Q3/2017: Continued growth in the Paper business line and improvement in profitability
The continued growth in the Paper business line and improvement in Valmet’s profitability were the highlights of Valmet’s third quarter results. Net sales and order backlog also increased compared to the corresponding period in the previous year.
Valmet’s profitability improved in the third quarter due to higher net sales and lower selling, general, and administrative expenses. Comparable EBITA margin was 7.9 percent, which is the highest quarterly margin for Valmet since becoming an independent company, and close to the lower end of our long-term margin target of 8–10 percent. However, the 6.8 percent margin for the first nine months of the year indicates that there is still room for profitability improvement.
Order backlog currently stands at EUR 2,523 million, i.e. 15 percent higher than a year ago. In January–September, growth in orders received was 11 percent. Orders received increased in the Paper and Services business lines, remained at the previous year’s level in the Automation business line and decreased in the Pulp and Energy business line.
Orders received in the Paper business line totaled 275 million in the third quarter. In January–September, Paper orders received grew as much as 76 percent from the corresponding period in the previous year. There was growth in China, North America and EMEA, and in both board and paper business as well as in tissue. For the last 12 months, Paper orders received total more than a billion euros. Looking at the development of the business line on longer term, it is clear that the last four quarters have been exceptionally active.
Paper business line
In the Services business line, orders received grew 7 percent both in the third quarter as well as year to date, while net sales remained on the previous year’s level or even somewhat decreased. This has provoked amazement among the investors. The reason behind this development is that the orders have grown the most in Energy and environmental and Mill improvements. In these business units, revenue recognition is often slower than in other service businesses.
Valmet reiterates its guidance, according to which both net sales and comparable EBITA will increase in 2017 in comparison with 2016. The short term market outlook for the next six months has decreased to a satisfactory level in the energy business (previously on good level). The outlook for Valmet’s other markets remained unchanged. Our view is that the short term market outlook for services, board and paper, and tissue is good, for automation market satisfactory, and for the pulp market weak.
In the third quarter, Valmet also strengthened its position as a responsible investment by being included in the Dow Jones Sustainability Index (DJSI) for the fourth consecutive year, among the world's 320 sustainability leaders. Valmet was also reconfirmed as a constituent of the Ethibel Sustainability Index (ESI) Excellence Europe, which contains 200 of the European stock listed companies that display the best performance in terms of corporate social responsibility (CSR).