Slide 1: Interim Review, January–June 2016
Good development in Services – new way to serve customers launched Interim Review, January–June 2016 July 28, 2016 Pasi Laine, President and CEO Kari Saarinen, CFO
Slide 2: Agenda
Agenda Interim Review, January–June 2016 1 Q2/2016 in brief 2 Business lines’ development 3 Valmet Way to Serve 4 Financial development 5 Guidance and short-term market outlook 6 New financial targets 7 Summary of Interim Review Q2/2016 8 Appendix
Slide 3: Q2/2016 in brief
Q2/2016 in brief Valmet <>
Slide 4: Q2/2016 in brief
Q2/2016 in brief Orders received and net sales remained at the previous year’s level in stable business1 Orders received decreased and net sales remained at the previous year’s level in capital business2 Order backlog at EUR 2.1 billion Profitability increased – Comparable EBITA margin at 7.1% Net d
Slide 5: Net sales split in Q2/2016
Net sales split in Q2/2016 Net sales by business line Net sales by area Orders received EUR 692 million 14% 20% 22% Net sales EUR 804 million 38% 12% 8% Comparable EBITA1 EUR 57 million 33% Comparable EBITA1 9% margin 44% 7.1% Services North America Automation South America Employees Pulp and Energy
Slide 6: Orders received decreased to EUR 692 million in Q2/2016
Orders received decreased to EUR 692 million in Q2/2016 Orders received (EUR million) Orders received in Q2/2016, by area 1,400 3,500 Asia-Pacific North 12% America 1,200 3,000 22% China 1,000 2,500 9% 800 2,000 South 600 1,500 America 1,101 1,023 5% 400 781 725 793 803 692 1,000 580 200 466 480 500
Slide 7: Stable business orders received totaled EUR 1,475 million during the last 4 quarters
Stable business orders received totaled EUR 1,475 million during the last 4 quarters Orders received (EUR million) in stable business1 500 1,500 450 402 409 1,350 394 400 1,200 330 342 88 350 95 81 1,050 293 300 267 273 273 75 900 242 78 250 750 200 600 150 293 307 313 321 450 267 273 242 273 252 26
Slide 8: Order backlog at EUR 2.1 billion at the end of Q2/2016
Order backlog at EUR 2.1 billion at the end of Q2/2016 Order backlog (EUR million) Structure of order backlog 3,000 2,500 2,406 2,312 ~30% 2,000 2,208 2,207 2,117 2,074 2,106 1,972 1,998 2,064 1,500 ~70% 1,000 500 0 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Stable business Capital
Slide 9: Business lines’ development
Business lines’ development
Slide 10: Orders received and net sales at the previous year’s level in Services
Orders received and net sales at the previous year’s level in Services in Q2/2016 Orders received (EUR million) Net sales (EUR million) Q1–Q2/2015: Q1–Q2/2016: Q1–Q2/2015: Q1–Q2/2016: EUR 600 million EUR 634 million EUR 546 million EUR 561 million 350 313 321 1,400 350 314 1,400 293 307 278 304 304
Slide 11: Orders received at previous year’s level and net sales increased in Automation
Orders received at the previous year’s level and net sales increased in Automation in Q2/2016 Orders received1 (EUR million) Net sales1 (EUR million) 120 450 120 101 450 95 100 88 375 100 6 375 10 78 81 79 81 75 6 72 80 62 300 80 66 8 300 8 8 15 55 11 6 60 225 60 9 225 85 95 40 82 150 40 73 150 70 6
Slide 12: Orders received decreased and net sales increased in Pulp and Energy
Orders received decreased and net sales increased in Pulp and Energy in Q2/2016 Orders received (EUR million) Net sales (EUR million) Q1–Q2/2015: Q1–Q2/2016: Q1–Q2/2015: Q1–Q2/2016: EUR 397 million EUR 417 million EUR 453 million EUR 443 million 700 622 1,400 350 312 1,400 600 560 1,200 300 1,200 26
Slide 13: Orders received and net sales decreased in Paper in Q2/2016
Orders received and net sales decreased in Paper in Q2/2016 Orders received (EUR million) Net sales (EUR million) Q1–Q2/2015: Q1–Q2/2016: Q1–Q2/2015: Q1–Q2/2016: EUR 278 million EUR 295 million EUR 273 million EUR 321 million 250 750 250 750 212 190 197 199 186 200 200 600 200 186 177 185 600 157 16
Slide 14: Valmet Way to Serve
Valmet Way to Serve Valmet <>
Slide 15: Shared Journey Forward
Our core commitments Our services offering Safety Reliability comes first • Spare parts and components • Maintenance and shutdown management • Outsourcing services Close to you Shared Journey Performance • Production consumables Forward • Process support and optimization Solutions to Valmet way to s
