Valmet Oyj (VALMT) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to Valmet's Q2 2023 Result Publication and Webcast. My name is Pekka Rouhiainen, and I'm the Head of Investor Relations here at Valmet. And the speakers today will be Valmet's President and CEO, Pasi Laine; as well as CFO, Katri Hokkanen. After the presentations you will have the chance to ask questions over the phone lines, but without further ado, Pasi, please.

Pekka, thank you. Welcome, everybody. So today's headline is orders received amounted close to EUR 1.3 billion and comparable EBITA increased EUR 153 million in the second quarter. We have the same setup than earlier. And usually I'll go first through the quarter 2, then some words about the segments and business lines. Then some extra topic about execution of acquisition strategy, then Katri will go through the financial development. I'll come back to say some words about guidance and short-term market outlook. So first quarter 2 in brief. So our orders received were about EUR 1.3 billion. Net sales was about EUR 1.4 billion. Backlog in the end of the periods were about EUR 4.4 billion and comparable EBITA increased EUR 153 million and margin was 10.8%. Gearing in the end of the period was 23. And here you see the cross as well. So Process Technologies in itself was about 44%, Services 32%, and Automation 24%. Geographically quite normal distribution, so roughly 40% in Europe. A little bit over 20% in North America, and then the growing areas, China, South America and Asia Pacific between 11% and 14%. Then if you looked at the -- if we look at the orders received trend, our orders received were almost EUR 1.3 billion. And then if you look at the trend, the trend was about close to or is ending up somewhat EUR 5.3 billion, EUR 5.4 billion. So we have been growing constantly through the acquisitions and organic growth and now we're in 12 months cumulative terms, we are somewhere at EUR 5.3 billion, EUR 5.4 billion order intake. Then if you look geographically and the first 6 months order intake, North America has been active 26%, Europe a little bit less than 40% and Asia Pacific active 16%, China 11% and South America 10%. So good distribution in order intake geographically as well. Then we have been talking many years about, first, about service and then after the acquisition of Automation business about stable business. And here you see the development of Valmet stable business over the years. So when we started our order intake was about EUR 1 billion. And now last 12 months cumulative is about EUR 3.2 billion. So we have acquired Automation. We have merged with Neles. We have done some other acquisitions as well. Organic growth we have calculated has been about 8%. So the big change in Valmet is that now order intake from stable business is about EUR 3.2 billion. And that now when the -- when the capital process technology hasn't been that active, then it means that stable business represents about 60% of our order intake during last 12 months. Big change compared to year 2014 when only 1/3 of the order intake came from Services, so good development in long run and in short run. Backlog, like I said about EUR 4.4 billion, 60% of the backlog is coming from Process Technologies, 25% from Services and 15% from Automation and we are now saying that about 50% of the backlog is expected to be realized as net sales during this year. And like I said about 40% of the backlog is related to stable businesses. Last year the corresponding figure was 35%. Then some words about segments of business-wise. First, Services. Services order intake during the first 6 months has been a little bit over EUR 1 billion. So growth by 11% or 12% compared to last year first 6 months. Katri will come back later on the quarterly numbers. But first half, half year Services has been growing nicely. Net sales has been growing also from EUR 720 million to EUR 846 million and profitability now for last 12 months is 16.8%. So Aki and [ Areas ] have been doing good work in improving profitability of our services. So now LTM is at 16.8%. So I'm very happy with the performance of our services, both in order intake and also in profitability development. Then Automation segment consisting of Automation Systems and Flow Controls. So now we have first time for whole 1 year in -- second time first, the whole year in LTM. So the order intake LTM is now almost EUR 1.4 billion and like said some years back we didn't have this business at all, so EUR 1.4 billion. First half of the year, there we are not comparing apples to apples, but the order intake in first half has been EUR 732 million, so good activity. Net sales has been active as well of EUR 642 million and profitability LTM is now 18.4%, so good profitability level in Automation business as well. And now I'll say some words about my happiness later on. After we'll -- I'll show the business line graphs. So Flow Control, here we have the total numbers, not only Valmet numbers. But Flow Control has been growing nicely in order intake from EUR 394 million to EUR 427 million. So nice activity in order intake. Net sales has been increasing nicely as well. So we are very happy with [ CMOS ] and CMOS team performance in Flow Control. And Emilia has continued the good development in Automation system, so order intake. Now first 6 months is about EUR 300 million, last year EUR 253 million, so EUR 51 million improvement compared to last year, so good development in Automation as well. And net sales has been developed in favor of lean automation as well. Then Process Technologies, all orders received was about almost EUR 1.1 billion in first half of the year. So clearly the order and the market activity has been slowing down. So year ago, our order intake was almost EUR 200 million more than this year, in first 6 months. Net sales has been of course active because of the earlier good order intake, so net sales this year has been a little bit over EUR 1.2 billion in first 6 months. We still have challenges with the profitability and still the same reasoning. So we have some selected Pulp and Energy projects which are still impacting the profitability and Katri will come back later on the quarterly profitability numbers. But last year, we ended up at 6%. Now we are 5.2%. And of course it's clear that our target is to get to 6% level as soon as possible. The Pulp on Energy order intake has been EUR 489 million. So down almost about EUR 90 million compared to last year. And now the LTM is EUR 980 million. Net sales has been developing favorably. So net sales was almost EUR 550 million in the first half of the year. And here, you see the lumpiness in order intake. Net sales has been not that lumpy. And of course, now there will be a lot of questions also in this con call about the flexibility of our capital business. And we have been saying all the years that we have been preparing for many years the business to be as flexible as possible. So we are prepared for the situation that sometimes the order intake is EUR 1.3 billion. Sometimes it's EUR 700 million. And now the LTM is EUR 980 million, so nothing dramatic here either. Paper business