Good afternoon, ladies and gentlemen, and welcome to Valmet's second quarter 2024 result publication webcast. My name is Pekka Rouhiainen. I'm the Head of Investor Relations here at Valmet, and with me today are Valmet's President and CEO, Pasi Laine, and CFO, Katri Hokkanen. After the presentations, as usual, you will have the chance to ask questions over the phone lines. But without further ado, Pasi, please go ahead.
Thank you, Pekka. Welcome. So our headline is that orders received remained at previous year's level and amounted close to EUR 1.3 billion, and Comparable EBITA decreased to EUR 141 million in second quarter. So the content is, like normal, so first, quarter two in brief, then some words about development of segments and business lines, then one, slide about our strategic path forward, then Katri will come to talk more about financial development, and then I'll join again here, talking about guidance and short-term market outlook. So first, quarter two in brief. Like said, orders received remained at previous year's level and amounted close to EUR 1.3 billion. I will go through the business line segments, later on, but we are very happy with this EUR 1.3 billion euro order intake.
Net sales was at almost at the same level, about EUR 1.3 billion. Our backlog, I'll come back, was three point eight billion, and comparable EBITA decreased to EUR 141 million, and margin was 10.6%. Gearing in the end of the period was 45%. Orders received were such that in Services in quarter, orders received was 497 , and that's good number. So we had very good order intake, and if I remember correctly, order intake in services grew by 15% compared to earlier year. In Services, in automation segment, quarterly order intake was 352 , and there, if I again remember correctly, we had 4% growth.
In process technology, comparing to last year, order intake decreased, but EUR 434 million order intake is good, good amount comparing to how the year started in quarter one. So we are happy with the orders received development in quarter two. Net sales, Katri will go through more in details, and then comparable EBITA in services, we're at EUR 80 million, roughly at the last year's level, in automation, 58, and then there's a decline in process technologies to 15%. Here's the graph, how Valmet has been developing over the last 10 years, and now our EBITA margin is at 11.2%, cumulative for LTM, and like we have been saying, of course, the target is to get between 12%-14% as soon as possible.
Orders received, like we said, was at last year's level, and if we take H1 and think about the areas, then Europe was 43%, North America 26%, so both were active. China, Asia Pacific and South America traditionally are about 10% each, and now Asia Pacific was more active than normally, so amounting to 15% of order intake in the first half of the year. Stable business. So this is the story we have been saying over the years, and when we started, our services was with order intake about EUR 1,055 million. Now, our LTM is EUR 1,777 million, so good development.
In automation segment, we didn't have it in the beginning, and now the order intake in automation segment for last twelve months is almost EUR 1.3 billion, so all these together is about EUR 3.1 billion. And this is, of course, good development that has been taking place in Valmet over the years. And stable business represents now 69% of the order intake, thinking about last 12 months, so it's... Of course, maturity of the business is now coming from our stable business. Then, some words about the backlog. So backlog is decreasing. It's now EUR 3.8 billion, and now, I think it starts to be at a good level. So when our backlog was at EUR 4.4 billion, then our delivery times for many of the products were too long.
Then, of course, longer from customer's perspective, and then also from longer from our perspective. So it's the longer the lead times are, the more difficult it is to prepare oneself for, for example, inflation or some very rapid developments like the war, which was started by Russia against Ukraine. So now, this 3.8 gives customers good delivery times, and also from risk management point of view, it's better for us. From current backlog, about 60% we are expecting to be materialized as net sales during 2024. Last year, the corresponding percentage was 50%. This means that we have now calculated it out at about...
We have about EUR 70 million now more backlog to be realized this year comparing to last year, so roughly 70%, EUR 70 million. And about 50% of the backlog is related to stable business. Last year, about 40% was related to stable business. Then some words about the segments and business lines. So first, services. So in the beginning of the year, order intake grew a little bit compared to last year. So this year, EUR 1,024 million, and this, this year, EUR 1,024 million, and last year, EUR 1,007 million. And we are very happy with the development of last quarter, and Katri will focus more on the quarterly numbers, but I told it already, EUR 498 million in order intake, so that's good development.
Net sales has been growing a little bit as well, and EBITA is now about last year's level, so EUR 140 million comparing last year to EUR 142, and so roughly at the same level in euros, a little bit down in March. Automation segment figures for the first half of the year were decreasing, and like I said, in last quarter it was increasing, but we had very, very strong start for 2023, and that's the reason why we still have a situation that comparing the first half of the year, orders have been decreasing in automation. And I'll come back to business line-specific topics later on.
