Valmet Oyj
OMXH:VALMT
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
21.62
29.2348
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Valmet Oyj
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen, and welcome to Valmet's 2022 Results Publication of Webcast. The highlights of the year included the finalization of the merger with Neles, which now means that Valmet's stable business consisting of Services and Automation was €2.8 billion in terms of net sales.
My name is Pekka Rouhiainen, I am the Head of Investor Relations here at Valmet; and the speakers today are President and CEO, Pasi Laine; as well as CFO, Katri Hokkanen. After the presentations, you will have the chance to ask questions over the phone lines.
Without further ado, Pasi please go ahead.
Thank you Pekka. Hello, so our headline is today that, orders received increased to €5.2 billion and comparable EBITA to €533 million. So the traditional agenda first 2022 in brief then some words about the segments and business lines then one page about Flow Control integration. Katri will go through the financial development, and I will then talk about dividend, guidance and short-term market outlook.
First year in brief, so orders received was €5.2 billion, net sales €5.1 billion, backlog ended to be €4.4 billion, unlike said, our EBITDA increased comparatively EBITDA increased to €533 million, and EBITDA margin was 10.5%. Gearing in the end of the year was 20%.
And here are the same numbers in pictures as well and last year, we employed about 17,500 people. And if you think about the net sales and divide that to the segment. So a little bit less than 50% came from Process Technology, and there is of course no change because of the merger with Neles. Services contributed to 32% and Automation segment to 20% of our net sales.
Geographically, North America was strong 21%; South America 14%, Europe Middle East and Africa 37%; China 16%; and Asia Pacific 12%. So good and quite traditional contribution of the net sales between the areas.
Then, here's the historic graph which we have been showing for some years now in quarter four call. So we started with orders received somewhere €2.5, €3 billion level and first time, we are over €5 billion, and quite constant growth in orders received.
Net sales has been growing even more steadily with €2.5 billion and now we have doubled that in nine years. So now we are a little bit over €5 billion. Comparable EBITDA has been improving Euros year after. So we started from €50 million, and now we ended up at 533 so constant improvement. And comparable EBITA margin has been developing every year, and now there is exception and our EBITDA margin went down even if comparable EBITA was going up. So, of course, this is disappointment to us of course our target was to improve our comparable EBITDA margin as well. But last year, we didn't succeed on that.
Our order's received has been increasing steadily. Here you see the graph. So it is going from this €2.5 billion, and now the trend of last four quarters is at a little bit over €5 billion level. Geographically, of course in this graph, we are not comparing apples to apples the year 2021 is without Flow Controls and 2022 has three quarters of Flow Controls included.
North America is a big market for us but almost €1.3 billion. South America last year a little bit less than in a good year so 350. Europe continues to be strong little bit over almost 2.1 billion. China was performing well 711 million. Of course, there is some growth from – coming from flow controls, but all-in-all Chinese market was active last year again. And Asia Pacific has been improving from 544 to 771. So all the areas with one exception actually two exceptions were growth. So three we're growing two not.
Stable business. Orders received total to a little bit over €2.8 billion. When we started, we had the services with €1 billion order intake and then we acquired systems business. We have been growing organically Services and Automation business and now we've made the merge. And now last year's order intake was a little bit over €2.8 billion.
So, this is a good summary slide telling what kind of changes, what has been one of the changes that has happened in Valmet. And we are of course very proud and happy of the organic development, merger development and acquisition development. Backlog ended up to be €4.4 billion. We are saying that about 65% comes from Process Technologies; Services 20%; and Automation 15%. We are also saying that about 75% of the backlog is currently expected to be realized as net sales during 2023. Last year the same number was 70%.
Then some words about the segments and business lines. So first, the services which is a segment and business line. Order intake ended up at a little bit over €1.7 billion. So nice growth in order intake. Net sales grew also and was a little bit of €1.6 billion. EBITDA in Euros improved from €204 million to €237 million. And EBITDA margin last year was year before 2021 was 15% and 22%, 14.8%.
So our organization did very good work like you all remember, first quarter was not that good, second was better, third were not that good and now we are only 0.2% below in margin compared to the previous year of good development and good work by services business line and all the area organizations. We can happily tell that all the geographical areas were growing and all the business lines were growing.
And if we take a look at the business units, all the business units were growing earlier. So if we take a look at the business units, so performance parts was about 35% of the orders received, Rolls 17, Fabrics 13, Board Paper and Tissue Solutions 17 and Pulp and Energy Solution 18. Roughly the same percentages less than a year ago, maybe some small changes, but all business units have been growing.
