we will become a leader in flow control within oil & gas ...€¦ · business line and reported...

© Metso

We will become a leader in flow control within oil & gas

and mining

Perttu Louhiluoto President, Flow Control

© Metso

Content

1. Flow Control business area is focused and synergistic

2. Valve business builds on a strong momentum

3. Metso’s pump business is a challenger with a strong foundation

4. We look for organic and non-organic growth

5. Conclusions - Our strategic target

Metso Capital Markets Day 2014: Flow Control by Perttu Louhiluoto 2 © Metso

Flow Control business area is focused and synergistic

© Metso

Flow Control reporting segment is growing and improving profitability

Metso Capital Markets Day 2014: Flow Control by Perttu Louhiluoto

Note: Flow Control’s reporting segment figures covering valves, pumps and process automation systems businesses * Before non recurring items

• Valve business is bigger and more profitable than ever - development has outpaced the market and leading competitors.

• Pumps has high

profitability with a main focus currently on mining.

• Process automation is

heavily exposed to pulp & paper with increased project activity and healthy services.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

100

200

300

400

500

600

700

800

900

1,000

Capital Services EBITA% *

4

EUR million

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New Flow Control Business Area is focused and synergistic

1 Flow Control reporting segment total with Process Automation Systems


Customers: pulp & paper and power generation, other process industries, marine, oil & gas

Net sales 2013 EUR 969 million ¹

Flow Control Valves and pumps managed as an integrated Flow Control Business Area

Process Automation Systems Managed as a separate end-to end business line and reported as a part of Flow Control segment ~ 1/3 of net sales ~ 1,600 employees

~ 2/3 of net sales ~ 2,800 employees

Valves Pumps

Customers: Oil & Gas, Mining, Pulp & Paper and other process industries

5

© Metso

Flow Control Business Area is broad based and geographically balanced1

Net sales by industry2

1. Percentage shares are for valves and pumps only – excluding process automation systems, based on rolling 12-month net sales ending Q3 2014 2. Oil & Gas industry includes Oil & Gas production, transportation, refining, energy&process, bioenergy, petrochemicals as well as industrial gas 3. Personnel split globally based on most up-to-date information

Net sales by market area

Net sales split service / capital

Personnel split globally

Metso Capital Markets Day 2014: Flow Control by Perttu Louhiluoto 6

58%

42%

Services

Capital

54%

16%

16%

14%

Oil & Gas

Pulp & Paper

Mining

Other

29%

30% 8%

27%

6%

Europe North America South America Asia-Pacific Middle East and Africa

48%

24%

7%

17% 4%

Europe North America South America Asia-Pacific Middle East and Africa

© Metso

Valves and pumps are a good fit

Valves and pumps is a logical combination • Flow control competencies can be leveraged • Synergies in business model, supply chain and

in sales network • Total scope of services within the processes

Example companies • Flowserve • Weir • ITT Industrial process • KSB • SPX Flow Technology

Automation market: EUR 30 billion

Flow Control market: EUR 70 billion

Pumps Manual Valves

IT: Operations Management

Automated on-off valves

Measurement and analyzers

Specialty systems

Automation systems

Electrification

Control Valves

Valve market EUR 35 billion

Valv

e a

utom

. Com

p.

Pumps market EUR 35 billion


© Metso

Our operations footprint is geographically well-spread

Shrewsbury, MA, USA

Sorocaba, Brazil

Vadodara, India

Helsinki, Finland

Horgau, Germany

Shanghai, China

Chung-ju, South Korea

Full solution & service portfolio are available

Reduced solution & service portfolio are available

Fergus Falls, MN, USA

Vereeniging, South Africa

Columbia, SC, USA

Metso Park, Alwar, Rajasthan, India

Slurry pump assembly

Valve technology Center / supply center

Sala, Sweden

>350 valve

services personnel

>40 valve

service centers


Valve business builds on a strong momentum

© Metso

We have built a strong position in valves and our customers trust us


• Strong niche position in oil & gas downstream and leader in pulp & paper

• One of the leading suppliers of intelligent valve controls

• Well-known valve brands Neles®, Jamesbury® and Mapag®

• Strong global operations and service presence with over 40 valve service centers around the world

• In more than 90 years, Metso has delivered millions of valves to customers globally

#5 in oil & gas

control valves

#1 in control and

on-off valves for pulp & paper

industry

10

Up to 90% product range

coverage of needed valves to a typical

refinery project

Flowing through Metso valves

70% of industrial gases 40% of the world’s

polyolefin 60% of the world’s LNG

© Metso

Metso’s valve business has grown faster than the leading competitors and the market


Our oil and gas customers value our flexibility, customer closeness and service capability.²

1. Valve peers include Cameron, Emerson, Flowserve, Pentair and Velan

100

105

110

115

120

125

130

135

140

145

150

Mar 2011

Mar 2012

Mar 2013

Mar 2014

Sep 2014

Metso Flow Control valves Valve peers

Flow Control valve rolling 12-month net sales development vs. peers1

Indexed (Q1/11 =100)

11

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We are improving our competitiveness faster than the market


Flow Control’s valve business rolling 12-month EBIT% development vs. peers1

Indexed (Q1/11 =100)

70

80

90

100

110

120

130

140

150

160

Mar 2011

Mar 2012

Mar 2013

Mar 2014

Sep 2014

Metso Flow Control valves Valve peers

• Improved supply chain management and realized procurement savings

• Cutting of fixed

costs • Volume leverage

• Pricing

management

12 1 Flow Control valve EBIT figures are excluding extraordinary items.

