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Executives

Johanna Henttonen – VP, IR

Jorma Eloranta – President and CEO

Olli Vaartimo – EVP and CFO

Analysts

Erkki Vesola – Swedbank Markets

Jan Kaijala – Nordea Markets

Tomi Railo – Enskilda Securities

Ben Maslen – Merrill Lynch

Irene Bermont – UBS

Johan Eliason – CA Cheuvreux

Andreas Willi – JP Morgan

Sasu Ristimaki – Carnegie Investment Bank

Kenneth Leiling – Danske Markets

Metso Oyj (OTCQX:MXCYY) Q2 2010 Earnings Call Transcript July 29, 2010 8:00 AM ET

Johanna Henttonen

Good afternoon ladies and gentlemen, and welcome to Metso Corporation’s second quarter report web cast. My name is Johanna Henttonen. I am heading Metso’s Investor Relations. Today we will start with a short presentation by our CEO and President, Jorma Eloranta, and after that we will continue with Q&A session together with our CFO, Olli Vaartimo, also present.

But before we start, I would like to remind you that certain information we will be discussing today is forward-looking, and thus include uncertainties that may cause our actual results to differ from our current expectations as of today. But Jorma, please, the floor is yours.

Jorma Eloranta

Thank you Johanna, and very good afternoon to everybody. Second-quarter key takeaways at least for me was the very strong order intake, secondly also the whole key financial figures improved, and thirdly, based on the positive mood in the market in the first half of this year’s development, we have given a bit more precise guidance on net sales for this year.

So let us take a bit more closer look at those figures and performance during the second quarter. So during the second quarter this year, overall positive tone in the global economy continued despite certain concerns over the budget deficit in some European countries, including my own country Finland. The recovery of demand remained in most of our customer industries, especially in the emerging markets. We all are at Metso naturally very happy for our key financial figures improved, not only when comparing the second quarter last year, but also from the first quarter this year.

For me, this is clear evidence that the recovery continued in our customer industries. As I said, our order intake during the first quarter was strong €1.7 billion. All businesses did well, but especially want to highlight the strong order intake in paper and fiber technology.

Our net sales were about €1.4 billion, up by 10% from second quarter last year. Net sales also picked up from €1.2 billion in the first quarter with strong contribution from mining and paper businesses. Before moving to profitability analysis, I want to mention that we have introduced EBITDA before nonrecurring items as a new financial indicator, additional information for those interested in that kind of information. Our idea is to give better view on underlying operational performance and to improve comparability.

EBITDA before nonrecurring items was €125 million or 9.1% of net sales in the second quarter. Our gross profit margins were up because increased capacity utilization rates. On the other hand, earnings were somewhat negatively affected as the SG&A expenses have increased, reflecting the increased demand and strengthening of our sales, marketing and other resources.

We expect this SGAs on net sales to start to decrease in coming quarters as the net sales are estimated to grow. In addition, we will continue naturally by control of our costs. I also want to highlight our strong free cash flow during the second quarter, €164 million, as you can see from this slide. So if we now take a look at second quarter development by business segment, first mining and construction technology, net sales in the second quarter were €541 million, up by 2% from the comparison period, and EBITDA before nonrecurring items has been positive this time for second quarter, or €64.8 million and margin improved to 12%.

We have solid evidence of improving trading environment and positive volume leverage. In the second quarter, we had about €32 million, one of gains from intellectual property right settlements, which together with some smaller non-recurring items improved the reported EBITDA margin to 18%. Intellectual property rights are important as one can see from this figure, they are important to us, and we definitely will continue to be active in protecting our intellectual property rights globally also in the future.

If you then take a look at the business lines in mining and construction technology, you can say that the underlying operational profitability during the first-half of this year was roughly in par with the comparison period both in services business, as well as in equipment and systems business. In energy and environmental technology, net sales were €334 million, down by 6%. EBITDA before nonrecurring items was €29.3 million and margin 8.8%.

EBITDA in the first half of this year improved in the comparison period, clearly on power business due to successful project execution, and weakened in automation and recycling businesses, mainly as a result of our significantly lower delivery volumes. For paper and fiber technology, net sales grew by 38% and were €494 million, a bit more than €70 million that came from our Fabrics, or Tamfelt business, out of that figure.