Geographically, North America was performing well and a strong so 34% of the order scheme from North America. South America, China and Asia Pacific are roughly the same size. So if you take 10% out of €1.7 billion then you end up roughly at €170 million level. So we have good about €170 million order intake in all these three growing areas. And Europe was 37% in Euros that was growing as well. So good performance in all the business units and good performance in all the areas as well.
In Automation segment, of course the big change is that order intake was almost €1.1 billion and big change was of course the merger of Neles -- merger with Neles, net sales was a little bit over €1 billion as well. Comparable EBITDA for the whole year, last year was €79 million, of course consisting only on systems business then. And now we ended up in a comparable EBITDA of €190 million. Last year, EBITDA margin was 19.2% and this year 18.3%. So we are happy with the performance of Automation segment both in Flow Control and in Systems business.
In Flow Controls, order intake in Valmet books was €576 million. And totally, you can add a little bit less than €200 million and then you end up at a total order intake so 770. This is of course very good performance by Flow Controls. Net sales grew as well. So in Valmet books €551 million and before that in Neles books €166 million. So good growth both in order intake and in net sales. And I'll come back to the integration later on. But we are very happy with the performance of Flow Controls.
In Flow Controls about 68% of the business came from a business unit called MRO and Services. Valve controls and actuators brought 19% and projects 30. So this is the first time when you see the split between the business units in Neles. But that's how it's -- the business is now managed and that's the share of businesses based on the business unit structure.
Customer segment-wise about 26 came from Pulp and Paper; Renewable Energy and Gases, seven; Refining and Chemical, 48; Metals and Mining, 10; and the rest of 10. And then by areas North America was strong last year. And traditionally it's also a strong for Flow Controls. So almost 40% a little bit over 30% from Europe, and then China Asia Pacific and South America close to 10% all of them.
In Systems business, we are proud to announce that the order intake went over €500 million first time ever. So here you see the growth trend starting from 2016 and order intake has been growing with one exception. Every year now it ended up around €505 million. Net sales grew also nicely €412 million to €489 million. So nice development in systems business as well. So we are happy with the performance of automation systems.
And here the traditional graphs. So Pulp and Paper was 72% and Energy and Process was 28%. Usually this is about 30/70 last year Pulp and Paper activity was a little bit more than in Energy and Process. In geographies, so North America was strong here as well. Europe is always big and then the rest of the areas, South America 6% and Asia Pacific and China 9%.
In Process Technologies, our order intake dropped from the peak year to a little bit over €2.3 billion. So now it's second best year in the history. So it's a good year in order intake. Net sales has been growing steadily. And last year it was a little bit over €2.4 billion. EBITDA last year was €175 million now to €30 million less €145 million. And EBITDA margin has gone from 8.1% to 6.0%. So the profitability is impacted like we have been saying with some selective -- some Pulp and Energy projects where we have cost overruns and the same projects, which we have earlier had. And now we have the full-year picture and last year's profitability. EBITDA margin was 6% in Process Technologies.
Then if we take a look on business lines, Pulp and Energy business line, order intake a little bit less than €1.1 billion but almost €90 million less than a year ago. But at the -- let's say one could say normal level if you look at the graph there, which is telling the history. Net sales has been growing steadily. So net sales ended up at €1.081 billion.
Orders received wise, Energy was active so 54% came from Energy. We had one year when we went over almost at the same level or same level in order intake in energy. And then we had a marine scrubber business booming. And then if I remember correctly, we told that marine business, scrubber business order intake was roughly €190 million. And last year it was very marginal, so no material orders at all, which now means that our boiler market has been active and we have been very successful in boiler market.
Then where we haven't been successful is with Pulp. So our competitor has been winning more cases, but order intake has been at a decent level in some of the business units. But of course, we have to accept the fact that our competition has been stronger in Pulp side, but we have been a lot stronger in energy. Geographically, Europe has been big, Asia Pacific as well and North America, South America and Chinese market haven't been active or we haven't been successful in Pulp cases on those areas.
Then in Paper business line, last year was very good order intake over 1.6% and now it's a little bit less than €1.3 billion. But I would say, that this is a good level order intake level for Paper business line. So, good performance. Net sales has been growing nicely, as well. So we started from €500 million and now the record is a little bit over €1.3 billion. So, good and constant development in Paper business line.
And like you here see, our net sales was a little bit higher than order intake, which means now that we start to be on top of the not on the backlog, so that it's not growing and lengthening our delivery times even further. So this is positive news that we have in Paper business line, higher net sales than orders received.
