Valmet Oyj (VALMT) Earnings Call Transcript & Summary

All right, ladies and gentlemen, welcome to Valmet's Pulp & Energy Investor Day. My name is Pekka Rouhiainen, and I'm the Head of Investor Relations here at Valmet. Today's agenda is so that we will have presentations by the business area head, Bertel Karlstedt as well as presentations from energy as well as the pulp business here at Valmet. There will also be a demo about the Valmet Industry Internet offering. The presentation slides are already available at Valmet website, if you wish to download them already now. [Operator Instructions] There will be 3 Q&A sessions after the energy presentation, the pulp presentation as well one at the end for Bertel Karlstedt, but without further due, Bertel, the stage is yours.

Thank you, Pekka, and greetings, and warm welcome. Welcome on my behalf as well to the Pulp & Energy Investor Day today. I will open the Investor Day briefly with a glance at the Pulp Energy business of Valmet. And it is, of course, evident that we are the business line responsible for all activity related to pulp and energy-related customers and offerings. In both cases, we are a globally leading actor. And in pulping, we are one of the few that has a complete delivery capability to our customers' needs. In the area of energy and energy production, I would say that the main strengths is, of course, long history and the capabilities in multifuel energy production as well as applications for waste and biomass-based energy production. These are the 2 strong strategical streams we have in the business line. On top of that, we have identified and leveraged with good success 2 growth platforms. One we call environmental solutions and systems. Applications aimed at emissions control, whether we are talking about order control, particle control or abatement of other emissions to air or water, including also the maritime sector and the IMO driven business we have seen grow faster in the past 2 years. On top of that, we also have a growth platform aimed at different type of biomass conversion applications. And right now, as we speak, I would say that the hottest topic on that front is the second-generation bio-ethanol where we have the pre-hydrolysis concept portion of that entire plan that the customers are building. We have a global presence, our own personnel, the 1,500 people we have is by historical reasons, strongly focused in the Nordic countries, in Finland, Sweden and Denmark. But we also, as a business line, have a strong engineering hub in Chennai, India. And we have a good set of resources in China as well, looking at anything from engineering, sales as well as supply chain management and project execution. That is our own organization. Besides that, we have 12,000 more volunteers around the world in area organizations supporting us in being close to the customer and being able to serve him in attractive way at all times. We have our own technology, the process technology capability and strength, we combine that with service and automation environment and that makes us unique in being able to serve the customers' need throughout the life cycle of the investments and the processes that we have. And when we tie the 3 of them together through by industrial Internet, we are really unique in offering and the capabilities we can offer. Looking at the numbers, orders received, 2 really good years behind us, a good last 12 months as well. We have order magnitude of EUR 1 billion business line for the time being whether we're looking at orders received or actual net sales. And when we look at -- from where this business has come lately, again, the last 12 months, I would say, a very traditional split between the energy and the pulp, meaning roughly 40% from energy, 60% from pulp. And if you look at the geographical split of the business activity lately, I would say, somewhat out of the ordinary in the sense that EMEA has traditionally been for us, roughly half of the orders are slightly below, 40% to 50%, as you can see here now below that 37% North America, still for us, a very modest market, again, only 4%, and the remaining 40% to 50% is traditionally split between China, Asia Pacific and South America, depending upon where the big investment projects are ongoing at any given time. And if you look at the last few months, as you can see, Latin America, South America has had a really big role in our net sales during the last 12 months. And that is, of course, driven by the big projects, I would say, unusually big portion actually of the overall net sales from that area during the last 12 months. Now that is our capability, our presence and our numbers. And of course, with that capability, we are committed to serve our customers and to push their performance forward. And I think when I -- when you look at the slide here, when we look at the pumping far to the left, we have the capabilities in chemical, mechanical pulping, dissolving pulp as well as in fiberboard plants. You find well-known and familiar logos and company names anywhere in Europe, Asia, Latin America, Far East, we have a worldwide leading customer clientele. The same holds true for energy, where customers are municipalities, utilities, independent power producers, pulp mills as well as the process industry. Also here, you find very familiar company names and logos. And then the growth platforms, bio and environmental technologies. Marine, I mentioned earlier, also ethanol industry, chemical industry, paper producers, pulp and paper industry and utilities. Also here, you find very familiar pulp and paper industry names, familiar energy producing company names as well as chemical industry and the seafaring logistics, medical and logistics key players. So we are a globally leading supplier for a strong global clientele, and we really take our customers' performance forward. With that short glance into who we are and what our role is in Valmet. I would leave the floor over to Kai Janhunen, who is the Vice President in charge of the Energy business unit in my organization. Please Kai, the floor is yours.

