Good morning, everyone, and welcome to Valmet's Fourth Quarter Results Webcast. My name is Pekka Rouhiainen. I'm the Vice President of Investor Relations at Valmet, and with me today are Valmet's President and CEO Thomas Hinnerskov and our CFO Katri Hokkanen. Today we will walk you through Valmet's Fourth Quarter and also highlighting some of the full-year highlights, the most notable one being the full-year margin increasing to a new record of 11.9% as our strategy delivered its first results during the second half.
The agenda for today is straightforward. First, Thomas will present the Q4 full-year highlights, including the acquisition of Severn. Next, Katri will walk us through the financial development in detail, and then Thomas will return to discuss the dividend proposal, the guidance for 2026, and the short-term market outlook for the next six months. After the presentations, we'll open the lines for your questions. So thank you for joining us today and your interest in Valmet. And with that, let's get started, Thomas.
Thank you, Pekka. 2025 was my full first year as CEO at Valmet, and it's been a true transformative year. We've been driving many changes and initiatives, and I'll get back to some of those later in the presentation. Therefore, firstly, I want to be thanking the Valmet team for all the hard work and commitment throughout the whole year.
I also would like to sort of thank everyone at Valmet personally for being very open and welcoming me to Valmet and being open for the behavioral and cultural aspects we've been working on in order to speed up our execution and being bolder in our thinking. Let me start by setting the overall frame for today.
We operate in a softer market in the second half of the year, but even though the market is going through a softer patch in the short term, we do remain confident that our strategic choices are the correct ones, and they will take us to the next level of performance by 2030. With that, let's start with the full year highlights.
For the full year, we delivered a resilient performance. Net sales held steady, and our comparable EBITDA margin reached, as Pekka said, a record of 11.9%, up 0.6 percentage points from previous years. This was driven by the bold operating model changes we decided already in the first quarter when the market was still largely in a better shape. That timing really mattered, and we were ahead of the curve.
It gave us the efficiency benefits when the environment turned softer later in the year without us having to react defensively at a challenging moment. Process Performance Solutions performed exceptionally well, and Biomaterial Solutions and Services maintained stable margins despite our customers' low operating rates and overall weaker global economy. Cash flow stayed strong at EUR 581 million, and orders remained solid against a very demanding comparison period. The board of Valmet proposes a EUR 1.35 dividend per share, unchanged from last year.
Overall, Lead the Way is now being embedded across the organization, and the benefit became visible already in the second half of last year. With that, let's have a look at the fourth quarter. The overall fourth quarter picture is quite similar to the full year.
The market was subdued in biomaterial services like we anticipated, and unfortunately, we saw more muted demand also in the parts of our Process Performance Solutions. Especially in the pulp and paper automation market was slower than expected. Also, some of the packages in automation actually got postponed in the end of the year. When we exclude the exceptionally large Arauco order and the FX from the comparison point, orders were very close to last year's level, which is a solid achievement, I think, in this environment. Profitability was clearly a highlight.
Our Comparable EBITDA margin reached an all-time high of 13.3% for the quarter, driven by the operating model improvements implemented earlier in the year. Those actions decided when the market was still better, gave us an efficiency that we needed in the second half.
We secured several important wins, including our largest ever energy order for a biomass power plant in Berlin. So these kinds of projects add to our installed base and create long-term lifecycle opportunities for us. Process Performance Solutions delivered another excellent quarter with a margin of 21.9%. Very good execution from the team and a strong starting point as we invest back into growth, growing into 2026, like we've talked about earlier as well.
And finally, we announced the acquisition of Severn just before Christmas. Severn brings leading Severe Service Valve technology and a high-quality installed base, truly strengthening our Flow Control in several key process industries. So a very strong strategic fit for us. One important clarification: our 2026 guidance does not include this acquisition. We will include Severn in our guidance once the transaction is fully finalized, which we expect will happen in Q2.
So overall, a strong quarter operationally, supported by disciplined execution and the benefit of the choices we made earlier in the year, even though the market didn't support us with tailwinds. Let's take a closer look at the order development behind the quarter. As expected, orders for the quarter decreased year on year in both segments, mainly because of the comparison period, including the exceptionally large pulp mill order from Arauco in Q4 2024. Like earlier said, this order impacted also biomaterial services and automation solution orders intake in Q4 last year.
