Ahlstrom-Munksjö Q3 2018 Results October 30, 2018 HANS SOHLSTRÖM, PRESIDENT AND CEO PIA AALTONEN-FORSELL, CFO
Profit improved in Q3 2018 – Major steps in the implementation of strategy Comparable EBITDA and margin Most businesses performed well MEUR % 100 20 • Comparable EBITDA improved for the third consecutive quarter, exceeding last year’s level 90 18 13.0% 12.7% 80 16 • Variable cost increases were successfully 70 11.4% 72 compensated 70 67 14 60 12 Good demand across most markets continued • 50 10 Strategic initiatives 40 8 • Completion of the acquisitions of Expera and 30 6 Caieiras 20 4 • Start-up of strategic investments in the Filtration and 10 2 Food Packaging businesses 0 0 • Decision to invest in improved product mix in Coated Specialties business • A plan to close PM1 in Stenay, France, to significantly improve competitiveness in the Food Packaging business 2
Stable demand on a good level across most markets Filtration Nonwovens Building & Wind FILTRATION & PERFORMANCE Insulation Abrasive Coated Specilaties Release Liners INDUSTRIAL SOLUTIONS Decor DECOR Beverage & Advanced Liquid Food packaging Tape Casing Medical Technologies SPECIALTIES 3
Sales growth driven by price increases – Third consecutive improvement in comparable EBITDA Comparable EBITDA and margin Sales MEUR MEUR % 700 100 20 566 90 18 542 600 70 80 72 16 500 70 14 60 12 400 13.0% 12.7% 50 10 300 40 8 30 6 200 20 4 100 10 2 0 0 0 4
Merger and integration successfully implemented Synergy benefits and cost reduction measures Ahlstrom-Munksjö targets synergy benefits and cost Synergy target Achieved run rate MEUR reduction measures with a total impact of EUR 50 million 60 annually, fully implemented at the end of Q1/2019 Majority from SG&A and variable costs Current estimate • 50 • Integration of the former Graphics and Packaging business area into Specialties to develop a combined 38 40 product and service offering • Incremental sales 30 • Production optimization • Product mix improvement 20 • Adjusting group structure to Ahlstrom- Munksjö’s business unit based operating model that locally 10 promotes accountability and enables flexibility and lean group functions 0 SG&A: Selling, General and Administrative expenses 5
Comparable EBITDA and margin by business area % MEUR MEUR % Filtration & Performance Decor 20 20 35 20 18 18 30 19.2% 16 16 18.5% 15 25 14 14 12 12 20 6.2% 10 10 10 6.4% 15 8 8 Q318 vs Q317 Q318 vs Q317 6 6 10 5 + gross margin + gross margin 4 4 5 - fixed costs 2 - fixed costs 2 0 0 0 0 Specialties Industrial Solutions MEUR % MEUR % 20 20 35 20 19.0% 17.2% 18 18 30 16 16 15 25 7.5% 14 14 5.3% 12 12 20 C1S: one-side 10 10 10 15 coated 8 8 Q318 vs Q317 6 6 10 5 4 4 - volumes in C1S Q318 vs Q317 5 2 2 - variable costs in C1S + gross margin 0 0 0 0 6
Operating cash flow negatively impacted by net working capital, balance sheet remains solid Net debt to MEUR MEUR EBITDA 90 500 2,0 1.7 77 80 450 1,8 400 1,6 70 Strong 457 350 1,4 Increase in balance 60 52 300 1,2 net working sheet 50 43 41 capital of 250 1,0 40 EUR 16m Net gearing 200 0,8 28 28 30 at 44% 150 0,6 20 100 0,4 5 10 50 0,2 0 0 0,0 7
Outlook for 2018 • Ahlstrom-Munksjö repeats its previous 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 Caieiras plant 8
Implementation of the strategy 9
Transformation in progress Acquisition driven Growth growth Targeting global focus, Creating a growth leadership in Ahlstrom and Munksjö platform through the increased Caieiras chosen growth separately focused on merger of Ahlstrom capex segments Expera profitability improvement and and Munksjö deleveraging 2013-2016 2017 2018- 500 Comparable EBITDA (* Caieiras 400 (** o Improved financial performance Expera 300 o Acquisition of Expera Specialty Solutions 200 o Acquisition of Caieiras specialty paper mill 100 o Organic growth investments 0 (* Illustrative, not a target or guidance 2015 LTM, (** Illustrative annual EBITDA impact from organic growth Q3 investments announced since 2016 10 2018
