Earnings Call: Q4 2020

Feb 4, 2021

All right, ladies and gentlemen. Welcome to Valmet's Q4 2020 Research Publication Webcast. My name is Pekka Rohenen. I'm the Head of Investor Relations here at Valmet. With me today are Pasi Lainen, Valmet's President and CEO as well as Kari Saarinen, CFO. The agenda is so that Pasi will first go through the highlights of the quarter. Kari will then present financials in more Shell. And after that, we will be taking questions over the phone lines. But without further ado, Pasi, please. Okay. Thank you, Pekka. So welcome also on my behalf. So net sales involvement amounted to SEK 3,740,000,000 and comparable EBITDA increased to SEK 365,000,000 in 2020. So I have traditional agenda. 1st, 2020 in brief, Then Development of Business Lines. Then like Pekka said, Kari will go through the financial development. And I'll go through financial proposal guidance and short term market outlook. So first, 2020 in brief. So our orders received decreased to SEK 1,772,000,000 in Stable Business. And orders received decreased to SEK 1,962,000,000 in Capital Business. Net sales were SEK 3,740,000,000 and backlog amounted to about SEK 3,300,000,000 in the end of the year. And comparable EBITA, like we said in the heading, increased to €365,000,000 And margin was 9.8%. And gearing was 13%. So here, you have the same in numbers as well, like total orders received was €3,653,000,000, Which take into account the challenges during 2020 because of COVID was a good number. Our net sales were SEK 3,740,000,000 and comparable EBITDA, like I said, 9.8 percent. And backlog in exact numbers SEK 3,000,000,000 NOK 257,000,000. End of the year, we employed about 14,000 B. Business wise, It's remarkable that big part of the business, about 58 54% came in orders received from Pulp and Energy and Paper Capital Businesses. And the rest came from Our stable businesses, including Services and Automation. Geographically, biggest change was that China was very active. Like you see, 24% of our orders came from China. Traditionally, it has been closer to 10%, 15%. So 24% Also good achievement for us in China. Here you see the development of Valomet since 2013. So our orders received has been increasing from about €2,200,000,000 level to 3.6 €1,000,000,000 level last year was the record. So this year, we were a little bit lower. Net sales has been growing nicely since 2014 and last year, we ended up a little bit over SEK 3,700,000,000. Comparable EBITDA Has been increasing nicely as well. First, it was SEK 50,000,000 and this year, we ended up €365,000,000 And at the same time, we have been able to improve comparable EBITDA margin every year. And now we ended up in record profitability in EBITDA margin being 9.5%. And that's close to the target, Which we said a couple of years ago to reach 10% to 12% EBITA percentage level. So nice and consistent development environment over the last 7 years. Like I said, our orders received decreased to €3,600,000,000 And here, maybe the here you see the graph as well. So at the highest, we were over SEK 4,000,000,000, SEK 4,300,000,000 Roughly and now we are at SEK 3,650,000,000, SEK 3,650,000,000. And here you see the area wise development as well that China orders were €885,000,000 last Yes. So China was very important for market for us in all the businesses, in Services, Automation, Balaban Energy and Paper. And here you see also that order intake Declined in North America comparing to earlier years as well as in Europe, Middle East and Africa. Our stable business, which includes services and automation, orders received totaled to 1,000,000,000 SEK772,000,000. And that's SEK100,000,000 roughly SEK100,000,000 down compared to last year. And this SEK100,000,000 is coming Like you will later see from Services, automation was holding the level of order intake of last year. Then our backlog is SEK 3,257,000,000. It's a little bit lower than in earlier quarters, but it's still at good level. So SEK 3,000,000,000 SEK 3,200,000,000 means that we have very good workload in most of our units. And it means also that in some units, we have a little bit longer Delivery times than normally we would have. So SEK 3,200,000,000 order intake is or backlog is good backlog for us. We are saying that about 75% of the order backlog is currently expected to realize as net Sales during 2021. Last year, the corresponding number was about 70%. Then some words about the business lines. Here, first, services. So order intake ended up in 1,350,000,000 And it's down compared to last year, about SEK 100,000,000. Net sales went down as well Compared to around last year, almost SEK 50,000,000. But here, one has to pay attention to one topic, and it's that orders received was Higher than net sales. So our order intake was higher net sales. And all in all, We are, of course, not talking about the profitability of the separate businesses, but we are happy with the profit development also in Services in 20 Swenti. Why order intake declined compared to last year? We have been