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

Metso Corporation

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-3-2(b):82-                

 

 

SIGNATURES

Date October 26, 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-September 2005

GOOD PROGRESS IN PROFITABILITY AND NET SALES

(Helsinki, Finland, October 26, 2005) — Metso Corporation (NYSE: MX; OMX: MEO1V)

•		Metso Corporation’s operating profit for the third quarter in 2005 was EUR 95.5 million, or 9.1% of net sales.
•		The net sales in January-September increased by 16 percent on the corresponding period last year and totaled EUR 2,967 million (1-9/2004: EUR 2,559 million). The operating profit was EUR 233.5 million, or 7.9 percent of net sales (EUR 91.8 million and 3.6%).
•		Earnings per share were EUR 1.22 (EUR 0.53).
•		The order backlog from continuing operations increased by 21 percent from the year end, and was EUR 2,059 million at the end of September (Dec. 31, 2004: EUR 1,705 million). New orders worth EUR 3,208 million were received (EUR 3,062 million in 1-9/04).
•		Net cash generated by operating activities was EUR 145 million.
•		Return on capital employed (ROCE) was 18.3 percent (6.6%) and return on equity (ROE) 21.4 percent (11.0%).
•		Gearing was 25.3 percent at the end of September (Dec. 31, 2004: 49.7%).

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

“Metso Automation’s and Metso Minerals’ profitability improvement has previously resulted mainly from internal programs, such as streamlined cost structure and business concept renewals. Now the net sales growth, as well, contributes to their profitability. I am also pleased with the profitability improvement in Metso Paper, which is now starting to see the benefits of the efficiency programs undertaken in the past two years,” says Jorma Eloranta, President and CEO of Metso Corporation. “All and all, the third quarter was the best ever in Metso’s history. We also estimate that 2005 will be the best year so far for Metso — but there is still a lot of development potential in all our businesses.”

Eloranta notes that the current performance level forms a good basis for the implementation of the new strategy, which targets profitable growth. “We have significantly enhanced our operational efficiency. For example, our productivity has improved substantially. At the same time, we have developed our supply chain to make the most of the strong demand in the rock and minerals processing sector as well as in the gas and energy industries,” Eloranta continues. In 2006-2008 Metso will seek annual increase in net sales of some 10 percent through organic growth and complementary acquisitions.

The growth prospects are supported by good demand for Metso’s products and services. “In August, when we introduced our new strategy and the financial targets for 2006, we estimated that the favorable market situation will continue also next year. Our view of the market development remains positive and we look confidently into 2006,” Eloranta says.

Short-term outlook

No material changes are expected in the market situation for Metso during the last quarter of 2005.

In Metso Paper’s markets, the demand for rebuilds and aftermarket services is expected to continue to be good. In the markets for new machinery, there are several tissue machine investments and a few paper machine and pulping line projects under consideration, but hardly any board machine investments.

The demand for Metso Minerals’ equipment related to aggregates production is expected to remain good, especially due to comprehensive road network development projects and other infrastructure investments. The demand in the mining industry is estimated to remain strong, though the shortage of experienced management and other resources continues to somewhat hold back the implementation of new investment projects.

Metso Automation’s market situation is expected 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 result will be burdened by the weak profitability of the Tissue business and restructuring costs, but the positive performance in the third quarter gives an improved basis for attaining the operating margin target set for 2005. It is estimated that Metso Ventures’ operating margin will be lower than its target because of structural changes and the weak profitability of Metso Panelboard.

The financial targets set for Metso Corporation in 2005 are an operating margin of 6 percent and ROCE of 12 percent. It is estimated that these financial targets will be clearly exceeded. Metso’s management expects that the Corporation’s net sales for 2005 will increase to approximately EUR 4.1 billion and that the operating profit margin will exceed 7 percent. The improved competitiveness of all of Metso’s business areas combined with a mostly positive market outlook support a continuation of favorable development.

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.

The Corporation’s key figures

EUR million		7-9/05				1-9/05				7-9/04				1-9/04				2004
Net sales			1,045				2,967				887				2,559				3,602
Operating profit			95.5				233.5				54.4				91.8				199.5
% of net sales			9.1				7.9				6.1				3.6				5.5
Earnings per share from continuing operations, basic, EUR			0.47				1.10				0.60				0.66				1.16
Earnings per share from continuing and discontinued operations, basic, EUR			0.47				1.22				0.56				0.53				1.05
Orders received			916				3,208				823				3,062				3,989
							30.9.05								30.9.04				31.12.04
Order backlog from continuing operations							2,059								1,852				1,705
Return on capital employed (ROCE), % annualized							18.3								6.6				10.7
Equity to assets ratio, %							36.3								28.0				30.9
Gearing, %							25.3								66.1				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 was declining in the third quarter. The price development of printing papers was steady in Europe, while in North America paper prices were mostly on the rise. The prices of board grades fell in both Europe and North America.

