Valmet Corp · OMXHEX:VALMT
Valmet — Non-Deal Roadshow (March 2015)
108 slides from Valmet's roadshow presentation, March 2015
Slide 1: Valmet becomes stronger as a result of acquiring Process Automation Systems
Valmet becomes stronger as a result of acquiring Process Automation Systems Roadshow material March 2015
Slide 2: Agenda
Agenda Valmet Roadshow 1 Valmet overview 2 Investment highlights 3 Financials 4 Acquisition of Process Automation Systems 5 Conclusions 6 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: A leading service and technology company
A leading service and technology company Net sales (2014) Strong market position in all markets served Stable, growing and 15% 18% profitable services business 21% Strong capital business with 40% 11% high technological know- how 13% 2014 figures Orders received EUR 3,071 M 39% Net sales EUR 2,473 M
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 Description Mill and plant improvements, roll and Technologies and solutions for pulp Technologies and solutions for workshop services, parts and fabrics, production, power generation, and board, tissue, and paper a
Slide 7: Strong global presence – good platform for growth
Strong global presence – good platform for growth North America China • Large installed base to be serviced EMEA • Service growth potential through • Capital project growing installed base • Large installed base to be serviced opportunities in pulp, • Capital project opportunities energy, board, and
Slide 8: Valmet's way forward
Valmet’s way forward Our Vision To become the global Our Must-Wins champion in serving our customers Our Strategy Customer excellence Valmet develops and Leader in technology supplies competitive and innovation Our Mission technology and services to Excellence in processes Converting renewable
Slide 9: Investment highlights
Investment highlights Valmet <>
Slide 10: Investment highlight summary
Investment highlight summary 1 Strong market position in growing markets Growing, profitable and stable service and 2 automation business with EUR 1.3 billion sales Strong in cyclical capital business with long-term growth 3 potential and increased flexibility in cost structure Unique offering with
Slide 11: Strong market position in growing markets
1 2 3 4 5 Strong market position in growing markets Services Pulp Energy Board Tissue Paper Automation #1-2 #1-2 #1-3 #1-2 #1 #1-2 #1-3 ~2% 7.5 ~1% 1.4 ~1% 2.0 ~3% 1.0 ~3% 0.6 ~-1% 0.6 ~1% 2.0 p.a. bn p.a. bn p.a. bn p.a. bn p.a. bn p.a. bn p.a. bn • Customers • Growth in • Growth in • World trade,
Slide 12: Growing, profitable and stable service and automation business
1 2 3 4 5 Growing, profitable and stable service and automation business with EUR 1.3 billion sales Growing Services net sales growth on average over 3% p.a. during the last 5 years Slight growth in Automation net sales over the last 10 years Profitable Relatively stable margins in Automation
Slide 13: Strong in cyclical capital business with long-term growth potential
1 2 3 4 5 Strong in cyclical capital business with long-term growth potential and increased flexibility in cost structure Pulp and Energy Paper Market position: Market position: #1-3 #1-2 Headcount reduction1: Headcount reduction1: ~500 ~800 Capacity cost reduction: Capacity cost reduction: 10% 20%
Slide 14: Unique offering with process technology, automation and services
1 2 3 4 5 Unique offering with process technology, automation and services Process • Valmet becomes a technology technology and service company with full automation offering • Strengthened competitiveness from combining paper, pulp and power plant technology, process know-how and automation • Full s
Slide 15: Continued focus on profitability, more effort into renewal
1 2 3 4 5 Continued focus on profitability, more effort into renewal Continued focus on • Improve project and service margin profitability • Reduce quality costs and lead times improvement • Savings in procurement measures • Continue to improve cost competitiveness • Improve cost competitiveness to
Slide 16: Financials
Financials Valmet <>
Slide 17: 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 18: Q4/2014 in brief
