Earnings call transcript: Valmet Q1 2025 beats forecasts, stock surges 7%

Valmet Oyj reported strong first-quarter earnings for 2025, significantly surpassing analyst expectations. The company posted earnings per share (EPS) of $0.53, exceeding the forecast of $0.3914. Revenue reached 1.53 billion euros, well above the anticipated 1.2 billion euros. Following the announcement, Valmet’s stock rose by 7.24%, closing at $23.20, reflecting investor confidence in the company’s performance and outlook. According to InvestingPro analysis, Valmet appears undervalued based on its Fair Value calculation, with the stock currently trading at $28.34.

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Key Takeaways

• Valmet’s Q1 2025 EPS of $0.53 exceeded forecasts by 35%.
• Revenue of 1.53 billion euros beat expectations by 27.5%.
• Stock price increased by 7.24% post-earnings announcement.
• Strong cash flow and order backlog support future growth.
• Strategic initiatives and cost-saving plans underway.

Company Performance

Valmet’s overall performance in the first quarter of 2025 was robust, with significant growth in orders and a strong cash flow of 217 million euros. The company maintained a stable net sales performance year-over-year, bolstered by a solid order backlog of 4.6 billion euros. Despite challenges in the pulp and paper markets, Valmet’s strategic focus on services and automation has kept its business resilient.

Financial Highlights

• Revenue: 1.53 billion euros, up from 1.2 billion euros forecasted.
• Earnings per share: $0.53, surpassing the $0.3914 forecast.
• Comparable EBITDA: 121 million euros, with a 10.2% margin.
• Cash flow: 217 million euros.
• Return on capital employed (ROCE): 13%.

Earnings vs. Forecast

Valmet’s Q1 2025 results showed a strong performance against forecasts, with EPS exceeding expectations by approximately 35% and revenue surpassing estimates by 27.5%. This marks a significant achievement compared to previous quarters, underscoring the company’s ability to navigate market challenges effectively.

Market Reaction

Following the earnings release, Valmet’s stock saw a notable increase of 7.24%, closing at $23.20. This positive market reaction reflects investor optimism, driven by the company’s earnings beat and strong financial position. Analysts maintain a consensus buy recommendation with a 23% upside potential from current levels. The stock currently trades at a P/E ratio of 16.2x, with an EV/EBITDA multiple of 8x, suggesting room for further appreciation.

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Outlook & Guidance

Valmet maintained its full-year guidance for net sales and comparable EBITDA, expecting stable market conditions in its services and automation segments. The company is preparing for strategic renewals and operational model changes, with a focus on achieving 80 million euros in cost savings by the end of 2026.

Executive Commentary

CEO Thomas Hinderskov emphasized the importance of agility in the global supply chain, stating, "We need to create a much more agile global supply chain." He also highlighted the company’s commitment to customer service, noting, "What drives value is that we serve our customers better than the competition."

Risks and Challenges

• Subdued process technologies market may impact future growth.
• Potential tariff impacts could affect profitability.
• Organizational restructuring could face execution challenges.
• Pulp and paper market activity remains low.
• Energy sector investment behavior is cautious.

Q&A

During the earnings call, analysts inquired about the potential impacts of tariffs and the strong Q1 service business margins, which were attributed to strategic pricing initiatives. Discussions also covered the company’s operational model changes and its approach to potential U.S. tariffs.

Full transcript - Valmet Oyj (VALMT) Q1 2025:

Pekka Rohenen, IR Representative, Valmet: Good morning, and welcome to Valmet’s First Quarter twenty twenty five Result Publication Webcast. While this year started strongly in Services and Automation segments, while the market conditions remained subdued in the Process Technologies segment. I’m Pekka Rohenen from IR, and with me today are Thomas Hinderskov, President and CEO as well as Katri Hockkanen, CFO. Today, Thomas 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 Thomas will then conclude on the guidance and short term market outlook.

But with that, I hand over to the presenters. Thomas, the floor is yours. Thank you, Pekka.

Thomas Hinderskov, President and CEO, Valmet: Very happy to be here. Great to start the year in a good way. And let’s start looking at Q1. Overall, orders received increased to 1,300,000,000 particularly pleased see the performance in our stable business, and we’ll come back to that several times during the presentation. Overall, also, backlog order backlog amounted to DKK 4,600,000,000.0, 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 €121,000,000 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 €217,000,000 Comparable ROCE increased a notch from 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 life cycle 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.

