CMD 2015: Increasing profitability through Must-Win implementation
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The document outlines Valmet's strategy for increasing profitability through must-win implementation, emphasizing customer excellence, technology leadership, and process excellence. Achievements in 2014 include significant growth in service agreements and product innovations, while initiatives for 2015 focus on cost competitiveness, health and safety, and enhancing global capabilities. The overall goal is to improve operational performance and maintain strong customer relationships in the pulp, paper, and energy industries.
CMD 2015: Increasing profitability through Must-Win implementation
- 1. Increasing profitability through Must-Win implementation Kari Saarinen, Head of Strategy and Operational Development Valmet Capital Markets Day March 19, 2015
- 2. Agenda Capital Markets Day 2015 March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 20152 1 Strategy implementation and Must-Wins 2 Must-Win achievements 2014 and way forward 3 Summary
- 4. Valmet’s Way Forward 4 Our Must-Wins Customer excellence Leader in technology and innovation Excellence in processes Winning team Our Vision To become the global champion in serving our customers Our Strategy Valmet develops and supplies competitive technology and services to the pulp, paper and energy industries. We are committed to moving our customers’ performance forward. Our Mission Converting renewable resources into sustainable results March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Must-Wins are our way to implement our strategy and cascade it to operational level actions throughout the organization
- 5. Valmet’s Must-Win implementation 5 • Nurture shared values • Drive high performance • Continue globalization of our capabilities • Strengthen our presence close to customers and growth markets • Strengthen Key Account Management to enhance growth at the customer • Drive services growth through long-term agreements and expanded customer base • Improve product cost competitiveness to increase gross profit • Drive renewal through biotechnology solutions and new offering • Implement Lean to reduce quality costs and lead times • Save in procurement • Improve health and safety • Sales and project management process to improve product margin • Continue to improve cost competitiveness Must-Win implementation objectives for 2015Must-Wins Customer excellence Leader in technology and innovation Excellence in processes Customer excellence Winning team March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015
- 6. Must-Win achievements 2014 and way forward
- 7. Services agreement based sales (indexed) Customer excellence 7 Development in 2014 • Major improvement in agreement based sales • Utilization of CRM1 more structured and improved • Orders received from key corporations increased • One third of new hires in emerging markets, in Q4/2014 55% new hires in emerging markets Customer excellence >30% growth in 2 years in services agreement volume March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Good development at agreement based sales Strengthen our presence close to customers and growth markets • Strengthen our presence in countries with high pulp, energy and paper production and low presence Key Account Management • Focus on closing projects faster, improving market coverage and hit ratio • Utilize CRM1 100% both at customer plans and sales management Drive services growth • Launch new service concepts • New service centers – Brazil and Indonesia Further improvements in 2015 100 120 131 201420132012 1) CRM = Customer Relationship Management
- 8. Leader in technology and innovation 8 Development in 2014 • Orders received of new products increased almost 50% • Commercialization of new offering and further development in lignin separation, pre-hydrolysis and gasification of biomass • Modularization of paper machine proceeding as planned Leader in technology and innovation March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Good development in increasing sales of new products Improve product cost competitiveness to increase gross profit • Multiple design and cost improvement initiatives in each business line - 40% of Pulp and Energy volume under specific cost competitiveness programs Drive renewal through biotechnology solutions and new offering • All business lines bringing new products to the market, >20% of sales from new offering • Focus R&D on Services. Organization created and R&D programs kicked off Further improvements in 2015 2014 achievements • 4 OCM1 and 1 NTT2 machines sold • 4 ‘new biotechnologies’ projects sold • 48 new services products launched • 80 new products launched in total 1) OCM = OptiConcept M paper and board machine 2) NTT = Advantage NTT tissue machine
- 9. Quality costs (EUR million and % of net sales) Implement Lean to reduce quality costs and lead times 9 Development in 2014 • Positive trend, quality costs within target range • Systematic monthly reporting and follow-up in place • Quality now on all management agendas and incentives • Active communication and awareness building Excellence in Processes 2012 2013 2014 By the end of 2016, quality costs reduced by 50% compared to 2012 baseline March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Quality costs were reduced in 2014, and further reduction planned for 2015–2016 Implement Lean • Launch Valmet Lean program • Provide Lean training for a wide group • Define and set up Lean measurement system • Each business line and area to have Lean projects Reduce lead times • Utilize Value Stream Mapping and Visual Management • Identify and eliminate waste Reduce quality costs • Consolidate quality feedback systems as feasible • Emphasis on finding root causes and implementing corrective action 2015 key actions 1 2 3 4 5
