Neles is Valmet's Flow Control business line starting April 1, 2022
Neles' Interim Review January-March 2022
Strong order intake and sales growth resulted in good profitability
• Strong growth in both orders received and sales
• Good business momentum across all Market Areas, North America continues to be particularly active
• Good sales volumes and solid sales margins resulted in good profitability, with Adjusted EBITA margin of 16.1 percent
Figures in parentheses refer to the first quarter of 2021 unless otherwise stated. Neles Group is reported as one segment.
Summary of operative key figures
EUR million | 1-3/22 | 1-3/21 | Change, % | 2021 |
Orders received1 | 196.0 | 153.9 | 27 | 625.2 |
Order backlog at end of period | 331.4 | 298.4 | 11 | 294.4 |
Sales2 | 165.8 | 129.1 | 28 | 610.9 |
Adjusted EBITA | 26.7 | 15.9 | 68 | 86.8 |
% of sales | 16.1 | 12.3 | 14.2 | |
Adjustment items3 | - | - | 7.2 | |
Operating profit | 25.1 | 15.1 | 66 | 75.8 |
% of sales | 15.2 | 11.7 | 12.4 | |
Earnings per share, EUR | 0.12 | 0.07 | 65 | 0.38 |
Free cash flow | 4.1 | 19.6 | -79 | 77.5 |
Personnel at end of period | 2,974 | 2,825 | 2,934 |
1 Of which EUR 135.2 (112.4) million in 1-3/22 was for the Services and MRO-driven businesses, including EUR 45.2
(40.5) million for Services orders received. Orders received increased organically with constant currencies by 16
percent in 1-3/22.
2 Of which EUR 116.6 (88.4) million in 1-3/22 were for the Services and MRO-driven businesses including EUR 36.4
(31.3) million for Services sales. Sales increased organically with constant currencies by 17 percent in 1-3/22.
3 Neles had no adjustment items in 1-3/22 (-).
Interim President and CEO Simo Sääskilahti: Good profitability thanks to strong sales volume and solid sales margins
Our business developed in a positive way despite the continued challenges from Covid-19, increasing cost pressures from inflation and the war in Ukraine.
Services and MRO-driven businesses developed well. Organic growth was further accelerated by Flowrox's valve and pump businesses, which were acquired in the fourth quarter of 2021. The integration of these businesses is progressing well, and the order intake, as well as sales funnel development, in the first quarter was very satisfactory.
Project orders also continued to grow in the first quarter. Pulp, paper and bioproducts projects orders remained at a good level. We also saw growth in Chemicals and Oil & Gas project orders after a challenging 2021.
Due to the war in Ukraine and the resulting sanctions, logistics, and financial transaction issues, we have suspended our sales to Russia. In recent years our sales to Russia has been less than 5 percent of total sales.
At the beginning of February, we changed our organization to accelerate the implementation of our strategy and improve transparency in the performance of our different customer types. We now have entities with clear responsibilities for improving the sales and delivery processes for the different customer categories. We will also be able to more effectively drive the coherent long-term development of our offering and capabilities of achieving growth in our current core industries and diversify to selected new growth industries.
On April 1, the merger between Valmet and Neles was completed. The integration planning had progressed well, and there was excitement throughout the organization about the new opportunities the merger would create. At this stage, I would like to thank Neles' personnel for providing reliable products and services to our customers in a challenging environment, working together to deliver solid financial results and building the foundations for future growth by executing our strategy during the last two years.
Neles' Interim Review January-March 2022
Operating environment
Orders received in the project business grew clearly during the first quarter. Orders in Pulp, Paper and Bioproducts projects stayed on a good level. After a challenging 2021, Chemicals and Oil & Gas project orders improved. The Services and MRO-driven businesses also developed well. The organic growth was further accelerated by the valve and pump businesses, which were acquired in the fourth quarter of 2021.
The EMEIA Market Area's orders received grew well, driven by the Services and MRO-driven businesses. Orders received in the project business were weak in the first quarter.