Slide 16: Financial development
Financial development Valmet <>
Slide 17: Key figures Q2/2016
Key figures Q2/2016 EUR million Q2/2016 Q2/2015 Change Q1–Q2/2016 Q1–Q2/2015 Change Orders received 692 781 -11% 1,495 1,360 10% Order backlog1 2,106 2,208 -5% 2,106 2,208 -5% Net sales 804 779 3% 1,456 1,340 9% Comparable EBITA2 57 54 6% 88 73 21% % of net sales 7.1% 6.9% 6.1% 5.5% EBITA 55 42 32%
Slide 18: Net sales EUR 25 million higher compared with Q2/2015
Net sales EUR 25 million higher compared with Q2/2015 Net sales bridge, Q2/2015 vs. Q2/2016 (EUR million) 31 -12 0 5 779 804 Net sales in Services Automation Pulp and Energy Paper Net sales in Q2/2015 business line business line business line business line Q2/2016 Change in net sales • Net sales inc
Slide 19: Gross profit at the previous year’s level
Gross profit at the previous year’s level Gross profit (EUR million and % of net sales) SG&A (EUR million and % of net sales) 200 23% 25% 200 25% 160 20% 160 20% 17% 120 15% 120 15% 80 10% 80 10% 40 5% 40 5% 0 0% 0 0% Q2/2015 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q1
Slide 20: Comparable EBITA margin development
Comparable EBITA margin development Net sales and Comparable EBITA (EUR million and %) New target 8–10% from 2017 onwards 854 779 804 777 734 7.3% 652 7.1% 6.9% Target 6–9% 588 590 6.4% 6.1% 561 519 4.8% 445 5.5% 408 427 Capital business 3.7% 3.5% 400 409 338 Stable business 498 371 377 337 354 319
Slide 21: Cash flow provided by operating activities
Cash flow provided by operating activities Cash flow provided by operating activities (EUR million) 140 120 100 117 80 60 64 40 46 43 20 30 33 17 16 3 0 -20 -20 -40 Q1/2014 Q2/2014 Q3/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q4/2014 • Change in net working capital1 EUR -16 million in Q2/
Slide 22: Net working capital -6% of rolling 12 months orders received
Net working capital -6% of rolling 12 months orders received Net working capital and orders received (EUR million) 1,500 30% 1,000 20% 1,101 1,023 500 781 725 793 803 10% 692 480 580 466 0 -181 0% -257 -249 -345 -353 -355 -265 -244 -238 -247 -500 -10% -1,000 -20% Q1/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2
Slide 23: Net debt increased compared to Q1/2016
Net debt increased compared to Q1/2016 Net debt (EUR million) and gearing (%) Equity to assets ratio (%) 29% 28% 45% 42% 300 27% 30% 40% 40% 41% 24% 40% 21% 36% 35% 36% 34% 35% 35% 200 238 231 20% 35% 229 178 192 30% 100 10% 25% 0 -39 0% 20% -54 -100 -5% -134 -10% 15% -7% -158 -166 10% -200 -20% -17
Slide 24: Capital employed and Comparable ROCE
Capital employed and Comparable ROCE Capital employed (EUR million) and Comparable return on capital employed (ROCE), before taxes1 (percent) 1,239 1,240 1,214 1,231 1,184 1,194 985 Target 967 14% 14% 902 13% minimum 877 12% 12% 15% 10% 10% 2% 2% 1% Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1
Slide 25: Guidance and short-term market outlook
Guidance, and short- term market outlook
Slide 26: Guidance and short-term market outlook
Guidance and short-term market outlook Guidance for 2016 (as given on February 9, 2016) Valmet estimates that net sales in 2016 will remain at the same level with Guidance for 2015 (EUR 2,928 million) and Comparable EBITA in 2016 will increase in 2016 comparison with 2015 (EUR 182 million). Due to n
Slide 27: New financial targets
New financial targets Valmet <>
Slide 28: New and increased financial targets from 2017 onwards
New and increased financial targets from 2017 onwards New target Growth • Net sales for stable business to grow over two times the market growth • Net sales for capital business to exceed market growth Profitability • Comparable EBITA: 8–10% ROCE • Comparable return on capital employed (pre-tax), RO
Slide 29: Summary of Interim Review Q2/2016
Summary of Interim Review Q2/2016
Slide 30: Q2/2016 in brief
Q2/2016 in brief Orders received and net sales remained at the previous year’s level in stable business1 Orders received decreased and net sales remained at the previous year’s level in capital business2 Order backlog at EUR 2.1 billion Profitability increased – Comparable EBITA margin at 7.1% Net d