Business unit wise, Board was 74%, so majority of the business is coming from packaging applications. Paper was contributing 9% and tissue 17%. And the board market has been very active. And like we have been, saying tissue market has been satisfactory to us and that has then resulted that order intake was only 17%, of the total.
Geographically, here are always big changes depending where the projects are landing. North America, good market for us 21%; South America not too much activity in 2022. Europe was strong, China was still strong and Asia Pacific was strong as well. So, here the pie chart is changing quite a lot, depending on in which land the country the big projects are landing.
Then, some words about integration of flow controls into Valmet. So, first of all, I want to say that the integration is according to plan or maybe even, a little bit better. So we have now started to integrate the sales effort, so that when we are offering Process Technology and services in selected cases, we are then including our wells into the package not in all, but it depends always on a customer case and application.
We have done most of the synergy actions in functions, common locations and supply chain. We have been saying earlier, that we expect about €25 million annual run rate synergies and we have been saying that about 60% of them will be achieved by end of 2023 and 90% after -- by the end of 2024.
Now we can tell that our orders received included about €10 million of synergy impact in 2022. So, we are well developing that. You have to remember that, Flow Control was only nine months with us. And then of course, in the beginning it took a little bit time to get the machines, synchronized and then we can tell that we have implemented cost synergy actions so that the annual rate is about €12 million. Out of which, we are saying, that roughly half was achieved already in -- as a realized cost saving in 2022. So integration is going according to plan, or even a little bit better and we have started and we have seen already synergy benefits both in sales, orders, orders sales and in costs. Good.
And now, I'll let Katri to continue with the financial development.
Thank you, Pasi and hello everybody, on my behalf as well. Before actually going into the financial development, I would like to thank all the Valmeteers for the year 2022. Thank you, for your hard work. And I also want to send a special thanks to my team globally, for getting us to this point today, that we can report the results.
A few words about the Q4 first. So our order intake increased to €1.4 billion. Our net sales also increased to €1.5 billion and our order backlog was at €4.4 billion. Our comparable EBITDA increased to €196 million or 12.7%. And gearing was 20% at the end of last year.
Then a few words about the full year numbers. So order intake was at the level of €5.2 billion and that was 10% higher than in Europe in 2021. Backlog as I said earlier was at the level of €4.4 billion. There was a 7% increase and net sales was €5.1 billion and there was 29% increase.
Comparable EBITDA was at the level of €533 million or 10.5%. So in millions of Euros we were €104 million ahead of 2021. But as Pasi said earlier, the margin was down by 0.4 percentage points.
Few words also about segment key numbers. So starting from order intake. So Q4, as said earlier was at the level of €1.4 billion. All of our segments increased during the fourth quarter. And then when looking at the full year numbers, so services was at the level of €1.8 billion. There was a 19% increase compared to 2021. Automation was at the level of €1.1 billion. So there we had now three quarters of low control. And then Process Technologies was at the level of 2.4% and there we had a decrease of 16%.
Moving onto the net sales of fourth quarter. Also all segments increased compared to the comparison quarter. And when looking at the full year numbers so Services was €1.6 billion, Automation €1 billion; and Process Technologies €2.4 billion, and all of these increased compared to 2021.
Then a few words about the profitability. So first Q4, Services was at the level of 18.7% and that was a good achievement from the Services segment. Considering that the first quarter was below 10% then during Q2 and Q3, we were around 14% level and now at 18.7%.
Automation was the highest this year – sorry last year 21.4% and then Process Technologies was at the level of 5.6%. And when looking at the full year, profitability Service is 14.8%, Automation segment was 18.3% and Process Technologies at the level of 6%. And as said earlier, €533 million was the comparable EBITDA, out of which 80% was coming from the stable business.
Gross profit was €1.2 billion at the end of last year, so there was an increase in millions of Euros but the profitability went down from 25% to 24% level. SG&A was at the level of €852 million. So there was a big increase compared to 2021. And out of that increase roughly 65% was coming from Flow Control. And the rest is then related to personnel cost increase so we have more people, there was also FX impact and more traveling.
Few words also about the development over the year. So net sales has been developing quite nicely over the years. And as Pasi said, last year was the first year that we were above €5 billion and stable business net sales was at the level of €2.6 billion. Pasi also mentioned, the comparable EBITDA percentage that it went down to 10.5%. This was the first year that we were not able to improve the margin even if in millions of Euros we improved. And when looking at our financial targets, so it is unchanged. So we are targeting to be between 12% to 14% and continue the hard work towards that target.
When looking at the cash flow, so that was €36 million at the end of last year. So there was a big drop compared to 2021. And of course, 2020 and 2021 have been kind of exceptionally high numbers when it comes to cash flow. But this change is coming from the change in net working capital.
