Metso Corporations Financial Statements Release 2007: Strong growth and record profits

Highlights of 2007

• New orders worth EUR 6,965 million were received in 2007, i.e. 22 percent more than in the previous year (EUR 5,705 million in 2006) *).
• At year's end, the order backlog was EUR 4,341 million (EUR 3,737 million at December 31, 2006).
• Net sales increased by 26 percent and totaled EUR 6,250 million (EUR 4,955 million) *).
• Earnings before interest, tax and amortization (EBITA) were EUR 635.4 million, i.e. 10.2 percent of net sales (EUR 481.1 million and 9.7%).
• Operating profit (EBIT) was EUR 579.8 million, i.e. 9.3 percent of net sales (EUR 457.2 million and 9.2%).
• Earnings per share were EUR 2.69 (EUR 2.89, adjusted EPS: EUR 2.28).
• Free cash flow was EUR 198 million (EUR 364 million).
• Return on capital employed (ROCE) was 26.1 percent (22.5%).
• The Board proposes a dividend of EUR 3.00 per share (EUR 1.50). The proposed dividend consists of an ordinary dividend of EUR 1.65 and an extra dividend of EUR 1.35.

Highlights of the last quarter of 2007

• New orders worth EUR 1,771 million were received in October-December (EUR 1,557 million in Q4/06) *).
• Net sales increased by 23 percent and totaled EUR 1,896 million (EUR 1,538 million) *).
• Earnings before interest, tax and amortization (EBITA) were EUR 193.9 million, i.e. 10.2 percent of net sales (EUR 136.1 million and 8.8%).
• Operating profit (EBIT) was EUR 179.7 million, i.e. 9.5 percent of net sales (EUR 125.0 million and 8.1%).
• Earnings per share were EUR 0.85 (EUR 0.86, adjusted EPS: EUR 0.65).

*) The acquisition of the Pulping and Power businesses at the end of 2006 contributed to the increase in 2007.

"2007 was again the best year ever for Metso. Our net sales grew by 26 percent, our EBITA margin exceeded 10 percent, and we are also proposing a record-breaking dividend. Our strong growth was driven by good demand in emerging markets and the mining and energy industry. About one half of the net sales growth derived from the successful Pulping and Power acquisition", says Jorma Eloranta, President and CEO of Metso Corporation.

"Going forward, we will seek further profitable growth by strengthening our global presence, investing in services growth and responding to our customers' environmental needs. We will also continue strict cost control and development of our delivery capability."

"Our market outlook continues to be favourable, especially on the emerging markets which already accounted for 43 percent of our 2007 order intake. Year-on-year, our order backlog rose by 16 percent, to 4.3 billion euros, the majority of which is for 2008 and some larger deliveries extend to 2009 and 2010. We are confident of delivering profitable growth in 2008 and beyond."

In 2008, Metso targets to achieve, at comparable exchange rates, net sales growth of about 10 percent compared to 2007 and to reach an operating profit margin level of about 10 percent.

Metso's key figures

In 2007, the accounting of actuarial gains and losses was changed to comply with the amendment of IAS 19. The actuarial gains and losses are recognized immediately in equity and the pension liability is presented in the balance sheet in full. The previous years' data has been restated accordingly.

1) In 2006, Metso recognized nonrecurring deferred tax assets totaling EUR 87 million, which improved the earnings per share by EUR 0.61. Of the deferred tax assets, EUR 57 million was recognized in Q2/2006 (impact on EPS: EUR 0.40) and EUR 30 million in Q4/2006 (impact on EPS: EUR 0.21).

2) The calculation of free cash flow has been revised: Only the capital expenditure related to maintenance of production facilities, and not the capital expenditure related to capacity increases, is deducted from net cash provided by operating activities. The comparison periods have been restated correspondingly.

Short-term outlook

The favorable market situation for Metso's products and services is expected to continue. However, general uncertainty about the growth of the global economy may have an impact on the realization of certain customer projects and the demand in certain geographical areas.

No significant changes are expected in Metso Paper's market situation in 2008. The demand for new paper, board and tissue machines and fiber lines is expected to remain at the current level, although issues related to our customers' financing and required permits may in some cases have an impact on timing of projects. In China, the main factor affecting customer investments in new equipment is the growth of paper and board consumption, which is estimated to continue at a rapid rate. In Europe and North America, demand is expected to focus mainly on machine rebuilds and services. The demand for power plants utilizing renewable energy sources is estimated to continue at an excellent level in Metso's main market areas; Europe and North America. Metso Paper aims to substantially grow its services business, and the demand for services is expected to remain satisfactory.

Metso Minerals' favorable market situation is expected to continue in 2008. The demand for mining products, metal recycling equipment and services business is expected to continue at an excellent level. Investments in industrials and commercial facilities, infrastructure, services and housing are forecast to remain buoyant, particularly in emerging economies. As a result, it is expected that the demand for metals will remain strong and that the investment activity of Metso's customers will remain excellent. In the construction sector, demand for Metso Minerals' equipment relating to aggregates production is estimated to remain good. Construction demand will be bolstered by ongoing development projects concerning road networks and other transportation infrastructure around the world.

The demand for Metso Automation's products in the pulp and paper industry is expected to be good in 2008. In the power, oil and gas industries, the demand for process automation systems is expected to be good and the demand for flow control systems excellent. Energy industry investments are driven by the increased consumption of energy and high oil prices due to global economic growth.

In 2008, Metso targets to achieve, at comparable exchange rates, net sales growth of about 10 percent compared to 2007, and to reach an operating profit margin level of about 10 percent.

The profit performance estimates are based on Metso's current market outlook, order backlog and business scope.

Board of Directors' proposal for the distribution of profit

The Parent Company's distributable funds totaled EUR 713,240,970.52 on December 31, 2007, of which the net profit for the year was EUR 518,795,581.49.

The Board proposes to the Annual General Meeting that a dividend of EUR 3.00 per share be distributed for the year ended on December 31, 2007, and that the rest be retained and carried further. The proposed EUR 3.00 dividend consists of an ordinary dividend of EUR 1.65 and an extra dividend of EUR 1.35.

It is proposed that the record date for the payment of dividends will be April 7, 2008 and that the dividend will be paid on April 15, 2008. All the shares outstanding on the dividend record date will be entitled to a dividend, except for the treasury shares held by the Parent Company.

Annual General Meeting 2008

The Annual General Meeting of Metso Corporation will be held at 3 p.m. on Wednesday, April 2, 2008 at the Marina Congress Center in Helsinki.

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