The growth in general came from all business lines. EBITDA before non-recurring items was €36 million and margin 7.3%. Clear improvement in the profitability was due to strong volume growth and more streamlined structure. I must say, I’m especially pleased with the significant profitability improvement in our paper on fiber technology since our people have been really working hard, extremely hard to improve profitability in the demanding environment of paper and pulp.

Well, but then order intake, so as one can easily see from this picture, the positive trend continued in quarterly orders received. Orders went up by 64% on the comparison period. All our businesses, as one can also see from the figure contributed positively to this growth. The strengthening in new orders was greatest in paper and fiber technology segment. As I just commented a little bit earlier, the share of emerging markets in new orders was also strong at 60%. I think it is a record high figure for Metso. So 60% so far in this emerging market order intake.

So, also our services business continued to perform well. Services business orders in the second quarter were €680 million, 38% up from the comparison period. Services accounted for 41% of our total orders received. During second quarter, we also saw clear recovery in services net sales as the result of steady growth in services orders since the beginning of this year. And then order backlog situation, at the end of June, our order backlog was about €2.4 billion, that is about 22% stronger than at the end of last year.

About $2.4 billion of deliveries in our order backlog are expected to be completed in 2010, and about €900 million of these are services business orders. Uncertainties, which we have had in our order backlog have continued to come down as customers are restarting previously suspended projects. And end of June backlog contained €395 million worth of deliveries with uncertain delivery schedules.

So, we will then move to cash flows and our financial position, we for a good reason monitor closely the networking capital development in order to prevent unhealthy growth in inventories, now when the volumes are again picking up, and during the second quarter we were able to decrease our net working capital by €44 million, and this is primarily due to tight control of inventories and adequate amount of customer advances.

So thanks to good control over the net working capital and healthy profitability, we delivered a strong free cash flow of €164 million during the second quarter. One can see from the gearing, our balance sheet keeps on getting stronger. At the end of June the gearing was 28.5%.

It will then move to the short-term outlook of the market looks, there are some comments from each and every customer market, as said earlier. And we anticipate that the recovery will continue in most of our customer industries, the uncertainty in the financial markets caused by the growing budget deficits in many European countries where however bring some bumps in the road.

Our customers improving capacity utilization rates are supporting our services business growth. And most of our customers seem to be gradually regaining their confidence to increase the level of the investments in new and excess capacity. So based on our increased order backlog and the expectation that the recovery of the global economy will continue, we have revised our net sales guidance to be a bit more precise.

We now estimate that our net sales in 2010 will grow about 10% from €5 billion level of 2009, and our guidance for this year’s net sales has been raised quarter-by-quarter as our confidence of the global recovery has been getting stronger.

Our profitability guidance is intact, so we say simply that we expect our profitability to be satisfactory this year. Our estimate is based on our order backlog in the end of June, which contains about, as I said about €2.4 billion worth of deliveries for 2010, and the expectation that the recovery of the global economy will continue.

So, for some closing remarks, today after the first half of the year, I’m even more confident that Metso is a more competitive company than before. Going forward, we estimate that the overall positive mood in the global markets will continue, reflecting the increased demand. We have started to strengthen our resources to fully leverage the improved market environment, and I believe that Metso is in a great position to make the most of the improved market opportunities.

So at Metso we are committed to develop our services business, our global presence, as well as our environmental businesses, and we have now, so we can say moved our focus from short-term issues back to profitable growth now and long-term. By doing so, we strongly believe that we’re building sustainable future for Metso.

So ladies and gentlemen, thank you very much for your kind attention and I think it is time now me and Olli to be ready to answer if you may have any questions.

Question-and-Answer Session

Johanna Henttonen

So, ladies and gentlemen it seems that Jorma and Olli are now ready to answer your questions. We will first take the questions here in Helsinki, and then continue with the conference call participants. Before your question, kindly state your own name and company name and please ask one question at a time. Thanks.

Erkki Vesola – Swedbank Markets

Hi, good afternoon, Erkki of Swedbank Markets. In your commentary, you talk about your improved competitiveness. Could you open up this a little bit? Have there been changes in the competitive environment, and how would you comment your market share improvement in the respective businesses?

Jorma Eloranta

Well, the competitiveness is reflecting to the fact that during the downturn we were restructuring Metso quite heavily. We closed roughly 20 smaller units, factories and other units and by doing that we didn’t decrease in any material way the offering to the customers, and our flexibility and cost structure today is better than before the recession. Market share is what comes to this kind of a short period of time. I don’t know whether it is – if there is anything concrete to comment. Yes, we follow, we monitor rolling three years basis and even shorter terms and so try to have a good picture on these issues, but I don’t see any alarming issues, or anything particular should have a impact to our competitiveness in the market share development.

