Valmet Oyj

Good morning, everyone, and welcome to Valmet's Q1 Result Webcast. Before we start the short practical note, today's webcast is audio only due to a flu in the team. Thanks for your understanding. I'm Pekka Rouhen from Investor Relations, and with me today are Valmet's President and CEO Thomas Hineskuv, as well as CFO Katri Hokkanen. Today, Thomas will start with an overview of Valmet from the customer and investor viewpoint and go through the first quarter performance. Katri will then discuss the financials in more detail. After that, Thomas will return to cover the guidance and short-term market outlook before we open the lines for the questions. And as usual, you can submit written questions through the webcast platform at any time. But with that, let's get started. Thomas, the floor is yours.

Thank you, Pekka, and good morning, everyone, from me as well. The headline message for this first quarter is that we continue to execute our strategy in an overall demanding market environment, while sales mix had a clear impact on our profitability. Customer decision-making remained cautious, and the geopolitical situation decreased visibility. Against that backdrop, our process performance business continued to deliver strong margins why biomaterial business was impacted by project facing and the mix. Importantly, the benefits from the early and decisive operating model actions we took last year are clearly and continue to be clearly visible, supporting earnings quality also in a softer market. Before we go into the core and detail, let me briefly remind you what Valmet is fundamentally about. Our strategy is built on improving the performance of industrial assets across their lifecycle. We help customers run their operation reliably, produce more efficiently with fewer resources, and operate with less manual effort. We do this through services, upgrades, and automation, often in operations that are critical to our customers every day, but also critical to a lot of us in society. For shareholders, this is important because it means recurring demand from our large global install base and less dependency on capital projects. So while quarterly results matters, the overall direction of the company is perhaps even more important. We are building a stronger, more resilient environment by creating measurable customer value every day. In short, Valmet today is far more than a product company. We're a lifecycle performance partner for our customers. This case is a good example of how our strategy translates into real business opportunities beyond our traditional markets. Today, more than 500 advanced vessels globally rely on Valmet's automation solution in mission-critical operations every day. For customers, these systems help save cost, reduce risk, and support increasingly complex vessel operation. For Valmet, this expands our install base into another attractive lifecycle market with long asset lives and recurring revenue potential over decades. It also demonstrates the strength and the scalability of our automation business. I think something we all as, you know, shareholders, but also us here in Finland can be truly proud of. With that said, let me turn to the first quarter highlights. Orders received amounted to 1.1 billion. Orders decreased 15% organically, mainly due to the timing of large capital project orders, which can vary significantly between quarters. This also reflects the current overcapacity in the global pulp and paper markets, where customers remain selective with large investment decisions. At the same time, our business is supported by a large global install base built over decades. So every day, customers rely on Valmet to improve reliability, efficiency, and performance through our services, our upgrades, and our automation. Large purchases remain an important part of our offering, but they are only one part of many ways that we create values for our customers on a daily basis. Net sales increased to 1.2 billion, 9% up organically. Growth was driven by a higher share of capital projects revenue. That sales mix towards capital projects and smaller mill improvement projects did impact our margins. So comparable evidently climbed to 114 million with a margin of 9.2%. Important to note that the negative FX impact was also visible in the comparable EBITDA, and Katja will come back to this in more detail. At the same time, process performance solutions performed strongly. The orders grew faster than the overall market, and comparable EBITDA margin increased to 18.5%. Very strong execution by the team in the process performance solutions. Our strategy is progressing. Last year, we renewed our operating model and made a number of difficult decisions early on, and I'm really pleased to see how these actions continue to deliver tangible benefits to us. Cost savings supported performance across both segments during the quarter. Our comparable SG&A costs are now 66 million lower than in 2024. reflecting the impact of these significant measures that we've taken. In parallel, we continue to advance strategic plans to optimize and simplify our footprint. These actions improve our speed, our responsiveness to customers, while also strengthening cost competitiveness and deliver reliability to our customers. Like you can see on the graph, this one was one of the slower quarters in recent years in terms of orders received. The main driver was low capital profit intake. Furthermore, the comparison period included a large pulp mill rebuilt from North America last year. By material services, the orders declined 7% organically. The service market overall remained soft as customers continued to defer purchases reduce inventories, and prioritize minimal maintenance. In contrast, process performance solutions orders increased 4% organically, reflecting a return to low year-on-year growth after a weaker condition seen in late 2025. This clearly demonstrates the strength of our lifecycle offering and the value that we bring to customers. Next, let's take a closer look at the segments. Starting with process performance solution, this segment serves a broad global customer base across a range of industries. In the first quarter, around 63% of orders came from customers outside pulp and paper. A good example is marine automation, where more than 500 advanced vessels globally rely on Valmet solutions every day. Process performance is also a highly important earning contributor, representing around half of Valmet's comparable EBITDA. in the quarter. This demonstrates both the diversification of our business model and the growing importance of automation and flow control within Boundless. First quarter orders increased 4% organically while similar development in flow and automation solutions. This is a solid result in the current market environment and reflects growth above some of our key peers. Net sales grew 7% organically Comparable EBITDA increased to 63 million and the margin improved to 18.5%. While the improvements were driven by cost savings from operating renewal and supported by elevated product margins during the quarter, it is nonetheless a very strong execution by the team. As communicated earlier, we do expect margins to ease somewhat from these record levels as we invest back into growth. but overall profitability remains very solid. Turning to biomaterial solutions and services, orders decreased mainly due to capital projects timing, especially in pulp, where the comparison period included a large modernization order. Biomaterial services orders declined 7% organically as the soft markets continued. Net sales increased 10% organically, driven by higher revenue recognition in large projects and smaller mill improvements. The Iraq project is proceeding according to schedule and budget, and we're very pleased with the progress so far, with roughly 50% of the project's net sales already booked. So this mixed shift was reflected in the margins, and the comparable EBITDA margin decreased to 7.1%. Importantly, execution on projects remained solid. Cost savings from the operating model renewal did partially offset the mixed impact. With that, I'll give the floor to Kapsi to hear more in detail about our finance for the quarter.

