Questions and Answers on Valmet’s Strategic Review and Q2/2026 Results
Valmet’s results for the second quarter of 2026 were published on 24 July 2026. At the same time, we announced that the Board of Directors had initiated a strategic review to evaluate a possible separation of its two core businesses (Biomaterial Solutions and Services, Process Efficiency Solutions) into two independent listed companies. The stronger-than-consensus earnings and the announced strategic review were received enthusiastically by the market, resulting in a 22 percent increase in Valmet’s share price on the day the results were published.
Following the earnings release, we have actively met with investors. Below, we address the key questions investors have raised regarding both the results and the strategic review.
Why did Valmet initiate a strategic review regarding a possible demerger?
In recent years, Valmet has systematically developed its businesses, and our two segments have become increasingly stronger while also operating more independently.
Process Efficiency Solutions has grown significantly through both organic growth and acquisitions. Following the acquisition of Severn Group, completed in July, the segment’s annual net sales is already approximately EUR 1.7 billion, with nearly 70 percent of orders coming from customers outside the pulp and paper industry.
In valves and valve automation, Valmet ranks among the five largest global players, and in our automation business we hold leading positions in certain customer segments. Customer retention is exceptionally strong in this business, which supports aftermarket service sales that account for a clear majority of the segment’s revenue. The segment’s role within Valmet has grown rapidly, and nearly half of the company’s profitability (Q2/26 LTM: EUR 301 million) now comes from the Process Efficiency Solutions segment.
At the same time, Biomaterial Solutions and Services has also evolved into an increasingly strong service business. In the paper, board, tissue, pulp, and energy markets, Valmet is a global market leader. Depending on the market, we are either the largest or second-largest player, and our share of the installed base is either slightly above or slightly below one-third, depending on the industry. Over several decades we have built a vast global installed base, creating significant opportunities for service sales and mill improvement projects. The share of services in the segment’s orders rose to approximately 55 percent in 2025. The growing share of services has increased the stability of the biomaterials business and improved the segment’s profitability several-fold during Valmet’s time as a listed company.
We now have two strong and profitable businesses with different customer bases, growth opportunities, and capital allocation needs. Consequently, the strategic review is driven by the long-term development of Valmet’s business portfolio rather than short-term market valuation considerations.
What is currently being evaluated?
The purpose of the strategic review is to determine whether these businesses could create more value as independent companies than together.
No decisions regarding a potential separation have been made. The results of the review will be communicated no later than with Valmet’s 2026 full-year results announcement in February 2027.
During the process, we will assess, among other things, whether a separate structure could enable clearer strategies, business-specific capital allocation optimization, simpler equity stories and performance metrics. The objective is to evaluate which structure would best support customer service, growth, and shareholder value creation over the long term.
What synergies exist between the Automation and Flow control businesses within the Process Efficiency Solutions segment? What about synergies between Automation and the biomaterials business?
This has been a frequent question since the announcement, and management’s message is that the situation regarding synergies has changed significantly over the years. When automation became part of Valmet in 2015, 80 percent of its customers were in the pulp and paper industry. At that time, the synergies between automation and Biomaterial Solutions and Services were naturally substantial, which was highlighted during the acquisition process.
However, through organic development and acquisitions, the business focus has changed considerably. Since 2022, automation has operated in the same segment as the valve and valve automation businesses. Today, in 2026, nearly 70 percent of orders in the Process Efficiency Solutions segment come from industries outside pulp and paper, and for automation alone the proportion is also already approximately 50 percent. This development is one of the factors that has led to the current strategic review.
The automation and valve businesses serve many of the same industries, where customers often require both automation solutions and flow control products. Following the announcement of the Severn transaction, we have also seen interest in our combined offering from new customer segments. This supports our view of the strategic rationale behind the arrangement, although it is still too early to assess how this interest will translate into future sales or order intake. In any case, the focus of the Process Efficiency Solutions segment has shifted toward new industries.
Q2/2026 Results
Second-quarter results exceeded consensus expectations across the board, and orders received totaled EUR 1.4 billion. Net sales increased by 6 percent to EUR 1.3 billion, and comparable EBITA rose to EUR 152 million following a somewhat softer Q1. Comparable EBITA margin remained stable at 11.5 percent.
Investors have been particularly interested in the outlook for the biomaterials service and project market, as well as the significant improvement in the biomaterials segment’s profitability from the first quarter.
What improved the profitability of Biomaterial Solutions and Services in Q2?
The segment’s comparable EBITA margin increased clearly to 10.4 percent.
The improvement was supported by several factors. Revenue growth was driven by large projects, and the measures launched during the past year to strengthen competitiveness continue to be reflected in the results. The renewal of the operating model, optimization of the production network, and improved cost discipline will continue to support profitability, including in more challenging market conditions.
What does the biomaterials service market currently look like?
The market environment remains soft and uncertainties have not disappeared, but we observed some encouraging signs during the second quarter.
In the services business, demand for spare parts and consumables stabilized after several weaker quarters. This suggests that customers have shifted their focus, at least slightly, from pure cost minimization back toward ensuring production efficiency and operational reliability.
Although the direction was positive, we would not yet characterize this as a broad-based market recovery. Visibility into customer decision-making remains weaker than normal.
What is the outlook for the large-project market?
Large-project activity improved clearly from the first quarter, which had been exceptionally weak. While one somewhat larger order was included, medium-sized orders were received broadly across different businesses and geographic regions.
Discussions on major projects with customers continue, and the first signs of market activation have been observed. At the same time, it is important to remember that the timing of major investments continues to have a significant impact on order intake in individual quarters. It is still too early to talk about a clear turnaround.
Why did the Process Efficiency Solutions segment maintain such a high margin?
During the first quarter, we noted that profitability was somewhat elevated and reiterated our objective of accelerating the segment’s growth by investing more heavily in growth initiatives.
Despite this, Process Efficiency Solutions achieved a comparable EBITA margin of 18.7 percent also in the second quarter. The segment’s operational performance remained strong, and product margins continued to be at an exceptionally high level.
We will continue investing in growth. The Severn acquisition is a good example of this approach: it is primarily an investment aimed at supporting growth and strengthening market position rather than a transaction based on cost synergies.
How is cost inflation affecting Valmet?
Cost inflation, and especially rising freight costs, remain under close monitoring.
We have been able to manage cost pressures through both procurement improvements and pricing actions. The global procurement organization established last year has delivered strong results, and we achieved significant procurement savings during the first half of the year. We continue to take active measures to improve supply chain competitiveness and manage the effects of cost inflation.
At the same time, it is worth remembering that the benefits related to last year’s operating model transformation are now fully visible. By the end of June, these measures had reduced comparable SG&A expenses over the last twelve months by EUR 79 million compared with the 2024 baseline.
What is the impact of the Severn Group acquisition on the 2026 outlook?
The acquisition of Severn Group was completed after the reporting period on 1 July 2026, meaning that its impact will be reflected during the second half of the year. A useful point of reference is that Severn Group generated revenue of EUR 205 million in 2025 and achieved an EBITA margin of 16 percent.
The acquisition is expected to provide a modest positive contribution to Valmet’s earnings during the remainder of the year. However, it is still too early to accurately assess business seasonality or integration impacts. Initial impressions have been very positive, and we have already seen genuine interest in our combined offering from new customer segments.