Valmet’s path forward Pasi Laine, President and CEO November 26, 2013 Agenda Capital Markets Day 2013 1 Valmet in brief 2 Investment highlights 3 Valmet Must-Wins 4 Market outlook and profitability 5 Summary Valmet in brief Valmet’s road to becoming a global market leader 1797 Tamfelt 1951 1968-1996 End of 2013 1856 Tampella Valmet Several M&As i.e. Demerger to create 1858 Beloit 1986 KMW Valmet and Metso 1987 Wärtsilä paper finishing machinery 1860 KMW 1992 Tampella Papertech 1868 Sunds Defibrator 1942 1951-1995 1999 Key acquisitions Rauma- Several M&As Metso created 2000 Beloit Technology Raahe through the 2006 Kvaerner Pulping merger of Valmet Kvaerner Power and Rauma 2009 Tamfelt 4 November 26, 2013 Pasi Laine, CMD 2013 Valmet’s historical performance Net sales and EBITA before NRI (EUR million)1 2,925 3,014 2,735 2,703 2,453 EBITA 2,092 2,061 7.6% target 6-9% 7.1% 1,946 6.3% 6.5% 6.4% 5.5% 5.6% 5.3 % Services 4.1% Capital 877 974 1,011 636 834 847 715 809 EBITA-% 2006 2007 2008 2009 2010 2011 2012 Q1-Q3/13 EBITA before 115 184 194 116 159 205 192 79 NRI (MEUR) • Services has been growing steadily • Cyclicality in capital business • EBITA-% has been relatively stable over time 1) Carve-out figures for 2010-2012; as reported for Metso’s Pulp, Paper and Power segment for 2006-2009 5 November 26, 2013 Pasi Laine, CMD 2013 Capitalizing on the growing pulp, energy, tissue, and packaging board needs globally Global market leader with Sales1 #1-2 market positions in all markets served Stable, growing and profitable EUR 1 billion services business High barrier to entry capital business with good long-term 19% 17% growth potential in businesses such as board, tissue, pulp and biotechnology 27% 34% 13% 2012 figures1 1 Net sales EUR 3,014 m 39 % Profit2 EUR 192 m 11% Employees 12,000 40% Position #1-2 Services South and Central America #1-2 Pulping China #1-2 Bioenergy generation Services Asia-Pacific #1-2 Paper, board, tissue Pulp and Energy EMEA Paper North America 1) Carve-out figures for the periods indicated, 2012 2) EBITA before non-recurring items 6 November 26, 2013 Pasi Laine, CMD 2013 Our three business lines serve the same customer base Services Pulp and Energy Paper Net sales1 1.0 bn, 34% Net sales1 1.2 bn, 39% Net sales1 0.8 bn, 27% • Mill and plant improvements Technologies and solutions for Technologies and solutions for • Roll and workshop services • Pulp production • Board • Parts and fabrics • Power generation • Tissue • Life-cycle services • Biomass conversion • Paper 875 805 1,189 743 877 974 1,011 975 522 748 698 666 2010 2011 2012 1-9/2013 2010 2011 2012 1-9/2013 2010 2011 2012 1-9/2013 1) Net sales by business line on a carve-out basis for the periods indicated (excl. Intra-Metso net sales) 7 November 26, 2013 Pasi Laine, CMD 2013 Strong global presence – good platform for growth North America EMEA China 1,112 • Large installed base employees • Large installed base to • Capital project opportunities to be serviced be serviced in board and tissue • Growth opportunity in • Growth opportunity in • Good services market increased outsourcing increased outsourcing with growth potential Net sales1) • Capital project oppor- EUR 572 m • Machine closures in printing tunities in tissue and writing 2,084 and board Net sales1) • Capital project opportunities employees in pulp, tissue, and bioenergy EUR 398 m South and Central America • Capital project opportunities Asia Pacific in pulp, tissue and bioenergy • Capital project 613 • Good services growth potential opportunities in pulp, employees tissue, and board Net sales1) • Good services market EUR 1,208 m 419 Net sales1) 7,850 with growth potential Net sales1) employees EUR 512 m employees EUR 324 m 1) Net sales breakdown by area on a carve-out basis for 2012 and breakdown of employees by area on a carve-out basis as at June 30, 2013 8 November 26, 2013 Pasi Laine, CMD 2013 Serving global customer base Services Pulp and Energy Paper Key customers Key customers Key customers Yunnan Yun-Jing Forestry & Pulp Mill Valmet is a registered trademark of Valmet Corporation. Other trademarks appearing here are trademarks of their respective owners. 