Munksjö Oyj's Interim Report for January-September 2016: All-time high third quarter profitability and cash flow

Munksjö Oyj's Interim Report for January-September 2016: All-time high third quarter profitability and cash flow

MUNKSJÖ OYJ, INTERIM REPORT, 26 OCTOBER 2016 AT 7:30 AM CEST Munksjö Oyj's Interim Report for January-September 2016: All-time high third quarter profitability and cash flow Highlights of the third quarter 2016 - Net sales were EUR 269.6 (269.3) million. - Adjusted EBITDA was EUR 29.5 (20.0) million and the adjusted EBITDA margin was 10.9% (7.4%). Items affecting comparability (IAC) amounted to EUR 0.0 (-4.9) million. - Operating result was EUR 15.5 (1.9) million and net result EUR 8.3 (3.2) million. - Earnings per share (EPS) were EUR 0.16 (0.07). - Operating cash flow was EUR 32.6 (9.8) million. - In addition to the annual maintenance and vacation stops the planned maintenance stop was carried out at the production facility for specialty pulp. Highlights of January-September 2016 - Net sales were EUR 860.5 (840.7) million. - Adjusted EBITDA was EUR 100.6 (71.5) million and the adjusted EBITDA margin was 11.7% (8.5%). Items affecting comparability (IAC) amounted to EUR 0.0 (-7.3) million. - Operating result was EUR 58.5 (24.2) million and net result EUR 31.5 (15.6) million. - Earnings per share (EPS) were EUR 0.62 (0.30). - Operating cash flow was EUR 73.0 (11.0) million. KEY FIGURES Jul-Sep Jan-Sep Jan-Dec MEUR 2016 2015 Chang 2016 2015 Change, % 2015 e, % Net sales 269.6 269.3 0% 860.5 840.7 2% 1,130.7 EBITDA (adj.*) 29.5 20.0 48% 100.6 71.5 41% 93.6 EBITDA margin, % (adj.*) 10.9 7.4 11.7 8.5 8.3 EBITDA 29.5 15.1 95% 100.6 64.2 57% 86.3 EBITDA margin, % 10.9 5.6 11.7 7.6 7.6 Operating result (adj.*) 15.5 6.8 128% 58.5 31.5 86% 40.0 Operating margin, % 5.7 2.5 6.8 3.7 3.5 (adj.*) Operating result 15.5 1.9 n.m. 58.5 24.2 142% 32.7 Operating margin, % 5.7 0.7 6.8 2.9 2.9 Net result 8.3 3.2 159% 31.5 15.6 102% 22.8 Earnings per share (EPS), 0.16 0.07 129% 0.62 0.30 107% 0.44 EUR Interest-bearing net debt 199.8 264.1 -24% 199.8 264.1 -24% 227.4 * Adjusted for items affecting comparability (IAC) A change marked as n.m. indicates that the percentage change is not meaningful Unless otherwise indicated, the figures in parentheses refer to the figures for the equivalent period in 2015. This financial report is unaudited. It is published in Swedish, Finnish and English. In case of any discrepancies between the three versions, the Swedish text shall prevail. Comment from Munksjö’s President and CEO, Jan Åström “Our year has developed positively and according to our ambitious targets. Our clearly improved profitability was already visible during the first six months. Our underlying performance was even stronger in the quarter reaching an all-time high level for a third quarter, even though it was impacted by the planned maintenance stop at the production facility for specialty pulp, which reduced EBITDA with approximately EUR 4 million. Last year the maintenance stop at the facility was made in the second quarter. The total EBITDA improvement during the first nine months amounted to EUR 29 million. Approximately half of this improvement was a result of our own actions related to our profitability improvement plan. The rest was mainly related to favourable cost conditions. We estimate that the demand situation continues to be on the current good level also during the last quarter of the year. We have during the first nine months of 2016 been able to show that our offering of high-quality and sustainable customer solutions have resulted in an increase in delivery volumes by 4 per cent. The improved financial result has increased our operating cash flow and has clearly strengthened our balance sheet. Our net debt is on the lowest level since the company was formed and our gearing is clearly below our target level, which supports our strategic growth agenda. In September we announced an investment amounting to EUR 14 million in Arches, France in order to secure our leading position within abrasive