UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

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

under 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 July 26, 2007

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		Aleksanteri Lebedeff
Executive Vice President and CFO		Senior Vice President,
Metso Corporation		General Counsel
		Metso Corporation

Metso’s Interim Review for January 1 — June 30, 2007

(Helsinki, Finland, July 26, 2007) — Metso Corporation (NYSE: MX; OMXH: MEO1V)

Another strong quarter for Metso

Highlights of the second quarter

•		New orders worth EUR 2,090 million were received in April — June, i.e. 50 percent more than in the corresponding period of last year (EUR 1,390 million in Q2/06).
•		The order backlog grew by 22 percent from the end of December 2006 and was EUR 4,574 million at the end of June 2007 (EUR 3,737 million on Dec. 31, 2006).
•		Net sales increased by 31 percent and totaled EUR 1,536 million (EUR 1,170 million in Q2/06).
•		Earnings before interest, tax and amortization (EBITA) were EUR 162.3 million, i.e. 10.6 percent of net sales (EUR 120.7 million and 10.3% in Q2/06).
•		Operating profit (EBIT) was EUR 148.3 million, i.e. 9.7 percent of net sales (EUR 116.4 million and 10.0% in Q2/06).
•		Earnings per share were EUR 0.68 (EUR 0.97 in Q2/06).
•		Free cash flow was EUR 67 million negative (EUR 26 million in Q2/06).

“The second quarter was another strong quarter for Metso. We saw brisk order intake in all our main businesses and our order backlog strengthened to an all-time-high level. This, together with the continuing favorable market outlook gives us exceptionally good visibility not only for the current year but also for 2008,” says Jorma Eloranta, President and CEO, Metso Corporation.

Eloranta says that Metso’s second-quarter financial performance was a substantial improvement on the seasonally low first quarter. “The growth in net sales was healthy both in Metso Minerals and Metso Automation, which delivered strong organic growth of more than 20 percent. I am also pleased with our second-quarter operating profit driven by strong volumes, which set a new quarterly record for Metso. Our free cash flow during the second quarter was negative mainly because of volume driven increase in receivables at the end of June. I consider this to be primarily a timing issue related to project deliveries,” explains Eloranta.

Eloranta says that Metso’s main operational priority is to ensure that the delivery capability continues to meet robust demand and healthy growth rates and competitiveness are sustained. “We are implementing various expansion programs to enhance our delivery capability and have increased our capital expenditure plans for 2007 to this end. We are also continuing our concerted efforts to develop our aftermarket operations, strengthen our global presence and to evaluate complementary acquisition candidates to accelerate Metso’s growth even further,” concludes Eloranta.

Metso’s key figures

EUR million		Q2/07				Q2/06				Change %				Q1- Q2/07				Q1- Q2/06				Change %				2006
Net sales			1,536				1,170				31				2,902				2,248				29				4,955
Earnings before interest, tax and amortization (EBITA)			162.3				120.7				34				284.2				220.6				29				481.1
% of net sales			10.6				10.3								9.8				9.8								9.7
Operating profit			148.3				116.4				27				256.7				211.8				21				457.2
% of net sales			9.7				10.0								8.8				9.4								9.2
Earnings per share, basic, EUR			0.68				0.97				(30	)			1.18				1.44				(18	)			2.89
Orders received			2,090				1,390				50				3,754				2,827				33				5,705
Order backlog at end of period															4,574				2,864				60				3,737
Free cash flow			(67	)			26				n.a.				30				178				(83	)			327
Return on capital employed (ROCE), annualized, %															24.0				21.7								22.2
Equity to assets ratio at end of period, %															34.9				37.2								36.1
Gearing at end of period, %															42.6				24.2								30.8

Metso’s second quarter 2007 review

Operating environment and demand for products in April-June

The market situation for Metso’s products and services continued to be favorable during the second quarter.

Metso Paper’s market situation was similar to that of the first quarter. The demand for new paper, board and tissue machines remained good in China, where continuing strong economic growth is fuelling the demand for various paper and board grades. The demand for fiber lines was good in South America and Asia, where pulp production capacity continues to increase rapidly due to good availability of cost competitive raw materials. In Europe and North America, the demand focused mainly on machine rebuilds and aftermarket services. Demand for power plants that use renewable energy sources was excellent and resulted from worldwide industry attempts to increase energy self-sufficiency and reduce climatic impacts.

The demand for Metso Minerals’ mining products, metal recycling equipment and aftermarket services remained excellent, as in the first quarter. The continuing high level of investment in industrial and commercial facilities, infrastructure, services and housing, particularly in emerging countries, has maintained lively demand for various metals. As a result, mining industry investments have continued at an excellent level globally. In the construction industry, the demand for Metso Minerals’ aggregates production-related equipment remained excellent in Europe and good in other markets. Demand is driven especially by projects to develop road networks and other transportation infrastructure in various parts of the world.

