Strategic business risks

Strategic business risks

Tightened competitive situation as a result of competitors’ increased production capacity and price pressures was highlighted as one of the main risks for the Company in 2016. The Company has focused on e.g. investing in production capacity, optimizing product quality, improving its R&D operations and market monitoring as well as business intelligence to mitigate the risk. The Company is also improving waste and recipe cost management which is expected to result in cost savings. The Company is also continually seeking for more long-term contracts with the customers.

Another trend in the competitive situation facing the Company is a wider adoption of SMS (spunbond-meltblow-spunbond) technology in the Company’s Specialties Business Area as opposed to wet-laid technology. To keep up with the competition the Company has redesigned its product portfolio and lowered the cost structure of its existing products and has made investments in SMS technology.

Flexibility of the Company’s production capacity and unexpected or major changes in market demand remains as one of the Company’s main risks. During 2016 Ahlstrom has continued to mitigate the risk by investing in production capacity. The Company has also developed its short-term supply planning, inventory management and forecasting processes.

Ahlstrom has strong relationships with key customers. These relationships are fundamental to Ahlstrom’s success, and loss of key customers due to e.g. decreased satisfaction would have a negative impact on Ahlstrom’s financial performance. Ahlstrom has focused on developing relationships with key customers and re-negotiated longer contracts with some of them.

Shortage of supply for the Company’s key raw materials can result in a situation where the Company is temporarily not fully able to meet customer demand. The risk is managed by continually developing alternative product recipes, searching for new suppliers and by negotiating annual delivery contracts with suppliers. Additionally, changes in production processes have been made to ease up shifting from one raw material supplier to another, in case needed.

Attracting highly skilled personnel is important especially in R&D, sales and marketing. Potential lack of competences in these areas can cause uncertainty in reaching set growth targets. The risk is mitigated by the annual human capital review process. The process comprises annual individual performance assessment and assessment of risk of key personnel leaving the Company. Also a branding campaign to increase Ahlstrom’s attractiveness as an employer is continued.

Unpredictable political environment in the Company’s operating countries is considered an important risk. E,g, uncertainty in future U.S. trade policies and the United Kingdom potentially leaving the European Union as a result of mid-year referendum are among potential risk factors. Unstable economic situation in Brazil and Argentina could also cause negative effects on the Group’s operations. Political events and trade sanctions can affect the Company directly and indirectly. While these events are outside of the Company’s influence, mitigation measures for potential effects include e.g. active demand planning and flexible operations. The Company actively monitors political atmosphere in its operating countries and strives to prepare well in advance for any potential negative political changes and risks. Also a tracking system with the aim of preventing sales to trade embargoed countries is in place. Political changes can also present the Company with new business opportunities.

Updated: February 2017

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