Questions and answers related to Q2/2015 report

Why did the profitability (EBITA %) increase y-o-y? (Compared to Q2 2014)

• Profitability improved due to higher level of net sales, improved gross profit, and the acquisition of Automation

What was the profitability excluding Automation?

• We don’t report business lines’ EBITAs separately
• Automation had strong start as part of Valmet

Why did Services orders received grow 13% in Q2? Is this sustainable growth?

• Growth was 6% in constant currencies, good overall development
• Growth (Q2/2015 vs Q2/2014) in all business units, excluding Mill improvements
• Growth in South America, Asia-Pacific and China
• Key issues to grow services are related to increase long term agreements, being close to customers
• Long-term outlook for services intact, service growth is a strategic priority for Valmet

Orders received declined clearly y-o-y – is this a bigger or a long-term change in the market?

• Orders received in H1/2014 on exceptional level, and as we have said earlier, it was not a surprise that orders received declined
• Pulp orders are always lumpy: large single orders, large impact on quarterly figures
• Orders received have been on a growing trend for three quarters

Which are the most active areas from a geographical point of view?

• Good overall activity
• Orders received more than doubled in North America in Q2/2015

Has the margin on the order backlog improved?

• When we have reasonable backlog, we have better possibilities to be selective on new orders
• Pricing environment has remained challenging

What are your cost assumptions for 2015?

• We expect the capacity costs to remain on the same level as in 2014, excluding currencies and Automation

How was Q2/2015 in Automation?

• Automation had a strong start as part of Valmet, positive feedback from customers and employees
• Based on the information we have, there is no change on the assumptions we had when we bought the Automation business, and the outlook is intact
• Automation business is stable on annual level

What are the assumptions behind “satisfactory” short-term market outlook?

• There is enough activity that we can employ the capacity

Is Automation more profitable than Services? How much?

• The stable business (Services and Automation) has higher profitability than capital business
• EBITA-margin in Automation has been between 10 and 12 percent

What are the one-offs?

• EUR 12 million in Q2/2015: EUR 10 million related to Automation (EUR 5 million related to transfer tax, EUR 2 million related to inventory step up release, EUR 2 million related to acquisition costs) 
• EUR 1.5 million related to tissue capacity cost reduction

What are your expectations about net working capital (NWC) going forward?

• Orders received key driver for NWC development 
• NWC was EUR -265 million at the end of Q2/2015
• On average, NWC has been -9% of rolling 12 months orders received

What is the situation regarding the dispute with Andritz?

• Valmet has denied the claims in its writ of response submitted to the Stockholm District Court. In June Andritz revised its claim, which subsequently changed their overall claim from EUR 52 million to EUR 54 million and interest for the alleged infringement.
• Valmet has not done any reservation for this.
• (On February 20, Valmet issued a stock exchange release about Andritz Oy having filed a summons application with the Stockholm District Court against Valmet AB, a subsidiary of Valmet Corporation, regarding patent infringement. In the claim Andritz is asking that Valmet under a penalty ceases to utilize the patent allegedly infringing Andritz's patent and the Court to impose royalty and damages on Valmet AB with EUR 52 million and interest for the alleged infringement. )

In Q2/2015 you reached your EBITA-margin target, and certainly Automation will support profitability going forward. Why didn’t you increase the profitability target?

• Based on cumulative figures, we are still below the target