valmt-2022-12-31-en

Report of the Board of Directors

January–December 2022

Governance

Current legislation, the company’s Articles of Association and the

rules and regulations of organizations regulating and supervising

the activities of listed companies are complied with in Valmet

Oyj and Valmet Group corporate governance. Valmet Oyj

complies without deviation with the Finnish Corporate

Governance Code for listed companies. The Code is publicly

available at www.cgfinland.fi.

Corporate Governance Statement and

Remuneration Report

Valmet has published a separate Corporate Governance

Statement and a Remuneration Report for 2022, which comply

with the recommendations of the Finnish Corporate Governance

Code for listed companies. The statements also cover other

central areas of corporate governance. The statements have

been published on Valmet’s website, separately from the Board

of Directors’ Report, at www.valmet.com/governance.

Annual General Meeting

The Annual General Meeting is the company’s highest decision-

making body, and its tasks are defined according to the Articles

of Association and the Finnish Limited Liability Companies Act.

The Annual General Meeting decides on the adoption of the

financial statements, the distribution of profit, discharging the

members of the Board of Directors and the President and CEO

from liability, appointing the members, Chairman and Vice-

Chairman of the Board as well as the auditor, their

remunerations, and other matters requiring a decision by the

Annual General Meeting according to the Finnish Limited Liability

Companies Act that are presented to the Annual General

Meeting. The General Meeting convenes at least once a year.

The Board of Directors convenes the Annual General Meeting.

The Board of Directors

The Board of Directors shall see to the administration of the

company and the appropriate organization of its operations, and

ensures that the monitoring of the company’s accounting and

asset management is arranged appropriately. The Board of

Directors monitors the Group’s activities, finances and risk

management, and its task is to promote the interests of

shareholders and the Group by ensuring the appropriate

organization of the entire Group’s governance and operations.

According to Valmet’s Articles of Association, the Board of

Directors shall include at least five (5) members and at most

eight (8) members. The term of office of Board members ends at

the end of the first Annual General Meeting following the

elections. The Annual General Meeting selects the Chairman,

Vice-Chairman, and other members of the Board.

President and CEO

The Board of Directors selects a President and CEO for the

company and decides on the salary and remuneration of the

President and CEO as well as other terms related to the position.

The Board of Directors monitors the work of the CEO.

The President and CEO is responsible for the company’s daily

administration according to the instructions and regulations of

the Board of Directors. The President and CEO is responsible for

ensuring the legality of the company’s accounting and for the

reliable organization of the company’s asset management.

Merger with Neles

On July 2, 2021, Valmet announced that the Boards of Directors

of Valmet Oyj and Neles Corporation had signed a combination

agreement and a merger plan to combine the two companies

through a merger. Both companies held an Extraordinary

General Meeting on September 22, 2021, and both EGMs

approved the merger. Valmet and Neles had received all

competition approvals for the merger of Neles into Valmet on

March 21, 2022. Valmet’s Annual General Meeting on March 22,

2022, resolved to pay a dividend of EUR 1.20 per share and the

Neles Annual General Meeting on March 22, 2022, resolved to

pay a dividend of EUR 0.266 per share in accordance with the

combination agreement. In addition, Neles’ Board of Directors

decided on March 22, 2022, on an extra distribution of funds in

total of EUR 2.00 per share in accordance with the combination

agreement. The dividends and Neles' extra distribution of funds

of EUR 2.00 per share were executed on March 31, 2022. The

merger of Valmet and Neles was registered with the Finnish

Trade Register on April 1, 2022.

On July 2, 2021, Valmet entered into EUR 350 million term

loan facilities agreement with Danske Bank A/S and Nordea Bank

Abp. The syndication of the term loan facilities was closed on

October 20, 2021. The loan was used for refinancing existing

indebtedness of Valmet and Neles in connection with the

merger. EUR 215 million (originally 301 million) bridge facility

agreement, originally entered into by Neles, was transferred to

Valmet in connection with the completion of the merger. The

bridge loan facility was used for financing of the extra

distribution to shareholders of Neles. The outstanding bridge

loan facility was repaid in December 2022.

On March 22, 2022, the Boards of Directors of Valmet and

Neles approved a loan agreement between the companies

concerning the part of the extra distribution of funds of EUR 2.00

per share payable to Valmet. According to the loan agreement,

the part of the extra distribution payable to Valmet as a

shareholder of Neles was not paid in cash to Valmet in

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

connection with payment of the extra distribution to other

shareholders of Neles, but the amount payable to Valmet was

recorded as debt owed by Neles to Valmet.

Valmet and Neles were separate listed companies prior to the

merger. On April 1, 2022, Valmet announced that the statutory

merger of Neles Corporation into Valmet had been registered

and the combination of Valmet’s and Neles’ business operations

had been completed. Neles is consolidated into Valmet as of

April 1, 2022, and forms Valmet’s fifth business line called Flow

Control. After the merger, Valmet’s business lines are Services,

Flow Control, Automation Systems, Paper, and Pulp and Energy.

Automation Systems business line was previously called

Automation.

The final Shareholders’ Meeting of Neles was held on June 22,

2022, in Vantaa. The Shareholders’ Meeting adopted the final

accounts of Neles in accordance with Chapter 16, Section 17 of

the Finnish Companies Act, consisting of the financial statements

and annual report for the financial period January 1, 2022–March

31, 2022. The Shareholders’ Meeting also resolved on

discharging the members of the Board of Directors and the

President and CEO of Neles from liability.

Update on the integration of Flow Control into

Valmet

The integration of Flow Control (former Neles) into Valmet is

proceeding according to the plan. Active sales and marketing of

Valmet's whole offering was started in the second quarter, and

several package orders were received in 2022. Most of the cost

synergy actions regarding function costs, common locations and

supply chain were implemented already during 2022. Valmet

expects to generate annual run rate synergies of approximately

EUR 25 million, of which approximately 60 percent are expected

to be achieved by the end of 2023 and approximately 90 percent

by the end of 2024. Valmet's orders received included

approximately EUR 10 million synergy impact in 2022.

Approximately EUR 12 million of annual run rate cost synergies

were achieved by the end of 2022. Roughly half of the achieved

run rate synergies were realized as cost savings in 2022.

Russia's invasion of Ukraine and sanctions on

Russia

Due to Russia's invasion of Ukraine, Valmet reviewed key

contractual obligations, project schedules, and identified risks for

projects that are delivered to Russia. Based on the review,

Valmet identified projects that it estimates no longer to meet the

criteria of a customer contract for revenue recognition purposes,

and consequently made a reversal of approximately EUR 80

million to its order backlog during 2022.

On June 3, 2022, Valmet announced that it has initiated

employee reductions, which will result in a 50 percent reduction

in the number of employees in Russia in the first implementation

phase. A second phase was implemented in autumn and resulted

in further employee reductions and the closure of one legal

entity. Consequently, Valmet recorded an expense of

approximately EUR 20 million during 2022 for estimated

restructuring costs, asset impairments and other exceptional

items triggered by Valmet's decision to withdraw from Russia.

These costs have been reported in cost of sales, in selling,

general and administrative expenses and in other operating

expenses, and have been reported as items affecting

comparability. Therefore, they do not impact Comparable EBITA.

At the end of 2022, Valmet had a total of approximately 30

employees in Russia, working primarily in administration,

engineering, and maintenance. Valmet does not have production

in Russia. Approximately 2 percent of Valmet's net sales came

from its Russian operations in 2021.

Valmet will withdraw from Russia completely and will continue

to implement the withdrawal in stages as the review of

implementation options is fully completed. Valmet complies with

all sanctions and export regulations impacting business with

Russia and Belarus and monitors the development actively.

Valmet's results in 2022

Figures in brackets, unless otherwise stated, refer to the

comparison period, i.e., the same period of the previous year.

Starting from January 1, 2022, Valmet has a new financial

reporting structure consisting of three reportable segments

(segments): Services, Automation and Process Technologies.

Services segment includes the Services business line.

Automation segment includes the Automation Systems business

line (previously called Automation), and as of April 1, 2022, also

the Flow Control business line. Process Technologies segment

includes the Pulp and Energy, and Paper business lines.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Key figures1


EUR million	2022	2021	2020
Orders received	5,194	4,740	3,653
Order backlog2	4,403	4,096	3,257
Net sales	5,074	3,935	3,740
Comparable earnings before interest, taxes and amortization (Comparable EBITA)	533	429	365
% of net sales	10.5%	10.9%	9.8%
Earnings before interest, taxes and amortization (EBITA)	550	448	355
% of net sales	10.8%	11.4%	9.5%
Operating profit (EBIT)	436	399	319
% of net sales	8.6%	10.1%	8.5%
Profit before taxes	431	395	307
Profit for the period	338	296	231
Earnings per share, EUR	1.92	1.98	1.54
Earnings per share, diluted, EUR	1.92	1.98	1.54
Adjusted earnings per share, EUR3	2.37	2.09	1.64
Equity per share2, EUR	13.55	8.87	7.60
Dividend per share, EUR	1.304	1.20	0.90
Cash flow provided by operating activities	36	482	532
Cash flow after investments	56	382	-60
Return on equity (ROE)	18%	24%	21%
Return on capital employed (ROCE) before taxes	18%	24%	22%
Equity to assets ratio2	49%	42%	39%
Gearing2	20%	-7%	13%

1 The calculation of key figures is presented in the section ‘Formulas for calculation of indicators’.

2 At the end of period.

3 Adjusted earnings per share (Adjusted EPS) is a new alternative performance measure that excludes the impact of fair value adjustments arising from business combinations,

net of tax (2022: EUR 78 million, 2021: EUR 17 million, 2020: EUR 15 million). Adjusted EPS enables users of the financial information to prepare more meaningful analysis on

Valmet's performance.

4 Board of Directors’ proposal.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Orders received increased 10 percent to

EUR 5,194 million in 2022


Orders received, EUR million	2022	2021	Change
Services	1,756	1,481	19%
Automation	1,081	467	>100%
Flow Control	576	—
Automation Systems	505	467	8%
Process Technologies	2,356	2,793	-16%
Pulp and Energy	1,072	1,160	-8%
Paper	1,285	1,634	-21%
Total	5,194	4,740	10%


Orders received, comparable foreign exchange rates, EUR million1	2022	2021	Change
Services	1,679	1,481	13%
Automation	1,021	467	>100%
Flow Control	530	—
Automation Systems	491	467	5%
Process Technologies	2,319	2,793	-17%
Pulp and Energy	1,072	1,160	-8%
Paper	1,247	1,634	-24%
Total	5,018	4,740	6%

1 Indicative only. January to December 2022 orders received in euro calculated by

applying January to December 2021 average exchange rates to the functional

currency orders received values reported by entities.


Orders received, EUR million	2022	2021	Change
North America	1,260	725	74%
South America	353	696	-49%
EMEA	2,098	2,022	4%
China	711	755	-6%
Asia-Pacific	771	544	42%
Total	5,194	4,740	10%

Orders received increased 10 percent to EUR 5,194 million (EUR

4,740 million) in 2022. The increase was largely due to Neles,

which has been consolidated to Valmet as of April 1, 2022.

Orders received increased in the Automation and Services

segments and decreased in the Process Technologies segment.

Stable business (Services and Automation segments) accounted

for 55 percent (41%) of Valmet’s orders received.

Orders received increased in North America and Asia-Pacific,

remained at the previous year's level in EMEA (Europe, Middle

East and Africa) and decreased in South America and China.

Measured by orders received, the top three countries were the

USA, China and Indonesia, which together accounted for 42

percent of total orders received. South America, China and Asia-

Pacific together accounted for 35 percent (42%) of orders

received.

Changes in foreign exchange rates compared to the exchange

rates in 2021 increased orders received by approximately EUR

175 million in 2022.

In 2022, Valmet received among others an order for OCC,

stock preparation and container board lines with a large scope of

automation systems, Industrial Internet solutions and services to

the United Kingdom (typically valued at around EUR 150–170

million), an order for a coated board making line with

automation and Industrial Internet solutions as well as spare

parts and consumables packages to Asia-Pacific (typically valued

at around EUR 140–180 million), an order for a paper machine

rebuild in the USA (typically worth between EUR 90 and 120

million), an order for a fine paper making line with an extensive

scope of automation to China (typically valued at EUR 80–100

million), an order for key pulp technology and automation

solutions to Finland (typically valued at around EUR 75–100

million), an order for a combined heat and power plant and a

pretreatment system with automation to Poland, an order for a

fiberline modernization to a pulp mill in Brazil (typically valued at

around EUR 25–40 million), and an order for a tissue production

line to Mexico.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Order backlog amounted to EUR 4.4 billion


	As at Dec 31,
Order backlog, EUR million	2022	2021	Change
Total	4,403	4,096	7%

Order backlog amounted to EUR 4,403 million at the end of year

2022 and was 7 percent higher than at the end of 2021.

Approximately 20 percent of the order backlog relates to the

Services segment, 15 percent to the Automation segment, and

65 percent to the Process Technologies segment (at the end of

December 2021, 20%, 5% and 75% respectively).

Approximately 75 percent of the order backlog is currently

expected to be realized as net sales during 2023 (at the end of

2021, approximately 70% was expected to be realized as net

sales during 2022).

Net sales increased 29 percent to EUR 5,074

million in 2022


Net sales, EUR million	2022	2021	Change
Services	1,606	1,360	18%
Automation	1,040	412	>100%
Flow Control	551	—
Automation Systems	489	412	19%
Process Technologies	2,428	2,163	12%
Pulp and Energy	1,081	1,022	6%
Paper	1,347	1,141	18%
Total	5,074	3,935	29%


Net sales, comparable foreign exchange rates, EUR million1	2022	2021	Change
Services	1,538	1,360	13%
Automation	983	412	>100%
Flow Control	510	—
Automation Systems	473	412	15%
Process Technologies	2,375	2,163	10%
Pulp and Energy	1,070	1,022	5%
Paper	1,305	1,141	14%
Total	4,897	3,935	24%

1Indicative only. January to December 2022 net sales in euro calculated by applying

January to December 2021 average exchange rates to the functional currency net

sales values reported by entities.


Net sales, EUR million	2022	2021	Change
North America	1,058	780	36%
South America	718	384	87%
EMEA	1,876	1,614	16%
China	829	780	6%
Asia-Pacific	593	377	57%
Total	5,074	3,935	29%

Net sales increased 29 percent to EUR 5,074 million (EUR 3,935

million) in year 2022. Stable business (Services and Automation

segments) accounted for 52 percent (45%) of Valmet’s net

sales. Net sales increased in all three segments.

Net sales increased in all areas. Measured by net sales, the top

three countries were the USA, China and Brazil, which together

accounted for 45 percent of net sales. South America, China,

and Asia-Pacific together accounted for 42 percent (39%) of net

sales.

Changes in foreign exchange rates compared to the exchange

rates in 2021 increased net sales by approximately EUR 177

million in 2022.

Comparable EBITA increased 24 percent,

but Comparable EBITA margin decreased

to 10.5 percent


Comparable EBITA, EUR million	2022	2021	Change
Services	237	204	16%
Automation	190	79	>100%
Process Technologies	145	175	-17%
Other	-39	-30	30%
Total	533	429	24%

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS


Comparable EBITA, % of net sales	2022	2021
Services	14.8%	15.0%
Automation	18.3%	19.2%
Process Technologies	6.0%	8.1%
Total	10.5%	10.9%

In 2022, Valmet's comparable earnings before interest, taxes

and amortization (Comparable EBITA) increased 24 percent to

EUR 533 million, i.e. 10.5 percent of net sales (EUR 429 million

and 10.9%). Items affecting comparability amounted to EUR 17

million (EUR 19 million), mainly including a gain of EUR 59

million from remeasurement of Valmet's previously held equity

interest in Neles and expenses from Valmet’s withdrawal from

Russia.

Comparable EBITA of the Services segment increased to EUR

237 million in 2022, corresponding to 14.8 percent of the

segment's net sales (EUR 204 million and 15.0%). Comparable

EBITA increased due to higher net sales, but the margin was

lower due to cost inflation.

Comparable EBITA of the Automation segment increased to

EUR 190 million in 2022, corresponding to 18.3 percent of the

segment's net sales (EUR 79 million and 19.2%).

Comparable EBITA of the Process Technologies segment

decreased to EUR 145 million in 2022, corresponding to 6.0

percent of the segment's net sales (EUR 175 million and 8.1%).

Comparable EBITA decreased as margins in some Pulp and

Energy projects were impacted by cost inflation.

Operating profit

Operating profit (EBIT) in 2022 was EUR 436 million, i.e. 8.6

percent of net sales (EUR 399 million and 10.1%).

In the second quarter, Valmet recorded a gain of EUR 59

million under other operating income from remeasurement of

Valmet's previously held equity interest in Neles.

Net financial income and expenses

Net financial income and expenses amounted to EUR -5 million

(EUR -3 million) in 2022.

Profit before taxes and Earnings per share

Profit before taxes was EUR 431 million (EUR 395 million) in

2022. The profit attributable to owners of the parent was EUR

338 million (EUR 296 million), corresponding to earnings per

share (EPS) of EUR 1.92 (EUR 1.98). Adjusted EPS was EUR

2.37 (EUR 2.09).

Return on capital employed (ROCE) and return

on equity (ROE)

The return on capital employed (ROCE) before taxes was 18

percent (24%) and return on equity (ROE) 18 percent (24%) in

2022.

Segments and business lines

Services: Orders received totaled EUR 1,756 million in 2022


Services segment	2022	2021	Change
Orders received (EUR million)	1,756	1,481	19%
Net sales (EUR million)	1,606	1,360	18%
Comparable EBITA (EUR million)	237	204	16%
Comparable EBITA, %	14.8%	15.0%
Personnel (end of period)	6,307	5,958	6%

Orders received by the Services segment increased 19 percent

to EUR 1,756 million (EUR 1,481 million) in 2022. Services

accounted for 34 percent (31%) of all orders received. Orders

received increased in all businesses and all geographical areas.

Changes in foreign exchange rates compared to the exchange

rates in 2021 increased orders received by approximately EUR

77 million.

Net sales for the Services segment amounted to EUR 1,606

million (EUR 1,360 million) in 2022, corresponding to 32 percent

(35%) of Valmet’s net sales. Changes in foreign exchange rates

compared to the exchange rates in 2021 increased net sales by

approximately EUR 68 million.

Comparable EBITA of the Services segment increased to EUR

237 million in 2022, corresponding to 14.8 percent of the

segment's net sales (EUR 204 million and 15.0%). Comparable

EBITA increased due to higher net sales, but the margin was

lower due to cost inflation.

The Services segment was affected by cost inflation, reduced

component availability and longer delivery times of certain

components in 2022.

Automation: Orders received totaled EUR 1,081 million in

2022


Automation segment	2022	2021	Change
Orders received (EUR million)	1,081	467	>100%
Net sales (EUR million)	1,040	412	>100%
Comparable EBITA (EUR million)	190	79	>100%
Comparable EBITA, %	18.3%	19.2%
Personnel (end of period)	4,842	1,986	>100%

Orders received by the Automation segment increased more

than 100 percent to EUR 1,081 million (EUR 467 million) in

2022, due to the consolidation of Neles into Valmet as of April 1,

2022. Automation accounted for 21 percent (10%) of Valmet’s

orders received. Changes in foreign exchange rates compared to

the exchange rates in 2021 increased orders received by

approximately EUR 60 million.

Net sales for the Automation segment amounted to EUR 1,040

million (EUR 412 million) in 2022, corresponding to 20 percent

(10%) of Valmet’s net sales. Changes in foreign exchange rates

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

compared to the exchange rates in 2021 increased net sales by

approximately EUR 56 million.

Comparable EBITA of the Automation segment increased to

EUR 190 million in 2022, corresponding to 18.3 percent of the

segment's net sales (EUR 79 million and 19.2%).


Flow Control business line	2022	2021	Change
Orders received (EUR million)	576	—
Net sales (EUR million)	551	—
Personnel (end of period)	2,792	—

The Flow Control business line was formed on April 1, 2022,

when Neles merged with Valmet. Orders received by the Flow

Control business line amounted to EUR 576 million in April–

December and accounted for 11 percent of Valmet's orders

received in 2022.

Net sales for the Flow Control business line amounted to EUR

551 million in April–December, corresponding to 11 percent of

Valmet’s net sales in 2022.

Reduced component availability and the lockdowns in China

earlier in 2022 caused longer lead times for Flow Control in

April–December.


Automation Systems business line	2022	2021	Change
Orders received (EUR million)	505	467	8%
Net sales (EUR million)	489	412	19%
Personnel (end of period)	2,050	1,986	3%

Orders received by the Automation Systems business line

increased 8 percent to EUR 505 million (EUR 467 million) in

2022. Automation Systems accounted for 10 percent (10%) of

Valmet’s orders received. Orders received increased in North

America, remained at the previous year's level in Asia-Pacific,

EMEA and China, and decreased in South America. Orders

received increased in both Pulp and Paper, and Energy and

Process.

Net sales for the Automation Systems business line amounted

to EUR 489 million (EUR 412 million) in 2022, corresponding to

10 percent (10%) of Valmet’s net sales.

Component availability continued at a reduced level and

delivery times of certain components were longer during 2022.

Process Technologies: Orders received totaled EUR 2,356

million in 2022


Process Technologies segment	2022	2021	Change
Orders received (EUR million)	2,356	2,793	-16%
Net sales (EUR million)	2,428	2,163	12%
Comparable EBITA (EUR million)	145	175	-17%
Comparable EBITA, %	6.0%	8.1%
Personnel (end of period)	5,647	5,654	0%

Orders received by the Process Technologies segment decreased

16 percent to EUR 2,356 million (EUR 2,793 million) in 2022.

Process Technologies accounted for 45 percent (59%) of all

orders received. Changes in foreign exchange rates compared to

the exchange rates for the corresponding period in 2021

increased orders received by approximately EUR 38 million.

Net sales for the Process Technologies segment amounted to

EUR 2,428 million (EUR 2,163 million) in 2022, corresponding to

48 percent (55%) of Valmet’s net sales. Changes in foreign

exchange rates compared to the exchange rates for the

corresponding period in 2021 increased net sales by

approximately EUR 53 million.

Comparable EBITA of the Process Technologies segment

decreased to EUR 145 million in 2022, corresponding to 6.0

percent of the segment's net sales (EUR 175 million and 8.1%).

Comparable EBITA decreased as margins in some Pulp and

Energy projects were impacted by cost inflation.


Pulp and Energy business line	2022	2021	Change
Orders received (EUR million)	1,072	1,160	-8%
Net sales (EUR million)	1,081	1,022	6%
Personnel (end of period)	1,892	1,946	-3%

Orders received by the Pulp and Energy business line decreased

8 percent to EUR 1,072 million (EUR 1,160 million) in 2022. Pulp

and Energy accounted for 21 percent (24%) of all orders

received. Orders received increased in North America, Asia-

Pacific and EMEA and decreased in South America and China.

Orders received increased in Energy and decreased in Pulp.

Net sales for the Pulp and Energy business line amounted to

EUR 1,081 million (EUR 1,022 million) in 2022, corresponding to

21 percent (26%) of Valmet’s net sales.

Cost inflation impacted Pulp and Energy’s business

environment during 2022. The Pulp and Energy business line has

managed the challenges caused by COVID-19 well, and the

pandemic did not cause major impacts on its operations during

2022.


Paper business line	2022	2021	Change
Orders received (EUR million)	1,285	1,634	-21%
Net sales (EUR million)	1,347	1,141	18%
Personnel (end of period)	3,755	3,708	1%

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Orders received by the Paper business line decreased 21 percent

to EUR 1,285 million (EUR 1,634 million) in 2022. Paper

accounted for 25 percent (34%) of all orders received. Orders

received increased in North America and Asia-Pacific, remained

at the previous year's level in China, and decreased in South

America and EMEA. Orders received decreased in all businesses.

Net sales for the Paper business line amounted to EUR 1,347

million (EUR 1,141 million) in 2022, corresponding to 27 percent

(29%) of Valmet’s net sales.

The fire at Valmet's Rautpohja factory site in Jyväskylä,

Finland, in May, COVID-19 and lockdowns in China impacted

Paper business line’s operations during 2022. The Paper

business line has managed the challenges caused by the fire and

COVID-19 well.

Cash flow and financing

Cash flow provided by operating activities amounted to EUR 36

million (EUR 482 million) in 2022. Net working capital totaled

EUR -82 million (EUR -673 million) at the end of the year.

Change in net working capital in the statement of cash flows was

EUR -399 million (EUR 76 million) in 2022. Payment schedules of

large long-term projects have a significant impact on net

working capital development. Inventories have increased due to

the consolidation of Neles and higher stock levels in response to

component supply issues. Trade receivables increased and

advance payments received from customers were lower in 2022

compared with 2021.

Cash flow after investments totaled EUR 56 million (EUR 382

million) in 2022.

At the end of 2022, gearing was 20 percent (-7%) and equity

to assets ratio was 49 percent (42%). Interest-bearing liabilities

amounted to EUR 809 million (EUR 477 million), and net

interest-bearing liabilities totaled EUR 502 million (EUR -88

million) at the end of the reporting period. Interest-bearing

liabilities increased mainly due to consolidation of Neles.

The average maturity of Valmet’s non-current debt was 3.3

years, and average interest rate was 2.3 percent at the end of

2022. Lease liabilities have been excluded from calculation of

these two key performance indicators.

Valmet’s liquidity was strong at the end of the reporting

period, with cash and cash equivalents amounting to 277 million

(EUR 517 million) and interest-bearing current financial assets

totaling EUR 30 million (EUR 47 million).

Valmet’s liquidity was secured with a committed revolving

credit facility of EUR 300 million, which was undrawn at the end

of the reporting period. In October, Valmet utilized the first 1-

year extension option and the maturity of the revolving credit

facility was extended until October 2025 with 1-year extension

option left dependent on the approval of the banks concerned.

Liquidity was additionally secured by an uncommitted

commercial paper program worth of EUR 300 million, of which

EUR 95 million was outstanding at the end of the reporting

period. In December, Valmet increased its commercial paper

program, originally signed in 2013, from EUR 200 million to EUR

300 million.

In December, the outstanding bridge loan facility of EUR 215

million was repaid and a new term loan of EUR 50 million was

withdrawn. The new term loan matures in 2027 with 1-year

extension option dependent on the approval of the bank.

Capital expenditure

Gross capital expenditure (excluding business combinations and

right-of-use assets) totaled EUR 112 million (EUR 97 million) in

2022, of which maintenance investments amounted to EUR 37

million (EUR 39 million).

Acquisitions and disposals

Acquisitions

On March 1, 2022, Valmet announced the acquisition of North

American-based Coldwater Seals, Inc., a global provider of

consumables and services to the pulp and paper industry.

Coldwater operates manufacturing facilities in the United States

and Sweden. It manufactures and supplies paper process parts,

including suction roll seal strips, ceramics, plastics, doctoring

products and other specialty products. Coldwater is the global

market leader for suction roll seals and plastic dewatering

elements. In the last twelve months preceding the acquisition,

the company had net sales of approximately EUR 15 million. The

value of the acquisition was not disclosed. The acquired

operations employ about 60 people. Coldwater operates globally

and has Technical Service Representatives in more than 70

countries.

Disposals

Valmet made no disposals in 2022.

Merger with Neles

On July 2, 2021, Valmet announced that the Boards of Directors

of Valmet Oyj and Neles Corporation had signed a combination

agreement and a merger plan to combine the two companies

through a merger. Both companies held an Extraordinary

General Meeting on September 22, 2021, and both EGMs

approved the merger. Valmet and Neles had received all

competition approvals for the merger of Neles into Valmet on

March 21, 2022. Valmet’s Annual General Meeting on March 22,

2022, resolved to pay a dividend of EUR 1.20 per share and the

Neles Annual General Meeting on March 22, 2022, resolved to

pay a dividend of EUR 0.266 per share in accordance with the

combination agreement. In addition, Neles’ Board of Directors

decided on March 22, 2022, on an extra distribution of funds in

total of EUR 2.00 per share in accordance with the combination

agreement. The dividends and Neles' extra distribution of funds

of EUR 2.00 per share were executed on March 31, 2022. The

merger of Valmet and Neles was registered with the Finnish

Trade Register on April 1, 2022.

On July 2, 2021, Valmet entered into EUR 350 million term

loan facilities agreement with Danske Bank A/S and Nordea Bank

Abp. The syndication of the term loan facilities was closed on

October 20, 2021. The loan was used for refinancing existing

indebtedness of Valmet and Neles in connection with the

merger. EUR 215 million (originally 301 million) bridge facility

agreement, originally entered into by Neles, was transferred to

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Valmet in connection with the completion of the merger. The

bridge loan facility was used for financing of the extra

distribution to shareholders of Neles. The outstanding bridge

loan facility was repaid in December 2022.

On March 22, 2022, the Boards of Directors of Valmet and

Neles approved a loan agreement between the companies

concerning the part of the extra distribution of funds of EUR 2.00

per share payable to Valmet. According to the loan agreement,

the part of the extra distribution payable to Valmet as a

shareholder of Neles was not paid in cash to Valmet in

connection with payment of the extra distribution to other

shareholders of Neles, but the amount payable to Valmet was

recorded as debt owed by Neles to Valmet.

Valmet and Neles were separate listed companies prior to the

merger. On April 1, 2022, Valmet announced that the statutory

merger of Neles Corporation into Valmet had been registered

and the combination of Valmet’s and Neles’ business operations

had been completed. Neles is consolidated into Valmet as of

April 1, 2022, and forms Valmet’s fifth business line called Flow

Control. After the merger, Valmet’s business lines are Services,

Flow Control, Automation Systems, Paper, and Pulp and Energy.

Automation Systems business line was previously called

Automation.

The final Shareholders’ Meeting of Neles was held on June 22,

2022, in Vantaa. The Shareholders’ Meeting adopted the final

accounts of Neles in accordance with Chapter 16, Section 17 of

the Finnish Companies Act, consisting of the financial statements

and annual report for the financial period January 1, 2022–March

31, 2022. The Shareholders’ Meeting also resolved on

discharging the members of the Board of Directors and the

President and CEO of Neles from liability.

Research and development

Valmet’s research and development (R&D) expenses in 2022

amounted to EUR 95 million, i.e. 1.9 percent of net sales (EUR

82 million and 2.1%). Research and development work is carried

out predominantly in Finland and Sweden, within the business

lines’ R&D organizations and pilot facilities. In addition, research

and development takes place within a network of customers,

suppliers, research institutes and universities. In the end of

2022, R&D employed 471 people (457 people).

Valmet’s R&D work is based on customers’ needs, such as

improving production and resource efficiency, maximizing the

value of raw materials, providing new revenue streams, and

developing new innovations and technologies.

Valmet develops competitive, leading production and

automation technologies and services. To enhance raw material,

water and energy efficiency in its customers’ production

processes, Valmet combines digitalization, process technology,

flow control, automation systems and services. Valmet also

develops solutions for replacing fossil materials with renewable

ones and for producing new high-value end products.

Personnel


	As at Dec 31,
Personnel by business line	2022	2021	Change
Services	6,307	5,958	6%
Automation	4,842	1,986	>100%
Flow Control	2,792	—
Automation Systems	2,050	1,986	3%
Process Technologies	5,647	5,654	0%
Pulp and Energy	1,892	1,946	-3%
Paper	3,755	3,708	1%
Other	752	648	16%
Total	17,548	14,246	23%


	As at Dec 31,
Personnel by area	2022	2021	Change
North America	2,040	1,500	36%
South America	833	604	38%
EMEA	10,787	9,296	16%
China	2,323	1,911	22%
Asia-Pacific	1,565	935	67%
Total	17,548	14,246	23%

During 2022, Valmet employed an average of 16,554 (14,163)

people. The number of personnel at the end of December was

17,548 (14,246). Personnel expenses totaled EUR 1,171 million

(EUR 948 million) in 2022, of which wages, salaries and

remuneration amounted to EUR 920 million (EUR 750 million).

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Changes in Valmet’s Executive team

Simo Sääskilahti (M.Sc. Eng., M.Sc. Econ.), started as Business

Line President, Flow Control, and member of Valmet's Executive

Team on April 1, 2022. Sääskilahti held the position of interim

President and CEO of Neles in January–March 2022. Prior to that

he was CFO of Neles. Valmet announced Sääskilahti's

appointment on October 26, 2021.

On April 11, 2022, Valmet announced that Kari Saarinen has

resigned from his position as CFO of Valmet. The employment

relationship ended in accordance with Saarinen’s executive

agreement on October 31, 2022, while his working obligation

ended at the end of April.

On April 27, 2022, Valmet announced that Katri Hokkanen

(M.Sc. Econ.) has been appointed interim CFO at Valmet as of

May 1, 2022. She reports to President and CEO Pasi Laine.

Hokkanen joined Valmet in 2006 and held the position of Vice

President, Finance in Valmet’s Pulp and Energy business line

prior to being appointed interim CFO. Earlier she has led the

finance operations in Valmet’s Asia-Pacific Area organization and

in the EMEA services business.

On July 27, 2022, Valmet announced that Katri Hokkanen has

been appointed CFO at Valmet as of August 1, 2022.

On September 8, 2022, Valmet announced that Sami Riekkola

(M.Sc. Eng.) has been appointed Business Line President, Pulp

and Energy, at Valmet as of October 1, 2022. Since 2018,

Riekkola held the position of Business Line President,

Automation Systems, at Valmet. Before this, he worked in

various automation positions at Valmet in Europe and Asia.

Riekkola will continue as a member of Valmet's Executive Team

reporting to President and CEO Pasi Laine. Bertel Karlstedt, who

was President of Valmet's Pulp and Energy business line until

September 30, 2022, will concentrate on leading ongoing, large

customer delivery projects within the Pulp and Energy business

line supporting the development of long-term customer

relationships as Senior Vice President reporting to Sami

Riekkola.

On October 31, 2022, Valmet announced that Emilia Torttila-

Miettinen (M.Sc. Eng.) has been appointed Business Line

President, Automation Systems at Valmet as of December 1,

2022. She became a member of Valmet’s Executive Team and

reports to President and CEO Pasi Laine. Torttila-Miettinen began

her career at Valmet in 2003 and her latest position was Vice

President, Operations of the Automation Systems business line.

During her career, she has gained wide experience in Valmet’s

automation business by working in different management

positions in automation services in 2014–2020 and in product

management and engineering positions in 2004–2014.

Russia's invasion of Ukraine and sanctions on

Russia

Due to Russia's invasion of Ukraine, Valmet reviewed key

contractual obligations, project schedules, and identified risks for

projects that are delivered to Russia. Based on the review,

Valmet identified projects that it estimates no longer to meet the

criteria of a customer contract for revenue recognition purposes,

and consequently made a reversal of approximately EUR 80

million to its order backlog during 2022.

On June 3, 2022, Valmet announced that it has initiated

employee reductions, which will result in a 50 percent reduction

in the number of employees in Russia in the first implementation

phase. A second phase was implemented in autumn and resulted

in further employee reductions and the closure of one legal

entity. Consequently, Valmet recorded an expense of

approximately EUR 20 million during 2022 for estimated

restructuring costs, asset impairments and other exceptional

items triggered by Valmet's decision to withdraw from Russia.

These costs have been reported in cost of sales, in selling,

general and administrative expenses and in other operating

expenses, and have been reported as items affecting

comparability. Therefore, they do not impact Comparable EBITA.

At the end of 2022, Valmet had a total of approximately 30

employees in Russia, working primarily in administration,

engineering and maintenance. Valmet does not have production

in Russia. Approximately 2 percent of Valmet's net sales came

from its Russian operations in 2021.

Valmet will withdraw from Russia completely and will continue

to implement the withdrawal in stages as the review of

implementation options is fully completed. Valmet complies with

all sanctions and export regulations impacting business with

Russia and Belarus and monitors the development actively.

Organizational changes

Valmet announced on May 23, 2022, that it is initiating

personnel negotiations on potential temporary layoffs to adjust

production capacity to match the reduced workload at the valve

factory in Helsinki. The war in Ukraine and the intensified

COVID-19 restrictions in China had reduced the orders at the

valve factory. The exceptional situation has particularly impacted

the factory’s oil and gas projects. The impact of the COVID-19

pandemic in China also continued to cause challenges related to

component availability and logistics.