Demand for metals was good, and the prices of most base metals increased on global markets. Scrap iron price also rose. Investments in the mining industry continued at a good level, although growth was still limited by a shortage of experienced personnel and other resources. In the construction and civil engineering industry, the demand for aggregates was generally good in all markets.

The price of crude oil also continued to rise in the third quarter, and oil refineries were operating at full capacity.

Demand for Metso’s products

Demand for Metso Paper’s rebuilds and aftermarket services continued to be good, and demand for new machines remained satisfactory. In Europe, investments in paper machine rebuilds continued at a good level. The market situation for paper machinery was satisfactory in Asia and North America. The demand for new pulping lines and rebuild projects was good especially in South America.

Demand for Metso Minerals’ equipment related to aggregates production continued to be good in Europe and Asia, and was excellent in North America. The positive trend of the mining industry investments continued particularly in Brazil, China and Australia, and demand for equipment remained excellent. Strong demand continued for metals recycling equipment as customers invested to increase their production.

In the energy, oil and gas industry, there was excellent demand for Metso Automation’s field systems and good demand for automation systems. In the pulp and paper industry, there was good demand for field systems and satisfactory demand for automation systems.

Orders received and order backlog

In January-September 2005, the value of orders received by Metso Corporation totaled EUR 3,208 million, an increase of 5 percent from January-September 2004. The Corporation’s order backlog of continuing operations increased by 21 percent from the end of 2004 and was EUR 2,059 million at the end of September. The order backlog of continuing operations increased by 11 percent compared with the order backlog on September 30, 2004.

The largest orders received by Metso Paper in the third quarter included a tissue machine in the USA, a paper machine modernization in Finland and a pulp bleaching system in Spain. Orders received by all the business lines of Metso Minerals clearly increased on the comparison period. The largest individual order for metals recycling systems was received from Japan, where Metso Minerals will deliver a complete metals crushing plant. The largest orders received by Metso Automation were for paper machine automation systems in Brazil and control valves for a gas liquification plant in Japan.

Metso Paper accounted for 38 percent, Metso Minerals 42 percent, Metso Automation 13 percent and Metso Ventures 7 percent of orders received.

The orders received from Indonesia, Brazil, Russia and Germany increased the most compared with January-September 2004. 42 percent (47% in 1-9/04) of orders originated from Europe, 21 (21) percent from North America, 22 (18) 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-September increased and totaled EUR 2,967 million, up by 16 percent on the comparison period. Net sales growth was the strongest in Metso Minerals, where net sales rose by 26 percent compared with January-September 2004, due to the good market situation. Aftermarket operations accounted for 38 percent (42% in 1-9/04) of the Corporation’s net sales (excluding Metso Ventures). The decrease in the relative proportion of aftermarket business was due to strong growth in project and equipment sales.

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

Compared with January-September 2004, the relative share of net sales increased the most in Sweden due to the Kvarnsveden paper machine delivery and in Brazil and Chile due to several pulp and mining industry deliveries. 45 percent (41% in 1-9/04) of net sales came from Europe, 21 (22) percent from North America, 17 (24) percent from Asia-Pacific, 12 (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 233.5 million, or 7.9 percent of net sales (EUR 91.8 million, or 3.6% of net sales in 1-9/04). The improvement in the profitability of all of Metso’s business operations continued. Metso Paper’s profitability improved due to the implemented efficiency improvement measures and good capacity utilization. Metso Minerals’ increased volumes, good capacity utilization rates and a streamlined cost structure improved profitability. Metso Automation’s profitability improved due to higher delivery volumes, a more efficient supply chain and an increase in productivity. The improvement in Metso Ventures’ operating profit was due primarily to Valmet Automotive’s higher delivery volumes.

Metso’s net financial expenses were EUR 33 million including nonrecurring expenses of EUR 5 million recorded in the second quarter due to early repayment of loans (EUR 40 million in 1-9/04).

Metso’s profit from continuing operations before taxes was EUR 200 million. The Corporation’s tax rate is estimated to be around 24 percent in 2005. The result of

Metso’s U.S. operations has turned clearly positive this year and consequently Metso will be able to utilize tax loss-carry forwards from prior years, for which Metso has not recognized any deferred tax assets. This reduces the Corporation’s tax rate (see Notes).

The distributable profit, i.e. the net income for the review period, was EUR 169 million. Earnings per share from continuing operations was EUR 1.10, while earnings per share from continuing and discontinued operations was EUR 1.22.