Metso Automation’s market situation was good in the fiber and paper industry. In the power, oil and gas industry, the demand for process automation systems was good and the demand for flow control systems was excellent. Energy industry investments are driven by the increased consumption of energy and high oil prices due to global economic growth.

Orders received in April-June

Metso’s order intake during the second quarter was at an all time high, EUR 2,090 million, which is 50 percent more than during the same period a year before. About one third of the growth was organic and the rest was due to the acquisition of the Pulping and Power businesses that was completed at the end of 2006.

At Metso Paper, the growth in new orders came through the acquired businesses, especially the Power business line, which had a strong quarter with new orders worth EUR 480 million. Metso Paper’s largest orders for April-June included pulp mill equipment for Votorantim Celulose e Papel in Brazil and for Celulose Beira Industrial in Portugal, and an order received for a printing paper line for Henan Puyang Longfeng Paper in China. Metso Paper also received an order for two biomass-fired power boilers for EDP Producão — Bioeléctrica S.A. in Portugal.

Metso Minerals’ order intake continued to grow at the healthy 27 percent pace. Orders increased strongly in all business lines and in all geographical regions except Asia-Pacific, where no major orders were received due to timing reasons. Metso Minerals’ largest orders were a materials handling solution for Companhia Brasileira de Alumínio to Brazil and minerals processing equipment for Gold Reserve for its gold-copper project in Venezuela.

Metso Automation’s new orders in the second quarter were on par with the same period a year earlier. Metso Automation’s largest orders were a process automation system for Henan Puyang Longfeng Paper in China and an automationsystem modernization project for an oil refinery in Brazil.

Financial performance in April-June

Metso’s net sales in the second quarter grew 31 percent compared with the corresponding period last year and were EUR 1,536 million. In Metso Paper, the growth came from the acquired Pulping and Power businesses. Metso Minerals and Metso Automation delivered strong organic growth.

As expected, Metso’s second-quarter financial performance improved substantially on the first quarter. Earnings before interest, tax and amortization (EBITA) were EUR 162.3 million or 10.6 percent of net sales compared with EUR 120.7 million or 10.3 percent of net sales for the corresponding period last year. EBITA and EBITA margin improved for both Metso Paper and Metso Minerals, while Metso Automation’s EBITA improved but EBITA margin decreased slightly. Metso’s second-quarter operating profit was EUR 148.3 million or 9.7 percent of net sales compared with EUR 116.4 million or 10.0 percent of net sales a year earlier.

Metso’s January-June 2007 Interim Review

Orders received and order backlog

In the first half of the year, Metso’s orders received grew by 33 percent on the comparison period, and were EUR 3,754 million. Orders received grew in all business areas. The increase in orders was proportionally strongest in Metso Paper’s Power business line, Metso Minerals’ Recycling business line and Metso Automation’s Flow Control business line. Two thirds of the new orders increase was attributable to the acquisition of the Pulping and Power businesses. Metso’s order backlog increased by 22 percent on the end of 2006 and was EUR 4,574 million at the end of June.

Orders received by business area

		Q1-Q2/07								Q1-Q2/06
						% of orders								% of orders
		EUR million				received				EUR million				received
Metso Paper			1,756				46				1,108				39
Metso Minerals			1,569				42				1,314				46
Metso Automation			413				11				372				13
Valmet Automotive			47				1				59				2
Intra-Metso and other orders received			(31	)							(26	)
Total			3,754				100				2,827				100

Orders received by market area

		Q1-Q2/07								Q1-Q2/06
						% of orders								% of orders
		EUR million				received				EUR million				received
Europe			1,606				43				1,070				37
North America			596				16				609				22
South and Central America			442				12				318				11
Asia-Pacific			872				23				643				23
Rest of the world			238				6				187				7
Total			3,754				100				2,827				100

Net sales

Metso’s net sales for January-June grew by 29 percent on the comparison period and totaled EUR 2,902 million. The increase would have been 3 percentage points higher without the effect of exchange rate translation. Excluding the effect of the Pulping and Power businesses acquired at the end of 2006, the increase in net sales was approximately 14 percent. The main drivers for organic growth were the continuing good market situation and strengthened competitiveness. Aftermarket operations accounted for 33 percent (37% in Q1-Q2/06) of Metso’s net sales. Decrease in the share of aftermarket operations was mainly due to the acquired Pulping and Power businesses, where the share of aftermarket business is below Metso’s average. Measured in euros, the net sales of aftermarket operations increased by 17 percent.

