Ahlstrom-Munksjö interim report January-September 2018: Profit improved in Q3 – major steps in the implementation of our strategy

Ahlstrom-Munksjö interim report January-September 2018: Profit improved in Q3 – major steps in the implementation of our strategy

AHLSTROM-MUNKSJÖ OYJ, INTERIM REPORT RELEASE OCTOBER 30, 2018 at 12:02

This release is a summary of Ahlstrom-Munksjö’s interim report January-September 2018. The complete report is attached to this release as a pdf-file. It is also available at www.ahlstrom-munksjo.com.

Q3/2018 VS Q3/2017

  • Net sales EUR 565.6 million (EUR 541.6 million), an increase of 4.4%. In constant currency growth was 7.8%.

  • Comparable EBITDA EUR 71.8 million (EUR 70.4 million), representing 12.7% (13.0%) of net sales

  • Continued success in compensating for variable cost increases

  • Net profit EUR 19.4 million (EUR 17.5 million)

  • Earnings per share EUR 0.20 (EUR 0.18)

  • Comparable EPS excluding depreciation arising from mergers EUR 0.33 (EUR 0.29)

Highlights during and after the reporting period

  • Major steps in the execution of our strategy: Completion of the acquisitions of Expera Specialty Solutions and the Caieiras specialty paper mill significantly strengthen our presence in the Americas

  • Investment of EUR 21 million to improve product mix of the Jacarei plant in Brazil in the Coated Specialties business

  • A plan to permanently close one paper machine to significantly improve the competitiveness of the coated one-sided product segment

  • An Extraordinary General Meeting authorized the Board of Directors to conduct a rights issue worth approximately EUR 150 million

1-9/2018 VS 1-9/2017 proforma

  • Net sales EUR 1,725.8 million (EUR 1,685.5 million), an increase of 2.4%. In constant currency growth was 6.3%.

  • Comparable EBITDA EUR 205.6 million (EUR 227.2 million), representing 11.9% (13.5%)

  • Net profit EUR 62.7 million (EUR 69.2 million)

  • Earnings per share EUR 0.64 (EUR 0.71)

  • Comparable EPS excluding depreciation arising from mergers EUR 0.98 (EUR 0.98)

In this interim report, January-September 2017 and full-year 2017 figures are presented on a pro forma basis to illustrate the financial impact of the merger between Ahlstrom and Munksjö as if it had been completed at the beginning of 2015.
The appendix, including unaudited consolidated financial statements, has been prepared according to the IFRS standards.

Key figures

EUR MILLION, OR AS INDICATED Q3/2018 Q3/2017 Q2/2018 1-9/2018 1-9/2017 2017
Net sales 565.6 541.6 587.8 1,725.8 1,685.5 2,232.6
Comparable EBITDA 71.8 70.4 67.1 205.6 227.2 290.4
Comparable EBITDA margin, % 12.7 13.0 11.4 11.9 13.5 13.0
Items affecting comparability included in EBITDA -8.7 -7.0 -6.8 -20.5 -13.4 -23.8
EBITDA 63.1 63.3 60.4 185.1 213.9* 266.6*
Comparable operating result excl. depreciations arising from mergers ** 50.1 46.7 45.2 139.8 154.9 195.2
Comparable operating result 42.4 38.8 37.5 116.9 131.4 163.8
Comparable operating result margin, % 7.5 7.2 6.4 6.8 7.8 7.3
Items affecting comparability included in operating result -8.7 -7.0 -6.8 -20.5 -13.4 -23.8
Operating result 33.7 31.7 30.7 96.3 117.9* 140.0*
Net profit 19.4 17.5 22.1 62.7 69.2* 88.5*
Earnings per share (basic), EUR 0.20 0.18 0.22 0.64 0.71* 0.91*
Comparable EPS excl. depreciations arising from mergers, EUR ** 0.33 0.29 0.34 0.98 0.98 1.32
Cash generated from operating activities 28.0 51.6 27.5 60.7 135.7 212.9
Depreciation and amortization *** 29.4 31.6 29.6 88.7 95.9 126.5
Capital expenditure 38.5 17.8 31.4 95.6 49.5 89.7
Net debt 456.6 404.2 422.2 456.6 404.2 375.3
Gearing ratio, % 44.1 39.3 41.6 44.1 39.3 36.2

*Fair valuation adjustment of EUR -11 million (EUR -7.6 million net of tax) on acquired Ahlstrom inventories is excluded as it is adjusted in the 2016 pro forma income statement.                                                                     
** Excluding both depreciation and amortizations from mergers.                                            
*** Depreciation and amortization arising from mergers was EUR 7.7 million (EUR 7.8 million) in July-September.
                             
