July 26, 2021
Valmet’s second quarter results were announced on July 22, 2021. The quarter was strong in many aspects. As CFO Kari Saarinen highlighted in the quarterly webcast, all our Group level key figures improved comparing to last year. When comparing the results to the consensus expectations, orders were clearly higher than expected, but sales and profits slightly lower. However, after the result was published, several analysts increased their estimates for 2021, and some analysts also raised their target prices for Valmet’s share.
Valmet has been impacted by COVID-19 the most in the stable business, which has suffered from travel restrictions and access restrictions to customer sites. Automation orders bounced back to pre-COVID levels already in Q4/2020, as automation services can in many cases be performed remotely. In Q2/2021, Automation orders increased 11% from the pre-COVID Q2 in 2019, and 12% year over year.
Services orders in the first quarter were at the same level as in Q1/2020, when COVID-19 had not yet bursted into a global pandemic. In the Q2 report, analysts and investors were looking forward to signs of returning to a growth path in Services. The figures were affirmative: Services orders were at the same level as in pre-COVID Q2/2019 and increased 13% compared to the “lockdown” quarter Q2/2020. Valmet also lifted the short-term market outlook for services to good/satisfactory. The outlook is good in North America, China and South America, but satisfactory in EMEA, which is the biggest market for Valmet and where COVID-19 related restrictions continue. Lower capacity utilization and closures in graphical paper mills caused negative impacts for Services. Many parts of Asia also still suffer from the pandemic.
The second quarter was good also looking at capital business orders. Paper reached its highest quarterly number for order intake ever, EUR 440 million. Also Pulp and Energy orders were at a high level at EUR 326 million. Valmet’s order backlog reached its new record exceeding EUR 4 billion. The backlog gives us visibility and good workload to the coming several quarters.
Net sales were flat compared to Q2/2020. Net sales in Pulp and Energy decreased due to pulp projects now being in different execution phases than a year ago. Net sales of the other three business lines all increased, and Valmet’s comparable EBITA grew 24% year over year. Gross margin improved three percentage points to 26% thanks to strong sales management, good project execution and cost control. Net sales mix did not change much, stable business was 44% of net sales compared to 43% last year. Comparable EBITA margin was within Valmet’s target range at 10.1%. Cash flow was high driven by good profitability and reduced net working capital.
Besides the good/satisfactory short-term market outlook for Services, the outlook was kept good for four of our markets: Automation, Pulp, Board and Paper, and Tissue. The outlook for energy remained weak.
Going forward, input cost inflation and high logistics costs are topics that need to be closely watched and carefully managed. First and foremost, as always, we need to focus on flawless execution of the orders that our customers have trusted Valmet with.