metso annual report 1999 · metso metso corporation is one of the world’s most significant...

Annual Report 1999

Linking Innovations

Metso was created in the summer of 1999through the merger of Valmet, the world’sleading paper and board machinesupplier, and Rauma, the world’s numberone in its key areas of fiber technology,rock crushing, forest machines and flowcontrol solutions. The synergies andinnovation potential created by thismerger will ensure the Corporation’sfuture growth.

Keyfigures

(in millions, except per share data) 1995 1996 1997 1998 1999

EUR EUR EUR EUR EUR

Net sales 3,096 3,697 3,898 3,695 3,387

Net sales change, % 9.4 19.4 5.4 -5.2 -8,3

Operating profit 214 274 325 246 -10

Income before extraordinary items 220 292 328 251 -28

Income before income taxes 226 280 314 249 -87

Net income 186 213 232 184 -88

Exports and foreign operations, % of net sales 86.5 75.1 84.7 87.1 89,8

Orders received 3,730 3,322 3,528 3,399 3,528

Order backlog, December 31 2366 2000 1718 1342 1,586

Gross capital expenditure 118 154 163 133 121

Business acquisitions, net of cash acquired 5 13 136 24 116

Research and development 91 115 119 119 127

Number of personnel, December 31 23,491 22,885 23,496 23,064 23,274

Shareholders' equity 927 1,010 1,172 1,206 1,085

Balance sheet total 2,834 2,575 2,909 2,798 3,169

Gearing, % 6.8 -1.8 15.5 14.6 42,8

Equity to assets ratio, % 40.6 43.3 42.2 45.4 37,3

Return on capital employed (ROCE), % 19.0 22.6 23.0 16.5 1.6

Return on equity (ROE), % 21.9 23.3 22.5 16.1 -2.4

Earnings per share 1.26 1.59 1.78 1.37 -0.22

Dividend per share 0.33 0.47 0.55 0.59 0.40*

Market capitalization, Dec. 31 1,557 1,945 1,745 1,553 1,752

Metso

*Proposal by the Board of Directors

Business Area Reviews

58 Fiber and Paper Technology

62 Automation and Control Technology

64 Rock and Mineral Processing

66 Forest Machines

67 Gears and Components

68 Manufacture of Specialty Cars

69 Organization

72 Board of Directors and Auditors

74 Management Board and Corporate Headquarters

76 Corporate Governance

78 Contact Information

81 Information for Shareholders

2 President’s Review

4 This is Metso

6 Metso’s Operations

8 R & D, Environment and Personnel

Consolidated Financial Statements 1999

12 Shares and Shareholders

14 Board of Directors’ Report

19 Consolidated Statements of Income

20 Consolidated Balance Sheets

22 Consolidated Statements of Cash Flows

24 Consolidated Statements of Changes

in Shareholders’ Equity

25 Notes to Consolidated Financial Statements

49 Parent Company Statement of Income,

Balance Sheet and Statement of Changes

in Shareholders’ Equity

53 Financial Indicators

54 Formulas for Calculation of Financial Indicators

55 Auditors’ Report

Contents

2 | Metso Corporation 1999

President’s Review

To our Shareholders,

The year 1999 was an impor-tant milestone for Metso – infact, the beginning of a newera. The merging, restructuringand integrating of two tradi-tional and distinguished com-panies, Rauma and Valmet, toform a new company, was oneof the major tasks of the year.

Integrationprogressed rapidlyAfter the merger was approvedby extraordinary shareholders’meetings of both Rauma andValmet in January, and wasgiven the green light by thecompetition authorities, workwas started in earnest tointegrate organizations anddismantle overlaps.

This integration and devel-opment progressed at fullspeed from the very start.Rauma’s fiber technology andValmet’s paper machines werecombined as the Fiber andPaper Technology businessarea. Valmet Automation andRauma’s Neles Controlsbecame the Automation andControl Technology businessarea. The Machinery businessarea emerged from a combina-tion of Rauma’s and Valmet’sremaining businesses. Opera-tional overlaps were combined

and some sales companiesclosed.

Metso was officially estab-lished at the beginning of July,when quotation of the newCorporation’s shares began onthe Helsinki and New YorkStock Exchanges. Already inspring, the Corporation hadacquired a new graphic ap-pearance and its Metso name,which received the final ap-proval of a shareholders’meeting in August.

Market situationweakenedIn addition to the integrationprocess, the market situationof Metso’s largest customergroup, the pulp and paperindustry, weakened rapidlyand heightened the pressuresfor change. Operations had tobe quickly down-sized tocorrespond to demand. Planswere announced in the springto make an estimated 2,000persons, equivalent to 9percent of the Corporation’spersonnel, redundant by theend of the year 2000. Ap-proximately one third of theseoriginated from the disman-tling of overlapping functions,and another third from thedifficult market situation. Theremaining third was aimed atimproving the profitability ofloss-making product groups.

The negotiations required bythe co-operation legislationconcerning the reductionswere completed by the end of1999.

The restructuring and inte-gration measures were notcompleted in time to favorablyaffect Metso’s financial resultsfor 1999, but the nonrecurringexpenses related to their imple-mentation burdened the resultwhich showed a loss in 1999.

Metso’s goal ishealthy growthIn November, Metso publishedits new strategic direction.According to the strategy,Metso will be developed into aflexible and profitable know-how driven company, servingcustomers in selected sectors ofprocess industry. Metso’s corebusinesses were defined asFiber and Paper Technology,Rock and Mineral Processing,and Automation and ControlTechnology.

A central goal of the strategyis to reduce the dependency onbusiness investment cycles bydeveloping Rock and MineralProcessing, which is less vul-nerable to such cycles, intoanother profitable growthplatform for the Corporation.This business group wastherefore strengthened byacquiring the business opera-


tions of Masterskreen Interna-tional, a Northern Irish manu-facturer of mobile screens, andthose of W.S. Tyler, a US screenand crusher manufacturer.

Likewise, Fiber Technologywas strengthened by the acqui-sition of two businesses fromGermany - the fiberboard pressdivision of Eduard Küsters,and the fiberboard machinemanufacturer, Kvaerner PanelSystems GmbH.

Operations which weredefined as noncore businessesin the strategy were sold. Thelargest divestment was the saleof the Timberjack ForestMachines group to Deere &Company of the USA. Thisagreement was signed inDecember. The deal still re-quires the approval of thecompetition authorities whichis expected in the spring of2000.

Metso’s new strategy alsoputs emphasis on seekinggrowth through a new custom-er service concept, “FutureCare”, and through newbusinesses with high growthpotential.

The Future Care conceptseeks to exploit all of Metso’sservice know-how, rangingfrom project design to processmaintenance and moderniza-

tion. The objective is to win anincreasing share of the expand-ing maintenance and moderni-zation markets, for whichMetso is extremely well-positioned due to its large baseof installed machinery. Thiswas also the objective of theoffer, announced in January2000, to purchase Beloit’spaper machine roll coverdivision, and aftermarketbusiness assets and relatedtechnology at the US Chapter11 process of Beloit’s ownerHarnischfeger. Also in linewith the Future Care concept,the Helser Division of ANIMinerals Processing Inc., a UScrusher parts and servicecompany, was acquired for theRock and Mineral Processinggroup in the fall of 1999.

New business potential isbeing developed in areas wherethere is simultaneously asynergy connection with thecore business structure andpotential for natural growth.Power transmission solutionsfor wind power are an exam-ple of one of these areas ofrapid growth. The most recentcorporate acquisition, thepurchase of Santasalo’s indus-trial gear operations, will also

strengthen Metso’s position onthe rapidly growing windenergy market.

The primary goal of Metso’sstrategy is healthy growth andimproved profitability, leadingto an increase in the value ofthe Corporation.

Brighter outlookfor 2000For many reasons, the outlookfor 2000 is considerablybrighter than last year.

Firstly, the benefits of theintegration and restructuringprograms will begin to showin 2000, and cost-effectivenesswill improve. Half of theestimated EUR 100 millionmerger benefit is expected tobe realized during 2000, andthe remainder in 2001.

Secondly, the market situa-tion is clearly improving. Thisis indicated by the strengthen-ing prices of market pulp and

paper grades, which are theend products of Metso’s corecustomer industries. Theprices of crude oil and basemetals have also strengthenedsince late 1999. These trendswill clearly increase the invest-ment willingness of our corecustomer industries.

Combined with Metso’sinvestment power, collectiveknow-how and willingness tochange and grow, we possessall the prerequisites for asignificant improvement ofour position compared withlast year.

Heikki Hakala


MetsoMetso Corporation is one ofthe world’s most significantdevelopers and manufacturersof process industry machineryand systems. It is the world’sleading supplier of processes,machinery and systems for thepulp and paper industry andthe foremost expert in the keytechnologies of this sector.Metso is also a strong supplierin its growth areas, namelyautomation and flow controlsolutions, and rock and miner-al processing systems.

Metso Corporation operatesthrough a global sales andservice network, having itsown offices in over 40 coun-tries and employing more than23,000 persons. Its net salesfor 1999 totaled EUR 3.4billion. Metso’s shares arelisted on both the Helsinki andNew York Stock Exchanges,and it has approximately23,000 shareholders. Metso isdomiciled in Helsinki, Finland.

Business operationsMetso Corporation uniquelycombines process know-howand expertise in automationand machine technology.Metso is being developed into

This is Metso

the world’s leading supplierof process and automationsolutions for its customers’core processes. The maincustomer industries of theCorporation are pulp andpaper, construction and civilengineering, and mining.Other significant customersectors include the energy andchemical industries.

Metso’s business areas aredivided into Fiber and PaperTechnology (50% of net salesin 1999), Automation andControl Technology (17%)and Machinery (33%). In1999, 56% of the Corpora-tion’s net sales came fromEurope, 28% from NorthAmerica, 8% from Asia-Pacific, 5% from SouthAmerica and the remainderfrom other parts of theworld.

StrategyMetso will focus on threecore businesses: fiber andpaper technology, rock andmineral processing, andautomation and controltechnology. The Corpora-

tion’s goal is to create addedvalue for its shareholders bygrowth, by continually im-proving profitability, and byleveling out business cycles.Metso will be developed intoa flexible and profitableknow-how driven company,serving its customers inselected areas of processindustry. Metso will focusparticularly on the customers’core processes. The strategicobjective of the Corporationis healthy, acceleratinggrowth.

Growth will be soughtprimarily in core businesses,exploiting the innovationpotential that is inherent inMetso’s combined areas ofknow-how. Metso’s coreoperations are market leadersin their own sectors, andtheir current installed baseprovides a natural platformfor future growth - particu-larly in modernization andmaintenance. This is also thebasis for the Corporation’s


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new Future Care business andcustomer service concept.

The Future Care conceptties together all of Metso’sservice know-how. It offersthe customer a completepackage of services, rangingfrom project design to pro-cess rebuilds and mainte-nance, from a single supplier.The innovative combinationof automation and processexpertise possessed by Metsobrings a new dimension toservice for all sectors – in-cluding those that are notcore businesses – and willlead to the development ofnew business areas and/orcustomer sectors.

The innovation potentialwill be turned into a businessasset in two main ways. Onthe one hand, Future Carewill generate healthy naturalgrowth. On the other hand,all innovations will be sys-tematically screened to identi-fy suitable new growth busi-nesses for investment. Newbusiness potential will bedeveloped in areas withapparent synergies with the

core business structure andthe potential for naturalgrowth.

Organic growth will besupported by corporateacquisitions, which aim atbalancing Metso’s businessstructure and reducing theCorporation’s dependency onthe investment cycles of itscustomers. Initially, therelative importance of rockand mineral processing,which is less cyclical thanfiber and paper technology,will be increased.

Financial targetsMetso’s profitability target isto achieve an average operat-ing profit of 9 percent of netsales and ROCE of 20 per-cent.

Dividend policyMetso’s dividend policy isbased on long-term profita-bility development and on itsfinancial status at any giventime. The objective is to

distribute annually at leastone third of the earnings pershare to shareholders asdividends.

ValuesMetso Corporation’s corevalues – appreciation ofdiverse know-how and aneffective business approach,cooperation, efficiency andhonesty – guide all its opera-tions, and are reflected in thenew corporate image.

Net sales Operating profit Net sales by business area

Fiber and Paper Technology 50%

Automation and Control Technology 17%

Machinery 33%

EUR (in millions)

= Excl. nonrecurringexpenses

EUR million %EUR million


MachineryThe Machinery business area comprises Nordberg, a develop-er, manufacturer and supplier of rock crushing and processingplants and systems, Timberjack, a supplier of forest machines,Santasalo, which supplies gears and components, and ValmetAutomotive, a specialty car manufacturer.

Rock and Mineral Processing• One of the world’s leading designers, manufacturers and

suppliers of crushing, grinding and screening solutions forrock and similar materials.

• The products range from crushers and grinding mills toauxiliary equipment for the handling of crushed materials.

• Main customer segments are quarries, mines and civil engi-neering contractors. The fastest growing customer group iscivil engineering contractors for major construction projects.

• The group intends to strengthen its market position by devel-oping its maintenance and spare parts services, improving itssupport services and increasing its market share in spare parts.

• Operations e.g. in Finland, France, Great Britain, the USA,Brazil, South Africa, Australia and China.

Metso’s Operations

Fiber and Paper TechnologyThe Fiber and Paper Technology business area develops, de-signs and manufactures systems, equipment and maintenanceservices for both the pulp and paper industry and the convert-ing and panelboard industries. The Fiber and Paper Technolo-gy business area operates under the name of Valmet.

Fiber Technology• One of the world’s most significant suppliers of equipment

and processes for fiber processing.• Equipment and processes for chemical, mechanical and

recycled fiber based stock preparation, and for panelboardmanufacturing.

• Operations in Finland, Sweden, Germany, Belgium, the USA,Canada, South Africa and New Zealand.

• Main customer segments: the pulp and panelboard industries.

Automation and Control TechnologyThe Automation and Control Technology business area devel-ops, designs and delivers automation and field control solu-tions for the process industry. The operations cover all threemain areas of process automation: process automation andinformation applications, control and automated valves, andprocess measurements and analyzers. The Automation andControl Technology business area operates under the name ofNeles Automation.• Main customers are the pulp, paper, power generation, oil

refining, chemical and petrochemical industries.

33%

17%

50%

Share of total net sales




Paper Technology• Global market leader in papermaking technology, and a

significant supplier of converting equipment for the packag-ing industry.

• Products and services: paper, board and tissue machines,paper finishing systems, air systems and converting equip-ment.

• Largest units are located in Finland, Sweden, Great Britain,Italy, Switzerland, the USA, China, Thailand and Australia.

• Main customer segments: the paper industry and packagingmaterials manufacturers.

Service• Responsible for developing and producing expert services

related to maintaining and maximizing uptime for customerproduction lines, processes and equipment, regardless ofwhether they were originally supplied by Valmet or othersuppliers.

• Operations cover spare parts and consumables, rolls, spe-cialized field and workshop services, and process solutionsapplying the latest technology.

• Range of services includes individual original spare partsand tailored process development programs.

• 24 service centers around the world: in Europe, NorthAmerica, Asia-Pacific and South America.

Forest Machines• Global leader in engineering, manufacturing and marketing

of forest machines.• Provides maintenance, service parts and training through its

dealer network.• The main customers are private logging contractors and

forest companies.• Operates in 13 countries, with the largest units in Finland,

Sweden, Canada, the USA and New Zealand.• The group's machines are used in more than 80 countries.

Gears and Components• Develops, manufactures and supplies industrial gears, and

provides related maintenance services.• Also provides designing, manufacturing and expert services

related to machine construction.• Customers include the Corporation’s own operations, other

process equipment and systems suppliers, and the processindustry.

• Operations in Finland, Sweden, Germany, Canada and theUSA.

Manufacture of Specialty Cars• Contract manufacturer of specialty cars, offering its exper-

tise to various car manufacturers.• One of Europe’s major manufacturers of convertibles.• The company's objectives are to develop and manufacture

new specialty car models and to cooperate simultaneouslywith several car manufacturers.

• The automotive plant is located in Finland.

• Already has close cooperation with Metso’s Fiber and PaperTechnology business area, and in the future with otherbusiness groups within the Metso Corporation.

• Business operations are divided into five divisions: FieldControls (process measurements and field control valves),Paper Automation (automation and information systems forthe paper industry), Automation Networks (automation andinformation systems for other process industries), SCADASolutions (IT solutions for oil, gas and water distribution

and electricity transmission), and Jamesbury (automated andmanual valves).

• Largest units are located in Finland, the USA, Canada,Mexico, Austria, Great Britain, France and Germany.


R & D, Environment and Personnel

RESEARCH ANDDEVELOPMENTMetso Corporation’s researchand development is focused,in line with the Corporation’sstrategy, on automation andcontrol technology, andprocess know-how. A futurechallenge for technologydevelopment will be to allo-cate sufficient resources tonew, innovative areas.

Metso is aiming at healthygrowth in which the entirebody of knowledge and skillsin the Corporation will beeffectively exploited tostrengthen its position incurrent and new customersectors. Critical to organicgrowth will be innovativeresearch and development,creating strategic competitiveadvantage for the Corporation.

Organization of researchand developmentThe actual research anddevelopment is in the busi-ness units. Geographically, itis concentrated largely inFinland and Sweden, al-though there are also signifi-cant R&D units in the USAand France. Approximately1,300 persons are employedin technology development.

The development of tech-nology in the business areasis coordinated in the Corpo-

ration by a TechnologyBoard, whose task is toensure the potential fororganic growth within thepresent business operations attheir boundaries, as well asthe potential for extendingthe business areas. The Tech-nology Board comprises thepresidents of the businessareas and the Senior VicePresident, Corporate Tech-nology.

External cooperation net-works are also an essentialpart of technology develop-ment. Metso is networked withcustomers and research insti-tutes around the world, withthe aim of building as wide acompetence base as possibleand thereby accelerating thecreation of new innovations.

PatentsNearly 950 invention disclo-sures were made in Metso in1999 concerning new equip-ment and process solutionsand related automation appli-cations. 280 of these led tonew priority patent applica-tions. Due to Metso’s system-atic industrial property rightsmanagement system, the newproducts developed by thevarious business units arecurrently protected by about

4,500 patents in force andabout 3,000 patent applica-tions pending in all the mainmarket areas.

Metso Corporation’s in-vestments in research anddevelopment totaledEUR 127 million in 1999,which was about 4 percent ofnet sales.

ENVIRONMENTALAFFAIRSMetso Corporation’s environ-mental affairs are based onits environmental policy. Thispolicy commits Metso tofollowing the principle ofsustainable development andtaking environmental ques-tions into consideration in itsown operations and in theproducts and services offeredto customers.

The need to consider theenvironmental impact ofproducts throughout their lifecycles is an essential part ofthe service concept that Metsooffers its customers, and oneway of increasing the competi-tiveness of customer coreprocesses. Development isfocused on environmentallysound products and processesthat meet customer needs, aswell as on ways of identifyingand managing the lifetime


environmental impacts ofproducts. This development isbased on close cooperationwith customers.

In its own operations,Metso complies with environ-mental legislation and antici-pates new developments.Metso’s environmental sys-tems meet ISO 14000 stan-dards.

One of the more importantinternational projects of 1999was Metso’s active participa-tion in and influencing of thepreparation of the pulp andpaper industry’s Best Availa-ble Technologies (BAT) docu-ment based on the EU’sIntegrated Pollution Preven-tion and Control (IPPC)directive. The IPPC directiveis aimed at achieving a highlevel of environmental protec-tion by dealing with thecombined effects of variousemissions.

In 1999 Metso was alsoselected for the Dow JonesSustainability General Index(DJSGI) which includes 229companies from around theworld. Entry to the indexrequires excellence in manyareas. The company mustwork for a cleaner environ-ment. It must also promotewelfare both internally andexternally and, through itsown example, must leadother companies in the samesector towards sustainabledevelopment.

Current statusand developmentof environmental systemsin the CorporationThe main areas of focus forenvironmental affairs in 1999were the development ofMetso’s environmental policyand a survey of the currentstatus of environmentalsystems in the various busi-ness areas.

The business areas contin-ued to build their environmen-tal systems in accordance withISO 14000 standards in 1999.As part of this process, theunits determined their envi-ronmental goals and programsin the following areas:- the reduction of wastes and

emissions, and their righttreatment

- increasing the environmen-tal awareness of personneland sub-contractors

- the efficient use of energyand raw materialsThe development work was

supported by personneltraining and by the Corpora-tion’s internal and externalaudits. The goal is for theCorporation’s main units tobe ready for certification inthe year 2001. During theyear under review, ISO 14001certification was granted totwo Fiber and Paper Technol-ogy units and three Machin-ery units.

The business areas areresponsible for the dailymanagement of environmen-tal affairs.

In the Corporation, envi-ronmental affairs are coordi-nated by an Environmental

Committee comprising thoseresponsible for environmentalaffairs in the business areasand experts from the corpo-rate staff.

HUMAN RESOURCESDEVELOPMENTMetso’s human resourcesstrategy supports Metso’sgoal of becoming a flexibleknow-how driven company.The objective is to ensurethat the Corporation has acompetent and committedpersonnel for business opera-tions. The Corporation’sstrategy and commitment toits new business and custom-er service concept, FutureCare, demands a thoroughknowledge especially ofcustomer core processes inautomation and controltechnology and in mechanicalengineering. In addition tothe development of compe-tencies, the ability to nurturethe working capabilities ofthe personnel will also beamong the main future chal-lenges in the Corporation.

Personnelincentive systemsThe profit-based incentivesystems are being developedto support the achievement ofthe business strategies andobjectives. The goal is tobring as large a proportion ofthe personnel as possiblewithin the various profit andperformance-based flexibleincentive systems. Currently,about 80 percent of thepersonnel are covered bybonus or incentive systems.

Development andtraining programsMetso’s development andtraining programs support

the continuing developmentof competencies. The Corpo-ration has two programsdeveloping general manage-ment capabilities which havebeen renewed and will restartin 2000. One is targeted atyoung, future potentials whohave a few years’ workingexperience, while the other isaimed at experienced personsworking in business manage-ment duties. An internaldoctoral program, known asthe Metso Academy, supportsresearch in core technologies.25 employees are currentlydoing doctoral research underthis program in addition totheir normal work. By theend of 1999, three doctorsand two licentiates hadgraduated from the MetsoAcademy. The program isbeing implemented in cooper-ation with the universities.

Business-related training isfocused on product know-ledge and the knowledge ofcustomer processes, thetraining of customer operat-ing personnel, technology,project management, infor-mation technology and con-trol systems, leadershiptraining and the usual lan-guage and cross-culturaltraining. Learning on the jobhas high priority in humanresources development.

The main focus of person-nel activities in 1999 wasthe implementation of per-sonnel re-arrangementscaused by the merger andthe development of newjoint operating principlesand cooperation models.They were completed inlarge part during 1999. Thebeginning of December sawthe establishment of theMetso Forum, an organ ofcooperation between thepersonnel and the manage-ment at the European level.


Economicvalue added


11 | Metso Corporation 199911 | Metso Corporation 1999


Companies 16.6%Nominee registered shareholders 44.8%Financial institutions and insurance companies 7.8%Public institutions 22.5%Foundations and associations 2.1%Private individuals 4.3%Foreign shareholders 1.9%

Share capital and sharesThe share capital of MetsoCorporation is EUR 228million. According to theArticles of Association, theshare capital may be EUR168 million at minimum andEUR 673 million at maxi-mum. The Corporation has asingle series of shares, thenominal value being FIM 10(EUR 1.68). Any shareholderwhose ownership of theCorporation’s shares or the

voting rights produced bythose shares reaches or ex-ceeds 33 1/3 percent or 50percent is obliged to redeemthe shares of other sharehold-ers upon demand and in themanner defined in the Arti-cles of Association.

