Earnings Transcript for VALMT.HE - Q1 Fiscal Year 2023

Pekka Rouhiainen: Good afternoon, ladies and gentlemen, and welcome to Valmet's Q1 2023 Result Publication and Webcast. My name is Pekka Rouhiainen, I'm the Head of Investor Relations here at Valmet. Valmet's Q1 order intake was strong and also profitability was at a good level, and the result will be presented today by President and CEO, Pasi Laine; as well as CFO, Katri Hokkanen. And after the presentation, you will have the chance to ask questions over the phone lines. So, Pasi, please go ahead.

Pasi Laine: Thank you, Pekka. Good afternoon. So like Pekka said, orders received increased to €1.5 billion and comparable EBITA to €133 million in the first quarter. So, a strong quarter. First, I'll go through quarter one, then some numbers of development of segments and business lines, then Katri will go through the financial development, and I'll come to summarize the guidance and short-term market outlook. First, the first quarter in the brief. So, like I said, orders received was €1.55 billion, net sales increased to €1.32 billion. Our backlog is big, so almost €4.6 billion, comparable EBITA increased to €133 million and margin was 10.1%, and gearing in the end of the period was 15%. If we hear the numbers again, but then if we look the net sales by segment, so this time about 48% of the revenue came from Process Technologies, Services contributed to 29% and Automation to 23%. And net sales by area, it's quite traditional, so Europe almost 40%, North America a little bit over 23% and the rest of the areas about the same size from 12% to 14%. In the end of the period, we employed almost 17,800 people. Here is the trend of our orders received and it looks of course nice. First time, we are close – in 12 months curve, we are close to €5.5 billion and there has been steady growth from the beginning of Valmet with some drop downs. But all-in-all the trend has been quite linear actually from this €3 billion level to €5.5 billion level. Geographically, Europe was traditional, 4%. North America, beginning of the year a little bit stronger than an average 28%. South America, China and Asia Pacific, there is normal variation in a quarter between the regions, but nothing extraordinary here in the area view either. And good order intake trend and nice trend continues. Then, like we have been saying from the beginning that we want to grow services, now we were one – order intake was about €1 billion and now our LTM is almost €1.9 billion. That's of course something we are proud of. And at the same time, we have been developing our Automation segment. So first nothing and then we bought Automation Systems, and now we merged with Neles, and now we have first time full year and the order intake in the Automation segment for one year, last 12 months. It's a little bit over €1.3 billion. And this results now then the fact that our stable business order intake during last 12 months has been about €3.2 billion. We are of course very happy with this development, which has been a strategic target for Valmet for many years. Then backlog, like I said, almost €4.6 billion. 60% is related to Process Technologies, 25% to Services and 15% to Automation. We are saying the order backlog is now €192 million higher than end of last year. And we are saying that about 65% of the backlog is expected to realize as net sales during 2023. Last year, the same percentage was 60%. So we see also the impact of Flow Controls in this number. So, strong backlog in all the businesses. Then some words about the segments and business lines. First, Services, like I said, the LTM is now almost €1.9 billion and the quarter one was strong. Order intake was €577 million. And there are many reasons for that. Of course, we have a good business activity. Inflation has been contributing to that, and price increases. And then we had also one large single order, which was close to €30 million. So that contributed as well. But even without that large single order, activity in services has been good. Net sales grew as well, ended up to almost €390 million. Katri will go through the quarterly numbers more, but I can tell here that LTM now is 16% in our EBITA percentage so – and euro wise, the LTM is now €269 million. So, good bounce back in service profitability in the first quarter and Katri will tell more about that later on. Automation segment, first and the full year in LTM numbers, so it's one year since we merged with Neles. And now the order intake for the last 12 months is little bit over €1.3 billion. In first quarter, order intake was €391 million, which was, of course, good level. Sales wise, LTM about – a little bit more than €1.2 billion and net sales wise quarter one, €304 million. And profitability now for last 12 months is 18.2%. So, we are happy with the order intake, we are happy with the net sales, and we are also happy with the profitability of the Automation segment. Flow Controls has been now for one year with us, and the LTM is now €793 million, so almost €800 million. And here, you see on the graph that it has been going back to the growth mode it had until 2019. Then there was the COVID drop, and now we are back to the same line of growth which there was earlier. So good development in order intake in Flow Controls. Quarter one was strong, all in all, €217 million orders in first quarter. Net sales has been growing as well. So net sales was €188 million. So we are happy with the Flow Controls performance and the integration is going, like we have been saying well, and we are also in process to achieve the synergy targets what we have publicly said. So good development in Flow Controls. In Automation Systems, LTM is now €533 million. The first quarter was strong as well, €175 million, so almost €30 million higher than last year, and net sales has been improving as well. So last year, €88 million, this year, 113 – €116 million and LTM is €517 million. So we are also happy with the development in our Automation Systems business. Process Technologies, which is the combination of pulp, and energy and paper, order intake was €584 million, so less than a year ago. So from the peak year when we had €2.8 billion, we are back in LTM at earlier year’s level, so to about €2.2 billion. So this is quite normal order intake level what we have had over the last six years, or four or five years, except one year. So normal activity. Net sales wise, we are now at €2.5 billion level and ended up in quarter one having €628 million as a net sales. Profitability is – LTM is now 5.4%. First quarter was not strong, and Katri will go through that number. But LTM is now 5.4%. And the margin is impacted like we have earlier been saying by selected Pulp and Energy projects. So there is no change in that statement. So it's still Pulp and Energy and selected projects. Pulp and Energy, order intake, €212 million, down compared to last year, but there is always quarterly variation in order intake. And LTM is now a little bit about €957 million. So lower activity than the last two years but higher than three years ago. So, one could say that the activity has been a little bit down compared to a normal year on LTM basis. Net sales wise, we ended up with net sales €286 million, and there is growth of about €10 million compared to last year. And like I earlier said, we have challenges with selected Pulp and Energy projects. In Paper business line, orders received was €372 million, down compared to last year, but €372 million is a very good level for one quarter in Paper machines. LTM is now a little bit over €1.2 billion. So €200 million above the years before and then, of course, down compared to extraordinary year 2021. So, one could say that we are at a normal order intake level currently compared to the previous years. Net sales wise, we ended up at €342 million and LTM is €1.4 billion. So it means that currently we can meet our backlog, which then means that our delivery times are getting more reasonable. So there is nothing to worry about it. I think it's more telling that we are getting back to more normal situation. And it's also telling that our organization have done extremely good work with the fire and – which was Rautpohja a year ago in May and they have now been able to ramp up the capacity even if we had had all the challenges with the fire at Rautpohja factory. So well done by paper business line. Good. Now I'll let Katri to continue.