The actual figures for Q1-Q3 2017 and full-year 2017 are presented in the appendix only.

Ahlstrom-Munksjö has adopted the European Securities and Markets Authority (ESMA) guidelines on Alternative Performance Measures (APMs) to reflect the underlying business performance and improve comparability. These measures should, however, not be considered as a substitute for measures of performance in accordance with IFRS. Alternative performance measures are derived from performance measures reported in accordance with IFRS by adding or deducting items affecting comparability (IAC), or purchase price allocation (PPA,) and they are called “comparable”. More details on APMs and key figures is available in the appendix.

CEO COMMENTS

In the third quarter, most of our businesses performed well. I’m pleased, that our gross margin for products improved for the second consecutive quarter and exceeded last year’s level. We continued to succeed in compensating for the sharply increased raw material and energy costs. Thanks to our successful commercial strategy and improved cost efficiency, driven by synergy benefits, our third quarter comparable EBITDA improved sequentially and exceeded last year’s level.

The coated one-side product segment, part of the Food Packaging business in the Specialties business area, is one of the few segments where our offering and position are not optimally aligned with our strategy of niche orientation in customized solutions. While we have proceeded with the key elements of our turnaround plan for the segment, the operating environment has further deteriorated mainly due to increased raw material costs. In order to significantly improve competitiveness we have initiated in October a plan to permanently close one paper machine and rationalize the product offering in Stenay, France.

Our strategic initiatives pave the way for global leadership

Our investment projects to achieve higher customer value and profitable growth are proceeding well. By completing the investment in Madisonville, U.S., we are continuing to grow our attractive Filtration business. This investment strengthens our technical capabilities in the region for filtration material applications, supporting our customers with sustainable solutions, and increasing our capacity.

We have also completed the parchmentizer line investment in Saint Severin, France, to meet growing demand for sustainable cooking and baking papers and food packaging solutions. Our parchment papers are made without chemical additives, and most of their variants are biodegradable and certified as home-compostable. In August, we decided to invest in our Coated Specialties business to improve product mix and production efficiency at the Jacarei plant in Brazil.

I’m very pleased that we have completed the acquisitions of Expera and Caieiras and are up to speed with the integration implementation. Both acquisitions are major steps in the execution of our strategy. The transformative acquisition of Expera will almost triple our net sales in the U.S. and provide a platform for growth, while Caieiras will significantly strengthen our Latin American operations.

Delivering exceptional customer value

I’m particularly pleased, and also honored, by the Supplier of the Year Award from 3M, in recognition of our contribution to their competitiveness. We work in close collaboration with our customers to understand how we can improve their performance and enable them to grow their businesses. External recognition gives credibility to our strategic priorities and shows that we are on the right track.

In the third quarter, most of our businesses performed well. I’m pleased, that our gross margin for products improved for the second consecutive quarter and exceeded last year’s level. We continued to succeed in compensating for the sharply increased raw material and energy costs. Thanks to our successful commercial strategy and improved cost efficiency, driven by synergy benefits, our third quarter comparable EBITDA improved sequentially and exceeded last year’s level.

The coated one-side product segment, part of the Food Packaging business in the Specialties business area, is one of the few segments where our offering and position are not optimally aligned with our strategy of niche orientation in customized solutions. While we have proceeded with the key elements of our turnaround plan for the segment, the operating environment has further deteriorated mainly due to increased raw material costs. In order to significantly improve competitiveness we have initiated in October a plan to permanently close one paper machine and rationalize the product offering in Stenay, France.

Our strategic initiatives pave the way for global leadership

Our investment projects to achieve higher customer value and profitable growth are proceeding well. By completing the investment in Madisonville, U.S., we are continuing to grow our attractive Filtration business. This investment strengthens our technical capabilities in the region for filtration material applications, supporting our customers with sustainable solutions, and increasing our capacity.

We have also completed the parchmentizer line investment in Saint Severin, France, to meet growing demand for sustainable cooking and baking papers and food packaging solutions. Our parchment papers are made without chemical additives, and most of their variants are biodegradable and certified as home-compostable. In August, we decided to invest in our Coated Specialties business to improve product mix and production efficiency at the Jacarei plant in Brazil.

I’m very pleased that we have completed the acquisitions of Expera and Caieiras and are up to speed with the integration implementation. Both acquisitions are major steps in the execution of our strategy. The transformative acquisition of Expera will almost triple our net sales in the U.S. and provide a platform for growth, while Caieiras will significantly strengthen our Latin American operations.

