Financial statements bulletin 2008: Downturn of market towards year-end reflected on Ahlstrom's financial performance

Financial statements bulletin 2008: Downturn of market towards year-end reflected on Ahlstrom's financial performance

Ahlstrom Corporation STOCK EXCHANGE RELEASE 5.2.2009
  
Key highlights of year 2008:
  •          Full-year net sales grew by 2.4% to EUR 1,802.4 million (EUR 1,760.8 million). Fourth-quarter net sales amounted to EUR 419.0 million (EUR 462.5 million), decreasing by 9.4% due to a strong decline in the demand especially in December.
  •          Full-year operating profit decreased to EUR 14.6 million (EUR 25.8 million), and to EUR 35.7 million (EUR 67.8 million) excluding non-recurring items. Profitability was burdened by high raw material and energy prices throughout the year, ramp-up and integration costs as well as a downturn of the market in the final quarter.
  •          Net cash from operating activities developed favorably and increased by EUR 58.5 million to EUR 102.4 million as a result of improvement in working capital turnover.
  •          Further restructuring actions have been started to adjust operations to the weakening demand, including plans on capacity closures in Italy and a reduction of personnel worldwide. This incurred non-recurring items of EUR 21.7 million booked in the fourth quarter results.
  •          The Board of Directors proposes a dividend of EUR 0.45 (EUR 1.00) per share to be paid for the fiscal year 2008.
  •  
    Outlook 2009:
  •          Based on the weak visibility, Ahlstrom changes its disclosure policy. An exact outlook on net sales and profitability is not given.
  •          In 2009, the operating environment is anticipated to remain very challenging, and the demand for Ahlstrom products will vary significantly by product line and depending on the general development of the customer industries.
  •  
     
     
     
    Jan Lång, President & CEO, comments the year 2008:
     
    In 2008, Ahlstrom finalized most of the growth investment program initiated after the IPO. Approximately EUR 500 million has been invested in growth initiatives in two years, and as a result of this, Ahlstrom's global reach is now stronger than ever before.
     
    What I am not happy about is the weak financial performance in 2008, which was mainly driven by the low gross margin, weak demand in the fourth quarter as well as the higher than expected ramp-up and integration costs related to the growth investment program. On a positive note, we achieved growth in net sales that was in line with market growth, and cash flow improved significantly as a result of an improvement in working capital turnover.
     
    Several measures were taken to improve profitability, and to adjust operations to the decline in demand. These included finalizing the work began at the end of 2007 to close down and restructure non-competitive operations in the USA and Europe. Towards the end of the year, production was cut down globally to adjust the operations to the changed market situation.
     
    The operating environment is anticipated to remain very challenging throughout 2009. It is clear that in difficult times such as these, all means to maximize cash flow will be utilized, including a lower investment activity than in 2008. Ahlstrom has also announced further global restructurings for 2009 to respond to the decrease in demand. Despite the current challenges, I wish to stress that together with the strengthened Corporate Executive Team, we shall take an active approach in developing Ahlstrom over the longer term in addition to managing short-term matters.
     
     
    OPERATING ENVIRONMENT
     
    In 2008, Ahlstrom's operating environment was very challenging and reflected the rapid downturn of the global economy. In the first half-year, demand for most of Ahlstrom's products was strong despite the early signs of eventual softness of demand in some product segments. Demand was especially strong in high-growth sectors, such as the windmill industry.
     
    Demand started to gradually soften in the latter part of the year, resulting in a steeply declining order stock for most of Ahlstrom's products as well as a downsizing of inventory levels in the supply pipeline at the end of the year. Demand decreased especially strongly in filtration products due to the decline of the global automotive and construction industries. On the other hand, demand was brisk in medical and food nonwovens, crepe papers as well as release and label papers on the South American market.
     
    Prices for Ahlstrom's main raw materials, wood pulp and rayon, and the price of oil, reached their historical peak levels during the first half of the year, which had a negative impact on Ahlstrom's gross margins. Towards the end of the third quarter, indications of a turn in the price trend started to emerge, and during the fourth quarter, the average USD market price of NBSK pulp was approximately 16% lower, polyester 18%, rayon 9% and crude oil over 51% lower than on the third quarter. The decreasing trend has continued in the beginning of 2009.
     
     
    FINANCIAL PERFORMANCE
     
    Ahlstrom's business is reported in two segments: the Fiber Composites segment and the Specialty Papers segment. The Fiber Composites segment comprises the Advanced Nonwovens, the Home & Personal Nonwovens, the Glass Nonwovens and the Filtration business areas. Customers served operate in the building, transportation, healthcare and hygiene, food and industrial packaging as well as the utilities industries.
     
