Valmet Corp · OMXHEX:VALMT
Valmet — Non-Deal Roadshow (May 2014)
73 slides from Valmet's roadshow presentation, May 2014
Slide 1: Valmet Roadshow material May 2014
Valmet Roadshow material May 2014
Slide 2: Agenda
Agenda Valmet Roadshow 1 Valmet overview 2 Investment highlights 3 Financials 4 Conclusions 5 Appendix
Slide 3: Valmet overview
Valmet overview Valmet <>
Slide 4: Valmet's road to becoming a global market leader
Valmet’s road to becoming a global market leader 1797 Tamfelt 1951 1968-1996 End of 2013 1856 Tampella Valmet Several M&As i.e. Demerger to create 1858 Beloit 1986 KMW Valmet and Metso 1987 Wärtsilä paper finishing machinery 1860 KMW 1992 Tampella Papertech 1868 Sunds Defibrator 1942 1951-1995 1999
Slide 5: Capitalizing on the growing pulp, energy, tissue, and packaging board needs globally
Capitalizing on the growing pulp, energy, tissue, and packaging board needs globally Global market leader with Sales1 #1-2 market positions in all markets served Stable, growing and profitable 11% 15% EUR 1 billion services business High barrier to entry capital business with good long-term 15% 26%
Slide 6: Our three business lines serve the same customer base
Our three business lines serve the same customer base Services Pulp and Energy Paper Net sales1 1.0 bn, 39% Net sales1 0.9 bn, 35% Net sales1 0.7 bn, 26% • Mill and plant improvements Technologies and solutions for Technologies and solutions for • Roll and workshop services • Pulp production • Board
Slide 7: Strong global presence – good platform for growth
Strong global presence – good platform for growth North America 1,126 EMEA China • Large installed base employees • Large installed base to • Capital project opportunities to be serviced be serviced in board and tissue • Growth opportunity in • Growth opportunity in • Good services market increased
Slide 8: Serving global customer base
Serving global customer base Services Pulp and Energy Paper Key customers Key customers Key customers Yunnan Yun-Jing Forestry & Pulp Mill Valmet is a registered trademark of Valmet Corporation. Other trademarks appearing here are trademarks of their respective owners. 8 May 2014 © Valmet | Roadshow
Slide 9: Valmet's way forward
Valmet’s way forward Mission Strategy Must-wins Vision Converting renewable Valmet develops and > Customer To become the global resources into supplies competitive excellence champion in serving sustainable results technology and > Leader in our customers services to the pulp, technology paper and e
Slide 10: Investment highlights
Investment highlights Valmet <>
Slide 11: Investment highlight summary
Investment highlight summary Established market leader with #1-2 market positions 1 in all markets served Stable, growing, and profitable services business 2 with over EUR 1 billion sales provides good visibility and resilience Long-term growth potential in capital business 3 from increase in pulp,
Slide 12: Established market leader with #1-2 market positions in all markets served
1 Established market leader with #1-2 market positions in all markets served Services (>EUR 1 bn)1 Capital (~EUR 1.6 bn)1 Pulp Energy Paper Market position Machines Services #1-2 Pulping #1-2 Bioenergy generation #1-2 Board #1-2 Tissue #1 Paper #1-2 Large installed base • 3,800 pulp and paper mills
Slide 13: EUR 1 billion of net sales from stable and growing services
2 EUR 1 billion of net sales from stable and growing services Strong trends driving services Comprehensive offering market expansion Customers outsource non-core operations Capacity increases in China, South America and Asia-Pacific Customer cost pressure and efficiency requirements increase d
Slide 14: Pulp, energy, board, and tissue capital business on long-term growth trajectory
3 Pulp, energy, board, and tissue capital business on long-term growth trajectory Pulp and Energy Paper Energy Pulp Board Tissue Printing and writing papers and newsprint ~1% 2.0 ~1-2% 1.4 ~3% 1.0 ~3% 0.6 ~-1% 0.6 p.a. bn p.a. bn p.a. bn p.a. bn p.a. bn Demand drivers • Growth in energy • Growth in
