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Valmet's Interim Review January-March 2016

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Valmet's Interim Review January-March 2016

  1. 1. Orders received, net sales and profitability increased Interim Review, January–March 2016 April 27, 2016 Pasi Laine, President and CEO Kari Saarinen, CFO
  2. 2. Agenda Interim Review, January–March 2016 Q1/2016 in brief Business lines’ development Financial development Summary of Interim Review Q1/2016 Appendix 1 2 3 5 6 Guidance and short-term market outlook4
  3. 3. Q1/2016 in brief
  4. 4. Order backlog at EUR 2.2 billion Orders received and net sales increased in capital business2 April 27, 2016 © Valmet | Interim Review, January–March 20164 Q1/2016 in brief 1) Stable business = Services and Automation business lines 2) Capital business = Pulp and Energy, and Paper business lines Net debt EUR 192 million Profitability improved compared to Q1/2015, but was below the targeted level Orders received and net sales increased in stable business1
  5. 5. Net sales split in Q1/2016 April 27, 2016 © Valmet | Interim Review, January–March 20165 Net sales by areaNet sales by business line Orders received EUR 803 million Net sales EUR 652 million Comparable EBITA1 EUR 31 million Comparable EBITA1 margin 4.8% Employees 12,297 39% 9% 28% 24% Services Automation Pulp and Energy Paper 24% 7% 45% 14% 11% North America South America EMEA China Asia-Pacific 1) Due to new regulation by the European Securities and Market Authority, Valmet has decided to replace the performance measure ‘EBITA before non-recurring items’ with ‘Comparable EBITA’. The content of items affecting comparability, i.e. items previously disclosed as non-recurring, remain unchanged and therefore ‘Comparable EBITA’ equals previously disclosed ‘EBITA before non-recurring items’ (EUR 182 million in 2015). Items affecting comparability consist of income and expenses arising from activities that amend the capacity of Valmet’s operations or are incurred outside its normal course of business.
  6. 6. 1,101 1,023 466 480 580 781 725 793 803 0 500 1,000 1,500 2,000 2,500 3,000 3,500 0 200 400 600 800 1,000 1,200 1,400 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Orders received (LHS) Last 4 quarters (RHS) Orders received increased to EUR 803 million in Q1/2016 April 27, 2016 © Valmet | Interim Review, January–March 20166 • Orders received increased in the Pulp and Energy, Paper, and Services business lines • Automation contributed to orders received with EUR 66 million • North America and EMEA accounted for 69% of orders received in Q1/2016 Orders received (EUR million) Orders received in Q1/2016, by area North America 13% South America 14% EMEA 55% China 11% Asia-Pacific 7%
  7. 7. Stable business orders received totaled EUR 1,468 million during the last 4 quarters April 27, 2016 © Valmet | Interim Review, January–March 20167 Orders received (EUR million) in stable business 267 273 242 273 293 307 252 267 313 95 78 75 81 267 273 242 273 293 402 330 342 394 0 150 300 450 600 750 900 1,050 1,200 1,350 1,500 0 50 100 150 200 250 300 350 400 450 500 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Services (LHS) Automation, total (including internal) (LHS) Last 4 quarters (RHS) • Stable business orders received totaled to EUR 394 million in Q1/2016 • Stable business rolling 12 months orders received have increased from about EUR 1.1 billion to almost EUR 1.5 billion
  8. 8. 1,972 2,406 2,312 1,998 2,064 2,208 2,117 2,074 2,207 0 500 1,000 1,500 2,000 2,500 3,000 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Order backlog at EUR 2.2 billion • Order backlog EUR 133 million higher than at the end of Q4/2015 • About 70% of the order backlog is currently expected to be realized as net sales during 2016 • Approximately 25% of the order backlog relates to stable business April 27, 2016 © Valmet | Interim Review, January–March 20168 Order backlog (EUR million) ~25% ~75% Stable business Capital business Structure of order backlog
  9. 9. Business lines’ development