Did you strip a slide or what? No. Sorry about that. Okay. That’s now here we are.

So first of all, let’s look at the stable business then. First of all, Q1 order intake, $974,000,000. 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 strongly 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, as sort of 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 Q1 twenty twenty five. Then organic growth in 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 in the market. So very pleased with the strong performance by our teams and a 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% organic growth, nicely improving. So good to see. So yes, very pleased overall with strong, stable business. Orders totaling close to DKK 3,500,000,000.0 on a last twelve months basis.

So that really sort of demonstrates our abilities to serve customers from equipment throughout the life cycle, sort of true life cycle approach. Just to a small customer highlight of the quarter. We launched Valmed DNAE in 2024. It was one of the highlights of 2024. Very pleased to see that we continue getting traction.

We’ve already have received a good amount of orders for our D and A. This customer case is from Q1, Finnish power plant, selective Valmet D and A to modernize its automation of its power plant. Great win by the team in the energy sector. Customer made a thorough evaluation process and ended up concluding that Valmed DNA adds the most value to them. So this customer, ESE Energia, decided to replace old third party system with this comprehensive DNA solution.

So really sort of full automation system upgrade of their power plant. Strategically, I mean, this brings Valmed 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 strengthened 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 of sort of recent history and the background for the strategic renewal, but also the operating to a very large extent. 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 ROCE 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 a plan to renew Valmed’s operating model as the 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 what we 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 life cycle 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 life cycle. 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 in the market. So the process we’re going through now will impact up to a maximum of eleven fifty roles globally. All these roles are white collar employees, so no blue collars are included in these eleven fifty potential people. So in terms of financial, we do estimate, like we said when we came out as well, that an €80,000,000 savings with full run rate achieved by the end of twenty twenty six or beginning of twenty twenty six, sorry. So in roughly a year’s time.

The renewed strategy will be fully communicated at our upcoming Capital Market Day on June 5. The renewed 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 yes, I’m really looking forward to meeting you all in person in Tampere and really have a good, thorough discussion on where the future strategic direction of Valmed is going. So with this, I’ll hand over to Katri for the financial. Here you go.

Katri Hockkanen, CFO, Valmet: Thank you, Thomas, and good morning, everyone, also on my behalf. And I will go through the financial development next on the slides. Valemet’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, ’70 ’3 percent 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 EBITA, 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 €1,300,000,000 and the order backlog was close to €4,600,000,000 And the big Arauco pulp mill order is visible in the order backlog. Net sales decreased a bit, and comparable EBITDA was exactly the same as last year at €121,000,000 and the margin was 10.2%.

Both net sales and comparable EBITDA decreased sequentially from the fourth quarter, which is a typical seasonal pattern for us in Valmet. Items affecting comparability were minus SEK 8,000,000 for the quarter, and they were mostly related to our other segment and, to a 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 €24,000,000 for the quarter, leading to €89,000,000 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 $0.33 Some words about the order backlog next. So order backlog is €122,000,000 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 €2,900,000,000 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 twelve 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 EBITA margin. 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 one.

Net sales decreased by 17% or €84,000,000 which then led to a lower comparable EBITA, 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 EBITA margin reached now 18% on the last twelve 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 EBITA. And comparable EBITA 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 twelve months comparable EBITDA was €258,000,000 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 EBITA increased to €55,000,000 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 segment’s 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 were €16,000,000 for the quarter, and the expenses in Other have been roughly €50,000,000 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 twelve months basis, while the margin went up a notch to 28.4%. Comparable SG and A expenses have been increasing faster than our net sales since 2022, which is partly why we are now planning the €80,000,000 cost reductions. Cash flow continued to be on a strong level, and this was clearly one of the highlights of the quarter. And last twelve months cash flow increased to SEK633 million, and Q1 was SEK217 million.

CapEx amounted to SEK24 million, a bit lower than in the comparison quarter. And then when you look at the net working capital, it decreased clearly from the year end to minus €193,000,000 and this is now minus 3% of the last twelve months rolling orders received. And it’s worth noting that the AGM decided on a dividend of EUR 1.35 per share, and it’s paid in two installments in April and October. And the net working capital, therefore, included EUR $249,000,000 dividend liability. Moving then on to a balance sheet.

