Ahlstrom January-March 2016 interim report: Profitability improvement continued despite lower demand in some key markets
Ahlstrom Corporation STOCK EXCHANGE RELEASE April 28, 2016 at 08:30 EET
This is a summary of the January-March 2016 interim report. The complete report with tables is attached to this release and available at www.ahlstrom.com
Ahlstrom January-March 2016 interim report
Profitability improvement continued despite lower demand in some key markets
Continuing operations January-March 2016 compared with January-March 2015
- Net sales EUR 243.7 million (EUR 251.5 million). Net sales at constant currencies declined by 2.5%
- Operating profit EUR 8.7 million (EUR 11.0 million)
- Adjusted operating profit EUR 12.9 million (EUR 10.3 million), representing 5.3% (4.1%) of net sales, and the tenth consecutive quarter of year-on-year improvement
- Profit before taxes EUR 4.8 million (EUR 12.1 million)
- Earnings per share EUR 0.01 (EUR 0.13)
- Net cash flow from operating activities EUR 8.4 million (EUR -1.5 million), the first positive first-quarter operating cash flow since 2012
Marco Levi, President & CEO
"January-March 2016 marked our tenth consecutive quarter of year-on-year improvement in profitability, with the majority of our businesses delivering higher margins. In addition to the tailwind we received from lower input costs, we have achieved this through better pricing, optimization of our product mix as well as lower cost structure.
In the Filtration & Performance segment, the Wallcover & Poster business delivered higher sales and margin with the Industrial Nonwovens unit making steady progress. In the Specialties segment, the Advanced Liquid Technologies, Tape, and Medical units all improved profitability. However, the subdued demand conditions in some of our markets, such as filtration as well as tape and medical products, were reflected in our overall net sales performance.
I'm also happy to say that we have delivered our first positive first-quarter operating cash flow in four years. The improving trend in our financial performance gives us confidence and we are on track to reach our target of over 8 percent adjusted operating profit margin by 2018. We are executing our redefined strategy announced at the beginning of the year, and our new operating model is gaining momentum and bringing us further cost savings."
Outlook for 2016
Ahlstrom reiterates the outlook published on January 29, 2016. The company expects net sales from continuing operations in 2016 to be in the range of EUR 950-1,050 million. The adjusted operating profit from continuing operations is expected to be 4.2%-5.2% of net sales.
The outlook excludes the Building & Wind business unit, which has been reported as part of discontinued operations from the beginning of 2016. The adjusted operating profit excludes restructuring costs, impairment charges and capital gains or losses.
|EUR million||Q1/2016||Q1/2015||Change, %||2015|
|% of net sales||10.3||9.3||9.5|
|% of net sales||3.6||4.4||1.7|
|Adjusted operating profit*||12.9||10.3||25.3||41.6|
|% of net sales||5.3||4.1||4.2|
|Profit before taxes||4.8||12.1||-60.5||17.1|
|Profit for the period||1.9||7.2||-73.2||3.4|
|Earnings per share, EUR||0.01||0.13||-0.05|
|Return on capital employed, %||6.9||7.2||3.0|
|Net cash flow from operative activities **||8.4||-1.5||60.0|
|Interest-bearing net liabilities **||194.9||254.0||-23.3||195.9|
|Gearing ratio, % **||66.5||74.0||65.4|
|Equity ratio, % **||34.9||34.3||35.8|
|Number of personnel at end of period||3,019||3,108||-2.9||3,043|
EBITDA = earnings before interest, taxes, depreciation and amortization
* Excluding restructuring costs, impairment charges and capital gains or losses.
** Including discontinued operations
On January 21, 2016, Ahlstrom announced the planned divestment of its glassfiber business to Owens Corning. As a consequence, the Building & Wind business unit is reported in discontinued operations until the transaction has been completed.
The German competition authority has opened a second-phase investigation into the planned divestment to allow enough time to complete an appropriate review of the transaction. Ahlstrom and Owens Corning aim to complete the transaction during the first half of 2016. However, it is possible that the completion will not take place until the second half of 2016.
Result from discontinued operations
In January-March 2016, profit from discontinued operations for the period was EUR 1.6 million (EUR 1.6 million).
