Neles’ Interim Report January 1 – September 30, 2020

Neles Corporation, Stock exchange release, October 28, 2020 at 09:00 am EET

This is a summary of Neles’ interim review for January 1 - September 30, 2020. The complete report is attached to this release and also available at

January-September in brief

  • Solid adjusted EBITA margin continued in the third quarter despite still challenging Covid-19 pandemic situation, supported by cost saving actions
  • Pulp and Paper projects continued at a good level; weaker activity in Oil and Gas projects compared to the first half of the year
  • Increased market activity in Services and Maintenance, Repairs and Operations-driven (MRO) businesses, but recovery slower than previously anticipated due to continued postponements of large maintenance shutdowns and tightening cash management by customers

The partial demerger of Metso Group took place on June 30, 2020, and the continuing operations were renamed Neles Group. Until the end of 2020, Neles Group will be reported as continuing operations and the demerged Metso Minerals business as discontinued operations (for the period January 1–June 30, 2020).

In this Interim Report, in addition to IFRS financial information, a comparable balance sheet and a cash flow statement are disclosed. Figures in parentheses refer to the corresponding period in 2019 unless otherwise stated.

Neles Group is reported as one segment, starting on June 30, 2020.

Summary of key figures

Operative key figures,
Neles, continuing operations
EUR million
7-9/20 7-9/19 Change, % 1-9/20 1-9/19 Change, % 2019
Orders received 134 171 -221 456 527 -13 681
Order backlog at end of period 293 295 -1 293 295 -1 280
Sales 144 170 -151 421 493 -15 660
Service sales 2 32 38 -16 93 108 -14 152
% of sales 23 22   22 22   23
Adjusted EBITA, continuing operations 23 28 -18 62 78 -21 97
% of sales 15.8 16.6   14.8 15.9   14.7
Adjustment items 3 2 -   8 -   -
Operating profit 19 27 -30 52 75 -31 93
% of sales 13.5 16.0   12.3 15.3   14.0
Earnings per share, continuing operations, EUR 0.09 0.15 -40 0.24 0.38 -37 0.46
Free cash flow 17 12 42 32 48 -33 34


Balance sheet key figures, IFRS

Return on capital employed (ROCE) before taxes, % 14.8 19.2 19.2
Balance sheet total 625 3,972 3,887
Net debt 118 420 798
Equity to assets ratio, % 42.2 40.2 42.3
Net debt / EBITDA, rolling 12 months 1.3 - -
Gearing, % 46.5 28.4 52.3
Personnel at end of period, continuing operations 2,840 2,911 2,866

1 Organic orders received declined by 10% in 1–9/2020 and 15% in 7–9/2020. Organic sales declined by 12% in 1–9/2020 and 10% in 7–9/2020.

 2 Services sales include the sales volume from the Services business

3 Adjustment items amounted to EUR 8.0 million in 1–9/2020 and EUR 2.3 million in 7–9/2020. No adjustment items were included in 7–9/2019 and full-year 2019. The adjustments were attributable to advisory, brand, IT and other costs related to the creation and rebranding of Neles as well as setting up a new operating structure. See Note 5.

Creation of Neles on June 30th

Metso’s Extraordinary General Meeting on October 29, 2019, approved the partial demerger of the company. The registration of the completion of the partial demerger was executed on June 30, 2020. According to the demerger plan, the Metso Minerals businesses were carved out and combined with Outotec Group. Metso’s valves business formed the continuing operations and on July 1, 2020, Metso Group was renamed Neles Group. Metso’s shareholders continue as shareholders of Neles Corporation. Additionally, shareholders received 4.3 new Outotec shares for one old Metso share as consideration for the distributed net assets of the Minerals business. The partial demerger of Metso was completed on June 30, 2020, with share trading continuing under the Neles name on Nasdaq Helsinki on July 1. In IFRS reporting, a gain of EUR 2,022 million was recorded on the distribution of the Minerals net assets at fair value and is included in Profit for the period, discontinued operations.    

Public tender offer by Alfa Laval and stake building by Valmet:

On July 13, Alfa Laval AB (publ) published its intention of making a Public Tender Offer (PTO) for all shares of Neles Oyj at a price of EUR 11.50 per share. Tender Offer was published on August 12, 2020. On October 15, Alfa Laval amended its PTO terms by lowering the minimum acceptance threshold to more than 50% of outstanding Neles shares (previously 2/3 of outstanding Neles shares) and extending the PTO to October 30 (previously October 22). Neles’ Board recommended the acceptance of the PTO on August 12 and repeated its recommendation on October 19.

Valmet Oyj, which acquired a stake of 14.88% in Neles Oyj on July 1, has increased its ownership to 29.54% as of September 30, 2020. On September 29, Valmet published a proposal for a merger between Valmet Oyj and Neles Oyj. On October 12, Neles’ Board announced there were no ongoing discussions with Valmet and repeated the recommendation for Alfa Laval’s PTO.