The employees within the scope of the negotiations were those

in the Flow Control business line’s valve production and related

operations in Helsinki, excluding the positioner production unit.

The negotiations involved around 340 employees. The layoffs

were temporary and lasted a maximum of 90 days.

Fire at the Rautpohja site in Jyväskylä, Finland

A fire broke out at Valmet’s Rautpohja factory site in Jyväskylä,

Finland, on May 7, 2022. The fire, which started at a workshop

during a roll test, caused damages to parts of roll and headbox

manufacturing and preassembly. Operations resumed with some

special arrangements, like transferring some of the production to

temporary locations. Full production capacity has been reached.

Valmet maintains property damage and business interruption

insurance and expects to recover fire-related losses through

insurance.

Impacts of the COVID-19 pandemic on Valmet

The COVID-19 pandemic impacted Valmet’s operations during

2022. Travel restrictions in Asia and the lockdown in China

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

impacted Valmet's business environment especially during the

first half of the year. Services, Flow Control and Automation

Systems business lines were affected by reduced component

availability and longer delivery times of certain components.

The Pulp and Energy, and Paper business lines have managed

the challenges caused by COVID-19 well, and apart from cost

inflation, the pandemic has not caused major impacts on the

Process Technologies business. The organization has performed

well under the new circumstances and found new ways to

operate, which can be utilized to improve Valmet's and

customers' processes also after the pandemic.

Strategic goals and their implementation

On June 23, 2022, Valmet announced that it adjusts its strategy

to include Flow Control and aligns its financial targets with its

financial reporting structure.

Valmet’s strategy is: Valmet develops and supplies competitive

and reliable process technologies, services and automation to

the pulp, paper and energy industries. Our automation business

covers a wide base of global process industries. We are

committed to moving our customers’ performance forward with

our unique offering and way to serve.

Valmet's mission is converting renewable resources into

sustainable results. Valmet’s vision is to become the global

champion in serving its customers and in moving the industries

forward.

Valmet seeks to achieve its strategic targets by continuous

improvement and renewal. Valmet has the following Must-Win

initiatives: ‘Customer excellence’, ‘Leader in technology and

innovation’, ‘Excellence in processes’ and ‘Winning team’, as well

as selected Business Accelerators.

Valmet’s product and services offering consists of process

technologies that increase the value of the customers’ end

products, automation systems and flow control solutions,

productivity enhancing services, plant upgrades and rebuilds,

new cost-efficient equipment and solutions for optimizing raw

material and energy usage.

To improve operational excellence, Valmet is in the process of

renewing its ERP system. The aim is to improve Valmet’s

operational capability through process harmonization and

standardization, and through renewal and modernization of the

ERP platform.

Valmet has an annual strategy process, where, among others,

Valmet’s strategy, Must-Wins and financial targets are reviewed.

Due to the completion of the merger with Neles, on April 1,

2022, Valmet confirmed its new financial targets that were

preliminarily announced on July 2, 2021. Valmet’s new target for

Comparable EBITA margin is 12–14 percent (previously 10–

12%). The new target for Comparable return on capital

employed (ROCE) before taxes is at least 15 percent (previously

at least 20%). Valmet’s other financial targets remained

unchanged.

Valmet's financial targets are the following:

Financial targets

•Net sales for Services and Automation segments to grow over two

times the market growth

•Net sales for Process Technologies segment to exceed market growth

•Comparable EBITA: 12–14%

•Comparable return on capital employed (ROCE) before taxes: at least

15%

•Dividend payout at least 50% of net profit

Continued focus on improving profitability

Valmet continues to focus on improving profitability through

various actions in e.g., sales process management, project

management and project execution, in procurement and quality,

as well as in technology and R&D.

To improve sales process management, Valmet is focusing on

key account management and analyzing the customers’ share of

wallet. Valmet is targeting market share improvement at key

customers and adding focus on sales training. Valmet has also

launched ‘Valmet's Way to Serve’ services concept – a shift

towards more unified and customer-oriented services.

Valmet is continuously improving its project management and

project execution by training personnel and implementing a

Valmet-wide project execution model. By focusing on improving

project management and execution, Valmet is targeting

continuous improvement of gross profit.

Valmet has set a long-term savings target for procurement. In

order to decrease procurement costs, Valmet is focusing on

design-to-cost and adding supplier involvement through supplier

relationship management. Valmet has also set a target for

quality cost savings and is adding focus on root cause analysis of

quality deviations. Furthermore, Valmet is continuing to adopt

the Lean principles and methodology.

Valmet is constantly focusing on new technologies and R&D to

improve product cost competitiveness and performance. The

renewal of Valmet’s ERP system will increase efficiency once

implemented.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Disclosure of non-financial information

Valmet reports its non-financial information in accordance with

the Non-Financial Reporting Directive (NFRD), the Finnish

Accounting Act, the European Union (EU) Taxonomy Regulation,

and the Task Force on Climate-related Financial Disclosures

(TCFD) recommendations.

Business model and value creation

Valmet is a leading global developer and supplier of process

technologies, automation and services for the pulp, paper, and

energy industries. With our automation systems and flow control

solutions we serve an even wider base of process industries.

Valmet’s mission is to convert renewable resources into

sustainable results.

Our strong technology offering includes pulp mills, tissue,

board and paper production lines, air emission control solutions,

and power plants for bioenergy production. Our services,

automation systems and flow control solutions improve

production performance and increase the environmental

efficiency and cost-effectiveness of Valmet’s customers’

production processes, while ensuring safe and reliable

operations. Our product and service portfolio consists of

productivity-enhancing services, plant upgrades and rebuilds,

cost-effective new equipment and solutions for optimizing

energy and raw material use, and technologies increasing the

value of our customers' end products. Valmet’s technologies

maximize the value of renewable raw materials, while

minimizing their environmental impact.

Valmet’s technologies and services enable customers to apply

and increase circularity in their operations to produce end

products with less energy and water, and significantly reduced

emissions, chemicals, and raw materials, and to further improve

flexibility in fuel source selection to replace fossil fuels with

renewable ones. Valmet sees the transition to a carbon neutral

economy as an opportunity and believes technology plays a key

role in mitigating the impacts of climate change. Valmet is

enabling the transition of the pulp and paper industry to carbon

neutrality.

In Valmet’s own operations, more efficient processes, energy

efficiency investments and purchasing CO2-free electricity and

district heat enable us to reduce CO2 emissions significantly, as

well as the use of natural resources. In our own operations, we

are constantly improving our processes to increase resource

efficiency by reducing the use of water, chemicals and various

waste streams and we aim to increase the use of recycled

materials, such as recycled steel in our technology offering.

Valmet strives to develop the transparency and traceability of

its entire value chain, from the sourcing of raw materials to the

recycling of its products. Valmet mainly purchases raw materials

(metals, minerals, and polymers), metal-based components,

energy and services from 30,000 suppliers in nearly 60

countries.

Valmet works closely with its customers throughout its key

processes – from product development to the commercialization

of new solutions. Valmet has the financial strength to invest in

innovation development and growth. In 2022, Valmet launched a

new R&D and innovation program called Beyond Circularity,

which improves Valmet’s readiness to support the green

transition in Valmet’s customer industries based on the

company’s technology vision 2030. The program aims to further

strengthen Valmet’s R&D work to develop process technologies,

automation, and services for utilizing renewable materials and

recycled waste and side streams. The program also allows

Valmet to further improve the energy efficiency of its process

technologies and enables a shift to the use of fossil-free energy

in its pulp and paper industry customers’ production processes.

In addition to value for its owners, Valmet creates economic

and social value as an employer, taxpayer, and customer for its

suppliers. Valmet provides employment and business

opportunities to a wide range of stakeholders and indirectly

builds wealth in local societies.

Sustainability, including climate-related matters, is at the core

of Valmet's business strategy, operations, and value creation.

Sustainability is integrated into our strategy and main processes

through Valmet´s comprehensive Sustainability360° Agenda,

which covers Valmet’s entire value chain including the supply

chain, Valmet’s own operations and the use phase of Valmet's

technologies.

One main material topic in Valmet's Sustainability360° Agenda

is our Climate Program, which supports the Paris Climate

Agreement’s 1.5-degree pathway and the United Nations

Sustainable Development Goals. Our Climate Program's CO2

emissions reduction targets have been approved by the Science

Based Targets initiative.

Materiality and management

Valmet’s Sustainability360° Agenda covers the most material

sustainability topics for Valmet. In 2022, the Agenda was

renewed with new material topics grouped around three focus

areas: Environment; Social; and Governance. Each focus area

has three main material topics with concrete targets and action

plans integrated into the company’s annual planning process as

a part of the strategy implementation. Valmet’s

Sustainability360° Agenda, its related targets, and all supporting

policies are owned, driven and monitored by Valmet’s Executive

Team.

Valmet’s Climate Program steering team drives and follows the

progress of the program towards the targets providing status

updates and guidance on implementation quarterly. The

progress of Valmet’s Climate Program is also monitored by the

Executive Team.

All Valmet’s corporate functions, business lines and areas are

responsible for ensuring that Groupwide initiatives are

implemented to meet Valmet’s sustainability goals. Valmet has

tied selected sustainability topics such as health, safety and

quality, as well as sustainable supply chain KPIs, to

remuneration. In 2022, Valmet's Board of Directors linked ESG

targets to Valmet’s Executive Team’s long-term share-based

incentive plan. The potential reward for the 2022–2024

performance period is based on an ESG Index with predefined

targets linked to implementing Valmet’s Climate Program and

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Sustainability Agenda, as well as targets supporting the

company’s long-term strategic and financial development.

Valmet has a systematic company-wide risk management

process for regularly assessing the probability and impact of

risks and opportunities, in which sustainability, including

climate-related matters, is integrated. Valmet has several

Groupwide policies to mitigate these risks and promote

opportunities. The basis of Valmet’s operations is its Code of

Conduct, which creates a uniform ethical foundation for all our

business transactions and work assignments globally. It also

describes our approach to sustainable business operations,

people and society and environmental issues. Valmet strives for

globally consistent and transparent management practices to

ensure all its stakeholders can reliably assess the company’s

operations and development.

Valmet has a global supplier sustainability management

process which is fully integrated into its procurement processes

to assess potential risks related to human and labor rights,

ethical business practices, climate and environmental

management, and health and safety. All Valmet’s suppliers are

assessed for sustainability risks and required to commit to the

minimum requirements set by the Sustainable Supply Chain

Policy. Compliance is assessed through potential self-

assessments and audits.

Valmet’s global management system (GMS) supports an

efficient process-oriented way of working toward the satisfaction

of customer and other stakeholder expectations. Valmet’s global

management system provides a common platform for quality

and HSE management in all operations. Our main operations are

certified in accordance with the ISO 14001:2015

(environmental), ISO 45001:2018 (health and safety) and ISO

9001: 2015 (quality) management standards.

Material topics

Valmet has fully integrated environmental, social and employee

matters, respect for human rights, and anti-corruption and

bribery matters into Valmet’s Sustainability360° Agenda.

Environmental and climate-related matters

Valmet has estimated that around 4 percent of its environmental

impact arises from its supply chain, and around 1 percent from

its own operations. Most of Valmet’s value chain’s environmental

impact, i.e., 95 percent originates in the customer use of its

technologies.

Valmet is actively developing its offering and its new products

and services to reduce CO2 emissions, water, chemical and raw

material consumption, and waste, while increasing energy

efficiency. Valmet monitors the market demand for

environmentally efficient and carbon neutral technologies and

aims to maintain the orders received from new products and

services above 25 percent of total orders received annually.

Valmet has also set climate-related targets across the value

chain as part of its Climate Program. Today, Valmet already

provides bioenergy self-sufficient chemical pulp mills and

enables carbon neutral heat and power production with our

current biomass-based energy solution offering. By 2030,

Valmet’s target is to enable carbon neutral pulp and paper

production for all its customers by developing new process

technologies and to improve the energy efficiency of

our current offering by 20 percent. Valmet also targets a

reduction of 20 percent in CO2 emissions in its supply chain and

80 percent in its own operations by 2030. As part of its own

operations’ environmental program, Valmet has also defined

targets for reducing energy and water consumption and for

increasing the share of recycled or reused waste.

Valmet also has a comprehensive climate-related e-learning

course, available for its employees and suppliers through a

supplier portal.

Valmet has a stand-alone budget and action plan to improve

environmental efficiency at its production facilities. The company

also continuously develops the resource and energy efficiency of

its technology and solutions, based on R&D action plans and

through the Beyond Circularity program.

Social and employment-related matters

Valmet has more than 17,500 employees in over 40 countries

around the world. Valmet values active dialogue and teamwork

as an important part of its success and emphasizes respectful

behavior and a safe, healthy and well-managed working

environment in all locations. The company sets clear

expectations for managers and employees through its manager

and employee role descriptions, which focus on driving

performance, building engagement, supporting development,

and living the company's values. As an employer, Valmet is

committed to promoting equal opportunities for everyone and

respecting its employees’ right to freedom of association and

collective bargaining.

Valmet strives to protect the health, safety and wellbeing of its

own people and partners. We invest in a positive safety culture

collaborating with customers and partners and constantly

improving our processes and practices towards our common goal

of zero harm.

Valmet participates in public discussions of its operating

environment and regulations. Valmet builds trust and reputation

by operating both sustainably and profitably.

Respect for human rights

As a global process technology, automation and services

supplier, Valmet operates in a very multicultural environment.

Valmet recognizes its responsibility to respect human rights and

requires its business partners to do the same.

Valmet is committed to international frameworks related to

human rights, such as the UN Guiding Principles on Business and

Human Rights. Valmet’s commitment to respect human rights is

laid out in its Human Rights Statement.

Valmet has a comprehensive due diligence framework to

monitor and manage human rights in its own operations and

supply chain. Valmet has integrated human rights into company

policies and related processes to ensure human rights are

respected and promoted in all our operations. Valmet also

provides human rights training to its employees through an e-

learning course that is globally available to all Valmeteers.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Anti-corruption and bribery

Valmet’s Code of Conduct requires Valmet and its employees to

act with honesty and integrity. It sets Valmet’s commitment of

zero tolerance for corruption and bribery. It also defines

Valmet’s expectation that all its business partners fully comply

with applicable anti-bribery laws and regulations. Valmet’s Code

of Conduct is complemented by Valmet’s Sustainable Supply

Chain Policy, which also sets Valmet’s requirements for its

suppliers regarding business ethics and legal compliance,

including refusing to participate in any form of corruption,

bribery or money laundering. Valmet also has a global Anti-

Corruption Policy and other internal policies and guidelines

containing the rules, which ensure Valmet’s business or

employees are not involved in any form of corruption or bribery.

Valmet has a Code of Conduct and Anti-bribery Compliance e-

learning course for employees. Valmet also arranges regular

training for targeted groups on the Code of Conduct, anti-

corruption, and other ethics and compliance topics to enforce the

principles and rules set by the related policies and guidelines.

Non-financial indicators


	CO2 emissions from energy consumption in own operations1		Orders received from new products and services2		Number of internal audits performed		Sponsorships and donations


	New direct suppliers screened over sustainability3		Employees completed Valmet's Code of Conduct training4		Employees covered by collective bargaining agreements		Workforce represented in formal management-worker health and safety committees

1Direct emissions (Scope 1) from used fuels and indirect emissions (Scope 2, market based) from purchased electricity, district heat and steam in own operations. Valmet

merged with Neles on April 1, 2022. Data from the new Flow Control Business Line are included in the 2022 data from the merger date. Please check GRI Supplement 2022 for

the CO2 emission factors used.

2Valmet's new products and services reduce CO2 emissions, water and raw material consumption, and waste, while increasing energy efficiency. Valmet monitors the market

demand for more environmentally efficient technologies by monitoring the share of orders received from new products and services. Valmet’s target in 2022 was that at least

25 percent of orders received should come from new products and services.

3Supplier data from the new Flow Control Business Line is not included in the 2022 figures.

4Historical data from 2020 unavailable due to a system change. All active employees, including blue-collar workers, trained in the Code of Conduct. External workforce excluded.

Data from the 2022 acquisitions are included in the reported figure.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Breakdown of employees by contract type, employment type, region and gender



Number of employees by employment contract and gender1
	Female		Male		Total
	2022	2021	2022	2021	2022	2021
Permanent	3,185	2,529	12,595	10,344	15,781	12,874
Temporary	508	414	1,259	958	1,767	1,372
Total	3,693	2,943	13,854	11,302	17,548	14,246


Number of permanent employees by employment type and gender1
	Female		Male		Total
	2022	2021	2022	2021	2022	2021
Full-time	3,066	2,427	12,441	10,227	15,508	12,655
Part-time	119	102	154	117	273	219
Total	3,185	2,529	12,595	10,344	15,781	12,874


Workforce by geography and gender1
	Female		Male		Total
	2022	2021	2022	2021	2022	2021
North America	338	204	1,701	1,296	2,040	1,500
South America	163	118	670	486	833	604
EMEA	2,443	2,068	8,344	7,227	10,787	9,296
China	551	442	1,772	1,469	2,323	1,911
Asia-Pacific	198	111	1,367	824	1,565	935
Total	3,693	2,943	13,854	11,302	17,548	14,246


Workforce by region and employee contract
	Regular 2022	Fixed term 2022	Total 2022
North America	2,039	1	2,040
South America	764	69	833
EMEA	10,073	714	10,787
China	1,360	963	2,323
Asia-Pacific	1,545	20	1,565
Total	15,781	1,767	17,548


Lost time incident frequency, total recordable incident frequency, number of fatalities and absentee rate, own personnel
	2022	2021
LTIF2	1.6	1.4
TRIF3	3.2	3.1
Fatalities	0	0
Absentee rate	2.9%	2.6%


Lost time incident frequency, total recordable incident frequency and number of fatalities, external workers
	2022	2021
LTIF2	2.3	3.1
TRIF3	4.7	6.8
Fatalities	2	1

1The gender category includes the options Female, Male, Not Declared. In 2022, the number of individuals in the “Not Declared” category was not large enough to be included in

a separate column.

2LTIF reflects the number of injuries resulting in an absence of at least one workday per million hours worked.

3LTIF + medical treatment and restricted work cases. 2021 TRIF for external workers restated due to one incident investigated during 2022.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Valmet’s management approach to non-financial impacts


	ENVIRONMENTAL AND CLIMATE-RELATED MATTERS		SOCIAL AND EMPLOYMENT-RELATED MATTERS
Policies and standards	International frameworks and Valmet's policies covering all topics:	•UN Global Compact •UN Sustainable Development Goals •United Nations Universal Declaration of Human Rights •UN Guiding Principles on Business and Human Rights •Declaration on Fundamental Principles and Rights at Work of the International Labour Organization (ILO) •OECD’s Guidelines for Multinational Enterprises
	• Health, Safety and Environment (HSE) Policy: Defines Valmet’s approach to managing HSE performance in its own operations and in customer industries • Instructions for sustainable and responsible research, product development, and design: Support the implementation of Valmet’s HSE policy • Guidance on hazardous substances and restricted materials: Describes the management approach and provides instructions for compliance with regulatory requirements regarding the prohibition and reporting of materials found in Valmet’s products		•Health, Safety and Environment (HSE) Policy: Defines Valmet’s approach to managing HSE performance in its own operations and in customer industries •Human Resources Policy: Framework for the management of the human resources function, which is committed to developing an engaged and performance-driven community and continuously driving the global development of Valmet employees’ capabilities •Equal Opportunity and Diversity Policy: Defines Valmet's approach to promoting equal opportunities for all employees •Minimum Safety Standards: Defines minimum requirements for safety at work for specific high-risk activities
Due diligence processes	•The HSE event reporting and management system is used to monitor and prevent HSE-related incidents and hazards •Compliance with HSE-related laws and regulations is ensured by complying with Valmet’s related processes •Internal and external audits executed globally to evaluate compliance with internal, legal and other HSE requirements and to correct non-conformities		•The HSE event reporting and management system is used to monitor and prevent HSE-related incidents and hazards •Compliance with laws and regulations is ensured by complying with Valmet’s related processes •Internal and external audits executed globally to evaluate compliance with internal, legal and other HSE requirements, and to correct non-conformities
Risks and risk management	Risks: •Non-compliance with environmental regulations may result in fines, creating reputational and business risks •Climate-related regulation and initiatives may change the availability and use of biomass and increase the cost of raw materials and energy, result in new taxes and tariffs, and change our stakeholder’s attitudes, which could impact Valmet’s and its customers’ operations and business environments •EU Taxonomy regulation may diminish investors interest and Valmet’s access to capital and increase the cost of capital in the long term if Valmet’s technologies and services are not considered environmentally sustainable •Climate-related physical risks; extreme weather events and variability in weather patterns, water shortages and scarcity of raw materials may cause production interruptions throughout Valmet’s value chain •Risks related to Valmet’s suppliers may create significant reputational or business risks Risk management: •ISO 14001:2015 environmental management systems in all operations •Risk management of environmental and climate-related matters is integrated into all activities to ensure proactive risk identification and mitigation •Climate scenario analysis to support strategy and risk management •Global supplier sustainability management process, including risk assessments and audits		Risks: •Valmet’s own employees' and partners' health and safety risks are related to the pandemic, work-related illnesses, injuries and work- life integration •Non-compliance with occupational health and safety regulations may result in fines, creating reputational and business risks •Retention and engagement of key employees and a slowing down of the resourcing process due to the hot labor market and talent shortage •Risks related to Valmet's suppliers may create significant reputational or business risks Risk management: •ISO 45001:2018 health and safety management systems in all operations •HSE event management system •HSE committees covering all personnel •Clear Covid management principles in all locations, production facilities and on project sites •Development of global training portfolio and ensuring necessary competence is in place across regions •Development of engagement and retention through employee survey action execution •Debottlenecking of resourcing process •Global supplier sustainability management process, including risk assessments and audits
Outcomes of policies and due diligence processes	•New products and services that meet environmental requirements and help customers produce sustainable products which require less water and energy, and fewer raw materials, enable the use of renewable resources producing less waste and fewer emissions •Supplier sustainability audits and corrective actions in accordance with Valmet’s global supplier sustainability risk management process •CO2 reduction and other environmental targets for renewable energy, energy efficiency, water consumption and waste management •Climate training, including e-learning		•Healthy and safe workplaces for Valmet’s own employees and partners •Operations free of life-changing incidents, reduction in overall incident frequencies •Training programs developed to enhance skills •Supplier sustainability audits and corrective actions in accordance with Valmet’s global supplier sustainability risk management process

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS


	RESPECT FOR HUMAN RIGHTS		ANTI-CORRUPTION AND BRIBERY
Policies and standards	International frameworks and Valmet's policies covering all topics:	•Valmet's Code of Conduct •Valmet's Human Rights Statement •Valmet's Sustainable Supply Chain Policy •ISO 9001:2015 Quality management system •ISO 14001:2015 Environmental management system •ISO 45001:2018 Occupational health and safety management system
	•Equal Opportunity and Diversity Policy: Defines Valmet’s approach to promoting equal opportunities for all employees •Non-Discrimination and Anti-Harassment Policy: Defines Valmet’s zero tolerance of discrimination or harassment in any form		•Anti-Corruption Policy: Defines Valmet's zero tolerance approach to bribery and corruption in more detail •Compliance reporting guideline: Defines how Valmet employees can voice their concerns about potential violations of the Code of Conduct, Anti-Corruption Policy, unethical behavior and other misconduct •Approval guideline for Agency agreements and Agent approval process: Describes Valmet’s due diligence process and requirements for agent approval
Due diligence processes	•Human rights due diligence framework executed through long-term action plans, and based on UN Guiding Principles for Business and Human Rights •External third-party supplier audits executed globally to evaluate compliance and correct non-conformities		•Risk management evaluations help Valmet find the best ways to manage risks and train the unit’s personnel to use existing tools and procedures •Internal audits executed globally to evaluate compliance with anti-corruption and bribery-related rules and implement necessary corrective actions •External third-party supplier audits executed globally to evaluate compliance and correct non-conformities
Risks and risk management	Risks: •Potential violations of human rights may impact Valmet’s reputation and thus its financial position Risk management: •Valmet’s human rights due diligence framework for identifying and mitigating potential negative human rights impacts and risks •Global supplier sustainability management process, including risk assessments and audits		Risks: •Unethical business practices may impact Valmet’s reputation and thus its financial position Risk management: •Internal risk management audits •Anti-Corruption Policy works as a tool to set the tone for preventive misconduct and mitigate potential risks •Global supplier sustainability management process, including risk assessments and audits
Outcomes of policies and due diligence processes	•Reporting system in place for violations of Code of Conduct •Continuous human rights training to increase awareness of potential negative impacts •Location-level social impact assessment and improvement actions, in accordance with Valmet’s human rights due diligence framework •Supplier sustainability audits and corrective actions in accordance with Valmet’s global supplier sustainability risk management process		•Reporting system in place for violations of Code of Conduct, including anti-corruption and bribery and other misconduct •Anti-corruption and bribery training, including e-learning •Supplier sustainability audits and corrective actions in accordance with Valmet’s global supplier sustainability management process

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

EU taxonomy for sustainable finance

The European Union Sustainable Finance Taxonomy Regulation

(the EU taxonomy) requires large companies subject to the Non-

Financial Reporting Directive (NFRD) to disclose the extent to

which their economic activities have a substantial positive

environmental impact. The EU taxonomy is intended to

encourage financial markets to invest and finance more

sustainably. It sets the criteria for activities that the EU has

classified as environmentally sustainable. Activities that are

described in the taxonomy are referred to as eligible activities.

Eligible activities that also meet set criteria are referred to as

aligned activities in the taxonomy.

The currently available criteria allow companies to demonstrate

their contribution to two environmental objectives: climate

change mitigation and climate change adaptation. Valmet’s

economic activities contribute to both, but more substantially to

climate change mitigation. It is expected that the EU

Taxonomy’s remaining environmental objectives will increase the

eligibility of Valmet once the related activities and technical

criteria are published and reported.

In 2022, Valmet’s operations were reviewed against the

Taxonomy activities to reassess eligibility based on the eligible

economic activities listed in Annexes I and II of the delegated

regulation, complementary regulations such as the Natural Gas

and Nuclear Act, and FAQ documents published in 2022 by the

European Commission to expand and clarify the content of the

Taxonomy regulation.

In 2022, Valmet’s approach to identifying and reporting

sustainable economic activities consisted of:

1.Eligibility assessment: mapping of economic activities to

taxonomy activity descriptions and NACE codes.

2.Substantial contribution assessment: screening of activities

against technical screening criteria.

3.Do no significant harm (DNSH) assessment: screening of

Valmet’s procedures to ensure that our operations do not

cause significant harm to relevant environmental objectives.

Screening conducted at an appropriate level for each

environmental objective. Valmet's Group-level approach is in

line with the recommendations of the Task Force on Climate-

Related Financial Disclosures (TCFD), and Valmet assesses

climate risks as part of its Groupwide risk management

system.

4.Minimum safeguards assessment: A review of Valmet’s

corporate social safeguards to ensure that our operating

instructions, company policies, and management system are

compliant with the UN Guiding Principles on Business and

Human Rights and the ILO Declaration on Fundamental

Principles and Rights at Work.

As a result of the 2022 assessment, the following economic

activities were identified as taxonomy eligible for Valmet:

•3.1 Manufacture of renewable energy technologies

•3.2 Manufacture of equipment for the production and use of

hydrogen

•3.6 Manufacture of other low-carbon technologies

As a result of the re-assessment of Valmet’s 2021 eligibility,

related to the clarifying guidance by the EU in 2022, Valmet’s

taxonomy-eligibility categorized in activity 3.6 Manufacturing of

other low carbon technologies and in 8.2 Data-driven solutions

for GHG emissions reductions, decreased significantly compared

to 2021. The predominant purpose of these two activities is GHG

emissions reductions. Valmet offers solutions for the carbon-

neutral production of pulp and energy, and enables the

transition to carbon neutral paper, board, and tissue processes

by 2030 at the latest. However, the predominant purpose of

most solutions previously classified as activity 3.6 or 8.2 is the

production of pulp and paper solutions, not GHG emission

reduction.

The EU taxonomy currently covers the economic activities of

40 percent of listed companies1 in sectors that are responsible

for 80 percent of direct greenhouse gas emissions in Europe2.

Valmet expects its eligibility to increase as the Taxonomy

evolves to include more sectors relevant to Valmet´s operations.

For now, Valmet's taxonomy-eligible and aligned economic

activities are conducted predominantly in the energy segments

while other core businesses, consisting of mainly process

technology and automation solutions and services for the pulp

and paper sector, are currently not described in the Taxonomy

Regulation. Valmet continues to develop taxonomy-related

reporting and complies with new guidance when it is published

by the EU.

Key performance indicators

Valmet has made some estimations in the calculation of the key

performance indicators (KPIs), net sales3, capital expenditure

(Capex), and operating expenditure (Opex), due to our

interpretation of the Taxonomy regulation. Double counting has

been avoided by classifying external revenue streams into

taxonomy-eligible economic activities only once. The shares of

eligible and aligned net sales have been used as key to calculate

eligible and aligned Opex and Capex.

Taxonomy net sales4 are calculated according to the EU

Taxonomy definition of turnover, and in line with IFRS 15 which

are included in Valmet’s total net sales presented in the Valmet’s

consolidated financial statements. It includes the external sales

of taxonomy eligible activities. Net sales have been calculated

separately in each business line for eligible and aligned

activities.

1 Share of domiciled companies in the EU with more than 500 employees active in economic sectors covered by the EU Taxonomy Climate Delegated Act. (Source: Bloomberg,

2021)

2 Source: Eurostat, 2021.

3 Valmet uses the term net sales in its financial statements while the EU Taxonomy Regulation refers to the term Turnover.

4 Consolidated financial statements, note 3. Revenue recognition.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Taxonomy Capex5 is presented and measured in line with the

Capex presented in the Group’s financial statements. It consists

of purchases of property, plant and equipment, and intangible

assets. Leases and equity investments at fair value through

other comprehensive income have been excluded from the

amount. Capex associated with taxonomy-eligible activities has

been considered eligible. Plans to expand taxonomy-aligned

economic activities or plans to allow the activities to become

taxonomy-aligned, have not been separately taken into

consideration.

The Taxonomy regulation's definition of Opex relates to assets

and economic activities that generate taxonomy eligible net

sales. It consists of expenses relating directly to maintenance

and servicing of assets including e.g., facility improvements, and

research and development projects supporting the transition

towards a low carbon economy and achieving the Science Based

Targets that Valmet has set and which have been validated by

the SBTi. Valmet has applied a conservative interpretation of the

Taxonomy OpEx definition. Raw materials, and salaries of

employees performing repairs, maintenance, and services of

eligible fixed assets, are excluded.

The following tables present Valmet's 2022 Taxonomy KPIs

associated with Valmet’s taxonomy-eligible economic activities:


Turnover6				Substantial contribution criteria		'Does Not Significantly Harm' criteria
Economic activities	NACE codes	Absolute turnover (EUR million)	Proportion of turnover	Climate change mitigation	Climate change adaptation	Climate change mitigation	Climate change adaptation	Water and marine resources	Circular economy	Pollution	Biodiversity and ecosystems	Minimum safeguards	Taxonomy- aligned proportion of turnover, 2022	Enabling activity	Transitional activity

A. TAXONOMY-ELIGIBLE ACTIVITIES
Taxonomy-aligned activities (A.1)
3.1 Manufacture of renewable energy technologies	C27, C28, M71, F42.22	215	4%	100%			Yes	Yes	Yes	Yes	Yes	Yes	4%	E
Turnover (A.1)		215	4%	100%									4%
Eligible, but not aligned activities (A.2)
3.1 Manufacture of renewable energy technologies	C27	10	—%	100%
3.2 Manufacture of equipment for the production and use of hydrogen	C28	4	—%	100%
3.6 Manufacture of other low carbon technologies	C28, C33	11	—%	100%
Turnover (A.2)		25	—%	100%									—%
Total (A)		240	5%	100%									5%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover (B)		4,834	95%

Total (A + B)		5,074	100%


Capex				Substantial contribution criteria		'Does Not Significantly Harm' criteria
Economic activities	NACE codes	Absolute Capex (EUR millions)	Proportion of Capex	Climate change mitigation	Climate change adaptation	Climate change mitigation	Climate change adaptation	Water and marine resources	Circular economy	Pollution	Biodiversity and ecosystems	Minimum safeguards	Taxonomy- aligned proportion of Capex, 2022	Enabling activity	Transitional activity

A. TAXONOMY-ELIGIBLE ACTIVITIES
Taxonomy-aligned activities (A.1)
3.1 Manufacture of renewable energy technologies	C27, C28, M71, F42.22	2	2%	100%			Yes	Yes	Yes	Yes	Yes	Yes	2%	E
Capex (A.1)		2	2%	100%									2%
Eligible, but not aligned activities (A.2)
3.1 Manufacture of renewable energy technologies	C27	0	—%	100%
3.2 Manufacture of equipment for the production and use of hydrogen	C28	0	—%	100%
3.6 Manufacture of other low carbon technologies	C28, C33	0	—%	100%
Capex (A.2)		0	—%	100%									—%
Total (A)		3	2%	100%									2%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Capex (B)		109	98%

Total (A + B)		112	100%

5 Consolidated financial statements, note 4. Intangible assets and property, plant and equipment.

6 Net Sales is used in other parts of Valmet's financial statements, while the EU Taxonomy Regulation uses the term Turnover.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS


Opex				Substantial contribution criteria		'Does Not Significantly Harm' criteria
Economic activities	NACE codes	Absolute Opex (EUR millions)	Proportion of Opex	Climate change mitigation	Climate change adaptation	Climate change mitigation	Climate change adaptation	Water and marine resources	Circular economy	Pollution	Biodiversity and ecosystems	Minimum safeguards	Taxonomy- aligned proportion of Opex, 2022	Enabling activity	Transitional activity

A. TAXONOMY-ELIGIBLE ACTIVITIES
Taxonomy-aligned activities (A.1)
3.1 Manufacture of renewable energy technologies	C27, C28, M71, F42.22	6	2%	100%			Yes	Yes	Yes	Yes	Yes	Yes	2%	E
Opex (A.1)		6	2%	100%									2%
Eligible, but not aligned activities (A.2)
3.1 Manufacture of renewable energy technologies	C27	0	—%	100%
3.2 Manufacture of equipment for the production and use of hydrogen	C28	1	—%	100%
3.6 Manufacture of other low carbon technologies	C28, C33	0	—%	100%
Opex (A.2)		1	—%	100%									—%
Total (A)		7	2%	100%									2%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Opex (B)		303	98%

Total (A + B)		310	100%

Tables are based on the templates for KPIs presented in Annex II of the Commission Delegated Regulation (EU) 2020/852. Templates have been modified to include only

reportable information, excluding e.g. columns for substantial contribution criteria of environmental objectives 3-6.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Shares and shareholders

Share capital and share data1


	2022	2021	2020
Share capital, December 31, EUR million	140	100	100
Number of shares, December 31:
Number of outstanding shares	184,184,830	149,471,196	149,490,976
Treasury shares held by the Parent Company	344,775	393,423	373,643
Total number of shares	184,529,605	149,864,619	149,864,619
Average number of outstanding shares	175,617,981	149,467,939	149,499,114
Average number of diluted outstanding shares	175,617,981	149,467,939	149,499,114
Trading volume on Nasdaq Helsinki Ltd.2	125,393,868	97,242,422	162,711,000
% of total shares for public trading	68	65	109
Earnings per share, EUR	1.92	1.98	1.54
Earnings per share, diluted, EUR	1.92	1.98	1.54
Adjusted earnings per share, EUR3	2.37	2.09	1.64
Dividend per share, EUR	1.304	1.20	0.90
Dividend, EUR million	2394	179	135
Dividend payout ratio	68%4	61%	58%
Effective dividend yield	5.2%4	3.2%	3.9%
Price to earnings ratio (P/E)	13.1	19.1	15.1
Equity per share, EUR	13.55	8.87	7.60
Highest share price, EUR	38.59	38.53	25.20
Lowest share price, EUR	19.95	23.02	13.33
Volume-weighted average share price, EUR	26.90	32.58	21.15
Share price, December 31, EUR	25.16	37.72	23.36
Market capitalization, December 31, EUR million	4,643	5,653	3,501

1The formulas for calculation of the figures are presented in the section ‘Formulas for Calculation of Indicators´.

