Valmet Oyj

Good morning, everyone, and welcome to Valmet's Third Quarter Result Webcast. My name is Pekka Rouhenen, Vice President of Investor Relations, and with me today are President and CEO Tomas Hinderskov and CFO Katri Hokkanen. Thank you for taking the time to join us today. We'll walk you through Valmet's Third Quarter. We will highlight our improving performance, key order wins, and how we are navigating a market that continues to present both challenges and opportunities. Agenda is straightforward and the usual. So first Thomas will present the Q3 highlights and discuss our strategy execution. And then Katri will go through the financials and Thomas then conclude with the guidance and market outlook. And after the presentations, we'll open the lines for your questions. And there's also the possibility to post the questions through the digital platform. So thank you again for joining us and your interest in Valmet. But with that, Thomas, the floor is yours.

Thank you very much, Pekka. And also a warm welcome and good morning from my side. Before we start, I do want to highlight that we've updated the interim board and this presentation to reflect our two-segment structure in the new strategy, but also even more so making it more investor-friendly and easier to read. So I hope you appreciate that and actually have noticed the change from last time. Let's start with the key highlights for Valmet's third quarter, a period that truly demanded our best as the market was challenging in some of our key areas. It's important to be clear, while the process performance continued to benefit from a favorable market, biomaterials faced real headwinds, and that's why I'm pleased with the achievements in this quarter overall. This quarter was defined by improving performance and some landmark wins achieved in a very challenging market. Next, I'll walk you through seven highlights that together paint the picture of how Valmet is not just navigating, but actually leading in this environment. First, our process performance segment continued its strong growth track, delivering 11% organic growth in orders received. This is a clear signal of market trust and our team's ability to execute. The market environment was sort of a tale of two realities, continued good demand and process performance, but weaker conditions in biomaterial. Our diversified portfolio helped us balance these forces. Despite the headwinds, we increased orders organically by 7%, reaching 1.1 billion euros. That's a solid achievement in today's environment. A real milestone was the win of a record-large tissue order from the US that set sort of a new benchmark for ValMed and it opens up for robust lifecycle opportunities going forward. Financially, we delivered our best third quarter ever, comparable EBITDA of 159 million and margin of 12.3%. Slightly higher than last year and one step closer towards our 2030 financial target of delivering 15% comparable EBITDA margin. We've also started executing our lead the way strategy and already we're seeing concrete benefits, especially through the savings from our renewed operating model coming through also here in Q3. Finally, our guidance for 2025 remains on chain, both in terms of net sales and comparable EBITDA are expected to stay on last year's level. That stability is a sign of solid execution and the strength of our lifecycle approach. With those highlights in mind, let's look at how our strategy is coming to life. When we launched our Lead the Way strategy in June, we set out more than just to change our operating model. It's a route to overall higher performance, more integrated customer service, and increased shareholder returns. Since then, we've put the new operating model and reporting structure in place. Our teams are now aligning around lifecycle, value creation, and supply chain excellence. Lead the way isn't just a slogan. It's showing up in how we work together, how we serve our customers, and how we deliver better results. Already, we're seeing concrete benefits. We're targeting, as you know, 80 million in annual savings from the operating model renewal. And in Q3 alone, we realized 15 million of those. We expect the full run rate from early 2026. However, it is good to note that partly we will reinvest some of that savings into growth and to capture future growth. Also, we're strengthening our leadership team, especially in tissue business, where Joon joined us in August, and we made other key hires to support our execution. What's most encouraging is the feedback, however, from our customers. They're responding positively to our lifecycle approach and our regenerative purpose. It's clear that our strategy supports long-term value creation and performance. So the lead the way strategy isn't just underway, it's already making a difference. We're building momentum and we're committed to delivering on our promise. As we move forward with our new strategy, it's encouraging to see that our core strength and ongoing execution are already delivering results. While the full impact of our new strategy will unfold over time, the momentum we're seeing in orders received this quarter shows that Valmis is well positioned to capture opportunities in both favorable but also in challenging markets. In Q3, our orders received increased organically by 7%. This was the fourth consecutive quarter of organic growth. This achievement is a reflection of our team's ability to win business and deliver value even when the market conditions vary across segments. Process performance continued its strong growth with 11% organic growth in orders received. At the same time, biomaterial was faced with softer marking condition. Our record-breaking tissue order from the US, however, demonstrates our capability to secure major wins in this segment. These results support a strong order backlog, provide a solid foundation as we move into the final quarter of the year and look ahead into 2026. Let's bring