saying early as well that The utilization of graphical paper mills has declined, and it has caused us a decline in order intake. And then of course, it has been challenging to access customer sites, especially in mill improvement type of projects. And that has been causing the other Or that's the other reason for declining order intake. To the outlook, I'll come back in the end of the presentation. Net, if we looked at business by business unit, The biggest change is that the mill improvement business is now 25% The head of the business and in earlier years has been quite much bigger percentage. So that's Where the biggest hit has happened in our order intake. Geographically, I would point out that China was active like you see here 10% ending up Somewhere to €135,000,000 The other area which was active was South America, but there we had Currency headwind, and that's why it was not growing in euros, but in local currencies, we had very good developments in South America. The rest of areas were impacted by COVID, like earlier explained. In Automation, our orders received were €315,000,000 last year, euros 315,000,000 And last year, SEK 416,000,000. So we had very good catch up in the end in last quarter. Last quarter order intake was 1.20, which is the record order intake in Valmet years. We were successful with package sales. So about €80,000,000 of the order intake in automation came From Packages, which we are selling together, where we are selling together our capital equipments and automation. So that market Was developing well. And all in all, we are quite pleased that automation, even if There was a COVID year, I was able to achieve last year's numbers in order intake. Net sales grew to 4,000,000,000, It's also good development. COVID was impacting our Services business mainly in direct sales, Exactly like in Services, but otherwise, our team managed the COVID impact very well in Automation. Business or customer wise, 71% of our order intake is coming from Pulp and Paper And 29% last year came from Energy and Processes. Geographically, China was also stronger than it has been in previous years. Due to the package sales, we have been getting together Automation has been getting together with the Capital Businesses. In Pulp and Energy, 3rd quarter was low in order intake, and then we had bounced back in Or it's more a timing question, not a pound. But timing was more positive in Pulp and Energy in order intake. And our order intake ended up in SEK 291,000,000 in the last quarter. The whole year was SEK 934,000,000, which is lower than a year ago, but still at good level. Net sales ended up in SEK 1,000,000,000 and grew over SEK 80,000,000 compared to earlier years. In Pulp and Energy, our organization managed COVID well as well. So of course, There are some delays in some of the projects, but nothing material from our perspective. And all in all, our teams have focused a lot in making the best that our personnel is safe as well as customers' personnel are safe in the sites where we work. But good development in pulp and energy as well. The big change is that 72% of order intake came from pulp and energy was 28%. Some years ago, energy was over 50%. Now energy market hasn't been that active. Pulp market has been active. And the positive thing, of course, is that to the big extent, we can use the same resources, Both in manufacturing and engineering in selling energy boilers and making recovery boilers for Pallopside. So this flexibility in our organization means that we have good workload utilization in for Energy Engineers and Energy Manufacturing Capability because they are now used for pulp projects. Geographically, again, the same comment that China was more active than it usually is. And of course, we got in the beginning of the year nice order in South America from Amadeus project and That's why South American order intake was nice as well last year. Paper business line Continued with order intake of SEK 1,000,000,000, so SEK 1,000,000,000, 29,000,000. And it's the 4th year In a row that our order intake is over SEK 1,000,000,000. This year or last year, our net sales were also SEK 1,000,000,000,000, 1,000,000,000,000. So market has been active in Paper business line again. And the same message than what I had for. Pulp and Energy, our organization has managed COVID-nineteen exceptional situations well, trying to make sure that our people are safe And then also making sure that our deliveries are working on time. And of course, in all our businesses, people have now learned We work remotely a lot compared to earlier years. So the way how we make start up is different than it was 2 years ago. And so our organization has learned many new things and ways to work in 2020. Paper business line by customers is interesting one. So 21%, so roughly 200,000,000, 210,000,000 orders came from Traditional paper machines, so printing and writing paper machines. Then board was about 53%, So maturity of our business. And then this you came back in nice volume, so About 26%, which