SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

[July 27, 2005]

Metso Corporation

(Translation of registrant’s name into English)
Fabianinkatu 9 A,
PO Box 1220
FIN-00101
Helsinki, Finland

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F

Form 20-F þ		Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o		No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g-32(b):82-                    

 

 

SIGNATURES

Date July 27, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.

Name:

Olli Vaartimo		Harri Luoto
Executive Vice President and CFO		Senior Vice President,
Metso Corporation		General Counsel
		Metso Corporation

Metso Corporation’s interim review, January-June 2005:

(Helsinki, Finland, July 27, 2005) – Metso Corporation (NYSE: MX; OMX: MEO)

•		Metso Corporation’s net sales in January-June increased by 15 percent and totaled EUR 1,922 million (1-6/2004: EUR 1,672 million).
•		The operating profit (EBIT) strengthened further in the second quarter and was EUR 83 million. January-June operating profit was EUR 138 million, or 7.2 percent of net sales (EUR 37.4 million and 2.2%).
•		Earnings per share were EUR 0.75 (EUR 0.03 negative).
•		The order backlog from continuing operations increased by 27 percent from the year end, and was EUR 2,157 million at the end of June (Dec. 31, 2004: EUR 1,705 million). New orders were received worth EUR 2,292 million (EUR 2,239 million).
•		Net cash generated by operating activities was EUR 124 million.
•		Return on capital employed (ROCE) was 17.3 percent (4.6%) and return on equity (ROE) 21.0 percent (0.9% negative).
•		Gearing was 25.8 percent at the end of June (Dec. 31, 2004: 49.7%).
•		It is estimated that Metso Corporation’s net sales for 2005 will increase to approximately EUR 4.1 billion, and the financial targets set for 2005 will be exceeded.

This interim review is prepared in accordance with IFRS. Metso adopted IFRS at the beginning of 2005.

“In 2004 and 2005, Metso has focused on improving its profitability and strengthening its balance sheet. The new business concepts and restructuring measures are now yielding good results. This provides a solid foundation for the further evolution of Metso,” says Jorma Eloranta, President and CEO of Metso Corporation.

“We will continue efforts toward operational excellence in all business areas, in particular in Metso Paper. At the same time, the management agenda will be increasingly shifted toward profitable growth, starting from Metso Automation and Metso Minerals. We primarily target organic growth, notably in the emerging markets. We will also be investigating complementary add-on acquisitions to strengthen our competitiveness as well as our product and service offering. Overall we are pleased with the progress made this year. We feel that there remains a lot of opportunity in Metso for growth and further improvement,” says Eloranta.

The demand for Metso’s main products was good in the second quarter. The good capacity utilization rates of the pulp and paper industry contributed to a positive demand for Metso Paper’s rebuilds and aftermarket operations. Also the markets for new paper machine became more active, and Metso booked two new paper machine orders in the second quarter.

In the construction and civil engineering industry, demand for aggregates and consequently for Metso Minerals’ crushing and screening equipment and aftermarket services was good in Europe and Asia and excellent in North America. Demand for Metso Minerals’ mining products remained good.

Demand for the products and services of Metso Automation continued to be good in the power, oil and gas industry, and satisfactory in the pulp and paper industry.

Metso’s operating profit improved significantly on the comparison period and was EUR 138.0 million, or 7.2 percent of net sales. Metso Minerals’ profitability continued to improve. Also Metso Paper’s profitability improved clearly on the comparison period, due to improved efficiency and capacity utilization. Metso Automation’s profitability remained good.

Short-term outlook

The demand for rebuilds and aftermarket services in the pulp and paper industry are expected to remain good. Also investments in new production lines are anticipated to gradually pick up, mostly in China and South America. Comprehensive road network development projects are estimated to maintain the demand for aggregates production equipment on a good level. The demand in the mining industry is estimated to remain strong, though the investment activity is anticipated to somewhat level out due to the general shortage of experienced management and other resources.

The good market outlook, the measures aimed at streamlining the cost structure, the strengthened order backlog and the first half-year result will support a continuation of the favorable profit trend. Metso Minerals and Metso Automation are expected to clearly surpass the operating profit targets set for 2005. Metso Paper’s operating profit target is challenging because profit is burdened by the weak profitability and restructuring costs in the Tissue business. It is estimated that Metso Ventures’ operating profit will be slightly lower than its target due mainly to structural changes.

The financial targets set for Metso Corporation in 2005 are an operating margin that is 6 percent of net sales and a 12 percent return on capital employed. It is estimated that the Corporation’s net sales for 2005 will increase to approximately EUR 4.1 billion and that the financial targets set for 2005 will be exceeded.

Metso’s strategic objectives and financial targets will be discussed in more detail in the Capital Markets Day at the end of August.

Metso is a global technology corporation serving customers in the pulp and paper industry, rock and minerals processing, the energy industry and selected other industries. In 2004, the net sales of Metso Corporation were approx. EUR 4 billion, and it has some 22,000 employees in more than 50 countries. Metso’s shares are listed on the Helsinki and New York Stock Exchanges.

