The main global news headline of Q1 2020 has been the coronavirus pandemic. To help investors understand what the situation means for Valmet, we decided to gather the most common questions we have received recently to this blog. Please note that these answers describe the situation as of 26 March 2020.
What kind of exposure do you have to China?
In 2019, the orders received from China were 7% of our total orders, amounting to EUR 267 million. Demand for capital projects declined compared to 2018 and overall orders were 49% lower than in 2018. We have approximately 1,800 employees in China in several locations.
How did coronavirus impact your operations in China in Q1/2020?
We saw some negative impact in service demand in China. Our own operations were also impacted to some extent during the coronavirus outbreak. This led to delays in certain projects. However, our factories resumed to normal routines in the beginning of March.
What kind of balance sheet structure do you have?
Our balance sheet is relatively strong. At the end of 2019, Valmet’s gearing was -9% and equity to assets ratio was 41%. Interest-bearing liabilities amounted to EUR 268 million, and net interest-bearing liabilities totaled EUR -90 million at the end of 2019. The average maturity of Valmet’s non-current debt was 3.1 years, and average interest rate was 1.1 percent at the end of December 2019.
Valmet’s liquidity was strong at the end of 2019, with cash and cash equivalents amounting to EUR 316 million and interest-bearing current financial assets totaling EUR 42 million. Valmet’s liquidity was additionally secured by a committed revolving credit facility worth of EUR 200 million, which matures in 2024, and an uncommitted commercial paper program worth of EUR 200 million. In December 2019, Valmet signed a 10-year EUR 50 million loan agreement with the Nordic Investment Bank. All the above facilities were undrawn at the end of 2019.
Have the long-term growth drivers for Valmet changed due to coronavirus?
We continue to have a strong position in the market of converting renewable resources. The long-term growth drivers have not changed, even though the coronavirus creates uncertainty in the future.
The demand for our board technology continues to be driven by e-commerce and the shift from plastic packaging into renewable materials. Tissue demand is driven by the need for higher quality, as well as urbanization as well as the rise in purchasing power and living standards in emerging countries. Pulp demand will continue to increase due to growing board and tissue consumption. Our customers will also continue to seek for process efficiencies, raw material savings and more sustainable operations through our automation and services offering.
Are you seeing customers delaying or canceling orders?
There have been some delays in certain projects, but we believe these projects will continue when the situation related to travel and other restrictions improves. In the case of long-term delivery projects, initial customer advance payments are typically 10–30 percent of the value of the project, and customers make progress payments as the project is implemented. This decreases the risks and financing requirements related to Valmet’s projects.
Valmet’s AGM was cancelled from March 19, 2020 and postponed to later date. Does this mean that dividend distribution is delayed as well?
Following the development of the coronavirus situation and the announcement by the Finnish Government on March 16, 2020, the Board of Directors of Valmet decided to cancel the Annual General Meeting from Thursday, March 19, 2020. Valmet will convene the Annual General Meeting at a later date. This means that the dividend distribution is delayed as well, because The Board of Directors’ proposal on dividend distribution needs to be approved by the shareholders’ meeting.