Q4/2014 in brief Orders received increased in services in Q4/2014 • Orders received increased by 17% • Services net sales stable Orders received increased in capital business • Orders received increased in Paper and decreased in Pulp and Energy • Net sales increased in Paper, and Pulp and Energy Ord
Slide 19: Key figures Q4/2014
Key figures Q4/2014 EUR million Q4/2014 Q4/2013 Change 2014 2013 Change Orders received 480 428 12% 3,071 2,182 41% Order backlog 1,998 1,398 43% Net sales 777 666 17% 2,473 2,613 -5% EBITA1 48 -25 106 54 94% % of net sales 6.1% -3.7% 4.3% 2.1% EBIT2 38 -66 72 -59 % of net sales 4.8% -9.9% 2.9% -2.2
Slide 20: EBITA margin in the targeted range in Q4/2014
EBITA margin in the targeted range in Q4/2014 Net sales and EBITA before NRI (EUR million) 777 714 666 631 601 588 590 EBITA target 6–9% 519 5.5% 6.1% 5.1% 4.1% 3.7% 3.1% -3.7% 0.7% Services Capital 243 256 256 274 251 235 278 224 EBITA-% Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 EBITA before
Slide 21: 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 0.25 per share 21 March, 2015 © Valmet
Slide 22: Guidance and short-term market outlook
Guidance and short-term market outlook Guidance for 2015 (as given on February 6, 2015) Valmet estimates that, including the acquisition of Process Automation Guidance for Systems1, net sales in 2015 will increase in comparison with 2014 (EUR 2015 2,473 million) and EBITA before non-recurring items
Slide 23: Acquisition of Process Automation Systems
Acquisition of Process Automation Systems
Slide 24: Valmet becomes a stronger company
Valmet becomes a stronger company The acquisition was announced on January 15, 2015 The acquisition has an excellent strategic fit Combination of Valmet and Automation creates a unique customer offering Automation is a strong, established business Acquisition makes Valmet more stable and more profit
Slide 25: Combination creates a unique customer offering
Combination of Valmet and Automation creates a unique customer offering Valmet becomes a technology Valmet becomes a unique company and service company with full Process automation offering technology Strengthened competitiveness from combining paper, pulp and power plant technology, process kno
Slide 26: Process Automation Systems is a strong, established business
Process Automation Systems is a strong, established business Long-term customer relations High level of technology and know-how Strong service business, based on large installed base and captive business model ~1,600 automation professionals working close to customers at ~80 locations around
Slide 27: Valmet with Automation
Valmet with Automation Increased stability and improved profitability Illustrative net sales in 20141 Improving profitability Automation has a solid financial track record 11% 15% - Historically continuous double-digit EBITA 18% margin of 10–12% 36% 19% 11% - Stable net sales, with slight growth 1
Slide 28: Conclusion
Conclusion Valmet <>
Slide 29: Investment highlight summary
Investment highlight summary 1 Strong market position in growing markets Growing, profitable and stable service and 2 automation business with EUR 1.3 billion sales Strong in cyclical capital business with long-term growth 3 potential and increased flexibility in cost structure Unique offering with
Slide 30: Important notice
Important notice It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for growth, profitability and investment willingness, expectations fo
Slide 31: Appendix
Appendix 1 Management, ownership and share price development 2 Financials 3 Process Automation Systems 4 Market statistics
Slide 32: Management, ownership and share price development
Appendix Management, ownership and share price development
Slide 33: 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 SVP, Strategy and SVP, Human Resources SVP, Marketing & Share ownership: 49,021 Share ownership: 5,148 Operational Dev
Slide 34: Board of Directors
Board of Directors Bo Mikael Von Friederike Erkki Pehu- Risberg Frenckell Helfer Lehtonen (b. 1956) (b. 1947) (b. 1976) (b. 1950) Chairman of Vice Chairman of Board member Board member the Board the Board Austrian citizen Finnish citizen Swedish citizen Finnish citizen • BSc in Mech. Engineering, MB
Slide 35: Largest shareholders on February 28, 2015
Largest shareholders on February 28, 2015 Based on the information given by Euroclear Finland Ltd. # Shareholder name Number of shares % of shares and votes 1 Solidium Oy1 16,695,287 11.14% 2 Cevian Capital Partners Ltd. 10,323,191 6.89% 3 Nordea Funds 5,001,578 3.34% 4 Skagen Global Verdipapirfond
