Ahlstrom Financial Statements Bulletin 2015: Clear improvement in profitability in the last quarter of 2015

Ahlstrom Financial Statements Bulletin 2015: Clear improvement in profitability in the last quarter of 2015

Ahlstrom Corporation STOCK EXCHANGE RELEASE January 29, 2016 at 08.30

This is a summary of the Financial statements bulletin 2015. The complete report with tables is attached to this release and available at www.ahlstrom.com

Ahlstrom Financial Statements Bulletin 2015

Clear improvement in profitability in the last quarter of 2015

October-December 2015 compared with October-December 2014

  • Net sales EUR 255.0 million (EUR 247.0 million), showing an increase of 3.2%.Comparable net sales at constant currencies declined by 2.4%.
  • Operating profit EUR -16.4 million (EUR -4.3 million).
  • Operating profit excluding non-recurring items EUR 7.6 million (EUR -1.8 million), representing 3.0% (-0.7%) of net sales, and the ninth consecutive quarter of year-on-year improvement.
  • Profit before taxes EUR -20.5 million (EUR 5.7 million).
  • Earnings per share EUR -0.46 (EUR 0.09).
  • Net cash flow from operative activities EUR 23.3 million (EUR 18.9 million).

January-December 2015 compared with January-December 2014

  • Net sales EUR 1,074.7 million (EUR 1,001.1 million), showing an increase of 7.4%. Comparable net sales at constant currencies declined by 0.7%.
  • Operating profit EUR 21.9 million (EUR -3.7 million).
  • Operating profit excluding non-recurring items EUR 47.5 million (EUR 28.6 million), representing 4.4% (2.9%) of net sales.
  • Profit before taxes EUR 22.6 million (EUR -9.4 million), including a EUR 20.3 million capital gain booked from the sale of Munksjö Oyj shares.
  • Earnings per share EUR 0.06 (EUR -0.22).
  • Net cash flow from operative activities EUR 60.0 million (EUR 35.4 million).

Major events after the reporting period

  • Jan. 21, 2016: Agreement to divest the glassfiber business signed
  • Jan. 29, 2016: Redefined strategy and new long-term financial targets announced

                  
Marco Levi, President & CEO

"Improving profitability was the major theme of our performance in 2015, and this was also reflected in the last quarter of the year, as we clearly delivered according to our plans. We have achieved this through continued optimization of the existing product portfolio, enhanced pricing, as well cost savings. In addition, we have increased the capacity utilization of the new assets including the Binzhou wallcoverings production line and the Longkou plant. The slowdown in some of our key markets that started in the middle of last year persisted until the end of the reporting period, and had a clear negative impact on net sales.

The slowdown was most visible in the Filtration business area, and particularly in engine filtration.  The Food and Medical business area was also impacted by this to some extent, but as a whole it consistently improved during the year. The Building and Energy business area continued to make very good progress in terms of sales growth and profitability improvement. I'm also pleased with the accelerated pace of the ramp-up of our wallcoverings production line in China.

We start the new year with a much stronger balance sheet thanks to improved cash flow generation and the sale of non-core financial assets during last year. In 2016, our main focus will be on the implementation of the redefined strategy we announced today. We are building a stronger customer-driven company that is lean and focused, and have already taken action with the recently announced divestment of the glassfiber business."

Outlook for 2016

The company expects net sales from continuing operations in 2016 to be between EUR 950-1050 million. The adjusted operating profit from continuing operations is expected to be 4.2%-5.2% of net sales.

The outlook excludes the Building & Wind business unit, which will be reported as part of discontinued operations starting from the beginning of 2016. The adjusted operating profit excludes restructuring costs, impairment charges and capital gains or losses.

Dividend proposal

The Board of Directors proposes to the Annual General Meeting that a dividend totaling EUR 0.31 per share be paid for the financial year ended on December 31, 2015.  