For further information, please contact:

Jorma Eloranta, President and CEO, Metso Corporation, tel. +358 204 84 3000

Olli Vaartimo, Executive Vice President and CFO, Metso Corporation, tel. + 358 204 84 3010
Johanna Sintonen, Vice President, Investor Relations, Metso Corporation, tel. +358 204 84 3253

or

USA: Mike Phillips, Senior Vice President, Finance and Administration, Metso USA, Inc., tel. +1 770 246 7237.

 

It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for customer industry profitability and investment willingness, expectations for company growth, development and profitability and the realization of synergy benefits and cost savings, and statements preceded by ”expects”, ”estimates”, ”forecasts” or similar expressions, are forward-looking statements. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties which may cause the actual results to materially differ from the results currently expected by the company.

Such factors include, but are not limited to:

(1) general economic conditions, including fluctuations in exchange rates and interest levels which influence the operating environment and profitability of customers and thereby the orders received by the company and their margins

(2) the competitive situation, especially significant technological solutions developed by competitors

(3) the company’s own operating conditions, such as the success of production, product development and project management and their continuous development and improvement

(4) the success of pending and future acquisitions and restructuring.

Metso Corporation’s Interim Review, January 1 — June 30, 2005

The Corporation’s key figures

		4-6/05				1-6/05				4-6/04				1-6/04				2004
		EUR				EUR				EUR				EUR				EUR
		million				million				million				million				million
Net sales			1,028				1,922				879				1,672				3,602
Operating profit			83.3				138.0				45.3				37.4				199.5
% of net sales			8.1				7.2				5.2				2.2				5.5
Earnings per share from continuing operations, basic, EUR			0.37				0.63				0.21				0.06				1.16
Earnings per share from continuing and discontinued operations, basic, EUR			0.49				0.75				0.14				(0.03	)			1.05
Orders received			1,203				2,292				1,268				2,239				3,989
							30.6.05								30.6.04				31.12.04
Order backlog from continuing operations							2,157								1,900				1,705
Return on capital employed (ROCE), %							17.3								4.6				10.7
Equity to assets ratio, %							34.3								24.8				30.9
Gearing, %							25.8								78.2				49.7

Metso adopted the International Financial Reporting Standards (IFRS) at the beginning of 2005. The transition to IFRS has been described in the Notes to the Interim Review.

Metso’s operating environment

In the pulp and paper industry markets the price of chemical pulp turned to a decline. In Europe, the prices for printing paper rose slightly, but were still clearly below the prices targeted by producers. In North America, paper prices continued their moderate increase. The overall capacity utilization rates of pulp and paper industry machinery were good, but in Finland a dispute over the paper industry collective bargaining agreement resulted in a shutdown of mills in May-June.

As in the previous quarters, the investment activity in the mining industry continued to be good, although the rise in prices of both metals and iron scrap leveled off. Due to a shortage of experienced management and other resources the time required to implement investments in the mining industry has been lengthened and investment decision-making has slowed. The demand for aggregates continued to be good in Europe, North America and Asia due to investments in construction and civil engineering.

The continuing high price of crude oil kept investments in the energy, oil and gas industry at the good level of the first quarter.

Demand for Metso’s products

The good capacity utilization rates of the pulp and paper industry contributed to a positive demand for Metso Paper’s machinery rebuilds and aftermarket services. After a lengthy quiet period, the markets for new paper machines became slightly more active, and Metso booked two new paper machine orders in the second quarter. The tissue machine markets clearly improved, and Metso Paper received several orders for small machines though the price level was weak. Major investments continued in the pulp industry in South America, and the demand for pulping line rebuilds was strong in all market areas.

The demand for Metso Minerals’ construction and civil engineering equipment was good in Europe and Asia and excellent in North America. The demand for mining industry equipment remained excellent in South America, Asia and the Pacific region. Demand for metals recycling equipment continued strong. The high capacity utilization of mines and quarries continued to keep the demand for aftermarket and maintenance services good.

Markets for Metso Automation’s energy, oil and gas industry products continued to be good. In contrast, demand for pulp and paper industry products was satisfactory. The demand for field equipment was good in North America and Asia, whereas in Europe demand weakened a little. The demand for process automation systems was satisfactory.

Orders received and order backlog

In January-June 2005, the value of orders received by Metso Corporation totaled EUR 2,292 million, an increase of 2 percent from January-June 2004. The orders received in the comparison period included a large order for an SC magazine paper line for Stora Enso’s Kvarnsveden mill in Sweden. The Corporation’s order backlog of continuing operations increased by 27 percent from the end of 2004 and was EUR 2,157 million at the end of June. The order backlog of continuing operations increased by 14 percent compared with the order backlog on June 30, 2004.

Major orders received by Metso Paper included papermaking line orders in China and Indonesia, a rebuild of a fine paper machine in Germany and a fiber line for a new bamboo pulp mill in China. The orders received by Metso Minerals comprised of numerous smaller projects, equipment and aftermarket deliveries. Metso

Automation’s most significant orders included the delivery of large energy automation systems to Russia.