Result including discontinued operations
In January-March 2016, net sales including discontinued operations were EUR 267.2 million (271.8 million). Profit for the period was EUR 3.5 million (EUR 8.8 million profit) and earnings per share were EUR 0.04 (EUR 0.17). The earnings per share include the interest payment on the hybrid bond after tax.
The return on capital employed (ROCE) was 8.0% (8.1%), and the return on equity (ROE) was 4.7% (10.7%).
Redefined strategy and long-term financial targets
Ahlstrom's redefined strategy and new long-term financial targets extending to the year 2018 were announced during the first-quarter of 2016. Global trends faced by our customers steer our product offering and provide us with a wealth of opportunities. We are committed to growing and creating stakeholder value by providing the best performing sustainable fiber-based materials.
As part of the implementation the company's business structure was simplified and reorganized into two business areas: Filtration & Performance and Specialties. The aim of this change is to increase market and customer focus. Both segments have business unit specific strategies and operating models. This enables us to provide customer-driven product development and tailored customer service, cost efficiency, better allocation of resources, and specific go-to-market approaches.
The roadmap for execution outlines the change in strategy and is focused on commercial excellence, a new lean operating model, organic growth via higher asset turnover and growth via new platforms.
Long-term financial targets over the economic cycle:
- Operating profit margin: Adjusted operating profit margin to be above 8% by 2018
- Gearing: Gearing to be maintained below 100%
- Dividend policy: We aim for a stable dividend, increasing over time, based on the annual net income performance
The adjusted operating profit margin excludes restructuring costs, impairment charges, capital gains or losses, and discontinued operations.
The global economic outlook remains uncertain. The European markets continue to suffer from slower growth, and the outcome of Britain's referendum on its membership in the European Union increases uncertainty. In addition, the recent slowdown in China has raised concerns, although the expected shift in the country's economic structure towards more consumer consumption and less investment can also provide opportunities.
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 market-related shutdowns at plants, which could affect profitability. Tightened competition through competitors' increased production capacity, aggressive pricing as well as adoption of new technologies can also affect profitability. Shifts in the pattern of demand for the company's products can strain the flexibility of its asset base and leave some assets underutilized, while others are over-loaded.
Further swings in currency exchange rates may lead to fluctuations in net sales and profitability. 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 2015. 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 publishes its January-March 2016 interim report 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.
Marco Levi, President & CEO, tel. +358 (0)10 888 4700
Sakari Ahdekivi, CFO, tel. +358 (0)10 888 4768
Juho Erkheikki, Financial Communications & Investor Relations Manager, tel. +358 (0)10 888 4731
Ahlstrom's President & CEO Marco Levi and CFO Sakari Ahdekivi will present the report at an analyst and press conference in Helsinki on Thursday, April 28 at 11:00 a.m. Finnish time. The event will take place at Ahlstrom's head office, Alvar Aallon katu 3 C, second floor, Antti meeting room.
The combined webcast and teleconference will be held in English and can be viewed at the following address: http://qsb.webcast.fi/a/ahlstrom/ahlstrom_2016_0428_q1
Conference call details:
In Finland +358 (0)9 2310 1621
In Sweden +46 (0)8 5033 6539
In the U.K. +44 (0)20 3427 1915
To participate via telephone, please dial in a few minutes before the conference begins. A list of phone numbers for other countries is available at www.ahlstrom.com/Investors. The confirmation code is 9954843.
An on-demand webcast of the conference will be available on Ahlstrom's website for twelve months after the call.
The presentation material will be available at www.ahlstrom.com/en/Investors/Reports-and-presentations/2016/ after the report has been published
Financial information in 2016
|Report||Date of publication||Silent period|
|Interim report January-June 2016||Wednesday, August 3||July 1-August 2|
|Interim report January-September 2016||Friday, October 28||October 1-27|
During the silent period, Ahlstrom will not communicate with capital market representatives.
Ahlstrom in brief
Ahlstrom provides innovative fiber-based materials with a function in everyday life. We are committed to growing and creating stakeholder value by proving the best performing sustainable fiber-based materials. Our products are used in everyday applications such as filters, medical fabrics, life science and diagnostics, wallcoverings, tapes, and food and beverage packaging. In 2015, Ahlstrom's net sales amounted to EUR 1.1 billion. Our 3,300 employees serve customers in 22 countries. Ahlstrom's share is quoted on the Nasdaq Helsinki. More information is available at www.ahlstrom.com.