2 In addition to Nasdaq Helsinki Ltd, Valmet’s shares are also traded on other marketplaces, such as Cboe CXE, Cboe BXE and Turquoise. A total of approximately 21 million

Valmet shares were traded on these three alternative marketplaces in 2022. (Source: www.valmet.com/investors/valmet-share/trading-volumes/).

3 Adjusted earnings per share (Adjusted EPS) is a new alternative performance measure that excludes the impact of fair value adjustments arising from business combinations,

net of tax (2022: EUR 78 million, 2021: EUR 17 million, 2020: EUR 15 million). Adjusted EPS enables users of the financial information to prepare more meaningful analysis on

Valmet's performance.

4 Board of Directors’ proposal.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Largest shareholders on December 31, 2022


		Shares	% of share capital
1	Solidium Oy	18,640,665	10.10%
2	Oras Invest Ltd	9,300,000	5.04%
3	Varma Mutual Pension Insurance Company	6,712,789	3.64%
4	Ilmarinen Mutual Pension Insurance Company	6,186,993	3.35%
5	Elo Mutual Pension Insurance Company	2,751,500	1.49%
6	OP Funds	2,625,184	1.42%
7	The State Pension Fund	2,100,000	1.14%
8	Evli Funds	1,476,000	0.80%
9	Danske Invest funds	1,397,582	0.76%
10	Nordea Funds	1,041,905	0.57%
11	Sigrid Jusélius Foundation	716,954	0.39%
12	Mandatum Life Insurance Company Limited	678,528	0.37%
13	Samfundet folkhälsan i Svenska Finland rf	661,923	0.36%
14	Investment fund Aktia Capital	614,080	0.33%
15	The Social Insurance Institution of Finland, KELA	526,188	0.29%

Source: Euroclear Finland.

Shareholdings of the Board of Directors in Valmet Oyj on

December 31, 2022


		Shares
Mäkinen, Mikael	Chairman of the Board	7,462
Eskola, Jaakko	Vice Chairman of the Board	2,423
Cantell, Aaro	Member of the Board	8,408
Hämälainen, Anu	Member of the Board	2,239
Kemppainen, Pekka	Member of the Board	4,578
Lindberg, Per	Member of the Board	1,634
Maurer, Monika	Member of the Board	4,578
Söderström, Eriikka	Member of the Board	5,708
Total		37,030
% of outstanding shares		0.02%

Shareholdings of the Executive Team in

Valmet Oyj on December 31, 2022


		Shares
Laine, Pasi	President and CEO	177,137
Hokkanen, Katri	CFO	5,598
Macharey, Julia	SVP, Human Resources and Operational Development	38,319
Niemi, Aki	Business Line President, Services	63,222
Paukkunen, Petri	Area President, Asia Pacific	8,418
Riekkola, Sami	Business Line President, Pulp and Energy	16,433
Salonsaari-Posti, Anu	SVP, Marketing, Communications, Sustainability and Corporate Relations	31,350
Simola, Vesa	Area President, EMEA	52,971
Sääskilahti, Simo	Business Line President, Flow Control	1,437
Tacla, Celso	Area President, South America	94,129
Tiitinen, Jukka	Area President, North America	94,330
Torttila-Miettinen, Emilia	Business Line President, Automation Systems	250
Vähäpesola, Jari	Business Line President, Paper	61,348
Zhu, Xiangdong	Area President, China	30,617
Total		675,559
% of outstanding shares		0.37%

Number of shareholders

The number of registered shareholders at the end of year 2022

was 89,056 (58,894).

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Flagging notifications

During the review period, Valmet received the following flagging notifications referred to in the Securities Market Act:


Transaction date	Shareholder	Threshold	Direct holding, %	Indirect holding, %	Total holding, %
April 1, 2022	Solidium Oy	Below 10%	9.25%	-	9.25%
May 19, 2022	Solidium Oy	Above 10%	10.10%	-	10.10%
Dec 16, 2022	Oras Invest Oy	Above 5%	5.04%	-	5.04%

Trading of shares


Trading of Valmet shares on Nasdaq Helsinki	January 1–December 31, 2022	January 1– December 31, 2021
Number of shares traded	125,393,868	97,242,422
Total value, EUR million	3,369	3,166
High, EUR	38.59	38.53
Low, EUR	19.95	23.02
Volume-weighted average price, EUR	26.90	32.58
Closing price on the final day of trading, EUR	25.16	37.72

The closing price of Valmet’s share on the final day of trading for

the reporting period, December 30, 2022, was EUR 25.16, i.e.

33 percent lower than the closing price on the last day of trading

in 2021 (EUR 37.72 on December 30, 2021).

In addition to Nasdaq Helsinki Ltd, Valmet’s shares are also

traded on other marketplaces, such as Cboe CXE, Cboe BXE and

Turquoise. A total of approximately 21 million Valmet shares

were traded on these three alternative marketplaces in 2022

(Source: www.valmet.com/investors/valmet-share/trading-

volumes/).

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Board authorizations regarding share repurchase and share

issue

Valmet Oyj’s Annual General Meeting on March 22, 2022,

authorized Valmet’s Board of Directors to decide on the

repurchase of a maximum number of 7,500,000 of the

Company’s own shares in one or several tranches. The

Company's own shares may be repurchased otherwise than in

proportion to the shareholdings of the shareholders (directed

repurchase). The Company's own shares may be repurchased

using the unrestricted equity of the Company at a price formed

on a regulated market on the official list of Nasdaq Helsinki Ltd

on the date of the repurchase or at a price otherwise formed on

the market.

The Company's own shares may be repurchased for reasons of

developing the Company's capital structure, financing or carrying

out acquisitions, investments or other business transactions, or

for the shares to be used in an incentive scheme, however so

that a maximum of 500,000 shares may be repurchased to be

used in an incentive scheme, which corresponds to

approximately 0.3 percent of all the shares in the Company. The

Board of Directors decides on all other terms related to the

repurchasing of the Company's own shares.

Valmet Oyj’s Annual General Meeting authorized Valmet’s

Board of Directors to decide on the issuance of shares as well as

the issuance of special rights entitling to shares in one or several

tranches. The issuance of shares may be carried out by offering

new shares or by transferring treasury shares held by Valmet.

Based on this authorization, the Board of Directors may also

decide on a directed share issue in deviation from the

shareholders’ pre-emptive rights and on the granting of special

rights. Based on this authorization, a maximum number of

15,000,000 shares may be issued, which corresponds to

approximately 10.0 percent of all the shares in Valmet Oyj. The

new shares and treasury shares may be issued for consideration

or without consideration.

The Board of Directors may decide on all other terms of the

issuance of shares and special rights entitling to shares pursuant

to Chapter 10(1) of the Finnish Companies Act. The Board of

Directors may use this authorization, for example, for reasons of

developing the Company’s capital structure, in financing or

carrying out acquisitions, investments or other business

transactions, or for the shares to be used in incentive schemes,

however so that the Board of Directors may issue a maximum of

500,000 shares to be used in incentive schemes, which

corresponds to approximately 0.3 percent of all the shares in the

Company.

The authorizations shall remain in force until the close of the

next Annual General Meeting, and they cancel the authorizations

granted by the Annual General Meeting of March 23, 2021.

Based on the authorization granted by the Annual General

Meeting 2022, on June 21, 2022, Valmet’s Board of Directors

decided on a directed share issue related to the reward payment

of Valmet’s long-term share-based incentive plan, Deferred

Share Plan, for the discretionary period 2021. In the share issue

on June 23, 2022, a total of 868 Valmet’s treasury shares were

conveyed without consideration to the participants of the plan, in

accordance with the terms and conditions of the plan.

In its meeting on December 20, 2022, the Board of Directors

of Valmet decided to use the authorization granted by the

Annual General Meeting to repurchase the Company's own

shares. Based on the authorization, the Board decided to initiate

a fixed-term share buy-back program for the purpose of

acquiring the Company's own shares to meet part of the

obligations arising from the LTI Plans and the Restricted Pool

incentive. The share acquisitions will begin at the earliest on

February 6, 2023, and will end at the latest on February 24,

2023. The maximum number of shares to be acquired is

125,000. The shares will be acquired at market price in public

trading on Nasdaq Helsinki Ltd.

As at December 31, 2022, Valmet’s Board of Directors had not

used any other authorizations given by the Annual General

meeting on March 22, 2022.

In its meeting on December 16, 2021, Valmet's Board of

Directors decided to use the authorization granted by the Annual

General Meeting 2021 to repurchase the Company's own shares.

Based on the authorization, the Board decided to initiate a fixed-

term share buy-back program for the purpose of acquiring the

Company's own shares to meet part of the obligations arising

from the LTI Plans and the Restricted Pool incentive. The share

acquisitions began on February 9, 2022, and ended on February

22, 2022, and in total 150,000 shares were acquired. The shares

were acquired at market price in public trading on Nasdaq

Helsinki Ltd.

Based on the authorization granted to the Board of Directors

by the Annual General Meeting 2021, Valmet’s Board of

Directors decided in December 2021 on a directed share issue

related to the reward payment of Valmet’s share-based long-

term incentive plans for the performance period 2021. In the

share issue on March 15, 2022, a total of 200,447 Valmet’s

treasury shares were conveyed without consideration to the

participants of the plans, in accordance with the terms and

conditions of the plans.

Share-based incentive plans

Valmet’s share-based incentive plans are part of the

remuneration program for Valmet’s key personnel. The aim of

the plans is to align the interests of the shareholders and the

key employees to increase the value of Valmet in the long run,

to steer the key employees towards achieving the Company’s

selected strategic targets, to commit the key employees to the

Company, and to offer them a competitive reward plan based on

holding the Company's shares. Any shares to be potentially

awarded are, or have been, acquired through public trading, and

therefore the incentive plans have no diluting effect on the share

value.

Long-term incentive plans – Performance Share Plan and

Deferred Share Plan

In its meeting on December 17, 2020, the Board of Directors of

Valmet Oyj decided on new share-based long-term incentive

plans, a Performance Share Plan and a Deferred Share Plan, for

Valmet's key employees.

The Performance Share Plan is directed to the Executive Team

members. It includes a three-year performance period parallel to

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

a one-year performance period. Valmet's Board of Directors

decides on the predefined performance measures and targets in

the beginning of each performance period.

The Deferred Share Plan is directed to other key employees in

management positions, and management talents. It includes a

one-year performance period. The predefined performance

measures and targets are decided by Valmet’s Board of Directors

and are aligned with the targets of the Performance Share Plan.

The Deferred Share Plan is directed to a maximum of 130

participants, of which approximately 80 are key employees in

management positions, and approximately 50 are management

talents.

The Performance Share Plan includes a recommendation for

the members of Valmet's Executive Team to own and hold an

amount of Company shares equaling their gross annual base

salary (100 percent ownership recommendation). Management

shareholding can be found on Valmet's website at

www.valmet.com/investors/shareholders/management-

shareholding.


	Long-term incentive plans 2021–2023		Long-term incentive plans 2022–2024
Plan name	Performance Share Plan and Deferred Share Plan	Performance Share Plan	Performance Share Plan and Deferred Share Plan	Performance Share Plan
Performance period	2021	2021–2023	2022	2022–2024
Incentive based on	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	Predefined strategic target	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	ESG Index, targets linked to implementing Valmet’s Climate Program and Sustainability Agenda
Reward payment	In spring 2022	In spring 2024	In spring 2023	In spring 2025
Participants
Performance Share Plan	13	11	14	13
Deferred Share Plan	110		130
Total gross number of shares earned	360,200 shares	46,370 shares	As at December 31, 2022, a total of 186,585 shares were allotted to participants	As at December 31, 2022, a total of 33,234 shares were allotted to participants


	Long-term incentive plans 2023–2025
Plan name	Performance Share Plan and Deferred Share Plan	Performance Share Plan
Performance period	2023	2023–2025
Incentive based on	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	Development of a valuation multiple of Valmet’s share in comparison to peer group as well as targets supporting the Company’s long-term strategic and financial development
Reward payment	In spring 2024	In spring 2026
Participants
Performance Share Plan	14	14
Deferred Share Plan	130
Total gross number of shares earned	The rewards to be paid will correspond to a maximum total of approximately 442,960 Valmet shares

Based on the authorization granted to the Board of Directors by

the Annual General Meeting 2021, Valmet’s Board of Directors

decided in December 2021 on a directed share issue related to

the reward payment of Valmet’s share-based long-term

incentive plans for the performance period 2021. In the share

issue on March 15, 2022, a total of 200,447 Valmet’s treasury

shares were conveyed without consideration to the participants

of the plans, in accordance with the terms and conditions of the

plans.

Based on the authorization granted by the Annual General

Meeting 2022, on June 21, 2022, Valmet’s Board of Directors

decided on a directed share issue related to the reward payment

of Valmet’s long-term share-based incentive plan, Deferred

Share Plan, for the discretionary period 2021. In the share issue

on June 23, 2022, a total of 868 Valmet’s treasury shares were

conveyed without consideration to the participants of the plan, in

accordance with the terms and conditions of the plan.

In its meeting on December 20, 2022, the Board of Directors

of Valmet decided to use the authorization granted by the

Annual General Meeting to repurchase the Company's own

shares. Based on the authorization, the Board decided to initiate

a fixed-term share buy-back program for the purpose of

acquiring the Company's own shares to meet part of the

obligations arising from the LTI Plans and the Restricted Pool

incentive. The share acquisitions will begin at the earliest on

February 6, 2023, and will end at the latest on February 24,

2023. The maximum number of shares to be acquired is

125,000. The shares will be acquired at market price in public

trading on Nasdaq Helsinki Ltd.

At the end of the reporting period, the Company held 344,775

treasury shares related to the share-based incentive programs.

More information about share-based incentive plans can be

found in Valmet’s Remuneration Report, which is available at

www.valmet.com/governance.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Resolutions of Valmet Oyj’s

Annual General Meeting

The Annual General Meeting 2022 was held in Helsinki on March

22, 2022. The Annual General Meeting adopted the financial

statements for 2021 and discharged the members of the Board

of Directors and the President and CEO from liability for the

financial year 2021. The Annual General Meeting adopted the

remuneration report for governing bodies. The decision is

advisory. The Annual General Meeting approved the Board of

Directors' proposals concerning authorizing the Board of

Directors to decide on repurchasing the Company’s own shares

and to decide on the issuance of shares and the issuance of

special rights entitling to shares.

The Annual General Meeting decided to pay dividends of EUR

1.20 per share for the financial period ended on December 31,

2021.

The Annual General Meeting confirmed the number of Board

members as eight, however, before the completion of the

merger of Valmet and Neles Corporation (the “Effective Date”),

the number of members of the Board of Directors be six. Aaro

Cantell, Pekka Kemppainen, Per Lindberg, Monika Maurer, Mikael

Mäkinen, and Eriikka Söderström were re-elected as Board

members. Jaakko Eskola and Anu Hämäläinen were elected

conditionally as new Board members for the term commencing

on the Effective Date, and Mikael Mäkinen was re-elected as the

Chairman of the Board and Aaro Cantell re-elected as the Vice-

Chairman of the Board until the Effective Date from which date

on Jaakko Eskola shall act as the Vice-Chairman of the Board.

The term of office of the members of the Board of Directors

expires at the close of the Annual General Meeting 2023.

PricewaterhouseCoopers Oy was elected as the Company's

auditor for a term expiring at the end of the next Annual General

Meeting.

Valmet published a stock exchange release on March 22, 2022,

concerning the resolutions of the Annual General Meeting and

the organizing meeting of the Board of Directors. The stock

exchange release and meeting materials can be viewed on

Valmet’s website at www.valmet.com/investors/governance/

annual-general-meeting/2022/.

Lawsuits and claims

Several lawsuits, claims and disputes based on various grounds

are pending against Valmet in various countries, including

product liability lawsuits and claims as well as legal disputes

related to Valmet’s deliveries. Valmet is also a plaintiff in several

lawsuits.

Valmet’s management does not expect to the best of its

present understanding that the outcome of these lawsuits,

claims and disputes will have a material adverse effect on

Valmet in view of the grounds currently presented for them,

provisions made, insurance coverage in force and the extent of

Valmet’s total business activities.

Risks and business uncertainties

Valmet’s operations are affected by various strategic, financial,

operational and hazard risks. Valmet takes measures to exploit

emerging opportunities and to limit the adverse effects of

potential threats. The assessment of risks related to sustainable

development holds an important role in risk management. If

such threats materialized, they could have material adverse

effects on Valmet’s business, financial situation and operating

result, or on the value of shares and other securities.

The objective of Valmet’s risk management is to ensure the

implementation of an effective and successful strategy for

achieving both long- and short-term goals. The task of Valmet’s

management is to regulate risk appetite.

In assessing risks, Valmet takes into consideration the

probability of the risks and their estimated impact on net sales

or financial results. Valmet’s management estimates that the

Company’s overall risk level is currently manageable in

proportion to the scope of its operations and the practical

measures available for managing these risks.

Financial uncertainty in the global economy, coupled with

fluctuations in exchange rates and tightening financial market

regulations may have an adverse effect on the availability of

financing from banks and capital markets and could reduce the

investment appetite of Valmet’s customers. Valmet estimates

that the high proportion of business derived from stable business

(Services and Automation segments) and the geographical

diversification will reduce the possible negative effects that

market uncertainties may have.

If global economic growth weakens, it might have adverse

effects on new projects under negotiation or on projects in the

order backlog. Some projects may be postponed, suspended, or

canceled. In the case of long-term delivery projects, initial

customer advance payments are typically 10–30 percent of the

value of the project, and customers make progress payments as

the project is implemented. This significantly decreases the risks

and financing requirements related to Valmet’s projects. Valmet

continually assesses its customers’ creditworthiness and their

ability to meet their obligations. As a rule, Valmet does not

finance customer projects. If economic growth slows down

significantly, the markets for Valmet’s products may shrink,

which may lead to, for example, tougher price competition.

Increasing geopolitical tensions, increase of protectionist and

more political regulation, and sanctions may create uncertainty

to customers’ investment activity and impact Valmet’s

operations. Changes and uncertainty in future regulation and

legislation can have effects, especially on the energy business

and the use of data.

Large fluctuations in energy prices can affect the global

economy. These fluctuations can also affect Valmet and its

customers.

Should the global issues with component availability and

logistics continue, it could have adverse effects on Valmet's

business.

Changes in labor costs and the prices of raw materials and

components can affect Valmet’s profitability. Raw material and

component cost inflation has been high, and wage inflation is

continuing. Valmet’s goal is to offset this through increased

productivity and price increases. It is possible, however, that

tough competition in some product categories will make it

difficult to pass on cost increases to product prices. On the other

hand, some of Valmet’s customers are raw material producers

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

and their ability to operate and invest may be enhanced by

strengthening commodity prices and hampered by declining

commodity prices.

To ensure a high level of quality in both production and

services, it is important to sustain a high level of competence

and talent availability. This includes, for example, maintaining

efficient recruitment programs, utilization of existing talent and

sharing knowledge globally.

Through acquisitions, Valmet may become exposed to risks

associated with new markets and business environments. The

actual acquisition process also includes risks. Other risks

associated with acquisitions include, but are not limited to,

integration of the acquired business, increased financial risk

exposure, retention of key personnel and achieving the targets

set for the acquired business.

Valmet’s operations, products and services rely largely on data

networks, software and digital solutions. Any malfunctions and

cybersecurity breaches in such networks, software and solutions

as well as potential failures in information system development

projects may adversely affect Valmet’s business and financial

position and lead to reputational damage.

Management of project business risks important

An important part of Valmet’s business consists of project

business. Pulp business projects in particular can be large, thus

project-specific risk management is crucial. Key risks related to

projects are project cost estimation, scheduling, project risk

management, quality and performance risks, and materials

management risks. Risk analysis shall, as a minimum, take place

for all significant project quotations. The work concerning threat

and opportunity assessment continues during the execution

phase of the project. Risk management is based on careful

planning and continuous, systematic monitoring and evaluation.

Project risks are managed by improving and continuously

developing project management processes and the related

systems.

There may be changes in the competitive situation of Valmet’s

individual businesses, such as the emergence of new, cost-

effective competition in the markets. Valmet can safeguard its

market position by developing its products and services, and

through good customer service and local presence.

Availability of financing crucial

Securing the continuity of Valmet’s operations requires sufficient

available funding under all circumstances. Valmet estimates that

its liquid cash assets and committed credit limits are sufficient to

secure its immediate liquidity and to ensure the flexibility of

financing. The average maturity of Valmet’s non-current debt,

excluding lease liabilities, is 3.3 years. Loan facilities include

customary covenants, and Valmet is in clear compliance with the

covenants at the balance sheet date.

Net working capital and capital expenditure levels have a key

impact on the adequacy of Valmet’s financing. Setting aside

investments into the renewal of the ERP system, Valmet does

not expect any significant increase in annual capital expenditure

and estimates that it is well-positioned to keep capital

expenditure approximately at the level of total depreciation.

Of the financial risks that affect Valmet’s profit, currency

exchange rate risks are among the most substantial. Exchange

rate changes can affect Valmet’s business, although the wide

geographical scope of the Company’s operations reduces the

impact of any individual currency. Economic insecurity typically

increases exchange rate fluctuations. Valmet hedges its currency

exposures linked to firm delivery and purchase agreements.

Changes in legislation and the way authorities interpret

regulation, for example regarding taxation, can also have an

impact on Valmet’s financials.

As at December 31, 2022, Valmet had EUR 1,611 million (EUR

730 million) of goodwill on its statement of financial position.

Valmet assesses the carrying value of its goodwill for impairment

annually, or more frequently if facts and circumstances indicate

that carrying value may not be recoverable. Valmet has not

identified any indications of impairment during the reporting

period. The principles used for impairment testing are presented

in the financial statements.

COVID-19 and other pandemics

In case of a pandemic outbreak or prolonged pandemics, there

could be further adverse impact on Valmet’s operations,

customer investment activity, project deliveries, supply chain

and availability of financing for both Valmet and its customers.

Epidemic outbreaks and potential other pandemics remain a risk

to Valmet’s operations also after COVID-19. Pandemics might

have impact on the supply chain and business operations by

increasing the likelihood of interruptions. Valmet’s operations are

dispersed all around the world, Valmet has a global customer

base and our suppliers operate in several countries. This

mitigates the overall impacts of risks to Valmet, should there be

any disruptions in some isolated country or case.

Valmet currently has a solid order backlog, strong balance

sheet and liquidity coupled with a flexible organization, and a

structured way to operate in changing circumstances. This will

support Valmet in mitigating the global challenges caused by

COVID-19 and other pandemics. Valmet also has a Global

Incident Management Team (IMT), and regional IMT structure

established to manage Valmet’s response to pandemics.

Russia's invasion of Ukraine

Russia's invasion of Ukraine causes significant risks and

uncertainties to the markets affecting the entire global economic

environment and financial markets. If the war is further

prolonged or geopolitical tensions increase further, there could

be additional adverse impacts on Valmet’s operations, customer

investment activity, project deliveries, availability and prices of

components, supply chain and availability of financing for both

Valmet and its customers. Valmet has an Incident Management

Team (IMT) to monitor the situation and manage the Company's

response to the impacts of the war.

Valmet will withdraw from Russia completely. Approximately 2

percent of Valmet's net sales came from its Russian operations

in 2021. Valmet does not have production in Russia.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Events after the reporting period

On November 9, 2022, Valmet announced that it has entered

into an agreement to acquire the U.S. based NovaTech

Automation’s Process Solutions business. On January 3, 2023,

Valmet announced that the acquisition has been completed. The

value of the acquisition was not disclosed. The acquired business

specializes in process control and optimization solutions for

batch, continuous and hybrid processes. It serves customers

mainly in process industries such as food and beverage,

pharmaceuticals and chemical products. With a turnover of

approximately USD 18 million, it employs 76 people in the

United States and the Benelux countries. The acquisition

excludes NovaTech Automation’s other divisions. The NovaTech

Automation Process Solutions business will be integrated to

Valmet’s Automation Systems business line and will be included

in Valmet’s financial reporting for the first time in the interim

report for January–March, 2023.

There have been no other subsequent events after the review

period that required recognition or disclosure.

Guidance for 2023

Valmet estimates that net sales in 2023 will increase in

comparison with 2022 (EUR 5,074 million) and Comparable

EBITA in 2023 will increase in comparison with 2022 (EUR 533

million).

Market outlook

General economic outlook according to World Bank

Global growth is expected to decelerate sharply to 1.7 percent in

2023, the third weakest pace of growth in nearly three decades.

The United States, the euro area and China are all undergoing a

period of pronounced weakness, and the resulting spillovers are

exacerbating other headwinds faced by emerging market and

developing economies. The combination of slow growth,

tightening financial conditions and heavy indebtedness is likely

to weaken investment and trigger corporate defaults. Further

negative shocks, such as higher inflation, even tighter policy,

financial stress, deeper weakness in major economies, or rising

geopolitical tensions, could push the global economy into

recession. (The World Bank Global Economic Prospects, January

2023)

Short-term market outlook

Valmet reiterates the good short-term market outlook for

services, flow control, automation systems, energy, and board

and paper, the good/satisfactory short-term market outlook for

pulp, and the satisfactory short-term market outlook for tissue.

The short-term market outlook is given for the next six months

from the end of the reported period. It is based on customer

activity (50%) and Valmet’s capacity utilization (50%), and the

scale is ‘weak–satisfactory–good’.

Board of Directors' proposal for the distribution

of profit

Valmet Oyj’s distributable funds on December 31, 2022, totaled

EUR 1,453,506,822.23 of which the net profit for the year 2022

was EUR 309,501,276.62 (according to Finnish Generally

Accepted Accounting Standards).

The Board of Directors proposes to the Annual General Meeting

that a dividend of EUR 1.30 per share be paid based on the

statement of financial position to be adopted for the financial

year which ended December 31, 2022, and the remaining part of

profit be retained and carried further in the Company’s

unrestricted equity.

The dividend shall be paid in two installments. The first

installment of EUR 0.65 per share shall be paid to shareholders

who on the dividend record date of March 24, 2023, are

registered in the Company’s shareholders’ register held by

Euroclear Finland Ltd. The dividend shall be paid on April 5,

2023.

The second installment of EUR 0.65 per share shall be paid in

October 2023. The second installment shall be paid to

shareholders who on the dividend record date are registered in

the Company’s shareholders’ register held by Euroclear Finland

Ltd. The dividend record date and payment date shall be

resolved by the Board of Directors in its meeting scheduled for

September 28, 2023. The dividend record date for the second

installment would be October 2, 2023, and the dividend payment

date October 12, 2023.

All the shares in the Company are entitled to a dividend except

for treasury shares held by the Company on the dividend record

date.

In Espoo on February 2, 2023

Valmet’s Board of Directors

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | REPORT OF THE BOARD OF DIRECTORS

Financial indicators


	As at and for the twelve months ended Dec 31
EUR million	2022	2021	2020	2019	20181
Net sales	5,074	3,935	3,740	3,547	3,325
Net sales change, %	29%	5%	5%	7%	9%
Comparable EBITA	533	429	365	316	257
% of net sales	10.5%	10.9%	9.8%	8.9%	7.7%
EBITA	550	448	355	315	241
% of net sales	10.8%	11.4%	9.5%	8.9%	7.2%
Operating profit	436	399	319	281	211
% of net sales	8.6%	10.1%	8.5%	7.9%	6.4%
Profit before taxes	431	395	307	269	205
% of net sales	8.5%	10.0%	8.2%	7.6%	6.2%
Profit for the period	338	296	231	202	152
% of net sales	6.7%	7.5%	6.2%	5.7%	4.6%
Profit attributable to owners of the parent	338	296	231	201	151

Amortization	-114	-49	-36	-34	-30
Depreciation, property, plant and equipment (excl. right-of-use assets)	-55	-47	-47	-48	-46
Depreciation, right-of-use assets	-34	-24	-24	-23	—
Depreciation and amortization	-203	-120	-106	-105	-76
% of net sales	-4.0%	-3.0%	-2.8%	-3.0%	-2.3%

Cash flow provided by operating activities	36	482	532	295	284
Cash flow after investments	56	382	-60	58	208
Gross capital expenditure (excl. business combinations and right-of-use assets)	-112	-97	-89	-79	-79

Business combinations, net of cash acquired and loans repaid	117	-15	-48	-163	-2
Additions to investments in associated companies	—	—	-456	—	—

Total assets	6,273	4,420	3,959	3,452	2,988
Equity attributable to owners of the parent	2,496	1,326	1,137	1,040	944
Total equity	2,501	1,332	1,142	1,046	949
Interest-bearing liabilities	809	477	497	268	201
Net interest-bearing liabilities	502	-88	149	-90	-219
Net working capital (NWC)	-82	-673	-595	-426	-474
Return on equity (ROE), %	18%	24%	21%	20%	16%
Comparable return on capital employed (ROCE) before taxes, %	17%	23%	22%	23%	20%
Return on capital employed (ROCE) before taxes, %	18%	24%	22%	23%	19%
Equity to assets ratio, %	49%	42%	39%	41%	43%
Gearing, %	20%	-7%	13%	-9%	-23%

Orders received	5,194	4,740	3,653	3,986	3,722
Order backlog at end of year	4,403	4,096	3,257	3,333	2,829

Average number of personnel	16,554	14,163	13,615	13,235	12,461
Personnel at end of year	17,548	14,246	14,046	13,598	12,528

1 Valmet implemented IFRS 16 – Leases as of January 1, 2019, by applying the simplified transition method and therefore 2018 figures are not restated.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | FINANCIAL INDICATORS

Formulas for calculation of indicators

In addition to financial performance indicators as defined by IFRS, Valmet publishes certain other widely used measures of

performance that can be derived from figures in the Consolidated statement of income and financial position, as well as notes

thereto. The formulas for calculation of these alternative performance measures are presented below.


EBITA:		Comparable return on capital employed (ROCE) before taxes, %:

Operating profit + amortization		Profit before taxes + interest and other financial expenses +/- items affecting comparability	X 100
Operating profit + amortization		Balance sheet total - non-interest-bearing liabilities (average for the period)	X 100

Comparable EBITA:		Equity to assets ratio, %:

Operating profit + amortization +/- items affecting comparability		Total equity	X 100
		Balance sheet total - amounts due to customers under revenue contracts	X 100

Earnings per share:		Gearing, %:

Profit attributable to shareholders of the Company		Net interest-bearing liabilities	X 100
Average number of outstanding shares during period		Total equity	X 100

Earnings per share, diluted:		Net interest-bearing liabilities:

Profit attributable to shareholders of the Company		Non-current debt + non-current lease liabilities + current debt + current lease liabilities - cash and cash equivalents - other interest- bearing assets
Average number of diluted shares during period

Adjusted earnings per share:		Dividend per share:

Profit attributable to shareholders of the Company - expensing of fair value adjustments recognized in business combinations, net of tax		Dividend for the financial period
Average number of outstanding shares during period		Number of shares at end of period

Equity per share:		Dividend payout ratio, %:

Equity attributable to owners of the parent		Dividend per share	X 100
Number of outstanding shares at end of period		Earnings per share	X 100

Return on equity (ROE), %:		Effective dividend yield, %:

Profit for the period	X 100	Dividend per share	X 100
Total equity (average for period)	X 100	Closing share price at end of period	X 100

Return on capital employed (ROCE) before taxes, %:		Price / earnings ratio:

Profit before taxes + interest and other financial expenses	X 100	Closing share price at end of period
Balance sheet total - non-interest-bearing liabilities (average for period)	X 100	Earnings per share

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | FORMULAS FOR CALCULATION OF INDICATORS

Consolidated statement of income


		Year ended Dec 31,
EUR million	Note	2022	2021
Net sales	2, 3	5,074	3,935
Cost of goods sold	4, 5, 7, 13	-3,857	-2,943
Gross profit		1,217	992

Selling, general and administrative expenses	4, 5, 13, 18	-852	-597
Other operating income	19	100	27
Other operating expenses	19	-36	-27
Share in profits and losses of associated companies, operative investments	22	7	3
Operating profit		436	399

Financial income	10	15	9
Financial expenses	10	-20	-13
Share in profits and losses of associated companies, financial investments	22	—	—
Profit before taxes		431	395

Current tax expense		-112	-103
Deferred taxes		18	4
Income taxes, total	16	-93	-99

Profit for the period		338	296

Attributable to:
Owners of the parent		338	296
Non-controlling interests		—	1
Profit for the period		338	296

Earnings per share attributable to owners of the parent:
Earnings per share, EUR		1.92	1.98
Diluted earnings per share, EUR		1.92	1.98

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of comprehensive income


		Year ended Dec 31,
EUR million	Note	2022	2021
Profit for the period		338	296

Items that may be reclassified to profit or loss:
Gains and losses on cash flow hedges	8, 9, 17	-4	-13
Change in fair value reserve	8	-2	2
Currency translation on subsidiary net investments	17	-4	25
Share of other comprehensive income of associated companies accounted for using equity method	22	-1	1
Income tax relating to items that may be reclassified	16	1	2
Total items that may be reclassified to profit or loss		-10	17

Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit plans	15	58	14
Share of other comprehensive income of associated companies accounted for using equity method	22	1	-1
Income tax relating to items that will not be reclassified	16	-12	-5
Total items that will not be reclassified to profit or loss		47	9

Other comprehensive income for the period		38	26

Total comprehensive income for the period		376	322

Attributable to:
Owners of the parent		376	321
Non-controlling interests		—	1
Total comprehensive income for the period		376	322

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of financial position

Assets


		As at Dec 31,
EUR million	Note	2022	2021
Non-current assets
Intangible assets
Goodwill		1,611	730
Other intangible assets		1,030	274
Total intangible assets	4	2,641	1,004

Property, plant and equipment
Land and water areas		41	25
Buildings and structures		152	123
Machinery and equipment		217	183
Right-of-use assets		105	65
Assets under construction		85	72
Total property, plant and equipment	4, 5	600	468

Other non-current assets
Investments in associated companies	22	15	461
Non-current financial assets	8, 9	22	22
Deferred tax assets	16	62	66
Non-current income tax receivables		33	28
Other non-current assets		14	8
Total other non-current assets		145	585
Total non-current assets		3,386	2,057

Current assets
Inventories
Materials and supplies		240	94
Work in progress		424	425
Finished products		271	143
Total inventories	7	934	662

Receivables and other current assets
Trade receivables	8	834	644
Amounts due from customers under revenue contracts	3	485	280
Other current financial assets	8, 9	89	80
Income tax receivables		45	28
Other receivables		223	150
Cash and cash equivalents	8	277	517
Total receivables and other current assets		1,953	1,700
Total current assets		2,887	2,363

Total assets		6,273	4,420

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of financial position

Equity and liabilities


		As at Dec 31,
EUR million	Note	2022	2021
Equity
Share capital		140	100
Reserve for invested unrestricted equity		1,369	426
Cumulative translation adjustments		-20	-16
Hedge and other reserves		8	13
Retained earnings		999	804
Equity attributable to owners of the parent	17	2,496	1,326

Non-controlling interests		5	6

Total equity		2,501	1,332

Liabilities
Non-current liabilities
Non-current debt	8	555	195
Non-current lease liabilities	5, 8	63	37
Employee benefit liabilities	15	132	189
Non-current provisions	11	38	25
Other non-current liabilities	8, 9	8	4
Deferred tax liabilities	16	238	69
Total non-current liabilities		1,034	520

Current liabilities
Current debt	8	155	222
Current lease liabilities	5, 8	35	22
Trade payables	8	442	374
Current provisions	11	181	189
Amounts due to customers under revenue contracts	3	1,205	1,263
Other current financial liabilities	8, 9	50	24
Income tax liabilities		79	79
Other current liabilities	12	591	396
Total current liabilities		2,738	2,569

Total liabilities		3,772	3,088

Total equity and liabilities		6,273	4,420

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of cash flows


		Year ended Dec 31,
EUR million	Note	2022	2021
Cash flows from operating activities
Profit for the period		338	296
Adjustments
Depreciation and amortization	4, 5	203	120
Financial income and expenses	10	5	3
Income taxes	16	93	99
Other non-cash items1		-73	-22
Change in net working capital	6	-399	76
Interest paid		-12	-8
Interest received		11	8
Dividends received		1	—
Income taxes paid		-131	-91
Net cash provided by (+) / used in (-) operating activities		36	482

Cash flows from investing activities
Capital expenditures on fixed assets	4	-112	-97
Proceeds from sale of fixed assets		2	2
Business combinations, net of cash acquired and loans repaid	20	117	-15
Investments in associated companies	22	13	11
Net cash provided by (+) / used in (-) investing activities		20	-99

Cash flows from financing activities
Redemption of own shares		-5	-3
Dividends paid	17	-180	-135
Proceeds from non-current debt		400	100
Repayments of current portion of non-current debt		-587	-119
Repayments of lease liabilities	8	-39	-26
Net proceeds from (+) / repayments of (-) current debt		96	—
Financial investments		23	27
Net cash provided by (+) / used in (-) financing activities		-292	-155

Net increase (+) / decrease (-) in cash and cash equivalents		-236	227
Effect of changes in exchange rates on cash and cash equivalents		-4	16
Cash and cash equivalents at beginning of year	8	517	274
Cash and cash equivalents at end of year		277	517

1 Includes in 2022 a gain of EUR 59 million from remeasurement of Valmet's previously held equity interest in Neles with no cash flow impact.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of changes in equity


EUR million	Share capital	Reserve for invested unrestricted equity	Cumulative translation adjustments	Hedge and other reserves	Retained earnings	Equity attributable to owners of the parent	Non- controlling interests	Total equity
Balance at January 1, 2022	100	426	-16	13	804	1,326	6	1,332
Profit for the period	—	—	—	—	338	338	—	338
Other comprehensive income for the period
Gains and losses on cash flow hedges
Fair value gains and losses, net of tax	—	—	—	-3	—	-3	—	-3
Transferred to profit or loss, net of tax	—	—	—	—	—	—	—	—
Change in fair value reserve, net of tax	—	—	—	-1	—	-1	—	-1
Currency translation on subsidiary net investments	—	—	-4	—	—	-4	—	-4
Remeasurement of defined benefit plans, net of tax	—	—	—	—	47	47	—	47
Other comprehensive income for the period, total	—	—	-4	-4	46	38	—	38
Total comprehensive income for the period	—	—	-4	-4	384	376	—	376

Transactions with owners in their capacity as owners
Dividends	—	—	—	—	-179	-179	-1	-180
Issue of ordinary shares as consideration for a business combination, net of transaction costs	40	937	—	—	—	977	—	977
Purchase of treasury shares	—	—	—	—	-5	-5	—	-5
Share-based payments, net of tax	—	6	—	—	-5	2	—	2
Balance at December 31, 2022	140	1,369	-20	8	999	2,496	5	2,501

Balance at January 1, 2021	100	423	-40	21	633	1,137	6	1,142
Profit for the period	—	—	—	—	296	296	1	296
Other comprehensive income for the period
Gains and losses on cash flow hedges
Fair value gains and losses, net of tax	—	—	—	-13	—	-13	—	-13
Transferred to profit or loss, net of tax	—	—	—	3	—	3	—	3
Change in fair value reserve, net of tax	—	—	—	1	—	1	—	1
Currency translation on subsidiary net investments	—	—	24	—	—	24	—	25
Share of other comprehensive income of associated companies accounted for using equity method	—	—	—	—	1	1	—	1
Remeasurement of defined benefit plans, net of tax	—	—	—	—	9	9	—	9
Other comprehensive income for the period, total	—	—	24	-9	10	26	—	26
Total comprehensive income for the period	—	—	24	-9	306	321	1	322

Transactions with owners in their capacity as owners
Dividends	—	—	—	—	-135	-135	-1	-135
Purchase of treasury shares	—	—	—	—	-3	-3	—	-3
Share-based payments, net of tax	—	3	—	—	2	5	—	5
Balance at December 31, 2021	100	426	-16	13	804	1,326	6	1,332

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | CONSOLIDATED FINANCIAL STATEMENTS

Notes to the consolidated financial statements

1 | Basis of preparation

General information

Valmet Oyj (the “Company” or the “parent company”), a public

limited liability company, and its subsidiaries (together “Valmet,”

“Valmet Group” or the “Group”) form a global developer and

supplier of process technologies, automation and services for the

pulp, paper and energy industries. Valmet Oyj is domiciled in

Helsinki, and its registered address is Keilasatama 5, 02150

Espoo, Finland. The Company’s shares are listed on the Nasdaq

Helsinki Ltd as of January 2, 2014. The copies of the

consolidated financial statements are available at

www.valmet.com or the parent company’s head office,

Keilasatama 5, 02150 Espoo, Finland. The consolidated financial

statements were authorized for issue by Valmet’s Board of

Directors on February 2, 2023, after which, in accordance with

Finnish Limited Liability Company Act, the financial statements

are either approved, amended or rejected in the Annual General

Meeting. The consolidated financial statements have been

prepared in accordance with the basis of presentation set out

below and accounting policies described in connection with each

note.