  10. 10. Orders received and net sales increased in Services in Q1/2016 April 27, 2016 © Valmet | Interim Review, January–March 201610 Net sales (EUR million)Orders received (EUR million) • Orders received increased compared with Q1/2015 - Orders received increased in China and South America, and remained stable in EMEA, North America and Asia-Pacific - Orders received increased in Mill Improvements, Performance Parts and Fabrics, remained stable in Rolls, and decreased in Energy and Environmental - Changes in foreign exchange rates1 decreased orders received by approximately EUR 3 million • Net sales increased compared with Q1/2015 1) Compared with the exchange rates for January–March 2015 2015: EUR 1,119 million 2015: EUR 1,128 million 267 273 242 273 293 307 252 267 313 0 200 400 600 800 1,000 1,200 1,400 0 50 100 150 200 250 300 350 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Orders received (LHS) Orders received, last 4 quarters (RHS) 224 251 235 278 242 304 268 314 257 0 200 400 600 800 1,000 1,200 1,400 0 50 100 150 200 250 300 350 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Net sales (LHS) Net sales, last 4 quarters (RHS) 2014: EUR 1,055 million 2014: EUR 989 million
  11. 11. Orders received1 in Automation totaled to EUR 81 million in Q1/2016 April 27, 2016 © Valmet | Interim Review, January–March 201611 • Orders received EUR 66 million in Q1/2016 - EMEA accounted for ~55% and North America for ~25% of orders received - Pulp and Paper accounted for ~75% and Energy and Process for ~25% of orders received - Internal orders received amounted to EUR 15 million • Net sales EUR 58 million in Q1/2016 - Internal net sales amounted to EUR 9 million Net sales2 (EUR million)Orders received2 (EUR million) 1) Includes internal and external orders received. 2) Q1/2015 orders received and the underlying figures for ‘Orders received, last 4 quarters’ and ‘Net sales, last 4 quarters’ are calculated based on Metso’s reported figures and pro forma figures excluding Process Automation Systems and are therefore indicative only. 85 70 67 66 10 8 8 1562 95 78 75 81 0 75 150 225 300 375 450 0 20 40 60 80 100 120 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Orders received, internal (from other business lines) Orders received, external Orders received, total (including internal) Orders received, last 4 quarters (RHS) 68 66 95 58 11 6 6 9 55 79 72 101 66 0 75 150 225 300 375 450 0 20 40 60 80 100 120 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Net sales, internal (from other business lines) Net sales, external Net sales, total (including internal) Net sales, last 4 quarters (RHS)
  12. 12. Orders received increased and net sales decreased in Pulp and Energy in Q1/2016 April 27, 2016 © Valmet | Interim Review, January–March 201612 Net sales (EUR million)Orders received (EUR million) • Orders received increased compared with Q1/2015 - Orders received decreased in North America and increased in all other areas - Orders received increased in both Pulp and Energy • Net sales decreased compared with Q1/2015 2015: EUR 864 million 2015: EUR 913 million 622 560 96 66 138 259 206 261 238 0 200 400 600 800 1,000 1,200 1,400 0 100 200 300 400 500 600 700 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Orders received (LHS) Orders received, last 4 quarters (RHS) 181 229 234 312 222 231 215 245 181 0 200 400 600 800 1,000 1,200 1,400 0 50 100 150 200 250 300 350 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Net sales (LHS) Net sales, last 4 quarters (RHS) 2014: EUR 1,344 million 2014: EUR 956 million
  13. 13. Orders received and net sales increased in Paper in Q1/2016 April 27, 2016 © Valmet | Interim Review, January–March 201613 Net sales (EUR million)Orders received (EUR million) • Orders received increased compared with Q1/2015 - Orders received increased in EMEA and China and decreased in other areas - Orders received increased in both Board and Paper, and Tissue • Net sales increased compared with Q1/2015 2015: EUR 673 million 2015: EUR 659 million 2014: EUR 671 million 2014: EUR 528 million 212 190 128 142 149 129 197 199 186 0 150 300 450 600 750 0 50 100 150 200 250 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Orders received (LHS) Orders received, last 4 quarters (RHS) 114 108 120 186 97 177 185 200 157 0 150 300 450 600 750 0 50 100 150 200 250 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Net sales (LHS) Net sales, last 4 quarters (RHS)