Katri Hokkanen: Thank you, Pasi. And hello, everybody, on my behalf as well. I'm really happy to be here today to present the results. I will start my presentation from the traditional key figures slide. Order intake was €1.55 billion, as Pasi said earlier. So it was 17% higher than one year ago. Order backlog is strong, €4.6 billion that is roughly on the same level than what we had last year. Net sales was €1.3 billion. There is 38% increase compared to last year. And our comparable EBITA was €133 million, or 10.1%. And there was 1.8 percentage points increase compared to last year. Our adjusted earnings per share for the quarter was €0.55, and I will come back to the other numbers a little bit later in my presentation. Then when we look at the segment numbers, starting from the order intake; services was €577 million that was 28% higher than a year ago. And this was actually the record quarter for Services and for Services business units. And Pasi already mentioned that we had this one single order worth of €30 million booked now in Q1. Automation was €391 million, and there we had €217 million of Flow Control and the rest was then Automation Systems. And it's good to mention that also in Automation Systems, the orders grew 19% compared to last year. So a very nice start there as well. Process Technologies was €584 million, so that was 20% lower than a year ago, and all-in-all, we were at €1.55 billion asset and 17% higher. Moving on to the net sales. Actually, all the segments net sales increased compared to last year. Services was €389 million and that was 23% higher than a year ago. Automation was €304 million, and there we didn't have Flow Control last year, so that's good to understand from the numbers. And then on the Process Technologies that net sales was €628 million, so that was 13% higher. So we were clearly over €1 billion in terms of net sales and 38% higher than a year ago. A few words also about the comparable EBITA and starting from Services; Service was €63 million and more than doubled compared to last year. And the profitability was 16.1% and that was 6.5 percentage points higher than the slow Q1 last year. Automation was €50 million, and 16.3%. So there was also a 4.2 percentage point’s improvement compared to last year. And Process Technologies was €30 million and down to 4.7%, and all-in-all we were at 10.1% as said earlier, and this was actually the first time ever that our Q1 was above 10%. So one milestone we've reached here again. We have a little bit changed this slide, so this now includes the comparable gross profit and SG&A. We wanted to increase the transparency and hope that you will find this useful. And I will start from the comparable gross profit. That was 25% for the Q1 and that was 2 percentage points higher than last year and their stable business was a little bit over half of the net sales. And when we look at the last 12 months we are close to €1.4 billion and 25%. Then moving to the SG&A. When we look at the last 12 months, SG&A is a little bit over €900 million and that has increased compared to last year, and the increase is mainly coming from Flow Control. So in the last 12 months number, we now have one full year of Flow Control. Then when we look at our comparable EBITA margin development, our net sales, when we look at last 12 months was at the level of €5.4 billion. Out of that, €2.5 billion is related to capital business and €2.9 billion to stable business. And comparable EBITA is €587 million or 10.8%. So we have improved compared to year-end, but we have not yet reached our previous record of 10.9%, so the work continues. And our target is unchanged. We want to be between 12% to 14% in comparable EBITA margin. Cash flow for the quarter was €208 million, and when we look at the last 12 months we are at €225 million. And net working capital was minus €413 million, and when you look at the chart we have now eliminated the liability related to dividend out and the net working capital there is minus €174 million, and that is minus 3% of rolling 12 months order intake. So it improved compared to year end. Net debt at the end of Q1 was €345 million, and gearing was 15%. And our net debt-to-EBITDA ratio decreased to 0.49. Capital employed was €3.1 billion, and comparable return on capital employed was 19% at the end of Q1. And earnings per share, sorry, adjusted earnings per share last 12 months we are at €2.50. That was my part. So I will give the floor back to Pasi.

