Financial risk management

Liquidity or refinancing risk arises when a company is not able to arrange funding at terms and conditions corresponding to its creditworthiness. Cautious maturity distribution of interest-bearing debt and sufficient cash, short-term investments and committed and uncommitted credit facilities are maintained to protect short-term liquidity and to manage refinancing risk. Diversification of funding among different markets and an adequate number of financial institutions are used to safeguard the availability of liquidity at all times. Treasury monitors bank account structures, cash balances and forecasts of the subsidiaries and manages the utilization of the consolidated cash resources.

At end of December 2025 Cash and cash equivalents amounted to EUR 535 million (EUR 482 million) and current interest-bearing financial assets managed centrally by Treasury to EUR 22 million (EUR 30 million). Due to the global nature of operations, some of the Valmet subsidiaries are located in countries in which currency is subject to limited exchangeability or capital controls. Given Valmet’s total liquidity position, balances in such countries are immaterial. 

In 2025, new loans worth EUR 281 million were drawn, all of which related to the EUR 375 million Schuldschein loan transaction. The Schuldschein loan transaction consists of 11 tranches with both fixed and floating interest rate structures and offers a diversified maturity profile of three, five, seven and ten years, with an average maturity of nearly six years.

Valmet’s liquidity was additionally secured by a committed and undrawn revolving credit facility worth EUR 300 million, which matures in 2026, uncommitted and undrawn overdraft limits of EUR 16 million and a commercial paper program worth EUR 300 million which was undrawn at the end of the reporting period.

In 2025, Valmet signed a new EUR 450 million committed multi-currency revolving credit facility agreement. The facility has a tenor of five years with two one-year extension options subject to the lenders’ approval. The new facility refinances the earlier 
EUR 300 million revolving credit facility dated October 2021. The facility was undrawn at the end of the reporting period. Liquidity was additionally secured by an uncommitted commercial paper program worth of EUR 300 million, of which EUR 10 million was outstanding at the end of the reporting period and undrawn overdraft limits of EUR 15 million.

Net working capital management is an integral part of the liquidity risk management. Treasury monitors and forecasts net working capital fluctuations in close co-operation with the subsidiaries. Net working capital decreased to EUR 29 million (EUR 134 million) as at December 31, 2025.

Group’s refinancing risk is managed by balancing the proportion of current and non-current interest-bearing debt and average maturity of non-current interest-bearing debt. The average maturity of non-current interest-bearing debt, including current portion, as at December 31, 2025, was 3.3 years (3.4 years). The amount of current interest-bearing debt, including current portion of non-current interest-bearing debt, was 10 percent (8%) of total debt portfolio. As at December 31, 2025, Valmet’s interest-bearing liabilities consist of debt and lease liabilities, and debt portfolio includes loans from financial institutions, issued bonds and commercial papers.

The table below presents undiscounted cash flows on the repayments and interests on Valmet’s financial liabilities (excl. lease liabilities and derivatives) as at December 31, 2025 and 2024 by the remaining maturities from the balance sheet date to the contractual maturity date. The remaining maturities of lease liabilities are presented in Note 5, and correspondingly remaining maturities of derivatives in Note 9 in Valmet's Financial Statements 2025.

The information presented in above tables excludes the impact of lease liabilities and derivatives.

Valmet's capital structure management aims to safeguard the continuity of business operations, ensure flexible access to capital markets and secure adequate funding at competitive rates. The Company's capital structure consists of both equity and interest-bearing debt. As at December 31, 2025, total equity was EUR 2,590 million (EUR 2,614 million) and the amount of interest-bearing debt was EUR 1,285 million (EUR 1,387 million).

Valmet's objective is to maintain a strong capital structure that supports the confidence of customers, investors, creditors and the market. In 2025, Valmet disclosed new 2030 financial targets of which one is to target a gearing level below 50%. The capital 
structure is assessed regularly by the Board of Directors and managed operationally by Treasury. Loan facility agreements include customary covenants and Valmet is in clear compliance with the covenants at the end of the reporting period. Valmet had no credit rating at December 31, 2025.

The information presented in above table excludes the impact of lease liabilities.

Interest rate risk arises when changes in market interest rates and interest margins influence finance costs, returns on financial investments and valuation of interest-bearing items. The interest rate risk is managed and controlled by Treasury. The interest rate risks are managed through balancing the ratio between fixed and floating interest rates and duration of interest-bearing debt and interest-bearing financial assets. Additionally, Valmet may use derivative instruments such as forward rate agreements, swaps, options and futures contracts to mitigate the risks arising from interest-bearing assets and liabilities. The ratio of fixed rate debt of the total debt portfolio is required to stay within the 10–60 percent range including the interest rate derivatives. The duration of the non-current interest-bearing debt, including the current portion, and the interest rate derivatives is allowed to deviate between 6–42 months.