The total number of sharesissued by Metso Corporationis 135,817,275. An extraordi-nary shareholders’ meeting,held on August 18, 1999,authorized the Board of

Directors to decide on theacquisition of the Corpora-tion’s own shares, using itsdistributable funds, to anamount that would notexceed 5 percent of the Cor-poration’s share capital.These shares would be usedas payment in corporateacquisitions or to financeinvestments. In 1999, a totalof 1,697,100 of the Corpora-tion’s own shares were ac-quired for EUR 18.2 million

through the Helsinki Ex-changes. Of these shares,1,136,259 were used whenacquiring the assets andoperations of W.S. Tyler inthe USA. On December 31,1999, the Corporation held560,841 of its own shares,acquired for a total price ofEUR 6.1 million (EUR 10.86/share.

The Corporation has novalid authorization for ashare issue.

The merger ofValmet and RaumaThe merger of Valmet Corpo-ration and Rauma Corpora-tion, approved by the extraor-dinary shareholders’ meetingsof the two companies onJanuary 31, 1999, took effecton July 1, 1999. In the merger,Valmet shareholders received57.5 percent of the new com-pany’s shares, and Raumashareholders 42.5 percent.Valmet Corporation share-holders received one MetsoCorporation share for eachValmet share, while RaumaCorporation shareholdersreceived 1.08917 Metso Cor-poration shares for each Rau-ma share. They also received acash compensation if thenumber of shares received wasnot a whole number.

In relation to the mergerplan, two of the company’sshareholders, UPM-KymmeneCorporation and the Repub-lic of Finland, agreed not tosell their Metso Corporationshares before June 30, 2000,and to inform each other ofany intention to sell at least30 percent of their respectiveshares before June 30, 2001.

Quotationof sharesThe quotation of MetsoCorporation’s shares began

Shares and Shareholders

BREAKDOWN OF SHARE OWNERSHIP ON DECEMBER 31, 1999Number of Number of % of Total number % of share Number of % of numbershares shareholders shareholders of shares capital votes of votes

1 - 100 11,545 49.8% 462,567 0.3% 462,567 0.3%101 - 1,000 10,008 43.1% 3,121,235 2.3% 3,121,235 2.3%1,001 - 10,000 1,454 6.3% 3,343,587 2.5% 3,343,587 2.5%10,001 - 100,000 143 0.6% 4,144,707 3.1% 4,144,707 3.1%Over 100,000 30 0.1% 63,768,790 47.0% 63,768,790 47.0%

Nominee-registered shares 14 0.1% 60,906,549 44.8% 60,906,549 44.8%Shares to be transferred ornot converted into book entries 69,840 0.1% 69,840 0.1%Total 23,194 100% 135,817,275 100% 135,817,275 100%

SHARE CAPITAL AND SHARE DATA 1995 - 1999(In EUR millions, except for per share data and share prices) 1995 1996 1997 1998 1999

Share capital, Dec. 31 242 230 228 228 228Number of shares

Number of outstanding shares, Dec. 31 143,916,610 136,915,180 135,826,010 135,826,010 135,256,434Average number of shares 142,827,440 139,945,936 136,264,946 135,826,010 135,631,740

Number of shares redeemed and canceled - 7,001,430 1,089,170 - -Number of own shares, Dec. 31 - - - - 560,841Trading volume, Helsinki Exchanges ** 36,131,418 72,283,518 97,260,307 74,734,449 46,058,568

% of shares 108.4 92.8 97.1 74.6 46.0Earnings / share 1.26 1.59 1.78 1.37 (0.22)Dividend / share 0.33 0.47 0.55 0.59 0.40*Dividend 48 65 74 80 54*Dividend / earnings, % 26 29 31 43 neg.*Effective dividend yield, % 3.1 3.3 4.3 5.1 3.0*P/E ratio 8.60 8.91 7.21 8.34 neg.Equity / share 6.40 7.33 8.56 8.88 7.98Highest share price 18.07 15.29 19.30 18.53 13.70Lowest share price 6.56 8.75 11.60 7.72 8.26Average share price 10.16 12.13 15.63 13.00 10.76Share price, Dec. 31 10.82 14.21 12.85 11.43 12.90Market capitalization, Dec. 31 1,557 1,945 1,745 1,553 1,752* Proposal by the Board of Directors** This is of the total amount of shares for public trading

Formulas for calculation of share-related indicators are on page 54.

Breakdown of shares by shareholder category, Dec. 31, 1999 (% of share capital)


Finan

cial Statemen

ts

on July 1, 1999 on the mainlist of the Helsinki Exchanges(HEX:MEO1V) and on theNew York Stock Exchange(NYSE:MX). During July-December, 1999, a total of17.3 million Metso Corpora-tion shares were traded onthe Helsinki Exchanges to avalue of EUR 198 million, theaverage share price beingEUR 11.45. In the sameperiod, 0.5 million ADSs(American Depository Shares)were traded on the New YorkStock Exchange to a value ofUSD 5.4 million, the averageprice per ADS being USD11.79.

During January-June, 12.8million Rauma Corporationshares were traded on theHelsinki Exchanges to a valueof EUR 143.2 million. Duringthe same period, 14.9 millionValmet Corporation shareswere traded on the HelsinkiExchanges to a value of EUR154.2 million.

Bonds with warrantsand option rightsMetso Corporation has fourstock option programs,approved in the merger plan,which are designed to be partof the incentive system forkey personnel. The programsgive the right to subscribe fora maximum of 5,000,000shares, and involve 143persons. The first subscrip-tion period for options givingthe right to 1,000,000 sharesis July 1, 1999 to January 31,2001, and the subscriptionprice per share is FIM 60.00(EUR 10.09). Share subscrip-tions based on the otheroptions will take place instages from April 2, 2000 toApril 17, 2005. No optionrights had been exercised byDecember 31, 1999.

Metso Corporation’s Board

Monthly turnover of Metso’s shares on the Helsinki Exchanges Average monthly share price on the Helsinki Exchanges

METSO'S BIGGEST SHAREHOLDERS ON DECEMBER 31, 1999Percentage

Shares of sharecapital

UPM-Kymmene Corporation 19,922,164 14.7%The Finnish Government 15,695,287 11.6%Ilmarinen Mutual Pension Insurance Company 5,511,878 4.1%Varma-Sampo Mutual Pension Insurance Company 3,705,069 2.7%

Pohjola Non-Life Insurance Company Limited 2,082,279 1.5%Pohjola Life Assurance Company Limited 1,570,000 1.2%

3,652,279 2.7%

Industrial Insurance Company Ltd 1,542,134 1.1%Sampo Insurance Company Ltd 673,436 0.5%Sampo Enterprise Insurance Company Limited 631,747 0.5%Otso Loss of Profits Insurance Company Ltd 253,848 0.2%Sampo Life Insurance Company Limited 100,000 0.1%Insurance Company of Finland Limited 31,664 0.0%

3,232,829 2.4%

Odin Norden 2,209,476 1.6%Odin Finland 230,637 0.2%

2,440,113 1.8%

The Local Government Pensions Institution 1,992,019 1.5%Suomi Mutual Life Assurance Company 1,530,927 1.1%Federation of Finnish Metal, Engineeringand Electrotechnical Industries 749,796 0.5%LEL Employment Pension Fund 672,756 0.5%

Tapiola General Mutual Insurance Company 321,200 0.2%Tapiola Mutual Life Assurance Company 190,900 0.1%Tapiola Corporate Life Insurance Company Ltd 98,900 0.1%

611,000 0.4%

Nominee-registered shares *) 60,906,549 45%Other shareholders **) 15,194,609 11%Total 135,817,275 100%

*) The Corporation has been informed that the funds managed by Franklin Resources Groupheld 6.98% of shares votes in July 1999. Additionally they had a 3.03% voting authority bringingtheir total voting rights to 10.01%.**) Includes 560,841 shares owned by Metso Corporation

of Directors has decided topropose to the year 2000Annual General Meeting thatoptions giving the right tosubscribe to 5,000,000 sharesbe given to key persons in theCorporation. The purpose isto unify the incentive systemsso that holders of earliergiven options will have theright to exchange them forthe options now to be given,and that it will be possible onthe basis of the current andproposed options to subscribefor a maximum of 5,000,000shares. The intention is thatthe subscription periods of2,500,000 option certificates,to be marked with the codeA, would begin on April 1,2001, and that the subscrip-tion periods of another2,500,000 option certificates,to be marked with the codeB, would begin on April 1,2003. The subscription peri-od for all options would endon April 30, 2005, and thesubscription price per sharewould be EUR 16, less theamount of dividends pershare distributed betweenFebruary 1, 2000 and thedate of subscription.

Shareholding of theBoard of Directors andthe ManagementOn December 31, 1999, themembers of Metso Corpora-tion’s Board of Directorsowned 5,945 shares. ThePresident & CEO owned10,262 shares and 105,000warrants, giving the right tosubscribe for an equalnumber of shares, in accord-ance with the terms andconditions of the warrants. AMERICAN DEPOSITORY SHARES

(Each ADS represents one share) 1998 1999Trading volume (NYSE) 2,291,474 826,018Earnings / ADS, USD 1.38 (0.22)Highest ADS price, USD 20.14 13.77Lowest ADS price, USD 9.30 9.18ADS price, Dec. 31, USD 13.16 13.50

In thousands EUR

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1995 1996 1997 1998 1999-50

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MarketsThe main customer industriesof Metso Corporation arepulp and paper, constructionand civil engineering, mining,and other process and energyindustry.

The small number of newinvestment projects by the pulpand paper industry restricteddemand for the products ofPaper Technology and of Auto-mation and Control Technologyin all the main markets until theend of the year, when the situa-tion began to improve slightly,especially in Europe and NorthAmerica. The demand forreplacement investments, proc-ess parts rebuilds, and spareparts and services remainedbrisk throughout the year.

The weak profitability ofthe energy and chemicalindustries reduced the sector’swillingness to invest andrestricted growth in demandfor Automation and ControlTechnology products.

The demand for rock crush-ers supplied for constructionand civil engineering was goodin Europe, but the civil engi-neering industry's machineryinvestments in North Americafailed to meet expectations.The demand for crushers

supplied to the mining industrywas poor in all markets.

The demand for forest ma-chines continued good inEurope, but the correspondingmarket in North America wasslack until near the end of theyear.

Orders received andorder backlogIn 1999, new orders werereceived worth EUR 3,528million (EUR 3,399 million in1998). The volume of ordersreceived by the Fiber and PaperTechnology business area, theRock and Mineral Processinggroup, and the Gears andComponents group increasedon the respective 1998 levels.On the other hand, the neworders received by the Automa-tion and Control Technologybusiness area, and Forest Ma-chines group, declined. At theend of the year under review,Metso Corporation’s orderbacklog totaled EUR 1,586million (EUR 1,342 million onDecember 31, 1998), represent-ing an 18 percent increase onthe previous year. During thelast quarter of the year a papermachine order from Italy worthEUR 250 million was includedin the order backlog.

Net salesMetso Corporation’s net salesin 1999 totaled EUR 3,387million (EUR 3,695 million),which was 8 percent lowerthan the previous year. Thenet sales of the Rock andMineral Processing group andthe Gears and Componentsgroup increased. The net salesof the Automation and Con-trol Technology business arearemained at approximatelythe previous year’s level. Thenet sales of Fiber and PaperTechnology and Forest Ma-chines declined due to the lackof large orders and the reduc-tion in delivery volumes offorest machines.

Exports and operationsoutside Finland accounted for90 percent of the Corpora-tion’s net sales (87%) or EUR3,042 million (EUR 3 219million). 56 percent of the netsales were from Europe, 28percent from North America,8 percent from Asia-Pacific, 5percent from South Americaand the remaining 3 percentfrom the rest of the world.

ProfitabilityMetso’s profitability was weakin 1999. The operating loss forthe year under review was EUR10 million (operating profit

Board of Directors’ Report


EUR million EUR million % EUR million

Operating profit Orders receivedNet sales


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1995 1996 1997 1998 1999

EUR 246 million), includingEUR 67 million in nonrecurringmerger and restructuring costs.Profitability was weaker than1998 in all business areas, andan operating loss was recordedin Fiber and Paper Technology.

Income before extraordinaryitems and income taxes wasEUR 28 million negative (EUR251 million positive). Financialincome and expenses includereceived dividends of EUR 9million and foreign exchangegains of EUR 8 million. Netincome for the year underreview, excluding extraordinaryitems, was EUR 29 millionnegative (EUR 186 millionpositive). Earnings per sharewere EUR 0.22 negative (EUR1.37 positive). The return oncapital employed (ROCE) was1.6 percent (16.5%). Thereturn on equity (ROE) wasnegative (16.1% positive).

Of items affecting incomeand arising from harmonizationof the accounting principles ofRauma and Valmet, EUR 22million was entered as extraor-dinary income and EUR 27million as extraordinary ex-penses. EUR 54 million wasalso entered in extraordinaryexpenses as a one-time write-offof the goodwill value of theConverting Equipment busi-ness.

The threat of loss related tothe inventory value of delayeddeliveries to the APRIL Groupin Indonesia has disappeared.

Business areasThe net sales of Fiber and PaperTechnology decreased by 12percent on the previous year,and totaled EUR 1,711 million(EUR 1,949 million). Thebusiness area accounted for 50percent (52%) of the Corpora-tion’s net sales. Profitabilityweakened significantly com-pared with the previous year,and the operating loss was EUR75 million (operating profitEUR 112 million), equivalent to–4.4 percent of the net sales(5.7%). The operating lossincludes non-recurring costs ofEUR 45 million. Profitabilitywas primarily weakened by asignificant reduction in thevolume of deliveries and tightprice competition. In PaperTechnology, Converting Equip-ment continued to operate at aloss, and the profitability ofBoard Machines continued tobe weak. The profitability ofPaper Machines diminishedclearly.

The net sales of Automationand Control Technology re-mained at nearly the same levelas the previous year, totaling

EUR 599 million (EUR 597million). The business areaaccounted for 17 percent(16%) of the Corporation’s netsales. Profitability decreasedcompared with the previousyear. The operating profit of thebusiness area was EUR 6million (EUR 38 million),which is 1 percent of the netsales (6.3%). The operatingprofit included EUR 11 millionin nonrecurring costs. Profita-bility was weakened by lowcapacity utilization rates andtight price competition.

The net sales of Forest Ma-chines fell by 11 percent com-pared to the previous year, andtotaled EUR 471 million (EUR530 million). The businessgroup accounted for 14 percent(14%) of the Corporation’s netsales. Profitability was weakercompared with the previousyear. The operating profit wasEUR 28 million (EUR 42million), or 6 percent of the netsales (7.9%). Profitability wasweakened by a significantreduction in the volume ofdeliveries in the importantNorth American markets.

The net sales of the Rock andMineral Processing group werenearly at the same level as in

the previous year, totaling EUR469 million (EUR 465 million).The business group accountedfor 13 percent (12%) of theCorporation’s net sales. Profita-bility was reduced comparedwith the previous year. Theoperating profit was EUR 22million (EUR 34 million), or4.7 percent of the net sales(7.3%). The decline in profita-bility was mainly due to thesmaller number of deliveries tothe mining segment.

The net sales of the Gearsand Components group grewby 7 percent on the previousyear, and totaled EUR 103million (EUR 96 million). Thebusiness group accounted for 3percent (3%) of the Corpora-tion’s net sales. Profitabilityweakened on the previous year.The operating profit was EUR1 million (EUR 7 million), or 1percent of the net sales (7.3%).

The net sales of the Manu-facture of Specialty Cars groupdropped by 5 percent comparedwith the previous year, andstood at EUR 114 million (EUR120 million). The businessgroup accounted for 3 percent(3%) of the Corporation’s netsales.



Machinery 33%

Net sales by business areaFinland 11%Other Nordic countries 11%Other European countries 34%North America 28%South America 5%Asia-Pacific 8%Rest of the world 3%

Net sales by market area

EUR million %EUR million

PersonnelOrder backlog R & D


0

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25

1995 1996 1997 1998 1999

Return on equityEquity ratio Return on capital employed

% % %

Profitability improved slightlyon the previous year. Theoperating profit was EUR 27million (EUR 25 million),which is 24 percent of the netsales (21%).

Sales between the businessareas amounting to EUR 78million (EUR 62 million) havebeen eliminated from the netsales of the Corporation.

Capital expenditure,acquisitions anddivestmentsThe Corporation’s gross capitalexpenditure, including acquisi-tions, amounted to EUR 237million (EUR 157 million), or7.0 percent (4.3%) of theCorporation’s net sales. Duringthe year under review, a deci-sion was made to establish anew service technology centerin China, the total value of theinvestment being EUR 11million. Metso also establisheda service joint venture companywith the YIT Corporation,known as Scandinavian MillService Oy.

The Fiber and Paper Technol-ogy business area was strength-ened by the acquisition of thefiberboard press division ofEduard Küsters Maschinenfab-rik GmbH & Co. KG of Ger-many, and Kvaerner PanelSystems GmbH of Germany, anequipment manufacturer for thepanelboard industry. The Wara-tah Group, a New Zealandmanufacturer of heavy harvest-er heads, and Siiro Equipment,a US manufacturer of cut-offmachines, were acquired for theForest Machines group. TheRock and Mineral Processinggroup was supplemented by theacquisition of MasterskreenInternational Ltd., a NorthernIreland manufacturer of mobilescreens, the assets and opera-tions of W.S. Tyler, an Americanscreen and crusher manufactur-er, and the assets and operationsof the Helser Division of ANIMinerals Processing Inc., anAmerican crusher parts, refur-bishment and service company.A major part of the industrialgears operations of Componen-

ta Corporation (former San-tasalo-JOT Group) was ac-quired for the Gears and Com-ponents group.

During the year underreview, Metso divested its 50percent holding in Oy Scan-Auto Ab. Metso signed anagreement on the sale of theTimberjack Group, the manu-facturer of forest machines, toDeere & Company of the USAfor EUR 600 million. The dealstill requires the approval ofthe competition authoritieswhich is expected in thespring of 2000.

Research anddevelopmentThe Corporation’s costs inresearch and developmentamounted to EUR 127 million(EUR 119 million) in the yearunder review, equivalent to 3.7percent (3.2%) of the net sales.

PersonnelMetso Corporation employed23,274 persons (23,064) at theend of 1999. This includes



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cial Statemen

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1.5

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1995 1996 1997 1998 19990

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9

1995 1996 1997 1998 1999

Earnings / share Equity / share

EUREUR



Machinery 35%

Other 1%

Personnel by business area

1,310 employees of the ac-quired companies. The Corpo-ration employed 11,186 per-sons, or 48 percent of the totalpersonnel, in Finland, 2,361or 10 percent in other NordicCountries, 2,840 or 12 percentin other European Countries,4,678 or 20 percent in NorthAmerica, 585 or 3 percent inAsia-Pacific, 587 or 3 percentin South America, and 1,037or 4 percent in the rest of theworld. Total salaries andwages amounted to EUR 758million (EUR 745 million).

Board of Directors,Auditors and ManagementThe Board of Directors select-ed at the Annual GeneralMeetings held by Valmet onMarch 30, 1999 and by Rau-ma on March 31, 1999 contin-ued as the Board of Directorsof Metso Corporation. PerttiVoutilainen was elected asChairman of the Board andMikko Kivimäki as Vice Chair-man. The other members ofthe Board are Felix Björklund,Jaakko Rauramo, Matti Sund-berg, Markku Tapio and,representing the personnel,

Pertti Turtiainen. AuthorizedPublic Accountant SVH Price-waterhouse Coopers Ltd waselected as the auditor of theCorporation.

During the year under review,changes were made in the topmanagement of Metso. It wasdecided at a meeting of MetsoCorporation’s Board of Direc-tors on September 23, 1999,that Matti Sundberg, elected asCEO in conjunction with themerger, would relinquish hismanagement position in thecompany with effect fromOctober 1, 1999, after whichHeikki Hakala, President &CEO, would chair the Corpora-tion’s Management Board.Heikki Hakala will retire at thebeginning of 2001.

FinancingMetso’s net cash provided byoperating activities was EUR 2million negative (EUR 129million positive). Metso’s netinterest-bearing liabilitiestotaled EUR 465 million at theend of 1999 (EUR 178 million).Gearing, i.e. the ratio of netliabilities to shareholders’equity, was 42.8 percent(14.6%). The Corporation’sequity to assets ratio was 37.3percent (45.4%).

Moody’s Investors Serviceconfirmed Metso’s long-termloan rating as Baa2. Standard& Poors’ granted the ratingBBB+ for long-term loans andA-2 for short-term loans.

SharesThe number of Metso Corpora-tion’s shares on December 31,1999 was 135,817,275, and theshareholders’ equity was EUR228 million.

The quotation of MetsoCorporation’s shares began onJuly 1, 1999 in the Helsinki andNew York Stock Exchanges.During July-December, MetsoCorporation shares were tradedin the Helsinki Exchanges tothe value of EUR 198 million.The highest quotation of theperiod was EUR 13.70 and thelowest EUR 9.65. On Decem-ber 31, 1999, the share pricewas EUR 12.90, and the Cor-poration’s market capitalizationEUR 1,752 million. DuringJuly-December, trading in theNew York Stock Exchangeamounted to USD 5.4 million.The price of an ADS on Decem-ber 31, 1999 was USD 13.50.The highest price was USD13.75 and lowest USD 10.13.The total trading turnover ofthe Rauma Corporation andValmet Corporation sharesquoted separately in the first

half of the year, plus the MetsoCorporation shares, was EUR496 million (EUR 972 million)in the Helsinki Exchanges.

An extraordinary sharehold-ers’ meeting of Metso Corpora-tion, held on August 18, 1999,authorized the Board of Direc-tors to decide on acquiring theCorporation’s own shares,using its distributable funds, upto an amount corresponding to5 percent of the Corporation’sshare capital, to be used aspayment in corporate acquisi-tions or in the financing ofinvestments. In 1999, a total of1,697,100 of the Corporation’sown shares were acquired for aprice of EUR 18.2 million.1,136,259 of the shares wereused as payment in acquiringthe assets and operations of theUS company, W.S. Tyler. OnDecember 31, 1999, the Corpo-ration possessed 560,841 of itsown shares, their acquisitionprice totaling EUR 6.1 million(EUR 10.86/share).

The Board of Directors hasno valid authorization for ashare issue.

The Year2000 projectThe turn of the millenniumhad no negative effect onMetso Corporation’s businessor on income from operations.The Year 2000 workinggroups will continue to oper-ate until March 2000, howev-er, to ensure that no leap dayrelated disturbances arise. The


Finland 48%Other Nordic countries 10%Other European countries 12%North America 20%South America 3%Asia-Pacific 3%Rest of the world 4%

Personnel by area


total costs arising from theYear 2000 project were ap-proximately EUR 11.5 mil-lion, of which about EUR 5.5million were recorded in1998, and the remaining EUR6 million in 1999.

Creation of MetsoCorporationExtraordinary shareholders’meetings of Rauma and Valmetapproved the merger of thecompanies on January 31, 1999.The European Commissionstated on February 8, 1999 thatit would not oppose the plannedmerger of Rauma and Valmet.The Bureau of Competition ofthe Federal Trade Commission,USA and the Bureau of Compe-tition Policy, Canada had earliermade similar decisions. TheNational Board of Patents andRegistration of Finland gavepermission on June 18, 1999 forimplementation of the merger,which took effect on July 1,1999. From July 1, 1999 toAugust 24, 1999 the companyoperated under the name Val-met-Rauma Corporation. Anextraordinary shareholders’meeting held on August 18,1999 approved the new corpo-rate name, Metso Oyj in Finn-ish, Metso Abp in Swedish andMetso Corporation in English.The new name was registered onAugust 24, 1999.

