Valmet's Q1 result surprised the market positively

April 23, 2021

 

Although COVID-19 kept setting limitations for business operations around the world, the first quarter was historical for Valmet in many respects. Orders received totaled EUR 1,312 million, which is our highest ever quarterly order intake. Valmet received several noteworthy orders in the capital business. Metsä Fibre ordered all main process islands and automation for a new bioproduct mill in Finland, with an order value of about EUR 350–400 million. Fujian Liansheng in China ordered a folding boxboard making line and a fine paper making line, with a total typical value of around EUR 190–220 million. Not as big in euros but a very interesting opening was the equipment order for Renewcell’s textile recycling plant in Sweden. Renewcell can upcycle cellulosic textile waste, such as cotton and viscose clothes, transforming it into a dissolving pulp product called Circulose®, produced from 100% recycled textiles. These orders among others lifted the order backlog to a new record of EUR 3,709 million, marking an increase of EUR 452 million compared to year end.

Services business line has been suffering most due to the pandemic. As COVID-19 spread out in March 2020, the comparison period was still strong in Services. Still, Services orders received and net sales remained at the same level in Q1/2021, which is a good achievement. As CEO Pasi Laine highlighted in the result webcast, the recovery in Services was even quicker than anticipated at the end of 2020, even though COVID-19 related restrictions are still in place in many parts of the world. All in all, Valmet’s net sales remained on the previous year’s level, and Paper was the only business line with a net sales increase.

The Comparable EBITA increased by 55% in Q1/2021. The corresponding margin was 9.4%. A record was established also on the bottom line, as the comparable EBITA for rolling 12 months reached 10.4%. This is the first time for Valmet to be within the target range of 10–12%.

Valmet revised its guidance for 2021 upwards six days before the publishing of the results. We estimate that both net sales and Comparable EBITA will increase in 2021 compared with 2020. The short-term market outlook for the next six months remains good for most of our businesses: pulp, board and paper, tissue and automation. The outlook for services was upgraded to satisfactory, and the outlook for energy remains weak.

Despite the guidance upgrade, the result surprised the market positively and beat the consensus expectations for orders, net sales and, most significantly, for comparable EBITA, although the share of net sales of the lower-margin capital business increased. On the results day, the share was up 2.99% and closed at EUR 34.45. Next morning several analysts published their research reports on Valmet and several also lifted their target prices. In the morning following the results day, the share was up two percent.