Pasi Laine: So, guidance and short-term market outlook. So we keep the guidance the same as it has been earlier. So we estimate net sales will increase comparing with 2022 and comparable EBITA will increase in 2023 as well when we compare it with the year 2022. Then short-term market outlook, and like we have been saying it's roughly 50% of the customer activity and 50% of the capacity utilization. And in Services, we have good order intake. We have had good order intake a long time, and we still have a good market activity. So we continue to keep good as a market outlook. In Automation, the same story. So order intake has been good, and market activity is still good and Flow Control is the same, so good market active – order intake and good market activity as well. In Pulp, we have units where we have a good workload situation then. We have one unit where the workload situation is not good, and that's why we say good/satisfactory. In Energy, last year, order intake was record and market activity continues to be good as well. So we continue to have the short-term market outlook as good, board and paper, the same, same situation, good workload and good market activity. And in tissue, we still keep the satisfactory even if there have been more activity, but still workload is not as good as it could be. And that's why we still keep tissue as satisfactory. So no change compared to last quarter.

Pekka Rouhiainen: All right. Thanks, Pasi and Katri, for the presentation, and we will now move to the Q&A session. So I will ask Pasi and Katri to move here behind the tables. And this is a virtual event, so we will be only taking questions over the phone lines. So operator, I hand now over to you.

Operator: [Operator Instructions] The next question comes from Antti Kansanen from SEB. Please go ahead.