The first half, EUR 681 million, and last year, EUR 732 million, and then last year we had very strong first half, first quarter of the year. Profitability is roughly at the same level, EUR 110 million, and last year, and EUR 109 million this year. Then Flow Control's business line orders received were EUR 389 million in first half of the year, first half of the year, and last year, a little bit higher. The change is coming mainly from pulp and paper big projects, although those... That market hasn't been active like earlier, like we have seen in our Process Technology order intake, so mainly the change is coming from that segment. We have good activity in MRO business and Services, which is very important from many perspectives.
So we are selling small amount of valves to customers who already have installed base and doing services, and that business is doing reasonably well in Flow Control, so we are happy with the development of flow Controls. And like we see, net sales and order intake are at par, so current business level continues. And then, of course, the target is to grow the business every year, and of course, Valmet has a target to grow this year as well in order intake. In automation system business, we had very strong quarter one last year. This year we had a good quarter, too, so the activity is increasing, but the first half of the year, last year was EUR 304 million, this year, EUR 291 million, so small decrease.
We have good development in services and in energy and process, and then the market, which is not very active, is the package sales together with Process Technology. The delta is mainly coming from that. The acquisition of Analyzer Products was completed 2nd of April, so we have about EUR 22 million orders here in quarterly numbers from API in our numbers. Then Process Technology, first quarter last year... Sorry, first quarter this year, our order intake was EUR 195 million, and now it bounced back to good levels at EUR 434 million. So good activity in Process Technology for the quarter.
Profitability has been declining, so last year our profitability was EUR 59 million, and now it was EUR 36 million. So LTM is now at 4%. Last year, total year was at 4.5%. Pulp and energy business line, so orders received increased from 2004 , from the first quarter, when order intake was EUR 57 million, and now it was EUR 187 million, so clear improvement in market activity in pulp and energy business line. And the same has happened in paper business line, so orders received for the first quarter were EUR 138 million, and now it was EUR 247 million, so we are back at the normal order intake volumes in both in pulp and energy and paper business line.
Now, then some words about the strategy. So, of course, we have been working on our strategy process in very active way in the springtime, and we have been also telling to investors, to all of you, that there is little bit change in the business scope of Valmet. So earlier, we were mainly pulp and paper and bioenergy-focused company, and now, like we presented last time, about EUR 1.4 billion of our business is coming from non pulp and paper businesses, and this has to be reflected also in our mission statement. And that's why we have now developed our our mission statement. In the mission statement, we continue to say, "We create sustainable results by converting renewable resources." So the same story continues.
So when with Valmet technology, our customers can take renewable resources in and make sustainable products. And then for other industries where flow controls automation systems are mainly active, we say that we make industrial processes reliable and efficient. That's exactly the role of automation, so making processes, reliable, safe, efficient, reducing emissions, and that's the mission of our automation segment for pulp and non-pulp and paper customers, so process energy customers. We are happy, very well happy with that, definition, and we are also happy that over the years, Valmet has developed that much that we are not only depending on pulp and paper business, we have also other businesses.
So it's the same kind of big change that has taken place in our stable business, so it was EUR 1 billion-EUR 3.1 billion, and this non-pulp and paper we have been growing from EUR 200 million-EUR 1.4 billion. And of course, the development continues in the future as well. We haven't done any other changes, so strategy continues to be the same, continuous improvement, and renewal continues to be the same as early, and the vision as well, to become the global champion, serving our customers and in moving the industries forward. So small addition, but very important change in our mission statement, and we are very happy with that change. So now I let Katri to continue the presentation.
Thank you, Pasi, and hello, everybody on my behalf as well. I will walk through the financial development next. Here you can see the key figures after the second quarter, so order intake was EUR 1.3 billion and roughly on the same level than the comparison quarter. Order backlog amounted to EUR 3.8 billion, and net sales was EUR 1.3 billion, and that was 7% lower than the comparison quarter. Comparable EBITA was EUR 141 million or 10.6% for the quarter, and here the lower volume in net sales was impacting the comparable EBITA. Adjusted earnings per share for the quarter was EUR 0.43, and that was 28% lower, and here the lower result as well as higher financial expenses were the reason.
