Metso Corporation Stock Exchange Release February 7, 2007 at 12.00 p.m. METSO CORPORATION'S FINANCIAL STATEMENTS RELEASE 2006 A RECORD YEAR FOR METSO; STRONG VOLUME GROWTH ESTIMATED TO CONTINUE IN 2007 Highlights of 2006 - In 2006, new orders worth EUR 5,705 million were received (EUR 4,745 million in 2005). - At years end, the order backlog was EUR 3,737 million (EUR 2,350 million at December 31, 2005). This includes EUR 727 million order backlog of the Pulping and Power businesses acquired from Aker Kvaerner. The acquired businesses were consolidated into Metso's balance sheet on December 31, 2006. - Net sales increased by 17 percent and totaled EUR 4,955 million (EUR 4,221 million). - Operating profit was EUR 457.2 million, i.e. 9.2 percent of net sales (EUR 335.0 million and 7.9%). - Nonrecurring deferred tax assets of EUR 87 million were recognized through the income statement. - Earnings per share from continuing operations were EUR 2.89 (EUR 1.57). - Free cash flow was EUR 327 million (EUR 106 million). - Return on capital employed (ROCE) was 22.2 percent (18.8%). - The Board proposes a dividend of EUR 1.50 per share. Highlights of the last quarter of 2006 - New orders worth EUR 1,557 million were received in October- December (EUR 1,537 million in Q4/05). - Net sales increased by 23 percent and totaled EUR 1,538 million (EUR 1,254 million in Q4/05). - Operating profit was EUR 125.0 million, i.e. 8.1 percent of net sales (EUR 101.5 million and 8.1% in Q4/05). - In the final quarter, a nonrecurring deferred tax asset of EUR 30 million was recognized in the income statement. - Earnings per share from continuing operations were EUR 0.86 (EUR 0.47 in Q4/05). Year 2006 was a year of consistent profitable growth for Metso. The favorable market situation prompted brisk order intake throughout our businesses. Our net sales clearly exceeded our over 10 percent growth target for a second year in a row, and our operating profit improved substantially, says Jorma Eloranta, President and CEO of Metso Corporation. Also the outlook for 2007 is positive: We have started the year with a very solid order backlog out of which over 80 percent is scheduled to be delivered this year. Furthermore, we expect the overall favorable demand for our products to continue, which give us confidence that our net sales growth will remain strong, Eloranta notes. Of course, we still see opportunities to improve our performance. Aftermarket development, continuous improvement of productivity and further cutting of non-quality costs remain on our agenda as means to further boost our profitability. In addition, we will be investing in supply chain management and in securing our delivery capability to respond to the growth especially in Metso Minerals and Metso Automation. We continue to strengthen our presence in the emerging markets to secure Metso's longer-term development. According to Eloranta, the integration of Pulping and Power businesses, acquired from Aker Kvaerner in the end of 2006, is proceeding according to plans. The acquisition will significantly improve our capabilities as a full-scope supplier to the pulp and paper industries. Furthermore, we see very promising business opportunities in the power industry and biomass technology. Key figures EUR million Q4/06 Q4/05 Change 2006 2005 Change % % Net sales 1,538 1,254 23 4,955 4,221 17 Operating profit 125.0 101.5 23 457.2 335.0 36 % of net sales 8.1 8.1 9.2 7.9 Earnings per share 0.86 0.47 83 2.89 1.57 84 from continuing operations, basic, EUR Earnings per share 0.86 0.47 83 2.89 1.69 71 from continuing and discontinued operations, basic, EUR Orders received 1,557 1,537 1 5,705 4,745 20 Order backlog from 3,737 2,350 59 continuing operations, Dec 31 Free cash flow 327 106 208 Return on capital 22.2 18.8 employed (ROCE), annualized, % Equity to assets 36.1 37.5 ratio, Dec 31, % Gearing, Dec 31, % 30.8 22.4 Metso's last quarter 2006 review Operating environment and demand for products in October-December In the fourth quarter, the demand for Metsos products and services continued much the same as in the first nine months. The construction, mining and energy industry markets were good overall, while the pulp and paper industry markets were satisfactory. The overall demand for aftermarket services continued to be good. Metso Papers new paper and board machine orders originated mainly from Asia. The demand for rebuilds was quiet in Europe and North America. The demand for tissue machines remained good in all markets. The demand for fiber lines was strongest in Southeast Asia. In construction, the demand for Metso Minerals aggregates production-related equipment was good. The demand for mining equipment continued to be excellent in all markets. The demand for metal recycling equipment was excellent except in the USA. The demand for Metso Automations valves and field device systems remained excellent. The demand for automation systems was good in the power, oil and gas industry, and satisfactory in the pulp and paper industry. Orders received in October-December Metsos order intake in the last quarter of 2006 was overall on the same level as in the comparison quarter last year. The orders received by Metso Minerals grew by 23 percent on the comparison quarter due to strong demand for mining equipment. The 8 percent increase in Metso Automations order intake was mainly attributable to the good demand for valves and field device systems. Metso Papers order intake for the last quarter of 2006 was good, even though it was 14 percent down on the exceptionally high comparison quarter of 2005. Metso Ventures orders decreased due to Metso Panelboard. The largest orders received in October-December included a papermaking line to Japan, fiber lines to Southeast Asia and India, and bulk materials handling and processing equipment to Brazil. Financial performance in October-December Metsos net sales grew by 23 percent compared with October- December 2005. The growth was strongest in Metso Paper, where the increase of 33 percent was due to the timing of large project deliveries for the final quarter. Metso Minerals deliveries increased by 21 percent and Metso Automations deliveries by 18 percent. The delivery problems that hindered Metso Automation in the third quarter have been solved for the most part, and the delivery volumes of valves and field device systems in the last quarter were record-high. The net sales of Metso Ventures increased by 5 percent due to the larger delivery volumes of the Foundries and Valmet Automotive. Operating profit for the years last quarter totaled EUR 125.0 million, i.e. 8.1 percent of net sales. The biggest improvements in operating profit were made by Metso Minerals and Metso Automation, mainly due to increased delivery volumes. Metso Paper's last-quarter operating profit margin was negatively affected by the high share of project deliveries and low volume in higher-margin aftermarket business. Metso Paper also recognized some EUR 10 million in expenses related to business reorganizations in Italy and the USA, and to the integration of the Pulping and Power businesses. Metso Ventures operating profit for the last quarter was weaker than in the comparison quarter due to Metso Panelboards losses. The operating loss of Metso Ventures includes expenses of EUR 9 million resulting from Metso Panelboards restructuring costs and goodwill impairment and a gain of EUR 10 million from the divestment of Metso Powdermet AB. In the last quarter, Metso recognized a nonrecurring deferred tax asset of EUR 30 million with respect to its U.S. operations. This had a positive impact in the income statement. Financial Statements Release 2006 Metso's operating environment and demand for products The market situation for Metsos products and services was favorable all year. The construction, mining and energy industry markets were excellent on the whole and the pulp and paper markets were good. The overall demand for aftermarket services was good. With respect to Metso Papers products, the demand for new paper and board machines was satisfactory. The demand continued to be focused on Asia, particularly China, where many customers are actively investing. The Japanese market picked up, leading to two orders for new paper machines. The demand for paper and board machine rebuilds leveled off as expected in Europe and North America, partly due to business restructuring in paper companies. The demand for new tissue machines, rebuilds and related services was good in all markets. The demand for new fiber lines, rebuilds and related aftermarket services was good overall. Demand for new fiber lines was especially brisk in South America and Asia. The demand for Metso Minerals crushing and screening equipment and services related to construction was excellent due to road network development projects and other infrastructure investments. Despite volatility, metal prices remained high and the demand for various kinds of crude ore continued to grow driven by emerging markets. The demand for mining equipment and related aftermarket services was excellent in all market areas and particularly in South America and Australia, where the large mining companies carried out major investments. Mining industry projects were increasingly large in scope. The demand for metal recycling equipment was also excellent thanks to increased recycling and high metal prices. The markets for Metso Automation's process automation systems in the pulp and paper industry were satisfactory all year. The demand for flow control systems was good in the pulp and paper industry and excellent in the power, oil and gas industry. The markets for process automation systems in the power industry were good. Orders received and order backlog Metsos orders received increased by 20 percent on the year 2005, and their total value was EUR 5,705 million. Growth came from all business areas. The growth in orders was proportionally strongest at Metso Minerals and Metso Automation. At the end of 2006, Metsos order backlog was EUR 3,737 million, which included a EUR 727 million order backlog from the Pulping and Power businesses acquired in December. The value of orders received from the BRIC countries (Brazil, Russia, India and