These consolidated financial statements were prepared in

accordance with the International Financial Reporting Standards

(“IFRS”) as adopted by the European Union. The financial

statements figures are presented mainly in millions of euros

subject to rounding, which may cause some rounding

inaccuracies in aggregate column and row totals.

Where necessary, comparative information has been

reclassified to achieve consistency in disclosure with current

financial year amounts.

Basis of presentation

Subsidiaries

Subsidiaries are all entities over which Valmet Group has control.

Control over an entity exists when the Group is exposed, or has

rights, to variable returns from its involvement with the entity

and has the ability to affect those returns through its power over

the entity. When the Group has less than a majority of the

voting or similar rights of an entity, the Group considers all

relevant facts and circumstances in assessing whether it has

control over an entity, including the contractual arrangement

with the other vote holders of the entity, rights arising from

other contractual arrangements and the Group’s voting rights

and potential voting rights.

The Group reassesses whether it controls an entity if facts and

circumstances indicate that there are changes to one or more of

the three elements of control. Subsidiaries are fully consolidated

from the date on which control is transferred to the Group. They

are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealized gains and

losses arising from transactions between Group companies are

eliminated.

Associated companies

The consolidated financial statements include associated

companies in which Valmet either holds between 20 percent to

50 percent of the voting rights or in which Valmet otherwise has

significant influence but not control. Investments in associated

companies are accounted for using the equity method of

accounting. Investments in associated companies are initially

recorded at cost, and the carrying amount is increased or

decreased to recognize Valmet’s share of changes in net assets

of the associated companies after the date of the acquisition.

The Group’s investment in associated companies includes

goodwill identified on acquisition. The Group determines at each

reporting date whether there is any objective evidence that the

investment in the associate is impaired.

Valmet’s share of post-acquisition profit or loss is recognized in

Consolidated statement of income and its share of post-

acquisition movements in other comprehensive income (OCI) is

recognized in Consolidated statement of comprehensive income

with a corresponding adjustment to the carrying amount of the

investment. The share of results of associated companies is

presented in Consolidated statement of income either included in

Operating profit or adjacent to Financial income and expenses

below Operating profit depending on the nature of the

investment.

Foreign currency translation

Items included in the financial statements of each of Valmet

Group’s entities are measured using the currency of the primary

economic environment in which the entity operates (the

functional currency). These consolidated financial statements are

presented in euros, which is the Group’s presentation currency.

The statements of income of foreign Group companies are

translated into euros using the average exchange rate for the

reporting period. The statements of financial position are

translated at the closing exchange rate of the reporting date.

Translating the net income for the period using different

exchange rates in the Consolidated statement of income and in

the Consolidated statement of financial position results in a

translation difference, which is recognized in the Consolidated

statement of comprehensive income.

Goodwill and fair value adjustments arising on the acquisition

of a foreign entity are treated as assets and liabilities of the

foreign entity and translated at the closing rate. Exchange rate

differences arising are recognized in the Consolidated statement

of comprehensive income.

When a subsidiary is disposed of or sold, exchange rate

differences that were recorded in equity are recognized in profit

or loss as part of the gain or loss on sale.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Foreign currency transactions

Foreign currency transactions are translated into the functional

currency using the exchange rates prevailing on the date of

transaction. Non-monetary items that are measured at fair value

are translated into functional currency using the exchange rate

of the transaction date.

Foreign exchange gains and losses resulting from the

settlement of such balances and from the translation of

monetary assets and liabilities denominated in foreign currencies

at year-end exchange rates, are recognized in Consolidated

statement of income. Foreign exchange gains and losses that

relate to borrowings and cash and cash equivalents are

presented in Consolidated statement of income within Financial

income and expenses. All other foreign exchange gains and

losses are presented in Other operating income and expenses, or

in Net sales or Cost of goods sold.

Key exchange rates:


		Average rates		Year-end rates
		2022	2021	2022	2021
USD	(US dollar)	1.0563	1.1851	1.0666	1.1326
SEK	(Swedish krona)	10.6258	10.1469	11.1218	10.2503
CNY	(Chinese yuan)	7.0836	7.6388	7.3582	7.1947

Critical accounting estimates and judgments

The preparation of financial statements in conformity with IFRS

requires management to make estimates and exercise judgment

in the application of the accounting policies. Estimates and

judgments are continually evaluated and are based on historical

experience and other factors, including expectations of future

events that are believed to be reasonable under the

circumstances. The resulting accounting estimates will, by

definition, seldom equal the related actual results.

Significant accounting policies applied, and critical accounting

estimates and judgments made are described adjacent to each

note as follows:


•Revenue recognition	Note 3
•Intangible assets and property, plant and equipment	Note 4
•Leases	Note 5
•Inventories	Note 7
•Financial assets and liabilities	Note 8
•Derivative financial instruments	Note 9
•Provisions	Note 11
•Employee benefit obligations	Note 15
•Income taxes	Note 16

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 | Reporting segments and geographic

information

Accounting policies

The Group’s Chief Operating Decision Maker (CODM) is the

President and CEO of Valmet. Valmet has three operating

segments and three reportable segments for financial reporting

purposes: Services, Automation and Process Technologies.

Corporate functions are presented as Other.

The Services segment provides customers with flexible and fit-

for-purpose services throughout the lifecycle to improve process

performance and reliability. The Automation segment delivers

automation solutions ranging from single measurements to mill-

or plant-wide process automation systems, and mission-critical

flow control technologies and services for the process industries.

The Process Technologies segment provides technology solutions

for pulp and energy production, as well as for biomass

conversion and emission control, and complete production lines,

machine rebuilds and process components for board, tissue and

paper production.

Valmet adopted its current financial reporting structure on

January 1, 2022. The financial reporting structure was revised to

reflect Valmet’s new operational model, in anticipation of the

forthcoming integration of Neles into Valmet, and is aligned with

the way the CODM evaluates the operational performance of the

segments and allocates resources. Previously Valmet had one

reportable segment. Valmet has restated segment information

for comparative periods. The accounting policies of the segments

are the same as those used in preparing the consolidated

financial statements.

One key indicator of performance reviewed by the COMD is

Earnings before interest, taxes and amortization (EBITA).

Performance is also assessed through Comparable EBITA, i.e.

with EBITA excluding certain items of income and expense that

reduce the comparability of the Group’s performance from one

period to another. The alternative performance measures of

EBITA and Comparable EBITA, are published by Valmet as part

of regulated financial information to enable users of the financial

information to prepare more meaningful analysis on Valmet’s

performance. Items affecting comparability consist of income

and expenses arising from activities that amend the capacity of

Valmet’s operations, such as restructuring costs, gains or losses

on sale of businesses or non-current assets, and transaction

costs related to business combinations, and income and

expenses incurred outside Valmet’s normal course of business,

such as impairment charges and income and expenses recorded

as a result of settlement payments to/from third parties (e.g.

penalties incurred as a result of tax audits or settlements to

closed lawsuits), share in profits and losses of associated

companies as well as expenses arising from changes in

legislation expected to affect Valmet temporary only (e.g.

customs or other tariffs imposed by authorities on Valmet’s

products).

Orders received:


	Year ended Dec 31,
EUR million	2022	2021
Services	1,756	1,481
Automation	1,081	467
Process Technologies	2,356	2,793
Total	5,194	4,740

Net sales:


	Year ended Dec 31,
EUR million	2022	2021
Services	1,606	1,360
Automation	1,040	412
Process Technologies	2,428	2,163
Total	5,074	3,935

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Comparable EBITA:


	Year ended Dec 31,
EUR million	2022	2021
Services	237	204
Automation	190	79
Process Technologies	145	175
Other	-39	-30
Total	533	429

Comparable EBITA, % of net sales:


	Year ended Dec 31,
EUR million	2022	2021
Services	14.8%	15.0%
Automation	18.3%	19.2%
Process Technologies	6.0%	8.1%
Total	10.5%	10.9%

EBITA:


	Year ended Dec 31,
EUR million	2022	2021
Services	228	210
Automation	170	83
Process Technologies	134	173
Other	18	-18
Total	550	448

EBITA, % of net sales:


	Year ended Dec 31,
EUR million	2022	2021
Services	14.2%	15.5%
Automation	16.3%	20.1%
Process Technologies	5.5%	8.0%
Total	10.8%	11.4%

Items affecting comparability:


	Year ended Dec 31,
EUR million	2022	2021
Services	-9	6
Automation	-20	4
Process Technologies	-10	-3
Other	57	11
Total	17	19

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amortization:


	Year ended Dec 31,
EUR million	2022	2021
Services	-7	-6
Automation	-84	-11
Process Technologies	-7	-8
Other	-16	-24
Total	-114	-49

Reconciliation between Comparable EBITA, EBITA and Operating profit:


	Year ended Dec 31,
EUR million	2022	2021
Comparable EBITA	533	429

Items affecting comparability in cost of sales
Expenses related to capacity adjustments	-3	—
Expensing of fair value adjustments recognized in business combinations	-13	-2
Other items affecting comparability1	-31	1
Items affecting comparability in selling, general and administrative expenses
Expenses related to capacity adjustments	-1	—
Expenses related to acquisitions	-11	-6
Other items affecting comparability	-11	—
Items affecting comparability in other operating income and expenses
Expenses related to capacity adjustments	—	—
Other items affecting comparability2	77	10
Items affecting comparability in share in profits and losses of associated companies, operative investments
Other items affecting comparability	9	16
EBITA	550	448

Amortization included in cost of sales
Other intangibles	-2	-1
Amortization included in selling, general and administrative expenses
Intangibles recognized in business combinations	-92	-21
Other intangibles	-18	-14
Amortization included in share in profits and losses of associated companies, operative investments
Other intangibles	-2	-13
Operating profit	436	399

1Includes in 2022 expenses from Valmet’s withdrawal from Russia and expenses related to the fire at Valmet’s Rautpohja factory site in Jyväskylä, Finland. Includes in 2021

income arising from real estate related transactions and post-acquisition period remeasurement of contingent consideration.

2Includes in 2022 a gain of EUR 59 million from remeasurement of Valmet's previously held equity interest in Neles, expenses from Valmet’s withdrawal from Russia, and

income and expenses related to the fire at Valmet’s Rautpohja factory site in Jyväskylä, Finland. Includes in 2021 income arising from real estate related transactions and post-

acquisition period remeasurement of contingent consideration.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Entity-wide information

Valmet has operations globally in over 40 countries. Measured

by net sales, the top three countries in 2022 were the USA,

China and Brazil which together accounted for 45 percent of

total net sales. In 2021, the top three countries were China, the

USA, and Finland, which together accounted for 46 percent of

total net sales.

Net sales from Finland (the country of domicile) amounted to

EUR 565 million in 2022 (EUR 434 million).

Net sales by destination 2022, EUR 5,074 million

Net sales by destination 2021, EUR 3,935 million

Non-current assets by location:


EUR million	Finland	North America	South America	EMEA excluding Finland	China	Asia-Pacific	Non- allocated	Total
2022	325	180	20	164	104	46	2,450	3,288
2021	261	152	16	159	85	25	1,262	1,961

Non-current assets comprise intangible assets, property, plant

and equipment, investments in associated companies, and non-

current income tax receivables. Non-allocated assets include

mainly goodwill, investments in associated companies,

non-current income tax receivables and other fair value

adjustments arising from business combinations that have not

been pushed down to adjust the value of assets in the

subsidiaries’ books.

Gross capital expenditure (excluding business combinations and right-of-use assets) by location:


EUR million	North America	South America	EMEA	China	Asia-Pacific	Total
2022	6	3	80	15	8	112
2021	4	1	83	7	1	97

Major customers

Valmet enters into large long-term projects which however

individually rarely contribute more than 10 percent of annual

revenue. In 2022 and 2021, there was no single customer with

revenue exceeding 10 percent of net sales.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 | Revenue recognition

Accounting policies

Valmet supplies process technologies, automation systems,

valves and services primarily for the pulp, paper and energy

industries as well as municipal and industrial heat and power

producers. Valmet’s customer base also includes other process

industries and marine, where automation solutions are widely

used. In the process technologies business, the Group’s revenue

arises from projects, the scope of which ranges from delivery of

complete mill facilities on a turnkey basis to single section

machine rebuilds, that may or may not include process

automation solutions. Service business revenue includes revenue

from short-term and long-term maintenance contracts, smaller

improvement and modification contracts, rebuilds, as well as

sale of spare parts and consumables. Process technologies and

service business revenue largely arises from the same customers

with service offering being focused on maintaining installed base

of equipment and automation solutions.

Revenue is recognized to depict the transfer of promised goods

or services to the customers in an amount that reflects the

consideration to which Valmet expects to be entitled to in

exchange for those goods or services. The timing and method as

well as unit of revenue recognition are determined in accordance

with the five-step model of IFRS 15 as follows:


Step 1:	Identification of the contract(s) with a customer
Step 2:	Identification of the performance obligations in the contract
Step 3:	Determination of the transaction price attached to the contract
Step 4:	Allocation of the transaction price to the performance obligations identified in the contract
Step 5:	Recognition of revenue when (or as) the entity satisfies a performance obligation

In long-term projects involving delivery of both equipment and

services, one or more performance obligations are identified.

The identification of performance obligations depends on the

scope of the project and terms of the contracts, and largely

follows the level at which quotes are being requested by the

customers.

In short-term service contracts that involve delivery of a

combination of equipment and services, depending on the scope

of the contract and terms attached thereto, one or more

performance obligations are identified. When scope of the

contract involves services provided at the customer site, such as

installation, maintenance, technical support or mechanical

audits, these are typically considered as a separate performance

obligation from delivery of significant equipment and services

provided off-site. On the other hand, when services in the scope

of the contract are performed at Valmet premises only, such as

workshop services, material and services typically cannot be

identified separately, and consistently only one performance

obligation is identified.

In long-term service contracts where Valmet’s activities are

largely performed at the customer’s site, depending on the

contract and terms attached thereto, one or more performance

obligations are identified. When the scope of the contract

involves various service elements that are sold separately on a

stand-alone basis, these elements would typically be determined

to consist of performance obligations on their own.

Revenue is recognized when a customer obtains control of a

good or service. A customer obtains control when it has the

ability to direct the use of and obtain the benefits from the good

or service, either over time or at a point in time.

When Valmet determines that control on goods or services is

transferred over time, this is typically based on either that

customer simultaneously receives and consumes benefits as

Valmet performs, or that Valmet’s performance creates an asset

with no alternative use throughout the duration of a contract and

Valmet has enforceable right to payment for performance

completed to date.

Deliverables within Valmet’s product offering that have the

characteristics of the first criterion include mill maintenance

services or other field services provided under long-term

contracts, in which the receipt and simultaneous consumption by

the customer of the benefits of Valmet’s performance can be

readily identified. Deliverables with the characteristics of the

second criterion include projects where the scope of the contract

involves design and construction of an asset according to

customer specifications. The assets created in these projects do

not have alternative use because the design is based on specific

customer needs. When revenue is recognized over time,

progress towards complete satisfaction of the performance

obligation is measured using the cost-to-cost method. The cost-

to-cost method is estimated to result in a revenue profile that

best depicts the transfer of control on the deliverables to the

customer.

Recognition of revenue at a point in time is applicable, among

others, in contracts where services are performed at Valmet’s

premises, and deliveries of spare parts, valves and consumables.

Control of deliverables typically transfers based on the delivery

terms used, at the takeover, or at a later point in time when

customer acceptance is received.

Valmet’s contracts often involve elements of variable

consideration, such as penalties, liquidated damages or

performance bonus arrangements. Variable consideration is

estimated by using either the expected value or the most likely

amount -method, depending on the type of variable element and

related contractual terms and conditions. Amount of variable

consideration is included in transaction price only to the extent

that it is highly probable that a significant reversal of revenue

does not occur later. Transaction prices are reassessed at each

reporting date. Variable elements are generally allocated

proportionately to all performance obligations in the contract, or

when terms of the variable payments relate to satisfying a

specific performance obligation and allocated amount depicts the

amount of consideration to which Valmet expects to be entitled

in exchange for transferring related goods or services, variable

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

consideration is allocated to that specific performance obligation,

and not all performance obligations in the contract.

Valmet provides its customers with standard payment terms. If

extended payment terms exceeding one year are offered to

customers, the invoiced amount is discounted to its present

value and interest income is recognized over the credit term.

When Valmet incurs costs in fulfilling its contractual

obligations, these are expensed as incurred, unless costs can be

capitalized as inventory. The latter is typically the case in

performance obligations for which revenue is recognized at a

point in time. Costs to obtain a contract that are expected to be

recovered are capitalized when amortization period is one year

or more. Otherwise, these costs are expensed as incurred.



	Critical accounting estimates and judgments For performance obligations satisfied over time, the progress and the profitability are based on the management’s estimates, which require significant judgement concerning the stage of completion, the cost to complete, and the time of completion. Management regularly reviews the progress and execution of performance obligations. As part of the process, management reviews information including, but not limited to, key contractual obligations outstanding, project schedule, identified risks and opportunities, as well as changes in estimates of revenues and costs. A projected loss on a customer contract is recognized in full through profit or loss when it becomes known.



	Valmet regularly enters into contracts where the consideration includes one or more variable elements. Variable consideration is estimated by using either the expected value or the most likely amount -method, depending on the type of the arrangement. In making judgments about variable consideration, Valmet considers historical, current and forecast information. Impact of changes in estimates is recognized in revenue in the period when the estimate is updated.

Disaggregation of revenue

Valmet’s revenue is reported, and monitored by management,

by business line and area. Paper, and Pulp and Energy business

lines’ revenue is derived from large long-term projects, for which

revenue is mostly recognized over time based on the cost-to-

cost method. Service business line’s revenue is generated from

large volume of short-term contracts with relatively low

individual value, for which revenue is mainly recognized at a

point in time. Flow Control business line's valves equipment

sales are recognized at a point in time. Automation business

line’s revenue consists of long-term contracts and short-term

service contracts. The nature of long-term contracts, and

therefore also the revenue recognition method, is similar to

process technologies projects although with average contract

values being lower. Revenue for short-term service contracts is

recognized at a point in time. Nature of revenue in each area in

any given reporting period is driven by volume and size of

ongoing projects.

Net sales by business lines:


	Year ended Dec 31,
EUR million	2022	2021
Services	1,606	1,360
Flow Control	551	—
Automation Systems	489	412
Pulp and Energy	1,081	1,022
Paper	1,347	1,141
Total	5,074	3,935

Timing of revenue recognition:


	Year ended Dec 31,
EUR million	2022	2021
Performance obligations satisfied at a point in time	2,321	1,682
Performance obligations satisfied over time	2,753	2,253
Total	5,074	3,935

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Contract balances

In order to mitigate credit risk and compensate for contract

costs incurred upfront, Valmet regularly requires advance

payments from its customers. During the reporting period

Valmet had not entered into any material contracts where the

period between when Valmet transfers a promised good or

service to a customer and when the customer pays for that good

or service will be one year or more. Neither were there any

ongoing projects from previous reporting periods for which the

former would apply.

The creditworthiness of a customer is verified before entering

into a contract. However, if a risk of non-payment arises after

contract inception, the probability of collection of consideration is

re-evaluated and if assessed improbable, recognition of revenue

is discontinued. An allowance for non-collectability of open

receivables and contract assets is established as concluded

appropriate.

Valmet receives payments from customers based on invoicing

schedules as set out in the customer contracts. Changes in

contract assets and liabilities are due to Valmet’s performance

under the customer contracts. Amounts due from customers

under revenue contracts primarily relate to Valmet’s right to

consideration for work completed but not yet invoiced at the

reporting date. These assets are transferred to trade receivables

when right to consideration becomes unconditional, which is

typically at the time when Valmet has contractual right to issue

an invoice. A significant part of amounts due to customers relate

to advance consideration received from customers in long-term

contracts for which revenue is recognized over time. These

amounts are recognized as revenue as (or when) Valmet

performs under the contracts.

The following tables show movements in amounts due from

customers under revenue contracts and amounts due to

customers under revenue contracts during the reporting period.

Revenue recognized in the period also includes revenue

recognized related to performance obligations satisfied in

previous periods, the amount of which however is insignificant.

Amounts due from customers under revenue contracts:


EUR million	2022	2021
Balance at beginning of the period	280	229
Translation differences	-6	2
Acquired in business combinations	—	—
Revenue recognized in the period	1,179	787
Transfers to trade receivables	-968	-738
Balance at end of the period	485	280

Amounts due to customers under revenue contracts:


EUR million	2022	2021
Balance at beginning of the period	1,263	1,002
Translation differences	-7	32
Acquired in business combinations	29	5
Revenue recognized in the period	-2,090	-2,230
Consideration invoiced and/or received	2,011	2,454
Balance at end of the period	1,205	1,263


	As at Dec 31,
EUR million	2022	2021
Amounts due to customers under revenue contracts for which revenue is recognized
Point in time	359	349
Over time	846	913
Carrying value at end of the period	1,205	1,263

Valmet typically issues contractual product warranties under

which it guarantees the mechanical functioning of equipment

delivered during the agreed warranty period. Valmet does not

issue service-type warranties.

As at December 31, 2022, Valmet had no costs to obtain or

fulfil contracts capitalized under IFRS 15.

The aggregate amount of transaction price allocated to

unsatisfied or partially satisfied performance obligations as at

December 31, 2022, was EUR 4,403 million (EUR 4,096 million).

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4 | Intangible assets and property, plant

and equipment

Accounting policies

Fixed assets consist of intangible assets and property, plant and

equipment. Intangible assets, which comprise mainly goodwill,

software, patents and licenses, are stated at historical cost less

accumulated amortization and impairment losses, if any.

Goodwill is not amortized, but tested for impairment.

Property, plant and equipment is stated at historical cost, less

accumulated depreciation and impairment losses, if any. Land

and water areas are not depreciated.

Subsequent improvement costs related to an asset are

included in the carrying value of such an asset or recognized as

a separate asset, as appropriate, only when the future economic

benefits associated with the costs are probable, and the related

costs can be separated from normal maintenance costs.

Depreciation and amortization

Amortization of intangible assets with a definite useful life is

calculated on a straight-line basis over the expected economic

lives of the assets, being the following:


Patents and licenses	5–10 years
Software	3–5 years
Technology	3–20 years
Customer relationships	3–20 years
Other intangibles	3–40 years

Depreciation of property, plant and equipment is calculated on a

straight-line basis over the expected useful lives of the assets,

being the following:


Buildings and structures	15–40 years
Machinery and equipment	3–20 years

Expected useful lives are reviewed at each balance sheet date

and if they differ significantly from previous estimates the

remaining depreciation periods are adjusted accordingly.

Impairment

The carrying value of fixed assets subject to amortization or

depreciation is reviewed for impairment whenever events and

changes in circumstances indicate that the carrying amount of

an asset may not be recoverable. The recoverable amount of an

asset is the higher of its fair value and its value in use. An asset

is impaired if its carrying amount exceeds its recoverable

amount, at which time an impairment loss is recognized in the

Consolidated statement of income in Other operating expenses.

The previously recognized impairment loss may be reversed if,

and only if, there is exceptional and significant improvement in

the circumstances having initially caused the impairment.

The carrying value of goodwill is reviewed for impairment

annually or more frequently, if the facts and circumstances, such

as decline in sales, operating profit or cash flows, or material

adverse changes in the business environment, suggest that

carrying value may not be recoverable. Valmet has three cash

generating units (CGUs) that establish the first aggregation

levels at which impairment testing can be done. The testing of

goodwill for impairment is performed at the CGU level as

goodwill does not generate cash flows independent from the

CGUs. Valmet uses value in use method to measure the

recoverable amount of goodwill subject to testing. Value in use

is estimated through discounted cash flow method. A previously

recognized impairment loss on goodwill is not reversed even if

there is significant improvement in circumstances having initially

caused the impairment.



	Critical accounting estimates and judgments Impairment testing Preparation of impairment analysis requires use of numerous estimates. The valuation is inherently judgmental and highly susceptible to change from period to period, because it requires management to make assumptions about future supply and demand related to its individual business units, future sales prices and achievable cost levels. The value of the benefits and savings expected from the efficiency improvement programs are inherently subjective. All outsized improvements are excluded from future cash inflows and outflows. The value in use of a cash generating unit is determined by discounting estimated future cash flows with a discount rate approximating the weighted average cost of capital (WACC). The WACC is based on comparable peer industry betas and capital structure. Triggering events for impairment reviews at Valmet include the following: •Material permanent deterioration in the economic or political environment of the customers’ or of own activity •Businesses or asset’s significant under-performance relative to historical or projected future performance •Significant changes in Valmet’s strategic orientations affecting the business plans and previous investment policies.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets:


EUR million	Goodwill	Patents and licenses	Capitalized software	Other intangible assets	Total
2022
Acquisition cost at beginning of the period	730	46	178	521	1,475
Translation differences	4	—	—	-2	2
Capital expenditure	—	2	—	30	32
Acquired in business combinations	876	1	4	830	1,712
Retirements	—	-3	-2	-1	-6
Reclassifications	—	1	26	-27	—
Other changes and disposals	—	—	—	-1	-1
Acquisition cost at end of the period	1,611	47	206	1,352	3,215

Accumulated amortization at beginning of the period	—	-33	-97	-340	-471
Translation differences	—	—	—	4	4
Amortization charges for the period	—	-3	-16	-93	-112
Impairment losses	—	-2	—	—	-2
Retirements	—	3	2	1	6
Other changes and disposals	—	—	—	—	—
Accumulated amortization at end of the period	—	-36	-111	-428	-575

Carrying value at end of the period	1,611	11	95	924	2,641


EUR million	Goodwill	Patents and licenses	Capitalized software	Other intangible assets	Total
2021
Acquisition cost at beginning of the period	711	44	145	518	1,418
Translation differences	9	—	—	4	14
Capital expenditure	—	1	—	27	29
Acquired in business combinations	10	—	—	6	16
Retirements	—	-4	-4	-1	-8
Reclassifications	—	—	34	-34	—
Other changes and disposals	—	3	3	1	7
Acquisition cost at end of the period	730	46	178	521	1,475

Accumulated amortization at beginning of the period	—	-31	-86	-318	-435
Translation differences	—	—	—	—	-1
Amortization charges for the period	—	-2	-12	-21	-36
Impairment losses	—	—	—	—	-1
Retirements	—	3	4	1	8
Other changes and disposals	—	-3	-3	-1	-7
Accumulated amortization at end of the period	—	-33	-97	-340	-471

Carrying value at end of the period	730	12	80	181	1,004

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Property, plant and equipment (excluding right-of-use assets):


EUR million	Land and water areas	Buildings and structures	Machinery and equipment	Assets under construction	Total
2022
Acquisition cost at beginning of the period	25	395	942	72	1,434
Translation differences	—	-4	-6	-1	-11
Capital expenditure	4	1	8	67	80
Acquired in business combinations	12	26	34	2	74
Disposals	—	—	-8	—	-8
Retirements	—	-7	-32	—	-40
Reclassifications	—	18	37	-56	—
Other changes	—	—	—	—	-1
Acquisition cost at end of the period	41	428	975	84	1,528

Accumulated depreciation at beginning of the period	—	-272	-759	—	-1,030
Translation differences	—	2	5	—	7
Depreciation charges for the period	—	-13	-42	—	-55
Impairment losses	—	-1	-1	—	-2
Disposals	—	—	6	—	6
Retirements	—	7	32	—	38
Other changes	—	1	1	—	2
Accumulated depreciation at end of the period	—	-276	-758	—	-1,034

Carrying value at end of the period	41	152	217	85	495


EUR million	Land and water areas	Buildings and structures	Machinery and equipment	Assets under construction	Total
2021
Acquisition cost at beginning of the period	25	395	916	48	1,385
Translation differences	—	9	19	1	29
Capital expenditure	—	—	8	60	68
Acquired in business combinations	—	—	—	—	—
Disposals	—	-1	-2	—	-3
Retirements	—	-17	-32	—	-49
Reclassifications	—	7	30	-37	—
Other changes	—	1	4	—	5
Acquisition cost at end of the period	25	395	942	72	1,434

Accumulated depreciation at beginning of the period	—	-271	-738	—	-1,009
Translation differences	—	-5	-14	—	-19
Depreciation charges for the period	—	-12	-36	—	-47
Disposals	—	—	2	—	2
Retirements	—	17	32	—	48
Other changes	—	-1	-4	—	-5
Accumulated depreciation at end of the period	—	-272	-759	—	-1,030

Carrying value at end of the period	25	123	183	72	404

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Depreciation and amortization 2022,

EUR 201 million

Depreciation and amortization 2021,

EUR 107 million

Depreciation and amortization by function:


	Year ended Dec 31,
EUR million	2022	2021
Cost of goods sold	-58	-44
Selling, general and administrative expenses
Marketing and selling	-7	-5
Research and development	-4	-4
Administrative	-132	-54
Total	-201	-107

Table does not include amortization included in share in profits and losses of associated companies, operative investments.

Goodwill impairment testing

At the acquisition date goodwill arising from business

acquisitions is allocated to the cash generating unit or cash

generating units expected to benefit from the synergies of the

combination, irrespective of whether other assets and/or

liabilities of the acquiree are assigned to the CGU or CGUs.

In 2022 and 2021, Valmet has identified three CGUs. The first

CGU comprises of Valmet’s Paper business line and the paper

business related part of Valmet’s service business. The second

CGU comprises of Valmet’s Pulp and Energy business line and

the pulp and energy related part of Valmet’s service business.

The third CGU consists of Valmet’s Automation Systems and

Flow Control business lines.

Valmet assesses the value of its goodwill for impairment

annually or more frequently, if facts and circumstances indicate,

that a risk of impairment exists. Testing is performed by

comparing the carrying value of the CGU to its recoverable

amount, which is determined based on a value in use

calculation. This calculation uses pre-tax cash flow projections

based on financial budgets approved by Valmet’s management

and Board of Directors covering a five-year period.

The following table sets out the allocation of goodwill as at

December 31, 2022, and 2021, and the key assumptions applied

in the value in use calculations (in both financial years, testing

was performed as at September 30).

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Allocation of goodwill:


	As at Dec 31,
EUR million	2022	2021
Paper business line and the paper business related part of Valmet’s service business	366	235
Pulp and Energy business line and the pulp and energy related part of Valmet’s service business	386	329
Automation Systems and Flow Control business lines	859	166
Total	1,611	730

Key assumptions applied:


	2022	2021
Long-term growth rate, (%)
Paper business line and the paper business related part of Valmet’s service business	2.0%	1.6%
Pulp and Energy business line and the pulp and energy related part of Valmet’s service business	2.0%	1.2%
Automation Systems and Flow Control business lines	2.3%	1.0%
Pre-tax discount rate, (%)
Paper business line and the paper business related part of Valmet’s service business	16.3%	12.3%
Pulp and Energy business line and the pulp and energy related part of Valmet’s service business	15.4%	11.8%
Automation Systems and Flow Control business lines	10.8%	9.2%

From the goodwill arising from the merger of Valmet and Neles,

EUR 692 million has been allocated to Automation Systems and

Flow Control business lines, EUR 118 million has been allocated

to Paper business line and the paper business related part of

Valmet's service business, and EUR 59 million has been allocated

to Pulp and Energy business line and energy related part of

Valmet's service business. For more information on business

combinations, see Note 20.