Thank you, Bertel, and hello to everybody also from my behalf. So about the energy business in Valmet, I will tell you shortly about what we are, what we are delivering, global market drivers, about our order backlog and then key references also kind of illustrating then the actual orders, what we have received in respect of the markets and their behavior and the development. Good, Bertel already mentioned, but certainly, around EUR 400 million business 40% of the Pulp and Energy, the Energy, and we are 620 people working in the organization that is the direct organization. And then if I take all the Valmeteers working in the area of the energy, I would say around 1,000 people working daily in the area organization and in also the P&E global functions. Main locations in Finland offices here in Tampere, Vantaa, Raisio. We have 2 production facilities, one here in Tampere and another one in Lapua. In addition to this, we have R&D center in Tampere, where we can test all kinds of new fuels, new technologies, emission control equipment and so forth. And Valmet and also our Energy, we are the kind of high-end supplier to our customers. So it means that we are also a high-end supplier in respect of technologies. And then we have the performance center, which is supporting then our industrial Internet initiatives. Our solution offering, as Bertel mentioned, that we have a tradition in the biomass and waste, and we are delivering the energy plants to biomass-to-energy and then industrial residues waste-to-energy plants. So energy and let's say, heat and power generation with our boilers and gasifiers to those fuels in those areas. Another foundation in our energy is then the emission control technologies, air emissions then recently also about the solid and liquid emissions as well and then also the heat recovery from the flue gases. As also, Bertel mentioned, to us it's very essential that we are serving the energy segment and the customers. It means that together with our product technologies, we are integrating our automation deliveries. And then the life cycle services, reliability, performance services, spare parts and so forth. And industrial Internet, of course, that's the modern platform to glue together all these 3 elements, technologies, automation, services and so the customers in a modern way. Customer segments in -- where we are active are the industrial, pulp and paper are the routes and there are other industrial capital energy producers and users, power generation utilities, municipalities, IPPs and waste management meaning the waste-to-energy customers and marine also in respect of these marine scrubbers and the pollution controls. Global trends, they are forming the global market for energy. And then, of course, then the legislation and directives in Europe and decisions acts, they are going to confirming then the development towards to the required results and expectations of these global trends. Of course, the what are kind of the actual to our energy are the resource efficiency. We talk about, of course, the efficient production. When I said that we have the high-end solutions, it means also that we are turning with the best efficiency, the energy content of the fuels to heat and power to our customers. It's also about the circular economy and then the use of residual waste after the circulating in the most possible manner to energy. So that is kind of the logic what we are following also in our energy business. The other is then this environmental awareness. We all are now talking today about the carbon neutrality and in EU, we have a European green deal, a big package of dictating our energy, our industry emissions and future on that. And recently, we also heard about China's plan to be carbon neutral by 2060. This then kind of validated through the legislation that is the framework where we are working today and also in the future. Today, we see a lot of our orders are coming from coal phase out going to the renewables from fossil to renewables and then also about the tightening emission legislation, need for new blue gas cleaning, new emission cleaning installations. A bit busy slide. I apologize. It is to illustrate that we are globally working also in our energy area, majority of our order backlog is coming from the European area. It is, as I said, mostly it is about our customers turning from fossils to renewables or meeting or kind of building the installations to meet the tightening emission legislations. Europe, as I said, the biggest market, but we have a good foundation also in the China and also in Asia Pacific, which is to say that from fossil towards -- so it's not only about the European it's also global trend that go from the fossil towards to the renewable and sustainable energy. And that is the niche where we are working in our Valmet energy. Some key references in this respect. Big order here in Tampere in Finland for our local municipal heat and electricity company. It is part of the big many year program to turn from the fossil fuels to renewable fuels. The new installation CFP based boiler plant will then be the main source of district heating for turn of Tampere, here in Finland. The next one is an example about the industrial customers. Norske Skog, Bruck in Austria. It's also part of the program for coal phaseout, reduce carbon footprint and replace the coal with waste [ divide ] fuels, waste coming from their own production [ slats ], spillovers and then also some introducing some external waste streams to make the energy for the captive use at the plant. The third example from Poland, it's an example of rebuild. We are rebuilding currently a coal -- old coal-based power plant to renewable to use the biomass that will be then the source for district heating in city called Konin in Poland. And that's kind of -- that will be the first Polish city, which is heated then with renewable energy. So of course, it's a good example and good about this kind of coal base turning to the renewables then. And then the last is about this energy efficiency. It is for this new heat plant to Finland capital, Helsinki, Vuosaari plant. We are then delivering this heat recovery from flue gases then by introducing this heat recovery, we can increase the production of the district heating in 69-megawatt to the plant. So then kind of having this is kind of taking all the energy out of the flue gas is to keep. So summarizing my presentation that we are a high-end supplier so we are focusing to be the reliable technology partner to our customers. Energy market is in a change. So we are kind of introducing the opportunities to our customers from fossil-based heat and power generation to sustainable renewable energy production. And to us, it's important that in addition, together with our technologies, we are combining the offering with automation and the services to our customers. As the last bullet is saying that we are enabling our customers initiatives for energy turnaround. I guess that is the kind of a big picture of the market and our presence at the moment. Thank you.