China) was more than 50 percent up on 2005. The contribution of these countries to Metso's order intake rose to 23 percent, whereas it was 19 percent in the comparison year. Orders received by business area 2006 2005 EUR % of EUR % of million orders million orders received received Metso Paper 2,139 37 1,993 41 Metso Minerals 2,630 45 1,936 40 Metso Automation 717 12 580 12 Metso Ventures 332 6 324 7 Intra-Metso orders received (113) - (88) - Total 5,705 100 4,745 100 Orders received by market area 2006 2005 EUR % of EUR % of million orders million orders received received Europe 1,993 35 2,110 44 North America 1,099 19 960 20 South and Central America 757 13 562 12 Asia-Pacific 1,503 27 896 19 Rest of the world 353 6 217 5 Total 5,705 100 4,745 100 Net sales Metsos net sales rose by 17 percent on the comparison year and totaled EUR 4,955 million. The increase was due both to the continuing good market situation and to strengthened competitiveness, and was attributable to all business areas. The exchange rate translation did not affect the growth of net sales. Aftermarket operations accounted for 36 percent (38% in 2005) of Metso's net sales (excluding Metso Ventures). In terms of euros, the aftermarket business volume increased by 10 percent and the growth came from Metso Minerals. The largest individual countries in terms of net sales in 2006 were the United States, Brazil, China, Finland and Germany. Deliveries of mining equipment and fiber lines resulted in a large net sales increase in Brazil. Net sales by business area 2006 2005 EUR % of net EUR % of net million sales million sales Metso Paper 1,947 38 1,702 39 Metso Minerals 2,174 43 1,735 40 Metso Automation 613 12 584 14 Metso Ventures 332 7 284 7 Intra-Metso net sales (111) - (84) - Total 4,955 100 4,221 100 Net sales by market area 2006 2005 EUR % of net EUR % of net million sales million sales Europe 2,002 41 1,900 45 North America 1,012 20 889 21 South and Central America 685 14 485 12 Asia-Pacific 991 20 735 17 Rest of the world 265 5 212 5 Total 4,955 100 4,221 100 Financial result In 2006, Metsos operating profit was EUR 457.2 million, or 9.2 percent of net sales (EUR 335.0 million and 7.9% in 2005). The improvement in profitability was mainly attributable to strong volume growth, especially at Metso Minerals. Metso Paper and Metso Automation also improved their operating profits. The operating profit of Metso Ventures was affected by the losses of Metso Panelboards operations. Metsos net financial expenses decreased to EUR 36 million (EUR 43 million) as a result of continuing strong cash flow from operating activities. Metsos profit from continuing operations before taxes was EUR 421 million (EUR 292 million). In 2006, Metso recognized nonrecurring deferred tax assets totaling EUR 87 million with a positive impact in the income statement with respect to its U.S. operations where Metso had unrecognized tax losses and other temporary differences between accounting and taxation. At the end of 2006, all the deferred tax assets related to the U.S. operations had been recognized. The recognition is based on the fact that Metso's U.S. operations have turned clearly profitable. In 2006, Metsos tax rate, excluding the deferred tax assets of EUR 87 million, was 23 percent. Metso's tax rate for 2007 is estimated to be about 30 percent. The profit attributable to shareholders was EUR 409 million, corresponding to earnings per share of EUR 2.89. Excluding the nonrecurring deferred tax assets of EUR 87 million, earnings per share were EUR 2.28. The return on capital employed (ROCE) was 22.2 percent (18.8%) and the return on equity (ROE) was 30.3 percent (20.9%). Cash flow and financing Metso's net cash generated by operating activities was EUR 442 million (EUR 164 million). The increase in inventories and receivables due to volume growth was compensated by increase in accounts payable and advances received. Metso's free cash flow was EUR 327 million (EUR 106 million). The acquisition of the Pulping and Power businesses increased Metsos net interest-bearing liabilities by EUR 261 million, and they totaled EUR 454 million at the end of the year. Gearing (the ratio of net interest-bearing liabilities to shareholders equity) was 30.8 percent. The effect of the acquisition of the Pulping and Power businesses on gearing was 18 percentage points. Metso's equity to assets ratio was 36.1 percent. In April 2006, Metso paid dividends for 2005 of EUR 198 million. In December, Metso drew a EUR 100 million loan from the European Investment Bank. The purpose of the loan, which was agreed in 2004, is to finance R&D activities carried out within Metso. The loan has a floating interest rate, its tenure is 10 years and repayment will begin in 2010. In addition, Metso signed a EUR 500 million revolving 5-year loan facility in December which is primarily intended to support Metso's short-term funding. It replaces an originally EUR 450 million facility agreed in 2003. In September, Moody's Investor Service upgraded the long-term credit ratings of Metso to Baa3 from Ba1 and considered the outlook on ratings stable. In October, Standard & Poor's Ratings Services upgraded the long-term credit rating of Metso to BBB- from BB+ and the short-term rating to A-3 from B. The rating on Metso's senior unsecured debt was upgraded to BB+ from BB. Standard & Poor's considered the outlook on ratings stable. Capital expenditure Metsos gross capital expenditure was EUR 131 million excluding acquisitions (EUR 107 million). Capital expenditure was mainly related to information systems, as well as to expansions and maintenance of production facilities. Production facilities are being expanded at, for example, Metso Minerals units in Tampere, Finland and in Columbia, South Carolina, USA, and Metso Paper's unit in Wuxi, China. Additionally, Metso Papers pilot paper machine in Jyväskylä, Finland was rebuilt and the service unit in Zaragoza, Spain was expanded. In 2007, Metso's capital expenditure excluding acquisitions is expected to increase with some 15-20 percent compared to 2006. This increase is due to the capacity investments necessitated by strong volume growth, to information systems investments and to the expansion of operations due to the acquisitions completed. Acquisitions and divestments In August, Metso Paper received the relevant regulatory approvals from the Chinese authorities for the acquisition of Shanghai- Chenming Paper Machinery Co. Ltd, agreed in February 2006. All the shares of the company were transferred to Metso on August 31, 2006. The debt-free purchase price and the investments related to the development of the unit total about EUR 35 million. The company's new name is Metso Paper Technology (Shanghai) Co., Ltd. In September, Metso agreed to acquire the business assets of Svensk Gruvteknik AB and Svensk Pappersteknik AB in Sweden to strengthen its aftermarket business. The business assets were transferred to Metso on October 1, 2006. The debt-free purchase price totaled approximately EUR 4 million. In December, Metso Paper acquired all of Sumitomo Heavy Industries' (SHI) shares of the Metso-SHI Co., Ltd. joint venture that has represented Metso Paper and Metso Automation on the Japanese markets. Previously Metso possessed 65 percent and SHI 35 percent of the joint venture. Metso completed the acquisition of Aker Kvaerners Pulping and Power businesses in December. The businesses were transferred to Metso on December 29, 2006. The European Commission clearance for the acquisition was received on December 12, 2006. In 2006, net sales of the Pulping and Power businesses transferred to Metso were approximately EUR 600 million and the number of employees was approximately 2,100. The estimated acquisition price is EUR 341 million including EUR 6 million costs related to acquisition and EUR 52 million acquired net cash (for further information see "Acquistion of Pulping and Power businesses of Aker Kvaerner"). The final transaction price will be based on the balance sheet values at the time of the closing and will be agreed during the first quarter of 2007. According to Metsos estimates the annual cost-based synergies to be derived from the acquisition amount to EUR 20-25 million. About one third of this is estimated to be realized during 2007. The one- time costs arising from the integration are estimated to be approximately EUR 10 million and they are estimated to be realized mainly during 2007. The acquisition cost exceeded the book value of the acquired business by EUR 384 million, of which EUR 154 million was allocated to intangible assets, i.e. to the acquired technology, customer relations and order backlog, in accordance with the IFRS principles. The intangible assets will be annually amortized during their economic useful life, thereby reducing the operating result, but with no cash flow effect. The amortization of intangible assets resulting from the transaction is estimated to be EUR 37 million in 2007, EUR 20 million in 2008, and EUR 13 million thereafter. The rest of the transaction price exceeding the book value will remain as goodwill not to be amortized. The acquired Pulping and Power businesses were consolidated into Metso's balance sheet at December 31, 2006, but they have no effect to Metso's 2006 income statement. The transaction is estimated to have a positive effect on Metso's operating profit before the integration costs and on Metso's cash flow from operating activities in 2007. In December, Metso also completed the divestment to Canadian Groupe Laperrière & Verreault Inc. (GL&V) of a so-called remedy package related to the acquisition of Aker Kvaerners Pulping and Power businesses. The remedy package comprised of the following Metso's and Aker Kvaerner's overlapping areas: Kvaerner Pulpings pulp washing, oxygen delignification and bleaching businesses as well as Metsos batch cooking business and its licensing back to Metso. The remedy package was transferred to GL&V on December 29, 2006. The clearance received from the European Commission on December 12, 2006 was conditional on the divestment of the remedy package. Even after the divestment, Metso has a comprehensive pulp industry product offering. Metso finalized in December the divestment