Antti Kansanen: Hi, guys. It's Antti from SEB. Thanks for taking my questions. Two of them. Firstly, on the process technology side, and especially on paper division and especially on the board side. I mean, you have enjoyed a very good demand over there in the recent couple of years. And now, obviously, we are seeing a much more adverse news flow coming in. So could you talk a little bit about the order pipeline and your discussion with clients that you have had during the quarter? Are you seeing any hesitancy on investing? And what do you think about demand in terms of expansion of capacity, replacing older machines and so forth?

Pasi Laine: So like I said earlier as well that our customers are planning their investment for coming 10 to 15 to 20 years and we haven't seen any hesitation generally in the decision-making by our customers. Then there are some customers who are now maybe hesitating their decision-making. I'm not sure whether that's because of the demand or is it so that people have to adjust to the inflated cost level. So a couple of the customers are maybe hesitating. But generally, I haven't seen slowness in the customer negotiation activity.

Antti Kansanen: And then the second question is on services and I mean great growth and margins during the quarter. So where did you kind of see the biggest activity during the quarter? Was it kind of customers pulling forward maintenance action doing modernization projects to bring costs down? And maybe a second question then on the services margin. I mean, it was very strong considering the seasonality. So what should we expect going into further this year? I'm assuming you're going to see a little bit higher labor inflation hitting that division. So how are you prepared in terms of pricing?

Pasi Laine: So we have seen customer activity, especially in Pulp and Energy side where the market for mill improvement has been active. So like now it's – I'm answering also at the same time to another question. So if there is a slowdown, then we would see that in our consumable business. But then at the same time, it can be an opportunity for customers to make some refurbishment projects. And then we would see that actually in increased level of the mill improvement type of projects and – but currently, the market activity in almost all the things have been actually at a good level. Then on the profitability and labor rates, Katri can answer.

Katri Hokkanen: Yes. So, of course, we have been discussing about this topic for quite some time. And we knew also that this wage inflation is coming. So we have started to take that into account. And, of course, you can see also in the profitability that we have been able to increase the prices, but that will continue. So, of course, this year, we expect to see probably some 5% inflation in the salaries.

Antti Kansanen: All right, very clear. Thanks so much.

Operator: The next question comes from Mikael Doepel from Nordea. Please go ahead.

Mikael Doepel: Yes, thanks. A couple of questions. And coming back to the Service business, first of all. So I wonder if you could talk a bit about the – I mean, about the market dynamics compared to the paper companies, I mean, you mentioned that the focus might shift a bit if things go weaker, which might impact the mix of your Service business. But if I hear you correctly, you haven't seen anything of that yet. So I was wondering, I mean, given the fact that some of your biggest customers have actually gone out and said that things are looking pretty weak across the board, it seems as if this hasn't really had an impact on you. Maybe you could just talk a bit about those market dynamics.

Pasi Laine: No. We have been, of course, reading as well that some of the customers are saying that there's less activity. And then, of course, we work globally. So then one should understand that we, of course, are following globally the market activity. It's clear that the market activity in China hasn't been as strong as it used to be or it has been as strong, but it hasn't been growing. And let's see when the COVID impact from the Chinese market is over. So there could be a positive thing. But at least for us the big areas like Europe and North America have been active and we haven't yet seen any slowdown in the Service sales activity. And like I said, then if there are shutdowns coming then it can – it will impact the consumable business like paper machine, clothing, but then it can be an opportunity for mill improvement type project. But up to now, we haven't seen it yet in our market activity, the slowdown.

Mikael Doepel: Okay. Well, that's clear and just a follow-up on that then. I mean, in the past few years, you had done quite a good job in improving your market share in the Service business. And I'm wondering about Q1 and the outlook you have for the next six months, do you assume or is it fair to assume that you have continued on that track? So I guess one reason why you are doing quite well has to do with the fact that you're also gaining market share. Is that a fair assessment in your view?

Pasi Laine: One quarter is too short time to assess that one. But, of course, we continue to grow and we – our target is to grow twice the market size. So market growth – so increased market share, but one quarter is too short time. So we don't have the measurement with that accuracy of our market share.

Mikael Doepel: Okay, great. Thank you very much.