That single project alone created a very demanding benchmark for this quarter, obviously. Against that backdrop, our performance was solid. We secured our largest ever energy order for the Berlin Biomass Power Plant, which also came with an extensive service agreement, highlighting our lifecycle approach that we have launched early in the year at our strategy.
This is an important long-term value driver for us. Overall, our energy business had a good year and was able to close some key wins. In biomaterial services, the market remained subdued, and we saw a decrease in service orders compared to Q4 last year. This is fully in line with what we communicated earlier. Operating rates, investment activity has been under pressure, and we saw the impact in our Q4 financials. In Process Performance Solutions, the environment softened, particularly in the pulp and paper automation.
The difficult end market of our customers showed also in automation demand during the quarter, and furthermore, some package deals did not materialize and were postponed for later. Going forward, we see the market now stabilizing from the weaker Q4 level.
Overall, while the headline year-on-year comparison shows a clear decline, we had a decent quarter in a soft market and continued to capture some strategically important wins that strengthen our installed base for the long-term service opportunities. Let me then highlight one example that illustrates the strength and diversity of our automation technology. We secured the automation delivery for the next-generation Polar Star Polar Research Vessel. This is a mission-critical platform for a vessel operating in some of the most extreme environments on Earth.
The order showcases how far beyond the traditional process industries our automation offering today reaches. When a customer like this chooses Valmet to run a vessel like this, it is a strong testament or statement of trust in the reliability, safety, and sophistication of our systems. It also builds long-term value. These vessels have a multi-decade lifecycle, and the automation is essential to their operation.
That creates recurring lifecycle revenue and further strengthens our install base in a segment where we already hold a leading global position in cruise and marine automation. So while the quarter was soft in pulp and paper automation, this kind of win demonstrates the underlying competitiveness of our technology and our ability to grow in diverse markets. Let's look at another concrete example of our strategy to further strengthen our process performance business and diversify outside our traditional biomaterial business.
We are very excited, I have to say, to be able to announce the acquisition of Severn in the fourth quarter. This is a strategically important step for Valmet in the mission-critical flow control business. Severn brings leading severe service valve technologies, a strong installed base, and deep customer relationships in industries that are complementary to ours, to our biomaterial business and businesses such as refining, chemicals, energy, and gases, as well as metal and mining. So the strategic fit is excellent.
Severn has a proven track record in demanding applications where reliability is key and is strengthening our flow control business both technology-wise but also commercially. It clearly expands our addressable market and increases our presence in segments where we see long-term growth potential beyond our traditional biomaterial business. It also takes us to top five globally in the valves business. The combination also brings clear synergy opportunities, broader market reach, complementary offering, and the ability to increase service penetration in a large, high-quality installed base.
Severn generated around EUR 250 million of revenue in 2025 with an EBITDA margin of about 16%, reflecting a solid operating foundation. We expect the acquisition to close during the second quarter of this year. Overall, very good strategic fit. In addition, it strengthens flow controls, broadens our portfolio, and improves our growth profile over the long term.
Now let's turn to Process Performance Solutions. Process Performance Solutions delivered a record year in comparable EBITDA. Orders came in at EUR 372 million, decreasing as anticipated due to the very strong comparison period, which includes the landmark automation order from Arauco last year. Net sales remained at last year's level. Flow controls continued to grow organically while automation solutions saw a decline, particularly or partly, I would say, reflecting the softer demand condition we already discussed on the previous slides. The clear highlight is profitability.
Comparable EBITDA reached a new record of EUR 90 million, and the margin increased to 21.9%. The margin was supported by solid commercial execution, operating model efficiencies, and overall disciplined cost control. So even with a softer automation market and a tough comparison on orders, PPS continued to show strength and resilience. However, we do want to be mindful of the fact that we don't expect the margins to continue at this record level into 2026, as we will be investing back into long-term growth by hiring key personnel both in the sales but also in R&D.
Now let's move to the Biomaterial Solutions and Services. Starting with orders, the highlight win in the quarter was the Berlin biomass power plant order, which I mentioned earlier. But compared to last year's exceptionally strong fourth quarter, orders were clearly lower as the comparison period included the very large Arauco pulp mill order. Full year, services orders were up 4% organically and represented 52% of the orders received.
Looking at the market environment, the biomaterial services market continued to be soft, very much in line with what we saw already in the third quarter. In fact, the year was divided into two parts: a good active first half followed by a clearly softer second half as customer operating rates were visible in the market. On the net sales side, development was as expected. Capital net sales came in at a solid level in the quarter, and we saw the Arauco project progressing well.
