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September 6, 2005

BY EDGAR

Ms. Angela Crane

Branch Chief

U.S. Securities and Exchange Commission

Division of Corporation Finance

Mail Stop 6010

Washington, D.C. 20549-0405

Re:

Annual Report on Form 20-F for the Fiscal Year Ended December 31, 2004 of

Metso Corporation (File No. 001-14400)

On behalf of our client, Metso Corporation (the “Company”), we are submitting the following letter in response to the comments of the Staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) that were contained in the Staff’s further comment letter to Mr. Olli Vaartimo of the Company dated August 10, 2005 (the “Comment Letter”) with respect to the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2004 (the “2004 Form 20-F”). This letter supplements the information set forth in the Company’s response letter dated August 5, 2005.

The responses of the Company to the Staff’s comments in the Comment Letter are set forth below. For your ease of reference, each comment contained in the Comment Letter is printed below in bold and italics and is followed by the Company’s response. Please note that the Company proposes to include the text and table noted in the Company’s response to comment number 1 in the amendment to the 2004 Form 20-F (the “Amended 2004 Form 20-F”) that the Company proposes to file once the Staff’s comments have been resolved. In addition, please note that the Company’s responses to the Staff’s comment number 2 are set forth below each bullet point in the comment.

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Note 30 — Differences between Generally Accepted Accounting Principles in Finland and the United States, page F-48

Other

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Note 30 — Differences between Generally Accepted Accounting Principles in Finland and the United States, page F-48

1.

Please refer to comment 3 in our letter dated June 30, 2005. We have reviewed your proposed disclosure to be included in your amended 2004 Form 20-F and have the following comments. Please revise to present a summary table in your footnote disclosure showing the impact of each adjustment in total and by fiscal year to which it relates. The table should include a reconciliation that reconciles your net income, shareholder equity and related per share amounts for all period presented in accordance with U.S. GAAP. This restated amount should agree to the total restated as presented. Also, please do not present “as restated” amounts for the individual impact of the restatements that do not agree to the “total” restated amounts on the U.S. GAAP financial statements.

In response to the Staff’s comment, the Company proposes to include in the Amended 2004 Form 20-F the following text and summary table immediately before paragraph “a) Business combination” of Note 30 to the Company’s financial statements.

“The financial statements in accordance with U.S. GAAP have been restated for 2002 and 2003. The below table summarizes the changes made, due to the restatements, in the reconciliation of net income and equity as previously presented. See Notes 30 d) and q) for additional information related to these restatements.

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Year ended December 31,

As previously

Impact of

As

As previously

Impact of

As

reported

Restatement

restated

reported

Restatement

restated

(€ in millions)

Reconciliation of net income

Net income (loss) in accordance with Finnish GAAP

—

(258 )

—

(258 )

U.S. GAAP adjustments:

a) Business combination, net

(8 )

—

(8 )

(6 )

—

(6 )

b) Purchase accounting, net

(21 )

—

(21 )

(6 )

—

(6 )

c) Amortization of goodwill

—

—

d) Impairment of goodwill

—

—

—

(12 )

(18 )

(30 )

e) Impairment of brand names

—

—

—

(13 )

—

(13 )

f) Fair value of financial derivatives

—

(24 )

—

(24 )

g) Pension surplus refund

—

—

h) Employee benefit plans

(4 )

—

(4 )

(2 )

—

(2 )

i) Restructuring costs

(5 )

—

(5 )

—

j) Written put option on subsidiary shares

—

—

—

(5 )

—

(5 )

l) Net investment hedge

—

(4 )

—

(4 )

m) Repurchase commitments

—

—

—

(3 )

—

(3 )

p) Fees on bond exchange

—

—

—

—

—

—

q) Valuation allowances for deferred tax assets

—

(91 )

(91 )

—

r) Discontinued Operations

—

—

—

—

Deferred tax effect of U.S. GAAP adjustments

(10 )

—

(10 )

—

Net income (loss) in accordance with U.S. GAAP

(91 )

(245 )

(235 )

Income (loss) from continuing operations

(91 )

(206 )

(196 )