And when looking at the net working capital profile, so it has changed after Flow became part of Valmet. And I already said this last time that, if we would have had Flow Control as part of us the whole time, we roughly estimate that it net working capital would have been on the level of minus 7%. And now when looking at last year's number, we were at minus 2%, so clearly below that being at minus 82%.
And there are three items, which contributed to this decline. First is related to inventory. So this one we have been discussing already in the earlier quarters that our inventory levels have gone up. This is partly explained by Flow Control, but we have also increased the inventories in legacy Valmet to be able to deliver to our customers.
Then the second topic impacting this was trade receivable. So we had very high invoicing month in December. So that then increased the trade receivables. And, of course, that is something that then we expect to collect early this year.
And then the third item was related to customer advances. So in 2022 we had less customer advances than in 2021. So there's where the gradients impacting the cash flow and also the net working capital.
Net debt was at €502 million at the end of last year and our gearing was 20%. So no big changes there. And we have now added a new ratio to the presentation material. So it's this net debt-to-EBITDA ratio and that was 0.78 at the end of last year.
Capital employed was at the level of €3.3 billion. So no changes to previous quarter and there is an increase of €1.5 billion and that is related to the merger of Neles. Our comparable return on capital employed was at the level of 17% and our financial target is to be at least 15%.
Then last, but not least adjusted earnings per share so this is without the business combinations. Last year we were at 2.37% and it has increased compared to 2021.
So this was my part of the presentation. Thank you and I will give the floor back to a Pasi.
Thank you, Katri. It seems that Katri talks faster and more precisely than I so I have to speed up as well in my presentation skills. So I'll go through the dividend proposals guidance and short-term market outlook. First the dividend proposal. So like you know our policy is that dividend payout should be at least 50% of the net profit. And now our Board of Directors have decided to make a dividend propose after the AGM in a way that we would be paying €1.30 dividend per share, which represents about 68% payout ratio.
And here you have then the graph showing how the dividend has been developing from €0.15 and now the proposal is €1.30. And we haven't added here in the slide, but we are proposing also that the dividend is paid in two installments. So one in spring and one in autumn to make the cash flow management easier in Valmet, but 1.30 is the dividend proposal to AGM.
Then our guidance in short-term market outlook. So this time we are saying that Valmet estimates that the net sales in 2023 will increase in comparison with 2022 and comparable EBITA in 2023 will increase in comparison with 2022. So both guidances are increased.
Then short-term market outlook. Services we keep the good status like you have seen order intake has been developing well which means that we have good capacity utilization and current market activity is still good. In Flow Control same reasons good order intake and market activity continues to be good. Automation Systems business the same, good market activity and good order intake last year.
In Pulp and Energy same story. So we have units where we have good utilization a good backlog and then we have one unit where the situation is not that good. And that's why it's good/satisfactory.
Energy order intake has been good and market activity continues to be good. And board and paper order intake has been good. There's still plenty of projects active and tissue we order intake wasn't that good last year and we keep then the satisfactory outlook for short-term market outlook for tissue. So that's the guidance and short-term market outlook.
Thanks Pasi, and we are now ready to move on to the Q&A session then. So, we will be taking questions over the phone lines.
[Operator Instructions] The next question comes from Antti Kansanen from SEB. Please go ahead.
Hi guys. Thanks for taking my question. First one is on the services and kind of the order growth that you saw on Q4 and kind of the demand outlook. I mean, the growth was 5% in comparable FX. So I'd assume that is fully driven by pricing, but the outlook remains good. So, could you maybe elaborate what did you see geographically or different type of services in Q4 and kind of what is the outlook there going into first half this year?
That was a good question. So, we saw good market activity and Katri, correct if my answer is not correct. So, we saw good market activity in all the areas and then the same goes actually with all the business units. So, I wouldn't say that we have seen any difference compared to the whole year results and outlook.
Okay. And then, the kind of the process tech margins and the issues that you have had with the projects, is it any way possible to quantify kind of the revenue impact this year from those projects relating to -- or in comparison to '22? I mean, just trying to get how much of those projects are still ongoing this year compared to how much they impacted last year's numbers?
Yes. That's a difficult one to answer. It's -- of course, we know the backlog numbers and how much, but we have been saying all the time that it's selected projects in Pulp and Energy segment. So first you can take Paper away from that calculation and then you can think that it's selected. So, it can't be maturity and then you can -- so -- but I can't give to accurate answer on that. So, maybe the best is that I continue with the message we have had earlier and we have been saying that it's selected projects in Pulp and Energy.