of Metso Powdermet AB in Sweden to Sandvik AB. Metso recorded a tax-free sales gain of EUR 10 million from the divestment. Changes in the corporate structure Metso dismantled the Metso Ventures business area on January 1, 2007. Two of Metso Ventures three foundries were transferred under Metso Paper and one under Metso Minerals. Metso Panelboard became part of Metso Paper, Metso Powdermet Oy was transferred to Metso Minerals and Metso Powdermet AB was divested. Valmet Automotive will be reported as a separate financial holding unit of Metso Corporation from the beginning of 2007. Metso Automation changed its organization as of October 1, 2006. The business lines within Metso Automation are Flow Control and Process Automation Systems. Metso Minerals' operations were organized according to the three core customer segments as of January 1, 2007. The business lines are Construction, Mining and Recycling. Metso Paper's business lines after the acquisition of the Pulping and Power businesses are: Fiber, Paper and Board, Finishing, Tissue, Service, Power and Panelboard. Research and development Metsos research and development expenses totaled EUR 109 million (EUR 96 million), representing 2.2 percent of net sales. Metso has strengthened its competence in materials technology by establishing a new Metso Materials Technology business unit, part of Metso Minerals. The new unit provides product solutions and research and development services related to materials technology, and it develops materials technology solutions for components and wear parts meeting the needs of different industries, such as wood processing, power generation, minerals processing and chemicals production. Resources for the new unit were transferred from Metso Powdermet Oy. During the year, Metso Paper rebuilt its PM2 pilot paper machine at Jyväskylä, Finland. A new press section was installed in the pilot paper machine, the dryer section was rebuilt and several other improvements covering the whole process line were made. Metso Paper launched a number of paper making related products improving efficiency and end product quality. For example, the Val product family was supplemented with a new ValFlo headbox, ValFormer forming section and ValZone calender based on new technology. In the fiber business, research and development was focused on washing presses and more environmentally sound bleaching processes. In 2006, Metso Minerals launched a wireless sensor which can be used to monitor the movements of blocks of ore in the mine from blasting to pre-crushing and piling, and on to the grinding process. Also the new generation HP4 cone crusher was launched. Due to its heavy-duty structure and increased power the crusher can produce fine-grade aggregates in a process that would normally call for two separate third and fourth stage crushers. In 2006, Metso Automation's new products included a Neles SwitchGuard, an intelligent controller for pneumatic on/off valves. Other product launches included a microwave technology- based solid content transmitter, the kajaaniTS, designed for total solids measurements in municipal wastewater treatment plants and for their sludge treatment processes. Metso Automation also launched the new-generation metsoDNA CR solution and IQMoisture, which is a fast on-line measurement method developed to control the machine- and cross-direction moisture profiles of paper and board machines. Additionally, Metso Automation launched new products supplementing its PaperIQ quality control system and PaperIQ profilers product range. Environment The environmental impact of Metso's own production is minor and relates mainly to the consumption of raw materials and energy, emissions to air, water consumption and waste. Metso seeks to reduce environmental hazards through continuous development and by decreasing the use of power, raw materials and hazardous substances. Metso's R&D develops products and solutions that reduce environmental impacts in Metso's customer industries. Metso's product range includes several products for the recycling of raw materials both in rock, metal and mineral processing and in the pulp and paper industry. Risks and business uncertainties Metso's operations are affected by various strategic, operational, hazard and financial risks. Metso takes measures to manage and limit the potential adverse effects of these risks. However, if such risks materialized, they could have material adverse effects on Metso's business, financial condition and operating result or on the value of shares and other securities. Metsos risk assessments take into consideration the probability and effects of the risks on net sales and financial results. The risk level is estimated to be currently acceptable in proportion to the quality and scope of the Corporations operations. This section features a brief description of Metsos most significant strategic and operational risks. Business cycles in the global economy and customer industries affect the demand for Metso's products and the company's financial situation. The geographical diversity of operations and the range of customer industries served reduce the effect of business cycles over the long term. New equipment orders tend to be more affected by business cycles than the demand for rebuilds, process improvements and aftermarket operations, the latter of which Metso is actively aiming to increase. The long-term development of Metso's business can be affected by development risks related to new markets and business opportunities, and these can also be reflected in Metso's values and brand. Business development risks also include the risks related to acquisitions. Changes in customer industry demand affect Metso's operations. Such changes may be related, for instance, to strategy changes in customer companies, product development, product requirements, or environmental aspects. Metso also has a number of competitors, varying by business area and product. Metso protects its products and business-related intellectual property rights through patents and trademarks. Metso's technology risks are related to technological competence, research and product development. The use of new technology may temporarily increase quality-related costs. The risks associated with raw materials and the subcontractor and supplier network are significant for Metso's operations. The direct risks associated with raw materials procurement have decreased in recent years, because Metso's operations have increasingly focused on manufacturing and assembling core components. On the other hand, outsourcing has increased the importance of and risks related to suppliers and subcontractors. Supply problems of raw material suppliers may increase the costs of the raw materials used in Metsos products and lengthen delivery lead times. For example, steel and scrap iron are among the most important raw materials. Changes in the prices of electricity, oil and metals may indirectly and adversely affect Metso's operations, if the price fluctuations decrease the investment willingness of customer industries. Due to the geographically widespread operations of Metso and its customers, global political developments, political unrest, terrorism and armed conflicts constitute risks to Metso and its customers. Operations are also affected by cultural and religious factors and by legislation, particularly the environmental legislation of different countries. Metso monitors these international trends and laws that are under preparation and anticipates their effects. By assessing human resources and organizational structures, Metso aims to ensure organizational efficiency and competence and to avoid risks such as unsuitable recruiting, imbalance in the age structure and excessive personnel turnover. Metso's Corporate Treasury is responsible for managing liquidity, interest rate and currency risks and other financial risks and securing the availability of equity and debt capital on competitive terms. Subpoena from U.S. Department of Justice requiring Metso to produce documents In November, Metso Minerals Industries, Inc., which is Metso Minerals' U.S. subsidiary, received a subpoena from the Antitrust Division of the United States Department of Justice calling for Metso Minerals Industries, Inc. to produce certain documents. The subpoena relates to an investigation of potential antitrust violations in the rock crushing and screening equipment industry. Metso is co-operating fully with the Department of Justice. Personnel At the end of the year Metso employed 25,678 people which is 3,500 more than at the end of 2005. In 2006, Metso employed an average of 23,364 people. Due to the rapidly growing importance of the BRIC countries (Brazil, Russia, India and China), Metso's personnel in these countries increased by 44 percent on 2005. These countries accounted for 13 percent of Metso total personnel compared with 10 percent in 2005. The acquisitions of the Pulping and Power businesses, Svensk Pappersteknik AB and Shanghai-Chenming Paper Machinery, all of which were carried out in 2006, increased Metso Paper's personnel by about 2,600. Metso Minerals personnel increased by 649 due to the growth of business and the acquisition of Svensk Gruvteknik AB in October. Metso Automation's number of personnel increased by 183 persons mainly due to the efforts to bolster sales and customer service resources. The salaries and wages of Metso employees are determined on the basis of local collective and individual agreements, employee performance and job evaluations. Basic salaries and wages are complemented by performance-based compensation systems. In 2006, the total amount of salaries and wages paid was EUR 909 million. Personnel by business area 2006 2005 Dec 31 % of Dec 31 % of total total personnel personnel Metso Paper 10,867 42 8,201 37 Metso Minerals 9,170 36 8,521 39 Metso Automation 3,352 13 3,169 14 Metso Ventures 1,967 8 1,993 9 Corporate Office and shared services 322 1 294 1 Total 25,678 100 22,178 100 Personnel by area Dec 31, Dec 31, Change % 2006 2005 Finland 9,281 8,340 11 Other Nordic countries 3,580 2,491 44 Other Europe 3,067 2,959 4 North America 3,715 3,526 5 South and Central America 2,439 2,070 18 Asia-Pacific 2,262 1,498 