Discontinued Operations:

Income (loss) from Discontinued Operations, net of income tax expense of €2 million in 2002 and tax benefit of €2 million in 2003

—

(39 )

—

(39 )

(Loss) on disposal of Discontinued expense of €9 million

—

—

—

—

—

—

Net income (loss) on Discontinued Operations

—

(39 )

—

(39 )

Net income (loss) in accordance with U.S. GAAP

(91 )

(245 )

(235 )

Basic and diluted earnings (loss) per share:

Continuing operations

0.69

(0.67 )

0.02

(1.51 )

0.07

(1.44 )

Discontinued Operations

0.14

—

0.14

(0.29 )

—

(0.29 )

Total basic and diluted earnings (loss) per share

0.83

(0.67 )

0.16

(1.80 )

0.07

(1.73 )

Weighted average number of common shares outstanding under U.S. GAAP (in thousands):

Basic

136,190

—

136,190

136,190

—

136,190

Diluted

136,190

—

136,190

136,190

—

136,190

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Year ended December 31,

As previously

Impact of

As

As previously

Impact of

As

reported

Restatement

restated

reported

Restatement

restated

(€ in millions)

Reconciliation of shareholders’ equity

Shareholders’ equity in accordance with Finnish GAAP

1,379

—

1,379

1,024

—

1,024

U.S. GAAP adjustments:

a) Business combination, net

—

—

b) Purchase accounting, net

(35 )

—

(35 )

(41 )

—

(41 )

c) Amortization of goodwill

—

—

d) Impairment of goodwill

—

—

—

(12 )

(18 )

(30 )

e) Impairment of brand names

—

—

—

(13 )

—

(13 )

f) Fair value of financial derivatives

—

—

g) Pension surplus refund

(1 )

—

(1 )

(0 )

—

(0 )

h) Employee benefit plans

(59 )

—

(59 )

(52 )

—

(52 )

i) Restructuring costs

—

—

—

—

j) Written put option on subsidiary shares

—

—

—

(5 )

—

(5 )

k) Investments

—

—

m) Repurchase commitments

—

—

—

(3 )

—

(3 )

n) Treasury stock

(1 )

—

(1 )

(1 )

—

(1 )

o) Translation difference

(47 )

—

(47 )

(70 )

(2 )

(72 )

p) Fees for bond exchange

—

—

—

—

—

—

q) Valuation allowances for deferred tax assets

—

(91 )

(91 )

—

(48 )

(48 )

r) Discontinued Operations

—

—

—

—

Deferred tax effect of U.S. GAAP adjustments

—

—

Shareholders’ equity in accordance with U.S. GAAP

1,419

(91 )

1,328

1,066

(68 )

In response to the Staff’s comment, the Company proposes to replace in their entirety paragraphs (d) “Impairment of goodwill” and (q) “Valuation allowances for deferred tax assets” of Note 30 as they currently stand in the 2004 Form 20-F in the manner set forth below under the heading “Proposed Disclosure to be Included in the Amended 2004 Form 20-F” below. This revised disclosure would be included in the Amended 2004 Form 20-F.

In response to your request to provide this information in future filings, the Company notes that, pursuant to FAS 154 paragraph 26, this level of disclosure in future filings is not required in accordance with the above guidance. Accordingly and respectfully, it would be the Company’s intention to not include this level of information in its future filings other than its Amended 2004 Form 20-F for these restatement items.

Proposed Disclosure to be Included in the Amended 2004 Form 20-F

“d) Impairment of goodwill

Under U.S. GAAP, as a result of the adoption of SFAS 141 and SFAS 142, goodwill and certain intangible assets having indefinite lives are no longer subject to amortization. Their book values are tested annually for impairment, or more frequently, if facts and circumstances indicate the need. Fair value measurement techniques, such as the discounted cash flow methodology, are utilized to assess potential impairments. The testing is performed on the reporting unit level, which can

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be either a reportable segment or one level below reportable segment. In the discounted cash flow method, Metso discounts forecasted performance plans to their present value. The discount rate utilized is the weighted average cost of capital for the reporting unit, calculated as the opportunity cost to all capital providers weighted by their relative contribution to the reporting unit’s total capital and the risk associated with the cash flows and the timing of the cash flows. Comparison methods (e.g., peer comparables) and other estimation techniques are used to verify the reasonableness of the fair values derived from the discounted cash flow assessments.