  14. 14. Progress in ‘Leader in technology and innovation’ April 27, 2016 © Valmet | Interim Review, January–March 201614  IQ Portfolio – Product: Quality measurements, controls, profilers and machine vision for paper machines and pulp dryers – Customer benefit: Improved quality – Sustainability: Raw material savings  OptiFlo Aqua Layering – Product: OptiFlo aqua layering for liner and fluting – Customer benefit: Two plies with single headbox, improved strength properties, and wet end chemical savings (30% less chemicals) – Sustainability: Energy, raw material and chemical savings  Advantage™ ReTurne – Product: Turbine for regaining energy from paper machine headbox – Customer benefit: Electric energy recovery (50% of jet energy ~4,800 MWh/year) – Sustainability: Electric energy savings  PolySulfide System – Product: Polysulfide generation plant and cooking system – Customer benefit: Lower production cost and stronger softwood pulp adapted for packaging grade paper and board – Sustainability: Raw material savings
  15. 15. A successful year with Automation April 27, 2016 © Valmet | Interim Review, January–March 201615  Integration – Integration process successfully finalized  Personnel – Automation employee engagement high  New products – Several new products launched, such as Valmet IQ quality management solution  Cross-selling – 31 automation packages sold together with Valmet’s pulp, energy and paper projects  Industrial Internet – Strengthened Valmet’s position in Industrial Internet  Increased Valmet’s stable business – Contributed with EUR 329 million of orders received and EUR 318 million of net sales during the 12 months ended March 31, 2016 Valmet IQ quality management solution
  16. 16. Financial development
  17. 17. Key figures Q1/2016 April 27, 2016 © Valmet | Interim Review, January–March 201617 EUR million Q1/2016 Q1/2015 Change 2015 Orders received 803 580 38% 2,878 Order backlog1 2,207 2,064 7% 2,074 Net sales 652 561 16% 2,928 Comparable EBITA2 31 19 61% 182 % of net sales 4.8% 3.5% 6.2% EBITA 30 19 56% 157 Operating profit (EBIT) 19 13 43% 120 % of net sales 2.9% 2.4% 4.1% Earnings per share, EUR 0.08 0.05 43% 0.51 Return on capital employed (ROCE), before taxes3 7% 6% 12% Cash flow provided by operating activities 3 -20 78 Gearing1 24% -17% 21% Items affecting comparability: EUR -2 million in Q1/2016 (EUR 0 million in Q1/2015) 1) At the end of period 2) Due to new regulation by the European Securities and Market Authority, Valmet has decided to replace the performance measure ‘EBITA before non- recurring items’ with ‘Comparable EBITA’. The content of items affecting comparability, i.e. items previously disclosed as non-recurring, remain unchanged and therefore ‘Comparable EBITA’ equals previously disclosed ‘EBITA before non-recurring items’. Items affecting comparability consist of income and expenses arising from activities that amend the capacity of Valmet’s operations or are incurred outside its normal course of business. 3) Annualized
  18. 18. Stable business net sales increased EUR 73 million compared to Q1/2015 April 27, 2016 © Valmet | Interim Review, January–March 201618 Net sales bridge, Q1/2015 vs. Q1/2016 (EUR million) 561 15 58 -41 60 652 Net sales in Q1/2015 Services business line Automation business line Pulp and Energy business line Paper business line Net sales in Q1/2016 Change in net sales • Net sales increased in Services and Paper business lines compared to Q1/2015 • Net sales decreased in Pulp and Energy business line • Automation became part of Valmet as of April 1, 2015
  19. 19. Good development in gross profit compared to Q1/2015 April 27, 2016 © Valmet | Interim Review, January–March 201619 Gross profit (EUR million and % of net sales) • Gross profit increased compared to Q1/2015 • Selling, general & administrative (SG&A) expenses increased compared to Q1/2015 due to Automation acquisition • Further actions to improve gross profit through Must-Win implementation SG&A (EUR million and % of net sales) 23% 0% 5% 10% 15% 20% 25% 0 40 80 120 160 200 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 EUR million (LHS) % of net sales (RHS) 20% 0% 5% 10% 15% 20% 25% 0 40 80 120 160 200 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 EUR million (LHS) % of net sales (RHS)