backings. The investment will be made due to an increased customer demand, and includes a rebuild of a paper machine to allow for new product applications and a more efficient production. After the rebuild, the paper machine is planned to be ramped up during the first quarter of 2018. Our performance during 2016 has further strengthened the company and I look positively at our development for the rest of the year and the years to come.” Outlook The demand outlook for the last three months of 2016 for Munksjö’s specialty paper products is expected to remain stable compared with the current good level and to reflect the seasonal pattern. The seasonal shutdowns at the end of 2016 are expected to be carried out to about the same extent as in 2015. The EBITDA margin in 2016 is expected to further improve compared with 2015 driven by the on-going profitability improvement plan. The cash flow effect of capital expenditure for fixed assets for 2016 is expected to be approximately EUR 40 million. Plan to reach profitability target at the end of 2016 Munksjö’s profitability target is to reach an EBITDA margin of 12 per cent at the end of 2016. The drivers for the profitability improvement include continued operational efficiency, profitable growth, product and service quality leadership and utilising the position as a market and innovation leader. Within operational efficiency, the majority of the planned actions include measures to adjust our cost structure. Of the realised actions in the financial result in January-September 2016, the majority were related to operational efficiency. Further information on the actions related to the profitability improvement plan and their effect on the financial result can be found under the heading Munksjö Group. Events after the end of the reporting period - There are no significant events after the end of the reporting period. The Munksjö Group Jul-Sep Jan-Sep Jan-Dec MEUR 2016 2015 Change, 2016 2015 Change, 2015 % % Net sales 269.6 269.3 0% 860.5 840.7 2% 1,130.7 EBITDA (adj.*) 29.5 20.0 48% 100.6 71.5 41% 93.6 EBITDA margin, % 10.9 7.4 11.7 8.5 8.3 (adj.*) EBITDA 29.5 15.1 95% 100.6 64.2 57% 86.3 EBITDA, margin % 10.9 5.6 11.7 7.6 7.6 Operating result 15.5 6.8 128% 58.5 31.5 86% 40.0 (adj.*) Operating margin, % 5.7 2.5 6.8 3.7 3.5 (adj.*) Operating result 15.5 1.9 n.m. 58.5 24.2 142% 32.7 Operating margin, % 5.7 0.7 6.8 2.9 2.9 Net result 8.3 3.2 159% 31.5 15.6 102% 22.8 Capital expenditure 10.6 10.9 -3% 28.5 30.9 -8% 39.8 Employees, FTE 2,784 2,808 -1% 2,756 2,782 -1% 2,774 * Adjusted for items affecting comparability (IAC) A change marked as n.m. indicates that the percentage change is not meaningful Third quarter 2016 Total group delivery volumes increased and were higher than in the corresponding period last year. The positive volume development in most of the product segments, especially the Brazilian paper business in Business Area Release Liners, more than compensated for the lower volume for the specialty pulp business, which was affected by the maintenance stop at the production facility. Net sales increased to EUR 269.6 (269.3) million, as higher volumes more than compensated for the lower average price. EBITDA adjusted for IAC increased to EUR 29.5 (20.0) million and the adjusted EBITDA margin was 10.9% (7.4%). The positive result effect of lower variable costs, driven mainly by operational efficiency related actions, more than compensated for the negative result effect of the lower average price and higher fixed costs, which were mainly related to the maintenance stop at the pulp production facility and accruals for incentive plans. The annual maintenance and vacation shutdowns in the third quarter were carried out to about the same extent as in 2015. The planned maintenance stop at the production facility for specialty pulp had a negative EBITDA effect of approximately EUR 4 million. IAC amounted to EUR 0.0 (-4.9) million. The operating result was EUR 15.5 (1.9) million and net result EUR 8.3 (3.2) million. In the reporting period, the currency hedging result impacting