Erkki Vesola – Swedbank Markets

Thanks.

Johanna Henttonen

Any other questions from Helsinki?

Jan Kaijala – Nordea Markets

Jan Kaijala, Nordea Markets. Just a general question concerning the development in practically all of your divisions in the second quarter versus the previous quarters, would there be anything within those numbers, some late revenue recognition, major project deliveries, or something like that, that we should be aware of when looking at the numbers, that they might have been boosted by something that would not necessarily continue in the following quarter?

Jorma Eloranta

No. I think why we have just wanted to take this non-recurring items as separate. One can see that these what we consider as non-recurring. Then each and every analyst can, well, take their own conclusion. So we are transparently openly saying this we consider non-recurring, and I don’t recognize that there would be anything during the second quarter, which would be unusual or exceptional in nature. Olli do you?

Olli Vaartimo

No.

Johanna Henttonen

Thank you.

Tomi Railo – Enskilda Securities

Tomi Railo, Enskilda. A few questions, I didn't spot the word pricing in the report, if I was reading correctly. Can you just describe the pricing situation? After the first quarter, you commented that it's stabilizing. Can you just describe the environment?

Jorma Eloranta

Well, we commented the pricing is through last – at the end of last year that it is a bit more challenging, and we also at the same time wanted to comment, yes, there are other issues, I mean procurement prices may go down and so forth, and also that the capacity utilization in various factories may have a bigger impact to our profitability.

In our kind of business, it is really so that there are many elements. I mean, some positive, some negative elements impacting our performance, actual performance and we note this that many people took a bit too much conclusion to our comment, but we tried to be open and transparent. There is nothing particular too new to comment in this pricing environment, yes, always competition, but yes, good quality with the normal pricing environment.

As an outcome, our gross margins improved during the second quarter. Outcome of these pricing pressures make up the procurement or sourcing little cheaper and better. And our conclusion is that mainly the gross margin improvement came from better capacity utilization rates, which we comment in the text.

Tomi Railo – Enskilda Securities

Also, if you could help us a little bit with the currency impact in revenues, orders, earnings.

Jorma Eloranta

Yes, it had a relatively big impact to translation – the transaction had nothing because we hedge everything. But Olli would you care…

Olli Vaartimo

Yes, I think the comment on the report as well, we will be now reporting 3% increase in net sales with the same exchange rates what we had one year back. So, net sales would have come down about three percentage point.

Jorma Eloranta

That is the half year development.

Olli Vaartimo

And at the half-year level, our operating profit or EBITDA would have been with the first half – last year’s first six months exchange rates about – a bit more than €20 million lower. So, some positive impact both on sales and EBIT but nothing material.

Tomi Railo – Enskilda Securities

Then I am able to calculate that out of the figures, but if I can just ask, Fabrics. I mean, the services orders were €680 million. What was the figure for Fabrics, i.e., Tamfelt?

Jorma Eloranta

Roughly 70 million, a bit more than 70.

Olli Vaartimo

Net sales and orders received, so there are in the, let us say, magnitude of €70 million to €80 million.

Tomi Railo – Enskilda Securities

And then also, finally, a question on sub suppliers, has there been any development to better direction? Are they able to ramp up their operations?

Jorma Eloranta

Yes, well the mood has improved and that has a positive impact also. So they are building up, although in some countries like Finland the situation is very, very different in different companies. I mean, smaller (inaudible). So, we have subcontractors, which don’t have a lot of capacity left, but then we have sub contractors who really have nothing but capacity left. They don’t have enough business to do.

Erkki Vesola – Swedbank Markets

Erkki, Swedbank again. Previously, you indicated in MCT that you booked some lower margin orders during the latter half of '09 that could still have an impact on your margins during also Q2. This doesn't seem to have been an issue, or was it?

Jorma Eloranta

Well, it was true that there was some lower margin – lower-priced, but there were some positive, which have a positive impact. And so the outcome was the gross margins improved.

Erkki Vesola – Swedbank Markets

So we should not be expecting a jump upward in the MCT margins during the latter half of this year?

Jorma Eloranta

Olli, would you…

Olli Vaartimo

I think you will not see any jumps, but basically so the underlying weaker margin, the volume of the underlying weaker margin orders, what we took at the end of last year is, let's say, gradually diminishing, so it should – on its behalf, have a positive impact on the profitability then going forward. Like Jorma said, there are as many other parameters as well which you have to take into consideration.

