Valmet Oyj

Good morning and welcome to Valmet's first quarter 2025 result publication webcast. Valmet's year started strongly in services and automation segments while the market conditions remained subdued in the process technology segment. I'm Pekka Rouhenen from IR, and with me today are Tomas Hindesku, president and CEO, as well as Katri Hokkanen, CFO. Today, Tomas will first go through the highlights of the quarter and provide an update on the strategy renewal process. After that, Katri will go through the financial development in more detail, also from the segment perspective, and Tomas will then conclude on the guidance and short-term market outlook. With that, I hand over to the presenters. Thomas, the floor is yours.

Thank you, Pekka. I'm very happy to be here. Great to start the year in a good way. Let's start looking at Q1. Overall, orders received increased to 1.3 billion. Particularly pleased to see the performance in our stable business, and we'll come back to that several times during the presentation. Overall, also, order backlog amount to 4.6 billion, a bit higher than at the end of Q4, which, of course, is a positive development that we are happy about. Net sales were flat year over year, stable business grew, process technology decreased, which of course is unfortunate, but it is a consequence also of this subdued market that we're currently experiencing. Comparable EBITDA remained on the same level as last year, landing at 121 million, with a slightly better margin of 10.2%. Cash flow was very strong in 2024 and I'm very happy to say that the good trajectory really continued and our cash conversion was very strong in Q1 and cash flow landed at 217 million. Comparable row C increased a notch from a year end to now 13%. But maybe the biggest news of the quarter was our plan to renew the operating model. The proposed model will help us serve our customers better throughout the lifecycle of our equipment and the things that we deliver and the solutions we deliver to customers. It will also simplify how we operate and it will increase our efficiency. And I'll come back to that later in my presentation as well. First of all, Let's have a look at the Q1. Let's look at the stable business then. First of all, Q1 order intake 974 million. That was a record. Even though it was partly supported by an acquisition that we did last year, the organic growth was also strong. The year started strong in the stable business. where we reported orders increased by 14%. So even on an organic basis with the acquisition or taking the acquisition out, we did also see organic growth of 8% in service. Positively, however, supported by a large mill improvement project, but also consumables and the performance parts grew nicely. I would also have to say, and we can come back to that, the organic growth was also supported by price increases in the segment. Geographically, orders increased in Asia Pacific, in South America, and in North America, and were flat in China and EMEA. So big thanks to all area teams for effort in Q1, and a special thanks to Asia Pacific for making a record quarter in service orders received at Q1 2025. Then organic growth and automation, 12%, driven by strong performance in both flow control and automation system. In automation system, we saw good activity in the pulp and paper, but also in other process industries. In flow control orders grew, particularly in service and in the valve controls and actuators. We might have seen some pre-tariff buying, might have been visible in particular in the flow control in North America, but overall, I think it's fairly, sort of shows a fairly level of the actual activity that we saw on the market. So very pleased with the strong performance by our teams and good level of customer activity in this stable business. So I'd say this sort of highlights the resilience of our stable business throughout the years, through cycles, really has been a strong contributor, also organically 6% roughly. So of course it's also impacted by acquisitions over the years, but 6% of granted growth, nicely improving So good to see. So yeah, very pleased overall with strong, stable business orders totaling close to 3.5 billion on a last 12 months basis. So that really sort of demonstrates our abilities to serve customers from equipment throughout the lifecycle, sort of true lifecycle approach. Just a small customer highlight of the quarter, we launched Valmet DNAe in 2024. It was one of the highlights of 2024. Very pleased to see that we continue getting traction. We've already received a good amount of orders for our DNAe. This customer case is from Q1, finished power plant, selected Valmet DNAe to modernize its automation of its power plant. Great win by the team in the energy sector. The customer made a thorough evaluation process and ended up concluding that Valmet DNAE adds the most value to them. So this customer, ESE Energia, decided to replace old third-party system with this comprehensive DNAE solution. So really sort of full automation system upgrade of their power plant. Strategically, I mean, this brings Valmet really sort of much closer to the customer and adds value with sort of deep system integration. And we can add value to the customer throughout the life cycle with upgrades, remote support, future add-ons that will come into the system. So clearly, we strengthen our reputation outside pulp and paper and particularly in the energy segment. So big thanks to the team and also big thanks to our valued customer for your trust on this one. So moving on to strategy. Strategy process started late last year, and I have to say it's progressing and proceeding very well, and really exciting and fruitful discussions that we're having on a broad basis in the company. But let's first look a little bit at sort of recent history and the background for the strategic renewal, but also the operating to a very large extent. Looking at our numbers from the last three to four years, organic growth has clearly plateaued, both in terms of net sales and comparable EBITDA, as well as margin. So of course, that's not something that we are really happy about. On top of that, capital employed have increased, so row C clearly decreased as well. So this is something we want to take action on and improve in the coming years. On top of that, you can say market activity in the process technology, as we also saw in Q1, remains on a low level. And in here, we need to make sure we have an efficient operation that performs also in challenging market situations. So that's why at the end of Q1, we, as a consequence of all this, announced the plan to renew Valmet's operating model as a first action in this strategic renewal process. Overall, we're aiming to serve our customers better. This is basically the most important end goal and purpose of the changes that we are making. it will sort of make us or put us in a better position to sort of achieve delivering and taking that lifecycle approach to what the customer will have a strong business areas who are then responsible and accountable for driving the profitability and the growth of both capital and related aftermarket service. So throughout the customer lifecycle and customers will actually be interfacing with one business area. Secondly, it will simplify the organizational structure. The current five geographical areas will be integrated into the new business areas, so keeping that local proximity to customers. Thirdly, we will drive efficiency by establishing a global supply unit to support our cost competitiveness, but also put us in a position where we can have a more flexible supply chain that actually can manage peaks and troughs in the demand and the market. So the process we're going through now will impact up to a maximum of 1,150 roles globally. All these roles are white collar employees, so no blue collars are included in these 1,150 potential people. In terms of financial, we do estimate, like we said when we came out as well, that an 80 million euro savings with full run rate achieved by the end of 2026, or beginning of 2026, sorry. So in roughly a year's time. The Renew strategy will be fully communicated at our upcoming Capital Market Day on June 5th. The Renew strategy really sort of aim of identifying future growth areas, both existing and of our current business, but also simplify the way we're working and increase our operational efficiency. So, yeah, we're really looking forward to meeting you all in person in Tampere and really have a good discussion on where the future strategic direction of Valmet is going. So with this, I'll hand over to Katri for the financial. Here you go.

