Financial Performance of Valmet : financial ratio analysis of Valmet and its competitors Andritz and Voith

Abstract

Analysis of firm performance is an important subject that interests both business and academia. Financial ratio analysis is most often used for assessing this aspect because it provides quantifiable data that can be used for benchmarking and improvement. Financial ratio analysis is based on compiling data from financial statements released by a company and comparing the results against previous performance of the company as well as industry standards. Valmet is a large industrial company in Finland, born out of a demerger with another Finnish company, Metso Corporation. The objective was to assess Valmet’s financial performance by means of financial ratio analysis in the years 2013-2020 and compare it to two of its main competitors to provide a baseline for the results. Literature on the subjects of firm performance, strategic management, performance measures, and financial ratio analysis were reviewed to gain a deep theoretical understanding of the topics. This review also provided practical assistance in the avoidance of common mistakes made in ratio analysis and in interpreting results. Secondary data was collected from the financial statements of each company from their webpages and aggregated to Microsoft Excel for calculating the 19 financial ratios that were selected. The results from the calculations were then formed into graphs and interpreted by comparing Valmet to Andritz and Voith. In exploring the research questions it was found that Valmet’s financial performance was mostly improving in the time period in consideration. The strongest aspects of performance were found in profitability, solvency and market ratios. From cross-examining the ratio groups, it was also found that Valmet is efficient in its use of leverage, showcased by their profitable acquisition in 2015. The weakest performance aspect was liquidity while efficiency ratios remained steady and showed no major deviation from industry standard as set by Andritz and Voith.