Munksjö Oyj Interim Report January-September 2013 - Integration proceeding according to plan

Munksjö Oyj Interim Report January-September 2013 - Integration proceeding according to plan

Helsinki, Finland, 2013-11-19 07:30 CET (GLOBE NEWSWIRE) --

MUNKSJÖ OYJ, INTERIM REPORT, 19 November, 2013 at 7.30 CET

Highlights of the third quarter 2013

-- Net sales for the third quarter increased to MEUR 245,1 (146,3), as a
result of the first phase of the business combination.
-- Adjusted EBITDA was MEUR 11,0 (10,1).
-- Operating result adjusted for non-recurring items amounted to MEUR -0,2
(3,8). Most of the non-recurring items, totalling MEUR -1,9 (-4,6), was
mainly costs for activities for achieving synergies.
-- Operating result was MEUR -2,1 (-0,8).
-- Earnings per share (EPS) were EUR -0,2 (-0,6).

Highlights of the reporting period January-September 2013

-- At the end of May, the first phase of the business combination was
completed.
-- Trading with Munksjö Oyj's shares commenced on the Helsinki Stock Exchange
7 June.
-- Net sales increased to MEUR 607,6 (448,0), primarily as a result of the
completion of the first phase of the business combination.
-- Adjusted EBITDA was MEUR 39,0 (33,4).
-- Operating result adjusted for non-recurring items amounted to MEUR 13,1
(15,0). Most of the non-recurring items, totalling MEUR -32,5 (-7,2),
relates to the business combination.
-- Operating result was MEUR -19,4 (profit of 7,8).
-- Earnings per share (EPS) were EUR -1,3 (-0,5).
-- Interest-bearing net debt at the end of the reporting period was MEUR 257,5
(245,0), equivalent to a gearing of 66,8% (118,0%).

KEY FIGURES (MEUR) Jul-Sep Jan-Sep Full year
2013 2012 2013 2012 2012
Net sales 245,1 146,3 607,6 448,0 607,1
EBITDA (adj*) 11,0 10,1 39,0 33,4 42,3
EBITDA margin, % (adj*) 4,5 6,9 6,4 7,5 7,0
EBITDA 9,1 5,5 6,5 26,2 32,8
EBITDA margin, % 3,7 3,7 1,1 5,8 5,4
Operating result (adj*) -0,2 3,8 13,1 15,0 16,9
Operating margin, % (adj*) -0,1 2,6 2,2 3,3 2,8
Operating result -2,1 -0,8 -19,4 7,8 7,5
Operating margin, % -0,9 -0,5 -3,2 1,7 1,2
Net result -7,3 -6,7 -31,2 -5,8 -10,4
Earnings per share (EPS), EUR -0,2 -0,6 -1,3 -0,5 -0,9
Interest-bearing net debt 257,5 245,0 257,5 245,0 217,3

*Adjusted for non-recurring items

Munksjö's President and CEO, Jan Åström

"This is the second interim report issued by Munksjö Oyj since the completion
of the business combination in May. Integration efforts are proceeding at full
intensity. The projects enabling the business combination have now been brought
to completion while the more long-term projects have been initiated. Synergy
benefits are expected to reach MEUR 20-25, of which a level of 60 per cent
should be achieved in 12 months and the final target level in 36 months.

The second phase of the combination, in which Ahlstrom's specialty papers
business in Jacarei, Brazil is combined with Munksjö, is expected to be
completed by the end of the current year. With this, the business combination
will be concluded in its entirety.

Normally, demand for our specialty papers decreases in July and August because
of the holiday season in Europe. As in the past, we have responded to this
seasonal change in demand by shutting down the production facilities for the
holidays and perform planned maintenance operations. This year's stop had the
same magnitude as previous years.

In terms of volumes, demand for many of Munksjö's products is higher than in
2012, even though the market conditions for specialty papers continued to be
challenging in the third quarter.

The programme to substantially improve profitability in business area Graphics
and Packaging has now been launched and the first results in financial
performance were noticeable in September. The programme foresees a combination
of reduced costs, redistribution of volumes from Munksjö's other business
areas, investments in quality and product development as well as benefits from
the on-going integration process. We are building the foundation to be able to
deliver on our financial target of 12 per cent EBITDA-margin.

