Ahlstrom Financial Statements Bulletin 2013: Ready to implement the new growth strategy
Ahlstrom Corporation STOCK EXCHANGE RELEASE January 30, 2014 at 12.55
This is a summary of the Financial Statements Bulletin 2013. The complete report with tables is attached to this release and available at www.ahlstrom.com
Ahlstrom Financial Statements Bulletin 2013
Ready to implement the new growth strategy
Continuing operations October-December 2013 compared with October-December 2012
- Net sales EUR 243.4 million (EUR 240.1 million).
- Operating profit / loss EUR -5.5 million (EUR 1.0 million).
- Operating profit / loss excluding non-recurring items EUR -2.5 million (EUR -4.1 million).
- Operating margin excluding non-recurring items -1.0% (-1.7%).
- Profit / loss before taxes EUR -11.1 million (EUR -8.4 million).
- Earnings per share EUR -0.29 (EUR -0.23).
October-December 2013 in brief
· Net sales at constant currency rates rose by 5.1% from the comparison period.
- The company continued to launch new products to improve its sales mix and profit margin. One key product launch was the Ahlstrom Flow2Save(TM), a new high efficiency filtration media for improved indoor air quality.
- To strengthen focus and address the growth and profitability issues, the Food and Medical business area was divided into two segments as of January 1, 2014.
- The demerger of Ahlstrom's Label and Processing business in Brazil, Coated Specialties, was completed. This was the final step in combining Label and Processing business and Munksjö AB. Ahlstrom also completed the sale of two production lines in Osnabrück to comply with the regulatory commitments related to the demerger.
- Ahlstrom completed the sale of its remaining shares in the thermal paper manufacturer Jujo Thermal Ltd. and the divestment of the West Carrollton plant.
Continuing operations January-December 2013 compared with January-December 2012
- Net sales EUR 1,014.8 million (EUR 1,010.8 million).
- Operating profit EUR 10.7 million (EUR 21.8 million).
- Operating profit excluding non-recurring items EUR 13.4 million (EUR 21.1 million).
- Operating margin excluding non-recurring items 1.3% (2.1%).
- Profit / loss before taxes EUR -15.4 million (EUR -6.4 million).
- Earnings per share EUR -0.46 (EUR -0.44).
· The Board of Directors proposes to the Annual General Meeting that a dividend consisting of Munksjö Oyj shares and cash be paid for the financial year that ended on December 31, 2013. According to the proposal, Ahlstrom shareholders will receive one Munksjö share for each 26 shares held in Ahlstrom and a cash dividend of EUR 0.09 per share. The aggregate maximum amount of the total dividend is EUR 14.0 million, or EUR 0.30 per share.
Outlook for 2014
- Net sales are expected to be EUR 930-1,090 million. The operating profit margin excluding non-recurring items is expected to be 2-5% of net sales.
Jan Lång, President & CEO
"Improving our financial performance is our highest priority this year. I am confident that our enhanced product offering, in combination with our rightsizing program will improve our results in 2014 and beyond. We are well on track to achieve our long-term target of 20% of net sales from new products, which will enhance our product mix and margins. "
"We were encouraged by the continued growth in net sales at constant currency rates, although our operating profit remained unsatisfactory in the review period. Following the demerger of Label and Processing and the earlier divestment of Home and Personal, our cost structure is too heavy. We have identified additional cost saving opportunities and have expanded the previously announced rightsizing program from the EUR 35 million target to EUR 50 million."
"Towards the end of last year and at the beginning of this year, we completed a number of transactions related to the transformation of the company. Now that our business portfolio has been restructured, we can concentrate our efforts on profitability and growth."