For the full year numbers, quickly, order intake EUR 2.3 billion, so that is 17% lower than last year. Net sales was EUR 2.5 billion, and that is also 7% lower, and then comparable EBITA, EUR 262 million or 10.3%. And I will come back to the other balance sheet numbers a bit later in my presentation. Moving then on to the services, starting from the order intake, so that was EUR 497 million for the quarter, and that was 15% higher than the comparison quarter. And here orders received from tissue converting, which was integrated into Valmet at the beginning of November last year, amounted to EUR 38 million. So actually, without t issue converting t , the increase was 7%.
Net sales remained at the previous year's level, being at EUR 473 million, and here tissue converting impact was EUR 38 million. Comparable EBITA remained at previous year's level, being at EUR 80 million, and the margin decreased to 16.9%. Here the organic net sales decrease had a negative impact on the comparable EBITA margin. Next, automation. Their order intake remained at the previous year's level, being at EUR 352 million, and in automation systems, orders received increased in automation services and decreased in capital. Orders received from the acquired API business amounted to EUR 22 million in the second quarter. Good to note here that the comparison quarter last year included a large single order in flow control.
Net sales remained at the previous year's level, and it was EUR 351 million, and here the API impact was EUR 19 million in the second quarter. Comparable EBITA remained at previous year's level, and it was EUR 58 million, and the margin was 16.5%, and the margin decreased mainly due to integration of this API business. Lastly, some words about process technologies. Pasi mentioned already the order intake, so it was EUR 434 million, and good improvement to the first quarter. Net sales was EUR 500 million, and here we had tissue converting EUR 41 million and forgot to mention that in the bookings it was EUR 42 million. Then comparable EBITA amounted to EUR 15 million, and the margin was 3%, and comparable EBITA was impacted by lower volume.
We have a traditional summary slide from the segments, and here I want to highlight the other segments. So it was EUR 12 million for the quarter and for full year, 2023 . Comparable gross profit was 27.8% of the net sales in the second quarter, and here stable business represented 62% of the net sales. When you look at the last twelve months curve, so we were now at 27.1% in comparable gross profit, and it has been developing well over the years. On comparable SG&A, the expenses were EUR 27 million higher in the second quarter, and that was coming from the acquired tissue converting and analyzer products and integration mainly.
When you look at the SG&A chart, so for the last 12 months, we were now at EUR 942 million level, and actually the increase compared to year-end, EUR 901 million, is mainly related to previously mentioned tissue converting as well as API. Then cash flow was strong, provided from operating activities amounted to EUR 128 million in the second quarter. As said, very strong, and for the last 12 months, we were at EUR 447 million. And net working capital amounted to EUR 150 million, and that equals 3% of the last 12 months' orders received. And if we compare to year 2021, our net working capital has increased mainly, mainly in capital business and also due to the integration of flow control and, and tissue converting.
Nowadays, our business mix contains much more stable business, which typically ties up much more net working capital than capital business. Net debt increased. If we compare it against the first quarter, it was EUR 1.1 billion, and gearing amounted to 45%. The increase in the net debt and gearing compared to the first quarter is mainly related to dividend payment, as well as the acquisition of API. Net debt to EBITDA ratio increased. Also compared with the first quarter, it was 1.63, and the average interest rate of our total debt was 4.5% at the end of second quarter, and net financial expenses amounted to EUR 32 million after the first half, and the comparison number last year was 12.
Capital employed was close to EUR 4.2 billion, and comparable return on capital employed, 14%. The acquisitions, analyzer products and integration this year, tissue converting last year, and then flow control in 2022, have increased the capital employed. Second quarter, last 12 months, adjusted EPS decreased if we compare it with 2023, being at EUR 2.02, and this was mainly due to lower EBITDA and higher financial expenses. That was my part, so I will give the floor back to Pasi. Thank you.
Thank you, Katri. And now guidance and short-term market outlook. So if I start from the short-term market outlook, so in tissue we keep the satisfactory level. It was satisfactory, and it continues to be. Board and paper, we are increasing now to satisfactory, from weak to satisfactory. So earlier we were saying that the market is weak, even if we have satisfactory workload, and now we are. Order intake has been increasing, and we also have a market activity in front of us, so that we have good reasons to say that the market activity is at a satisfactory level. In energy, it goes to from good level to satisfactory, and there the European market is less active than it was a year ago, and that's why we are reducing it.
In pulp, like you saw, order intake has been improving in pulp side, so that's the reason, and the market outlook also for coming period is more active, and that's the reason why we are increasing our market outlook, short-term market outlook, from weak to satisfactory. In automation systems, we have been keeping the good level, and it continues to be at a good level. Then we, of course, have to remember as well that last year we had not that active third quarter in automation, and now we see that we are, of course, not guiding any quarterly numbers, but we see that the market activity for coming end of the year is at a good level this year compared even with last year. In flow controls, we have good market activity.