Thank you, Thomas, and good morning, everyone, also on my behalf. And I will go through the financial development next on the slides. Valmet's orders were nicely tilted towards stable business during the first quarter, and good to remember that the first quarter is typically a seasonally strong quarter in stable business for us, and year-over-year growth was also strong. In the first quarter, 73% of our orders came from stable business. On the net sales side, they were more evenly distributed, and seasonally, our net sales in the first quarter are typically a bit lower than in other quarters. Then in terms of comparable epithet, almost all of our profits were made in services and automation segments, and the quarter was weak for process technologies profitability. Q1 orders increased to 1.3 billion, and the order backlog was close to 4.6 billion, and the big Arauko pulp mill order is visible in the order backlog. Net sales decreased a bit, and comparable epithet was exactly the same as last year at 121 million, and the margin was 10.2%. Both net sales and comparable epithet decreased sequentially from the fourth quarter, which is a typical seasonal pattern for us in Valmet. Items affecting comparability were minus 8 million for the quarter and they were mostly related to our other segment and to smaller extent to process tech and automation segments. The IAC provisions related to the operational model change and the workforce reductions are to be expected to be booked in the second quarter this year. Amortizations were 24 million for the quarter, leading to 89 million operating profit. And going forward, the quarterly amortizations are expected to be roughly on a similar level than in the Q1. Adjusted EPS remained at last year's level at 33 cents. Some words about the order backlog next. So order backlog is 122 million higher than at the end of last year. And order backlog has grown in stable business and a bit lower in process tech. And roughly 60% of the backlog is related to process technologies and then 40% to stable business. And the order backlog for this year is roughly 2.9 billion, adding is the same amount we had last year at this point. And this is in line with our guidance of flat net sales for this year. Moving next to the segment financials, starting from the process technologies, the market activity continues to be low, but the orders received on the last 12 months basis are on a good level, supported by the big order in Q4 last year. Net sales, however, are decreasing, and this has also led to lower comparable EBITDA margins. Orders received in process tech increased in the first quarter, but it is fair to admit that the market activity continues to be subdued, and book-to-bill ratio is below 1. Net sales decreased by 17%, or 84 million, which then led to a lower comparable EBITDA, and margin was disappointingly low at 1.5%. Moving on to services next, where the development looks much better. Both orders and net sales have been growing steadily in the last years, and comparable epithelium margin reached now 18% on the last 12 months basis. The first quarter marked a very strong start for the year in services. Orders received grew 8% organically across the service portfolio. Net sales also increased by 6% organically and supported also the comparable EBIT day. And comparable EBIT day margin was 17.6%, which is the best ever Q1 margin for services. Looking at automation segment next, orders received and net sales trends are also very positive here in the recent years. And the last 12 months comparable epithet was 258 million and margin 17.6%. And the margin has plateaued, but partly this is explained by the acquisition of API, where the margin has historically been lower. Orders received increased by 24% in automation segment, of which half, which is 12%, was organic growth. And this also means that the start of the year was very strong in terms of orders in automation segment. And 63% of the orders came from outside of pulp and paper industry in the first quarter. Net sales increased by 10%, and this was due to the acquisition of API. But organically, we saw a slight decrease of 2% here. Comparable epithet increased to 55 million, and the margin was 16.2%. And good to remember that automation's net sales and profitability are typically seasonally lower in the first quarter. Looking then at the segments big picture, so as said, services and automation performed well, while process tech has been suffering from the low market activity. The expenses in other were 16 million for the quarter, and the expenses in other have been roughly 50 million in the last years, and we expect similar or slightly higher level this year. Then comparable with the gross profit, it was exactly at last year's level on a last 12 months basis, while the margin went up a notch to 28.4%. Comparable SG&A expenses have been increasing faster than our net sales since 22, which is partly why we are now planning the 80 million cost reductions. Cash flow continued to be on a strong level and this was clearly one of the highlights of the quarter. Last 12 months cash flow increased to 633 million and Q1 was 217 million. CapEx amounted to 24 million, a bit lower than in the comparison quarter. And then when you look at the networking capital, it decreased clearly from the year end to minus 193 million. And this is now minus 3% of the last 12 months rolling orders received. And it's worth noting that the AGM decided on a dividend of 1.35 euros per share, and it's paid into installments in April and October. And the networking capital therefore included 249 million dividend liabilities. Moving then on to a balance sheet, thanks to the strong cash flow, net debt decreased to 875 million and gearing to 36%, and net debt to EBITDA decreased to 1.3. And the average interest rate was 4%, and net financial expenses 15 million in the first quarter. Lastly, for your words about ROSI and earnings per share, both ROSI and adjusted EPS have been under pressure in the recent years, but they remained roughly at par with the end of last year on last 12 months basis. That concludes my part of the presentation. I will now hand back to you, Thomas.

