Risks and business uncertainties
Valmet’s operations are affected by various risks. Valmet actively seeks to capitalize on emerging opportunities while mitigating the potential adverse impacts of identified threats. As part of its annual risk assessment, Valmet's risk management has identified the most significant risks and opportunities as being linked to the global and key market area economic cycles, customer industry dynamics, and risks associated with project operations.
Strategic risks
Financial uncertainty in the global economy, coupled with fluctuations in exchange rates, and tightening financial market regulations, may affect customers’ financing availability and investment appetite. If economic growth slows down significantly, the markets for Valmet’s products may shrink, which may lead to, for example, tougher price competition. Competitive pressures are addressed through product development, customer service, and local presence.
Valmet’s strong presence in the selected businesses, combined with geographical diversification, helps mitigate the potential negative effects of market uncertainties. A weakening global economy could also adversely affect new projects under negotiation or those already in the order backlog. Valmet manages project risk through advance and progress payments, continuous assessment of customer creditworthiness, and a general policy of not financing customer projects.
Geopolitical conflicts pose significant risks to global markets, supply chains, and transport logistics. If the conflicts are further prolonged or enlarged, there could be additional adverse impacts on Valmet’s operations, customer investment activity, project deliveries, availability and prices in the supply chain and availability of financing for both Valmet and its customers.
Rising protectionism, shifting political narratives, and regulatory changes —such as tariffs and the weaponization of environmental policies—create uncertainty in global trade and customer investment decisions. The ongoing trade war further contributes to economic and financial market instability.
Valmet actively monitors developments, particularly U.S. tariffs and potential retaliatory measures, and takes proactive steps to mitigate supply chain and cost impacts. Its strong U.S. presence helps reduce direct tariff exposure.
Financial risks
Currency exchange rate and interest rate risks are Valmet’s most substantial financial risks. Economic insecurity typically increases exchange rate fluctuations and can impact interest rates as well. Valmet hedges its currency exposures linked to binding delivery and purchase agreements. The interest rate risks are managed by balancing the ratio between fixed and floating interest rates and duration of interest-bearing debt and interest-bearing financial assets. Additionally, Valmet uses derivative instruments to mitigate the risks.
Changes in legislation or regulatory interpretation, particularly in taxation, may influence financial outcomes. Valmet monitors these developments closely.
Valmet maintains a strong balance sheet, sufficient liquidity, and committed credit facilities to secure operational continuity. Capital expenditure and net working capital levels are closely monitored.
Valmet carries a significant goodwill balance, which is tested for impairment annually or more frequently if needed. No indications of impairment were identified during the reporting period.
To mitigate credit risk, Valmet diversifies its financial holdings across reputable banks and selects counterparties based on high creditworthiness.
Operational risks
Valmet’s business involves projects, and the company faces execution risks such as cost estimation, scheduling, quality, and materials management, especially in large pulp projects. These risks are mitigated through risk analysis, systematic monitoring during execution, and continuous development of project management processes and systems.
Supply chain disruptions, component availability, and logistics challenges may adversely affect Valmet’s business. Changes in labor costs and raw material prices can impact profitability. While the company aims to offset inflation through productivity improvements and pricing strategies, strong competition may limit its ability to pass on cost increases to customers. Customer investment capacity may also fluctuate with commodity price changes.
Valmet’s operations, products, and services rely heavily on data networks, software, and digital solutions. Malfunctions, cybersecurity breaches, or failures in system development projects could negatively impact business, financial performance, and reputation. Valmet has implemented several mitigation measures to reduce the likelihood and impact of these risks.
More information about risks can be found in the Financial Statements 2024.