Valmet's Financial Statements Review January 1 - December 31, 2022: Orders received increased to EUR 5.2 billion and Comparable EBITA to EUR 533 million in 2022

Valmet Oyj's stock exchange release on February 2, 2023 at 1:00 p.m. EET

Figures in brackets, unless otherwise stated, refer to the comparison period, i.e., the same period of the previous year.

ESPOO, Finland, Feb. 2, 2023 /PRNewswire/ -- Starting from January 1, 2022, Valmet has a new financial reporting structure consisting of three reportable segments (segments): Services, Automation and Process Technologies. Services segment includes the Services business line. Automation segment includes the Automation Systems business line (previously called Automation), and as of April 1, 2022, also the Flow Control business line. Process Technologies segment includes the Pulp and Energy, and Paper business lines.

October–December 2022: Net sales, Comparable EBITA and Comparable EBITA margin increased

•  Orders received increased 27 percent to EUR 1,385 million (EUR 1,093 million).

–  Orders received increased in all three segments.

–  Orders received increased in China, Asia-Pacific and North America, remained at the previous year's level in EMEA (Europe, Middle East and Africa), and decreased in South America.

•  Net sales increased 28 percent to EUR 1,540 million (EUR 1,199 million).

–  Net sales increased in all three segments.

•  Comparable earnings before interest, taxes and amortization (Comparable EBITA) increased 33 percent to EUR 196 million (EUR 147 million).

–  Comparable EBITA increased in the Automation and Services segments and decreased in the Process Technologies segment.

•  Comparable EBITA margin was 12.7 percent (12.2%).

•  Earnings per share were EUR 0.66 (EUR 0.67). Adjusted earnings per share were EUR 0.80 (EUR 0.69).

•  Items affecting comparability amounted to EUR -6 million (EUR 8 million).

•  Cash flow provided by operating activities was EUR -13 million (EUR 96 million).

January–December 2022: Net sales and Comparable EBITA increased, but Comparable EBITA margin decreased

•  Orders received increased 10 percent to EUR 5,194 million (EUR 4,740 million).

–  Orders received increased in the Automation and Services segments and decreased in the Process Technologies segment.

–  Orders received increased in North America and Asia-Pacific, remained at the previous year's level in EMEA and decreased in South America and China.

•  Net sales increased 29 percent to EUR 5,074 million (EUR 3,935 million).

–  Net sales increased in all three segments.

•  Comparable earnings before interest, taxes and amortization (Comparable EBITA) increased 24 percent to EUR 533 million (EUR 429 million).

–  Comparable EBITA increased in the Automation and Services segments and decreased in the Process Technologies segment.

•  Comparable EBITA margin was 10.5 percent (10.9%).

•  Earnings per share were EUR 1.92 (EUR 1.98). Adjusted earnings per share were EUR 2.37 (EUR 2.09).

•  Items affecting comparability amounted to EUR 17 million (EUR 19 million).

•  Cash flow provided by operating activities was EUR 36 million (EUR 482 million).

Dividend proposal

The Board of Directors proposes for the Annual General Meeting a dividend of EUR 1.30 per share for 2022, to be paid in two installments. The proposed dividend equals 68 percent of the net result.

Guidance for 2023

Valmet estimates that net sales in 2023 will increase in comparison with 2022 (EUR 5,074 million) and Comparable EBITA in 2023 will increase in comparison with 2022 (EUR 533 million).

Short-term market outlook

Valmet reiterates the good short-term market outlook for services, flow control, automation systems, energy, and board and paper, the good/satisfactory short-term market outlook for pulp, and the satisfactory short-term market outlook for tissue.

The short-term market outlook is given for the next six months from the end of the reported period. It is based on customer activity (50%) and Valmet's capacity utilization (50%), and the scale is 'weak–satisfactory–good'.

President and CEO Pasi Laine: Orders received and Comparable EBITA increased in 2022

"Valmet's orders received increased to EUR 5.2 billion in 2022. Our order backlog amounted to EUR 4.4 billion at the end of 2022, which is EUR 307 million higher than at the end of 2021. Net sales increased and amounted to EUR 5.1 billion. Comparable EBITA increased to EUR 533 million, meaning that we have been able to increase Valmet's Comparable EBITA nine years in a row as an independent company. Valmet's Comparable EBITA margin decreased to 10.5 percent in 2022, as cost inflation impacted the margins. Valmet's goal is to offset the cost inflation through increased productivity, procurement savings and price increases.