corresponds to EUR 260,000,000 order intake roughly was a good year for this year, and you will see that There's a change in our market outlook as well, but all parts of the business were performing well. And like you remember from earlier Yes, we can use the same engineering manufacturing capacity for boat and paper boat. And here you see that 50% of total intake came from China. So we are very pleased with our market development and market position and market activity in China. Good. That was my summary. Now it's Kari's turn to go through the financial numbers. All right. Thank you, Pasi. And also good afternoon on my behalf as well. And first, I would like to thank all the Valmetteers who have been working risklessly on very difficult circumstances to deliver these excellent results for year 2020. And also a big thanks to the finance team around the world for the quality that is second to none. So Quarter 4 in brief. So our orders so stable business orders reduced by 9% to SEK 4 CHF 63,000,000 Our capital business orders received remained at previous year's level at CHF 502,000,000 at the quarter. Quarter's net sales, those increased by 6% to almost SEK1.2 billion. Capital business increased here 11%, where stable business was flat. Sales mix, 44% net sales was stable, 56% capital. Last year, we were at 47% stable and 53% for capital, so some change there. Our order backlog, SEK 3,300,000,000. This is pretty much the same level as last year. And then our comparable EBITDA For the quarter, that was record high 12.5%. Then looking at key figures in a bit more detail. So orders received reduced by 7%. Paper business line increased. Automation total, So including the package sales, those remained at the previous year's level and Pulp and Energy and as well as Services business line reduced. Orders to China and orders placed at Pacific increased. The other geographical areas reduced during quarter 4. Order backlog, last year's level. We estimate that around 75% of order backlog will be recognized as revenue during this year. Last year, this figure was 70%. Net sales. Total net sales were plus 6%, an increase during the quarter at Paper Business Line. Services and Automation were flat and Pulp and Energy reduced. Net sales in China increased. Rest of the world was at the previous year's level. Our comparable EBITDA, SEK 146 €1,000,000, which equals to 12.5%. And as I said, this is record high. Key drivers for strong EBITDA Good sales, also successful project execution, also prudently with the costs. Please note that the comparable EBITA here Does not include Valmet's share of Neles' profits. Our quarter's order cash flow, CHF 114,000,000. That's a bit below than last year's, but on a relatively good level. And then about full year. So orders received for the full year, those reduced by 8%. Paper business line and automation business line Total, including package orders, were at previous year's level. And then Services business line and also Pulp and Energy business lines are reduced. And Pasi already elaborated the impact of COVID-nineteen pandemic, specifically on services here. Orders received in China area, Those increased and were 3.5 times higher than year 2019, and that highlights our Strong position in China. Foreign exchange impact to orders, you see it was negative. So calculating with the comparable currency, it was minus CHF 101,000,000 The impact and majority of that It's coming from Brazilian Realis. Net sales for the year, a bit over CHF 3,700,000,000. Paper business line and also Pulp and Energy business lines increased, so Capital business increased. And Automation and Services business lines were at the previous year's level. We had a bigger increase in South America, over 60% at full year's net sales. Full year comparable EBITDA, that increased to 9.8% Of net sales, order to SEK 365,000,000. And here, important thing to notice is that we have been able to improve Both EBITA percent as well as EBITA euros every year since the beginning of Valmet year 2014. And we are also getting close to our target range of 10% to 12%. Operating profit, 8.5% And EPS, that was €1.54 Cash flow for the year, €532,000,000 and gearing was 13%. Absolute gross profit, that was the highest ever. Gross profit percent, that was 20 3.4%, almost the same as last year. And I said earlier, the stable business sales were 44% Of the quarter's net sales last year, we were at 47%. Full year stable business net sales also 44%. Last year, it was 48%. So our organization has been successful in maintaining gross profit levels, Even though the sales mix has changed during the year. SG and A is a bit lower, Lower than last year for the quarter as well for the full year, pandemic has reduced travel and also our personnel has found New remote ways to serve our customers and also perform in both external and internal projects. During last year, there were also permanent and temporary layoffs at some functions and locations. And then going further, of course, there will be some pressure on SG and