Okay. But there's kind of like no communication on when those projects are due to be finalized or anything like that?
No. No, no, we can't communicate that and then.
Okay. And then perhaps a follow-up on the process tech. I mean the backlog is a bit down, but obviously from a very elevated level. So is it kind of getting back to normal or is there some point of concern about kind of capacity utilization or do you have enough workflow going forward? How would you look at that? I know it's a mixture of different businesses and probably quite uneven situation. But how should we think about kind of the volume impact?
No, we have one business unit where we have -- not that good work situation, but it's a small one and then the rest they have good workload.
And then the last one.
Like you said and like I said also, it's good that the backlog is getting a little bit down in -- especially in pulp side. So, it means that our delivery times start to be more competitive again.
Okay. And then the last one actually to Katri regarding your financial expenses this year, I mean you have roughly €700 million in debt or how should we think about how much will that cost you in '23, if the interest rates going up? How is the structure on that set?
Yes. So, when looking at the interest, of course, it's probably better to look at the net debt, so that was €502 million. And now, at the end of last year, our average interest rate was 2.3%. So there was 1% increase compared to the third quarter. So, clearly the interest has a little bit increased. So of course if this continues it will have an impact. But of course, we are playing with the fixed and floating interest rates. That's one way of handling it, but with this level, I think that we are not worried about the situation.
Right. Thank you.
Thank you.
The next question comes from Mikael Doepel from Nordea. Please go ahead.
Yes. Hi. Good afternoon everybody. First a question on order intake heading into this year. Now what are your expectations there overall if you think about new equipment and aftermarket businesses separately? And are you seeing any hesitations out there given the macro headwinds?
So we are giving the market outlook with the business or the segments what we told. And like we said or like I said, we are still seeing good activity in stable business in services and flow control and automation and pulp. It's good/satisfactory and energy and board and paper are good and Tissue is satisfactory. So we are not guiding the order intake for the whole year and not more specifically. But for coming six months this is our view of the market is saying.
Then hesitation, we haven't seen increasing hesitation. So in our pipeline, we always have a certain amount of projects. And some of them customers are delaying, some they are speeding up and some are going according to plans. But we haven't seen any actually change compared to the normal situation now in our capital or process technology sales pipeline.
Okay. And then in terms of productivity, I guess, you talked about your margins going down in 2022. You're citing supply chain issues and weaker productivity. So I was just wondering, are you able to quantify what kind of an impact the weaker productivity actually had on your earnings and margins last year and if you would expect that to reverse this year?
So of course internally we have analyzed many things. So productivity is maybe it's in a gross profit of course the inflation had maybe a bigger role than productivity and then cost inflation both in materials and labor and logistics and so on. And for coming year of course, people are reading newspapers and you can see that there's some discussion that logistics prices might drop at some point of the year and maybe even raw material prices. But then next inflationary topic is more the salary inflation and the impact of it. So we are working on, of course, all these fronts to make sure that our gross profit would go up. But last year we did. Katri, do you want to add something?
I think you nail it. Well, it's exactly like that. Yes.
Okay. No, that's clear. And just finally just wondering given the opening up in China and you're having a decent exposure, I was wondering, if you can say anything about what you're seeing on the ground in China right now in terms of activity, and also in terms of the project pipeline, I guess, there are a few bigger integrated packaging mills planned and are these moving ahead now?
Last year our order intake in services was developing well like you can calculate from percentages even if there was COVID and COVID limitations. Capital market was active last year as well, and we are still a little bit above the normal, if you can have a normal Chinese market.
But it has -- Chinese market has been last three years good for us. Now the sentiment is more positive. So, of course, people are the somehow relieved that the normal life comes back and people can travel and meet with each other and go to restaurants. So when talking with our Chinese team they are happy now.
All right. Good. Thanks very much.
The next question comes from Sven Weier from UBS. Please go ahead.
Yes. Good afternoon. Thanks for taking my question. As always, the first one partly is around the revenue and the EBIT guidance for this year. Obviously, there's still a bit of a sizable impact from the one additional quarter from Neles. I mean, would you also be happy to say that you expect the company to grow organically on both items?
I think it's – rules are saying that, company can give only one guidance and company is giving only one guidance. So as a total Valmet is giving guidance that net sales will increase and EBITDA will increase. Sorry, Sven but I can't open that more.
Okay. It's fine. I was kind of expecting that answer. That's okay. Worth the try always. And maybe on the second one you can be a little bit more detail, because I was wondering on the Stora project in Oulu, I hope I pronounced that correctly. I was a bit surprised with the order size you had announced related to the project given that the total project size is €1 billion. I mean, are you expecting more business potential from that middle, or is that basically it. What you have announced?
