Valmet's Interim Review January 1 - September 30, 2023: Orders received amounted to EUR 980 million and Comparable EBITA increased to EUR 150 million in the third quarter

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Oct 25, 2023, 06:58 ET

Valmet Oyj's stock exchange release on October 25, 2023 at 1:00 p.m. EEST

ESPOO, Finland, Oct. 25, 2023 /PRNewswire/ --

Figures in brackets, unless otherwise stated, refer to the comparison period, i.e., the same period of the previous year.

July–September 2023: Net sales remained at the previous year's level, Comparable EBITA margin increased

Orders received decreased 17 percent to EUR 980 million (EUR 1,178 million).
- Orders received decreased in all three segments.
- Orders received increased in China and North America, and decreased in Asia-Pacific, EMEA (Europe, Middle East and Africa) and South America.
Net sales remained at the previous year's level and amounted to EUR 1,295 million (EUR 1,288 million).
- Net sales increased in the Services and Automation segments and decreased in the Process Technologies segment.
Comparable earnings before interest, taxes and amortization (Comparable EBITA) increased 11 percent to EUR 150 million (EUR 136 million).
- Comparable EBITA increased in the Services and Automation segments and decreased in the Process Technologies segment.
Comparable EBITA margin was 11.6 percent (10.5%).
Earnings per share (EPS) were EUR 0.47 (EUR 0.38). Adjusted EPS was EUR 0.52 (EUR 0.51).
Items affecting comparability amounted to EUR -4 million (EUR -4 million).
Cash flow provided by operating activities totaled EUR 57 million (EUR 115 million).

January–September 2023: Net sales, Comparable EBITA and Comparable EBITA margin increased

Orders received remained at the previous year's level and amounted to EUR 3,801 million (EUR 3,809 million).
- Orders received increased in the Automation segment, remained at the previous year's level in the Services segment, and decreased in the Process Technologies segment.
- Orders received increased in South America and North America, remained at the previous year's level in China and Asia-Pacific and decreased in EMEA.
Net sales increased 14 percent to EUR 4,033 million (EUR 3,534 million).
- Net sales increased in the Automation and Services segments and remained at the previous year's level in the Process Technologies segment.
Comparable earnings before interest, taxes and amortization (Comparable EBITA) increased 29 percent to EUR 437 million (EUR 337 million).
- Comparable EBITA increased in the Services and Automation segments and decreased in the Process Technologies segment.
Comparable EBITA margin was 10.8 percent (9.5%).
EPS was EUR 1.38 (EUR 1.25). Adjusted EPS was EUR 1.63 (EUR 1.56).
Items affecting comparability amounted to EUR -4 million (EUR 23 million).
Cash flow provided by operating activities totaled EUR 229 million (EUR 49 million).

Guidance for 2023
Valmet reiterates its guidance issued on February 2, 2023, in which Valmet estimates that net sales in 2023 will increase in comparison with 2022 (EUR 5,074 million) and Comparable EBITA in 2023 will increase in comparison with 2022 (EUR 533 million).

Short-term market outlook

Valmet reiterates the good/satisfactory short-term market outlook for services (capacity utilization good, customer activity satisfactory), the good short-term market outlook for flow control, automation systems and energy, and the satisfactory short-term market outlook for pulp, board and paper, and tissue.

The short-term market outlook is given for the next six months from the end of the reported period. It is based on customer activity (50%) and Valmet's capacity utilization (50%), and the scale is 'weak–satisfactory–good'.

President and CEO Pasi Laine: Comparable EBITA increased in the third quarter

"During the first nine months of 2023 Valmet's orders received remained at the previous year's level. Orders increased in Automation, remained at the previous year's level in Services and decreased in Process Technologies. Automation's orders grew well and the market activity was good. In Services, the market activity was at a very good level at the start of the year, and order intake in the first quarter was record breaking. The market activity in Services decreased during the second and third quarter. Even though there are projects in the pipeline and customers are discussing investments, we have seen some delays in project decision schedules in the Process Technologies segment. In the third quarter of 2023 Valmet's orders received amounted to EUR 980 million.