Operator: The next question comes from Sindre Sorbye from Arctic Asset Management. Please go ahead.

Sindre Sorbye: Hi. Thank you for taking my questions. Today I have two questions. First, on SG&A. I mean, in light of sharp increase in turnover, the SG&A ratio to sales appears to be somewhat on the high side. Admittedly, the increase from the fourth quarter is – or is less than it usually is in the third quarter. But I think Katri alluded to the fact, or she said that Flow Control was kind of an explanation there. Is it so that the SG&A share is higher in Flow Control? And should there be scope for SG&A as a percent of sales to come further down in the coming quarters?

Katri Hokkanen: Okay, I can start then you can. Okay, so overall the SG&A, as we said, was at the level of roughly €900 million. And there the increase compared to last year’s, it was roughly €830 million. So that was that €75 million increase, was maybe 70% related to Flow Control. So there is also increase in personnel-related costs and some increase in the travel expenses. Do you want to add something?

Pasi Laine: Yes. Flow Controls is more SG&A heavy business than our tradition.

Katri Hokkanen: Yes.

Pasi Laine: So that's why you see that there is actually increase in the SG&A percentage compared to net sales, because Flow Control has an impact on that.

Sindre Sorbye: But is it also so that, assuming that your strong order intake within Services means that Services will push this ratio or have an upward push on this ratio? Because I can imagine that travel expenses, for instance, are heavier in Services and in the other businesses?

Katri Hokkanen: We didn't quite catch the question, so there is something on the line, so.

Pasi Laine: So, if I guess that – but in Automation and Flow Control and Services, the SG&A content is higher than in capital business. So if you want to grow Flow Controls or stable business means Automation segment and Services segment, then you have to increase SG&A. And then, SG&A is less heavy in capital side where actually the SG&A is quite constant, and there is quite a big variation in the order intake. And this variation is then changing the SG&A percentage compared to order intake. But I don't know if I guessed your question at all correctly.

Sindre Sorbye: That’s very well guessed, actually, that was what I asked about. My second question is related to the Pulp and Energy segment. I think you said that Pulp orders were actually up while Energy orders were down. At the same time, you have a good outlook on the Energy side and that factor in the Pulp side. With this kind of, let's say, just fluctuation do you expect to come back to the strong energy order intake in the coming quarters?

Pasi Laine: In Capital business, the quarter is a little bit difficult. So, sometimes you have more orders booked in one quarter than the other one. So, we are saying here that it has decreased compared to last year, that's true. And in Pulp increase, that's true as well. But energy by order intake has been strong and the pipeline is strong as well, but there is always quarterly variation. And then Pulp has been better than last year, and let's see how it continues. We are saying that good/satisfactory. So that's our current understanding of market activity in Pulp side.

Sindre Sorbye: Okay thanks. Thank you.

Operator: The next question comes from Panu Laitinmaki from Danske Bank. Please go ahead.

Panu Laitinmaki: Thank you. I have two questions. Firstly, on the margins in the Process Technologies, they were down from Q1 – sorry, from Q4 last year and quite a bit from Q1. So what do you expect to happen there? How long do these selected propylene projects continue? And how should we kind of think about this in the coming quarters and years?

Pasi Laine: This is a difficult one. Then Katri answers.

Katri Hokkanen: Thank you. So it is – okay the EBITDA percentage for the Process Technologies was down to 4.7%. So at year-end, we were at 5.6%. And maybe one thing to note this is that we had a little bit lower net sales now, some €40 million. And typically, it's normal that there is some variation between the quarters in Process Technologies. But I repeat what Pasi said earlier that we have those same issues that we have had in the past, and our target is to improve as soon as possible.

Panu Laitinmaki: Can you comment when do these projects end? Is it like this year, or do they carry on until next year?

Pasi Laine: We haven't been saying that, but we have been telling when the challenges started. So one could assume that a little bit less challenges in beginning of next year than now.

Panu Laitinmaki: Okay. Then secondly, on the Services, on the very good order intake growth, I still struggle to understand how much was price and how much was then like the big order or project that you sold, that you mentioned? I mean, how much is something that's exceptional? Or what do you think is the kind of run rate going forward?

