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Valmet: The Nordic Phoenix of Industrial Technology
How a Finnish War Reparations Factory Became the Global Champion of Pulp and Paper Technology
Picture the craggy fortifications of Suomenlinna, a string of islands rising from the cold Baltic waters just southeast of Helsinki. In the 1750s, under Swedish rule, shipwrights hammered away at a small military shipyard nestled within these fortress walls—a strategic outpost designed to defend against Russian ambitions. The history of Valmet goes all the way back to the 1750s. It was then that a small shipyard was established in the Viapori fortress on the islands outside Helsinki. In the early 20th century it ended up under the ownership of the Finnish state and became part of Valmet. Those shipwrights, working with Swedish naval officers in a fortress that would later become a UNESCO World Heritage site, could never have imagined their modest enterprise would spawn a €5.4 billion industrial technology giant with operations in over 40 countries.
The company has more than 225 years of industrial history and a strong track record in continuous improvement, sustainability and renewal. Valmet's net sales in 2024 were approximately EUR 5.4 billion. This is a company that holds 30–35 percent market share in pulp equipment—one of the world's largest installed bases in the biomaterial process technology industry.
The central question that makes Valmet's story fascinating isn't just how a company survives for over two centuries—it's how a Finnish war reparations factory, born from the wreckage of World War II, was transformed through two dramatic demergers, a heated bidding war with Swedish rival Alfa Laval, and strategic M&A into the undisputed global champion of pulp and paper technology. This is a story of Finnish industrial policy, the art of the spinoff, building on installed base economics, mastering cyclical industries, and making bold strategic bets when others would have played it safe.
I. The Deep Roots: From Fortress Shipyards to State Metalworks (1750s–1951)
The story of Valmet cannot be told as a single, linear narrative. The history of Valmet can be woven from many different strings, looking into the history of different companies which today form Valmet Corporation. In Finland, the threads include Tamfelt, Tampella, and Valmet itself. In Sweden, there's Götaverken, Karlstads Mekaniska Werkstad (KMW), and Sunds bruk. Across the Atlantic, the lineage extends to Beloit and Dominion—storied names that have been subsumed into today's Valmet through a century of consolidation.
Götaverken, originally AB Keillers Mekaniska Verkstad, was founded in 1841 as a shipyard by a Scottish businessman Alexander Keiller in Göteborg, Sweden. Alexander Keiller's mother was the creator of the famous Keiller's marmalade, which is believed to have been the first commercial brand of marmalade, originating in Dundee, Scotland. As steam propulsion became more common in 1850s, Götaverken started to design and manufacture boilers for steam production. During the coming years almost 1,000 steam boilers were produced in Göteborg. Among the customers were also Swedish and Finnish pulp mills.
In Finland itself, the roots of Valmet's Järvenpää unit lie in Osberg's machine shop founded in Sörnäinen, Helsinki in 1854. At the turn of the century, after merger with Siltarakennus Oy, the company's name was changed to Kone ja Silta (Machine and Bridge). Another critical thread: Tamfelt was established in 1797 and became one of the world's leading suppliers of technical textiles. These operations are now part of Valmet's Services business line.
But the truly transformative chapter—the one that would forge the company's identity for decades—began in the devastation following World War II. Finland found itself in an extraordinarily precarious position: having fought alongside Germany against the Soviet Union in the Continuation War (1941–1944), it had to navigate a punishing peace settlement while preserving its independence, sandwiched between East and West during the earliest days of the Cold War.
War reparations of Finland to the Soviet Union were originally worth US$300,000,000 at 1938 prices. Finland agreed to pay the reparations in the Moscow Armistice signed on 19 September 1944. Finland was originally obliged to pay $300,000,000 in gold to be paid in the form of ships and machinery, over six years. The Soviet Union agreed to prolong the payment period from six to eight years in late 1945. In summer 1948 the sum was cut to $226,500,000.
Prior to the war reparations period, Finland's economy was predominantly agrarian, with approximately 60% of the workforce employed in agriculture and limited capacity in heavy industry, primarily focused on timber and paper products. The reparations obligation from 1944 to 1952 compelled Finland to deliver industrial goods valued at an average of 4% of annual GDP, targeting advanced sectors such as metalworking, shipbuilding, and machinery that exceeded existing domestic production capabilities.
This demand forced the Finns to industrialize at a pace and scale that would have been unimaginable in peacetime. Finland manufactured and delivered over 600 locomotives to the Soviet Union as war reparations from 1946 to 1952, primarily narrow-gauge models for industrial applications despite possessing minimal prewar expertise in large-scale locomotive production. The effort compelled Finnish firms to establish new assembly lines and acquire specialized skills in heavy engineering, transforming limited metalworks into viable producers of complex rail equipment.
The shipbuilding industry played an important role in Finnish reparations, and many vessels were manufactured at the Valmet dock on Suomenlinna for reparations. Apartments were renovated for the dock workers in the residential buildings of Länsi-Mustasaari.
Out of this cauldron of forced industrialization, the Finnish government decided to consolidate its scattered war production capabilities. Valmet (originally Valtion Metallitehtaat - State Metalworks) was formed in 1951, when the country of Finland decided to group their various factories working on war reparations to the Soviet Union under one company. Valmet and the factories within the group produced a wide array of products including aeroplanes, automobiles, locomotives, weapons manufacturing and everyday household appliances.