The key assumptions are based on past performance and

management’s and Board of Directors’ expectations on market

development. Assumptions on product mix are in line with the

Group’s financial targets with stable business growth exceeding

that of process technologies business. Profitability margin

assumptions are reflecting improvements similarly in line with

the Group’s financial targets as communicated. External sources

are also used to obtain data on growth, demand, and price

developments that is used in establishing the assumptions. The

discount rate used in testing is derived from the weighted

average cost of capital based on comparable peer industry betas

and capital structure. The assumptions requiring most judgment

are the market development and product mix.

As a result of the annual impairment tests, no impairment loss

was recognized on goodwill in 2022, or in 2021.

Sensitivity analysis

Valmet’s management has assessed that no reasonably possible

change in any of the key assumptions would cause any of the

CGU’s carrying amount to exceed its recoverable amount.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 | Leases

Accounting policies

Valmet assesses at the inception of a contract whether it is or

contains a lease. A contract is considered to contain a lease if it

conveys a right to use an either explicitly or implicitly identified

asset for a period of time in exchange for consideration. In lease

contracts where Valmet is the lessee, a right-of-use asset and a

lease liability is recognized at lease commencement date to

reflect Valmet's right to use the underlying asset and the unpaid

future lease payments respectively.

Lease liability is initially measured at an amount equal to the

present value of the future lease payments that are not yet paid

at the commencement date. Lease payments are discounted

using either the interest rate implicit in the lease or, if the

interest rate implicit in the lease cannot be readily determined,

Valmet’s incremental borrowing rate. As interest rate implicit in

the contract is not commonly readily available, incremental

borrowing rates reflecting entity-specific factors and lease term

are used to calculate the present value of the lease liability.

Incremental borrowing rates are estimated based on market

prices adjusted with calculated margins representing the entity-

specific factors such as credit and country risk.

In subsequent periods the lease liability is measured using the

effective interest rate method, and the carrying amount of lease

liability is increased with the interest on the lease liability,

reduced with the amount of lease payments made, and adjusted

to reflect any reassessments or lease modifications made. When

the lease liability is remeasured, the corresponding adjustment

is reflected in the right-of-use asset. Variable lease payments

not based on index or rate are not included in the liability but

are expensed as incurred.

A right-of-use asset is initially measured at cost comprising of

the amount of the initial measurement of the lease liability and

any lease payments made at or before the commencement date,

any initial direct costs incurred by Valmet, and restoration costs,

less any lease incentives received. Subsequently, the right-of-

use asset is depreciated on a straight-line basis over the shorter

of lease term or the useful life of the asset.

Valmet applies exemptions provided by IFRS 16 not to

recognize a right-of-use asset and corresponding lease liability

for leases with a contract term of 12 months or less, and for

leases of low-value assets. The payments for these leases are

recognized as an expense on a straight-line basis over the lease

term. Further, Valmet separates non-lease components from

lease components only for asset classes in which the amount of

non-lease components is significant.



	Critical accounting estimates and judgments Valmet has a significant volume of open-ended real estate lease contracts which carry a short notice period only, or which have an initial fixed term but carry extension or termination options. Estimating the likely lease term for these contracts and assessing if the options will be exercised requires significant judgement. When assessing the lease term for these contracts, management considers the relevant facts and circumstances. The likely lease term is typically assessed following the three-year financial forecasts established by management. In case there are specific circumstances in place, such as beneficial market rates, significant leasehold improvements, or other significant direct or indirect costs associated with exiting the lease, lease term can be above three years. Considering other than real estate leases, the need for assets leased under open-ended contracts is commonly short-term in nature, and as such open-ended contracts where the notice period is 12 months or less are accounted for as short-term leases.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Valmet’s leasing activities

Majority of Valmet’s lease arrangements concern real estate,

vehicles, and machinery and equipment located primarily on

Valmet’s premises. The length of these lease arrangements is

typically 3 to 5 years and contracts may include options to

extend the lease.

The below tables present the right-of-use assets recognized in

the Consolidated statement of financial position and the

movements during the period and the future minimum lease

payments as at December 31, 2022.


EUR million	Land and water areas	Buildings and structures	Machinery and equipment	Right-of-use assets total
2022
Carrying value at beginning of the period	9	42	13	65
Translation differences	—	-1	—	-1
Additions	3	21	9	32
Acquired in business combinations	—	44	3	46
Depreciation	—	-25	-8	-34
Other changes	—	-2	-2	-3
Carrying value at end of the period	11	80	14	105


EUR million	Land and water areas	Buildings and structures	Machinery and equipment	Right-of-use assets total
2021
Carrying value at beginning of the period	8	42	15	66
Translation differences	1	1	—	2
Additions	1	15	6	22
Acquired in business combinations	—	2	—	2
Depreciation	-1	-15	-8	-24
Other changes	-1	-2	-1	-4
Carrying value at end of the period	9	42	13	65


	As at Dec 31,
EUR million	2022	2021
Not later than 1 year	35	23
Later than 1 year and not later than 2 years	25	16
Later than 2 years and not later than 3 years	19	9
Later than 3 years and not later than 4 years	10	6
Later than 4 years and not later than 5 years	6	3
Later than 5 years	15	9
Total	110	65

Lease payments related to short-term leases and leases of low-

value assets, as well as variable lease payments that are not

based on index or rate, are not included in the lease liability but

are recognized as an expense as incurred in either Cost of goods

sold or Selling, general and administrative expenses. The below

table presents lease payments for such leases. Interest expense

related to leases included in Financial expenses is presented in

Note 10.


	Year ended Dec 31,
EUR million	2022	2021
Expenses related to short-term leases	-2	-2
Expenses related to leases of low-value assets	-6	-5
Expenses related to variable lease payments not included in lease liabilities	-1	-2
Total	-9	-9

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6 | Net working capital

Valmet’s net working capital is typically negative due to advance

payments received from customers related to long-term

projects.

Net working capital does not include non-operative items such as

taxes, interest-bearing assets and liabilities, or other items

related to funding of the Group’s operations.


	As at Dec 31,		Impact
EUR million	2022	2021	2022
Assets included in net working capital
Non-current trade receivables	—	1	—
Other non-current assets	14	8	-6
Inventories	934	662	-272
Trade receivables	834	644	-190
Amounts due from customers under revenue contracts	485	280	-205
Derivative financial instruments (assets)	69	43	-26
Other receivables	223	150	-72

Liabilities included in net working capital
Employee benefits	-132	-189	-57
Provisions	-219	-214	5
Other non-current non-interest-bearing liabilities	-1	-2	-1
Trade payables	-442	-374	68
Amounts due to customers under revenue contracts	-1,205	-1,263	-58
Derivative financial instruments (liabilities)	-56	-26	30
Other current liabilities	-588	-394	194
Total net working capital	-82	-673	-591
Effect of changes in foreign exchange rates			9
Remeasurement of defined benefit plans			55
Change in allowance for doubtful receivables and inventory obsolescence provision			-9
Acquired in business combinations			136
Change in net working capital in the Consolidated statement of cash flows			-399

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7 | Inventories

Accounting policies

Inventories are valued at the lower of cost and net realizable

value. Net realizable value is the estimated selling price in the

normal course of business less the estimated costs of completion

and the estimated costs necessary to make the sale.

Materials and supplies and finished products are valued on a

first in, first out (FIFO) basis or on a weighted average cost

basis. Work in progress includes costs related to ongoing

projects, for which revenue is recognized at a point in time.

Work in progress typically includes costs for direct labor and

material and allocated overhead costs.


	Critical accounting estimates and judgments Provision for slow-moving and obsolete inventory is based on the best estimate of such amounts at the balance sheet date. The estimate is based on a systematic ongoing review and evaluation of inventory balances. As part of this evaluation, Valmet also considers the composition and age of the inventory compared to anticipated future needs.

Specification of changes in inventory obsolescence provision:


EUR million	2022	2021
Balance at beginning of the period	36	30
Translation differences	—	1
Additions charged to profit or loss	16	11
Acquired in business combinations	16	—
Used reserve	-4	-1
Reversal of reserve	-9	-5
Balance at end of the period	55	36

The cost of inventories recognized as expense was EUR 3,607

million and EUR 2,837 million for the years ended December 31,

2022, and 2021, respectively.

8 | Financial assets and liabilities

Accounting policies

Valmet classifies its financial assets into the following categories:

at amortized cost, at fair value through other comprehensive

income and at fair value through profit or loss. Measurement

category of financial assets is determined based on related

business model and contractual cash flow characteristics of a

given instrument. Financial assets are derecognized when the

contractual rights to cash flows have expired, or the rights to

cash flows together with substantially all risks and rewards of

ownership, have transferred.

Financial liabilities are classified either at amortized cost or at

fair value through profit or loss. Financial liabilities are

derecognized when they are extinguished, that is when the

obligation specified in the contract is discharged, cancelled or

expires.

Financial assets and liabilities are recognized when Valmet

becomes party to the contractual provisions of the instrument.

Both financial assets and liabilities are presented as non-current

when their maturity exceeds 12 months.

Financial assets at amortized cost

The Group’s financial assets measured at amortized cost include

trade, loan and other receivables together with cash and cash

equivalents. These assets are recognized initially at fair value

including transaction costs and trade receivables at their

transaction price. Subsequently the assets are recognized at

amortized cost using the effective interest rate method. Trade

receivables are the most significant of these assets, and for

them the amortized cost equals to the original amount invoiced

to customers, net of allowance for expected credit losses. If

extended payment terms exceeding one year are offered to

counterparty, the receivable is discounted to present value and

interest income is recognized over the credit term.

Valmet evaluates changes in credit risk associated with

different financial assets at each reporting date as required by

general impairment guidelines set out in IFRS 9. If credit risk

has not changed significantly since initial recognition, allowance

amounting to expected credit losses for next 12 months is

recognized. Should the credit risk have changed significantly,

valuation of allowance is based on lifetime expected credit

losses.

For trade receivables and contract assets arising from

customer contracts for which revenue is recognized over time,

simplified impairment model is applied and valuation of

allowance is based on lifetime expected credit losses which are

recognized at first reporting date. Valmet’s application of the

simplified impairment model considers historical credit loss

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

experience, time value of money and forward-looking

information relevant to estimate future credit losses, and the

inputs used in the model are updated on a regular basis. The

model applied includes statistical model together with an option

to apply case-by-case analysis for significant trade receivables

overdue more than 90 days. Final bad debts are written off when

official announcement of receivership, liquidation or bankruptcy

is received confirming that the receivable will not be honored by

the customer. Changes in allowance together with final bad

debts are reported under Other operating income and expenses.

Financial assets at fair value through other comprehensive

income

Majority of Valmet’s financial assets measured at fair value

through other comprehensive income (OCI) are interest-bearing

financial assets managed centrally by the Group treasury.

Business model for these assets involves both holding until

maturity and selling before maturity date approaches, depending

on prevailing market circumstances and Group treasury’s

operational requirements. Gains and losses from these assets

are recognized in the fair value reserve of Equity and at

derecognition these are recycled through OCI to Consolidated

statement of income.

Valmet also applies fair value through other comprehensive

income option to certain publicly traded equity investments.

Change in fair value of the related shares is recognized in the

fair value reserve of Equity. Should the investments be divested

in the future, any cumulative gain or loss remains in Equity, and

is not recycled through OCI to Consolidated statement of

income. Fair value of the equity investments classified at fair

value through other comprehensive income as at December 31,

2022, was EUR 8 million (EUR 9 million).

Financial assets and liabilities at fair value through profit or

loss

The majority of the Group’s financial assets and liabilities

measured at fair value through profit or loss are derivative

financial instruments, for which the related accounting policies

are presented in Note 9. Valmet’s other equity holdings,

excluding publicly traded equity investments, include various

industrial participations, shares in real estate holdings and other

shares which are measured at fair value through profit or loss.

For these other equity ownerships, if reliable market value does

not exist, historical cost is considered best available estimate of

fair value. Valmet has not voluntarily assigned any financial

assets or liabilities to be measured at fair value in addition to

items designated to this category mandatorily in accordance with

IFRS 9.

Financial liabilities at amortized cost

Valmet’s financial liabilities measured at amortized cost consist

of loans from financial institutions, lease liabilities and trade

payables. Loans from financial institutions are initially recognized

at fair value, net of transaction costs incurred. Subsequently

these liabilities are measured at amortized cost by using the

effective interest rate method. Loans from financial institutions

are classified as current liabilities unless Valmet has an

unconditional right to defer settlement of the liability for at least

12 months after the end of the reporting period. Accounting

policies for leases are presented in Note 5.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair value estimation

For those financial assets and liabilities, which have been

recognized at fair value in the Consolidated statement of

financial position, the measurement hierarchy and valuation

methods described below have been applied. There have been

no transfers between fair value levels.

Level 1

Quoted unadjusted prices at reporting date in active markets.

The market prices are readily and regularly available from an

exchange, dealer, broker, market data provider, pricing service

or regulatory agency. The quoted market price used for financial

assets is the current bid price. Level 1 financial instruments

include equity investments classified as financial assets at fair

value through other comprehensive income.

Level 2

The fair value of financial instruments in Level 2 is determined

using valuation techniques. These techniques utilize observable

market data readily and regularly available from an exchange,

dealer, broker, market data provider, pricing service or

regulatory agency. Level 2 financial instruments include over-

the-counter (OTC) derivatives classified as financial assets and

liabilities at fair value through profit or loss or derivatives

qualified for hedge accounting and all other financial assets and

liabilities except for equity investments.

Level 3

A financial instrument is categorized into Level 3 if the

calculation of the fair value cannot be based on observable

market data. Level 3 financial instruments include equity

investments classified as financial assets at fair value through

profit or loss. There were no changes in Level 3 instruments for

the 12 months ended December 31, 2022.



	Critical accounting estimates and judgments Under the simplified impairment model applied to trade receivables and contract assets, an allowance amounting to lifetime expected credit losses is recognized at first reporting date. The amount of this allowance is estimated based on a model that considers historical credit loss experience, time value of money and forward-looking information relevant to estimate future credit losses. The inputs used in the model are updated on a regular basis. Application of the guidance for impairment of financial assets, in particular estimation of future expected credit losses and application of case-by-case analysis to significant trade receivables overdue more than 90 days, requires significant management judgment and includes consideration of available customer and market information. Resulting impairment of financial assets is best estimate based on information available and may differ from the actual result.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Classification of financial assets and liabilities as at December 31:


	As at Dec 31,
EUR million	2022	2021
Non-current financial assets
Equity investments at fair value through other comprehensive income	8	9
Equity investments at fair value through profit or loss	2	2
Loan receivables at amortized cost	—	1
Loan receivables at fair value through profit or loss	—	—
Derivative financial instruments at fair value through profit or loss	—	—
Derivative financial instruments qualified for hedge accounting	11	10
Carrying value at end of the period	22	22

Current financial assets
Interest-bearing financial assets at fair value through other comprehensive income	30	47
Non-interest-bearing financial assets at amortized cost	5	14
Trade receivables at amortized cost	834	644
Derivative financial instruments at fair value through profit or loss	8	10
Derivative financial instruments qualified for hedge accounting	50	23
Cash and cash equivalents at amortized cost	277	517
Carrying value at end of the period	1,205	1,255


	As at Dec 31,
EUR million	2022	2021
Non-current financial liabilities
Loans from financial institutions at amortized cost	555	195
Lease liabilities at amortized cost	63	37
Derivative financial instruments at fair value through profit or loss1	—	—
Derivative financial instruments qualified for hedge accounting1	7	3
Carrying value at end of the period	625	235

Current financial liabilities
Loans from financial institutions at amortized cost	40	222
Lease liabilities at amortized cost	35	22
Interest-bearing liabilities at amortized cost	115	—
Trade payables at amortized cost	442	374
Derivative financial instruments at fair value through profit or loss	15	8
Derivative financial instruments qualified for hedge accounting	35	15
Carrying value at end of the period	681	642

1Included in Other non-current liabilities in the Consolidated statement of financial position.

Carrying values presented in the table above approximate fair

values.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Non-current equity investments comprised EUR 8 million listed

shares (EUR 9 million) and various industrial participations,

shares in real-estate holdings and other shares amounting to

EUR 2 million as at December 31, 2022 (EUR 2 million). Current

interest-bearing financial assets managed centrally by the Group

treasury amounted to EUR 30 million (EUR 47 million).

Valmet manages its cash by investing in financial assets with

varying maturities. Interest-bearing financial assets with

maturities at the date of acquisition exceeding three months are

classified as Other current financial assets and assets with

maturities of three months or less are classified as Cash and

cash equivalents in the Consolidated statement of financial

position. Cash and cash equivalents comprised of cash at bank

and in hand of EUR 264 million (EUR 391 million), investments

to commercial papers of EUR 0 million (EUR 30 million) and

other short-term financial assets with maturities of three months

or less of EUR 13 million (EUR 97 million) mainly comprising of

banker’s acceptance drafts and bank deposits. For more

information on derivative financial instruments, see Note 9.

Analysis of trade receivables by age:


	As at Dec 31,
EUR million	2022	2021
Trade receivables, not due	591	489
Trade receivables 1–30 days overdue	146	76
Trade receivables 31–60 days overdue	38	17
Trade receivables 61–90 days overdue	18	7
Trade receivables 91–180 days overdue	18	31
Trade receivables more than 180 days overdue	24	23
Total	834	644

Movement in allowance for trade receivables and contract assets:


EUR million	2022	2021
Balance at beginning of the period	19	18
Translation differences	—	1
Additions charged to profit or loss	6	5
Acquired in business combinations	4	—
Used reserve	-5	-3
Reversals	-3	-2
Balance at end of the period	21	19

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net debt reconciliation:


	As at Dec 31,
EUR million	2022	2021
Cash and cash equivalents	277	517
Current interest-bearing financial assets	30	47
Loans from financial institutions and other current debt	710	417
Lease liabilities	99	60
Net debt	-502	88


	2022
	Liabilities from financing activities		Other assets
EUR million	Loans from financial institutions and other current debt	Lease liabilities	Cash and cash equivalents	Current interest- bearing financial assets	Total
Balance at beginning of the period	417	60	517	47	88
Translation differences	—	-1	-4	6	3
Cash flows	-91	-39	-236	-23	-129
New leases	—	36	—	—	-36
Acquired in business combinations	384	46	—	—	-431
Other changes	—	-3	—	—	3
Net debt at end the of period	710	99	277	30	-502


	2021
	Liabilities from financing activities		Other assets
EUR million	Loans from financial institutions and other current debt	Lease liabilities	Cash and cash equivalents	Current interest- bearing financial assets	Total
Balance at beginning of the period	436	61	274	73	-150
Translation differences	—	1	16	1	16
Cash flows	-19	-26	227	-27	245
New leases	—	24	—	—	-24
Acquired in business combinations	1	2	—	—	-3
Other changes	—	-3	—	—	3
Net debt at end of the period	417	60	517	47	88

9 | Derivative financial instruments

Accounting policies

Derivative financial instruments

Derivative financial instruments are used to hedge the Group’s

exposure to foreign exchange rate, interest rate and commodity

price risks arising from operational, investment and financing

activities in accordance with Valmet’s treasury policy, which is

discussed further in Note 21.

Trade date accounting is applied to Group’s derivative financial

instruments and these are measured at initial recognition and at

each reporting date at fair value in balance sheet. Fair value of

open derivative contracts is calculated as present value of future

cash flows using currency, interest and commodity price

quotations at reporting date. The instruments are classified as

non-current assets or liabilities when the remaining maturities

exceed 12 months and as current assets or liabilities when the

remaining maturities are 12 months or less.

When hedge accounting is applied derivatives are designated

at inception either as hedges of firm commitments or highly

probable forecasted sale and purchase transactions. When hedge

accounting criteria are not met derivatives are measured at fair

value through profit or loss.

Application of hedge accounting

Valmet has designated certain forward exchange contracts,

interest rate swaps, and electricity forward contracts to cash

flow hedge accounting relationships. When hedge accounting is

applied, relationship between hedging instrument and hedged

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

item is documented, including related risk management strategy

and objectives. Both at hedge inception and at each reporting

date a forward-looking assessment is performed to ensure that

changes in cash flows of the hedging instrument are expected to

offset changes in cash flows from the hedged item. When

performing this assessment, if critical terms of hedging

instrument and hedged item match, economic relationship exists

and hedge accounting relationship is considered effective. In

Valmet’s hedge accounting relationships hedge ratio is 1:1 (i.e.

the relationship between the quantity of hedging instrument and

quantity of hedged risk in their relative weighting).

For derivatives that have been designated to a cash flow hedge

accounting relationship, the effective portion of change in fair

value is recognized through other comprehensive income (OCI)

in the hedge reserve under Equity and reclassified to profit or

loss concurrently with the underlying hedged transaction. The

gains or losses relating to the ineffective portion of derivatives

hedging operative items (e.g. foreign currency denominated

sales and purchase transactions) are reported in profit or loss.

Both the ineffective portion and the reclassification from Equity

are reported either in Net sales and Cost of goods sold or under

Other operating income and expenses on a case-by-case basis.

Net loss from foreign exchange related to operative items was

EUR -13 million in 2022 (EUR -13 million). Respectively, the

ineffective portions of derivatives hedging non-operative items

(e.g. interest-bearing financial assets and liabilities, and other

items related to Group’s funding) are reported under Financial

income and expenses in profit or loss. Ineffectiveness arising

from application of hedge accounting during the reporting period

was insignificant. Should a hedged transaction no longer be

expected to occur, any cumulative gain or loss previously

recognized under Equity is reclassified through OCI to profit or

loss.

When hedging for changes in foreign currency denominated

firm commitments or highly probable forecasted sale and

purchase transactions, currency component of forward exchange

contracts has been designated as hedging instrument in hedge

accounting relationships in every case. In addition, based on a

case-by-case designation, the interest component of forward

exchange contracts can also be designated as hedging

instrument in hedge accounting relationships. In cases where

interest component is not designated as part of Valmet’s hedge

accounting relationships, it is recognized in profit or loss.

Valmet has designated all open interest rate swaps as hedging

instruments to hedge future changes in cash flows arising from

Valmet’s floating rate loans from financial institutions. Interest

arising from interest rate swaps is reported under Financial

income and expenses concurrently with interest expense arising

from hedged floating rate loans from financial institutions.

For highly probable forecasted purchases of electricity, the

Group has designated system-price component of electricity

purchases as hedged risk and electricity forward contracts as

hedging instruments to hedge accounting relationships. The

realized gains and losses related to effective portion of the

electricity forward contracts are recognized in Consolidated

statement of income under Cost of goods sold.

Derivatives at fair value through profit or loss

Certain forward exchange contracts and commodity derivatives

do not qualify for hedge accounting and change in fair value is

recorded through profit or loss. Gains or losses arising from

derivatives hedging operative items are recognized case-by-case

either in Net sales and Cost of goods sold or in Other operating

income and expenses. When the forward exchange contracts

hedge exchange rate risk arising from foreign currency

denominated non-operative items, gains and losses are

recognized in Financial income and expenses in profit or loss.



	Critical accounting estimates and judgments Financial instruments In accordance with the disclosure requirements on financial instruments, the management is obliged to make certain assumptions of the related future cash inflows and outflows associated with different financial assets and liabilities. Management assumes that the fair values of derivatives, especially fair values of forward exchange contracts, materially reflect the present values of future cash inflows or outflows to be realized from such instruments. Hedging of foreign currency denominated firm commitments or highly probable forecasted sale and purchase transactions Under Valmet’s treasury policy, all Valmet entities are required to hedge their foreign currency risk when they have become engaged in a firm commitment denominated in a currency different from their functional currency. The commitment can be between Valmet entities or external to Valmet Group. In addition, certain highly probable forecasted sales and purchases are hedged in co-operation with the Group treasury. When revenue for a customer contract is recognized over time, the entity applies cash flow hedge accounting to both foreign currency denominated sales and purchases and recognizes the effect from the hedging instruments in the OCI until the hedged sales and/or purchases are recognized in Consolidated statement of income. Although the exposure hedged by Valmet entities has been clearly defined in Valmet treasury policy, the final realization of the hedged items depends also on factors beyond management’s control, which cannot be foreseen when initiating the hedge relationship. Such factors include change in the market environment causing the other party to postpone or cancel the commitment or highly probable forecasted sale or purchase. Management tries to the extent possible to include clauses in the related contracts to reduce the impact of such adverse events to the Consolidated statement of income.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notional amounts and fair values of derivative financial instruments as at December 31:


EUR million	Notional amount	Fair value, assets	Fair value, liabilities	Fair value, net
2022
Forward exchange contracts1
Under hedge accounting	2,404	43	-41	2
Not designated for hedge accounting	1,111	7	-15	-8
Total	3,515	50	-56	-6

Electricity forward contracts2
Under hedge accounting	169	9	—	9

Nickel commodity swaps3
Not designated for hedge accounting	192	1	—	1

Steel scrap commodity swaps3
Not designated for hedge accounting	1,048	—	—	—

Interest rate swaps1
Under hedge accounting	125	9	—	9
Total		69	-56	13

Netting fair values of derivative financial instruments subject to ISDAs4		-45	45
Total, net		24	-11	13

2021
Forward exchange contracts1
Under hedge accounting	2,108	28	-17	11
Not designated for hedge accounting	994	10	-9	1
Total	3,102	38	-25	13

Electricity forward contracts2
Under hedge accounting	171	4	—	4

Nickel commodity swaps3
Not designated for hedge accounting	42	—	—	—

Interest rate swaps1
Under hedge accounting	75	1	-1	-1
Total		43	-27	16

Netting fair values of derivative financial instruments subject to ISDAs4		-23	23	—
Total, net		19	-3	16

1Notional amount in EUR million.

2Notional amount in GWh.

3Notional amount in metric tons.

4Group’s derivatives are carried out under International Swaps and Derivatives Association’s Master Agreements (ISDA). In case of an event of default under these Agreements

the non-defaulting party may request early termination and set-off of all outstanding transactions. These agreements do not meet the criteria for offsetting in the statement of

financial position.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Maturities of financial derivatives as at December 31:


	2023	2024	2025	2026	2027 and later
2022
Notional amounts
Forward exchange contracts1	3,289	220	6	—	—
Electricity forward contracts2	120	48	—	—	—
Nickel commodity swaps3	192	—	—	—	—
Steel scrap commodity swaps3	1,048	—	—	—	—
Interest rate swaps1	25	—	30	25	45

Fair values, EUR million
Forward exchange contracts	—	-6	—	—	—
Electricity forward contracts	8	1	—	—	—
Nickel commodity swaps	1	—	—	—	—
Steel scrap commodity swaps	—	—	—	—	—
Interest rate swaps	—	—	2	1	6


	2022	2023	2024	2025	2026 and later
2021
Notional amounts
Forward exchange contracts1	2,685	410	7	—	—
Electricity forward contracts2	101	70	—	—	—
Nickel commodity swaps3	42	—	—	—	—
Interest rate swaps1	—	—	—	30	45

Fair values, EUR million
Forward exchange contracts	6	7	—	—	—
Electricity forward contracts	3	1	—	—	—
Nickel commodity swaps	—	—	—	—	—
Interest rate swaps	—	—	—	-1	1

1Notional amount in EUR million.

2Notional amount in GWh.

3Notional amount in metric tons.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10 | Financial income and expenses


	Year ended Dec 31,
EUR million	2022	2021
Dividends received	1	—
Interest income on financial assets (excl. derivatives)	8	4
Net gain from foreign exchange	3	1
Interest component from forward contracts	4	4
Financial income total	15	9

Interest expenses on financial liabilities measured at amortized cost (excl. leases)	-10	-5
Interest expenses on lease liabilities	-3	-2
Net interest from defined benefit plans	-3	-3
Other financial expenses	-4	-4
Financial expenses total	-20	-13

Financial income and expenses, net	-5	-3

Exchange rate differences included in financial income and expenses:


	Year ended Dec 31,
EUR million	2022	2021
Exchange rate differences from interest-bearing financial assets and liabilities, and other items related to Group’s funding	17	-9
Exchange rate differences from derivative financial instruments	-14	9
Net gain or loss from foreign exchange	3	1

Interest expenses on financial liabilities at amortized cost (excl.

leases) includes interest expenses on interest-bearing loans and

interest rate swaps.

11 | Provisions

Accounting policies

A provision is recognized when Valmet has a present legal or

constructive obligation as a result of a past event, payment is

probable, and Valmet is able to estimate the amount of the

obligation reliably. Provisions are reviewed at the end of each

reporting period and adjusted to reflect the current best

estimate or reversed if they are no longer needed. Long-term

provisions are discounted to their present value based on the

expected timing of cash outflows when the effect of the time

value of money is significant.

Warranty provisions

The Group typically issues contractual product warranties under

which it generally guarantees the mechanical functioning of

equipment delivered during the agreed warranty periods,

ranging from 12 to 24 months. The main principle in measuring

the warranty provision is to book a certain percentage, based on

past experience, of total revenue of a deliverable as a provision

for expected warranty work. For sales involving new technology

and long-term delivery contracts, additional warranty provision

may be established on a case-by-case basis to take into account

the potentially increased risk. The actual warranty costs of each

project are booked against the warranty provision and thus the

remaining warranty provision of each project can be followed.

Actual warranty costs incurred on projects are monitored

regularly in order to assess the need for amending the

percentage based on which warranty provisions are recognized

going forward.

Restructuring provisions

A provision for restructuring costs is recognized only when

general recognition criteria for provision are met and after

management has prepared and approved a formal plan to which

it is committed, and it has raised a valid expectation in those

affected by the measures that it will carry out the restructuring

by starting to implement that plan or announcing its main

features.

The costs included in a provision for restructuring are those

costs that are either incremental or incurred as a direct result of

the plan or are the result of a continuing contractual obligation

with no continuing economic benefit to Valmet or a penalty

incurred to cancel the contractual obligation. Restructuring and

capacity adjustment expenses are recognized in either Cost of

goods sold or Selling, general and administrative expenses

depending on the nature of the expense. Restructuring costs can

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

also include other costs incurred as a result of a restructuring

plan, which are recorded under Other operating income and

expenses, such as asset impairment charges.

Provisions for onerous contracts

A provision for an onerous contract is recognized when the

Group has a contract in which the unavoidable costs of meeting

the obligations under the contract exceed the economic benefits

expected to be received under it. The unavoidable costs under a

contract reflect the least net cost of exiting from the contract,

which is either the cost of fulfilling contractual obligations or

penalties arising from the failure to fulfil those obligations.

Other provisions

Other provisions include provisions related to environment,

personnel, legal and tax related processes. These provisions are

recognized when general provision recognition criteria are met.



	Critical accounting estimates and judgments The amount recognized as a provision is the best estimate of the expenditure required to settle the obligation at the reporting day, taking into account related risks and uncertainties, management judgment supplemented by experience with similar transactions and future events when there is sufficient evidence that they will occur and affect the amount of payment. Under contractual warranty clauses, Valmet generally guarantees the performance of products delivered for a certain warranty period. The warranty provision is based on historical realized warranty costs for deliveries of standard products. The warranty period typically commences from the date of customer acceptance of the delivered equipment. For more complex contracts, including long-term projects, the warranty reserve is calculated contract by contract and updated regularly to ensure its appropriateness. Provisions for restructuring costs are recognized when the requirements for recognition are satisfied. For reasons beyond the control of management the final costs may differ from the initial amount for which the provision has been established. Valmet recognizes a provision for losses associated with environmental remediation obligations when such losses are probable, and a reliable estimate of amounts can be made. Following initial recognition, the amount of provision is adjusted later if further information is obtained or circumstances change.

Specification of changes in provisions:


	2022
EUR million	Warranty provisions	Restructuring provisions	Provisions for onerous contracts	Other provisions	Total
Balance at beginning of the period	188	2	18	6	214
Translation differences	-2	—	—	—	-2
Additions charged to profit or loss	112	5	16	—	133
Acquired in business combinations	7	—	1	1	9
Used reserve	-80	-1	-9	-2	-92
Reversal of reserve	-35	—	-9	—	-44
Balance at end of the period	190	5	18	6	219

Non-current	35	1	—	2	38
Current	156	4	18	4	181

Provisions for expected contract losses relate primarily to long-

term projects. The Group did not have material environmental or

product liabilities as at December 31, 2022, or December 31,

2021.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12 | Other current liabilities


	As at Dec 31,
EUR million	2022	2021
Accrued personnel costs	210	157
Accrued project costs	103	112
Accrued interest	4	2
Other payables	274	125
Other current liabilities total	591	396

The maturity of payables is largely determined by local trade

practices and individual agreements between Valmet and its

suppliers and rarely exceeds six months. Accrued personnel

costs, which include holiday pay, are settled in accordance with

local laws and stipulations.

13 | Personnel expenses and number of personnel

Personnel expenses:


	Year ended Dec 31,
EUR million	2022	2021
Salaries and wages	-913	-743
Pension costs, defined contribution plans	-87	-72
Defined benefit plan costs1	-7	-10
Other post-employment benefits	-9	-7
Share-based payments2	-7	-7
Other indirect employee costs	-148	-108
Total	-1,171	-948

1For more information, see Note 15.

2For more information, see Note 14.

Number of personnel:


	2022	2021
Personnel at end of the period	17,548	14,246
Average number of personnel during the period	16,554	14,163

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14 | Share-based payments

Accounting policies

Valmet’s share-based incentive plans are part of the

remuneration and retention program for Valmet’s key personnel.

In majority of jurisdictions where key employees participating in

the Group’s long-term incentive (LTI) plans reside, Valmet has

an obligation to withhold an amount for the key employee’s tax

obligations associated with the share-based payment rewards,

and transfer that amount directly to the tax authorities on the

key employee’s behalf. Thus, the arrangements carry net

settlement feature and both equity and cash settled portions of

the plans are accounted for against equity.

Non-market vesting conditions, such as Comparable EBITA as

a percentage of net sales, and orders received growth in the

stable business, are used for calculating the number of shares

related to Group’s LTI plans that are expected to vest. These

estimates are revised at the end of each reporting period and

impact of the revision to previous estimate is recognized through

profit or loss with corresponding adjustment to equity.

The compensation expense for the shares is recognized as an

employee benefit expense evenly during the required service

period whereas the compensation expense resulting from the

cash portion is recognized as an employee benefit expense on

accrual basis between grant and payment date. Valuation of the

related expenses is based on number of shares expected to vest,

remaining vesting period at the reporting date and Valmet’s

closing share price as at the grant date.

Granted share amounts of the share-based incentive plans:


	Plan 2021– 2023	Plan 2022– 2024
2022
At beginning of the period	413,596	—
Maximum number of shares to be granted	-7,298	281,682
Changes due to achievement criteria	272	-61,863
Actual number of shares granted	-360,200	—
Shares returned by plan participants	2,397	—
Shares transferred to treasury shares	-2,397	—
At end of the period	46,370	219,819

Long-term incentive plan for 2018–2020

The Board of Directors of Valmet Oyj decided in December 2017

on a new long-term share-based incentive plan for Valmet’s key

employees. The plan included three performance periods, which

were the calendar years 2018, 2019 and 2020. Valmet’s Board

of Directors decided on the performance criteria and targets in

the beginning of each performance period. The plan was directed

to a total of approximately 130 participants, of which 90 were

key employees in management positions (including Executive

Team members), and 40 were management talents, which was a

new target group in Valmet’s share-based incentive plan.

For all plan participants the maximum reward was capped at

grant to a fixed number of shares. For the President and CEO,

the reward was capped at grant to a maximum number of

shares calculated based on 130 percent of his annual base

salary. For reward calculation purposes, other members of the

Executive Team formed a group and maximum reward

calculation for each individual member was based on average

annual base salary of that group. The fixed maximum number of

shares was calculated in the beginning of the performance

period based on 110 percent of the average annual base salary

of all other members of the Executive Team.

The potential reward was purely performance based for all plan

participants. The rewards from the plan were paid partly in

Company shares and partly in cash. The cash portion was

dedicated to cover taxes and tax-related payments arising from

the reward to the plan participants. The rewarded shares were

not to be transferred during the restriction period, which ended

two years after the end of the performance period. As a rule, no

reward was paid if the plan participant’s employment or service

at Valmet ended before the reward payment. Should a plan

participant’s employment or service have ended during the

restriction period, he or she had to, as a rule, gratuitously return

the shares given as reward to the Company. The Board has the

right to cancel the reward or recollect paid rewards that are

subject to the Transfer Restriction, fully or partly, if the LTI plan

participant has acted against the law or against the ethical

guidance of the Company or otherwise unethically.