Like said, MRO Business Services is active. Project hasn't been in pulp and paper that much active, but everything else is going on the active level. And then in services, we are saying that the market continues to be good. And there it might be good to compare with the third and fourth quarter of last year when we were saying that our workload is still good, but the market activity is satisfactory. And now we say that the market activity is good and workload is good, and this is, of course, a big change in our market situation. And this is the reason—these are the reasons why we made a positive change to our guidance.
So we estimate for the whole year that net sale, net sales will remain at the previous year's level in comparison with, with 2023, and comparable EBITDA in 2024 will increase in comparison with 2023. Good. Now I let Pekka to say two words.
Thank you, Pasi. So, now it's time to go to the Q&A, and I also invite Katri to join Pasi here to the, here to the front. So if you are ready for the... From that part, I will now hand over to the operator, please.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Sven Weier from UBS. Please go ahead.
Yep, good afternoon. Thanks for taking my questions. The first one is just on the outlook change, right? I mean, you obviously just upgraded it back to good after... Sorry, to satisfactory after one weak quarter. I mean, looking a little bit ahead, if we look at the current pulp and paper results, and if we think more about maybe bigger capacity projects, would it be fair to say that it will probably take more than one quarter until the outlook goes back to good? That's the first one.
Mm. No. Now we are, of course, guiding for coming six months, and there we say that it's at a satisfactory level. We have seen now more activity, customers buying single island projects and where we are competitive. That's why we have now... We have had also better order intake in quarter two, and we have good visibility for coming quarters. For the activity to go to the good level, I would say that in pulp, it means that the big project pipeline should become even more active. Then in paper and board, it should mean that the paper and board market should be even more active than it's today.
Yeah, that makes sense. Thank you. That's the... Was the first one. The second one, I was just wondering, I understand obviously Process Technology EBIT margin was down because of the negative sales development. I was just wondering where you stand on those legacy projects that were lower margin. Have they been largely completed in the meantime? Is that maybe also a reason why you became a bit more upbeat about the guidance, that you think you're done on these, and you have a better margin in the second half?
We haven't been kind of commenting the old projects, but what we said about the margin, that of course net sales has an impact, but we have also been now closing some of old projects and smaller ones, and that has also impacted the margin this year, this quarter.
This quarter.
Sorry.
Yes.
Yeah, this quarter.
Yeah.
Yeah, which leads me to the next question, because I was wondering, because you also talked about the first time integration of API, how that diluted margins. Were there maybe also some, what you would normally call one-off costs, that were not really adjusted in the comparable EBITA, but were maybe more one-off in nature?
Well, I can-
Mm
comment kind of in general, the automation segment profitability or the Comparable EBITA. So it was flat, but the margin decreased. And we also said that this integration of API impacted the margin, and we have also published in the interim report that it, its impact to Valmet's net profit was EUR -4 million. So it was impacting that.
And the-
But that was the integration cost that you do, however, adjust on comparable-
No, integration cost would, you would book in under comparable. But it's so that the organization was using all the Siemens systems until 2nd or 1st of April, and then they had to change to all Valmet systems, so meaning ERP. So we had full ERP rollout, we had full HR system rollout, we had all the systems rolled out in that organization.
Mm.
It takes a while before they are effective with all those tools, and at the same time, they had some capacity limitations in some of their units. So I would say more that it's a normal situation, having that kind of so big change happening in an organization in a so short time period of time.
Okay, understood. Maybe one final remark from my side, Pasi. Just wanted to congratulate you on a great career and your achievements also at Valmet in the last ten years. It's been great, and I'm wishing you all the best for the next chapter. Thanks for everything.
Yeah. Thank you. I'll come to a little bit longer answer in the end.
Thanks, Pasi.
Yeah.
The next question comes from Panu Laitinmäki from Danske Bank. Please go ahead.
Thank you. I have two questions. Firstly, on the guidance and the kind of implied second-half improvement. I mean, you had both revenue and EBITA down in the first half, year-over-year, but then you are guiding flat sales and higher EBITA for the year. So it implies a clear improvement in second half. The question is that, what is driving this, and how does this split into different divisions? So, which... Are they all going to improve or some of them more than the others? Any comments on that?