Delivering exceptional customer value

I’m particularly pleased, and also honored, by the Supplier of the Year Award from 3M, in recognition of our contribution to their competitiveness. We work in close collaboration with our customers to understand how we can improve their performance and enable them to grow their businesses. External recognition gives credibility to our strategic priorities and shows that we are on the right track.

OUTLOOK FOR 2018

Ahlstrom-Munksjö reiterates the market outlook for 2018. As announced on October 10, 2018, the company has discontinued providing an outlook for comparable EBITDA in 2018 due to the completion of the Expera acquisition.

Market outlook: Demand for Ahlstrom-Munksjö’s fiber-based products is expected to remain stable at the current good level for most of the product segments and to reflect the seasonal pattern.

SYNERGY BENEFITS AND COST REDUCTION MEASURES   

The merger creating Ahlstrom-Munksjö Oyj was completed on April 1, 2017. The combination created a global leader in innovative and sustainable fiber-based materials. Ahlstrom-Munksjö has completed all of the original integration initiatives. The successful combination of businesses has created a solid basis for improved performance and the company has continued its efforts to improve its operational efficiency.

Ahlstrom-Munksjö is targeting synergies and cost reduction initiatives with a profit improvement impact of EUR 50 million annually in its existing businesses by the end of the first quarter of 2019.

Cost synergies comprise mainly lower fixed costs as well as lower variable costs through coordination of sourcing activities and optimization of production. The plan also includes business synergies from incremental sales and product mix improvement, predominantly relating to the integration of the former Graphics and Packaging business area into the new Specialties business area, and developing a combined product and service offering.

Cost reduction measures include adjusting Group structure to Ahlstrom-Munksjö’s operating model, where business units have clear responsibility and local accountability. The operating model enables operational flexibility and lean group functions. This also included the concentration and relocation of the company’s head office to Helsinki from Stockholm.

At the end of the reporting period, the annual synergy achievement run rate was approximately EUR 38 million. Costs related to the achievement of synergies and cost reduction measures are estimated to be EUR 30-35 million by the end of the first quarter of 2019.

Achieved synergy benefits and related costs, EUR million
Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18
Achieved annualized synergy benefits 13 17 19 26 32 38
Quarterly costs 4 7 8 2 3 2
Cumulative costs 11 19 21 24 25

Additional information

Hans Sohlström, President and CEO, tel. +358 10 888 2520
Pia Aaltonen-Forsell, CFO, tel. +46 10
 250 1029
Johan Lindh, Head of Investor Relations, + 358 10 888 4994
Juho Erkheikki, Investor Relations Manager, tel. +358
 10 888 4731

Webcast and conference call

A combined news conference, call and live webcast will be arranged on the publishing day, October 30, 2018, at 2:00 p.m. EEST (1:00 p.m. CEST) at Ahlstrom-Munksjö’s head office in Helsinki (Alvar Aallon katu 3 C, meeting room Antti). The report will be presented in English by President and CEO Hans Sohlström and CFO Pia Aaltonen-Forsell.

Webcast and conference call information

The combined webcast and teleconference can be viewed at: https://qsb.webcast.fi/a/ahlstrommunksjo/ahlstrommunksjo_2018_1030_q3/

Finland: +358 (0)9 7479 0360
Sweden: +46 (0)8 5033 6573
UK: +44 (0)330 336 9104

Conference ID: 3967538

To join the conference call, participants are requested to dial one of the numbers above 5-10 minutes prior to the start of the event. An on-demand version of the conference call will be available on Ahlstrom-Munksjö’s website later the same day. By dialing in to the conference call, the participant agrees that personal information such as name and company name will be collected. The conference call will be recorded.


Ahlstrom-Munksjö in brief
Ahlstrom-Munksjö is a global leader in fiber-based materials, supplying innovative and sustainable solutions to its customers. Our mission is to expand the role of fiber-based solutions for sustainable everyday life. Our offering include filter materials, release liners, food and beverage processing materials, decor papers, abrasive and tape backings, electrotechnical paper, glass fiber materials, medical fiber materials and solutions for diagnostics as well as a range of specialty papers for industrial and consumer end-uses. Our annual net sales are about EUR 3 billion and we employ some 8,000 people. The Ahlstrom-Munksjö share is listed on the Nasdaq Helsinki and Stockholm. Read more at www.ahlstrom-munksjo.com.

Share this pageShare this page