Erkki Vesola – Swedbank Markets

Thanks.

Johanna Henttonen

Are there more questions here in Helsinki? If not, I think we are now ready to take the conference call participants into play. So operator please.

Operator

Thank you. (Operator instructions) Our first question comes from Ben Maslen. Please go ahead announcing your company name.

Ben Maslen – Merrill Lynch

Yes, good afternoon, everyone. It's Ben Maslen from Merrill Lynch. Hi, Jorma, Olli. A couple of questions, please. Firstly, can you just talk about where the capacity utilization rates are at the moment across your different businesses, and if you could split Mining and Construction, that would be helpful. That's the first question. Secondly, in Q3 last year, you had a very strong quarter of margins. I think you got some exceptional summer work benefits. Can you just talk a little bit about Q3 and whether we should expect a similar thing this year, or was that a one-off? And then just finally, on the cash flow, it's very strong. Can you talk a little bit about your expectations for working capital in the second half of the year, and just your priorities for the balance sheet going forward? Thank you.

Jorma Eloranta

Capacity utilization rates, they are still units in which we don’t have the full capacity utilization even in house. Mining and Construction, we really can’t split it because in mining the procurement is there, the business is roughly 90%. So we are buying quite a lot and using the same resources what comes to the production, not engineering but production. So we can’t split those capacity utilization rates at least not very clearly.

In mining, one could see that the order intake went up by 69%. So very strongly. So we need the capacity which we have. In construction area, the order intake growth was a bit low, and there might be some areas where we have still left capacity. There is some effect I think, Olli can comment as well the cash flow. The only thing I want to say in the cash flow, it is very much reflecting also the order intake and advances we are receiving from the customer, which we but also then building the inventory of those project, but they are normally very much balanced incoming advances, as well as the building of other projects. Olli, could you…

Olli Vaartimo

Yes, if you look at the summer holiday impact on our third quarter, the financial performance, we see that our SG&As have typically been about 10% lower during the third quarter and I’m expecting them to be somewhat lowered during the first and second quarter this year this time as well. But simultaneously when our volumes are increasing, so we’re increasing our investments in the SG&A area as well. So that may take away part of the typical drop what we experienced during the third quarter, but definitely basic assumption should be that especially on the fixed cost side that we should see some benefits because of the holiday period.

Cash flows like Jorma said, during the first half of the year we have not seen too much growth in our inventories, because of the inventory control we have been benefiting from good advances received. Simultaneously, we have to say that also our payables have been increasing very nicely, when we have been increasingly the procurement activity. So that has helped basically eliminate the increase in receivables, which is say an outcome of increasing net sales volume.

Now in moving to the second quarter, I’m not expecting – moving to the second half of the year, so I’m not expecting to see quite as big benefit from the accounts payables. So, I think my guidance is such that one should be a little bit more cautious about the cash flow development during the second half of the year. Like Jorma said, very much we will be depending on how the order intake will develop, and we will definitely keep very tight control over the inventories as we have learnt our lessons from the last let us say up period.

Ben Maslen – Merrill Lynch

Maybe just a follow up if I can on the automation business, I mean you said that margins were little bit weaker in the area, is that a function of underutilization, and…

Olli Vaartimo

Yes.

Ben Maslen – Merrill Lynch

And how do you expect that to trend, going forward, because your order comments sounded more positive?

Jorma Eloranta

Yes, in the flow control business, the order backlog has been too low, based on the capacity what we have, and there we have had underutilization of capacity, and at the moment it looks promising that we will get more orders to fully benefit our capacity, and to serve our customers whatever way you wanted. So it should help in the coming quarters.

Ben Maslen – Merrill Lynch

Okay, thank you very much.

Operator

Our next question comes from the line of Irene Bermont. Please go ahead announcing your company name.

Irene Bermont – UBS

Hi, this is Irene Bermont from UBS. I have a couple of questions, the first of which is on paper and fiber. Your orders were particularly strong in Q2, but we haven't seen that many big order announcements in the area. So, could you provide a little bit more color on the orders here, and tell us whether the pipeline of potential orders in pulp has improved, whether there is any more certainty on the timing of those orders here. And the other question is on mining and construction, whether we should expect a pickup, in particular, mining orders in Q3 sequentially, especially given how your peers have performed?