Slide 15: Global diversified footprint with large exposure to growing emerging markets
4 Global diversified footprint with large exposure to growing emerging markets Emerging markets expansion1 Exposure to emerging markets2 Net sales (EUR million) 80% 1,153 1,234 1,077 1,116 70% Approximate share of sales generated in emerging markets2 FLSmidth Outotec 60% 228 Wärtsilä Atlas Copco 50%
Slide 16: Strong focus on profitability improvement
5 Strong focus on profitability improvement We are addressing the current decline Short- to mid-term in the capital business profitability improvement through Cost-savings program EUR 100 million cost-reduction program with clearly defined steps that take profitability Valmet is re-shaping its ope
Slide 17: Financials
Financials Valmet <>
Slide 18: Financial targets
Financial targets Growth Net sales growth to exceed market growth Profitability EBITA1 before non-recurring items: 6-9% ROCE Return on capital employed (pre-tax), ROCE 2: minimum of 15% Dividend Dividend payout at least 40% of net profit policy 1) EBITA before non-recurring items = operating profit
Slide 19: Q1/2014 in brief
Q1/2014 in brief Success in orders received in capital business • Orders received increased in Pulp and Energy • Orders received increased in Paper • Net sales declined in capital business Stable development in services • Stable orders received • Services net sales decreased slightly Order backlog i
Slide 20: Key figures Q1/2014
Key figures Q1/2014 EUR million Q1/2014 Q1/2013 Change 2013 Orders received 1,101 511 116% 2,182 Order backlog 1,972 1,8071 9% 1,398 Net sales 519 631 -18% 2,613 EBITA2 4 26 -85% 54 % of net sales 0.7% 4.1% 2.1% EBIT3 -8 19 -59 % of net sales -1.5% 3.0% -2.2% Earnings per share, EUR -0.04 0.08 -0.42
Slide 21: Strong development in orders received
Strong development in orders received Orders received (EUR million), Orders received (EUR million), by business line by area 1,200 1,101 3,000 1,200 1,101 3,000 1,000 212 2,500 1,000 861 2,500 861 422 800 2,000 800 47 2,000 127 103 511 600 511 214 34 1,500 600 622 1,500 428 382 428 452 382 76 168 39
Slide 22: Order backlog increased by EUR 574 million
Order backlog increased by EUR 574 million Order backlog (EUR million) Structure of the order backlog 2,500 2,000 ~20% 1,972 1,807 1,883 1,500 1,658 1,398 1,000 ~80% 500 0 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Cancelled Fibria order of EUR 331 million excluded from Q1/2013 figures Services business Capital
Slide 23: Net sales and profitability development, annual
Net sales and profitability development, annual Net sales and EBITA before NRI (EUR million)1 2,925 3,014 2,735 2,703 2,613 2,453 2,092 2,061 EBITA target 6-9% 7.1% 7.6% 6.3% 6.5% 6.4% 5.5% 5.6% 2.1% Services Capital 834 847 877 974 1,011 1,032 EBITA-% 636 715 2006 2007 2008 2009 2010 2011 2012 2013
Slide 24: Development of the business lines
Development of the business lines Services Pulp and Energy Paper 1,200 2,000 1,000 1,000 800 1,500 800 600 600 1,000 400 400 500 200 200 0 0 0 2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 Net sales Orders received Net sales Orders received Net sales Orders received • Orders received s
Slide 25: Customer activity increased in early 2014
Customer activity increased in early 2014 Date Description Business line Country Value Jan 9 Prehydrolysis system (pilot scale) Pulp and Energy Netherlands Not disclosed Jan 27 Multi-fuel boiler Pulp and Energy Finland Not disclosed Jan 31 Upgrade of recovery boiler and power boiler Pulp and Energy
Slide 26: Profitability improvement continues to be a focus area for Valmet
Profitability improvement continues to be a focus area for Valmet Gross profit (EUR million and % of net sales) SG&A (EUR million and % of net sales) 140 35% 140 35% 120 30% 120 30% 100 25% 100 25% 80 20% 80 20% 60 15% 60 15% 40 10% 40 10% 20 5% 20 5% 0 0% 0 0% Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/201
Slide 27: Strong balance sheet to support large orders