Restructuring measuresRestructuring measures wereimplemented during the yearunder review, due to the marketsituation, weak profit develop-ment and the changes requiredby business restructuring. As aresult of these actions and othermerger-related measures, theCorporation will reduce its

personnel by an estimated2,000 persons by the end of theyear 2000. Negotiations re-quired by cooperation legisla-tion concerning the reductions,held in each business unit, werecompleted by the end of 1999.

It is estimated that annualsavings of more than EUR 100million will accrue from thesynergy benefits of the merger,adaptation to the marketsituation and structural chang-es. Most of the synergy benefitscomprise cost savings and arebeing realized in the Fiber andPaper Technology businessarea. The synergy benefits andcost savings are expected to befully achieved in 2001. Non-recurring costs of EUR 67million have been caused by themerger and restructuring.

Events afterthe financial yearIn January, 2000, an offer wasmade for the purchase ofcertain service operations of theAmerican paper machinemanufacturer, Beloit, for USD160 million. The deal is expect-ed to be confirmed during thespring. The net sales of theBeloit operations included inthe offer are approximatelyUSD 200 million.

Board of Directors’proposal for thedistribution of profitThe consolidated distributablefunds of Metso Corporationon December 31, 1999 wereEUR 581 million. The parentcompany’s distributable fundstotaled EUR 461 million. OnDecember 31, 1999, a total of135,256,434 Metso sharesgiving entitlement to fulldividends for 1999 were heldoutside the Corporation.

Metso Corporation’s Boardof Directors proposes to theAnnual General Meeting that adividend of EUR 0.40 per sharebe distributed.

Short-term outlookThe price of market pulp hascontinued to rise and theprices of paper grades havestrengthened further. Theinvestments of the pulp andpaper industry are expected togrow, and increase the demandfor the products of Fiber andPaper Technology, and Auto-mation and Control Technolo-gy. The demand for processparts rebuilds and moderniza-tions, spare parts and servicesis estimated to remain good.

The investments of the civilengineering industry are expect-ed to continue strong in Europeand to liven up in the NorthAmerican markets. Thestrengthening of basic metalprices is expected to createbetter conditions for mininginvestments in the current year.

The conditions for invest-ment are expected to showgradual improvement in theSoutheast Asian and SouthAmerican markets.

The demand for forest ma-chines is estimated to be goodin both Europe and NorthAmerica.

A clear improvement isexpected in the Corporation’sprofitability in 2000, due to theaffect of restructuring measuresand the improved marketsituation.

Helsinki, February 16, 2000

Pertti VoutilainenMikko KivimäkiFelix BjörklundJaakko RauramoMatti SundbergMarkku TapioPertti Turtiainen


Finan

cial Statemen

tsFin

ancial Rep

orts

Year ended December 31,1997 1998 1999 1999

Note EUR EUR EUR USD

Net sales 3,898 3,695 3,387 3,411Cost of goods sold 3), 6) (2,873) (2,696) (2,556) (2,574)Gross profit 1,025 999 831 837

Selling, general and administrative expenses 2),3),6) (756) (757) (794) (800)Other income and expenses, net 4) 56 4 20 20Nonrecurring operating expenses 5) - - (67) (67)Operating profit (loss) 325 246 (10) (10)

Financial income and expenses, net 7) 0 2 (19) (19)Share of profits of associated companies 8) 3 3 1 1Income before extraordinary items and income taxes 328 251 (28) (28)

Extraordinary income and expenses, net 9) (10) (2) (59) (60)Income before taxes 318 249 (87) (88)

Income taxes 10) (82) (63) 0 0Minority interests (4) (2) (1) (1)

Net income 232 184 (88) (89)

Earnings per share 11) 1.78 1.37 (0.22) (0.22)

Consolidated Statements of Income(in millions, except for per share amounts)


Consolidated Balance Sheets(in millions)

ASSETS

December 31,1998 1999 1999

Fixed assets and financial assets Note EUR EUR USDIntangible assets 12)

Goodwill 177 170 171Other intangible assets 47 46 46

224 216 217Tangible assets 12), 13)

Land and water areas 54 56 57Buildings 235 262 264Machinery and equipment 286 296 298Other tangible assets 14 19 19Assets under construction 46 51 51

635 684 689Financial assets

Shareholdings and other securities 14) 158 124 125Own shares 14) - 6 6Loans receivable 18) 10 10 10Accounts receivable 18) 68 57 58Other long-term investments 15), 18) 78 55 55

314 252 254Total fixed and financial assets 1,173 1,152 1,160

Unfunded pensions 16) 12 - -

Current assetsInventories

Materials and supplies 165 198 199Work in process 43 226 228Finished products 199 237 239

407 661 666Receivables 18)

Accounts receivable 609 775 780Cost and earnings of projects under construction in excess of billings 17) 203 158 159Loans receivable 5 6 6Accrued income and prepaid expenses 132 151 152Deferred tax asset 10) - 69 69Other receivables 24 37 37Other short-term investments 8 1 1

981 1,197 1,205Cash and cash equivalents 225 159 160Total current assets 1,613 2,017 2,031

Total assets 2,798 3,169 3,191


Finan

cial Statemen

ts

SHAREHOLDERS' EQUITY AND LIABILITIES

December 31, 1998 1999 1999

Note EUR EUR USDShareholders' equity 19)

Share capital 228 228 230Share premium reserve 209 7 7Legal reserve 222 221 223Revaluation reserve 12 0 0Cumulative translation adjustment (56) (2) (2)Reserve for own shares - 6 6Other reserves - 202 203Retained earnings 407 511 515Net income for the financial year 184 (88) (89)

Total shareholders' equity 1,206 1,085 1,093

Minority interests 10 9 9

LiabilitiesLong-term debt 20)

Bonds 229 240 242Loans from financial institutions 77 116 116Pension loans 85 79 80Other long-term debt 25 51 51

416 486 489Other long-term liabilities

Accrued expenses 21) 26 47 47Other long-term loans 23 2 2

49 49 49

Current liabilitiesCurrent portion of long-term debt 36 34 34Other interest-bearing short-term debt 22) 129 256 258Advances received 12 118 119Accounts payable 241 246 248Billings in excess of cost and earnings of projects under construction 17) 121 136 137Accrued expenses and deferred income 23) 536 669 674Deferred tax liability 10) 8 22 22Other current liabilities 34 59 59

1,117 1,540 1,551Total liabilities 1,582 2,075 2,089

Total shareholders’ equity and liabilities 2,798 3,169 3,191


Consolidated Statements of Cash Flows(in millions)


EUR EUR EUR USDCash flows from operating activities:Net income 232 184 (88) (89)Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 119 131 130 132Gain on sale of fixed assets (3) (9) (2) (2)Gain on sale of subsidiaries and associated companies (38) - (14) (14)(Gain) loss on marketable securities (21) (9) (8) (8)Foreign exchange (gains) losses 13 (16) (8) (8)Share of profits and losses of associated companies (3) (4) (3) (3)Write-offs of intangible assets - - 58 58Other non-cash items 23 23 66 66

Change in net working capital, net of effect from business acquisitions (190) (171) (133) (134)Net cash provided by (used in) operating activities 132 129 (2) (2)

Cash flows from investing activities:Capital expenditures on fixed assets (161) (133) (121) (122)Proceeds from sale of fixed assets 8 28 31 31Business acquisitions, net of cash acquired (136) (24) (116) (117)Investments in associated companies (2) - (3) (3)Proceeds from sale of subsidiaries and associated companies 9 10 21 21(Investments in) proceeds from sales of marketable securities 98 55 42 43

Net cash used in investing activities (184) (64) (146) (147)

Cash flows from financing activities:Reacquisition of shares (18) - (6) (6)Dividends paid (65) (74) (80) (81)Hedging of net investment in foreign subsidiaries (29) (1) (1) (1)Net borrowings (payments) on short-term debt (31) 23 117 118Proceeds from issuance of long-term debt 251 79 54 54Principal payment of long-term debt (67) (47) (27) (27)Notes receivable issued (43) (62) (16) (16)Proceeds from payment on notes receivable 25 30 22 22Other - (2) - -

Net cash provided by (used in) financing activities 23 (54) 63 63

Effect of changes in exchange rates on cash and cash equivalents 6 (9) 19 19Net increase (decrease) in cash and cash equivalents (23) 2 (66) (67)Cash and cash equivalents at beginning of year 246 223 225 227

Cash and cash equivalents at end of year 223 225 159 160


Finan

cial Statemen

ts


EUR EUR EUR USD

Change in net working capital, net of effect from business acquisitions:(Increase) decrease in assets and increase (decrease) in liabilities:

Inventory (25) (24) (149) (150)Receivables (40) 24 (121) (122)Other assets (21) (9) (25) (25)Percentage of completion: recognized assets and liabilities, net (97) 22 55 55Accounts payable 4 (23) (36) (36)Accrued liabilities 80 (109) 136 137Other liabilities (91) (52) 7 7

Total (190) (171) (133) (134)

Supplemental cash flow information:Acquisition of businesses:

Intangible assets 3 1 2 2Tangible assets 19 13 45 45Goodwill 89 8 52 52Current assets, other than cash 74 13 74 75Minority interest - (1) - -Liabilities assumed (49) (10) (57) (57)

Total, net of cash acquired 136 24 116 117

Cash paid during the year for:Interest 36 35 50 50Income taxes 46 64 38 38


Consolidated Statements ofChanges in Shareholders’ Equity(in millions)

Number Share Share Revalu- Cumulative Reserveof capital premium Legal ation translation for own Other Retained

shares (Par value reserve reserve reserve adjustment shares reserves earnings Total(thousands) FIM 10

per share) EUR EUR EUR EUR EUR EUR EUR EUR

Balance at December 31, 1996 136,915 230 207 222 12 (22) - - 355 1,004

Dividends - - - - - - - - (65) (65)Translation adjustments - - - - - 8 - - - 8Cancellation of own shares (1,089) (2) 2 - - - - - (18) (18)Net income - - - - - - - - 232 232

Balance atDecember 31, 1997 135,826 228 209 222 12 (14) - - 504 1,161

Dividends - - - - - - - - (74) (74)Translation adjustments - - - - - (42) - - (42)Other - - - - - - - - (23) (23)Net income - - - - - - - - 184 184

Balance atDecember 31, 1998 135,826 228 209 222 12 (56) - - 591 1,206

Dividends - - - - - - - - (80) (80)Translation adjustments - - - - - 54 - - 0 54Cash payment forfractional shares (9) 0 0 - - - - - 0 0Reacquisition of own shares - - - - - - 6 - (6) 0Other - - (202) (1) (12) - - 202 6 (7)Net income - - - - - - - - (88) (88)

Balance atDecember 31, 1999 135,817 228 7 221 0 (2) 6 202 423 1,085


Finan

cial Statemen

ts

Notes toConsolidated Financial Statements(in millions)

1 Accounting principles

Basis of presentationThe consolidated financial statements, prepared in accordancewith Finnish generally accepted accounting principles (FinnishGAAP), include the financial statements of Metso Corporation (the"Parent Company") and its subsidiaries (together, "Metso"). MetsoCorporation was formed in 1999 as a result of the merger of Rau-ma Corporation ("Rauma") and Valmet Corporation ("Valmet"). Themerger was consummated on July 1, 1999 and is accounted for bythe pooling of interest method. Accordingly, the financial state-ments have been restated to retroactively combine the financialstatements of Rauma and Valmet as if the merger had occurred atthe beginning of the earliest period presented.

The income statement of the parent company is presented forsix months starting from the date of consummation and the bal-ance sheet for the year ended as at December 31, 1999.

The financial statements are presented in millions of euros(EUR), except for share and per share amounts.

Solely for the convenience of the reader, the consolidated finan-cial statements as of and for the year ended December 31, 1999have been translated into United States dollars ("USD") using theDecember 31, 1999 Noon Buying Rate of the Federal Reserve Bankof New York of USD 1.00 = EUR 0.9930. The translation should notbe construed as a representation, that the amounts shown couldbe converted into USD at that rate.

Use of estimatesThe preparation of financial statements, in conformity with FinnishGAAP, requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and dis-closure of contingent assets and liabilities at the dates of the finan-cial statements and the reported amounts of revenues and ex-penses during the reporting period. Actual results could differfrom those estimates.

Accounting conventionThe financial statements are prepared under the historical costconvention.

Principles of consolidationThe consolidated financial statements include the accounts of theparent company, Metso Corporation, and each of those companiesin which it owns, directly or indirectly through subsidiaries, over50% of the voting rights. The companies acquired during the fi-nancial period have been consolidated from the date the responsi-bility for their operations was transferred to Metso. Subsidiariessold have been included up to their date of sale.

All intercompany transactions are eliminated as part of the con-solidation process. Minority interests are presented separately be-fore net income. They are also shown separately from shareholders’equity and liabilities on the consolidated balance sheets.

Acquisitions of companies are accounted for by using the pur-chase method. Goodwill represents the excess of the purchasecost over the fair value of the net assets of acquired companies.The excess of purchase price allocated to fixed assets is depreciat-ed concurrently with the underlying assets. Goodwill arising fromacquisitions is amortized over a period not to exceed twenty years.Badwill represents the excess of net assets of acquired companiesover the purchase cost. Commencing on January 1, 1999, badwill

arising from acquisitions is allocated to reduce the acquired fixedassets proportionally to their fair values at the time of the acquisi-tion. The cumulative effect of the change in the accounting princi-ple of EUR 11 was charged to expenses in 1999, net of taxes, and isincluded in extraordinary expenses in the consolidated statementof income.

The equity method of accounting is used for investments in as-sociated companies in which the investment provides Metso withthe ability to exercise significant influence over operating and fi-nancial policies of the investee company. Such influence is pre-sumed to exist for investments in companies in which Metso’s di-rect or indirect ownership is between 20% and 50%. Under the eq-uity method, the share of profits and losses of associated compa-nies is included in the consolidated statements of income. Theshare of result of the associated companies, the activity of which isclosely connected with the business areas of Metso, is recorded inother income and expenses, net. Metso’s share of post-acquisitionretained profits and losses of associated companies is reported aspart of investments in associated companies in the consolidatedbalance sheets.

Other shareholdings and securities (voting rights less than 20%)are stated at cost and dividends received are included in the state-ments of income; write-down is made where it is deemed neces-sary to reduce the cost to estimated net realizable value.

Foreign currency translationTransactions in foreign currencies are recorded at the rates of ex-change prevailing at the date of the transactions. At the end of theaccounting period, unsettled foreign currency transaction balanc-es are valued at the rates of exchange prevailing at the balancesheet date. Trade flow related foreign currency exchange gainsand losses are treated as adjustments to sales and purchases. For-eign exchange gains and losses associated with financing are en-tered as a net amount under financial income and expenses, net.

The statements of income of foreign subsidiaries are translatedinto euro at the average exchange rates for the year and the bal-ance sheets are translated at the exchange rate of the balancesheet date. The resulting translation differences are recorded di-rectly to equity. When Metso hedges the equity of its foreign sub-sidiaries with foreign currency loans and derivative financial in-struments the translation difference is reduced by the currency ef-fect of hedging instruments and recorded in equity.

Derivative financial instrumentsMetso uses a variety of derivative financial instruments, mainly for-ward exchange contracts, and a limited number of interest rate, cur-rency and cross-currency swaps and currency options, as part of anoverall risk management policy. These instruments are used to re-duce the foreign currency and interest rate risks relating to existingassets and liabilities and firm commitments.

Metso does not hold or issue derivative financial instruments fortrading purposes.

Metso uses principally forward exchange contracts to hedge thecurrency risk on certain commercial assets (receivables) and liabilities(payables) and firm commitments (orders). The derivatives are desig-nated at inception as a hedge with respect of the hedged item orgroup of items with similar characteristics. If a derivative has beencontracted to close or reduce net exposure to a certain currency orgroup of currencies, it is fair valued quarterly and the arising variationin fair values is recognized in the consolidated statements of income.

Notes to Consolidated Financial Statements(in millions)


Metso hedges its net foreign investments in certain currenciesto reduce the effect of exchange rate fluctuations. The hedging in-struments are cross-currency swaps, foreign currency loans, for-ward exchange contracts and options. Premium/discount on theforward exchange contracts are computed at the inception of thecontracts and recognized, net of taxes, in the cumulative transla-tion adjustments component of the equity over the life of the con-tracts. Both realized and unrealized exchange gains and lossesmeasured on these instruments are recorded, net of taxes, in a sep-arate component of equity against the translation differences aris-ing from consolidation.

Currency and cross-currency swaps are used to hedge foreigncurrency denominated loans. The translation differences arisingfrom the derivative instruments are recorded concurrently withthe translation difference of the underlying loans.

Metso’s exposure to interest rate risk, arising from interest bear-ing receivables and loans, is managed using interest rate swaps.The net of interest payable and receivable on the swaps is accruedand recorded in interest and other financial expenses to match theinterest income/expense on the related underlying hedge items.Realized gains and losses occurring from early termination of con-tracts are recorded in income over the remaining period of theoriginal swap agreement.

If the interest leg of a cross-currency swap or an interest swap hasnot been designated as a hedge of an underlying interest at its in-ception, the interest portion of the swaps is fair valued quarterly.

Other long-term investmentsMarketable debt securities, e.g. bonds, commercial papers andtime deposits are included in other long-term investments whentheir maturity, at the time of their acquisition, exceeds one year.Commencing in 1999 the unrealized gains on marketable securi-ties are not recognized in income.

Revenue recognitionSales and anticipated profits under long-term engineering andconstruction contracts with a contract value exceeding EUR 5 arerecorded on a percentage-of-completion basis, using either unitsof delivery (based on predetermined milestones) or cost-to-costmethod of accounting as the measurement basis. Estimated con-tract profits are recorded in earnings in proportion of recordedsales. In cost-to-cost method sales and profits are recorded afterconsidering the ratio of accumulated costs to estimated total coststo complete each contract. In certain cases, subcontractor materi-als, labor and equipment, are included in sales and costs of goodssold when management believes that Metso is responsible for theultimate acceptability of the project. Changes to total estimatedcontract costs and losses, if any, are recognized in the period inwhich they are determined.

Revenues from other goods and services sold are recognized,net of sales taxes, discounts and foreign exchange differences,when substantially all of the risks and obligations of ownership aretransferred to the buyer, or when the service is performed.

Sales, against which trade-ins are accepted, are recorded at thenominal or contract price. The difference between the trade-in al-lowance and the recorded value of the inventory received is recog-nized in cost of goods sold.

Research and developmentResearch and development costs are expensed as incurred. Suchcosts may have been deferred in a limited number of cases, where

they have had alternative future use. Should such costs have beendeferred, systematic amortization has been made over periods notexceeding five years. Commencing on January 1, 1999, all researchand development expenses are expensed as incurred.

Maintenance, repair and renewalsMaintenance, repairs and renewals are generally charged to ex-pense as incurred. However, major betterments are capitalized anddepreciated over their expected useful lives.

Pensions and coverage of pension liabilitiesThe pension coverage of personnel working for Metso in Finland ismainly insured by payments made to pension insurance compa-nies and, to some extent, by an internal Pension Fund. The Fundhas been closed to new employees since 1987.

The companies within Metso have various pension schemes inaccordance with the local conditions and practices in the coun-tries in which they operate. The schemes are generally fundedthrough payments to insurance companies or to trustee-adminis-tered funds as determined by periodic actuarial calculations. Met-so has met minimum funding requirements for the countries inwhich it maintains pension schemes.

A portion of Valmet’s voluntary additional pension liability in-curred in previous years has not been fully funded. It was recordedin assets as unfunded pensions and in liabilities as long-term ac-crued expenses. This pension liability amounting to EUR 12 at De-cember 31, 1998 was charged to income in 1999, net of taxes, andis included in extraordinary expenses in the consolidated state-ment of income.

Fixed assets and long-term investmentsIntangible and tangible assets are stated at cost, less accumulateddepreciation. Land and water areas are not depreciated.

Depreciation and amortization is calculated on a straight-linebasis over the expected useful lives of the assets as follows:

Buildings 15 – 40 yearsMachinery and equipment 3 – 20 yearsOther tangible assets 5 – 20 yearsIntangibles,other than goodwill 3 – 12 yearsGoodwill 5 – 20 years

Gains and losses on the disposal of fixed assets are included inoperating profit (loss) or in extraordinary items depending on thenature of the disposal.

Metso reviews long-lived assets and certain intangibles to be heldand used by the company for impairment whenever events andchanges in circumstances indicate that the carrying amount of anasset may not be recoverable. When such events or changes in cir-cumstances indicate that an asset may not be recoverable, Metsoestimates the future cash flows expected to result from the use ofthe asset and its eventual disposal. If the sum of such expected fu-ture cash flows (undiscounted and without interest charge) is lessthan the carrying amount of the asset, an impairment loss is recog-nized in an amount by which the asset’s net book value exceeds itsfair market value. For purposes of assessing impairment, assets areto be grouped at the lowest level for which there are separatelyidentifiable cash flows. The carrying value of goodwill for each busi-ness area is reviewed if the facts and circumstances, such as declinesin sales, operating profit or cash flows or material adverse changes


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in the business climate, suggest that its carrying value may not berecoverable.

Capitalization of interest expensesCommencing on January 1, 1999, the interest expenses of self-con-structed investments exceeding EUR 10 are capitalized in Metso’sfinancial statements. The capitalized interest expense is amortizedover the remaining useful life. The cumulative effect of the changein the accounting principles of EUR 7, before taxes, was recorded inextraordinary income in 1999.

Revaluation of fixed assetsCommencing on January 1, 1999 fixed assets are no longer reval-ued. Revaluation recognized in prior periods, amounting to 12 EUR,has been reversed in 1999 by canceling the revaluation reserve inthe shareholders’ equity against a reduction in the value of sharesheld in associated companies.

LeasingRental expenses for operational leases are expensed as incurred.Acquisitions of property and equipment under capital leasing arerecorded in fixed assets and depreciated over their expected use-ful lives.

Own shares (treasury stock)The own shares held by Metso are valued at reacquisition price ina separate caption under financial assets.

The own shares have been deducted from the number of sharesoutstanding and the share capital for the calculation of per shareand other performance related indicators.

Cash and cash equivalentsCash and cash equivalents consist of cash in banks and other liq-uid investments with original maturity of ninety days or less.

InventoriesInventories are stated at the lower of historical cost calculated onan "average cost" basis or net realizable value. Historical costs in-clude purchase costs as well as transportation and processingcosts. The costs of finished goods include direct materials, wagesand salaries plus social costs, subcontracting and other directcosts. In addition, production costs include an allocable portion ofproduction and project administration overheads. Net realizablevalue is the estimated amount that can be realized from the sale ofthe asset in the normal course of business after allowing for thecosts of realization.

Inventories are shown net of a reserve for obsolete and slow-moving inventories. A reserve is established and a correspondingcharge is taken to income in the period in which the loss occursbased upon an assessment of technological obsolescence, turn-over and related factors.

Trade-in equipment received is recorded as inventory at thelower of cost or net realizable value reduced by a reasonable salesmargin.

Extraordinary itemsExtraordinary items, net of taxes, include significant income andexpenses not resulting from ordinary course of business opera-tions, income and expenses related to harmonization of account-ing principles between Rauma and Valmet, and to discontinuedactivities.