The new company came to include various metalworks that manufactured war reparations products for the Soviet Union in different parts of Finland. In the year of its establishment, the company had some 6,200 employees. At the beginning of 1951, the Valtion Metallitehtaat group was renamed Valmet Oy.
This was no carefully conceived corporate strategy—it was industrial policy forged under duress. Early management of the company was handled by army and navy officers who previously managed the factories. Their task was to find and develop commercial products from the existing industrial capabilities. These military men had to transform artillery works into factories capable of competing in global civilian markets. The task seemed almost impossible.
The Investor Takeaway: Valmet's origins reveal something important about Finnish industrial DNA. The company was born from necessity, forged under extraordinary pressure, and developed a culture of adaptation and transformation that would define it for the next seven decades. This wasn't a company founded by visionary entrepreneurs—it was a state initiative to turn swords into plowshares, and it succeeded beyond anyone's expectations.
II. The Conglomerate Era: Diversification and State Ownership (1951–1990s)
With the war reparations finally completed in September 1952—the last train crossing the border at Vainikkala—Valmet faced an existential question: what comes next?
The airplane industry was maintained to strengthen national security, but it was not profitable. The branch did, however, make a solid contribution to Valmet's product development and designed, among other things, the straddle carrier used in harbors and manufactured as part of Finland's war reparations. For decades, the entire conglomerate searched for new fields, such as the manufacture of cars or instrumentation. Modern quality control of production operations entered the Finnish manufacturing industry via Valmet's operations, for example in its car factories. National politics strongly influenced the management and decision-making in the company.
The transformation from artillery manufacturer to paper machine supplier was perhaps the least likely, yet most consequential, pivot in Valmet's history. Valmet began manufacturing paper machines at the former Rautpohja artillery works in Jyväskylä, Finland in the early 1950s and delivered its first paper machine in 1953. Valmet became a paper machine supplier of international importance in the mid-1960s, when it delivered several machines to the world's leading paper industry countries.
The logic was surprisingly sound: Finland's abundant forests and existing paper industry created domestic demand for machinery. The metalworking skills developed during the reparations period could be redirected to precision manufacturing. And paper machines—massive, complex pieces of engineering that run continuously for decades—would provide the steady, long-term business relationships that state-owned enterprises needed to thrive.
At the beginning of 1951, the Valtion Metallitehtaat group was renamed Valmet Oy. The various factories, which had previously manufactured warships, aircraft and artillery pieces, spent years finding their new purposes. The conversion of an artillery works into a paper machine manufacturer was a success, but import restrictions created serious obstacles in its route to Western markets.
Meanwhile, tractor production emerged as another anchor business. Valmet tractors were a line of robust agricultural machines manufactured by the Finnish state-owned company Valmet from 1951 until the brand's evolution into Valtra in the late 1990s, renowned for their reliability in harsh Nordic climates and versatility in farming, forestry, and even military applications. The origins of Valmet tractors trace back to post-World War II Finland, where the need to pay war reparations to the Soviet Union spurred the consolidation of state factories, including artillery and rifle works, into Valmet in 1951 to diversify into civilian production.
This led to the launch of the Valmet 15 in 1952, Finland's inaugural domestically produced tractor, equipped with a 4-cylinder gasoline engine producing 15 horsepower. Initial production was modest, with 10 test units assembled in 1951, 75 in 1952, and nearly 1,000 by the end of 1953, targeted primarily at small farms seeking to mechanize operations and replace horse-drawn plows.
The automotive venture proved particularly interesting. Valmet Automotive continued to assemble cars, particularly specialty models, on a contractual basis. In the automotive sector, Valmet began production of the Porsche Boxster in September 1997 and of the Saab 9-3 Convertible in early 1998. Saab-Valmet had been established in 1968 as a joint venture, placing the automotive plant in Uusikaupunki, Finland—a facility that today manufactures vehicles for Mercedes-Benz.
By the mid-1980s, Valmet had become a sprawling Finnish conglomerate, but it increasingly recognized that paper machinery was its path to global relevance. The key milestone came in 1986: Valmet acquired KMW's paper machine production operations in 1986. Since then Karlstad has been established as Valmet's technology center and main location for tissue machines business and innovation. Some milestones in the development have been the TAD-machine developed in 1980s, DCT-concept launched in 2004 and NTT-concept launched in 2008.
That same year brought another important transaction: Valmet had shipyards in Turku and Helsinki. In 1986, Valmet sold its shipbuilding operations to Wärtsilä Oy, which merged them with its own shipyards to form Wärtsilä Marine. The company was declared bankrupt in 1989. In connection with the shipyard transaction, Valmet bought from Wärtsilä a paper-finishing machinery unit located in Järvenpää, Finland. Together with Valmet's own paper machine manufacturing units, the Järvenpää unit formed Valmet Paperikoneet Oy, which then purchased Tampella's board machine manufacturing operations in 1992.
This was classic strategic portfolio management: shedding the cyclical, capital-intensive shipbuilding business while doubling down on paper machinery where Valmet had genuine competitive advantages.
The divestiture process continued: Valmet sold its tractor, forest machine and transportation vehicle manufacturing operations to Sisu Auto in 1994. In 1997, Sisu Auto was sold to Partek, and the tractors became known as Valtra Valmet, and later Valtra. The tractors—those robust machines born from repurposed rifle factories—would eventually end up under AGCO's ownership.