Jorma Eloranta

Yes, the PFD. Yes, it is true, we have not been able to announce all the orders we have received. Metso, as a company, has a policy and we have an active interest to announce every major order publicly, and announce also information which is relevant to investors like the value of the orders and so forth.

Unfortunately in some cases, customers make it very clear that we can’t do so. They have their own internal or any other reasons, which we definitely are not always even don’t understand. But sometimes it is so that it is also clear that if we announce it in a wrong way, we create a very negative atmosphere with the customer, which may have a negative impact to our sales.

As I said, at the implementation of the project I said, we as a company won’t always, I mean it is obvious. We want to announce all orders we receive, but we also have a policy that we announce only orders, which we consider to be firm. Quite often it means that we have received advance payments and so forth. Sometimes we have noticed that customers are announcing orders, which we have not announced. And that is also a bit unpleasant and confusing to any external analyst.

I’m sorry for that, but that might be one explanation. Then what comes to the paper and fiber technology, new coming orders, paper and fiber technology still, I see that there is still good potential that this pipeline is not empty. Okay, then it comes to timing, it's very difficult always to say. The same applies also to mining, so we got 69% increase in mining in the second quarter, and there is also a lot of all kind of activity in the pipeline. So the pipeline is promising, but don’t take the pipeline as a order. So order is order when we have received and we have a binding contract.

Irene Bermont – UBS

Understood. Thank you very much.

Operator

Our next question comes from the line of Johan Eliason. Please go ahead announcing your company name.

Johan Eliason – CA Cheuvreux

Yes, hi, this is Johan Eliason, Cheuvreux. I just had a question. I didn't quite hear what you said on Tamfelt. Did it add 70 million to sales and orders in the first half, or in the quarter?

Jorma Eloranta

First half.

Johan Eliason – CA Cheuvreux

Yes, okay. That's what I thought, yes. Thank you very much. That was it.

Operator

Our next question comes from the line of Andreas Willi. Please go ahead announcing your company name.

Andreas Willi – JP Morgan

It's Andreas from JP Morgan. Good afternoon. I have question on the fiber business, in terms of the outlook for large orders there, if you maybe could talk a little bit about the pipeline. Are there enough large orders out there that there's basically one for Metso, one (inaudible), so you don't have to go too aggressively for the first one, or do you expect it to be very competitive, again, as there's too much uncertainty whether there will be a second one and a third one?

Jorma Eloranta

Well, it is obvious that for many reasons, even ethical reasons and legal reasons we can’t even consider the situation would be one to somebody, and the other one to somebody else. Unfortunately there is a competition on each and every order to come.

Andreas Willi – JP Morgan

But is it –

Jorma Eloranta

Have been and most likely will be. Yes, if there is lot of orders, then make capacity issues and so forth. And may come and hopefully will come that somebody is not so hungry than somebody else. And so…

Olli Vaartimo

But maybe we could comment that now during the first half, the order development of our fiber business has been positive and in that way also we start to have a fairly healthy capacity utilization rates. So in that way we don’t have to be desperate after new orders, but of course, when we talk about fiber line orders, we’re talking about let us say 2 to 3 years perspective. So we have to have long-term view on making decisions about those orders. But the order backlog today is definitely a lot stronger than what it was six months ago. So making our situation a lot better.

Andreas Willi – JP Morgan

Thank you.

Operator

Our next question comes from the line of Sasu Ristimaki. Please go ahead announcing your company name.

Sasu Ristimaki – Carnegie Investment Bank

Oh, yes, it's Sasu from Carnegie here. A few questions, if I may. They'll be short ones. Firstly, looking at your outlook by customer industry slide, page 13, it seems that you have slightly downgraded construction in Europe. Is that related particularly to the southern countries, or is there a broader issue to be aware of? Then, the second issue is still on the paper and fiber side, then. Now, you've had a pretty good order trend for a couple of quarters, what's your own thinking about the kind of correct dimensioning of this business, that – are you thinking of it as a kind of €1.5 billion revenue business, or a bit – €2.5 billion revenue business going forward? And then, my third question is really that in the spring of 2010, to what extent do you think the currency situation helped you close deals versus your competition? Thank you.

Jorma Eloranta

Okay. First, the outlook, the construction, yes, we little bit commented that there are let us say, weak indications that because of the certain deficit in government budget in some European countries, it could happen that the construction projects will be delayed or not materializing as planned. Okay, on the other hand the stimulus package in developed countries are very little, roughly 50% went to infrastructure building type of projects, while in developing areas, it was more or less half of the stimulus package. This money went to these kind of infrastructure building issues.