Orders received in Valmet's stable business totaled EUR 3.1 billion during the last four quarters. During this period, stable business represented 60% of Valmet's orders received. This is a clear change in the company compared to 2014, when stable business represented 34% of orders received. Our order backlog amounted to EUR 4.1 billion.

During the third quarter, Valmet's net sales remained at the previous year's level and Comparable EBITA increased. Net sales increased in the Services and Automation segments, and decreased in Process Technologies. Comparable EBITA margin was 18.4% in Services, 18.7% in Automation and 4.5% in Process Technologies. Valmet's Comparable EBITA increased to EUR 150 million and margin to 11.6%.

Valmet's Climate Program is progressing well. I am very pleased to announce that we have already reached the first target in the program: Valmet can now enable carbon neutral production for all pulp and paper industry customers. We achieved this target well ahead of schedule, as the initial target year was 2030. In addition to this achievement, we're on track with our three other Climate Program goals. By 2030, Valmet aims to enhance the energy efficiency of its existing technology offering by 20%. We are also committed to reducing our own operations' CO₂ emissions by 80% and decreasing our supply chain's CO₂ emissions by 20%.

On August 18, 2023, Valmet's Board of Directors accepted my resignation as President and CEO and initiated the search for my successor. After a decade as CEO and 33 years as a Valmeteer, it is time for a new leader to continue the work alongside our renewed Executive Team. Until my successor is appointed and ready to step in as Valmet's new CEO, I will remain fully committed to enhancing Valmet's financial performance and serving our customers."

Update on the integration of Flow Control into Valmet

The merger of Neles into Valmet was completed on April 1, 2022. The integration of Flow Control (former Neles) into Valmet is proceeding according to the plan. Most of the cost synergy actions regarding function costs, common locations and supply chain were implemented already during 2022. Sales synergies have developed well. Valmet expects to generate annual run rate synergies of approximately EUR 25 million, of which approximately 60 percent are expected to be achieved by the end of 2023 and approximately 90 percent by the end of 2024.

Key figures¹

EUR million	Q3/2023	Q3/2022	Change	Q1–Q3/	Q1–Q3/	Change
EUR million	Q3/2023	Q3/2022	Change	2023	2022	Change
Orders received	980	1,178	-17 %	3,801	3,809	0 %
Order backlog²	4,133	4,672	-12 %	4,133	4,672	-12 %
Net sales	1,295	1,288	1 %	4,033	3,534	14 %
Comparable EBITA	150	136	11 %	437	337	29 %
% of net sales	11.6 %	10.5 %		10.8 %	9.5 %
EBITA	147	132	11 %	433	360	20 %
% of net sales	11.3 %	10.2 %		10.7 %	10.2 %
Operating profit (EBIT)	127	97	30 %	359	280	28 %
% of net sales	9.8 %	7.6 %		8.9 %	7.9 %
Profit before taxes	120	98	23 %	340	279	22 %
Profit for the period	86	71	21 %	256	217	18 %
Earnings per share, EUR	0.47	0.38	21 %	1.38	1.25	10 %
Adjusted earnings per share, EUR	0.52	0.51	3 %	1.63	1.56	5 %
Equity per share, EUR²	13.49	13.21	2 %	13.49	13.21	2 %
Cash flow provided by operating activities	57	115	-50 %	229	49	>100%
Cash flow after investments	31	88	-65 %	135	100	34 %
Comparable return on capital employed (Comparable ROCE) before taxes (LTM)				16 %	16 %
Return on capital employed (ROCE) before taxes (LTM)				15 %	17 %
Return on equity (ROE) (LTM)				15 %	17 %
Net debt to EBITDA⁴ ratio³				0.74	0.71
Gearing²				21 %	18 %
Equity to assets ratio²				46 %	47 %

The calculation of key figures is presented on page 55.
At end of period.
Net debt to EBITDA ratio is a new alternative performance measure. It enables users of the financial information to prepare more meaningful analysis on Valmet's performance and is presented with comparatives from Q1/2023 onwards.
Last twelve months' EBITDA