line had excellent year in '21. It had a good year in '22. Now LTM is almost EUR 1.2 billion. First half of the year, almost EUR 600 million, so almost EUR 90 million, EUR 95 million down compared to last year's first half. Net sales about EUR 702 million. So here as well net sales is higher than the order intake. Here, the same answer that we have been preparing ourselves for flexibility. And Jari and Jari's team have been working on that topic a lot. So today's Paper business line has a lot of more flexibility in its capacity cost than the Paper business line we started with 9 years ago, almost 10 years ago. So there is always lumpiness in the order intake of capital business. And now the market is not as active as it has been, but we are prepared for that. Good. Then there has been quite a lot of discussion about acquisitions in these conf calls, but also in one-on-one meetings, and there have been a lot of discussion around the topic. And now I'm happy to inform about 2 acquisitions we have signed now. So first, some words about the strategy. So we have been saying the whole time that we continue to strengthen our Process Technology, Services and Automation. And we are not prioritizing whether we would focus more on Automation or Services, Process Technology. We look for opportunities to strengthen all of these corners of our triangle. And then we have been saying that we are selected like we are saying here that we annually evaluate about 50 cases. So we work a lot on this topic. And then, of course, we are targeting acquisitions which are helping us to reach our financial targets to reach 12 to 14 points in EBITA. And we have executed 10 acquisitions and 1 merger with Neles after 2014. So we have been active on this topic for many years already. Now we are very happy to announce 2 acquisitions and the first one is the acquisition of Korber's business area tissue. We have many years' discussions with Korber and I'm very happy now that we are in the situation that we have signed the acquisition agreement. So it was signed on 7th of July. The enterprise value is about EUR 380 million. And then, of course, we need to get the competition of authority approvals in selected countries, not that many, but in some countries. And we expect that we can close the transaction in November the 2nd this year. And the business will be integrated as one part of Paper business line as a separate business unit. And in our reporting, we will report part in Process Technology and Services, in Services business line numbers, but the unit will be as 1 unit managed by the head of Paper business line. On the business, what they are doing -- or first, let's start what we do. So we do currently tissue machines. So after tissue machine, you get a so-called jumbo roll. And then Korber has all the technology to transfer this jumbo roll to rolls what you buy in local stores or what the away-from-home market is using. So they have all the technologies to transfer the jumbo roll to consumer rolls. And I'll have a picture of that later on. Korber has the widest offering in converting industry and it's the market leader. Net sales was about EUR 305 million last year and EBITDA margin 12 points. And it has a good and strong and growing service business, which is about 36% of the net sales or was 36% of the net sales in '22. Headquarter is located in Italy and Lucca. It's a so-called tissue valley. And then it has operations, of course, in Italy, Brazil, China, Japan and U.S.A. Then the rationale of the acquisition is that we can -- we are now -- after the acquisition has been closed, we have the widest technological offering to make fiber to make tissue, jumbo rolls and then convert that to the end users. It's strengthening process technologies, strengthening customer services segment as well. And then it's strengthening also our Automation offering. We have good Automation offering for the tissue and Korber has very advanced automation offering where they're using third-party hardware, but they have very good applications and remote services and everything else for the converting customers. So in the long run, we can see that we will have the benefit of having the data from both sides and trying to optimize the production units. Then we see that we will have sales synergies and cost synergies so that we estimate those to bring about EUR 8 million by the end -- EUR 8 million benefit by end of '26. And here's the picture how it looks like. So we have first tissue, stock preparation tissue machine, tissue rewinders and then the converting lines. Converting lines can be together with the machine in the same location or in other location. And a big part of the converting lines are sold to tissue machine, to companies who make tissue as well, about 80%. So the customer base we are here serving is actually not expanding that much. So our current customers are buying the machine from us and they are buying the converting line from somebody like Korber, but now we are the one-stop supplier or will be that kind of supplier to that segment in the future. So I'm very happy that finally we have signed the agreement and we are waiting eagerly for the closing day. Then to strengthen Automation, we have made -- signed a deal to acquire Process Gas Chromatography business from Siemens. We have been looking for opportunities to strengthen our Automation business for many years. And there aren't that many companies available which would have a reasonable size of a product business. And we are very happy now that we have been able to sign the deal to acquire this part of the Siemens business. Enterprise value was about EUR 102 million and net sales of that business was last year about EUR 120 million and profitability above -- EBITDA margin above 10%. So we see the good potent -- first of all, where they are used. So these are used in chemical and gas processes to analyze the components of different gases and chemicals. They are used by big corporation, big chemical corporation, petrochemical corporation, big gas corporations. And all the big ones are using these products. And then this product, which is called Maxum is the market leader. So it's very well-recognized by the end customers and appreciated by end customers. So the rationale is that we can provide good framework to continue this business. We have global network and we can integrate or provide good facilities and good support for the business. It will be organized as one business unit reporting to head of Valmet Automation System business line head. And we will, of course, have some synergies with Flow Control as well because Flow Control is serving the same customers. And then we see that this is an opportunity also for our System business to learn new industries and get new customers. So in the long run, I see this as a important step to widen the customer base of our really very well operating Automation business. So I'm also very happy that we were able to sign this deal and we are estimating that the deal will be closed in the 1st of April next year. Good. Little bit longer story from me this time, and now I'll let Katri to tell the important topics.