President and CEO Olli Isotalo:

During the third quarter, the market continued to be mixed. As during the first half, we were successful in winning important Pulp and Paper projects. As already anticipated in our half-year review, the Oil and Gas project situation slowed during the third quarter compared with the high level of activity in the first half of the year. During the third quarter, our Services and MRO-driven businesses saw increasing market activity in many market areas compared with the second quarter, but continued to be negatively impacted by postponements in customers’ planned large maintenance shutdowns, mobility restrictions and lockdowns, as well as customers’ tightening cash management actions. The increased market activity in Services and MRO-driven businesses has therefore yet to materialize in orders.

Our sales grew 2% sequentially from the second to the third quarter, despite negative impact from exchange rates. Thanks to the continued cost saving actions that we had already initiated during the second quarter, we were able to maintain solid profitability during the reporting period, despite the low sales volume. Cost savings included temporary measures such as reduced working time, which we plan to mostly end during the fourth quarter. In the second quarter, we also undertook some permanent cost-saving actions, mainly in the US and Finland, from which we already started to see savings during the third quarter. We also increasingly focused on managing our net working capital and cash flows and achieved a reduction in our inventory levels.

During the third quarter, there has been considerable debate about, and public interest in the ownership situation of Neles Oyj. In the midst of this, management and employees have been focusing on daily business, serving customers and executing the growth strategy Neles’ Board approved on July 1.

Market outlook

We expect the market activity in Pulp and Paper projects to continue at a good level.

Market activity in Oil and Gas projects is expected to continue to decline from the good level in the first half of the year, due to general economic concerns. Postponements and global uncertainties are reducing visibility in the Oil and Gas project business.

Market activity for Services and the customer Maintenance, Repair and Operations-driven (MRO) businesses is expected to gradually improve from the suppressed levels during the reporting period, because customers’ operations are resuming to a more normal level. Large shutdowns are still being postponed due to the Covid-19 pandemic situation and customers’ tightening cash management actions.

The ongoing Covid-19 pandemic continues to create uncertainties and risks of abrupt changes in all markets.

Covid-19 pandemic update

The Covid-19 pandemic continues to pose significant short-term risks and uncertainties for the markets. The spread and severity of the pandemic continue to be difficult to predict. Abrupt measures taken by various national and local governments to restrict the spread of the virus have increased the unpredictability of the demand for Neles’ products and services. The pandemic-related mobility restrictions have impacted Neles’ operations by restricting Neles’ ability to provide services at customer sites, as well as the running of manufacturing sites when lockdowns were imposed. These uncertainties are expected to continue in the fourth quarter.

In the third quarter, customers have returned to more normalized operations compared to the second quarter, but large maintenance projects are still largely postponed due to mobility restrictions and tightening cash management by customers. The situation has caused slow-down in Services and MRO-driven businesses. Also, due to earlier shutdowns, there has been some deterioration in supplier delivery times during the third quarter. Thus far, Neles has experienced no material credit losses or cancelations of orders in the order backlog.

During the second and third quarters, management took proactive measures to ensure the safety of employees, and to control costs and preserve cash flow to protect Neles’ financial position. The measures included a variety of enforced safety procedures at manufacturing sites, remote working and strict travel restrictions, cuts on external spending across the organization, as well as cost-saving and optimization activities. Increased attention was also paid to managing net working capital.

There is an increased risk that global economic growth will significantly deteriorate because of the pandemic, which, with uncertain political and trade-related developments, could affect Neles’ customer industries, reduce investment appetite and customer spending, thus weakening the demand for Neles’ products and services, as well as affecting the company’s business operations and profitability. There are also other market- and customer-related risks that could cause planned and ongoing projects to be postponed, delayed or discontinued.

Audiocast and conference call details

Neles’ President and CEO Olli Isotalo and CFO Simo Sääskilahti will present the financial results in an audiocast and a conference call for analysts and investors today at 2:00 p.m. EET. The audiocast can be followed at A recording and a transcript will be available at the same webpage after the event has finished.

Conference call participants are requested to dial in five minutes before the event on:

Finland Toll: +358 981 710 310
Sweden Toll: +46 856 642 651
United Kingdom Toll: +44 333 300 0804
United States Toll: +1 631 913 1422

Participant PIN: 97484886#

Neles Corporation

Simo Sääskilahti, CFO
Rita Uotila, VP, Investor Relations

For more information, please contact:

Rita Uotila, Vice President, Investor Relations, Tel. +358 400 954141, E-mail:

Neles is one of the leading providers of mission-critical flow control solutions and services for process industries. With our global team of experts and innovative solutions, we help our customers to improve their process performance and ensure the safe flow of materials. Neles is listed on the Nasdaq Helsinki in Finland and had sales of about EUR 660 million in 2019. Neles employs about 2,900 people in approximately 40 countries. Neles was created in the partial demerger of Metso Corporation, and trading in Neles stock started on July 1, 2020.,


Neles Interim Report Q3 2020 ENG