North America Specialty Solutions – The Fifth Business Area • New business area in Ahlstrom-Munksjö Russ Wanke, EVP and Executive • Management Team member • Continuous focus on customers and operations • Sharing best practises • Integration implementation Functions – – Businesses – Reporting – Governance • Detailed synergy estimations, including dynamic synergies 11
North America Specialty Solutions – Among the leading North American suppliers North America Specialty Solutions key facts (2017) • Approx. USD 721 million net sales, 86% in the US • Product portfolio is less impacted by economic cycles given exposure to growing cycle-resistant end markets • More than 400 customers • About 1,870 employees • Four paper mills with two integrated pulp mills North America Ahlstrom-Munksjö key facts in the U.S. (2017) Specialty Solutions • Approx. USD 380 million net sales in the U.S. (pro forma 2017) Other Ahlstrom-Munksjö • Five plants, one sales office plants • Filtration, Medical, Beverage & Casing, Ahlstrom-Munksjö sales office Advanced Liquid Technology • About 700 employees 12
Caieiras Integration of Caieiras – a platform for regional growth • Integration implementation • Caieiras product mix is a good match, with 80% of sales in Ahlstrom- Munksjö’s portfolio, and fills gaps in the regional offering Realize synergies Louveira: Engine and industrial filters Local supply to South American customers Enhance capabilities, process and quality control Combine sales and sourcing activities Optimize production Attractive growth potential in South America Caieiras sales Tape and grease Jacarei: proof paper, crepe Coated specialties and flexible Decor packaging Coffee filter paper 13 Release 13 liner
A balanced sales mix (* Sales breakdown by end-use (** Geographical sales breakdown Health care RoW Asia Industrial Transportation South America Europe Home building and furniture North America Consumer goods **) Ahlstrom- Munksjö annual report 2017, management’s estimate for Expera and Caieiras based on 2017 sales *) Illustrative unaudited combined net sales 2017, after acquisitions of Expera and Caieiras 14
Completed investments driving strategic progress Efficiency Customer Profitable and agility value growth Production ramp-up ongoing Back of sandpaper Abrasive backings Paper machine rebuild EUR 14m Arches, Q1/18- Filtration material Filtration Capacity debottlenecking EUR 3m Turin, H1/18- Filtration material Filtration Product offering EUR 23m Madisonville, H2/18- Food Packaging New line installation EUR 7m Saint Severin, Q3/18- Baking paper 15
New investment decisions driving our strategic progress Efficiency Customer Profitable and agility value growth Electrotechnical Insulation, Billingsfors EUR 23m paper Boiler and pulp line rebuild, Q3/19- Specialty Insulation, Aspa EUR 4m pulp Bailing line modernization, Q3/19- Pre-impregnated Decor, Dettingen EUR 5m decor paper Production line upgrade, Q1/19 Sterilization Medical, Pont Audemer EUR 4m wrap Converting line rebuild, Q2/19- Industrial filter Filtration, Turin EUR 28m material Capacity expansion, H2/20- Coffee, tea, and Beverage & Casing, Chirnside casing material EUR 28m New production line, Q4/19- Coated Coated Specialties, Jacarei specialty EUR 21m paper Coating line upgrade, Q3/19- 16
Investment to improve product mix and efficiency in Coated Specialties • EUR 21 million investment in the Coated Specialties business at Jacarei plant in Brazil • Expansion of the site’s capabilities of coating and calendering on the paper machine, completion in the third quarter of 2019 Benefits of the investment include: • – Further improve product mix towards coated specialty papers – Increase production flexibility Coated – Broadening product offering Specialties • Maintain a leading position in coated specialty papers Abrasive in Brazil Insulation Release Liners • Demand growth for high value-added coated specialty papers is robust in the region 17
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