    The Specialty Papers segment covers the Release & Label Papers and the Technical Papers business areas. Customers served operate in the building, transportation, healthcare and hygiene, food and industrial packaging and graphics industries.
     
    Ahlstrom provides information on the breakdown of net sales per segment, per business area and per geographical area. The breakdown of operating profit is reported per segment.
     
     
     
     
     
     
     
    *Excluding non-recurring items
     
     
    Financial performance in October-December 2008
     
    Net sales
     
    During the October-December period, the global economic downturn reflected on Ahlstrom's business significantly. A strong decline in the demand for most of Ahlstrom's products emerged towards the end of the year coupled with a downsizing of inventory levels in the supply chain. Group net sales totaled EUR 419.0 million (EUR 462.5 million), decreasing by 9.4% compared with the same period last year. Sales volumes decreased by 16.6% during the fourth quarter. Comparable net sales adjusted for the currency effect, plant closures and acquisitions decreased by 4.5% and comparable volumes by 6.1%.
     
    The net sales of the Fiber Composites segment amounted to EUR 229.1 million (EUR 249.7 million), representing 55% of the Group net sales. The net sales of the segment decreased by 8.2% compared with he fourth quarter in 2007. Net sales decreased in all business areas, which was due to lower volumes and pricing pressures in many products, especially in transportation filtration, wipes for home and personal care as well as in industrial nonwovens products. On the other hand, net sales grew in medical and food nonwovens applications.
     
    The net sales of the Specialty Papers segment amounted to EUR 191.6 million (EUR 214.4 million), accounting for 45% of the Group net sales. The net sales of the segment decreased by 10.6% from the fourth quarter of 2007, mostly as a result of plant closures within the Release & Label Papers business area completed in 2008. The comparable net sales adjusted for closures and acquisitions decreased by 1%. Net sales grew in crepe papers, vegetable parchment as well as release and label papers on the South American market.
     
    In terms of geographical areas, the relative share of Europe of the Group net sales continued to decrease, accounting for 52% (59%) of Group total. Growth was strongest in North and South America as a result of completed acquisitions and organic growth investments.
     
     
    Financial result
     
    In the fourth quarter, Group operating loss amounted to EUR -35.4 million (EUR -34.7 million), decreasing by 2.1% from the fourth quarter last year. The loss was mainly due to an exceptionally low demand at the end of the quarter, and non-recurring costs and write-downs related to restructuring actions announced for 2009. Operating loss in the quarter excluding non-recurring items amounted to EUR -13.7 million (operating profit of EUR 11.0 million). 
     
    In order to adjust its operations to the demand, Ahlstrom is planning to close down its Gallarate and Carbonate sites, as well as to close down one production line in Cressa. All three sites are located in Italy and manufacture nonwoven fabrics. In addition, Ahlstrom has started negotiations with the representatives of the personnel on temporary and permanent layoffs worldwide.
     
    Related to the above mentioned actions, Ahlstrom has booked a non-recurring restructuring charge of EUR 6.3 million in the fourth quarter financial results. In addition, a non-cash write-down on goodwill and tangible assets of EUR 15.4 million has been booked, mostly related to nonwoven wiping fabrics. The distribution of the non-recurring items and write-downs by segment is the following: Specialty Papers EUR 1.8 million and Fiber Composites EUR 20.2 million. In addition, a non-recurring gain of EUR 0.3 million related to sale of assets has been booked in the fourth quarter financials.
     
    The operating loss of the Fiber Composites segment amounted to EUR -24.7 million (operating profit of EUR 2.7 million) representing 70% of the Group operating loss. Most of the decline is accountable for the non-recurring items and write-downs related with the restructuring actions. Excluding the non-recurring items and write-downs, the operating loss amounted to EUR -4.5 million (profit of EUR 15.7 million), reflecting the significantly lower level of demand and the weak performance of the wipes business. In addition, profitability was burdened by ramp-up and integration costs.
     
    The operating loss of the Specialty Papers segment amounted to EUR -6.5 million (EUR -33.6 million) representing 18% of the Group operating loss. The main reasons for the loss were the weak profitability of the Release & Label Papers business area as well as the restructuring charges stated above. Excluding the non-recurring items and write-downs, the operating loss of the segment amounted to EUR -4.6 million (EUR -2.8 million).
     