In total, we booked roughly EUR 400 million of Arauco as net sales during 2025, and we estimate that roughly another EUR 400 million will be booked as net sales in 2026 as the project continues to advance according to plans. In services, net sales decreased organically by about 7%. This reflects the order mix in the recent quarters, which had been more tilted towards longer lead-time mill improvement projects. Also, along with the FX impact, that mix effect was clearly visible in the net sales for the fourth quarter as well.
Comparable EBITDA amounted to EUR 123 million with a margin of 11.6%, unchanged from last year. Biomaterial Services net sales were lower, but the operating model efficiency we implemented early in the year supported the segment's margin development. I'm very pleased that we made those decisions when we did. Without them, the year-end would have been significantly tougher for this segment in terms of delivering the margin. This covers the operational and market development for our segment this quarter. To give you a deeper look at our financial development, I'll now hand over to Katri, our CFO. Katri, the floor is yours. Thank you.
Thank you, Thomas. And actually, before I begin, I want to sincerely thank the Valmet Finance team and our investor relations team for a very strong year-end reporting effort. This was the first annual closing under our new renewed operating model and reporting structure. We introduced several improvements to our quarterly and annual reporting during the year. So delivering these changes while maintaining excellent accuracy and clarity required significant teamwork. And I want to thank everyone involved for their dedication in this.
I'll now take you through Valmet's financial development focusing in the fourth quarter. I will cover our profitability, cash flow balance sheet, and other key financials. And as always, my aim is to provide a clear and transparent view of our financial position and the drivers behind our performance. Let's start with an overview of our net sales and comparable EBITDA for the fourth quarter. Net sales amounted to EUR 1.5 billion in Q4. And this was EUR 51 million lower than in the comparison period.
T his was mainly due to a negative currency impact of approximately EUR 42 million as the euro strengthened against the US dollar and some other key currencies. Organically, net sales were only 1% lower than Q4 last year, showing steady development in both segments. Comparable EBITDA reached EUR 196 million, and the margin rose to 13.3%, which is the highest quarterly margin in Valmet's history.
The increase was driven by the cost savings from our own operating model renewal, which continued to support profitability in the second half. By the end of the year, we realized approximately EUR 35 million in cost savings related to the operating model renewal. This includes approximately EUR 20 million in the fourth quarter, and the targeted EUR 80 million annual cost savings run rate has been reached now. Like said earlier, we will be investing part of those savings back into growth. So the incremental net savings impact will be roughly EUR 30 million in the first half this year.
I'm pleased to note that even with the weaker market and currency headwinds, our operating model and disciplined execution allowed us to deliver another quarter of strong financial performance. Let's move next to our order backlog. At the end of 2025, Valmet's order backlog amounted to EUR 4.3 billion, which is EUR 146 million lower than at the end of 2024. Based on the current delivery schedules, we expect approximately EUR 3.1 billion of the backlog to convert into net sales during this year.
This is in line with the level we guided last year when a similar amount of backlog was expected to be recognized as net sales during 2025. Our book-to-bill ratio for the full year was 1, reflecting the softer market in the second half of the year. Even so, the absolute backlog continues to provide a very solid visibility for this year. Overall, the backlog remains at the healthy level, supporting stable deliveries for the year ahead.
As always, our teams are working hard to create a solid amount of book and bill during the year on top of the order backlog. Moving on to our cash flow and working capital next. Cash flow from operating activities amounted to EUR 189 million for the fourth quarter, bringing the full year operating cash flow to EUR 581 million. Our comparable cash conversion ratio for 2025 was 94%, which is in line with our long-term average and demonstrates the strength of our cash generation capability. Net working capital decreased to EUR 29 million at year-end compared with EUR 134 million a year ago.
I'm very pleased to see over EUR 100 million released during the year. CapEx for the year totaled EUR 103 million, representing about 2% of net sales. This is broadly in line with previous years. We expect this to increase a bit this year. Efficient cash generation, together with disciplined capital allocation, remain the key priorities for us. They both support and enable both operational flexibility and also our long-term growth ambitions.
Let's move on to our balance sheet and leverage position. At the end of 2025, Valmet's net debt amounted to EUR 904 million, and our gearing decreased to 35%, down from 38% in the third quarter. Net debt decreased by EUR 41 million from Q3, even though we paid the second dividend installment of EUR 0.67 per share, which totaled EUR 123 million in Q4. Our net debt-to-EBITDA ratio improved sequentially to 1.40 compared with 1.50 at the end of the third quarter. We are well within our target of under 50% gearing, which means we are in a good position for the upcoming Seven acquisitions as well.