Valve peers include Cameron, Emerson, Flowserve, Pentair and Velan

© Metso

Valves is not just about valves


Valve Actuator Automated On/Off valve Positioner Control valve

Segment Butterfly

+ = + = Ball

Actuator is the motor to operate the valve and is fairly simple standardized unit.

Automated On/Off valves consist of a valve and an actuator and some simple measurement.

Positioner gives flow controlling signal to the actuator.

Control valve consists of a valve, an actuator and a positioner.

Valves are controlling and closing the liquid and gas flows in the pipes and can be fairly complex units depending on pressure, temperature and flow media.

http://valveproducts.metso.com/imgvariants/mr/neles/images/ball/HR/ball19.jpg

© Metso

We are less dependent on customers’ capex spend than most valve companies¹


Capital projects valves

Aftermarket valves

Spare parts and

maintenance

Valve control products

1 Illustrative split based on 2014 YTD valve net sales

• 0-5% average growth • Healthy profitability

• 5-10% average growth • Healthy and steady profitability

• 5-10% average growth • Strong profitability

• 10+% average growth • Strong+ profitability

© Metso

Long term valve performance optimization to the leading Polish refinery, Grupa Lotos


1980’s 2005

2014

2007

In 2005, Long-term maintenance and service cooperation established with Lotos In 2007, Capacity expansion project to 10 million tons, Metso as the preferred supplier of on-off valves Today Metso is #1

in the on-off valves and has close to 30% share of the

installed base within the plant

Extensive valve service agreement signed covering Intelligent maintenance and Device management, together with optimization of inventories Results:

Reducing customer's spare parts stock by 25% within the first 11 months through contractual stocking by Metso

Valve performance ensured in the process

Extended maintenance intervals and reduced costs

Implementing the Intelligent shutdown concept targeted for the optimal planning, preparation and execution of the 2017 year shutdown

Customer relationship established and first valves supplied via EPCs

2013

Metso’s pump business is a challenger with a strong

foundation

© Metso Metso Capital Markets Day 2014: Flow Control by Perttu Louhiluoto

• Pumps has been part of our integrated mining offering with a heavy focus on opportunities that are synergistic with the rest of the mining portfolio. • Mining slurry applications are the

most service intensive pump applications (wear and tear). • Flow Control business area will

approach pumps as a product business seeking to maximize the opportunity capture with pumps.

- Metso will continue to pursue the integrated opportunities

Metso’s pump business has been heavily mining focused

17

© Metso

Our pump business builds on strengths


• Significant global footprint • Top-notch technology and expert knowledge • Serving a wide range of slurry applications

with pumps, hoses, and valves • Major manufacturer of rubber components • Competitive horizontal and vertical slurry

pumps > 65 000 Mining slurry pumps delivered

Strong market presence in mining

slurry pumps

18 © Metso


• Introduction of new pumps to our portfolio • (Stronger) push into the accessories and related products (hoses, couplings,

hydro cyclones, slurry valves) • Strengthening of pumps dedicated sales structure (own / distributors) • Expansion to related applications/industries • Expansion to other pump segments through acquisitions

There are multiple avenues for us to strengthen our pump business both short and mid-term

19

We look for organic and inorganic growth

© Metso

We will continue to generate profitable growth going forward


Flow Control strongholds are quite resilient to changes in oil price

We can continue to grow through organic actions during current market conditions

There is plenty of room for inorganic actions

21


Source: Historical: Thomson-Reuters Datastream

Oil price has been tumbling recently – our direct exposure is limited

0

25

50

75

100

125

150

Brent oil spot price USD/bbl Impact of oil price decrease

Valve + pump business current exposure1

Downstream/ midstream opex

Other process industries

Upstream capex

Upstream opex

Downstream/ midstream capex

22 1. Based on rolling 12-month net sales ending Q3/2014

© Metso

Impact of oil price varies across the value chain

Midstream Upstream Downstream

Downstream Natural Gas

Gas Development Production

Condensate Exploration

Discovery

Oil

Development

Production

Transportation

Transportation

LNG Regasification

Power plant/ large industry

Power plant/ large industry

Household/ smaller industry

Pipeline Transportation Midstream

Processing (NGL)

Specialty products

Petrochemical plant

Petrochem feedstock Industry

Industry

Retail

Wholesale Refining Petroleum products

Petroleum products

Cars, trucks, etc.