No, I can start, and then Katri will give the correct answer. So, if we start from services, so we had very low order intake in services last year, especially in third quarter and also fourth quarter. And then we had still a high backlog, and we had long delivery times. And market was like you maybe remember, was quite challenging. And now we don't see that kind of situation, so we have good market activity, our delivery times are shorter in services. So, based on that market activity and delivery capability, we estimate that our performance in services is better than a year ago. And the same applies in all automation segment. So, and there, of course, we have also the impact of API integration.
So now we have had it for one quarter with, all the challenges I explained. And then-
Mm
... in coming quarters, we will have the full positive impact of API coming in the picture as well. In Process Technology, the revenue recognition from all new projects is not that big anymore in for the year. But it has, of course, impact to EBITDA from the workload perspective, and then also from margin perspective.
Mm-hmm.
Katri-
And maybe, maybe just to add kind of to the net sales, what Pasi mentioned also in his presentation, that we have now EUR 70 million more in the backlog to be recognized this year, and the delivery times are now back in, in pre-COVID levels. So of course, those are also important drivers together with the market activity.
Yeah.
Thank you. The second question is still on the process technologies margin. I mean, I get the comment that revenue was down year-on-year, but it was similar to Q1 sequentially. So, like, was there something like one of negative in the process technologies margin in Q2? And what's your kind of thought of how soon could you return back to 6%, which I believe is the kind of target?
Well-
So, like Katri said, we were closing some projects. So I wanted to close some projects now.
Yeah. So Pasi has been very active, and of course, that was good for us.
Mm-hmm.
But they were smaller ones.
Mm-hmm. Yeah.
Okay. Thank you.
The next question comes from Antti Kansanen from SEB. Please go ahead.
Hi, it's Antti from SEB. Thanks for taking my questions. I'll start with a comment on delivery times, and if you look at kind of single islands in pulp and then your paper board and tissue machines, kind of the demand that you are facing right now, what are actually the delivery times? What I'm trying to kind of understand is the level of 2025 sales. So is it still like Q1 and Q2 orders next year that would impact the full year, full year revenues in 2025?
Mm-hmm. Of course it will, of course it will impact. So but if I start from the delivery time, so at the longest, I think we started to be at three years delivery times in board machines, which was way too long, and now the delivery time would be under two years. So now we would be having that kind of delivery time, what the customer needs in any case for its construction work and everything else. So now we are back in a normal delivery times. The same applies to pulp and pulp and energy, single island deliveries, where typically the construction works takes two years, when the ground work starts. And then I don't remember now, but well, we haven't...
You can, of course, calculate actually it from our backlog. We have been telling that how much is related to Process Technology backlog, and from that, you can actually calculate how much typically we recognize revenue from the projects which we booked during the year in Process Technology. I think we haven't published that number-
Mm
but now, of course, when the delivery times are short, we can recognize more revenue from the new coming orders than in the situation that we are actually selling capacity, which will be free in a year.
Yeah, because what I'm trying to maybe better understand from next year's perspective is that obviously the existing backlog for 2025 and beyond is quite a lot slimmer than it was, for example, a year ago. And if we just look at PT, I mean, you have grown the business, you have made acquisitions, and there are quite a lot of more personnel in there. So, is kind of the activity level that you are seeing in the marketplace sufficient to have a, let's say, a satisfactory workload in 2025? Or do we kind of need to see a further acceleration to kind of be in the clear for next year's earnings?
Oh, we have, we have been reporting this capacity cost, and we are, of course, managing that capacity cost all the time. And like we have this year done already some, some actions in, pulp and energy. And, and then, of course, it, if needed, then there will be further actions. But, but Oh, but all in all, we have tried to be very careful, especially in the, in the process technologies capacity cost.
Mm.
But if there is too much capacity cost or if there is a possibility after the acquisitions to make the footprint even more effective, then of course we'll do it.
Mm-hmm. And if I may add what we also discussed after the first quarter call, that procurement savings, of course, is a very important topic for us. And we then said that we have actually been having a good start on that. So of course, we work in many fronts.
Mm. And I guess also kind of the backlog margin for delivery is better given the impact from legacy, legacy projects, but, but I don't know if you want to quantify anything on that front.
You guessed correctly.
Yeah, I thought so. All right, thank you.
The next question comes from Mikael Doepel from Nordea. Please go ahead.