It is estimated to increase Valmet's gearing by approximately 15 percentage points once completed. The average interest rate of our total debt was 3.4% at year-end, decreasing from 4% a year earlier. During Q4, we also completed our first Schuldschein loan transaction, which amounted to EUR 375 million. This transaction strengthens our long-term debt structure, diversifies funding sources, and broadens our debt investor base. Big congratulations once more to the team who made this transaction happen. Net financial expenses decreased slightly to EUR 62 million for the year.
Overall, the balance sheet remains strong, which gives us flexibility as we continue to execute our strategy even in a softer market. Moving on to our capital efficiency and EPS. Our comparable ROCE for the full year was 13%, and this is a solid level and slightly higher than a year ago. However, our long-term financial target is to reach a 20% comparable ROCE by 2030, so we still have work ahead of us.
The main driver behind the lower ROCE compared to 2022 is the series of acquisitions we have made in recent years. These have increased our capital employed. We remain confident that these investments will support stronger returns over time, and they fit well with our strategy and long-term financial ambition and increase shareholder value. Adjusted earnings per share for the year was EUR 1.82. The year-on-year decrease is mainly related to changes in the expensing of fair value adjustments from acquisitions.
Just as a reminder, adjusted EPS excludes acquisition-related impacts, but it does include items affecting comparability, which is sometimes misunderstood. Looking at the key financial figures for the fourth quarter, I'm pleased to note that almost all the numbers are in the black for Q4, with the exceptions of orders for reasons we have already discussed and net sales, which decreased mainly due to currency impacts.
Comparable EBITDA increased to EUR 196 million, up 2% from the previous year, and the margin improved to 13.3%. EBITDA and operating profit also increased from last year's levels. Cash flow from operating activities was EUR 189 million, up 7% year-on-year in Q4 and 5% in 2025. For the full year, items affecting comparability amounted to EUR -85 million compared to EUR -53 million in 2024. The increase in these costs was mainly driven by restructuring expenses related to the operating model renewal.
On a full-year basis, our tax rate was 25.7%, which is in line with Valmet's historical ETR level, which has been around 25%. You will also notice that our effective tax rate in Q4 was higher than usual as there were some one-off impacts in the taxes. That concludes my review of the key financials. Thomas, over to you, please.
Thank you very much, Katri. Very clear, very transparent, very good. Thanks. So let's start with the dividend. So we laid out our capital allocation priorities back at the capital market day last year in June. First, organic growth. We're reinvesting part of the operating model savings back into growth, particularly into strengthening commercial execution. This is a deliberate choice to support our long-term profitability. Secondly, strategic M&A. We expect to close the approximately EUR 410 million acquisition of Severn in 2026.
A significant strategic step aligned with our portfolio ambition. Thirdly, dividends. Our policy is to pay out 50% of profit for the period or minimum 50% for the period. The board's proposal is a EUR 1.35 dividend translating into 89% payout ratios and EUR 249 million in total dividends, unchanged from last year. Fourth, share buybacks, which remain a flexible tool depending on the balance sheet strength and other capital allocation needs of the previous priorities. Overall, the proposed dividend is consistent with our policy. It reflects confidence in Valmet's cash flow and long-term financial position.
Let me start with the short-term market outlook for the first half of 2026 compared with the fourth quarter. In PPS, the market softened in Q4, particularly in pulp and paper automation, but also in Flow Control, where earlier tariff-cost pre-buying turned into a temporary headwind. From here, we do not expect further softening. We see the PPS market stabilizing at the Q4 level and improving modestly during the first half of 2026. In Biomaterial Solutions and Services, the market environment in pulp, packaging, and paper remains soft and highly dependent on the timing of any possible individual customer decision.
Biomaterial Solutions and Services are also expected to remain soft, but not to worsen from current levels, which is why we've adjusted the wording. Capacity utilization, especially in Europe and China, remains low and continues to pressure our customers' profitability. From our perspective, the market is flattening, not deteriorating further. Turning then to our 2026 guidance, which we published today. First, we expect net sales to remain at previous level. This reflects the flat order backlog and the short-term market environment I just described.
Second, we expect comparable EBITDA to remain at previous level or increase. The drivers are clear. On the positive side, we'll have additional net savings of roughly EUR 30 million from the operating model renewal, as well as the first benefits from the new global supply unit. On the more cautious side, general market uncertainty remains high, and for that reason, we guide for flat or increase.