Good afternoon on my behalf as well. Good to be here today to share the financial results with you. I will highlight the key figures for the quarter, starting from the order intake. That was close to EUR 1.3 billion and 3% lower than the comparison quarter. Order backlog was at the level of EUR 4.4 billion or 8% down and net sales was EUR 1.4 billion and 10% higher than the comparison quarter. Comparable EBITA was EUR 153 million or 10.8% and that was 1.3 percentage points higher than last year. Items affecting comparability was EUR 2 million for the quarter. And last year, it was EUR 32 million. And last year, it was impacted by Neles. Earnings per share -- sorry, adjusted earnings per share for the quarter was EUR 0.60 and that was 12% lower than last year. It was impacted by financial expenses as well as effective tax rate, which was lower last year again because of Neles. A few words also about the segments, starting from the orders. Services was EUR 430 million. That was 6% lower than the comparison quarter. Maybe good to mention that the second quarter last year was our second best order intake quarter ever. The best was the first quarter this year. And now Services is a little bit over EUR 1 billion when we look at the year-to-date numbers. Automation had a good quarter in terms of order intake. It was EUR 340 million and 12% higher. And year-to-date, Automation was EUR 732 million. Process Technologies was a little bit below EUR 500 million for the quarter. That was 8% lower. And year-to-date, Process Tech is close to EUR 1.1 billion or 15% down. And as total quarter was EUR 1.3 billion, and year-to-date, we were at EUR 2.8 billion or 7% higher. On the net sales side, it was developing well in all the segments, both for the quarter and also for the year-to-date numbers. Quarter was EUR 1.4 billion. And year-to-date, we were at EUR 2.7 billion, over 20% higher than last year. Comparable EBITA was developing nicely for stable business. Services was EUR 80 million for the quarter or 17.5%. And year-to-date Services was at the level of 16.8%. Automation segment was EUR 61 million or 17.9%. And year-to-date, they were at 17.2%. Process Technologies was EUR 30 million for the quarter -- sorry, for the quarter, it was 4.8%. And year-to-date, Process Technologies was at the level of 4.7%. Other segment costs were EUR 17 million for second quarter. And year-to-date, it's minus EUR 26 million. Here, the beginning of the year has been cost heavy and there has been lots of activity which has impacted this number. And the quarter EBITA was EUR 153 million and year-to-date, we are at EUR 286 million or 10.5%, and that is 1.5 percentage points higher than last year year-to-date. Comparable gross profit was 26% for the quarter. And when we look at the last 12 months, we were at 25% level. SG&A last 12 months, we were at EUR 900 million and that represents 16% of the net sales. When we look at net sales and comparable EBITA, so both have been developing favorably. Net sales, when you look at last 12 months, we are close to EUR 5.6 billion. And out of that, EUR 3 billion is related to stable business. And comparable EBITA margin last 12 months is now 11.1% and target is unchanged to be between 12% to 14%, and that work continues. Cash flow for the last 12 months was EUR 273 million, and net working capital was minus EUR 31 million and this is now excluding the dividend liability. And it represents 1% of -- sorry, minus 1% of the rolling 12 months' orders. And net working capital, of course, the capital project payments are impacting quite a lot here as well as the elevated inventory levels which we have had. And maybe good to mention here also that since the proportion of stable business has increased, of course, that comes also with the positive net working capital. Net debt was EUR 542 million at the end of second quarter and gearing was 23%. Good to mention here that we have now paid the first installment related to dividends out in April. And net debt-to-EBITDA ratio was 0.77. Capital employed was close to EUR 3.4 billion at the end of second quarter and comparable return on capital employed was 15%. And good to note here that integration of Flow Control has impacted capital employed as well as the percentage when looking at the last 12 months' numbers. And then last but not least, adjusted earnings per share was EUR 2.42 when looking at the last 12 months' numbers. Those were the financials shortly. I will give the floor back to Pasi.