In a reflection of the company's growing international profile, Valmet stock was listed on the New York Stock Exchange for the first time in May 1996. Further stock offerings reduced the Finnish State's stake in Valmet to 58.6 percent in 1994 and to 20 percent in June 1996.
For 1998, Valmet's last full year of operation before its merger with Rauma, the company posted net sales of Fmk 11.65 billion (US$2.3 billion) and net income of Fmk 675 million (US$133 million).
By the late 1990s, Valmet had successfully transformed from a post-war conglomerate into a focused paper machinery supplier with international reach. But the industry was consolidating globally, and management saw both opportunities and threats on the horizon.
The Investor Takeaway: The conglomerate era demonstrates Valmet's willingness to constantly prune and focus. From aircraft to tractors to ships to automobiles, the company shed businesses that didn't fit its core competencies while strategically acquiring capabilities in paper machinery. This discipline—knowing what to own and what to divest—would become a defining characteristic.
III. Inflection Point #1: The Metso Merger (1999)
In November 1998 the boards of directors of Valmet and Rauma proposed a merger of the two companies, in yet another consolidation move, this one creating the world's largest supplier of pulp and paper equipment. The merger was approved by shareholders in January 1999 and by the European Union one month later. It closed on July 1, 1999, with the new company initially called Valmet-Rauma Corporation; it adopted the name Metso Corporation on August 24 of that year—"Metso" being the Finnish word for wood grouse, a bird familiar to Finns and symbolic of the company's ties to nature and the environment.
The strategic logic was compelling on its face: This combination united Valmet's expertise in paper and board technology with Rauma's strengths in fiber processing, rock crushing, and flow control solutions, positioning the new entity as the world's largest supplier of equipment for the pulp and paper industry.
Metso stock was listed on both the Helsinki and New York stock exchanges, and the company's two largest initial shareholders were UPM-Kymmene, with a 14.7 percent stake deriving from its interest in Rauma, and the Finnish State, with an 11.6 percent interest deriving from its stake in Valmet.
The merged entity expected significant synergies: Through the elimination of overlapping operations in the areas of corporate administration and distribution networks and from the benefits of economies of scale in procurement and component production, Metso hoped to save approximately Fmk 400 million (US$80 million) per year. The company planned to reduce its personnel by about 2,000 persons, or about nine percent of its workforce, during 1999 and 2000.
But the merger also planted the seeds of future conflict. Rauma brought rock crushing equipment (Nordberg), forest machines (Timberjack), and flow control solutions—businesses with fundamentally different end markets, customer relationships, and capital cycles than paper machinery. As one industry observer noted at the time, perhaps easier growth would have been achieved if the two companies had each acquired a competitor in their own fields.
The early 2000s proved this concern prescient—and also demonstrated Metso's ability to execute bold M&A regardless. A pivotal move was the 2001 acquisition of Swedish firm Svedala Industri AB for approximately SEK 9.1 billion, which integrated Svedala's rock crushing and screening technologies with Metso's existing Nordberg crushers, establishing Metso as a world leader in rock and mineral processing. This transaction boosted combined net sales to around €5.5 billion and expanded the workforce to 32,000 employees.
On the pulp and paper side, Metso also expanded aggressively. In 2000 Metso acquired Beloit Corporation's tissue and paper-making technology as well as its service operations in the United States and France. In December 2006, Metso completed the acquisition of the Pulping and Power businesses from Norwegian Aker Kvaerner ASA.
The core of Kvaerner power business was acquired through mergers of the Swedish Götaverken and the Finnish Tampella boiler businesses. Kvaerner had further broadened its biomass product portfolio through the acquisition of the boiler business of Fortum Engineering, in 2002, and a majority acquisition of the Finnish boiler plant supplier Noviter Oy, in 2005. In January 2007, Metso acquired Aker Kvaerner's pulping and power businesses. The former Kvaerner Pulping and Kvaerner Power operations became an integral part of Metso, and later formed the core of Valmet's Pulp & Energy business line.
By 2008, Metso had become Finland's ninth largest company and the number of Metso shareholders had increased from 25,000 to 42,000. Metso strengthened its market position and service capacity in growing markets, particularly in India and China. During 2008, the expansions to the Ahmedabad foundry and the Bawal factory in India were completed.
By 2009, half of Metso's orders received came from emerging markets, compared to less than one fifth in 1999. In the same year, Metso entered into a combination agreement with Tamfelt, one of the world's leading suppliers of technical textile.
But underneath the impressive headline growth numbers, tensions were building. The mining and construction businesses operated on different cycles than pulp and paper. The former was heavily exposed to commodity prices and emerging market infrastructure investment; the latter depended on packaging demand, printing markets, and tissue consumption in mature economies. Managing these disparate businesses under one corporate umbrella increasingly felt like trying to ride two horses simultaneously.
The global financial crisis of 2008-2009 exposed these tensions acutely. Mining orders collapsed as commodity prices cratered, while paper machinery demand held up better (though still declining). Different businesses needed different capital allocation strategies, different management attention, and different investor messaging.
By 2013, after years of internal debate, Metso's board had reached a conclusion: the sum was worth less than its parts.
The Investor Takeaway: The Metso merger represents a classic case of industrial logic trumping financial logic. On paper, combining complementary businesses to create a one-stop shop for the process industries made sense. In practice, the complexity of managing divergent business models eventually overwhelmed the synergies.
