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Metso in brief

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

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Metso in brief

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  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 • Metso’s business areas: • Metso Paper - Metso Minerals • Metso Automation - Metso Ventures

  2. Metso Paper Fiber and Paper Technology • World’s 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 • World’s leading supplier of equipment and systems for rock and mineral processing • World’s 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 world’s 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 Metso’s 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 Metso´s business with China 1956 first delivery of paper machinery to China (Guangzhou) 1989 first joint-venture Valmet-Xian Paper Machinery Co.Ltd. established (Xian) 1990´s 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 - Metso Dynapac China. Beijing Representative Office - Metso Minerals (Hong Kong) Ltd. Beijing Rep. Office = rep../sales 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.. Nanjing:Metso 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 Corporation´s 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 China´s accession trade names, brands product design technology transfer

  11. Customs tariffs for typical Metso´s 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 Metso´s 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 China´s 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 Metso´s 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

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