Valmet Corp · OMXHEX:VALMT
Valmet — SEB Finnish Blue Chip Seminar 2014
36 slides from Valmet's conference presentation, Sep 3, 2014
Slide 1: Valmet – focus on profitability improvement
Valmet – focus on profitability improvement SEB Finnish Blue Chip Seminar September 3, 2014 Hanna-Maria Heikkinen Vice President, Investor Relations
Slide 2: Agenda
Agenda 1 Valmet in brief 2 Trends in pulp and paper market 3 Investment highlights 4 Financials 5 Conclusions
Slide 3: Valmet in brief
Valmet in brief Valmet <>
Slide 4: 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 5: 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 6: Strong global presence – good platform for growth
Strong global presence – good platform for growth North America 1,133 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 7: Trends in pulp and paper market
Trends in pulp and paper market
Slide 8: 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 9: 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 +3.4% +2.5% 160 140 120 Printing & Writing +0.5% -0.3% 100 80 Cartonboard +2.6% +2.8% 60 40 Tissue +3.1%
Slide 10: 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 11: 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 12: Tissue consumption growth trends
Tissue consumption growth trends Tissue consumption per capita vs. population1 New products and 2,500 25 consumption models based on tissue are 2,000 20 helping increase 1,500 15 consumption in developed markets 1,000 10 500 5 0 0 Consumption in emerging markets is China Rest of Asia Oceania Africa
Slide 13: Tissue market growing long term
Tissue market growing long term • 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. is low in the Americas 4 Mton China 5-15% and EMEA. China
Slide 14: Investment highlights
Investment highlights Valmet <>
Slide 15: 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 16: 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 17: 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 18: 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 19: 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 459 60% Wärtsilä 2010 2011 2012
Slide 20: 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 by the end cost-reduction of 2014 program with clearly defined steps that take profitability Valmet is
Slide 21: 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 22: Key Must-Win objectives to improve profitability to the targeted level of 6–9%
Key Must-Win objectives to improve profitability to the targeted level of 6–9% Improve project Reduce quality Savings in Continue to Improve product and service costs and lead procurement improve cost cost margin times competitiveness competitiveness to increase gross profit • Harmonization of • Com
Slide 23: Financials
Financials Valmet <>
Slide 24: Q2/2014 in brief
Q2/2014 in brief Stable development in services • Services orders received on a par with Q2/2013 • Net sales stable compared with Q2/2013 Success in orders received continued in capital business • Orders received increased in the Paper, and Pulp and Energy business lines • Net sales remained on a pa
Slide 25: Key figures Q2/2014
Key figures Q2/2014 EUR million Q2/2014 Q2/2013 Change Q1-Q2/2014 Q1-Q2/2013 Change Orders received 1,023 861 19% 2,124 1,372 55% Order backlog1 2,406 1,883 28% 2,406 1,883 28% Net sales 588 714 -18% 1,107 1,345 -18% EBITA2 22 22 -3% 26 48 -47% % of net sales 3.7% 3.1% 2.3% 3.4% EBIT3 16 5 >100% 9 2
Slide 26: Continued strong development in orders received
Continued 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 1,023 1,023 1,000 861 212 2,500 1,000 861 60 2,500 190 422 120 800 128 2,000 800 47 2,000 103 600 511 1,500 600 511 214 34 1,500
Slide 27: Customer activity has increased in 2014
Customer activity has increased in 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 Sw
Slide 28: Order backlog increased by EUR 434 million compared with Q1/2014
Order backlog increased by EUR 434 million compared with Q1/2014 Order backlog (EUR million) Structure of order backlog 3,000 2,500 ~20% 2,406 2,000 1,883 1,972 1,807 1,500 1,658 1,398 1,000 ~80% 500 0 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Services business Capital business Cancelled Fibria order of E
Slide 29: Net sales and profitability development
Net sales and profitability development Net sales and EBITA before NRI (EUR million) 714 666 631 601 588 519 EBITA target 6–9% 5.1% 4.1% 3.7% 3.1% 0.7% -3.7% Services Capital 243 256 257 274 251 224 EBITA-% Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 EBITA before 26 22 31 -25 4 22 NRI (MEUR) • Net sales dec
Slide 30: 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 31: Strong balance sheet to support large orders
Strong balance sheet to support large orders Financial position as of June 30, 2014 (EUR million) 141 70 199 114 2,387 2,246 782 40 -54 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 Ne
Slide 32: 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 33: Conclusion
Conclusion Valmet <>
Slide 34: Summary of key messages
Summary of key messages 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, energ
Slide 35: 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 36: FORWARD
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