Yes, thank you, and good afternoon, everybody. I've just a couple of quick questions. Following on the earlier one regarding the delivery times, just wondering if you could talk a bit about that also in terms of automation segments as well as the service business. So what is the lead time now from orders to sales in those segments?
So, in Flow Control segment first, so, valves, typically if you sell a project, then the project delivery time goes together with the process.
Mm technology, order or delivery time, so customers are ordering them well in advance, so it can be that the delivery time is one year or even longer. In services, the delivery time can be some weeks, and then typically if customer is buying maintenance and repair operations valves, well, let's say 3, 4, 5, 7 valves, 10 valves, then the delivery time is from 3 months - 6 months. Systems business, of course, service goes quick
Mm.
So that's where it goes quickly, and then if you buy a QCS system, the delivery time is something like four to five months, and DCS about six months to one year. And then, of course, in this bigger project, we use POC method in revenue recognition. So the revenue recognition from our perspective happens-
Mm
... when the costs are coming in.
Okay. No, that's helpful. Thank you. And then just a final one from my side on the service business. Just wondering if you could talk a bit about what kind of a dynamics you currently see in that your service division or segment? I mean, I think you've been talking about customer operating rates improving in the past couple of quarters. Listening to your customers, it sounds like that's gonna continue, but is there something else also happening? I think there might be some upgrades and that kind of a work that didn't really materialize last year. Do you see any kind of change into the dynamics? Do you see some pent-up demand coming through? Any color you can give there would be helpful. Thank you.
Thanks, Mikael. That was good point. I think neither of us remembered to say it-
... that in services, we can now say that all market areas are active. So earlier we were hinting that couple market areas haven't been that active, and now in last quarter, actually all market areas, so North America, South America, Europe, Asia Pacific, and China, all have been active. And then we have seen also good activity level in all the PUs.
All the PUs have also good activity level. I think that tells that the whole industry is back in normal business. Maybe there is still room for improvement in operational rates and prices in some of the segments, but currently the good services order intake is coming from all parts-
... which is positive. I don't know if Katri wants to, wants to add.
No, you are absolutely right.
Yeah.
All businesses and all market areas-
Yeah. Yes
so that's very, very good.
Okay.
All right.
And then-
That's good. Thank you very much. for reminding us because that was in our question and answer story, but we forgot to tell it.
Mm. Well, good that it came through. Thank you very much.
The next question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead.
Yeah. Hi, Pasi and Katri. This is Johan at Kepler Cheuvreux. I have two questions. First, you talk about this improved market activity on pulp. I understand that from earlier, single island orders and similar. But I've also understood there's been some news articles about three pretty big pulp projects all in Brazil, and I was wondering a little bit how you view your competitive situation. I mean, at the last CMD, you sort of indicated that your market share had fallen to 30%-40% from previously, I think 40%-60% or something like that in pulp equipment. What's your view on these orders? Will any of these materialize? And would you be willing or, first of all, would you be competitive to win them, and what would you-...
be willing to take them as EPC contracts, or would you still sort of prefer to take parts of these potentially very big projects? I guess now that's a bit up to your successor CEO, obviously, but what's your view on those projects? Thanks.
Well, first of all, we, we cannot comment about the projects themselves. And you can follow our customers', communication, and they are talking about the project. But you are right that there are projects developing in, in Brazil, and they are all in Brazil, and it's good that they are in Brazil. Then you were saying that, like we have been saying ourselves, that the market share dropped, during, one and a half years to 30% last year. Again, when there were not big, mega mills decision done, then actually our, our market share was again 50/50 with Andritz. We have very capable, team in, in Brazil making EPC projects.
Why we have been not that successful lately in a couple big projects was one reason was that we were executing at the same time a very big paper machine project, so we couldn't take the risk of overloading our organization. Now, currently we have a reasonable market workload in our organization, and we are sure that our organization can take full mill supply if customer so decides. And we are, of course, working hard with our competitiveness. Like Katri said, it's quite a lot depending also on the supply chain. And then we have been, of course, making sure that we have good references in Brazil.
So we have excellent references, and our customer base, and all the mills we have been delivering are working with very good efficiency, and that, of course, helps us also in discussions about the future cases.
Excellent. Sounds good. Then, just coming back to this, somewhat underperforming legacy projects. With the Q2 numbers, can we now say going forward that that's all behind you, or will there still be some lingering project impacts in
Uh
in the coming quarters?
In projects, you always have a situation that some projects go well and some don't. And like Katri said, we wanted to close some of the lengthy discussions where I have been myself involved and wanted to close them now before I leave the company.
