CEO word and outlook for Q2/2020

We made a strong improvement in comparable EBITDA and the achieved margin of 12.8% was the highest in two and a half years. Our sales volumes recovered as expected and customer activity was at a good level for most of the quarter, while the coronavirus pandemic started to have an impact on our business towards the end of the reporting period. During the quarter we were able to strengthen our balance sheet, thanks to the improved profitability and sale of the fine art business, and we have strong liquidity going forward with no major near-term refinancing needs.

 

SWIFT RESPONSE TO THE PANDEMIC

The spread of the COVID-19 virus around the world has created strong demand for healthcare goods in general, and specifically for protective medical products that are made from our fabrics. We are leveraging our in-depth knowledge of fiber-based solutions and global manufacturing platform to support our customers in the healthcare industry globally as well as in the communities where we operate.

During the first quarter, our Medical business has nearly tripled face mask fabric production. We have also expanded the production of face mask fabrics to production lines normally used for industrial filtration materials at the plants in Italy and Finland to fight the pandemic, and we are evaluating further expansion opportunities across our global manufacturing platform.

Safety of our employees is of utmost importance and we initiated already in January a centralized crisis alert team to carry out a global pandemic contingency and preparedness response plan. Our COVID-19 Safety Protocol that we have applied across the organization has been elementary in keeping plants operational, while ensuring safety of our employees.

We are currently implementing immediate actions, such as temporary layoffs, shorter working hours and minimizing the use of external personnel and services, to mitigate the financial impact as we expect our volumes to decline in the second quarter. Meanwhile, we continue to work on ensuring competitiveness in the longer-term and have identified additional streamlining opportunities in manufacturing fixed costs in the range of EUR 20 million, with gradual impact from the end of 2020 onwards.

LOOKING AHEAD  

We are taking rapid response to fight the pandemic, while at the same time cushioning the negative financial impact. Our organization has performed very well in this unprecedented situation and this makes me proud. Together we can weather these difficult times and come out stronger than before.

OUTLOOK FOR Q2/2020  

The overall demand outlook has become uncertain due to the outbreak of the COVID-19 pandemic. Very strong demand is expected to continue in the health care and life science end-use segments. Demand for consumer goods related products is expected to remain satisfactory, while decline in transportation, homebuilding and furniture, as well as in industrial related products. Ahlstrom-Munksjö’s comparable EBITDA in the second quarter of 2020 is expected to be lower than in the second quarter of 2019 due to lower delivery volumes. 

Updated: April 23, 2020

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