Net sales by business area

		Q1-Q2/07								Q1-Q2/06
		EUR								EUR
		million				% of net sales				million				% of net sales
Metso Paper			1,374				47				886				39
Metso Minerals			1,188				40				1,044				46
Metso Automation			320				11				274				12
Valmet Automotive			47				2				59				3
Intra-Metso net sales and other			(27	)							(15	)
Total			2,902				100				2,248				100

Net sales by market area

		Q1-Q2/07								Q1-Q2/06
		EUR million				% of net sales				EUR million				% of net sales
Europe			1,155				40				939				42
North America			548				19				505				22
South and Central America			421				14				287				13
Asia-Pacific			657				23				404				18
Rest of the world			121				4				113				5
Total			2,902				100				2,248				100

Financial result

Metso’s earnings before interest, tax and amortization (EBITA) during the first half of 2007 were EUR 284.2 million or 9.8 percent of net sales (EUR 220.6 million or 9.8 percent in Q1-Q2/06). EBITA in euros improved clearly in all business areas primarily due to strong volume growth. EBITA margin improved both for Metso Paper and Metso Minerals, while it decreased slightly for Metso Automation. At Metso Paper, improvement came from all business lines. Metso Paper’s profitability was negatively affected during the first half by about EUR 10 million because of a steep increase in stainless steel price. Metso Minerals’ profitability improved in all business lines, with the greatest improvement recorded for the Mining business line. Metso Automation’s EBITA margin was negatively affected by the rise in raw material and subcontracting prices and due to large share of project deliveries.

Metso’s operating profit was EUR 256.7 million or 8.8 percent of net sales in January-June (EUR 211.8 million or 9.4 percent in Q1-Q2/06). Operating profit includes a EUR 18 million amortization of intangible assets related to the acquisition of the Pulping and Power businesses and a EUR 3 million credit loss in Metso Paper.

Metso’s net financial expenses were EUR 18 million in January-June (EUR 18 million).

Metso’s profit from continuing operations before taxes in the first half-year was EUR 238 million (EUR 194 million). The profit attributable to shareholders was EUR 167 million (EUR 204 million) in January-June, corresponding to earnings per share (EPS) of EUR 1.18 (EUR 1.44 per share). In the comparison period, Metso recognized in the income statement a nonrecurring deferred tax asset of EUR 57 million related to its U.S. operations, which lowered the tax rate for 2006 and improved EPS by EUR 0.40. Metso’s tax rate for 2007 is estimated to be about 30 percent.

The return on capital employed (ROCE) was 24.0 percent (21.7%) and the return on equity (ROE) was 23.5 percent (32.5%).

Cash flow and financing

Metso’s net cash generated by operating activities during the first six months was EUR 95 million (EUR 225 million). As a result of the strong growth of the order backlog and net sales, both inventories and receivables increased strongly in all business areas during the second quarter. Growth in inventories was offset by growth in advances received and accounts payable, but strong growth in receivables, especially in June, had a negative impact on net working capital, which increased by EUR 176 million in the second quarter. Mainly because of timing and the volume-driven increase in receivables in June, Metso’s free cash flow was EUR 67 million negative during the second quarter. Free cash flow for the first six months was EUR 30 million (EUR 178 million).

Net interest-bearing liabilities totaled EUR 623 million at the end of June. Gearing was 42.6 percent. Metso’s equity to assets ratio was 34.9 percent. In April, Metso paid dividends of EUR 212 million for 2006.

In May, Standard & Poor’s Ratings Services upgraded the long-term credit rating of Metso Corporation to BBB from BBB- and the short-term rating to A-2 from A-3. The rating on Metso’s senior unsecured debt was upgraded to BBB- from BB+. The outlook on rating is considered stable.

The current Moody’s Investor Service rating for Metso’s long-term credit is Baa3. The outlook on rating is considered stable.

Capital expenditure

Metso’s gross capital expenditure in the first half-year was EUR 74 million excluding acquisitions (EUR 57 million). About one third of the capital expenditure was related to capacity increasing investments necessitated by strong volume growth.

In the second quarter, Metso decided to establish a service center for Metso Paper at Guangzhou, China. The service center will start its operations in 2008. Also in China, Metso Paper’s Service Center in Wuxi and Metso Automation’s valve production plant in Shanghai are being expanded.

In India, Metso is expanding mobile crusher assembly capacity in Bawal. The capacity of the Brazilian crusher manufacturing plant is also being expanded.

In Finland, Metso is expanding its power boiler production facilities at Lapua and increasing the capacity in the paper machine roll production line in Jyväskylä. A new assembly line for mobile crushers was introduced in Tampere early in the year, and a crusher pilot plant and test laboratory are still under construction.

Metso has also decided to invest in an enterprise resource planning (ERP) solution covering the entire supply chain within Metso Automation. The investment is due to be completed by the turn of 2009-2010. Similar investment is underway in Metso Minerals.

Metso estimates that the gross capital expenditure in 2007 will be about 30 percent higher than in 2006. The growth will be due to capacity increasing investments, as well as the ERP investments of Metso Minerals and Metso Automation.