Okay, excellent. I must say I've been impressed how the company has developed under your leadership, especially compared with the previous decade when it was part of Metsä. I wish you all the good luck for your future endeavors. Thank you, Pasi.
Thank you, Johan.
The next question comes from Tommi Railo from DNB. Please go ahead.
Yes, hi, Pasi and Katri. It's Tommi from DNB. I'm still coming back to the guidance upgrade earlier in June. You mentioned then that overall general kind of positive development and reading is now, I guess that it's more second half tilted profit improvement year on year. My first question is that what do you mean by increasing in EBITDA year on year? And I'm not very optimistic to get an answer, but I'm still trying.
You will not get a clear answer, so sorry, sorry, Tommi. Good, good try, and thanks for letting us know that your expectations were not very high. But we mean, of course, that it's increasing, so it, it... Can we say that-
And the second question is that the this is then as everyone has seen second half tilted and I hear you that you are saying services automation improving. Is there something that we you know but we can't see? For example BT having easy comparison for the second half where the numbers last year impacted by cost overruns included in the numbers so you can comfortably yourself see that you will beat those numbers hence profit improvement is coming from BT side especially as well or maybe savings timings or so which is triggering the second half profit improvement year on year.
So, of course, we have to be confident ourselves, otherwise we shouldn't have done it. And we have our estimation process, and based on that process, we are giving the guidance. And when the estimation process is giving the numbers, then of course, management has to make the profit warning to whichever direction. So you have to do it when your numbers are showing that. And we are not guiding quarters, we are guiding for the full year. And like you said yourself, and maybe I have been saying, and Katri as well, that the comparison quarters, for example, in services, are not that challenging from last year, and that's why we believe that we can make better numbers in latter part of the year.
... Thank you! And, I'm still continuing that you practically refer to services now, especially with the latter comment. But, would you be able to comment kind of tracking? Is it services tilted? Is it automation tilted? How much is the kind of weight from BP side? Because of course there is expectation that it's really second half improvement because you are behind for the first half.
We, we-
Where is it coming from?
We can't give business line numbers like you know, we are guiding only for the whole company, and then it, it's not acceptable to give guidance for
Mm segments or business lines.
If you look now where we are today, you're talking about the comparable EBITA. Stable- business is flat year over year, and then the decrease is related to process technologies.
Pasi has been . talking a lot about the improved market outlook compared to last year in services. So market outlook is good, and also in the automation segment it's good, and- ... an upgrade also in pulp and board and paper. So all of these ingredients, and then of course, what we mentioned earlier about having EUR 70 million more order backlog for this year to be recognized. So it's combination. Of course, the market activity is really important there.
All right. Thank you very much, and all the best, Pasi. It's been a pleasure.
Thank you, Tommy.
The next question comes from Tom Skogman from Carnegie. Please go ahead.
Yes, hi, this is Tom from Carnegie, and also congratulations from me to you, Pasi. 10 good years of Valmet, that's a big achievement. But I would like to use your knowledge that you have built up just to talk about the industry sentiment. And I mean, last year was a big shock for your customers, and some pulp and paper companies were forced to cut dividends aggressively. We have heard that there is over capacity being built in Europe and in China, in board machines, et cetera. But could you open up this landscape, you know, not for next quarter, but just the next 3-5 years? I mean, how do you see this playing out as you still work for Valmet?
Oh, yeah. That's a good question, and I was visiting some customers and I, I'm not saying in which area, and I was asking them, two different CEOs that, "Okay, how do you see the market?" And the first question that, okay, that it's good market. And then the next comment was, of course, depending on which year you compare. And both were saying that they themselves have to forget the exceptional COVID years when it was very easy to make money. And said that comparing to earlier years, market is good, and they continue to develop their companies. And that's somehow the sentiment in all in many of our customer discussions, that they continue to believe in the industry.
They know that there were a couple of quite easy years, and now they have to work harder on making good, good numbers, but nobody is somehow in long or medium term suspecting whether they are in good business. So if we think about between 2000, 2010, when there was bad years, then everybody was losing their confidence in long-term development, and now that's not the case at all. Then what is interesting is that now when, for example, we have over capacity in Europe, then actually the ones who have modern machine and can run lightweight are having good situation because their cost base is lower per product produced, produced package, and then because of energy and raw material and many other things.
So actually, now we start to see again that the ones who have been investing in new machines are doing better than the ones who haven't been doing it. Which then, of course, gives confidence to those customers who have been buying bigger, modern machines from us.
