Valmet Corp · OMXHEX:VALMT
Valmet — Non-Deal Roadshow (March 2014)
67 slides from Valmet's roadshow presentation, March 2014
Slide 1: Valmet Roadshow material March 2014
Valmet Roadshow material March 2014
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 in order 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 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 11% 15% EUR 1 billion services business High barrier to entry capital business with good long-term 15% 26%
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, 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 8: Strong global presence – good platform for growth
Strong global presence – good platform for growth North America 1,147 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 March 2014 © Valmet | Roadsh
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 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 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, South America and Asia-Pacific Customer cost pressure and efficiency requirements increase d
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 1,116 70% Approximate share of sales generated in emerging markets2 FLSmidth Outotec 60% Wärtsilä Atlas Copco 50% 201
Slide 18: 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 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: Summary of Financial Statements 2013
Summary of Financial Statements 2013 Solid performance in services • Stable order intake • Services net sales on previous year’s level, over EUR 1 billion • Profitability on the same level as in 2012 Challenging year in capital business • Orders received in 2013 declined in Energy, and Board and Pap
Slide 22: Key figures 2013
Key figures 2013 EUR million Q4/2013 Q4/2012 Change 2013 2012 Change Orders received 428 678 -37% 2,182 2,445 -11% Order backlog 1,398 1,9181 -27% Net sales 666 925 -28% 2,613 3,014 -13% EBITA2 -25 54 54 192 -72% % of net sales -3.7% 5.8% 2.1% 6.4% EBIT3 -66 22 -59 138 % of net sales -9.9% 2.4% -2.2
Slide 23: Orders received declined in capital business, stable in services
Orders received declined in capital business, stable in services Orders received (EUR million), Orders received (EUR million), by business line by area 1,000 3,500 1,000 3,500 861 861 900 900 47 800 127 2,800 800 2,800 677 678 677 678 103 700 700 586 587 62 600 177 503 154 511 2,100 600 33 503 226 5
Slide 24: Order backlog
Order backlog Order backlog (EUR million) Structure of the order backlog 2,500 1,918 1,807 1,883 2,000 1,658 1,398 ~25% 1,500 1,000 ~75% 500 0 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Cancelled Fibria order of EUR 331 million excluded Services business Capital business • Management estimates that ~80% of the o
Slide 25: 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 26: Services business line
Services business line Orders received (EUR million) Sales (EUR million) 2012: 2013: 2012: 2013: EUR 1,055 million EUR 1,035 million EUR 1,011 million EUR 1,032 million 350 1,400 350 1,400 290 276 282 282 293 300 260 1,200 300 274 1,200 253 243 257 257 230 237 233 232 234 250 1,000 250 1,000 200 800
Slide 27: Pulp and Energy business line
Pulp and Energy business line Orders received (EUR million) Sales (EUR million) 2012: 2013: 2012: 2013: EUR 733 million EUR 680 million EUR 1,198 million EUR 907 million 500 452 1,750 500 1,500 400 1,400 400 360 1,200 294 289 278 300 1,050 300 271 900 221 240 240 210 205 200 129 700 200 600 100 102
Slide 28: Paper business line
Paper business line Orders received (EUR million) Sales (EUR million) 2012: 2013: 2012: 2013: EUR 657 million EUR 467 million EUR 805 million EUR 674 million 300 900 300 272 900 250 211 750 250 217 750 201 202 200 177 168 600 200 167 600 154 152 127 131 138 150 115 450 150 450 79 93 100 300 100 300
Slide 29: Announced orders in 2014
Announced orders in 2014 Date Description Business line Country Value Prehydrolysis system (pilot Jan 9 Pulp and Energy Netherlands Not disclosed scale) Jan 27 Multi-fuel boiler Pulp and Energy Finland Not disclosed Upgrade of recovery boiler and Sweden and Jan 31 Pulp and Energy Not disclosed power
Slide 30: 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 31: Strong balance sheet to support large orders
Strong balance sheet to support large orders Financial position as of December 31, 2013 (EUR million) 139 71 211 2,313 2,174 140 813 -1 -1 Total equity Balance sheet Advances Adj. balance total received sheet total Long-term Short-term Cash and Other Net debt debt debt equivalents financial assets N
Slide 32: Cash flow