Metso’s research and development expenditure totaled EUR 57 million (EUR 54 million) during January-June, i.e. 2.0 percent of Metso’s net sales.

Holding in Talvivaara Mining Company Ltd

Metso has an approximate 4 percent holding in Talvivaara Mining Company Ltd, which was listed on the London Stock Exchange in May 2007. Metso’s holding, which is classified in the balance sheet as an available-for-sale investment, was valued at approximately EUR 29 million at the end of June. In connection with the listing, Metso has undertaken to retain its Talvivaara shares for at least 6 months. Metso’s holding relates to joint R&D project with Talvivaara Mining Company in the development of rock processing and bulk materials handling processes.

Acquisitions and divestments

In June 2007, Metso strengthened Metso Paper’s maintenance service business by acquiring Mecanique et Depannage Industries s.a.r.l. (MDI) from France. MDI employs 30 people.

In March 2007, Metso acquired the North American metal recycling technology provider, Bulk Equipment Systems and Technologies Inc. (B.E.S.T. Inc), located in Cleveland, Ohio. The acquisition price, approximately EUR 9 million, was paid in April. The company’s net sales in 2006 were EUR 8 million and it employs approximately 40 people. The company is integrated in Metso Minerals’ Recycling business line.

In March 2007, Metso sold the majority of Metso Paper AG in Delémont, Switzerland. Metso Paper remained as a minority shareholder in the company. Metso Paper AG is a supplier of roll logistic systems, solutions and services. The company has about 70 employees and annual net sales of approximately EUR 10 million.

Acquisition and integration of the Pulping and Power businesses

Metso closed the acquisition of Aker Kvaerner’s Pulping and Power businesses on December 29, 2006. The parties have reached an agreement on the balance sheet value of the acquired businesses and the earlier estimated acquisition price (EUR 341 million) was revised to EUR 336 million, including EUR 6 million in expenses related to the acquisition and EUR 53 million in net cash.

Metso estimates that the annual cost savings achievable through synergies will amount to EUR 20-25 million after integration. About one third of these are expected to be realized during 2007. During the first half-year about EUR 6 million of synergy benefits were realized. The nonrecurring expenses resulting from integration of the acquired businesses are estimated to be less than EUR 10 million, of which EUR 3 million was recognized in the first half and the rest are expected to be recorded in the remaining two quarters in 2007.

Integration of the acquired businesses into Metso Paper has proceeded according to plan. During the first half-year, the global customer interface organization was restructured and employee negotiations were completed regarding the pruning of overlapping activities in Sweden and Finland. By the end of June these measures resulted into the reduction of about 100 employees.

The amortization of intangible assets resulting from the transaction is estimated to be EUR 37 million in 2007, EUR 20 million in 2008 and after that EUR 13 million annually until the intangible assets have been fully amortized. The rest of the transaction price exceeding the balance sheet value will remain as goodwill, which is not amortized. In the first half-year, the amortization of intangible assets amounted to EUR 18 million.

Personnel

Metso had 26,609 employees at the end of June, about 300 of who were seasonal workers. This was 993 employees more than at the end of the first quarter (25,616 employees). In the first half-year, Metso had an average of 25,968 employees.

Personnel by area

		June 30,				Dec 31,
		2007				2006				Change %
Finland			9,783				9,281				5
Other Nordic countries			3,587				3,580				0
Other Europe			3,016				3,067				(2	)
North America			3,773				3,715				2
South and Central America			2,564				2,439				5
Asia-Pacific			2,497				2,262				10
Rest of the world			1,389				1,334				4
Total personnel			26,609				25,678				4

BUSINESSES

Metso Paper

														Q1-				Q1-
EUR million		Q2/07				Q2/06				Change %				Q2/07				Q2/06				Change %				2006
Net sales			708				469				51				1,374				886				55				2,092
Earnings before interest, tax and amortization (EBITA)			47.7				27.4				74				84.8				51.2				66				105.6
% of net sales			6.7				5.8								6.2				5.8								5.0
Operating profit			35.7				25.1				42				61.1				46.6				31				89.8
% of net sales			5.0				5.4								4.4				5.3								4.3
Orders received			1,103				564				96				1,756				1,108				58				2,276
Order backlog at end of period															2,584				1,540				68				2,225
Personnel at end of period															11,954				9,328				28				11,558

Aker Kvaerner’s Pulping and Power businesses were acquired as of December 29, 2006, and the acquired balance sheet was consolidated to Metso on December 31, 2006. The acquired businesses had no effect to Metso’s income statement for 2006 and are therefore not included in the comparative segment information except for order backlog and personnel as at December 31, 2006.

In January-June, Metso Paper’s net sales increased by 55 percent on the comparison period and totaled EUR 1,374 million.