Our long-term ambition remains unchanged. Our 2020 target is a 15-point comparable EBITDA margin, a clear step up from the 11.9 in 2025. We continue working with determination to progress also in 2026. Despite the market challenges, our simplified operating model, our focus strategy position us well to navigate near-term volatility and to continue creating long-term value for both our customers and our shareholders. With that, I'll hand over to Pekka for instructions on the Q&A.
Thank you, Thomas and Katri. Let's now go to the Q&A part here. As usual, you have the chance to ask the questions through the digital platform and also, of course, dial into the webcast. But we start with the questions here from the platform since we have a few. So first of all, Thomas, can you discuss the Services Market in 2025 and the outlook for 2026 for Biomaterials Services as it's one of the important factors for the guidance?
Yeah, clearly that is one of the swing factors for the guidance. Looking back, 2025, I think divide the year in two parts. The first half, clearly strong, especially in the beginning of it with parts, but then also sort of over the summer period, good mill improvement projects coming off, some pre-buying ahead of the tariffs as well. We also said so that in the first half. Then turning into a softer second half that really reflects our customers' operating rates and the challenges that they're going through. Going then into 2026, which I think is what we are most sort of interested in and passionate about, how that will turn out. Clearly, softness continues.
We don't see that it's going to be more soft than what we've experienced now, but it is going to be soft. It is a bit foggy in terms of looking sort of further out how it will. But then I think what we are doing as well ourselves is we're investing in commercial capabilities. We're strengthening our lifecycle concepts to actually help our customers. There's still a lot they can do in terms of the mill improvement projects to drive up their efficiency so they become more competitive in their market. And I see that as a positive thing where it's in our hands that we can actually drive that ourselves.
Thank you, Thomas. Thank you for that clarification. And then about the guidance, it was already reflected here, but we received also a few questions before the call started. So does the guidance include Severn acquisition and what kind of financial impacts? So two questions here. Do you expect from Severn in 2026?
Yeah, good point. I think it is very important to clarify that Severn is not included in our guidance. It's too early to do that. We will, of course, include it once we close it in the second quarter. That is clear. Severn had a 2025 estimate of roughly EUR 215 million of sales. That will, of course, come into Valmet at the time we close the deal from a run rate perspective.
Yes, thank you. And then a question on the services. Net sales may be going to Katri here. So what's the services net sales decrease in Q4? So were there some specific drivers for that decrease?
Good question. Thank you. First of all, organically, it went down by 7%. So FX played a role there. But Thomas discussed and told in his presentation that, as you remember, in Q3, our orders were a bit more tilted towards these mill improvement projects, and they take longer time to recognize as revenue. So that was the main reason.
All right. Thank you. Thank you for those. And please use the platform. We'll address those questions also later if there are any more. But now we go to the conference call. So Operator, I hand over to you.
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 Panu Laitinmäki from Danske Bank. Please go ahead.
Hi. Thanks for taking my questions. I have two. Firstly, on the biomaterials, the margin trend was better in Q4 than in Q3 if we look at the year-on-year development and the absolute level. The question is, what was behind that improvement? I mean, you said that you got a bit more cost savings in Q4 than Q3, but was that the reason or was there something else in the underlying business?
Yeah, basically, if you think about, I think we also said it in my part, that a large part of that margin improvement in Q4 for bio was that they had part of the operating model changes that they actually received or that impacted them positively. And as you probably remember, Panu, we said roughly 2/3 of the savings from the operating model comes into the biomaterial business.
Okay. Thank you. Then, secondly, on the performance, you said in your comments that you don't expect the margin to remain at the record high 25 level. Were you referring to the Q4, not continuing at the 22 level or on a kind of full-year basis, what you reported for that division?
I think we're specifically accounting on that it will not stay on what's sort of Q4 level going forward. So, as you recall from the capital market day, this is one of the areas where we want to invest into driving more organic growth with investing into sales resources and further R&D resources that we started executing right after the capital market day and the strategy was launched.
Some of these recruitments are coming online late last year and early this year. And that put, we can say, increased the cost level and therefore take the margins down. Then it's also clear when you drive sales in this area, we will not see the bottom line impact as fast because it takes a bit of time before it really gets into the service mode of these solutions.
And may I build on top of that? So if you look at the PPS margin, so it was actually really strong in the second half of last year. And we expected to ease a bit, but still remain on a solid level.