Katri Hokkanen: Well, I can start and you can continue. So the orders received increased 28% in Services and we have evaluated that the inflation impact is roughly what we have said also in the past, some 6%. And then we have this roughly €30 million order what we mentioned earlier, so that then is 7% of the total. So, rest is more or less organic growth and maybe good to mention that Q1 is usually quite strong seasonally.

Panu Laitinmaki: Okay, that’s clear. Thank you. Can I just squeeze in one on Services? So, I mean, the margin increased quite a bit, and it was clearly above what it was in Q1 2021, which was probably not impacted by inflation. So where does this increase come from? Is it just like higher scale? Or what have you done better than you did two years ago?

Katri Hokkanen: I will start again. So of course, the volume explains it. So, net sales was higher than a year ago. And we have openly said it many times that we were slow with the price increases last year. So, we were not happy with the profitability Q1 2022. And of course, now 16% is – 16.1% is good achievement.

Panu Laitinmaki: Is this like a new normal? So, if you have like seasonally lower margin in Q1 and then you should have higher than this going forward? Or how should we think about this?

Pasi Laine: No, we are not commenting segment profitability estimate.

Panu Laitinmaki: All right, thanks.

Operator: The next question comes from Sven Weier from UBS. Please go ahead.

Sven Weier: Yes, good afternoon. Thanks for taking my two questions. The first one is on the backlog, you currently disclosed 65% due remainder of the year. Last year, it was 60%. Can you just remind us what the incremental backlog from Neles was? Because I guess the Q1 number last year did not include Neles here? That's my first one. Thank you.

Pasi Laine: Q1 didn't include Neles, and then thereafter, we haven't been actually disclosing the Flow Controls backlog separately.

Sven Weier: Okay, fair enough.

Pasi Laine: But Katri might be able to help you with a even better answer than mine.

Katri Hokkanen: No, I don't know if it's even better.

Pasi Laine: Which was nothing. Yes, good.

Katri Hokkanen: But maybe it's good too, okay. Strong backlog, as we said, €4.6 billion and some 40% is related to stable business. So that was also in Pasi's presentation. So the amount of stable has increased compared to last year.

Sven Weier: Okay, thank you. And the other question I had just – I mean, we discussed already the impact of the turmoil, lower pulp prices, profit warnings in the sector. I guess a bit too early to see an impact of that yet, but what about the impact of high interest rates? I mean, that's been going on for a while. I guess some clients might have still pulled forward project decisions, maybe still – especially in Europe, maybe to benefit from still relatively low rates. I mean, is that an important part of the discussion or do you feel that in this long-term thinking that you mentioned, whether the interest rates are 1%, 2% higher or not also doesn't really move the needle that much?

Pasi Laine: With the customers I have been talking over the years – actually over last years, people have more saying that there should be a interest that all the products should have a price, money as well. So the ones with whom we deal, they are used to interest rates, and so it's exactly like you said that it's not moving the needle.

Sven Weier: And I mean, Pasi, I mean, on this pulp price weakness that we see demand weakness, I guess, we've all been looking at this long enough to have seen these fluctuations in the past, right, sometimes longer, sometimes shorter. What's your experience from the back days? I mean, in the last, let's say, five to 10 years, did you feel that this had an impact? Or did you feel the clients have always kind of looked through these fluctuations?

Pasi Laine: They have looked through to the fluctuation. All the ones who are building pulp, they have been over decades in the business and they know that sometimes the price is better, sometimes less and they base the investment decision on demand and then on the cost, what they will achieve with the invested mill. So the ones who have highest cost per ton will have challenges and the ones who have newer, more effective mill, they have lesser challenge in times when the price goes down. So we haven't seen any impact of that price having any impact to our customer decisions yet.

Sven Weier: Okay. Pasi and Katri thank you very much.

Pasi Laine: Thank you.

Operator: The next question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead.