Industry

Bulk products

Distribution

LNG Liquefaction

Pipeline Transportation

Downstream Oil

• Sensitive to long(er) term changes • Shifts between geographies • Oil field depletion

• Geopolitical drivers • Shifts due to oil/gas

price ratio

• Lower oil price supports refinery margins and end product demand

• Geographic shifts, majors vs. NOC



Source: ARC, EIF

Long-term target market conditions are favorable

Valve market development by

industry (Total market size:

EUR 35 billion)

Total market 20141)

( EUR billion)

Total market CAGR 2014-2018

Oil &Gas

Refining

Pulp &Paper

Mining

Chemicals

Power 2.8 5.2

2.5

1.1 2.8

7.5

3.8% 5.4%

4.3%

4.6% 4.8%

6.6%

Pump market development by

industry (Total market size:

EUR 35 billion)

Total markt 20142)

( EUR billion)

Total market CAGR

2014-2018 Mining

Oil &Gas

Refining

Chemicals

Power

1.8

2.2 3.1

5.2 2.3

6.5% 7.4%

1.3% 7.3%

2.1%

1) Valve market for other customer industries amounts to EUR 13 billion

2) Pump market for other customer industries amounts to EUR 20 billion

24

© Metso

Our leading indicators have developed positively

1. Selected EPC companies include: Technip, JGC, Chiyoda, Tecnimont, KBR, Linde Engineering, Fluor, CB&I, Saipem, Jacobs Engineering, Samsung Engineering and GS Engineering & Construction 2. Selected Pulp&Paper equipment providers include: Andritz (segment), and Valmet (corporate level) 3. Selected mining equipment providers include Atlas Copco (segment), Metso (MPS), Sandvik (segment) and Weir (segment)

EPC order trend1

(Rolling 12-month order intake)

billion EUR EPCs rolling 12-month order intake

Pulp & Paper equipment providers order trend2


Mining equipment providers order trend3


50

100

150

Sep 2014

Sep 2013

Sep 2012

Sep 2011

Sep 2010

0

3000

6000

9000

Sep 2010

Sep 2014

Sep 2013

Sep 2012

Sep 2011

EUR billion EUR million

0

3000

6000

9000

12000

Sep 2014

Dec 2013

Dec 2012

Dec 2011

Dec 2010

EUR million


© Metso

Markets are fragmented enabling winners to grow

Pumps

Higher degree of consolidation for the general purpose pumps while specialty pumps are

more like valves

Source: EIF, company reports

Valves

Highly fragmented industry due to varying requirements between industries,

applications, regions and customers

Others

Metso

Others

Metso

Total market size 2014 EUR 35 billion1

Total market size 2014 EUR 35 billion2

Top 10 players

Top 9 players


1. Based on all product categories except unspecified other. Covering all end use industries. Control valves figures based on ARC report. All other figures based on EIF report 2. Taken directly from EIF report

© Metso © Metso 27 © Metso © Metso

A combination of continuous improvement and acquisition will take us to the next level

Global business model integration Business size

EUR 3 billion EUR 0 Billion

Niche specialist

Global industry specialist

General flow control company

Net Sales: EUR 20 – 200 million

Net Sales: EUR 0,3 million – 1,5 billion

Net Sales: EUR 1,5+ billion

Indu

stry

focu

s

Wide

Narrow

Hundreds of companies

Dozen + companies

Handful of companies


Conclusions Our strategic target

© Metso

Process safety and

sustainability evermore important

Need for value-adding partners

Flow control industry trends

Product reliability

and process uptime

Demand for intelligence increasing

Continued cost

pressure

Customers are more

dependent on suppliers

process knowhow

Metso Capital Markets Day 2014: Flow Control by Perttu Louhiluoto 29 © Metso

© Metso

We will become a leader in flow control within oil & gas and mining

We have a strong presence in • Oil & gas downstream valves • Pulp & paper valves • Mining pumps

We are known for our • Strong customer commitment • Excellent process know-how • Strong global operations footprint • Reliable, highly engineered

products • Service capabilities with advanced

service solutions and products

We will build significant positions by • Expanding valve, pump and valve

controls offering to oil & gas and mining customers

We will excel in • Supply chain management • Cost competitive manufacturing • Sales capabilities and

manufacturing


© Metso

Targeting profitable growth Capital Markets Day 2014


Flow Control’s performance has been strong Development of valve business has outpaced the market and the leading competitors Our pump business has been mining focused and is highly profitable

Focused and synergistic business area with strong growth outlook

We aim to become a leader in flow control within oil & gas and mining by: • Improving our operational and sales

capabilities. • Expanding our offering • Making targeted acquisitions in our core

industries

© Metso

we will become a leader in flow control within oil & gas ...€¦ · business line and reported...

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