Thank you, Katri. Good. So let's move to the guidance and the short-term market outlook. Overall, our guidance is unchanged. We continue to estimate that full-year net sales and comparable EBITDA will remain on last year's level. Short term market outlook for process tech continue to be the same as earlier. Customer activity is stable, however, on a low level overall. So when we sort of double click a bit on that, you know, in pubs, some discussions with customers on some larger greenfields projects in South America that are out there in the market. These discussions continue, and it's always very hard to say anything about timing of customers' decisions, in particular in these kind of very large decision processes. Outside of these big green fields, custom activity for smaller projects and rebuilds continues to be rather low. Same goes with board and paper custom activity, also on a low level. However, if you then sort of look a bit on the energy side of things, there is some activity, there is active discussions, but there's also a delay in the decision-making. It's clear that the current market sentiment with a lot of clouds and on global economy is sort of dragging processes or decision-making processes a bit out or at least a bit extra rounds of discussions. Tissue market continues to be quite active, which is nice to see. Then when it comes to services, we had a very strong start of the year and good organic growth in terms of our orders, good customer activity in general. We estimate that that activity continues to be on a stable level going forward, but on what we would say is a good level. Automation, also good activity, will remain stable. Of course, there's some seasonality in Q1. We typically have a strong quarter in terms of what is received for the service and for the automation business. However, that of course also went for last year, but we'd still outperform this year. Maybe also just to say that short-term market outlook, when we talk about this, is aimed to capture the underlying customer activity, and it shouldn't be read as our guidance in terms of our orders received, because that is, of course, reflected on how well we perform, how good we are in the market and the selling process. Then lastly, maybe let's just touch, when we're here on outlook, on the current tariffs. Briefly, at least, first and foremost, we're, of course, following very close to the US tariffs as they change or any potential response from other countries. I would say, though, thanks to our global footprint and especially strong presence in the US, especially also in the service part, we are rather well covered. But of course, we are constantly looking at can we take and make proactive steps to protect our supply chain, our cost structure, The plant global supply chain unit that we're planning in a new operating model will be key in keeping us competitive, especially in such a lively situation as we're currently experiencing. Second, in many areas, especially in the process technology, our geographical footprint is quite similar to our competitors, so we're not at any structural disadvantages there as well. We're sort of an even playing field, I would say. Thirdly, the broader question is how this uncertainty impacts the global economy, then our customers, their customers, and then at that end also Valmet. I would say 23rd of April haven't really seen any sort of major changes in customer activities are still continuing quite well. We are maybe seeing some hesitations like we've seen for the year to date on sort of investment decisions, including in our stable business on bigger repairs or bigger maintenance things. But, you know, This may continue until there's more clarity on the overall terrorist situation. I think the uncertainty is probably the worst thing, but we are clearly managing and doing our best, and I think we've gone in a good position to actually manage the situation quite well. So overall, unchanged guidance. That's all from me, and I'll hand back to Pekka.