No, no. It's maybe not our normal. We have announced the orders what we are getting from Oulu. So we got –
A credit.
Yes.
So there's no more fixed debit for you then.
Of course, some small ones but not that ones that we – that size – sizable that we would make announcement.
Okay. Thank you. And the other one is a follow-up question to the Process Technology margin. Is it still fair to assume that there is still an impact this year, but the impact is smaller than it was in 2022 from those problems we talked about in the Q&A?
No I'm not giving a direct answer to that, but I'll come back to our earlier statement that once Valmet targets to reach higher profitability all the business lines have to improve. So, automation has to improve Services has to improve and Process Technologies have to improve. Are we able to do it this year? I can't promise that, but of course our goal setting has to be that all the business lines are improving. Otherwise, we couldn't be saying that our EBITDA guidance is that EBITDA will increase.
Okay. And the final one is just on the pulp greenfield pipeline, how you look at that you already mentioned that last year the period was a bit more successful. But how do you see the pipeline in general? Is it still a reasonably good one or now with pulp prices going down a bit has been any change?
No. The pulp business people are paying a lot of attention to mega mills, and we traditionally haven't been listing the mega mills. Our dear friends might be listing them we haven't. So I would assume that some bigger mega mill cases, if we decide, it will be in latter part of the year.
And then one has to remember that in pulp side pulp business there are also Island decision. So, somebody wants to build a new recovery or increased the fiber line on build on new cooking line and so on. And that's the market where from last year, we got that order intake what we got. So that market continues to be active. So for us to have a good business, we can't base that on the thinking that, there has to be a mega mill every year.
Thank you, Pasi.
Thank you, Sven.
The next question comes from Panu Laitinmäki from DanskeBank. Please go ahead.
Firstly, on the competition, I mean you commented in the pulp side competitor was maybe more successful and it seems that Stora Voit got the bigger order. So, can you kind of comment. Is it more like pricing why competition has won these orders or what was the kind of plan out?
Now, all-in-all in both side our hit ratio last time against dear friends from Germany was about 70%. And sometimes you lose project. And then we can't of course open why we lost. But of course we have had good discussions with Stora why they selected somebody else but that happens in the business. And generally the hit ratio has been about 70% for us against Voit.
And in the pulp side?
Pulp side, we got good-sized business there in all.
All right. And secondly on the services margin, it was up clearly from previous year. The question is basically was Q4 2021 already impacted by the inflation since we haven't seen like earlier quarters. So, I mean is it like above normal levels in Q4 2022, or was it like the recovery after inflation.
Our look at it so that it has been a development over the year. So, Q4 margin was lower than this year. Of course then there was the low margin in Q1 and then we have been improving again. So, we have been increasing the prices. So, we have said also earlier that we were maybe a little bit late with increasing the prices and that was visible earlier this year in our results.
All right. Thanks. Then on the receivables like they increased. Was there anything special related to like timing of sales or where did the increase come from?
It came from many fronts, but we had a very high invoicing month in December. So, that was clearly visible and it is in our current receivables. So, it was very active December let's put it that way.
All right. And then finally on Networks or Flow Control, I think the split of orders that you showed was quite interesting. So, Pulp and Paper was only like 25% if I remember correctly. And then clearly the biggest part came from Refining and Chemicals. So, can you talk about like what are you seeing in there and where is the growth coming from and kind of how do you see the different end markets?
So, I think it's -- actually it's quite normal. If I remember correctly at the highest Pulp and Paper has been now 29% in the order intake. So 26% is good taking into account that the total amount of growing. So, I'm not calculating my head, but I actually would assume now that 26% is bigger number than a year before 29% in absolute terms.
So, Flow Control has been doing good work on that front as well. But otherwise this is selling quite well in where we are and where the growth -- so growth can come still in paper. And we have been saying that Flow Controls can increase the market presence in board and tissue.
Then an interesting case is the -- the case is -- Metals and Mining as well. But I'm sure that in our Capital Markets Day Simo will open the growth avenues even more. So, if it's okay that this time, I'm just telling that we try to grow in all these segments.
All right. That’s clear. Thanks.
The next question comes from Tomi Railo from DNB. Please go ahead.
Hi, this is Tomi from DNB. Also trying to ask about the profitability and the underperforming projects. Just simply it must be fair to assume that the share of revenues is smaller this year compared to last year.
You all try to know put us to answer something what we haven't have been reluctant to answer to me. The same question and answer continues that we have selected projects where there are cost overruns in Pulp and Energy.