Slide 36: Ownership structure on February 28, 2015
Ownership structure on February 28, 2015 14.1% Nominee registered and non-Finnish holders 11.1% Finnish institutions, companies and foundations 54.4% Solidium Oy Finnish private investors 20.3% Sector Number of shareholders % of total shareholders Number of shares % of shares Nominee registered and
Slide 37: Share of non-Finnish holders and number of shareholders
Share of non-Finnish holders and number of shareholders 57% 60,000 55% 58,000 53% 56,000 51% 54,000 49% 52,000 47% 50,000 45% 48,000 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 Non-Finnish holders (LHS) Total number of share
Slide 38: Share price development and trading volume
38 Million shares 0 1 2 3 4 5 6 7 8 6.00 7.00 8.00 9.00 10.00 11.00 12.00 01/14 01/14 March, 2015 01/14 01/14 01/14 01/14 02/14 02/14 02/14 02/14 03/14 03/14 © Valmet 03/14 03/14 04/14 04/14 04/14 04/14 05/14 05/14 05/14 05/14 Valmet 06/14 06/14 06/14 06/14 07/14 07/14 07/14 07/14 07/14 07/14 08/14
Slide 39: Financials
Appendix Financials Valmet <>
Slide 40: Latest development in sustainability
Latest development in sustainability Valmet has defined a sustainability agenda as part of the implementation of its business strategy Valmet has been selected for the world’s leading Dow Jones Sustainability Index among three (3) other Finnish companies Valmet scored high points in CDP climat
Slide 41: Customer activity increased in 2014 (H1)
Customer activity increased in 2014 Announced orders during H1/2014 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 pow
Slide 42: Customer activity increased in 2014 (H2)
Customer activity increased in 2014 Announced orders during H2/2014 Date Description Business line Country Value Jul 2 Advantage DCT 200 tissue line Paper Middle East Not disclosed Jul 8 Wood chipping plant Pulp and Energy Sweden Around EUR 20 million Aug 4 Advantage NTT line Paper USA Not disclosed
Slide 43: Orders received exceeded EUR 3 billion in 2014
Orders received exceeded EUR 3 billion in 2014 Orders received (EUR million), Orders received (EUR million), by business line by area 1,400 3,500 1,400 3,500 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 2,000 103 600 511 480
Slide 44: Order backlog approximately EUR 2 billion
Order backlog approximately EUR 2 billion Order backlog (EUR million) Structure of order backlog 3,000 2,500 ~20% 2,406 2,312 2,000 1,972 1,998 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 Q2/14 Q3/14 Q4/14 Services business Capital business • Management estimates tha
Slide 45: Services orders received stable in 2014, growth in Q4/2014
Services orders received stable in 2014, growth in Q4/2014 Orders received (EUR million) Net sales (EUR million) 2013: 2014: 2013: 2014: EUR 1,035 million EUR 1,055 million EUR 1,032 million EUR 989 million 300 282 281 273 273 1,200 300 274 278 1,200 267 256 256 237 242 243 251 250 233 1,000 250 224
Slide 46: Pulp and Energy orders received almost doubled in 2014
Pulp and Energy orders received almost doubled in 2014 Orders received (EUR million) Net sales (EUR million) 2013: 2014: 2013: 2014: EUR 680 million EUR 1,344 million EUR 907 million EUR 956 million 800 1,600 400 1,600 700 622 1,400 350 312 1,400 600 560 1,200 300 1,200 452 221 240 240 229 234 500 1
Slide 47: Paper orders received approximately EUR 670 million in 2014
Paper orders received approximately EUR 670 million in 2014 Orders received (EUR million) Net sales (EUR million) 2013: 2014: 2013: 2014: EUR 467 million EUR 671 million EUR 674 million EUR 528 million 300 900 300 900 250 212 750 250 218 750 190 186 200 168 600 200 167 600 142 139 152 150 128 128 45
Slide 48: Good development in gross profit – SG&A at a normalized level
Good development in gross profit – SG&A at a normalized level Gross profit (EUR million and % of net sales) SG&A (EUR million and % of net sales) 160 35% 140 35% 140 30% 120 30% 120 25% 100 25% 100 20% 80 20% 80 15% 60 15% 60 40 10% 40 10% 20 5% 20 5% 0 0% 0 0% Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/201
Slide 49: Development of capacity costs and quality costs