LTM = Last twelve months

Segment key figures

Segment key figures
Orders received, EUR million	Q3/2023	Q3/2022	Change	Q1–Q3/	Q1–Q3/	Change
Orders received, EUR million	Q3/2023	Q3/2022	Change	2023	2022	Change
Services	349	427	-18 %	1,356	1,338	1 %
Automation	289	306	-6 %	1,021	758	35 %
Flow Control	185	189	-2 %	613	387	58 %
Automation Systems	104	117	-12 %	408	371	10 %
Process Technologies	343	444	-23 %	1,424	1,713	-17 %
Pulp and Energy	138	211	-35 %	626	792	-21 %
Paper	205	233	-12 %	798	921	-13 %
Total	980	1,178	-17 %	3,801	3,809	0 %

Net sales, EUR million	Q3/2023	Q3/2022	Change	Q1–Q3/	Q1–Q3/	Change
Net sales, EUR million	Q3/2023	Q3/2022	Change	2023	2022	Change
Services	429	381	13 %	1,275	1,101	16 %
Automation	312	296	5 %	953	676	41 %
Flow Control	192	183	5 %	581	360	62 %
Automation Systems	120	114	5 %	372	317	17 %
Process Technologies	554	610	-9 %	1,805	1,757	3 %
Pulp and Energy	250	256	-2 %	799	798	0 %
Paper	304	355	-14 %	1,006	959	5 %
Total	1,295	1,288	1 %	4,033	3,534	14 %

Comparable EBITA, EUR million	Q3/2023	Q3/2022	Change	Q1–Q3/	Q1–Q3/	Change
Comparable EBITA, EUR million	Q3/2023	Q3/2022	Change	2023	2022	Change
Services	79	55	45 %	221	142	55 %
Automation	58	52	12 %	169	112	50 %
Process Technologies	25	36	-31 %	84	107	-21 %
Other	-12	-7	72 %	-37	-25	52 %
Total	150	136	11 %	437	337	29 %

Comparable EBITA, % of net sales	Q3/2023	Q3/2022		Q1–Q3/	Q1–Q3/
Comparable EBITA, % of net sales	Q3/2023	Q3/2022		2023	2022
Services	18.4 %	14.3 %		17.3 %	12.9 %
Automation	18.7 %	17.6 %		17.7 %	16.6 %
Process Technologies	4.5 %	5.8 %		4.7 %	6.1 %
Total	11.6 %	10.5 %		10.8 %	9.5 %

EBITA, EUR million	Q3/2023	Q3/2022	Change	Q1–Q3/	Q1–Q3/	Change
EBITA, EUR million	Q3/2023	Q3/2022	Change	2023	2022	Change
Services	79	55	44 %	222	134	65 %
Automation	58	48	21 %	165	99	67 %
Process Technologies	25	36	-30 %	86	98	-12 %
Other	-15	-7	>100%	-40	29
Total	147	132	11 %	433	360	20 %

News conference and webcast for analysts, investors and media

Valmet will arrange a news conference in English as a live webcast at https://valmet.videosync.fi/q3-2023 on Wednesday, October 25, 2023, at 2:00 p.m. Finnish time (EEST). President and CEO Pasi Laine and CFO Katri Hokkanen will be presenting the results.

Recording of the webcast will be available shortly after the event at the same address.

It is possible to take part in the news conference through a conference call by registering through the link below:

http://palvelu.flik.fi/teleconference/?id=1009890

After the registration you will be provided phone numbers and a conference ID to access the conference. If you wish to ask a question during the conference, please dial *5 on your telephone keypad to enter the question queue.

All questions should be presented in English.

The event can also be followed on social media platform X at http://www.x.com/valmetir.

Further information, please contact:

Pekka Rouhiainen, VP, Investor Relations, Valmet, tel. +358 10 672 0020

VALMET
Katri Hokkanen
CFO

Pekka Rouhiainen
VP, Investor Relations

DISTRIBUTION:
Nasdaq Helsinki
Major media
www.valmet.com

Valmet is a leading global developer and supplier of process technologies, automation and services for the pulp, paper and energy industries. With our automation systems and flow control solutions, we serve an even wider base of process industries. Our 17,500 professionals around the world work close to our customers and are committed to moving our customers' performance forward – every day.

The company has over 220 years of industrial history and a strong track record in continuous improvement and renewal. In 2022, a major milestone was achieved when the flow control company Neles was merged into Valmet. Valmet's net sales in 2022 were approximately EUR 5.1 billion.