Okay. Another way to ask, would you be able to comment the overall order backlog quality from the profitability point of view? Is it better or similar than -- starting last year?
We are happy with the order backlog quality.
Yes. It's on a good level €4.4 billion it's over €300 million higher than a year ago. And of course, it's good to also mention that we have 35% of stable business in the backlog and that is more than what we had in 2021. So I agree with Pasi.
Okay. And then, Energy really good up-tick almost at €600 million orders, as Pasi said, above the previous peaks which included the scrubber. Do you have any capacity limitations on that side, or is it really in a way shared with the pulp and so on, so can you continue to grow orders in Energy?
So Energy business unit is sharing the capacity with recovery boilers which is part of the pulp side. And I think our capacity starts to be very well utilized there. So in Energy side, it's easier to outsource manufacturing.
But then, at some point of time becomes the limitation of project management and engineering capability. And I think we start to be at very high-level from an organization load point of view. Katri, you have been as a business controller.
Yes.
Do you want to correct my statement?
No I don't want to correct your statement. You are absolutely right. And you know the business as well.
But you know it better.
Yeah. But it's exactly as you said that we cross utilize the resources, yes.
And finally, group costs jumped in the fourth quarter at least. Any color you could give for this year for the quick quarter?
Yeah. So the other was €39 million. So there was an increase as you said. And we have more people there now. There has been some increase in the personnel cost and we will do our best to keep it roughly on the same level I think. That's fair to say.
Thank you very much.
Thank you.
The next question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead.
Hello. Its Johan here at Kepler Cheuvreux. Just coming back to the pulp side again you mentioned you have been losing some share. You've gone for the Ireland midsized orders rather than the big greenfield. But I think some time ago Pasi, you sort of mentioned now with Neles you're a bigger company you might take on risk and go for the greenfields as well. Have anything changed there regarding your strategy?
No we have been doing greenfields earlier as well. And like currently we are doing one very big greenfield closer with Metsa in Finland and in South America we have been doing several of them. Of course we go after them. And in the future -- we have been going after them.
We haven't been during the last two years as successful as Enbridge but of course then we want to be successful in the future. And of course now when Valmet's EBITA is over €500 million then of course our capability to take calculated risks is higher.
But of course, we want to say, to the investors as well that we are not making any stupid decisions now because we are a bigger company. So of course we will be very careful with our decision-making in the future as well.
I think this one sentence what I said last time has been a little bit over quoted by many people. It was one sentence in one sentence. So of course we are careful. But of course, we want to increase our market share in pulp.
Okay. Excellent. Then on profitability. I mean we learned about this excellent profit improvement in the automation systems business, if you took it over from Metso, a couple of years ago. Now obviously, we see it down year-over-year which is clearly the Nele impact in Q4 and on the full year I suppose. But would you say the automation systems margins, have they improved further, or have they also slowed sort of on a standalone basis?
Difficult question to answer. So we opened the system business profitability last year. And then I'm not allowed to tell the business line profitability for systems of flow controls. But I would say that last year's profitability in Automation segment was actually quite good but of course, they should continue to improve the profitability as well.
Okay. And then coming back to the interest comment. You said 2.3% now at the end of the quarter. I think previously, Katri sort of alluded to the fact that you had a big cash position that wasn't yielding any interest income at all and that's why your interest rate looked or interest net looked a little bit high. How we sit today? I mean are you – your cash position is that yielding anything or should we just calculate the costs on the debt?
When you look at the overall, you should look at the net debt. So of course, we have had a strong cash at the end of last year, almost €300 million. We also gained the interest, so you should look at the net debt.
Okay. Excellent. Thank you very much.
Thank you.
The next question comes from Antti Kansanen from SEB. Please go ahead.
Yes. Thanks for taking the follow-up. It's on the pulp and energy side, where we now see this kind of a mix shift from pulp towards energy. So could you on a general level talk a little bit about profitability differences on those two businesses. If you do an energy project, is it materially different than the pulp side or clearly the same type of margin. Is there any impact on profitability from this shift?
In average the same and some years energy is better than pulp, less and some years the other way around but as a rule of thumb it's the same.
Okay. So you kind of just ensure the workload on the boiler side and then similar type of project model.
Customers tend to squeeze with the same pressure on both businesses.
Okay. Thank you. That’s all.
Thank you.
[Operator Instructions] The next question comes from Mikael Doepel from Nordea. Please go ahead.
