Valmet’s Financial Statements review January-December 2014: profitability in the targeted range in Q4/2014
Valmet has formed a separate legal group as of December 31, 2013. The financial information for the year 2014 and the Statement of Financial Position as at December 31, 2013 presented in this Financial Statements Review are based on actual figures. The Statement of Income and Statement of Cash Flow for the year 2013 and all other comparison figures are based on financial carve-out data. Figures in brackets, unless otherwise stated, refer to the comparison period, i.e. the same period of the previous year.
October-December 2014: Profitability in the targeted range
• Orders received increased 12 percent and amounted to EUR 480 million (EUR 428 million).
o Orders received increased in the Paper and Services business lines, and decreased in the Pulp and Energy business line.
• Net sales increased 17 percent to EUR 777 million (EUR 666 million).
o Net sales increased in Pulp and Energy, and Paper business lines and remained at the previous year’s level in the Services business line.
• Earnings before interest, taxes and amortization (EBITA) and non-recurring items were EUR 48 million (EUR -25 million), and the corresponding EBITA margin was 6.1 percent (-3.7%).
o EBITA margin reached the targeted range of 6-9 percent in Q4/2014.
• Earnings per share were EUR 0.17 (EUR -0.41).
• Non-recurring items amounted to EUR -5 million (EUR -34 million).
• Cash flow provided by operating activities was EUR 30 million (EUR -38 million).
January-December 2014: EBITA almost doubled
• Orders received increased 41 percent and amounted to EUR 3,071 million (EUR 2,182 million).
o Orders received increased in the Pulp and Energy, and Paper business lines, and remained at the previous year’s level in the Services business line.
• Net sales decreased 5 percent to EUR 2,473 million (EUR 2,613 million).
o Net sales increased in the Pulp and Energy business line, remained at the previous year’s level in the Services business line, and decreased in the Paper business line.
• Earnings before interest, taxes and amortization (EBITA) and non-recurring items were EUR 106 million (EUR 54 million), and the corresponding EBITA margin was 4.3 percent (2.1%).
o Profitability has improved in every quarter of 2014.
• Earnings per share were EUR 0.31 (EUR -0.42).
• Non-recurring items amounted to EUR -12 million (EUR -86 million).
• Cash flow provided by operating activities was EUR 236 million (EUR -43 million).
The Board of Directors proposes for the Annual General Meeting that a dividend of EUR 0.25 per share be paid. The proposed dividend equals to 81 percent of the net result.
Guidance for 2015
Valmet estimates that, including the acquisition of Process Automation Systems, net sales in 2015 will increase in comparison with 2014 (EUR 2,473 million) and EBITA before non-recurring items in 2015 will increase in comparison with 2014 (EUR 106 million).
The completion of the acquisition of Process Automation Systems is subject to approval by the competition authorities.
General economic outlook
Global growth in 2015-16 is projected at 3.5 and 3.7 percent, downward revisions of 0.3 percent relative to the October 2014 World Economic Outlook. The revisions reflect a reassessment of prospects in China, Russia, the euro area, and Japan as well as weaker activity in some major oil exporters because of the sharp drop in oil prices. The United States is the only major economy for which growth projections have been raised. The distribution of risks to global growth is more balanced than in October. The main upside risk is a greater boost from lower oil prices, although there is uncertainty about the persistence of the oil supply shock. Downside risks relate to shifts in sentiment and volatility in global financial markets, especially in emerging market economies, where lower oil prices have introduced external and balance sheet vulnerabilities in oil exporters. Stagnation and low inflation are still concerns in the euro area and in Japan. (International Monetary Fund, January 20, 2015)
Short-term market outlook
Valmet is reiterating its short-term market outlook presented on July 31, 2014. Valmet estimates that activity in board and paper markets will remain on a good level. The activity in the services, pulp, energy, and tissue markets is estimated to remain satisfactory.
President and CEO Pasi Laine: A good first year as an independent company
Valmet had a good first year as an independent company. While the focus was strongly on improving profitability, we were also succesful in receiving orders. We received over EUR 3 billion of orders during 2014, which clearly indicates that customers appreciate and trust Valmet and that we have the skills and technology to move our customers forward. It was also pleasing to notice the increase in orders received in the Services business line in the last quarter of the year. All in all, Valmet’s order backlog is now approximately EUR 2 billion, and this gives us a good starting point for 2015.
Valmet has been able to improve its profitability in every quarter of 2014 and EBITA almost doubled in the full year of 2014. The highlight of our hard work was the last quarter of 2014, when profitability reached the targeted range. This is a result of the excellent and goal-oriented work put in by every Valmet employee at every site and location around the world. When meeting with Valmet employees around the world, I have been amazed by the determination and energy everyone has shown to reach this target. That is why I want to thank all Valmet employees for all the efforts made during the course of 2014. Our work on profitability does not, of course, end here. We still have further profitability improvement potential through savings in procurement and quality, by actions to improve project and service margin, by continuing to improve cost competitiveness, and by improving product cost competitiveness to increase gross profit.
After a good first year as an independent company, I am excited to go into 2015. We have a better starting point going into 2015 compared to a year ago, while also the acquisition of Process Automation Systems helps making Valmet even stronger than before. Through the acquisition, Valmet will become a technology and services company with full automation offering and the acquisition will help Valmet in increasing business stability and profitability.
In the picture: Pasi Laine, President and CEO of Valmet.