The fixed rate interest portion was 50 percent (49%), the duration was 1.5 years (1.2 years) and the EUR denominated debt of the total debt portfolio was 98 percent (99%) at the end of 2025. The basis for the interest rate risk sensitivity analysis is an aggregate 
Group level interest rate exposure, composed of interest-bearing financial assets, interest-bearing liabilities (excl. leases) and interest rate swaps, which are used to hedge the underlying exposures. The sensitivity analysis does not include the interest component of foreign exchange derivatives since the impact of a one percentage point change in interest rates is not significant, assuming similar change in all currency pairs at the same time. For all interest-bearing debt, assets and interest rate derivatives to be fixed during the next 12 months a change of one percentage point upwards or downwards in interest rates with all other variables held constant would have following effect, net of taxes:

The information presented in above table excludes the impact of lease liabilities.

Valmet has used interest rate derivatives to hedge the interest rate risk of its debt portfolio. All interest rate swaps have been designated to cash flow hedge accounting relationships. The nominal and fair values of the outstanding interest rate derivative contracts are presented in Note 9 to the Financial Statements 2025.

Valmet operates globally and is exposed to foreign exchange risk in several currencies, although the geographical diversity of operations decreases the significance of any individual currency. Substantial proportion of Valmet’s net sales and costs are generated in euros (EUR), US dollars (USD), Swedish kronas (SEK) and Chinese yuans (CNY).

Transaction exposure

Foreign exchange transaction exposure arises when a subsidiary has commercial or financial transactions and payments in another currency than its own functional currency and when related cash inflow and outflow amounts are not equal or concurrent.

In accordance with Valmet’s treasury policy, subsidiaries are required to hedge in full the foreign currency exposures on Consolidated statement of financial position and other firm commitments. Cash flows denominated in a currency other than the functional currency of the subsidiary are hedged with internal forward exchange contracts with Treasury for periods, which do not usually exceed two years. Subsidiaries also carry out hedging directly with the banks in countries, where the regulation does not allow corporate internal cross-border contracts. Treasury monitors the net position of each currency and decides to what extent a currency position is to be closed. Treasury is responsible for entering into external forward transactions corresponding to the internal forwards whenever a subsidiary applies hedge accounting. Valmet’s treasury policy defines upper limits on the open currency exposures managed by Treasury; limits have been calculated on the basis of their potential profit or loss impact. To manage the foreign currency exposure Treasury may use forward exchange contracts and foreign exchange options. Valmet is exposed to foreign currency risk arising from both on and off-balance sheet items. The foreign currency exposure is composed of all assets and liabilities denominated in foreign currencies and their counter values in local currencies. Calculation includes external and internal short and long-term sales and purchase contracts, projected cash flows for unrecognized firm commitments and financial items, net of respective hedges. The following table illustrates Group’s outstanding foreign currency risk at the end of the reporting period:
As at December 31, 2025

As at December 31, 2024

This Group level currency exposure is the basis for the sensitivity analysis of foreign exchange risk. Assuming euro to appreciate or depreciate 10 percent against all other currencies, the impact on cash flows, net of taxes, would be:

The sensitivity analysis as required by IFRS 7, includes financial instruments, such as trade and other receivables, trade and other 
payables, interest-bearing liabilities, deposits, cash and cash equivalents and derivative financial instruments.

The table below presents the effects, net of taxes, of a +/- 10 percent change in EUR against all other currencies:

Changes in fair value of derivative contracts that qualify for cash flow hedge accounting are recorded in equity. The effect in profit or loss is the change in fair value for all other financial instruments exposed to foreign exchange risk.

The nominal and fair values of the outstanding forward exchange contracts are presented in Note 9 to the Financial Statements 2025.

Translation or equity exposure

Foreign exchange translation exposure arises when goodwill or fair value step-ups, or the equity of a subsidiary, is denominated in a currency other than the functional currency of the parent company. As at December 31, 2025, the total non-EUR 
denominated goodwill and fair value step-ups, and equity of the subsidiaries, was EUR 1,000 million (EUR 1,073 million). The major translation exposures were in 2025 EUR 334 million in USD and EUR 201 million in CNY, and respectively in 2024
EUR 428 million in USD and EUR 234 million in CNY. Valmet is currently not hedging any equity exposure.