Thanks to the strong cash flow, net debt decreased to SEK $875,000,000 and gearing to 36%, and net debt to EBITDA decreased to 1.3 And the average interest rate was 4% and net financial expenses, 15,000,000 in the first quarter. Lastly, a few words about ROCE and earnings per share. Both ROCE 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 basis. That concludes my part of the presentation. I will now hand back to you, Thomas.

Thomas Hinderskov, President and CEO, Valmet: 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 continued 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, in pulp, some discussions with customers on some larger greenfield 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’ decision, in particular, in these kind of very large decision processes. Outside of these big greenfields, customer activity for smaller projects and rebuilds continues to be rather low.

Same goes with board and paper customer activity also on a low level. And if however, if you then sort of look there 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 a little bit that sort of 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 then to services, we had a very strong start to the year and good organic growth both 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 a what we would say as 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 orders received for the service and for the automation business. However, that, of course, also went for last year, but they would still outperform this year.

Maybe also just to say that short term market outlook sort of that when we talk about this is aimed to capture sort of the underlying customer activity, and it shouldn’t be sort of 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 U. S. Tariffs as they change or any potential response from other countries.

I would say, though, thanks to our sort of global footprint and especially strong presence in The U. S, 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 the new operating model will be key in keeping us competitive, especially in such a sort of a lively situation as we currently experience. Second, in many areas, and especially in the process technology, our geographical footprint is quite similar to our competitors.

So we are 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 Valmetz. I would though say April 23, haven’t really seen any sort of major changes in customer activities, so 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 this may continue to sort of more clarity on the overall tariff situation. I think the uncertainty is probably the worst thing, but we are clearly managing and doing our best. And I think we’ve got a good position to actually manage the situation quite well. So overall, unchanged guidance. That’s all for me, and I’ll hand back to Pekka.

Pekka Rohenen, IR Representative, Valmet: Thank you, Thomas. Thank you, Katrin. Let’s now move on to the Q and 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 the Thomas and Katri here. So please utilize that option as well.

But first, let’s go to the teleconference lines. So operator, handing over to

Conference Operator: The next question comes from Antti Kansanan from SEB. Please go ahead.

Antti Kansanan, Analyst, SEB: Hi guys, it’s Antti from SEB. A couple of questions from me all on the Services business. First is on the Q1 margin, 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?

Thomas Hinderskov, President and CEO, Valmet: Thanks, Antti. I think overall, Q1, as you said, very 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 market or margin. I think that’s sort of the actually basically the main driver behind the whole thing.

Efficient, the volumes also coming through also helps the margin and then good pricing.

Antti Kansanan, Analyst, SEB: Any color on kind of the level of the price increases on a year over year basis?

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

Mikhail Dopel, Analyst, Nordea: Okay.

Antti Kansanan, Analyst, SEB: 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 Yes.

Thomas Hinderskov, President and CEO, Valmet: No, I wouldn’t read 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.

Katri Hockkanen, CFO, Valmet: And of course, the strong volume, as you said, it will

Thomas Hinderskov, President and CEO, Valmet: support the It’s clear that

when the volume goes up, the drop down rate is, of course, good.

Katri Hockkanen, CFO, Valmet: Yes.

Antti Kansanan, Analyst, SEB: 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 mill improvements and such?

So is there any change? Or is it just a different comparison?

Thomas Hinderskov, President and CEO, Valmet: I mean for me, Antti, quite clearly, it’s just sort of good Q1. I don’t so there’s not a don’t see it as a change. It’s just that we just reached a very good level, right?

Johanna Lyason, Analyst, Kepler Cheuvreux: Good level.

Antti Kansanan, Analyst, SEB: Thank you.

Thomas Hinderskov, President and CEO, Valmet: Stable on a good level. That’s how I read it, the market currently

Antti Kansanan, Analyst, SEB: in the service

Thomas Hinderskov, President and CEO, Valmet: I would say don’t take it sort of as a downgrade on the service outlook in that sense when we say stable.

Antti Kansanan, Analyst, SEB: The

Conference Operator: next question comes from Mikhail Dopel from Nordea. Please go ahead.

Mikhail Dopel, Analyst, Nordea: Thank you, and good morning, Thomas, Katri and Pekka. A couple of questions. So first, coming back to your commentary, Thomas, 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?

So 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?

Thomas Hinderskov, President and CEO, Valmet: In the service side or across the board, Michael?