Thank you. Thank you, Kai. And we will now move on to the Q&A session. [Operator Instructions] But we already have a couple of questions here online first, coming from Johan Eliason, who is asking, do you still receive scrubber orders from the Marine segment, have you delivered the backlog now or is there still projects in the backlog in the marine scrubbers?

There are still projects in the backlog. Yes, at the moment, quite substantially, we have been delivering in challenging times to go with, but I have to say that successfully delivered to our customers. And -- but the deliveries will continue also to the next year from the existing backlog. This year, unfortunately, has been low in the orders for marine scrubbers due to the kind of prevailing conditions in the market at the moment.

Yes. I assume that sort of low demand in the market will now continue in the short term.

Yes. That is the expectation for the short term and at least the visibility for the next year is similar that it is a modest market.

Okay. All right. Then there is a question on the business potential geographically. So where do you see in the energy business most potential in terms of geography? So which countries do you see more potential at the moment?"

In my presentation, maybe already this blue picture was defining that, of course, Europe is the big market, and that is our expectation that it will continue to be like that. In Europe, of course, we could say that we have built all the capacity, what we need, but it's about turning the capacity from fossil to renewables. So that program is -- and that kind of market is active and that is going on, but we are also, of course, we are established in Asia Pacific. We are established in China. China had a huge plan from fossil to renewable. So carbon neutrality. So of course, that is then, it's more than biomass extending China. We talk about waste to energy. But we have a good footprint already for industrial customers also do the waste-to-energy customers in China. And in Asia Pacific then, I still need that there is a need to build the primary energy, the consumption of primary energy is still growing in Asia Pacific market. So there is two-fold market I see in Asia Pacific, then is that we build the new capacity and we are also kind of turning the old capacity to renewable. So those 3 markets are the main markets to work.

All right. Thank you. Then there is a question from [ Mr. James Filsa ]. Please talk to the environmental and economic benefits of customers converting existing power plants to biomass rather than other renewable sources?"

Well, what is referred to be the other renewable sources, of course, if I, as an engineer, start to respond that when we have a coal-fired unit, we have a thermal power plant already there. So what else we can then combust and the book coal there. And then, of course, biomass is a good option on that. Other might be the waste. Waste then again, has some kind of a more challenges on the combustion and on the technology and also there are some kind of features in the legislation, you need to take care of when you are designing a waste based unit. So in kind of this kind of framework, I see that the biomass, of course, it's a very viable solution. Then again, of course, it's about the economics of having the biomass in the proximity at the delivery. And as we all know that the kind of a big portion of the economy of the power plant is about the fuel and fuel logistics. So these are, of course, desiring when it is favorable for biomass, then it is good to do so. And of course, taxation, we are business, which is kind of also governed by the legislation, it is legislative business. So of course, then carbon taxes and those, they are kind of pushing the operators from fossil to have the renewable source.

All right. Thanks. Then Tomas Skogman is asking about the raw materials for energy. What are the main competitors for raw materials that you use in boilers? What is the economical and environmental benefit of burning them in your boilers versus other alternative deals?"

