Latest results

As anticipated, the market conditions changed little during the fourth quarter. There were several positive developments in our Services business. Service orders received grew quarter-on-quarter, although there were big differences between geographical markets. We won some major orders for our digital service concepts relating to advanced installed base management and process monitoring. Despite the positive trends in Services, the overall Services and MRO-driven businesses remained at a weak level due to customers’ tight cash management, and postponements of large service and upgrade projects due to the Covid-19 pandemic.

In 2020, project business developed well. We received many orders particularly during the first half of the year and second half orders were also at a good level. Project sales increased quarter by quarter, peaking in the fourth quarter. The share of the Services and MRO-driven businesses was slightly over 60% of total orders received in 2020, compared to a bit less than 70% in 2019. We continue to see a healthy project funnel in Pulp and Paper for 2021. We are also seeing activity in Chemicals and Oil & Gas projects, but at a lower level than a year ago and with uncertainties around the timing of orders.

We continued tight cost management to keep our profitability at a good level, despite the low sales volume. We will also continue many cost saving measures at the beginning of 2021. We completed personnel negotiations for temporary layoffs at our Helsinki plant and will continue our ongoing global efforts to reallocate resources to support our strategy execution. In 2020, we reported EUR 11 million in adjustment items associated with the partial demerger, the launch of Neles, the share ownership developments which started in the second quarter, and restructuring. The activities associated with these adjusting items are largely completed. Certain development activities, in particular our ongoing ERP harmonization project, will continue in 2021 and will be reported as part of our operating costs instead of adjusting items.

We completed our annual customer satisfaction survey, and the results were very pleasing. Customer satisfaction, measured by a net promoter score, improved from 29 in 2019 to an all-time high of 38 in 2020. I feel this is strong testimony to the great commitment of Neles personnel in serving our customers and co-operating with our partners for the long-term, even in difficult times.

The Covid-19 pandemic continues to present significant short-term risks and uncertainties for the markets. It continues to be difficult to predict the pandemic’s spread and severity. Abrupt measures taken by various national and local governments to restrict the spread of the virus have increased the unpredictability of the demand for Neles’ products and services. The pandemic-related mobility restrictions have impacted Neles’ operations by restricting Neles’ ability to provide services at customer sites, as well as the running of manufacturing sites when lockdowns have been imposed. These uncertainties are expected to continue in the first half of 2021.

The business situation did not change significantly from the third to the fourth quarter. Customers have returned to more normal operations than in the second quarter, but large maintenance projects remain largely postponed due to mobility restrictions and customers’ tight cash management. The situation has caused a slowdown in the Services and MRO-driven businesses. The company’s supply chains have been operational, and the delays in delivery times reported in the third quarter have eased. Thus far, Neles has experienced no material credit losses or order cancelations in the order backlog.

Since the second quarter, management has taken proactive measures to ensure the safety of employees, control costs and preserve cash flow to protect Neles’ financial position. The measures have included a variety of enforced safety procedures at manufacturing sites, remote working and strict travel restrictions, cuts to external spending across the organization, and cost-saving and optimization activities. Increased attention has also been paid to managing net working capital.

There is an increased risk that global economic growth will significantly deteriorate because of the pandemic, which, with uncertain political and trade-related developments, could affect Neles’ customer industries, and reduce investment appetite and customer spending, weakening the demand for Neles’ products and services, as well as affecting the company’s business operations and profitability. Other market- and customer-related risks could also cause planned and ongoing projects to be postponed, delayed or discontinued.