Long-term incentive plans – Performance

Share Plan and Deferred Share Plan

The Board of Directors of Valmet Oyj decided in December 2020

on new share-based long-term incentive plans, a Performance

Share Plan and a Deferred Share Plan for Valmet’s key

employees. The Performance Share Plan is directed to Valmet’s

Executive Team and the Deferred Share Plan is directed to other

key employees in management positions, and management

talents.

The Performance Share Plan includes a three-year performance

period parallel to a one-year performance period. The Deferred

Share Plan includes a one-year performance period. Valmet’s

Board of Directors decides on the predefined performance

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

measures and targets in the beginning of each performance

period.

The rewarded shares based on the one-year performance

period from both the Performance Share Plan and the Deferred

Share Plan may not be transferred during a two-year restriction

period. Should a key employee’s employment or service end

during the restriction period, he or she must, as a rule,

gratuitously return the shares given as reward to the Company.

As a rule, no reward is paid if the key employee’s employment or

service at Valmet ends before the reward payment. The earning

under the Performance Share Plan is limited by a pay cap

determined by the Board of Directors in order to avoid

unexpectedly high pay-outs resulting from share price volatility.

The Board has the right to cancel the reward or recollect paid

rewards that are subject to the Transfer Restriction, fully or

partly, if the LTI plan participant has acted against the law or

against the ethical guidance of the Company or otherwise

unethically. Additionally, the Board has the right to recollect paid

rewards after the plan has ended if the LTI plan participant has

caused a misstatement of the information based on which the

reward was paid.

The below tables summarize the key attributes of the long-

term incentive plans that existed during the current or previous

period:

Long-term incentive plan 2018–2020:


Performance period	2018	2019	2020
Incentive based on	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business
Reward payment	In spring 2019	In spring 2020	In spring 2021
Total gross number of shares earned (including the matching share rewards)	350,029 shares	271,428 shares	148,369 shares
Valmet’s closing share price as at the grant date	EUR 18.33	EUR 19.83	EUR 19.59
Vesting period	February 2018 to December 2020	February 2019 to December 2021	February 2020 to December 2022

Performance Share Plans and Deferred Share Plans:


	Long-term incentive plans 2021–2023		Long-term incentive plans 2022–2024
Plan name	Performance Share Plan and Deferred Share Plan	Performance Share Plan	Performance Share Plan and Deferred Share Plan	Performance Share Plan
Performance period	2021	2021–2023	2022	2022–2024
Incentive based on	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	Predefined strategic target	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	ESG Index, targets linked to implementing Valmet’s Climate Program and Sustainability Agenda
Reward payment	In spring 2022	In spring 2024	In spring 2023	In spring 2025
Participants
Performance Share Plan	13	11	14	13
Deferred Share Plan	110		130
Total gross number of shares earned	360,200 shares	46,370 shares	As at December 31, 2022, a total of 186,585 shares were allotted to participants	As at December 31, 2022, a total of 33,234 shares were allotted to participants
Valmet’s closing share price as at the grant date	26.51	26.51	33.63	33.63
Vesting period	February 2021 to March 2024	February 2021 to March 2024	February 2022 to March 2025	February 2022 to March 2025

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


	Long-term incentive plans 2023–2025
Plan name	Performance Share Plan and Deferred Share Plan	Performance Share Plan
Performance period	2023	2023–2025
Incentive based on	Comparable EBITA as a percentage of net sales, and orders received growth in the stable business	Development of a valuation multiple of Valmet’s share in comparison to peer group as well as targets supporting the Company’s long-term strategic and financial development
Reward payment	In spring 2024	In spring 2026
Participants
Performance Share Plan	14	14
Deferred Share Plan	130
Total gross number of shares earned	The rewards to be paid will correspond to a maximum total of approximately 442,960 Valmet shares
Valmet’s closing share price as at the grant date
Vesting period	February 2023 to March 2026	February 2023 to March 2026

Restricted shares pool

As part of total remuneration, for example for retention

purposes, the Board of Directors decided on an additional

incentive element in December 2018, the restricted shares pool,

from which shares can be granted to selected key employees.

Restricted share pools are intended to be annually commencing,

and the annual restricted shares pool is subject to separate

approval by the Board of Directors. In 2022, 9,000 shares were

allocated from the restricted shares pool. In 2023, a maximum

of 66,445 Company shares can be allocated to possible

participants in the restricted shares pool. As a rule, the

restriction period for these shares is three years. Plan

nominations as well as detailed terms of allocation will be

proposed by the President and CEO to the Chairman of the

Board of Directors for approval. A precondition for the payment

of the share reward based on the restricted shares pool is that a

threshold Valmet Comparable EBITA is exceeded and that the

employment relationship of the individual participant with

Valmet continues until the payment date of the reward.

Share ownership recommendation

To recognize and highlight the importance and value of having

the members of Valmet’s Executive Team own and hold

Company shares, the Board of Directors has approved in

December 2017 a share ownership recommendation for Valmet’s

Executive Team members. All members of Valmet’s Executive

Team are recommended to own and hold Company shares

equaling to their gross annual base salary (100 percent

ownership recommendation).

Costs recognized for the share ownership

plans

The compensation expense for the shares is recognized as an

employee benefit expense evenly during the required service

period with corresponding entry in equity. The compensation

expense resulting from the cash portion is recognized as an

employee benefit expense on accrual basis between grant and

payment date with a corresponding entry made to equity.

Valuation of the related expenses is based on number of shares

expected to vest, remaining vesting period at the reporting date

and Valmet’s closing share price as at the grant date.

Costs arising from share-based payments plans:


	Year ended Dec 31,
EUR thousand	2022	2021
Plan 2018–2020	-553	-1,516
Plan 2021–2023	-2,757	-5,465
Plan 2022–2024	-3,524	—
Total	-6,834	-6,981

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15 | Employee benefit obligations

Accounting policies

Pensions and coverage of pension liabilities

Valmet has various employee benefit schemes in place in line

with local regulations and practices in countries in which Valmet

operates. In certain countries, the schemes involve defined

benefit plans with retirement, disability, death, and other post-

retirement benefits, such as health benefits, and termination

income benefits. Defined benefit plans are post-employment

benefit plans other than defined contribution plans. In defined

benefit plans the benefits are usually based on the number of

service years and the salary levels of the final service years. The

schemes are generally funded through payments to insurance

companies or to trustee-administered funds as determined by

periodic actuarial calculations.

In addition, certain entities within Valmet Group have

multiemployer pension arrangements classified as defined

contribution plans. The contributions to defined contribution

plans and to multi-employer and insured plans are charged to

profit or loss concurrently with the payment obligations. In

defined contribution plans, the Group pays fixed contributions

into a separate entity and the Group will have no legal or

constructive obligation to pay further contributions.

In the case of defined benefit plans, the net defined benefit

liability recognized from the plan is the present value of the

defined benefit obligation as at end of the reporting period,

reduced by the fair value of the plan assets. Independent

actuaries calculate the defined benefit obligation by applying the

projected unit credit method under which the estimated future

cash flows are discounted to their present value using a duration

specific discount rate. The cost of providing pension and other

employee benefits is charged to profit or loss concurrently with

the service rendered by the employees. The service cost is

recorded as part of personnel expenses in profit or loss and the

net interest is recorded under financial income and expenses.

Actuarial gains and losses arising from experience adjustments,

changes in actuarial assumptions and actual return on plan

assets (excluding interest income on plan assets) are recognized

through OCI into equity.

The acquisition of former Neles plans have been recognized as

a transfer in amount as of April 1, 2022 and fresh start approach

has been adopted, i.e., no historical figures have been reported.

To the former Neles plans, service cost and net interest have

been determined for the period of April 1 to December 31, 2022.



	Critical accounting estimates and judgments The benefit expense and liabilities arising from defined benefit arrangements are calculated based on assumptions that include the following: •The discount rates used to discount employee benefit obligations (both funded and unfunded): These rates are determined by reference to market yields at the end of the reporting period on high quality corporate bonds. In countries where there is no deep market in such bonds, the market yields (at the end of the reporting period) on government bonds have been used. The currency and term of the corporate bonds or government bonds are consistent with the currency and duration of the post- employment benefit obligations. •Estimated rates of future pay increases, which include general pay rise expectations as well as merit increases. Actual increases may not reflect estimated future increases. Due to the significant uncertainty of the global economy, these estimates are difficult to project.

Amounts recognized in the Consolidated statement of financial position:


	As at Dec 31,
	2022			2021
EUR million	Funded	Unfunded	Total	Funded	Unfunded	Total
Present value of funded obligation	216	—	216	203	—	203
Fair value of plan assets	-216	—	-216	-188	—	-188
Net surplus (-) / deficit (+) of funded plans	—	—	—	16	—	16
Present value of unfunded obligation	—	124	124	—	172	172
Asset (-) / liability (+)	—	124	124	16	172	188

Amounts in the Consolidated statement of financial position
Liabilities	8	124	132	17	172	189
Assets	7	—	7	1	—	1
Net liability	—	124	124	16	172	188

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in the Consolidated statement of income:


	Year ended Dec 31,
	2022			2021
EUR million	Funded	Unfunded	Total	Funded	Unfunded	Total
Employer's current service cost	2	4	7	2	8	10
Net interest on net surplus / deficit	—	3	3	1	2	3
Settlements	—	1	—	—	—	-1
Total expenses	2	8	10	3	10	12

Changes in the present value of the defined benefit obligation:


	2022			2021
EUR million	Funded	Unfunded	Total	Funded	Unfunded	Total
Present value of obligation at beginning of the period	203	172	375	200	170	371
Other adjustments	—	1	1	—	—	—
Acquired in business combinations	66	13	79	—	—	—
Employer's current service cost	2	5	7	2	8	10
Interest expense	7	3	10	4	2	6
Liabilities extinguished on settlements	-3	—	-3	-3	—	-3
Actuarial gain (-) / loss (+) due to change in financial assumptions	-61	-64	-124	-7	-3	-10
Actuarial gain (-) / loss (+) due to change in demographic assumptions	—	-1	-1	—	-1	—
Actuarial gain (-) / loss (+) due to experience	3	8	11	2	3	5
Benefits paid from the arrangements	-14	—	-14	-8	—	-8
Benefits paid directly by employer	—	-5	-6	-1	-5	-6
Translation differences	12	-9	3	13	-2	11
Present value of defined benefit obligation at end of the period	216	124	340	203	172	375
- of which related to active members			109			158
- of which related to deferred members			49			67
- of which related to pensioner members			181			149

Changes in the fair value of the plan assets during the period:


	2022			2021
EUR million	Funded	Unfunded	Total	Funded	Unfunded	Total
Fair value of plan assets at beginning of the period	188	—	188	170	—	170
Other adjustments to the fair value of assets	-3	—	-3	-3	—	-3
Acquired in business combinations	76	—	76	—	—	—
Interest income on assets	7	—	7	4	—	4
Return on plan assets excluding interest income	-56	—	-56	8	—	8
Employer contributions	6	—	6	5	—	5
Benefits paid from the arrangements	-14	—	-14	-8	—	-8
Translation differences	12	—	12	12	—	12
Fair value of plan assets at end of the period	216	—	216	188	—	188

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Remeasurement of the net defined benefit liability / asset reported in other comprehensive income:


	Year ended Dec 31,
	2022			2021
EUR million	Funded	Unfunded	Total	Funded	Unfunded	Total
Experience gain (-) / loss (+) on assets	56	—	56	-8	—	-8
Actuarial gain (-) / loss (+) on liabilities due to change in financial assumptions	-61	-63	-124	-7	-3	-10
Actuarial gain (-) / loss (+) on liabilities due to change in demographic assumptions	—	-1	-1	—	-1	—
Actuarial gain (-) / loss (+) on liabilities due to experience	3	8	11	2	3	5
Translation differences	—	—	—	1	-1	-1
Total gain (-) / loss (+)	-2	-57	-58	-12	-2	-14

The major categories of plan assets as a percentage of total plan assets of Valmet’s defined benefit plans:


	2022			2021
As at Dec 31	Quoted	Unquoted	Total	Quoted	Unquoted	Total
Equities	21%	—	21%	26%	—	26%
Bonds	68%	—	68%	58%	—	58%
Other	2%	10%	11%	1%	14%	16%
Total	90%	10%	100%	86%	14%	100%

At December 31, 2022, there were no plan assets invested in

affiliated companies or property occupied by affiliated

companies.

The principal actuarial assumptions used to determine the defined benefit obligation (expressed as weighted averages):


	2022			2021
As at Dec 31	Funded	Unfunded	All plans	Funded	Unfunded	All plans
Discount rate	5.0%	4.1%	4.7%	2.4%	1.8%	2.2%
Salary increase	2.0%	2.9%	2.3%	2.8%	3.0%	2.9%
Pension increase	1.2%	2.0%	1.5%	2.3%	2.2%	2.2%
Medical cost trend rates	—	4.8%	4.8%	—	5.0%	5.0%

The weighted average life expectancy used for the major defined benefit plans:


	Life expectancy at age 65 for a male participant currently aged 65		Life expectancy at age 65 for a female participant currently aged 65
Expressed in years	2022	2021	2022	2021
Sweden	22	22	24	24
Canada	22	22	24	24
USA	21	21	23	23
Finland	21	21	26	26


	Life expectancy at age 65 for a male participant currently aged 45		Life expectancy at age 65 for a female participant currently aged 45
Expressed in years	2022	2021	2022	2021
Sweden	24	23	26	25
Canada	23	23	25	25
USA	22	22	24	24
Finland	24	24	28	28

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Life expectancy is allowed for in the assessment of the defined

benefit obligation using mortality tables, which are generally

based on experience within the country in which the

arrangement is located, with in many cases an allowance made

for anticipated future improvements in longevity.

Sensitivity analysis on present value of the defined benefit obligation:


	As at Dec 31,
	2022			2021
EUR million	Funded	Unfunded	Total	Funded	Unfunded	Total
Discount rate
Increase of 0.25%	-5	-5	-10	-6	-8	-14
Decrease of 0.25%	5	5	10	6	9	15

Salary increase rate
Increase of 0.25%	—	3	3	1	5	6
Decrease of 0.25%	—	-3	-3	-1	-5	-6

Pension increase rate
Increase of 0.25%	1	2	3	1	5	6
Decrease of 0.25%	—	-3	-4	-1	-5	-6

Medical cost trend
Increase of 1%	—	—	—	—	—	—
Decrease of 1%	—	-1	-1	—	—	—

Life expectancy
Increase of one year	6	4	10	6	8	14
Decrease of one year	-6	-5	-11	-6	-7	-13

The table above presents the changes in the value of the defined

benefit obligation when major assumptions are changed while

holding the others constant.

Weighted average duration of the defined benefit obligation:


	2022			2021
Expressed in years	Funded	Unfunded	All plans	Funded	Unfunded	All plans
As at December 31	9	17	12	13	20	16

Valmet sponsors both defined contribution and defined benefit

arrangements. Valmet operates various defined benefit pension

and other long-term employee benefit arrangements pursuant to

local conditions, practices and collective bargaining agreements

in the countries in which it operates. The majority of Valmet’s

defined benefit liabilities relate to arrangements that are funded

through payments to either insurance companies or to

independently administered funds based on periodic actuarial

calculations. Other arrangements are unfunded with benefits

being paid directly by Valmet as they fall due. All arrangements

are subject to local tax and legal restrictions in their respective

jurisdictions. Valmet’s defined benefit arrangements in the USA,

Canada and Sweden together represent 86 percent of Valmet’s

defined benefit obligation and 90 percent of its pension assets.

These arrangements provide income in retirement, which is

substantially based on salary and service at or near retirement.

In the USA and Canada annual valuations are carried out to

determine whether cash funding contributions are required in

accordance with local legislation.

Defined benefit pension arrangements in Sweden are offered in

accordance with collective labor agreements and are unfunded.

The liability recorded on Valmet’s balance sheet and cash

contributions to funded arrangements are sensitive to the

assumptions used to measure the liabilities, the extent to which

actual experience differs to the assumptions made and the

returns on plan assets. Therefore, Valmet is exposed to the risk

that balance sheet liabilities and/or cash contributions increase

based on these influences.

Assets of Valmet’s funded arrangements are managed by

external fund managers. The allocation of assets is reviewed

regularly by those responsible for managing Valmet’s

arrangements based on local legislation, professional advice and

consultation with Valmet, based on acceptable risk tolerances.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The expected contributions to defined benefit type

arrangements in 2023 are EUR 1.0 million in respect of Finnish

plans and EUR 10 million in respect of foreign plans. Valmet paid

contributions of EUR 87 million (EUR 72 million) to defined

contribution arrangements during 2022.

16 | Income taxes

Accounting policies

Tax expenses in the profit or loss comprise current and deferred

taxes. Taxes are recognized in profit or loss except when they

are associated with items recognized in Consolidated statement

of comprehensive income or directly in equity. Current taxes are

calculated on the taxable income on the basis of the tax rates

stipulated for each country as at the balance sheet date.

Additionally, non-recoverable foreign taxes on financing

transactions or transactions with shareholders, which are not

based on taxable profits, are reported in Current tax expenses.

Non-recoverable withholding taxes and foreign taxes on

operative items are reported in Other operating income and

expenses. These non-recoverable foreign taxes include for

example taxes paid that are not creditable based on applicable

Double Tax Treaty. Taxes are adjusted for taxes of prior financial

periods, if applicable. Interest that is calculated based on unpaid

tax amounts is reported under Financial expenses.

Management evaluates positions taken in tax returns with

respect to situations in which applicable tax regulation is subject

to interpretation. The tax provisions recognized in such

situations are based on evaluations by management on the

probability that the items subject to interpretation reported to

tax authorities can be substantiated on examination.

Deferred taxes are calculated on temporary differences

between the tax bases of assets and liabilities and their carrying

amounts in the financial statements. Deferred taxes have been

calculated using the statutory tax rates or the tax rates enacted

or substantively enacted as at reporting date. Deferred tax

assets are only recognized to the extent that it is probable that

future taxable profit will be available against which the

temporary differences can be utilized. The most significant

temporary differences arise from differences in revenue

recognition methods applied for tax purposes, depreciation

differences relating to property, plant and equipment, treatment

of costs arising from defined benefit pension plans, provisions

deductible at a later date, fair value measurement of assets and

liabilities in connection with business combinations and unused

tax losses. Deferred taxes are not recognized on items that do

not affect accounting or tax profit. Deferred tax assets and

liabilities are offset when there is a legally enforceable right to

offset current tax assets against current tax liabilities and when

the deferred income tax assets and liabilities relate to income

taxes levied by the same taxation authority on either the same

taxable entity or different taxable entities where there is an

intention to settle the balances on a net basis.



		Critical accounting estimates and judgments Deferred tax assets and liabilities are recognized for temporary differences. They are expected to be realized through the income statement over extended periods of time in the future. Valmet management has made certain assumptions regarding future tax consequences and used certain estimates when calculating differences between carrying amounts of assets and liabilities and their tax bases. Key assumptions underlying tax calculations include, e.g., likelihood that recoverability periods for tax loss carryforwards will not change, and that existing tax laws and rates remain unchanged into foreseeable future. At each balance sheet date deferred tax assets are assessed for recoverability and when circumstances indicate that it is no longer probable that deferred tax assets can be recovered, balances are reduced to their recoverable amounts. Liabilities and assets are recognized with respect to income tax amounts management is expecting to pay and recover, respectively. Management has chosen not to discount non- current tax balances. Valmet entities are subject to tax audits on an ongoing basis. Complex and constantly changing regulations in multiple jurisdictions where Valmet operates create uncertainties relating to tax obligations towards authorities. Changes in the tax authorities’ interpretations could have unfavorable impact on Valmet’s financials.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The differences between income tax expense computed at the

Finnish statutory rate (20 percent in 2022 and 2021) and income

tax expense recognized in profit or loss are shown in the table

below.


	Year ended Dec 31,
EUR million	2022	2021
Profit before taxes	431	395

Taxes calculated according to tax rate in Finland	-86	-80
Impact of changes in tax rates	-1	-1
Income tax for prior years1	1	-3
Effect of different tax rates in foreign subsidiaries	-16	-13
Utilization of tax losses carried forward	1	—
Non-recoverable foreign taxes	-3	-2
Effect of tax-free income and non-deductible expenses2	9	—
Other	3	—
Income tax expense	-93	-99
Effective tax rate, (%)	21.6%	25.1%
Effective tax rate, (%) excluding income tax for prior years	21.8%	24.4%

1Includes in 2021 refund of additional taxes, late payment interest and penalties related to the Finnish Supreme Administrative Court’s decision, and subsequent reassessment

of income tax receivables.

2Includes in 2022 the effect from the tax-free gain of EUR 59 million from remeasurement of Valmet's previously held equity interest in Neles.

Tax effects of components in other comprehensive income:


	Year ended Dec 31,
	2022			2021
EUR million	Before taxes	Tax	After taxes	Before taxes	Tax	After taxes
Gains and losses on cash flow hedges	-4	1	-3	-13	3	-10
Change in fair value reserve	-2	—	-1	2	—	1
Remeasurement of defined benefit plans	58	-12	47	14	-5	9
Currency translation on subsidiary net investments	-4	—	-4	25	—	25
Share of other comprehensive income of associated companies accounted for using equity method	—	—	—	1	—	1
Total comprehensive income for the period	48	-10	38	29	-3	26

Deferred tax	—	-10	—	—	-3	—
Total	—	-10	—	—	-3	—

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of deferred tax balances:


EUR million	Balance at beginning of the period	Translation differences	Charged to income statement	Charged to other compre- hensive income	Acquired in business combination	Balance at end of the period
2022
Deferred tax assets
Tax losses carried forward	4	—	-1	—	3	6
Fixed assets	9	—	1	—	1	11
Leases	1	—	—	—	10	10
Inventory	4	—	—	—	9	13
Provisions	30	—	4	—	2	37
Accruals	2	—	1	—	1	4
Employee benefits	21	-1	-3	-11	—	5
Other	5	—	6	3	9	23
Total deferred tax assets	77	-1	6	-8	34	108
Offset against deferred tax liabilities1	-11					-45
Net deferred tax assets	66					62

Deferred tax liabilities
Purchase price allocations	74	1	-10	—	195	261
Fixed assets	4	—	—	—	5	9
Leases	1	—	-1	—	9	9
Other	1	—	-2	2	4	5
Total deferred tax liabilities	80	2	-13	2	213	284
Offset against deferred tax assets1	-11					-45
Net deferred tax liabilities	69					238

2021
Deferred tax assets
Tax losses carried forward	4	—	—	—	—	4
Fixed assets	10	—	-1	—	—	9
Inventory	3	—	—	—	—	3
Provisions	27	1	2	—	—	30
Accruals	1	1	—	—	—	3
Employee benefits	25	—	—	-4	—	21
Other	2	-1	2	3	—	6
Total deferred tax assets	72	1	3	-1	—	76
Offset against deferred tax liabilities1	-10					-10
Net deferred tax assets	61					66

Deferred tax liabilities
Purchase price allocations	72	2	-1	—	2	74
Fixed assets	4	—	-1	—	—	4
Other	—	-2	1	2	—	1
Total deferred tax liabilities	76	—	-1	2	2	79
Offset against deferred tax assets1	-10					-10
Net deferred tax liabilities	65					69

1Deferred tax assets and liabilities are offset when there is legally enforceable right to offset tax assets against tax liabilities and when the deferred income taxes relate to the

same fiscal authority.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

A deferred tax liability on undistributed profits of Valmet’s legal

entities located in countries where distribution generates tax

consequences is recognized when it is likely that earnings will be

distributed in the near future. For the years ended December 31,

2022, and 2021, earnings of EUR 46 million and EUR 38 million,

respectively, would have been subject to recognition of a

deferred tax liability, had Valmet regarded a distribution in the

near future as likely. A deferred tax asset is recognized for tax

loss carryforwards to the extent that the realization of the

related tax benefit through future taxable profits is probable.

There were no material tax loss carryforwards for which a

deferred tax asset had not been recognized. Valmet has tax loss

carryforwards of EUR 9 million that will expire within the

following five years.

17 | Equity

Share capital and number of shares


	2022	2021
Share capital at end of the period, EUR	140,000,000	100,000,000
Number of shares at end of the period	184,529,605	149,864,619
Treasury shares at end of the period	344,775	393,423
Shares outstanding at end of the period	184,184,830	149,471,196
Average number of shares outstanding during the financial year	175,617,981	149,467,939

Valmet Oyj has one series of shares. The shares of Valmet Oyj

do not have a nominal value.

Treasury shares

As at December 31, 2022, Valmet Oyj held 344,775 (393,423)

of its own shares. These shares have been acquired through

purchase on the Helsinki Stock Exchange (Nasdaq Helsinki Ltd).

The total amount paid to acquire Valmet’s own shares during the

reporting period, including transaction costs, was EUR 5 million

(EUR 3 million) and it has been deducted from Retained earnings

in Equity. Own shares have been acquired for the purposes of

Valmet’s long-term incentive plans.

Dividends

The Board of Directors proposes that a dividend of EUR 1.30 per

share will be paid out based on the Consolidated statement of

financial position to be adopted for the financial year ended

December 31, 2022, and that the remaining part of the Retained

earnings will be carried forward in Valmet Oyj’s unrestricted

equity. These financial statements do not reflect this dividend

payable of EUR 239 million.

In compliance with the resolution of the Annual General

Meeting, on March 22, 2022, Valmet paid out dividends of EUR

179 million for 2021, corresponding to EUR 1.20 per share.

Reserve for invested unrestricted equity

Reserve for invested unrestricted equity includes other equity-

related investments and share subscription prices to the extent

not designated to be included in share capital. The reserve for

invested non-restricted equity fund in Valmet’s Consolidated

statement of financial position consists of the fund held by the

parent company Valmet Oyj.

Hedge and other reserves

Hedge reserve includes effective portion of fair value movements

related to derivative financial instruments, which qualify for

hedge accounting.

Fair value reserve includes the change in fair values of

interest-bearing financial assets classified as fair value through

other comprehensive income.

Legal reserve consists of restricted equity, which has been

transferred from distributable funds under the Articles of

Association, local company law or by a decision of the

shareholders.

Cumulative translation adjustments

Cumulative translation adjustments consist of currency

translation differences, which relate to translation of foreign

operations from their functional currencies to Valmet Group’s

reporting currency euro.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18 | Selling, general and administrative expenses


Selling, general and administrative expenses 2022, EUR 852 million	Selling, general and administrative expenses 2021, EUR 597 million

19 | Other operating income and expenses


	Year ended Dec 31,
EUR million	2022	2021
Gain on sale of fixed assets	1	1
Reversal of allowance for doubtful receivables and contract assets	4	4
Interest component from forward contracts	—	2
Commodity derivatives	1	1
Gain from remeasurement of Valmet's previously held equity interest in Neles	59	—
Insurance compensation	22	—
Post-acquisition period remeasurement of contingent consideration	2	3
Income related to tax and customs duty adjustments	2	5
Income arising from real estate related transactions	—	5
Other income	10	7
Other operating income, total	100	27

Impairment of fixed assets and right-of-use assets	-4	-1
Net loss from foreign exchange	-9	-12
Interest component from forward contracts	-1	—
Non-recoverable foreign taxes	-8	-2
Allowance for doubtful receivables and contract assets	-7	-6
Other expenses	-6	-6
Other operating expenses, total	-36	-27

Other operating income and expenses, net	64	—

Exchange rate differences included in Other operating income and expenses:


	Year ended Dec 31,
EUR million	2022	2021
Exchange rate differences from trade receivables and payables	2	-18
Exchange rate differences from derivative financial instruments	-11	6
Net loss from foreign exchange	-9	-12

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20 | Business combinations

Acquisition of Coldwater

On March 1, 2022, Valmet acquired North American-based

Coldwater Seals, Inc, a global provider of consumables and

services to the pulp and paper industry. The net sales of

Coldwater were approximately EUR 15 million in the last twelve

months. The acquired operations employ approximately 60

employees, who are located in Atlanta and Appleton in the

United States and Kil in Sweden. The acquired business has been

consolidated into the Group financials from the acquisition date

onwards.

The acquisition of Coldwater did not have a material impact on

the results or financial position of Valmet, or its financial

reporting in 2022.

Merger of Valmet and Neles

On April 1, 2022, Valmet announced that the statutory merger of

Neles Corporation into Valmet had been registered and the

combination of Valmet’s and Neles’ business operations had

been completed.

Neles delivers mission-critical flow control innovations,

technologies, and services for the continuously evolving needs of

global process industries, helping customers to improve their

process performance and to ensure the safe flow of materials.

Net sales of Neles were approximately EUR 611 million in 2021,

and Neles employed approximately 2,900 employees. The

purpose of the merger was to create a leading company with a

unique, competitive and balanced total offering for process

industries globally.

The merger was accounted for as a business combination in

accordance with the acquisition method of accounting, with

Valmet determined as the acquirer of Neles. As Valmet held an

equity interest in Neles prior to the merger, the merger was

accounted for as a business combination achieved in stages. The

total merger consideration consists of the fair value of the shares

issued as merger consideration, the fair value of Valmet's

previously held equity interest in Neles, and the effect from the

settlement of pre-existing relationship between Valmet and

Neles. Net cash inflow associated with the business combination

consist of cash and cash equivalents acquired, amounting to EUR

130 million.

Neles' shareholders, excluding Valmet as well as Neles with

respect to treasury shares held by Neles, received as merger

consideration 0.3277 new shares in Valmet for each share they

held in Neles on the merger completion date. A total of

34,664,986 new shares were issued as merger consideration, for

which the fair value was determined, based on the listed share

price as at March 31, 2022, of 28.21 EUR, to be EUR 978 million.

Valmet's previously held equity interest in Neles was

remeasured to fair value at the merger date. The fair value of

Valmet's previously held equity interest was EUR 411 million,

and a gain of EUR 59 million was recognized in Other operating

income in the Consolidated statement of income.

The settlement of pre-existing relationship consists of the

elimination of a EUR 89 million receivable arising from Neles'

extra distribution of funds, netted with the elimination of

EUR 1 million of trade payables.

The components of the merger consideration transferred and

their fair values are summarized in the following table.


EUR million	As at April 1, 2022
Shares issued as merger consideration	978
Fair value of Valmet's previously held equity interest in Neles	411
Settlement of pre-existing relationship	87
Total Merger consideration	1,476

Neles has been consolidated into Valmet as of April 1, 2022. Fair

values of assets acquired, liabilities assumed, and goodwill

recognized at the date of acquisition is summarized in the

following table. The net assets acquired are denominated in

euro.

Goodwill arising from the business combination is attributable

to the assembled workforce, value of geographic presence and

future customers, technologies and products, and synergies

expected to be derived from the combined businesses. The

goodwill arising from the merger is not expected to be tax-

deductible.

From the merger completion date, the acquired business has

contributed EUR 551 million to net sales and EUR -3 million to

the profit of the Group, which includes EUR 83 million

amortization of intangibles and inventory fair-value step-up

recognized at acquisition.

If the acquisition had occurred on January 1, 2022,

management estimates that Valmet's Consolidated statement of

income would show net sales of EUR 5,239 million and profit for

the period amounting to EUR 375 million, with the assumption

that the fair value adjustments as at the merger completion date

would have been the same if the merger had occurred on

January 1, 2022.

Acquisition related costs of EUR 10 million have been charged

to Selling, general and administrative expenses in the

Consolidated statement of income in 2022.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair values of assets acquired and liabilities assumed and goodwill at the date of acquisition:


EUR million	As at April 1, 2022
Non-current assets
Goodwill	870
Other intangible assets	828
Property, plant and equipment	73
Right-of-use assets	47
Deferred tax asset	34
Other non-current assets	13
Total non-current assets	1,865

Current assets
Inventories	203
Trade receivables	87
Other current financial assets	1
Other current assets	50
Cash and cash equivalents	130
Total current assets	470

Non-current liabilities
Non-current lease liabilities	32
Employee benefit liabilities	18
Deferred tax liabilities	211
Total non-current liabilities	261

Current liabilities
Current debt	384
Current lease liabilities	15
Trade payables	60
Provisions	10
Amounts due to customers under revenue contracts	30
Other current liabilities	100
Total current liabilities	598

Net assets acquired	1,476

21 | Financial risk management

As a global Group, Valmet is exposed to a variety of business

and financial risks. Financial risks are managed centrally by the

Group treasury (hereafter Treasury) under annually reviewed

written policies approved by Valmet’s Board of Directors.

Treasury identifies, evaluates and hedges financial risks in close

co-operation with the subsidiaries. Treasury functions as

counterparty to the subsidiaries, manages centrally external

funding and is responsible for the management of financial

assets and appropriate hedging measures. The objective of

financial risk management is to mitigate potential adverse

effects of financial risks on Valmet’s financial performance.

Lease liabilities recognized in Consolidated statement of

financial position are part of Valmet’s interest-bearing liabilities.

To present information focused on Group’s long-term funding

and related financial risks, figures presented in this note

regarding liquidity and refinancing risk, capital structure and

interest rate risk management, exclude the impact of lease

liabilities. More information regarding leases is presented in

Note 5.

Sensitivity analysis

Sensitivity analysis presented in connection with various

financial risks is based on the risk exposures at the end of the

reporting period.

Sensitivities are calculated by assuming a change in one of the

risk factors of a financial instrument, such as interest or

currency rate. Sensitivity calculations are based on the changes

in the relevant risk variable that are reasonably possible. The

reasonably possible changes are assumed to be a variation of 1

percentage point (100 basis points) in interest rates, and a 10

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

percent change in foreign exchange rates and in commodity

prices.

Liquidity and refinancing risk management

Liquidity or refinancing risk arises when a company is not able to

arrange funding at terms and conditions corresponding to its

creditworthiness. Cautious maturity distribution of interest-

bearing debt and sufficient cash, short-term investments and

committed and uncommitted credit facilities are maintained to

protect short-term liquidity and to manage refinancing risk.

Diversification of funding among different markets and an

adequate number of financial institutions are used to safeguard

the availability of liquidity at all times. Treasury monitors bank

account structures, cash balances and forecasts of the

subsidiaries and manages the utilization of the consolidated cash

resources.

At end of the reporting period Cash and cash equivalents

amounted to EUR 277 million (EUR 517 million) and current

interest-bearing financial assets managed centrally by Treasury

to EUR 30 million (EUR 47 million). Due to the global nature of

operations, some of the Valmet subsidiaries are located in

countries in which currency is subject to limited exchangeability

or capital controls. Given Valmet’s total liquidity position,

balances in such countries are immaterial.

In 2022, the outstanding EUR 179 million term loan was repaid

and a new term loan worth EUR 50 million was withdrawn. In

order to finance the completion of the merger with Neles, Valmet

withdrew EUR 350 million term loan facilities. As part of the

merger term loans worth of EUR 365 million were assumed by

Valmet, of which EUR 150 million was repaid immediately on the

merger registration date and EUR 215 million in December 2022.

Valmet’s liquidity was additionally secured by a committed and

undrawn revolving credit facility worth EUR 300 million, which

matures in 2025, committed and undrawn overdraft limits of

EUR 16 million and an uncommitted commercial paper program

worth EUR 300 million of which EUR 95 million was outstanding

at the end of the reporting period.

Net working capital management is an integral part of the

liquidity risk management. Treasury monitors and forecasts net

working capital fluctuations in close co-operation with the

subsidiaries. Net working capital increased to EUR -82 million

(EUR -673 million) as at December 31, 2022, due to e.g.

milestone payments for large capital projects.

Group’s refinancing risk is managed by balancing the

proportion of current and non-current interest-bearing debt and

average maturity of non-current interest-bearing debt including

committed undrawn credit facility. The average maturity of non-

current interest-bearing debt, including current portion, and

committed undrawn credit facility as at December 31, 2022, was

3.3 years (4.2 years). The amount of current interest-bearing

debt, including current portion of non-current interest-bearing

debt, was 22 percent (53%) of total debt portfolio. As at

December 31, 2022, Valmet’s interest-bearing liabilities consist

of debt and lease liabilities, and debt portfolio includes only

loans from financial institutions.