Strong balance sheet to support large orders Financial position as of March 31, 2014 (EUR million) 154 80 224 2,317 2,163 132 772 27 -39 Total equity Balance sheet Advances Adj. balance total received sheet total Long- Short- Cash and Other Net debt term debt term debt equivalents financial assets N
Slide 28: Guidance and short-term market outlook
Guidance and short-term market outlook Guidance for 2014 (as given on February 6, 2014) Guidance for Valmet estimates that net sales in 2014 will decline from the 2013 2014 level and EBITA before non-recurring items will increase in comparison with 2013 Short-term market outlook Q3/2013 Q4/2013 Q1/2
Slide 29: Conclusion
Conclusion Valmet <>
Slide 30: Valmet - unique combination of technology, capital equipment and services globally
Valmet - unique combination of technology, capital equipment and services globally Global, diversified Services customer base • >EUR 1 bn business • >2,000 customer plants worldwide • ~70 service centers Growing end-markets Global Capital organization • Established market close to leader customers •
Slide 31: Important notice
Important notice IMPORTANT: You must read the following before continuing. The following applies to this document, the oral presentation of the information in this document by Valmet (the “Company”) or any person on behalf of the Company, and any question-and-answer session that follows the oral pre
Slide 32: Appendix
Appendix Valmet <>
Slide 33: Valmet's Must-Win initiatives and objectives
Valmet’s Must-Win initiatives and objectives Must-Wins Primary Must-Win objectives 1. Customer • Strengthen our presence close to customers and growth markets excellence • Strengthen Key Account Management to enhance growth at the customer • Drive service growth through long-term agreements and expa
Slide 34: Profitability improvement program proceeding according to plan
Profitability improvement program proceeding according to plan • Announced in April 2013, targeting EUR 100 million in savings by the Profitability end of 2014 improvement • Impact on all business lines, especially in the Board and Paper, and program Energy business units • ~1/3 of the program targe
Slide 35: Net sales and profitability development
Net sales and profitability development Net sales and EBITA before NRI (EUR million) 714 666 631 601 519 EBITA target 6–9% 5.1% 4.1% 3.1% -3.7% 0.7% Services Capital 243 257 257 274 224 EBITA-% Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 EBITA before 26 22 31 -25 4 NRI (MEUR) • Net sales declined • Profitability
Slide 36: Services business line
Services business line Orders received (EUR million) Sales (EUR million) 2013: 2013: EUR 1,035 million EUR 1,032 million 300 282 282 1,200 300 274 1,200 267 257 257 237 233 243 250 1,000 250 224 1,000 200 800 200 800 150 600 150 600 100 400 100 400 50 200 50 200 0 0 0 0 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14
Slide 37: Pulp and Energy business line
Pulp and Energy business line Orders received (EUR million) Sales (EUR million) 2013: 2013: EUR 680 million EUR 907 million 800 1,600 400 1,600 700 622 1,400 350 1,400 600 1,200 300 1,200 452 221 240 240 500 1,000 250 205 1,000 400 800 200 181 800 300 600 150 600 200 102 400 100 400 61 66 100 200 50
Slide 38: Paper business line
Paper business line Orders received (EUR million) Sales (EUR million) 2013: 2013: EUR 467 million EUR 674 million 300 900 300 900 250 212 750 250 217 750 200 168 600 200 167 600 138 152 150 127 450 150 114 450 79 93 100 300 100 300 50 150 50 150 0 0 0 0 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q1/13 Q2/13 Q3/1
Slide 39: Customer activity increased in early 2014
Customer activity increased in early 2014 Start-up in Heat recovery steam Start-up in 2015 Boiler plant, Start-up in Large-scale 2017 Extensive paper machine Start-up in generator, Sweden boiler plant, 2015 Finland 2016 grade conversion rebuild, EPC (engineering, procurement and Finland Finland cons
Slide 40: Positive cash flow