As once the pandemic is over and business activity returns. Our internal improvement projects such as ERP and digitalization continued pretty much at same level as earlier. R and D costs were 2% of net sales. Our EBITA target, that's 10% to 12%, and this was set A year ago, we got very close to the target already within 1 year, even with the changed sales mix. And then the highest ever EBITA shows that our stable business were able to perform well, Even though the net sales were flat and their relative share reduced and that our capital businesses Had very good project progress to ensure strong revenue and also and they also had resilient project management and execution during the challenging year as well. Cash flow. So we have had now 6 good quarters with cash flow. Quarters of cash flow, CHF 140,000,000 and full year CHF 532,000,000 Favorable development of profitability as well as new capital orders were the key contributors to the record high cash flow. Networking capital. So, networking capital was minus 16% of rolling 12 months orders received, and it was minus SEK588,000,000. And that means that in case the net working capital would increase 5% to a bit more normal level To minus 11%, minus 12% rolling 12 months orders. So net working capital would increase CHF 180,000,000 to CHF 200,000,000 So that's important to know this year. And then looking at net debt. Net debt, so our gearing increased to 13% from last year's minus 22%. We need to notice here that we took some loans now because of the acquisition of Nelesis Shares as well as the PNP Poland. Our equity to asset ratio, 39%. So that is actually That has been our equity to asset ratio actually has remained quite stable, around 40% over the years. And then return on capital employed. So capital employed increased because we took that SEK 230,000,000 loans to finance the acquisitions. But with good financial performance, our return on capital employed was 22%, And that remained over our target level of 20%. Thank you. And back to you, Pasi. Good. Then it's time for dividend proposal guidance and short term market outlook. So our dividend policy is saying that We should pay dividend payout should be at least 50% of the net profit. And our Board of Directors Krogs is proposing to an annual general meeting that we would pay €0.90 per share, which represents about 58% payout ratio. And if that will be approved by AGM, Then we would have a nice history of growing our dividend constantly year after year. And now the increase would be €0.10 per share comparing to last year. So €0.90 Per share is now the proposed. And we are, of course, happy that we have been able to increase our dividends year after year since Valmet has been de merged. Then guidance on short term market outlook. So guidance is that Farmet estimates that net sales in 2021 remain at the previous year's level in comparison with 2020 And comparable EBITDA in 2021 will remain at the previous year's level in comparison with 2020. So We are saying flat, flat for net sales and EBITDA. Then market outlook, which is for coming 6 months, And we are saying that 50% roughly is coming from capacity utilization and 50% from market activity. In Services, we are still saying satisfactory and weak. And if I little bit describe the Areas. Then we have good activity in China. I would say Asia Pacific is becoming more active. Then in Europe, it's very difficult to know what how things are developing. North America, the same. And then South America will continue to be active. So that's geographically. Then business type wise, We will have still challenges to access customer sites in Mill type of project, any type of projects. And then rest of the services should be more coming to the normal level. Then how we see a little bit longer term the future is such that the first half, because the Vaccination hasn't been proceeding further. There are some implications to our services business. And then during the latter part of the year, We start to see more activity in mill type of projects as well with our customers. That's our current thinking in the long run. In automation, we changed the market outlook to good Order outlook to Kurt. And like you saw, our order intake was at last year's level. We have good capacity utilization in almost all the units and there is good market activity in automation still. So all the reasons to say that the market is good. In the Palop, you saw the order intake was good in 2020. And there are still Several projects in development phase and negotiation phase. So we have all the reasons to say That pulp continues to be good. In Energy, the market was not active last year. And Currently, we are saying that the outlook is weak. And there, like I said, so of course, it would be nice to have It's factory and good in energy as well. But capacity utilization point of view, we can use almost all the people in recovery side and in other parts of to Pulp and Energy Business. So we don't have a challenge with the capacity utilization at all in that