Well, I would say that the one common factor is the residue. So when we talk also about the biomass I'm a Finn, so to me, it's in the genes that we are having kind of a forest industry and a good forest industry means that you are taking care of the forest, and you are harvesting the forest and you will kind of -- then the trees are growing the best, but when you are harvesting, you have the tree branches, you have the tops, you have the stumps and you have all the leftover and also from the industry, you have the residues also from the pulp and paper industry, you have the bark, you have then the kind of all sorts of [ slats ] coming out. So instead of landfilling then you turn it to the crude energy by combustion. And then, of course, it's about what you are combusting. So as I said, it is the residue. And then it is a question how you are combusting. So it's a good efficiency, clean technology, good emission control. So I guess, then we are actually -- we talk a lot about the carbon dioxide, but of course, we are landfilling then we have the methane, which is actually in many times as kind of greenhouse gas. So with good, an efficient way to turn it to energy. It's also sustainable for the environment..

All right. There's a question from Johan Eliason. Previously, your biomass boilers could only burn sorted waste, is there any change here to open up your technology to a more broad-based waste?"

Actually, I think it's more, more in that we are talking about the sorted waste because I now take to the discussion to circular economy and the demand to go to the recycling so instead of having a mass in generation, I think it's today and future, hopefully, that we are sorting the waste first, taking all the valuable out. I think that that is going to be the legislation that you have demand to recycle and then kind of the residue of what you are having there is the energy fraction. And then you turn it to energy by combusting it with the best possible efficiency. So I'm not kind of worried that we cannot do incineration because to me, it's a bit yesterday. Today it should be the recycling circular economy and then the good efficient energy as a part of the circular economy.

Yes. And there’s question from Antti Suttelin. What share of your boiler business goes to heat and how much electricity -- to electricity production? So -- and there is a follow-up. I assume there is more future for biomass in heat production rather than electricity production.

Yes. It's -- but it's kind of acute at the moment and distance question. But then we need to also understand that there are different markets. So if I talk about Europe, that is true. If I talk about the Nordics, it's more on spot. If I go to Asia, if I go to China, so maybe then it's about -- there is a demand for electricity in a different manner than what we have in Europe. In Europe, of course, we have this variable energy, wind, solar -- it's already in the picture, and we have kind of accommodated our place in the picture. And that is more and more focusing on the heat. So heat only plan so that the heat is the first primary product to our customers and then kind of also the electricity can be part of that or not. Sorry, I don't have exactly the number, how much is heat, how much is electricity, but surely, the kind of the balance has been going and is going more towards to the heat. Europe is especially like that. Then, let's say, countries where there’s still demand for primary energy electricity. So there it is a bit of less.

Yes. [indiscernible] is asking what is typically the efficiency for biomass or waste-to-energy if producing electricity? And compared to heat or combined heat and power, so what is typically the efficiency for biomass or waste to energy producing electricity?

Well, normally, of course, when we are delivering here in Europe, so we have this -- they are combined plants. So then we are there in about 90% and I don't hardly remember that we have done a condensing plant anymore in Europe. And then and when go, then we are, let's say, close to 40-something in the way it is only about electricity products. And then of course, when we have this heat recovery from flue gas is, as I showed in an example so we can go a bit above 100% efficiencies of the plant.

All right.

It needs a little bit of explanation. I won't do it now because my time is limited, but it comes how we are calculating from the low heat values?

Sure. Thanks, There is, I think, time for one more question, and I will take it from here. From [ Arof Baaderi ]. Can we have an idea on your market share on biomass conversion, second-generation be it for ethanol or heat recovery, please?

I think by ethanol is for the next presentation. So I'm not going to take for that. And then the markets heat recovery market share, if we talk about recovering the flue gas heat, so I don't have any percentage on that. I would say that we are a well-recognized supplier because it is quite a lot of customers are district heating customers in Nordics, where we are, let's say, traditionally established so. So it's kind of a quality advance that we have a good market share enough to answer for the heat recovery at this moment

Okay. And one more from Antti Suttelin, I assume EMEA is the biggest part of your sales for energy. Is there enough biomass in EMEA for the phasing out of coal into biomass in heat production.

I think -- let's say that instantly what comes to my mind, of course, biomass is still a niche. It's -- and if you look at the whole kind of energy portfolio and the production, the goal is, of course, much greater and larger parts. So surely not to replace every coal with biomass, but I also see all the cracks are kind of trending that there is an increase in the biomass. Biomass needs to be sustainable and then of course, if this also was sustainable biomass it's then a question on that. I cannot give an answer that do we have enough biomass in a sustainable manner to replace all the coal, but let's say, for me as a business owner, of course, I see that there is an increasing opportunity for biomass to kind of have a share on this for fossil to renewable. And it's good actually that we talk because earlier the discussion was only about electricity, but now we talk also about the heat, which has been maybe coming behind on this kind of renewable -- turning to renewables. So in a manner I see that it's a very good and active market for us to turn it from fossil to renewable to biomass.

