Valmet's Interim Review January 1 - September 30, 2015: Strong development in orders received in China - profitability in the targeted range in Q3/2015
Valmet Corporation's stock exchange release on October 28, 2015 at 12:00 noon EET
Figures in brackets, unless otherwise stated, refer to the comparison period, i.e. the same period of the previous year. Automation has been consolidated into Valmet's financials since April 1, 2015, when the acquisition of Automation was completed.
July-September 2015: Orders received increased - solid performance in Automation
- Orders received increased to EUR 725 million (EUR 466 million).
- Orders received increased in the Pulp and Energy, and Paper business lines and remained at the previous year's level in the Services business line.
- Automation contributed to orders received with EUR 70 million.
- Orders received more than doubled in China.
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- Net sales increased to EUR 734 million (EUR 590 million).
- Net sales increased in the Paper, and Services business lines and decreased in the Pulp and Energy business line.
- Automation contributed to net sales with EUR 66 million.
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- Earnings before interest, taxes and amortization (EBITA) and non-recurring items were EUR 47 million (EUR 32 million), and the corresponding EBITA margin was 6.4 percent (5.5%).
- Profitability improved due to the higher level of net sales, improved gross profit, and the acquisition of Automation.
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- Earnings per share were EUR 0.14 (EUR 0.11).
- Non-recurring items amounted to EUR -4 million (EUR -1 million).
- Cash flow provided by operating activities was EUR 16 million (EUR 117 million).
January-September 2015: EBITA more than doubled
- Orders received decreased to EUR 2,085 million (EUR 2,590 million).
- Orders received increased in the Services business line and decreased in the Pulp and Energy, and Paper business lines.
- Automation contributed to orders received with EUR 156 million.
- Orders received increased in China and North America.
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- Net sales increased to EUR 2,074 million (EUR 1,697 million).
- Net sales increased in the Paper, and Services business lines and remained at the previous year's level in the Pulp and Energy business line.
- Automation contributed to net sales with EUR 134 million.
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- Earnings before interest, taxes and amortization (EBITA) and non-recurring items were EUR 120 million (EUR 58 million), and the corresponding EBITA margin was 5.8 percent (3.4%).
- Profitability improved due to the higher level of net sales, improved gross profit, and the acquisition of Automation.
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- Earnings per share were EUR 0.33 (EUR 0.14).
- Non-recurring items amounted to EUR -16 million (EUR -7 million), of which costs related to acquisition of Automation amounted to approximately EUR 12 million.
- Cash flow provided by operating activities was EUR 14 million (EUR 206 million).
Valmet reiterates its guidance for 2015
Valmet is reiterating its guidance presented on February 6, 2015 in which Valmet estimates that, including the acquisition of Process Automation Systems, net sales in 2015 will increase in comparison with 2014 (EUR 2,473 million) and EBITA before non-recurring items in 2015 will increase in comparison with 2014 (EUR 106 million).
Short-term outlook
General economic outlook
Global growth for 2015 is projected at 3.1 percent, 0.3 percentage point lower than in 2014, and 0.2 percentage point below the forecasts in the July 2015 World Economic Outlook (WEO) Update. Prospects across the main countries and regions remain uneven. Relative to last year, the recovery in advanced economies is expected to pick up slightly, while activity in emerging market and developing economies is projected to slow for the fifth year in a row, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries. (International Monetary Fund, September 28, 2015)
Short-term market outlook
Valmet estimates that the short-term market outlook for board and paper has decreased to a satisfactory level (previously good level).
Valmet reiterates the good short-term market outlook for pulp, the satisfactory short-term market outlook for services, automation, and tissue, and the weak short-term market outlook for energy.
President and CEO Pasi Laine: Profitability in the targeted range for the second consecutive quarter
We have been working hard to improve our profitability and to reach our EBITA margin target. In the third quarter of 2015, we reached this target - for the second consecutive quarter. During the last four quarters, we have been in the targeted range for three quarters.
The integration of the automation business has been a success. It has now been six months since the acquisition was completed, and I still get a lot of positive feedback from both customers and employees. By combining process know-how, services and automation, we can serve our customers even better than before. As a result of the acquisition, Valmet's stability and profitability have increased. The share of stable business, meaning Automation and Services, was about half of the net sales in the third quarter.
From a geographical point of view, Valmet's orders received developed especially well in China. In the third quarter, orders received increased also in North America and EMEA (Europe, Middle-East and Africa). A balanced geographical exposure increases stability of the overall business.
Going forward, Valmet continues to develop new advanced and competitive technologies and services. Good examples of the results of our research and development process are the OptiConcept M board and paper production machine, and the Advantage NTT tissue production machine. Both machines offer customers a cost-efficient, energy-efficient and flexible way to produce high-quality products, with significant raw material savings. The machines have been well received by the markets - in total, Valmet has so far sold ten OptiConcept M machines and five Advantage NTT tissue machines.
