Slide 1: Valmet Roadshow material August 2014
Valmet Roadshow material August 2014
Slide 2: Agenda
Agenda Valmet Roadshow 1 Valmet overview 2 Investment highlights 3 Financials 4 Conclusions 5 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: 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 6: 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 7: 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 8: 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. 8 August 2014 © Valmet | Roads
Slide 9: Valmet’s way forward
Valmet’s way forward Mission Strategy Must-Wins Vision Converting renewable Valmet develops and > Customer To become the global resources into supplies competitive excellence champion in serving sustainable results technology and > Leader in our customers services to the pulp, technology paper and e
Slide 10: Investment highlights
Investment highlights Valmet <>
Slide 11: 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 12: 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 13: 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 14: 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 15: 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 16: 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 17: Financials
Financials Valmet <>
Slide 18: 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 19: 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 20: 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 21: 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 22: 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 23: 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 24: 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 25: Development of the business lines
Development of the business lines Services Pulp and Energy Paper 1,200 2,000 1,000 1,000 800 1,500 800 600 600 1,000 400 400 500 200 200 0 0 0 2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 Net sales Orders received Net sales Orders received Net sales Orders received • Strong trends dri
Slide 26: 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 27: 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 28: 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 29: 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 30: Conclusion
Conclusion Valmet <>
Slide 31: 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 32: 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 33: Appendix
Appendix 1 Management and ownership 2 Financials 3 Market statistics
Slide 34: Appendix: Management and ownership
Appendix Management and ownership
Slide 35: 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: 30,046 Share ownership: 700 Operat
Slide 36: Board of Directors
Board of Directors Jukka Mikael Von Friederike Erkki Pehu- Viinanen Frenckell Helfer Lehtonen (b. 1948) (b. 1947) (b. 1976) (b. 1950) Chairman of Vice Chairman of Board member Board member the Board the Board Austrian citizen Finnish citizen Finnish citizen Finnish citizen • MSc in Engineering • MSc
Slide 37: Largest shareholders on July 31, 2014
Largest shareholders on July 31, 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 Nordea Funds 6,387,872 4.26% 3 Ilmarinen Mutual Pension Insurance Company 4,292,126 2.86% 4
Slide 38: Ownership structure on July 31, 2014
Ownership structure on July 31, 2014 14.9% Nominee registered and non-Finnish holders 11.1% Finnish institutions, companies and foundations 50.7% Solidium Oy Finnish private investors 23.3% Sector Number of shareholders % of total shareholders Number of shares % of shares Nominee registered and non-
Slide 39: Non-Finnish holders and number of shareholders
Non-Finnish holders and number of shareholders 55% 59,000 54% 58,000 53% 57,000 52% 56,000 51% 55,000 50% 54,000 49% 53,000 48% 52,000 47% 51,000 46% 50,000 45% 49,000 44% 48,000 12/2013 01/2014 02/2014 03/2014 04/2014 05/2014 06/2014 07/2014 Non-Finnish holders (LHS) Total number of shareholders (R
Slide 40: Appendix: Financials
Appendix Financials Valmet <>
Slide 41: 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 42: 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 43: Stable development in Services business line
Stable development in Services business line Orders received (EUR million) Net sales (EUR million) Q1-Q2/2013: Q1-Q2/2014: Q1-Q2/2013: Q1-Q2/2014: EUR 563 million EUR 540 million EUR 499 million EUR 475 million 300 282 281 273 1,200 300 274 1,200 267 256 257 237 243 251 250 233 1,000 250 224 1,000 2
Slide 44: Orders received continued on a good level in Pulp and Energy
Orders received continued on a good level in Pulp and Energy Orders received (EUR million) Net sales (EUR million) Q1-Q2/2013: Q1-Q2/2014: Q1-Q2/2013: Q1-Q2/2014: EUR 513 million EUR 1,182 million EUR 461 million EUR 410 million 800 1,600 400 1,600 700 622 1,400 350 1,400 600 560 1,200 300 1,200 452