Metso Corporation’s return on capital employed (ROCE) in January-September was 18.3 percent (6.6% in 1-9/04), and return on equity (ROE) was 21.4 percent (11.0% in 1-9/04).

BUSINESSES

Metso Paper
EUR million		7-9/05				1-9/05				7-9/04				1-9/04				2004
Net sales			396				1,192				378				1,089				1,559
Operating profit			25.7				63.2				20.1				14.7				48.0
% of net sales			6.5				5.3				5.3				1.3				3.1
Orders received			322				1,240				291				1,426				1,726
							30.9.05								30.9.04				31.12.04
Order backlog							1,012								1,124				946

Metso Paper’s net sales in January-September were EUR 1,192 million, up by 9 percent on the comparison period. The growth was due to an increase in paper machinery deliveries, of which the most significant is the ongoing delivery of a newsprint line to Stora Enso’s Kvarnsveden mill in Sweden. Aftermarket and maintenance services accounted for 34 percent of the net sales (37% in 1-9/04). The relative proportion of the aftermarket business decreased due to a clear increase in project and equipment sales. Measured in euros, the volume of aftermarket operations was at the level of the previous year.

Metso Paper’s operating profit improved significantly on the comparison period and was EUR 63.2 million, or 5.3 percent of net sales. The operating profit includes business restructuring expenses net of EUR 3 million. Higher delivery volumes, the efficiency improvement measures and an improved capacity utilization rate clearly raised profitability. The comparison period’s operating profit was burdened by certain nonrecurring costs. The positive profit development of the Paper and Fiber business lines continued. The Tissue business line’s loss decreased during the third quarter compared with the two preceding quarters of 2005.

The remaining decisions concerning the program aimed at renewing Metso Paper’s business concept and streamlining its cost structure (MP50) will be made by the end of 2005. In the third quarter, negotiations were completed to reduce the number of personnel by 40 in the Karlstad unit in Sweden, which is part of the Tissue business line. The MP50 program’s total costs are estimated to remain under EUR 35 million, of which approximately EUR 30 million had been recognized by the end of September. The program is expected to generate annual savings of over EUR 43 million.

During the review period, Metso Paper established a sales company in Gurgaon, near New Delhi, in India in order to strengthen its presence in the emerging Indian pulp and paper industry markets.

In September, Metso Paper decided on a new organization structure, which will come into effect on January 1, 2006. The new business lines are: Fiber, Paper and Board, Finishing, Tissue, and Service. The purpose of the change is to strengthen customer service and clarify decision-making.

The value of orders received by Metso Paper was 13 percent lower than in the comparison period and totaled EUR 1,240 million. The orders received in the comparison period included a large order of an SC magazine paper line for Stora Enso’s Kvarnsveden mill in Sweden. At the end of September the order backlog was EUR 1,012 million, which was 7 percent higher than at the end of 2004. In February

2005, Metso signed a letter of intent with Modern Karton Sanayi Ticaret AS for the delivery of a board production line in Turkey. The signing of the final sales contract has been delayed.

Metso Minerals

EUR million		7-9/05				1-9/05				7-9/04				1-9/04				2004
Net sales			454				1,218				340				968				1,366
Operating profit			53.6				125.0				27.4				66.5				105.2
% of net sales			11.8				10.3				8.1				6.9				7.7
Orders received			405				1,368				373				1,115				1,566
							30.9.05								30.9.04				31.12.04
Order backlog							801								525				560

Texas Shredder, Inc., a supplier of metal shredder products, acquired on August 30, 2005, is included in Metso Minerals’ figures from the beginning of September.

The net sales of Metso Minerals increased on the comparison period by 26 percent and totaled EUR 1,218 million. Due to good demand, delivery volumes increased in all business lines. Metso Minerals’ aftermarket and maintenance services accounted for 47 percent of net sales (55% in 1-9/04). As project and equipment deliveries increased significantly, the relative proportion of the aftermarket business was lower than in the comparison period. However, measured in euros, the volume of aftermarket business increased.

The operating profit of Metso Minerals rose to EUR 125.0 million, which was 10.3 percent of net sales. Profitability improved significantly in all business lines due to higher volumes, the good capacity utilization rate and a streamlined cost structure.

The value of orders received by Metso Minerals increased by 23 percent and totaled EUR 1,368 million. Orders for minerals processing and metals recycling equipment rose by around one-third on the comparison period. The intake of orders for mobile crushers also clearly increased. Metso Minerals’ order backlog strengthened by 43 percent from the end of 2004 and was EUR 801 million at the end of September.

