Ahlstrom-Munksjö half-year report January-June 2018: Satisfactory profitability due to successful raw material cost compensation

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

Q2/2018 VS Q2/2017

  • Net sales EUR 587.8 million (EUR 576.9 million), an increase of 1.9%. In constant currency growth was 6.5%.

  • Overall stable demand at a good level across most markets

  • Comparable EBITDA EUR 67.1 million (EUR 77.4 million), representing 11.4% (13.4%) of net sales in an environment of significant raw material cost escalation

  • Net profit EUR 22.1 million (EUR 27.5 million)

  • Earnings per share EUR 0.22 (EUR 0.28)

  • Comparable EPS excluding depreciation arising from mergers EUR 0.34 (EUR 0.36)

Specified guidance for comparable EBITDA: Comparable EBITDA in 2018 is expected to be slightly below the previous year’s level (pro forma EUR 290.4 million) hence gaining momentum in the second half of the year.


  • Agreement to acquire the US based specialty paper producer Expera with net sales of USD 731 million to significantly expand presence in North America, for an enterprise value of USD 615 million

  • Fully committed financing for the transaction. Ahlstrom-Munksjö plans to conduct a rights offering of approximately EUR 150 million, which is expected to be launched during the fourth quarter of 2018.

  • Investment to reinforce market position in biodegradable and compostable tea bag, coffee and meat casing materials in the Beverage & Casing business

  • Investment to further grow Filtration business through capacity expansion in high-end filtration materials

  • Agreement to acquire the Caieiras specialty paper mill in Brazil to strengthen presence in the region

1-6/2018 VS 1-6/2017 PROFORMA

  • Net sales EUR 1,160.2 million (EUR 1,143.8 million), an increase of 1.4%. In constant currency growth was 6.0%.

  • Comparable EBITDA EUR 133.8 million (EUR 156.8 million), representing 11.5% (13.7%)

  • Net profit EUR 43.3 million (EUR 51.7 million)

  • Earnings per share EUR 0.44 (EUR 0.54)

  • Comparable EPS excluding depreciation arising from mergers EUR 0.65 (EUR 0.69)


EUR MILLION, OR AS INDICATED Q2/2018 Q2/2017 Q1/2018 1-6/2018 1-6/2017 2017
Net sales 587.8 576.9 572.4 1,160.2 1,143.8 2,232.6
Comparable EBITDA 67.1 77.4 66.7 133.8 156.8 290.4
Comparable EBITDA margin, % 11.4 13.4 11.7 11.5 13.7 13.0
Items affecting comparability included in EBITDA -6.8 -2.4 -5.0 -11.8 -6.3 -23.8
EBITDA 60.4 75.0* 61.7 122.0 150.5* 266.6*
Comparable operating result excl. depreciations arising from mergers ** 45.2 53.7 44.6 89.7 108.2 195.2
Comparable operating result 37.5 45.7 37.0 74.5 92.5 163.8
Comparable operating result margin, % 6.4 7.9 6.5 6.4 8.1 7.3
Items affecting comparability included in operating result -6.8 -2.4 -5.0 -11.8 -6.3 -23.8
Operating result 30.7 43.3* 31.9 62.7 86.2* 140.0*
Net profit 22.1 27.5* 21.2 43.3 51.7* 88.5*
Earnings per share (basic), EUR 0.22 0.28* 0.22 0.44 0.54* 0.91*
Comparable EPS excl. depreciations arising from mergers ** 0.34 0.36 0.32 0.65 0.69 1.32
Cash generated from operating activities 27.5 41.2 5.2 32.7 84.1 212.9
Depreciation and amortization *** 29.6 31.7 29.7 59.3 64.3 126.5
Capital expenditure 31.4 15.4 25.6 57.1 31.8 89.7
Net debt 422.2 420.3 395.4 422.2 420.3 375.3
Gearing ratio, % 41.6 41.3 39.8 41.6 41.3 36.2

*Fair valuation adjustment 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 8.0 million) in April-June.                                                  


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.

“In the second quarter, our performance in most of the businesses remained good. I am especially pleased that we, in the environment of significant raw material cost escalation, succeeded with our commercial strategy and implemented price increases as planned. We have focused on customer relationships that are service- and quality oriented with profitable orders of highly specialized and customized products. Thanks to our successful commercial strategy, we were able to compensate for the impacts of sharply increased raw material costs. Our gross margin for products improved compared to the previous quarter, reaching the same level as in the last year.