    Total net financial expenses increased to EUR 13.8 million (EUR 8.6 million). The increase is attributable to a higher level of debt incurred by the large capital expenditure and high financing costs related to certain currencies, e.g. the Russian ruble. Ahlstrom's share of the losses of the associated companies was EUR -0.3 million (profit of EUR 0.1 million).
     
    Loss before taxes increased to EUR -49.5 million (EUR -43.2 million) and excluding non-recurring items, to EUR -27.8 million (profit of EUR 2.5 million).
     
    Tax income amounted to EUR 12.4 million (EUR 14.2 million).
     
    Loss for the period increased to EUR -37.0 million (EUR -29.0 million) and earnings per share (EPS) weakened to EUR -0.79 (EUR -0.64).
     
    Return on capital employed (ROCE) amounted to -10.8% (-10.7%), and return on equity (ROE) to -22.4% (-15.1%).
     
     
    Financial performance in 2008
     
    Net sales
     
    In 2008, Group net sales amounted to EUR 1,802.4 million (EUR 1,760.8 million), growing by 2.4% from 2007. Comparable net sales adjusted for the currency effect, acquisitions and closures grew by 3.9% from last year. Net sales grew strongly throughout the three first quarters, but the weak demand at the end of the fourth quarter reflected significantly on the full-year figures. The development of sales volumes was nearly flat year-on-year, as comparable volumes adjusted for acquisitions and closures grew by 1.2%.
     
    The net sales of the Fiber Composites segment amounted to EUR 987.4 million (EUR 941.4 million), representing 55% of the Group net sales. The net sales of the segment grew by 4.9% compared with that of 2007. Comparable net sales adjusted for the currency effect, acquisitions and closures grew by 4.5% from last year. In terms of the business areas, net sales grew especially strongly in Home & Personal Nonwovens as a result of the acquisitions made in 2007, and also in Glass Nonwovens thanks to the brisk demand for windmill applications.
     
    The net sales of the Specialty Papers segment amounted to EUR 822.4 million (EUR 824.7 million), accounting for 45% of the Group net sales. The net sales of the segment decreased by 0.3% from 2007, mostly as a result of plant closures within the Release & Label Papers business area completed in 2008. On the other hand, new production gained through acquisitions, especially through the Jacarei plant in Brazil, increased the net sales by 11.5%. The comparable net sales adjusted for plant closures and acquisitions grew by 3.4%.
     
    In terms of geographical areas, the relative share of Europe of the Group net sales continued to decrease, accounting for 56% (62%) of Group total. Growth was strongest in North and South America as a result of completed acquisitions and organic growth investments.
     
     
    Financial result
     
    In 2008, Group operating profit amounted to EUR 14.6 million (EUR 25.8 million). Excluding non-recurring items, operating profit amounted to EUR 35.7 million (EUR 67.8 million), decreasing by 47.3% year-on-year. The non-recurring items of EUR 21.1 million were related with the restructuring actions announced in the beginning of 2009.
     
    Most of the decline in the operating profit was due to the exceptionally severe market conditions and low demand in the fourth quarter. For the first three quarters of the year, operating profit still totaled EUR 50.0 million (EUR 60.5 million), although burdened by historically high raw material and energy prices, as well as additional costs incurred by the several ramp-ups and integration of acquisitions.
     
    The operating profit of the Fiber Composites segment amounted to EUR 15.3 million (EUR 48.7 million), and excluding non-recurring items and write-downs, to EUR 33.2 million (EUR 60.6 million). The decrease in the operating profit is mainly due to the low demand in the fourth quarter, the weak performance of the wipes business, and additional costs related to ramp-ups and integration of acquisitions.
     
    The operating profit of the Specialty Papers segment amounted to EUR 10.2 million (loss of EUR -12.5 million). The improvement in the operating profit was mainly a result of new production at the Jacarei plant. Excluding the non-recurring items and write-downs, the operating result of the segment amounted to EUR 12.6 million (EUR 13.9 million).
     
    Loss before taxes was EUR -20.6 million (profit of EUR 0.2 million). Excluding non-recurring items, profit before taxes was EUR 0.5 million (EUR 42.1 million).
     
    Tax income totaled EUR 4.5 million (EUR 1.2 million).
     
    Loss for the period amounted to EUR -16.1 million (profit of EUR 1.3 million) and earnings per share (EPS) to EUR -0.38 (EUR 0.01).
     
    Return on capital employed (ROCE) amounted to 1.4% (2.5%), and return on equity (ROE) was -2.3% (0.2%). Net asset turnover was 1.4 (1.6).
     
     
    FINANCING
     
    In 2008, the net cash flow from operating activities increased by EUR 58.5 million to EUR 102.4 million (EUR 43.9 million) as a result of improvement in net working capital turnover.
     