Key figures from continuing operations
|EUR million||Q4/2013||Q4/2012||Change, %||Q1-Q4/2013||Q1-Q4/2012||Change, %|
|% of net sales||-2.3||0.4||1.1||2.2|
|Operating profit excl. NRI||-2.5||-4.1||38.9||13.4||21.1||-36.7|
|% of net sales||-1.0||-1.7||1.3||2.1|
|Profit / Loss before taxes||-11.1||-8.4||-31.5||-15.4||-6.4||-139.6|
|Profit / Loss for the period||-12.2||-9.8||-24.5||-18.9||-16.4||-15.2|
|Earnings per share||-0.29||-0.23||-0.46||-0.44|
|Return on capital employed, %||-3.5||-1.7||0.9||2.3|
|Net cash flow from operative activities*||3.7||15.5||-75.9||41.0||78.7||-48.0|
|Number of personnel, at the end of period||3,536||3,829||-7.7||3,536||3,829||-7.7|
*Including discontinued operations
The operating environment in the fourth quarter remained in line with the comparison period as the overall demand in Ahlstrom's main markets continued to be soft with regional variations. Geographically, demand in Europe remained weak, particularly in the southern part of the continent. The North American market continued to show some positive signs, while growth was fastest in Asia.
In the Advanced Filtration business area, the markets for laboratory and life science filtration continued to strengthen across the globe. Demand for water and high efficiency air applications grew as well, whereas demand in gas turbine filtration was stable.
In the Building and Energy business area, demand for flooring materials in Europe stagnated towards year end. The market for wind energy applications was steady at a low level. Demand for wallpaper and wallcovering substrates in Europe showed signs of softening, while remaining stable in China. Demand for construction-related materials remained soft.
In the Food and Medical business area, the market for food packaging products continued to be solid, and demand for masking tape and beverage improved from the comparison period, especially in Europe and Asia. Demand for medical fabrics continued to be soft, particularly in North America.
In the Transportation Filtration business area, the market for transportation filtration materials, including heavy duty applications, in North America and Asia continued to grow, and Europe showed signs of improving. In South America, the market slowdown caused by currency devaluation continued.
Market pulp prices either increased or were stable in the fourth quarter, and they were higher than in the comparison period. The prices of synthetic fibers such as polyester and viscose were stable, whereas polypropylene prices rose to a higher level than in the comparison period. The prices of chemicals in general were either stable or increased. In its production, Ahlstrom uses chemicals such as latex, liquid solvents and starch. The prices of liquid solvents like phenolic resins remained at a high level Natural gas prices increased slightly and were higher than in the comparison period.
Combination of the Label and Processing business and Munksjö AB
On May 24, 2013, Ahlstrom completed the first phase (LP Europe demerger) of the combination of its Label and Processing business in Europe and Munksjö AB. The combination created a new global leader in high-quality specialty papers. The second phase of the transaction, the demerger of Coated Specialties in Brazil, was completed on November 29, 2013.
On December 31, 2013 Ahlstrom completed the divestment of its pre-impregnated décor papers and abrasive paper backings businesses to Perusa, a German-based private equity group. The divestment was made to comply with the commitments made to the European Commission and to the Brazilian competition authority CADE as disclosed in May 2013.
Result from discontinued operations
The operative result for the European operation of the Label and Processing business has been included until May 27, 2013 and the operative result from Coated Specialties until December 2, 2013. The Brazilian operation of the former Home and Personal business area and pre-impregnated décor papers and abrasive paper backings businesses were included throughout the review period. All operative figures exclude depreciation. The sale of the Brazilian operation of the former Home and Personal business area to Suominen Corporation is expected to be completed in February 2014.
In October-December 2013, the profit from discontinued operations for the period was EUR 20.6 million (EUR 7.5 million), including a demerger effect of approximately EUR 23.9.
In January-December 2013, the profit from discontinued operations for the period was EUR 75.9 million (EUR 16.4 million). The figure includes a net of tax EUR 42.3 million impairment loss recognized on the re-measurement to fair value and costs to sell. In addition, it includes a demerger effect of approximately EUR 113.3 million, which includes among other things recognition of distribution liability to fair value and a write down related to the fair valuation of Munksjö Oyj shares.