Cash flow Operational cash flow (EUR million) 20 10 12 0 -5 -12 -10 -20 -30 -38 -40 -50 -53 -60 2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 • At the end of 2013, net working capital was EUR -195 million 32 March 2014 © Valmet | Roadshow
Slide 33: Structure of loans and borrowings
Structure of loans and borrowings Amount of outstanding interest-bearing debt: EUR 210 million (Dec 31, 2013) Main financing sources Back-up facilities EUR 114 million EIB loan EUR 200 million domestic Maturing in: H2/2016 commercial paper program • None outstanding EUR 72 million bank loan Matu
Slide 34: Maturity structure of long-term loans
Maturity structure of long-term loans Maturity profile (EUR millions) 250 200 150 100 200* 50 88 63 51 1 0 2014 2015 2016 2017 2018 *) EUR 200 million syndicated revolving credit facility, of which none is outstanding as of December 31, 2013. • Average maturity of long-term loans is 3.0 years 34 Mar
Slide 35: Dividend proposal
Dividend proposal Dividend policy Dividend payout at least 40% of net profit Board of Directors’ dividend proposal to the Annual General Meeting EUR 0.15 per share 35 March 2014 © Valmet | Roadshow
Slide 36: Conclusion
Conclusion Valmet <>
Slide 37: 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 38: 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 39: Guidance and short-term market outlook
Guidance and short-term market outlook Guidance for 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 Services Pulp and Energy Paper Pulp Energy Board an
Slide 40: 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 41: Appendix: Company information
Appendix Company information
Slide 42: 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 43: 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: 700 Operat
Slide 44: 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 45: Largest shareholders on February 28, 2014
Largest shareholders on February 28, 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 Varma Mutual Pension Insur
Slide 46: Ownership structure on February 28, 2014
Ownership structure on February 28, 2014 15.1% Nominee registered and non-Finnish holders 11.1% Finnish institutions, companies and foundations 51.9% Solidium Oy Finnish private investors 21.8% Sector Number of shareholders % of total shareholders Number of shares % of shares Nominee registered and
Slide 47: Appendix: Financials
Appendix Financials Valmet <>
Slide 48: Key ratios
Key ratios 2013 2012 Earnings per share, EUR1 -0.42 0.51 Diluted earnings per share, EUR2 - - Equity/share at end of period, EUR 5.39 - Return on equity (ROE), %3 -7 9 Return on capital employed (ROCE) before taxes, %3 -4 12 Equity to assets ratio at end of period, %3 41 38 Gearing at end of period,
Slide 49: Consolidated statement of income
Consolidated statement of income restated restated EUR million Q4/2013 Q4/2012 2013 2012 Carve-out Carve-out Carve-out Carve-out Net sales 663 922 2,600 3,005 Net sales, Metso Group 3 3 13 9 Net sales, total 666 925 2,613 3,014 Cost of goods sold -578 -748 -2,113 -2,345 Cost of goods sold, Metso Gro
Slide 50: Balance sheet as at December 31, 2013 (assets)
Balance sheet as at December 31, 2013 ASSETS Dec 31, 2013 Dec 31, 2012 EUR million Carve-out Non-current assets Intangible assets Goodwill 443 445 Other intangible assets 107 133 550 578 Property, plant and equipment Land and water areas 21 21 Buildings and structures 137 155 Machinery and equipment
Slide 51: Balance sheet as at December 31, 2013 (equity and liabilities)
Balance sheet as at December 31, 2013 EQUITY AND LIABILITIES Dec 31, 2013 Dec 31, 2012 EUR million Carve-out Equity Share capital 100 - Reserve for invested unrestricted equity 402 - Cumulative translation adjustments 2 24 Fair value and other reserves 5 4 Retained earnings 299 - Invested equity and
Slide 52: Appendix: Market statistics
Appendix Market statistics Valmet <>
Slide 53: 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 54: 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 55: 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 56: 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 57: 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 58: 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 59: 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 60: 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 61: 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 62: 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 63: 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 64: 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 65: 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 66: 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
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