The APAC Market Area's growth in orders received was driven mainly by strong activity in project orders, both in Pulp, Paper and Bioproducts and in the Chemicals and Oil & Gas project businesses.
Orders received in the North America Market Area were very high in the first quarter. In particular, the standalone Valve Controls and Actuation business in North America developed well.
Business in the South and Central America Market Area continues to develop positively. As a result of the Flowrox valve and pump businesses acquisition, several growth opportunities in the mining industry have been developed.
Covid-19 pandemic update
The Covid-19 pandemic situation has been followed closely by management, prioritizing the health and safety of Neles' employees and partners.
The global logistics situation continued to be challenging during the first quarter. The availability of transportation and its costs continued to be issues, impacting for example Neles' net working capital development and margins. In addition, challenges and risks related to the availability of electronics components continued.
At the end of March, Covid-19 situation in China deteriorated causing Neles' main factory in China, situated in Jiaxing, to be closed for 2 days. The other Neles factory situated in Shanghai has been closed since the end of March. At the end of first quarter, all Neles' factories, except Shanghai's technology center, were operational.
Impact of sanctions on Russian business in Q1
In the recent years Neles' sales to Russia has been less than 5 percent of total sales. Due to war in Ukraine and the subsequent sanctions affecting deliveries, logistics and financial transactions Neles suspended its sales to Russia in late February for an indefinite period of time.
Deliveries for items in the backlog were also suspended in late February. Subsequently, Neles has been winding down deliveries of the order backlog to Russia in a controlled manner according to the imposed sanctions, taking into account availability of logistics and financing as well as stakeholders.
Orders received in the first quarter of 2022 prior to suspension of sales amounted to EUR 4 million. At the end of the first quarter, Neles has the following risk exposure from Russia: orderbacklog worth approximately EUR 20 million, outstanding trade receivables approximately EUR 2 million and advances received approximately EUR 2 million.
In this Interim Review, Russian business is reported as unchanged on a going concern basis.
Orders and sales
Orders by market area
EUR million | 1-3/22 | 1-3/21 | 1-12/21 |
EMEIA | 70.3 | 54.7 | 230.7 |
North America | 71.0 | 54.6 | 222.4 |
South America | 12.7 | 10.8 | 46.4 |
Asia-Pacific | 42.0 | 33.8 | 125.7 |
Neles total | 196.0 | 153.9 | 625.2 |
Growth in orders received resulted both from Services and MRO-driven and the projects businesses. Orders received in the Services and MRO-driven businesses totaled EUR 135.2 (112.4) million, of which Services orders were EUR 45.2 (40.5) million.
The order backlog on March 31, 2022, was EUR 331.4 (298.4) million.
Sales by market area
EUR million | 1-3/22 | 1-3/21 | 1-12/21 |
EMEIA | 59.1 | 52.3 | 245.3 |
North America | 60.3 | 43.6 | 195.8 |
South America | 11.2 | 13.6 | 51.3 |
Asia-Pacific | 35.2 | 19.6 | 118.6 |
Neles total | 165.8 | 129.1 | 610.9 |
Growth in sales resulted both from Services and MRO-driven and the projects businesses. Sales in the Services and MRO-driven businesses totaled EUR 116.6 (88.4) million, of which Services sales were EUR 36.4 (31.3) million.
FX impact on orders received and sales
2021, EUR million
Organic growth in constant currencies Acquisitions
Impact of changes on exchange rates Total change
2022, EUR million
Orders received | Sales |
1-3 | 1-3 |
153.9 | 129.1 |
16% | 17% |
6% | 6% |
5% | 5% |
27% | 28% |
196.0 | 165.8 |
In the first quarter, orders received grew by 27 percent from the comparison period, of which organic growth with constant currencies was 16 percent, and growth from acquisition was 6
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Neles Oyj published this content on 27 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 April 2022 10:14:08 UTC.