Valmet is exposed to risk in variations of the prices of raw materials and of supplies including energy. Subsidiaries have identified their commodity price hedging needs and hedges have been executed through Treasury using approved counterparties and instruments. For commodity risks separate overall hedging limits are defined and approved. Hedging is done on a rolling basis with a declining hedging level over time. Electricity exposure in the Nordic subsidiaries has been hedged with electricity forwards and fixed price physical contracts. Hedging is focused on the estimated energy consumption for the next two-year period with some contracts extended to approximately five years. The execution of electricity hedging has been outsourced to an external broker. As at December 31, 2025, Valmet had outstanding electricity forwards amounting to 184 GWh (160 GWh) and 175 GWh (175 GWh) under fixed price purchase agreements.

To reduce its exposure to the volatility caused by the surcharge for certain metal alloys (Alloy Adjustment Factor) comprised in the price of stainless steel charged by its suppliers, Valmet may enter into average-price swap agreements for nickel. The Alloy Adjustment Factor is based on monthly average-prices of its components of which nickel is the most significant. Also, to reduce steel scrap price risk in Valmet's own foundry operations, Valmet can hedge steel scrap prices using average price swap agreements.As at December 31, 2025, Valmet had 402 metric tons outstanding average price swap agreements for nickel (1,483 metric tons) and 829 metric tons for steel scrap (1,303 metric tons).

The following table presenting the sensitivity analysis of the commodity prices comprises the net aggregate amount of commodities bought through forward contracts and swaps but excludes the anticipated future consumption of raw materials and electricity.

A 10 percent change upwards or downwards in commodity prices would have the following effects, net of taxes:

Cash flow hedge accounting has been applied to electricity forward contracts and the change in fair value is recognized in equity. Hedge accounting is not applied to nickel and steel scrap agreements and the change in the fair value is recorded through Consolidated statement of income.

Credit or counterparty risk is defined as the possibility of a customer, subcontractor or a financial counterparty not fulfilling its commitments towards Valmet. Subsidiaries are primarily responsible for credit risks pertaining to sales and procurement activities. The subsidiaries assess the credit standing of their customers, by taking into account their financial position, past experience and other relevant factors. Advance payments, letters of credit and third-party guarantees are actively used to mitigate credit risks. Treasury provides centralized services related to trade, project and customer financing and seeks to ensure that the principles of Valmet’s treasury policy are adhered to with respect to terms of payment and required collateral. Valmet has no significant concentrations of credit risks due to the large number and geographic dispersion of companies that comprise the Group’s customer base.

The maximum credit risk equals the carrying value of trade and other receivables, together with contract assets related to contracts for which revenue is recognized over time. The credit risk quality is evaluated both on the basis of aging of the trade receivables and also on the basis of customer specific analysis. The aging structure of trade receivables is presented in Note 8 to the Financial Statements 2025. Management considers investments at fair value through other comprehensive income to have low credit risk as they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. Counterparty risk arises also from financial transactions agreed upon with banks, financial institutions and corporations. The risk is managed by careful selection of banks and other counterparties and by applying counterparty specific limits and netting agreements such as ISDA (Master agreement of International Swaps and Derivatives Association), see Note 9 to the Financial Statements 2025. All financial institutions Valmet associates with have investment grade status. When measuring the financial credit risk exposure, all open exposures such as cash at bank accounts, investments, deposits and other financial transactions, for example derivative contracts, are included. The compliance with financial counterparty limits is regularly monitored by the management.

For those financial assets and liabilities, which have been recognized at fair value in the Consolidated statement of financial position, the measurement hierarchy and valuation methods described below have been applied. There have been no transfers between fair value levels.

Level 1

Quoted unadjusted prices at reporting date in active markets. The market prices are readily and regularly available from an exchange, dealer, broker, market data provider, pricing service or regulatory agency. The quoted market price used for financial assets is the current bid price. Level 1 financial instruments include equity investments classified as financial assets at fair value through other comprehensive income.

Level 2

The fair value of financial instruments in Level 2 is determined using valuation techniques. These techniques utilize observable market data readily and regularly available from an exchange, dealer, broker, market data provider, pricing service or regulatory agency. Level 2 financial instruments include over-the-counter (OTC) derivatives classified as financial assets and liabilities at fair value through profit or loss or derivatives qualified for hedge accounting and all other financial assets and liabilities except for equity investments. 

Level 3

A financial instrument is categorized into Level 3 if the calculation of the fair value cannot be based on observable market data. Level 3 financial instruments include equity investments classified as financial assets at fair value through profit or loss. There were no changes in Level 3 instruments for the 12 months ended December 31, 2025.

 Classification of financial assets and liabilities as at December 31, 2025:

¹ Included in Other non-current liabilities in the Consolidated statement of financial position