Result including discontinued operations
In October-December 2013, profit for the period including discontinued operations was EUR 8.4 million (EUR 2.3 million loss). Earnings per share with the effect of interest on the hybrid bond were EUR 0.15 (EUR -0.06).
Return on equity (ROE) was 9.2% (-1.8%).
In January-December 2013, the profit for the period including discontinued operations was EUR 57.0 million (EUR 0.1 million loss). Earnings per share with the effect of interest on the hybrid bond were EUR 1.17 (EUR -0.09).
Return on equity (ROE) was 13.8% (0.0%).
The figures above include the demerger effects explained in the previous section.
Following the completion of the Label and Processing demerger, Ahlstrom initiated a rightsizing program to bring down the costs of the company to reflect its new size and scope.
Ahlstrom expanded its rightsizing program from the previously communicated EUR 35 million to EUR 50 million as announced on January 30, 2014. The majority of the planned actions related to the rightsizing program will be realized by the end of 2014, and the full impact of the program is expected to be visible in 2015.
As a result of the planned program, Ahlstrom's personnel is estimated to be reduced by approximately 400 people globally at the maximum, instead of the earlier estimated 350 people as communicated with the previous cost savings target on August 7, 2013.
The targeted savings will be derived from all business areas and functions globally. In particular, the aim is to reduce selling, general and administration (SGA) costs and further improve supply chain efficiency. The aim is to bring the SGA costs back to a level of 10-11% of net sales in 2015.
The planned changes and personnel impacts are subject to employee consultation processes, which will be initiated according to local legislation in the countries affected.
Ahlstrom plans to book non-recurring costs of approximately EUR 15 million related to rightsizing during the years 2014-2015.
The program is moving ahead as targeted. As of December 31, 2013, approximately EUR 12 million in cost savings, of which approximately EUR 5 million is derived from costs being transferred to Munksjö Oyj and reported in discontinued operations, were achieved and only minor restructuring costs were booked.
Proposal for the distribution of profit
Ahlstrom aims to pay a dividend of not less than one third of the net cash from operating activities after operative investments, calculated as a three-year rolling average to achieve stability in the dividend pay-out. Operative investments include maintenance, cost reduction, and efficiency improvement investments.
The distributable funds on the balance sheet of Ahlstrom Corporation as of December 31, 2013 amounted to EUR 501,462,715.72.
The Board of Directors proposes to the Annual General Meeting that dividend in the aggregate maximum amount of EUR 14.0 million, or EUR 0.30 per share, shall be paid as follows:
(i) Dividend payable in Munksjö Oyj's shares: Each 26 Ahlstrom's shares entitle their holder to receive 1 share in Munksjö Oyj as a dividend. Ahlstrom shall distribute to its shareholders as dividend a maximum of 1,795,023 shares of Munksjö.
(ii) Dividend payable in cash: A dividend of approximately EUR 0.09 per share be paid in cash from the retained earnings. As per January 30, 2014, the number of shares of the Company amounts to 46,670,608 based on which the maximum amount to be distributed as dividend payable in cash would be approximately EUR 4.3 million.
Ahlstrom intends to pay dividends both in cash and in Munksjö shares also in the future.
The share of the Company will trade together with the right to dividend until March 25, 2014.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 March 28, 2014. No dividend will be paid based on shares owned by the Company or its subsidiaries. The Board proposes that the dividend payable in Munksjö shares shall be paid on April 4, 2014.The cash payment corresponding to the fractional entitlements and the dividend payable in cash shall be paid on or about April 8, 2014.
In addition, the Board of Directors proposes that EUR 70,000 will be reserved for donations at the discretion of the Board.
Based on Ahlstrom's view of the development of its main markets, pricing and product mix, competitive dynamics and expected cost savings, the company anticipates net sales in 2014 to be EUR 930-1,090 million. The operating profit margin excluding non-recurring items is expected to be 2-5% of net sales.
In 2014, investments excluding acquisitions from continuing operations are estimated to be approximately EUR 50 million (EUR 76.1 million in 2013).
