Ahlstrom Financial Statements Bulletin 2014: Operative result more than doubled in 2014

Ahlstrom Corporation STOCK EXCHANGE RELEASE January 29, 2015 at 12.00

This is a summary of the Financial Statements Bulletin 2014. The complete report with tables is attached to this release and available at www.ahlstrom.com

Ahlstrom Financial Statements Bulletin 2014

Operative result more than doubled in 2014

Continuing operations October-December 2014 compared with October-December 2013

  • Net sales EUR 247.0 million (EUR 243.4 million).
  • Operating profit / loss excluding non-recurring items EUR -1.8 million (EUR -2.5 million).
  • Operating margin excluding non-recurring items -0.7% (-1.0%).
  • Operating profit / loss EUR -4.3 million (EUR -5.5 million), including non-recurring items of EUR -2.5 million (EUR -3.0 million).
  • Profit / loss before taxes EUR 5.7 million (EUR -11.1 million), including capital gains booked from the sale of Suominen Corporation and Munksjö Oyj shares.
  • Earnings per share EUR 0.09 (EUR -0.29).

October-December 2014 in brief

  • Net sales growth was driven by better pricing and product mix as well as a favorable currency effect. Comparable net sales at constant currencies remained flat.     
  • Profitability was hurt by low capacity utilization in the Building and Energy business area. Advanced Filtration, Transportation, and Food business areas continued to improve profitability.
  • A new, simplified structure and organization effective as of January 1, 2015 was announced to enable faster execution and stronger accountability within business areas.

Continuing operations January-December 2014 compared with January-December 2013

  • Net sales EUR 1,001.1 million (EUR 1,014.8 million), comparable net sales growth rate at constant currencies was 1.4%.
  • Operating profit excluding non-recurring items EUR 28.6 million (EUR 13.4 million).
  • Operating margin excluding non-recurring items 2.9% (1.3%).
  • Operating profit / loss EUR -3.7 million (EUR 10.7 million), including non-recurring items of EUR -32.3 million (EUR -2.7 million).
  • Profit / loss before taxes EUR -9.4 million (EUR -15.4 million).
  • Earnings per share EUR -0.22 (EUR -0.46).

Outlook for 2015

  • Ahlstrom expects net sales in 2015 to be in the range of EUR 1,000-1,100 million. The operating profit margin excluding non-recurring items is expected to be 3.5-5% of net sales.

Dividend proposal

  • The Board of Directors proposes to the Annual General Meeting that a dividend totaling EUR 0.30 per share be paid for the financial year ended on December 31, 2014.

Marco Levi, President & CEO

"We more than doubled our operative result last year, driven by cost savings achieved through our rightsizing program, improved pricing, and better performance in our Advanced Filtration, Transportation Filtration, and Food business areas. Our performance in the fourth quarter - typically our weakest of the year - remained unsatisfactory, but these four business areas continued to make progress. We expect to continuously improve our financial performance going forward.'

'Our rightsizing program is nearing completion and is reaching its planned targets. However, we will continue to maintain stringent cost control going forward.' 

'Our roadmap to improved performance continues to gain momentum. I'm confident that our commercial excellence program will deliver enhanced margins, while our reprioritized product development will address customer needs better and more quickly. In addition, we will actively pursue growth in selected areas. The process of simplifying our organizational structure and processes is well underway, which is expected to further reduce our cost base. These focused initiatives will gradually bring improved efficiency and cost competitiveness in 2015 and beyond.'  