The tables below present undiscounted cash flows on the

repayments and interests on Valmet’s financial liabilities (excl.

lease liabilities and derivatives) by the remaining maturities from

the balance sheet date to the contractual maturity date. The

remaining maturities of lease liabilities are presented in Note 5,

and correspondingly remaining maturities of derivatives in

Note 9.


EUR million	2023	2024	2025	2026	2027 and later
Loans from financial institutions
Repayments	40	140	31	272	112
Interests	14	12	10	6	1
Trade payables and other current financial liabilities	557	—	—	—	—
Total	611	152	41	278	114

The information presented in above table excludes the impact of lease liabilities and derivatives.


EUR million	2022	2023	2024	2025	2026 and later
Loans from financial institutions
Repayments	222	40	40	31	84
Interests	3	—	—	—	—
Trade payables and other current financial liabilities	374	—	—	—	—
Total	599	40	40	31	85

The information presented in above table excludes the impact of lease liabilities and derivatives.

Capital structure management

The capital structure management seeks to safeguard the

ongoing business operations, to ensure flexible access to capital

markets and to secure adequate funding at a competitive rate.

Capital structure management at Valmet comprises both equity

and interest-bearing debt. As at December 31, 2022, total equity

was EUR 2,501 million (EUR 1,332 million) and the amount of

interest-bearing debt was EUR 710 million (EUR 417 million).

Valmet has not disclosed any long-term financial ratio target

for its capital structure. However, the objective of Valmet is to

maintain strong capital structure in order to secure customers’,

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

investors’, creditors’ and market confidence. The capital

structure is assessed regularly by the Board of Directors and

managed operationally by Treasury. Loan facility agreements

include customary covenants and Valmet is in clear compliance

with the covenants at the end of the reporting period. Valmet

had no credit rating at December 31, 2022.


	As at Dec 31,
EUR million	2022	2021
Interest-bearing debt	710	417
Cash and cash equivalents	277	517
Interest-bearing financial assets	30	47
Interest-bearing net debt	403	-147
Total equity	2,501	1,332

The information presented in above table excludes the impact of lease liabilities.

Interest rate risk management

Interest rate risk arises when changes in market interest rates

and interest margins influence finance costs, returns on financial

investments and valuation of interest-bearing items. The interest

rate risk is managed and controlled by Treasury. The interest

rate risks are managed through balancing the ratio between

fixed and floating interest rates and duration of interest-bearing

debt and interest-bearing financial assets. Additionally, Valmet

may use derivative instruments such as forward rate

agreements, swaps, options and futures contracts to mitigate

the risks arising from interest-bearing assets and liabilities. The

ratio of fixed rate debt of the total debt portfolio is required to

stay within the 10–60 percent range including the interest rate

derivatives. The duration of the non-current interest-bearing

debt, including the current portion, and the interest rate

derivatives is allowed to deviate between 6–42 months.

The fixed rate interest portion was 30 percent (44%), the

duration was 1.2 years (3.5 years) and the EUR denominated

debt was 100 percent (100%) of the total debt portfolio at the

end of 2022. The basis for the interest rate risk sensitivity

analysis is an aggregate Group level interest rate exposure,

composed of interest-bearing financial assets, interest-bearing

liabilities (excl. leases) and interest rate swaps, which are used

to hedge the underlying exposures. The sensitivity analysis does

not include interest component of foreign exchange derivatives

since the impact of a one percentage point change in interest

rates is not significant, assuming similar change in all currency

pairs at the same time. For all interest-bearing debt, assets and

interest rate derivatives to be fixed during the next 12 months a

change of one percentage point upwards or downwards in

interest rates with all other variables held constant would have

following effect, net of taxes:


EUR million	2022	2021
Profit for the period	-/+ 1.2	+/- 0.9
Equity	+/- 2.4	+/- 2.5

The information presented in above table excludes the impact of lease liabilities.

Valmet has used interest rate derivatives to hedge the interest

rate risk of its debt portfolio. All interest rate swaps have been

designated to cash flow hedge accounting relationships. The

nominal and fair values of the outstanding interest rate

derivative contracts are presented in Note 9.

Foreign exchange rate risk management

Valmet operates globally and is exposed to foreign exchange risk

in several currencies, although the geographical diversity of

operations decreases the significance of any individual currency.

Substantial proportion of Valmet’s net sales and costs are

generated in euros (EUR), US dollars (USD), Swedish kronas

(SEK) and Chinese yuans (CNY).

Transaction exposure

Foreign exchange transaction exposure arises when a subsidiary

has commercial or financial transactions and payments in

another currency than its own functional currency and when

related cash inflow and outflow amounts are not equal or

concurrent.

In accordance with Valmet’s treasury policy, subsidiaries are

required to hedge in full the foreign currency exposures on

Consolidated statement of financial position and other firm

commitments. Cash flows denominated in a currency other than

the functional currency of the subsidiary are hedged with

internal forward exchange contracts with Treasury for periods,

which do not usually exceed two years. Subsidiaries also carry

out hedging directly with the banks in countries, where the

regulation does not allow corporate internal cross-border

contracts. Treasury monitors the net position of each currency

and decides to what extent a currency position is to be closed.

Treasury is responsible for entering into external forward

transactions corresponding to the internal forwards whenever a

subsidiary applies hedge accounting. Valmet’s treasury policy

defines upper limits on the open currency exposures managed

by Treasury; limits have been calculated on the basis of their

potential profit or loss impact. To manage the foreign currency

exposure Treasury may use forward exchange contracts and

foreign exchange options. Valmet is exposed to foreign currency

risk arising from both on and off-balance sheet items. The

foreign currency exposure is composed of all assets and

liabilities denominated in foreign currencies and their counter

values in local currencies. Calculation includes external and

internal short and long-term sales and purchase contracts,

projected cash flows for unrecognized firm commitments and

financial items, net of respective hedges. The table below

illustrates Group’s outstanding foreign currency risk at the end

of the reporting period:

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


	As at Dec 31, 2022
EUR million	EUR	SEK	USD	CNY	Others
Operational items	229	-356	333	-211	5
of which trade receivables and other current assets	-56	-123	103	46	30
of which trade payables and other current liabilities	-13	35	-19	-38	34
Financial items	321	-135	-97	-120	31
Hedges	-579	485	-222	341	-26
under hedge accounting	-323	278	-224	235	35
not qualifying for hedge accounting	-256	207	3	106	-61
Total exposure	-29	-5	14	10	10


	As at Dec 31, 2021
EUR million	EUR	SEK	USD	CNY	Others
Operational items	169	-334	293	-196	68
of which trade receivables and other current assets	1	-123	79	45	-3
of which trade payables and other current liabilities	-41	60	-11	-25	16
Financial items	345	-207	2	-160	19
Hedges	-492	517	-294	357	-89
under hedge accounting	-219	257	-212	224	-51
not qualifying for hedge accounting	-273	260	-82	134	-38
Total exposure	22	-24	2	1	-1

This Group level currency exposure is the basis for the sensitivity

analysis of foreign exchange risk. Assuming euro to appreciate

or depreciate 10 percent against all other currencies, the impact

on cash flows, net of taxes, would be:


	As at Dec 31, 2022
EUR million	SEK	USD	CNY	Others	Total
EUR +/-10% change	+/- 0.4	-/+ 1.2	-/+ 0.8	-/+ 0.8	-/+ 2.4


	As at Dec 31, 2021
EUR million	SEK	USD	CNY	Others	Total
EUR +/-10% change	+/- 1.9	-/+ 0.1	-/+ 0.1	+/- 0.1	+/- 1.8

The sensitivity analysis as required by IFRS 7, includes financial

instruments, such as trade and other receivables, trade and

other payables, interest-bearing liabilities, deposits, cash and

cash equivalents and derivative financial instruments.

The table below presents the effects, net of taxes, of a +/- 10

percent change in EUR against all other currencies:


EUR million	2022	2021
Profit for the period	-/+ 0.5	+/- 2.5
Equity	-/+ 25.8	-/+ 17.4

Changes in fair value of derivative contracts that qualify for cash

flow hedge accounting are recorded in equity. The effect in profit

or loss is the change in fair value for all other financial

instruments exposed to foreign exchange risk.

The nominal and fair values of the outstanding forward

exchange contracts are presented in Note 9.

Translation or equity exposure

Foreign exchange translation exposure arises when goodwill or

fair value step ups, or equity of a subsidiary, is denominated in

currency other than the functional currency of the parent

company. As at December 31, 2022, the total non-EUR

denominated goodwill and fair value step ups, and equity of the

subsidiaries, was EUR 963 million (EUR 658 million). The major

translation exposures were in 2022 EUR 377 million in USD and

EUR 210 million in CNY, and respectively in 2021 EUR

180 million in USD and EUR 150 million in CNY. Valmet is

currently not hedging any equity exposure.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Commodity risk management

Valmet is exposed to risk in variations of the prices of raw

materials and of supplies including energy. Subsidiaries have

identified their commodity price hedging needs and hedges have

been executed through Treasury using approved counterparties

and instruments. For commodity risks separate overall hedging

limits are defined and approved. Hedging is done on a rolling

basis with a declining hedging level over time. Electricity

exposure in the Nordic subsidiaries has been hedged with

electricity forwards and fixed price physical contracts. Hedging is

focused on the estimated energy consumption for the next two-

year period with some contracts extended to approximately five

years. The execution of electricity hedging has been outsourced

to an external broker. As at December 31, 2022, Valmet had

outstanding electricity forwards amounting to 169 GWh (171

GWh) and 158 GWh (158 GWh) under fixed price purchase

agreements.

To reduce its exposure to the volatility caused by the

surcharge for certain metal alloys (Alloy Adjustment Factor)

comprised in the price of stainless steel charged by its suppliers,

Valmet may enter into average-price swap agreements for

nickel. The Alloy Adjustment Factor is based on monthly

average-prices of its components of which nickel is the most

significant. Also, to reduce steel scrap price risk in Valmet's own

foundry operations, Valmet can hedge steel scrap prices using

average price swap agreements. As at December 31, 2022,

Valmet had 192 metric tons outstanding average-price swap

agreements for nickel (42 metric tons) and 1,048 metric tons for

steel scrap (0 metric tons).

The following table presenting the sensitivity analysis of the

commodity prices comprises the net aggregate amount of

commodities bought through forward contracts and swaps but

excludes the anticipated future consumption of raw materials

and electricity.

A 10 percent change upwards or downwards in commodity

prices would have the following effects, net of taxes:


EUR million	2022	2021
Electricity - effect in equity	+/- 1.0	+/- 0.6
Nickel - effect in profit for the period	+/- 0.5	+/- 0.1
Steel scrap - effect in profit for the period	+/- 0.0	—

Cash flow hedge accounting has been applied to electricity

forward contracts and the change in fair value is recognized in

equity. Hedge accounting is not applied to nickel and steel scrap

agreements and the change in the fair value is recorded through

Consolidated statement of income.

Credit and counterparty risk management

Credit or counterparty risk is defined as the possibility of a

customer, subcontractor or a financial counterparty not fulfilling

its commitments towards Valmet. Subsidiaries are primarily

responsible for credit risks pertaining to sales and procurement

activities. The subsidiaries assess the credit standing of their

customers, by taking into account their financial position, past

experience and other relevant factors. Advance payments,

letters of credit and third-party guarantees are actively used to

mitigate credit risks. Treasury provides centralized services

related to trade, project and customer financing and seeks to

ensure that the principles of Valmet’s treasury policy are

adhered to with respect to terms of payment and required

collateral. Valmet has no significant concentrations of credit risks

due to the large number and geographic dispersion of companies

that comprise the Group’s customer base.

The maximum credit risk equals the carrying value of trade

and other receivables, together with contract assets related to

contracts for which revenue is recognized over time. The credit

risk quality is evaluated both on the basis of aging of the trade

receivables and also on the basis of customer specific analysis.

The aging structure of trade receivables is presented in Note 8.

Management considers investments at fair value through other

comprehensive income to have low credit risk as they have a low

risk of default and the issuer has a strong capacity to meet its

contractual cash flow obligations in the near term. Counterparty

risk arises also from financial transactions agreed upon with

banks, financial institutions and corporations. The risk is

managed by careful selection of banks and other counterparties

and by applying counterparty specific limits and netting

agreements such as ISDA (Master agreement of International

Swaps and Derivatives Association), see Note 9. All financial

institutions Valmet associates with have investment grade

status. When measuring the financial credit risk exposure, all

open exposures such as cash at bank accounts, investments,

deposits and other financial transactions, for example derivative

contracts, are included. The compliance with financial

counterparty limits is regularly monitored by the management.

22 | Investments in associated companies

Valmet Group has the following associated companies:


Company name	Place of incorporation and principal place of business	Share of ownership		Measurement
Company name	Place of incorporation and principal place of business	Dec 31, 2022	Dec 31, 2021	Measurement
Nanjing SAC Valmet Automation Co., Ltd.	China	21.95%	21.95%	Equity method
Allimand S.A.	France	35.8%	35.8%	Equity method
Valpro gerenciamento de obras Ltda	Brazil	51.0%	51.0%	Equity method

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Nanjing SAC Valmet Automation Co., Ltd. (SAC) is a company

established in 2011 between Metso Automation Co., Ltd. and

Guodian Nanjing Automation Co., Ltd. Guodian Nanjing

Automation Co., Ltd is a public company of which the majority is

owned by Huadian Power International Corporation Limited, part

of one of the five biggest power producing companies in China.

The ownership of Metso Automation Co., Ltd. transferred to

Valmet when the Group completed its acquisition of Process

Automation Systems on April 1, 2015. Nanjing SAC Valmet

Automation Co., Ltd. concentrates on developing new

technology, products and solutions to the digital power plant

concepts by combining the resources of the parties. The

associated company is focusing especially on the Chinese

market.

Valpro gerenciamento de obras Ltda is classified as joint

venture, because Valmet has, together with the other

shareholder, joint power to govern the company.

Allimand S.A., Valpro gerenciamento de obras Ltda and

Nanjing SAC Valmet Automation Co., Ltd. are private companies

and there are no quoted market prices available for their shares.

There are no contingent liabilities relating to Valmet’s interest in

Nanjing SAC Valmet Automation Co., Ltd, Allimand S.A. or

Valpro gerenciamento de obras Ltda.

On April 1, 2022, Valmet announced that the statutory merger

of Neles Corporation into Valmet had been registered and the

combination of Valmet’s and Neles’ business operations had

been completed. Neles has been consolidated into Valmet as of

April 1, 2022. In the comparison period as at December 31,

2021, Valmet held 29.54 percent share of Neles. Additional

information on the merger is presented in Note 20.

Summarized financial information for Nanjing SAC Valmet

Automation Co., Ltd. is set out below. The summarized financial

information below represents amounts shown in Nanjing SAC

Valmet Automation Co., Ltd.’s most recent financial statements.

The current and non-current assets and liabilities, revenues and

results of Allimand S.A. and Valpro gerenciamento de obras Ltda

are not material and thus not presented in the below tables.


	2022	2021
EUR million	SAC	Neles1	SAC
Balance sheet
Non-current assets	17	216	16
Current assets	123	449	108
Non-current liabilities	1	213	—
Current liabilities	68	175	60

Net assets	71	277	64
Valmet’s share of net assets	15	82	14

Income statement
Revenue	108	592	87
Profit or loss	13	50	9
Total comprehensive income	13	56	9

1In 2021, Neles’ balance sheet and income statement figures reflect Neles’ financials from October 2020 to September 2021.

Valmet had no material transactions with its associated

companies in 2022 or 2021, or material receivables or liabilities

as at December 31, 2022, or December 31, 2021.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation to carrying values in Valmet Group:


	2022	2021
EUR million	SAC	Neles	SAC
Net assets at beginning of the period1	64	253	52
Translation differences	-1	—	6
Profit for the period	13	50	9
Other comprehensive income for the period	-1	7	—
Other changes in net assets	—	—	—
Dividends paid	-4	-33	-4
Net assets at end of the period	71	277	64

Valmet's share of net assets	15	82	14
Notional goodwill and fair value adjustments	—	365	—
Carrying value at end of the period	15	447	14

Market value of listed shares		608

1 Neles as at September 30, 2020, in 2021.

Changes in investments in associated companies during the period:


	Year ended Dec 31,
EUR million	2022	2021
Historical cost
Historical cost at beginning of the period	464	464
Additions	—	—
Impairments	—	—
Reclassification1	-456	—
Other adjustments	—	—
Historical cost at end of the period	8	464

Equity adjustments
Equity adjustments at beginning of the period	-3	4
Profit for the period	9	17
Other comprehensive income for the period	—	2
Dividends received	-90	-11
Expensing of fair value adjustments	-2	-14
Reclassification1	93	—
Other adjustments	—	-1
Equity adjustments at end of the period	7	-3

Carrying value at end of the period	15	461

1 Reclassifications relate to consolidation of Neles into Valmet in 2022 and includes a gain of EUR 59 million from remeasurement of Valmet's previously held equity interest in

Neles.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23 | Audit fees

In 2022, the Annual General Meeting of Valmet Oyj elected

Authorised Public Accountants PricewaterhouseCoopers Oy as

Valmet Oyj’s auditor. The below table presents fees for audit and

other services provided by PricewaterhouseCoopers Oy and its

affiliates (PwC) to Valmet Group.


	Year ended Dec 31,
EUR million	2022	2021
Audit	-2.3	-1.7
Services under the Finnish Auditing Act, chapter 1, section 1(1), point 2	—	-0.5
Tax consulting	—	—
Other services	-0.1	-0.4
Total	-2.5	-2.6

In 2022, PricewaterhouseCoopers Oy has provided non-audit

services to entities of Valmet Group in total of EUR 0.1 million

(EUR 0.3 million) with the services consisting of tax and other

services.

24 | Contingencies and commitments

Valmet Oyj, with its subsidiaries, and financial institutions have

guaranteed commitments arising from the ordinary course of

business of Valmet Group up to a maximum of EUR 1,521 million

and EUR 1,406 million as at December 31, 2022, and 2021,

respectively.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

25 | Related party information

Valmet’s related parties include Valmet Group companies (see

Note 26) and associated companies and joint ventures (see Note

22) as well as the members of Valmet’s Board of Directors and

Executive Team.

Remuneration of Chief Executive Officer and

other Executive Team members

The table below presents the expenses related to management

compensation that have been recognized in profit or loss. More

information about share-based payments is presented in

Note 14.


EUR thousand	Salaries and other short-term benefits	Performance bonuses	Share-based payments	Post- retirement benefits	Total
2022
President and CEO	-767	-686	-781	-379	-2,613
Other Executive Team members	-3,412	-1,242	-2,666	-1,451	-8,771
Total	-4,179	-1,929	-3,447	-1,829	-11,384

2021
President and CEO	-697	-637	-734	-334	-2,402
Other Executive Team members	-2,971	-1,282	-2,672	-1,297	-8,224
Total	-3,669	-1,920	-3,406	-1,631	-10,626

The President and CEO is entitled to retire when reaching 63

years of age. All other Executive Team members belong to the

pension systems of their country of residence and have a

statutory retirement age. The President and CEO and members

of the Executive Team belong to supplementary defined

contribution pension plans.

Contributions to the plans are 15–20 percent of the employee’s

annual salary. Expenses are included in the post-retirement

benefits together with statutory pension benefits presented in

the table above. The final benefit received by the employee

depends on the return on the plan’s investments.

Remuneration paid to members of the Board of Directors


EUR thousand	2022
Mikael Mäkinen, Chairman	-167
Jaakko Eskola, Vice Chairman since April 1, 2022	-82
Aaro Cantell, Member since April 1, 2022, Vice Chairman until April 1, 2022	-83
Anu Hämäläinen, Member since April 1, 2022	-77
Pekka Kemppainen, Member	-84
Per Lindberg, Member	-74
Monika Maurer, Member	-87
Eriikka Söderström, Member	-93
Tarja Tyni, Member until March 22, 2022	-4
Rogério Ziviani, Member until March 22, 2022	-2
Juha Pöllänen, Personnel Representative	-8
Total	-761

As at December 31, 2022, the aggregate shareholding of the

Board of Directors, the President and CEO and other Executive

Team members was 712,589 shares (717,906 shares as at

December 31, 2021).

Valmet has no loan receivables from the Executive Team or the

members of the Board of Directors. No pledges or other

commitments have been given on behalf of management or

shareholders.

In 2022, Valmet sold goods to entities controlled by a member

of the Board of Directors and purchased services from the same

entities. The value of these sales amounted to EUR 428

thousand and purchases to EUR 25 thousand (no sales or

purchases in 2021). Outstanding current receivables were EUR

156 thousand and outstanding current payables EUR 8 thousand

at the end of the reporting period.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

26 | Subsidiaries


Company name	Country of incorporation and place of business	Parent holding, %	Group ownership interest, %
Neles Australia Flow Control Pty Ltd	Australia	—	100.0
Valmet Pty Ltd	Australia	—	100.0
Neles Austria GmbH	Austria	—	100.0
Valmet GesmbH	Austria	—	100.0
Valmet Celulose Papel e Energia Ltda.	Brazil	—	100.0
Valmet Fabrics Tecidos Técnicos Ltda.	Brazil	—	100.0
Valmet Flow Control Ltda.	Brazil	—	100.0
Valmet Ltd.	Canada	—	100.0
Valmet Flow Control Ltd.	Canada	100.0	100.0
Neles Chile SpA	Chile	—	100.0
Valmet S.A.	Chile	—	100.0
Neles (China) Investment Co. Ltd	China	100.0	100.0
Neles Flow Control (Shanghai) Co. Ltd	China	—	100.0
Neles Taiwan Co. Ltd	China	—	100.0
Valmet (China) Co., Ltd.	China	—	100.0
Valmet Automation (Shanghai) Co., Ltd.	China	—	100.0
Valmet Fabrics (China) Co., Ltd.	China	—	100.0
Valmet Flow Control (Jiaxing) Co., Ltd	China	—	100.0
Valmet Paper (Shanghai) Co., Ltd.	China	—	100.0
Valmet Paper Technology (China) Co., Ltd.	China	—	100.0
Valmet Paper Technology (Guangzhou) Co., Ltd.	China	—	100.0
Valmet Paper Technology (Xi'an) Co., Ltd.	China	—	75.0
Valmet Technologies Co., Ltd.	China	—	100.0
Valmet Paper Machinery (Changzhou) Co., Ltd.	China	—	100.0
Valmet d.o.o.	Croatia	—	100.0
Neles Czech Republic s.r.o.	Czech Republic	—	100.0
Valmet s.r.o.	Czech Republic	—	100.0
Valmet Technologies Oü	Estonia	—	100.0
Valmet Automation Oy	Finland	100.0	100.0
Valmet Flow Control Oy	Finland	100.0	100.0
Valmet Kauttua Oy	Finland	—	100.0
Valmet Technologies Oy	Finland	100.0	100.0
Valmet Automation SAS	France	—	100.0
Valmet SAS	France	—	100.0
Valmet Flow Control SAS	France	—	100.0
Valmet Deutschland GmbH	Germany	—	100.0
Valmet GmbH	Germany	—	100.0
Valmet Flow Control GmbH	Germany	—	100.0
Valmet Plattling GmbH	Germany	—	100.0
Neles India Private Limited	India	—	100.0
Valmet Technologies and Services Private Limited	India	—	100.0
Valmet Technologies Private Limited	India	—	100.0
PT Valmet	Indonesia	—	100.0
PT Valmet Automation Indonesia	Indonesia	—	100.0
PT Valmet Technology Center	Indonesia	—	100.0
Neles Italy SpA	Italy	—	100.0
Valmet S.p.A.	Italy	—	100.0
Valmet Technologies S.R.L.1	Italy	—	100.0
Neles Japan Co. Ltd	Japan	—	100.0
Valmet K.K.	Japan	—	100.0

1 Under liquidation.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Company name	Country of incorporation and place of business	Parent holding, %	Group ownership interest, %
Neles Flow Control Malaysia Sdn. Bhd.	Malaysia	—	100.0
Valmet Sdn. Bhd.	Malaysia	—	100.0
Neles Mexico SA de CV	Mexico	—	100.0
Valmet Technologies S. de R.L. de C.V.	Mexico	—	100.0
Neles Netherlands B.V.	Netherlands	—	100.0
Valmet B.V.	Netherlands	—	100.0
Valmet AS	Norway	—	100.0
Valmet Flow Control S.A.C	Peru	—	100.0
Valmet Automation Sp. z o.o.	Poland	—	100.0
Valmet Flow Control Sp. z.o.o.	Poland	—	100.0
Valmet Services Sp. z o.o.	Poland	—	100.0
Valmet Steel Structures Sp. z o.o.	Poland	—	100.0
Valmet Technologies and Services S.A.	Poland	—	100.0
Valmet Technologies Sp. z.o.o.1	Poland	—	100.0
Valmet Lda	Portugal	—	100.0
Valmet Flow Control, Unipessoal LDA	Portugal	—	100.0
Neles Automation WLL2	Qatar	—	49.0
Neles Korea Co. Ltd	Republic of Korea	—	100.0
Valmet Inc.	Republic of Korea	—	100.0
Valmet Flow Control S.R.L.	Romania	—	100.0
OOO Neles1	Russia	—	100.0
Valmet JSC1	Russia	—	100.0
Neles Plant Saudi Arabia LLC	Saudi Arabia	—	70.0
Neles Asia Pacific Pte Ltd	Singapore	—	100.0
Valmet Pte. Ltd.	Singapore	—	100.0
Valmet Flow Control South Africa Pty Ltd	South Africa	—	100.0
Valmet South Africa (Pty) Ltd	South Africa	—	100.0
Neles Flow Control Spain, S.L.	Spain	—	100.0
Valmet Technologies, S.A.U.	Spain	—	100.0
Valmet Technologies Zaragoza, S.L.	Spain	—	81.0
Coldwater AB	Sweden	—	100.0
Coldwater Jocell AB	Sweden	—	100.0
Valmet AB	Sweden	100.0	100.0
Valmet Flow Control AB	Sweden	—	100.0
Valmet Co., Ltd.	Thailand	—	100.0
Valmet Flow Control Co., Ltd.	Thailand	—	100.0
Valmet Flow Control Dis Tic A.S.	Turkey	—	100.0
Valmet Selüloz Kagit ve Enerji Teknolojileri A.S.	Turkey	—	100.0
Valmet Flow Control LLC2	United Arab Emirates	—	49.0
Valmet FZE	United Arab Emirates	—	100.0
Valmet Process Technologies and Services LLC2	United Arab Emirates	—	49.0
Neles UK Ltd	United Kingdom	—	100.0
Valmet Limited	United Kingdom	—	100.0
Neles-Jamesbury Inc.	USA	100.0	100.0
Valmet, Inc.	USA	73.5	100.0
Valmet Flow Control Inc.	USA	—	100.0
Valmet Co., Ltd.	Vietnam	—	100.0

1Under liquidation.

2Based on contractual arrangement, the Group has full control of the company and is consolidating the entity 100%.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27 | Events after the reporting period

On November 9, 2022, Valmet announced that it has entered

into an agreement to acquire the U.S. based NovaTech

Automation’s Process Solutions business. On January 3, 2023,

Valmet announced that the acquisition has been completed. The

value of the acquisition was not disclosed. The acquired business

specializes in process control and optimization solutions for

batch, continuous and hybrid processes. It serves customers

mainly in process industries such as food and beverage,

pharmaceuticals and chemical products. With a turnover of

approximately USD 18 million, it employs 76 people in the

United States and the Benelux countries. The acquisition

excludes NovaTech Automation’s other divisions. The NovaTech

Automation Process Solutions business will be integrated to

Valmet’s Automation Systems business line and will be included

in Valmet’s financial reporting for the first time in the interim

report for January–March, 2023.

28 | New accounting standards

New IFRS’s adopted

Valmet Group has applied new standards, amendments and

interpretations published by IASB that are effective for the first

time for financial reporting periods commencing on January 1,

2022. These standards, amendments and interpretations did not

have a material impact on the results or financial position of

Valmet Group, or the presentation of financial statements.

New IFRS’s not yet adopted

Valmet Group has not identified any new standards,

amendments or interpretations published by IASB that apply for

the first time to financial reporting periods commencing on or

after January 1, 2023, that are expected to have a material

impact on the results or financial position of Valmet Group, or

the presentation of financial statements.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Parent company statement of income, FAS


		Year ended Dec 31,
EUR	Note	2022	2021
Net sales1		16,386,451.29	14,361,580.50
Other operating income	3	5,430,988.64	4,508,170.79
Personnel expenses	2	-20,668,616.25	-17,148,845.38
Depreciation and amortization	7	-877,827.34	-1,093,875.93
Other operating expenses	3, 4	-33,540,575.65	-17,702,751.76
Operating profit		-33,269,579.31	-17,075,721.78

Financial income and expenses, net	5	202,516,930.18	54,786,799.42
Profit before appropriations and taxes		169,247,350.87	37,711,077.64

Group contributions		164,643,000.00	169,448,000.00
Income taxes	6	-24,389,074.25	-29,741,329.86

Profit for the period		309,501,276.62	177,417,747.78

1 Net sales includes services for Group companies which were previously reported as part of Other operating income.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | PARENT COMPANY FINANCIAL STATEMENTS

Parent company statement of financial position, FAS

Assets


		As at Dec 31,
EUR	Note	2022	2021
Non-current assets
Intangible assets	7	1,345,901.45	1,811,785.60
Property, plant and equipment	7	4,135,299.65	4,490,916.25
Equity investments	8	2,281,489,498.87	1,863,129,329.34
Non-current receivables	10, 11	132,823,313.93	110,493,726.64
Total non-current assets		2,419,794,013.90	1,979,925,757.83

Current assets
Current receivables	10, 11	645,972,564.84	372,569,506.15
Cash and cash equivalents		114,030,701.19	318,615,613.43
Total current assets		760,003,266.03	691,185,119.58

Total assets		3,179,797,279.93	2,671,110,877.41

Equity and liabilities


		As at Dec 31,
EUR	Note	2022	2021
Equity	12
Share capital		140,000,000.00	100,000,000.00
Reserve for invested unrestricted equity		481,121,229.04	430,864,381.31
Hedge and other reserves		6,943,646.00	-655,324.80
Retained earnings		655,940,670.57	662,778,984.83
Profit for the period		309,501,276.62	177,417,747.78
Total equity		1,593,506,822.23	1,370,405,789.12

Liabilities
Non-current liabilities	11, 13	572,235,388.82	206,278,837.88
Current liabilities	11, 14	1,014,055,068.88	1,094,426,250.41
Total liabilities		1,586,290,457.70	1,300,705,088.29

Total equity and liabilities		3,179,797,279.93	2,671,110,877.41

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | PARENT COMPANY FINANCIAL STATEMENTS

Parent company statement of cash flows, FAS


	Year ended Dec 31,
EUR thousand	2022	2021
Cash flows from operating activities
Profit before appropriations and taxes	169,247	37,711
Adjustments
Depreciation and amortization	878	1,094
Financial income and expenses, net	-202,517	-54,787
Other non-cash items	3,627	-2,111
Total adjustments	-198,012	-55,804

Change in working capital	-6,953	-13,298
Interest and other financial expenses paid	-27,598	-14,294
Dividends received	134,177	57,010
Interest and other financial income received	18,162	11,550
Income taxes paid	-41,226	-45,424
Net cash provided by (+) / used in (-) operating activities	47,799	-22,549

Cash flows from investing activities
Investments in tangible and intangible assets	-32	-268
Net increase (-) / decrease (+) in loan receivables from Group companies	-32,970	14,710
Net cash provided by (+) / used in (-) investing activities	-33,002	14,442

Cash flows from financing activities:
Purchase of treasury shares	-4,830	-2,759
Issue of treasury shares to Group companies	4,867	1,898
Dividends paid	-179,426	-134,526
Group contribution received	169,448	187,388
Proceeds from non-current debt	400,000	100,000
Repayments of current portion of non-current debt	-587,000	-118,000
Net proceeds from (+) / repayments of (-) current debt	94,739	—
Net proceeds from (+) / repayments of (-) debt from Group companies	-26,851	-33,376
Net increase (+) / decrease (-) in Group pool accounts	-153,511	229,690
Net cash provided by (+) / used in (-) financing activities	-282,563	230,315

Net increase (+) / decrease (-) in cash and cash equivalents	-267,767	222,208
Cash and cash equivalents transferred in merger	63,182	—
Cash and cash equivalents at beginning of the period	318,616	96,408
Cash and cash equivalents at end of the period	114,031	318,616

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | PARENT COMPANY FINANCIAL STATEMENTS

Notes to parent company financial statements

1 | Accounting principles

The parent company’s financial statements have been prepared

in accordance with the Finnish Accounting Standards (FAS).

Where necessary, comparative information has been

reclassified to achieve consistency in disclosure with current

financial year amounts.

Non-current assets

Tangible and intangible assets are measured at historical cost,

less accumulated depreciation according to plan. Land and water

areas are not depreciated.

Depreciation and amortization are calculated on a straight-line

basis over the expected useful lives of the assets as follows:


Intangible assets	10 years
Buildings and structures	12–30 years
Machinery and equipment	5–10 years
Other tangible assets	20 years

Investments in subsidiaries and other companies are measured

at lower of acquisition cost or fair value.

Financial instruments

Valmet’s financial risk management is carried out centrally by

the Group treasury (hereafter Treasury) under annually

reviewed written policies approved by Valmet’s Board of

Directors. Treasury functions in co-operation with the operating

units to minimize financial risks to both the parent company and

the Group.

Forward exchange derivative contracts are used to hedge

foreign exchange rate risk, and these instruments are measured

at fair value. The change in the fair value of derivative

instruments used to hedge operative items (e.g. foreign

currency denominated sales and purchase transactions) is

reported under Other operating income and expenses in profit or

loss. The change in the fair value of derivatives used to hedge

non-operative items (e.g. interest-bearing financial assets and

liabilities, and other items related to funding) are reported under

Financial income and expenses in profit or loss. The fair value of

forward exchange contracts is determined using forward

exchange market rates at the balance sheet date.

Cash flow hedge accounting is applied to interest rate swaps

hedging future changes in cash flows arising from floating rate

debt. The fair value of the interest rate swaps is calculated as

the present value of the estimated future cash flows arising from

the contract. The gain or loss related to the ineffective portion of

hedging instruments is expensed immediately and is reported

under Financial income and expenses. Interest arising from

interest rate swaps is reported under Financial income and

expenses concurrently with interest expense arising from hedged

floating rate debt.

The derivative contracts used to hedge the commodity risk

related to electricity and nickel are measured at fair value, and

the changes in fair values are recognized in Other operating

income and expenses in profit or loss. The fair value of

commodity derivatives is based on quoted market prices at the

balance sheet date.

Interest-bearing financial investments managed centrally by

the Treasury are measured at fair value. The change in the fair

value is recognized in fair value reserve within Equity in the

Statement of financial position. The fair values of the interest-

bearing financial assets are determined using prevailing market

rates at the balance sheet date.

Pensions

An external pension insurance company manages the parent

company’s statutory and voluntary pension plans that are all

defined contribution in nature. Contributions are expensed to the

Statement of income as incurred.

Deferred taxes

A deferred tax liability or asset has been calculated for all

temporary differences between tax bases of assets and liabilities

and their amounts in financial reporting, using the tax rates

enacted or substantially enacted by the balance sheet date. The

deferred tax liabilities are recognized in the Statement of

financial position in full, and the deferred tax assets are

recognized when it is probable that there will be sufficient

taxable profit against which the asset can be utilized.

Foreign currency transactions

Transactions in foreign currency are recorded at the exchange

rate prevailing on the date of the individual transaction. Foreign

currency denominated monetary items recognized in the

Statement of financial position have been translated into the

functional currency at the exchange rates prevailing at the

balance sheet date. Exchange rate gains and losses related to

operative items are reported under Other operating income and

expenses in the Statement of income, whereas exchange rate

gains and losses related to non-operative items are reported

under Financial income and expenses.

Receivables

Receivables are initially recognized at nominal amounts.

Subsequently they are measured at amortized cost, less

provision for impairment.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

Share-based incentive plan

Rewards arising from share-based incentive plans are settled

partly in shares and partly in cash. The shares to be transferred

as part of the plan are obtained in public trading. The acquisition

of shares is recognized as decrease in Retained earnings and

transfer of shares as increase in Reserve for invested

unrestricted equity and Personnel expenses. The part settled in

cash is recognized in the Statement of income under Personnel

expenses at the time of payment.