Okay. Thank you Kai for the presentation and answering the questions.

And we will next take you to Jussi Mäntyniemi who will be talking about the future growth in pulp, which is driven by favorable mega trends. So Jussi, the floor is yours.

All right. So hello, from my behalf. Yes, my name is Jussi Mantyniemi, and I'm heading the recovery business unit in Bertel 's team. And today we talk about pulp. And the outline of my presentation, it can be seen here. First, what is our offering, about our execution, how to execute the projects, then what are the trends that are driving the pulp market. Is there any possibilities in the future? And the end summary. And there's also time for questions and answers. So let's roll. On this page, you can see that our offering for the pulp mill. It's a full page, but maybe that is reflecting that we have a full offering for our pulp mill. All the main processes, they are included in our offering. If you look at the top row here, we can see that, okay, the wood is coming in to mill from the left. It's got wood handling, it's debarked, sift, conveyed, storage. We have that cover -- full coverage for that. And then it goes to the cooking and fiberline, where the fiber is separated from the rest of the wood. In the cooking and fiberline and it's also placed and washed and from there on, it continues to the drying, drying machine and from there to the bailing and then shipped to the end users. Looking at the middle row here. That's a chemical recovery what I'm representing here. The other part of the wood and the chemicals, they are taken into the evaporation where water is evaporated. Then the stuff goes to the recovery boiler. I'm happy to see that, that's in the center of this picture, by the way. And there, the heat is recovered. Chemicals are recovered. So recovery boiler is a kind of combination of the boiler and chemical reactor. Chemicals continue to the white liquor plant and then go back to the cooking so recovery boiler is a kind of combination of the boiler and chemical reactor. Chemicals continue to the white liquor plant and then go back to the cooking. So fully recovered. And by the way, it's worth mentioning that a modern pulp mill has more than -- it's very much surplus of energy. So in that sense, it's independent. On the bottom line here., bottom row, these are kind of complementing technologies we have to offer, like, for example, from the debarking of the wood, there's plenty of biomass heat. We were talking about in previous presentation, that can be used in a power boiler to produce again, heat and power for the pulp mill or to be sold to the external grid. We have technologies to control the emissions, to manage the [ ESPs ], scrubbers, and we have the means to kind of control the odor. As you may have noticed that the modern power mill, there is no, this kind of typical odor that how it used to be in the past. So we have means to control that. So to continue how to execute a project. First of all, these are quite long projects. It may take 2 years to develop the project itself. And then once the delivery is awarded, the pulp mill, it takes 2 to 3 years to build. So it's quite long process. And when executed, when we execute a project, it's based on very much on the processes we have, we have a very well-established process to run the project. And that process is based on a key thinking that we ensure when we go to the next phase of the project, everything has been properly done before we kind of move to the next phase, making sure that everything is in the right time and done in the right way. And what are the key things when thinking about a successful project execution. I would say that managing the risk is one item, evaluating the risk for the opportunities and then mitigate that and then make sure that things happen like they should happen. And the key thing is also do the things -- right things at the right time and on time. That is, of course, important from the customer point of view, but it's also important internally because that would kind of create issues in -- if we do the – if something is internally played that may create issues kind of in later phases. So that controlling a schedule is also extremely important. What you're going to see in the next short video. This is an example about the recovery boiler we built for Mondi in Central Europe a couple of years back. So the construction time itself at the site was 14 months. But now we will see it in 14 seconds, and by the way, please be noted that this is actually a small recovery boiler in today's world. And this is also kind of a good example of the -- kind of modernizing the mill. So this new boiler replaced an old 40 years boiler that was outdated, maybe had a poor efficiency and high maintenance cost. And plus, of course, with a new boiler some additional capacity was gained in the mill. So let's look at the video. [Presentation]

