CEO word and outlook for 2019

We experienced a pick up in sales volumes during the latter part of the quarter and we see emerging signs of improvement in some of our product segments. Overall, the market environment is still uncertain and demand remained weak, partially due to continued destocking in the supply chain.  

Our financial performance in the first quarter of 2019 was unsatisfactory. Gross margin for products exceeded last year’s level but not enough to compensate for the short-fall in sales volumes. Our raw material costs were still significantly higher than in the first quarter of 2018. Deliveries improved seasonally from the previous quarter, but remained below the level in the first quarter of 2018. Nevertheless our gross margin for products improved and this will enable better profitability once volumes recover.

Earnings were still negatively impacted by items affecting comparability, mainly relating to the merger of Ahlstrom-and Munksjö, the acquisitions of Expera and Caieiras as well as the paper machine closure in Stenay. Without any new decisions items affecting comparability will significantly decrease for the remainder of the year.

 

Improved competitiveness

We are well on track with our actions to improve competitiveness and drive future profitable growth. We have completed measures to achieve the targeted cost reduction and synergy benefits relating to the integration of Ahlstrom and Munksjö. We have made good progress on achieving the promised cost and business synergies relating to the Expera and Caieiras acquisitions. Furthermore, I’m pleased that we also have continued to introduce several new value added products to our customers. Among these, a sustainable alternative material to plastic straws is a good example of our strengthened capabilities to provide an innovative fiber-based solution to customers. This also illustrates how we can realize business synergies from our acquisitions. Our common platform enables efficient operations, global reach and readiness to better meet customer needs as well as strong focus on product development.

We have today also announced a plan to implement a new business structure to promote our core business capabilities, sharpen strategic targets and align business characteristics of each business area. This is a natural next step following the completion and initial integration phase of the Expera Specialty Solutions and will further improve our competitiveness and customer service.

We have leading market positions globally and a balanced exposure to a broad range of end-uses. This provides us with both stability and opportunities. We will also continue our focus on integration and delivering the promised synergies as well as cash flow.

Outlook for 2019

Ahlstrom-Munksjö’s pro forma comparable EBITDA reached EUR 330 million in 2018. At the beginning of 2019, customers reacted to signs of slowing economic growth. Although demand growth has slowed somewhat in certain product segments, and customers have reduced inventories, market fundamentals remain relatively solid. Ahlstrom-Munksjö will continue its efforts to improve performance and competitiveness. The gross margin for products continued to increase in the first quarter of 2019 and the targeted synergy benefits and cost reduction measures are expected to contribute positively to earnings for the full year.

Updated: April 25, 2019

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