Brisk start for the year

The first two months of the year have been busy for Valmet Investor Relations, as always. Publishing of the Financial Statements for year 2020 on February 23 finished the annual reporting process. In addition to annual and Q4 reporting, we have been working on the upcoming Capital Markets Day and Annual General Meeting. Valmet has also participated in one investor seminar and had three roadshow days already in 2021, despite the three-week silent period preceding Q4 results.

Valmet has approximately 250 institutional shareholders, who together own roughly 75% of the company (Solidium being the biggest owner with 11%). Our job is to offer them excellent service and regular meetings. To serve Valmet’s 51,000 private investors and to attract new ones, we actively produce content on our investor website, social media and Youtube.

Let’s have a look at some common discussion topics with investors after Valmet’s Q4/2020 results release.

How did Covid-19 impact your business and financial figures in Q4 and year 2020?

Site access restrictions, travel restrictions and lower capacity utilization in graphical paper mills had a negative impact on Services order intake and net sales. Automation business was also impacted by access restrictions to customers’ sites, but in Q4, Automation order intake including package sales to Valmet’s capital projects increased. On Valmet's capital business, i.e. Paper, and Pulp and Energy business lines, COVID-19 had no major impacts.

Certain expenses, such as travel costs, were lower due to the pandemic. Our whole organization has performed well under the new circumstances and found new ways to operate, which can be utilized to improve Valmet's and our customers’ processes also after the pandemic. 

What was the impact of cost savings actions in 2020?

We had some savings in SGA (Selling, General and Administration) expenses in 2020 from the savings actions that were implemented during the year. Bigger impact came from permanent actions, but there is also impact from temporary workforce reductions.

Less travelling due to COVID-19 caused savings as well in 2020.

Why was the cash flow so strong in 2020?

Cash flow provided by operating activities amounted to EUR 532 million in year 2020 (2019: EUR 295 million).

Net working capital decreased to -16% of the year’s orders (EUR -588 million). At the end of 2019, the corresponding figure was -11%. Decline in trade receivables and increase in amounts due to customers under revenue contracts had a big impact to NWC change in 2020.

Quarterly fluctuations in cash flow are typical for Valmet and it is good to bear in mind that the fluctuations can also go to negative direction.

What was the impact of the acquired PMP Group on orders received and net sales?

PMP Group was included in Valmet’s financial reporting since the start of Q4, as part of the Paper business line. PMP’s orders in Q4/2020 were EUR 8 million and net sales amounted to EUR 27 million.

What is the accounting treatment of your 29.5% Neles share?

Valmet’s share of Neles’ Q3/2020 net profit was booked to Valmet’s Q4/2020 P&L statement using the equity method. Valmet’s share of Neles’ profit is not included in Valmet’s Comparable EBITA. In EBITA, it had a positive impact of EUR 2.8 million in Q4/2020.

Do you expect the high level of activity in Paper to continue?

There is an active sales pipeline especially in China. Short-term market outlook continues to be good for board and paper; and tissue was upgraded to Good from Satisfactory. Orders have been over one billion euro level since 2017, four years in a row. This is a good level for Paper.

We have recently had a healthy market share in Paper, so the starting point for 2021 is good.

What is the pipeline in pulp? When and where are you expecting the next larger pulp project?

On February 19, 2021, Valmet announced to have finalized the agreement with Metsä Fibre on the Kemi bioproduct mill. Valmet will deliver the key technology for the new mill, covering all main process islands and automation systems. The order is included in Valmet's orders received of the first quarter 2021. The value of the order is about EUR 350-400 million.

Customers are discussing projects, but it is very difficult to say anything about the timing of the next big projects. The plans seem to be focusing on South America and Asia-Pacific.

How is Valmet’s service business impacted by the weakness in printing and writing paper demand?

Declining demand of graphical paper grades is nothing new for us. However, COVID-19 has accelerated the development that has been ongoing for many years, and this is visible in Valmet’s volumes as well. For our customers, lower demand in graphical paper has led to lower capacity utilization and machine closures. This means that demand for various wear parts has declined.

Demand is growing in board, tissue and pulp, and we continue to search for new ways to add value for our customers in these businesses.