Street Calls of the Week
Introduction & Market Context
Valmet Oyj (NASDAQ:VALM) presented its Q2 2025 financial results on July 23, 2025, highlighting strong order growth despite declining sales. The Finnish industrial company unveiled its new "Lead the Way" strategy, which includes ambitious 2030 financial targets and a restructuring program aimed at delivering €80 million in annual cost savings. Trading at €27.35, Valmet’s stock reflects market confidence in the company’s long-term strategic direction despite near-term challenges.
Executive Summary
Valmet reported a 19% increase in orders received to €1.52 billion in Q2 2025, while net sales decreased 6% to €1.24 billion compared to the same period last year. The company’s comparable EBITA remained relatively stable at €143 million (up 2% year-over-year), with margin improving to 11.5% from 10.6% in Q2 2024. However, adjusted earnings per share declined significantly to €0.23, down 47% from €0.43 in Q2 2024, primarily due to restructuring expenses related to the company’s operating model renewal.
As shown in the following chart of quarterly orders received, Valmet has seen substantial growth in this metric over recent quarters:
Quarterly Performance Highlights
Valmet’s order backlog reached €4.71 billion at the end of Q2 2025, representing a 23% increase from the previous year and providing solid visibility for future revenue. Approximately €2.3 billion of this backlog is expected to be realized as net sales during 2025.
The company’s comprehensive financial performance is detailed in the following key figures table:
Cash flow provided by operating activities amounted to €79 million in Q2 2025, down 38% from €128 million in Q2 2024. The company’s net working capital stood at -€139 million, representing -2% of the last 12 months’ orders received.
The following chart illustrates Valmet’s cash flow and net working capital development:
Net debt increased from Q1 2025 primarily due to a €125 million dividend payment, with the net debt to EBITDA ratio rising to 1.60. The company maintained a gearing ratio of 42%, within its target of less than 50%.
As shown in the following chart of net debt and gearing:
Strategic Initiatives
Valmet launched its new "Lead the Way" strategy during the quarter, focusing on transforming industries toward a regenerative future through two main business areas: Biomaterial Solutions and Services (advancing circularity) and Process Performance Solutions (unlocking resource efficiency).
The company introduced ambitious 2030 financial targets as part of this strategy, as illustrated in the following chart:
These targets represent a significant step up from previous goals, particularly in profitability metrics, with the comparable EBITA margin target increasing from 12-14% to 15%, and comparable ROCE target rising from at least 15% to 20%.
Valmet also implemented a new operating model effective July 1, 2025, which is expected to generate approximately €80 million in annual cost savings by early 2026. This restructuring affects up to 1,150 roles globally and resulted in €61 million in one-time costs during Q2 2025.
Segment Performance
Valmet’s performance varied significantly across its business segments. The Automation segment (now part of Process Performance Solutions) delivered strong results with orders up 11% organically and comparable EBITA increasing 15% to €66 million, with margin improving to 17.8%.
The following chart details the Process Performance Solutions segment performance:
Meanwhile, the Services segment (now part of Biomaterial Solutions and Services) saw orders increase by 7% to €534 million, with service orders growing 10% organically. However, net sales in this segment decreased by 3% to €460 million.
The Biomaterial Solutions and Services segment performance is illustrated here:
The Process Technologies segment faced challenges with comparable EBITA declining 74% to €4 million and margin dropping to 1.0%, primarily due to lower net sales.
Valmet’s new segment structure, effective July 1, 2025, is reflected in the following breakdown:
Forward-Looking Statements
Valmet reiterated its 2025 guidance, expecting net sales and comparable EBITA to remain at 2024 levels (€5,359 million and €609 million, respectively). The company’s short-term market outlook indicates high uncertainty, with activity in Biomaterial Solutions and Services expected to decrease slightly, while Process Performance Solutions activity is projected to remain stable.
As part of its long-term strategy, Valmet is targeting to double organic growth in biomaterial services to 8% and increase its market share to 25%. The company’s capital employed and comparable ROCE trends are shown in the following chart:
CEO Thomas Hinnerskov emphasized that the new strategy is "more focused, bolder, and more executable," highlighting the company’s confidence in its strategic direction despite current market uncertainties and the short-term impact of restructuring costs.
While Valmet faces challenges in achieving its ambitious targets amid market uncertainties and ongoing restructuring, the strong order growth and improving margins in key segments provide a foundation for potential future success. Investors will be watching closely to see if the company can successfully implement its cost-saving initiatives while maintaining momentum in its growth areas.
Full presentation:
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