Valmet Corp · OMXHEX:VALMT
Valmet — SEB Nordic Seminar 2014
56 slides from Valmet's conference presentation, Jan 8, 2014
Slide 1: Valmet Roadshow material, SEB Nordic Seminar 2014
Valmet Roadshow material SEB Nordic Seminar 2014, Copenhagen
Slide 2: Agenda
Agenda Valmet Roadshow 1 Demerger finalized 2 Valmet overview 3 Investment highlights 4 Financials 5 Appendix
Slide 3: Demerger finalized
Demerger finalized May 31 December 30 Demerger plan signed Last day to purchase by the Board of Directors or hold Metso shares to receive Valmet January 2, October 24 shares 2014 Metso Q3 Listing of Valmet result release shares on NASDAQ OMX Helsinki October 1 EGM decision December 31 on demerger De
Slide 4: Valmet overview
Valmet overview Valmet <>
Slide 5: 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 6: 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 EUR 1 billion services business High barrier to entry capital business with good long-term 19% 17% growth p
Slide 7: 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, 34% Net sales1 1.2 bn, 39% Net sales1 0.8 bn, 27% • Mill and plant improvements Technologies and solutions for Technologies and solutions for • Roll and workshop services • Pulp production • Board
Slide 8: Strong global presence – good platform for growth
Strong global presence – good platform for growth North America 1,112 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 9: 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. 9 January 2014 © Valmet | SEB
Slide 10: Valmet's way forward
Valmet’s way forward Mission Strategy Must-wins Vision Converting renewable Competitive > Customer To become the global resources into technologies and excellence champion in serving sustainable results services to the pulp, > Leader in our customers paper and energy technology industries. and innov
Slide 11: 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 12: Investment highlights
Investment highlights Valmet <>
Slide 13: 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 14: 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 2 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 15: 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, Spare and Mill and plant South America and Asia-Pacific wear parts improvements Customer cos
Slide 16: 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 17: 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 70% Approximate share of sales generated in emerging markets2 FLSmidth Outotec 60% Wärtsilä Atlas Copco 50% 2010 2011
Slide 18: Strong focus on profitability improvement
5 Strong focus on profitability improvement We are addressing the current decline in the capital business Short- to mid-term 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 19: Financial review
Financial review Valmet <>
Slide 20: 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 21: 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 2,453 EBITA 2,092 2,061 7.6% target 6-9% 7.1% 1,946 6.3% 6.5% 6.4% 5.5% 5.6% 5.3 % Services 4.1% Capital 834 847 877 974 1,011 809 636 715 EBITA-% 2006 2007 2008 2009 2010 2011 2012
Slide 22: Profitability improvement program
Profitability improvement program EUR 100 million savings program Impact of announced actions (EUR million) Announced in April, 2013 Capacity being adjusted Total 100 SG&A expense base is being reduced 25 100 Status of the program Two major negotiation processes completed – Total cost reduct
Slide 23: Profitability improvement actions
Profitability improvement actions Actions to reach target margin EBITA margin before NRI1 EUR 100 million savings program Efficiency improvement actions aimed at reaching historical gross margin levels 6-9% – Development of modularized and standardized solutions 6.4% – Procurement savings – Incr
Slide 24: Strong balance sheet to support large orders
Strong balance sheet to support large orders Pro forma financial position as of September 30, 2013 (EUR million) 156 63 201 2,427 2,271 144 2 4 824 Long-term Short-term Cash and Other Net debt debt debt equivalents financial Total equity Balance sheet Advances Adj. balance assets total received shee
Slide 25: Strong underlying cash flow generation from operations
