Nov 30, 2022
On November 29, 2022, Valmet’s Investor Relations organized a site visit to our Flow Control business line’s factory in Vantaa, Finland. The group of 16 analysts, institutional investors and bankers was hosted by Simo Sääskilahti, President, Flow Control business line, and site management.
Simo started the event with a presentation about the Flow Control business line. Flow Control produces different types of valves, actuators, and valve controllers for various industries. Market size in valves and valve automation is about EUR 40 billion (McKinsey). Valmet has a strong presence in valve control and actuator market and is present also in the valve instrumentation market, as well as pumps and compressors. Valmet focuses on mission critical valves.
The flow control market is very fragmented, and there are about 1,000 players. The top 10 companies’ combined market share is 22%, and the top 50 players have 46% of the market (Resolute Market Research, McKinsey). Valmet is roughly the 10th largest player with a 2% market share. In the pulp & paper industry, Valmet’s flow control business ranks #1 with a 20% share. In industrial gases, our position is #1–2, in refining and chemicals we are among the top 10.
Looking at the financial figures, Flow Control’s orders received during the last 12 months (Q4/2021–Q3/2022) totaled EUR 753 million, and net sales EUR 699 million. Of orders received, 47% came from refining & chemicals, 29% from pulp & paper, 7% from renewable energy & gases and metals & mining respectively, while the remaining 9% came from other industries (e.g., pharmaceuticals, food & beverage). Thus, the customer base of Flow Control is much more diversified than that of the rest of Valmet. Geographically, North America was the biggest area with 37% of orders received, EMEA the second biggest with 32%, followed by Asia-Pacific (12%), China (11%) and South America (8%).
Since Q2/2022, the business is part of Valmet, and the profitability is reported only at the Automation segment level. The comparable EBITA of the Automation segment was 17.6% in Q3/2022, covering both Flow Control and Automation Systems business lines. In the comparison period Q3/2021, the flow control business reported a 15.5% adjusted EBITA margin as Neles, while Automation Systems had a margin of 20.5%.
Market drivers for flow control business have a lot in common with the rest of Valmet. Demand in the pulp & paper industry is driven by growth in sustainable packaging and tissue, as well as more sustainable processes. Better process sustainability and efficiency drive demand also in refining & chemicals. Further valve market drivers include investments in more sustainable energy, hydrogen, and carbon capture, as well as digitalization and process optimization.
What are the competitive advantages of Valmet in flow control? Brands are very important in the industry. Our product brands Neles™, Jamesbury™, Neles Easyflow™, Stonel™, Valvcon™ and Flowrox™ are well-known and respected for their reliability, high performance, and quality. We are also known for high-end engineering and application knowledge in our core industries. Roughly 70% of sales come from maintenance and repair, and service penetration is high. Valmet’s flow control services cover the whole lifecycle of the customer’s plant.
The Flow Control business line has a global operational footprint. Of the business line’s 2,830 employees, 390 work in the Vantaa factory. Every year, a total of 130,000 valves, valve controls, and actuators are manufactured at the Vantaa factory, for delivery to customers operating in different process industries around the world.
After Simo’s presentation, the group visited the Demo Room, where we could see different parts in a valve system and hear about their features. Valmet sells both entire valve systems and their parts (valves, actuators, and valve controllers). There are numerous different types of valves, and they can be modified according to the use application. Valves can vary a lot in size, and their weight can range from 2 kg to 40 tonnes. The biggest valve delivered from Vantaa had a diameter of 62 inches! Depending on the customization requirements, the delivery times can range from 1 to 36 weeks, and also the price range is wide, from 100 to tens of thousands of euros.
With valve manufacturing in the region dating back to 1956, Vantaa is one of Valmet’s main Flow Control Technology Centers. The factory consists of two units, one for project deliveries and the other for high-volume valve products. During the site tour, we visited the 25,000m2 project section and the positioner factory. All Valmet positioners are made here. At the project factory, we saw e.g. valve parts in different production phases, ball grinding in action, and the facilities for sandblast and valve painting.
Valves have a big impact on the safety and sustainability of a production process. The valves may not leak or fail in any conditions. Thus, in addition to customers, legislation and international standards set demands for valve products and their testing. During the tour, we got to see 3D measurement in action, as well as the cryogenic laboratory, where the valves can be tested in extreme cold conditions (-196°C), or under big pressure. In the laboratory, the valve’s capacity and noise can be measured, and the process pressure and cavities can be tested. The group also saw a valve in flames during a fire safety test, as the process equipment needs to survive an eventual fire at the customer’s plant.
The guests asked a lot of questions from the hosts. We learned e.g., that some valves need to be replaced annually, while some that are less in use, like emergency shutdown valves, can last for a decade. To get an idea of order size, we heard that EUR 10 million is a big deal for Flow Control business line, and a few million euro order is a good size. In magnitude, a big order can include tens or a hundred valves.
The guests were pleased with the concrete and thorough plant tour. Valmet’s flow control team undoubtedly convinced us all with their engineering and application knowledge! Many thanks to all the visitors and our dedicated hosts at the site!