    Interest-bearing net liabilities increased by EUR 107.6 million to EUR 598.7 million (December 31, 2007: EUR 491.1 million).
     
    The gearing ratio was 95.3% (December 31, 2007: 65.3%) and the equity ratio 36.8% (December 31, 2007: 44.0%).
     
    As of December 31, 2008, Ahlstrom's interest-bearing liabilities amounted to EUR 656.9 million, divided into financing from banks and other financial institutions of EUR 524.6 million, EUR 117.5 million in borrowings under the company's Finnish commercial paper program and EUR 14.8 million in commitments under financial leases.
     
    During the reporting period, Ahlstrom held several preparatory discussions with the majority of its relationship banks concerning the refinancing of EUR 233 million worth of medium term credit facilities which will mature in 2009, of which EUR 200 million in the last quarter. Ahlstrom's unutilized credit facilities as of December 31, 2008 amounted to EUR 185 million.
     
     
    CAPITAL EXPENDITURE
     
    In 2008, Ahlstrom's capital expenditure excluding acquisitions amounted to EUR 128.0 million (EUR 154.7 million), representing 7.1% (8.8%) of Group net sales.
     
    Ahlstrom made no new major organic investment decisions during 2008. Among the largest on-going investments were the following, previously announced organic growth investments: two new dust filtration production lines, one in Wuxi, China and one in Bethune, South Carolina, the USA; a new glassfiber tissue production plant in Tver, Russia; a new food nonwovens production line in Chirnside, the UK; a new nonwoven wiping fabrics production line in Paulinia, Brazil; a new nonwoven production line in Brignoud, France; and the converting of a paper machine to nonwoven production in Turin, Italy.
     
    In addition, Ahlstrom is establishing a new medical nonwovens plant in Gujarat, India, with operations estimated to start in the first quarter of 2010.
     
     
    Acquisitions and investment decisions
     
    On February 1, 2008 Ahlstrom announced that it had signed an agreement to acquire Friend Group Inc., which consists of West Carrollton Parchment Company and West Carrollton Converting Company. The deal was closed on February 13, 2008, and the acquisition price was EUR 9.8 million.
     
    On August 29, 2008 Ahlstrom announced that it would acquire the remaining 40% of the joint venture formed with Votorantim Celulose e Papel (VCP) in Brazil and Ahlstrom now owns 100% of the shares. The assets in the joint venture comprise a paper machine, an offline coater and extensive finishing equipment at the Jacarei plant, close to São Paolo. The unit is part of Ahlstrom's Release & Label Papers business area and serves mainly the labeling applications and certain flexible packaging markets. The total acquisition price was EUR 116 million.
     
     
    RESEARCH AND DEVELOPMENT IN 2008
     
    Innovation is a key element in Ahlstrom's growth strategy. In 2008, the R&D expenses totaled EUR 23.8 million (EUR 23.9 million), representing 1.3% (1.4%) of Ahlstrom's net sales.
     
    In 2008, 48% (39%) of Ahlstrom's net sales was generated by new or improved products as a result of a large number of organic investments started up during the year. The company's target range for net sales generated by new or improved products is 25-35%. In its reporting, Ahlstrom uses the 3M definition, in which a new product is perceived by customer as new, not older than three years, and other innovations represent a significant technical contribution, not older than three years.
     
    Ahlstrom continued to introduce new products and technologies in order to further strengthen its position as a leading supplier of fiber-based materials. Among the key innovations of the year was the commercialization of Ahlstrom's Disruptor(TM) PAC water filtration media. The product can be used to remove a wide range of contaminants from water, such as virus, bacteria, metals, colloids, lead, arsenic, mercury and copper. During 2008, Disruptor(TM) PAC was awarded as an innovation of the year by a leading association in the nonwovens industry.
     
    In 2008, Ahlstrom also commissioned a new production platform in Chirnside, the UK, to serve the growing infusion products market. The unique production line is able to process renewable and compostable plant based fibers, and in line with this investment, Ahlstrom launched a new premium, compostable teabag material at the end of 2008.
     
    In addition, development efforts were continued to increase the share of eucalyptus pulp in Ahlstrom's products. In two years, the share of eucalyptus fibers has increased from 20% to nearly 40%, and benefits in terms of raw material sustainability, long-term availability and cost make this a highly strategic development initiative.
     