Equity share of untaxed reservesIn Finland and certain other countries, companies are permitted toreduce or increase taxable income by net charges or by incomerepresenting adjustments to untaxed reserve accounts, providedthat such amounts are reflected in the company’s financial state-ments and accumulated on the balance sheet. Such amounts areincluded, net of taxes, in other shareholders’ equity in the consoli-dated accounts.

Income taxesIncome taxes presented in the income statement consist of cur-rent and deferred taxes. Current taxes include estimated taxes cor-responding to the results for the financial year of the companies,and adjustments of taxes for previous years.

Commencing on January 1, 1999, a deferred tax liability or assethas been determined for all temporary differences between thetax bases of assets and liabilities and their amounts in financial re-porting, using the enacted tax rates effective for the future years.The deferred tax liabilities are recognized in the balance sheet infull, and the deferred tax assets at their estimated realizableamounts. Deferred tax assets are reduced by a valuation allowanceif, based on the weight of available evidence, it is more likely thannot that some portion or all of the deferred tax assets will not berealized. The cumulative effect of the change in accounting princi-ple of EUR 17 was recorded in income in 1999, and is included inextraordinary income in the consolidated statement of income.

No deferred tax liability has been recognized for undistributedearnings of domestic subsidiaries since such earnings can betransferred to the parent company without tax consequences.Metso does not provide deferred income taxes on undistributedearnings of foreign subsidiaries, except in situations where Metsohas elected to distribute earnings of foreign subsidiaries.

Earnings per shareEarnings per share is based on income before extraordinary itemsand income taxes adjusted for minority interests and taxes relatedto normal business operations. This amount is divided by theweighted average number of shares outstanding during each peri-od. The average number of own shares has been deducted fromthe number of outstanding shares.

The diluted earnings per share have been computed by apply-ing the "treasury stock" method, under which earnings per sharedata is computed as if the warrants and options were exercised atthe beginning of the period, or on the issuance of if later, and as ifthe funds obtained thereby were used to purchase common stockat the average market price during the period. In addition to theweighted average number of shares outstanding, the denominatorincludes the incremental shares obtained through the assumedexercise the warrants and options.

The assumption of exercise is not reflected in earnings per sharewhen the exercise price of the warrants and options exceeds theaverage market price of the common stock during the period. Thewarrants and options have a dilutive effect only when the averagemarket price of the common stock during the period exceeds theexercise price of the warrants and options.

WarrantyAn accrual is made for expected warranty costs. The adequacy ofthis accrual is reviewed periodically based on historical analysisand anticipated product returns.



2 Selling, general and administrative expenses

Selling, general and administrative expenses consist of the following:Year ended December 31,

1997 1998 1999EUR EUR EUR

Marketing and selling expenses (359) (369) (356)Research and development expenses (115) (117) (126)Amortization of goodwill (14) (16) (18)Administrative expenses (268) (255) (294)Total (756) (757) (794)

3 Personnel expenses and number of personnel

Information regarding personnel expenses and number of personnel are as follows: Year ended December 31,

1997 1998 1999EUR EUR EUR

Salaries to the members of boards of directors and managing directors of groupcompanies 15 14 15Other wages and salaries 721 731 743Pension costs 96 92 85Other indirect employee costs 147 133 150Total 979 970 993

1997 1998 1999Number of personnel:Personnel, average 23,612 23,754 22,965Personnel, at end of year 23,496 23,064 23,274

4 Other income and expenses, net

Other income and expenses consist of the following:Year ended December 31,

1997 1998 1999EUR EUR EUR

Other income 71 11 34Other expenses (15) (7) (14)Total 56 4 20

In 1997 other income included gain on disposal of Tamrock Corp's shares in the amount of EUR 25 and a gain of EUR 34 on sale of 25.4 %holding in Sisu Corp.


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5 Nonrecurring operating expenses

Nonrecurring operating expenses consist of the following:Year ended December 31,

1997 1998 1999EUR EUR EUR

Direct costs related to merger - - 4

Downsizing expenses and restructuring expenses related to mergerSeverance and related costs - - 29Write-down of fixed assets - - 11Other costs - - 18

- - 58

Integration expenses - - 5

Total - - 67

Direct costs include finder's fee, fees to outside consultants for accounting and legal assistance related to the merger of Valmet andRauma.

Restructuring expenses consist of both accrued and paid expenses related to restructuring the business operations. Downsizing expens-es consist of actions taken to adjust the business to a weakened market situation.

Integration expenses consist of expenses occurred in connection with the introduction of the Metso name and of fees to outside consult-ants involved in the integration of the two groups.

6 Depreciation and amortization

Depreciation and amortization expense consists of the following:Year ended December 31,

1997 1998 1999EUR EUR EUR

Intangible assetsGoodwill 14 16 18Other intangible assets 8 9 9

Tangible assetsBuildings 14 16 18Machinery and equipment 80 86 80Other tangible assets 3 4 5

Total 119 131 130

Depreciation and amortization charged against operations by activity areas as follows:Year ended December 31,

1997 1998 1999EUR EUR EUR

Cost of goods sold 64 71 60Marketing, selling and administrative expenses

Marketing and selling 8 8 7Research and development 11 11 14Administrative 22 25 31Amortization of goodwill 14 16 18

Total 119 131 130



7 Financial income and expenses, net

The following table provides a summary of financial income and expenses:

Year ended December 31,1997 1998 1999

EUR EUR EURFinancial income:

Dividends received 5 10 9Interest income 25 25 18Other financial income 5 11 3Net gain from foreign exchange 10 4 8

Financial income total 45 50 38

Financial expenses:Interest expenses (36) (42) (49)Other financial expenses (9) (6) (8)

Financial expenses total (45) (48) (57)

Financial income and expenses, net 0 2 (19)

8 Investments in associated companies

In addition to information provided below for investments in associated companies,see also note 14. Year ended December 31,

1997 1998 1999EUR EUR EUR

Dividends received 1 3 5Share of profits or losses in associated companies 3 4 3Equity value of investments in associated companies 46 43 23


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9 Extraordinary income and expenses

The following extraordinary income and expenses include significant transactions considered outside the normal course of business andeffects of changes in the accounting principles.


EUR EUR EURExtraordinary income, net of taxes

Capitalization of interest on self-constructed assets - - 5Recognition of deferred tax asset from prior years - - 17

Extraordinary income, net of taxes - - 22

Extraordinary expenses, net of taxesCompensation to Beloit on patent disputes (10) - -Final settlements of disposed activities - (2) -Allocation of badwill arising from the acquisition ofValmet Automotive to fixed assets - - (11)Write-down of Atlas goodwill - - (54)Recognition of unfunded pension liabilities - - (16)

Extraordinary expenses, net of taxes (10) (2) (81)

Extraordinary income and expenses, net (10) (2) (59)

Goodwill of AtlasIn July 1997, Valmet acquired a U.K. based company, Atlas Converting Equipment plc, and its subsidiaries, for a net price of EUR 126 result-ing in a goodwill of EUR 83, which is amortized on a straight-line basis over 15 years. A major portion of Atlas’ business has been in theAsia-Pacific area where the slow down of economy has reduced the local demand for converting machines and generated a world wideprice competition seriously affecting the profitability of Atlas. In accordance with FAS No 121 – Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of, Metso has reviewed the future undiscounted cash flows of Atlas’ business for im-pairment. The carrying amount of Atlas exceeds the sum of these cash flows. Based on the present value of future cash flows an impair-ment loss of EUR 54 was recognized. The discount rate used takes into account the financial costs of the investment added by a risk factoradherent to the business, the annual growth assumption used is 2%.

The impairment valuation involves management judgement as to the future development of the economic climate of Asia Pacific. Theoutcome and its impact on Atlas’ results may differ from the management’s estimates.



10 Income taxes

The domestic and foreign components of income before extraordinary items and income taxes are as follows:Year ended December 31

1997 1998 1999EUR EUR EUR

Finland 233 159 13Other countries 95 92 (41)Total 328 251 (28)

The components of income taxes are as follows: Year ended December 31,

1997 1998 1999Current taxes EUR EUR EUR

Finland 59 39 19Other countries 29 24 15

88 63 34

Deferred taxes

Finland (2) (1) (21)Other countries (4) 1 (13)

(6) 0 (34)

Current and deferred taxes 82 63 0Tax effect of extraordinary items (4) (1) (24)Income taxes, total 78 62 (24)

The differences between income tax expense (benefit) computed at Finnish statutory rates (28% in 1997, 1998,1999 and 29 % in 2000)and income tax expense (benefit) provided on earnings are as follows:


EUR EUR EUR

Income tax expense (benefit) at Finnish statutory rate 92 70 (8)Income tax for prior years (1) 0 0Deduction for write-down of investments in subsidiaries (2) - -Temporary differences for which no deferred tax has been provided (8) (7) (3)Benefit of operating loss carryforwards (12) (13) (8)Amortization of goodwill 3 4 5Nontaxable income (1) (1) (1)Nondeductible expenses 7 1 3Hedging transactions 0 0 -Taxes on foreign subsidiaries' net income in excess ofincome taxes at Finnish statutory rates 2 7 (1)Operating losses with no current tax benefit 4 - 11Effect of change in accounting principles - - (24)Other (6) 1 2Income tax expense (benefit) 78 62 (24)


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The components of net deferred tax asset (liability) consist of the following:Year ended December 31,

1998 1999EUR EUR

Noncurrent assets:Tax losses carried forward 51 67Provisions 2 36Other 26 20Valuation allowance (46) (43)

33 80

Current assets:Intercompany profit in inventory 9 9Provisions 26 35Valuation allowance - (2)

35 42

Current liabilities:Pensions and other (10) (9)

Noncurrent liabilities:Accelerated depreciation and other untaxed reserves (32) (22)Other (34) (44)

(66) (66)

Deferred tax asset (liability), net (8) 47



11 Earnings per share

Earnings per share is calculated as follows:Year ended December 31,

1997 1998 1999EUR EUR EUR

Income before extraordinary items and income taxes 328 251 (28)Minority interests (4) (2) (1)Taxes on normal business operations (82) (63) 0

242 186 (29)

Weighted average number of shares issued and outstanding (in thousands) 136,265 135,826 135,632

Earnings per share 1.78 1.37 (0.22)

Weighted average number of diluted shares issued and outstanding (in thousands) 136,654 136,050 135,711

Diluted earnings per share 1.77 1.37 (0.22)

12 Intangible and tangible assets

Year ended December 31,1998 1999

EUR EUR

GoodwillAcquisition cost at beginning of year 333 312Increases 13 73Decreases (21) (2)Exchange gains (losses) (13) 9Accumulated depreciation at end of year (135) (222)Net book value at end of year 177 170

Other intangible assetsAcquisition cost at beginning of year 85 95Increases 14 17Decreases (3) (26)Exchange gains (losses) (1) 2Accumulated depreciation at end of year (48) (42)Net book value at end of year 47 46

Land and water areasAcquisition cost at beginning of year 56 54Increases 2 1Decreases (3) (1)Exchange gains (losses) (1) 2Net book value at the end of the year 54 56

Notes to Consolidated Financial Statements(in millions, except for per share amounts)


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EUR EURBuildingsAcquisition cost at beginning of year 358 369Increases 25 61Decreases (8) (8)Exchange gains (losses) (6) 16Accumulated depreciation at end of year (134) (176)Net book value at end of year 235 262

Machinery and equipmentAcquisition cost at beginning of year 940 969Increases 84 67Decreases (39) (77)Exchange gains (losses) (16) 44Accumulated depreciation at end of year (683) (707)Net book value at end of year 286 296

Other tangible assetsAcquisition cost at beginning of year 40 45Increases 7 22Decreases 0 (2)Exchange gains (losses) (2) 2Accumulated depreciation at end of year (31) (48)Net book value at end of year 14 19

Assets under constructionAcquisition cost at beginning of year 36 46Increases 38 27Decreases (28) (25)Exchange gains (losses) 0 3Net book value at end of year 46 51



13 Capitalization of interest expenses

The capitalized interest expenses are following:As at December 31,

1999EUR

Net capitalized interest, beginning of year -Capitalized interest expense *) 7Amortization of capitalized interest expense (1)Net capitalized interest, end of year 6

*) Includes EUR 7 of accumulated capitalized interest expenses from prior years following a change in accounting principles.

14 Shareholdings and other securities

Shareholdings and other securities consist of the following:

Investments in associated companies: Year ended December 31,1998 1999

Number % Equity Number % Equityof shares ownership value of shares ownership value

EUR EUR

Oy Scan-Auto Ab 350,000 50% 22 - - -Sako Ltd 40,000 50% 7 80,000 100% 7Other 14 16Total investment in associated companies 43 23

Investments in shareholdings and other securities:

Number % Book Fair Number % Book Fairof shares ownership value value of shares ownership value value

EUR EUR EUR EUR

UPM-Kymmene Corporation 1,984,396 0.7% 29 48 1,670,596 0.6% 25 67Tamfelt Corporation 242,100 2.7% 4 5 242,100 0.1% 4 6Merita Plc 440,000 0.1% 1 2 700,416 0.1% 3 5Sampo Insurance Company Plc 356,408 0.6% 1 11 285,508 0.5% 1 10Sato Corporation 86,760 3.9% 4 4 86,760 4.0% 4 4Partek Corporation 4,126,039 8.5% 57 32 4,126,039 8.5% 57 56Other shares 19 20 7 7Total investment in other securities 115 122 101 155

Total shareholdings and other securities 158 165 124 178

Own shares held by Metso Corporation - - 560,841 0.4 % 6 7


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15 Other long-term investments

Other long-term investments consist of time deposits, certificates of deposits, treasury bills and bonds and other securities with a matu-rity of greater than one year at the time of acquisition. They amounted to EUR 78 at December 31, 1998 and to EUR 55 at December 31,1999. Prior to January 1, 1999 the long-term investments were fair valued quarterly. Commencing on January 1, 1999 they are recordedat lower of cost or market value.

Information regarding other long-term investments is as follows:

As at December 31,1998 1999

Unrealized Unrealized Fair Unrealized Unrealized FairCost gains losses value Cost gains losses valueEUR EUR EUR EUR EUR EUR EUR EUR

Time deposits 4 - - 4 - - - -Bonds 21 1 - 22 12 1 - 13Other securities 50 2 - 52 43 - - 43Total 75 3 - 78 55 1 - 56

Additional information regarding other long-term investments is as follows:Year ended December 31,

1997 1998 1999EUR EUR EUR

Purchases 59 24 10Proceeds from sales 41 19 20Proceeds from maturities 48 25 15Realized gains 6 4 2Realized losses - - -

Realized gains and losses on the sale of securities are determined by reference to the carrying value of the specific security sold.

As of December 31, 1999, the maturity dates of long-term investments in debt securities are as follows:EUR

Less than five years 47Five to ten years -More than ten years -Total 47

16 Unfunded pensions

Unfunded pension liability refers to the portion of total pension liability, which has not been expensed. As of December 31, 1998,it consisted of following:

EUR

Voluntary additional pension liability to former Valmet's pension plan 6 Additional direct pension liability 6Total 12

The unfunded pension liability of EUR 12 is included in assets and long-term accrued liabilities in the consolidated balance sheet for theyear ended December 31, 1998. In 1999 the remaining balance of the unfunded liability was expensed.



17 Cost and earnings of projects under construction in excess of billings/billings in excess of cost and earnings of projects under construction

Information on balance sheet items of uncompleted contracts at December 31, 1999 is as follows:

Cost andearnings of

uncompleted Billings ofprojects projects Net

EUR EUR EUR

Projects where cost and earnings exceed billings 437 279 158Projects where billings exceed cost and earnings 82 218 136

18 Interest bearing and non-interest bearing assets

Year ended December 31,1998 1999Non- Non-

Interest interest Interest interestbearing bearing Total bearing bearing Total

EUR EUR EUR EUR EUR EURFinancial assetsLoans receivable - 10 10 1 9 10Accounts receivable 61 7 68 53 4 57Other long-term investments 78 - 78 55 - 55Total 139 17 156 109 13 122

ReceivablesAccounts receivable 29 580 609 40 735 775Cost and earnings of projectsunder construction in excess ofbillings - 203 203 - 158 158Loans receivable 2 3 5 1 5 6Prepaid expenses and accrued income - 132 132 - 151 151Other receivables - 24 24 - 106 106Other short-term investments 8 - 8 1 - 1Total 39 942 981 42 1,155 1,197

19 Shareholders' equity

As of December 31, 1999 Metso had 135,817,275 issued shares with a par value of 10 Finnish markka the share capital being EUR 228.Under its Articles of Association Metso Corporation's authorized share capital may not be less than EUR 168 nor more than EUR 673.At the closing of the financial year Metso held 560,841 of its own shares. The reacquisition price of EUR 6 has been recorded in the reservefor own shares at cost.

Calculation of distributable funds at December 31, 1999:EUR

Reserve for own shares 6Other reserves 202Retained earnings 511Result for the financial year (88)Equity share of accelerated depreciation and other untaxed reserves (44)Reserve for own shares (6)Total distributable funds 581

The parent company's distributable funds at December 31, 1999 were EUR 461. The distribution of dividends to shareholders is limited tothe lower of consolidated distributable funds or distributable funds held by the parent company.


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20 Long-term debt

Long-term debt consists of the following at December 31:1998 1999

EUR EUR

Bonds 229 257Loans from financial institutions 100 124Loans from pension institutions 88 82Other long-term loans 35 57

452 520

Less current maturities 36 34

Total 416 486

Bonds:The bonds consist of two loans: a USD 200 bond (EUR 199) and a FIM 300 (EUR 50) bond. The USD denominated bond was issued in the Unit-ed States in December 1997 and registered with the Securities Exchange Commission (SEC). It matures in 2007 and bears a fixed annual inter-est rate of 6.875%. A portion of the bond has been converted through a currency swap agreement of GBP 45 (EUR 72) into British pound ster-ling with a fixed annual rate of 7.51%. The currency swap agreement matures concurrently with the bond.

The FIM denominated bond matures between 2000 and 2002 and bears a fixed annual interest rate of 10%. The bond has been convertedinto USD and to different rates of interest through cross-currency and interest rate swaps. The unrealized foreign currency differences, arisingfrom the USD denominated currency leg of the derivatives, have been recognized against the nominal value of the bond.

Loans from financial institutions:Loans from financial institutions consist of international bank borrowings with either fixed or variable interest rates. A major share of loansare EUR and USD denominated. The interest rates vary from 2.35% (CHF) to 12.5% (ZAR). The loans are payable from year 2000 to 2006.

In July 1998 Metso entered into a syndicated seven-year revolving credit facility with a group of international banks for DEM 450 (EUR 230).A syndicated credit facility of USD 80 (EUR 80) contracted by Metso expires in January 2002. At December 31, 1999 EUR 35 of the facilities weredrawn, at December 31, 1998 both facilities were undrawn.

Loans from pension institutions:In accordance with Finnish law, Finnish companies may borrow from their pension insurance companies a portion of amounts contributed forpensions during the year. As of December 31, 1999 the remaining balance of pension loans contracted prior to 1996 amounted to EUR 46.Principal payments are due annually based on 7% of the outstanding balance on the anniversary date of the loan. The interest rate, which isregulated by the Finnish government, was 5.5% from January 1, 1997 through December 31, 1998, 5% from January 1, 1999 to June 30, 1999and 5.25% from July 1, 1999 onwards.

After changes effective from 1996, new pension loans became available for a maximum period of ten years either with fixed or variableinterest rates. A further EUR 42 was borrowed in 1998 for seven years with a fixed interest rate of 3.95% p.a. It is payable in semiannualinstallments after two years’ grace period.

Other long-term loans:Other long-term loans consist principally of pension liabilities amounting to EUR 20 at December 31, 1998 and EUR 24 at December 31,1999.



Maturities of long-term debt as of December 31, 1999 are as follows:Loans from Loans from Other

financial pension long-termYear Bonds institutions institutions loans Total

EUR EUR EUR EUR EUR

2000 17 8 3 6 342001 17 6 11 12 462002 24 5 11 5 452003 - 4 11 1 162004 - 3 10 1 14Later 199 98 37 31 365

Options to purchase securities:The Annual General Meeting of former Rauma’s Shareholders held on April 2, 1996, approved a proposal by the Board of Directors to issuea bond loan with warrants to persons belonging to the management of former Rauma. The five-year bonds have been issued to 48 seniormembers of management for an aggregate amount of EUR 0.2 at an interest rate of five percent and an issue price of 100 percent. Thewarrants entitle the holders to subscribe to an aggregate total of 900,000 shares of Metso during the period of April 2, 2000 through Jan-uary 31, 2002 at a price of FIM 92 (EUR 15) per share. The original exercise price of FIM 100 (EUR 17) per share has been adjusted for theconversion ratio of the Rauma shares of 1.08917.

21 Other long-term liabilities - Accrued expenses

Long-term accrued liabilities consist of the following at December 31:1998 1999

EUR EUR

Pension liabilities 16 18Accrued postretirement benefits - 11Other long-term provisions and accruals 10 18Total 26 47

22 Other interest bearing short-term debt

Other interest bearing short-term debt consists of the following at December 31:1998 1999

EUR EUR

Loans from financial institutions 51 110Domestic commercial paper-financing 30 23Euro Commercial Paper-financing 38 100Other 10 23Total 129 256

The weighted average interest rate applicable to short-term borrowing at December 31, 1998 and 1999 was 6.2% and 5.6%, respectively.The Company has established a short-term Euro Commercial Paper Program of USD 150 (EUR 149) and domestic commercial paperprograms amounting to EUR 80.

Metso had uncommitted unused credit facilities for financing with banks totaling EUR 397 and EUR 485 at December 31, 1998 and 1999,respectively.


Finan

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23 Accrued expenses and deferred income

Accrued liabilities and deferred income consist of the following at December 31:1998 1999

EUR EUR

Accrued personnel expenses 135 129Accrued project costs 176 229Provision for losses on projects 3 -Accrued expenses for plant reorganization 4 23Warranty and guarantee liabilities 90 91Environmental and product liabilities 4 5Taxes currently payable 30 25Other 94 167Total 536 669

24 Mortgages and contingent liabilities

Mortgages and contingent liabilities consist of the following at December 31:1998 1999

EUR EUR

Mortgages on corporate debt 6 3

Other pledges and contingenciesMortgages 5 7Pledged assets 2 1

Guarantees on behalf of associated company obligations 1 0Other guarantees 6 4Total 14 12

Repurchase and other commitments 3 9Employee benefit obligations 2 -

The mortgage amount on corporate debt has been calculated as the amount of corresponding loans. The nominal value of the mortgagesat December 31, 1999 was EUR 5 larger than the amount of the corresponding loans. The pledged assets amount has been calculated asthe amount of the corresponding loans and other commitments.

25 Lawsuits and claims

Several product liability suits against Metso Corporation are pending in the USA. Management does not believe that the outcome of theseactions, individually or in the aggregate, will have a material adverse effect on Metso’s business, liquidity, results of operations or financialposition. The normal risks of legal disputes concerning deliveries cannot be regarded as material in terms of Metso’s total business activities.

26 Leasing contracts

Metso leases offices, manufacturing and warehouse space under various noncancelable leases. Certain contracts contain renewal optionsfor various periods of time.Minimum annual rentals for operating leases in effect at December 31, 1999 are shown in the table below:

Fiscal: EUR2000 342001 232002 172003 122004 92005 and later 25Total minimum lease payments 120

Total rental expense amounted to EUR 41, EUR 46 and 37 EUR in the years ended December 31, 1997, 1998 and 1999, respectively. Amountsunder capital leases are not significant.



