UPDATE 3-Metso's mining business to prop up profits in 2013

Tue Dec 11, 2012 6:00am EST

(Refiles to avoid duplication of word "stronger" in first paragraph)

* Market expected weaker 2013

* Metso sees growth from services sales

* Weak economy weighing on new machine orders

* Shares rise 3.2 pct

By Jussi Rosendahl and Ritsuko Ando

HELSINKI, Dec 11 (Reuters) - Finnish engineering group Metso gave a better than expected outlook for 2013 profits on Tuesday, saying a stronger mining services business would help compensate for weak machine orders in its paper, power and other markets.

Metso's shares were up 3.2 percent by 0926 GMT after the company forecast sales and profits in 2013 would be similar to results this year, a surprise to investors who had anticipated a fall. The Helsinki market's main share index was up 0.4 percent.

In October the company had reported a bigger than expected drop in quarterly orders as weak economies put customers off investing in large new projects, prompting analysts to forecast a weak year ahead.

Analysts were predicting that revenue in 2013 would fall to 7.1 billion euros ($9.2 billion) from an expected 7.4 billion in 2012, according to Thomson Reuters StarMine. In 2011 the company made a profit of 629 million euros on sales of 6.6 billion euros.

Metso executives said during an 'investor day' of presentations that they expected growth in the company's services business, which includes machinery maintenance and upgrades.

That would help boost total profits in its mining and construction division, as well as its automation unit, in 2013, they said, offsetting weaknesses in its pulp, paper and power division.

"Their industrial orders will come down in the next quarters as expected but the services they provide, especially for the mining sector, are seen rising," said Inderes' chief analyst Juha Kinnunen on the sidelines of Metso's investor conference.

"This is a confident guidance from them. It gives visibility and thus lowers the stock's risk level," he said.

Services already contribute about 55 percent of the group's revenue and the company said it wanted to boost services sales by about 40 percent to 4.5 billion euros by the end of 2016 as it develops new service offerings.

Last month the company said it would cut 560 Finnish jobs, mostly in the pulp and paper business, and outsource a further 136 positions. ($1=0.7736 euros) (Editing by Greg Mahlich)

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