Slide 31: Appendix
Appendix Valmet <>
Slide 32: Structure of loans and borrowings
Structure of loans and borrowings Interest-bearing debt EUR 351 million as at June 30, 2016 Amount of outstanding interest-bearing debt Main financing sources (EUR millions) Amount Lender 350 300 EUR 88 million European Investment Bank 250 EUR 86 million Skandinaviska Enskilda Banken 200 EUR 61 mill
Slide 33: Largest shareholders on June 30, 2016
Largest shareholders on June 30, 2016 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 Varma Mutual Pension Insurance Company 6,108,465 4.08% 3 Ilmarinen Mutual Pension Insurance
Slide 34: Ownership structure on June 30, 2016
Ownership structure on June 30, 2016 14.0% Nominee registered and non-Finnish holders 11.1% Finnish institutions, companies and foundations 47.8% Solidium Oy Finnish private investors 27.1% Sector Number of shareholders % of total shareholders Number of shares % of shares Nominee registered and non-
Slide 35: Share of non-Finnish holders and number of shareholders
Share of non-Finnish holders and number of shareholders 56% 59,000 54% 57,000 52% 55,000 50% 53,000 48% 51,000 46% 49,000 44% 47,000 12/2013 01/2014 02/2014 03/2014 04/2014 05/2014 06/2014 07/2014 08/2014 09/2014 10/2014 11/2014 12/2014 01/2015 02/2015 03/2015 04/2015 05/2015 06/2015 07/2015 08/2015
Slide 36: Paper, board, and tissue production trends
Paper, board, and tissue production trends North America (million tonnes) Europe (million tonnes) 10 40 15 40 13 35 8 30 30 11 25 9 6 20 20 7 15 4 10 5 10 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue (LHS) Newsprint (LHS) Tissue
Slide 37: Paper, board, and tissue operating rates
Paper, board, and tissue operating rates North America Europe 100% 100% 95% 95% 90% 90% 85% 80% 85% 75% 80% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue Newsprint Printing & Writing Tissue Newsprint Printing & Writing Containerb
Slide 38: Paper and board consumption growth trends
Paper and board consumption growth trends Paper and board consumption per capita vs. population Population growth in 250 2,500 emerging markets is 200 2,000 larger than in developed markets 150 1,500 100 1,000 Level of consumption per capita in 50 500 emerging markets 0 0 clearly below that in China
Slide 39: Tissue consumption growth trends
Tissue consumption growth trends Tissue consumption per capita vs. population 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 China Rest of Asia Oceania Africa L
Slide 40: Pulp and paper price trends
40 1,000 1,200 200 400 600 800 0 Source: Bloomberg July 28, 2016 1-Dec-07 1-Mar-08 1-Jun-08 1-Sep-08 1-Dec-08 1-Mar-09 Testliner (EUR/t) 1-Jun-09 Uncoated (USD/t) 1-Sep-09 Eucalyptus pulp (USD/t) 1-Dec-09 1-Mar-10 1-Jun-10 1-Sep-10 1-Dec-10 © Valmet | Interim Review, January–June 2016 1-Mar-11 1-Jun
Slide 41: 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-Aug-10 1-Mar-11 1-Oct-11 1-May-12 1-Dec-12 1-Jul-13 1-Feb-14 1-Sep-14 1-Apr-15 1-Nov-15 1-Jun-16 CIF ARA steam coal (USD/t) (LHS) Brent crude oil (USD/barrel) (LHS)
Slide 42: Crude oil, steam coal, natural gas and electricity: United States
Crude oil, steam coal, natural gas and electricity United States 140 7 120 6 100 5 80 4 60 3 40 2 20 1 0 0 1-Jan-10 1-Aug-10 1-Mar-11 1-Oct-11 1-May-12 1-Dec-12 1-Jul-13 1-Feb-14 1-Sep-14 1-Apr-15 1-Nov-15 1-Jun-16 FOB steam coal Richards Bay (USD/t) (LHS) WTI crude oil (USD/barrel) (LHS) Henry Hub
Slide 43: European Carbon Emission Allowance
43 10 0 1 2 3 4 5 6 7 8 9 2-Nov-12 2-Dec-12 2-Jan-13 Source: Bloomberg 2-Feb-13 July 28, 2016 2-Mar-13 2-Apr-13 2-May-13 2-Jun-13 2-Jul-13 2-Aug-13 2-Sep-13 2-Oct-13 2-Nov-13 2-Dec-13 2-Jan-14 2-Feb-14 2-Mar-14 2-Apr-14 2-May-14 © Valmet | Interim Review, January–June 2016 2-Jun-14 2-Jul-14 2-Aug-14
Slide 44: Important notice
Important notice IMPORTANT: 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 presentation (collectively, the “Information”). In
Slide 45: Interim Review January–September 2016
Interim Review January– September 2016 October 27, 2016 www.valmet.com/investors Capital Markets Day September 20, 2016 Helsinki, Finland www.valmet.com/cmd
Slide 46: FORWARD
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