Valmet's Interim Review January 1 - March 31, 2014: Strong development in orders received - profitability improvement continues to be in focus
Valmet Corporation's stock exchange release on April 25, 2014 at 09:00 a.m. EET
Valmet has formed a separate legal group as of December 31, 2013. The financial information presented in this Interim Review is based on actual figures as an independent group after the consummation of the demerger and carve-out figures prior to the consummation of the demerger. The carve-out financial information presented in this Interim Review reflects the performance and financial position of the entities that have historically formed the Pulp, Paper and Power segment within Metso Group. Figures in brackets, unless otherwise stated, refer to the comparison period, i.e. the same period of the previous year.
January-March 2014: Orders received more than doubled
- Orders received amounted to EUR 1,101 million (EUR 511 million).
- Orders received increased in Pulp and Energy, and Paper business lines.
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- Net sales declined by 18 percent to EUR 519 million (EUR 631 million).
- Net sales declined in all the business lines, particularly in the capital business.
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- Earnings before interest, taxes and amortization (EBITA) and non-recurring items were EUR 4 million (EUR 26 million), and the corresponding EBITA margin was 0.7 percent (4.1%).
- Profitability increased compared to the last quarter of 2013.
- Cost accrual of approximately EUR 10 million linked to an individual major pulp project had negative impact on the Q1/2014 result.
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- Earnings per share were EUR -0.04 (EUR 0.08).
- Non-recurring items related to the profitability improvement program amounted to EUR -6 million (EUR 0 million).
- Cash flow provided by operating activities was EUR 43 million (EUR -5 million).
Valmet reiterates its guidance for 2014
Valmet is reiterating its guidance presented on February 6, 2014 in which Valmet estimates that net sales in 2014 will decline from the 2013 level and EBITA before non-recurring items will increase in comparison with 2013.
Short-term outlook
General economic outlook
Global activity has broadly strengthened and is expected to improve further in 2014-15, with much of the impetus coming from advanced economies. Global growth is projected to strengthen from 3 percent in 2013 to 3.6 percent in 2014 and 3.9 percent in 2015. The global recovery is still fragile despite improved prospects, and significant downside risks - both old and new - remain. Recently, some new geopolitical risks have emerged. (International Monetary Fund, April 8, 2014)
Short-term market outlook
Valmet is reiterating its short-term market outlook presented on February 6, 2014. Valmet estimates that activity in the services, pulp, energy, board and paper, and tissue markets will remain satisfactory.
President and CEO Pasi Laine: Customer activity has revived during the early part of the year
Valmet's first quarter as an independent company commenced well in terms of orders received. Customer activity has revived during the early part of the year and in addition to a major pulp project order we received several other orders as well. It is gratifying to see that our business lines have received orders from different customer industries and geographical areas. Orders received increased in relation to the comparison period in both Pulp and Energy, and Paper business lines.
Although we have received a number of new orders, we expect net sales to decline during 2014 as the orders received during the first quarter will start to be recognized as net sales towards the end of 2014.
Our profitability improved compared to the last quarter of 2013, but it is still below the targeted level. Therefore our key focus in 2014 will be on improving profitability. The profitability improvement program initiated in 2013 has proceeded according to plan. Additionally, we continue to improve our processes and, at the same time, we aim to achieve additional savings in, for example, procurement and quality costs.
Key figures*
| Q1/2014 | Q1/2013 | Change | 2013 | |
| EUR million | Carve-out | Carve-out | ||
| Orders received | 1,101 | 511 | 116% | 2,182 |
| Order backlog | 1,972 | 2,138** | -8% | 1,398 |
| Net sales | 519 | 631 | -18% | 2,613 |
| Earnings before interest, taxes and amortization (EBITA) and non-recurring items | 4 | 26 | -85% | 54 |
| % of net sales | 0.7% | 4.1% | 2.1% | |
| Earnings before interest, taxes and amortization (EBITA) | -2 | 26 | -32 | |
| % of net sales | -0.4% | 4.1% | -1.2% | |
| Operating profit (EBIT) | -8 | 19 | -59 | |
| % of net sales | -1.5% | 3.0% | -2.2% | |
| Profit before taxes | -9 | 19 | -64 | |
| Profit | -6 | 12 | -62 | |
| Earnings per share, EUR | -0.04 | 0.08*** | -0.42 | |
| Diluted earnings per share, EUR | -0.04 | 0.08*** | - | |
| Equity per share, EUR | 5.12 | 5.82 | 5.39 | |
| Cash flow provided by operating activities | 43 | -5 | -43 | |
| Cash flow after investments | 35 | -13 | -97 | |
| Return on capital employed (ROCE) before taxes | -2% | 8% | -4% |
* The calculation of key figures is presented in the Tables section of the Q1/2014 Interim Review.