I am pleased with the current development and the results we have achieved
during the first four months with the new Munksjö and I am looking forward to
the completion of the transaction with Jacarei during the fourth quarter."

Outlook for 2013

The market development and demand has recovered after the holiday shutdowns.
However the market situation in the business areas Release Liners and Graphics
and Packaging remains challenging. The anticipated decrease in the result,
compared to last year, for these two business areas is expected to exceed the
positive impact of the synergy benefits and stand-alone savings. The result for
the fourth quarter will be affected by non-recurring items due to the measures
taken to achieve synergy benefits, as well as the programme for improving
profitability in the business area Graphics and Packaging.

Forming a global leader in specialty paper - combining Munksjö AB with
Ahlstrom's Label and Processing business area

On 28 August 2012, Munksjö Oyj, Munksjö AB, EQT and Ahlstrom Corporation agreed
on the intent to form a global leader in specialty papers by combining Munksjö
AB with Ahlstrom's Label and Processing business area in Europe (LP Europe) and
Brazil (Coated Specialties). In 2012, the new company had in aggregate net
sales of EUR 1,2 billion, approximately 3 000 employees, 15 production sites in
Europe, Brazil and China, and a worldwide sales organisation. The operations
are divided into four business areas: Decor, Release Liners, Industrial
Applications, and Graphics and Packaging.

The business combination is a natural step in Munksjö's strategy to focus on
growth within specialty papers. Munksjö Oyj is the world's largest specialty
paper company with a strong position in selected market segments. The
acquisition will boost competitiveness and efficiency while offering further
potential for organic and strategic growth.

Synergy benefits and integration

Annual synergy benefits resulting from the business combination are expected to
reach between MEUR 20-25 related to procurement, production efficiency,
economies of scale and improved overall performance and efficiency within the
organisation. Sixty per cent of the total synergy level is expected to be
achieved after the first 12 months and the remaining part within the following
two years.

Non-recurring items to achieve synergies are estimated to MEUR 10-15 and the
ambition is that the majority shall affect this years' result. Annual cost
savings as a result of the separation of the specialty paper operations from
Ahlstrom's other business operations, will amount to MEUR 10-15 annually.

Integration efforts were launched in May when the first phase of the business
combination was completed and are continuing according to plan. The synergy
benefits gained by the end of the third quarter are equivalent to approximately
30 per cent of the total expected annual synergy level.

The Munksjö Group

Jul-Sep Jan-Sep Full year
MEUR 2013 2012 2013 2012 2012
Reported 1)
Net sales 245,1 146,3 607,6 448,0 607,1
EBITDA (adj*) 11,0 10,1 39,0 33,4 42,3
EBITDA margin, % (adj*) 4,5 6,9 6,4 7,5 7,0
EBITDA 9,1 5,5 6,5 26,2 32,8
EBITDA, margin % 3,7 3,7 1,1 5,8 5,4
Operating result (adj*) -0,2 3,8 13,1 15,0 16,9
Operating margin, % (adj*) -0,1 2,6 2,2 3,3 2,8
Operating result -2,1 -0,8 -19,4 7,8 7,5
Operating margin, % -0,9 -0,5 -3,2 1,7 1,2
Net result -7,3 -6,7 -31,2 -5,8 -10,4
Capital expenditure 7,6 4,7 14,4 9,4 14,8
Employees, FTE 2 594 1 684 2 073 1 684 1 679
Pro forma I (incl. LP Europe) 2)
Net sales 245,1 255,7 788,6 790,4 1 055,6
EBITDA** (adj*) 11,0 13,0 43,6 48,2 69,2
EBITDA** margin, % (adj*) 4,5 5,1 5,5 6,1 6,6
EBITDA** 9,1 8,4 38,0 14,1 32,9
EBITDA**, margin % 3,7 3,3 4,8 1,8 3,1
Delivery volumes, tonnes 192 500 193 933 601 302 598 947 796 900
Pro forma II (incl. LP Europe and Coated Specialties) 3)
Net sales 265,1 281,0 855,1 866,1 1 154,6
EBITDA** (adj*) 12,1 13,2 47,3 53,3 76,6
EBITDA** margin, % (adj*) 4,6 4,7 5,5 6,2 6,6
EBITDA** 9,8 8,6 41,3 18,7 39,8
EBITDA**, margin % 3,7 3,1 4,8 2,2 3,4
Delivery volumes, tonnes 218 292 219 087 676 357 674 932 897 371