business. Paper and Board, good order intake like you saw and market activity continues with us good. Tissue Order intake improved in latter part of the year, which means that now we have good utilization and the market activity is good as well. So This is the outlook we have now for coming 6 months. So Pekka. All right. Thank you, Pasi and Kari. And we will then move to the Q and A session. And we don't have a physical audience here at Kaela Sodermaat. We'll be taking questions over the phone lines. So operator, I hand over to you now. Thank Our first question comes from the line of Robert Davies at Morgan Stanley. Please go ahead. Your line is open. Yes. Thank you for taking my question. My first one was just around Neles And just in terms of the accounting, when you provided your guidance for flat EBITDA for 'twenty one on 'twenty, is that including or excluding the Nelos contribution, Just to be clear. Well, thanks for the question. And so our comparable EBITDA Does not include anything from Nelles. So it's without any impact on Nelles. Okay. Thank you. And then just on, I guess, Some of the sort of changes in views in sort of the sort of short term outlooks, maybe if you could just kind of walk us Through there, what was the kind of key driver behind the change in energy in particular? Energy, Like you saw last year, order intake was quite low compared to earlier years. So the market activity hasn't been good. And there, the biggest contribution to the change is the marine scrubber business, which was not active last year. 2 years ago, our order intake was roughly €190,000,000 a year after €100 €20,000,000 €30,000,000 And last year, the order intake was very low. So that's maybe the biggest contributor to the low order intake. And we don't see that, that market will bounce in big way back in 'twenty one. It will be more active than 2020, but not to the level where it was in 2019. And then my final one with just around, I guess, the medium term outlook for margins. You've obviously So I had a number of years we've made very, very good progress on the margins and the guide for 'twenty one is sort of flattish. What's the kind of thinking over the sort of next 2 to 3 years in terms of the kind of evolution of the sort of margin profile Over that period, is mix going to be the biggest impact on the sort of margin outcome? Is it going to be kind of cost actions? What's going And will this be the biggest swing factor in your view now over the next 1 to 2 years? So where you come in that range? Like you know, our target is to reach EBITA, 20% to 12%, and we are now close by. And since the Acquisition of Automation, we have been saying that the margin improvement comes with operational improvement in all the topics. Trying to push the sales prices up, try to develop new, more cost competitive products, reduce cost In existing products by R and D, improving project delivery by project management, Improving quality, improving procurement savings. And we continue to Drive all those actions forward. So we are not saying that we are ready with any of those. And then the other thing we have been saying that once we have been Increasing the target setting by 2%, then it's not possible to achieve the improvement If only the other side of the business is or one side of the business is developing profitability. So If half is coming from stable, half is coming from capital roughly, then if you want to develop it by 2%, then if Development is coming only from one side, then the other part has to improve by 4%. So we have been pushing profitability Up in all our businesses. And like Kari can now comment on the mix issue, which was interesting in 2020. Yes. So yes, still to continue, so that our stable business and capital business mix typically is fifty-fifty. So that's a normal year if we look at like past years. And now it was 56, 44. And so even with that mix, so we were able to reach 9.8%. So that, of course, shows that our capital business is Strong and we are executing our projects well. And then also to elaborate a bit what Pasi was saying, so Not to forget the ERP project that one day is going to bring us efficiencies as well as the internal digitalization as well. That's great. Thank you. Thank you. Our next question comes from the line of Madhu Rimpela of Nordea Markets. Please go ahead. Your line is open. Thank you. My question would be on the margins of the different Business Unit. I know you don't talk about the absolute margins, but maybe you could help us to understand that how did they evolve during the year? Did we see Margin improvement across all of the business lines? Or was there some that didn't improve margins, for example, services? All our businesses were developing favorably. Okay. That is clear then. And then if you talk about these bigger pulp projects That you mentioned that you have in the pipeline. So can you comment a bit about how do you see them being Geographically spread across the globe. Bigger and medium and smaller. So South America will become active