operating profit amounted to EUR -0.9 (-1.1) million. Exchange losses on financial assets and liabilities were EUR 0.1 (profit of 4.0) million and are reported in financial items. January-September 2016 Total group delivery volumes increased in all four business areas. The delivery volume development was particularly strong in the specialty pulp business and the Brazilian paper business in business area Release Liners. Net sales increased to EUR 860.5 (840.7) million, as higher volumes compensated for the lower average price, mainly driven by the lower sales price for long fibre specialty pulp and a different product mix compared to corresponding period last year. EBITDA adjusted for IAC increased to EUR 100.6 (71.5) million and the adjusted EBITDA margin was 11.7% (8.5%). Higher delivery volumes had a positive effect of EUR 11 million. This was offset by EUR 11 million as an effect of the lower average price. Lower variable costs, driven mainly by operational efficiency related actions, the lower energy price and lower raw material prices had a positive result effect of EUR 41 million. Higher fixed costs had a negative result effect of EUR 13 million, mainly as a result of accruals for incentive plans and increased manning related to higher production volumes. Out of the total profitability improvement, amounting to EUR 29 million, approximately half was related to actions related to the plan to reach the profitability target. The annual maintenance and vacation shutdowns in the third quarter were carried out to about the same extent as in 2015. The maintenance shut down at the pulp production facility in Aspa, Sweden was carried out in September 2016 and had a negative EBITDA effect of approximately EUR 4 million in the third quarter. IAC amounted to EUR 0.0 (-7.3) million. The operating result was EUR 58.5 (24.2) million and net result EUR 31.5 (15.6) million. In the reporting period, the currency hedging result impacting operating profit amounted to EUR -0.9 (-4.7) million. Exchange losses on financial assets and liabilities were EUR 3.1 (profit of 8.2) million and are reported in financial items. Webcast and conference call A combined news conference, conference call and live webcast will be arranged on the publishing day news conference, conference call and live webcast will be arranged on the publishing day 26 October 2016 at 10:00 a.m. CEST (11:00 a.m. EEST, 8:00 a.m. GMT) at Munksjö’s headquarters in Stockholm (WTC, Klarabergsviadukten 70, Elevator D, 5th floor). 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 same webpage later the same day. To join the conference call, participants are requested to dial one of the numbers below 5-10 minutes prior to the start of the event. Webcast and conference call information Finnish callers: +358 (0)9 7479 0404 Swedish callers: +46 (0)8 5664 2793 US callers: +1 719 325 2213 UK callers: +44 (0)20 3043 2024 Conference ID: 6795982 Link to the webcast: http://qsb.webcast.fi/m/munksjo/munksjo_2016_1026_q3/ For further information, please contact Jan Åström, President and CEO, tel. +46 10 250 1001 Pia Aaltonen-Forsell, CFO, tel. +46 10 250 1029 Made by Munksjö - Intelligent paper technology Munksjö is a world-leading manufacturer of advanced paper products developed with intelligent paper technology. Munksjö offers customer-specific innovative design and functionality in areas ranging from flooring, kitchens and furnishings to release papers, consumer-friendly packaging and energy transmission. The transition to a sustainable society is a natural driving force for Munksjö's growth as the products can replace non-renewable materials. This is what "Made by Munksjö" stands for. Given Munksjö's global presence and way of integrating with the customers, the company forms a worldwide service organisation with approximately 2,900 employees and 15 facilities located in France, Sweden, Germany, Italy, Spain, Brazil and China. Munksjö's share is listed on Nasdaq in Helsinki and Stockholm. Read more at www.munksjo.com.
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