  20. 20. Target 6–9% Comparable EBITA margin development April 27, 2016 © Valmet | Interim Review, January–March 201620 Net sales and Comparable EBITA (EUR million) • Net sales and profitability increased compared with Q1/2015 - Profitability improved due to the higher level of net sales in the Paper and Services business lines, improved gross profit, and the acquisition of Automation • The first quarter was the weakest quarter in 2014 and 2015 Comparable EBITA (EUR million) 224 251 235 278 242 371 334 409 314295 337 354 498 319 408 400 445 338 519 588 590 777 561 779 734 854 652 0.7% 3.7% 5.5% 6.1% 3.5% 6.9% 6.4% 7.3% 4.8% Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Capital business Stable business Comparable EBITA % 19 54 47 63 314 22 32 48
  21. 21. 43 46 117 30 -20 17 16 64 3 -40 -20 0 20 40 60 80 100 120 140 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 Cash flow provided by operating activities April 27, 2016 © Valmet | Interim Review, January–March 201621 • Change in net working capital1 EUR -41 million in Q1/2016 • CAPEX excluding business combinations EUR -11 million in Q1/2016 • Cash flow provided by operating activities EUR 3 million in Q1/2016 Cash flow provided by operating activities (EUR million) 1) Change in net working capital, net of effect from business combinations and disposals in the consolidated statement of cash flows
  22. 22. -257 -249 -345 -353 -355 -265 -244 -238 -247 1,101 1,023 466 480 580 781 725 793 803 -20% -10% 0% 10% 20% 30% -1,000 -500 0 500 1,000 1,500 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Q1/2016 Orders received (LHS) Net working capital (LHS) Average net working capital/rolling 12 months orders received (RHS) Net working capital/rolling 12 months orders received (RHS) Net working capital -8% of rolling 12 months orders received April 27, 2016 © Valmet | Interim Review, January–March 201622 • Net working capital EUR -247 million, which equals -8% of rolling 12 months orders received • Payment schedules of large capital projects have significant impact on net working capital development Net working capital and orders received (EUR million)
  23. 23. Net debt increased compared to Q4/2015 April 27, 2016 © Valmet | Interim Review, January–March 201623 • Gearing (24%) and net debt (EUR 192 million) increased compared to Q4/2015 • Equity to assets ratio decreased from Q4/2015 • Automation acquisition was completed on April 1, 2015 Net debt (EUR million) and gearing (%) Equity to assets ratio (%) -39 -54 -158 -166 -134 238 229 178 192 -5% -7% -20% -21% -17% 29% 28% 21% 24% -30% -20% -10% 0% 10% 20% 30% -300 -200 -100 0 100 200 300 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Net debt (EUR million) Gearing (%) 40% 40% 41% 42% 34% 35% 35% 36% 35% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16
  24. 24. 985 967 902 877 1,239 1,240 1,214 1,231 1,184 1% 2% 2% 10% 10% 12% 14% 14% 13% Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Capital employed Comparable ROCE (before taxes), rolling 12 months Capital employed and Comparable ROCE April 27, 2016 © Valmet | Interim Review, January–March 201624 • Return on capital employed (ROCE) target: 15% Capital employed (EUR million) and Comparable return on capital employed (ROCE), before taxes1 (percent) 1) Rolling 12 months
  25. 25. Valmet continues to invest in operational excellence April 27, 2016 © Valmet | Interim Review, January–March 201625 New ERP solution renews and improves Valmet’s operational capability Objectives of the program • The purpose of the program is to renew and improve Valmet’s operational capability through - Process harmonization and standardization - ERP platform for renewal and modernization - Data & reporting quality improvement • The program benefits are based on process efficiency, data quality accuracy and savings on IT platform simplification • The program is expected to take 4 years Estimated costs in Phase Nordics • Total investment approximately EUR 50 million, of which EUR 30 million external investment and EUR 20 million expenses • External investment will be capitalized and depreciated over expected useful life • Annual global benefits expected to exceed EUR 30 million from 2020 Risk management • Strong Valmet team, supported by global technology partner • Standard operating procedure utilization: best practice based standards for processes, data and system build • Phased roll out starting in Nordics, experiences will be utilized in other countries