Positive cash flow Cash flow provided by operating activities (EUR million) 50 40 43 30 20 10 12 0 -5 -12 -10 -20 -30 -38 -40 -50 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 • At the end of March 2014, net working capital was EUR -257 million • CAPEX less than depreciation 40 May 2014 © Valmet | Roadsho
Slide 41: Structure of loans and borrowings
Structure of loans and borrowings Amount of outstanding interest-bearing debt: EUR 212 million (Mar 31, 2014) Maturity profile of long-term loans Main financing sources (EUR millions) EUR 107 million EIB loan 250 Maturing in: H2/2016 200 EUR 72 million bank loan Maturing in: H1/2016 150 EUR 33 m
Slide 42: Appendix: Company information
Appendix Company information
Slide 43: Comprehensive life-cycle services offering and large customer base with significant potential
Comprehensive life-cycle services offering and large customer base with significant potential Comprehensive life-cycle services offering Comprehensive life-cycle services offering serving global customer base with over 2,000 plants purchasing services from Valmet annually Spare and wear parts Fabric
Slide 44: Experienced management team
Experienced management team Corporate 23 <1 2 1 <1 23 6 2 10 19 Pasi Laine Markku Honkasalo Kari Saarinen Julia Macharey Anu Salonsaari-Posti President and CEO Chief Financial Officer Head of Strategy and Head of Human Resources Head of Marketing & Share ownership: 30,046 Share ownership: 700 Operat
Slide 45: Board of Directors
Board of Directors Jukka Mikael Von Friederike Erkki Pehu- Viinanen Frenckell Helfer Lehtonen (b. 1948) (b. 1947) (b. 1976) (b. 1950) Chairman of Vice Chairman of Board member Board member the Board the Board Austrian citizen Finnish citizen Finnish citizen Finnish citizen • MSc in Engineering • MSc
Slide 46: Largest shareholders on April 30, 2014
Largest shareholders on April 30, 2014 Based on the information given by Euroclear Finland Ltd. Largest shareholders # Shareholder name Number of shares % of shares and votes 1 Solidium Oy1 16,695,287 11.14% 2 Ilmarinen Mutual Pension Insurance Company 4,448,126 2.97% 3 Nordea Nordenfonden 3,010,975
Slide 47: Ownership structure on April 30, 2014
Ownership structure on April 30, 2014 14.2% Nominee registered and non-Finnish holders 11.1% Finnish institutions, companies and foundations 54.1% Solidium Oy Finnish private investors 20.6% Sector Number of shareholders % of total shareholders Number of shares % of shares Nominee registered and non
Slide 48: Appendix: Financials
Appendix Financials Valmet <>
Slide 49: Key ratios
Key ratios As at and for the three months ended March 31, 2014 2013 Carve-out Earnings per share, EUR -0.04 0.08 Diluted earnings per share, EUR -0.04 0.08 Equity/share at end of period, EUR 5.12 5.82 Return on equity (ROE), % -3% 5% Return on capital employed (ROCE) before taxes, % -2% 8% Equity ra
Slide 50: Consolidated statement of income
Consolidated statement of income Q1/2014 Q1/2013 EUR million Carve-out Net sales 519 631 Cost of goods sold -422 -498 Gross profit 97 133 Selling, general and administrative expenses -102 -114 Other operating income and expenses, net -2 -2 Share in profits and losses of associated companies 0 1 Oper
Slide 51: Balance sheet as at March 31, 2014 (assets)
Balance sheet as at March 31, 2014 Assets As at March 31, 2014 As at March 31,2013 EUR million Carve-out Non-current assets Intangible assets Goodwill 442 448 Other intangible assets 103 127 Total intangible assets 545 576 Property, plant and equipment Land and water areas 21 22 Buildings and struct
Slide 52: Balance sheet as at March 31, 2014 (equity and liabilities)
Balance sheet as at March 31, 2014 Equity and liabilities As at March 31, 2014 As at March 31, 2013 EUR million Carve-out Equity Share capital 100 - Reserve for invested unrestricted equity 402 - Cumulative translation adjustments -2 27 Fair value and other reserves -2 4 Retained earnings 270 - Inve
Slide 53: Appendix: Market statistics
Appendix Market statistics Valmet <>
Slide 54: Services market