The global economy is expected to gain momentum this year with regional variations. While the European economy has shown some signs of recovery, it may be uneven and fragile. Recent indicators for the development of the U.S. economy are more positive. In Asia, the Chinese economy in particular, may grow at a slower pace than previously anticipated.
The slower than anticipated economic growth poses risks to Ahlstrom's financial performance. It may lead to lower sales volumes and force Ahlstrom to initiate more market-related shutdowns at plants, which could affect profitability. The uncertainty related to global economic growth, increased volatility in our main markets and limited visibility are making it more difficult to forecast future developments.
In recent years, Ahlstrom has initiated investment projects such as the wallcoverings production line in Binzhou, China, that are in a start-up phase. The company's financial performance may be negatively affected by the commercialization of new production lines.
Ahlstrom's main raw materials are natural fibers, mainly pulp, synthetic fibers, and chemicals. The prices of some of the key raw materials used by Ahlstrom remain at a high level and are volatile.
If global economic growth slows down, maintaining current sales prices may be at risk and sustaining the current level of profitability may be compromised, even if raw material prices fall at the same time.
The general risks facing Ahlstrom's business operations are described in greater detail on the company website at www.ahlstrom.com and in the report by the Board of Directors in the company's Annual Report 2012. The risk management process is also described in the Corporate Governance Statement, also available on the company's website.
* * *
This report contains certain forward-looking statements that reflect the present views of the company's management. The statements contain uncertainties and risks and are thus subject to changes in the general economic situation and in the company's business.
Ahlstrom follows the disclosure procedure enabled by the Finnish Financial Supervision Authority and hereby publishes its Financial Statements Bulletin 2013 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.
Jan Lång, President & CEO, tel. +358 (0)10 888 4700
Seppo Parvi, CFO, tel. +358 (0)10 888 4768
Ahlstrom's President & CEO Jan Lång and CFO Seppo Parvi will present the financial statements bulletin 2013 at a Finnish-language press and analyst conference in Helsinki today, January 30, 2014, at 2:00 p.m. (CET+1). The conference will take place at Ahlstrom's head office at Alvar Aallon katu 3 C (second floor, meeting room Antti).
In addition, President & CEO Lång and CFO Parvi will hold a conference call in English for analysts, investors and representatives of the media today, January 30, 2014, at 4:00 p.m. (CET+1). To participate in the conference call, please call (09) 6937 9543 in Finland or +44 (0)20 3427 1903 outside Finland a few minutes before the conference begins. The access code is 1736357.
The conference call can also be listened to live on the Internet. The link to the English-language presentation (an audio webcast) including slides is available on the company website at www.ahlstrom.com. Questions may also be submitted in writing via the Internet. Listening to the conference call requires registration.
An on-demand webcast including slides is available for viewing and listening on the company website for one year after the conference call.
Presentation material will be available on January 30, 2014, after the Interim Report is published, at www.ahlstrom.com > Investors > Reports and presentations > 2013. Material in Finnish will be available at www.ahlstrom.fi > Sijoittajat > Katsaukset ja presentaatiot > 2013.
Financial information in 2014
|Report||Date of publication||Silent period|
|Interim report January-March||Tuesday, April 29||April 1-29|
|Interim report January-June||Wednesday, August 6||July 1 - August 6|
|Interim report January-September||Friday, October 24||October 1-24|
During the silent period, Ahlstrom will not communicate with capital market representatives.
Ahlstrom in brief
Ahlstrom is a high performance fiber-based materials company, partnering with leading businesses around the world to help them stay ahead. We aim to grow with a product offering for clean and healthy environment. Our materials are used in everyday applications such as filters, medical fabrics, life science and diagnostics, wallcoverings and food packaging. In 2013, Ahlstrom's net sales from the continuing operations amounted to EUR 1 billion. Our 3,500 employees serve customers in 24 countries. Ahlstrom's share is quoted on the NASDAQ OMX Helsinki. More information available at www.ahlstrom.com.