Thank you, Tomas. Thank you, Katri. Let's now move on to the Q&A section of this webcast. And as a reminder, you can post the questions throughout the online platform, and I will read them out to Tomas and Katri here. So please utilize that option as well. But first, let's go to the teleconference lines. So operator, handing over to you.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Antti Kansenan from SEB. Please go ahead.

Hi guys, it's Antti from SEB. SCB, a couple of questions from me all on the services business. First is on the Q1 margin, which was obviously strong, as you mentioned, best ever for the quarter and a big increase year over year. Maybe a bit color on behind the margin improvement, and should we kind of expect normal seasonality from here onwards, or was there something extraordinary supporting the Q1?

Thanks, Nancy. I think, you know, overall, Q1, as you said, you know, very good month or good quarter for the service business. Also, from a margin perspective, I think the team has done a really good job in terms of pricing, being ahead of the curve that, of course, impacts and shows in the strong margin. I think that's sort of actually basically the main driver behind the whole thing. You know, efficient, the volumes also coming through also helps the margin and then good pricing.

Any color on kind of the level of the price increases on a year-over-year basis?

I think it's sort of, it depends a bit on where you are in the world, of course, and what the tariffs have been, you know, how the inflation situation have been. But I think, you know, broadly, quite good overall price increases and we're sort of in line or above what you would expect, hence the improved margin.

Okay. And I guess there's nothing kind of extraordinary in terms of mix, I mean, regarding consumables versus parts versus projects type of thing that would be visible on the margin, that it's more of a pricing thing.

Yeah, no, I wouldn't, there's no sort of, I can't say these two things impacted it apart from the pricing side. It's basically sort of a relatively, in that sense, an average view of the business that you see, not a mix change.

And of course, the strong volume, as you said, it really supports the bottom line.

It's clear that when the volume goes up, the drop-down rate is, of course, good. Yes.

Okay. And then also on services and the outlook, I guess, after Q4, you had a gradually improving market activity, which is now stable. Is this just a function of kind of the comparison period, or are you referring to maybe slower decision making on some of the improvements and such. So is there any change or is it just a different comparison?

I mean, for me, quite clearly, it's just sort of, you know, good Q1. I don't see it as a change. It's just that we just reached a very good level, right? Good level, stable on a good level. That's how I read it, the market currently. In the service side of things, yeah. So I would say don't take it sort of as a downgrade on the service outlook in that sense. When we say stable.

Understood. That's all from me.

Thanks. Thank you, Antti. The next question comes from Mikael Dopel from Nordea. Please go ahead.

Thank you and good morning Tomas, Katri and Pekka. A couple of questions. So first coming back to your commentary, Tomas, around the tariffs and I think you said that you haven't seen any change to the customer activity overall but you also said there is some hesitation on bigger investment decisions. But just to be clear on that, so you have a stable outlook for process technologies, right? Does that mean that you don't see any hesitation currently due to the uncertainties around the potential tariffs, or how should we read that?