The coated one-sided product segment, part of the Foodpack business within the Specialties business area, is clearly underperforming. While we have proceeded with the key elements of our turnaround plan for this segment, the operating environment has further deteriorated. The turnaround plan consists of primarily product and cost optimization.

All in all, profitability stayed at a satisfactory level in the second quarter taking into account the raw material cost increase of about EUR 37 million. However, we are still behind the previous year’s level. Nevertheless, I have strong confidence in our ability to improve the company’s financial performance by continuing to focus on our commercial strategy and our growth initatives and their implementation.


I’m also pleased that our investment projects targeting at profitable growth are proceeding well, as we have reached capacity limits in many areas. Related to these growth initiatives, we have added shifts and personnel, which has increased our costs. The machine rebuild for abrasive backings and decor papers in Arches, France, and the debottlenecking investment for filtration material capacity in Turin, Italy have been completed. The saturation line investment for filtration materials in Madisonville, the US, and the new parchmentizer line investment in Saint Severin, France are proceeding according to plan. In addition, the acquisition of Caieiras specialty paper mill is expected to be completed in the third quarter and will significantly strengthen our Latin American platform.

In June, we decided to invest to further grow our Filtration business. We have already responded to the growing demand by expanding our manufacturing capabilities globally through several expansionary investments during the past few years. The new investment in Turin, Italy, will enable us to increase our capacity and allow us to strengthen our position in high-end filtration materials.

In July, we decided to further leverage our competence and differentiate our offering of advanced fiber based materials by investing in biodegradable and compostable solutions for coffee, tea and casing fiber materials in the Beverage & Casings business.


”The acquisition will almost triple Ahlstrom-Munksjö’s net sales in the U.S. and provide a platform for growth. We are excited to welcome Expera and their highly talented leadership team led by Russ Wanke to Ahlstrom-Munksjö. Together, our complementary capabilities and expertise will further strengthen our position in fiber-based materials and will enable us to offer even more valuable solutions to our customers.”


Ahlstrom-Munksjö specifies its guidance for 2018 comparable EBITDA.

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.

Specified guidance for comparable EBITDA

EBITDA: Comparable EBITDA in 2018 is expected to be slightly below the previous year’s level (pro forma EUR 290.4 million) hence gaining momentum in the second half of the year.

Former guidance for comparable EBITDA

EBITDA: Comparable EBITDA in 2018 is expected to be approximately at the previous year’s level (pro forma EUR 290.4 million), or slightly below. In the first-half of 2018, comparable EBITDA is expected to be lower than in the comparison period and to gain momentum in the second half of the year.


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 efforts to improve its operational efficiency.

Ahlstrom-Munksjö targets 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, predominately 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 32 million. The financial result for the second quarter of 2018 included realized synergies of approximately EUR 6.2 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
Achieved annualized synergy benefits 13 17 19 26 32
Quarterly costs 4 7 8 2 6
Cumulative costs 11 19 21 27


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, + 46 (0)70 588 10 38
Juho Erkheikki, Investor Relations Manager, tel. +358 (0)10 888 4731


A combined news conference, call and live webcast will be arranged on the publishing day, July 26, 2018, at 1:00 p.m. EEST (12:00 noon 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.


The combined webcast and teleconference can be viewed at: http://qsb.webcast.fi/a/ahlstrommunksjo/ahlstrommunksjo_2018_0726_q2/

Finland: +358 (0)9 7479 0361 Sweden: +46 (0)8 5033 6574 UK: +44 (0) 330 336 9105

Conference ID: 2302806

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.


•     Interim report January-September 2018                  October 30, 2018

Ahlstrom-Munksjö plans to organize a capital markets day in Helsinki on September 7, 2018.

Ahlstrom-Munksjö in brief
Ahlstrom-Munksjö is a global leader in fiber-based materials, supplying innovative and sustainable solutions to customers worldwide. Our offerings include decor paper, filter media, release liners, abrasive backings, nonwovens, electrotechnical paper, glass fiber materials, food packaging and labeling, tape, medical fiber materials and solutions for diagnostics. Combined annual net sales are about EUR 2.2 billion and we employ 6,000 people. The Ahlstrom-Munksjö share is listed on the Nasdaq Helsinki and Stockholm. Read more at www.ahlstrom-munksjo.com.