9 November 26, 2013 Pasi Laine, CMD 2013 Valmet’s way forward Mission Strategy Must-wins Vision Converting renewable Competitive > Customer To become the global resources into technologies and excellence champion in serving sustainable results services to the pulp, > Leader in our customers paper and energy technology industries. and innovation Strong commitment to > Excellence in move our customers’ processes performance forward. > Winning team 10 November 26, 2013 Pasi Laine, CMD 2013 Valmet’s Must-Win initiatives and objectives Must-Wins Primary Must-Win objectives 1. Customer • Strengthen our presence close to customers and growth markets excellence • Strengthen Key Account Management to enhance growth at the customer • Drive service growth through long-term agreements and expanded customer base 2. Leader in • Improve product cost competitiveness to increase gross profit technology and • Create new revenue from biotechnology solutions and new offering innovation 3. Excellence • Reduce quality costs • Improve project and service margin in processes • Savings in procurement • Implement cost competitiveness • Reduction in lead times program to reach EUR 100 million • Improve health and safety cost savings 4. Winning • Strengthen high-performance culture team • Continue further globalization of our capabilities to be closer to customers 11 November 26, 2013 Pasi Laine, CMD 2013 Experienced management team Corporate Pasi Laine Markku Honkasalo Kari Saarinen Julia Macharey Anu Salonsaari-Posti President and CEO Chief Financial Officer Head of Strategy and Head of Human Resources Head of Marketing & Operational Development Communications Business lines Jukka Tiitinen Jyrki Holmala Jari Vähäpesola Business Line President, Business Line President, Business Line President, Services Pulp and Energy Paper Areas William Bohn Celso Tacla Hannu Mälkiä Aki Niemi Hannu T. Pietilä Area President, North Area President, South Area President, EMEA Area President, China Area President, Asia-Pacific America America 12 November 26, 2013 Pasi Laine, CMD 2013 Investment highlights Investment highlight summary Established market leader with #1-2 market positions 1 in all markets served Stable, growing, and profitable services business 2 with over EUR 1 billion sales provides good visibility and resilience Long-term growth potential in capital business 3 from increase in pulp, energy, board and tissue consumption and from substitution of fossil fuels Global diversified footprint with large exposure 4 to growing emerging markets 5 Strong focus on profitability improvement 14 November 26, 2013 Pasi Laine, CMD 2013 1 Established market leader with #1-2 market positions in all markets served Services (>EUR 1 bn)1 Capital (~EUR 2 bn)1 Pulp Energy Paper Market position Machines Services #1-2 Pulping #1-2 Bioenergy generation #1-2 Board #1-2 Tissue #1 Large installed base Paper #1-2 • 3,800 pulp and paper mills • 200 wood-handling systems • 270 fluidized bed boilers • 700 board machines in the world • 470 cooking systems • 120 BioGrate boilers • 180 tissue machines • Over 50% purchase services • 300 complete fiber lines • 400 environmental protection • 900 paper machines from Valmet • 400 evaporation systems systems • 350 recovery islands • 200 mechanical pulping lines Superior technological know-how Consistent investments in R&D Extensive IP portfolio >70 new products launched per year 2010-2012 average ~EUR 70 m (2.5% of sales) ~1,800 protected inventions – June 30, 2013 1) Net sales in 2012 on a carve-out basis 15 November 26, 2013 Pasi Laine, CMD 2013 2 EUR 1 billion of net sales from stable and growing services Strong trends driving services Comprehensive offering market expansion Customers outsource non-core operations Capacity increases in China, Spare and Mill and plant South America and Asia-Pacific wear parts improvements Customer cost pressure and efficiency requirements increase demand for process improvements and maintenance services Roll and workshop Machine closures in EMEA region Fabrics services and North America 1 Large target market >7.4% 2010-2012 Valmet services 2 EUR 7.0 bn p.a. business line growth 1) Management estimate based on the size of Valmet’s services markets using an average services cost per volume produced, based on Valmet’s existing customers and estimates of current and forecasted growth in total production volumes 2) Annual growth between 2010 and 2012 based on available carve-out financials 16 November 26, 2013 Pasi Laine, CMD 2013 3 Pulp, energy, board, and tissue capital business on long-term growth trajectory Pulp and Energy Paper Energy1 Pulp Board Tissue Printing and writing papers and newsprint ~1% 2.0 ~1-2% 1.4 ~3% 1.0 ~3% 0.6 ~-1% 0.6 p.a. bn p.a. bn p.a. bn p.a. bn p.a. bn Demand drivers • Growth in energy • Growth in paper, • World trade, e- • Growth in emerging • Increasing role of consumption board, and tissue commerce and markets digital media • Demand for consumption in Asia emerging markets • Rise in purchasing decreases demand sustainable energy • Need for virgin wood growth drive power and living for printing and writing • Modernization of pulp, as recycling packaging standards in papers aging plants rates can not grow • Shift from plastic emerging markets • Some growth in • Incentives and infinitely packaging to emerging markets • Increased size of pulp renewable materials regulation Anticipated long-term