Metso Paper accounted for 39 percent, Metso Minerals 41 percent, Metso Automation 13 percent and Metso Ventures 7 percent of orders received.

The relative share of orders from Asia and South America increased the most compared with January-June 2004. 41 percent (50% in 1-6/04) of orders originated from Europe, 21 (20) percent from North America, 23 (16) percent from Asia-Pacific, 11 (9) percent from South America and 4 (5) percent from the rest of the world.

Net sales

Metso’s net sales in January-June increased significantly and totaled EUR 1,922 million, up 15 percent on the comparison period. Net sales grew in all business areas. The growth was strongest in Metso Minerals where net sales rose by 22 percent compared with January-June 2004. Aftermarket operations accounted for 39 percent (43% in 1-6/04) of the Corporation’s net sales (excluding Metso Ventures).

Of the net sales, 40 percent came from the deliveries of Metso Paper, 39 percent from Metso Minerals, 14 percent from Metso Automation and 7 percent from Metso Ventures.

Compared with January-June 2004, the relative share of net sales increased the most in North and South America. 46 percent (41% in 1-6/04) of net sales came from Europe, 21 (22) percent from North America, 18 (24) percent from Asia-Pacific, 10 (7) percent from South America and 5 (6) percent from the rest of the world.

Result

The Corporation’s operating profit improved significantly on the comparison period and was EUR 138.0 million, or 7.2 percent of net sales (EUR 37.4 million, or 2.2% of net sales in 1-6/04). Metso Minerals’ profitability continued to improve and Metso Paper’s profitability clearly increased on the comparison period, due to improved efficiency and better capacity utilization rates. Metso Automation’s profitability remained good. Metso Ventures’ operating profit turned positive.

Metso’s net financial expenses were EUR 24 million including nonrecurring expenses of EUR 5 million due to early repayment of loans (EUR 27 million in 1-6/04).

Metso’s income from continuing operations before taxes was EUR 114 million. No deferred tax assets have been booked with respect to the losses sustained in the previous years of Metso’s U.S. operations, which reduces the Corporation’s taxation rate (see Notes). The Corporation’s taxation rate is estimated to be around 24 percent in 2005.

The distributable profit, i.e. the net income for the review period, was EUR 104 million. Earnings per share from continuing operations was EUR 0.63, while earnings per share from continuing and discontinued operations was EUR 0.75.

Metso Corporation’s return on capital employed (ROCE) in January-June was 17.3 percent (4.6% in 1-6/04).

BUSINESSES

Metso Paper

		4-6/05				1-6/05				4-6/04				1-6/04				2004
		EUR				EUR				EUR				EUR				EUR
		million				million				million				million				million
Net sales			410				796				351				711				1,559
Operating profit (loss)			19.8				37.5				10.8				(5.4	)			48.0
% of net sales			4.8				4.7				3.1				(0.8	)			3.1
Orders received			564				918				699				1,135				1,726
							30.6.05								30.6.04				31.12.04
Order backlog							1,082								1,211				946

Metso Paper’s net sales in January-June were EUR 796 million, up 12 percent on the comparison period. The growth was due to an increase in paper machinery deliveries. Aftermarket and maintenance services accounted for 34 percent of the net sales (38 % in 1-6/04). The relative proportion of the aftermarket business decreased on the comparison period due to the increase in deliveries of new machines and rebuilds. Measured in euros, the volume of both aftermarket operations and machine rebuilds grew.

Metso Paper’s operating profit was EUR 37.5 million, or 4.7 percent of net sales. The efficiency improvement measures and an improved capacity utilization rate clearly raised profitability. The comparison period’s operating profit was burdened by nonrecurring costs. The results of the Paper and Fiber business lines, in particular, have improved. The Tissue business line still recorded a loss.

The program aimed at renewing Metso Paper’s business concept and streamlining its cost structure (MP50) will be brought to a conclusion by the end of 2005. The remaining measures related to the program are aimed particularly at renewing the business concept and streamlining the cost structure of the Tissue business. In the second quarter, negotiations were started to reduce approximately 40 people in the Karlstad unit, which is a part of the Tissue business line in Sweden. Metso Paper recorded approximately EUR 5 million in nonrecurring costs related to the program in the second quarter. The (MP50) program’s total expenses are estimated to remain under EUR 40 million, of which approximately EUR 30 million had been recorded by the end of June.

The value of orders received by Metso Paper was 19 percent lower than in the comparison period and totaled EUR 918 million. The orders received in the comparison period included a large order for an SC magazine paper line for Stora Enso’s Kvarnsveden mill in Sweden. The order backlog at the end of June was EUR 1,082 million, which was 14 percent higher than at the end of 2004.