In the service side or across the board, Michael?

Or in process technologies in particular.

In process technologies. I think process technologies, we sort of mark it as overall subdued. That maybe creates sort of also, then the tariffs on top of that creates a bit of a longer decision-making process. So it's getting harder to predict which quarter the orders come in. I think when we look at the pipeline, it's sort of unchanged on the process technology part.

Okay, okay. That's very clear. And also on the tariffs, how do you really deal with those when you agree on a project order currently? How do you kind of deal with those? Yeah, so that's... Or let's call it the potential tariffs.

Yeah, exactly. And that's why, of course, contractually, you need to have an opportunity to pass on any tariffs impacts onto the customers. I mean, it can, you know, it might be you're actually finalizing delivery in 18 months' time or two years, right? So that can, of course, have a... You know, a lot of things can change by then. And both we, but also the customers, wanted to make sure that that that is being dealt with in a fair way so that if tariffs increases, we can pass it on. If it decreases, of course, the customer gets the benefit of that. Yeah, okay.

No, that's clear. And then just finally... Process technology, of course, right? Yes, of course, of course, yeah. And then just finally on the cost savings, the 80 million that you are targeting, I'm just wondering, do you have any views of what the costs will be for implementing these and how and when you will book those? And also in terms of 2025, any idea of what kind of benefits you would expect to to gain from these savings to support your numbers as well as the guidance for the year?

Yeah, I mean, like Katja said in her, it's going to be booked in Q2. Yes. We're in the middle of the negotiations. It's progressing actually quite well in the negotiations. I think it's in very good spirit overall. We all see the purpose of these changes. Of course, a bit early to say what's the exact or sort of rough number on that, but it is something that we will have a clear view on in Q2 and book in Q2. Katri, any further?

Yeah, I think just to mention for the provision that it's going to be sizable, I think that's fair to say. But as Thomas said, the impact for this year too early to comment. So we will definitely come back to that when we publish the second quarter results.

Yeah. I think it's also important to state, Michael, that sort of, you know, just because there's cost associated with a thing, it should not keep us from taking sort of the difficult or making the difficult decisions, right? We need to do the right thing for the company, even if it has short-term cost consequences.

No, no, absolutely. That's absolutely clear. I was also thinking a bit about the, you know, given the fact that you expect the full run rate from the beginning of the year, 80 million just wondering how much out of that you expect to achieve in in 2025 but perhaps it's too early to comment on that yeah all right thanks thank you very much thank you michael michael the next question comes from ponu leighton markey from danske bank please go ahead

Hi, I have a question on the process technologies margin which has been coming down sequentially for about three years now. How do you see this developing going forward given the order book that you have? Will it go negative before it starts to improve and are you kind of planning to do additional cost savings in the process technologies to kind of protect the margin?

Yeah, maybe if I just give my quick comment country. I mean, good question. Overall, of course, 1.5%, 6 million euros, not something we're particularly happy or proud about. Clearly something that needs to improve. It is important, though, to sort of see this in an overall context, sales down. 124 million, if I remember correctly, from Q4 last year, where we had 2.8% margin. There is a lot of this sales volumes impact the overall margin quite a bit. and actually also more than I would like. And that's also one of the reasons why we're taking this, you know, the operating model change with the global supply unit. We need to create a much more agile global supply chain that can actually deal with peaks and troughs in a better way.

Yeah, and if I build on top of that, so of course the current market activity, our existing portfolio. So for this year, I'm not expecting that the margin would improve from the current 3% last 12 months level for the full year.

Okay, thanks. Then a bit related still on process technologies. So you had good power and energy orders, but then quite low in the paper size and you mentioned that the kind of pipeline is unchanged but timing is more difficult to predict. So how do you see the paper or kind of board order intake going forward? Was this exceptionally low due to timing or is this more like a run rate to expect or what are your thoughts on that?

No, I think it's, I mean, first and foremost, I don't think that in any quarter you can take it as run rate, sort of really in the process technology, in particular in the current environment, there's very sort of digital binary in terms of decision making and the size of the projects. But I would say, you know, compared to where we were looking into, let's say three months ago, basically same pipeline. When it comes out, a little bit harder to predict, particularly with the global... you know, global economy sort of clouds or at least fog in terms of the clarity that is there. Then some customers, you know, take bolder bets. Some just want to see a little bit how it's going. But yeah, I think viewed roughly unchanged in terms of the pipeline. But timing can be hard to predict.