IV. Inflection Point #2: The 2013 Demerger—Valmet Reborn
The strategic rationale for splitting Metso came down to a single powerful insight: focus creates value. On 1 October 2013, the Extraordinary General Meeting approved the demerger of Metso into two companies. At the start of 2014, Metso Corporation's Mining and Construction business and Automation business formed the new Metso Corporation and Metso's Pulp, Paper and Power business formed a new independent company under the name Valmet Corporation.
On October 1, 2013, Metso's Extraordinary General Meeting decided to demerge Metso Corporation into two separate listed companies. After the demerger, the Mining and Construction and Automation business remained as part of Metso, and the Pulp, Paper and Power business formed a new company, Valmet Oyj. The trading of shares in Valmet on the official list of the Helsinki Stock Exchange commenced on January 2, 2014.
The man chosen to lead the reborn Valmet was Pasi Laine, a career Metso/Valmet executive who embodied the company's engineering-driven culture. Pasi Laine's journey in the industrial sector began with a strong educational foundation. He holds a Master of Science degree in Engineering from Tampere University of Technology in Finland. This solid technical background provided him with the skills and knowledge to excel in various leadership roles throughout his career.
Pasi Laine joined Valmet in 1988, quickly establishing himself as a key player within the organization. Over the years, he held several senior management positions, contributing significantly to the company's growth and success. In 2013, Pasi Laine was appointed as the President and CEO of Valmet.
Metso's Board of Directors has appointed Mr Pasi Laine, M.Sc in Engineering, as President and CEO of the new company to be demerged from Metso Corporation and listed on the NASDAQ OMX Helsinki stock exchange. Metso's Board of Directors has signed a demerger plan to separate Metso's Pulp, Paper and Power business into a separate listed company to be named Valmet Corporation. The demerger will require the approval of Metso's Extraordinary General Meeting. If approved, the planned registration date of the demerger will be December 31, 2013. Pasi Laine (born 1963) is currently President of Metso's Pulp, Paper and Power business, and he will continue in this position until assuming the duties of the President and CEO of the new company.
Laine's response to his appointment captured both the opportunity and the challenge: "It is an honor to be given this new opportunity to develop Metso's Pulp, Paper and Power business as an independent company and implement our business strategy and accelerate growth. Our goal is to be the leading global technology and service provider for the pulp, paper and power industries. The new Valmet will be a modern and dynamic listed company."
There was a certain irony in the demerger. The pulp and paper business had often been viewed as the "unloved" part of Metso—a mature, cyclical business compared to the sexy growth prospects of mining equipment in a commodities supercycle. Yet it was precisely this perceived sleepiness that made Valmet attractive to long-term investors seeking stable, cash-generative businesses.
The company has over 200 years of industrial history and was reborn through the demerger of the pulp, paper and power businesses from Metso Group in December 2013. Valmet's net sales in 2013 were approximately EUR 2.6 billion.
Valmet will focus on delivering technology and services globally to industries that use bio-based raw materials. Valmet's vision is to become the global champion in serving its customers, and its mission is to convert renewable resources into sustainable results. Valmet's main customer industries are pulp, paper, and energy. All of these are major global industries that offer growth potential for the future. Valmet will complement its core business by applying its technology and know-how to industries beyond biomass, particularly in the energy sector. Valmet's product and service portfolio consists of productivity-enhancing services, plant upgrades and rebuilds, new cost-efficient equipment and solutions for optimizing energy and raw material usage, and technologies increasing the value of its customers' end-products.
The good financial results combined with favorable megatrends supporting future demand for Valmet's technology and services have also been reflected in share performance. The closing price for Valmet share on the first day of listing ten years ago was 6.65 euro. At the end of 2023, the share was valued at 26.11 euros. Had a shareholder bought Valmet shares on January 2, 2014, and sold them at the end of 2023, they would have got a return of 293% to the original investment. When we add the dividends Valmet has paid to shareholders during this decade, we get the total return of 391%.
The Investor Takeaway: The 2013 demerger vindicated the thesis that focused companies often outperform conglomerates. By separating from the mining/construction business, Valmet could pursue its own capital allocation strategy, communicate a clearer investment thesis, and attract shareholders who specifically wanted exposure to pulp, paper, and energy technology.
V. Building the New Valmet: Automation & Services Strategy (2014–2020)
Pasi Laine and his team didn't rest on the strategic clarity of the demerger. Within a year of Valmet's listing, they had identified a critical missing piece: automation.
Valmet Corporation and Metso Corporation have signed an agreement on the sale of Metso's Process Automation Systems business to Valmet on January 15, 2015. The enterprise value of the acquisition is EUR 340 million. The acquisition was financed with committed long-term financing. The acquisition was completed on April 1, 2015.
The acquired operations supply process automation and information management systems and related applications and services to the pulp, paper, energy and other process industries. The purchased operations employ about 1,600 people. Net sales for 2014 amounted to EUR 297 million. According to Valmet's new organizational structure, the acquired business forms Valmet's fourth business line, Automation. Valmet will continue to report its financial results as one segment, and Automation business line will be included in reporting starting from April-June 2015 Interim Review.
The strategic rationale was elegant: "Through the acquisition of Process Automation Systems, Valmet will become a technology and service company with full automation offering. The acquisition will help Valmet in increasing its business stability, while also improving profitability. By combining paper, pulp and energy technology, process know-how, services and automation, we can serve our customers even better than before and move our customers' performance forward. This transaction has an excellent fit with our existing strategy and the timing is right for Valmet," said Pasi Laine.