Key figures from continuing operations

EUR million Q4/2014 Q4/2013 Change, % Q1-Q4/2014 Q1-Q4/2013 Change, %
Net sales 247.0 243.4 1.5 1,001.1 1,014.8 -1.3
Operating profit -4.3 -5.5 22.5 -3.7 10.7 N/A
% of net sales -1.7 -2.3   -0.4 1.1  
Operating profit excl. NRI -1.8 -2.5 30.5 28.6 13.4 113.9
% of net sales -0.7 -1.0   2.9 1.3  
Profit / Loss before taxes 5.7 -11.1 N/A -9.4 -15.4 39.1
Profit / Loss for the period 5.6 -12.2 N/A -10.3 -18.9 45.6
Earnings per share 0.09 -0.29 N/A -0.22 -0.46 N/A
Return on capital employed, % -2.6 -3.5   -0.5 0.9  
Net cash flow from operative activities * 18.9 3.7 N/A 35.4 41.0 -13.5
Capital expenditure 16.3 26.1 -37.5 45.4 76.1 -40.2
Number of personnel, at the end of period 3,401 3,536 -3.8 3,401 3,536 -3.8

*Including discontinued operations

Operating environment

The operating environment in Ahlstrom's main markets in the fourth quarter of 2014 varied depending on regions and markets.

In the markets served by the Advanced Filtration business area, growth continued in gas turbine and other industrial filtration applications, particularly in North America and Asia. The laboratory and life science markets also grew, whereas demand for high efficiency air applications was somewhat weaker.

In the construction and energy markets, demand for building materials, such as flooring applications, remained steady in Europe, but continued to decline in Russia. The market for reinforced glass fiber products for the wind energy industry in Europe remained weak. Demand for wallpaper and wallcovering substrates softened in Europe and Russia, and weakened somewhat in China.

In the Food business area, demand for beverage and food packaging continued to be solid, particularly in North America, whereas demand for tape products was lower. Growth continued in the single-use coffee products market.    

Demand for medical fabrics produced by the Medical business area was stable in Europe and strengthened in North America as well as in Asia, where it was supported by the growing trend for single-use products.

Solid growth continued in the transportation filtration markets in North America, whereas demand in Asia and Europe slowed down slightly. In South America, the market continued to show positive signs following a slowdown in 2013.

Discontinued operations

The operative result of the Brazilian operation of the former Home and Personal business area was included in discontinued operations until February 10, 2014, when its sale to Suominen Corporation was completed. The comparison figures include the operative results from the Label and Processing business, as well as the Brazilian operations of the former Home and Personal business area. All operative figures exclude depreciation. 

Result from discontinued operations

In January-December 2014, profit from discontinued operations for the period was EUR 7.5 million (EUR 75.9 million). The figure includes Munksjö Oyj's contribution to costs to separate the Osnabrück site, as required by the European Commission. The comparison figure includes a demerger effect of approximately EUR 113.3 million as well as a net of tax EUR 42.3 million impairment loss recognized in the re-measurement to fair value and costs to sell.

Result including discontinued operations

In January-December 2014, the loss for the period including discontinued operations was EUR 2.7 million (EUR 57.0 million profit). Earnings per share with the effect of interest net of tax on the hybrid bond were EUR -0.06 (EUR 1.17).

Return on equity (ROE) was -0.8% (13.8%).

Rightsizing program

Following the completion of the Label and Processing demerger in 2013, Ahlstrom initiated a rightsizing program to bring down costs to reflect its new size and scope. The plan was to achieve approximately EUR 39 million in annual costs savings in continuing operations, targeting both selling, general and administration (SGA) costs and production overheads. In addition, approximately EUR 11 million in savings were derived from costs transferred to Munksjö Oyj, bringing the total target to EUR 50 million.

During the review period, Ahlstrom completed the plan to transfer its information technology operations to Tech Mahindra Ltd. As a result, about 50 employees globally moved to Tech Mahindra under a business transfer. The company also decided to close a masking tape material production line in Kauttua, Finland in the second quarter of 2015.

The majority of the actions related to the rightsizing program were completed by the end of 2014, and the full impact of the program is expected to be visible by the end of 2015. As a result of the program, Ahlstrom's personnel was reduced by approximately 400 people globally. The program is moving ahead as targeted, and approximately EUR 31 million in cumulative cost savings was achieved in continuing operations at the year-end.