The utilization of financial derivatives (expressed as notional amounts) can be divided as follows:As at December 31,

1998 1999EUR EUR

Trade flow related currency derivativesEar-marked with underlying item 575 238Fair valued derivatives - 301

Foreign currency denominated equity 758 230Foreign currency denominated loans 63 139Short-term funding 87 -Long-term funding 50 59Mitigation of interest risk 130 121Total notional amount of derivative instruments 1,663 1,088

The following table presents the notional amounts, carrying amounts and fair values of derivative financial instruments at December 31:

1998 1999Notional Carrying Fair Notional Carrying Fairamount amount value amount amount value

EUR EUR EUR EUR EUR EUR

Forward exchange contracts 1,256 3 9 647 (5) (9)Cross-currency swaps 180 (1) 5 74 (4) (4)Currency swaps 64 0 (4) 206 (26) (25)Interest rate swaps 130 (1) (2) 121 (0) (0)Currency options 34 0 (1) 40 4 4

Carrying amounts noted in the table above are included in the balance sheet. The notional amounts indicate the volumes in the use ofderivatives, they do not indicate the exposure to risk. The fair value reflects the estimated amounts that Metso would receive or pay toterminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts.

27 Financial instruments

Foreign currency risk managementBoth the production and sales activities of Metso are geographically widely spread creating exposure to various currency risks, the maincurrencies being USD, EUR, GBP and SEK.

The trade flow related currency risks are hedged with forward exchange contracts. Foreign exchange gains and losses reported in theoperating profit (-loss) resulted in a net gain of EUR 4 in 1998, and a net gain of EUR 5 in 1999.

Currency swaps, forward exchange contracts and, to some extent, options are used to hedge the equity investments denominated incertain foreign currencies. Their maturities vary from less than one year to seven years.

Metso has made long-term USD- and GBP-denominated loans to its foreign subsidiaries. The resulting currency risk has been hedgedwith cross-currency swaps and forward exchange contracts.

Forward exchange contracts are used to mitigate foreign currency risk arising from short-term borrowing. Prior to the introduction ofEUR, short-term funding was mainly done in USD and the currency risk was hedged with forward exchange contracts. Commencing onJanuary 1, 1999 the main currency for short-term borrowing is EUR.

Both the currency and the fixed interest rate of FIM 300 bond (EUR 50) have been converted with a FIM/USD cross currency swap,which matures in 2002. The notional amount of the contract at December 31, 1998 and 1999 was EUR 50 and EUR 59, respectively.

Metso measures and monitors foreign currency risk using sensitivity analysis. The hedging of net equity investments of foreign subsid-iaries, of short- and long-term funding are managed by the Corporate Treasury.

Interest rate managementMetso uses both interest and cross currency swaps to mitigate the interest risks arising from interest bearing receivables and debt. Thenotional amount of interest rate swaps outstanding at December 31, 1998 and 1999 was EUR 130 and EUR 121, respectively. Interest raterisk is managed using sensitivity analysis.


Finan

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As of December 31, 1999 the maturities of the financial derivatives are following (expressed as notional amounts):

2000 2001 2002 2003 2004 and afterEUR EUR EUR EUR EUR

Forward exchange contracts 594 51 2 - -Cross-currency swaps - - 67 - 7Currency swaps 82 - - - 124Interest rate swaps 82 19 20 - -Currency options 40 - - - -

Fair value of financial instrumentsU.S. FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments,” requires the disclosure of estimated fair values forall financial instruments, both on- and off-balance-sheet, for which it is practicable to estimate fair value. Metso has used a variety ofmethods and assumptions, which were based on market conditions and risks existing at the time to estimate the fair value of the Group’sfinancial instruments at December 31, 1998 and 1999. For certain instruments, including cash and cash equivalents, accounts payable andaccruals and short-term debt, it was assumed that the carrying amount approximated fair value due to the short maturity of those instru-ments. Quoted market prices or dealer quotes for the same or similar financial instruments were used to estimate the fair value for mar-ketable securities and long-term investments. Other techniques, such as estimated discounted cash flows or replacement cost have beenused to determine fair value for the remaining financial instruments.


Carrying Fair Carrying Fairvalue value value value

EUR EUR EUR EUR

Assets:Shareholdings and other securities(excluding shares in associated companies) 158 122 101 155Own shares - - 6 7Loans receivable, long-term 10 10 10 10Accounts receivable, long-term 68 68 57 57Other long-term investments 78 78 55 56Accounts receivable, short-term 609 609 775 775Loans receivable, short-term 5 5 6 6Short-term investments 8 8 1 1Cash and cash equivalents 225 225 159 159

Liabilities:Bonds 229 255 240 235Loans from financial institutions 77 81 116 114Pension loans 85 85 79 78Other long-term debt 25 25 51 51Current portion of long-term loans 36 36 34 34Other interest-bearing short-term debt 129 128 256 256



29 Principal subsidiaries

ShareholderCountry percentage

Fiber and Paper TechnologyValmet Oy Finland 100.0Valmet-Karlstad AB Sweden 100.0Valmet Inc. United States 100.0Valmet Fibertech AB Sweden 100.0Valmet Mechanical Pulping Oy Finland 100.0Valmet Canada Inc. Canada 100.0Valmet-Como S.p.A. Italy 100.0Valmet Woodhandling Oy Finland 100.0Valmet Manufacturing AB Sweden 100.0

Converting EquipmentValmet Rotomec S.p.A. Italy 100.0Atlas Converting Equipment plc Great Britain 100.0

Automation and Control TechnologyNeles Field Controls Oy Finland 100.0Neles Paper Automation Oy Finland 100.0Neles Automation Networks Oy Finland 100.0Neles Automation SCADA Solutions Ltd Canada 100.0Jamesbury Inc. United States 100.0

MachineryForest Machines

Timberjack Oy Finland 100.0Timberjack AB Sweden 100.0Timberjack Corporation United States 100.0Timberjack Inc. Canada 100.0

Rock and Mineral ProcessingNordberg-Lokomo Oy Finland 100.0Nordberg Inc. United States 100.0Nordberg Sales Corp. United States 100.0Nordberg-Bergeaud S.A. France 100.0

Gears and ComponentsSantasalo Gears Oy Finland 100.0

Manufacture of Specialty CarsValmet Automotive Oy Finland 100.0

28 Concentrations of credit risk

Metso is exposed to credit risk primarily in relation to the use of financial instruments and trade receivables. The companies within Met-so conduct diverse business activities with a large number of customers and suppliers. The receivables are well diversified and, whereappropriate, secured by various trade finance instruments such as letters of credit or by withheld security interest in products sold underextended credit terms. In the use of financial instruments, Metso minimizes credit and counterparty risk by dealing only with major localor international banks and financial institutions or companies with investment grade credit ratings.

Management believes that no significant unmanaged concentration of credit risk with any individual customer, counterparty or geo-graphical region exists for Metso.


Finan

cial Statemen

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30 Business area and geographic information

Net sales by business area: Fiber and AutomationPaper and Control

Technology Technology Machinery Total1997 EUR EUR EUR EURNet sales to unaffiliated customersand other business areas 2,237 598 1,138 3,973Sales to other business areas (3) (26) (46) (75)Net sales to unaffiliated customers 2,234 572 1,092 3,8981998Net sales to unaffiliated customersand other business areas 1,946 597 1,209 3,752Sales to other business areas (3) (20) (34) (57)Net sales to unaffiliated customers 1,943 577 1,175 3,6951999Net sales to unaffiliated customersand other business areas 1,711 599 1,155 3,465Sales to other business areas (6) (40) (32) (78)Net sales to unaffiliated customers 1,705 559 1,123 3,387

Net sales of Fiber and Paper Technology business area:Fiber Paper Converting

Technology Technology Equipment TotalEUR EUR EUR EUR

1997Total net sales 557 1,535 145 2,237Intra-business area sales - - - -Net sales to unaffiliated customersand other business areas 557 1,535 145 2,2371998Total net sales 408 1,356 185 1,949Intra-business area sales (3) - - (3)Net sales to unaffiliated customersand other business areas 405 1,356 185 1,9461999Total net sales 388 1,203 136 1,727Intra-business area sales (15) (1) - (16)Net sales to unaffiliated customersand other business areas 373 1,202 136 1,711

Net sales of Machinery business area: Rock and Manu-Forest Mineral Gears and facture of

Machines Processing Components Specialty Cars TotalEUR EUR EUR EUR EUR

1997Total net sales 500 430 113 98 1,141Intra-business area sales - (1) (2) - (3)Net sales to unaffiliated customersand other business areas 500 429 111 98 1,1381998Total net sales 530 465 96 120 1,211Intra-business area sales - (1) (1) - (2)Net sales to unaffiliated customersand other business areas 530 464 95 120 1,2091999Total net sales 471 469 103 114 1,157Intra-business area sales - - (2) - (2)Net sales to unaffiliated customersand other business areas 471 469 101 114 1,155



Operating profit (loss) by business area:1997 1998 1999

EUR EUR EUR

Fiber Technology 31 24 (12)Paper Technology 120 96 (38)Converting Equipment 1 (9) (25)Fiber and Paper Technology total 152 111 (75)

Automation and Control Technology 33 38 6

Forest Machines 35 42 28Rock and Mineral Processing 32 34 22Gears and Components 14 7 1Manufacture of Specialty Cars 19 25 27Machinery total 100 108 78

Corporate Headquarters and other 40 (11) (19)

Metso total 325 246 (10)

Capital employed by business area:1997 1998 1999

EUR EUR EUR

Fiber Technology 114 92 126Paper Technology 565 480 463Converting Equipment 159 151 78Fiber and Paper Technology total 838 723 667



Corporate Headquarters and other 240 360 391

Metso total 1,740 1,809 1,871


Finan

cial Statemen

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Capital expenditure (including business acquisitions) by business area:1997 1998 1999

EUR EUR EUR





Metso total 299 157 237

Depreciation and amortization by business area:1997 1998 1999

EUR EUR EUR





Metso total 119 131 130



Information about Metso's operations in different geographic areas as of and for the years ended December 31, 1997, 1998 and 1999 is as follows:

Other Other Rest ofNordic European North South Asia- the Elimi- Metso

Finland Countries Countries America America Pacific World nations totalEUR EUR EUR EUR EUR EUR EUR EUR EUR

Net sales to unaffiliatedcustomers by destination

1997 599 457 573 1,196 215 753 105 - 3,898

1998 479 455 863 1,110 158 547 83 - 3,695

1999 356 379 1,146 945 169 277 115 - 3,387

Fixed assets and financial assets by location

1997 670 117 200 217 7 19 2 - 1,232

1998 636 109 194 199 7 20 9 - 1,174

1999 579 110 160 260 6 28 9 - 1,152

Metso's export sales, including sales to unaffiliated customers and intra-group sales from Finland,in different geographic areas for the years ended December 31 are as follows:

Other Other Rest ofNordic European North South Asia- the Metso

Countries Countries America America Pacific World totalEUR EUR EUR EUR EUR EUR EUR

1997 336 286 301 33 488 23 1,467

1998 348 424 162 23 345 15 1,317

1999 355 590 163 22 136 11 1,277


Finan

cial Statemen

ts

July 1 - December 31,1999

EUR

Net sales -Cost of goods sold -Gross profit -

Selling, general and administrative expenses (12)Other income and expenses 16Nonrecurring operating expenses (7)Operating loss (3)

Financial income and expenses (4)Income before contributions, untaxed reserves and income taxes (7)

Group contributions 78Change in untaxed reserves -Change in accelerated depreciation -Extraordinary income and expenses -Income before taxes 71

Income taxes (16)

Net income 55

Parent Company Statement of Income( in millions )


ASSETS

December 31,1999

EUR

Fixed assets and financial assetsIntangible assets

Goodwill -Other intangible assets 1

1Tangible assets

Land and water areas 1Buildings 1Machinery and equipment 2Other tangible assets 1Assets under construction -

5Financial assets

Shareholdings and other securities 945Own shares 6Loans receivable 516Accounts receivable 13Other long-term investments 10

1,490Total fixed and financial assets 1,496

Current assetsInventories -

Materials and supplies -Work in process -Finished products -

-Receivables

Accounts receivable 12Loans receivable 273Accrued income and prepaid expenses 148Other receivables -Other short-term investments -

433Cash and cash equivalents 12Total current assets 445

Total assets 1,941

Parent Company Balance Sheet( in millions )


Finan

cial Statemen

ts

SHAREHOLDERS' EQUITY AND LIABILITIES

December 31,1999

EURShareholders' equity

Share capital 228Share premium reserve 82Legal reserve 216Reserve for own shares 6Other reserves 202Retained earnings 204Net income 55

Total shareholders' equity 993

Untaxed reserves 1

LiabilitiesLong-term debt

Bonds 240Loans from financial institutions 91Pension loans 51Other long-term debt 254

636Other long-term liabilities

Accrued expenses - -

Current liabilitiesCurrent portion of long-term debt 18Other interest-bearing short-term debt 248Advances received -Accounts payable 2Accrued expenses and deferred income 42Other current liabilities 1

311Total liabilities 948

Total shareholders’ equity and liabilities 1,941


ShareNumber capital Share Reserve

of (Par value premium Legal for own Other Retainedshares FIM 10 reserve reserve shares reserves earnings Total

(thousand) per share) EUR EUR EUR EUR EUR EUR

Opening balance at July 1, 1999 135,826 228 82 216 - 202 210 938

Cash paid for fractional shares (9) 0 0 - - - - 0

Reacquisition of own shares - - - - 6 - (6) 0

Income for the period - - - - - - 55 55

Balance at December 31, 1999 135,817 228 82 216 6 202 259 993

Parent Company Statement ofChanges in Shareholders’ Equity(in millions)


Finan

cial Statemen

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1995 1996 1997 1998 1999EUR EUR EUR EUR EUR

Net sales 3,096 3,697 3,898 3,695 3,387Net sales change % 9.4 19.4 5.4 (5.2) (8.3)Operating profit (loss) 214 274 325 246 (10)% of net sales 6.9 7.4 8.3 6.7 (0.3)Income before extraordinary items and income taxes 220 292 328 251 (28)% of net sales 7.1 7.9 8.4 6.8 (0.8)Income before taxes 226 280 318 249 (87)% of net sales 7.3 7.6 8.2 6.7 (2.6)Net income for the year 186 213 232 184 (88)

Exports and international operations 2,679 2,776 3,303 3,219 3,042% of net sales 86.5 75.1 84.7 87.1 89.8

Orders received 3,730 3,322 3,528 3,399 3,528Order backlog, December 31 2,366 2,000 1,718 1,342 1,586

Gross capital expenditure 118 154 163 133 121% of net sales 3.8 4.2 4.2 3.6 3.6Depreciation and amortization 110 118 119 131 130% of net sales 3.6 3.2 3.1 3.5 3.8Business acquisitions, net of cash acquired 5 13 136 24 116% of net sales 0.2 0.4 3.5 0.6 3.4

Research and development 91 115 119 119 127% of net sales 2.9 3.1 3.1 3.2 3.7

Shareholders' equity 927 1,004 1,161 1,206 1,085Net interest-bearing liabilities 63 (18) 181 178 465Balance sheet total 2,834 2,575 2,909 2,798 3,169Gearing, % 6.8 (1.8) 15.5 14.6 42.8Return on equity (ROE), % 21.9 23.3 22.5 16.1 (2.4)Return on capital employed (ROCE), % 19.0 22.6 23.0 16.5 1.6Equity to assets ratio, % 40.6 43.3 42.2 45.4 37.3

Average number of personnel 23,204 23,590 23,612 23,754 22,965

Formulas for calculation of financial indicators are presented on the following page.

Financial Indicators 1995 - 1999(in millions)


Formulas for Calculation of Financial Indicators

Gearing, %:

Net interest bearing liabilitiesx 100Shareholders´ equity + minority interests

Return on equity (ROE), %:

(Profit before extraordinary items and income taxes - taxes)x 100Shareholder´s equity + minority interests (average for period)

Equity to assets ratio, %:

(Shareholders´ equity + minority interests)x 100Balance sheet total – advances received

Return on capital employed (ROCE), %:

(Profit before extraordinary items and income taxes + interest and other financial expenses) x 100Balance sheet total – non-interest bearing liabilities (average for period)

Formulas for calculation of share-related indicators

Earnings / share: Effective dividend yield, %:Profit before extraordinary items and income taxes- taxes +/- minority interests Dividend per share

x 100Average number of shares during period Weighted average share price on Dec. 31

Equity / share: P/E ratio:

Shareholders' equity Weighted average share price on Dec. 31Number of shares at end of period Earnings per share

Dividend / share: Average share price:

Dividend distribution Total value of shares traded in euroNumber of shares at end of period Number of shares traded during period

Dividend / earnings, %: Market capitalization:

Dividend per share x 100 Total number of shares x share price at end of periodEarnings per share

Exchange rates used

Average rates Year end rates1999 1998 1997 1999 1998 1997 1996 1995

USD (US dollar) 1.0650 1.1126 1.1454 1.0046 1.1667 1.0969 1.2803 1.3641SEK (Swedish krona) 8.7100 8.8347 8.7489 8.5625 9.4874 8.6635 8.8111 9.0830GBP (Pound sterling) 0.6587 0.6719 0.6695 0.6217 0.7055 0.6612 0.7556 0.8820CAD (Canadian dollar) 1.5825 1.6461 1.5854 1.4608 1.8061 1.5721 1.7539 1.8604


Finan

cial Statemen

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Auditors’ Report

To the Shareholders of Metso Corporation,

We have audited the accounting records, the financial statements and the corporate governance ofMetso Corporation for the financial period ended December 31, 1999. Metso Corporation was formedthrough the merger of Valmet Corporation and Rauma Corporation on July 1, 1999. The financialstatements of the new parent company are for the period July 1, 1999 to December 31, 1999. The con-solidated financial statements have been prepared from the financial statements of the merged com-panies and their subsidiaries and relate to the period January 1, 1999 to December 31, 1999. The com-parative figures for previous years have been obtained by combining the official financial statementsof the merged companies.

The financial statements, which include the report of the Board of Directors, consolidated and par-ent company income statements, balance sheets and notes to the financial statements, have beenprepared by the Board of Directors and the Managing Director. Based on our audit we express anopinion on these financial statements and on corporate governance.

We have conducted the audit in accordance with Finnish Standards on Auditing. Those standardsrequire that we perform the audit to obtain reasonable assurance about whether the financial state-ments are free of material misstatement. An audit includes examining on a test basis evidence sup-porting the amounts and disclosures in the financial statements, assessing the accounting principlesused and significant estimates made by the management as well as evaluating the overall financialstatement presentation. The purpose of our audit of corporate governance is to examine that themembers of the Board of Directors and the Managing Director have legally complied with the rules ofthe Companies’ Act.

In our opinion the financial statements have been prepared in accordance with the Accounting Actand other rules and regulations governing the preparation of financial statements. The financial state-ments give a true and fair view, as defined in the Accounting Act, of both the consolidated and parentcompany’s result of operations as well as of the financial position. The financial statements with theconsolidated financial statements can be adopted and the members of the Board of Directors and theManaging Director of the parent company can be discharged from liability for the period audited byus. The proposal by the Board of Directors regarding the distributable assets is in compliance with theCompanies’ Act.

Helsinki, February 16, 2000

SVH Pricewaterhouse Coopers OyAuthorised Public Accountants

Tauno Haataja Lars BlomquistAuthorised Public Accountant Authorised Public Accountant


A flexibleknow-howdriven company



MarketsThe weak market situation inthe pulp and paper industryrestricted investment willing-ness in the sector in all themain markets until mid-1999when the situation began toimprove, especially in Europeand North America. TheAsian market continued to besplit between China, wherethe investment ratio of thecountry’s pulp and paperindustry was high, and therest of Asia where marketscontinued to be weak. Thecapacity utilization rates ofpaper mills improved some-what in the main markets andthe prices of some papergrades strengthened towardsthe end of the year. The priceof market pulp began a clearupward trend in the summerwhich continued for the restof the year.

The total demand for theproducts of the Fiber andPaper Technology businessarea did not essentially growin 1999. In Fiber Technology,the demand for productsincreased, but in Paper Tech-nology, the volume of ordersfor new paper and boardmachines continued to besmall. On the other hand, the

volume of rebuilds grewespecially in Europe. Themarket for Service picked upas pulp and paper mill utili-zation rates improved to-wards the end of the year.

Orders receivedand order backlogDuring 1999 new orders werereceived to the value of EUR1,866 million (EUR 1,718million). The volume of neworders in Fiber Technologygrew to EUR 542 million(EUR 333 million) mainlydue to orders for panelboardtechnology and mechanicalpulping equipment. Thevolume of new orders inPaper Technology also grew alittle from the previous yearand totaled EUR 1,304 mil-lion (EUR 1,233 million). Onthe other hand, new ordersfor converting equipment fellfrom the previous year,amounting to EUR 121million (EUR 152 million).

During the year underreview, orders were receivedfor 6 tissue machines, 3 papermachines and 3 board ma-chines, as well as 3 fiber linesand 5 panelboard lines. Otherorders were for rebuilds ofpaper, board and fiber lines,paper finishing systems and

air systems. The order back-log of the business area grewby 22 percent from the situa-tion at the end of 1998 andstood at EUR 1,226 millionon Dec. 31, 1999 (EUR 1,009million on Dec. 31, 1998).The order backlog of FiberTechnology was EUR 342million (EUR 154 million)while that of Paper Technolo-gy was EUR 924 million(EUR 788 million). The orderbacklog of converting equip-ment was EUR 58 million(EUR 68 million).

Net salesThe net sales of Fiber andPaper Technology during theyear under review were EUR1,711 million (EUR 1,949million in 1998), or 12 per-cent down on the previousyear. The net sales of FiberTechnology diminished by 5percent compared with 1998,totaling EUR 388 million(EUR 408 million). The netsales of Paper Technology fellby 13 percent and amountedto EUR 1,203 million (EUR1,356 million). The net salesof Converting Equipmentdecreased by 26 percent andwere EUR 136 million (EUR185 million). The decrease inthe net sales of Fiber and

Key figures

1998 1999(in millions) EUR EURNet sales 1,949 1,711Operating profit 112 (75)Orders received 1,718 1,866Order backlog, Dec. 31 1,009 1,226Personnel, Dec. 31 10,807 10,597

Fiber and Paper Technology

PresidentJuhani Pakkala


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Paper Technology resultedfrom the weak market situa-tion, which has continued fora long time, and in particularfrom reductions and post-ponements in orders for largeprojects during 1998.

ProfitabilityThe operating loss of Fiberand Paper Technology wasEUR 75 million (operatingprofit in 1998 EUR 112million), which included non-recurring expenses of EUR 45million. The operating loss ofFiber Technology was EUR 12million (operating profit EUR24 million), which includednonrecurring expenses of EUR20 million. The operating lossof Paper Technology was EUR38 million (operating profitEUR 96 million), whichincluded nonrecurring expens-es of EUR 23 million. Losseswere recorded by paper andboard machine operations, inparticular. The operating lossof converting equipment wasEUR 25 million (EUR 9million), which included non-recurring expenses of EUR2 million. Profitability wasweakened by the scarcity ofprojects and tight price com-petition.

Investmentsand acquisitionsIt was decided during theyear to establish a new serv-ice technology center inChina, representing an invest-ment of approx. EUR 11million. When it is completedin 2001 the center willstrengthen the business area’smarket position and servicecapabilities in the Chinesepulp and paper industry,which will carry out substan-tial modernization and re-newal of its productionmachinery in the comingyears, due to the growingdemand for paper, board andtissue. The technology centerwill both support the busi-ness area’s own machinedeliveries and offer a wideselection of expert servicesrelated to process improve-ments, rebuilds and mainte-nance services for all kinds offiber and paper productionlines.

The other investments ofthe business area focused onefficiency and productivityimprovements, and researchand development.

