Liquidity and refinancing risk management
Liquidity or refinancing risk arises when a company is not able to arrange funding at terms and conditions corresponding to its creditworthiness. Cautious maturity distribution of interest-bearing debt and sufficient cash, short-term investments and committed and uncommitted credit facilities are maintained to protect short-term liquidity and to manage refinancing risk. Diversification of funding among different markets and an adequate number of financial institutions are used to safeguard the availability of liquidity at all times. Treasury monitors bank account structures, cash balances and forecasts of the subsidiaries and manages the utilization of the consolidated cash resources.
At end of the reporting period Cash and cash equivalents amounted to EUR 432 million (EUR 277 million) and current interest-bearing financial assets managed centrally by Treasury to EUR 25 million (EUR 30 million). Due to the global nature of operations, some of the Valmet subsidiaries are located in countries in which currency is subject to limited exchangeability or capital controls. Given Valmet’s total liquidity position, balances in such countries are immaterial.
In 2023, new term loans worth EUR 725 million were drawn of which EUR 400 million related to the financing of Körber's Business Area Tissue acquisition, EUR 175 million was a term loan from the European Investment Bank and total of EUR 150 million were various bilateral term loans.
Valmet’s liquidity was additionally secured by a committed and undrawn revolving credit facility worth EUR 300 million, which matures in 2026, committed and undrawn overdraft limits of EUR 15 million and an uncommitted commercial paper program worth EUR 300 million of which EUR 44 million was outstanding at the end of the reporting period.
Net working capital management is an integral part of the liquidity risk management. Treasury monitors and forecasts net working capital fluctuations in close co-operation with the subsidiaries. Net working capital increased to EUR 191 million (EUR -82 million) as at December 31, 2023, due to e.g. milestone payments for large capital projects and increased portion of stable business.
Group’s refinancing risk is managed by balancing the proportion of current and non-current interest-bearing debt and average maturity of non-current interest-bearing debt including committed undrawn credit facility. The average maturity of non-current interest-bearing debt, including current portion, and committed undrawn credit facility as at December 31, 2023, was 3.0 years (3.3 years). The amount of current interest-bearing debt, including current portion of non-current interest-bearing debt, was 8 percent (22%) of total debt portfolio. As at December 31, 2023, Valmet’s interest-bearing liabilities consist of debt and lease liabilities, and debt portfolio includes loans from financial institutions and commercial papers.
The tables below present undiscounted cash flows on the repayments and interests on Valmet’s financial liabilities (excl. lease liabilities and derivatives) by the remaining maturities from the balance sheet date to the contractual maturity date. The remaining maturities of lease liabilities are presented in Note 5, and correspondingly remaining maturities of derivatives in Note 9 to the Financial Statements 2023.