Metso Minerals

		4-6/05				1-6/05				4-6/04				1-6/04				2004
		EUR				EUR				EUR				EUR				EUR
		million				million				million				million				million
Net sales			426				764				344				628				1,366
Operating profit			40.2				71.4				27.0				39.1				105.2
% of net sales			9.4				9.3				7.8				6.2				7.7
Orders received			458				963				374				742				1,566
							30.6.05								30.6.04				31.12.04
Order backlog							826								476				560

The net sales of Metso Minerals clearly increased on the comparison period and totaled EUR 764 million, 22 percent more than in January-June 2004. Due to good demand, delivery volumes increased particularly in the mining industry, and in crushing and screening equipment. Metso Minerals’ aftermarket and maintenance services accounted for 49 percent of net sales (56% in 1-6/04). Due to a significant number of project and equipment deliveries, the relative proportion of the aftermarket business was lower than in the comparison period.

The operating profit of Metso Minerals increased to EUR 71.4 million, which was 9.3 percent of net sales. Increased delivery volumes, the full use of manufacturing capacity and the efficiency improvement measures of the previous years improved profitability. The strongest improvement in profitability occurred in the Crushing and Screening business line.

The value of orders received by Metso Minerals increased by 30 percent and totaled EUR 963 million. Orders from the mining industry doubled from the comparison period. The intake of orders for metals recycling equipment was also good. Metso Minerals’ order backlog strengthened by 48 percent from the end of 2004 and was EUR 826 million at the end of June.

Metso Automation

		4-6/05				1-6/05				4-6/04				1-6/04				2004
		EUR				EUR				EUR				EUR				EUR
		million				million				million				million				million
Net sales			144				273				135				248				535
Operating profit			17.9				31.5				12.9				18.8				69.6
% of net sales			12.4				11.5				9.6				7.6				13.0
Orders received			145				290				154				294				570
							30.6.05								30.6.04				31.12.04
Order backlog							199								193				176

Metso Automation’s net sales rose by 10 percent from the comparison period and totaled EUR 273 million. The deliveries of field equipment, in particular, increased from the comparison period, mainly due to the good demand of the energy, oil and gas industry. Aftermarket and maintenance services accounted for 23 percent of net sales (24% in 1-6/04).

Metso Automation’s profitability was good and the operating profit rose to EUR 31.5 million, or 11.5 percent of net sales. Delivery volumes were higher than the comparison period and increased productivity improved profitability.

The value of orders received by Metso Automation was at the level of the comparison period, totaling EUR 290 million. Compared with the end of 2004, Metso Automation’s order backlog strengthened by 13 percent and was EUR 199 million at the end of June.

Metso Ventures

		4-6/05				1-6/05				4-6/04				1-6/04				2004
		EUR				EUR				EUR				EUR				EUR
		million				million				million				million				million
Net sales			71				133				66				120				230
Operating profit (loss)			7.8				6.6				(2.0	)			(7.8	)			(6.2	)
% of net sales			11.0				5.0				(3.0	)			(6.5	)			(2.7	)
Orders received			57				158				65				111				213
Number of cars produced			5,109				9,766				2,350				4,595				10,051
							30.6.05								30.6.04				31.12.04
Order backlog							88								73				66

The net sales of Metso Ventures were up by 11 percent on the comparison period and totaled EUR 133 million in January-June. The deliveries of Valmet Automotive and the Foundries increased. Metso Panelboard’s deliveries of aftermarket and maintenance services increased by about one third from the comparison period, but the timing of project deliveries to the latter half of this year reduced net sales.

Metso Ventures’ profitability improved and the operating profit turned positive due to the improved, though still a slight loss, result of Valmet Automotive. Metso Ventures’ operating profit for the second quarter also includes EUR 3.6 million in real estate sales gains.

The value of orders received by Metso Ventures clearly improved from the comparison period and rose to EUR 158 million, mainly due to the increased orders of Metso Panelboard and the Foundries and the increased production by Valmet Automotive. Metso Ventures’ order backlog improved by 33 percent from the end of 2004 and was EUR 88 million at the end of June.

Cash flow and financing

In January-June, Metso Corporation’s net cash generated by operating activities was EUR 124 million. EUR 12 million was committed to net working capital. Due to the growth in business volume, more capital was tied up in net working capital in the second quarter, especially in Metso Minerals. The Corporation’s free cash flow was EUR 107 million (EUR 55 million in 1-6/04).

Net interest-bearing liabilities decreased by EUR 202 million from the beginning of the year and totaled EUR 293 million at the end of June. During the second quarter, EUR 93 million in bonds and other loans was prematurely repaid. This caused a nonrecurring addition to financial expenses of EUR 5 million, while corresponding savings will be achieved later. Dividends of EUR 48 million were paid for 2004.

Gearing, i.e. the ratio of net interest-bearing liabilities to shareholders’ equity, was 25.8 percent, compared with 49.7 percent at the beginning of the year. Shareholders’ equity increased, as a result of both the improved net income and a capital increase of EUR 72 million arising from the stock option programs. In addition, the divestiture of Metso Drives decreased net interest-bearing liabilities. Metso’s equity to assets ratio was 34.3 percent at the end of June.