51 Rest of the world 1,334 1,294 3 Total personnel in continuing 25,678 22,178 16 operations Changes in the Metso Executive Team Metsos Executive Team and its members areas of responsibility were changed at the beginning of August. Risto Hautamäki is responsible for Metso Paper until March 31, 2007. Bertel Langenskiöld is responsible for the Fiber Business Line and the integration of the Pulping and Power units, and the whole Metso Paper as of April 1, 2007. Matti Kähkönen is responsible for Metso Minerals and Pasi Laine for Metso Automation. Vesa Kainu continues as an Executive Team member until February 28, 2007 when he will retire. The Chairman of the Executive Team is Jorma Eloranta, President and CEO, and the Vice Chairman is Olli Vaartimo, Executive Vice President and CFO. Financial targets and dividend policy In October, Metso updated its financial targets and upgraded its dividend policy. The average annual net sales growth target is more than 10 percent. Growth will be attained both organically and through value-enhancing complementary acquisitions. Major acquisitions with a significant impact on Metso will come on top of this 10 percent growth target. The operating profit margin target (EBIT-%) is more than 10 percent. Furthermore, Metsos target is that its key financial indicators, capital structure and cash flow metrics will support solid investment grade credit ratings. Metso also upgraded its dividend policy to distribute at least 50 percent (earlier 40 percent) of annual earnings per share as dividends or in other forms of repatriation of capital. Decisions of the Annual General Meeting On April 4, 2006 the Annual General Meeting of Metso Corporation approved the accounts for 2005 and discharged the members of the Board of Directors and the President and CEO from liability for the 2005 financial year. The Annual General Meeting approved the proposals of the Board of Directors concerning authorizations to resolve to repurchase and dispose of the Corporation's own shares. The Annual General Meeting also authorized the Board to make decisions on increasing the share capital by issuing new shares, convertible bonds and/or stock options. The Annual General Meeting decided to establish a Nomination Committee of the Annual General Meeting to prepare proposals for the following Annual General Meeting in respect of the composition of the Board of Directors and the remuneration of directors. The Nomination Committee consists of representatives appointed by the four biggest shareholders along with the Chairman of the Board of Directors as an expert member. Matti Kavetvuo was re-elected as Chairman of the Board and Jaakko Rauramo was re-elected as Vice Chairman. Christer Gardell and Yrjö Neuvo were elected as new members of the Board. The Board members re-elected were Svante Adde, Maija-Liisa Friman and Satu Huber. The term of office of Board members lasts until the end of the next Annual General Meeting. The Annual General Meeting decided that the annual remuneration of Board members be EUR 80,000 for the Chairman, EUR 50,000 for the Vice Chairman and the Chairman of the Audit Committee and EUR 40,000 for the members, and that the meeting fee, including committee meetings, be EUR 500 per meeting. PricewaterhouseCoopers Oy, a firm of Authorized Public Accountants, was re-elected to act as the Auditor of the Corporation until the end of the next Annual General Meeting. The Annual General Meeting decided to pay a dividend of EUR 1.40 per share for the financial year which ended on December 31, 2005. The dividend was paid on April 20, 2006. Nomination Committee's proposal of Metso Board members The Nomination Committee established by Metso's Annual General Meeting on April 4, 2006, proposes to the next Annual General Meeting, scheduled to be held on April 3, 2007, that the number of board members will remain at seven. The Nomination Committee proposes that, of the current Board members, Svante Adde, Maija-Liisa Friman, Christer Gardell, Matti Kavetvuo, Yrjö Neuvo and Jaakko Rauramo will be re-elected. It is proposed that Matti Kavetvuo will continue as Chairman of the Board and Jaakko Rauramo as Vice Chairman. It is also proposed that Eva Liljeblom, Professor at the Swedish School of Economics and Business Administration, Helsinki, Finland, will be elected as a new member of the Metso Board. The Nomination Committee proposes that the annual fees paid to Board members will remain unchanged. The Nomination Committee notes that a personnel representative will participate as an external expert in the Metso Board meetings also in the next Board term within the limitations imposed by Finnish law. The new Board will invite the personnel representative as its external expert in April 2007. The members of the Nomination Committee were Markku Tapio (Chairman of the Nomination Committee), Director General, State Shareholdings unit (State of Finland), Harri Sailas, CEO (Ilmarinen Mutual Pension Insurance Company), Mikko Koivusalo, Director, Investments (Varma Mutual Pension Insurance Company) and Henry Wiklund, Managing Director (Svenska litteratursällskapet i Finland r.f.). Matti Kavetvuo, Chairman of Metso's Board of Directors, served as the Committee's expert member. The fourth biggest shareholder, Odin Norden, did not nominate its representative for the Nomination Committee. Thus the right to nominate was transferred to the next largest shareholder, Svenska litteratursällskapet i Finland r.f. Share capital and market capitalization A total of 65,000 shares were subscribed with 2003A stock options on December 7-11, 2006. As a result of the registration of share subscriptions made with the 2003A stock options, Metso's share capital increased to EUR 240,923,343.80 on December 21, 2006. At the end of 2006, the number of shares was 141,719,614, including 60,841 own shares held by the Parent Company, and 300,000 shares held by a separate partnership company included in Metso's consolidated financial statements. These 360,841 shares together represent 0.25 percent of the total shares and votes. The shares held by the Parent Company were purchased in 1999 at a total purchase price of EUR 654,813. The partnership acquired its shareholding in 2006 at a total purchase price of EUR 10,989,900. The number of outstanding shares at the end of the year was 141,358,773, and their average number in 2006 was 141,580,759. Metsos market capitalization increased from the end of 2005 by EUR 2,132 million and was EUR 5,406 million at the end of 2006, excluding the own shares. Share ownership plan Metso has a share ownership plan for the strategy period 2006- 2008. The 2006 share ownership plan was originally directed to 55 Metso managers, and it covered a maximum total of 94,985 shares. After the financial year was closed, the plan was extended to cover an additional six Metso managers. Based on the 2006 earnings period, by the end of March 2007 a maximum total of 100,601 shares will be distributed. The entire Metso Executive Team is included in the sphere of the incentive plan, and they can be rewarded with a maximum of 25,955 shares. The reward from the plan is based on the achieved operating profit of Metso Corporation and its business areas in 2006. If the value of Metsos share, determined as the average price of the share during the first two full weeks of March 2007, exceeds EUR 38, the number of grantable shares will be decreased by a corresponding ratio. Repurchase of own shares Metso Corporation's Annual General Meeting on April 4, 2006 authorized Metso Corporation's Board of Directors to resolve to repurchase the Corporation's own shares with its distributable funds provided that the combined nominal value of the shares thus acquired corresponds to no more than 5 percent of the Corporation's total share capital at the moment of acquisition. The authorization entitled the Board to repurchase the Corporation's own shares among other things for use in the above mentioned share ownership plan. According to the authorization, the shares were to be acquired through public securities trading on the Helsinki Stock Exchange, at the share price prevailing on the day of acquisition. Metso Corporation's Board of Directors decided to outsource the administration of the share ownership plan to a partnership (MEO1V Incentive Ky) included in Metso's consolidated financial statements, which purchased the 300,000 Metso shares required to implement the share ownership plan. These shares were purchased on the Helsinki Stock Exchange during the period December 8-13, 2006 at an average price of EUR 36.63 per share. Metso Paper EUR million Q4/06 Q4/05 Change 2006 2005 Change % % Net sales 678 510 33 1,947 1,702 14 Operating profit 29.9 27.7 8 110.2 90.9 21 % of net sales 4.4 5.4 5.7 5.3 Capital employed, 617 329 88 Dec 31 Gross capital 48 34 41 expenditure Research and 60 51 18 development expenses Orders received 644 753 (14) 2,139 1,993 7 Order backlog, 2,165 1,267 71 Dec 31 Personnel, 10,867 8,201 33 Dec 31 Metso Papers net sales grew by 14 percent on the comparison year and totaled EUR 1,947 million. Growth was achieved in all business lines. Aftermarket operations accounted for 31 percent of net sales (35% in 2005). The increase in project and equipment deliveries reduced the proportional share of aftermarket operations. Measured in euros, the volume of aftermarket operations increased by 2 percent. Metso Papers operating profit was EUR 110.2 million, or 5.7 percent of net sales. The improvement in operating profit derived mainly from the Tissue Business Line. The operating profit was weakened by expenses of EUR 10 million recognized in the last quarter, related to business reorganizations in Italy and the USA, and to the integration of the Pulping and Power businesses. The value of orders received by Metso Paper increased by 7 percent on the comparison period and totaled EUR 2,139 million. The orders of tissue machines grew relatively the most. In 2006, Metso Paper received a total of seven new paper and board machine orders, six tissue machine orders and ten fiber process orders. At the end of year the order backlog was EUR 2,165 million. The order backlog includes the EUR 727 million order backlog of the Pulping and Power businesses