Thank you, Katri. Then still guidance and short-term market outlook. So we keep the same guidance that we estimate the net sales in '23 will increase in comparison with '22 and comparable EBITA in '23 will increase in comparison with '22. So increasingly increase both. Then the short-term market outlook. And like you remember, we are saying that 50% is coming from our capacity utilization and 50% is coming from the customer activity. And in Services, we have downgraded from good to good/satisfactory. And so we have had good order intake, like I was saying, Katri was saying, in Services. That, of course, is resulting that we have very good capacity utilization currently. Then we have seen that the market activity has been slowing down and that's why we are saying the market outlook -- saying that the market activity has decreased to satisfactory level. In Flow Control, we have still good market outlook. In Automation Systems, we have good market outlook. In Pulp, we have downgraded from good/satisfactory to satisfactory and so that now when there is some uncertainty in the markets and economic development and also interest rates have been increasing, then the decisions have been postponed. We have, of course, active discussions with customers. But let's see when the decisions will materialize and that's why we have been downgrading the outlook to satisfactory. And you see also that in our order intake. Now the order intake, LTM is somewhere at EUR 1 billion level and not high. In Energy, we have -- and that's, of course, the whole Pulp and Energy, not only pulp. In Energy, we keep the outlook as good. In Board and Paper, the same what I said earlier. So we have had good and now order intake LTM is somewhere at EUR 1.2 billion and last -- of EUR 600 million in first half year. And that's why we have now downgraded outlook from good to satisfactory. This year, we keep the outlook at the satisfactory level. So 3 changes in the market outlook. Good. And now we go to the -- oh, no. Now I'll let Pekka on the stage, and then I'll move.

Yes. Thanks, Pasi. So now it's time to move to the Q&A session. So I ask Katri also to join, Pasi here behind the tables. Thank you. And let's then go to the Q&A. So operator, please.

[Operator Instructions] The next question comes from Antti Kansanen from SEB.

It's Antti from SEB. A couple of questions from me and let's start with Services. I mean, after -- or as of Q1, you still have the good market outlook for the business. And if you now reflect the order intake that you keep during the quarter, was it as you expected? Was it weaker than anticipated? And maybe you can talk a little bit more detailed into kind of the market activity parts and consumables separately and then perhaps kind of project shutdown services and things like that separately, what do you see from your client base?

No. Like Katri said, I'll start and then Katri will add. So like -- no, no, I lost myself.

Maybe it was the second quarter last year. Yes.