Moody’s Investors Service confirmed Metso’s existing long-term Ba1 credit rating and changed the rating outlook from negative to stable on February 25, 2005. Standard & Poor’s Ratings Services has confirmed Metso’s existing long-term BB+ corporate rating, the BB rating on bonds issued and the EMTN program, as well as the B rating on short-term credits, and has kept the rating outlook as stable.

Capital expenditure

Metso’s gross capital expenditure, including acquisitions, totaled EUR 47 million (EUR 41 million in 1-6/04). Total capital expenditure was less than depreciation. Metso made investments to increase foundry capacity in Finland, Brazil, South Africa and India. Metso Minerals initiated investments in a production plant and logistic center in Columbia, South Carolina, USA, to significantly increase local manufacturing capacity and to concentrate logistical functions in one location. In May, Metso Minerals launched a project, expected to last several years, to build a comprehensive ERP (enterprise resource planning) system.

Divestitures

In March, Metso reached an agreement on the divestiture of its mechanical power transmission equipment business (Metso Drives) to CapMan, a private equity investor. Metso Drives Oy and its foreign subsidiaries were transferred to the ownership of funds managed/advised by CapMan on April 8, 2005. The debt-free price of the transaction was EUR 97 million. The sales gain related to the divestiture and Metso Drives’ net result in the first quarter, together totaling EUR 17 million, are reported in the income statement on the ‘Discontinued operations’ line, below the net result of ‘Continuing operations.’

Research and development

Metso’s research and development expenses in January-June totaled EUR 47 million (EUR 53 million in 1-6/04), representing 2.4 percent of the Corporation’s net sales.

During the review period, Metso Paper launched the SuperKit upgrade package, containing new equipment solutions, for continuous cooking digesters in pulp production. The second quarter saw the start-up, ahead of schedule, of the world’s largest and technologically most advanced OptiConcept uncoated fine paper line, delivered by Metso Paper for UPM’s Changshu mill in China.

Metso Minerals launched the new Lokotrack LT200HP crushing unit equipped with a cone crusher which is specifically designed for secondary and fine crushing. The unit can process 250 tph. Due to its interactive, intelligent automation system, the equipment optimizes the quantity of the end product and ensures high quality.

During the review period, Metso Automation launched a new rotary pulp consistency transmitter and online analyzer for pulp quality, which expands the range of consistency transmitters to cover all the pulp and papermaking processes.

Personnel

At the end of June, Metso Corporation’s continuing operations employed 22,380 persons, which was 475 more than at the end of 2004. Of these, approximately 600 were seasonal workers.

The Corporation employed 38 percent of its personnel in Finland, 11 percent in other Nordic countries, 13 percent in other European countries, 16 percent in North America, 7 percent in Asia-Pacific, 9 percent in South America and 6 percent in the rest of the world.

Changes in the top management

Metso Corporation’s Board of Directors appointed Risto Hautamäki as President of Metso Paper and a member of the Metso Executive Team as of April 1, 2005. Metso Paper’s Executive Vice President Bertel Karlstedt will resign from Metso on August 31, 2005.

Share capital and market capitalization

As a result of the registration of share subscriptions made with year 2000 and 2001 stock options, Metso’s share capital increased to EUR 240,812,843.80 on May 11, 2005. A total of 4,538,869 shares were subscribed with Metso Corporation’s year 2000 stock options and 865,200 shares with year 2001 stock options during a subscription period that ended on April 30, 2005. The number of shares at the end of June was 141,654,614, of which the Corporation holds 60,841 shares in treasury. The average number of shares in January-June was 137,652,684.

Metso’s market capitalization on the Helsinki Stock Exchange increased by 80 percent on the comparison period a year earlier and was EUR 2,553 million on June 30, 2005.

Decisions of the Annual General Meeting

Metso Corporation’s Annual General Meeting, held on April 4, 2005, approved the accounts for 2004 and voted to discharge the members of the Board of Directors and the President and CEO from liability. The Annual General Meeting approved the Board’s proposals concerning authorizations to repurchase and dispose of the Corporation’s shares. The Annual General Meeting also authorized the Board to decide on increasing the share capital by issuing new shares, convertible bonds and/or stock options. Furthermore, the Annual General Meeting decided to cancel stock options as proposed by the Board of Directors.

The Annual General Meeting decided to establish a Nomination Committee of the Annual General Meeting to prepare proposals for the following General Meeting concerning the composition of the Board of Directors and the remuneration of the Directors. The Nomination Committee comprises the representatives appointed by Metso’s four biggest registered shareholders as of December 1, 2005, along with the Chairman of the Board as an expert member. Furthermore, the Annual General Meeting decided to amend the Articles of Association to state that a person aged 68 years or more is not eligible to be elected to the Board of Directors.