Mikhail Dopel, Analyst, Nordea: Or in Process Technologies, in particular.

Thomas Hinderskov, President and CEO, Valmet: In Process Technologies. I think Process Technologies, we sort of market is 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.

Mikhail Dopel, Analyst, Nordea: Okay. Okay. Well, 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?

Thomas Hinderskov, President and CEO, Valmet: Yes. So that’s Or let’s

Mikhail Dopel, Analyst, Nordea: call it the potential tariffs too. Yes,

Thomas Hinderskov, President and CEO, Valmet: exactly. And that’s why, of course, contractually, you need to have an opportunity to pass on any tariffs impact on to the customers. I mean it can I mean it might be you’re actually finalizing delivery in eighteen months’ time or two years, right? So that can, of course, have a a lot of things can change by then. And both we, but also the customers wanted to make sure 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.

Mikhail Dopel, Analyst, Nordea: Okay. No, that’s clear. And then just finally

Thomas Hinderskov, President and CEO, Valmet: Process technology, of course, right.

Mikhail Dopel, Analyst, Nordea: Of course. Of course. And then just finally on the cost savings, the €80,000,000 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 gain from these savings to support your numbers as well as the guidance for the year?

Thomas Hinderskov, President and CEO, Valmet: Yes. I mean like Katja said in her, it’s going to be booked in Q2.

Katri Hockkanen, CFO, Valmet: Yes.

Thomas Hinderskov, President and CEO, Valmet: We are 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, 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?

Katri Hockkanen, CFO, Valmet: Yes. 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.

Thomas Hinderskov, President and CEO, Valmet: Yes. But I think it’s also important to state there, Michael, that sort of just because there’s costs associated with the 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.

Mikhail Dopel, Analyst, Nordea: No, no, absolutely. That’s absolutely clear. I was also thinking a bit about the given the fact that you expect the full run rate from the beginning of the year, 80,000,000, just wondering how much out of that do you expect to achieve in 2025, but perhaps it’s too early to comment on that. Yes. All right.

Thanks. Thank you very much.

Thomas Hinderskov, President and CEO, Valmet: Thank you, Michael.

Conference Operator: The next question comes from Ponu Leitenmarki from Danske Bank. Please go ahead.

Ponu Leitenmarki, Analyst, Danske Bank: 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?

Thomas Hinderskov, President and CEO, Valmet: Yes. Maybe if I just give my quick Mean, good question. Overall, of course, euros 1 point 5 percent, 6 million, not something we are 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 EUR 124,000,000, if I remember correctly, from Q4 last year, right? So where we had 2.8% margin, there is a lot of sort 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 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.

Katri Hockkanen, CFO, Valmet: Yes. 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 twelve months level for the full year.

Ponu Leitenmarki, Analyst, Danske Bank: Okay. Then a bit related still on Process Technologies. So you had good pulp and energy orders, but then quite low in the paper sites. 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?

Thomas Hinderskov, President and CEO, Valmet: No. I think it’s I mean, first and foremost, I don’t think that in any quarter, 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 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 economy sort of clouds or at least fog in terms of the clarity that is there.

Then some customers take bolder bets, some just want to see a little bit how it’s going. But yes, I think viewed roughly unchanged in terms of the pipeline. But timing can be hard to beat. Okay.

Ponu Leitenmarki, Analyst, Danske Bank: 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 U. S. In Q1?

Thomas Hinderskov, President and CEO, Valmet: I wouldn’t say that it was significant. It just we just saw that it there was some visibility of potential prebuying in the flow control in North America. I wouldn’t say it’s not a big ticket item. We just want to be very transparent.

Ponu Leitenmarki, Analyst, Danske Bank: 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?

Katri Hockkanen, CFO, Valmet: 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.

Thomas Hinderskov, President and CEO, Valmet: I just visited them actually in their in the Houston head office or sort of their North American headquarters in Houston, where there’s also some manufacturing production there a few a month ago roughly, really positive visit. Would say I’m very happy that we made that acquisition last year, and it is trajecting in the right way. That’s definitely how we see it currently.

Ponu Leitenmarki, Analyst, Danske Bank: So if you think about 25% full year, the API contribution should be clearly positive compared to what it was a year ago last year.

Thomas Hinderskov, President and CEO, Valmet: Yes, that’s the expectation. The

Conference Operator: next question comes from Johanna Lyason from Kepler Cheuvreux. Please go ahead.

