Valmet Corporation Q3 2024 Results

Valmet Corporation (VALMT), a global leader in industrial process technologies and services, reported a mixed third quarter in 2024. The highlights include:

• Record Comparable EBITA: The company achieved a record comparable EBITA margin of 12%, despite slower-than-expected market activity.
• Order Intake: Valmet reported a €1 billion order intake and a robust backlog of €3.5 billion.
• Net Sales: Net sales remained level at €1.3 billion, with operating cash flow reaching €110 million.
• Profit Warning: A profit warning was issued in October, citing lower-than-expected Q3 orders and a cautious market outlook.
• Service Business Outlook: The service business has been adjusted to a "satisfactory" short-term outlook due to delays in customer decision-making and lower utilization rates.

Key Takeaways

• Comparable EBITA margin reached a record high of 12%.
• Orders received totaled €1 billion, with a backlog of €3.5 billion.
• Net sales stood at €1.3 billion, with stable operating cash flow at €110 million.
• The service business outlook was adjusted to "satisfactory" due to market delays.
• Process Technologies orders decreased, while Services orders hit a record €412 million.
• Automation orders grew to €322 million, supported by acquisitions.
• A significant contract, the Arauco order, will be booked in Q4.

Company Outlook

• Valmet aims for a 12% to 14% EBITA margin in the long term.
• The company expects €70 million more sales from the backlog in Q4 compared to the previous year.
• A Capital Markets Day is planned for June 2024 to discuss future strategies.

Bearish Highlights

• Order backlog decreased by 14% to €3.5 billion.
• Process Technologies segment EBITA margin impacted by legacy project settlements and weak market, standing at 3.9%.
• Net sales are about €200 million behind targets for the year.

Bullish Highlights

• Services orders increased by 18% to €412 million.
• Automation orders have risen, with 60-70% coming from outside the pulp and paper sector.
• Strong order from Arauco expected to contribute positively to year-end results.

Misses

• The company issued a profit warning due to lower-than-expected Q3 orders.
• ROCE declined from 23% to approximately 13% following recent acquisitions.
• Integration of the recently acquired API business is expected to take time to achieve targeted profitability.

Q&A Highlights

• Management is in ongoing dialogues with customers about order timing and payments.
• Typical project down payments of 10-30% remain standard for significant contracts.
• Pricing environment remains tough, with efforts to raise prices in response to inflation.

Valmet's third-quarter results reflect a company navigating a complex market with strategic agility and a focus on long-term profitability. The diversified order portfolio and strong backlog are positive in a period marked by cautious customer behavior. A significant project booking is expected in Q4, and a Capital Markets Day is on the horizon to discuss further strategies. Investors are looking forward to insights at the next investor webcast scheduled for February 13, 2024.