Thank you, Thomas, and good morning, everyone. I will cover the group level development of key financials in my part, and let's start with the net sales and comparable every day. Net sales increased 5% year on year, or 9% organically, and net sales grew in both of the segments. FX had a big negative impact of approximately 44 million, and the biggest factor was the weakening of US dollar to euro compared with the first quarter last year. Comparable epithet was 114 million with a margin of 9.2%. Sales nickshifted towards large projects and smaller mill improvements. Despite higher net sales and cost savings, profitability decline due to the lower gross margin. Furthermore, FX had a significant negative impact on the comparable EBITDA. And it is good to note that with current FX rates, we estimate that the impact will be smaller during the remainder of the year. The sequential decrease in both net sales and profits from Q4 follows a normal seasonal pattern and was as expected. Let's then look at how our cost base has developed in the recent years. The operating model renewal implemented last year is clearly visible in the cost base. And on the last 12 months basis, comparable SG&A expenses are now 66 million lower than what they were in 2024. And that is almost one percentage point compared with net sales. While the operating model renewal brings savings, it is fundamentally aimed to improve the customer experience through the lifecycle focus, which is particularly important in the current market environment. Order backlog stood at 4.2 billion at the end of the first quarter, and this provides good visibility for deliveries and net sales going forward, with around 2.8 billion expected to convert into revenue during 2026 based on current schedules. While slightly lower than year end, the backlog remains at a healthy level and our focus is on disciplined execution, profitability and cash flow. Let's now turn to a cash flow development. Cash flow from operating activities decreased to 35 million in the first quarter, and this decrease was mainly related to an increase in the networking capital. The reported networking capital of minus 131 million includes a 249 million dividend liability, which doesn't have a cash flow impact. Excluding the dividend liability, networking capital increased by 89 million from year end, and this was mainly driven by project phasing and timing effects. It is important to bear in mind that quarterly fluctuations in cash flow are typical for Valmet, and we continue to expect cash conversion this year to be in line with our historical average of over 90%. Balance sheet remained strong. Gearing was 37% at the end of the first quarter and well below our 50% target. Net debt to EPI GA stood at 1.45 and liquidity remains healthy. We expect to close the Severn acquisition towards the end of the second quarter and this will have an approximately 15 percentage point impact to gearing. And we are comfortable with that level given the strong cash conversion ratio our business inherently has. Contra Bull Rosi improved to 13.4%. And as shown in the graph, capital employed decreased by around 230 million compared with 2024, which supported the returns. Our long-term target is 20% by 2030 to be driven by profitable growth, higher comparable everyday margins and disciplined value creating capital allocation. Adjusted EPS declined, and this was primarily due to items affecting comparability, which were related to planned strategic footprint measures. This slide gives you a snapshot of all of our figures at once, many of which we have already covered in detail. From this table, I would like to highlight the items affecting comparability, which amounted to minus 32 million, again related to strategic footprint measures in Sweden and in Poland. The effective tax rate was 23.6%. and this is below our long-term average of 25%, which we expect also going forward. The deviation in the tax rate in the first quarter from that 25 was due to timing effects. In summary, net sales increased, but the mix impacted our results. Furthermore, we had further headwinds from FX, which we do not expect to burden our Q2 results, to the same extent given the current FX rates. We expect the cash conversion ratio to remain at a solid level, also full year 2026, and look forward to starting the integration of Severn into Valmet towards the end of the second quarter. With that, I hand it over to Tomas to go over the guidance.