The business being acquired is a strong business, with established customer relations and a high level of technology and know-how. About 1,600 automation professionals work close to customers at approximately 80 locations around the world. The share of services business in the acquired business is significant, accounting for approximately 45 percent of net sales in 2013, and is based on large installed automation base and a captive business model.
Net sales of the Process Automation Systems business is approximately EUR 300 million, of which Valmet has accounted for approximately 10 percent. Therefore the acquisition increases the share of stable high-margin business of Valmet's net sales by approximately EUR 270 million. Process Automation Systems has a solid financial track record, with slight growth and relatively stable margins during the last 10 years. EBITA margin for Process Automation Systems has been approximately 10-12 percent.
This acquisition illustrates a key principle: high-margin, recurring revenue streams from automation and services provide crucial ballast when capital equipment orders inevitably cycle down. A pulp mill might only order new production lines every few decades, but it needs automation upgrades, spare parts, and maintenance services continuously.
The 2015 automation acquisition was also notable for what it represented: Valmet buying back a piece of its own corporate DNA from the company that had spun it off just two years earlier. The automation business had deep roots in Valmet's history, dating back to the instrumentation expertise developed in the aviation division during the war reparations era. It had migrated to Metso in 1999 and now returned to Valmet's portfolio—a reunification of capabilities that had been artificially separated.
In January 2015, Valmet Corporation and Metso Corporation signed an agreement on the sale of Metso's Process Automation Systems business to Valmet. The acquisition was completed on April 1, 2015. The acquisition strengthened Valmet's competitiveness by creating a unique customer offering combining paper, pulp and power plant technology, services, process know-how and automation.
The decade from 2014 to 2024 under Laine's leadership would see Valmet execute this playbook repeatedly: acquiring complementary capabilities, integrating them successfully, and building ever-stronger customer relationships through the combination of technology and services.
The Investor Takeaway: The automation acquisition demonstrates Valmet's understanding of installed base economics. By owning the automation systems that control customers' mills, Valmet creates switching costs and recurring revenue streams that smooth out the inherent cyclicality of capital equipment sales.
VI. Inflection Point #3: The Neles Merger & Alfa Laval Battle (2020–2022)
June 30, 2020 brought another transformation in Finnish industrial history. On 30 June 2020, Metso's partial demerger and combination of Metso Minerals business unit and Outotec took place. Two new companies started operations on 1 July 2020: Neles and Metso Outotec.
Neles—the flow control business that had been part of Rauma, then Metso, then briefly independent—was now a standalone public company. And Valmet saw an opportunity.
At the end of June 2020, Neles was separated from Metso. The State of Finland sold its share of 15 per cent to Valmet.
This was a strategic opening move. By acquiring the Finnish State's stake, Valmet established a blocking position that would prove crucial in the months ahead. What happened next was a corporate drama worthy of a business school case study.
In mid-July, the Swedish company Alfa Laval made an offer to buy Neles. Also Valmet started buying Neles stock. By the autumn, Valmet owned nearly 30 per cent of the stock.
On 13 July 2020, the Swedish company Alfa Laval made a two billion dollar takeover bid for Neles. Valmet announced that it will not support Alfa Laval's takeover bid in July 2020 and increased its holdings in Neles in August 2020. Alfa Laval launched a public cash tender offer for all Neles shares on 13 August 2020.
The bidding war highlighted different strategic visions. Alfa Laval, the Swedish heat transfer and fluid handling specialist, saw Neles as a way to expand its valve portfolio across multiple industries. Valmet saw something more personal: a chance to reunite businesses that had shared corporate parentage for years, serving many of the same customers in the pulp and paper industry.
Alfa Laval only received the support of a third of Neles owners for its takeover bid, and withdrew from the competition in November. By the autumn, Valmet owned nearly 30 per cent of the stock.
With Alfa Laval out of the picture, Valmet had time to pursue a negotiated merger on better terms. In July 2021, Valmet and Neles agreed to merge. Neles owners obtained 18.8 per cent of the merging company. The companies' synergies were considered to be substantial during the transaction. Neles was thought to help increase sales in automation systems, while its products were also to be sold to the paper industry. Neles merged into Valmet in April 2022, becoming Valmet's fifth business line, Flow Control.
The combination of Valmet's and Neles' business operations was completed on April 1, 2022. The Boards of Directors of Valmet Oyj and Neles Corporation have on July 2, 2021, signed a combination agreement and a merger plan to combine the two companies through a merger. The Extraordinary General Meetings of Valmet and Neles resolved to approve the merger on September 22, 2021.
The combined company will be a leading company with a unique offering for process industries globally with illustrative combined net sales for 2020 of approximately EUR 4.3 billion. In addition, it will have a globally balanced expert organization of 17,000 professionals.
The companies had several managers and employees who knew each other from Metso days. After the merger, the company had 17,000 employees, 3,000 of whom came from Neles.
The "coming home" narrative was powerful. People who had worked together at Metso—who understood each other's businesses, customers, and cultures—were reunited. This wasn't just a financial combination; it was a cultural re-integration that promised smoother execution than the typical M&A integration.