In April, we reached a major strategic milestone when the flow control company Neles was merged into Valmet, and we welcomed about 3,000 new colleagues to the company. After the merger completion, Valmet now has a large stable business, and we provide our customers with a unique and competitive offering covering process technologies, automation systems, flow control solutions and services. We are happy with the progress of the integration and the strong start of the new Flow Control business line.

Due to the merger with Neles and good organic growth, the orders received of Valmet's stable business, consisting of Services and Automation, increased to EUR 2.8 billion in 2022 and net sales increased to EUR 2.6 billion. Services and Automation segments contributed EUR 427 million to Valmet's Comparable EBITA in 2022. Valmet's stable business has several benefits: it is recurring and predictable, provides resilience to business cycles, makes Valmet's order intake less cyclical, and the future growth possibilities are good.

Sustainability is fully integrated into Valmet's strategy and operations through the comprehensive Sustainability 360^o Agenda. In 2022, Valmet continued to receive recognition for the progress of its sustainability work in various sustainability ratings and was included for the ninth consecutive year in the Dow Jones World and Europe Sustainability Indices and received an A- leadership rating in CDP's Climate ranking.

Global turbulence caused by the war in Ukraine and the economic and political developments is expected to continue. Past years have shown that we at Valmet can adapt well to continuous change and we will continue the work to retain our resiliency also in the future. Valmet has a unique offering supported by favorable megatrends. This gives us confidence going into 2023."

Merger with Neles

On July 2, 2021, Valmet announced that the Boards of Directors of Valmet Oyj and Neles Corporation had signed a combination agreement and a merger plan to combine the two companies through a merger. Both companies held an Extraordinary General Meeting on September 22, 2021, and both EGMs approved the merger. Valmet and Neles had received all competition approvals for the merger of Neles into Valmet on March 21, 2022. Valmet's Annual General Meeting on March 22, 2022, resolved to pay a dividend of EUR 1.20 per share and the Neles Annual General Meeting on March 22, 2022, resolved to pay a dividend of EUR 0.266 per share in accordance with the combination agreement. In addition, Neles' Board of Directors decided on March 22, 2022, on an extra distribution of funds in total of EUR 2.00 per share in accordance with the combination agreement. The dividends and Neles' extra distribution of funds of EUR 2.00 per share were executed on March 31, 2022. The merger of Valmet and Neles was registered with the Finnish Trade Register on April 1, 2022.

On July 2, 2021, Valmet entered into EUR 350 million term loan facilities agreement with Danske Bank A/S and Nordea Bank Abp. The syndication of the term loan facilities was closed on October 20, 2021. The loan was used for refinancing existing indebtedness of Valmet and Neles in connection with the merger. EUR 215 million (originally 301 million) bridge facility agreement originally entered into by Neles was transferred to Valmet in connection with the completion of the merger. The bridge loan facility was used for financing of the extra distribution to shareholders of Neles. The outstanding bridge loan facility was repaid in December 2022.

On March 22, 2022, the Boards of Directors of Valmet and Neles approved a loan agreement between the companies concerning the part of the extra distribution of funds of EUR 2.00 per share payable to Valmet. According to the loan agreement, the part of the extra distribution payable to Valmet as a shareholder of Neles was not paid in cash to Valmet in connection with payment of the extra distribution to other shareholders of Neles, but the amount payable to Valmet was recorded as debt owed by Neles to Valmet.

Valmet and Neles were separate listed companies prior to the merger. On April 1, 2022, Valmet announced that the statutory merger of Neles Corporation into Valmet had been registered and the combination of Valmet's and Neles' business operations had been completed. Neles is consolidated into Valmet as of April 1, 2022, and forms Valmet's fifth business line called Flow Control. After the merger, Valmet's business lines are Services, Flow Control, Automation Systems, Paper, and Pulp and Energy. Automation Systems business line was previously called Automation.

The final Shareholders' Meeting of Neles was held on June 22, 2022, in Vantaa. The Shareholders' Meeting adopted the final accounts of Neles in accordance with Chapter 16, Section 17 of the Finnish Companies Act, consisting of the financial statements and annual report for the financial period January 1, 2022–March 31, 2022. The Shareholders' Meeting also resolved on discharging the members of the Board of Directors and the President and CEO of Neles from liability.