  26. 26. Guidance, and short- term market outlook
  27. 27. Guidance and short-term market outlook 27 April 27, 2016 © Valmet | Interim Review, January–March 2016 Satisfactory Pulp and Energy Paper Satisfactory Pulp Energy Board and Paper Tissue Guidance for 2016 Services Short-term market outlook Guidance for 2016 (as given on February 9, 2016) Good Weak Good Satisfactory Satisfactory Good Weak Satisfactory Satisfactory Q2/2015 Q3/2015 Satisfactory Satisfactory Satisfactory Good Satisfactory Q4/2015 Satisfactory Satisfactory Good Satisfactory Q1/2016 Valmet estimates that net sales in 2016 will remain at the same level with 2015 (EUR 2,928 million) and Comparable EBITA in 2016 will increase in comparison with 2015 (EUR 182 million). Satisfactory Satisfactory Satisfactory SatisfactoryAutomation The short-term market outlook is given for the next six months from the ending of the respective quarter. Due to new regulation by the European Securities and Market Authority, Valmet has decided to replace the performance measure ‘EBITA before non-recurring items’ with ‘Comparable EBITA’. The content of items affecting comparability, i.e. items previously disclosed as non-recurring, remain unchanged and therefore ‘Comparable EBITA’ equals previously disclosed ‘EBITA before non-recurring items’ (EUR 182 million in 2015). Items affecting comparability consist of income and expenses arising from activities that amend the capacity of Valmet’s operations or are incurred outside its normal course of business.
  28. 28. Summary of Interim Review Q1/2016
  29. 29. Order backlog at EUR 2.2 billion Orders received and net sales increased in capital business2 April 27, 2016 © Valmet | Interim Review, January–March 201629 Q1/2016 in brief 1) Stable business = Services and Automation business lines 2) Capital business = Pulp and Energy, and Paper business lines Net debt EUR 192 million Profitability improved compared to Q1/2015, but was below the targeted level Orders received and net sales increased in stable business1
  30. 30. Appendix
  31. 31. 0 50 100 150 200 250 300 350 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Structure of loans and borrowings April 27, 2016 © Valmet | Interim Review, January–March 201631 Amount of outstanding interest-bearing debt (EUR millions) • Average maturity of long-term loans is 3.4 years - Average interest rate is 1.2% Main financing sources Back-up facilities Interest-bearing debt EUR 371 million as at March 31, 2016 EUR 88 million EUR 86 million European Investment Bank Skandinaviska Enskilda Banken Nordic Investment Bank Amount Lender EUR 61 million Swedish Export Kredit EUR 95 million None outstanding EUR 200 million domestic commercial paper program EUR 200 million syndicated revolving credit facility Amount Outstanding EUR 40 million
  32. 32. © Valmet | Interim Review, January–March 201632 April 27, 2016 Largest shareholders on March 31, 2016 Based on the information given by Euroclear Finland Ltd. # Shareholder name Number of shares % of shares and votes 1 Solidium Oy1 16,695,287 11.14% 2 Varma Mutual Pension Insurance Company 6,108,465 4.08% 3 Solero Luxco S.A.R.L 5,374,482 3.59% 4 Nordea Funds 3,395,486 2.27% 5 Ilmarinen Mutual Pension Insurance Company 3,388,055 2.26% 6 Elo Pension Company 2,510,000 1.67% 7 The State Pension Fund 1,695,000 1.13% 8 Keva 1,502,166 1.00% 9 Danske Invest Funds 1,318,700 0.88% 10 Mandatum Life Insurance Company Limited 1,217,307 0.81% 10 largest shareholders, total 43,204,948 28.83% Other shareholders 106,659,671 71.17% Total 149,864,619 100.00% Largest shareholders 1) A holding company that is wholly owned by the Finnish State • The holding of Cevian Capital Partners Ltd. decreased on March 4, 2016 to 0 shares (previously 10,323,191 shares), corresponding to an ownership of 0.00% (previously 6.89%) of Valmet’s shares.