About two thirds of the net sales growth was attributable to the Pulping and Power businesses acquired at the end of 2006. The aftermarket business accounted for 28 percent of net sales (35% in Q1-Q2/06). The decline in the share of aftermarket business was due to the acquired Pulping and Power businesses, where the share of aftermarket business is below Metso Paper’s average. Measured in euros, the volume of aftermarket business increased by 26 percent, and the growth was attributable mainly to the acquired Pulping and Power businesses.

Metso Paper’s EBITA was EUR 84.8 million, i.e. 6.2 percent of net sales (EUR 51.2 million or 5.8% in Q1-Q2/06). The operating profit was EUR 61.1 million, i.e. 4.4 percent of net sales (EUR 46.6 million or 5.3% in Q1-Q2/06). The operating profit for the first half-year includes a EUR 18 million amortization of intangible assets related to the acquisition of the Pulping and Power businesses and a EUR 3 million credit loss. The estimated negative impact of the steep rise in stainless steel price during the first half-year was about EUR 10 million.

The value of orders received by Metso Paper increased by 58 percent on the comparison period and totaled EUR 1,756 million. The order intake of the Power business line almost doubled and the order intake of the Paper and Board business lines grew by about one fourth. On the other hand, in the Panelboard and Tissue business lines, order intake declined clearly. Excluding the effect of the Pulping and Power businesses, Metso Paper’s volume of new orders grew by 3 percent. Among the most significant orders in January-June were orders received from Oji Paper for a paper making line in Japan, from Henan Puyang Longfeng Paper for a printing paper line in China, and for pulp mill equipment from VCP in Brazil and Celbi in Portugal. A long-term maintenance agreement was signed in the review period with Plattling Papier’s mill in Germany. This is Metso Paper’s first extensive service agreement for a production plant still under construction.

The end-of-June order backlog, EUR 2,584 million, was 16 percent higher than the order backlog at the end of 2006.

Metso Minerals

										Change				Q1-				Q1-
EUR million		Q2/07				Q2/06				%				Q2/07				Q2/06				Change %				2006
Net sales			648				541				20				1,188				1,044				14				2,199
Earnings before interest, tax and amortization (EBITA)			96.9				72.8				33				165.6				134.3				23				302.1
% of net sales			15.0				13.5								13.9				12.9								13.7
Operating profit			95.7				71.6				34				163.5				131.8				24				297.7
% of net sales			14.8				13.2								13.8				12.6								13.5
Orders received			798				628				27				1,569				1,314				19				2,655
Order backlog at end of period															1,673				1,101				52				1,277
Personnel at end of period															9,967				9,124				9				9,433

In January-June, Metso Minerals’ net sales increased by 14 percent on the comparison period and totaled EUR 1,188 million. The majority of the growth was derived from the Mining business line. The net sales of the Construction business line were also up on the comparison period. The Recycling business line’s net sales were on par with the comparison period. Metso Minerals’ aftermarket business accounted for 42 percent of net sales (43% in Q1-Q2/06). Measured in euros, the volume of the aftermarket business grew by 12 percent.

The operating profit of Metso Minerals was EUR 163.5 million, or 13.8 percent of net sales. All business lines improved profitability, with the Mining business line recording the strongest improvement as a result of robust volume growth.

The value of orders received by Metso Minerals was up by 19 percent and totaled EUR 1,569 million. Order intake grew strongly in all business lines. Among the largest orders in January-June were orders received for a grinding system from Boliden in Sweden, for bulk materials handling equipment from Alcoa in Brazil, for minerals processing equipment to Gold Reserve Inc. in Venezuela and grinding equipment from Osisko Exploration in Canada. The order backlog increased by 31 percent on the end of 2006 and was EUR 1,673 million at the end of June.

Metso Automation

														Q1-				Q1-
EUR million		Q2/07				Q2/06				Change %				Q2/07				Q2/06				Change %				2006
Net sales			174				140				24				320				274				17				613
Earnings before interest, tax and amortization (EBITA)			23.6				19.9				19				39.5				35.6				11				88.3
% of net sales			13.6				14.2								12.3				13.0								14.4
Operating profit			23.3				19.6				19				38.8				34.9				11				86.7
% of net sales			13.4				14.0								12.1				12.7								14.1
Orders received			185				181				2				413				372				11				717
Order backlog at end of period															365				272				34				276
Personnel at end of period															3,564				3,341				7				3,352

Metso Automation’s net sales increased by 17 percent in January-June and totaled EUR 320 million. The increase derived almost entirely from deliveries of flow control systems to the energy industry. The aftermarket business accounted for 21 percent of net sales (23% in Q1-Q2/06). Measured in euros, the volume of the aftermarket business grew by 7 percent.

Metso Automation’s operating profit amounted to EUR 38.8 million or 12.1 percent of net sales. The slight decrease in operating profit margin was primarily due to a rise in raw material and subcontracting prices and an increase in the share of project deliveries.