Services market Market trends Total market for Valmet’s EMEA and North America Cost pressure and outsourcing ► Largest market for the services offering ~EUR 7bn1 Services BL where majority of • Pulp and paper services = ~EUR 6bn ► Customer cost pressure and machine installed base is located • Power
Slide 55: Pulp market
Pulp market Market trends Total market for Valmet’s pulp Virgin wood pulp growth due to EMEA and North America technology ~EUR 1.4bn1 ► Chemical pulp production • Chemical pulp accounts for ~70% of the total limitations of recycled paper growth growing by ~1% p.a. in 2010- volume of virgin papermaki
Slide 56: Energy market
Energy market Market trends Global biomass and waste power Growth in energy consumption and EMEA and North America plant market ~EUR 4.5bn1 ► EMEA region and North • Average estimate for global biomass and waste demand for sustainable energy America, represent ~50% of power plant market between 2013
Slide 57: Paper market
Paper market Market trends EMEA and North America Total market for Valmet’s1: General: Demand for increased energy, ► Market expected to mainly Board technology ~EUR 1bn water and raw material efficiency relate to rebuilds of existing • Containerboard consumption growing by ~2.7% ► Focus on environm
Slide 58: The majority of new pulp lines are being built in South America and Asia
The majority of new pulp lines are being built in South America and Asia Market fluctuates from year to year New chemical pulp lines in SA and Asia Market size1 Gross capacity additions 2011-20202 (EUR million) (Avg. ktons p.a.) Valmet New lines Other Other increases 600 3,500 200 700 1,000 700 1,30
Slide 59: Market for larger size biomass boilers has significantly declined in EMEA and North America
Market for larger size (> 50 MWth) biomass boilers has significantly declined in EMEA and North America New boiler market served by Valmet1 (EUR million) Key messages (only projects where Valmet has been involved) and implications • Strong market decline in EMEA Rest of the world 2013 and unclear fu
Slide 60: Major changes in the paper and board market
Major changes in the paper and board market Estimated net sales1 (EUR millions) Board machines: 1,000 Narrow, slow, 900 and lower 800 technology 700 600 500 400 Paper 300 machines: 200 100 Wide, fast, and 0 high technology 1996 1998 2000 2002 2004 2006 2008 2010 2012 Paper Board 1) Company estimate
Slide 61: Consumption development
Consumption development Growth in board and tissue consumption is expected to continue while newsprint is declining Paper consumption1 (Mton) 220 CAGR 2001-2013 2013-2025F 200 180 Containerboard +3.6% +2.5% 160 140 120 Printing & Writing +1.2% +0.2% 100 80 Cartonboard +3.2% +2.2% 60 40 20 Tissue +3.
Slide 62: Paper and board consumption growth trends
Paper and board consumption growth trends Paper and board consumption per capita vs. population1 250 2,500 Population growth in emerging markets is 200 2,000 larger than in 150 1,500 developed markets 100 1,000 Level of consumption 50 500 per capita in emerging markets 0 0 clearly below that in East
Slide 63: Demand has shifted more towards smaller paper and board machines
Demand has shifted more towards smaller paper and board machines • We are focusing more on modularized and standardized solutions • Competition is higher in smaller machines Capacity of start-ups1, by machine Valmet’s market share1, size by machine size 47 Mton 35 Mton XL 40-60% Competition is lower
Slide 64: Tissue consumption growth trends
Tissue consumption growth trends Tissue consumption per capita vs. population1 New products and 2,500 25 consumption models 2,000 20 based on tissue are helping increase 1,500 15 consumption in 1,000 10 developed markets 500 5 0 0 Consumption in emerging markets is Western Europe China Oceania Latin
Slide 65: Tissue market growing long term
Tissue market growing long term • Recent market reduction due to heavy Chinese investments • Competition is high in all areas, Valmet is strongest in North America Capacity of start-ups1, by area Valmet’s market share1, by area 7 Mton 6 Mton South 20-40% America Number of competitors 5 Mton APAC ex.