* Adjusted for non-recurring items
** Does not include stand-alone cost savings or synergies with the exception of
those obtained after 27 May linked to LP Europe business. Further information,
under the heading Pro forma information in the notes to the interim report.
1) Includes LP Europe from 27 May 2013
2) Includes LP Europe from 1 January 2012
3) Includes LP Europe and Coated Specialties from 1 January 2012

Reported

Third quarter 2013

Planned maintenance operations were carried out during the third quarter as
part of the yearly shutdowns for the holiday season. While the scope of the
maintenance work corresponded to plan but the negative impact on the financial
result was slightly higher than last year.

Net sales increased to MEUR 245,1 (146,3). The acquired business contributed an
additional MEUR 105,1 to net sales.

EBITDA adjusted for non-recurring items was MEUR 11,0 (10,1) and the adjusted
EBITDA margin 4,5% (6,9%). Operating result adjusted for non-recurring items
was MEUR -0,2 (profit of 3,8). As previously communicated in connection to the
financial result for the second quarter, the non-recurring items were
primarily related to the measures taken to achieve synergy benefits and
amounted to MEUR -1,9 (-4,6).

Operating result was MEUR -2,1 (-0,8).

January-September 2013

The market conditions for Munksjö's four business areas varied during the
reporting period. A more detailed description for each area is provided on the
following pages. Munksjö's net sales increased to MEUR 607,6 (448,0). The
acquired business contributed an additional MEUR 152,0 to net sales.

While somewhat lower prices on raw material during the first nine months had a
positive effect on profitability, the less favourable product mix reduced the
effect. Operating profit adjusted for non-recurring items was MEUR 13,1 (15,0)
and operating margin 2,2% (3,3%).

Most of the non-recurring items totalling MEUR -32,5 (-7,2) were mainly related
to costs for the business combination. Munksjö has made a commitment to pay
certain costs arising from the divestiture of part of the business in
Osnabrück, Germany, required by the European Commission's Competition Authority
as a condition for regulatory approval. This commitment is included in the
non-recurring items in the amount of MEUR 13,5. The cost was booked in the
second quarter.

The operating result was MEUR -19,4 (7,8) and net result MEUR -31,2 (-5.8).

Pro forma II

Third quarter 2013

Pro forma II net sales decreased by 5,6% to MEUR 265,1 (281,0). Pro forma II
EBITDA adjusted for non-recurring items was MEUR 12,1 (13,2).

January-September 2013

Pro forma II net sales decreased slightly by 1,3% to MEUR 855,1 (866,1). Apart
from Release Liners, all business areas had higher or equivalent net sales than
the corresponding period last year. Net sales within Release Liners decreased
slightly in Europe as a result of lower volumes. Year-on-year, the BRL
(Brazilian Real) weakened significantly against the Euro, which has affected
the net sales and result of the Brazilian operation measured in Euro.

Pro forma II EBITDA adjusted for non-recurring items was MEUR 47,3 (53,3). The
lower result is mainly related to the business areas Release Liners and
Graphics and Packaging.

Webcast and conference call

A combined news conference, conference call and live webcast for investors,
analysts and media will be arranged on the publishing day, 19 November, 2013,
at 10.00 am CET (11.00 am EET, 9.00 am UK time) at restaurant Savoy, room
Salikabinetti (Eteläesplanadi 14, 7th floor, Helsinki). The report will be
presented by President and CEO Jan Åström. The event will be held in English.

The conference call and live webcast can be followed on the Internet and an
on-demand version of the webcast will be available on the webpage,
www.munksjo.com later the same day.

To join the conference call, participants are requested to dial one of the
numbers below 5 to 10 minutes prior to the start of the event.

Webcast and conference call information:

US callers: +1 334 323 6201
UK callers: +44 (0)20 7162 0077

Conference ID: 937161

Link to the webcast

Munksjö Oyj

For further information, please contact:

Jan Åström, President and CEO, tel. +46 10 250 1001
Kim Henriksson, CFO, tel. +46 10 250 1015
Attachments:Munksjö Oyj Interim Report January_September 2013.pdf

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