Valmet Oyj

Good afternoon ladies and gentlemen and welcome to Valmet second quarter 2024 result publication webcast. My name is Pekka Rouhin, I'm the head of investor relations here at Valmet and with me today are Valmet's president and CEO Pasi Laine and CFO Katri Hokkanen. After the presentations as usual you will have the chance to ask questions over the phone lines but without further ado Pasi please go ahead.

Thank you Pekka, welcome. So our headline is that orders received remained at previous year's level and amounted close to 1.3 billion and comparable every day decreased to 141 million in second quarter. So the content is like normal. So first quarter two in brief, then some words about development of segments and business lines. Then one slide about our strategic path forward. Then Katri will come to talk more about financial development, and then I'll join again here talking about guidance and short-term market outlook. So first, quarter two in brief. Like said, orders received remained at previous level amounted close to 1.3 billion. I will go through the business line segments later on, but we are very happy with this 1.3 billion euro order in. Net sale was at almost at the same level, about 1.3 billion. Our backlog, I'll come back, was 3.8 billion and comparable every day decreased 141 million and margin was 10.6. And gearing in the end of the period was 45%. Orders received were such that in services in quarter orders received was 497 and that's good number, so we had very good order intake. If I remember correctly, order intake in services grew by 15% compared to earlier year. In automation, quarterly order intake was 352, and there, if I again remember correctly, we had 4% growth. In process technology, comparing to last year, order intake decreased, but 434 million order intake is a good amount comparing to how the year started in quarter one. So we are happy with the orders received development in quarter two. Net sales, Katri will go through more in details, and then comparable epitane services, we were at 80 million, roughly at last year's level in automation, 58, and then there's declining process technologies to 15%. Here's the graph of how Valmet has been developing over the last 10 years. And now the happy day margin is at 11.2% cumulative for LTM. And like we have been saying, of course, the target is to get between 12 to 14% as soon as possible. Orders received, like we said, was at last year's level. And if we take H1 and think about the areas, then Europe was 43%, North America 26%, so both were active. China, Asia-Pacific and South America traditionally are about 10% each, and now Asia-Pacific was more active than normally, so amounting to 15% of order intake in the first half of the year. Stable business. So this is the story we have been saying over the years, We started our services with order intake about 1 billion and 55 million. Now our LTM is 1 billion 777 million, so good development. In automation segment, we didn't have it in the beginning, and now the order intake in automation segment for last 12 months is almost 1.3 billion, so all these together is about 3.1 billion. And this is of course good development that has been taking place in Valmet over the years. And stable business represents now 69% of the order intake, thinking about last 12 months, so it's of course majority of the business is now coming from our stable business. Then some words about the backlog. So backlog is decreasing, it's now 3.8 billion and now I think it starts to be at a good level. So when our backlog was at 4.4, then our delivery times for many of the products were too long. Then, of course, long from customer's perspective and then also long from our perspective. So the longer the lead times are, the more difficult it is to prepare oneself for, for example, inflation or some very rapid developments like the war which was started by Russia against Ukraine. So now this 3.8 gives customers good delivery times and also from risk management point of view it's better for us. From current backlog about 60% we are expecting to be materialized as net sales during 2024. Last year the corresponding percentage was 50%. This means that we have now calculated it out at about We have about 70 million now more backlog to be realized this year compared to last year. So roughly 70 million. And about 50% of the backlog is related to stable business. Last year about 40% was related to stable business. Then some words about the segments and business lines. So first, services. So in the beginning of the year, order intake grew a little bit compared to last year. So this year 1 billion 24 million, and this year 1 billion 24 million, and last year 1 billion 7 million. And we are very happy with the development of last quarter. And Katri will focus more on the quarterly numbers, but I told it already, 498 million in order intake. So that's good development. Net sales has been growing a little bit as well. And epi day is now about last year's level. So 140 million comparing last year to 142. And so roughly at the same level in euros. little bit down in March. Automation segment because for first half of the year we are decreasing and like I said in Last quarter it was increasing, but we had a very strong start for 2023. And that's the reason why we still have a situation that compared to the first half of the year, orders have been decreasing in automation. And I'll come back to business line specific topics later on. So the first half 681 million and last year 732. And then last year we had a very strong first quarter of the year. Profitability is roughly at the same level, 110 million last year and 109 million this year. Then flow controls business line orders received were 389 million in first half of the year and last year a little bit higher. The change is coming mainly from pulp and paper big projects, although that market hasn't been active earlier like we have seen in our process technology order intake. So mainly the change is coming from that segment. We have good activity in MRO business and services, which is very important from many perspectives. So we are selling small amount of valves to customers who already have installed base and doing services, and that business is doing reasonably well in flow control. So we are happy with the development of flow controls. And like we see, net sales and order intake are at par, so current business level continues and then of course the target is to grow the business every year and of course Simo has a target to grow this year as well in order intake. In automation system business, we had very strong quarter one last year. This year we had a good quarter two, so the activity is increasing. But the first half of the year, last year was 304 million, this year 291 million, so small decrease. We have good development in services and in energy and process, and then The market which is not very active is the package sales together with process technologies. Delta is mainly coming from that. The acquisition of analyzer products was completed 2nd of April, so we have about 22 million orders here in quarterly numbers from API in our numbers. Then process technology, first quarter last year, sorry, first quarter this year, our order intake was 195 million and now it bounced back to to good levels at 434 million. So good activity in process technology for the quarter. Profitability has been declining. So last year our profitability was 59 million and now it was 36 million. So LTM is now at 4%. Last year total year was at 4.5%. Pulp and energy business line, so orders received increased from 2004, from the first quarter when order intake was 57 million and now it was 187 million. So clear improvement in market activity in pulp and energy business line. And the same has happened in paper business line, so orders received for the first quarter were 138 million and now it was 247 million. So we are back at the normal order intake volumes both in pulp and energy and paper business line. No, then some words about the strategy. So, of course, we have been working on our strategy process in a very active way in the springtime. And we have been also telling to investors, to all of you, that there is a little bit change in the business scope of Valmet. So earlier we were mainly a pulp and paper and bioenergy focused company. And now, like we presented last time, about 1.4 billion of our business is coming from non-pulp and paper businesses. And this has to be reflected also in our mission statement. And that's why we have now developed our mission statement. In the mission statement, we continue to say we create sustainable results by converting renewable resources. So the same story continues. So with Valmet technology, our customers can take renewable resources in and make sustainable products. And then for other industries where flow controls, automation systems are mainly active, we say that we make industrial processes reliable and efficient. That's exactly the role of automation, so making processes reliable, safe, efficient, reducing emissions, and that's the mission of our automation segment for non-pulpan paper customers, so process energy customers. We are very happy with that definition and we are also happy that over the years Palmet has developed to that much that we are not only depending on pulp and paper business, we have also other businesses. So it's the same kind of big change that has taken place in in our stable business, so it was 1 billion to 3.1 billion. And this non-Palpan paper, we have been growing from 200 million to 1.4 billion. And of course, the development continues in the future as well. We haven't done any other changes, so strategy continues to be the same. Continuous improvement and renewal continues to be the same as early and the vision as well to become the global champion serving our customers and in moving the industries forward. So small addition, but very important change in our mission statement and we are very happy with that change. So, now I'll let Katri to continue the presentation.