So that's how the boiler went up in 14 seconds. So what are the kind of mega trends and what is the impact into our business. If we start from the right on this page. Urbanization increasing the living standard and change in how we do the purchasing -- I mean the buying. Most of us, these days more and more buy through the Internet. So it means that increase of tissue and board grades demand is increasing. So that, of course, is increasing the need for fibers. Digitalization and new technologies. I feel that, that kind of enables us to get the best out of the assets. So to ensure that all the processes run continuous basis at optimum, and we are able to keep optimizing the order time. And the left-hand side, efficient and clean world. I think it's kind of obvious that emission limits, they are not going to be relaxed. So they are going to be tougher and tougher all the time. So it means that we need to -- and we do continue developing technology, primary and secondary means to control the emissions. Continuing these market drivers. What does this market trends really mean? If you look at the left-hand side chart, this is about kind of long-term change in demand of the different paper grades. And we can see that, like I already mentioned, tissue and the bark grades, the demand is growing. And the impact of that is shown on the right-hand side graph. So the pulp demand is increasing 1% to 1.5% annually. And this is despite of the fact that the print grade, fine papers, the demand is declining. But increase in demand in the other grade is resulting in net demand growth in pulp. The other driver that increases our business possibilities is that the pulp in fleet is aging. Here, we can see the average kind of technical age of the mills in different continents, if you may. So to be able to maintain that kind of baseline of the production, of course, the mills has to be upgraded. It might be so that the mill, small mill is in the wrong location, maintenance cost is high, maybe problems with the environmental limitations. So there might be a decision to close down a mill completely and a new one will be built. So that's also the business, creating business for us. Or the other alternative is that mill is gradually upgraded, island by island, again business for us. So how do we see where the capacity is going to be built in the future? We see that the main market is in South America. And the driver for that is, of course, a competitive book; short fiber, wood based, mainly [ eucalyptus ]. Then in the Nordic countries and Russia, that's the kind of basis for soft wood and a long fiber pulp. So we can see that those 2 locations are the most active. Also China may become active also. And one of reason might be the government banning the import of the recycled paper. So there is a shortage of the fiber that needs to be then replaced by the diverse in fibers. So going to the future possibilities. I would like to highlight the one on the right, the new value-adding products and platforms for growth. So many customers are looking for what to do with the side streams. It's not always the best way to burn it and to make heat out of it. Maybe there is a higher value product. So these are examples of kind of new technologies that are creating kind of new value to our customers. Sulfuric acid plant, on the top, on the left. That's a process where we can make sulfuric acid from the odorous gases inside the mill without bringing anything additional to the mill. So internal production of sulfuric acid instead of trucking in the sulfuric acid. That's a commercial product by the way. Moving to the biomass gasifier. Modern mills can be actually fossil fuel free mill. The biggest user normally of the fossil fuel is the lime-kiln, where oil or natural gas is used as a fuel. But since the mill may have a kind of excess of bark. So what to do with the bark? Let's gasify that and use that gas, biogas as a fuel for the lime-kiln. Okay. And that's a commercial product. LignoBoost on the left bottom corner, that is a technology that allows us to extract the lignin, the other part of the wood, and that can be used to produce bio-based materials or chemicals instead of burning that and producing heat and power. Also a commercial product. Sugar extraction, especially in the dissolving pulp, we are able to extract from the prehydrolysis phase, the sucrose. And those sucrose can be used to produce biochemicals. I'm closing my presentation on this slide, this is my favorite slide. On the top of this triangle, these process technologies I described. But I see that having the process technology, good process technology is not enough. So then the service comes into the picture on the left, make sure that customer side able to utilize their assets on a continuous basis and get the order time best out of it. And the same applies to the automation. We have technologies to measure, follow and optimize the technologies on a continuous basis. So that is a unique offering we can offer to the pulp customer. Thank you. So Pekka is here, may have some questions.

Yes, yes. So let’s move now. Thank you, Jussi. And now we move on to the Q&A session regrading pulp. And we have already some questions here but please don’t hesitate to post more of those. Let’s get going. So first question coming from [indiscernible]. In the past, there has been large cost overruns and issues with large complete pulp mill projects. What has changed in the project execution model to ensure a successful project delivery with the current large pulp mill projects?

I think that is -- what I presented is very much reflecting to change in that situation that we have a strict process we are following. And that also covers the sales phase. So it's not only a question of the execution phase only, but it's also sales phase. So we have substantially improved that.

Sure. And there's a question from [ Sinda Servu ]. What are the pros and cons of and CTMP? Do you expect a growing share of the CTMP in the future? And what will be the implications for Valmet?