Slide 66: Paper, board, and tissue production trends
Paper, board, and tissue production trends North America (million tonnes) Europe (million tonnes) 12 50 15 40 11 13 35 10 40 30 9 11 8 30 25 7 9 20 6 20 7 15 5 4 10 5 10 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Tissue (LHS) Newspri
Slide 67: Paper, board, and tissue operating rates
Paper, board, and tissue operating rates North America Europe 100% 100% 95% 95% 90% 90% 85% 85% 80% 75% 80% 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013 2014 2015 Tissue Newsprint Printing & Writing Tissue Newsprint Printing & Writing Containerboard Cartonboard Containerboar
Slide 68: Pulp and paper price trends
68 1,000 1,200 200 600 800 0 400 May 2014 Source: Bloomberg 1-Dec-07 1-Feb-08 1-Apr-08 1-Jun-08 1-Aug-08 1-Oct-08 1-Dec-08 Testliner (EUR/t) Uncoated (USD/t) 1-Feb-09 1-Apr-09 © Valmet | Roadshow Eucalyptus pulp (USD/t) 1-Jun-09 1-Aug-09 1-Oct-09 1-Dec-09 1-Feb-10 1-Apr-10 1-Jun-10 1-Aug-10 1-Oct-10
Slide 69: Crude oil, steam coal, natural gas and electricity: Europe
Crude oil, steam coal, natural gas and electricity Europe 180 100 160 90 140 80 120 70 60 100 50 80 40 60 30 40 20 20 10 0 0 1-Jan-10 1-Jun-10 1-Nov-10 1-Apr-11 1-Sep-11 1-Feb-12 1-Jul-12 1-Dec-12 1-May-13 1-Oct-13 1-Mar-14 CIF ARA steam coal (USD/t) (LHS) Brent crude oil (USD/barrel) (LHS) Natural
Slide 70: Crude oil, steam coal, natural gas and electricity: United States
Crude oil, steam coal, natural gas and electricity United States 140 6 120 5 100 4 80 3 60 2 40 20 1 0 0 1-Jan-10 1-Jun-10 1-Nov-10 1-Apr-11 1-Sep-11 1-Feb-12 1-Jul-12 1-Dec-12 1-May-13 1-Oct-13 1-Mar-14 FOB steam coal Richards Bay (USD/t) (LHS) WTI crude oil (USD/barrel) (LHS) Henry Hub gas (USD/MM
Slide 71: Wood pellet price
Wood pellet price 350 31.0 330 30.5 310 30.0 290 29.5 270 29.0 250 28.5 230 28.0 210 27.5 190 27.0 1-Jun-10 1-Jun-11 1-Jun-12 1-Jun-13 1-Apr-10 1-Oct-10 1-Apr-11 1-Oct-11 1-Apr-12 1-Oct-12 1-Apr-13 1-Oct-13 1-Feb-10 1-Feb-11 1-Feb-12 1-Feb-13 1-Feb-14 1-Aug-10 1-Dec-10 1-Aug-11 1-Dec-11 1-Aug-12 1-D
Slide 72: European Carbon Emission Allowance price
72 0 1 2 3 4 5 6 7 8 9 2-Nov-12 16-Nov-12 May 2014 Source: Bloomberg 30-Nov-12 14-Dec-12 28-Dec-12 11-Jan-13 25-Jan-13 8-Feb-13 22-Feb-13 8-Mar-13 22-Mar-13 © Valmet | Roadshow 5-Apr-13 19-Apr-13 3-May-13 17-May-13 31-May-13 14-Jun-13 28-Jun-13 12-Jul-13 26-Jul-13 9-Aug-13 23-Aug-13 6-Sep-13 20-Sep-
Slide 73: Forward
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