Thank you. I still have two quick ones on automation, if I may continue. So On automation, you mentioned the pre-buy in flow control. So was this significant in the US in Q1?

I wouldn't say that it was significant. We just saw that there was some visibility of potential pre-buying in the flow control in North America. But I wouldn't say it's not a big ticket item. We just want to be very transparent.

Thanks. And the final one on automation. You mentioned that the API profit contribution was now positive, and I think it was negative for most of last year. So can you comment on where is the margin now? How do you expect that to develop going forward?

I think the only comment for that is that it contributed positively, so we cannot give on that level comments. But actually, everything is proceeding very well with the carve-out was challenging, and we're happy with the work that the team has been doing there.

I just visited them actually in their Houston head office, or sort of their North American headquarters in Houston, where there's also some manufacturing production there a month ago, roughly. Really positive visit. I would say I'm very happy that we made that acquisition last year, and it is trajecturing in the right way. That's definitely how we see it currently.

So if you think about 25 full year, the API contribution should be clearly positive compared to what it was last year. Yes, that's the expectations. Okay, thank you. That's all from me.

The next question comes from Johan Eliasson from Keplichu Reacts. Please go ahead.

Hi, it's Johan at Kepler Chevreux. Just coming back to your competitive picture a little bit. I mean, you highlighted from a tariff situation your competitors primarily in process tech is basically having the same geographic setup as you. But I was more wondering about the currency developments. We have seen a very strong appreciation of the Swedish krona. And I think you have quite significant capacities in Sweden in tissue pulp and energy. Would you have any comments on how do you see this impacting your competitive situation going forward?

I think, you know, overall, back to it depends on if you see the North American market, the dollar swings that we've seen lately, of course, a bit hard to predict, but it is sort of what it is and you just need to manage it when we get orders. When we have currency exposure, we do tend to hedge them in order to make sure that we're not here to take currency risk. And that goes for the Swedish krona versus if we send things to South America or North America or Asia in the pulp and tissue business.

But is it fair to say that you have a bigger cost exposure to the Swedish krona than your peers in tissue and pulp, for example?

Yeah, that's pretty, I mean, you would say that's a relatively logical conclusion as I guess we are the only one who has sort of major manufacturing in Sweden. So that's clear.

But of course, it's good to remember that it's a global business. And also when we talk about project business, also the subcontracting plays role there. So it's a combination of many things.

Yeah. Okay. Thank you very much.

The next question comes from Tom Skogman from Carnegie. Please go ahead.

Yes, hello. This is Tom from Carnegie. I have a couple of questions surrounding the new strategy. I guess we'll hear more about this in the capital market day. But is it correct to read between the lines, first of all, that there will be some larger cost-cutting also when it comes to blue colors? Is that what you're trying to signal to us?

Of course, we will discuss it more when it comes to the capital market day in Tampere. It is clear that we need to have a more efficient, more effective, cost-competitive global supply chain. That can impact blue colours, of course, depending on how the market is. We will also need to make the The make or buy decision is also up in the air. How much do you actually need to control yourself? How much can you subcontract? But I think it's important to just say that the first step on this new operating model, it is impacting white colours and not blue colours.

And you have a new chairman. I wonder, is he just kind of signing what you're proposing or is he very active in building the new model.

We got three new members of the board, very engaging, good input from different perspectives. So of course that's exciting and that's their full support on the operating model change. Of course it's been intense in terms of get them up to speed on the different actions, the reasons why and why we're doing as we're doing, but of course also getting them up to speed on the current thinking strategically so that there's full backup from the new board when we're going to present to you guys on June 5th. But great to have a chairman who also has a little bit of understanding the whole background of where we're coming from, also from a cultural perspective, right?

And then I guess the story has been about stability in service and automation the last five years that Malamud has presented to the investors. But when I read what you're doing here, it sounds like the service business will be integrated. So I assume you will not report service profitability in the future. Is that right or wrong? And then I also wonder, why should we then not be afraid that you just start to subsidize the equipment business with with service so you accept losses in the equipment business if you don't report it because to report something externally puts some kind of pressure on organization at least to avoid losses in a weak market.