The fiberboard press divi-sion of the German companyEduard Küsters Maschinen-fabrik GmbH & Co. KG wasacquired for the Fiber andPaper Technology businessarea. The annual net sales ofthe division are approximate-ly EUR 13 million. In addi-tion, the German companyKvaerner Panel SystemsGmbH was acquired tosupplement the range ofequipment supplied to thepanelboard industry. Thecompany’s annual net salesare about EUR 45 millionand it employs about 250persons.

Research anddevelopmentResearch and development inFiber and Paper Technologyis focused on the manage-ment of total pulp and paperindustry processes and thereduction of their environ-mental impact. During theyear substantial R&D invest-ments continued at the tenresearch centers in Finland,

Sweden, Germany, GreatBritain, Italy and the USA.The Karlstad research centerin Sweden inaugurated a newtissue pilot machine incorpo-rating Through Air Drying(TAD) technology, which willfacilitate the more wide-spread commercialization ofthis technology. The Opti-Concept paper making linewas supplemented by launch-ing the OptiSoft Slimlinecalender developed for paperfinishing and the OptiSizerand OptiDoser coating equip-ment.

Among the Fiber Technol-ogy innovations that achievedmarket success were new-generation delignificationmethods for chemical pulp-ing, by which lignin is ex-tracted from wood in anefficient and environmentally-friendly way with the aid ofoxygen and ozone, thusdecreasing emissions in the




Net sales Operating profit Orders received Personnel

EUR million %EUR million EUR million


pulp bleaching process. Thepanelboard industry launchedcleaning systems developedfor use with recycled wood,and new-generation formingand pressing lines which saveenergy and raw materialcosts.

Operating structureand customersThe Fiber and Paper Technol-ogy business area was re-organized during the yearunder review into sevenbusiness lines. Fiber Technol-ogy includes the mechanicalpulping, chemical pulpingand panelboard technologybusiness lines, while PaperTechnology includes thepaper machines, board ma-chines, tissue machines andconverting business lines. Inaddition, the service opera-tions of the whole businessarea were divided into aseparate product group.

The products of Fiber andPaper Technology are sold bythe business area’s own sales

companies in 29 countries. Inaddition, the business area’s24 service centers cover allthe main markets.

The investments in fiberand paper technology ma-chines and systems are affect-ed by the development ofconsumption of paper, boardand panelboard, capacityutilization rates, the prices ofpulp and the different paperand board grades, and theneeds of panelboard manu-facturers.

Integrationand cost cuttingDue to the merger, and theadjustments required bybusiness restructuring and themarket situation, the Fiberand Paper Technology busi-ness area implemented large-scale changes during the yearunder review.

In Fiber Technology, panel-board technology concen-trated all its Swedish opera-tions in Sundsvall. The panel-

board technology unit operat-ing in Finland will transfer inthe fall from Loviisa to Nas-tola. The transfer of themechanical pulping unit toValkeakoski in Finland hasalready been mostly complet-ed, while the pulp dryingbusiness moved from Karhulato Pori, Finland in 1999.

In Finland, Paper Technol-ogy’s liner and fluting boardmachine business will berelocated in Jyväskylä by theend of March 2000, at whichtime the operations of theTampere unit will finish. Itwas decided to convert theKarhula board machine unitinto a service center andmanufacturing unit for papermachine headboxes.

The merger resulted in thedismantling of overlaps in thedistribution network, admin-istration and production ofthe business area. It was alsodecided to combine the salescompanies operating in the



same areas or countries,resulting in the closure of 9offices during 1999. A fur-ther 4 offices will be com-bined during 2000.

1,200 employees will bemade redundant in the Fiberand Paper Technology busi-ness area, mostly as a resultof the contraction of opera-tions and structural changes.Personnel reductions affectedall the largest units in Europeand North America. Themost significant restructuringoccurred in the board ma-chines group and was com-pleted during the year underreview. The board machinebusiness is now concentratedin Karlstad in Sweden andJyväskylä in Finland.

Several cooperationprojects are underway withother business areas in theCorporation. One of the mostimportant is a developmentproject being carried out with

the Automation and ControlTechnology business area andfocused on applying embed-ded automation technologyto the OptiConcept paper-making line. Other develop-ment projects applying re-mote diagnostics and globalinformation networks topaper machine service andmaintenance are also beingimplemented. Cooperation isunderway with the Gears andComponents group to investi-gate solutions related tomechanical power transmis-sion, machine constructionand materials technology andaimed at raising the competi-tiveness of equipment andprocesses.

Board of Directors:ChairmanHeikki HakalaPresident and CEOMetso

Vesa KainuSenior Vice PresidentServiceValmet

Jyrki MustaniemiSenior Vice President,Customer andPublic RelationsMetso

Juhani PakkalaPresidentValmet

Sakari TamminenExecutive Vice President,CFOMetso


MarketsThe low level of investments inthe pulp and paper industryrestricted the growth of de-mand for Automation andControl Technology productsin 1999. Other factors affect-ing this trend were continuingconsolidation in the oil refiningindustry and weak profitabilityin the chemical and petro-chemical industries due to lowoil prices in the early part ofthe year. Demand had still notrevived by year’s end, despitethe rise in the price of oil.

Despite the tight marketsituation, success was achievedin increasing the market shareof paper industry automationsystems in the second half of1999. The demand for pulpindustry automation systemswas good in Europe. Themarkets for SCADA systemslivened up to some extent inNorth America. Conversely,the demand for field equip-ment, i.e. control valves andprocess measurement systems,weakened in all markets.

Orders receivedand order backlogThe new orders receivedamounted to EUR 573 million(EUR 588 million), being 3percent lower than the previ-ous year. Deliveries of auto-mation and SCADA systemsgrew, while deliveries of con-trol valves and process meas-

Automation and Control Technology

urement systems fell. The end-of-year order backlog fell by 6percent compared with the endof 1998, standing at EUR 181million on Dec. 31, 1999 (EUR192 million on Dec. 31, 1998).The lead time needed fororders shortened considerably,as the proportion of largeorders fell.

Net salesNet sales totaled EUR 599million in 1999, a level thatwas approximately the same asthe previous year (EUR 597million).

ProfitabilityThe operating profit was EUR6 million (EUR 38 million), or1 percent of net sales (6%)including nonrecurring costs ofEUR 11 million. Tight compe-tition and low capacity utiliza-tion rates weakened profitabili-ty. Another factor was themore unfavorable distributionof deliveries between productgroups, compared with theprevious year.

Research anddevelopmentResearch and developmentprojects during the year underreview focused on systemsdevelopment, and the applica-tion of remote diagnostics andinternet technologies in solvingproduction process problemsand planning preventive main-tenance for instance by utiliz-ing WAP technology.

Several products exploitingthe latest technology werelaunched. The nelesDNA is anopen automation applicationenvironment which continu-ously networks all automationand information operationsfrom the field to the office inone integrated system tosupport decision making in theorganization. The nelesDNAcreates better conditions tocompete with the large suppli-ers for automation deliveries.Other product launches includ-ed the SmartLX which is anoptical transmitter for measur-ing the consistence of mechani-cal stock, and the kajaaniCATiwhich is a measurement andmanagement system for thepaper machine’s wet end. ThenelesValvGuard, an automatedtesting and monitoring systemfor emergency shutdownvalves, was also launched.

The Finnish Society ofAutomation granted its 1999Automation Award to theAutomation and ControlTechnology business area forthe development of its remotediagnostics system and accom-panying intelligent field devices(the Field Browser).

Operating structureand customersThe business operations of theAutomation and ControlTechnology business area werere-organized into five divisions:Field Controls which suppliesprocess measurements, and

Key figures

1998 1999(in millions) EUR EURNet sales 597 599Operating profit 38 6Orders received 588 573Order backlog, Dec. 31 192 181Personnel, Dec. 31 4,440 4,352

PresidentArto Aaltonen


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control and automated valves,Paper Automation whichspecializes in paper productionautomation and informationsystems, Automation Net-works which supplies similarsystems to other processindustry, SCADA Solutionswhich supplies IT solutions foroil, gas and water distributionand electricity transmission,and Jamesbury which makesautomated and manually-operated valves.

The most significant cus-tomer segment is the pulp andpaper industry which accountsfor nearly a half of the busi-ness area’s deliveries. About athird of deliveries go to otherprocess industries and energygeneration, and the remainingone fifth to other customerindustries.

Product demand was influ-enced by the internationalprices and price expectationsof pulp and crude oil, andexpectations related to thedemand and supply of endproducts. Demand was alsoinfluenced by the developmentof more customer-orientedautomation technology.

The business area operatesglobally and each division isresponsible for its sales anddistribution around the world.

Automation and ControlTechnology has its own salesunits in 36 countries. Theseunits, together with the localrepresentatives and dealers,form a comprehensive, world-wide service network supple-mented by electronic tradingservices.

Restructuringand integrationCost cuts were initiated in thebusiness area due to the chang-es required by weak profitperformance and the restruc-turing of business operations.The dismantling of overlapsresulting from the merger wasinitiated in the distributionnetwork, administration andproduction. The combining ofsales offices is leading to theclosing down of 20 sales officesin countries with overlappingoperations. All-in-all, about300 persons will be maderedundant. These reductionsmainly affect units operatingoutside Finland. The numberof personnel was decreased byabout 100 persons in 1999.

Operations in America wereintegrated in order to improvecost effectiveness and customerservice. It was decided totransfer some of the Shrews-

bury activities to Atlanta andsome valve manufacture fromShrewsbury, USA, to Chihua-hua in Mexico where theJamesbury Division alreadyhad shut-off valve production.It was also decided to close theBrazilian valve factory and tomove its production to theMexico factories.

Considerable investmentwas required to combine anddevelop the resource planningsystems and production logis-tics systems of the new organi-zation. This development workis continuing.

A number of cooperationprojects with the Corporation’sFiber and Paper Technologybusiness area are underway inAutomation and ControlTechnology. The projects relateto research and development,and marketing and sales. Theprimary development target isto apply embedded automationtechnology to the OptiConceptpapermaking line. Otherdevelopment projects relatedto maintenance and the use ofremote diagnostics and globalinformation networks are alsoin progress.

Cooperation has also beeninitiated with the Corpora-tion’s Rock and Mineral

Processing group to developprocess automation solutionsfor crushers and crushingplants.


Arto AaltonenPresidentNeles Automation

Markku KarlssonSenior Vice President,Corporate TechnologyMetso

Juhani KuusiSenior Vice President, Headof Nokia Research Center

Juhani PakkalaPresidentValmet








MarketsDemand for the equipmentand services of the Rock andMineral Processing groupcontinued buoyant in Europeduring the year under review.In North America, on theother hand, construction andcivil engineering industrydemand did not fully live upto expectations, due to theslower-than-expected start tothe TEA21 infrastructuredevelopment program ap-proved by the US Congress.Demand continued to beslack in the South Americanand African markets as aresult of the low investmentactivity of the mining indus-try, prompted by the lowprice levels of major metalsprevailing throughout theyear. Asia remained quiet,even though the first signs ofa revival were to be observed.

Orders receivedand order backlogThe new orders received in1999 amounted to EUR 475million (EUR 462 million).Strong growth in contractingraised the volume of orders,particularly of mobile wheeland track-mounted crushingsystems. The demand forwear and spare parts was alsogood, especially in the con-struction and civil engineer-ing industry. The group’s end-

Rock and Mineral Processing

of-year order backlog grewby 12 percent, and stood atEUR 103 million on Dec. 31,1999 (EUR 92 million onDec. 31, 1998).

Net salesNet sales in the year underreview totaled EUR 469million (EUR 465 million), alevel that was approximatelythe same as the previous year.Growth in demand fromconstruction and civil engi-neering industries compensat-ed the steep decline in miningindustry deliveries and in-creased the net sales.

ProfitabilityThe operating profit fell by35 percent from the previousyear and was EUR 22 million(EUR 34 million). The de-crease was due to the smallvolume of mining deliveries,tight competition in the civilengineering contractor sector,and the costs related to boththe strengthening of marketposition in the growingconstruction and civil engi-neering industry and theadaptation of operations tocorrespond to lower miningindustry demand.

Investmentsand acquisitionsDuring the year under review,the Northern Irish company

Masterskreen International,specializing in the manufac-turer of mobile screens, wasacquired. Masterskreen'sproducts were already soldthrough the group’s distribu-tion network. Masterskreenhas annual net sales of ap-proximately EUR 8 millionand employs about 65 per-sons.

In October, the operationsof W.S. Tyler, an Americanscreen and crusher manufac-turer, were acquired tostrengthen the group’s posi-tion as a supplier of screensand classifying solutions forcrushed rock material. Thequality and cleanness require-ments for crushed materialsare continually tightening,and by combining its ownexpertise with that of W.S.Tyler, the group will be ableto supply more completesolutions for rock processing.The company's installed baseof over 16,000 screens and4,000 crushers also offers asolid foundation for furtherdeveloping the group’s after-market business. W.S. Tylerhas annual net sales of aboutEUR 40 million and employsabout 300 persons.

Near the end of 1999, theHelser Division of ANI Min-erals Processing Inc., anAmerican company specializ-ing in crusher parts, refur-

Key figures


PresidentOlli Vaartimo


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bishment and service wasacquired. This acquisitionwill strengthen the group’sposition in providing full-line, after-market services forcrushing equipment users inquarries and mines through-out North America, andespecially on the west coastwhere the group has not hadits own repair and refurbish-ment facility. Helser hasannual net sales of aboutEUR 10 million and employsabout 60 persons.

Research anddevelopmentResearch and developmentprojects in the year underreview were focused ondeveloping more efficientcrushing and screening pro-cesses, developing mobileequipment and automatingthe crushing process. Themost notable developmentprojects concerned new track-mounted screening and crush-ing units, a new-generationGP gyratory crusher series,two completely new solidscreen series, and the A2020automation system designedto optimize crusher opera-tions. After the installation ofa grinding mill in the R&Dcenter in Milwaukee, USA ,the center now possesses the

whole crushing and grindingprocess.

Operating structureand customersThe operations of the Rockand Mineral Processing groupare organized into four prod-uct divisions, namely thecrushing equipment division,the mobile equipment divi-sion, the screening and crush-ing systems division and theminerals processing division.

The group’s products aresold through four independ-ent regional organizations –Nordberg Americas, Nord-berg Europe, Nordberg Asia-Pacific and Nordberg South.Customers around the worldare served by a comprehen-sive network of 25 Nordbergsales companies and numer-ous local distributors.

The most significant cus-tomer segments are quarries,construction and civil engi-neering contractors, andmines. The quarrying seg-ment, which supplies crushedmaterial, accounts for about40 percent of sales, the min-ing segment for 20 percentand construction and civilengineering contractors for30 percent. About 10 percentof net sales is accounted forrecycle crushing, which uses

stone and construction wastematerial. One third of deliv-eries comprise wear and spareparts, and after-sales services.

The markets for the pro-ducts of the Rock and Miner-al Processing group areinfluenced by factors such asGDP development, infrastruc-ture investments, the prices ofmajor minerals and metalsand the price of and demandfor crushed material. Tighterenvironmental requirementsare limiting the use of naturalgravel and sand, which isincreasing the demand forrecycled crushed material.

Integrationand restructuringThe Rock and MineralProcessing group started aproject in cooperation withthe Corporation’s Automa-tion and Control Technologybusiness area to developprocess automation solutionsfor crushers and crushingplants. Cooperation was alsobegun with the Corporation’sGears and Componentsgroup to develop powertransmission solutions formining mills and crushers.

During 1999, productioncapacity was adapted to thedemand situation in thoseunits producing crushers for

the mining industry in theUSA and South Africa. Re-structuring measures werealso implemented to improvethe competitiveness of theTampere foundry in Finland.Due to the tight market situa-tion in Asia, the Singaporeoffice was closed and opera-tions were transferred to thePerth office in Australia. Morethan 200 employees from thegroup were made redundantto improve competitivenessand adjust capacity.


Mikko RysäPresidentTimberjack


Olli VaartimoPresidentNordberg

Tapani Vainio-MattilaPresidentSantasalo






MarketsDue to the high harvestingvolumes, the demand for forestmachines continued strong inEurope. Even in North Ameri-ca, where the demand wasexceptionally weak during thefirst six months of the year, themarkets began to pick uptowards the end of the year asthe forestry industry reducedits raw material inventoriesand the demand for timberincreased. The Asian marketsrevived slowly. The demandfor forest machines in SouthAmerica remained slack. Atthe end of the year, the in-creased pulp prices and thereduction in pulp reserves hada positive effect on forestmachine demand.

Orders receivedand order backlogNew orders worth EUR 485million (EUR 490 million)were received during 1999.The decline in orders wascaused by the weak demand inNorth America. Significantorders were gained in Europe,Russia and Indonesia. Themarket shares of the ForestMachine group remainedstable throughout the year. Theorder backlog increased by 58percent compared with thesituation at the end of 1998and was EUR 71 million onDecember 31, 1999 (EUR 45million on Dec. 31, 1998).

Net sales andprofitabilityThe group’s net sales for 1999were EUR 471 million (EUR530 million), which was 11percent lower than the previ-

Forest Machines

ous year. The decrease in netsales resulted primarily fromthe substantial decline indelivery volumes on the NorthAmerican market.

Operating profit for 1999was EUR 28 million (EUR 42million). Profitability wasweakened by the low capacityutilization of the North Ameri-can units, where productionvolumes had to be reduced. InEurope, the group’s profit-ability improved from thegood level achieved in 1998.

Investmentsand acquisitionsWaratah Group, a New Zea-land based manufacturer ofheavy-duty harvester headswas acquired. The acquisitionstrengthened the group’sproduct offering and was inline with its aim of becomingthe leading forestry attachmentsupplier in the world. Withyearly net sales of approxi-mately EUR 13 million, theWaratah Group has some 90employees. The integration ofWaratah into the Forest Ma-chine group has proceededwell, and its sales grew to-wards the end of the year.

At the end of 1999, Wood-lans Engineering Ltd., previ-ously the group’s dealer inEngland and Ireland wasacquired. Woodlans has yearlynet sales of about EUR 22million. The Forest Machinesgroup also established its ownretail companies in Austria andPoland.

Research anddevelopmentThe Forest Machines grouplaunched a compact wheelharvester mainly for thinningoperations and a medium-sizedtrack feller-buncher. Bothproducts are complementary tothe group’s harvesting machineproduct range. The group alsointroduced several forestryattachments.

An agreement on the sale ofTimberjack to Deere & Com-pany was signed on December13, 1999. The deal still re-quires the approval of thecompetition authorities whichis expected in the spring of2000.

Board of Directors:ChairmanHeikki HakalaPresident and CEO, Metso

Pekka HölttäSenior Vice President,Corporate TreasurerMetso

Mikko RysäPresident, Timberjack

Sakari TamminenExecutive Vice President, CFOMetso

Olli VaartimoPresident, Nordberg

Hannu VainioVice President and ForestDirector, UPM-Kymmene

Key figures


PresidentMikko Rysä


MarketsLimited investment by thepulp and paper industry andlow capacity utilization in theoffshore and shipbuildingsectors affected the demandfor gears and engineeringservices, and consequentlyreduced order volumes. Thebuilding of wind powerplants increased, boostingdemand for gears for thispurpose. Orders of windturbine gears grew by nearly80 percent.

Net sales andprofitabilityThe group’s net sales grew by7 percent and reached EUR103 million (EUR 96 million)due to deliveries of windturbine gears and materialstechnology services. Theoperating profit was EUR 1million (EUR 7 million).Profitability was weakenedby warranty costs due tobearing breakage in the windturbine gears and hard pricecompetition in machinebuilding.

Corporate acquisitionsand restructuringAt the end of 1999, SantasaloOy’s industrial gears opera-tions, with net sales of EUR50 million, were acquired. Atthe same time, sales anddistribution cooperation wasbegun with SEW-Eurodrive.

The Gears and Componentsgroup was reorganized intothree divisions, of which the

Gears and Components

first focuses on mechanicalpower transmission solutions,the second on engineering,manufacturing and installa-tion services for machinebuilding, and the third onmaterials technology andcomponents manufacturingutilizing powder metallurgy.

Research anddevelopmentThe group’s R&D was fo-cused on mechanical powertransmission. During 1999,wind turbine gears with apower output of 1.5 mega-watts were launched. Newtechnology monitoring theoperation and condition ofgears, and new jointing andsurfacing methods for ma-chine building were devel-oped. New applications werealso developed for powdermetallurgical manufacturing,including paper winder slit-ters.

Integrationof operationsIntegration of the acquiredgear operations into thegroup was started near theend of 1999. The goal is todevelop and increase the gearbusiness into a leader in itsfield. At the start of 2000, aunit in Parkano, Finland,supplying gear wheels andmachine building services andwhich was earlier part ofMetso’s Rock and MineralProcessing was joined to thegroup. A sales company

specializing in powder metal-lurgy was set up in Sweden.

In 1999, projects wereinitiated with the Corpora-tion’s other businesses toinvestigate solutions in powertransmission, machine build-ing and materials technologyaimed at increasing equip-ment and process competi-tiveness. The Corporation’sautomation expertise is alsobeing utilized in the develop-ment of gears.

Board of Directors:ChairmanOlli VaartimoPresidentNordberg

Vesa KainuSenior Vice PresidentServiceValmet

Hannu PietiläDivision PresidentNeles Automation

Pentti PietiläPresidentNordberg-Lokomo

Erkki PylvänäinenPresidentSantasalo Gears

Tapani Vainio-MattilaPresidentSantasalo

Key figures

1998 1999(in millions) EUR EURNet sales 96 103Operating profit 7 1Orders received 98 101Order backlog, Dec. 31 39 47Personnel, Dec. 31 841 1,254

PresidentTapani Vainio-Mattila


MarketsDuring the year under review,the demand for convertibleand sports cars continued toincrease in both Europe andthe USA, due to favorableeconomic growth. The Manu-facture of Specialty Carsgroup’s volume also increasedin 1999.

The group’s productioncomprised the Saab 9-3Convertible, the Saab 9-3Viggen and the PorscheBoxster sports car. A total of33,930 cars were produced in1999 (31,400 cars in 1998).

Net sales andprofitabilityThe group’s net sales de-creased in 1999 by 5 percentand totaled EUR 114 million(EUR 120 million). Theoperating profit was EUR 27million (EUR 25 million), upby 7 percent. The decrease innet sales compared with theprevious year was due toincome recognition related tothe ending of assembly con-tracts which affected thefigures for 1998.

InvestmentsThe major investment of1999 was a completely newproduction line for car assem-bly. The renewed assemblyline is even better suited forthe production of specialtycars. It also allows an im-provement in quality, produc-tivity and ergonomics. Theline’s capacity is 125 cars pershift. More efficient use ofspace also means that, ifnecessary, another completelynew assembly line can bebuilt in the automotive plant.The total cost of the invest-ment exceeded EUR 9 mil-lion.

Research anddevelopmentThe group's product develop-ment center has focused onbody and interior solutionsfor specialty cars, and thedevelopment of roof systemsfor convertibles.

At the beginning of 1999,the group was one of the firstautomotive plants in theworld to gain QS-9000 quali-ty certification.