Metso Automation

EUR million		7-9/05				1-9/05				7-9/04				1-9/04				2004
Net sales			148				421				140				388				535
Operating profit			25.8				57.3				19.6				38.4				69.6
% of net sales			17.4				13.6				14.0				9.9				13.0
Orders received			140				430				146				440				570
							30.9.05								30.9.04				31.12.04
Order backlog							191								198				176

Metso Automation’s net sales rose by 9 percent on the comparison period and totaled EUR 421 million. In particular, equipment deliveries to the energy, oil and gas industry increased from the comparison period. Aftermarket and maintenance services accounted for 21 percent of net sales (24% in 1-9/04). The decrease in the relative proportion of aftermarket business was due to an increase in equipment and project deliveries.

Metso Automation’s profitability remained good and the operating profit rose to EUR 57.3 million, or 13.6 percent of net sales. Profitability was improved in particular by field system delivery volumes, which were higher than in the comparison period, increased productivity and a more efficient supply chain.

The value of orders received by Metso Automation remained at the level of the comparison period. Compared with the end of 2004, Metso Automation’s order backlog strengthened by 9 percent and was EUR 191 million at the end of September.

Metso Ventures

EUR million		7-9/05				1-9/05				7-9/04				1-9/04				2004
Net sales			63				196				52				172				230
Operating profit (loss)			(0.5	)			6.1				(8.8	)			(16.6	)			(6.2	)
% of net sales			(0.8	)			3.1				(16.9	)			(9.7	)			(2.7	)
Orders received			66				224				33				144				213
Number of cars produced			4,160				13,926				1,496				6,091				10,051
							30.9.05								30.9.04				31.12.04
Order backlog							92								55				66

The net sales of Metso Ventures were up by 14 percent on the comparison period and totaled EUR 196 million in January-September. Net sales rose primarily due to the significant increase in Valmet Automotive’s production and the higher deliveries of the Foundries. Metso Panelboard’s net sales fell.

Metso Ventures’ profitability improved and the operating profit was EUR 6.1 million, or 3.1 percent of net sales. Valmet Automotive’s profitability improved, and the operating profit was slightly positive. The result of the Foundries remained good. Metso Panelboard recorded an operating loss, due to cost overruns in certain projects.

The value of orders received by Metso Ventures improved by 56 percent on the comparison period and rose to EUR 224 million. Orders increased in all business groups. Metso Ventures’ order backlog improved by 39 percent from the end of 2004 and totaled EUR 92 million at the end of September.

Cash flow and financing

In January-September, Metso Corporation’s net cash generated by operating activities was EUR 145 million. Increase in net working capital was EUR 94 million. Due to the growth in business volume, net working capital increased in the third quarter, especially in Metso Minerals and Metso Paper. The Corporation’s free cash flow was EUR 112 million (EUR 111 million in 1-9/04).

Net interest-bearing liabilities decreased by EUR 188 million from the beginning of the year and totaled EUR 307 million at the end of September. 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 25.3 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 the second quarter. In addition, the divestiture of Metso Drives decreased net interest-bearing liabilities. Metso’s equity to assets ratio was 36.3 percent at the end of September.

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 86 million (EUR 66 million in 1-9/04). Metso Paper commenced manufacturing of screen baskets in China, invested in the development of a pulping technology center operating in Anjalankoski, Finland, and established a service unit in Zaragoza, Spain. Metso made investments to increase foundry capacity in Finland, Brazil, South Africa and India. Metso Minerals initiated investments in a production plant and logistics center in Columbia, South Carolina, USA. Metso Minerals also launched a project,

expected to last several years, to develop a comprehensive ERP (enterprise resource planning) system.

Acquisitions and divestitures

On August 30, 2005, Metso Minerals acquired Texas Shredder, Inc., a U.S. supplier of metal shredder products located in San Antonio, Texas. The acquisition price was approximately EUR 13 million. The transaction strengthened Metso’s position in North America, the world’s largest metal recycling market. Texas Shredder’s net sales for the financial period ending on June 30, 2005 was EUR 46 million, and the number of personnel was 33. Texas Shredder is included in Metso Minerals’ figures from the beginning of September.

In March, Metso reached an agreement on the divestiture of its mechanical power transmission equipment business (Metso Drives), to CapMan, a Finnish 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 and the sales gain was EUR 17 million.

Research and development

Metso’s research and development expenses in January-September totaled EUR 68 million (EUR 75 million in 1-9/04), representing 2.3 percent of the Corporation’s net sales.

In August, a board machine containing the first ValFlo headboxes, representing Metso Paper’s cost-efficient Val product range, was started up in China. In August, a mill that produces bleached chemi-thermochemical pulp using Metso’s new BCTMP production technology was started up at Kaskinen, Finland. Metso Paper launched the FlyMaster fly roll, which utilizes new composite technology, and is suited for all supercalenders and other corresponding multinip calenders.