Key figures*
| EUR million | Q3/2015 | Q3/2014 | Change | Q1-Q3/ 2015 | Q1-Q3/ 2014 | Change |
| Orders received | 725 | 466 | 56% | 2,085 | 2,590 | -19% |
| Order backlog** | 2,117 | 2,312 | -8% | 2,117 | 2,312 | -8% |
| Net sales | 734 | 590 | 25% | 2,074 | 1,697 | 22% |
| Earnings before interest, taxes and amortization (EBITA) and non-recurring items | 47 | 32 | 45% | 120 | 58 | >100% |
| % of net sales | 6.4% | 5.5% | 5.8% | 3.4% | ||
| Earnings before interest, taxes and amortization (EBITA) | 43 | 31 | 37% | 104 | 51 | >100% |
| % of net sales | 5.9% | 5.3% | 5.0% | 3.0% | ||
| Operating profit (EBIT) | 33 | 26 | 25% | 78 | 35 | >100% |
| % of net sales | 4.4% | 4.4% | 3.8% | 2.1% | ||
| Profit before taxes | 29 | 24 | 21% | 71 | 31 | >100% |
| Profit / loss | 21 | 16 | 27% | 50 | 21 | >100% |
| Earnings per share, EUR | 0.14 | 0.11 | 25% | 0.33 | 0.14 | >100% |
| Earnings per share, diluted, EUR | 0.14 | 0.11 | 25% | 0.33 | 0.14 | >100% |
| Equity per share, EUR | 5.40 | 5.32 | 2% | 5.40 | 5.32 | 2% |
| Cash flow provided by operating activities | 16 | 117 | -86% | 14 | 206 | -93% |
| Cash flow after investments | 13 | 107 | -87% | -338 | 179 | |
| Return on equity (ROE) (annualized) | 8% | 3% | ||||
| Return on capital employed (ROCE) before taxes (annualized) | 11% | 6% |
*The calculation of key figures is presented in the Tables section of the January-September 2015 Interim Review.
**At the end of period.
| Equity to assets ratio and gearing | As at September 30, 2015 | As at September 30, 2014 | As at June 30, 2015 | ||
| Equity to assets ratio at end of period | 35% | 41% | 35% | ||
| Gearing at end of period | 28% | -20% | 29% |
| Orders received, EUR million | Q3/2015 | Q3/2014 | Change | Q1-Q3/ 2015 | Q1-Q3/ 2014 | Change |
| Services | 252 | 242 | 4% | 852 | 782 | 9% |
| Automation | 70 | - | - | 156 | - | - |
| Pulp and Energy | 206 | 96 | >100% | 603 | 1,279 | -53% |
| Paper | 197 | 128 | 54% | 474 | 530 | -10% |
| Total | 725 | 466 | 56% | 2,085 | 2,590 | -19% |
| Order backlog, EUR million | As at September 30, 2015 | As at September 30, 2014 | Change | As at June 30, 2015 | |
| Total | 2,117 | 2,312 | -8% | 2,208 |
| Net sales, EUR million | Q3/2015 | Q3/2014 | Change | Q1-Q3/ 2015 | Q1-Q3/ 2014 | Change |
| Services | 268 | 235 | 14% | 814 | 711 | 14% |
| Automation | 66 | - | - | 134 | - | - |
| Pulp and Energy | 215 | 234 | -8% | 668 | 644 | 4% |
| Paper | 185 | 120 | 54% | 459 | 342 | 34% |
| Total | 734 | 590 | 25% | 2,074 | 1,697 | 22% |
Webcast for analysts, investors and media
Valmet will arrange a news conference in English for investment analysts, investors, and media on Wednesday, October 28, 2015 at 2:00 p.m. Finnish time (EET). The news conference will be held at Valmet Head Office in Keilaniemi, Keilasatama 5, 02150 Espoo, Finland. The news conference can also be followed through a live webcast at www.valmet.com/webcasts.
It is also possible to take part in the news conference through a conference call. Conference call participants are requested to dial in at least five minutes prior to the start of the conference, at 1:55 p.m. (EET), at +44 1452 560304. The participants will be asked to provide the following conference ID: 53459057.
During the webcast and the conference call, all questions should be presented in English. After the webcast and the conference call, media has a possibility to interview the management in Finnish.
The event can also be followed in Twitter at www.twitter.com/valmetir.
Further information, please contact:
Hanna-Maria Heikkinen, Vice President, Investor Relations, Valmet, tel. +358 10 672 0007
Markku Honkasalo, Chief Financial Officer, Valmet, tel. +358 10 672 0008
VALMET
Markku Honkasalo
CFO
Hanna-Maria Heikkinen
VP, Investor Relations
Valmet is the leading global developer and supplier of technologies, automation and services for the pulp, paper and energy industries. Valmet's vision is to become the global champion in serving its customers.
Valmet's services cover everything from maintenance outsourcing to mill and plant improvements and spare parts. The strong technology offering includes pulp mills, tissue, board and paper production lines, as well as power plants for bio-energy production. Valmet's advanced automation solutions range from single measurements to mill wide turnkey automation projects.
Valmet's net sales in 2014 were approximately EUR 2.5 billion. Our 12,000 professionals around the world work close to our customers and are committed to moving our customers' performance forward - every day. Valmet's head office is in Espoo, Finland and its shares are listed on the NASDAQ OMX Helsinki Ltd.
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