Key figures

EUR million Q4/2015 Q4/2014 Change, % Q1-Q4/2015 Q1-Q4/2014 Change, %
Net sales 255.0 247.0 3.2 1 074.7 1 001.1 7.4
EBITDA excl. NRI 21.6 11.5 87.8 104.8 78.6 33.2
  % of net sales 8.5 4.7   9.7 7.9  
Operating profit -16.4 -4.3   21.9 -3.7  
  % of net sales -6.4 -1.7   2.0 -0.4  
Operating profit excl. NRI 7.6 -1.8   47.5 28.6 66.1
  % of net sales 3.0 -0.7   4.4 2.9  
Profit / Loss before taxes -20.5 5.7   22.6 -9.4  
Profit / Loss for the period -20.2 5.6   8.6 -10.3  
Earnings per share -0.46 0.09   0.06 -0.22  
Return on capital employed, % -11.4 -2.6   3.9 -0.5  
Net cash flow from operative activities * 23.3 18.9 23.1 60.0 35.4 69.2
Capital expenditure 13.7 16.3 -16.1 27.3 45.4 -39.9
Interest-bearing net liabilities * 195.9 253.8 -22.8 195.9 253.8 -22.8
Gearing ratio, % * 65.4 79.3   65.4 79.3  
Equity ratio, % * 35.8 34.8   35.8 34.8  
Number of personnel, at the end of period 3,311 3,401 -2.6 3,311 3,401 -2.6

EBITDA = earnings before interest, taxes, depreciation and amortization
NRI = non-recurring item
* Including discontinued operations in 2014.

Major events after the reporting period

Divestment of the glassfiber business

On January 21, 2016, Ahlstrom signed an agreement to divest its Building & Wind business unit to Owens Corning, a U.S.-based company listed on the New York Stock Exchange. The initial debt and cash free purchase price, which is subject to EBITDA adjustment, is EUR 73 million.

The Building & Wind business unit produces glassfiber tissue used mainly in flooring applications as well as reinforcements used in windmill blades. In 2014 the net sales of the business was approximately EUR 77 million and the business was profitable. The unit operates two plants in Finland in Karhula and Mikkeli and one in Tver, Russia, employing in total approximately 260 persons. It serves markets mainly in Europe and Russia as well as in North America and Asia.

The transaction is expected to be completed during the first half of 2016 and is subject to customary completion terms, such as merger clearances from relevant competition authorities.

Ahlstrom expects to book a capital gain of approximately EUR 25 million following the completion of the asset deal. From the beginning of 2016 the Building & Wind business will be reported as part of discontinued operations until the transaction has been completed.

Redefined strategy and long-term financial targets announced

Ahlstrom completed a comprehensive strategy review and has now redefined its strategy extending to the year 2018. Global trends faced by our customers steer our product offering and provide us with a wealth of opportunities. We are committed to growing and creating stakeholder value by providing the best performing sustainable fiber-based materials.

As part of the implementation the company's business structure was simplified and reorganized into two business areas: Filtration & Performance and Specialties. The aim of this change is to increase market and customer focus. Both segments have business unit specific strategies and operating models. This enables us to provide customer-driven product development and tailored customer service, cost efficiency, better allocation of resources, and specific go-to-market approaches.

The roadmap for execution outlines the change in strategy and is focused on commercial excellence, a new lean operating model, organic growth via higher asset turnover and growth via new platforms.

As part of the redefined strategy, the Board of Directors has approved Ahlstrom's new long-term financial targets over the economic cycle:

  • Operating profit margin: Adjusted operating profit margin to be above 8% by 2018
  • Gearing: Gearing to be maintained below 100%
  • Dividend policy: We aim for a stable dividend, increasing over time, based on the annual net income performance

The adjusted operating profit margin excludes restructuring costs, impairment charges, capital gains or losses, and discontinued operations.
Previous long-term financial targets were:

  • Net sales: at least 5% underlying annual growth
  • Net sales from new products: at least 20%
  • Operating profit*: 7% of net sales by 2016 and 10% of net sales beyond 2016
  • Gearing ratio: to be maintained within the 50-80% range

*Excluding non-recurring items.

Proposal for the distribution of profit

Ahlstrom aims to pay a stable and over time increasing dividend based on the annual net income performance of the company.

The distributable funds on the balance sheet of Ahlstrom Corporation as of December 31, 2015 amounted to EUR 415,834,745.25.

The Board of Directors will propose to the Annual General Meeting that for the financial year which ended on December 31, 2015, a dividend totaling EUR 0.31 per share be paid based on the dividend policy mentioned above.