Yeah. No, good question. I think, you know, if you look at our current operating model, it is quite clear that it is quite complex, both from our customer perspective, but also from an employee perspective, right? So you have sort of a basically a three-dimensionally matrix when it comes to service. So if the country is involved, the service business lies involved, the capital, the process technology business lies involved because they design actually the equipment, which needs to also be designed to be able to service it better. I met a lot of customers, actually had a few ones lately that were sort of, even though we discussed about very big, large capsule equipment, Decision and order or decision making they are already before that is sort of done They already talking about in discussions of how we're gonna make sure that you can service us in an effective and efficient way Because of course they buy the equipment to maybe perform and give them an outcome over 25 years So it's not for them just about the equipment It's actually about making sure that we deliver that outcome that we're discussing with them that the solution can deliver and also throughout the life cycle. So this closeness of integrating this for seeing it from a customer perspective rather than an internal and then maybe even a market communication perspective. At the end of the day, what drives value is that we serve our customers better than competition.

Yeah, maybe just for the reporting structure, what we will report. So stay tuned. We will, of course, tell more in the CMD. That's the right timing for that.

And then finally, about sourcing from China. I mean, can you fully avoid sourcing from China in things that you sell to the U.S. market, for instance, board machines?

I think, I mean, when we look at the current economy that we have globally outside our industry as well, it is quite clear that it's the whole world is very, very integrated. So if you start to put tariffs up in one place and take sort of you know, building blocks away of the current whole system flow of goods, it does impact somewhere, somewhere. And that's, of course, it's such an integrated global economy that is so it's hard to say that you can just do something without impacting another thing. I think that goes for everybody in this. How, if it's actually possible to create a board machine without sourcing anything from China, You can probably do that, but the question is, can you do it in an effective way or not, right? Okay, thanks.

Thanks, Tom.

Thanks, Tom. And I hope to see you in Tampere.

The next question comes from Sven Weyer from UBS. Please go ahead.

Good morning. Thanks for taking my question. It's just to follow up, Thomas, on your earlier statements regarding market activity in South Africa, South America, sorry, on pulp green fields. I mean, look, when I look at the pipeline, it's a bit of a long-dated one, right, with most projects probably ramping towards the end of the decade. maybe the earliest one making a decision on investment by the end of this year i mean is this also generally the impression you have from the discussions that these are really early early days and pre-engineering discussions where you know a decision making on those green fields would if anything be you know really on a 12 to i don't know 24 months type type of view thank you

Thanks, obviously, as you've done your homework, so you know that there are certain projects in the pipeline, certain customers are looking for making big moves, big decisions or big investments in the area. And these tend also to be, of course, longer projects. You need to have the forest, you need to plant the trees, et cetera, et cetera. You know, there are certain discussions that are quite detailed as well, so that the actual sort of developing the solutions is in the discussion phase, not just sort of what do we think overall, but in a quite detailed level.

And do you sense, I mean, regarding the tariff uncertainties, I mean, do you sense differences between your different customer groups? Let's say, do the pulp clients, are they a little bit less sensitive to tariffs and other client groups are more worried about this? Or what do you find among your clients?

It's a good question. I think the ones I've sort of visited this year, I think it's sort of it impacts everyone because it's just because the world has sort of become been put in a limbo situation and there's very sort of little clearness of direction of travel so that just makes people and our customers and I think everybody's customers more or less sort of stop up and pause and just sort of rethink what are we seeing you know how can this impact so I think it's I think it actually is less about the direct tariff. It's more about the global economy, how that's going to be impacted by it. And that's why it's a bit across the board. Even when I meet oil and gas customers in North America, for example, who would you think that they are sort of very positive, but it's still that sort of, yeah, what's the direction of travel of the global economy?

It makes sense. Thank you very much, Thomas.

And I see you as well.

There are no more questions at this time, so I hand the conference back to the speakers.

All right. Thank you. Thank you for all the good questions to the teleconference line. So we have a couple more here. in the online platform. Let's take this by the order how they came here. So first one's from James Winchester, who's asking, you kept your revenue and earnings guidance unchanged. What is your level of confidence on this, given the downgrade of service activity and the high uncertainty with tariffs? So the guidance in relation to the service shelter market outlook and tariffs.