Metso Corporation’s Annual General Meeting re-elected Matti Kavetvuo as the Chairman of the Board and Jaakko Rauramo, Chairman of SanomaWSOY Corporation, as the Vice Chairman of the Board. Svante Adde was elected as a new member of the Board. The Board members re-elected were Maija-Liisa Friman, President and CEO of Aspocomp Group Oyj, Satu Huber, Director of Finance and Head of the Finance Division, State Treasury, and Juhani Kuusi, D. Sc. (Tech.).

PricewaterhouseCoopers, a firm of Authorized Public Accountants, was re-elected as the Auditor of the Corporation.

Pentti Mäkinen, who was elected by Metso’s personnel groups, will attend the meetings of Metso’s Board of Directors as a personnel representative invited by the Board, starting from the Annual General Meeting of April 4, 2005 until the 2006 Annual General Meeting.

The Annual General Meeting decided to distribute a dividend of EUR 0.35 per share for the financial year that ended on December 31, 2004. The dividend was paid on April 14, 2005.

Short-term outlook

It is expected that, in Metso Paper’s markets, the demand for rebuilds and aftermarket services will continue to be good. It is anticipated that the improved capacity utilization rates in customer industry mills will gradually increase the readiness to also invest in new production lines. Investments in new machinery are expected to be focused in China and South America.

The demand for Metso Minerals’ equipment related to aggregates production is expected to remain good, especially due to comprehensive road network development projects. The demand in the mining industry is estimated to remain strong, though the investment activity is anticipated to somewhat level out due to the general shortage of experienced management and other resources.

Metso Automation’s markets are expected to continue to be good in the energy, oil and gas industry and satisfactory in the pulp and paper industry.

Metso Minerals and Metso Automation are expected to clearly surpass the operating profit targets set for 2005. Metso Paper’s operating profit target is challenging, because profit is burdened by the weak profitability and restructuring costs in the Tissue business. It is estimated that Metso Ventures’ operating profit will be slightly lower than its target due mainly to structural changes.

The financial targets set for Metso Corporation in 2005 are an operating margin that is 6 percent of net sales and a 12 percent return on capital employed. It is estimated that the Corporation’s net sales for 2005 will increase to approximately EUR 4.1 billion and that the financial targets set for 2005 will be exceeded. The measures aimed at streamlining the cost structure, the strengthened order backlog and the first half-year result will support a continuation of the favorable profit trend.

During 2004 and 2005, Metso has focused on improving its profitability and strengthening its balance sheet. Efforts toward operational excellence will be continued in all business areas, in particular in Metso Paper. At the same time the management agenda is increasingly shifted toward profitable growth, starting from Metso Automation and Metso Minerals. Metso is primarily targeting organic growth, notably in the emerging markets. Steps will also be taken to investigate complementary add-on acquisitions to strengthen Metso’s competitiveness as well as product and service offering.

Helsinki, July 27, 2005

Metso Corporation’s Board of Directors

The interim review is unaudited

CONSOLIDATED STATEMENTS OF INCOME

		4-6/				4-6/				1-6/				1-6/				1-12/
		2005				2004				2005				2004				2004
(Millions)		EUR				EUR				EUR				EUR				EUR
Net sales			1,028				879				1,922				1,672				3,602
Cost of goods sold			(748	)			(646	)			(1,404	)			(1,249	)			(2,673	)
Gross profit			280				233				518				423				929
Selling, general and administrative expenses			(199	)			(195	)			(388	)			(399	)			(798	)
Other operating income and expenses, net			2				7				8				13				(7	)
Reversal of Finnish pension liability			—				—				—				—				75
Operating profit			83				45				138				37				199
% of net sales			8.1	%			5.2	%			7.2	%			2.2	%			5.5	%
Financial income and expenses, net			(14	)			(17	)			(24	)			(27	)			(59	)
Profit on continuing operations before tax			69				28				114				10				140
Income taxes on continuing operations			(16	)			0				(27	)			(3	)			18
Profit on continuing operations			53				28				87				7				158
Profit (loss) on discontinued operations			16				(9	)			17				(11	)			(14	)
Profit (loss)			69				19				104				(4	)			144
Profit (loss) attributable to minority interests			0				0				0				0				(1	)
Profit (loss) attributable to equity shareholders			69				19				104				(4	)			143
Earnings per share from continuing operations, EUR
Basic			0.37				0.21				0.63				0.06				1.16
Diluted			0.37				0.21				0.63				0.06				1.16
Earnings per share from discontinued operations, EUR
Basic			0.12				(0.07	)			0.12				(0.09	)			(0.11	)
Diluted			0.12				(0.07	)			0.12				(0.09	)			(0.11	)
Earnings per share from continuing and discontinued operations, EUR
Basic			0.49				0.14				0.75				(0.03	)			1.05
Diluted			0.49				0.14				0.75				(0.03	)			1.05