The value of orders received by Metso Automation increased by 11 percent on the comparison period and was EUR 413 million. The increase came mainly from orders of the Flow Control business line for the power, oil and gas industries. Major orders during January-June were valve order from the Chiyoda-Technip Joint Venture to Qatar, process automation system to Henan Puyang Longfeng Paper to China and automation system modernization project to an oil refinery in Brazil. Due to the strong order intake in the first half-year, Metso Automation’s order backlog was substantially strongerthan in the comparison period. The order backlog increased by 32 percent on the end of 2006 and was EUR 365 million at the end of June.

Valmet Automotive

Valmet Automotive’s net sales in January-June were EUR 47 million. Operating profit was EUR 5.4 million, or 11.5 percent of net sales. In the first half-year, Valmet Automotive manufactured an average of 114 cars per day. Valmet Automotive’s number of personnel has been adjusted to correspond with the current production level.

Short-term risks of business operations

China is the primary market for new paper and board machines and thus any substantial changes in demand on the Chinese market may have a material adverse effect on Metso Paper’s profitability. Metso seeks to mitigate these risks by developing its global aftermarket operations and increasing the flexibility of its delivery chain.

The delivery times for Metso products have been lengthened because of strong growth in order intake and backlog. Therefore, there is a risk that material and other costs may rise significantly during the delivery time and have a greater impact on Metso’s profitability than currently anticipated. In the current strong demand situation, the scarcity of certain components and subcontractor resources, particularly at Metso Minerals and Metso Automation, may also lengthen delivery times.

Metso strives to manage and limit the potential adverse effects of these and other risks. However, if the risks materialize, they could have a significant adverse effect on Metso’s business, financial position and results of operations or on the price of the Metso share.

Events after the review period

Metso has acquired Bender Holdings Limited in United Kingdom

In July 2007, Metso acquired Bender Holdings Limited and its subsidiary companies in United Kingdom to further strengthen Metso Paper’s aftermarket business. The company employs 97 persons and its net sales in 2006 amounted to approximately EUR 24 million. With the acquisition, Metso Paper becomes the global market leader in Yankee cylinder grinding and coating services for tissue machines.

Metso has agreed to divests its German panelboard press business

In July 2007, Metso has agreed to divest Metso panelboard GmbH, Hannover, Germany-based supplier of continuous press and energy plants for the panelboard industry, to G. Siempelkamp GmbH & Co. KG of Germany. The transaction is estimated to be closed by the end of September 2007. Metso Panelboard GmbH employs approximately 65 people. In connection with the divestment, the parties have agreed to pursue cooperation where Metso’s front-end, forming and panelhandling technologies will be combined with Siempelkamp’s continuous press technology.

Metso seeks to delist and deregister from the United States

On July 26, 2007, Metso decided to apply for delisting of its American Depositary Shares from the New York Stock Exchange in the United States, and deregister from the U.S. Securities and Exchange Commission and terminate Metso’s reporting obligations under the Exchange Act. However, Metso plans to maintain its ADR facility, and following the delisting Metso’s ADSs are expected to be traded over-the-counter in the United States. Metso believes that the reasons why the New York Stock Exchange listing was originally sought in mid 1990’s are no longer valid since the capital markets have become more global. Metso’s ordinary shares will continue to trade on the Helsinki Stock Exchange.

Metso’s intention to delist from the New York Stock Exchange does not imply a reduced focus on its international shareholders or on its international or U.S. markets. Metso intends to continue its high standard of corporate governance, transparency in financial reporting and internal controls subsequent to effectiveness of the NYSE delisting and SEC deregistration. Metso expects to complete the delisting and deregistering process during 2007.

Short-term outlook

The favorable market outlook for Metso’s products and services is expected to continue for the rest of 2007. Metso’s record-high order backlog also provides exceptionally good visibility for 2008, which is estimated to be another solid growth year for Metso.

Metso Paper’s market situation is estimated to continue much the same as in the year’s first half. The demand for new paper and board machines is expected to be good in Asia and satisfactory elsewhere. The demand for new fiber lines is expected to be good in South America and satisfactory elsewhere. The demand for tissue machines is estimated to be satisfactory. The demand for power plants is estimated to be excellent. The demand for Metso Paper’s aftermarket services is expected to remain satisfactory.

Metso Minerals’ favorable market outlook is expected to continue. Demand is anticipated to remain excellent in the mining and metals recycling industries, and at a good level in the construction industry. The demand for aftermarket services is expected to remain excellent.

Metso Automation’s market outlook in the pulp and paper industry is estimated to be good. In the power, oil and gas industries, demand is expected to be good in process automation systems and excellent in flow control systems.