Valmet President and CEO Pasi Laine commented: "We are pleased that we can now start our journey together as a stronger Valmet. I warmly welcome our new Flow Control business line colleagues to the team. Valmet now has a unique, even stronger offering for global process industries and a solid platform for further business growth especially in automation systems and flow control solutions."
The Investor Takeaway: The Neles acquisition showcased Valmet's ability to play the M&A game at a high level. By moving quickly to acquire the Finnish State's stake, building a blocking position, and then outlasting a well-funded foreign bidder, Valmet demonstrated both strategic foresight and tactical execution.
VII. Valmet Today: Business Model & Financials (2024–2025)
Under the new "Lead the Way" strategy announced in June 2025, Valmet has reorganized into a cleaner structure: Valmet will change its financial reporting structure. In the new financial reporting structure, Valmet consists of two reportable segments: Biomaterial Solutions and Services, and Process Performance Solutions.
Process Performance Solutions delivers flow control technologies and automation systems ranging from individual measurements to full plant-wide solutions, complemented by lifecycle services. Biomaterial Solutions and Services serves global producers across the pulp, paper, packaging, tissue, and bioenergy industries, providing complete production lines and key process islands, and a full range of lifecycle services.
The 2024 results demonstrated both the opportunity and the challenge facing Valmet: We were pleased to see Valmet's orders received increase to a new record with a mix of roughly 60 percent stable business and 40 percent capital business. A strong order backlog of close to EUR 4.5 billion gives us a solid starting point going into 2025. Despite the increase in orders received, Valmet's net sales and Comparable EBITA did not grow in 2024 and we saw a clear decrease both in revenues and profitability in the Process Technologies segment.
October–December 2024: Orders received increased to a new record of close to EUR 2.5 billion. Orders received included a landmark order for a complete pulp mill with full-scope automation and flow control solutions to Brazil from Arauco, valued at over EUR 1 billion.
The Arauco order deserves special attention as it represents the full expression of Valmet's integrated strategy: The Board of Directors of Arauco have today approved an investment of a complete pulp mill and selected Valmet as the supplier for the project. Valmet's scope will be the delivery of complete pulp mill including also full-scope automation and flow control solutions to Arauco. The new pulp mill will be the world's largest single-phase pulp mill project with 3.5 million tonne per year pulp production capacity. The new mill is estimated to start-up in the second half of 2027. The pulp mill will be built in InocĂŞncia, in the state of Mato Grosso do Sul, Brazil.
The value of the order for Valmet is over EUR 1 billion. The delivery will have an important employment impact on Valmet and its subcontractors especially in Brazil, Finland, Sweden, Denmark, India and China.
Valmet will deliver the full production process from wood handling to ready pulp bales to produce hardwood pulp, as well as automation system and related flow control solutions for the whole mill including features from Valmet's Industrial Internet offering. Valmet's delivery scope includes the engineering, procurement, and construction, including civil construction and commissioning works at the site. Valmet's process technology delivery will include wood handling, cooking and fiber line, pulp drying and baling, non-condensable gases handling solution, evaporation, recovery boiler, biomass boiler, recausticizing, lime kiln, biomass dryer and gasifier. The automation delivery will include Valmet's latest distributed control system Valmet DNAe, advanced process controls, analyzers and online measurements as well as mill-wide optimization covering all process islands.
Leadership Transition
The leadership transition in 2024 marked the end of an era. Valmet's Board of Directors has accepted the resignation of Valmet's President and CEO Pasi Laine and related terms and conditions. Pasi Laine will continue as the President and CEO of Valmet until the end of September 2024. "During the last ten years we at Valmet have achieved a lot together. We have created a strong global organization with a forward-oriented culture that has enabled the company to grow both organically and through well-considered mergers and acquisitions, and consistently improve the company's profitability. The culture is based on our endeavor for renewal and continuous improvement, and on close collaboration within Valmet and with our global customers. Thanks to the committed work by all Valmet people, customers around the world value Valmet as their trusted partner with a unique offering and sustainable business practices."
Thomas Hinnerskov has started as Valmet's new President and CEO on 12 August 2024. Thomas Hinnerskov is a Danish citizen and was born in 1971. He joined Valmet from Mediq B.V. where he worked as the CEO since 2022.
Prior to his current position, Thomas Hinnerskov was the Executive Vice President at Kone responsible for South Europe, Middle East and Africa between 2021-2022 and Executive Vice President for Central Europe between 2016-2021. Earlier in his career Thomas Hinnerskov has had several leadership positions in ISS A/S between 2003-2016.
Thomas is an experienced leader who has lived in six countries on three continents. "I view myself as a global citizen," he says. "This cultural exposure has shaped me as a person and as a leader. I enjoy all parts of the world for both their complexity and grandeur. Everything has its pros and cons, and you can learn good things everywhere. I've lived in many different places, so it's also been wonderful to see my daughters embrace the diversity of life in the world. It has shaped them, too."
The Lead the Way Strategy
The new strategy is designed to create an accountable high-performance culture and accelerate the growth trajectory towards bolder targets with increased cost competitiveness. Valmet is holding its Capital Markets Day 2025 tomorrow June 5, 2025, presenting its new strategy and 2030 financial targets designed to deliver a step-up improvement in financial performance, growth, and ability to transform industries towards a regenerative tomorrow.