Yeah. As you know, As we said, we keep our guidance. I don't see the service that we're saying stable, that that's a change in the guidance, really. It's just like we're on a good level, it is stable. That's basically in line with what we said a quarter ago, where we saw activity level increase, and now they have increased, right? So it's still sort of now saying that it's on a stable level. So I don't see that part, really. What was the next one? There were two questions, right? Yes, given also the tariffs. As we talked a lot about the tariffs, we're trying to manage the situation to the best possible, really keeping our finger on the pulse, close to the customers, being with them in this time. It is about the fog that the global economy is creating, so that makes it a bit harder to predict the direction that we're traveling in. However, we stand by our guidance.

And maybe just to add that the order backlog to be recognized this year is 2.9 billion, which is the same what we had last year. So, of course, we do need orders. We have booked a bill, but that's a good starting point for the flat guidance.

Yeah. Also seeing that automation, 14% growth in orders. 12% organically for the quarter, even though the sales were minus 2%. That also creates a good backlog for the coming quarters.

Thank you. Then a follow-up from James regarding the cash flow that was strong in Q1. What's the expectation on cash flow for the full year?

Yeah, it was really, really good outcome. So we're happy with the development and of course supported by the positive development in the networking capital. And of course, it's our target to keep the cash conversion rate very steady. So very happy about the beginning and also for the last year's results. So there has been very good development.

But I think it's also a good testament to, I mean, the relationship, the service, the delivery that we bring to the customers that they're actually willing to pay. And we've seen that working capital coming down. So, you know, I think it is a good, strong testament to, you know, the value we bring to our customers that they're even in tough times, they're paying for it. Yes.

Good, and maybe to add to that, of course, on the other side, the dividend will be paid out during Q2, and then thank you for 250 million about the dividend. Then to Katri, a question from James, still on the same subject. Can you provide any color on other current liabilities, which were up a little bit sequentially?

Yeah, if I remember correctly, the dividend liabilities actually booked in there. So that's the change there, which was mentioned that it was 249 million related to the dividends, what Pekka mentioned.

Exactly. Yeah. Thanks, Katri. Then Sandra Intelman is asking what share of the business touches the US and is therefore potentially exposed to tariffs?

I think it's good to remember that in the U.S., we more or less have 2,500 people and strong service business, and a lot of our service business is actually made in the U.S. or made in America, as it's called over there. So I think that sort of creates a strong foundation that we're actually standing on in our service business. So I visit API. We have manufacturing there. Of course, it comes in sort of there are parts coming from different other parts of the world where there can be or there will be potentially tariffs coming on. But that's also about having strong position from a value proposition perspective so that you can pass on the tariffs to the customers.

Thank you. And then a question, this is actually the last one for now. So about organic growth in the stable business in Q1, which was 8% in services and 12% in automation. How would you characterize it? What share of organic growth was pricing related?

Yeah, I mean, I think I said it to Antti from SEB as well. I mean, you know, pricing clearly helped the organic growth. It clearly helped the margin. But we don't sort of disclose the split of how much is driven by pricing, how much was volume.

And of course, it's a very normal tool for the stable business. So because of the inflation, there are always some price increases. So that's kind of a normal course of business anyway.

And it's a flow business as well, right? It's a transactional business as well.

All right, fantastic. That's all from the Q&A for today. So since there are no further questions, it's time for us to start to wrap up the event of today. So thanks again for joining and for the interest towards Valmet. But before we close, a quick reminder of the upcoming investor events, which were already marketed by Thomas, but most importantly, of course, we'll be hosting the Capital Markets Day on June 5th. It will be live at our Tampere site. A great opportunity to hear about the renewed strategy, meet our leadership team, and see the D&A eShowroom demo in action. We warmly encourage you to join us there in person. Tampere is easy to reach from Helsinki, and we'll be organizing also transportation from Helsinki and from the airport. So please welcome there. It's going to be an engaging day. And you can find more information and register through the investor website to the event. And of course, we will also be streaming it as a live webcast. It will be available for everybody also online. And then we'll be back with our Q2 results on the 23rd of July. And with that, we'll conclude today's webcast. Thank you again and we hope to see many of you in Tampere in June.

See you soon. Thanks.

Thank you.