** Includes cancelled Fibria order (EUR 331 million).
*** The earnings per share information was computed as if the shares issued in conjunction with the Demerger had been outstanding for the comparison period.
| As at March 31, 2014 | As at March 31, 2013 | As at December 31, 2013 | |
| Equity ratio and gearing | Carve-out | Carve-out | |
| Equity ratio at end of period | 40% | 40% | 41% |
| Gearing at end of period | -5% | 3% | 0% |
| Q1/2014 | Q1/2013 | Change | 2013 | |
| Orders received, EUR million | Carve-out | Carve-out | ||
| Services | 267 | 282 | -5% | 1,035 |
| Pulp and Energy | 622 | 61 | 923% | 680 |
| Paper | 212 | 168 | 26% | 467 |
| Total | 1,101 | 511 | 116% | 2,182 |
| As at March 31, 2014 | As at March 31, 2013 | Change | As at December 31, 2013 | |
| Order backlog, EUR million | Carve-out | Carve-out | ||
| Total | 1,972 | 2,138* | -8% | 1,398 |
* Includes cancelled Fibria order (EUR 331 million).
| Q1/2014 | Q1/2013 | Change | 2013 | |
| Net sales, EUR million | Carve-out | Carve-out | ||
| Services | 224 | 243 | -8% | 1,032 |
| Pulp and Energy | 181 | 221 | -18% | 907 |
| Paper | 114 | 167 | -32% | 674 |
| Total | 519 | 631 | -18% | 2,613 |
News conference for analysts, investors and the media
Valmet will arrange a news conference in English for investment analysts, portfolio managers, and the media on Friday, April 25, 2014 at 1:00 p.m. Finnish time (EET). The news conference will be held at Valmet's Head Office in Keilaniemi, Keilasatama 5, 02150 Espoo, Finland. The conference can also be followed through a live webcast at www.valmet.com/webcasts.
The news conference can be participated also through a conference call. Conference call participants are requested to dial in at least five minutes prior to the start of the conference, at 12:55 p.m. (EET), at +44 1452 555566. The participants will be asked to provide the following conference ID: 25116176.
During the webcast and conference call, all questions should be presented in English. At the end of the event the media has the possibility to ask questions also in Finnish.
Further information, please contact:
Hanna-Maria Heikkinen, Vice President, Investor relations, Valmet Corporation, +358 10 672 0007
Markku Honkasalo, Chief Financial Officer, Valmet Corporation, +358 10 672 0008
VALMET CORPORATION
Markku Honkasalo
CFO
Hanna-Maria Heikkinen
VP, Investor Relations
Valmet Corporation is a leading global developer and supplier of services and technologies for the pulp, paper and energy industries. Our 11,000 professionals around the world work close to our customers and are committed to moving our customers' performance forward - every day.
Valmet's services cover everything from maintenance outsourcing to mill and plant improvements and spare parts. Our strong technology offering includes entire pulp mills, tissue, board and paper production lines, as well as power plants for bio-energy production.
The company has over 200 years of industrial history and was reborn through the demerger of the pulp, paper and power businesses from Metso Group in December 2013. Valmet's net sales in 2013 were approximately EUR 2.6 billion. Valmet's objective is to become the global champion in serving its customers.
Valmet's head office is in Espoo, Finland and its shares are listed on the NASDAQ OMX Helsinki Ltd.
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