And you also remember, Panu, on the webcast we said it in Q3 as well. We were commercially ahead of the curve in terms of anticipating some of the cost challenges that now come online from a tariff perspective, etc.
Okay. Thank you.
The next question comes from Mikael Doepel from Nordea. Please go ahead. Thank you. Good morning, everybody. Thanks for taking my question.
So I have a couple of questions or two, basically. I'll take them one by one. So firstly, on the service segment, I appreciate the comment earlier, but if you could give a bit more comment there. You say it's still a tough or soft market, you could say. Is there any region that stands out in terms of consumables demand, for example?
And how do you see the rebuilds and other projects if you look at the current environment? And also, if you think about the trajectory for the business in the midterm, do you see any pent-up demand building up currently? And also, is there something in this cycle that is different from the past? In other words, do you see any reason why demand would stay weak beyond a few quarters?
Good morning, Mikael. Thanks for joining and thanks for the call o r, thanks for the question, even though you are calling in. Good question. I think, let me elaborate a little bit because I think it's an important driver. There's probably three elements I'm sort of looking into when we think about it. You asked a little bit about the areas geographically where there's differences. I think it's clear that North America took some capacity out end of Q2, Q3. Now they're running at very good operating rates.
That's great to see that actually also impacts our business, also going now into this year. On the other hand, we had some quite low operating rates, in particular in the China-Asia market, which then, of course, also have impacted the service business.
Do we see that continue? I think, with the can we get into a global economy where there's a little bit less uncertainty that will also drive consumer behavior and confidence up, which will then, of course, be helpful for our customers, which will then create more demand and therefore the operating rates will go up? I think it's harder to see that it should go further down from here. I think that is a pretty stressed or pretty low end of the market range that we're in. What also I think is going to help us in the sort of going forward is if you look at our capital business in this area for 2025, then I would say, just to give you a little bit of more flavor to this, pulp business, we probably have a 50% market share there last year.
Packaging business, on the capital side I'm not talking about capital on the packaging business, definitely leading for sure in terms of capturing a very strong position there last year. And then on tissue, we also had a hit rate that was well above the 50% last year. So that builds also the install base, even though it was a relatively soft market also on the capital side, but it does help us going forward.
Okay. Thanks. And then another question on the projects or the capital business you just mentioned. So if we think about the larger potential greenfield projects out there, how would you describe the current market environment and the pipeline? I mean, do you see the increased geopolitical uncertainties pushing projects out in time or even some cancellations? Or are things actually progressing as planned? Any color there would be helpful. Thank you.
Yeah, no problem, Mike. I think not a big change from when we talked last. I think that sort of situation basically is the same. There are the same projects in Latin America as everybody knows about. There's still some activity across other parts of the world. I think our pipeline generally looks the same as what it did a year ago when we look at sort of our sales pipeline. So with that, I don't think there's bigger changes.
Maybe a bit of further color, I would say. I think North America with the old installed base, there are good opportunities for our customers to actually improve their current operation by doing larger mill improvement projects. But when that comes through, it's always difficult to sort of predict when it actually happens, right?
Sure. Sure. Absolutely. Then just a brief follow-up on that and related to Arauco, I think you mentioned that you expect revenues of about EUR 400 million from that project in 2026. What was that in 2025? You might have said this, but I missed it, sorry.
Roughly the same. So it's roughly evenly distributed. So if you think from a run rate perspective, you're going to see the same net sales in 2026 as you saw in 2025.
Right. Okay. Very clear. Thank you very much.
And we've been happy with the progress in the fourth quarter as well, progressing really well on all the different install islands. And very pleased with how the team is managing and operating that.
Oh, that's very good. Thank you.
The next question comes from Tom Skogman from DNB Carnegie. Please go ahead. Good morning.
This is Tom Skogman from DNB Carnegie. I would like to get a bit more clarity on these savings programs. So if you first start with this EUR 80 million program for white collars, I think you said the incremental savings in the P&L in 2026 will be around EUR 30 million. But is this kind of the total impact also adjusting for these growth plans that you have? Or should I take away some of these EUR 30 million and I build a bridge?
Yeah, good question, Tom. And that's, like we said before, we had roughly EUR 30 million. In 2025, we'll have another EUR 30 million in 2026. The EUR 30 million in 2026, that is sort of net of investment into growth.