acquired in December. Metso Papers order backlog increased by 13 percent, excluding the effect of the acquired Pulping and Power businesses. The acquisitions made in 2006 increased Metso Papers personnel by about 2,600 people. Metso Minerals EUR million Q4/06 Q4/05 Change 2006 2005 Change % % Net sales 623 517 21 2,174 1,735 25 Operating profit 79.4 52.6 51 286.0 177.6 61 % of net sales 12.7 10.2 13.2 10.2 Capital employed, 949 895 6 Dec 31 Gross capital 66 55 20 expenditure Research and 13 11 18 development expenses Orders received 697 568 23 2,630 1,936 36 Order backlog, 1,254 852 47 Dec 31 Personnel, 9,170 8,521 8 Dec 31 Metso Minerals' net sales rose by 25 percent on the comparison year and totaled EUR 2,174 million. The deliveries of the Crushing and Screening Business Line and the Minerals Processing Business Line grew strongly. The growth was relatively strongest in the Recycling Business Line. Metso Minerals aftermarket operations accounted for 43 percent of net sales (46% in 2005). The growth of project and equipment deliveries reduced the relative proportion of aftermarket operations. Measured in euros, the volume of aftermarket operations increased by 17 percent. The operating profit of Metso Minerals increased to EUR 286.0 million, which was 13.2 percent of net sales. Profitability improved the most in the Crushing and Screening Business Line, the Minerals Processing Business Line and the Recycling Business Line, due to strong volume growth, improved price levels and a more efficient supply chain. The value of orders received by Metso Minerals increased by 36 percent and totaled EUR 2,630 million. Growth was the strongest in the Minerals Processing and the Crushing and Screening Business Lines, primarily due to the excellent demand from the mining industry. The largest orders in 2006 included a grate kiln system for LKAB in Sweden, a bulk materials handling system and process equipment for Brazil, and grinding mills and mining crushers for Boddington Gold Mine (BGM) in Australia. The order backlog increased by 47 percent on the end of 2005 and was EUR 1,254 million at the end of 2006. Metso Automation EUR million Q4/06 Q4/05 Change 2006 2005 Change % % Net sales 193 163 18 613 584 5 Operating profit 31.8 23.4 36 86.7 80.7 7 % of net sales 16.5 14.4 14.1 13.8 Capital employed, 149 125 19 Dec 31 Gross capital 9 11 (18) expenditure Research and 29 29 0 development expenses Orders received 162 150 8 717 580 24 Order backlog, 276 179 54 Dec 31 Personnel, 3,352 3,169 6 Dec 31 Metso Automations net sales increased by 5 percent on the comparison year and totaled EUR 613 million. The last quarters delivery volumes of valves and field device systems increased to a record high. For the entire year, the net sales growth mainly originated from North America. Aftermarket operations accounted for 23 percent of net sales (24% in 2005). Measured in euros, the volume of aftermarket operations remained at the previous year's level. Metso Automations operating profit was EUR 86.7 million, or 14.1 percent of net sales. The operating profit improvement on the previous year originated from North America. The high operating profit margin of the final quarter was due to the strong volume leverage. The value of Metso Automations orders increased by 24 percent on the comparison period and totaled EUR 717 million. In particular, the orders of valves and field device systems grew. The largest orders in 2006 included valve deliveries for a Saudi Arabian oil company, an automation system for the Lagisza power plant in Poland, an automated control and shut-off valve delivery for Botnia S.A.s pulp mill in Uruguay, and an automation package for Guangzhou Paper's paper making line in China. The order backlog rose by 54 percent on the end of 2005 and was EUR 276 million at the end of 2006. Metso Ventures EUR million Q4/06 Q4/05 Change 2006 2005 Change % % Net sales 92 88 5 332 284 17 Operating profit (5.6) 4.7 - 1.7 10.8 (84) (loss) % of net sales (6.1) 5.3 0.5 3.8 Capital employed, 55 78 (29) Dec 31 Gross capital 7 15 (53) expenditure Research and 6 5 20 development expenses Orders received 83 100 (17) 332 324 2 Number of cars 8,236 7,307 13 32,393 21,233 53 produced Order backlog, 96 104 (8) Dec 31 Personnel, 1,967 1,993 (1) Dec 31 Metso Ventures' net sales rose by 17 percent on the comparison year and totaled EUR 332 million. The increase in net sales originated mainly from Valmet Automotive, whose production output was one and a half times greater than in 2005. Metso Ventures operating profit decreased on the comparison year and was EUR 1.7 million, or 0.5 percent of net sales. Valmet Automotive's profitability improved clearly. Metso Panelboard generated a loss, as a result of which restructuring of its operations was started. EUR 9 million in nonrecurring expenses related to Metso Panelboard were recognized for the last quarter of 2006, of which EUR 2 million were related to redundancies and EUR 7 million to goodwill impairment. In December, Metso completed the divestment of Metso Powdermet AB to Sandvik of Sweden. Related to the transaction, Metso Ventures recognized a sales gain of EUR 10 million for the fourth quarter. The value of orders received by Metso Ventures was EUR 332 million and the order backlog totaled EUR 96 million at the end of 2006. Metso dismantled the Metso Ventures business area on January 1, 2007, and transferred Metso Ventures businesses to Metso Paper and Metso Minerals excluding Valmet Automotive, which will be reported as a separate financial holding unit under Metso Corporation. As a result of the weakened car market, the daily car output of Valmet Automotive will decrease in stages to 102 cars per day by early April 2007. In December, Valmet Automotive announced a reduction of 222 employees. After the reductions to be implemented in the spring 2007, the personnel of the car plant will number a little over 800. Short-term outlook The overall market situation for Metso is expected to remain favorable in 2007. The overall market outlook for Metso Paper is expected to be satisfactory in 2007. The demand for new fiber and tissue lines as well as related rebuilds and aftermarket services is expected to slightly soften from the good level in 2006, except for South America and Asia where the markets for new fiber lines are expected to remain good. The demand for new paper and board machines, as well as rebuilds and aftermarket services is expected to remain satisfactory also in 2007. The strong demand is expected to continue in Asia. The demand for power production solutions, especially related to biomass utilization, is expected to remain excellent. Metso Minerals markets for both new equipment and aftermarket services are expected to remain excellent in mining and metal recycling. In the mining industry, the trend is towards large equipment and projects. The demand for Metso Minerals new equipment for the construction industry is expected to soften from excellent to good in 2007. This is mainly due to the leveling-off of North American aggregates demand. On the other hand, the demand for aftermarket services within construction segment is expected to continue excellent thanks to the active spare and wear part markets for the installed base. The demand for Metso Automation's process automation systems for the pulp and paper industry is estimated to get slightly stronger. The demand for flow control systems is expected to continue good in the pulp and paper industry and excellent in the power, oil and gas industry. The markets for process automation systems in the power industry are expected to continue to be good. Thanks to the strong order backlog, continuing favorable market situation and the expanded business scope, Metsos net sales in 2007 are estimated to grow by more than 20 percent on 2006, and the operating profit is estimated to clearly improve. At present, it is estimated that the operating profit margin in 2007 will be slightly below Metso's over 10 percent target. This is primarily due to the high first-year amortization of intangible assets, integration costs and only partially materializing synergy benefits related to the acquisition of the Pulping and Power businesses. The estimates concerning Metso's net sales and operating profit do not include changes resulting from any future acquisitions or divestitures. Board of Directors' proposal for the distribution of profit The Parent Company's distributable funds totaled EUR 406,751,418.41 on December 31, 2006, of which the net profit from the year 2006 is EUR 141,164,124.02. The Board proposes to the Annual General Meeting that a dividend of EUR 1.50 per share be distributed for the year ended on December 31, 2006, and that the remaining distributable funds will be placed in the retained earnings. The dividend record date for the proposed dividend is April 10, 2007 and the dividend will be paid on April 17, 2007. All the shares existing on the dividend record date are entitled to dividend for the year 2006, except for the own shares held by the Parent Company. Annual General Meeting 2007 The Annual General Meeting of Metso Corporation will be held at 2 p.m. on Tuesday, April 3, 2007 at The Helsinki Fair Centre (Messukeskus) in Helsinki, Finland. Helsinki, February 7, 2007 Metso Corporations Board of Directors The financial statements review is unaudited CONSOLIDATED STATEMENTS OF INCOME 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Net sales 1,538 1,254 4,955 4,221 Cost of goods sold (1,179) (939) (3,659) (3,110) Gross profit 359 315 1,296 1,111 Selling, general and (235) (218) (846) (794) administrative expenses Other operating income 0 2 6 12 and expenses, net Share in profits of 1 0 1 1 associated companies Reversal of Finnish - 3 - 5 pension liability Operating profit 125 102 457 335 % of net sales 8,1% 8,1% 9,2% 7,9% Financial income and (8) (10) (36) (43) expenses, net Profit on continuing 117 92 421 292 operations before tax Income taxes on continuing 5 (24) (11) (72) operations Profit on continuing 122 68 410 220 operations Profit (loss) on - - - 17 discontinued operations Profit (loss) 122 68 410 237 Profit (loss) attributable 0 0 1 1 to minority interests Profit (loss) attributable 122 68 409 236 to equity