Actions and activities in Q1/2015

Valmet was actively on roadshows in the first quarter, visiting Copenhagen, Stockholm, Oslo, Singapore, Tokyo, Amsterdam and London. In addition to roadshows, Valmet hosted its second Capital Markets Day in London in March. A summary video, the presentation material and a recording of the webcast can be found here. During the first quarter Valmet also hosted its Annual General Meeting. A recording of the President and CEO’s review together with the presentation slides, can be found here.

Here is a list of the most frequently asked questions during the first quarter, together with the answers:

Why did you acquire Process Automation Systems and what does that business do?

The acquisition has an excellent strategic fit. Firstly, the combination of Valmet and Process Automation Systems (PAS) creates a unique customer offering, as Valmet becomes a technology and service company with full automation offering. Secondly, PAS is a strong, established business on its own, with long-term customer relations and high level of technology and know-how. Thirdly, PAS will increase Valmet’s stability and improve its profitability.

PAS, which became Valmet’s fourth business line called Automation, supplies and develops automation and information management systems, applications and services. The offering includes, among others, distributed control systems, quality management systems and different kinds of analyzers and measurements. To put it simply, automation solutions help customers control, monitor, analyze and measure their processes.

Have you changed or are you planning to change your financial targets following the acquisition?

Financial targets are unchanged. Financial targets are a part of our annual strategy process, and the Board of Directors reviews the targets annually. Typically the strategy process starts in spring and is finalized by autumn.

Why did orders received in Services increase 17% in Q4/2014?

Service growth is a strategic priority for Valmet and has been a key focus area for Valmet’s management. As the development of the Services business in H1/2014 was not as good as we had hoped for, additional focus was put on this business during summer and autumn.

What has the development been in procurement and quality costs?

In procurement, the target is to save 10% by the end of 2016 (compared to 2013). Focus has been on global category management, design-to-cost and sourcing from lower-cost countries. The savings target for 2014 was exceeded, but we will continue with the good work we have started.

Regarding quality costs, the target is to reduce quality costs by 50% by the end of 2016 (compared to 2012 baseline). In 2014, quality costs developed according to plan, and they reduced both in absolute terms and in proportion to net sales.

What is your currency exposure?

Overall, sales and costs in different currencies are fairly balanced. Valmet has slightly more costs than sales in EUR, and vice versa for USD. In 2014, 44% of net sales was in EUR, 20% in SEK and 20% in USD. In the same year, 52% of costs were in EUR, 15% in SEK and 14% in USD. For more information and figures on foreign exchange risks, please take a look at CFO Markku Honkasalo’s CMD presentation, slides 18-21.

Valmet’s policy is to hedge the transaction risk. Assuming euro to appreciate or depreciate ten percent against all other currencies, the impact on cash flows, net of taxes, derived from the year-end (2014) net currency specific exposure would be EUR -/+ 1.5 million.