As part of the new Lindemann Innovative Shearing series Metso Minerals launched the first portable metal shears. These versatile shears are primarily suited for small metal recycling. The Trellex screen media product range was expanded by launching modular screen media that are compatible with almost all the systems on the market without welding or cutting steel rails.

In September, Metso Automation introduced a new paper caliper sensor based on very accurate, non-contact optical sensing technology. Also in September, Metso Automation opened a technology center at Aracruz, in Espírito Santo state, Brazil, to further improve its service on the South American markets.

Personnel

At the end of September, Metso Corporation’s continuing operations employed 21,941 persons, approximately the same number as the end of 2004.

The Corporation employed 37 percent of its personnel in Finland, 12 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, resigned 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 September was 141,654,614, of which the Corporation holds 60,841 shares in its treasury. The average number of outstanding shares in January-September was 138,980,817.

Metso’s market capitalization doubled compared with the corresponding period of 2004 and was EUR 2,990 million on September 30, 2005.

Decisions of the Annual General Meeting

Metso Corporation’s Annual General Meeting, held on April 4, 2005, approved the financial statements 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 representatives appointed by Metso’s four biggest registered shareholders as of December 1, 2005, along with Metso’s 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, Managing Director of Compass Advisers, 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 in Finland, 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.

New management agendas and financial targets

In August, Metso’s Board of Directors accepted management agendas and financial targets for 2006-2008. The strategic focus of Metso is shifting towards profitable growth, which will be attained through improved customer satisfaction and operational excellence.

In 2006-2008 Metso will be targeting annual net sales growth of some 10 percent to support the sustainable profit development and to strengthen its market leadership position. The growth will be attained both organically and through complementary acquisitions.

All Metso business areas will continue their efforts to improve profitability, productivity and quality and enhance customer satisfaction. Metso will complement its life cycle offering both through its own development and through acquisitions. Metso is also planning to enhance its sales, customer service, sourcing and production close to the customers, especially in emerging markets such as China, India and South America.

Financial targets 2006-2008

Metso’s target is to achieve more than 15 percent return on capital employed (ROCE %), regardless of the business cycle.

Another key target will be an operating profit margin (EBIT %) of 9 percent towards the end of the strategy period. The business area-specific operating margin targets are: over 8 percent for Metso Paper, over 11 percent for Metso Minerals and over 12 percent for Metso Automation. As the companies belonging to Metso Ventures are dissimilar in nature and operate in different markets, no medium-term operating margin target has been set for Metso Ventures.

Achieving the corporate-level operating margin target of 9 percent will require that Metso’s business areas successfully complete the ongoing development programs and that the market demand is at least as favorable as in 2005. Metso is continuing measures to decrease the negative impact of cyclicality on its financial performance.

Metso’s capital structure target is to be a solid investment grade company.

Financial targets for 2006

Metso estimates that the favorable market situation in the civil engineering and in the mining and energy segments will continue in 2006, while the pulp and paper industry demand is expected to be on par with 2005. Based on this estimate on market environment and taking into consideration Metso’s development phase, the operating margin target for Metso Corporation in 2006 is to exceed 7 percent.

Metso Paper will continue its efforts to improve its operational excellence. Consequently, the business area’s operating margin target is 6 percent in 2006. It is estimated that Metso Paper will be able to achieve the over 8 percent target towards the end of the strategy period.

Due to the good progress achieved to date in operational excellence together with the continuing high demand in the civil engineering and mining industries, the operating margin target for Metso Minerals is 10 percent in 2006.

The market situation for Metso Automation is expected to continue to be good in the energy, oil and gas industry and satisfactory in the pulp and paper industry. Metso Automation will scale up its investments in growth, and the operating margin target for Metso Automation for 2006 is 11 percent.

Metso Ventures’ operating margin target for 2006 is 6 percent.

New dividend policy

In August, the Board also established a new dividend policy according to which Metso distributes an annual dividend of at least 40 percent of earnings per share to its shareholders. Previously, Metso’s objective was to distribute annual dividends equivalent to at least one third of the average earnings per share over five years.

Corporate structure

As a part of the 2005 strategy process, Metso also studied various alternative corporate structures, including a separate listing of Metso Minerals. The implementation of the ongoing shift towards profitable growth will require strong commitment and focus from the management, so, just at this point in time, the benefits of the current structure outweigh the alternatives. There are, however,

valid arguments for alternative corporate configurations, and therefore, in August, the Metso Board decided to commission a more detailed feasibility study to assess these alternatives. The study is estimated to be completed by the end of the first quarter in 2006.