  33. 33. © Valmet | Interim Review, January–March 201633 April 27, 2016 Ownership structure on March 31, 2016 1) A holding company that is wholly owned by the Finnish State The ownership structure is based on the classification of sectors determined by Statistics Finland. Sector Number of shareholders % of total shareholders Number of shares % of shares Nominee registered and non-Finnish holders 314 0.7% 69,694,143 46.5% Finnish institutions, companies and foundations 2,649 5.5% 41,428,708 27.6% Solidium Oy1 0 0.0% 16,695,287 11.1% Finnish private investors 45,291 93.9% 22,046,481 14.7% Total 48,254 100.0% 149,864,619 100.0% 46.5% 27.6% 11.1% 14.7% Nominee registered and non-Finnish holders Finnish institutions, companies and foundations Solidium Oy Finnish private investors
  34. 34. © Valmet | Interim Review, January–March 201634 April 27, 2016 Share of non-Finnish holders and number of shareholders 47,000 49,000 51,000 53,000 55,000 57,000 59,000 44% 46% 48% 50% 52% 54% 56% 12/2013 01/2014 02/2014 03/2014 04/2014 05/2014 06/2014 07/2014 08/2014 09/2014 10/2014 11/2014 12/2014 01/2015 02/2015 03/2015 04/2015 05/2015 06/2015 07/2015 08/2015 09/2015 10/2015 11/2015 12/2015 01/2016 02/2016 03/2016 Non-Finnish holders (LHS) Total number of shareholders (RHS)
  35. 35. Paper, board, and tissue production trends April 27, 2016 © Valmet | Interim Review, January–March 201635 Source: RISI North America (million tonnes) Europe (million tonnes) China (million tonnes) Asia-Pacific (million tonnes) 10 20 30 40 4 6 8 10 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue (LHS) Newsprint (LHS) Printing & Writing (RHS) Containerboard (RHS) Cartonboard (RHS) 10 15 20 25 30 35 40 5 7 9 11 13 15 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue (LHS) Newsprint (LHS) Printing & Writing (RHS) Containerboard (RHS) Cartonboard (RHS) 5 15 25 35 45 55 2 4 6 8 10 12 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue (LHS) Newsprint (LHS) Printing & Writing (RHS) Containerboard (RHS) Cartonboard (RHS) 5 10 15 20 25 30 35 40 3 4 5 6 7 8 9 10 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue (LHS) Newsprint (LHS) Printing & Writing (RHS) Containerboard (RHS) Cartonboard (RHS)
  36. 36. Paper, board, and tissue operating rates April 27, 2016 © Valmet | Interim Review, January–March 201636 Source: RISI North America Europe China Asia-Pacific 75% 80% 85% 90% 95% 100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue Newsprint Printing & Writing Containerboard Cartonboard 80% 85% 90% 95% 100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue Newsprint Printing & Writing Containerboard Cartonboard 70% 80% 90% 100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue Newsprint Printing & Writing Containerboard Cartonboard 75% 80% 85% 90% 95% 100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tissue Newsprint Printing & Writing Containerboard Cartonboard
  37. 37. Paper and board consumption growth trends April 27, 2016 © Valmet | Interim Review, January–March 201637 Population growth in emerging markets is larger than in developed markets Level of consumption per capita in emerging markets clearly below that in developed markets This offers us long- term growth potential Paper and board consumption per capita vs. population Average global consumption: 53 kg per capita Source: RISI 0 500 1,000 1,500 2,000 2,500 0 50 100 150 200 250 EasternEurope WesternEurope NorthAmerica LatinAmerica Japan China RestofAsia Oceania Africa MiddleEast Consumption per capita, kg (LHS) Population, million (RHS)
