Metso in brief

1
Metso in brief

• Leading supplier of process industry machinery,
  systems and know-how and aftermarket services
• Global market leader of papermaking lines and
  rock crushing systems
• Net sales in 2001 EUR 4.3 billion
• Approx. 30,000 employees
• Approx. 24,000 shareholders
• Listed on the Helsinki (ME01V.HEX) and New York
  (MX.NYSE) Stock Exchanges
• Metsos business areas
• Metso Paper - Metso Minerals
• Metso Automation - Metso Ventures

2
Metso Paper Fiber and Paper Technology

• Worlds leading supplier of pulp and paper
  industry equipment, processes and related
  knowledge-based technology services and solutions
• Main customer segments are the pulp and paper
  industry and the manufacturers of packaging
  materials

Business Areas
29
3
Metso MineralsRock and Mineral Processing

• Worlds leading supplier of equipment and systems
  for rock and mineral processing
• Worlds broadest product and service offering
• Main customer segments are mining, aggregate and
  construction industries as well as recycling
  industry

Business Areas
34
4
Metso AutomationAutomation and Control
Technology

• One of the worlds leading experts in automation
  and information technology for the process
  industry
• Main customer segments are the pulp and paper
  industry, as well as the power generation and
  the hydrocarbon industry

Business Areas
39
5
Metso Ventures

• Metso Ventures contains businesses that are
  synergetic with Metsos core business areas, as
  well as new businesses and those that are under
  strategic development
• Metso Ventures includes Metso Panelboard, Metso
  Engineering and Valmet Automotive
• Personnel approx. 3,600

Business Areas
44
6
Milestones of Metsos business with China

• 1956 first delivery of paper machinery to China
  (Guangzhou)
• 1989 first joint-venture Valmet-Xian Paper
  Machinery Co.Ltd. established (Xian)
• 1990s several representative offices established
• 1999 first wholly-owned manufacturing plant,
  Metso Minerals (Tianjin) Co. established
• 2001 first service center Metso Paper (Wuxi)
  Co.Ltd. established

7
Metso Corporation in China
Beijing - Metso Paper, Inc. Representative
Office - Metso Automation Pte Ltd. Beijing
Representative Office - Metso Minerals (Tianjin)
Co Ltd/Beijing Branch
rep../sales office
- Metso Dynapac China. Beijing Representative
Office - Metso Minerals (Hong Kong) Ltd. Beijing
Rep. Office
own production unit
joint venture
service technology center
supply center
Tianjin Metso Minerals (Tianjin) Co. Ltd.. Metso
Dynapac Compaction Paving Eq.
Xian Valmet-XianPaper Machinery Co. Ltd..
NanjingMetso Minerals (Tianjin) Co.,
Ltd./Nanjing Sales Branch
Shanghai - Metso Automation (Shanghai) Co.
Ltd.- Shanghai Neles-Jamesbury Valve Co. Ltd. -
Metso Automation Shanghai Supply Center,
Waigaioqiao
Chengdu -Metso Minerals (Tianjin) Co.
Ltd./Changdu Branch
Wuxi Metso Paper (Wuxi) Co. Ltd.
Guangzhou - Metso Minerals (Tianjin) Co.
Ltd./Guangzhou Sales Branch
Hongkong - Metso Minerals (Hong Kong) Ltd.
8
Metso in China

• Employing more than 1,930 persons in
• 3 wholly-owned manufacturing plants
• 2 joint-venture manufacturing plants
• 10 representative offices
• 1 service center
• Number of persons working in joint-ventures is
  not
• consolidated in Metso Corporations total
  numbers.

9
Tariff reductions and competitive situation

• Generally, imported western made products or
  locally by western/joint-venture companies made
  industrial equipment products have been of higher
  quality, but also more expensive than genuine
  Chinese made products
• Often there have been two markets divided by the
  price gap
• Tariff reductions have therefore played a more
  significant role in the competition between
  foreign companies (importers/local operators) as
  such than between foreign and Chinese

10
Problem areas noted prior to Chinas accession

• trade names, brands
• product design
• technology transfer

11
Customs tariffs for typical Metsos products in
China

• before / after / year of impl.
• machinery for making
• pulp, paper, paperboard 8.4 8.4 -
• other machinery for
• making pulp 6.0 6.0 -
• machinery for rock
• crushing, screening 10.4 5.0
  2004
• valves (pressure-reducing,
• check, safety ) 10.0 5.0
  2004

12
Expected positive effects of accession of China
to the WTO on Metsos business

• abolishment of state subsidies to non-profitable
  industrial companies will lead to large scale
  modernization of pulp and paper mills, mines and
  construction activities - more business
• machinery and equipment business will become
  simpler due to fewer Chinese bodies linked to
  individual deals
• business contracts will become clearly specified
  and items valued separately hardware, know-how,
  guarantees, training, technical support

13
Possible negative effects of Chinas WTO accession

• harmonized taxation of foreign and domestic
  companies will abolish the tax incentives enjoyed
  by foreigners in certain areas
• tax levels will obviously rise in general to meet
  state budget needs when new tax forms are
  developed foreign owned companies are likely to
  be in target areas
• financing might at least in the short run become
  even more difficult due to turbulance in the
  banking sector

14
Conclusion on effects of tariff reductions- in
Metsos case

• No major change in competition situation, because
  
• - most western competitors also producing in
  China
• - in case of big projects of national interest
  (like big pulp and paper mills) Chinese
  customers have often received customs duty
  exemptions anyway
• However tariff reductions make generally business
  more effective and transparent supporting a
  genuine market economy