Strong underlying cash flow generation from operations Capex and Depreciation (EUR million)1 EBITDA (before NRI) less Capex (EUR million)1 186 188 140 77 77 64 -58 -58 -60 2010 2011 2012 2010 2011 2012 Capex 2 Depreciation EBITDA (bef ore NRI) – Capex 2 • Relatively low need for capex • Long-term av
Slide 26: Long-term liquidity in place
Long-term liquidity in place New financing facilities Other borrowings EUR 200 million syndicated EUR 139 million EIB loan revolving credit facility • Amount outstanding of Maturity: 5 years from the demerger two EIB loans: date – EUR 135 million loan entered into in May 2004, and International
Slide 27: Conclusion
Conclusion Valmet <>
Slide 28: 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 29: 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 30: Valmet's policy on commenting on short-term market outlook and profitability of business lines
Valmet’s policy on commenting on short-term market outlook and profitability of business lines Services Pulp and Energy Paper Pulp Energy Board & paper Tissue Short-term Satisfactory market outlook Satisfactory Weak Weak Satisfactory Profitability Satisfactory Weak Weak Valmet will comment on its sh
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: Company information
Appendix Company information
Slide 33: 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 34: 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: 17,616 Share ownership: - Operatio
Slide 35: Board of Directors
Board of Directors Jukka Mikael Von Erkki Pehu- Pia Viinanen Frenckell Lehtonen Rudengren (b. 1948) (b. 1947) (b. 1950) (b. 1965) Chairman of Vice Chairman of Board member Board member the Board the Board Finnish citizen Swedish citizen Finnish citizen Finnish citizen • MSc in Engineering • MSc in S
Slide 36: Largest shareholders on January 3, 2014
Largest shareholders on January 3, 2014 (Valmet stock exchange release on January 7, 2014) Largest shareholders # Shareholder name Number of shares in Valmet % of shares and votes in Valmet 1 Solidium Oy1 16,695,287 11.14% 2 Ilmarinen Mutual Pension Insurance Company 4,450,126 2.97% 3 Varma Mutual P
Slide 37: Appendix: Financials
Appendix Financials Valmet <>
Slide 38: Key pro forma data
Key pro forma data As at and for the nine As at and for the year ended EUR million, unless otherwise indicated months ended September 30, 2013 December 31, 2012 Comments (unaudited) • Pro forma income statement assumes Net sales 1,946 3,014 that the Demerger and the Valmet formation related transact
Slide 39: Valmet carve-out income statement
Valmet carve-out income statement For the nine months Carve-out income statement, EUR million For the year ended December 31, ended September 30, 2013 2012 2012 2012 2011 2010 (restated1, (unaudited) (audited) (audited) (audited) unaudited) Net sales 1,936 2,082 3,005 3,005 2,692 2,450 Net sales, Me
Slide 40: Valmet pro forma income statement
Valmet pro forma income statement 2012 Pro forma income statement, Carve-out PF adj. PF adj. PF adj. Pro forma PF adj. I EUR million 1-12/2012 (restated1, II III IV 1-12/2012 Comments (unaudited) unaudited) Net sales 3,014 3,014 • Pro forma income statement assumes Cost of goods sold -2,405 -2,405 t
Slide 41: Pro forma balance sheet as at September 30, 2013
Pro forma balance sheet as at September 30, 2013 Carve-out PF adj. PF adj. PF adj. Pro forma Pro forma balance sheet, EUR million PF adj. I Assets 30.9.2013 (unaudited) II III IV 30.9.2013 (unaudited) Comments Goodwill 446 446 • Pro forma income statement assumes Other intangible assets 118 118 that
Slide 42: Pro forma balance sheet as at September 30, 2013
Pro forma balance sheet as at September 30, 2013 Carve-out PF adj. PF adj. PF adj. Pro forma Pro forma balance sheet, EUR million PF adj. I Equity and liabilities 30.9.2013 (unaudited) II III IV 30.9.2013 (unaudited) Comments Share capital – 100 100 • Pro forma income statement assumes Reserve for i
Slide 43: Appendix: Market statistics
Appendix Market statistics Valmet <>
Slide 44: 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 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: 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 Afri
Slide 53: 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 54: 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 Africa Oceania Middle East Japan C
Slide 55: 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 56: FORWARD
FORWARD