 103

127

5846

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EUR million

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

Balance sheet continues to be strongFree cash flow affected mainly by EUR 56 million increase of net working capital

Paid income taxes totaled EUR 37 million

Dividend of EUR 157 million paid in April

Maturity structure of debt was extended- New EUR 300 million bond issued

- EUR 205 million of the 2019 outstanding EUR 400 million bond purchased back


© Metso© Metso

1,445 1,4111,290 1,268 1,300

1,3991,305 1,320 1,396 1,411

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EUR Million

Flow Control backlog Minerals Services backlog Minerals Equipment backlog

Order backlog increasedOur backlog at end of June for 2017 deliveries totaled approximately EUR 1 billion

Deliveries for the remainder of the year higher compared to the end of June 2016- We continue to expect some postponements to planned delivery timetables

Delivery timetableOrder backlog


Deliveries in 2017

Deliveries after 2017

Deliveries in 2016

Deliveriesafter 2016

0

500

1,000

1,500

Order backlogJune 30, 2016

Order backlogJune 30, 2017

EUR million

company/metso metsogroup metsoworldmetsoworld metsogroup

www.metso.com

© Metso

Key figures

EUR million Q2/2017 Q2/2016 Change % H1/2017 H1/2016 Change % 2016Orders received 749 761 -2 1,482 1,424 4 2,724

without currency effect -3 1

Orders received, services business 480 444 8 976 877 11 1,741

without currency effect 7 8

Sales 675 671 1 1,323 1,272 4 2,586

without currency effect 0 2

Sales, services business 445 439 1 868 848 2 1,703

without currency effect 0 -1

Adjusted EBITA 70.0 77.3 -9 136.5 133.0 3 274.0

% of sales 10.4 11.5 10.3 10.5 10.6

Operating profit 59.8 69.3 -14 119.2 119.7 0 227.1

Earnings per share, EPS, EUR 0.24 0.28 -14 0.47 0.46 2 0.87

Return on capital employed (ROCE), before tax, annualized, % 11.1 11.0 10.4

Free cash flow 4 74 -95 43 136 -68 339


© Metso

Cash flow and financial position

June 30, 2017 Dec 31, 2016

Return on equity (ROE), annualized, % 10.2 9.0

Return on capital employed (ROCE) before taxes, annualized, % 11.1 10.4

Gearing at the end of the period, % 7.5 -1.8

Cash conversion, % 61 261

Equity to assets ratio at the end of the period, % 45.9 48.0

Debt to capital, % 39.0 35.6

Net debt / EBITDA 0.3 -0.1

Interest cover (EBITDA) 9.0 7.4

Cash assets 629 698


© Metso

132 121

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South and Central Americaorders

EUR mill ion

148165

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Asia-Pasific orders

EUR mill ion

153 155

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North America orders

EUR mill ion238 234

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EMEA orders

EUR mill ion

Orders were EUR 194 million and +19%+ Good activity continued in several regions

+ Equipment orders +36%, services flat

Geographical figures in Q2/2017

Mining

Orders were EUR 342 million and -15%+ Services orders +12% with increase across the

services offering

+ Recovery more visible in the equipmentbusiness

Flow ControlAggregates

Orders were EUR 174 million and +4%+ Orders from oil & gas as well as pulp & paper

customers slightly higher

+ Pumps grew significantly

20

Minerals sales +6%Flow Control sales -2%

North America23% of sales

EMEA35% of sales

Minerals sales flatFlow Control sales -1%

Asia-Pacific24% of sales

Minerals sales +16%Flow Control sales -3%

South and Central America18% of sales

Minerals sales flatFlow Control sales flat

-2% +12% -9%+2%


Metso 2017 H1 Half-year Review presentation

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