Johanna Lyason, Analyst, Kepler Cheuvreux: Yes. Hi, it’s Johan at Kepler Cheuvreux. 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 with 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?

Thomas Hinderskov, President and CEO, Valmet: I think 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 don’t really sort of 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.

Johanna Lyason, Analyst, Kepler Cheuvreux: 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?

Thomas Hinderskov, President and CEO, Valmet: Yes. That’s pretty I mean, you would say that’s a relatively logical, I want to say, conclusion as I guess we are the only one who has sort of major manufacturing in Sweden. So that’s clear.

Katri Hockkanen, CFO, Valmet: 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.

Johanna Lyason, Analyst, Kepler Cheuvreux: Okay. Thank you very much.

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

Tom Skogman, Analyst, Carnegie: Yes. Hello. This is Tom from Carnegie. I have a couple of questions surrounding the new strategy. I guess you will hear more about this in the Capital Market Day.

But I 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?

Thomas Hinderskov, President and CEO, Valmet: Tom, of course, we will discuss it more when it comes to at the Capital Market Day in Tampere. It is clear that we need to have a more effective efficient we want to drive a more efficient, more effective cost competitive global supply chain. That can impact blue collars, of course, depending on how the market is. We will also need to sort of make the, I to say, the make or buy decision is also up in the sort of how much do you actually need to control yourself, how much can you subcontract. So but I think it’s important to just say that the first step on this new operating model, it is impacting white colors and not blue colors, right?

Tom Skogman, Analyst, Carnegie: And you have a new Chairman. I wonder, is he just kind of finding what you’re proposing? Or is he very active in building the new model?

Thomas Hinderskov, President and CEO, Valmet: We’ve 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 are doing, but of course, getting them up to speed on the current thinking strategically so that there’s full backup from the new board in when we’re to present to you guys in June on June 5. Great to have a Chairman also who has sort of a little bit of understanding the whole background of who where we’re coming from also from a cultural perspective, right?

Tom Skogman, Analyst, Carnegie: Then I guess the story has been about stability in Service and Automation the last five years that Valmet 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 Service, so you accept losses in the equipment business if you don’t report it Because to report something externally put some kind of pressure on organization at least to avoid losses in a weak market.

Thomas Hinderskov, President and CEO, Valmet: Yes. No, good question. I think 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 line is involved, the capital, the process technology business line is involved because they design actually the equipment, which needs also be designed to be able to service it better.

Met a lot of customers, actually had a few ones lately that were sort of even though we discuss about very big large capital equipment decision and order decision making, they are already before that is sort of done, they’re already talking about and discussing sort of how we’re going to 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 twenty five 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 also throughout the life cycle. So this closeness of integrating this for the seeing it from a customer perspective rather than an internal and then even to maybe a market communications perspective. At the end of the day, what drives value is that we serve our customers better than competition.

Katri Hockkanen, CFO, Valmet: Yes. Maybe just for the reporting structure, what we will report. So stay tuned. We will, of course, tell more in the CMD. It’s the

Tom Skogman, Analyst, Carnegie: 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?

Thomas Hinderskov, President and CEO, Valmet: 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 building blocks away of the current whole system flow of goods, it does impact somewhere, somewhere. And that’s, of course, it’s we’re 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?

Sven Wyr, Analyst, UBS: Okay. Thanks.

Katri Hockkanen, CFO, Valmet: Thanks, Tom.

Thomas Hinderskov, President and CEO, Valmet: Thanks, Tom. And I hope to see you in Tampere in

Conference Operator: The next question comes from Sven Wyr from UBS. Please go ahead.

Sven Wyr, Analyst, UBS: Yes. 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 greenfields. 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 decision making on those greenfields Or does anything be really on a twelve to, I don’t know, twenty four months type of view? Thanks,

Thomas Hinderskov, President and CEO, Valmet: Sven. Obviously, as you’ve done your homework, so you know that there are certain projects in the pipeline, certain customers looking for making big moves, big decisions or big investments in the area. And these are tend also to be, of course, longer projects. You need to have the forest, you need to plant the trees, etcetera, etcetera. But there are current 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.

Sven Wyr, Analyst, UBS: And do you sense I mean, regarding the tariff uncertainties, I mean, you sense differences between the 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?