either this year or next year again with Capacity Extensions or even there are discussions about new mills, then Asia Has potential. And then one interesting area is China as well. So some of the Chinese customers are planning to build Virgin Fiber Pulp Mills in China. So China will be active market. So at least 3 these 3 will be active. Thank you. And maybe to follow-up on that topic. So would you say that the current backlog, which is at a pretty good level, Would carry you through 2021 with good utilization rates? Or do you still have backlog left in the equipment business for the start of 2022. So what I'm trying to understand is that when do you think that you will need to start getting New orders from these bigger projects in order to kind of ensure the backlog continuation or utilization continuation in the Equipment Business. If I answer a little bit the other way around, like last year, Pulp and Energy order intake was somewhere at €940,000,000 and it's good enough level for us to keep everybody busy. And to get To that level, we needed one bigger order in from and it came in South America. So with this €900,000,000 level, we have good utilization. And when it goes over, then we have, of course, Even better utilization. And currently, we are only giving market outlook for coming 6 months. But if I give more general answer, it seems that all our customers are Pretty confident that the long term development of pulp demand is good. And also that long term board and packaging grade demands as well as tissue demands are good. So then, of course, there are variations between the quarters and half years. But I think all our Customers are pretty confident with the long term development currently. Okay. Thank you. I'll get it back in the queue. Thank you. Our next question comes from the line of Tom Stogman of Carnegie. Please go ahead. Your line is open. Yes. This is Tom from Carnegie. A bit of kind of technicality. So I understand you don't book Neles now as as part of EBITA adjusted. But is it booked as EU items? And is that the line where we'll find it in the future? Or where will it be found? Well, the Neles' the share of Neles' profit is part of EBITDA and also EBIT. So it is there, but it's not part of the comparable EBITDA. So because we treat that as an item that Management can't really impact on the level of the profit there. But Can we say that we think about it, how to make sure that everybody understands how much is coming from Nellis? Yes, it is there. So that is So maybe, Tom, to continue still. So we have our share of Nellessi's quarterly profit from quarter 3 2020, and that is around EUR 3,000,000 in EBITDA. Nothing comparable to that. Yes, I noticed there was like Plus 1 between EBITA adjusted and EBITA reported. So there are then EU items and then it's passed 3 from this. Yes. That's a bit it gets a bit complicated, Tom, but there's also then items between comparable other items between comparable EBITDA and EBITDA as well. I hope you can clarify that in some tables in the coming reports. And then I wonder how much sales came from the acquired P&P company In 2020. That was around €27,000,000 That came from P&P Poland. And that's the full year figure, right? Yes. That's all in quarter 4 because we started to consolidate beginning of October. Yes. And then the FX impact on top line last year, what I heard you say, It was quite a big number, but I couldn't catch it during our presentation. Yes, Tom. So it was SEK 101,000,000 the conversion for orders, So SEK 101,000,000 for net sales, it was SEK 100,000,000? Negative. Negative and big piece coming from Brazilian reals. Yes. And then finally, I have to ask, of course, again about Neles Now we saw that Alfa Laval CEO yesterday stated that he is still very interested in buying Nelle, so I mean, what should we expect without perhaps talking about your tax expense? But is it so that this really Now remain an unclear situation most likely throughout this year? Or what do you expect? No. We have been saying that we are long term in NLS. We have now 29.5% of the shares and we say that we are long term. And We are also saying that it would be good to create a very strong Nordic engineering company merging by Valmet and Neles. And That's still our thinking. But currently, there's nothing new to say about it. I just noticed yesterday when Nellis reported that customer satisfaction was record high. The 1st year, the company was independent despite Difficulties in the pandemic. I mean, to me, that signals that the company will perhaps do its best as a stand alone Company, but with a strong owner, that is not like any real alternative for you just to remain a big owner there. So were you referring to customer satisfaction in Neles? Well, it jumped remarkably compared to when it was Part of Metso. I mean, this really signals that employees and customers really like that Neles is an independent company, apparently. Customers like Neles products and have been liking Neles products last 60 years. It was just remarkable