Development of capacity costs and quality costs Capacity costs1 Personnel Personnel costs Quality costs (EUR million and % of net sales) (EUR million) (EUR million) By the end of 2016, quality costs reduced 1,180 1,141 12,547 11,765 1,001 10,464 721 697 by 50% 609 compared to 2012 baseline 2012 2013
Slide 50: Strategy implementations through Must-Wins
Strategy implementations through Must-Wins Must-Wins Must-Win implementation objectives for 2015 • Strengthen our presence close to customers and growth markets Customer • Strengthen Key Account Management to enhance growth at the customer excellence • Drive services growth through long-term agreeme
Slide 51: Key Must-Win objectives to improve profitability to 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 (by 50% by procurement improve cost cost margin the end of 2016) (10% by the end competitiveness competitiveness and lead times of 20
Slide 52: Positive cash flow
Positive cash flow Cash flow provided by operating activities (EUR million) 140 120 100 117 80 60 40 43 46 20 30 0 -20 -38 -40 -60 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q4/2013 • At the end of 2014, net working capital was EUR -353 million • CAPEX less than depreciation 52 March, 2015 © Valmet
Slide 53: Strong balance sheet with negative gearing
Strong balance sheet with negative gearing Net debt (EUR million) and gearing (%) Equity to assets ratio (%) 200 20% 45% 150 15% 42% 100 10% 41% 41% 40% 40% 50 5% 40% -1 0 0% 0% -39 -54 -50 -5% -100 -5% -10% 35% -7% -158 -150 -166 -15% -200 -20% -250 -20% -21% -25% 30% Q4/13 Q1/14 Q2/14 Q3/14 Q4/14
Slide 54: ROCE on improving trend
ROCE on improving trend Capital employed (EUR million) Return on capital employed (ROCE), before taxes1 (%) 1,200 20% 1,000 15% 1,024 985 967 902 9% 800 877 10% 6% 600 5% 3% 400 0% -2% -4% 200 -5% 0 -10% Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 ROCE (before taxes) Target, 15% • De
Slide 55: Strong development in net working capital in 2014
Strong development in net working capital in 2014 Orders received and net working capital (EUR million and %) Net working capital has been 1,000 on average -9% of rolling 12 25% 800 months orders received 20% 600 15% 400 10% 200 5% 0 0% -200 -5% -400 -10% -600 -15% -800 -20% -1,000 -25% 2010 Q1 2010
Slide 56: Largest part of cash flow from EBITDA
Largest part of cash flow from EBITDA -2 -24 14 103 236 145 EBITDA, 2014 Change in net Net interests and Income taxes paid Other non-cash items Cash flow from working capital dividends received operating acitivties, 2014 56 March, 2015 © Valmet
Slide 57: Foreign exchange risk management in Valmet
Foreign exchange risk management in Valmet All operating units are required to hedge in full their foreign currency exposures Hedging takes place when firm commitment arises or at the latest immediately after operating units have reported their monthly currency exposure Valmet is not hedging a
Slide 58: Foreign currency exposure
Foreign currency exposure The exposure is a net of all assets and liabilities denominated in foreign currencies derived from sales and purchase contracts, projected cash flows and firm commitments A 10 percent appreciation or depreciation of EUR against all other currencies would have an effect
Slide 59: Split of net sales and costs per currency in 2014
Split of net sales and costs per currency in 2014 Net sales by currency (2014) Costs by currency (2014) Others Others BRL BRL 7% 7% 5% 4% RMB RMB 5% 8% EUR 44% USD EUR USD 52% 20% 14% SEK SEK 15% 20% • Sales and costs in different currencies fairly balanced • More costs than sales in EUR, vice versa
Slide 60: Cost structure
Cost structure Capacity costs (EUR million) 1,180 1,141 1,001 2012 2013 2014 • Capacity costs have decreased in 2013 and 2014 • Savings program in 2013–2014 generated higher than planned capacity cost savings • Capacity costs expected to be flat in 2015 60 March, 2015 © Valmet
Slide 61: Long-term financing
Long-term financing Amount of outstanding interest-bearing debt: EUR 68 million (Dec 31, 2014) Maturity profile of interest-bearing debt Main financing sources (EUR millions) EUR 64 million EIB loan 250 Maturing in: H2/2016 200 EUR 4 million other financing sources 150 100 2001 Back-up facilities
Slide 62: Strong balance sheet to support large orders