Thanks to the strong order backlog, continuing favorable market situation and expanded business scope, it is estimated that Metso’s net sales for 2007 will grow by more than 20 percent on 2006 and that the operating profit will clearly improve. It is estimated that the operating profit margin in 2007 will be slightly below Metso’s target of over 10 percent. This is primarily due to factors related to the acquisition of the Pulping and Power businesses — namely the high first-year amortization of intangible assets, the costs of integration and the fact that synergy benefits will not fully materialize in the first year.

The estimates concerning financial performance are based on Metso’s current business scope, order backlog and market outlook.

Helsinki, July 26, 2007

Metso Corporation’s Board of Directors

The interim review is unaudited

CONSOLIDATED STATEMENTS OF INCOME

EUR million		4-6/2007				4-6/2006				1-6/2007				1-6/2006				1-12/2006
Net sales			1,536				1,170				2,902				2,248				4,955
Cost of goods sold			(1,138	)			(845	)			(2,164	)			(1,623	)			(3,659	)
Gross profit			398				325				738				625				1,296
Selling, general and administrative expenses			(248	)			(216	)			(486	)			(422	)			(846	)
Other operating income and expenses, net			(3	)			8				3				9				6
Share in profits of associated companies			1				0				1				0				1
Operating profit			148				117				256				212				457
% of net sales			9.7	%			10.0	%			8.8	%			9.4	%			9.2	%
Financial income and expenses, net			(10	)			(11	)			(18	)			(18	)			(36	)
Profit on continuing operations before tax			138				106				238				194				421
Income taxes on continuing operations			(41	)			31				(71	)			10				(11	)
Profit on continuing operations			97				137				167				204				410
Profit (loss) on discontinued operations			—				—				—				—				—
Profit (loss)			97				137				167				204				410
Profit (loss) attributable to minority interests			0				0				0				0				1
Profit (loss) attributable to equity shareholders			97				137				167				204				409
Profit (loss)			97				137				167				204				410
Earnings per share from continuing operations, EUR
Basic			0.68				0.97				1.18				1.44				2.89
Diluted			0.68				0.97				1.18				1.44				2.89
Earnings per share from discontinued operations, EUR
Basic			—				—				—				—				—
Diluted			—				—				—				—				—
Earnings per share from continuing and discontinued operations, EUR
Basic			0.68				0.97				1.18				1.44				2.89
Diluted			0.68				0.97				1.18				1.44				2.89

CONSOLIDATED BALANCE SHEETS

ASSETS

EUR million		June 30, 2007				June 30, 2006				Dec 31, 2006
Non-current assets
Intangible assets
Goodwill			767				492				768
Other intangible assets			257				100				274
			1,024				592				1,042
Property, plant and equipment
Land and water areas			55				58				57
Buildings and structures			220				208				221
Machinery and equipment			313				275				318
Assets under construction			38				25				19
			626				566				615
Financial and other assets
Investments in associated companies			18				19				19
Available-for-sale equity investments			43				13				15
Loan and other interest bearing receivables			6				8				6
Available-for-sale financial assets			5				34				5
Deferred tax asset			213				212				228
Other non-current assets			35				47				33
			320				333				306
Total non-current assets			1,970				1,491				1,963
Current assets
Inventories			1,383				1,031				1,112
Receivables
Trade and other receivables			1,267				1,017				1,218
Cost and earnings of projects under construction in excess of advance billings			307				162				284
Loan and other interest bearing receivables			2				2				2
Available-for-sale financial assets			10				32				10
Tax receivables			22				15				16
			1,608				1,228				1,530
Cash and cash equivalents			213				382				353
Total current assets			3,204				2,641				2,995
Assets held for sale			—				—				—
TOTAL ASSETS			5,174				4,132				4,958

SHAREHOLDERS’ EQUITY AND LIABILITIES

EUR million		June 30, 2007				June 30, 2006				Dec 31, 2006
Equity
Share capital			241				241				241
Share premium reserve			77				76				77
Cumulative translation differences			(35	)			(35	)			(45	)
Fair value and other reserves			462				440				432
Retained earnings			712				558				763
Equity attributable to shareholders			1,457				1,280				1,468
Minority interests			5				6				6
Total equity			1,462				1,286				1,474
Liabilities
Non-current liabilities
Long-term debt			586				583				605
Post employment benefit obligations			159				154				157
Deferred tax liability			59				22				57
Provisions			48				29				53
Other long-term liabilities			2				2				2
Total non-current liabilities			854				790				874
Current liabilities
Current portion of long-term debt			106				160				93
Short-term debt			167				26				132
Trade and other payables			1,333				973				1,238
Provisions			201				178				213
Advances received			673				434				655
Billings in excess of cost and earnings of projects under construction			315				242				222
Tax liabilities			63				43				57
Total current liabilities			2,858				2,056				2,610
Liabilities held for sale			—				—				—
Total liabilities			3,712				2,846				3,484
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES			5,174				4,132				4,958
NET INTEREST BEARING LIABILITIES
Long-term interest bearing debt			586				583				605
Short-term interest bearing debt			273				186				225
Cash and cash equivalents			(213	)			(382	)			(353	)
Other interest bearing assets			(23	)			(76	)			(23	)
Total			623				311				454