Paper and fiber technology, size yes, that is an very relevant question, and we have been discussing very much about both sides of our business, and if I throw a figure without committing very strongly to that, I would simply say 1.8 billion, 2 billion roughly in the neighborhood is the size of demand.

The third question, sorry…

Olli Vaartimo

They were two of them.

Johanna Henttonen

Sasu, do you want to repeat the question? It was about currencies?

Sasu Ristimaki – Carnegie Investment Bank

Yes. Yes, the question was, to what extent do think have the currency moves helped you take deals, i.e., improve your competitive position in 2010?

Jorma Eloranta

Not seriously very much. If you look at the competitive arena, it's – we have competitors also in Europe zone, and so yes, we have some US also. But not really big impact, yes, some impact because of devaluating of Euro. Now when the euro has got a bit stronger again, I don’t either see this a big competitive issue, but…

Olli Vaartimo

As I’ve said earlier is also, the main issue for us is the construction agreement, where we have relatively a big part of our production capacity still in Europe, but when simultaneously the construction equipment market is fairly weak at the moment. So, so far it has not had any major impacts. But of course, when the construction equipment market will recover, so 3Q definitely it should help us.

Sasu Ristimaki – Carnegie Investment Bank

Yes, good. One just extremely quick final follow up. In the mining and construction division at the moment, the orders that you've been taking in Q2, what kind of delivery dates or revenue recognition dates should we be thinking about?

Jorma Eloranta

Olli, will you comment there?

Olli Vaartimo

First of all, when we talk about mining and construction, so you have to bear in mind that half of the orders are services orders with relatively short delivery times. I would say the average being somewhere between to say in the area of 6 months. Then of course, we have some heavier equipment grinding mills, some grinding mill orders which we have disclosed as well, where we are talking currently of about maybe in average 18 months delivery time. So, the orders what we had in our bookings, will be recognized as revenue to a great extent during the second half of this year already, but they will partially then cover parts of 2011 as well.

Sasu Ristimaki – Carnegie Investment Bank

Great. Thank you very much for that.

Operator

Our next question comes from the line of Kenneth Leiling. Please go ahead announcing your company name.

Kenneth Leiling – Danske Markets

Yes, thank you. Kenneth Leiling from Danske Markets. I just have a couple of questions on the Mining business. I mean, are you seeing any signs that your mining customers are a little bit more reluctant in actually making orders final because of the uncertainty as to what's happening in China and the Chinese metal demand? And secondly, if you could comment about your pipeline within the mining business, what particular areas are especially strong right now in your own pipeline. Thanks.

Jorma Eloranta

Well, China is always a kind of a issue to be discussed, but in real life we haven’t yet seen. Yes, we have some – seen some more like a discussion over it and how China is developing and what is the impact of the CapEx issues and so, but not really affecting in any material way, so the concrete discussions with which we have. Well, those metals, which there is demand and no inventory building, and prices positively are typically, although the mining companies are also trying to have a longer-term gold, copper, iron or they have been very important for us. Do you have any…

Olli Vaartimo

No.

Jorma Eloranta

Okay.

Kenneth Leiling – Danske Markets

Okay. Thank you.

Operator

There are no further questions registered on the phone.

Johanna Henttonen

Thank you. Are there are more questions here in Helsinki? Okay.

Tomi Railo – Enskilda Securities

Tomi Railo, Enskilda. Just anything you can comment on your CapEx needs, again, going into 2011 and 2012?

Jorma Eloranta

No really so long-term, but it seems to me that we have an interest level to increase in order to have open bottlenecks, and increase the capacity in particular in emerging markets, Brazil, and China and India. So, I think we commented a little bit in the interim that it little bit goes up from the…

Olli Vaartimo

Slightly up, but basically I think the impact of the demand increase what we’re seeing at the moment and the activity increase will be more visible in our CapEx next year. So, we don’t have time to spend anymore even for new ideas which come up. So, new ideas will more have an impact on next year’s CapEx, which we have not discussed too much yet, but if market activity is improving as it is at the moment. So, one should expect some increase in CapEx next year.

Johanna Henttonen

All right. Are there more questions in Helsinki. All right. If not, I will thank you for the web cast, thank you for participating. All the details can be found in our website.

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