  38. 38. 0 5 10 15 20 25 0 500 1,000 1,500 2,000 2,500 EasternEurope WesternEurope NorthAmerica LatinAmerica Japan China RestofAsia Oceania Africa MiddleEast Population, million (LHS) Consumption per capita, kg (RHS) Tissue consumption growth trends April 27, 2016 © Valmet | Interim Review, January–March 201638 New products and consumption models based on tissue are helping increase consumption in developed markets Consumption in emerging markets is still low, but growing Offers us long-term growth potential in both developed and emerging markets Tissue consumption per capita vs. population Average global consumption: 4.5 kg per capita Source: RISI
  39. 39. 0 200 400 600 800 1,000 1,200 1-Dec-07 1-Mar-08 1-Jun-08 1-Sep-08 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10 1-Jun-10 1-Sep-10 1-Dec-10 1-Mar-11 1-Jun-11 1-Sep-11 1-Dec-11 1-Mar-12 1-Jun-12 1-Sep-12 1-Dec-12 1-Mar-13 1-Jun-13 1-Sep-13 1-Dec-13 1-Mar-14 1-Jun-14 1-Sep-14 1-Dec-14 1-Mar-15 1-Jun-15 1-Sep-15 1-Dec-15 1-Mar-16 Eucalyptus pulp (USD/t) Northern bleached softwood pulp (USD/t) Uncoated (USD/t) Copy paper (EUR/t) Testliner (EUR/t) Pulp and paper price trends April 27, 2016 © Valmet | Interim Review, January–March 201639 Source: Bloomberg
  40. 40. 0 10 20 30 40 50 60 70 80 90 100 0 20 40 60 80 100 120 140 160 180 1-Jan-10 1-Aug-10 1-Mar-11 1-Oct-11 1-May-12 1-Dec-12 1-Jul-13 1-Feb-14 1-Sep-14 1-Apr-15 1-Nov-15 CIF ARA steam coal (USD/t) (LHS) Brent crude oil (USD/barrel) (LHS) Natural gas spot price NBP (GBP/therm) (RHS) 0 20 40 60 80 100 120 0 20 40 60 80 100 1-Jan-10 1-Aug-10 1-Mar-11 1-Oct-11 1-May-12 1-Dec-12 1-Jul-13 1-Feb-14 1-Sep-14 1-Apr-15 1-Nov-15 European Energy Exchange, Phelix (EUR/MWh) (LHS) Nordpool Power (EUR/MWh) (LHS) UK Baseload (GBP/MWh) (RHS) Crude oil, steam coal, natural gas and electricity April 27, 2016 © Valmet | Interim Review, January–March 201640 Source: Bloomberg Europe
  41. 41. 0 1 2 3 4 5 6 7 0 20 40 60 80 100 120 140 1-Jan-10 1-Aug-10 1-Mar-11 1-Oct-11 1-May-12 1-Dec-12 1-Jul-13 1-Feb-14 1-Sep-14 1-Apr-15 1-Nov-15 FOB steam coal Richards Bay (USD/t) (LHS) WTI crude oil (USD/barrel) (LHS) Henry Hub gas (USD/MMBtu) (RHS) 70 75 80 85 90 0 50 100 150 200 1-Jan-10 1-Aug-10 1-Mar-11 1-Oct-11 1-May-12 1-Dec-12 1-Jul-13 1-Feb-14 1-Sep-14 1-Apr-15 1-Nov-15 Electricity spot price, PJM (USD/MWh) (LHS) Electricity spot price, NEPOOL (USD/MWh) (LHS) US utility capacity utilization rate (RHS) Crude oil, steam coal, natural gas and electricity April 27, 2016 © Valmet | Interim Review, January–March 201641 Source: Bloomberg United States
  42. 42. 0 1 2 3 4 5 6 7 8 9 10 2-Nov-12 2-Dec-12 2-Jan-13 2-Feb-13 2-Mar-13 2-Apr-13 2-May-13 2-Jun-13 2-Jul-13 2-Aug-13 2-Sep-13 2-Oct-13 2-Nov-13 2-Dec-13 2-Jan-14 2-Feb-14 2-Mar-14 2-Apr-14 2-May-14 2-Jun-14 2-Jul-14 2-Aug-14 2-Sep-14 2-Oct-14 2-Nov-14 2-Dec-14 2-Jan-15 2-Feb-15 2-Mar-15 2-Apr-15 2-May-15 2-Jun-15 2-Jul-15 2-Aug-15 2-Sep-15 2-Oct-15 2-Nov-15 2-Dec-15 2-Jan-16 2-Feb-16 2-Mar-16 European Energy Exchange (EEX) spot price (EUR/t) European Carbon Emission Allowance April 27, 2016 © Valmet | Interim Review, January–March 201642 Source: Bloomberg
  43. 43. Important notice April 27, 2016 © Valmet | Interim Review, January–March 201643 IMPORTANT: The following applies to this document, the oral presentation of the information in this document by Valmet (the “Company”) or any person on behalf of the Company, and any question-and-answer session that follows the oral presentation (collectively, the “Information”). In accessing the Information, you agree to be bound by the following terms and conditions. The Information is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. The Information is not for publication, release or distribution in the United States, the United Kingdom, Australia, Canada or Japan. The Information does not constitute