Strong balance sheet to support large orders Financial position as of December 31, 2014 (EUR million) 51 16 146 192 -166 2,412 2,266 41 809 Non-current Current debt Cash and Other Net debt Total equity Balance sheet Advances Adj. balance debt equivalents financial total received sheet total assets N
Slide 63: EBITA bridge 2013–2014
EBITA bridge 2013–2014 -21 68 106 -23 28 54 EBITA 2013 Change in net sales Increase in Decrease in SG&A Other EBITA 2014 gross margin • The cost-savings program executed in 2013–2014 improved EBITA • Decrease in SG&As had the greatest impact on EBITA development in 2014 • SG&As decreased by over 20
Slide 64: High volatility in market activity
High volatility in market activity Orders received1 (EUR million) 3,225 3,071 • Volatility in market 2,584 2,445 activity is high in the 2,182 capital business 1,999 2,080 2,016 1,585 1,390 1,147 1,362 Capital Services 999 1,145 1,055 1,035 1,055 637 2009 2010 2011 2012 2013 2014 1) 2014 actual figu
Slide 65: 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 2,473 2,092 EBITA target 6-9% 2,061 7.1% 7.6% 6.3% 6.5% 6.4% 5.5% 5.6% 4.3% 2.1% Services Capital 877 974 1,011 1,032 989 EBITA-% 636 834 847 715 2006 2007 2008 2009 2010
Slide 66: Revenue recognition
Revenue recognition A significant amount of Valmet’s revenues are derived from major, long-term contracts In accordance with its accounting principles, Valmet applies the percentage of completion (“POC”) method for recognizing long-term delivery contracts where the signing of a sales contract (fir
Slide 67: Key ratios
Key ratios 2014 2013 Carve-out Earnings per share, EUR 0.31 -0.421 Diluted earnings per share, EUR 0.31 -0.421 Equity per share at end of period, EUR 5.36 5.39 Return on equity (ROE), % (annualized) 6% -7%2 Return on capital employed (ROCE) before taxes, % (annualized) 9% -4% Equity to assets ratio
Slide 68: Consolidated statement of income
Consolidated statement of income Q4/2014 Q4/2013 Q1-Q4/ Q1-Q4/ 2014 2013 EUR million Carve-out Carve-out Net sales 777 666 2,473 2,613 Cost of goods sold -633 -591 -2,004 -2,172 Gross profit 144 75 469 441 Selling, general and administrative expenses -109 -126 -401 -469 Other operating income and ex
Slide 69: Balance sheet as at December 31, 2014
Balance sheet as at December 31, 2014 Assets As at December 31, 2014 As at December 31, 2013 EUR million Non-current assets Intangible assets Goodwill 446 443 Other intangible assets 91 107 Total intangible assets 537 550 Property, plant and equipment Land and water areas 22 21 Buildings and structu
Slide 70: Balance sheet as at December 31, 2014
Balance sheet as at December 31, 2014 Equity and liabilities As at December 31, 2014 As at December 31, 2013 EUR million Equity Share capital 100 100 Reserve for invested unrestricted equity 403 402 Cumulative translation adjustments 9 2 Fair value and other reserves -3 5 Retained earnings 296 299 E
Slide 71: Process Automation Systems
Appendix Process Automation Systems
Slide 72: Automation in brief
Automation in brief Supplies and develops automation and information management systems, applications and services Net sales (2014) Global market leader with #1 market position in pulp and 9% paper 19% 9% Industry-leading product portfolio Comprehensive services High barriers to entry and a limited
Slide 73: Automation offering
Automation offering Distributed • Complete control system platform for several processes: process, Control machine, drive controls and information management System (DCS) • Used for monitoring and controlling distributed equipment in process plants and industrial processes Quality Control • A system
Slide 74: Strengthened presence close to customers
Strengthened presence close to customers Valmet: Over 100 locations in 30 countries • 70 service centers Automation: • 50 sales offices • 1,600 automation professionals • 30 production units • 80 locations • 13 technology centers Valmet location Automation location 74 March, 2015 © Valmet
Slide 75: Valmet and Automation serve mainly the same customer base
Valmet and Automation serve mainly the same customer base Pulp Energy Paper Process 80% of Automation’s sales to Valmet’s current 20% of Automation’s sales to customer industries other process industries • 10% of Automation’s sales together with Valmet project deliveries • 90% of Automation’s sales
Slide 76: Market position