     
    CHANGES IN GROUP STRUCTURE
     
    Ahlstrom closed four plants in 2008 due to unsatisfactory profitability and cash flow. The plant in Ascoli, Italy, was closed in January, and the plant in Chantraine, France, in June. These plants produced one-side coated papers for wet glue labeling, flexible packaging and graphical end users, and belonged to Ahlstrom's Release & Label Papers business. The plant in Darlington, South Carolina, USA, was closed in January and the plant in Bellingham, Massachusetts, USA, in October. Both of the plants produced filtration media.
     
    The business area organization was changed during the year. The organization effective as from January 1, 2009 is as follows. The Fiber Composites segment comprises the Advanced Nonwovens, Home & Personal Nonwovens, Glass & Industrial Nonwovens and Filtration business areas. Specialty Papers segment comprises the Technical Papers and Release & Label Papers business areas. The new business area organization will be implemented in financial reporting as from the first quarter of 2009 onwards.
     
     
    CHANGES IN MANAGEMENT
     
    President & CEO
     
    B.Sc. (Econ.) Risto Anttonen (born 1949) acted as interim CEO from February 28, 2008 to December 31, 2008, following President & CEO Jukka Moisio's resignation on February 28, 2008.
     
    On August 13, 2008, the Board of Directors of Ahlstrom Corporation appointed M.Sc. (Econ.) Jan Lång (born 1957) President & CEO of the company as from January 1, 2009. Lång joins Ahlstrom from the position of President and CEO of Uponor Corporation.
     
    As from January 1, 2009, Risto Anttonen assumed the role of Deputy of the President & CEO and continues as a member of the Corporate Executive Team.
     
    Corporate Executive Team
     
    The composition of Corporate Executive Team (CET) changed during the year. The current CET is presented at the corporate website at www.ahlstrom.com.
     
     
    PERSONNEL
     
    At the end of 2008, Ahlstrom had 6,365 employees (6,481). The average number of employees in 2008 was 6,510 (6,108).
     
     
    Geographically, 65% of Ahlstrom's employees were located in Europe, 25% in North America, and 10% in the rest of the world. With 25% of the total workforce, the USA has the largest percentage of employees, followed by France with 19%, Italy with 15%, Finland with 11% and Germany with 9%.
     
    In 2008, 56% of Ahlstrom's employees worked within the Fiber Composites segment, 38% in the Specialty Papers segment and 6% in other operations.
     
     
    ANNUAL GENERAL MEETING
     
    Ahlstrom Corporation's Annual General Meeting of Shareholders (AGM) was held on April 2, 2008. The key resolutions of the AGM are summarized below.
     
    The AGM resolved to distribute a dividend of EUR 1.00 per share for the fiscal year of 2007. The AGM approved the financial statements and consolidated financial statements and discharged the members of the Board of Directors and the CEO from liability for the financial period from January 1 to December 31, 2007.
     
    PricewaterhouseCoopers Oy (PwC) was elected as Ahlstrom's auditor as recommended by the Audit Committee. PricewaterhouseCoopers Oy (PwC) has designated Authorized Public Accountant Eero Suomela as auditor in charge.
     
    The AGM confirmed the number of Board members unchanged at seven. Thomas Ahlström, Sebastian Bondestam, Jan Inborr, Bertel Paulig, Peter Seligson and Willem F. Zetteler were re-elected as members of the Board of Directors and Martin Nüchtern was elected as a new member as proposed by the Compensation and Nomination Committee of the Board. The term of the Board of Directors will expire at the close of the next Annual General Meeting.
     
    The AGM authorized the Board of Directors to repurchase a maximum of 4,500,000 Ahlstrom shares. The shares may be repurchased only through public trading at the prevailing market price by using unrestricted shareholders' equity.
     
    The AGM also authorized the Board of Directors to distribute a maximum of 4,500,000 own shares held by the Company. The Board of Directors is authorized to decide to whom and in which order the shares will be distributed. The shares may be used as consideration in acquisitions and in other arrangements as well as to implement the Company's share-based incentive plans in the manner and to the extent decided by the Board of Directors. The Board of Directors has also the right to decide on the distribution of the shares in public trading for the purpose of financing possible acquisitions.
     
    The authorizations are valid for 18 months from the close of the Annual General Meeting but will, however, expire at the close of the next Annual General Meeting, at the latest.
     
     
    RISK MANAGEMENT
     
    Based on a risk assessment made in the Group, the risks identified are described below.
     
    Market risk is related to the highly competitive fiber-based materials markets. Long term supply and demand imbalances could drive down prices in the market and have an adverse effect on the Group's business. 
     