Leasing

Lease payments have been recognized as rental expenses in the

Statement of income.

2 | Personnel expenses


	Year ended Dec 31,
EUR thousand	2022	2021
Salaries and wages	-17,225	-14,162
Pension costs	-2,975	-2,722
Other indirect employee costs	-468	-265
Total	-20,669	-17,149

Remuneration to management:


	Year ended Dec 31,
EUR thousand	2022	2021
President and CEO	-2,613	-2,402
Members of the Board	-761	-715
Total	-3,374	-3,117

The President and CEO is entitled to retire when reaching 63

years of age. The President and CEO belongs to a supplementary

defined contribution plan. The contribution to the plan is 20

percent of his annual salary. Expenses are included in the

remuneration to management table above. Additional

information on management remuneration is presented in Note

25 of the Consolidated financial statements.

Number of personnel:


	2022	2021
Personnel at end of the period	143	118
Average number of personnel during the period	140	116

3 | Other operating income and expenses


	Year ended Dec 31,
EUR thousand	2022	2021
Change in fair value of derivatives	5,431	4,508
Other operating income, total	5,431	4,508

Consulting and other services	-27,573	-12,872
IT	-980	-1,277
Other	-4,988	-3,554
Other operating expenses, total	-33,541	-17,703

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

4 | Audit fees


	Year ended Dec 31,
EUR thousand	2022	2021
Audit	-469	-423
Services under the Finnish Auditing Act, chapter 1, section 1(1), point 2	-35	-509
Tax consulting	—	-48
Other services	-84	-343
Total	-588	-1,322

5 | Financial income and expenses


	Year ended Dec 31,
		2022			2021
EUR thousand	Group companies	Others	Total	Group companies	Others	Total
Dividends received	122,629	89,594	212,223	47,000	10,010	57,010
Interest income	9,824	1,468	11,292	5,340	131	5,472
Interest expenses	-7,256	-8,894	-16,149	-371	-4,425	-4,796
Net gain/loss from foreign exchange	-246	340	93	-6,925	7,407	483
Interest component from forward contracts	-4,863	3,600	-1,263	-4,188	3,702	-486
Other financial expenses	—	-3,679	-3,679	—	-2,895	-2,895
Total	120,088	82,429	202,517	40,856	13,931	54,787

6 | Income taxes


	Year ended Dec 31,
EUR thousand	2022	2021
Income tax for the financial period	-24,562	-29,950
Income tax for prior periods	242	181
Change in deferred taxes	-69	28
Total	-24,389	-29,741

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

7 | Intangible assets and property, plant and equipment


EUR thousand	Intangible assets	Land areas	Buildings and structures	Machinery and equipment	Other tangible assets	Tangible assets total	Total
2022
Acquisition cost at beginning of the period	2,739	809	9,476	592	557	11,434	14,172
Additions	1,896	—	—	—	38	38	1,934
Disposals	-1,878	—	—	—	—	—	-1,878
Acquisition cost at end of the period	2,757	809	9,476	592	596	11,472	14,229

Accumulated depreciation at beginning of the period	-927	—	-6,097	-592	-254	-6,943	-7,870
Depreciation charges for the period	-484	—	-369	—	-25	-394	-878
Accumulated depreciation at end of the period	-1,411	—	-6,466	-592	-279	-7,337	-8,747

Carrying value at end of the period	1,346	809	3,010	—	316	4,135	5,481


EUR thousand	Intangible assets	Land areas	Buildings and structures	Machinery and equipment	Other tangible assets	Tangible assets total	Total
2021
Acquisition cost at beginning of the period	2,739	809	9,208	592	557	11,166	13,904
Additions	—	—	268	—	—	268	268
Acquisition cost at end of the period	2,739	809	9,476	592	557	11,434	14,172

Accumulated depreciation at beginning of the period	-443	—	-5,512	-592	-229	-6,333	-6,776
Depreciation charges for the period	-484	—	-585	—	-25	-610	-1,094
Accumulated depreciation at end of the period	-927	—	-6,097	-592	-254	-6,943	-7,870

Carrying value at end of the period	1,812	809	3,379	—	303	4,491	6,303

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

8 | Investments


EUR thousand	Shares in Group companies	Other shares	Investments in associated companies	Investments total
2022
Acquisition cost at beginning of the period	1,405,474	1,492	456,164	1,863,129
Additions1	874,359	165	—	874,524
Disposals1	—	—	-456,164	-456,164
Acquisition cost at end of the period	2,279,833	1,657	—	2,281,489

Carrying value at end of the period	2,279,833	1,657	—	2,281,489

1Neles Oyj has merged with Valmet Oyj on April 1, 2022. Valmet's previously held equity interest in Neles was reclassified and new subsidiaries were acquired in the merger.

More information regarding the new subsidiaries is presented in Note 9.


EUR thousand	Shares in Group companies	Other shares	Investments in associated companies	Investments total
2021
Acquisition cost at beginning of the period	1,405,474	1,492	456,164	1,863,129
Additions	—	—	—	—
Disposals	—	—	—	—
Acquisition cost at end of the period	1,405,474	1,492	456,164	1,863,129

Carrying value at end of the period	1,405,474	1,492	456,164	1,863,129

9 | Subsidiaries


Company name	Domicile	Ownership %
Valmet Technologies Oy	Finland	100.0
Valmet Automation Oy	Finland	100.0
Valmet Flow Control Oy	Finland	100.0
Valmet AB	Sweden	100.0
Valmet, Inc.	USA	73.5
Neles-Jamesbury Inc.	USA	100.0
Valmet Flow Control Ltd.	Canada	100.0
Neles (China) Investment Co., Ltd.	China	100.0

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

10 | Specification of receivables

Non-current receivables:


	As at Dec 31,
EUR thousand	2022	2021
Loan receivables from Group companies	115,496	98,803
Deferred tax assets	—	616
Derivatives from Group companies	6,742	1,519
Derivatives from others	10,585	9,555
Non-current receivables total	132,823	110,494

Current receivables:


	As at Dec 31, 2022			As at Dec 31, 2021
EUR thousand	Group companies	Others	Total	Group companies	Others	Total
Trade receivables from	14,979	—	14,979	9,606	—	9,606
Loan receivables from	97,523	—	97,523	38,269	—	38,269
Group pool accounts	242,683	—	242,683	94,029	—	94,029
Prepaid expenses and accrued income from	213,955	76,787	290,742	193,302	37,347	230,649
Other receivables from	—	45	45	—	16	16
Current receivables total	569,140	76,833	645,973	335,207	37,363	372,570

Specification of prepaid expenses and accrued income:


	As at Dec 31,
EUR thousand	2022	2021
Prepaid expenses and accrued income from Group companies
Group contribution receivables	164,643	169,448
Accrued interest income	2,771	1,441
Derivatives	45,321	20,409
Other	1,220	2,004
Total	213,955	193,302

Other prepaid expenses and accrued income
Derivatives	58,348	32,748
Other	18,440	4,599
Total	76,787	37,347

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

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11 | Financial assets and liabilities recognized at fair value

Notional amounts and fair values as at December 31:


EUR thousand	Notional amount	Fair value, assets	Fair value, liabilities	Fair value, net	Changes in fair value recognized in profit or loss	Changes in fair value recognized in hedge reserve
2022
Forward exchange contracts
With Group companies	3,092,057	52,027	-50,331	1,697	34,838	—
Others	3,437,871	49,845	-54,983	-5,139	-50,176	—
Interest rate swaps1
Others	125,000	8,697	-18	8,680	315	8,680
Electricity forward contracts2
Others	169	8,772	-55	8,717	5,071	—
Nickel commodity swaps3
With Group companies	192	—	-1,322	-1,322	-1,248	—
Others	192	1,322	—	1,322	1,248	—
Steel scrap commodity swaps3
With Group companies	1,048	—	-3	-3	-3	—
Others	1,048	3	—	3	3	—


EUR thousand	Notional amount	Fair value, assets	Fair value, liabilities	Fair value, net	Changes in fair value recognized in profit or loss	Changes in fair value recognized in hedge reserve
2021
Forward exchange contracts
With Group companies	2,717,655	21,937	-36,153	-14,215	2,508	—
Others	3,051,457	37,982	-24,349	13,633	-5,994	—
Interest rate swaps1
Others	75,000	567	-1,540	-972	-12	-819
Electricity forward contracts2
Others	171	3,646	—	3,646	4,148	—
Nickel commodity swaps3
With Group companies	42	—	-74	-74	-33	—
Others	42	74	—	74	33	—

1All interest rate swaps have been designated to cash flow hedge accounting relationships.

2Notional amount in GWh.

3Notional amount in metric tons.

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Maturities of financial derivatives as at December 31:


	2023	2024	2025	2026	2027 and later
2022
Notional amounts
Forward exchange contracts1	6,074,786	443,889	11,253	—	—
Electricity forward contracts2	120	48	—	—	—
Nickel commodity swaps3	384	—	—	—	—
Steel scrap commodity swaps3	2,096	—	—	—	—
Interest rate swaps1	25,000	—	30,000	25,000	45,000

Fair values, EUR thousand
Forward exchange contracts	-3,510	63	5	—	—
Electricity forward contracts	7,564	1,153	—	—	—
Nickel commodity swaps	—	—	—	—	—
Steel scrap commodity swaps	—	—	—	—	—
Interest rate swaps	-18	—	1,586	1,305	5,806


	2022	2023	2024	2025	2026 and later
2021
Notional amounts
Forward exchange contracts1	4,918,852	836,253	14,007	—	—
Electricity forward contracts2	101	70	—	—	—
Nickel commodity swaps3	84	—	—	—	—
Interest rate swaps1	—	—	—	30,000	45,000

Fair values, EUR thousand
Forward exchange contracts	-668	93	-7	—	—
Electricity forward contracts	3,118	529	—	—	—
Nickel commodity swaps	—	—	—	—	—
Interest rate swaps	-153	—	—	-1,387	567

1Notional amount in EUR thousand.

2Notional amount in GWh.

3Notional amount in metric tons.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

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Classification of financial assets and liabilities as at December 31:


	As at Dec 31,
EUR thousand1	2022	2021
Non-current financial assets
Equity investments at amortized cost	2,279,833	1,405,474
Equity investments at fair value through profit or loss	1,657	457,656
Loan receivables at amortized cost	115,496	98,803
Derivative financial instruments at fair value through profit or loss	8,630	10,507
Derivative financial instruments qualified for hedge accounting	8,697	567
Carrying value at end of the period	2,414,313	1,973,007

Current financial assets
Loan receivables at amortized cost	97,523	38,269
Trade receivables at amortized cost	14,979	9,606
Derivative financial instruments at fair value through profit or loss	103,669	53,157
Cash and cash equivalents at amortized cost	114,031	318,616
Carrying value at end of the period	330,202	419,648


	As at Dec 31,
EUR thousand1	2022	2021
Non-current financial liabilities
Loans from financial institutions at amortized cost	555,022	195,000
Derivative financial instruments at fair value through profit or loss	7,409	9,892
Derivative financial instruments qualified for hedge accounting	18	1,387
Carrying value at end of the period	562,449	206,279

Current financial liabilities
Loans from financial institutions at amortized cost	39,978	222,000
Interest-bearing liabilities at amortized cost	94,739	—
Trade payables at amortized cost	3,222	5,052
Derivative financial instruments at fair value through profit or loss	99,577	50,703
Carrying value at end of the period	237,516	277,756

1Carrying values presented in the table approximate fair values.

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12 | Statement of changes in equity


	Year ended Dec 31,
EUR thousand	2022	2021
Share capital at beginning of the period	100,000	100,000
Issue of ordinary shares as consideration for a business combination	40,000	—
Share capital at end of the period	140,000	100,000

Reserve for invested unrestricted equity at beginning of the period	430,864	428,348
Issue of ordinary shares as consideration for a business combination	43,860	—
Share-based payments	6,396	2,516
Reserve for invested unrestricted equity at end of the period	481,121	430,864

Hedge and other reserves at beginning of the period	-655	-2,709
Additions	7,599	2,054
Hedge and other reserves at end of the period	6,944	-655

Retained earnings at beginning of the period	840,197	800,064
Dividends paid	-179,426	-134,526
Purchase of treasury shares	-4,830	-2,759
Retained earnings at end of the period	655,941	662,779

Profit for the period	309,501	177,418

Total equity at end of the period	1,593,507	1,370,406

Statement of distributable funds:


	As at Dec 31,
EUR	2022	2021
Reserve for invested unrestricted equity	481,121,229.04	430,864,381.31
Hedge and other reserves	6,943,646.00	-655,324.80
Retained earnings	655,940,670.57	662,778,984.83
Profit for the period	309,501,276.62	177,417,747.78
Total distributable funds	1,453,506,822.23	1,270,405,789.12

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13 | Non-current liabilities


	As at Dec 31,
EUR thousand	2022	2021
Loans from financial institutions	555,022	195,000
Derivatives from Group companies	730	8,509
Derivatives from others	6,696	2,769
Deferred tax liabilities	1,310	—
Other non-current liabilities	8,477	—
Non-current liabilities total	572,235	206,279

Maturities of financial liabilities as at December 31:


EUR thousand	2023	2024	2025	2026	2027 and later
Loans from financial institutions	39,978	139,978	30,978	271,978	112,088
Trade payables and other financial liabilities	3,222	—	—	—	—
Total	43,200	139,978	30,978	271,978	112,088


EUR thousand	2022	2023	2024	2025	2026 and later
Loans from financial institutions	222,000	39,978	39,978	30,978	84,066
Trade payables and other financial liabilities	5,052	—	—	—	—
Total	227,052	39,978	39,978	30,978	84,066

The information presented in above maturity tables excludes the impact of derivatives.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

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14 | Current liabilities


	As at Dec 31, 2022			As at Dec 31, 2021
EUR thousand	Group companies	Others	Total	Group companies	Others	Total
Current portion of non-current loans	—	39,978	39,978	—	222,000	222,000
Trade payables	627	2,594	3,222	1,205	3,847	5,052
Accrued expenses and deferred income	53,029	57,635	110,664	27,842	33,597	61,439
Other current interest-bearing debt	31,168	94,739	125,907	26,996	—	26,996
Group pool accounts	733,194	—	733,194	778,383	—	778,383
Other liabilities and provisions	—	1,090	1,090	—	556	556
Current liabilities total	818,018	196,037	1,014,055	834,426	260,000	1,094,426

Specification of accrued expenses and deferred income:


	As at Dec 31,
EUR thousand	2022	2021
Accrued expenses and deferred income to Group companies
Accrued interest expenses	844	16
Derivatives	51,175	27,737
Other	1,010	89
Total	53,029	27,842

Accrued expenses and deferred income to others
Accrued interest expenses	3,540	2,087
Derivatives	48,402	22,966
Accrued salaries, wages and social costs	4,773	4,300
Accrued income taxes	—	3,264
Other	920	980
Total	57,635	33,597

15 | Other contingencies

Guarantees:


	As at Dec 31,
EUR thousand	2022	2021
Guarantees on behalf of Group companies	1,412,286	1,302,112
Guarantees on own behalf	216	201
Total	1,412,502	1,302,313

Lease commitments:


	As at Dec 31,
EUR thousand	2022	2021
Payments in the following year	790	852
Payments later	79	749
Total	869	1,601

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List of account books used in parent company


Voucher description	Voucher class	Voucher format
General journal and general ledger		In electronic format
Specifications of accounts receivable and payable		In electronic format
Fixed assets transactions	770, 774, 778, 782, 783, 786	In electronic format
Bank transactions	425, 426, 500–692, 694, 699, 730, 950, 960, 970	In electronic format
Sales invoices	300, 305, 310, 320, 330, 350, 400, 410, 424, 491–499, 802, 930, 935, 940	In electronic format
Purchase invoices	100, 110, 115, 120, 130, 140, 150, 160, 190, 191, 290, 291–294, 297–299, 737, 801, 824, 830, 910, 915	In electronic format
Travel invoices	755	In electronic format
Salary transactions	750	In electronic format
Journal vouchers	700, 710, 715, 720, 725, 740, 756, 793, 900, 980, 985, 990	In electronic format
Financial transactions	760, 765, 768	In electronic format
Opening balance	791, 792	In electronic format

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | LIST OF ACCOUNT BOOKS USED IN PARENT COMPANY

107

Signatures of Board of Directors’ Report and

Financial Statements


		Espoo, February 2, 2023


	Mikael Mäkinen		Jaakko Eskola
	Chairman of the Board		Vice Chairman of the Board




Aaro Cantell		Anu Hämäläinen		Pekka Kemppainen
Member of the Board		Member of the Board		Member of the Board



Per Lindberg		Monika Maurer		Eriikka Söderström
Member of the Board		Member of the Board		Member of the Board



		Pasi Laine
		President and CEO




	The Auditor’s Note

	Our auditor’s report has been issued today.

	Helsinki, February 2, 2023

	PricewaterhouseCoopers Oy
	Authorised Public Accountant Firm



		Pasi Karppinen
	Authorised Public Accountant

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FINANCIAL STATEMENTS

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Auditor’s Report (Translation of the Finnish Original)

To the Annual General Meeting of Valmet Oyj

Report on the Audit of the

Financial Statements

Opinion

In our opinion

•the consolidated financial statements give a true and fair view

of the group’s financial position and financial performance and

cash flows in accordance with International Financial Reporting

Standards (IFRS) as adopted by the EU

•the financial statements give a true and fair view of the parent

company’s financial performance and financial position in

accordance with the laws and regulations governing the

preparation of the financial statements in Finland and comply

with statutory requirements.

Our opinion is consistent with the additional report to the Audit

Committee.

What we have audited

We have audited the financial statements of Valmet Oyj

(business identity code 2553019-8) for the year ended 31

December 2022. The financial statements comprise:

•the consolidated statement of financial position, consolidated

statement of income, consolidated statement of

comprehensive income, consolidated statement of changes in

equity, consolidated statement of cash flows and notes,

including a summary of significant accounting policies

•the parent company’s balance sheet, income statement,

statement of cash flows and notes.

Basis for Opinion

We conducted our audit in accordance with good auditing

practice in Finland. Our responsibilities under good auditing

practice are further described in the Auditor’s Responsibilities for

the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the parent company and of the group

companies in accordance with the ethical requirements that are

applicable in Finland and are relevant to our audit, and we have

fulfilled our other ethical responsibilities in accordance with these

requirements.

To the best of our knowledge and belief, the non-audit services

that we provided to the parent company and to the group

companies are in accordance with the applicable law and

regulations in Finland and we have not provided non-audit

services that are prohibited under Article 5(1) of Regulation (EU)

No 537/2014. The non-audit services that we have provided are

disclosed in note 23 to the Financial Statement.

Our Audit Approach

Overview

•Overall group materiality: € 21.5

million, which represents

approximately 5% of profit

before tax

•We conducted audit work in all

major countries covering all key

reporting units. The focus of our

work was on the most significant

reporting units in Finland,

Sweden, USA, Brazil, China and

India.

•Accounting for long-term

projects and long-term service

contracts

•Timing of revenue recognition

for Service and Automation

segment related contracts

•Goodwill valuation

As part of designing our audit, we determined materiality and

assessed the risks of material misstatement in the financial

statements. In particular, we considered where management

made subjective judgements; for example, in respect of

significant accounting estimates that involved making

assumptions and considering future events that are inherently

uncertain.

Materiality

The scope of our audit was influenced by our application of

materiality. An audit is designed to obtain reasonable assurance

whether the financial statements are free from material

misstatement. Misstatements may arise due to fraud or error.

They are considered material if individually or in aggregate, they

could reasonably be expected to influence the economic

decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain

quantitative thresholds for materiality, including the overall

group materiality for the consolidated financial statements as set

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | AUDITOR’S REPORT

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out in the table below. These, together with qualitative

considerations, helped us to determine the scope of our audit

and the nature, timing and extent of our audit procedures and to

evaluate the effect of misstatements on the financial statements

as a whole.


Overall group materiality	€ 21.5 million (previous year € 19 million)
How we determined it	Approximately 5% of profit before tax
Rationale for the materiality benchmark applied	Profit before tax is a generally accepted benchmark. We chose 5%, which is within the range of acceptable quantitative materiality thresholds in auditing standards.

How we tailored our group audit scope

We tailored the scope of our audit, taking into account the

structure of the group, the accounting processes and controls,

and the industry in which the group operates.

We conducted audit work in all key countries covering all key

reporting units. The group audit scope was focused on the most

significant reporting units in Finland, Sweden, USA, Brazil, China

and India, where we performed an audit of the complete

financial information due to their size and their risk

characteristics. Additionally, we performed audits of one or more

financial statement line items or specified audit procedures at

other reporting components based on our overall risk

assessment and materiality. We also carried out specific audit

procedures over group functions and areas of significant

judgement, including taxation, goodwill and material litigation.

For the remaining reporting units, we performed other

procedures to confirm there were no significant risks of material

misstatement in the group financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional

judgment, were of most significance in our audit of the financial

statements of the current period. These matters were addressed

in the context of our audit of the financial statements as a

whole, and in forming our opinion thereon, and we do not

provide a separate opinion on these matters.

As in all of our audits, we also addressed the risk of

management override of internal controls, including among

other matters consideration of whether there was evidence of

bias that represented a risk of material misstatement due to

fraud.

Key audit matter in the audit of the group

Accounting for long-term projects and long-term service

contracts

Refer to note 3 to the consolidated financial statements for the

related disclosures.

Over time revenue recognition for long-term projects and long-

term service contracts is significant to the financial statements

based on the quantitative materiality and the degree of

management judgment required to account for revenue

recognition. The complexity and judgments are mainly related to

the estimation of project cost, which serves as a basis for the

determination of the percentage of completion, which the group

applies for recognizing revenues and for the assessment of

provisions for projects and potential loss-making contracts.

The total amount of revenue and profit to be recognized under

long-term projects and long-term service contracts can be

affected by changes in conditions and circumstances over time,

such as:

•modifications and scope changes to the original contract due

to changes in client specifications

•uncertainties and risks relating to assumptions utilized in the

estimation of project cost, components delays, overruns or

other circumstances that impacts the project cost of

completion.

This matter is a significant risk of material misstatement referred

to in Article 10(2c) of Regulation (EU) No 537/2014.

How our audit addressed the key audit matter

Our procedures included understanding of the end-to-end

revenue recognition process relating to long-term projects and

long-term service contracts. We identified and tested certain key

internal controls and IT systems supporting revenue recognition

and project management and accounting.

We have met and discussed regularly with business line and

corporate management to identify new significant and high-risk

projects, existing projects with significant fluctuations in gross

margins, and potentially loss-making projects, including those

with ongoing disputes and litigations.

We have performed detailed procedures on individually

significant and high-risk projects. This includes assessing the

reasonableness of estimated project cost of completion by

obtaining an understanding of the cost model and key

assumptions utilized in the estimates, and challenging

management’s judgments and estimates. In addition, we have

also inspected pricing and sales forecasts, and other relevant

supporting evidences utilized in the development of cost

estimates such as historical data, price quotations, and

engineering specifications.

In addition, we have discussed the progress of projects with

business line management and certain project management

representatives.

Further, we have performed a lookback analysis by comparing

actual project outcomes to their related cost estimates to obtain

perspective on the accuracy of the estimation process.

With the outcome of those discussions and the results of our

audit procedures, we assessed management’s assumptions in

the determination of the project cost estimate.

Timing of revenue recognition for Service and Automation

segment related contracts

Refer to note 3 to the consolidated financial statements for the

related disclosures.

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The company has several revenue streams relating to Service

and Automation segments contracts where revenue is

recognised at a point in time.

We focused on this area because the significant portion of the

group net sales arises from these contracts and there is a risk

that revenue is recognised in the incorrect period.

How our audit addressed the key audit matter

Our procedures included understanding of the end-to- end

revenue recognition process.

Through this, we have identified the appropriate period before

and after year-end wherein risk of misstatement is likely to

arise, and tested revenue transactions in these periods and

inspected supporting evidences including customer contracts and

sales orders, invoices, delivery and freight documents, and

collection supports.

We have also tested credit notes issued subsequent to year-

end to identify potential indicators of premature revenue

recognition in relation to billing goods or services that do not

meet the agreed delivery terms.

Goodwill valuation

Refer to notes 4 and 20 to the consolidated financial statements

for the related disclosures.

At 31 December 2022 the group’s goodwill balance is valued at

1,611 million euro which includes 876 million euro goodwill from

the business combinations in 2022.

Under IFRS the company is required to annually test goodwill

for impairment. Goodwill valuation was important to our audit

due to the size of the goodwill balance and because the

assessment of the value in use of the group’s Cash Generating

Units is complex, involving judgement about the future results of

the business by estimating future, EBITDAs and inflation rates

and determining the discount rate for the calculations. We

focused on the risk that goodwill may be overstated.

Based on the annual goodwill impairment test management

concluded that no goodwill impairment was needed.

How our audit addressed the key audit matter

For the business combinations, we assessed the methodology

adopted by management for calculating the purchase price, fair

values of the acquired assets and liabilities, and the resulting

goodwill. We also tested the key assumptions in the valuation

models.

We evaluated management’s future cash flow forecasts and

the process by which they were drawn up, including comparing

them to the latest Board approved budgets, and testing the

underlying calculations. We evaluated and challenged the

company’s future cash flow forecasts in a discussion with

management of the business involved, and the process by which

they were drawn up, and tested the underlying value in use

calculations. We compared the current year actual results to the

figures for the financial year ended 31 December 2022 included

in the prior year impairment models to consider whether any

forecasts included assumptions that have proven to be

optimistic.

We evaluated and challenged the discount rate used.

We assessed the sensitivity analysis that had been performed

by management around the key drivers of the cash flow

forecasts, which were:

•the projected EBITDAs

•the discount rate

to identify how much each of these key drivers needed to

change, either individually or collectively, before the goodwill

was impaired.

We also evaluated the likelihood of such a movement in those

key assumptions that would require for goodwill to be impaired.

We assessed the adequacy of the disclosures in note 4, by

checking that they were compliant with IFRSs and that their

presentation was consistent with our understanding of the key

issues and sensitivities in the valuation.

We have no key audit matters to report with respect to our

audit of the parent company financial statements.

There are no significant risks of material misstatement referred

to in Article 10(2c) of Regulation (EU) No 537/2014 with respect

to the parent company financial statements.

Responsibilities of the Board of Directors and the

Managing Director for the Financial Statements

The Board of Directors and the Managing Director are

responsible for the preparation of consolidated financial

statements that give a true and fair view in accordance with

International Financial Reporting Standards (IFRS) as adopted

by the EU, and of financial statements that give a true and fair

view in accordance with the laws and regulations governing the

preparation of financial statements in Finland and comply with

statutory requirements. The Board of Directors and the

Managing Director are also responsible for such internal control

as they determine is necessary to enable the preparation of

financial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the financial statements, the Board of Directors

and the Managing Director are responsible for assessing the

parent company’s and the group’s ability to continue as a going

concern, disclosing, as applicable, matters relating to going

concern and using the going concern basis of accounting. The

financial statements are prepared using the going concern basis

of accounting unless there is an intention to liquidate the parent

company or the group or to cease operations, or there is no

realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial

Statements

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to

issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance but is not a guarantee

that an audit conducted in accordance with good auditing

practice will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they

could reasonably be expected to influence the economic

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | AUDITOR’S REPORT

111

decisions of users taken on the basis of these financial

statements.

As part of an audit in accordance with good auditing practice,

we exercise professional judgment and maintain professional

skepticism throughout the audit. We also:

•Identify and assess the risks of material misstatement of the

financial statements, whether due to fraud or error, design

and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to

provide a basis for our opinion. The risk of not detecting a

material misstatement resulting from fraud is higher than for

one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the

override of internal control.

•Obtain an understanding of internal control relevant to the

audit in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the parent company’s or the

group’s internal control.

•Evaluate the appropriateness of accounting policies used and

the reasonableness of accounting estimates and related

disclosures made by management.

•Conclude on the appropriateness of the Board of Directors’

and the Managing Director’s use of the going concern basis of

accounting and based on the audit evidence obtained, whether

a material uncertainty exists related to events or conditions

that may cast significant doubt on the parent company’s or

the group’s ability to continue as a going concern. If we

conclude that a material uncertainty exists, we are required to

draw attention in our auditor’s report to the related disclosures

in the financial statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are based

on the audit evidence obtained up to the date of our auditor’s

report. However, future events or conditions may cause the

parent company or the group to cease to continue as a going

concern.

•Evaluate the overall presentation, structure and content of the

financial statements, including the disclosures, and whether

the financial statements represent the underlying transactions

and events so that the financial statements give a true and

fair view.

•Obtain sufficient appropriate audit evidence regarding the

financial information of the entities or business activities

within the group to express an opinion on the consolidated

financial statements. We are responsible for the direction,

supervision and performance of the group audit. We remain

solely responsible for our audit opinion.

We communicate with those charged with governance regarding,

among other matters, the planned scope and timing of the audit

and significant audit findings, including any significant

deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a

statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with

them all relationships and other matters that may reasonably be

thought to bear on our independence, and where applicable,

related safeguards.

From the matters communicated with those charged with

governance, we determine those matters that were of most

significance in the audit of the financial statements of the

current period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or

regulation precludes public disclosure about the matter or when,

in extremely rare circumstances, we determine that a matter

should not be communicated in our report because the adverse

consequences of doing so would reasonably be expected to

outweigh the public interest benefits of such communication.

Other Reporting Requirements

Appointment

We were first appointed as auditors by the annual general

meeting on 26 March 2014. Our appointment represents a total

period of uninterrupted engagement of 9 years.

Other Information

The Board of Directors and the Managing Director are

responsible for the other information. The other information

comprises in the report of the Board of Directors and the

information included in the Annual Report but does not include

the financial statements and our auditor’s report thereon. We

have obtained the report of the Board of Directors prior to the

date of this auditor’s report and the Annual Report is expected to

be made available to us after that date.

Our opinion on the financial statements does not cover the

other information.

In connection with our audit of the financial statements, our

responsibility is to read the other information identified above

and, in doing so, consider whether the other information is

materially inconsistent with the financial statements or our

knowledge obtained in the audit, or otherwise appears to be

materially misstated. With respect to the report of the Board of

Directors, our responsibility also includes considering whether

the report of the Board of Directors has been prepared in

accordance with the applicable laws and regulations.

In our opinion

•the information in the report of the Board of Directors is

consistent with the information in the financial statements

•the report of the Board of Directors has been prepared in

accordance with the applicable laws and regulations.

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | AUDITOR’S REPORT

112

If, based on the work we have performed on the other

information that we obtained prior to the date of this auditor’s

report, we conclude that there is a material misstatement of this

other information, we are required to report that fact. We have

nothing to report in this regard.

Helsinki 2 February 2023

PricewaterhouseCoopers Oy

Authorised Public Accountants

Pasi Karppinen

Authorised Public Accountant (KHT)

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | AUDITOR’S REPORT

113

Independent Auditor’s Reasonable Assurance Report on

Valmet Oyj’s ESEF Financial Statements (Translation of the Finnish

Original)

To the Management of Valmet Oyj

We have been engaged by the Management of Valmet Oyj

(business identity code 2553019-8) (hereinafter also “the

Company”) to perform a reasonable assurance engagement on

the Company’s consolidated IFRS financial statements for the

financial year 1 January - 31 December 2022 in European Single

Electronic Format (“ESEF financial statements”).

Management’s Responsibility for the ESEF Financial

Statements

The Management of Valmet Oyj is responsible for preparing the

ESEF financial statements so that they comply with the

requirements as specified in the Commission Delegated

Regulation (EU) 2019/815 of 17 December 2018 (“ESEF

requirements”). This responsibility includes the design,

implementation and maintenance of internal control relevant to

the preparation of ESEF financial statements that are free from

material noncompliance with the ESEF requirements, whether

due to fraud or error.

Our Independence and Quality Management

We have complied with the independence and other ethical

requirements of the International Code of Ethics for Professional

Accountants (including International Independence Standards)

issued by the International Ethics Standards Board for

Accountants (IESBA Code), which is founded on fundamental

principles of integrity, objectivity, professional competence and

due care, confidentiality and professional behaviour.

Our firm applies International Standard on Quality

Management 1, which requires the firm to design, implement

and operate a system of quality management including policies

or procedures regarding compliance with ethical requirements,

professional standards and applicable legal and regulatory

requirements.

Our Responsibility

Our responsibility is to express an opinion on the ESEF financial

statements based on the procedures we have performed and the

evidence we have obtained.

We conducted our reasonable assurance engagement in

accordance with the International Standard on Assurance

Engagements (ISAE) 3000 (Revised) Assurance Engagements

Other than Audits or Reviews of Historical Financial Information.

That standard requires that we plan and perform this

engagement to obtain reasonable assurance about whether the

ESEF financial statements are free from material noncompliance

with the ESEF requirements.

A reasonable assurance engagement in accordance with ISAE

3000 (Revised) involves performing procedures to obtain

evidence about the ESEF financial statements compliance with

the ESEF requirements. The procedures selected depend on the

auditor’s judgment, including the assessment of the risks of

material noncompliance of the ESEF financial statements with

the ESEF requirements, whether due to fraud or error. In making

those risk assessments, we considered internal control relevant

to the Company’s preparation of the ESEF financial statements.

We believe that the evidence we have obtained is sufficient

and appropriate to provide a basis for our opinion.

Opinion

In our opinion, Valmet Oyj’s ESEF financial statements for the

financial year ended 31 December 2022 comply, in all material

respects, with the minimum requirements as set out in the ESEF

requirements.

Our reasonable assurance report has been prepared in

accordance with the terms of our engagement. We do not

accept, or assume responsibility to anyone else, except for

Valmet Oyj for our work, for this report, or for the opinion that

we have formed.

Helsinki 2 February 2023

PricewaterhouseCoopers Oy

Authorised Public Accountants

Pasi Karppinen

Authorised Public Accountant (KHT)

VALMET | FINANCIAL STATEMENTS 2022 AND INFORMATION FOR INVESTORS | INDEPENDENT AUDITOR'S REASONABLE ASSURANCE

REPORT ON VALMET OYJ'S ESEF FINANCIAL STATEMENTS

114


Contents
Report of the Board of Directors 2022 ...........................	2
Financial indicators .............................................................	30
Formulas for calculation of indicators ..........................	31

Consolidated financial statements ..................................	32
Consolidated statement of income .................................	32
Consolidated statement of comprehensive income .....	33
Consolidated statement of financial position ................	34
Consolidated statement of cash flows ............................	36
Consolidated statement of changes in equity ...............	37
Notes to the consolidated financial statements ............	38

Parent company financial statements ...........................	92
Parent company statement of income, FAS ...................	92
Parent company statement of financial position, FAS	93
Parent company statement of cash flows, FAS .............	94
Notes to parent company financial statements ............	95
Signatures of Board of Directors’ report and financial statements ..............................................................................	108


Notes to the consolidated financial statements.........		38
1.	Basis of preparation........................................	38
2.	Reporting segments and geographic information..	40
3.	Revenue recognition.......................................	44
4.	Intangible assets and property, plant and equipment....................................................	47
5.	Leases..........................................................	52
6.	Net working capital........................................	54
7.	Inventories....................................................	55
8.	Financial assets and liabilities...........................	55
9.	Derivative financial instruments........................	60
10.	Financial income and expenses.........................	64
11.	Provisions.....................................................	64
12.	Other current liabilities...................................	66
13.	Personnel expenses and number of personnel......	66
14.	Share-based payments....................................	67
15.	Employee benefit obligations...........................	70
16.	Income taxes.................................................	74
17.	Equity..........................................................	77
18.	Selling, general and administrative expenses.......	78
19.	Other operating income and expenses................	78
20.	Business combinations....................................	79
21.	Financial risk management..............................	80
22.	Investments in associated companies.................	84
23.	Audit fees.....................................................	87
24.	Contingencies and commitments.......................	87
25.	Related party information................................	88
26.	Subsidiaries..................................................	89
27.	Events after the reporting period.......................	91
28.	New accounting standards...............................	91