Market position Anticipated Estimated market size for long-term market growth the current offering (EUR) ~1% 2.0 Market position p.a. bn • Global market leader with #1 Market drivers #1-3 market position in pulp and paper • Industry-leading product portfolio • Investments in new pulp and paper machi
Slide 77: Automation offering and market overview
Automation offering and market overview Scope/product Market size Market position in Main competitors pulp and paper Distributed • DCS for process and Pulp and paper DCS market: • ABB Control System (DCS) machines controls • Condition monitoring • EUR 900 million #3 • • Honeywell Emerson • Informati
Slide 78: Recent development
Recent development Orders received (EUR million)1 Net sales (EUR million)1 400 400 350 333 350 322 304 309 310 296 300 261 300 250 250 200 200 200 150 150 100 100 50 50 0 0 2011 2012 2013 2014 2011 2012 2013 2014 1-9/ 1-9/ Orders received Net sales Process Automation Systems is relatively stable bus
Slide 79: Price and financing the acquisition
Price and financing the acquisition Enterprise value of acquisition1: EUR 340 million The acquisition will be financed with committed long-term financing Average maturity of long-term debt will increase to over 4 years2 1) Refers to the debt-free enterprise value of the acquisition. 2) Average m
Slide 80: Balance sheet structure after the acquisition
Balance sheet structure after the acquisition of Process Automation Systems Enterprise value Process Automation Systems’ net asset value1 approximately EUR 55 million of acquisition • Difference between enterprise value and net asset value will be split roughly equally between goodwill and purchase
Slide 81: Valmet will have a strong balance sheet also after the acquisition
Valmet will have a strong balance sheet also after the acquisition Process Automation Systems had net assets of approximately EUR 55 million on June 30, 2014 Valmet will have a strong balance sheet also after the acquisition To illustrate, if the transaction would have taken place on September
Slide 82: Market statistics
Appendix Market statistics Valmet <>
Slide 83: Comprehensive life-cycle services offering and large customer base
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 84: Net sales split, by business unit
Net sales split, by business unit Net sales split, business units (2014) Net sales split, Valmet (2014)2 12% 19% Services Rolls and Workshop Services Mill Improvements (EUR 989 million)1 15% Performance Parts 11% 7% Fabrics 10% Energy and Environmental 8% 29% 3% 9% 25% 8% 5% Pulp and 4% 15% Energy 4
Slide 85: North America
North America Orders received Net sales Employees (EUR million and % of total) (EUR million and % of total) (number and % of total) Recent orders received +18% +6% -1% 490 449 1,147 1,141 414 422 Oct 7, 2014 Equipment for 19% 16% 16% 18% evaporator train 10% 11% upgrade, USA 2013 2014 2013 2014 2013
Slide 86: North America
North America Mature services focused market with recurring opportunities in paper, tissue and biotechnology Market environment Market position & competition Actions for Valmet • Large installed base to be served • Strong position and market share • Continue to develop and grow - Opportunities in cu
Slide 87: South America
South America Orders received Net sales Employees (EUR million and % of total) (EUR million and % of total) (number and % of total) Recent orders received -47% +3% 533 -23% 421 418 432 24% 281 325 16% 13% 9% 4% 4% 2013 2014 2013 2014 2013 2014 Orders received by Net sales by business line business l
Slide 88: South America
South America Cyclical capital business relies on new pulp projects. Services, power and tissue provide growth opportunities Market environment Market position & competition Actions for Valmet • Capital project opportunities in • Fierce competition in new pulp • Keep market share and improve pulp, t
Slide 89: EMEA
EMEA Orders received Net sales Employees (EUR million and % of total) (EUR million and % of total) (number and % of total) Recent orders received -15% +83% Mar 11, 2015 -4% 7,514 Mar 3, 2015 Biomass-based boiler 1,470 6,376 Softwood line plant, Finland 1,096 1,053 rebuild, 804 64% 61% Sweden 48% 42%
Slide 90: EMEA
EMEA Valmet’s largest and most important area with significant services and technology markets in all Valmet’s businesses Market environment Market position Actions for Valmet • Large installed base to be serviced • Valmet has a strong position both • Grow Services with Key Account - Growth opportun