these numbers to life with a concrete example of how our solutions are making an impact in the market. Today, I want to show our automation platform wins outside the pulp and paper space, which many people associate us with. We've been selected to automate a hydrogen fuel cell facility in Naepo in South Korea. The point here really is the versatility of the Valmet platform, solving problems in surprising areas, even such as clean energy and fuel cells. Every new automation site expands our install base and our opportunity for delivering this lifecycle software and services over time, delivering recurring revenue opportunities for us as Wellman. It's repeat business with Lotte Engineering and Construction, and it does introduce us to Nepo Gene Energy alongside their existing LNG plant in South Korea. To sum up, this is a small win today, but a strong proof that Valmet automation platform is relevant far beyond pulp and paper. Let's now zoom in on the process performance segment, where our momentum has been especially strong. In Q3, process performance delivered another standout performance, building on the momentum we've seen throughout the year, Orders received increased to 345 million with organic growth of 11%. That's, again, the fourth consecutive quarter of double-digit growth driven by strong performance in a robust market. These figures do suggest that our market share has grown through acquisition, but definitely also organically. Net sales also grew organically reaching 361 million, but that's truly remarkable is actually our profitability. Comparable EBITDA climbed to 79 million and the margin hit a record high at 21.9%. This does reflect a disciplined commercial execution, the benefit of operating model renewal, but also improved performance in API, the acquisition or the business we acquired last year, as you will remember. With this level of performance, process performance is setting sort of the pace for Valmet overall. This quarter, we secured the largest tissue order in Valmet's history, a true milestone for our biomaterial business. This landmark US orders expands our North American install base, strengthens our leadership in the ultra-premium tissue segment, and deepens our longstanding partnership with Sofidel. Financially, it's a record high order included in our Q3 results. Revenue will be recognized over the period of 2026 to 2028 with additional long-term growth expected from lifecycle services after the startup. The project covers the tissue line, automation, flow control, digital solution, delivering efficiency and reliability for our customer. I would say wins like this set the stage for future growth and innovation in this segment. Moving on to the broader performance of biomaterial segment beyond the Lionmark win we just discussed. This quarter, the segment operated in a notably softer market. The environment for large approaches has been subdued for some time. What's new is that the service market slowed down compared to Q1 and Q2 when our service orders grew at double-digit rates organically. Importantly, we saw the first sign of this softening already back in Q2 and communicated it also clearly at our previous webcast. We noted a more cautious environment emerging with customer activity expected to decrease throughout the year. In Q3, service orders were essentially flat 1% plus, We saw a slowdown in especially consumable and performance parts. Net sales remained at last year's level, but margin pressure was evident. Our comparable EBITDA margin declined to 9.5%, despite the cost benefit coming in from our operating model renewal. The margin was lower across the product portfolio, I would say. This does highlight the needs for even tighter cost control. We're addressing this head on through our new global supply unit, which is a key part of a broader strategy to strengthen cost competitiveness in the segment. This covers the operational and market development for our segment this quarter. To give you a bit more deeper look into the financial development, I'll now hand over to Katri, our CFO. The floor is yours.

Thank you, Thomas. I will now take you through Valamet's financial development for the third quarter. I will cover profitability, cash flow, balance sheet and other key financials in my presentation. And as always, my aim is to provide a clear and transparent view of our financial position and the drivers that are there behind our performance. Let's start with an overview of our net sales and comparable EBITDA for the third quarter. Net sales for Q3 remained stable at 1.3 billion and organically net sales were 2% higher than in Q3 last year. And this was due to currency headwinds of roughly 31 million as Euro strengthened against the US dollar and other key currencies. Comparable EBITDA reached 159 million with the margin of 12.3%, as said, a record high for the third quarter. This increase was driven by a very strong performance in process performance solutions and approximately 15 million in cost savings from our operating model renewal. Our last 12 months comparable epithelium margin remained at 11.7%. Sequentially, it's flat, but still at record level. And actually, these results show that we have ability to deliver consistent financial performance, even as market conditions fluctuate. Having covered our net sales and profitability, let's now look at our order backlog and what it means for Valmet's outlook. At the end of the third quarter, our backlog stood at 4.5 billion, which is 74 million higher than what we had at the end of 2024. And this solid backlog together with healthy book-to-bill ratio this year creates a good foundation as we move into the final quarter of this year and also to 2026. And based on our current delivery schedules, we expect that roughly 3.6 billion of the backlog will be recognized as net sales in the fourth quarter as well as in 2026. And this provides us with good visibility and also supports our confidence in