Yes. Okay. Yeah. So that's the total impact. And then I'm a bit surprised that you don't give out any information at all about this EUR 100 million savings program or kind of supply chain savings and manufacturing footprint. Should I estimate some savings at all this year, or is this kind of not the thing for 2026 rather for 2027 and beyond, or what should I think?
Yeah, that's a good question, Tom. There are a couple of parts to the whole global supply savings, right? The EUR 100 million we talked about back in June. Clear that there's some that we are driving sort of relentlessly, sort of get short-term impact particularly from a procurement perspective. Then we're also looking over overall footprint. How does that actually where should we focus our manufacturing capabilities? So how to think about and, of course, we'll throw more color to that and information about that as we progress throughout 2026. And there will be sort of yeah, so you'll know more about that. I would probably think about having something similar to the operating model savings in your spreadsheet.
So around EUR 30 million savings this year and nothing in 2025, basically?
Yeah. I would have said double-digit millions, so very much in line with what the boss just said.
But there were no savings here in 2025, right?
They really start to materialize in 2026, so that's the thing.
Yes. And when you have to think about why did we say no savings in 2025, Tom, it's sort of like we think compared to what we have seen earlier, right? So we talk about how are we cranking up the machine to deliver more, right? And that's.
But can you just give some thoughts about where you will get this? It's kind of half the supply chain and then the rest is kind of factory closures and what of this will be reinvested also so we don't plug in too much into our models?
Yeah. It's clear that some of these savings in terms of driving our global competitiveness are very, very important from a competitiveness perspective, of course, also from margin expansion perspective. So some of it will be or will have to be, in particular, in today's environment, be reinvested into actually winning the projects. That is clear.
Yeah, I understand that. Okay. And then finally, the Severn order trend in 2025. You had just said the sales, what it was, but give some indication on the order trend there.
Oh, for Severn?
Yes.
Yeah, let's come back to that when we close.
Okay. Thank you.
The next question comes from Sven Weier from UBS. Please go ahead.
Yeah, good morning. Thanks for taking my questions. The first one is a follow-up on Mikael's regarding the greenfield project pipeline and your position in the Chinese market because, obviously, we've seen a few projects there last year. I think there's another one coming this year, at least one. So we always talk about South America, but there's quite a few things happening in China. So how do you see your chances of winning something there in 2026? That's the first one. Thank you.
Yeah. Thanks Sven. And thanks for joining. China market, important market for us. We're well established. We delivered the first machine there back 90 years ago, I think. So we've been a longstanding supplier into the Chinese market. It is clear, as you said, some of the dynamics we see in the China market is that they're going they have aggressive, generally, investment philosophy, but they're also going more integrated, which we haven't sort of not seen to the same extent before. So they're going more backwards into actually having their own pulp supply. And that will drive demand for pulp projects in the Chinese market over the next couple of years.
Do you also see that going ahead in your current pipeline for this year?
Yeah. Yes. It's always difficult to say sort of when does things really pan out. I have to sort of say that as well. But yes, we do see it in the pipeline.
And the second question I had is just around the guidance because, obviously, with flat sales, you give a bit of a point guidance on revenues, which appreciate. But on EBIT, right, you say flat or could also increase. I just wonder about the moving parts, right, because, I mean, operating leverage is not going to have an impact if your revenues are flat. I mean, what are the and you talked about the savings. I mean, should we expect a big mix impact on the bridge? And, I mean, what kind of range are we talking here? Could it be a significant increase, or are we talking about a relatively narrow range here also for EBIT?
Yeah. So good question. So what's really the sort of the swing factors here? I think, as we've shown in last year, especially second half, we've taken sort of our own destination, really, in our own hands, right? With having been early on on the operational savings, which then hit the bottom line already second half. Swing factors going into 2026, I would say, to a very large extent, two things: service growth and then growth in our PPS business. Lots of Katri talked about our order backlog, but still a lot of book to bill going into or have to happen this year in 2026, right? And that's mainly thinking about PPS and the service, especially maybe on PPS, which may be especially on the automation systems.
So the upside is not limited by the EUR 30 million net savings, but there could be also a positive mix effect on top of that if things go well.
Yeah. Back to how does the growth come in service and, in particular, in PPS? Yes.
Which would then be more, I guess, back-end loaded on service given that short-term, the service market is still difficult, as you said, right?
Exactly. And that, of course, as you said, that creates the mix impact as well, which then drives up our margin.
Understood. Thank you, Thomas.