CONSOLIDATED BALANCE SHEETS

ASSETS

		June 30,				June 30,				Dec 31,
		2005				2004				2004
(Millions)		EUR				EUR				EUR
Non-current assets
Intangible assets
Goodwill			495				502				491
Other intangible assets			91				98				94
			586				600				585
Property, plant and equipment
Land and water areas			61				76				70
Buildings and structures			223				273				253
Machinery and equipment			273				313				307
Assets under construction			27				39				19
			584				701				649
Financial assets
Investments in associated companies			19				16				17
Available for sale financial assets			13				12				10
Treasury stock			—				1				1
Loan and other interest bearing receivables			52				12				15
Deferred tax asset			165				139				159
Other non-current assets			13				17				37
			262				197				239
Total non-current assets			1,432				1,498				1,473
Current assets
Inventories			888				692				692
Receivables
Trade and other receivables			848				839				790
Cost and earnings of projects under construction in excess of advance billings			151				207				190
Interest bearing receivables			67				35				53
			1,066				1,081				1,033
Cash and cash equivalents			374				419				372
Total current assets			2,328				2,192				2,097
Assets held for sale			—				42				—
TOTAL ASSETS			3,760				3,732				3,570

SHAREHOLDERS’ EQUITY AND LIABILITIES

		June 30,				June 30,				Dec 31,
		2005				2004				2004
(Millions)		EUR				EUR				EUR
Equity
Share capital			241				232				232
Other shareholders’ equity
Share premium reserve			77				14				14
Legal reserve			228				228				228
Cumulative translation differences			(39	)			(43	)			(48	)
Treasury stock			—				1				1
Fair value and hedge reserves			(11	)			—				—
Other reserves			202				202				202
Retained earnings			328				211				218
Net profit (loss) for the period			104				(4	)			143
Equity attributable to shareholders			1,130				841				990
Minority interests			6				7				5
Total equity			1,136				848				995
Liabilities
Non-current liabilities
Long-term debt			747				914				885
Post employment benefit obligations			158				230				171
Deferred tax liability			14				32				16
Provisions			47				50				31
Other long-term liabilities			2				9				6
Total non-current liabilities			968				1,235				1,109
Current liabilities
Current portion of long-term debt			8				20				19
Short-term debt			31				194				31
Trade and other payables			1,165				1,112				1,065
Advances received			327				222				227
Billings in excess of cost and earnings of projects under construction			125				88				124
Total current liabilities			1,656				1,636				1,466
Liabilities held for sale			—				13				—
Total liabilities			2,624				2,884				2,575
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES			3,760				3,732				3,570
NET INTEREST BEARING LIABILITIES
Long-term interest bearing debt			747				914				885
Short-term interest bearing debt			39				214				50
Cash and cash equivalents			(374	)			(419	)			(372	)
Other interest bearing assets			(119	)			(47	)			(68	)
Total			293				662				495

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

		4-6/				4-6/				1-6/				1-6/				1-12/
		2005				2004				2005				2004				2004
(Millions)		EUR				EUR				EUR				EUR				EUR
Cash flows from operating activities:
Net profit (loss) for the period			69				19				104				(4	)			143
Adjustments to reconcile net profit (loss) to net cash provided by operating activities
Depreciation			23				29				49				58				115
Provisions / Efficiency improvement programs			(2	)			(11	)			(7	)			(17	)			(11	)
Asset write-downs related to the efficiency improvement programs			—				—				—				—				10
Other			9				30				31				55				23
Change in net working capital			(74	)			24				(12	)			22				63
Cash flows from operations			25				91				165				114				343
Financing expenses, net			(13	)			(12	)			(15	)			(14	)			(51	)
Taxes paid			(17	)			(8	)			(26	)			(15	)			(31	)
Net cash provided by (used in) operating activities			(5	)			71				124				85				261
Cash flows from investing activities:
Capital expenditures on fixed assets			(25	)			(21	)			(45	)			(39	)			(89	)
Proceeds from sale of fixed assets			19				4				28				9				39
Business acquisitions, net of cash acquired			—				(1	)			(1	)			(2	)			(2	)
Proceeds from sale of businesses			95				294				95				367				390
(Investments in) proceeds from sale of financial assets			(84	)			13				(49	)			25				(21	)
Other			0				(19	)			(1	)			(19	)			(5	)
Net cash provided by (used in) investing activities			5				270				27				341				312
Cash flows from financing activities:
Share options exercised			72				—				72				—				—
Dividends paid			(48	)			(27	)			(48	)			(27	)			(27	)
Net funding			(113	)			(57	)			(162	)			(106	)			(293	)
Other			1				(1	)			(2	)			(6	)			(12	)
Net cash provided by (used in) financing activities			(88	)			(85	)			(140	)			(139	)			(332	)
Net increase (decrease) in cash and cash equivalents			(88	)			256				11				287				241
Effect from changes in exchange rates			(6	)			(1	)			(9	)			2				1
Cash and cash equivalents at beginning of period			468				164				372				130				130
Cash and cash equivalents at end of period			374				419				374				419				372

Free cash flow:

		4-6/				4-6/				1-6/				1-6/				1-12/
		2005				2004				2005				2004				2004
(Millions)		EUR				EUR				EUR				EUR				EUR
Net cash provided by operating activities			(5	)			71				124				85				261
Capital expenditures on fixed assets			(25	)			(21	)			(45	)			(39	)			(89	)
Proceeds from sale of fixed assets			19				4				28				9				39
Free cash flow			(11	)			54				107				55				211

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

																						Equity
						Share				Cumulative				Fair value								attributable
		Share				premium				translation				and other				Retained				to				Minority				Total
		capital				reserve				adjustments				reserves				earnings				shareholders				interest				equity
(Millions)		EUR				EUR				EUR				EUR				EUR				EUR				EUR				EUR
Balance at Dec 31, 2004			232				14				(48	)			431				361				990				5				995
Effects of adopting IAS 39
Treasury stock			—				—				—				(1	)			—				(1	)			—				(1	)
Cash flow hedges, net of tax			—				—				—				4				—				4				—				4
Available- for-sale financial assets,      net of tax			—				—				—				2				—				2				—				2
Other			—				—				—				—				2				2				—				2
Balance at Jan 1, 2005			232				14				(48	)			436				363				997				5				1,002
Dividends			—				—				—				—				(48	)			(48	)			—				(48	)
Share options exercised			9				63				—				—				—				72				—				72
Translation differences			—				—				23				—				—				23				—				23
Net investment hedge gains (losses)			—				—				(14	)			—				—				(14	)			—				(14	)
Cash flow hedges, net of tax			—				—				—				(17	)			—				(17	)			—				(17	)
Available-for-sale financial assets, net of tax			—				—				—				—				—								—				—
Other			—				—				—				—				13				13				1				14
Net profit (loss) for the period			—				—				—				—				104				104				—				104
Balance at June 30, 2005			241				77				(39	)			419				432				1,130				6				1,136

The distributable funds of Metso Corporation at June 30, 2005 consist of retained earnings (EUR 432 million) excluding accelerated depreciation and untaxed reserves (EUR 4 million) and negative translation differences (EUR 39 million), and other reserves (EUR 202 million), totaling EUR 591 million.

At the end of the period Metso Corporation possessed 60,841 of its own shares.

ASSETS PLEDGED AND CONTINGENT LIABILITIES

		June 30,2005				Dec 31,2004
(Millions)		EUR				EUR
Mortgages on corporate debt			3				2
Other pledges and contingencies
Mortgages			2				2
Pledged assets			—				4
Guarantees on behalf of associated company obligations			—				—
Other guarantees			8				9
Repurchase and other commitments			12				15
Lease commitments			124				142

Other guarantees include EUR 5 million guarantees given on behalf of sold businesses. The respective buyers have indemnified Metso and have committed themselves to release Metso from its guarantee obligations within agreed time periods.

NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS

		June 30,2005				Dec 31,2004
(Millions)		EUR				EUR
Forward exchange rate contracts			1,624				1,770
Interest rate and currency swaps			2				2
Currency swaps			5				73
Interest rate swaps			183				188
Interest rate futures contracts			0				10
Option agreements
Bought			20				10
Sold			43				16
Electricity forward contracts 1)			322				329

The notional amounts indicate the volumes in the use of derivatives, but do not indicate the exposure to risk.

KEY RATIOS

		1-6/2005				1-6/2004				1-12/2004 *)
Earnings per share from continuing operations, EUR			0.63				0.06				1.16
Earnings per share from discontinued operations, EUR			0.12				(0.09	)			(0.11	)
Earnings per share from continuing and discontinued operations, EUR			0.75				(0.03	)			1.05
Equity/share at end of period, EUR			7.98				6.17				7.27
Return on equity (ROE), % (annualized)			21.0				(0.9	)			15.9
Return on capital employed (ROCE), % (annualized)			17.3				4.6				10.7
Equity to assets ratio at end of period, %			34.3				24.8				30.9
Gearing at end of period, %			25.8				78.2				49.7
Free cash flow			107				55				211
Free cash flow/share			0.78				0.40				1.55
Gross capital expenditure of continuing operations (excl. business acquisitions)			46				35				89
Business acquisitions, net of cash acquired			1				2				2
Depreciation and amortization of continuing operations			49				52				105
Average number of shares (thousands)			137,653				136,190				136,190
Average number of diluted shares (thousands)			137,667				136,190				136,192

EXCHANGE RATES USED

		1-6/				1-6/				1-12/				June 30,				June 30,				Dec 31,
		2005				2004				2004				2005				2004				2004
USD (US dollar)			1.2855				1.2275				1.2433				1.2092				1.2155				1.3621
SEK (Swedish krona)			9.1407				9.1640				9.1250				9.4259				9.1451				9.0206
GBP (Pound sterling)			0.6861				0.6736				0.6786				0.6742				0.6708				0.7051
CAD (Canadian dollar)			1.5883				1.6430				1.6170				1.4900				1.6343				1.6416
BRL (Brazilian real)			3.2912				3.6582				3.6350				2.8385				3.7905				3.6177