how big jump it was in customer satisfaction when it was an independent company compared to being part of a conglomerate. I can't comment on that. So you have to ask that from Oli. All right. Thank you. Thank you. And our next question comes from the line of Johan Eliason of Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Hi. It's Johan here. Just a short question On the graphical mill closures, do you see do you think you've seen the negative impact Fully on sort of the service order intake in the Q4 or is the further downside Potentially offsetting the recovery post the pandemic for the Service business. So how should we think about it? I think we have seen the Full in Q4. And that means basically, I mean, If you get access to clients, etcetera, Q4 next year should probably rather show a positive sign if you can Actual customers in a more normal way with modernization. Yes. Now of course, We were serving some of the printing and cryographical paper companies like with our paper machine clothing. And then The capacity was reserved for those customers. And now when they have closed, then we start to sell the same capacity to board customers. And it will take a while before we can sell it, but that's what we are planning. And Then graphical paper, those machines which are closed forever, that market, of course, will not come back. And earlier, we have been saying that a year or yearly, euros 10,000,000 to €20,000,000 of our order intake is disappearing because of the close also of Paper Machines. And last year, it was a little bit bigger and that market Partly will not come back, but we can sell the capacity then to other customers, board customers and tissue customers. And why would they change? Has Market share in fabrics, there have been restrictions by your capacity rather than From competitors or Last years, we have been also capacity limited. So Then we can sell that extra capacity to port and packaging crates. Okay. Understood. Thank you very much. Thank you. And we've had one further question just come through. That's from the line of Manu Rimpela of Nordea. Please go ahead. Your line is open. Thank you. A follow-up question from me. Could you please talk about the self help measures that you have? You mentioned this ERP program and you also Have some other measures that you're working on to improve the execution and other parts of your business. So Could you just help us to understand a bit more what are the kind of main tailwinds that you expect from these into 2021? And which are the measures that we are working on? Well, already mentioned this ERP and digitalization, which are like internal efficiencies for us. Then, of course, we are working a lot on the quality costs on the Project Management and Project Execution side. We're also working on the sales management side as well. So, Continuing with the same kind of activities that we have done over the years and some of those are closed. Some of them, we continue with the add on topics as well, like for instance, procurement. So we started procurement all the way Since year 2013, and we are not yet finished. And some of these things take Like we need to continuously improve many things. And ERP project, it will still take some time Before we are getting like any major benefits out of that this year, we are going to have 21 rollouts, and we still Okay. Thank you. When will you have this ERP rollout completed and starting to generate savings? I guess it's generating costs at the moment. I would think that it we most likely, it will still take 2 years before we are on the savings side here. Thank you. Thank you. And we've had one further question just come through. That's from the line of Tom Skupman of Carnegie. Please go ahead. Your line is open. Yes. Hi. This is Tom from Carnegie again. I would just like to discuss your guidance for flat sales a bit Based on your comments, 75% of the order book will be delivered this year. It means that the order book for this year is up by 5%. You will likely, in Q1, book this €350,000,000 to €400,000,000 metapulp Mill order, Implying the order book will be up a lot after Q1, especially for this year's deliveries. And then if you talk about Service sales coming back in the second half. Your I mean, your guidance seems extremely cautious on the top line. Do you see anything negative that I don't see? If I remember correctly, last year, we were saying 70%, but Backlog was a little bit bigger. And now we are saying that 75% from small amount of backlog, if I remember correctly. So you can't say that It's 5% high here. But this Guidance is done now based on the current situation. We all know that there are reasons to be Positive. And then there are reasons to be cautious because of COVID and COVID spreading and actions Getting tougher in Europe. So our guidance is based on the current facts and some cautiousness. And you expect the Metso order now to be booked in Q1? I can't comment on timing of Metz's decision making. So it's better that you We all wait, and I'm sure that they