Events after the review period

At the beginning of October, Metso Paper agreed with Myllykoski Corporation to supply a large paper making line, to be located in the Czech Republic. As the investment is still subject to e.g. local authority approvals, a dissolution clause is included. Project engineering has been started on separate terms, in anticipation of the final confirmation. Myllykoski is scheduling the line to come on stream in early 2007. The delivery will be valued at well over EUR 200 million.

Short-term outlook

No material changes are expected in the market situation for Metso during the last quarter of 2005.

In Metso Paper’s markets, it is expected that the demand for rebuilds and aftermarket services will continue to be good. In the markets for new machinery, there are several tissue machine investments and a few paper machine and pulping line projects under consideration, but hardly any board machine investments.

The demand for Metso Minerals’ equipment related to aggregates production is expected to remain good, especially due to comprehensive road network development projects and other infrastructure investments. The demand in the mining industry is estimated to remain strong, though the shortage of experienced management and other resources continues to somewhat hold back implementation of new investment projects.

Metso Automation’s market situation is expected 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 result will be burdened by the weak profitability of the Tissue business and restructuring costs, but the positive performance in the third quarter gives an improved basis for attaining the operating margin target set for 2005. It is estimated that Metso Ventures’ operating margin will be lower than its target because of structural changes and the weak profitability of Metso Panelboard.

The financial targets set for Metso Corporation in 2005 are an operating margin of 6 percent and ROCE of 12 percent. It is estimated that these financial targets will be clearly exceeded. Metso’s management expects that the Corporation’s net sales for 2005 will increase to approximately EUR 4.1 billion and the operating profit will exceed 7 percent of net sales. The improved competitiveness of all of Metso’s business areas combined with a mostly positive market outlook support a continuation of favorable development.

Helsinki, October 26, 2005

Metso Corporation’s Board of Directors

The interim review is unaudited

CONSOLIDATED STATEMENTS OF INCOME

		7-9/				7-9/				1-9/				1-9/				1-12/
		2005				2004				2005				2004				2004
(Millions)		EUR				EUR				EUR				EUR				EUR
Net sales			1,045				887				2,967				2,559				3,602
Cost of goods sold			(767	)			(645	)			(2,171	)			(1,894	)			(2,673	)
Gross profit			278				242				796				665				929
Selling, general and administrative expenses			(186	)			(190	)			(574	)			(589	)			(798	)
Other operating income and expenses, net			3				3				11				16				(7	)
Reversal of Finnish pension liability			—				—				—				—				75
Operating profit			95				55				233				92				199
% of net sales			9.1	%			6.1	%			7.9	%			3.6	%			5.5	%
Financial income and expenses, net			(9	)			(13	)			(33	)			(40	)			(59	)
Profit on continuing operations before tax			86				42				200				52				140
Income taxes on continuing operations			(21	)			40				(48	)			37				18
Profit on continuing operations			65				82				152				89				158
Profit (loss) on discontinued operations			—				(6	)			17				(17	)			(14	)
Profit (loss)			65				76				169				72				144
Profit (loss) attributable to minority interests			0				0				0				0				(1	)
Profit (loss) attributable to equity shareholders			65				76				169				72				143
Earnings per share from continuing operations, EUR
Basic			0.47				0.60				1.10				0.66				1.16
Diluted			0.47				0.60				1.10				0.66				1.16
Earnings per share from discontinued operations, EUR
Basic			—				(0.04	)			0.12				(0.13	)			(0.11	)
Diluted			—				(0.04	)			0.12				(0.13	)			(0.11	)
Earnings per share from continuing and discontinued operations, EUR
Basic			0.47				0.56				1.22				0.53				1.05
Diluted			0.47				0.56				1.22				0.53				1.05

CONSOLIDATED BALANCE SHEETS

ASSETS

		Sep 30,				Sep 30,				Dec 31,
		2005				2004				2004
(Millions)		EUR				EUR				EUR
Non-current assets
Intangible assets
Goodwill			496				501				491
Other intangible assets			96				98				94
			592				599				585
Property, plant and equipment
Land and water areas			59				73				70
Buildings and structures			222				262				253
Machinery and equipment			279				316				307
Assets under construction			23				28				19
			583				679				649
Financial assets
Investments in associated companies			18				18				17
Available for sale financial assets			14				10				10
Treasury stock			—				1				1
Loan and other interest bearing receivables			33				11				15
Deferred tax asset			146				194				159
Other non-current assets			13				17				37
			224				251				239
Total non-current assets			1,399				1,529				1,473
Current assets
Inventories			928				724				692
Receivables
Trade and other receivables			880				829				790
Cost and earnings of projects under construction in excess of advance billings			136				196				190
Interest bearing receivables			102				34				53
			1,118				1,059				1,033
Cash and cash equivalents			340				285				372
Total current assets			2,386				2,068				2,097
Assets held for sale			—				47				—
TOTAL ASSETS			3,785				3,644				3,570