The company's shares will trade together with the right to dividend until April 5, 2016. The dividend will be paid to each shareholder who is registered in the Company's shareholder register maintained by Euroclear Finland Ltd on the record date of April 7, 2016. On December 31, 2015, the number of shares of the company amounted to 46,670,608 based on which the maximum amount that can be distributed as dividend would be EUR 14,467,888.48. No dividend will be paid based on shares owned by the company or its subsidiaries. The Board of Directors proposes that the dividend be paid on April 14, 2016.

In addition, the Board of Directors proposes that EUR 60,000 will be reserved for donations at the discretion of the Board.

Outlook in 2016

The company expects net sales from continuing operations in 2016 to be between EUR 950-1050 million. The adjusted operating profit from continuing operations is expected to be 4.2%-5.2% of net sales.

The outlook excludes the Building & Wind business unit, which will be reported as part of discontinued operations starting from the beginning of 2016. The adjusted operating profit excludes restructuring costs, impairment charges and capital gains or losses.

Short-term risks

The global economic outlook remains uncertain. The euro area continues to suffer from slower growth and the recent slowdown in China has raised concerns, although the expected shift in the country's economic structure towards more consumer consumption and less investment can also provide opportunities.

Slower-than-anticipated economic growth poses risks to Ahlstrom's financial performance. It may lead to lower sales volumes and force the company to initiate market-related shutdowns at plants, which could affect profitability. Tightened competition through competitors' increased production capacity, aggressive pricing as well as adoption of new technologies can also affect profitability. Shifts in the pattern of demand for the company's products can strain the flexibility of its asset base and leave some assets underutilized, while others are over-loaded.

Further swings in currency exchange rates may lead to fluctuations in net sales and profitability. Ahlstrom's main raw materials are wood pulp, synthetic fibers, and chemicals. The prices of these key raw materials are volatile and possible increases can affect the company's profitability depending on its ability to mitigate the risk.

Disclosure procedure

Ahlstrom publishes its Financial statements bulletin 2015  enclosed to this stock exchange release. The report is attached to this release in pdf format and is also available on the company's web site at www.ahlstrom.com.

Additional information

Marco Levi, President & CEO, tel. +358 (0)10 888 4700
Sakari Ahdekivi, CFO, tel. +358 (0)10 888 4768

Ahlstrom's President & CEO Marco Levi and CFO Sakari Ahdekivi will present the financial statements at an analyst and press conference in Helsinki on Friday, January 29 at 11:00 a.m. Finnish time. The event will take place at Ahlstrom's head office, Alvar Aallon katu 3 C, second floor, Antti meeting room.

The combined webcast and teleconference will be held in English and can be viewed at the following address: http://qsb.webcast.fi/a/ahlstrom/ahlstrom_2016_0129_q4/

Conference call details:

In Finland +358 (0)9 2313 1619
In Sweden +46 (0)8 5065 3933
In the U.K. +44 (0)20 3427 1929

To participate via telephone, please dial a few minutes before the conference begins. A list of phone numbers for other countries is available at www.ahlstrom.com/Investors. The confirmation code is 5738142.

An on-demand webcast of the conference will be available on Ahlstrom's website for twelve months after the call.

The presentation material will be available at www.ahlstrom.com/en/Investors/Reports-and-presentations/2015/ after the report has been published

Financial information in 2016

Report Date of publication Silent period
Interim report January-March 2016 Thursday, April 28 April 1-27
Interim report January-June 2016 Wednesday, August 3 July 1-August 2
Interim report January-September 2016 Friday, October 28 October 1-27

During the silent period, Ahlstrom will not communicate with capital market representatives.

Ahlstrom in brief

Ahlstrom provides innovative fiber-based materials with a function in everyday life. We are committed to growing and creating stakeholder value by proving the best performing sustainable fiber-based materials. Our products are used in everyday applications such as filters, medical fabrics, life science and diagnostics, wallcoverings, tapes, and food and beverage packaging. In 2015, Ahlstrom's net sales amounted to EUR 1.1 billion. Our 3,300 employees serve customers in 22 countries. Ahlstrom's share is quoted on the Nasdaq Helsinki. More information available at www.ahlstrom.com.

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