- 10. Save in procurement Excellence in Processes 1) CCC = cost-competitive countries March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Target to save 10% in procurement by the end of 2016 Key procurement saving actions for 2015 1 2 3 4 5 10 Development in 2014 • First year savings target exceeded • Valmet group-wide procurement savings program established and resourced • Focus on global category management, design- to-cost and sourcing from lower-cost countries • Valmet’s first supplier days held in Q3/2014 Increase design-to-cost practices in business lines • Cross-functional teams and total cost management Start new global categories • Category management spend doubled • Further increase CCC1 participation Develop procurement structure • Supplier management practice implementation • Payment policy implementation • Procure-to-pay process harmonization and IT tools 201520142013 2016 New 2015T Target Actual 2014 target exceeded Target to save 10%
- 11. Improve health and safety 11 Excellence in Processes 9.7 8.3 6.5 5.5 4.5 Q3/13Q1/13 Q1/14 Q4/15 targetQ3/12 Q3/14Q1/12 1) LTIF = Lost Time Incident Frequency March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Common standards, procedures and tools • Valmet health and safety manual updated Improve competency and awareness • Health and safety mindset and responsibility trainings in units and e-learnings for all Sustainable improvements in local health and safety performance • Action plans in all locations and corporate follow- up of units with LTIF1 > 5 • Corporate health and safety assurance program with auditor pool from business lines and areas Valmet guidelines for leaders’ health and safety walks Health and safety is on agendas: improvement plans and alignment projects started Key actions for global development towards health and safety excellence 1 2 3 4 5 Development in 2014 • Multiple units reached excellent level in health and safety • Global standards, procedures and tools further developed • Action plans in high LTIF1 units started in 2014 giving results towards the end of the year LTIF1 (rolling 12 months) - own employees
- 12. Continue to improve cost competitiveness Focus on keeping SG&A and capacity cost flat with increased volumes 12 Excellence in Processes 1) Capacity cost means total fixed type of own costs which generally do not vary with production levels and which are based on present normal capacity, e.g. wages & salaries, rents & leases, estates & equipment, travel, common functions, telecom expenses, insurances and other outside services Capacity costs1 (EUR million) 1,180 1,141 1,001 2012 2013 2014 Personnel 12,547 11,765 10,464 2012 2013 2014 March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Selling, general and administrative (SG&A) costs • Focus on keeping SG&A flat: no headcount increases except in selected areas and R&D • R&D efficiency, awareness and management of costs, facility utilization/consolidation Cost awareness • Further develop cost awareness and transparency • Cost management programs Resourcing • Cost shift to lower-cost countries • Outsourcing plans and production roadmap Must-Wins • Emphasis on Must-Win implementation EUR 100 million cost competitiveness program implemented and targets exceeded 2015 focus 1 2 3 4 5 EUR 100 million cost competitiveness program successfully implemented in 2013–2014 • Higher than planned capacity cost savings • Headcount reduction since Q3/2013 >1,600 employees In 2014–2015, capacity cost will be flat • Despite slightly growing headcount and growth investments in some areas Personnel costs (EUR million) 721 697 609 2012 2013 2014
- 13. Employees based on education Winning team 13 Development in 2014 • More then 6,000 persons participated in creation of Valmet’s values • Renewal, headcount reduced by 11% to 10,400 (+800 and -2,100) • 700 senior managers and high potentials assessed as part of new talent review process Winning Team March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 2015 Basis for high performance laid Nurture shared values • Value discussions at annual reviews • New ways of communicating to personnel Drive high performance • Upgraded annual review process launched • New training modules for key processes and for talents Continue globalization of our capabilities • Succession planning and competence mapping • Ensure proper resourcing and competence pools in emerging markets and key countries Further improvements in 2015 Doctorate degree 1% Master’s degree 13% Bachelor’s degree 24% Technical diploma 22% Associate’s degree / College degree 11% Non-degree program 3% High school diploma 12% Basic education 8% Unallocated 6%
- 14. Summary
- 15. Summary Increasing profitability through Must-Win implementation March 19, 2015 © Valmet | Kari Saarinen, Capital Markets Day 201515 Lean program ongoing to further reduce quality costs and lead times Procurement savings program to expand category management and increase design to cost practises Continue to focus on HSE, aim to lower LTIF from 5.5 to 4.5 Multiple product design and cost improvement initiatives to continue good development in 2014 Continue globalization of our capabilities