Yes, exactly. So Katri said that last year was very good order intake in second quarter. So the comparison number is tough. But then of course, it's the fact that we are seeing 6% down compared to that. Did we estimate it? I think in end of March, maybe not then, then maybe later on, we started to see that the market is slowing down. So still I would say that our understanding in end of first quarter was that the market continues to be more active. So there has been a change in the market compared to what we saw in end of March. Then a more detailed view. South America is still active. North America is holding. Europe has been holding, let's see what happens now in Europe after summer vacation. So now of course, during the summertime, it's a little bit difficult to see any good trends. There is clear slow market in China. And Asia Pacific is holding, so geographically. So then in consumables, we see less activity. So now when the mills are not running as well as they -- or as with us high production volumes and earlier, then we see that there is less need for our paper machine clothing and less need for roll workshop services as well. So those are related to the production volumes. And then in mill service type of -- project type of and field service type of services, we see a little bit different behavior that pulp customers have been more active than paper customers in that kind of segment. But as an average, the market has been still reasonably good for the first half of the year. And performance part has been active.

Yes, I was just kind of thinking that was Q2 demand then ended up being satisfactory? I mean, just trying to get -- do you expect the activity kind of sequentially weaken going into the second half versus what you actually then ended up seeing on the second quarter? Or am I kind of overreaching here?

No, no. We had quite a lot of discussion that should we keep it as good or should we change it. But then we were, in the end, concluding that now when the order intake in second quarter is 6% down compared to earlier year, then it would not be right to continue to say that the market is good, even if for the first half of the year order intake has been growing.

Okay. And then maybe a bit more detailed question on kind of the shutdown services and things like that. Are you seeing that your clients are kind of cutting production in a way that results you doing shutdown services? Or are they just kind of lowering it, but still continuing to run so that there's perhaps not as much demand as you hoped for?

It's of course -- of course, it depends a little bit on the area. So once again that we have -- we are operating all the continents and we have thousands of customers. So it's difficult to make one summary. But I would more say so that the customers who are now worried about their cash flow are reacting on mill improvement projects quickly because that's maybe the quickest way for them to reduce their cash outflow. And if they have that kind of improvement projects, which are not 100% necessary to be executed now, then they delay the decision make.

All right. Makes sense. And then one question on the cash flow. And I mean you referred to the project payment schedules as one part of kind of what is driving the working capital to be negative. Is this kind of, in your view, a normal project business-type of phenomenon? Or is there something related to -- I mean, you have talked about profitability issues in some of the key projects. So are these also impacting the cash flows? Or how should we think about -- and when should we kind of expect improving cash conversion from here?

Yes. If I kind of start from the overall situation, so our projects are cash flow-positive and that's kind of our operational model. And it was still highly on the positive side, even if it's lower than what it was, for example, at year-end, but nothing has really changed. So no changes in the contract terms. There are lots of variations between the quarters. So it's -- when we talk about these payment schedules, they are reflected on the time. So that's normal. Nothing special there.

So it's just a kind of cyclical kind of the project cycle and no issues at all? And then perhaps at some point, we should see a reversal or...

Well, it kind of goes with kind of the capital orders. So those can fluctuate quite a lot between the quarters. But I think that when we look at the net working capital as total, of course, the other focus point is the inventory level. So they have been elevating. We have been discussing about it quite a lot, and we have to now check carefully that is there some levels which we can bring down and where do we still face the component availability because, of course, we want to make sure that we can still deliver.

Okay. And what do you then kind of expect for second half I guess based on the backlog, the growth is maybe slowing down a little bit on the sales side. So is it too early to expect a big improvement in the second half or...

I think that if you're referring to the net working capital, of course, it's very highly on our management agenda that I can say. One part, of course, is the inventory. But when it comes to these capital projects and their timing, so that is cyclical and it can cause a fluctuation into the net working capital.

The next question comes from Sven Weier from UBS.

Firstly, I also wanted to follow up on the Service order intake because I guess if we look at the situation sequentially, it looks a little bit more drastic than just the year-on-year comparison. I know there's been a big ticket in Q1. There is a bit of seasonality in Q2, but it still seems like a more abrupt change on behalf of your customers, maybe also reflecting their poor situation that they have in Q1 and Q2. I was just wondering, do you think that's a kind of a new run rate in the Service order intake from here? And have you also been seeing kind of a destocking in Q2 that has maybe made these Service orders overshoots to the downside?