Pekka HölttäSenior Vice President,Corporate TreasurerMetso

Mauri JaakonahoSenior Vice President,Finance and AdministrationNeles Automation

Juhani RiuttaPresidentValmet Automotive


Key figures

1998 1999(in millions) EUR EURNet sales 120 114Operating profit 25 27Cars produced 31,400 33,930Personnel, Dec. 31 1,476 1,408

Manufacture of Specialty Cars

PresidentJuhani Riutta



Mechanical Pulping Line

Chemical Pulping Line

Panelboard Line

Paper Making Line

Board Making Line

Tissue Making Line

Converting Line

Service

Automation and Control Technology

Field Controls

Paper Automation

Automation Networks

SCADA Solutions

Jamesbury

Machinery

Rock and Mineral Processing

Forest Machines

Gears and Components

Manufacture of Specialty Cars

Metso’s Organization

Board of Directors

President and CEO Corporate Headquarters


Healthygrowth frominnovationpotential



Pertti Voutilainen, born 1940.Chairman of the Board.M.Sc. in Economics andBusiness Administration,M.Sc. in Engineering.President of Merita BankPlc., Executive Vice Presidentof MeritaNordbanken Plc.Chairman of the Board:Kiinteistösijoitus Oyj Citycon.Chairman: The FinnishBankers’ Association.Board Member: Sato Corpo-ration Plc, Sponda Plc., OyRealinvest Ab, EuropeanBanking Federation.Holdings: 980 Metso shares

Board of Directors and Auditors

Mikko Kivimäki, born 1939.Vice Chairman of the Board.MA in Law.President and CEO,Rautaruukki Oyj.Chairman of the Board:Rautaruukki Oyj.Vice Chairman of the Board:Varma-Sampo Mutual Pen-sion Insurance Company,Industrial InsuranceCompany Ltd.Board Member: Merita Plc.,Nordbanken Holding AB,MeritaNordbanken Plc.,Confederation of FinnishIndustry and Employers.Supervisory Board Member:YIT Corporation.Other: Chairman of theBoard of Management in theFinnish MaritimeAdministration.Holdings: 1,000 Metso shares

Felix Björklund, born 1943.B.Sc. in Economics andBusiness AdministrationPartner, Nordic Capital.Chairman of the Board: SFKFinance Oy, Starkki Oy, Maj& Tor Nessling Foundation,Stiftelsen Svenska Handels-högskolan.Board Member: Amer GroupPlc, Oy Snellman Ab, Palo-heimo Oy.Vice Chairman of Superviso-ry Board: Finnair Oyj.Holdings: 2,500 Metso shares


Jaakko Rauramo, born 1941.M.Sc. in Engineering.President and CEO,Sanoma-WSOY Oyj.Chairman of the Board:Sanoma Corporation, WernerSöderström Corporation,Rautakirja Oyj, HelsinkiMedia Company Oy.Supervisory Board Member:Finnish Medical Foundation.Board Member: Sanoma-WSOY Oyj, Svenska Dag-bladets AB, A-pressen ASA,Scandinavian InternationalManagement Institute.Trustee: Reuters FoundersShare Company Limited.Holdings: 55 Metso shares

Matti Sundberg, born 1942.M.Sc. in Economics andBusiness Administration, Dr.(hon), Senior Advisor,Metso Corporation.Chairman of the Board: OyScan-Auto Ab, Oy LM Erics-son Ab, Aarne Koskelo Foun-dation.Board Member: Foundationfor Economic Education,World Forestry Center.Vice Chairman of the Super-visory Board: The FinnishFair Corporation.Supervisory Board Member:Merita Bank Plc., SampoInsurance Company Ltd., theFinnish Air Force BenevolentFund.Other: Chairman of theAdvisory Board of the Centerfor Excellence Finland, Chair-man of the Finnish-AmericanChamber of Commerce inFinland.Holdings: 2,910 Metso sharesWarrants and Options:86,000 warrants (19941) and80,000 options (19982).

Markku Tapio, born 1948.MA in Social Science.Director General, State Share-holdings Unit, Ministry ofTrade and Industry.Chairman of the Board: AltiaGroup Oy, Finnish IndustryInvestment Ltd.Board Member: Primalco Oy.No holdings.

Pertti Turtiainen, born 1946.Labor representative, MetsoCorporation. Member ofFinnish Parliament.No holdings.

1) Valmet Corporation’s bonds withwarrants, issued in 1994 (1 warrantgives the right to subscribe for 2Metso Corporation shares).

2) Valmet Corporation’s optionrights, issued in 1998 (1 option givesthe right to subscribe for 1 MetsoCorporation share).

Auditor:Authorized PublicAccountantSVH PricewaterhouseCoopers Oy

Shareholdings,January 31, 2000


Management Board andCorporate Headquarters

Heikki Hakala, born 1941.Chairman of the ManagementBoard. M.Sc. in Economicsand Business Administration,D Tech (hon). President andCEO. Hakala joined thecompany in 1986*.Chairman of the Board: Pohjo-la Group Insurance Corpora-tion, Ilmarinen Mutual Pen-sion Insurance Company.Vice Chairman of the Board:Lassila & Tikanoja plc, Kuusa-koski Oy.Board Member: Confederationof Finnish Industry and Em-ployers, Federation of FinnishMetals, Engineering andElectrotechnical Industries.Holdings: 10,262 Metso shares.Warrants and Options: 40,000(19963) and 65,000 (19984).

Sakari Tamminen, born 1953.Vice Chairman of the Manage-ment Board. M.Sc. in Econom-ics and Business Administra-tion. Executive Vice Presidentand CFO. Tamminen joinedthe company in 1986*.Holdings: 580 Metso shares.Warrants and Options: 30,000(19963) and 45,000 (19984).

Arto Aaltonen, born 1947.M.Sc. in Engineering. Presi-dent, Automation and ControlTechnology business area(Neles Automation). Aaltonenjoined the company in 1987*.No holdings.Warrants and Options: 40,000(19963) and 50,000 (19984).

Jyrki Mustaniemi, born 1940.M.Sc. in Engineering, D Tech(hon), Senior Vice President,Customer and Public Rela-tions. Mustaniemi joined thecompany in 1978*.Holdings: 35 Metso shares.Warrants and Options:30,000 warrants (19941) and40,000 options (19982).

Juhani Pakkala, born 1945.M.Sc. in Engineering. Presi-dent, Fiber and Paper Tech-nology business area (Valmet).Pakkala joined the companyin 1970*.No holdings.Warrants and Options:25,000 warrants (19941) and30,000 options (19982).


*) In this Management Board presen-tation, the year of joining the compa-ny refers to the year in which theBoard Member joined Valmet orRauma or the predecessors of Rauma.

1) Valmet Corporation’s bonds withwarrants, issued in 1994 (1 warrantgives the right to subscribe for 2Metso Corporation shares).

2) Valmet Corporation’s optionrights, issued in 1998 (1 option givesthe right to subscribe for 1 MetsoCorporation share).

3) Rauma Corporation’s bonds withwarrants, issued in 1996 (1 warrantgives the right to subscribe for 1Metso Corporation share).

4) Rauma Corporation’s optionrights, issued in 1998 (1 option givesthe right to subscribe for 1 MetsoCorporation share).

Markku Karlsson, born 1950.D Tech. Senior Vice President,Corporate Technology. Em-ployed by the company in1984 – 1990, re-joining thecompany in 1995*.Holdings: 632 Metso shares.Warrants and Options: 10,000warrants (19941) and 30,000options (19982).

Harri Luoto, born 1946.MA in Law. Senior Vice Presi-dent, General Counsel. Luotojoined the company in 1982*.Holdings: 564 Metso shares.Warrants and Options: 30,000warrants (19941) and 30,000options (19982).

Olli Vaartimo, born 1950.M.Sc. in Economics andBusiness Administration.President, Machinery businessarea and Rock and MineralProcessing group (Nordberg).Vaartimo joined the companyin 1974*.Holdings: 544 Metso shares.Warrants and Options: 40,000(19963) and 50,000 (19984).

Corporate Headquarters

President & CEOHeikki Hakala

Executive Vice President,CFOSakari Tamminen

FinanceReijo Kostiainen

TreasuryPekka Hölttä

Corporate Communica-tionsTarja Kivelä

Corporate DevelopmentMikko Siiteri

Information TechnologyIsmo Platan

Internal AuditJarmo Kääriäinen

Human Resources andAdministrationEero Leivo

Human ResourcesHelge Ingård

AdministrationSeppo Leväjärvi

Corporate TechnologyMarkku Karlsson

Customer andPublic RelationsJyrki Mustaniemi

Legal MattersHarri Luoto


Corporate Governance

The corporate governancesystem in Metso Corporationfavors solutions that are assimple and clear-cut as possi-ble. The Corporate Adminis-tration is based on Finland’sCompanies’ Act and onMetso’s Articles of Associa-tion. The Corporation’sgeneral operating principlesand responsibility relation-ships are described in thedocuments, "Arrangement ofthe Management of MetsoCorporation" and "Corpo-rate Governance (CG)". Theprinciples of corporate gov-ernance contained in themare summarized below.

Annual GeneralMeetingThe Annual General Meetingis the supreme decision-making body of Metso Cor-poration, assembling normal-ly once a year. The AnnualGeneral Meeting decides onthe matters stipulated in theCompanies Act.

Board of Directors ofMetso CorporationThe Board of Directors ofMetso Corporation hasultimate responsibility for themanagement and properarrangement of the opera-tions of the Corporation, andfor assuring good corporategovernance in compliancewith legislation and a code ofethical conduct.

The Board of Directorsdecides upon matters, which,considering the scope andsize of the operations of theCorporation, are of majorimportance. These include theacceptance of the goals of theCorporation and the mainstrategies for achieving them,the acceptance of annualbudgets and action plans, thedefinition and acceptance ofcontrol policies, the accept-ance of the organizationalstructure of the Corporation,the nomination of the Presi-dent & CEO and the Man-agement Board, and themonitoring and evaluation oftheir performance.

In accordance with theArticles of Association, theBoard of Directors consists ofat least five and at most eightmembers. The term of themembers expires at the end ofthe Annual General Meetingwhich next follows the meet-ing at which they were elect-ed. The Annual GeneralMeeting appoints a Chairmanand Vice Chairman of theBoard. The present Boardbegan its operations on July1, 1999, when the merger ofRauma and Valmet Corpora-tions took effect. The mem-bers of the Board of Directorsare presented on pages 72-73.

The Board of Directors,together with the Auditorselected at the Annual GeneralMeeting, forms an AuditCommittee which meetsunder the Chairman of theBoard twice annually.

The Chairman and ViceChairman of the Board forma Compensation Committeewhich makes proposals to theBoard concerning the com-pensation of the managementand the personnel compensa-tion systems.

President and CEOThe Board of Directors ofMetso Corporation appointsthe President and CEO, whoacts as Chairman of theManagement Board. Thecurrent President and CEO ofthe Corporation, Mr HeikkiHakala, took up his post onJuly 1, 1999, when the merg-er of Rauma and Valmet tookeffect. He will retire at thebeginning of the year 2001.

Management Boardof Metso CorporationThe Management Boardconsists of the President andCEO as Chairman, the mem-ber designated by the Boardof Directors of Metso Corpo-ration as Vice Chairman, andthe Presidents of the BusinessAreas and the officers of theCorporate Headquartersdesignated by the Board ofDirectors as members. TheManagement Board assiststhe President and CEO inmatters on the agenda ofmeetings of the Board ofDirectors, and considers allmatters essential for corpo-rate management, includingmatters relating to corporateimage, monthly reports,interim reviews, principles forimportant investor relations,


strategies for the businessareas, acquisitions, divest-ments, bonus plans and themain principles of humanresources policy. The Man-agement Board deals withand prepares matters relatingto investments on the agendaof the Board of Directors ofMetso Corporation.

The Management Boardmay have extended meetings,if necessary, in which thePresidents of the BusinessGroups and other executivesdesignated by the Board ofDirectors may also partici-pate.

The current ManagementBoard is presented on pages74-75.

Business organizationMetso Corporation is dividedinto Business Areas which areaccountable for the businessresults. The Business Areasare Fiber and Paper Technol-ogy, Automation and ControlTechnology, and Machinery.The three business areas arefurther divided into BusinessGroups which are also ac-countable for the businessresults. The Business Groupsindependently manage theirduties as required by businessoperations.

Boards of theBusiness GroupsThe Board of Directors ofMetso Corporation appointsthe Boards of each BusinessGroup. The members arechosen from the Corporate

Staff and Business Groupexecutives. These Boards maybe supplemented with exter-nal, non-executive members,chosen for their specialknowledge and experience.The President and CEO ofMetso Corporation acts asthe Chairman of the Boardsof the Business Groups if nototherwise designated by theBoard of Directors of MetsoCorporation. BusinessGroups have ManagementGroups which will be formedand meet as required by theneeds of business operations.

Management salariesand other benefitsThe Chairman and ViceChairman of the Board ofDirectors of Metso Corpora-tion form a CompensationCommittee which makesproposals to the Board con-cerning the compensation ofthe management and thepersonnel compensationsystems.

The total salaries of allmembers of the ManagementBoard are result-based. Theannual bonus is based on theresult of the Corporation,and, concerning the manage-ment of the Business Areas,also on the result of thebusiness in question. SeniorCorporate Management isincluded in the optionschemes. More detailedinformation on Metso Corpo-ration’s option schemes may

be found on page 13, and onthe option holdings of theManagement Board on pages74-75.

AuditorsThe task of the statutoryauditing is to check andverify the financial statementsand the information given bythem on the result and thefinancial position of theCorporation. In addition, theAuditors, together with theBoard of Directors of MetsoCorporation form an AuditCommittee. The Corporationhas one auditor. The auditorsand deputy auditor must be afirm of public accountantscertified by the CentralChamber of Commerce. Theauditors’ duties will end atthe end of the next AnnualGeneral Meeting followingtheir election.

Insider holdingsMetso Corporation has, as ofMarch 1, 2000, adopted theGuidelines for Insiders ap-proved by the Helsinki Ex-changes.

In accordance with theSecurities Market Act, thefollowing persons are perma-nent insiders in Metso Corpo-ration:- the members of the Board

of Directors- the President and CEO- the Auditor, or the princi-

pally responsible auditor ofthe firm of public account-ants In addition, the extended

inner circle of Metso Corpo-ration includes:- the members of the Board

of ManagementMetso Corporation’s regis-

ter of insider holdings ismaintained by the CorporateLegal Department, whichupdates the information inthe Central Securities Deposi-tory. The updated informa-tion on Metso Corporation’sinsider holdings can be or-dered from the SIRE systemof the Central SecuritiesDepository at Eteläesplanadi20, FIN-00130 Helsinki. Thetoll-free service number tothe Central Securities Deposi-tory is + 358 (0)800 180 500.The regular phone number is+358 (0)9 686 200, and fax+358 (0)9 6862 0230.

Metso Corporation’s ex-tended insider holdings arealso presented on the Corpo-ration’s homepages at:

www.metsocorporation.com/Investor Information/Shares/Insiders


Complete contact information can be found on the home pages of Metsoand its business groups:www. metsocorporation.com (www.valmet.com,www.nelesautomation.com, www.nordberg.com, www.santasalo.com,www.timberjack.com and www.valmet-automotive.com).

Metso’s Contact Information

Metso CorporationCorporate HeadquartersFabianinkatu 9 APO Box 1220, FIN-00101 HelsinkiFinlandTel. +358 20 484 100Fax +358 20 484 101

Metso CorporationMoscow Representative OfficePereulok Mamonovskij, d. 6, kv. 7103001 Moscow, RussiaMailing address:PO Box 295, FIN-53101 LappeenrantaFinlandTel. +7 095 209 2836

+7 095 209 2860Fax +7 095 956 3348

Metso (Asia-Pacific) Pte. Ltd.501 Orchard Road, Wheelock PlaceSingapore 238880Tel. +65 738 6500Fax +65 738 8966

Metso USA Inc.133 Federal StreetSuite 302, Boston, MA 02110, USATel. +1 617 369 7850Fax +1 617 369 7877

VALMET - FIBER ANDPAPER TECHNOLOGY

Valmet CorporationCorporate Head OfficePO Box 587, FIN-40101 JyväskyläFinlandTel. +358 20 482 150Fax +358 20 482 151

Largest Manufacturing Unitsand R & D Centers

Valmet Panelboard n.v.Pr. Pattynstraat 1B-8870 Izegem-Kachtem, BelgiumTel. +32 51 335 588Fax +32 51 318 815

Valmet, Ltd.4900 Thimens BoulevardVille Saint-Laurent, Quebec H4R 2B2CanadaTel. +1 514 335 5426Fax +1 514 335 6909

Valmet, Ltd., Enerdry Division106 N. Cumberland Street, Suite 100Thunder Bay, ON, P7A 4M2CanadaTel. +1 807 346 7100Fax +1 807 344 5296

Valmet Chemical Pulping OyPO Box 34FIN-28101 Pori, FinlandTel. +358 20 482 176Fax +358 20 482 179

Valmet Woodhandling OyPO Box 210FIN-28101 Pori, FinlandTel. +358 20 482 176Fax +358 20 482 177

Valmet Mechanical Pulping OyValmet Mechanical Pulping Works OyPO Box 125FIN-37601 ValkeakoskiFinlandTel. +358 20 482 170Fax +358 20 482 171

Valmet Panelhandling OyPO Box 15FIN-15561 Nastola, FinlandTel. +358 20 482 172Fax +358 20 482 173

Valmet CorporationPaper Making MachinesPO Box 587FIN-40101 Jyväskylä, FinlandTel. +358 20 482 150Fax +358 20 482 151

Valmet CorporationCoaters and ReelsCalendersWindersWärtsilänkatu 100FIN-04400 JärvenpääFinlandTel. +358 20 482 180Fax +358 20 482 181

Valmet CorporationRoll HandlingMuovitie 1, FIN-15860 HollolaFinlandTel. +358 20 482 130Fax +358 20 482 131

Valmet-Raisio OyPO Box 101FIN-21201 Raisio, FinlandTel. +358 2 443 3111Fax +358 2 443 3606

Valmet CorporationTampere Roll FactoryPO Box 34FIN-33841 Tampere, FinlandTel. +358 20 482 120Fax +358 20 482 2051

Valmet CorporationAir SystemsValmet Turku Works OyPansiontie 56FIN-20240 Turku, FinlandTel. +358 20 482 140Fax +358 20 482 141

Valmet Panelboard GmbHPostfach 710120, Lohweg 8DE-30541 Hannover, GermanyTel. +49 511 589 790Fax +49 511 589 79377

Valmet Panelboard GmbHSterkenhofweg 27DE-47807 Krefelt, GermanyTel. +49 2151 34 0Fax +49 2151 34 18 24

Valmet Gorizia S.p.A.Via A. Gregorcic 46IT-34170 Gorizia, ItalyTel. +39 0481 528 311Fax +39 0481 22 027

Valmet Rotomec S.p.A.Rotomec DivisionStr. Statale Casale-Asti Km 5San GiorgioPO Box 112I-15033 Casale Monferrato (AL)ItalyTel. +39 0142 4071Fax +39 0142 407 375

Valmet Fibertech ABSE-851 94 Sundsvall, SwedenTel. +46 60 16 50 00Fax +46 60 16 55 00

Valmet Manufacturing ABBox 995SE-851 25 Sundsvall, SwedenTel. +46 60 16 50 00Fax +46 60 56 81 60

Valmet-Karlstad ABBoard Making MachinesTissue Making MachinesPO Box 1014SE-651 15 Karlstad, SwedenTel. +46 54 171 000Fax +46 54 171 255

Valmet Flootek ABMurmansgatan 126DSE-212 25 Malmö, SwedenTel. +46 40 680 5550Fax +46 40 930 190

Valmet Roll Handling Ltd.109, route de MoutierCH-2800 Delémont, SwitzerlandTel. +41 32 421 1212Fax +41 32 421 1290

Valmet Atlas plcWolseley Road, Woburn Road Ind. Est.Kempston, Bedford MK42 7XTEngland, UKTel. +44 1234 852 553Fax +44 1234 851 151

Valmet Atlas plcMontgomery WayBiggleswade, Beds SG18 8UBEngland, UKTel. +44 1767 310 100Fax +44 1767 310 200

Valmet Atlas - WindersPennine Business Park, Pilsworth RoadHeywood, Lancashire OL10 2TLEngland, UKTel. +44 1706 620 620Fax +44 1706 620 720

Valmet General LtdPennine Business Park, Pilsworth RoadHeywood, Lancashire OL10 2TLEngland, UKTel. +44 1706 622 442Fax +44 1706 622 772

Valmet, Inc., Honeycomb DivisionPO Box 502Biddeford, ME 04005, USATel. +1 207 282 1521Fax +1 207 283 0926

Valmet, Inc.12933 Sam Neely RoadCharlotte, NC 28273PO Box 7467Charlotte, NC 28241USATel. +1 704 588 5530Fax +1 704 587 2360

Valmet, Inc.2900 Courtyards DriveNorcross, GA 30071, USATel. +1 770 263 7863Fax +1 770 441 9652

Valmet, Inc., Appleton DivisionPO Box 2339Appleton, WI 54913-2339, USATel. +1 920 733 7361Fax +1 920 733 1048

Valmet, Inc., Enerdry Division2200 Sutherland Avenue, Suite B-201Knoxville, TN 37919, USATel. +1 423 525 6990Fax +1 423 522 3281

Largest Sales Offices

Valmet (ANZ) Pty Ltd14-28 South RoadBraybrook Vic 3019PO Box 4185West Footscray, MelbourneVictoria 3012, AustraliaTel. +61 3 9311 8133Fax +61 3 9311 8744

Valmet Ges.m.b.H.Franzosengraben 10AT-1030 Vienna, AustriaTel. +43 1 799 62 55Fax +43 1 799 62 59

Valmet Brasil Ltda.Rua Dr. Antonio Galizia, 181 - Sala 14CEP 13024-510 Campinas – SPBrazilTel. +55 19 255 3989Fax +55 19 251 6932

Valmet S.A.Ramón Carrasco 206, piso 3Lomas de San AndrésConcepción, ChileTel. +56 41 483 910Fax +56 41 483 912

Valmet CorporationBeijing Representative OfficeRoom 760, 7th FloorHong Kong-Macau Centre, Office Bldg.Dongsi Shitiao, LijiaoqiaoBeijing 100027, ChinaTel. +86 10 6501 3595, 6501 3586Fax +86 10 6501 2588

Valmet SASBordeaux TechnowestLes Cinq Chemins, B.P. 34FR-33186 Le Haillan, FranceTel. +33 5 57 92 14 14Fax +33 5 57 92 14 12

Valmet Vertrieb GmbHOstendstrasse 1DE-64319 Pfungstadt, GermanyTel. +49 6157 9455-0Fax +49 6157 9455 80

PT. Valmet IndonesiaJl. Raya Jatiwaringin No. 54Pondok Gede 17411, IndonesiaTel. +62 21 848 0138, 848 0141Fax +62 21 848 0139

Valmet KKSumitomo Jukikai Bldg.9-11, Kitashinagawa 5-ChomeShinagawa-ku, Tokyo 141, JapanTel. +81 3 5421 8478Fax +81 3 5421 8479

Valmet KKToranomon 2-5-21, MinatoTokyo, JP 105, JapanTel. +81 3 3508 8844Fax +81 3 3593 2230

Valmet Korea Inc.3Fl. Woonam Bldg.294, Chamsil-Dong, Songpa-GuSeoul 138-220, KoreaTel. +82 2 417 7032 (7033, 7034)Fax +82 2 417 7195

Valmet Fibertech ABRepresentative OfficeAv. Fontes Pereira de Melo35-11°c, PT-1000 Lisbon, PortugalTel. +351 1 314 2681, 352 3003Fax +351 1 352 3281

ZAO Valmet STPLermontovskij pr., 44PO Box 208RU-198103 St. Petersburg, RussiaMailing address:ZAO Valmet STPPO Box 314, FIN-53101 LappeenrantaFinlandTel. +7 812 251 0498, 251 1297Fax +7 812 251 6600