    Economic cycles impact the demand for, and price of, end-use products in the industries that Ahlstrom serves, as well as the development of Ahlstrom's raw material prices. Ahlstrom is mainly exposed to cyclical changes in the following end-use industries: building, automotive and marine industries, where demand has declined significantly during 2008. On the other hand, demand in the food, packaging, medical and energy industries wherein Ahlstrom has a strong presence, are more stable over the cycles.
     
    Wood pulp prices are subject to substantial cyclical fluctuations. This was evidenced by increases in market prices in early 2008, followed by price decreases at the end of the year. Similarly Ahlstrom's energy costs are subject to significant variations, and lately have shown substantial decreases due to the significant decline of oil prices. Purchasing prices from suppliers are, to a certain extent, reflected in Ahlstrom's customer sales prices, and typically prices are adjusted with a delay.
     
    Ahlstrom's ability to utilize its production capacity efficiently may be affected by variations in customer demand or interruptions in production. A variety of conditions may cause customers to reduce, delay or cancel anticipated or confirmed orders. In the fourth quarter this risk materialized, and Ahlstrom had to take market related downtime due to the unstable economic environment.
     
    In recent years, Ahlstrom has been actively pursuing a global growth strategy, which has included a number of organic growth investments and acquisitions. These include risks of e.g. adverse regulatory conditions, commercial objectives not achieved, retention of key staff, anticipated synergies and cost savings being delayed or not being achieved, and higher than anticipated costs of planned expansion projects. In 2008, additional costs were incurred due to several ramp-ups and the integration of acquisitions.
     
    Ahlstrom's main financial risks are related to interest rates and foreign exchange. In 2008, interest expenses increased due to the increase in net debt. The foreign exchange rates, mainly USD had a negative impact on Ahlstrom's net sales of EUR 61.3 million. The profitability, however, is not affected to the same extent since sales and costs denominated in the same currency partly offset each other. The net currency exposure is hedged up to three months.
     
    Due to the currency hedging policy of the Group, no material foreign exchange losses were incurred in 2008. However, hedging costs increased due to the volatility caused by the financial crisis.
     
    Ahlstrom will provide more detailed information on its risk management in the Annual Report 2008.
     
     
    SUSTAINABILITY
     
    Ahlstrom is committed to sustainable development. For Ahlstrom, sustainability means responsibility towards the environment and people, and running of its business in a respectable way. Ahlstrom reports according to the G3 guidelines issued by the Global Reporting Initiative (GRI).
     
    In its approach to management of its health, safety, environmental obligations and asset protection (HSEA), Ahlstrom applies a continuous improvement model. This model is applied to all phases of the life cycle of Ahlstrom's products: from product development, through raw material sourcing, production operations, product delivery and ultimate disposal or recycle.
     
    Climate change will be the biggest single factor for changing the world's economy in the coming years, and Ahlstrom has formulated its strategy in both mitigating and adapting to the climate change.    
     
    In 2008, Ahlstrom invested approximately EUR 2.2 million for environmental improvements. Following its climate change mitigation strategy, another EUR 4.0 million was directed towards energy reduction projects. The focus areas for these investments were energy efficiency and associated CO2 emissions reduction. In 2008, Ahlstrom's improving trend in energy efficiency continued for the third year in a row. In 2008, CO2 emissions decreased by 9.2% over 2007 totals.
     
    Funds were directed also to wastewater treatment improvements, water conservation, and ambient emissions reductions of NOx and particulate. In addition to environmental investments, Ahlstrom invested EUR 4.6 million in the area of health and safety improvements and assets protection during 2008.
     
    Following its commitment to Sustainable Forestry Management (SFM), Ahlstrom certified seven plants for Chain-of-Custody in 2008, and will continue to certify more plants in 2009. Ahlstrom believes that following the SFM will have a vast potential in battling the climate change. 
     
    Ahlstrom believes that there are no material issues regarding compliance with applicable environmental laws or regulations at any of its sites. The company continuously monitors regulatory developments worldwide. At this time, Ahlstrom does not foresee any prospective environmental, health or safety regulatory change that would have a material impact on Ahlstrom's operations or product offerings.
     
    Consistent with its standard practice, Ahlstrom will provide more detailed information on Sustainability in its Annual Report 2008.
     
     
    SHARES AND SHARE CAPITAL
     
    Ahlstrom's share is listed on the NASDAQ OMX Helsinki. Ahlstrom has one series of shares. The share is classified under the Materials sector and the trading code is AHL1V.
     