shareholders Profit (loss) 122 68 410 237 Earnings per share from continuing operations, EUR Basic 0.86 0.47 2.89 1.57 Diluted 0.86 0.47 2.89 1.57 Earnings per share from discontinued operations, EUR Basic - - - 0.12 Diluted - - - 0.12 Earnings per share from continuing and discontinued operations, EUR Basic 0.86 0.47 2.89 1.69 Diluted 0.86 0.47 2.89 1.69 CONSOLIDATED BALANCE SHEETS ASSETS Dec 31, Dec 31, 2006 2005 (Millions) EUR EUR Non-current assets Intangible assets Goodwill 768 498 Other intangible assets 274 99 1,042 597 Property, plant and equipment Land and water areas 57 58 Buildings and structures 221 220 Machinery and equipment 318 286 Assets under construction 19 17 615 581 Financial and other assets Investments in associated companies 19 20 Available-for-sale equity investments 15 12 Loan and other interest bearing 6 5 receivables Available-for-sale financial assets 5 34 Deferred tax asset 228 163 Other non-current assets 33 39 306 273 Total non-current assets 1,963 1,451 Current assets Inventories 1,112 888 Receivables Trade and other receivables 1,218 918 Cost and earnings of projects under 284 173 construction in excess of advance billings Loan and other interest bearing 2 2 receivables Available-for-sale financial assets 10 135 Tax receivables 16 14 1,530 1,242 Cash and cash equivalents 353 323 Total current assets 2,995 2,453 Assets held for sale - - TOTAL ASSETS 4,958 3,904 SHAREHOLDERS' EQUITY AND LIABILITIES Dec 31, Dec 31, 2006 2005 (Millions) EUR EUR Equity Share capital 241 241 Share premium reserve 77 76 Cumulative translation differences (45) (9) Fair value and other reserves 432 424 Retained earnings 763 553 Equity attributable to shareholders 1,468 1,285 Minority interests 6 7 Total equity 1,474 1,292 Liabilities Non-current liabilities Long-term debt 605 593 Post employment benefit obligations 157 157 Deferred tax liability 57 20 Provisions 53 33 Other long-term liabilities 2 7 Total non-current liabilities 874 810 Current liabilities Current portion of long-term debt 93 160 Short-term debt 132 35 Trade and other payables 1,238 925 Provisions 213 191 Advances received 655 312 Billings in excess of cost and 222 146 earnings of projects under construction Tax liabilities 57 33 Total current liabilities 2,610 1,802 Liabilities held for sale - - Total liabilities 3,484 2,612 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 4,958 3,904 NET INTEREST BEARING LIABILITIES Long-term interest bearing debt 605 593 Short-term interest bearing debt 225 195 Cash and cash equivalents (353) (323) Other interest bearing assets (23) (176) Total 454 289 CONDENSED CONSOLIDATED CASH FLOW STATEMENT 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Cash flows from operating activities: Profit (loss) 122 68 410 237 Adjustments to reconcile profit (loss) to net cash provided by operating activities Depreciation 27 26 105 102 Provisions / Efficiency (3) (2) (7) (12) improvement programs Interests and dividend 4 6 26 39 income Income taxes (5) 24 11 72 Other 1 3 7 (14) Change in net working capital (34) (52) (18) (170) Cash flows from operations 112 73 534 254 Interest paid and (21) (15) (24) (40) dividends received Income taxes paid (17) (15) (68) (50) Net cash provided by (used 74 43 442 164 in) operating activities Cash flows from investing activities: Capital expenditures on (41) (32) (129) (104) fixed assets Proceeds from sale of 3 7 14 46 fixed assets Business acquisitions, (268) (1) (277) (14) net of cash acquired Proceeds from sale of 13 - 13 95 businesses, net of cash sold (Investments in) proceeds 41 (46) 154 (111) from sale of financial assets Other (1) (1) (2) (2) Net cash provided by (used (253) (73) (227) (90) in) investing activities Cash flows from financing activities: Share options exercised 1 - 1 72 Redemption of own shares (11) - (11) - Dividends paid - - (198) (48) Net funding 49 12 35 (158) Other - - (6) (2) Net cash provided by (used 39 12 (179) (136) in) financing activities Net increase (decrease) in (140) (18) 36 (62) cash and cash equivalents Effect from changes in - 1 (6) 13 exchange rates Cash and cash equivalents at 493 340 323 372 beginning of period Cash and cash equivalents at 353 323 353 323 end of period Free cash flow 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Net cash provided by 74 43 442 164 operating activities Capital expenditures on fixed (41) (32) (129) (104) assets Proceeds from sale of fixed 3 7 14 46 assets Free cash flow 36 18 327 106 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Share Share Cumu- Fair Re- Equi- Mino- To- ca- pre- lati- value tain- ty rity tal pi- mium ve and ed attri- inte- equi- tal re- trans- other ear- bu- rest ty serve la- re- nings table tion ser- to ad- ves share- just- hol- ments ders (Millions) EUR EUR EUR EUR EUR EUR EUR EUR Balance at 232 14 (48) 435 364 997 5 1,002 Jan 1, 2005 Dividends - - - - (48) (48) - (48) Share options 9 62 - - - 71 - 71 exercised Translation - - 60 - - 60 - 60 differences Net investment - - (21) - - (21) - (21) hedge gains (losses) Cash flow - - - (11) - (11) - (11) hedges, net of tax Available-for- - - - 0 - 0 - 0 sale equity investments, net of tax Other - - - 0 1 1 1 2 Net profit for - - - - 236 236 1 237 the period Balance at 241 76 (9) 424 553 1,285 7 1,292 Dec 31, 2005 Dividends - - - - (198) (198) - (198) Share options 0 1 - - - 1 - 1 exercised Translation - - (59) - - (59) - (59) differences Net investment - - 22 - - 22 - 22 hedge gains (losses) Cash flow - - - 16 - 16 - 16 hedges, net of tax Available-for- - - - 1 - 1 - 1 sale equity investments, net of tax Redemption of - - - (11) - (11) - (11) own shares Other - - 1 2 (1) 2 (2) 0 Net profit for - - - - 409 409 1 410 the period Balance at 241 77 (45) 432 763 1,468 6 1,474 Dec 31, 2006 Acquisition of Pulping and Power businesses of Aker Kvaerner On December 29, 2006 Metso completed the acquisition of the Pulping and Power businesses of Aker Kvaerner, after clearance was received from the European Commission. The acquired businesses were consolidated into Metso Paper's balance sheet from the date of the acquisition. Part of the excess purchase price, EUR 154 million, was allocated to intangible assets, representing the calculated fair values of acquired customer base, new technology and order backlog. The remaining goodwill arising from the acquisition, EUR 271 million, is based on significant synergy benefits and widened business portfolio offering Metso potential to expand its operations into new markets and customer segments. Had the acquisition occurred on January 1, 2006, Metso's net sales would have increased by EUR 600 million. The calculation of pro forma net income of the acquired businesses would be impracticable considering the effects of the acquisition cost. Preliminary details of the acquired net assets and goodwill are as follows: Carrying Fair value Fair value amount allocations (Millions) EUR EUR EUR Intangible assets 6 154 160 Property, plant and equipment 25 - 25 Inventories 52 - 52 Trade and other receivables 186 - 186 Other assets 26 - 26 Minority interests (1) - (1) Advances received (216) - (216) Deferred tax liabilities (4) (41) (45) Other liabilities assumed (169) - (169) Non-interest bearing net assets (95) 113 18 Cash and cash equivalents 247 - 247 Debt assumed (195) - (195) Purchase price (335) - (335) Costs related to acquisition (6) - (6) Goodwill 384 (113) 271 Purchase price settled in cash (307) Settlement of acquired debt (195) Costs related to acquisition (6) Cash and cash equivalents 247 acquired Cash outflow on acquisition for (261) 2006 Estimated purchase price payable (28) Total cash outflow on acquisition (289) Other acquisitions At the end of August, 2006 Metso completed the acquisition of a Chinese paper machine manufacturer Shanghai-Chenming Paper Machinery Co. Ltd. at a cash price of EUR 12 million and debt assumed EUR 19 million. The company is consolidated into Metso Paper from September 1, 2006. Metso acquired in September 2006 the business operations of two Swedish companies Svensk Gruvteknik AB and Svensk Pappersteknik AB at a total price of EUR 4 million. The acquired businesses were transferred into Metso on October 1, 2006 and they are included in the figures of Metso Minerals and Metso Paper from that date. In December Metso acquired the remaining 35% minority interest of Metso-SHI Co., Ltd. in Japan from Sumitomo Heavy Industries. The price of the transaction was EUR 2 million. For the year ended December 31, 2006, the net sales of acquired businesses described above, which have been included in Metso's consolidated financial statements, amounted to EUR 6 million and their net loss was EUR 2 million. Had the acquisitions occurred on January 1, 2006, Metso's net sales would have increased by EUR 15 million and net income would have decreased by EUR 8 million. In August 2005, Metso acquired Texas Shredder, Inc., a U.S. supplier of metal shredder products located in San Antonio, Texas. The total acquisition price was EUR 14 million. Texas Shredder is included in Metso Minerals' figures from the beginning of September, 2005. In 2005, Metso also made some minor acquisitions in Spain to strengthen its aftermarket and maintenance services within pulp and paper industry. The acquired businesses are included in Metso Paper's figures from the date of their acquisition. For the year ended December 31, 2005, the net sales of the businesses acquired in 2005, which have been included in Metso's consolidated financial statements, amounted to EUR 23 million and their net income was EUR 1 million. Had the acquisitions occurred on January 1, 2005, Metso's net sales for 2005 would have increased by EUR 38 million and there would have been no effect on Metso's net income for 2005. Information on other acquisitions for the years ended December 31, 2005 and 2006 is as follows: 2006 2005 (Millions) EUR EUR Intangible assets 4 8 Property, plant and equipment 24 2 Inventories 5 6 Trade and other receivables 0 8 Other assets 1 3 Minority interests 2 (1) Advances received (6) 0 Deferred tax liabilities 0 (3) Other liabilities assumed (8) (12) Non-interest bearing net assets 22 11 Cash and cash equivalents acquired 2 2 Debt assumed (19) 0 Purchase price (18) (16) Costs related to