Slide 91: China
China Orders received Net sales Employees (EUR million and % of total) (EUR million and % of total) (number and % of total) Recent orders received -7% -32% 0% 2,061 Jan 23, 2015 Oct 30, 2014 389 1,927 Key board Advantage DCT 241 241 266 machine 200HS tissue 18% 18% line, China 15% solutions, China 1
Slide 92: China
China Paper market flat and Services growing, local low cost competition present Market environment Market position Actions for Valmet • Capital project opportunities in • Valmet has a strong position in • Continue to develop and grow board and tissue Paper. Recent successes with Services: local low
Slide 93: Asia-Pacific
Asia-Pacific Orders received Net sales Employees (EUR million and % of total) (EUR million and % of total) (number and % of total) Recent orders received -6% >100% 625 588 589 +34% 381 May 21, 2014 285 Part of a major Aug 15, 2014 190 pulp mill rebuild, 5% 6% Paper machine 19% Thailand 9% 11% 15% gr
Slide 94: Asia-Pacific
Asia-Pacific A key growth area for Valmet Market environment Market position Actions for Valmet • Capital project opportunities in • Valmet has a strong market • Localize Services business to be more pulp, tissue, and board position but relatively modest local cost competitive and closer to customer
Slide 95: Pulp mill market is cyclical and characterized by large orders
Pulp mill market is cyclical and characterized by large orders Market fluctuates from year to year Valmet is well prepared for the cyclical nature of the business Market size1 (EUR million) Own capacity has been reduced during the last few years Valmet Others Capacity cost reduced 10% in 2014
Slide 96: Consumption development
Consumption development Growth in board and tissue consumption is expected to continue while newsprint is declining Paper consumption1 (Mton) 220 CAGR 2001-2014 2014-2018F 200 180 Containerboard +3.7% +2.2% 160 140 120 Printing & Writing +0.6% +0.1% 100 80 Cartonboard +2.8% +2.8% 60 40 20 Tissue +3.
Slide 97: 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 50 500 consumption per capita in emerging 0 0 markets clearly Eastern Europe Chi
Slide 98: Demand has shifted 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 99: 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 100: 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 101: Paper, board, and tissue production trends
Paper, board, and tissue production trends North America (million tonnes) Europe (million tonnes) 12 50 12 50 11 11 10 40 10 40 9 9 8 30 8 30 7 7 6 20 6 20 5 5 4 10 4 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 102: 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 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue Newsprint Printing & Writing Tissue Newsprint Printing & Writing
Slide 103: Pulp and paper price trends
103 1,000 1,200 200 600 800 0 400 Source: Bloomberg 1-Dec-07 March, 2015 1-Mar-08 1-Jun-08 1-Sep-08 1-Dec-08 © Valmet Testliner (EUR/t) 1-Mar-09 Uncoated (USD/t) 1-Jun-09 Eucalyptus pulp (USD/t) 1-Sep-09 1-Dec-09 1-Mar-10 1-Jun-10 1-Sep-10 1-Dec-10 1-Mar-11 1-Jun-11 1-Sep-11 Pulp and paper price tre
Slide 104: Historically large spread in pulp prices
Historically large spread in pulp prices • In the autumn of 2014, many pulp producers announced NBSK price hikes Northern bleached Pulp prices, Europe: NBSK and BHKP (USD/ton) softwood kraft pulp is produced mainly in 1,100 350 Canada and the Nordic Spread at the end of October, 2014: $203 countries
Slide 105: 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-Jul-10 1-Jan-11 1-Jul-11 1-Jan-12 1-Jul-12 1-Jan-13 1-Jul-13 1-Jan-14 1-Jul-14 1-Jan-15 CIF ARA steam coal (USD/t) (LHS) Brent crude oil (USD/barrel) (LHS) Natural
Slide 106: 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-Jul-10 1-Jan-11 1-Jul-11 1-Jan-12 1-Jul-12 1-Jan-13 1-Jul-13 1-Jan-14 1-Jul-14 1-Jan-15 FOB steam coal Richards Bay (USD/t) (LHS) WTI crude oil (USD/barrel) (LHS) Henry Hub gas (USD/
Slide 107: European Carbon Emission Allowance price
107 0 1 2 3 4 5 7 8 9 6 2-Nov-12 2-Dec-12 Source: Bloomberg March, 2015 2-Jan-13 2-Feb-13 2-Mar-13 2-Apr-13 2-May-13 © Valmet 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 2-Jun-14 European Energy Exchange (EEX) spot price (EUR/t) 2-Jul-1
Slide 108: Forward
FORWARD