"Since stepping into the role of President and CEO ten months ago, I've had the opportunity to engage deeply with our customers, employees and investors around the world. These conversations reaffirmed that Valmet's 225-year legacy, strong customer relationships, and highly committed people form a powerful foundation for the company's next chapter. At the same time, it became clear that realizing our full potential requires a shift in mindset and culture – one that elevates performance, sharpens accountability, and unlocks new levels of value creation."
Valmet's new Strategy 'Lead the Way' is based on four strategic fundamentals: Customer success, Lifecycle commitment, Global competitiveness, and Accountability. These strategic fundamentals are being reinforced by Valmet's operating model renewal, announced on March 31, 2025, and effective since July 1, 2025. The new operating model allows us to operate with strong business areas close to customers, providing integrated expertise in services and technology with a lifecycle approach.
Valmet's new 2030 financial targets reflect a step change in ambition. Valmet's financial targets are the following: Organic net sales growth (CAGR) over the cycle of 5% (previously: over two times the market growth); Comparable EBITA margin of 15% (previously: 12–14%); Comparable return on capital employed before taxes of 20% (previously: at least 15%).
The new Global Supply organization targets EUR 100 million of cost efficiencies by optimizing procurement, logistics, and manufacturing activities across the full Biomaterial Solutions and Services segment. By 2030, the segment seeks to double the organic growth in biomaterial services to 8% and reach 14% Comparable EBITA margin.
As part of its strategic execution, Valmet has implemented a new operating model effective July 1, 2025, which is expected to deliver annual cost savings of approximately €80 million. This restructuring affects up to 1,150 roles globally, with full run-rate savings expected by early 2026. The company recorded €61 million in restructuring costs in Q2 2025 related to these changes.
Comparable Cash conversion ratio over the last twelve months was 92%, in line with our long‑term average. Our order backlog stood at EUR 4.5 billion at the end of the quarter, up from year‑end 2024 and providing good visibility into Q4/2025 and 2026.
The Investor Takeaway: The new leadership and "Lead the Way" strategy represent a deliberate shift toward higher performance expectations. The 15% EBITA margin target (up from 12-14%) and 20% ROCE target (up from 15%) signal that management believes there's meaningful profit potential to unlock through operational improvements and strategic focus.
VIII. Playbook: Business & Strategic Lessons
The Installed Base Moat
Valmet's most durable competitive advantage is its installed base. When you supply a pulp mill that costs hundreds of millions of dollars and operates for 40+ years, you create a multi-decade relationship. That mill needs spare parts, maintenance services, automation upgrades, and eventually modernization projects—all of which tend to flow to the original equipment supplier.
In the Capital Markets Day 2023, Valmet said its market share in pulp equipment is 30–35 percent, instead of the 40 percent communicated earlier. Valmet had lost share to Andritz, who were more willing to do big EPC projects in South America. Valmet's President and CEO Pasi Laine said on the call that when looking at year 2023, market share was 50/50.
This installed base economics explains why the 2015 automation acquisition and 2022 Neles merger were so strategically important. Each addition extends the range of products and services Valmet can offer to existing customers, deepening relationships and creating switching costs.
The Art of the Spinoff
Valmet's history offers a masterclass in corporate restructuring. The 2013 demerger from Metso unlocked value by creating focus. The subsequent acquisition of automation systems from Metso in 2015 showed that demergers can be followed by selective re-integration of complementary businesses. The Neles merger in 2022 reunited businesses with shared heritage under improved governance.
The common thread: corporate structures should serve strategy, not the other way around. When conglomerate structures create more confusion than synergy, demergers make sense. When focused companies can benefit from adjacent capabilities, targeted acquisitions make sense.
Cyclical Industry Mastery
Pulp and paper machinery is inherently cyclical. Customer investment decisions depend on end-market demand, commodity prices, financing conditions, and technology cycles. Valmet has learned to manage this cyclicality through several mechanisms:
- Services revenue provides ballast when capital equipment orders decline
- Automation systems create recurring revenue streams from installed base
- Geographic diversification means different regions cycle at different times
- Strong balance sheet allows investment through downturns
Competitive Positioning
Valmet's main competitors in pulp and paper include Andritz AG and Voith GmbH & Co. KGaA. Andritz, based in Austria, offers a broad portfolio similar to Valmet, including plants, equipment, and services for the pulp and paper industry, hydropower, and solid/liquid separation. They compete through their extensive global reach and diverse offerings, often bidding on large-scale projects. Voith, a German family-owned company, is another significant player, particularly strong in paper machine technology and hydropower. Voith's reputation for engineering excellence and innovation in paper production presents a direct challenge to Valmet's market share.
Porter's Five Forces Analysis:
Supplier Power: Moderate. Valmet sources components globally and has significant procurement scale.
Buyer Power: Moderate to High. Customers are large pulp and paper companies with significant bargaining power, but high switching costs for installed base services reduce buyer leverage over time.
Threat of New Entrants: Low. Capital requirements, technical expertise, and installed base relationships create high barriers to entry.
Threat of Substitutes: Low in core business (mills need machinery to produce pulp and paper), but digital technologies could substitute for some services.
Competitive Rivalry: High. Andritz and Voith are formidable global competitors with significant capabilities.
Hamilton Helmer's 7 Powers Analysis:
Scale Economies: Moderate. Fixed costs in R&D and global service networks create some scale advantages.
Network Effects: Limited in traditional business, but growing in automation/digital services.
Counter-Positioning: Valmet's focused strategy may be difficult for diversified competitors like Andritz to replicate without similar restructuring.
