By Ott Ummelas and Alistair Holloway
HELSINKI, Oct 30 (Reuters) - Finnish engineering firms Metso and Wartsila on Wednesday posted sliding earnings due to persistently weak demand for capital goods and repeated no relief for the sector was in sight.
Metso, the world's largest supplier of machinery for the struggling pulp and paper industry, and Wartsila, which makes marine and power plant engines, both posted third-quarter results at the low end of expectations and said they saw no sustainable uptake in demand.
While Metso said it at least expected a seasonal rise in demand in the fourth quarter, Wartsila said it would accelerate its cost-cutting programme to bring expenditures in line with the weaker demand.
"All measures to improve the profitability will continue, as a matter of fact they will be stepped up," Wartsila Chief Executive Ole Johansson told Reuters, declining to give a size of further job cuts.
Analysts said that despite a slight recovery in the third-quarter order intake for the companies -- a key indicator of future sales -- the outlook for both remained cloudy at best given the slow pace of recovery by the stumbling global economy.
"What is worrying is the market outlook, which remains very difficult," said Evli Bank analyst Pekka Spolander.
"If (Wartsila) now starts to receive more orders, then sometime in the second half of next year we could see growing sales, but at the moment it looks very uncertain," he added.
At 1215 GMT, shares in Metso were up 2.4 percent at 9.01 euros, while Wartsila traded 0.5 percent softer at 11 euros on a firmer Helsinki bourse . Both shares outperformed the weaker index of their European peers .
Wartsila has lost almost 50 percent in 2002 and Metso some 25 percent as the weak engineering and economic outlook hammers shares globally. The results follow similar grim earnings from troubled sector major ABB last week.
METSO REPEATS SEES BETTER Q4
Metso posted a July-September profit before extraordinary items of three million euros ($2.95 million), down sharply on the year-ago period and below analysts' expectations.
Sales rose 25 percent to 1.1 billion euros, boosted by Metso's purchase of Sweden's Svedala in the latter half of 2001, while the company's order intake rose 52 percent to 1.06 billion euros.
Metso, which last month warned on its third-quarter profit due to the weak markets, said demand for its products would stay at current levels and repeated it expected its seasonally strong fourth-quarter operating profit to rise year-on-year.
Analysts said despite the fall in profits Metso's order intake and cashflow in the third quarter were positive.
"I think the market is a bit too cautious, taking into account Metso's results once the cycle (turns) and when the synergies (from Svedala) are in," said Nordea analyst Ville Kivela, who said he will keep his "buy" rating on the stock.
WARTSILA KEEPS LOWER 2002 PROFITABILITY OUTLOOK
Wartsila also reiterated its profit warning from last month, calling for full-year operational profitability at its key Power Divisions to be below last year's level of four percent. It repeated the unit's 2002 sales would rise due to acquisitions.
The company posted July-September profit before extraordinary items of 10.6 million euros, down sharply from a year-ago figure 27.5 million.
"Results were weak as expected, as the demand was weak in both marine and power plant units. The marine business has improved slightly, but not as much as necessary," said Conventum analyst Tuomas Hirvonen, who has a "hold" rating for Wartsila.
Wartsila repeated it will only achieve its long-term operating profit margin target of 7-8 percent after 2003.