Thomas Hinderskov, President and CEO, Valmet: It’s a good question. I think the ones I’ve sort of visited this year, I think it 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, 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 sort of it’s a bit across the board. Even when I meet oil and gas customers who would in North America, for example, who would you think that they are sort of I would say very positive. But it’s still that sort of yes, what’s the direction of travel of the global economy.

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

Pekka Rohenen, IR Representative, Valmet: All right. Thank you. Thank you for all the good questions through the teleconference line. So we have a couple more here in the online Let’s take this by the order how they came here. So first one is 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 charter market outlook and tariffs.

Thomas Hinderskov, President and CEO, Valmet: As we said, we keep our guidance. I don’t see the service how we 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 sort of activity level increased.

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? So there was two questions, didn’t it?

Pekka Rohenen, IR Representative, Valmet: Yes. Given also the tariffs.

Thomas Hinderskov, President and CEO, Valmet: Yes. So I think we’re 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 sort of the fog that the global economy is sort of creating. So that makes it a bit harder to predict the direction that we’re traveling in. However, we stand by our guidance, right?

Katri Hockkanen, CFO, Valmet: And maybe just to add that the order backlog to be recognized this year is SEK 2,900,000,000.0, which is the same what what we had last year. So of course, we do need orders. We have book to bill, but that’s a good starting point for the flat guidance.

Thomas Hinderskov, President and CEO, Valmet: Yes. Also seeing that automation, 14% growth in orders, 12% organically, right, for the quarter, even though that sales were minus 2%. So that actually also creates a good backlog for the coming quarters, right?

Pekka Rohenen, IR Representative, Valmet: Thank you. Then a follow-up from James regarding to the cash flow that was strong in Q1. So what’s the expectation on cash flow for the full year?

Katri Hockkanen, CFO, Valmet: Yes. It was really, really good outcome. So we’re happy with the development and, of course, supported by the positive development in the net working 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.

Thomas Hinderskov, President and CEO, Valmet: But I think it’s also a good testament to I mean, the relationship, the service, the delivery, the we bring to the customers that they’re actually willing to pay, and we’ve seen net working capital coming down. So I think it is a good strong testament to the value we bring to our customers that they’re even in tough times, they’re paying for it,

Katri Hockkanen, CFO, Valmet: right?

Mikhail Dopel, Analyst, Nordea: Yes.

Pekka Rohenen, IR Representative, Valmet: Good. And maybe to add to that, that of course, on the other side, the dividend will be paid out during Q2 and then, I think, you for $250,000,000 about the dividend. Then to Qatari, 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?

Katri Hockkanen, CFO, Valmet: Yes. If I remember correctly, the dividend liability is actually booked in there. So that’s the change there, which was mentioned that it was EUR $249,000,000 related to the dividends, what Pekka mentioned.

Pekka Rohenen, IR Representative, Valmet: Exactly. Thanks, Katri. Then Sander Intelmann is asking what share of the business touches The U. S. And is therefore potentially exposed to tariffs?

Thomas Hinderskov, President and CEO, Valmet: I think it’s good to remember that in The U. S, we more or less have 2,500 people, so 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 we 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 we pass on the tariffs to the customers.

Pekka Rohenen, IR Representative, Valmet: Thank you. And then a question this is actually the last one for now. So about the 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?

Thomas Hinderskov, President and CEO, Valmet: Yes. I mean, I think I said it to Antti from SEB as well. I 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 prime pricing, how much was volume.

Katri Hockkanen, CFO, Valmet: 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 then

Thomas Hinderskov, President and CEO, Valmet: price It’s the flow business as well, right? It’s a transactional business as well. It’s just sort of

Katri Hockkanen, CFO, Valmet: Yes.

Pekka Rohenen, IR Representative, Valmet: All right. Fantastic. That’s all from the Q and 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 for towards Valomed.

But before we close, a quick reminder of the upcoming investor events, which were already marketed by Thomas Vand. Most importantly, of course, we’ll be hosting the Capital Markets Day on June 5. It will be live at our Tampere site. A great opportunity to hear about the renewed strategy, meet our leadership team and see the DNAE showroom demo in action. We warmly encourage you to join us there in person.

Pampara 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 July 23. And with that, we’ll conclude today’s webcast. Thank you again, and we hope to see many of you in Tambere in June.

Thomas Hinderskov, President and CEO, Valmet: See you soon. Thanks.

Katri Hockkanen, CFO, Valmet: Thank you.

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