    During 2008, a total of 6.1 million Ahlstrom shares were traded for a total of EUR 89.8 million. The lowest trading price during the review period was EUR 6.51 and the highest EUR 18.78. The closing price on December 31, 2008 was EUR 6.65 and market capitalization was EUR 310 million.
     
    Equity per share of Ahlstrom Group was EUR 13.46 at the end of the review period (December 31, 2007: EUR 15.35).
     
    At the end of the review period, there were no outstanding options entitling to subscription of Ahlstrom shares.
     
     
    OUTLOOK FOR 2009
     
    In 2009, the market environment is anticipated to be very challenging with a very short-term visibility of the demand for Ahlstrom products. Therefore, Ahlstrom has decided to change its disclosure policy as from the beginning of 2009. During a period of major uncertainty, the outlook includes forecasts of the business and market environment only.
     
    According to current estimates, the demand for Ahlstrom products will vary significantly by product line and depending on the general development of the customer industries. The food packaging, medical applications and energy industries are anticipated to be less sensitive to the current uncertainty, and for Ahlstrom, this is anticipated to reflect on the demand for e.g. food and medical nonvowens, specialty papers for food packaging and wrapping, crepe papers as well as glassfiber reinforcements for the windmill industry.
     
    On the other hand, the uncertainty of the global economy, and especially the decline of the transportation and construction industries, is expected to impact the demand for such Ahlstrom products as filtration media for the automotive and construction industries, nonwovens and specialty papers for the building industry, glassfiber reinforcements for the marine industry as well as different kinds of nonwoven wipes.
     
    The prices for Ahlstrom's main raw materials, wood pulp and rayon, and the price of energy, are anticipated to continue at the current low level, based on the decreasing price trend that started towards the end of 2008.
     
    In the current operating environment, Ahlstrom will focus on maximizing its cash flow in 2009, including a lower capital expenditure than in 2008.
     
     
    EVENTS AFTER THE BALANCE SHEET DATE
     
    Change in the Corporate Executive Team
     
    On January 9, 2009, Rami Raulas, born 1961, M.Sc. (Econ.), was appointed Senior Vice President, Sales & Marketing and member of the Corporate Executive Team effective as of February 1, 2009. He joins Ahlstrom from Meadville Enterprises (HK) Ltd.
     
     
    PROPOSAL FOR THE DISTRIBUTION OF PROFITS
     
    The distributable funds in the balance sheet of Ahlstrom Corporation as per December 31, 2008 amount to EUR 645,356,691.77.  
     
    The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.45 per share be paid for the fiscal year that ended on December 31, 2008 from the retained earnings. As per February 4, 2009, the number of shares of the Company amounts to 46,670,608 based on which the maximum amount to be distributed as dividend would be EUR 21,001,773.60. 
     
    The dividend will be paid to shareholders registered in the Register of Shareholders held by Euroclear Finland Ltd (former Finnish Central Securities Depository Ltd) on the record date, March 30, 2009. The Board proposes that the dividend be paid on April 6, 2009.
     
    In addition, the Board of Directors proposes that EUR 35,000 be reserved to be used for the public good at the discretion of the Board.
     
     
     
    This financial statement bulletin has been prepared in accordance with the International Financial Reporting Standards (IFRS). Comparable figures refer to the same period last year unless otherwise stated.
     
    This report contains certain forward-looking statements that reflect the present views of the company's management. Due to the nature of these statements, they contain uncertainties and risks and are subject to changes in the general economic situation and in the company's business.
     
     
    Helsinki, February 5, 2009
     
    Ahlstrom Corporation
    Board of Directors
     
     
    ADDITIONAL INFORMATION
     
    Jan Lång, President & CEO, tel. +358 (0)10 888 4700
    Jari Mäntylä, CFO, tel. +358 (0)10 888 4768
     
    Ahlstrom's President & CEO Jan Lång will present the financial statements in Finnish in a news conference in Helsinki on February 5, 2009 at 9.00 a.m. Finnish time. The conference for media and analysts will take place at Palace Gourmet banquet floor, address Eteläranta 10, floor 10. Welcome.
     
    In addition, a conference call for analysts and investors will be held in English on February 5, 2009 at 1.30 p.m. Finnish time. The discussion will again be led by President & CEO Jan Lång. To participate in the teleconference, please dial +358 (0)9 2313 9202 a few minutes before the call. Use the title of the conference call: Ahlstrom conference call. A replay number is available until February 12, 2009. The number for the replay is +358 (0)9 2314 4681, access code: 823275.
     
    The presentation material will be available at www.ahlstrom.com > Investors > IR presentations on February 5, 2009 after the financial statements bulletin has been published.
     
