Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orders received remained at the previous year's level, amounting to close to EUR1.3 billion.
- Order intake in services grew by 15% compared to the previous year, reaching EUR497 million.
- Automation segment saw a 4% growth in quarterly order intake, amounting to EUR352 million.
- Stable business now represents 69% of the order intake, indicating a strong and consistent revenue stream.
- Positive change in market outlook for pulp and paper, with increased activity and satisfactory levels.
Negative Points
- Comparable EBITA decreased to EUR141 million, with a margin of 10.6%.
- Net sales were 7% lower than the comparison quarter, impacting overall revenue.
- Adjusted earnings per share for the quarter were EUR0.43, 28% lower than the previous year.
- Order intake for the full year was EUR2.3 billion, 17% lower than the previous year.
- Process technologies segment saw a decline in profitability, with EBITA dropping from EUR59 million to EUR36 million.
Q & A Highlights
Q: The first question is just on the outlook change, right? I mean, you obviously just upgraded it back to good after -- sorry, to satisfactory after one week quarter. I mean, looking a little bit ahead, if you look at the current pulp and paper results, and if we think more about maybe bigger capacity projects, would it be fair to say that it will probably take more than one quarter until the outlook goes back to good?
A: Now, we are, of course, guiding for coming six months and there we say that it's at a satisfactory level. And we have seen now more activity, customers buying single-island projects where we are competitive. So that's why we have now and we have had also better order intake in quarter two and we have good visibility for coming quarters. And then for the activity to go to the good level, I would say that in pulp, it means that the big project pipeline should become even more active. And then in paper and board, it should mean that paper and board market should be even more active than it is today. (Pasi Laine, CEO)
Q: I was just wondering, I understand obviously, process technology, EBIT margin was down because of the negative sales development. I was just wondering where you stand on those legacy projects that were lower margin. Has that been largely completed in the meantime? Is that maybe also reason why you became a bit more upbeat about the guidance, that you think you're done on these and you have a better margin in the second half?
A: We haven't been kind of commenting the old projects, but what we said about the margin that, of course, net sales has an impact. But we have also been now closing some of old projects and smaller ones, and that has also impacted the margin this year -- this quarter. (Katri Hokkanen, CFO)
Q: I was wondering, because you also talked about the first-time integration of API, how that diluted margins, whether maybe also some -- what you would normally call one-off costs that were not really adjusted in the comparable EBITA, but were maybe more one-off in nature?
A: Well, I can comment kind of in general the automation segment profitability or the comparable EBITA. So it was flat, but the margin decreased. We also said that this integration of API impacted the margin. And we have also published in the interim report that its impact to Valmet's net profit was minus EUR4 million. So, it was impacting that. (Katri Hokkanen, CFO)
Q: I have two questions, firstly, on the guidance and the kind of implied second-half improvement. I mean, you had both revenue and EBITA down in the first half year on year, but then you are guiding flat sales and higher EBITA for the year. So, it implies a clear improvement in second half. The question is that, what is driving this and how does this split into different divisions? So are they all going to improve or some of them more than the others? Any comments on that?
A: If we start from services, so we had very low order intake in services last year and especially in the third quarter and also fourth quarter. And then, we had still high backlog and we had long delivery times. And market was, like you maybe well remember, was quite challenging. And now we don't see that kind of situation. We have good market activity. Our delivery times are short in services. So based on that market activity and delivery capability, we estimate that our performance in services is better than a year ago. And the same applies in automation segment. So -- and there, of course, we have also the impact of API in the grades. And so now, we have had it for one quarter with all the challenges, I explained. And then in coming quarters, we will have the full positive impact of API coming in the picture as well. (Pasi Laine, CEO)
Q: The second question is still on the process technologies margin. I mean, I get the comment that revenue was down year on year, but it was similar to Q1 sequentially. So was there something like one-off negative in the process technologies margin in Q2? And what's your kind of thought of how soon could you return back to 6%, which I believe is the kind of target?
A: So like Katri said, we were closing some projects, So I wanted to close some projects now. (Pasi Laine, CEO)
Q: I'll start with a comment on delivery times. And if you look at kind of single islands in pulp and then your paper, board, and tissue machines, kind of the demand that you are facing right now, what are actually the delivery times? What I'm trying to kind of understand is the level of '25 sales. So is it still like Q1 and Q2 orders next year that would impact the full-year revenues in '25?
A: Of course, it will impact. But if I start from the delivery time, so at the longest, I think we started to be at three years delivery times in board machines, which was way too long. And now, the delivery time would be under two years. So now we would be having that kind of delivery time with the customer needs, in any case, for its construction work and everything else. So now we are packing at normal delivery times. The same applies to pulp and energy, single-island deliveries, where typically the construction works takes two years when the groundwork starts. (Pasi Laine, CEO)
Q: I was wondering if you could talk a bit about that also in terms of automation segment as well as the service business. What is the lead time now from orders to sales in those segments?
A: So, in automation segment first, while typically, if you sell a project, then the project delivery time goes together with the process technology order or delivery time. So customers are ordering them well in advance or it can be that delivery time is one year or even longer. In services, the delivery time can be some weeks. And then typically, if customer is buying maintenance and repair operations valves were, let's say, 3, 4, 5, 7 valves, 10 valves, then the delivery time is from three months to six months. (Pasi Laine, CEO)
Q: Just wondering if you could talk a bit about what kind of a dynamics you currently see in that -- your service division or segment. I think you've been talking about customer operating rates improving in the past couple of quarters. Listening to your customers, it sounds like that's going to continue. But is there something else also happening? I think there might be some upgrades and that kind of work that didn't really materialize last year. Do you see any kind of change
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