delivering it in line with our full year guidance. Next, I'll walk you through our cash flow and working capital development for the quarter. Cash flow from operating activities amounted to 94 million in Q3 and 569 million over the last 12 months. and our comparable cash conversion ratio was 92% for the last 12 months, and this is right in line with Valmet's long-term historical average. Strong cash conversion demonstrates the strength of our business model and also our ability to turn profits into cash, even as market conditions fluctuate. Networking capital amounted to minus 76 million or minus 1% of last 12 months' orders, Sequentially, from Q2 to Q3, we tied up 63 million more working capital, but this was mainly due to timing effects, which reflect normal variation between the quarters. But to put this into perspective, if we compare with Q3 last year, we have actually released roughly 100 million in net working capital. And this improvement comes from reductions in our inventories and also in our contract assets, which is a good achievement in the current environment. And if we zoom out even further, at its lowest level about five years ago, our networking capital was half a billion euros lower than what it is today. However, it's very important to understand the underlying dynamics. So this shift reflects the growth of our process performance solutions and biomaterial services business, which typically require more networking capital than CapEx-driven project business. As these segments have grown, while then the biomaterial project business has been in a low cycle, our working capital profile has also evolved accordingly. And as always, payment schedule in our long-duration projects have a significant impact on networking capital development. Then, yesterday's capex was 81 million. This is representing 2.2% of net sales and it's also in line with our long-term average. I have to say that efficient cash generation, disciplined capital allocation remain our key priorities. It's supported by both operational flexibility and also our long-term growth ambitions. Next, I will walk you through our balance sheet development and gearing. At the end of Q3, our net debt to that 945 million, and we reduced our gearing to 38%. This is a clear improvement from the previous quarter and well within our target of under 50% guarantee. Our net debt-to-EPI-DA ratio also improved, now at 1.5. And the net average interest rate on our total debt remained stable at 3.6%. And net financial expenses fell to 13 million in third quarter. And this is down from the 17 million we had a year ago. And this improvement is driven by both a lower average interest rate and also a reduction of our total debt. For context, a year ago, our average interest rate was 4.4%. It's also worth noting that the second dividend installment, 67 cents per share, totaling 123 million, was paid in early October, and it's not yet reflected in these figures. Our liquidity remains robust with a cash and cash equivalents of 479 million at quarter end. So in summary, balance sheet is strong. Our gearing is comfortably below our target and our liquidity gives us the flexibility to invest in growth, support our long-term strategy, even in a challenging market environment. Moving on to capital efficiency and EPS. Our comparable ROSI for the last 12 months was 13.1%. This is a solid level, but I want to be transparent. So our financial target is to reach 20% comparable ROSI by 2030, and we still have some way to go. The decrease in ROSI in recent years is mainly due to the acquisitions we have made. So these have increased our capital base, and it takes time for the full earnings impact to come through. We are confident that these investments will support stronger returns over time, and we have a clear plan how to get there. Then our last 12 months adjusted earnings per share was 1.77 euros, down 8% from full year 2024. And it's important to clarify that this is adjusted EPS, which excludes the acquisition related adjustments, but includes items affecting comparability. It's sometimes assumed that these items affecting comparability are excluded from adjusted EPS. But in our reporting, they are included. Even though our comparable epithet is 6 million euros higher year to date than last year, the decrease in adjusted EPS was mainly related to restructuring expenses from our operating model renewal. And these are, of course, one of costs that support our long-term competitiveness. So we are taking the right steps to ensure stronger returns and sustainable value for our shareholders. Moving on to key figures to conclude my presentation. Most of these figures have already been presented today, but I'd like to highlight a few important topics. First, almost all key indicators have developed favorably in the third quarter. And this is a clear sign that our performance was strong, even in a challenging market environment. Yet to date, net sales down 3%. This is still in line with our guidance of flat net sales for the year, so we remain on track. Items affecting comparability were minus 10 million euros, and these are mainly related to a settlement agreement in the biomaterial solutions and services segment following a delivery made two years ago. And the delivery required corrective actions led to a commercial dispute, which has now been resolved. And while unfortunate, incidents like this are rare, but they do sometimes happen in the project business. Lastly, the effective tax rate was roughly 3% points lower in the third quarter and 4% points lower year-to-date. While this change is rather large, it's important to note that the tax rate always reflects the geographical mix of our business. And last year, the tax rate was higher than typical. This year, it's lower. So going forward, we continue to expect a tax rate of roughly 25%. That concludes my review of the key financials. Thomas, over to you to go through guidance and our view of market outlook.