Valmet S.A.Alberto Alcocer, 28 BajoES-28036 Madrid, SpainTel. +34 91 457 2341, 457 2370Fax +34 91 458 6679


Valmet Skandinavien ABAxel Johnsons väg 6PO Box 1034SE-651 15 Karlstad, SwedenTel. +46 54 170 000Fax +46 54 171 010

Valmet Technology (Thailand) Co., Ltd.49/24 Moo 5, Tambon ThoongsukhlaAmphoe Sriracha, Chonburi 20230Laem Chabang, ThailandTel. +66 38 401 100Fax +66 38 400 970

Valmet Limited10 Western Road, Borough GreenKent TN15 8AG, UKTel. +44 1732 883 284Fax +44 1732 885 496

Largest Service Centers

Valmet Service Australia Pty LtdPO Box 4185West Footscray 3012Melbourne, Victoria, AustraliaTel. +61 3 9311 8133Fax +61 3 9311 8744

Valmet, Ltd., Canadian Service Center4900 Thimens Blvd.Ville St. Laurent, Quebec H4R 2B2CanadaTel. +1 514 335 5426Fax +1 514 335 6909

Valmet Corporation, ServiceWärtsilänkatu 100FIN-04400 Järvenpää, FinlandTel. +358 20 482 180Fax +358 20 482 181

Valmet Corporation, ServicePO Box 600FIN-48601 Karhula, FinlandTel. +358 20 482 132Fax +358 20 482 133

Oulun Kumitehdas OyLumijoentie 2FIN-90400 Oulu, FinlandTel. +358 20 482 162Fax +358 20 482 163

Finbow OySiuronvaltatie 158FIN-37140 Nokia, FinlandTel. +358 20 482 164Fax +358 20 482 165

Valmet Corporation, ServicePansiontie 56FIN-20240 Turku, FinlandTel. +358 20 482 140Fax +358 20 482 141

Pinaltek OyPO Box 240FIN-78201 Varkaus, FinlandTel. +358 20 482 160Fax +358 20 482 161

Valmet Chemical Pulping Oy, ServiceKarjarannantie 39FIN-28100 Pori, FinlandTel. +358 20 482 176Fax +358 20 482 9871

Valmet Corporation, ServicePO Box 587FIN-40101 Jyväskylä, FinlandTel. +358 20 482 150Fax +358 20 482 5335

Valmet Oy, ServiceKäpälämäenkatu 11FIN-11710 Riihimäki, FinlandTel. +358 20 482 166Fax +358 20 482 167

Valmet Mechanical Pulping Oy, ServicePO Box 125FIN-37601 Valkeakoski, FinlandTel. +358 20 482 170Fax +358 20 482 171

Roval S.A.R.L.Rue de la GareFR-62112 Corbehem, FranceTel. +33 3 27 71 34 90Fax +33 3 27 71 34 99

Valmet Service GmbHOstendstrasse 1DE-64319 Pfungstadt, GermanyTel. +49 6157 94550Fax +49 6157 86017

Valmet-Como S.p.A.Via Roma 8IT-22026 Maslianico (Como), ItalyTel. +39 031 518 111Fax +39 031 511 818

Valmet-Karlstad AB, ServicePO Box 1014SE-651 15 Karlstad, SwedenTel. +46 54 171 000Fax +46 54 171 241

Valmet Fibertech AB, ServiceSE-851 94 Sundsvall, SwedenTel. +46 60 16 50 00Fax +46 60 56 81 66

UHAB Industrigummering ABPO Box 812SE-953 28 Haparanda, SwedenTel. +46 922 298 10Fax +46 922 298 09

Farros Blatter AGMetzgerstrasse 1, PO Box 81CH-8406 Winterthur, SwitzerlandTel. +41 52 208 1616Fax +41 52 208 1626

Valmet Technology (Thailand) Co., Ltd.49/24 Moo 5, Tambon ThoongsukhlaAmphoe Sriracha, Chonburi 20230ThailandTel. +66 38 401 100Fax +66 38 400 972

Valmet, Inc., Midwest Service CenterPO Box 2339Appleton, WI 54913, USATel. +1 920 733 7361Fax +1 920 749 4457

Valmet, Inc., Southeast Service CenterPO Box 7467Charlotte, NC 28241, USATel. +1 704 588 5530Fax +1 704 588 6865

Valmet, Inc., Northeast Service Center35 Sullivan ParkwayFort Edward, NY 12828, USATel. +1 518 747 3381Fax +1 518 747 1541

NELES AUTOMATION -AUTOMATION AND CONTROLTECHNOLOGY

Neles Automation Inc.Head OfficeTulppatie 1 B, PO Box 310FIN-00811 Helsinki, FinlandTel. +358 20 483 150Fax +358 20 483 151

Largest Manufacturing Unitsand R & D Centers(including sales andcustomer service)

Neles AutomationSCADA Solutions Ltd.10333 Southport Road S.W.T2W 3X6Calgary, Alberta, CanadaTel. +1 403 253 8848Fax +1 403 259 2926

Shanghai Neles-Jamesbury Valve Co.Ltd.1063 Si Ping Road200092 Shanghai, ChinaTel. +86 21 6502 1410Fax +86 21 6502 0368

Neles AutomationField Controls OyLevytie 6, PO Box 310FIN-00811 Helsinki, FinlandTel. +358 20 483 150Fax +358 20 483 151

Neles AutomationNeles Automation Networks OyNeles Paper Automation OyNeles Field Controls OyLentokentänkatu 11, PO Box 237FIN-33101 Tampere, FinlandTel. +358 20 483 170Fax +358 20 483 171

Neles AutomationNeles Field Controls OyNeles Paper Automation OyKehräämöntie 3, PO Box 177FIN-87101 Kajaani, FinlandTel. +358 20 483 120Fax +358 20 483 121

Neles AutomationNeles Field Controls OyElektroniikkatie 9FIN-90570 Oulu, FinlandTel. +358 20 483 3800Fax +358 20 483 3801

Jamesbury de Mexico S.A. de C.V.ChihuahuaAve. retorne el Saucito # 1010Parque Industrial “El saucito”31109 Chihuahua, MexicoTel. +521 422 0060Fax +521 422 0955

Neles AutomationSCADA Solutions Ltd.7000 Hollister, HoustonTX 77 040, USATel. +1 713 939 9399Fax +1 713 939 0393

Neles AutomationSCADA Solutions Ltd.(Baltimore)Suite 8/9, 9160 Red Branch RoadColumbia, Maryland 21045, USATel. +1 410 910 1300Fax +1 410 772 9562

Jamesbury Inc.640 Lincoln Street01605-0004Worcester MA, USATel. +1 508 852 0200Fax +1 508 852 8172

Largest Sales Offices(including sales andcustomer service)

Neles Automation (ANZ) Pty. Ltd.14-28 South Road, Braybrook3019 Melbourne, VictoriaAustraliaTel. +61 3 9311 8133Fax +61 3 9311 8744

Neles Automation Vienna OfficeFranzosengraben 12AT-1030 Wien, AustriaTel. +43 1 795 52-0Fax +43 1 795 52199

+43 1 796 2708

Neles Automation do Brazil Ltda.Av. Brig Faria Lima 169912 216-990 São Jose do CamposSP, BrazilTel. +55 123 401 000Fax +55 123 221 151

Neles Automation Canada Ltd.111 Granton Drive, Unit 101L4B 1L5Richmond Hill, Ontario, CanadaTel. +1 905 707 3000Fax +1 905 707 3001

Neles Automation Chile Ltda.Av.Lota 2257 of. 801Providencia, ChileTel. +56 2 233 9743Fax +56 2 233 9744

Neles Automation Shanghai Rep.Office2F, Building 12Hongqiao State Guest House1591 Hongqiao Rd200336 Shanghai, ChinaTel. +86 21 6295 3410Fax +86 21 6295 5350

Neles Automation S.A.6-8 rue du Maine68271 Wittenheim, FranceTel. +33 3 89 506 400Fax +33 3 89 506 440

Valmet Automation GmbHGrünwalder Weg 28 bD-82041 Oberhaching, GermanyTel. +49 89 613 808-0Fax +49 89 613 808-55

+49 89 613 38 48

PT Valmet, Automation DivisionJl.Raya Jatiwaringin No. 54Pondok Gede17411 Bekasi, Jawa BaratIndonesiaTel. +62 21 848 0138/41

+64 21 848 0138/41/43/44(FC)Fax +62 21 848 0139

Neles Automation S.p.A.Via Santa Maria 9020093 Cologno, Monzese (Milan)ItalyTel. +39 02 254 5137Fax +39 02 254 8445

Valmet Automation K.K./Neles Automation K.K.Morisaki Bldg. 2-14-4, AkasakaMinato-ku, 107-0052 TokyoJapanTel. +81 3 3586 8201 (PA)

+81 3 3586 9611 (FC)Fax +81 3 3586 8207

+81 3 3586 9606

Neles Automation ASLøxaveien 17N-1351 Rud, NorwayTel. +47 67 175 300Fax +47 67 175 310

Neles AutomationProjects St. PetersburgLermontovskij pr., 44RU-198 103 St. Petersburg, RussiaTel. +7 812 251 6898Fax +7 812 251 6600

Valmet Automation South Africa54 Suni Avenue, Corporate ParkMidrand, Halfwayhouse1685 Johannesburg, South AfricaTel. +27 31 303 1098Fax +27 31 303 1595

Neles Automation Pte Ltd501 Orchard Road #05-09 Wheelock Place238880 Singapore, SingaporeTel. +65 735 5200Fax +65 735 4566

Neles Automation ABNytorpsvägen 32S-183 11 Täby, SwedenTel. +46 8 792 1000Fax +46 8 768 4371

+46 8 758 5880

Neles Automation Taiwan Branch Office11F-1, 1247 Chung-Cheng RoadTaoyuanTaiwan, R.O.CTel. +886 3 357 5254Fax +886 3 357 5249


Neles Automation Co. Ltd9th Floor, Home Place Office Bldg.283/44-45 Soi Thonglor 13Sukhumvit 55 Rd10110 Bangkok, ThailandTel. +66 2 712-7241…6Fax +66 2 712-7234

Neles Controls FZEJebel Ali FreezoneDubai, United Arab EmiratesTel. +971 4 836 974Fax +971 4 836 836

Neles Automation Ltd.2 Lindenwood, Crockford LaneChineham Business Park, ChinehamBasingstoke, Hampshire RG24 8QY, UKTel. +44 870 606 1478Fax +44 1256 811 668

Neles Automation USA Inc.3100 Medlock Bridge Road, Suite 25030071 Norcross GA, USATel. +1 770 446 7818Fax +1 770 246 7202

Neles Automation C.A.Multicentro Empresarial del EsteTorre Miranda-Nucleo “A”-Piso 6-OficinaA-62, Ave.Franciosco de Miranda,Chacao1060 Caracas, VenezuelaTel. +58 2 266 43 11Fax +58 2 262 10 11

NORDBERG - ROCKAND MINERAL PROCESSING

Nordberg Group OyHeadquartersLokomonkatu 3, PO Box 307FIN-33101 Tampere, FinlandTel. +358 20 484 140Fax +358 20 484 141

Largest Manufacturingand R&D Units

Nordberg Industrial Ltda.Av. das Nações 3801Distrito Industrial33.200-000 Vespasiano – MGBrazilTel. +55 31 629 3300Fax +55 31 629 3314

Nordberg-Lokomo OyLokomonkatu 3, PO Box 306FIN-33101 Tampere, FinlandTel. +358 20 484 142Fax +358 20 484 143

Nordberg-Bergeaud S.A.B.P. 159F-71006 Mâcon Cedex41, rue de la RépubliqueF-71006 MâconFranceTel. +33 3 8539 6300Fax +33 3 8539 6298

Nordberg (Pty) Ltd.PO Box 1599, Houghton 2041Nordberg HouseWordsworth Office Park41 Wordsworth RoadSenderwood, Johannesburg 2007South AfricaTel. +27 11 453 1221Fax +27 11 453 0472

Nordberg Inc.3073 South Chase AvenueMilwaukee, WI 53207, USATel. +1 414 769 4300Fax +1 414 769 1766

Largest Sales Offices

Nordberg Australia Pty. Ltd.PO Box 399West Perth, WA 68722nd Floor, 1110 Hay StreetWest Perth, WA 6005, AustraliaTel. +61 8 9420 5555Fax +61 8 9420 5500

Nordberg AufbereitungstechnikGes.m.b.H.Am Nussbaumhof 29A-4813 Altmünster, AustriaTel. +43 7612 89575Fax +43 7612 89577

Nordberg Machinery Ltd.PO Box 1330Guelph, Ontario N1H 6N8660 Speedvale Ave. West,Suite 106Guelph, Ontario N1K 1E5CanadaTel. +1 519 821 7070Fax +1 519 821 4376

Nordberg Corporation (Chile)Casilla 328-V, Correo 21Santiago de ChileVitacura 4380, 5to. PisoVitacura, Santiago, ChileTel. +56 2 370 2000Fax +56 2 370 2039

Nordberg China Ltd.Units 620-622, 6/F, Tower IIGrand Central PlazaShatin, N.T., Hong Kong, ChinaTel. +852 2698 1008Fax +852 2603 0635

Nordberg China Ltd.Beijing Representative OfficeRoom 510-511, 5/FBeijing Canway Building66 Nan Li Shi Lu, Xicheng DistrictBeijing 100045, ChinaTel. +86 10 6801 7983Fax +86 10 6801 7984

Nordberg GmbHAm Sportplatz 1D-64823 Gross-UmstadtGermanyTel. +49 6078 93520Fax +49 6078 8581

Nordberg Singapore Pte. Ltd.Indian Branch OfficeNo. 1013, 10th FloorBarton Centre, M. G. RoadBangalore 560001, IndiaTel. +91 80 509 1577Fax +91 80 509 1580

Nordberg Nippon K.K.No. 3, Tohsho Bldg. 3F3-9-5 Shin-YokohamaKouhoku-ku, Yokohama222-0033 JapanTel. +81 45 476 3930Fax +81 45 476 3933

Nordberg (Malaysia) Sdn BhdNo. 20 Jalan U1/32HICOM – GlenmarieIndustrial Park Phase 1BSeksyen U140000 Shah Alam, SelangorMalaysiaTel. +60 3 519 3299Fax +60 3 519 3313

Nordberg Norway A/SBoks 131, N-3161 StokkeBorgeskogen S, N-3160 StokkeNorwayTel. +47 3336 0400Fax +47 3336 0401

Nordberg Philippines Inc.Room 304, Gaston BuildingNo. 30 J. Elizalde Street, BF HomesParañaque 1700, Metro ManilaPhilippinesTel. +63 2 809 6169Fax +63 2 809 6165

Nordberg Portugal Lda.Rua Sebastião e Silva, Nos. 71-73Zona Industrial de Massamá2745-838 Massamá, PortugalTel. +351 1 438 8550Fax +351 1 438 8559

Nordberg España S.A.Polígono Industrial El MalvarCalle Nevada, 928500 Arganda del Rey (Madrid)SpainTel. +34 91 870 0669Fax +34 91 870 3526

Nordberg Sweden ABBergkällavägen 27BS-192 79 Sollentuna, SwedenTel. +46 8 626 8650Fax +46 8 626 8660

Nordberg (Thailand) Co. Ltd.9th Floor, Home Place Office Building283/44 Soi Thonglor 13Sukhumvit 55 RoadNorth Klongton, WattanaBangkok 10110, ThailandTel. +66 2 712 7241Fax +66 2 712 7240

Nordberg (UK) Ltd.PO Box 8, Bardon 22CoalvilleLeicestershire LE67 1ZY, UKTel. +44 1530 278 200Fax +44 1530 278 240

SANTASALO – GEARS ANDCOMPONENTS

Santasalo Group OyPuunaulakatu 3, PO Box 51FIN-28101 Pori, FinlandTel. +358 20 484 110Fax +358 20 484 111

Largest Manufacturing and SalesUnits (including maintenanceservices)

Santasalo North America Inc.PO Box 20100Cambridge N1R 8C8, OntarioCanadaTel. +1 519 621 6390Fax +1 519 621 7660

Santasalo Gears OyMartinkatu, RautpohjaPO Box 158, FIN-40101 JyväskyläFinlandTel. +358 20 484 126Fax +358 20 484 127

Santasalo Gears OySantasalonkatu 5, PO Box 27FIN-03601 Karkkila, FinlandTel. +358 20 484 132Fax +358 20 484 133

Santasalo Gears OySantasalo Engineering OyVanhantalontie 3FIN-39700 Parkano, FinlandTel. +358 20 484 124Fax +358 20 484 125

Santasalo Engineering OyValkolammentie 2FIN-07910 Valko, FinlandTel. +358 20 484 128Fax +358 20 484 129

Santasalo Engineering OyPuunaulakatu 3, PO Box 96FIN-28101 Pori, FinlandTel. +358 20 484 122Fax +358 20 484 123

Santasalo Powdermet OyLokomonkatu 3, PO Box 306FIN-33101 Tampere, FinlandTel. +358 20 484 120Fax +358 20 484 121

Valmet Hydraulics OyValmetintie 9, FIN-40420 JyskäPO Box 633, FIN-40101 JyväskyläFinlandTel. +358 20 484 126Fax +358 20 484 127

Santasalo GmbHOtto-Hahn-Str. 51, Pf 21 05 62DE-42369 Wuppertal, GermanyTel. +49 202 24140Fax +46 202 241 4200

Santasalo Powdermet OyPO Box 54SE-735 21 Surahammar, SwedenTel. +46 220 348 80Fax +46 220 334 90

Santasalo Svenska ABVarholmsgatan 2SE-414 74 Göteborg, SwedenTel. +46 31 141 090Fax +46 31 141 086

Santasalo Gear Service Inc.57-A Pelham Davis Circle29615 Greenville, South CarolinaUSATel. +1 864 627 1700Fax +1 864 627 1705

TIMBERJACK – FOREST MACHINES

Timberjack Group OyHeadquartersPO Box 1220FIN-00101 Helsinki, FinlandTel. +358 20 484 160Fax +358 20 484 161

Distribution Centers

Timberjack Indústria e Comércio Ltda.Continental Distribution Centerfor South AmericaAlameda Caiapós, 29806460-110 – Tamboré, BarueriSão Paulo, BrazilTel. +55 11 7295 4790Fax +55 11 421 1762

Timberjack (Asia-Pacific) Pty. Ltd.Continental Distribution Centerfor Asia-Pacific501 Orchard RoadWheelock Place # 05-09Singapore 238880Tel. +65 738 6500Fax +65 839 9781

Timberjack ABContinental Distribution Centerfor Europe, Russia, AfricaPO Box 502S-195 25 Märsta, SwedenTel. +46 8 591 252 00Fax +46 8 591 112 61

Timberjack CorporationContinental Distribution Center forNorth America6215 Unit E Fulton Industrial BlvdAtlanta, GA 30336-2859, USATel. +1 404 629 9044Fax +1 404 629 0513

VALMET AUTOMOTIVE -MANUFACTURE OF SPECIALTY CARS

Valmet Automotive Inc.Autotehtaankatu 14, PO Box 4FIN-23501 Uusikaupunki, FinlandTel. +358 20 484 180Fax +358 20 484 181

Company Analyst Telephone

FrankfurtCredit Suisse First Boston Kristian Gevert +49-69-75382195Salomon Smith Barney Barbara C. Haas +49-69-2607117

HelsinkiAlfred Berg Robert Sergelius +358-9-22832710Aros Securities Carl-Henrik Frejborg +358-9-17337310Carnegie Finland Raoul Konnos +358-9-61871230CAI Cheuvreux Nordic Jan Kaijala +358-9-69692969Conventum Hannu Nyman +358-9-54993311Danske Securities Mats Lindholm +358-9-75145332Evli Securities Pekka Spolander +358-9-47669201Enskilda Securities Johan Lindh +358-9-61628726Leonia Bank Eeva Mäkelä +358-204255476Mandatum Stockbrokers Erkki Vesola +358-9-16672341Merita Securities Jari Koskela +358-9-12340312OKOBANK Sanna Päiväniemi +358-9-4044393Svenska Handelsbanken Markus Larsson +358-104442409

LondonABG-Securites Klas Andersson +44-171-9055632Dresdner Kleinwort Benson Marcus Storr +44-171-4752467Goldman Sachs Håkan Östling +44-171-7742365HSBC Securities Roddy Bridge +44-171-3364218Merrill Lynch Paul Compton +44-171-7722552Morgan Stanley Dean Witter Gideon Franklin +44-171-4256649BNP-Paribas Liz Mitchell +44-171-5953685

StockholmDeutsche Bank Hans-Olov Bornemann +46-8-4635512Warburg Dillon Reed Patrik Sjöblom +46-8-4537324

Annual General MeetingThe Annual General Meeting of Metso Corporation will be held in theMarina Congress Center at Katajanokanlaituri 6, Helsinki, Finland, onWednesday March 29, 2000, at 12 noon. Registration of the sharehold-ers participating in the meeting and distribution of ballots will begin at11 a.m.

The shareholders who have been entered as shareholders in theCorporation’s shareholder register maintained by the Finnish CentralSecurities Depository Ltd. by Friday March 24, 2000 at the latest, shallhave the right to participate in the Annual General Meeting.

Shareholders who wish to participate in the meeting should notify theCorporation of their intention to participate no later than 4 p.m., March24, 2000, either by mail to Metso Corporation, Fabianinkatu 9 A, PO Box1220, FIN-00101 Helsinki, Finland, or by phone at +358-(0)-1080 8300,or by fax at +358-(0)20-484 3125. Written notices of participation mustbe received by the above-mentioned deadline. Powers-of-attorney shouldbe sent to the above-mentioned address along with notification ofparticipation.

DividendThe Board of Directors has decided to propose to the Annual GeneralMeeting that a dividend of EUR 0.40 per share be paid for 1999.

Dividends will be paid to those shareholders who are entered in theCorporation’s shareholder register maintained by the Finnish CentralSecurities Depository Ltd. on the record date for payment of dividends,i.e. on April 3, 2000. The actual payment of dividends will take place onApril 10, 2000.

Metso Corporation's financial publications in 2000In addition to its financial statements and annual report for 1999,Metso Corporation will publish three interim reviews on the followingschedule:Interim review for January – March, 2000 May 3, 2000Interim review for January – June, 2000 August 9, 2000Interim review for January – September, 2000 October 31, 2000

Ordering of financial publicationsThe financial publications will be published in Finnish, English andSwedish. They can be ordered by mail fromMetso Corporation, Corporate CommunicationsPO Box 1220, FIN-00101 Helsinki,or by phone at +358-(0)20-484 100, or by fax at +358-(0)20-484 3123,or by email at [email protected]

Metso Corporation’s financial reports will also be published onMetso’s internet pages at http://www.metsocorporation.com.

Investor relations:Ms Taina Sollamo (on maternity leave until fall 2000),tel. +358-(0)20-484 100, fax +358-(0)20-484 3141, [email protected]

Ms Paula Laurinen, secretarytel. +358-(0)20-484 3268, fax 020 484 [email protected]

Mr Mike Phillips (North America),tel. + 1-617-369 7850, fax + 1-617-369 [email protected]

Infomation to Shareholders

AnalystsThe following analysts have regularly monitored the Metso Corpora-tion during the year 1999. The list may be incomplete. The listedanalysts monitor Metso on their own initiative. Metso is not responsi-ble for their views.

Metso Corporation

Corporate Headquarters

Fabianinkatu 9 A

PO Box 1220, FIN-00101 Helsinki

Finland

Tel. +358 20 484 100

Fax +358 20 484 101

www.metsocorporation.com

VSK99EN

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