Of course, Sven. Thanks.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Timo Heinonen from Handelsbanken Markets. Please go ahead.
Thanks for taking my question. This is Timo from Handelsbanken. I mean, I'm sorry if you already commented this, but the service profitability is very strong in fourth quarter. And, of course, I know that the cost savings, but at the same time, the sales down quite a bit. I think it must have been some underlying improvement. I mean, that the margin is up only because of the cost savings.
First of all, thanks for joining, Timo. And did you mean, are you talking just about the bioservice, or did you talk about the whole thing?
Bioservices, of course.
Sorry. Once again, I couldn't hear you.
I mean, if we look at what the margin could have been, and, of course, you have had some cost savings, but then the revenue being down, so it seems that you have been able to kind of improve the underlying margin as well.
Did you ask about whole business? Profitability improving. Yeah. Profitability improving, excluding the cost savings.
Timo, as you know, we cannot give comments on the services profitability overall. But if you look at the bio side, the main driver for because the volume was dropping, then margin was kept, was actually the operating model savings. So that was the number one thing.
Okay. But no kind of underlying improving, I mean, pricing or anything like that?
Not significant, I wouldn't say.
Okay. Thanks.
I think it was mainly about getting ahead of the curve from the softness in the market. That's what we were quite pleased with, that that decision really proved out to be the right one.
Okay. The next question comes from Tom Skogman from DNB Carnegie. Please go ahead.
Yes. Hello again. I would just like to understand the dynamics a bit better in China because, to me, it seems like you have other competition there than you have in the Western world. And it's very hard to understand what is kind of happening to your market shares in China, in board machines and in pulp mills. I mean, you see so few order announcements from you regarding Chinese customers, especially on the pulp side, but there seems to be a lot of things happening there. So I would like to understand this a bit better.
Yeah. I mean, I'm not sure I fully get your question, Tom. So forgive me. So ask a follow-up if I'm not answering your on that one. I think China market, yes, it is a different market than some of the others. There's some different competition. But clearly, our large Chinese customers, they do look at total cost of ownership or cost per ton or being the most efficient.
They understand probably very, very well that it is about having the lowest operating cost, especially in that market where there also is overcapacity. So how do you actually get to be able to compete effectively and profitable in that market as well? And that's where I think our technology comes really into play because we can deliver that with the most or the lowest total cost of ownership to our customers, right?
But if you look at pulp mills in China, I mean, what is your market share there the last five years or so? And is there any kind of change going on?
Yeah. I don't think we disclose sort of regional market shares. But I think, as I said, I think it was to Mikael's question that we had a good year in our pulp business as well with sort of a 50% taking 50% of market share from a global perspective.
But are there other competitors in China, in pulp mills? I mean, this is really what I want to understand. How are you doing against them in kind of midsize projects, etc., if that's kind of one of the hopes that there will be things happening this year?
I think our advances also in the Chinese market, or maybe in particular in the Chinese market even more so, is back to most efficient equipment, but also this thing about being able to support the customers in the startup, in the process, in startup of the equipment. And that's where other competitors, especially sort of local competitors, don't have the capability at all.
Okay. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers.
Thank you, Operator, and thank you for the good Q&A session. There are no more questions in the digital platform either, so I think it's time to start to wrap up. The Q1 report for Valmet will be published on April 28. I hope to see many of you in the roadshows and seminars we are planning to attend in Q1. Now, I'd like to hand over, Thomas, for you for any closing remarks.
Thank you, Pekka. Thanks, everyone who joined us today for a good discussion here on this webcast and other venues as well. First and foremost, I just really want to thank the Valmet team for the hard work and commitment during the past year. Thanks to the finance team for delivering another great, transparent report, all at the right time and hit all the deadlines.
To sum up, or maybe also, maybe even more importantly, I want to send a big thanks to our customers for the trust that you have shown us throughout the year and for a lot of you, very challenging year. And I sincerely think that we've also played it back and to try to deliver as much value and make you as competitive as you possibly can in your markets as well. But thank you very much for the trust. To sum up, we achieved a record high EBITDA margin in Q4 thanks to the early action we took last year. 2025 was a true transformative year for Valmet with new strategy, new operating model, a lot of initiatives.
Next strategic milestone is the Severn acquisition, which makes us even better positioned for growth in the Process Performance Solutions and outside our Biomaterial core. So with this and despite some market headwinds, we are starting the year 2026 from a position of strength. See you out there. Have a great weekend when you get there. Thank you.