SHAREHOLDERS’ EQUITY AND LIABILITIES

		Sep 30,				Sep 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			(12	)			(41	)			(48	)
Treasury stock			—				1				1
Fair value and hedge reserves			(8	)			—				—
Other reserves			202				202				202
Retained earnings			315				214				218
Net profit (loss) for the period			169				72				143
Equity attributable to shareholders			1,212				922				990
Minority interests			6				7				5
Total equity			1,218				929				995
Liabilities
Non-current liabilities
Long-term debt			748				901				885
Post employment benefit obligations			163				230				171
Deferred tax liability			15				30				16
Provisions			33				50				31
Other long-term liabilities			2				10				6
Total non-current liabilities			961				1,221				1,109
Current liabilities
Current portion of long-term debt			3				15				19

 

		Sep 30,				Sep 30,				Dec 31,
		2005				2004				2004
(Millions)		EUR				EUR				EUR
Short-term debt			31				27				31
Trade and other payables			1,138				1,117				1,065
Advances received			336				255				227
Billings in excess of cost and earnings of projects under construction			98				69				124
Total current liabilities			1,606				1,483				1,466
Liabilities held for sale			—				11				—
Total liabilities			2,567				2,715				2,575
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES			3,785				3,644				3,570
NET INTEREST BEARING LIABILITIES
Long-term interest bearing debt			748				901				885
Short-term interest bearing debt			34				42				50
Cash and cash equivalents			(340	)			(285	)			(372	)
Other interest bearing assets			(135	)			(45	)			(68	)
Total			307				613				495

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

		7-9/				7-9/				1-9/				1-9/				1-12/
		2005				2004				2005				2004				2004
(Millions)		EUR				EUR				EUR				EUR				EUR
Cash flows from operating activities:
Profit for the period			65				76				169				72				143
Adjustments to reconcile net profit (loss) to net cash provided by operating activities
Depreciation			27				28				76				86				115
Provisions / Efficiency improvement programs			(3	)			(23	)			(10	)			(40	)			(11	)
Asset write-downs related to the efficiency improvement programs			—				9				—				9				10
Financing expenses, net			9				12				33				38				52
Income taxes			21				(40	)			48				(37	)			29
Other			3				19				(17	)			45				(58	)

		7-9/				7-9/				1-9/				1-9/				1-12/
		2005				2004				2005				2004				2004
(Millions)		EUR				EUR				EUR				EUR				EUR
Change in net working capital			(82	)			(8	)			(94	)			14				63
Cash flows from operations			40				73				205				187				343
Financing expenses, net paid			(10	)			(3	)			(25	)			(17	)			(51	)
Income taxes paid			(9	)			(5	)			(35	)			(20	)			(31	)
Net cash provided by (used in) operating activities			21				65				145				150				261
Cash flows from investing activities:
Capital expenditures on fixed assets			(27	)			(24	)			(72	)			(63	)			(89	)
Proceeds from sale of fixed assets			11				15				39				24				39
Business acquisitions, net of cash acquired			(12	)			—				(13	)			(2	)			(2	)
Proceeds from sale of businesses			—				(7	)			95				360				390
(Investments in) proceeds from sale of financial assets			(16	)			(17	)			(65	)			8				(21	)
Other			0				8				(1	)			(11	)			(5	)
Net cash provided by (used in) investing activities			(44	)			(25	)			(17	)			316				312
Cash flows from financing activities:
Share options exercised			—				—				72				—				—
Dividends paid			—				—				(48	)			(27	)			(27	)
Net funding			(8	)			(178	)			(170	)			(284	)			(293	)
Other			—				5				(2	)			(1	)			(12	)
Net cash provided by (used in) financing activities			(8	)			(173	)			(148	)			(312	)			(332	)
Net increase (decrease) in cash and cash equivalents			(31	)			(133	)			(20	)			154				241
Effect from changes in exchange rates			(3	)			(1	)			(12	)			1				1
Cash and cash equivalents at beginning of period			374				419				372				130				130
Cash and cash equivalents at end of period			340				285				340				285				372

Free cash flow:

		7-9/				7-9/				1-9/				1-9/				1-12/
		2005				2004				2005				2004				2004
(Millions)		EUR				EUR				EUR				EUR				EUR
Net cash provided by operating activities			21				65				145				150				261
Capital expenditures on fixed assets			(27	)			(24	)			(72	)			(63	)			(89	)
Proceeds from sale of fixed assets			11				15				39				24				39
Free cash flow			5				56				112				111				211