Johan Eliason: Yes. Hello, and thank you for taking my question. It’s Johan at Kepler Cheuvreux. I was curious about your comment on the paper order intake. You say now that your delivery times have normalized. What are they today? And then, I guess it's different if it's a board or fine paper or a tissue machine. Can you give some indication on when could I expect to get a new machine delivery if I place the order today?

Pasi Laine: So tissue machines has always shorter delivery time, and there we have capacity. But now when the backlog was at the highest our promise delivery times started to be three years for the board machine. And board machines and paper machines are done with the same organization, so there the delivery time is the same and now it's getting shorter.

Johan Eliason: And that basically implies, with the backlog you have, you can achieve this current turnover for another two years, if I understand you correctly?

Pasi Laine: I'm not commenting the net sales for current years, but we have been increasing our capacity and then, of course last year's. We had still challenges with COVID in China, so there were still lockdowns and one easily forgets that last year was a challenging one. So we had COVID and we had logistic challenges. And then on top of that, we had fire. So now we start to be out of those ones and then our capacity is under normal utilization currently.

Johan Eliason: Okay. Good. And on tissue, I guess we should start to see some action on new orders there. I mean, there's partly an effect from lower pulp prices and the overall pressure on their margins. If we place tissue orders, we could get those within a year or how long is the lead time there?

Pasi Laine: It depends a little bit on the scope, but one-year is a good guess.

Johan Eliason: And how big, I mean, tissue has always been a smaller part for you. But what sort of size are we talking about over the cycle in terms of revenue or order fluctuation for tissue? How big can it be in a peak year?

Pasi Laine: So if I remember correctly, the peak year in order intake was over €350 million some years back and let's say a normal year is between €200 million and €250 million.

Johan Eliason: Okay. Excellent. And those were all questions I had. Thank you very much.

Pasi Laine: Thank you, Johan.

Operator: The next question comes from Antti Kansanen from SEB. Please go ahead.

Antti Kansanen: Yes. Hi. Thanks for taking my follow-ups both on services. First is kind of, Pasi, coming back to the seasonality. If you look at Q1 sales, I mean, that tends to be weaker than the other quarters. Was there anything extraordinary in this quarter that would have resulted in higher sales? Or was it just business as usual?

Pasi Laine: Just business as usual.

Katri Hokkanen: Business as usual, yes.

Antti Kansanen: Okay. That's very clear. And then perhaps a more broader question then; I mean, you mentioned that if there's a downturn and more downtime that could benefit the demand for mill improvements. But how has it been in your business in the past couple of years? I mean in some industries, we're seeing clients investing more into installed base as the lead times of new equipment have been long, and I guess they have been long in your industry as well. Then again, your clients have been running with very high capacity utilization. So has there actually been a pent-up? So what's the dynamic being in that business the past couple of years?

Pasi Laine: Yes. So we have had very good activity in the new equipment side as well. So then that's the difference against the industries you mentioned. So we have had all the time good new equipment market. Then on the rebuilds normal market, then improvements we have had them as well. So let's see if the improvement market is getting more active now if there are more and more shutdown possibility. So that could be my answer today.

Antti Kansanen: Yes. I mean your lead times have been very long. I just thought that maybe some customer cases, they have been too long and they have then decided on, perhaps spend more money on their existing installments which then you have seen on services demand, but this hasn't played at least a major role?

Pasi Laine: No. They are so different volumes that if you improve old machine in 5%, it's totally different than the volumes what you get from new machine, which is twice the size of the old machine. So they are not in a way comparable actions.

Antti Kansanen: But it will become relevant on those guys who are higher on the cost curve now? If we see kind of a lower product prices, then they will start to invest and bring their production cost down?

Pasi Laine: Yes.

Antti Kansanen: Okay. Thanks.

Pasi Laine: Thank you.

Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Pekka Rouhiainen: Thank you for the good Q&A session. Thanks, Pasi and Katri for the presentations. And this will now then start to conclude the event. So half year financial review will be published on the 26th of July. So see you all then at least, but until then have a nice spring.