Yeah, and would you expect that equipment sales will tilt more to pulp the next five years after five really good years in paper?
There was an exceptional time in paper. So, like you remember, we had about EUR 700 million order intake, then it went to EUR 1 billion, and then suddenly 1.7, and was it 1.3 thereafter. So this was this extraordinary COVID time, so I would... I'm not of course saying that what's, no, let's say so that, this kind of market volume, EUR 1 billion, is good volume for our paper business line. And then in pulp, there is more lumpiness in order intake. So sometimes the order intake is a lot of 1 billion, sometimes less, and then it depends just on timing that which year it happens to be so. So I wouldn't be saying that there's tilt from other market to another one.
It's more that it depends, the share depends more at how the timing of individual projects is happening. Both are needed, so if there's new pulp, then the pulp needs to be used as well. And like we were saying also in our Capital Markets Day, or it was Jari who was telling that, that about 30% of our board machines and paper machines, even on the high market, were sold to replace old capacity.
How would you see plantations being developed? We hear every now and then that there's a lack of good locations for plantations, which could be a limiting factor for the whole industry. What's your view?
That discussion was very active two years ago, and now it has disappeared again. So in South America, when they are developing new plantations, then it takes seven years for the trees to grow. So if somebody starts new plantation now, then he could start to build the pulp mill after four years. And-
Okay, then.
Now our customers are saying that they have active projects, and then, of course, they have secured their raw material supply if they are talking about investments.
And then the question to Katri, what—I mean, net working capital has changed a lot, and the business mix has changed a lot. Can you provide some kind of a range where you expect it to be with Valmet's current business mix? Are we really on a high level at the moment or not?
I think if you look at the developments, of course, it improved from year end, so that was positive thing, and inventories is the topic where we are mainly working with. So we have said that on the stable business side, the inventories have been on elevated level, and we have been actively working with those. Some changes there were now, especially in the finished goods, so they came down. On the other hand, the work in progress has increased a bit, and that is then linked to the stable business, where majority of the revenue recognition is done in point in time.
But inventory is the topic that we have been working with, and I cannot give you exact amount because, of course, then when you have capital projects, the prepayments can have a big impact then, and now capital volume has been lower, as we have been discussing a lot. So it's a combination of that, but of course, we want to optimize the levels, and we are working hard with that.
But it's like, you know, 5% to -5% of orders, so what is some kind of an acceptable range for current Valmet?
I think you have to look at it also kind of from historical perspective. So Pasi was mentioning the stable business part, so close to 70% is stable business from the booking. So you have to take that into account, that it ties more capital than capital business.
Yeah, and then finally, the service sales mix, what will it be in the second half based on what you have, you know, booked as orders in the first half? Will it tilt more or less to spare parts or modernization project?
Mm-hmm. Like I said, we have now good activity in all the businesses, so I would more say that it's stable... Nothing to any direction.
Okay. All right, thank you, Pasi and Katri.
We'll close the meeting. I would say some words. So, 11 years ago, we started IR work with Valmet, so now we have been listed over 10.5 years. We calculated I have participated in roughly 600 IR meetings over the years, and I think all of them are not calculated. So I have done over 600 meetings with our analysts and investors. And first to the analysts, I have to say that we have had the luxury of having very good and professional analysts. So you all who have been working, analyzing us, who are now doing and who have been earlier doing, you have been very professional, and you have been doing very good question and good reports and have been treating Valmet in fair and professional way.
So that has been very nice. And then, of course, we have had a lot of discussions with investors as well, and I have to say that I have learned a lot from this, investor and IR meetings. So, investors and analysts is a bunch of people where you end up if you have good brains and good mathematical thinking, and I have enjoyed a lot discussing with you and debating with you and trying to answer to your difficult questions and, in a way that it helps you, but that I'm not opening too much and...
I have enjoyed a lot to work with you, and I hope you all personally all the best in the future, and continue to be very constructive and supportive to Katri and Valmet, and then I am happy as well. So thank you.
Thank you, Pasi, for those words. I'm sure also on behalf of all the analysts and investors as well. So for Valmet, the next larger event is, of course, 12th August , when Thomas Hinnerskov will start as the President and CEO of Valmet, and then that, of course, means that Pasi Laine will also be leaving Valmet. So on my behalf, thank you very much, Pasi, for these years. And Valmet's next result webcast will be then on 30th October . So until then, have a nice summer, everybody!