acquisitions 0 0 Goodwill 13 3 Purchase price settled in cash (18) (16) Costs related to acquisitions 0 0 Cash and cash equivalents acquired 2 2 Cash outflow on acquisitions (16) (14) ASSETS PLEDGED AND CONTINGENT LIABILITIES Dec 31, 2006 Dec 31, 2005 (Millions) EUR EUR Mortgages on corporate debt 14 3 Other pledges and contingencies Mortgages 2 2 Pledged assets 0 0 Guarantees on behalf of - - associated company obligations Other guarantees 6 5 Repurchase and other 10 12 commitments Lease commitments 166 125 NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS Dec 31, 2006 Dec 31, 2005 (Millions) EUR EUR Forward exchange rate 1,357 1,159 contracts Interest rate and currency 1 2 swaps Currency swaps 1 1 Interest rate swaps 143 183 Interest rate futures - 20 contracts Option agreements Bought 7 29 Sold 6 55 The notional amount of electricity forwards was 475 GWh as of December 31, 2006 and 354 GWh as of December 31, 2005. The notional amounts indicate the volumes in the use of derivatives, but do not indicate the exposure to risk. KEY RATIOS 1-12/2006 1-12/2005 Earnings per share from continuing 2.89 1.57 operations, EUR Earnings per share from discontinued - 0.12 operations, EUR Earnings per share from continuing and 2.89 1.69 discontinued operations, EUR Equity/share at end of period, EUR 10.38 9.08 Return on equity (ROE), % (annualized) 30.3 20.9 Return on capital employed (ROCE), 22.2 18.8 % (annualized) Equity to assets ratio at end of period, 36.1 37.5 % Gearing at end of period, % 30.8 22.4 Free cash flow 327 106 Free cash flow/share 2.31 0.76 Gross capital expenditure of continuing 131 107 operations (excl. business acquisitions) Business acquisitions, net of cash 277 14 acquired Depreciation and amortization of 105 102 continuing operations Number of outstanding shares at end of 141,359 141,594 period (thousands) Average number of shares (thousands) 141,581 139,639 Average number of diluted shares 141,600 139,665 (thousands) EXCHANGE RATES USED 1-12/ 1-12/ Dec 31, Dec 31, 2006 2005 2006 2005 USD (US dollar) 1.2630 1.2448 1.3170 1.1797 SEK (Swedish krona) 9.2533 9.2801 9.0404 9.3885 GBP (Pound sterling) 0.6819 0.6839 0.6715 0.6853 CAD (Canadian dollar) 1.4267 1.5097 1.5281 1.3725 BRL (Brazilian real) 2.7375 3.0459 2.8105 2.7446 BUSINESS AREA INFORMATION NET SALES 10-12/ 10-12/ 1-12/ 1-12/ Change, 2006 2005 2006 2005 % (Millions) EUR EUR EUR EUR Metso Paper 678 510 1,947 1,702 14.4 Metso Minerals 623 517 2,174 1,735 25.3 Metso Automation 193 163 613 584 5.0 Metso Ventures 92 88 332 284 16.9 Intra Metso net (48) (24) (111) (84) sales Metso total 1,538 1,254 4,955 4,221 17.4 OTHER OPERATING INCOME (+) AND EXPENSES (-), NET 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Metso Paper (0.5) (2.1) (1.2) (4.6) Metso Minerals 0.6 2.4 5.9 6.7 Metso Automation 0.4 (0.5) 0.3 (0.9) Metso Ventures 0.2 (0.2) 0.4 3.4 Corporate office and (1.1) 2.4 0.4 7.4 other Metso total (0.4) 2.0 5.8 12.0 SHARE IN PROFITS OF ASSOCIATED COMPANIES 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Metso Paper 0.7 0.3 1.6 2.3 Metso Minerals 0.0 0.2 0.1 0.2 Metso Automation 0.2 0.1 0.8 0.5 Metso Ventures (0.4) (0.2) (1.6) (1.7) Corporate office and - - - - other Metso total 0.5 0.4 0.9 1.3 REVERSAL OF FINNISH PENSION LIABILITY TEL 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Metso Paper - 2.0 - 3.2 Metso Minerals - 0.2 - 0.4 Metso Automation - 0.4 - 0.8 Metso Ventures - 0.4 - 0.6 Corporate office and - 0.1 - 0.1 other Metso total - 3.1 - 5.1 OPERATING PROFIT (LOSS) 10-12/ 10-12/ 1-12/ 1-12/ Change, 2006 2005 2006 2005 % (Millions) EUR EUR EUR EUR Metso Paper 29.9 27.7 110.2 90.9 21.2 Metso Minerals 79.4 52.6 286.0 177.6 61.0 Metso Automation 31.8 23.4 86.7 80.7 7.4 Metso Ventures (5.6) 4.7 1.7 10.8 (84.3) Corporate office (10.5) (6.9) (27.4) (25.0) 9.6 and other Metso total 125.0 101.5 457.2 335.0 36.5 OPERATING PROFIT (LOSS), % OF NET SALES 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 % % % % Metso Paper 4.4 5.4 5.7 5.3 Metso Minerals 12.7 10.2 13.2 10.2 Metso Automation 16.5 14.4 14.1 13.8 Metso Ventures (6.1) 5.3 0.5 3.8 Metso total 8.1 8.1 9.2 7.9 ORDERS RECEIVED 10-12/ 10-12/ 1-12/ 1-12/ Change, 2006 2005 2006 2005 % (Millions) EUR EUR EUR EUR Metso Paper 644 753 2,139 1,993 7.3 Metso Minerals 697 568 2,630 1,936 35.8 Metso Automation 162 150 717 580 23.6 Metso Ventures 83 100 332 324 2.5 Intra Metso orders (29) (34) (113) (88) received Metso total 1,557 1,537 5,705 4,745 20.2 QUARTERLY INFORMATION NET SALES 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 510 390 433 446 678 Metso Minerals 517 498 534 519 623 Metso Automation 163 134 140 146 193 Metso Ventures 88 78 84 78 92 Intra Metso net (24) (22) (21) (20) (48) sales Metso total 1,254 1,078 1,170 1,169 1,538 OTHER OPERATING INCOME (+) AND EXPENSES (-), NET 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper (2.1) 0.4 1.7 (2.8) (0.5) Metso Minerals 2.4 2.2 3.1 0.0 0.6 Metso Automation (0.5) 0.2 0.1 (0.4) 0.4 Metso Ventures (0.2) 0.6 0.1 (0.5) 0.2 Corporate office 2.4 (1.8) 2.9 0.4 (1.1) and other Metso total 2.0 1.6 7.9 (3.3) (0.4) OPERATING PROFIT (LOSS) 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 27.7 20.9 27.2 32.2 29.9 Metso Minerals 52.6 59.9 70.8 75.9 79.4 Metso Automation 23.4 15.3 19.6 20.0 31.8 Metso Ventures 4.7 5.7 2.5 (0.9) (5.6) Corporate office (6.9) (6.4) (3.7) (6.8) (10.5) and other Metso total 101.5 95.4 116.4 120.4 125.0 CAPITAL EMPLOYED Dec 31, Mar 31, June 30, Sep 30, Dec 31, 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 329 239 273 255 617 Metso Minerals 895 921 924 940 949 Metso Automation 125 123 132 130 149 Metso Ventures 78 75 71 85 55 Corporate office 653 780 655 743 534 and other Metso total 2,080 2,138 2,055 2,153 2,304 ORDERS RECEIVED 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 753 496 527 472 644 Metso Minerals 568 681 620 632 697 Metso Automation 150 191 181 183 162 Metso Ventures 100 103 84 62 83 Intra Metso orders (34) (34) (22) (28) (29) received Metso total 1,537 1,437 1,390 1,321 1,557 ORDER BACKLOG Dec 31, Mar 31, June 30, Sep 30, Dec 31, 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 1,267 1,372 1,453 1,482 2,165 Metso Minerals 852 1,021 1,078 1,189 1,254 Metso Automation 179 234 272 309 276 Metso Ventures 104 129 128 115 96 Intra Metso order (52) (64) (67) (73) (54) backlog Metso total 2,350 2,692 2,864 3,022 3,737 PERSONNEL Dec 31, Mar 31, June 30, Sep 30, Dec 31, 2005 2006 2006 2006 2006 Metso Paper 8,201 8,233 8,640 8,766 10,867 Metso Minerals 8,521 8,650 8,847 8,892 9,170 Metso Automation 3,169 3,170 3,341 3,315 3,352 Metso Ventures 1,993 2,031 2,054 2,040 1,967 Corporate office 294 319 339 329 322 and Shared services Metso total 22,178 22,403 23,221 23,342 25,678 Key figures, Metso Ventures Metso Panelboard 1-12/2006 1-12/2005 (Millions) EUR EUR Net sales 115 112 Operating loss (23.3) (2.7) Capital employed at end of period (6) 16 Order backlog at end of period 42 50 Personnel at end of period 282 281 Metso Foundries 1-12/2006 1-12/2005 (Millions) EUR EUR Net sales 95 82 Operating profit 4.9 5.3 Capital employed at end of period 35 30 Order backlog at end of period 51 45 Personnel at end of period 657 618 Valmet Automotive 1-12/2006 1-12/2005 (Millions) EUR EUR Net sales 109 78 Operating profit 11.7 5.9 Capital employed at end of period 23 30 Amount of vehicles produced 32,393 21,233 Personnel at end of period 1,013 1,068 BUSINESS AREA INFORMATION BY NEW ORGANIZATION STRUCTURE (1.1.2007) In September 2006, Metso announced that it would dismantle the Metso Ventures business area as of January 1, 2007. Two of Metso Ventures three foundries were transferred under Metso Paper and one under Metso Minerals. Metso Panelboard became part of Metso Paper. Metso Powdermet Oy became part of Metso Minerals and Metso Powdermet AB that was disposed of as of Dec 29, 2006, is reported as part of Corporate Office and other. Valmet Automotive is reported as part of the Corporate office and others group. Segment information in accordance with the new organization structure is presented in the tables below. NET SALES 10-12/ 10-12/ 1-12/ 1-12/ Change, 2006 2005 2006 2005 % (Millions) EUR EUR EUR EUR Metso Paper 717 554 2,092 1,842 13.6 Metso Minerals 630 523 2,199 1,756 25.2 Metso Automation 193 163 613 584 5.0 Valmet Automotive 28 25 109 77 41.6 Corporate office 3 3 10 9 11.1 and other Corporate office 31 28 119 86 38.4 and others total Intra Metso net (33) (14) (68) (47) sales Metso total 1,538 1,254 4,955 4,221 17.4 OTHER OPERATING INCOME (+) AND EXPENSES (-), NET 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Metso Paper (10.4) (2.3) (11.0) (4.9) Metso Minerals 10.7 2.4 16.1 6.8 Metso Automation 0.4 (0.5) 0.3 (0.9) Valmet Automotive 0.0 0.0 0.0 0.0 Corporate office (1.1) 2.4 0.4 11.0 and other Corporate office and (1.1) 2.4 0.4 11.0 others total Metso total (0.4) 2.0 5.8 12.0 SHARE IN PROFITS OF ASSOCIATED COMPANIES 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Metso Paper 0.7 0.3 1.7 2.3 Metso Minerals 0.0 0.2 0.1 0.2 Metso Automation 0.2 0.1 0.8 0.5 Valmet Automotive - - - - Corporate office (0.4) (0.2) (1.7) (1.7) and other Corporate office and (0.4) (0.2) (1.7) (1.7) others total Metso total 0.5 0.4 0.9 1.3 REVERSAL OF FINNISH PENSION LIABILITY (TEL) 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 (Millions) EUR EUR EUR EUR Metso Paper - 2.2 - 3.4 Metso Minerals - 0.2 - 0.4 Metso Automation - 0.4 - 0.8 Valmet Automotive - 0.2 - 0.4 Corporate office - 0.1 - 0.1 and other Corporate office and - 0.3 - 0.5 others total Metso total - 3.1 - 5.1 OPERATING PROFIT (LOSS) 10-12/ 10-12/ 1-12/ 1-12/ Change, 2006 2005 2006 2005 % (Millions) EUR EUR EUR EUR Metso Paper 13.2 26.9 89.8 91.5 (1.9) Metso Minerals 90.0 52.9 297.7 179.4 65.9 Metso Automation 31.8 23.4 86.7 80.7 7.4 Valmet Automotive 1.0 5.8 11.7 6.0 95.0 Corporate office (11.0) (7.5) (28.7) (22.6) 27.0 and other Corporate office (10.0) (1.7) (17.0) (16.6) 2.4 and others total Metso total 125.0 101.5 457.2 335.0 36.5 OPERATING PROFIT (LOSS), % OF NET SALES 10-12/ 10-12/ 1-12/ 1-12/ 2006 2005 2006 2005 % % % % Metso Paper 1.8 4.9 4.3 5.0 Metso Minerals 14.3 10.1 13.5 10.2 Metso Automation 16.5 14.4 14.1 13.8 Valmet Automotive 3.6 23.2 10.7 7.8 Corporate office N/A N/A N/A N/A and other Corporate office