Update on the integration of Flow Control into Valmet

The integration of Flow Control (former Neles) into Valmet is proceeding according to the plan. Active sales and marketing of Valmet's whole offering was started in the second quarter, and several package orders were received in 2022. Most of the cost synergy actions regarding function costs, common locations and supply chain were implemented already during 2022. Valmet expects to generate annual run rate synergies of approximately EUR 25 million, of which approximately 60 percent are expected to be achieved by the end of 2023 and approximately 90 percent by the end of 2024. Valmet's orders received included approximately EUR 10 million synergy impact in 2022. Approximately EUR 12 million of annual run rate cost synergies were achieved by the end of 2022. Roughly half of the achieved run rate synergies were realized as cost savings in 2022.

Russia's invasion of Ukraine and sanctions on Russia

Due to Russia's invasion of Ukraine, Valmet reviewed key contractual obligations, project schedules, and identified risks for projects that are delivered to Russia. Based on the review, Valmet identified projects that it estimates no longer to meet the criteria of a customer contract for revenue recognition purposes, and consequently made a reversal of approximately EUR 80 million to its order backlog during 2022.

On June 3, 2022, Valmet announced that it has initiated employee reductions, which will result in a 50 percent reduction in the number of employees in Russia in the first implementation phase. A second phase was implemented in autumn and resulted in further employee reductions and the closure of one legal entity. Consequently, Valmet recorded an expense of approximately EUR 20 million during 2022 for estimated restructuring costs, asset impairments and other exceptional items triggered by Valmet's decision to withdraw from Russia. These costs have been reported in cost of sales, in selling, general and administrative expenses and in other operating expenses, and have been reported as items affecting comparability. Therefore they do not impact Comparable EBITA. At the end of 2022, Valmet had a total of approximately 30 employees in Russia, working primarily in administration, engineering and maintenance. Valmet does not have production in Russia. Approximately 2 percent of Valmet's net sales came from its Russian operations in 2021.

Valmet will withdraw from Russia completely and will continue to implement the withdrawal in stages as the review of implementation options is fully completed. Valmet complies with all sanctions and export regulations impacting business with Russia and Belarus and monitors the development actively.

Key figures¹

¹  The calculation of key figures is presented on page 62.

²  At end of period.

³  Adjusted earnings per share (Adjusted EPS) is a new alternative performance measure that excludes the impact of fair value adjustments arising from business combinations, net of tax. Adjusted EPS enables users of the financial information to prepare more meaningful analysis on Valmet's performance and is presented with comparatives from Q2/2022 onwards.

Segment key figures

News conference and webcast for analysts, investors and media

Valmet will arrange a news conference in English as a live webcast at https://valmet.videosync.fi/2022-q4 on Thursday, February 2, 2023, at 2:00 p.m. Finnish time (EET). President and CEO Pasi Laine and CFO Katri Hokkanen will be presenting the results.

Recording of the webcast will be available shortly after the event at the same address.

It is possible to take part in the news conference through a conference call by registering through the link below:

http://palvelu.flik.fi/teleconference/?id=1009887 

After the registration you will be provided phone numbers and a conference ID to access the conference. If you wish to ask a question during the conference, please dial *5 on your telephone keypad to enter the question queue.

All questions should be presented in English.

The event can also be followed on Twitter at www.twitter.com/valmetir.

Further information, please contact:

Pekka Rouhiainen, Vice President, Investor Relations, Valmet, tel. +358 10 672 0020

VALMET

Katri Hokkanen

CFO

Pekka Rouhiainen

Vice President, Investor Relations

DISTRIBUTION:

Nasdaq Helsinki

Major media

www.valmet.com

 Valmet is a leading global developer and supplier of process technologies, automation and services for the pulp, paper and energy industries. With our automation systems and flow control solutions, we serve an even wider base of process industries. Our 17,500 professionals around the world work close to our customers and are committed to moving our customers' performance forward – every day.

The company has over 220 years of industrial history and a strong track record in continuous improvement and renewal. In 2022, a major milestone was achieved when the flow control company Neles was merged into Valmet. Valmet's net sales in 2022 were approximately EUR 5.1 billion. 

Valmet's shares are listed on the Nasdaq Helsinki, and the head office is in Espoo, Finland.

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