In continuing operations, savings of approximately EUR 5 million on a quarterly basis were achieved in the fourth quarter of 2014 compared to the corresponding quarter in 2013. Comparable SGA costs continued to decrease in the fourth quarter of 2014, but were impacted by set-up costs related to the EMEA financial and customer service center in Vilnius and research facility in Shanghai.

Ahlstrom booked non-recurring costs of approximately EUR 15 million related to rightsizing during the years 2013-2014, of which approximately EUR 12 million were booked in 2014.

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, 2014 amounted to EUR 405,671,194.25.

The Board of Directors will propose to the Annual General Meeting that for the financial year which ended on December 31, 2014, a dividend totaling EUR 0.30 per share be paid based on the dividend policy mentioned above.

The company's shares will trade together with the right to dividend until March 26, 2015. 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 of March 30, 2015. On December 31, 2014, the number of shares of the company amounted to 46,670,608 based on which the maximum amount that can be distributed as dividend would be EUR 14,001,182. No dividend will be paid based on shares owned by the company or its subsidiaries. The Board of Directors proposes that the dividend be paid on April 8, 2015.

In the Financial Statements Bulletin 2013 published on January 30, 2014, the Board of Directors indicated to pay dividends in a combination of cash and Munksjö Oyj shares. The Board has decided to distribute the dividend in cash only in 2015.

In addition, the Board of Directors proposes that EUR 60,000 will be reserved for donations at the discretion of the Board.


Ahlstrom expects net sales in 2015 to be in the range of EUR 1,000-1,100 million. The operating profit margin excluding non-recurring items is expected to be 3.5-5% of net sales.

In 2015, investments excluding acquisitions are estimated to be approximately EUR 35 million (EUR 45.4 million in 2014).

Short-term risks

The global economy may be growing at a slower pace than previously predicted due to lower expectations in Europe and Asia. On the other hand, recent indicators for the development of the U.S. economy continue to be positive.

Slower-than-anticipated economic growth poses risks to Ahlstrom's financial performance. It may lead to lower sales volumes and force the company 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 key raw material prices makes it more difficult to forecast future developments. Further swings in currency exchange rates may lead to fluctuations in net sales and profitability. 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 wood pulp, synthetic fibers, and chemicals. The prices of these key raw materials are volatile and possible increases can affect the company's profitability depending on its ability to mitigate the risk.

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 for 2013. 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.

Disclosure procedure

Ahlstrom publishes its Financial Statements Bulletin 2014 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.

Additional information

Marco Levi, President & CEO, tel. +358 (0)10 888 4700
Sakari Ahdekivi, CFO, tel. +358 (0)10 888 4768

Ahlstrom's President & CEO Marco Levi and CFO Sakari Ahdekivi will present the report at an analyst and press conference in Helsinki on Thursday, January 29 at 3:00 p.m. Finnish time. The event will take place at Ahlstrom's head office, Alvar Aallon katu 3 C, second floor, meeting room Antti.

The combined web- and teleconference will be held in English and can be viewed at the following address: http://qsb.webcast.fi/a/ahlstrom/ahlstrom_2015_0129_q4/

To participate via telephone, please dial +358 (0)9 2313 9201 in Finland or +44 (0)20 7162 0077 outside Finland a few minutes before the conference begins. The confirmation code is 950721.

An on-demand webcast including slides is available for viewing and listening on the company website for one year after the conference call.

The presentation material will be available at www.ahlstrom.com/en/Investors/Reports-and-presentations/2014/ after the report has been published.

Financial information in 2015

Report Date of publication Silent period
Interim report January-March 2015 Tuesday, April 28 April 1-28
Interim report January-June 2015 Wednesday, August 6 July 1- August 6
Interim report January-September 2015 Wednesday, October 28 October 1-28

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 2014, Ahlstrom's net sales from the continuing operations amounted to EUR 1 billion. Our 3,400 employees serve customers in 23 countries. Ahlstrom's share is quoted on the NASDAQ OMX Helsinki. More information available at www.ahlstrom.com.