That's certainly the business for us, and it's a different use for a different grade of end product. So there are kind of room for CTMP and chemical pulp.

All right. Tom Skogman is asking, ARAUCO announced last week that the start-up of the MAPA will be delayed. What is the financial impact for Valmet? Do you expect delays in other projects as well?

I don't see that that has an impact. Of course, we have been -- we are inside the project, and we are following, know exactly what's happening there at the site. So we are on top of that on kind of based on our delivery.

Good. And there is a follow-up from Tom Skogman. Any new plant projects in Latin America? It's been rumored that Oyj Energy would launch an investment for 2 million tons of hardwood pulp. When could this happen?

It's difficult to say what happens and when, but we have active cases in South America like globally, anywhere.

Good. Then Aurelio Calderon with the question, what would be a normalized level of investment in pulp mills going forward? For example, is it going to be 1 or 2 large mega projects per year? What is the risk from [ RISA ] or at least a little bit to follow-up? Maybe we take the first one first. So normalized level of investment in pulp mills going forward. So it's going to be 1 to 2 mega projects per year.

Yes. We say that this growth of 1%, 1% to 1.5% plus then the replacement mill process and all that. I would say that, of course, there is a high cyclicality, but to cover that demand, it's 1 to 2 new mills, I would say, and the rest comes from kind of incremental capacity increases and upgrading the existing mills. And of course, the trend is that maybe the number of the cases has been less due to the fact that the capacity of the mills, new mills is extremely high. In the past, 20 years ago, 0.5 million was the kind of big one. Now the 2 million tons per year is almost becoming a standard. So of course, the kind of frequency of the mills is becoming less.

Yes. And then there's follow-up on this one or a little bit different question from Aurelio. But anyway, so what is the risk from recycled pulp for virgin pulp mills? So what kind of relationship is there between virgin being a little bit more important to Valmet compared to recycled? And what percentage of global pulp consumption is virgin?

That was shown and I don't remember it from the top of my head, the exact numbers, but I say that it might be so that the recycled fiber is not kind of increasing. Of course, the demand could be increasing but availability, it might be shortened, of course, banning to some countries are banning the import plus the kind of good quality of recycled paper is declining because of the print, printing paper production is declining. So I believe that in the long term, that is going down actually. Availability of recycled fiber is going a lot down to some extent.

Yes. Then a question from Antti Kansanen from SEB. Could you provide a bit more color on the potential you see in China for the next few years in terms of number of large projects or added tonnage?

That remains to be seen for the cases are going to be realized and when, but I see there's potential that I can see.

All right. Then there's a next question from Antti Suttelin. By the way, there is a question also for those who came in late, the presentations can be found from Valmet's investor website. So they are already available there, the whole set. Somebody was asking about this. Then Antti Suttelin is asking, how much of sales derived from the 4 value-adding processes?

What do you mean by value-adding processes? I didn't get the question.

All right. This is a little bit not completely clear to me either. So maybe we skip that one. Antti, we get back to you later.

Yes.

Then a question from Antti Kansanen, SEB. On your risk assessment and pricing when quoting a new pulp project, how do you assess the profitability? Is it a project as a standalone? Or do you include aftermarket and future modernization potential in the calculation as well?

The project itself, of course, has to be profitable.

Could you also quantify how much of aftermarket revenues you tend to get from a big project?

That varies a lot because it's a question of how old boiler -- I mean, a plant we are talking about in a couple of first years, the services, it's mainly kind of inspections and optimizing operation. And then the mill is aging, then it's going to be a more and more kind of replacement of equipment and things like that. So it's kind of gradually increasing, so there is no single number what that might be.

Yes. And then [ James Field ] is asking how much of the demand growth do you expect to be fulfilled by increased recycling of pulp? And what do you expect for the demand growth in virgin pulp? Well, this was a little bit covered but maybe coming back to this topic of recycled versus virgin.

Yes. But it's -- I say that it's somewhere between 1% and 1.5% is increase in demand of the virgin pulp. So that might be even be higher in the future.

[ Sinda Servu ] with a question about what potential do you see with lignin extraction and refining similarly for microfibrillar cellulose?

This lignin extraction, like I said, it's already commercial process. But there is still a lot of work actually ongoing at the moment that what the end use might be. There's a lot of potential, but there's no yet kind of breakthrough. But there is plenty of potential. But as you know, in this business, it takes 10 years to develop something new.