Yes. I don't see that it's drastic and it's good that you reminded that in Q1, we had an extraordinary order intake and that's not the comparison. Then in a normal year, like we have been saying earlier, one to remember that about in a normal year, 55% order intake happens in the first half of the year, 45% in the second half of the year. So that has been the normal phenomenon before the COVID times and now we are maybe more in a normal situation. And then it's true that customers are most probably destocking as well. So when the delivery times were very long, then they -- and then we said that part of the order intake is active because customers have to react to the longer delivery times. And now when our delivery times and all the transportation times are getting more back to the normal, then I'm sure that they are also making actions to reduce their inventory levels. And that has, of course, impacted our Services order intake. But I don't see any drastic change in customers' behavior. So when they produce with the machinery, then they need to buy spares. They need to buy consumables. They need to continue to maintain the machines. Our customers are still financially strong. They still all believe in the future of the industry. So even if there's no downturn -- short downturn in the demand and pricing, then I haven't heard anybody saying that they wouldn't have a big belief in long-term in the industry. And this means then, of course, that the Services market will continue. But now that kind of fluctuates.

Yes. And I think you said in the Q1 call, if I remember correctly, you already said that consumable demand might go down. But on the other hand, you might have more revenues from maintenance shutdowns, and we saw the guidances of your customers, right, that there is also maintenance shutdowns in the second half. So is that still your kind of best guidance that there is this kind of balancing out of the 2?

And then maybe where I was not correct is that, of course, the maintenance shutdowns are happening, but then maybe some of the customers are postponing some of the improvement projects, which are not 100% necessary if they want to manage their cash flows. And that's maybe was something I didn't think of carefully enough before the conf call after first quarter.

Okay. Fair enough. And second question I just had was on the -- when I take your backlog guidance, the 50% remainder of the year, same last year, that's, I think, suggesting EUR 200 million lower sales than last year, if I did it correctly. So does it mean you have to make any kind of short-term layoffs to deal with that? Or how should we look at the overall volume in the second half?

We are not giving any other guidance that increase and increase in the net sales. And I think one guidance is that there's now less capital business in the backlog and -- than a year ago. And then about the layoffs, we have been building the business structure such that we have good flexibility in the organization. So currently, we don't need any extra layers. But then all the time we have situations that can be that in one specific location, we don't have enough work. And then especially in Finland, it's very easy to layoff temporary people and then people will get back immediately when we have workload back on the normal levels. And that's, in a way, normal capacity management, what we do every year.

Clear. Last question I had was just on the other line, which picked up to minus EUR 17 million in the quarter. Is that kind of a Q2 seasonality here because we had the same swing Q2 last year? Something to keep in mind on that?

When we look at -- okay, the Q2 was EUR 17 million. And year-to-date, we are at minus EUR 26 million. And of course, if you compare it to last year's EUR 39 million. So it has been cost heavy beginning of the year. We estimate that it will be approximately somewhere between EUR 45 million to EUR 50 million.

The next question comes from Panu Laitinmaki from Danske Bank.

I have 3 questions. Firstly, on the revised market outlook for Board and Paper. I mean, how big is this change? And I'm just wondering about the magnitude of the change you see in the market because if I look at your market outlook, you have had good outlook for this business for quite a long time, and it was in 2016, the last time you expected it to be satisfactory. And at that time, you had like EUR 700 million run rate in the orders and now about EUR 1.2 billion. So is this a kind of level you should expect it to land now? Or any thoughts on kind of...

No, we are not giving guidance on order intake on business lines. But 2016, thereafter, the market has been active and very active. And we are used to the levels where the order intake is at a totally different level than in 2016 when we didn't actually believe that the order intake will go over EUR 1 billion. And like you have noticed, the record has been EUR 1.6 billion. And then in 2016, we didn't even dream of that kind of volumes. Now of course, after the good years, our expectation level and your expectation level have changed. So one should not compare these 2 words, satisfactory 2016 with today's word satisfactory.

Okay. Then on the Services margin, I mean, can you comment on what you expect in the coming quarters given that the orders came down, so maybe revenue will follow? And then you probably had quite good pricing impact year-on-year and you started to have that later last year. So basically do you expect margin to improve going forward?

It is difficult, you can take.

I can start, and then you can continue. Of course, we are not guiding the margin going forward. But you are right. It has been developing. So it was now 16.8%. And if you compare it to last year's 14.8%, of course, there has been good development. Volume has been supporting it so we have more net sales. And it's also good to remember what was the situation last year. So the profitability for Services segment was below 10% on the first quarter and second quarter was a little bit over 14%. So price increases have been done.

And of course, we continue to work on the profit improvement. So Valmet's target is still to get between 12% to 14%, and we continue to work on profitability of all the businesses, including Services.

My final question is on Process Technologies and, let's say, propylene projects in that business. The margin was similar in Q2 compared to Q1. So basically the question is that do you have any kind of new issues there? Or is it still the same projects impacted by inflation? Or what is kind of behind the margin level we saw?

It's the same issue.