will let us know when they are ready to make the decision. I can't comment on that. But you have earlier said that only the environmental permit is missing, and that was received already last year. Yes. But It's made such decision. It's not our decision. I can't comment on that. Sorry, Tom. I understand. Yes. Thank you. And we've had one further question come through. That's from the line of Antti Kansalan of SEB, please go ahead. Your line is open. Hi, guys. It's Antti from SEB. Sorry, I might miss this if You said it earlier on the call, but coming back to the sales guidance, notably on the services side, and you mentioned tighter restrictions right now. So Could you repeat a little bit what you expect from services from different type of activities regarding recovery and taking into account the impact from the Graphical Paper decline what we are seeing? So 1st 6 months, we are thinking that the COVID restrictions will impact our services. And then currently, we believe that in latter part of the year, the vaccination has been so widely used that the societies are opening and our services is Opening. Graphical paper dropped a lot this year, might be that some of the capacity We'll bounce back a little bit, but then longer term, there is a decline in Graphical Paper. Part of the capacity what we have been using for Graphical Papers, we can sell now to packaging grades. And that, of course, will take some while. Then our mill business, where we make Field Services and Mill Improvement Project that has been mostly affected by COVID. I think Kari was saying 16% order intake drop. Yes. And it's because we have challenges to get customer access. And then the other thing is that customers don't want to have unnecessary personnel or disturbances in the processes. And we think that, that market will bounce back once the societies are opening again. Currently, we think that, that will happen in the second quarter. Okay. And I think earlier, You've been pretty cautious on talking about the recovery in Services. I mean, the comparison figures are weaker from last Here, when we go to second half, but should we kind of expect return to trend growth? Or should we expect kind of a pent up demand driven Stronger year on year growth in the second half. Is there a lot of actions that haven't been done and are just customers are just waiting for you guys to get into the sites? First of all, I think it's good to remind that in quarter 1, our last year, we had all time record quarter. So of course, that will be that's a challenging figure. But I think it goes so, like I said, that currently, There will be still COVID limitations. And then latter part of the year, the limitations will be getting smaller. Traditionally, we have been saying that 55% of the order intake happens in the first part and 45% of the order intake in 2nd part, and if our current thinking is correct, then this year it might not be the case that I can't say whether it's the other way around, but we will not see a normal Distribution of the order intake, most probably in services in 2021. Kari, do you agree with that? Yes, I do. I do. And also what Pasi was saying that so that quarter 1 last year for services order intake, that was record high. So It would be difficult to beat even with the good circumstances. Now it's a bit unclear here. And then if I may still To elaborate a bit what Tom Skogman asked earlier, and of course, we fight hard so that we increase the net Sales and so but there's also certain uncertainties that may be here beyond management control, Even though a lot of good ingredients. Yes, sure. Okay. Thanks. And could you still remind a basic question on the Modernization of the mill improvement business. When you get an order, what's typically the lead time when you book sales from that? In that business, we have field services Also included, so it can be weeks. And then typical project is, let's say, 6 months. Okay. Thanks so much. All from me. Thank you. And we have a follow-up from Tom Skuckman at Carnegie. Please go ahead. Your line is open. Okay. It seems we're getting no answer from Tom. So, I believe there are no further questions than on the line. So I'm Tom Smith back in the queue. Once again, Tom, your line is open. If your phone is on mute, you will need to unmute. Hi, Tom. Can you hear us? Okay. I think Tom is having some phone issues. But yes, therefore, there are no further questions in the queue at this time. So I'll hand back to our speakers for closing comments. All right. Thank you for the presentations and Pasi and Karian, of course, for the good discussions. And the next events for us will be the Capital Markets Day that will be held on the 10th March starting at 1 p. M. Finnish time. So it will be a virtual event. And hopefully, everybody will participate active to that one as well. And then on April 2nd, we will have the Q1 result publication. So those are the next Valmet events. Mark them down to your calendars. But This now concludes this event. Thank you, everybody. Thank you.