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

						Share				Cumulative				Fair value								Equity
		Share				premium				translation				and other				Retained				attributable 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			—				—				53				—				—				53				—				53
Net investment hedge gains (losses)			—				—				(17	)			—				—				(17	)			—				(17	)
Cash flow hedges, net of tax			—				—				—				(14	)			—				(14	)			—				(14	)
Other			—				—				—				—				—				—				1				1
Net profit (loss) for the period			—				—				—				—				169				169				0				169
Balance at Sep 30, 2005			241				77				(12	)			422				484				1,212				6				1,218

The distributable funds of Metso Corporation at Sep 30, 2005 consist of retained earnings (EUR 484 million) excluding accelerated depreciation and untaxed reserves (EUR 4 million) and negative translation differences (EUR 12 million), and other reserves (EUR 202 million), totaling EUR 670 million. At the end of the period Metso Corporation possessed 60,841 of its own shares.

ASSETS PLEDGED AND CONTINGENT LIABILITIES

		Sep 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 4 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

		Sep 30, 2005				Dec 31, 2004
(Millions)		EUR				EUR
Forward exchange rate contracts			1,171				1,770
Interest rate and currency swaps			2				2
Currency swaps			1				73
Interest rate swaps			183				188
Interest rate futures contracts			10				10
Option agreements
Bought			24				10
Sold			54				16
Electricity forward contracts 1)			363				329

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

KEY RATIOS

		1-9/				1-9/				1-12/
		2005				2004				2004 *)
Earnings per share from continuing operations, EUR			1.10				0.66				1.16
Earnings per share from discontinued operations, EUR			0.12				(0.13	)			(0.11	)
Earnings per share from continuing and discontinued operations, EUR			1.22				0.53				1.05
Equity/share at end of period, EUR			8.56				6.77				7.27
Return on equity (ROE), % (annualized)			21.4				11.0				15.9
Return on capital employed (ROCE), % (annualized)			18.3				6.6				10.7
Equity to assets ratio at end of period, %			36.3				28.0				30.9
Gearing at end of period, %			25.3				66.1				49.7
Free cash flow			112				111				211
Free cash flow/share			0.81				0.82				1.55
Gross capital expenditure of continuing operations (excl. business acquisitions)			73				63				89
Business acquisitions, net of cash acquired			13				2				2
Depreciation and amortization of continuing operations			76				80				105
Average number of shares (thousands)			138,981				136,190				136,190
Average number of diluted shares (thousands)			138,939				136,190				136,192

EXCHANGE RATES USED

		1-9/				1-9/				1-12/				Sep 30,				Sep 30,
		2005				2004				2004				2005				2004				Dec 31, 2004
USD
(US dollar)			1.2635				1.2257				1.2433				1.2042				1.2409				1.3621
SEK
(Swedish krona)			9.2162				9.1620				9.1250				9.3267				9.0588				9.0206
GBP
(Pound sterling)			0.6852				0.6731				0.6786				0.6820				0.6868				0.7051
CAD
(Canadian dollar)			1.5477				1.6286				1.6170				1.4063				1.5740				1.6416
BRL
(Brazilian real)			3.1526				3.6351				3.6350				2.6725				3.5372				3.6177

BY BUSINESS AREA INFORMATION

NET SALES BY BUSINESS AREA

		7-9/				7-9/				1-9/				1-9/				10/2004-				1-12/
		2005				2004				2005				2004				9/2005				2004
(Millions)		EUR				EUR				EUR				EUR				EUR				EUR
Metso Paper			396				378				1,192				1,089				1,662				1,559
Metso Minerals			454				340				1,218				968				1,616				1,366
Metso Automation			148				140				421				388				568				535
Metso Ventures			63				52				196				172				254				230
Intra Metso net sales			(16	)			(23	)			(60	)			(58	)			(90	)			(88	)
Metso total			1,045				887				2,967				2,559				4,010				3,602

OTHER OPERATING INCOME(+)AND EXPENSES(-), NET BY BUSINESS AREA

		7-9/				7-9/				1-9/				1-9/				10/2004-				1-12/
		2005				2004				2005				2004				9/2005				2004
(Millions)		EUR				EUR				EUR				EUR				EUR				EUR
Metso Paper			0.9				(1.2	)			(0.5	)			2.2				(19.4	)			(16.7	)
Metso Minerals			2.4				1.3				4.3				2.6				2.4				0.7
Metso Automation			0.5				0.2				0.0				0.3				(3.6	)			(3.3	)
Metso Ventures			(0.5	)			(0.4	)			2.1				(1.8	)			1.8				(2.1	)
Corporate office and other			(0.1	)			2.7				5.0				12.0				7.6				14.6
Metso total			3.2				2.6				10.9				15.3				(11.2	)			(6.8	)