Thank you, Pasi, and hello everybody on my behalf as well. I will walk through the financial development next. Here you can see the key figures after the second quarter, so order intake was 1.3 billion and roughly on the same level than the comparison quarter. Order backlog amounted to 3.8 billion. and net sales was 1.3 billion, and that was 7% lower than the comparison quarter. Comparable epithet was 141 million, or 10.6% for the quarter, and here the lower volume in net sales was impacting the comparable epithet. Adjusted earnings per share for the quarter was 43 cents, and that was 28% lower, and here the lower result as well as higher financial expenses were the reason. For the full year numbers, quickly, order intake 2.3 billion, so that is 17% lower than last year. Net sales was 2.5 billion, and that is also 7% lower, and then comparable EBITDA 262, or 10.3%. And I will come back to the other balance sheet numbers a bit later in my presentation. Moving then on to the services, starting from the order intake. So that was 497 million for the quarter, and that was 15% higher than the comparison quarter. And here, orders received from tissue converting, which was integrated into Valmet at the beginning of November last year amounted to 38 million. So actually, without tissue converting, the increase was 7%. Net sales remained at the previous year's level, being at 473 million, and here tissue converting impact was 38 million. Comparable epithelium remained at previous year's level, being at 80 million, and the margin decreased to 16.9%. And here the organic net sales decrease had a negative impact on the comparable epi day margin. The next automation, their order intake remained at the previous year's level being at 352 million. And in automation systems, orders received increased in automation services and decreased in capital. And orders received from the acquired API business amounted to 22 million in the second quarter. And good to note here that the comparison quarter last year included a large single order in flow control. Net sales remained at the previous year's level and it was 351 million and here the API impact was 19 million in the second quarter. Comparable EpiDay remained at previous year's level and it was 58 million and the margin was 16.5% and the margin decreased mainly due to integration of this API business. Lastly, some words about process technologies. Pasi mentioned already the order intake, so it was 434 million, and good improvement to the first quarter. Net sales was 500 million, and here we had tissue converting 41 million, and forgot to mention that in the bookings it was 42 million. Then comparable epithelium amounted to 15 million, and the margin was 3%, and comparable epithelium was impacted by lower volume. Then we have a traditional summary slide from the segments and here I want to highlight the other segments. So it was 12 million for the quarter and for full year 23 million. Comparable cross-profit was 27.8% of the net sales in the second quarter and here stable business represented 62% of the net sales. And when you look at the last 12 months curve, so we were now at 27.1% in comparable cross-profit and It has been developing well over the years. On comparable SG&A, the expenses were 27 million higher in the second quarter, and that was coming from the acquired tissue converting and analyzer products and integration mainly. And when you look at the SG&A chart, so for the last 12 months, we were now at 942 million level, and actually the increase compared to year-end, 901 million, is mainly related to previously mentioned issue converting as well as API. Then cash flow was strong, provided from operating activities amounted to 128 million in the second quarter, as said, very strong. And for the last 12 months, we were at 447 million. And networking capital amounted to 150 million, and that equals 3% of the last 12 months' orders received. If we compare to year 2021, our networking capital has increased mainly in capital business and also due to the integration of flow control and tissue converting. And nowadays our business mix contains much more stable business, which typically ties up much more networking capital than capital business. Net debt increased, if we compare it against the first quarter, it was 1.1 billion and gearing amounted to 45%. And the increase in the net debt and gearing compared to first quarter is mainly related to dividend payment as well as the acquisition of API. Net debt to EBITDA ratio increased also compared with the first quarter, it was 1.63. And the average interest rate of our total debt was 4.5% at the end of second quarter. And net financial expenses amounted to 32 million after the first half and the comparison number last year was 12. Capital employed was close to 4.2 billion and comparable return on capital employed 14%. And the acquisitions, analyzer products and integration this year, tissue converting last year, and then flow control in 2022 have increased the capital employed. Second quarter, last 12 months, adjusted EPS decreased, if we compare it with 2023, being at two euros and two cents. And this was mainly due to lower epithet and higher financial expenses. That was my part, so I will give the floor back to Pasi. Thank you.