Upon adoption of SFAS 142 as of January 1, 2002, Metso completed the transitional impairment test and concluded that there was no impairment of goodwill or identifiable intangibles with indefinite lives. Metso also completed this annual impairment test as of September 30, 2002 and no impairment in the carrying value was recorded as a result of those tests. In 2003, as a result of tightened competition, reduced demand in certain market areas and the development of exchange rates, especially the impact of the weakened U.S. dollar, the operating profits of Metso Minerals operations were lower than expected. As of September 30, 2003, upon completion of the first step of the annual impairment assessment, based on updated forecasted plans approved by the Board of Directors, it was determined that a potential risk of impairment existed, since the carrying values exceeded the fair values of certain Metso Minerals’ reporting units. The second step of the impairment test compared the implied fair value of these reporting units goodwill to the corresponding carrying value of goodwill. The outcome of the second step was that the carrying value of goodwill of such reporting units exceeded the implied fair value of the goodwill by €224 million (as restated, see below). Accordingly, an impairment loss of this amount was recognized.

Concurrently, Metso performed an impairment assessment of its goodwill under Finnish GAAP, which resulted in an impairment loss of €205 million, see Note 11. The difference in the amount of the goodwill impairment under Finnish GAAP versus U.S. GAAP, adjusted for goodwill reversed in the business combination under U.S.GAAP, has been reported in the reconciliation of income statement and shareholders equity of Note 30. The business combination has been explained in Note 30 (a).

In conjunction with the transition to IFRS, in 2004, the Company undertook a complete review of the defined pension benefit liability under IAS 19. In the course of this review, an error was detected in the purchase accounting related to the U.S. GAAP pension liability recorded in the acquisition of Svedala in 2001 (see note b) on purchase accounting). In order to correctly record this pension liability in accordance with U.S. GAAP, the balance sheet at the time of acquisition would have reflected an additional pension liability of €20 million, net of tax effect of €8 million, instead of a pension asset of €6 million, net of tax effect of €2 million, as reported prior to the restatement. The corresponding increase to goodwill would have been €26 million, which would have been allocated to the underlying reporting units in accordance with SFAS 142. The 2002 and 2003 financial statements, in accordance with U.S. GAAP, have been restated to reflect the impact of adjustments made to the pension assets and liabilities combined with the increase in goodwill from the Svedala acquisition in 2001.

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In 2003, the Company recorded an impairment charge on its goodwill. After consideration of this additional goodwill, the impairment charge in 2003, under U.S. GAAP, would have been increased as a result of this additional goodwill. As a result, the restated U.S. GAAP income statement reflects an additional impairment loss of €18 million in 2003. The impact of this restatement on the U.S. GAAP financial statements has been summarised in Note 30 (see Note 30).

In the year ended December 31, 2004, Metso performed its annual impairment test and concluded that there were no indications of impairment.

An analysis of goodwill by reporting segment under U.S. GAAP, as restated is given below:

Paper

Automation

Minerals

Ventures

Discontinued

Total

(€ in millions)

2003:

As of January 1, 2003

Translation difference

(11 )

(1 )

(18 )

(6 )

(36 )

Increases

—

—

—

—

—

—

Impairment

—

—

(175 )

—

(49 )

(224 )

Decreases

—

—

—

—

—

—

As of December 31, 2003

2004:

Translation difference

(3 )

(1 )

(6 )

—

(9 )

Increases

—

—

—

Decreases

—

(0 )

(4 )

—

(135 )

(139 )

As of December 31, 2004

—

An analysis of identifiable intangible assets under U.S. GAAP is given below:

Order

Other intangible

Brand Names

Customer Value

Backlog

assets

Total

(€ in millions)

2003:

As of January 1, 2003

Translation difference

(3 )

(1 )

—

(3 )

(7 )

Additions

—

—

—