Yes. Thanks. Just a brief follow-up. Coming back to your comment there around margins. I'm just wondering if you can talk a bit more about the headwinds and tailwinds going into this year. I mean you mentioned the order backlog having a bigger share of stable business. So that should suggest that there'd be a bit of a mix improvement perhaps supporting margins. But I was also wondering to what extent there is still a catch-up effect coming from pricing versus costs, or are you in fact already seeing pricing ahead of cost in the year. So maybe if you could talk a bit about the headwinds and tailwinds for margin. Thanks.
Katri, do you want to take this?
Well, if I start of course, maybe the one question more for this year is related to the salary cost inflation and that impact on the cost level. So maybe that's one thing at least to mention. Do you want to add something here?
No. And then on the other side it might be that logistic costs are going down.
Yes. That it. Yes. So both trends.
Okay. But do you feel comfortable with your current pricing in the order backlog to handle these changes to cost inflation one?
You never feel comfortable but of course, we are comfortable enough but there will be a lot of work is needed like last year as well and the same kind of work continues that we will have somewhere some cost increases and we have to compensate them from somewhere else. So normal management is needed. Nothing special.
Fair enough. Thank you very much.
The next question comes from Tom Skogman from Carnegie. Please go ahead.
Yes. Good afternoon. This is Tom from Carnegie. So I have a couple of questions, starting with the market sentiment. I mean, I'm sitting next to our pulp and paper analyst in our office and things are getting much worse for your customers at the moment and you have a very long experience both of you from this industry. So when -- how long can the downturn be without that really starting to impact customer negotiations and confidence to go ahead with the project. Is it -- if the downturn in pulp and board prices are longer than one year would that start to have an impact or so?
Okay to say now some of the European or we have been focusing a little bit on our own numbers. So I haven't had time to analyze globally what our customers have been announcing. So some of the -- our European customers have now announced that demand was weak in quarter four.
Then when discussing with some customers they have been saying that they see that the market will pick up somewhere in latter part of the first half. Then when you think of -- and then of course I haven't been yet following what happens in Latin America and China and North America with the results. So too early to say that. But when thinking about the investments our customers are looking for the long-term growth of the market and that's deciding whether they invest or not, short-term everybody knows that there is fluctuation of market. But my view is still on the positive side.
Okay. Then in service, I mean, we saw during the pandemic that you were not allowed to visit some customers and then we had a very high board price last year and also on the pulp side the price is very high. So I guess a lot of modernization projects have not went ahead that have been planned for several years. So do you see pent-up demand in service that could be realized now when the heat is off for your customers?
In pent-up demand, we have been saying that maybe limitation. So this pent-up demand will not materialize as a peak in order intake because customers have limited resources and we have limited resources. So we have been trying to say that first there was a level then business went down and then it came back. But this pent-up peak after the -- with a little bit lower period is not possible because there's -- customers don't have unlimited resources and we don't have unlimited resources either.
All right. And then I wonder about capital allocation when you start to turn your net working capital into cash, you will soon have a very strong balance sheet and a strong cash flow again. And then the question is I mean, given you have so high market shares in the kind of project business, is it so that acquisitions will focus now on flow control and automation companies. I mean, I realize you want to buy service companies to if something is available, but we have tried that for the last 10 years. So -- but this is a new opportunity when you have Neles now as part of the company. So will capital allocation focus more and more on the Automation and Flow Control business.
Katri, can you comment on other parts, but if I'll comment on acquisitions. So we continue to work on all these three lines so Process Technology Services and Automation and we somehow internally keep all of them at the same level. So the one who has good idea and can bring a good opportunity will be supported. And let's see where we can find good and suitable acquisition targets earliest. Like you know, it takes several years to develop the cases. So it's not something that you have money and then you buy something. So it can be that an acquisition process takes three to four years. So it's long-term activity and all the corners of the triangle will be supported.
Yeah.
So there is no kind of strategy to further strengthen the automation low control, but you have a much lower market share than in the
Of course, we want to strengthen it, but I don't want to send a message that we strengthen that and neglect the opportunities and services of Process Technology. So of course, if there are opportunities, good opportunities, then of course we'll strengthen our Automation business. No question about that.
All right. Thank you.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
I will tell in the closing comment, but first time when it has taken over one hour, so maybe my presentation was long. So thanks for a very good activity and thanks for very good questions.
Yeah. All right. And thanks also from my behalf. And the next event for Valmet will be the Capital Markets Day that will take place on the 8th of March here in Espoo so welcome everybody. We distributed formal invites today, so please register and come to see the Capital Markets Day. And then after that the quarter one results will be published on April 26. So thanks for the active Q&A and have a nice rest of the week for everybody.