     
    AHLSTROM'S FINANCIAL INFORMATION IN 2009
     
    Ahlstrom Corporation will publish its financial information in 2009 as follows:
     
    Annual report 2008: Week 12 
    Interim report January - March: Wednesday, April 29
    Interim report January - June: Friday, July 24
    Interim report January - September: Wednesday, October 28 
     
    Ahlstrom's Annual General Meeting will be held on Wednesday, March 25, 2009 at 1.00 p.m. at the Finlandia Hall, Mannerheimintie 13 e, Helsinki.
     
     
    Distribution:
    NASDAQ OMX Helsinki
    www.ahlstrom.com
    Main media
     
     
    Ahlstrom in brief
    Ahlstrom is a global leader in the development, manufacture and marketing of high performance fiber-based materials. Nonwovens and specialty papers, made by Ahlstrom, are used in a large variety of everyday products, such as filters, wipes, flooring, labels, and tapes. Based upon its unique fiber expertise and innovative approach, the company has a strong market position in several business areas in which it operates. Ahlstrom's 6,400 employees serve customers via sales offices and production facilities in more than 20 countries on six continents. In 2008, Ahlstrom's net sales amounted to EUR 1.8 billion. Ahlstrom's share is quoted on the NASDAQ OMX Helsinki. The company website is at www.ahlstrom.com.
     
     
    APPENDIX
    Consolidates financial statements 2008
     

     
    APPENDIX
     
    CONSOLIDATED FINANCIAL STATEMENTS
     
     
    ACCOUNTING PRINCIPLES
     
    This report has been prepared in accordance with the International Financial Reporting Standards (IFRS) and the accounting policies set out in IAS 34 (Interim Financial reporting) as adopted by EU and in the Group's Financial Statements for 2008.
     
    Application of amended or new IFRS-standards as of January 1, 2008      
     
    The Group has adopted the following amended standards and new interpretations as of January 1, 2008:
     
    - Amendments to IAS 39 and IFRS 7: Reclassification of Financial Assets
    - Amendments to IAS 39 and IFRS 7: Reclassification of Financial Assets
    - Effective date and Transition (not yet endorsed by EU)
    - IFRIC 11: IFRS 2 Group and Treasury Share Transactions
    - IFRIC 12: Service Concession Arrangements (not yet endorsed by EU)
    - IFRIC 14: IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction         
     
    The above mentioned interpretations do not have an effect on the consolidated financial statements.
     
    Financial statements bulletin is based on the audited Financial Statements of 2008.
     
     
     

    STATEMENT OF CHANGES IN EQUITY
     
    1) Issued capital
    2) Share premium
    3) Non-restricted equity reserve 
    4) Hedging reserve
    5) Translation reserve
    6) Retained earnings
    7) Minority interest
    8) Total equity
     
     
     
     
    *) Includes EUR -20.8 million payment to the pension fund to cover approximately half of the historical deficit of the defined benefit pension plan in the United Kingdom in Q1 2007.
     

     
     
     
     
     
     
     
     
     
     
     
    Market prices have been used in transactions with associated companies.
     
     
     
     
     

     
    Acquisitions in 2008
     
    In February, Ahlstrom acquired the Friend Group Inc., which consists of West Carrollton Parchment Company and West Carrollton Converting Company. The Friend Group has two sites in West Carrollton serving mainly the food packaging market in the USA. West Carrollton is a producer of vegetable parchment and has parchmentizing and converting operations located in West Carrollton, Ohio, the USA.
     
    Ahlstrom West Carrollton has been incorporated in Ahlstrom's accounts as part of Specialty Papers segment since February 1, 2008. Management estimates that if the acquisition had occurred on January 1, 2008, Ahlstrom Group's net sales and profit for the period would not have changed materially.
     
    The acquisition price includes professional fees amounting to EUR 0.1 million. The goodwill that arose from the acquisition of the shares of the Friend Group Inc. reflects the synergy benefits resulting from the expanded product offering to the Technical Papers' vegetable parchment business and provides synergies to our existing business as well as growth opportunities.
     
     
    The acquisition had the following effect on the Group's assets and liabilities:
     
     
    Ahlstrom has acquired the remaining 40% of the joint venture formed in September 2007 with Votorantim Celulose e Papel (VCP).  The price for this acquisition was EUR 28.0 million.           
     
    In addition, Ahlstrom has acquired the shares from the minority shareholders of two sales companies amounting to EUR 1.4 million.

     
     
     
     

     
     
     
     

     
    CALCULATION OF KEY FIGURES
     
     
     
     
     
     
     
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