or form part of, and should not be construed as an offer or the solicitation of an offer to subscribe for or purchase any securities, and nothing contained therein shall form the basis of or be relied on in connection with any contract or commitment whatsoever, nor does it constitute a recommendation regarding any securities. Prospective investors are required to make their own independent investigations and appraisals of the business and financial condition of the Company before taking any investment decision with respect to securities of the Company. No securities of the Company are being offered or sold, directly or indirectly, in or into the United States and no shares in the Company have been, or will be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or under the securities laws of any state of the United States and, accordingly, may not be offered or sold, directly or indirectly, in or into the United States (as defined in Regulation S under the Securities Act), unless registered under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act and in compliance with any applicable state securities laws of the United States. The Information is directed solely at: (i) persons outside the United Kingdom, (ii) persons with professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the “Order”), (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order and (iv) persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities of the Company or any member of its group may otherwise lawfully be communicated or caused to be communicated (all such persons in (i)-(iv) above being “Relevant Persons”). Any investment activity to which the Information relates will only be available to and will only be engaged with Relevant Persons. Any person who is not a Relevant Person should not act or rely on the Information. By accessing the Information, you represent that you are a Relevant Person. The Information contains forward-looking statements. All statements other than statements of historical fact included in the Information are forward-looking statements. Forward- looking statements give the Company’s current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “estimate,” “plan,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could” and other words and terms of similar meaning or the negative thereof. Such forward- looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause the Company’s actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which it will operate in the future. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the Information or the opinions contained therein. The Information has not been independently verified and will not be updated. The Information, including but not limited to forward- looking statements, applies only as of the date of this document and is not intended to give any assurances as to future results. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to the Information, including any financial data or forward-looking statements, and will not publicly release any revisions it may make to the Information that may result from any change in the Company’s expectations, any change in events, conditions or circumstances on which these forward-looking statements are based, or other events or circumstances arising after the date of this document. Market data used in the Information not attributed to a specific source are estimates of the Company and have not been independently verified.
  44. 44. Interim Review January–June 2016 July 28, 2016 www.valmet.com/investors Capital Markets Day September 20, 2016 Helsinki, Finland More information to follow!

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