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

		4-6/				4-6/				1-6/				1-6/				1-12/
EUR million		2007				2006				2007				2006				2006
Cash flows from operating activities:
Profit (loss)			97				137				167				204				410
Adjustments to reconcile profit (loss)
to net cash provided by operating activities
Depreciation			36				26				72				52				105
Provisions / Efficiency improvement programs			0				(1	)			0				(3	)			(7	)
Interests and dividend income			10				7				16				15				26
Income taxes			41				(31	)			71				(10	)			11
Other			6				2				10				3				7
Change in net working capital			(176	)			(64	)			(175	)			(2	)			(18	)
Cash flows from operations			14				76				161				259				534
Interest paid and dividends received			(7	)			(3	)			(7	)			(2	)			(24	)
Income taxes paid			(35	)			(17	)			(59	)			(32	)			(68	)
Net cash provided by (used in) operating activities			(28	)			56				95				225				442
Cash flows from investing activities:
Capital expenditures on fixed assets			(42	)			(30	)			(74	)			(56	)			(129	)
Proceeds from sale of fixed assets			3				—				9				9				14
Business acquisitions, net of cash acquired			(10	)			—				(10	)			—				(277	)
Proceeds from sale of businesses, net of cash sold			—				—				2				—				13
(Investments in) proceeds from sale of financial assets			0				70				3				103				154
Other			—				(3	)			—				(2	)			(2	)
Net cash provided by (used in) investing activities			(49	)			37				(70	)			54				(227	)
Cash flows from financing activities:
Share options exercised			—				—				0				—				1
Redemption of own shares			—				—				—				—				(11	)
Dividends paid			(212	)			(198	)			(212	)			(198	)			(198	)
Net funding			113				(2	)			28				(10	)			35
Other			15				(1	)			15				(6	)			(6	)
Net cash provided by (used in) financing activities			(84	)			(201	)			(169	)			(214	)			(179	)
Net increase (decrease) in cash and cash equivalents			(161	)			(108	)			(144	)			65				36
Effect from changes in exchange rates			3				(4	)			4				(6	)			(6	)
Cash and cash equivalents at beginning of period			371				494				353				323				323
Cash and cash equivalents at end of period			213				382				213				382				353

Free cash flow

EUR million		4-6/2007				4-6/2006				1-6/2007				1-6/2006				1-12/2006
Net cash provided by operating activities			(28	)			56				95				225				442
Capital expenditures on fixed assets			(42	)			(30	)			(74	)			(56	)			(129	)
Proceeds from sale of fixed assets			3				—				9				9				14
Free cash flow			(67	)			26				30				178				327

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

										Cumu-				Fair								Equity
						Share				lative				value								attri-
						pre-				trans-				and				Re-				butable				Mi-
						mium				lation				other				tained				to				nority				Total
		Share				re-				adjust-				re-				earn-				share-				inter-				e-
EUR million		capital				serve				ments				serves				ings				holders				est				quity
Balance at Jan 1, 2006			241				76				(9	)			424				553				1,285				7				1,292
Dividends			—				—				—				—				(198	)			(198	)			—				(198	)
Share options exercised			—				—				—				—				—				—				—				—
Translation differences			—				—				(43	)			—				—				(43	)			—				(43	)
Net investment hedge gains (losses)			—				—				15				—				—				15				—				15
Cash flow hedges, net of tax			—				—				—				14				—				14				—				14
Available-for-sale equity investments, net of tax			—				—				—				1				—				1				—				1
Other			—				—				2				1				(1	)			2				(1	)			1
Net profit for the period			—				—				—				—				204				204				0				204
Balance at June 30, 2006			241				76				(35	)			440				558				1,280				6				1,286
Balance at Dec 31, 2006			241				77				(45	)			432				763				1,468				6				1,474
Dividends			—				—				—				—				(212	)			(212	)			—				(212	)
Share options exercised			0				0				—				—				—				0				—				0
Translation differences			—				—				16				—				—				16				—				16
Net investment hedge gains (losses)			—				—				(6	)			—				—				(6	)			—				(6	)
Cash flow hedges, net of tax			—				—				—				(1	)			—				(1	)			—				(1	)
Available-for-sale equity investments, net of tax			—				—				—				20				—				20				—				20
Share-based payments, net of tax			—				—				—				1				—				1				—				1
Redemption of own shares			—				—				—				—				—				—				—				—
Other			—				—				—				10				(6	)			4				(1	)			3
Net profit for the period			—				—				—				—				167				167				0				167
Balance at June 30, 2007			241				77				(35	)			462				712				1,457				5				1,462