Switching Costs: High in automation and services due to installed base relationships and proprietary systems.
Branding: Strong in core markets due to long history and engineering reputation.
Cornered Resource: Engineering talent in Finland and deep process know-how.
Process Power: Moderate. Manufacturing and service delivery processes are well-developed.
Key Performance Indicators to Track
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Services revenue as % of total sales — Higher services mix indicates stronger installed base monetization and business stability. Target: continued growth toward 40%+ of revenues.
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Comparable EBITA margin — The new 15% target represents a step change from historical 10-12% levels. Progress toward this target will indicate whether the "Lead the Way" strategy is working.
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Order backlog and book-to-bill ratio — Given long project cycles, order backlog provides forward visibility. A book-to-bill ratio above 1.0 indicates growing demand.
IX. Risks and Opportunities
Bull Case
Bioeconomy Tailwinds: The global transition toward sustainable materials creates structural demand for pulp, paper-based packaging, and biomaterials—all areas where Valmet provides critical process technology.
Packaging Growth: As e-commerce continues expanding globally and consumers shift away from plastics, demand for sustainable paper-based packaging should grow consistently.
Services Expansion: Valmet's installed base of automation systems and process technology creates a large addressable market for recurring services revenue. The target of doubling organic services growth to 8% would significantly improve business quality.
Margin Expansion: The new €80 million cost savings program combined with restructuring and operating model improvements could drive meaningful margin expansion toward the 15% EBITA target.
Arauco Execution: Successful delivery of the €1+ billion Arauco project would demonstrate Valmet's full-scope capabilities and could generate significant reference value for future large projects.
Bear Case
Cyclical Exposure: Despite services diversification, Valmet remains exposed to capital equipment cycles in the pulp and paper industry. A global recession or overcapacity in key end markets could pressure order intake significantly.
Competition from Andritz: The Austrian competitor has shown willingness to take on large EPC projects that Valmet has historically avoided. Continued share losses in pulp equipment would undermine Valmet's market position.
Technology Disruption: While unlikely to eliminate demand for pulp and paper machinery, digital disruption could erode value in some services businesses, and alternative materials could eventually reduce demand for paper-based products.
Execution Risk: The "Lead the Way" strategy involves significant organizational change and restructuring. Failure to execute the €80 million savings target or achieve the new financial targets could disappoint investors who bought into the ambitious new strategy.
Emerging Market Volatility: With Brazil becoming increasingly important (Arauco), Valmet faces currency risk, political risk, and project execution risk in emerging markets.
Myth vs. Reality
Myth: Pulp and paper is a dying industry. Reality: While newsprint and graphic paper markets have declined, packaging paper, tissue, and specialty papers continue growing. Global demand for sustainable packaging materials is a structural tailwind.
Myth: Valmet is just a machinery company. Reality: Services and automation now represent a substantial portion of revenue, creating more stable, recurring income streams with higher margins than capital equipment.
Myth: The 225-year history is just marketing. Reality: While the corporate entity "Valmet" dates to 1951, many of its constituent businesses (Tamfelt from 1797, the Suomenlinna shipyard from the 1750s, Götaverken from 1841) do have roots extending back over two centuries.
X. Conclusion: The Nordic Phoenix Rises Again
Valmet's story is one of remarkable transformation and resilience. From a fortress shipyard in the 1750s to a war reparations manufacturer in the 1940s, from a diversified state conglomerate to a focused global technology leader—the company has reinvented itself repeatedly while maintaining its engineering DNA.
The 2013 rebirth as an independent company marked the beginning of a decade of value creation under Pasi Laine's leadership. The strategic additions of automation (2015) and flow control (2022) filled critical gaps in the offering. The successful defense against Alfa Laval demonstrated M&A sophistication.
Now, under Thomas Hinnerskov's leadership and the "Lead the Way" strategy, Valmet is attempting another transformation: from a well-managed industrial company to a high-performance organization with best-in-class margins and returns on capital.
"Valmet has an amazing 225-year legacy of innovation, with strong customer relationships and highly committed people, which forms a powerful foundation for the company's next chapter. At the same time, realizing our full potential requires a shift in mindset and culture – one that elevates performance, sharpens accountability, and unlocks new levels of value creation."
The company's positioning for the bioeconomy transition—converting renewable resources into sustainable results—aligns with some of the most powerful megatrends of our time. The question isn't whether demand for sustainable packaging, tissue, and biomaterials will grow; it's whether Valmet can capture that growth while improving its profitability.
For investors, Valmet presents an intriguing combination: a 225-year track record of adaptation, dominant market positions in niche industrial technologies, meaningful recurring revenue from services and automation, and a management team committed to margin improvement. The risks—cyclicality, competition, execution—are real but understood.
Perhaps the most fitting description of Valmet comes from its Finnish heritage. The company's name derives from "Valtion Metallitehtaat"—State Metalworks—a reminder of its origins in post-war reconstruction. But "Metso," the name adopted during the merger era, means wood grouse—a bird that thrives in Finnish forests, symbolic of the company's ties to nature and the environment.
Today's Valmet draws on both legacies: the industrial capability forged under pressure in the 1940s and 1950s, and the sustainable technology focus that positions it for the bioeconomy future. Like the phoenix of myth, it has been reborn multiple times—always emerging stronger, more focused, and better positioned for the decades ahead.
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