By Lucien Joppen
Dear Mr. Isotalo, last year, the partial demerger of Metso was announced. Anno 2020, the demerger is official. From now on, Metso Outotec and Neles will independently move their business forward. What prompted this move?
“Metso’s valve business – Metso Flow Control – has had a strong customer base and market position in several process industries. Over the years, the company has developed a proven operational and financial track record to enhance its independent growth. While Metso has been a good home for the valves business, the flow control division had limited synergies with the Minerals business.”
What are the implications from the demerger for Neles?
“Under dedicated management and with a clear, independent strategy building on our unique strengths, we can now take Neles to the next level as a focused flow control company. Neles will have the means to continue delivering even more intelligent, reliable solutions to serve our customer’s needs while fully utilizing its growth potential. Neles has a clear ambition going forward: we envision to become a leading diversified valve and valve automation company, reinventing reliability in flow control. Our mission is to provide market-leading expertise, products and services to add the most value to customers. In some way, our strategy can be described as an evolution rather than revolution, with redefined focus on innovation and leveraging our service capabilities. We will continue broadening our offering and reach, developing our multichannel service and MRO-business supported by digitalization, and further develop our valve controls and actuators business. Coming back to reinventing reliability. In practice this would mean that we develop more reliable, higher quality products and also in our services and expertise.”
What will your customers notice from the new company or will it continue its operations as before?
“Being close to our customers and serving them throughout their investment and operations lifecycle is Neles’ priority. Our customers will experience the same high-quality of products, services and know-how they have come to rely on. Coming from outside Neles, I soon understood the company culture of Neles. I can say that we have a culture of ensuring customer success and getting things done. These are elements that our customers’ value and we are very proud of. What will be new, however, is that we will have even better agility to serve our customers. And the new Neles-brand and identity, of course.”
In terms of positioning in the Top 10 segment in the valve market, how will Neles and its brand distinguish itself from its direct competitors?
“Today, Neles is among the Top 10 in valve and valve automation. In valve automation alone, we are in Top 5 or higher in some applications, such as positioners in certain geographical markets. We have a unique combination of mission-critical product offering and world-class brand recognition for our products, strong application knowhow, frontrunner position in services and MRO, as well as truly global delivery capabilities. But what really sets us apart, is the never-walk-away mentality of our people. It means we will work together to make sure we will find the right solution for our customers, even when it is hard. This is also the feedback we get from our customer surveys.”
As for sectoral markets, a significant part of Neles’ business depends on oil/gas and petrochemicals. Given the present situation in these industries, will Neles step up its efforts to focus on other markets?
“Neles serves diverse industries which have different drivers and are in different cycles. For example, pulp and paper project momentum is healthy, and we have been active in developing/packaging our solutions to support the renewal in pulp, paper and bioproducts. We are evaluating opportunities to expand also to newer markets for Neles such as mining and metals, to balance industry cycles.”
What are aspects within Neles that are well-developed, and where do you see room for improvement?
“First of all, we have strong, globally recognized main product brands in Neles and Jamesbury. Both our products, as well as the work of our global team, are known for high quality and reliability. We also can rely on a large installed base and strong service penetration. Today, MRO roughly accounts for 70% of our sales. In terms of expertise and capabilities, Neles has a strong engineering and application know-how in core industries. As for automation/digital solutions, we have the technical know-how and market insights to improve customer experience. Of course, there is always room for improvement. This is how companies evolve over the years. There is always room to improve supply chains or availability of products and services. Today, we have well-established manufacturing bases and Technology Centers in Finland, Germany, the United States, China and India, complemented by smaller assembly operations in strategic locations. We also have service centers in ~40 countries. To make sure we can be even more flexible in meeting our customer’s needs, we keep on developing our service and supply capabilities as well our as our global network of partners and distributors.”
Which will be the key areas for Neles to develop new product solutions to answer customer demand? Could you already give some telling examples?
“To mention a few areas of focus in R&D, we build on continuous and systematic product renewal and offering expansion. Also, we are exploring new manufacturing methods and materials technologies, e.g. 3D-printing. There are also programs going on to improve our simulation and design automation capabilities.”
Which are the most important market drivers for Neles’ key markets and how do you intend to act upon these drivers?
“An increased demand for materials as well as ‘industry renewal’ (see box text Transformation in Paper and Pulp) is visible ‘megatrend’ which is impacting many industries. The pulp and paper industry – one of our key markets – is a good example. This sector is transforming to bioproducts to meet the demand for bio-based materials. We have been active in developing solutions to support this transformation through improved process reliability achieved by our products but also via digital tools designed to help collect and utilize accurate data to choose the right valves for the job and to improve process performance. Sustainability and safety requirements are vital topics in all process industries. We see this as increased renewal investments to upgrade and replace assets, e.g. in oil & gas due to tighter fuel regulations. This drives spending more on reliable and better-performing equipment, which is our specialty. Furthermore, there is a growing demand for automation is also driving investments into more automated/control valves, as well as predictive maintenance and process optimization. Neles and its predecessors have been developing valve automation and digitalization since the early 90s and expanding our capabilities control valves since 2010.”
In terms of geographical markets, Neles is strongly represented in the Americas and Europe. Will the company increasingly focus on APAC, given the expected economic growth and subsequent demand for resources and energy?
“During the past years, we have been and are investing in developing our footprint in APAC. For example, we have a new Valve Technology Center being built in Jiaxing, China. This new facility will start operations this year, and it will further improve our service and delivery capabilities globally but also allow us to be closer to our customers and installed base in China.”
Neles aims to grow via acquisitions. Does the company look for geographical expansion, or does it aim for acquisitions of companies that have products or expertise that are not currently in its portfolio?
“We are looking into both types of opportunities, complementary product offering or presence in an industry or a geographical area. But we are not excluding more bolt-on acquisitions with specific technologies, or even larger moves if all fits.”
TRANSFORMATION IN PAPER AND PULP
Growth and fluctuation in demand and growing concerns related to environmental performance, energy efficiency and raw material efficiency have pushed the pulp and paper industry into a state of transformation and renewal. The modern paper mill has become so much more than a traditional p&p-facility. Modern mills rely on a multi-layered process, incorporating elements familiar from refineries, power plants and the like. By using recyclable wood, these bioproduct mills are helping the industry take giant leaps in the direction of resource efficiency, carbon neutrality and sustainability as a whole.
As production volumes grow, and the availability of natural resources is being stretched, getting more out of less is becoming a must. In the pulp and paper industry, this does not only mean improving production efficiency, but also the smart utilization of process waste and side streams for the creation of new commercially viable bioproducts (biochemicals, biofuels, bioenergy, bio-textiles et cetera).
ABOUT OLLI ISOTALO
Olli Isotalo (1959, Finnish nationality, M.Sc. in Engineering) has over three decades of experience in various management positions in the engineering industry. For the last 25 years, he has been leading businesses in an international environment and been involved, or directly responsible for numerous change processes, turnarounds, acquisitions and integration processes. He describes himself as ‘a goal-oriented and decisive leader with a strong track record in delivering results and improving businesses year by year. My management style is transparent and communicative, combined with good people management skills.’
When asked about his appointment and plans with Neles, Isotalo answers the following: “In 2025, I envision we are a bigger player than the Neles from today. For our customers, we still want to make a difference for their business and operations by reinventing reliability, setting new standards for reliability in the industry. Our team around the world is empowered and enabled to do so. Our strategy binds this all together. It is my job to steer us towards our targets and this vision.”