Slide 45: Strong development in orders received in Paper
Strong development in orders received in Paper Orders received (EUR million) Net sales (EUR million) Q1-Q2/2013: Q1-Q2/2014: Q1-Q2/2013: Q1-Q2/2014: EUR 296 million EUR 402 million EUR 384 million EUR 222 million 300 900 300 900 250 212 750 250 218 750 190 200 168 600 200 167 600 138 152 150 128 450
Slide 46: Positive cash flow
Positive cash flow Cash flow provided by operating activities (EUR million) 60 50 40 46 43 30 20 10 12 0 -10 -5 -12 -20 -30 -38 -40 -50 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 • At the end of June 2014, net working capital was EUR -249 million • CAPEX less than depreciation 46 August 2014 ©
Slide 47: Structure of loans and borrowings
Structure of loans and borrowings Amount of outstanding interest-bearing debt: EUR 185 million (Jun 30, 2014) Maturity profile of interest-bearing debt Main financing sources (EUR millions) EUR 89 million EIB loan 250 Maturing in: H2/2016 200 EUR 72 million bank loan Maturing in: H1/2016 150 EUR
Slide 48: Key ratios
Key ratios Q1-Q2/ Q1-Q2/ Q1-Q4/ 2014 2013 2013 Carve-out Carve-out Earnings per share, EUR 0.03 0.091 -0.42 Diluted earnings per share, EUR 0.03 0.091 -0.42 Equity per share at end of period, EUR 5.19 5.65 5.39 Return on equity (ROE), % (annualized) 1% 3%2 -7%2 Return on capital employed (ROCE) befo
Slide 49: Consolidated statement of income
Consolidated statement of income Q2/2014 Q2/2013 Q1-Q2/ Q1-Q2/ 2014 2013 EUR million Carve-out Carve-out Net sales 588 714 1,107 1,345 Cost of goods sold -475 -589 -897 -1,087 Gross profit 113 125 210 258 Selling, general and administrative expenses -97 -120 -200 -234 Other operating income and expe
Slide 50: Balance sheet as at June 30, 2014
Balance sheet as at June 30, 2014 Assets As at June 30, 2014 As at June 30, 2013 As at December 31, 2013 EUR million Carve-out Non-current assets Intangible assets Goodwill 441 446 443 Other intangible assets 99 124 107 Total intangible assets 540 570 550 Property, plant and equipment Land and water
Slide 51: Balance sheet as at June 30, 2014
Balance sheet as at June 30, 2014 Equity and liabilities As at June 30, 2014 As at June 30, 2013 As at December 31, 2013 EUR million Carve-out Equity Share capital 100 - 100 Reserve for invested unrestricted equity 403 - 402 Cumulative translation adjustments -4 9 2 Fair value and other reserves -2
Slide 52: Appendix: Market statistics
Appendix Market statistics Valmet <>
Slide 53: 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 54: 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 55: 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 56: 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 57: 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 58: 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 59: 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 60: 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 61: 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 62: 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 63: 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 64: 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 65: 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 66: 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 67: 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
Slide 68: Pulp and paper price trends
68 1,000 1,200 200 600 800 0 400 Source: Bloomberg 1-Dec-07 August 2014 1-Mar-08 1-Jun-08 1-Sep-08 1-Dec-08 Testliner (EUR/t) Uncoated (USD/t) 1-Mar-09 1-Jun-09 Eucalyptus pulp (USD/t) © Valmet | Roadshow 1-Sep-09 1-Dec-09 1-Mar-10 1-Jun-10 1-Sep-10 1-Dec-10 1-Mar-11 Pulp and paper price trends 1-Ju
Slide 69: 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-Jun-10 1-Nov-10 1-Apr-11 1-Sep-11 1-Feb-12 1-Jul-12 1-Dec-12 1-May-13 1-Oct-13 1-Mar-14 CIF ARA steam coal (USD/t) (LHS) Brent crude oil (USD/barrel) (LHS) Natural
Slide 70: Crude oil, steam coal, natural gas and electricity: United States
Crude oil, steam coal, natural gas and electricity United States 140 6 120 5 100 4 80 3 60 2 40 20 1 0 0 1-Jan-10 1-Jun-10 1-Nov-10 1-Apr-11 1-Sep-11 1-Feb-12 1-Jul-12 1-Dec-12 1-May-13 1-Oct-13 1-Mar-14 FOB steam coal Richards Bay (USD/t) (LHS) WTI crude oil (USD/barrel) (LHS) Henry Hub gas (USD/MM
Slide 71: European carbon emission allowance price
71 0 1 2 3 4 5 6 7 8 9 2-Nov-12 16-Nov-12 Source: Bloomberg 30-Nov-12 August 2014 14-Dec-12 28-Dec-12 11-Jan-13 25-Jan-13 8-Feb-13 22-Feb-13 8-Mar-13 22-Mar-13 5-Apr-13 © Valmet | Roadshow 19-Apr-13 3-May-13 17-May-13 31-May-13 14-Jun-13 28-Jun-13 12-Jul-13 26-Jul-13 9-Aug-13 23-Aug-13 6-Sep-13 20-S
Slide 72: FORWARD
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