and N/A N/A N/A N/A others total Metso total 8.1 8.1 9.2 7.9 ORDERS RECEIVED 10-12/ 10-12/ 1-12/ 1-12/ Change, 2006 2005 2006 2005 % (Millions) EUR EUR EUR EUR Metso Paper 677 807 2,276 2,164 5.2 Metso Minerals 705 573 2,655 1,963 35.3 Metso Automation 162 150 717 580 23.6 Valmet Automotive 28 26 109 78 39.7 Corporate office 4 4 15 12 25.0 and other Corporate office 32 30 124 90 37.8 and others total Intra Metso orders (19) (23) (67) (52) received Metso total 1,557 1,537 5,705 4,745 20.2 QUARTERLY INFORMATION BY NEW ORGANIZATION STRUCTURE (1.1.2007) NET SALES 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 554 417 469 489 717 Metso Minerals 523 503 541 525 630 Metso Automation 163 134 140 146 193 Valmet Automotive 25 31 28 22 28 Corporate office 3 3 2 2 3 and other Corporate office 28 34 30 24 31 and others total Intra Metso net (14) (10) (10) (15) (33) sales Metso total 1,254 1,078 1,170 1,169 1,538 OTHER OPERATING INCOME (+) AND EXPENSES (-), NET 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper (2.3) 0.9 1.7 (3.2) (10.4) Metso Minerals 2.4 2.3 3.2 (0.1) 10.7 Metso Automation (0.5) 0.2 0.1 (0.4) 0.4 Valmet Automotive 0.0 0.0 0.0 0.0 0.0 Corporate office 2.4 (1.8) 2.9 0.4 (1.1) and other Corporate office 2.4 (1.8) 2.9 0.4 (1.1) and others total Metso total 2.0 1.6 7.9 (3.3) (0.4) OPERATING PROFIT (LOSS) 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 26.9 21.5 25.1 30.0 13.2 Metso Minerals 52.9 60.2 71.6 75.9 90.0 Metso Automation 23.4 15.3 19.6 20.0 31.8 Valmet Automotive 5.8 5.0 4.0 1.7 1.0 Corporate office (7.5) (6.6) (3.9) (7.2) (11.0) and other Corporate office (1.7) (1.6) 0.1 (5.5) (10.0) and others total Metso total 101.5 95.4 116.4 120.4 125.0 CAPITAL EMPLOYED Dec 31, Mar 31, June 30, Sep 30, Dec 31, 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 363 266 300 292 631 Metso Minerals 907 934 939 955 967 Metso Automation 125 123 132 130 149 Valmet Automotive 30 32 28 31 23 Corporate office 655 783 656 745 534 and other Corporate office 685 815 684 776 557 and others total Metso total 2,080 2,138 2,055 2,153 2,304 ORDERS RECEIVED 10-12/ 1-3/ 4-6/ 7-9/ 10-12/ 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 807 544 564 491 677 Metso Minerals 573 686 628 636 705 Metso Automation 150 191 181 183 162 Valmet Automotive 26 31 28 22 28 Corporate office 4 2 3 6 4 and other Corporate office 30 33 31 28 32 and others total Intra Metso orders (23) (17) (14) (17) (19) received Metso total 1,537 1,437 1,390 1,321 1,557 ORDER BACKLOG Dec 31, Mar 31, June 30, Sep 30, Dec 31, 2005 2006 2006 2006 2006 (Millions) EUR EUR EUR EUR EUR Metso Paper 1,335 1,459 1,540 1,547 2,225 Metso Minerals 874 1,043 1,101 1,213 1,277 Metso Automation 179 234 272 309 276 Valmet Automotive - - - - - Corporate office 4 3 3 7 0 and other Corporate office 4 3 3 7 0 and others total Intra Metso order (42) (47) (52) (54) (41) backlog Metso total 2,350 2,692 2,864 3,022 3,737 PERSONNEL Dec 31, Mar 31, June 30, Sep 30, Dec 31, 2005 2006 2006 2006 2006 Metso Paper 8,852 8,902 9,328 9,445 11,558 Metso Minerals 8,785 8,914 9,124 9,158 9,433 Metso Automation 3,169 3,170 3,341 3,315 3,352 Valmet Automotive 1,068 1,088 1,077 1,082 1,013 Corporate office 304 329 351 342 322 and other Corporate office 1,372 1,417 1,428 1,424 1,335 and others total Metso total 22,178 22,403 23,221 23,342 25,678 Notes to the Financial Statements Release This Financial Statements Release has been prepared in accordance with IAS 34 Interim Financial Reporting. In August 2005, IASB issued IFRS 7 Financial Instruments: Disclosures which requires the company to disclose information enabling users of its financial statements to evaluate the significance of financial instruments on its financial position and performance. Metso does not expect the new disclosure requirements to have a material impact on its financial statements. Metso will begin to apply IFRS 7 and the related amendments to IAS 1 Presentation of Financial Statements from January 1, 2007. In November 2006, IASB issued IFRS 8 Operating Segments. Metso does not expect the new disclosure requirements to have an impact to its financial statements. Metso will apply the standard for the financial year beginning on January 1, 2007 provided that it will receive the endorsement from EU. Tax losses carried forward and related deferred tax assets as at December 31 stated by the most significant countries are as follows: Tax losses Deferred tax Not Deferred tax carried asset recorded asset in forward balance sheet (Millions) EUR EUR EUR EUR 2005 Finland 257 67 0 67 USA 154 59 59 0 Germany 63 23 0 23 Other 81 23 18 5 Total 555 172 77 95 Tax losses Deferred tax Not Deferred tax carried asset recorded asset in forward balance sheet (Millions) EUR EUR EUR EUR 2006 Finland 164 43 0 43 USA 77 32 0 32 Germany 51 19 0 19 Other 92 27 10 17 Total 384 121 10 111 Shares traded on the Helsinki and New York Stock Exchanges The Helsinki Stock Exchange traded 267 million Metso Corporation shares in 2006, equivalent to a turnover of EUR 8,123 million. The share price on December 31, 2006 was EUR 38.24. The highest quotation was EUR 38.65 and the lowest EUR 23.21. The New York Stock Exchange traded 5 million Metso ADRs (American Depository Receipts), equivalent to a turnover of USD 175 million. The price of an ADR on December 31, 2006 was USD 50.50. The highest quotation was USD 50.82 and the lowest USD 27.84. DISCLOSURES OF CHANGES IN HOLDINGS The following is a brief account of shareholders disclosures, received by Metso, of changes in holdings in the company during 2006. J.P. Morgan Chase & Co. announced that the funds they managed held 7,197,701 Metso shares/ADRs on January 9, 2006, corresponding to 5.08 percent of the paid up share capital of Metso Corporation. Deutsche Bank AG announced that, together with its subsidiary companies, it was in possession of 4.96 percent of the share capital and 4.48 percent of the voting rights of Metso Corporation on January 9, 2006. Deutsche Bank AG announced that, together with its subsidiary companies, it was in possession of 5.02 percent of the share capital and 4.48 percent of the voting rights of Metso Corporation on January 10, 2006. Deutsche Bank AG announced that, together with its subsidiary companies, it was in possession of 4.96 percent of the share capital and 4.42 percent of the voting rights of Metso Corporation on January 11, 2006. J.P. Morgan Chase & Co. announced that the funds they managed held 7,055,242 Metso shares/ADRs on January 19, 2006, corresponding to 4.98 percent of the paid up share capital of Metso Corporation. Deutsche Bank AG announced that, together with its subsidiary companies, it was in possession of 5.15 percent of the share capital and 4.40 percent of the voting rights of Metso Corporation on February 7, 2006. Deutsche Bank AG announced that, together with its subsidiary companies, it was in possession of 4.79 percent of the share capital and 4.06 percent of the voting rights of Metso Corporation on February 21, 2006. Fidelity International Limited announced that, together with its subsidiary companies, it owned 4.98 percent of the share capital and voting rights of Metso Corporation on March 16, 2006. Fidelity International Limited announced that, together with its subsidiary companies, it owned 5.11 percent of the share capital and voting rights of Metso Corporation on March 20, 2006. Fidelity International Limited announced that, together with its subsidiary companies, it owned 3.98 percent of the share capital and voting rights of Metso Corporation on March 29, 2006. Fidelity International Limited announced that, together with its subsidiary companies, it owned 5.12 percent of the share capital and voting rights of Metso Corporation on April 21, 2006. Fidelity International Limited announced that, together with its subsidiary companies, it owned 4.84 percent of the share capital and voting rights of Metso Corporation on May 26, 2006. J.P. Morgan Chase & Co. announced that the funds they managed owned 5.03 percent of the share capital of Metso Corporation on July 31, 2006. Marathon Asset Management LLP announced that they had 7,032,235 Metso shares on August 25, 2006, which corresponds to 4.96 percent of the share capital of Metso Corporation. Out of this holding, Marathon Asset Management LLP was in possession of 4,885,862 shares to which they had voting rights. This voting authority represents 3.45 percent of the total voting rights in Metso. Fidelity Management Research Corporation announced that it together with its subsidiaries owned 4.95 percent of the share capital and voting rights of Metso Corporation on October 2, 2006. J.P. Morgan Chase & Co. announced that the funds they managed held 7,070,989 Metso shares on October 30, 2006 corresponding to 4.99 percent of the paid up share capital of Metso Corporation. J.P. Morgan Chase & Co. announced that the funds they managed held 7,348,896 Metso shares on November 29, 2006 corresponding to 5.19 percent of the paid up share capital of Metso Corporation. Metso's Interim Reviews in 2007 Metso's Interim Review for JanuaryMarch will be published on April 27, 2007, Interim Review for JanuaryJune on July 26, 2007, and Interim Review for JanuarySeptember on October 25, 2007. The printed Annual Report for 2006 will be published during the week starting on March 12, 2007. Metso is a global engineering and technology corporation with 2006 net sales of approximately EUR 5 billion. Its 25,500 employees in more than 50 countries serve customers in the pulp and paper industry, rock and minerals processing, the energy industry and selected other industries. www.metso.com For further information, please contact: Jorma Eloranta, President and CEO, Metso Corporation, tel. +358 204 84 3000 Olli Vaartimo, Executive Vice President and CFO, Metso Corporation, tel. +358 204 84 3010 Johanna Sintonen, Vice President, Investor Relations, Metso Corporation, tel. +358 204 84 3253 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 companys 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. Metso Corporation Olli Vaartimo Kati Renvall Executive Vice President and CFO Vice President, Corporate Communications Distribution: Helsinki Stock Exchange New York Stock Exchange The media www.metso.com