Statements Release 2017 Helsinki, February 13, 2018 JAN STRM, - - PowerPoint PPT Presentation

Q4/2017 & Financial Statements Release 2017

JAN ÅSTRÖM, PRESIDENT AND CEO PIA AALTONEN-FORSELL, CFO

Helsinki, February 13, 2018

Agenda

• Q4/2017 in brief
• Business area reviews
• Financials
• Update on synergies
• Outlook

Key takeaways from Q4/2017

Organic net sales growth at 7.3%

Excellent organic growth continued with stable profitability

• Demand continued to be good for most products across many regions
• Business units managed well keeping margins intact despite continued cost inflation
• Performance driven by Filtration with record annual profitability, growth in Release Liners as well as good

improvement in Coated Specialties in Brazil Synergy benefits are clearly visible

• Well on-track to achieve annual synergy benefits of above EUR 40 million
• Currently achieved annual run rate of about EUR 19.3 million, impact on Q4/2017 result about EUR 4.1 million

Looking forward

• Rapid increase in raw materials prices in Q4/17 reflected in outlook

– Time-lag to compensate for increased raw material costs – Further pricing initiatives on-going, particularly in Decor

• Results from the process to address the challenges in coated one-sided business expected to be gradually

visible during 2018

3

Key figures

Strong sales growth

4

EUR MILLION Q4/2017 Q4/2016 CHANGE, % 2017 2016 CHANGE, % Net Sales 547.1 527.5 3.7 2,232.6 2,147.9 3.9 Comparable EBITDA 63.1 61.3 3.0 290.4 268.7 8.1 Comparable EBITDA margin,% 11.5 11.6 13.0 12.5 EBITDA 52.7 55.4

• 4.9

266.6 239.9 11.1 Items affecting comparability included in EBITDA

• 10.4
• 5.9
• 23.8
• 28.8

Net result 19.3 13.5 42.6 88.5 49.8 77.6 Earnings per share, EUR 0.20 0.14 43.1 0.91 0.51 78.7 Comparable EPS excluding merger related items (PPA), EUR 0.37 0.20 85.0 1.29 0.96 34.4 Net debt** 375.3 N/A N/A 375.3 N/A N/A Gearing, %** 36.2 N/A N/A 36.2 N/A N/A Cash generated from operating activities 77.2 75.6 2.2 212.9 232.1

• 8.3

*Fair valuation of EUR 11 million inventory adjustment excluded as already included in pro forma 2016 figures **No comparative balance sheet figures on pro forma basis available

Strong organic sales growth in Q4/2017

Net sales EUR 547.1 million in Q4/17 (EUR 527.5 million)

• Net sales +3.7%
• Comparable net sales +7.3% at constant

currency rates – Higher selling prices and volumes as well as improved product mix – Strong growth in Filtration, Decor, Release Liners, Coated Specialties, and Tape

• Price increases to fight raw material inflation
• Sales predominately in euro, other main

currencies are USD, CNY and SEK – Translation effect from stronger EUR on net sales

MEUR

535.9 561.0 523.5 527.5 566.9 576.9 541.6 547.1

100 200 300 400 500 600 700 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Net Sales Net Sales

5 2,125,. 2,147.9 2,232.6

250 500 750 1000 1250 1500 1750 2000 2250 2500 2015 2016 2017

EBITDA margin maintained at a good level in Q4/2017

Comparable EBITDA EUR 63.1 million in Q4/17 (EUR 61.3 million)

• Margin at 11.5% (11.6%)
• Supported by higher volumes and lower fixed

costs

• Negative impact of EUR 15 million from higher

raw material costs – Mainly related to pulp and titanium dioxide – Price increases implemented to fight raw material inflation in 2017

• Figure impacted by EUR 4 million related to

annual maintenance stop at Aspa (in 2016,

• ccurred in Q3)

MEUR 203.0 268.7 290.4 9.6% 12.5% 13.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 25 50 75 100 125 150 175 200 225 250 275 300 2015 2016 2017 MEUR

Comparable EBITDA and margin

6

59.9 77.3 70.2 61.3 79.4 77.4 70.4 63.1 11.2% 13.8% 13.4% 11.6% 14.0% 13.4% 13.0% 11,5% 0% 2% 4% 6% 8% 10% 12% 14% 16% 10 20 30 40 50 60 70 80 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17

Target : EBITDA margin above 14% over a business cycle

Comparable EBITDA and margin

Business area reviews

Decor

Net sales EUR 94.2 million in Q4/17 (EUR 88.7 million)

• Net sales +6.2%
• Continued good demand in all segments
• Higher selling prices, volumes in line with the

comparison period Comparable EBITDA EUR 8.6 million in Q4/17 (EUR 11.4 million)

• Higher selling prices

– However, did not yet fully compensate for the rapid increase in titanium dioxide and pulp costs – Further price increases on-going

• Figure was positively impcated by about EUR 2

million related inventory adjustment and energy subsidy

8

93.2 97.8 84.9 88.7 95.4 98.2 90.5 94.2 20 40 60 80 100 120 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Net sales

13.7 17.6 11.0 11.4 11.3 8.1 5.8 8.6 14.7% 18.0% 13.0% 12.9% 11.8% 8.2% 6.4% 9.2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 5 10 15 20 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Comparable EBITDA and margin

Filtration and Performance

Net sales EUR 159.9 million in Q4/17 (EUR 149.5 million)

• Net sales +6.9%
• Growth was driven by the higher sales of

filtration, nonwoven and wallcover products

• Higher selling prices, partially off-set by an

adverse currency effect Comparable EBITDA EUR 24.6 million in Q4/17 (EUR 19.5 million)

• Higher volumes
• Improved operational efficiency
• Full-year comparable EBITDA margin at a

record high of 18.1%

9

20.0 24.9 29.7 19.5 31.8 33.1 31.1 24.6 13.2% 15.6% 19.0% 13.0% 18.8% 19.0% 19.2% 15.4.% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Comparable EBITDA and margin

151.9 159.2 156.5 149.5 169.0 174.3 162.0 159.9 20 40 60 80 100 120 140 160 180 200 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Net sales

Industrial Solutions

Net sales EUR 158.7 million in Q4/17 (EUR 155.5 million)

• Net sales +2.0%
• Higher sales of Release Liners and Coated

Specialties products

• Higher selling prices in most segments

Comparable EBITDA EUR 25.3 million in Q4/17 (EUR 28.7 million)

• Higher selling prices and sales volumes as well

as improved product mix

• Negative effect from the higher material costs:

price spread between soft- and hardwood pulp narrowed

• The figure impacted by EUR 4 million related to

annual maintenance stop at Aspa pulp mill (in 2016, carried out in Q3)

10

152.7 161.7 148.4 155.5 163.7 162.5 155.9 158.7 20 40 60 80 100 120 140 160 180 200 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Net sales

19.0 23.5 21.9 28.7 28.4 27.9 26.8 25.3 12.4% 14.5% 14.8% 18.4% 17.4% 17.2% 17.2% 16.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Comparable EBITDA and margin

Specialties

Net sales EUR 138.9 million in Q4/17 (EUR 139.8 million)

• Net sales in-line with the comparison period
• Higher sales of tape, medical as well vegetable

parchment products

• Lower sales of coated one-sided products, tea bag

materials Comparable EBITDA EUR 10.2 million in Q4/17 (EUR 13.2 million)

• Higher raw material costs
• Operational challenges in the coated one-sided

business – Results from a process to address the challenges expected to be gradually visible during 2018

• Positive impact from increased volumes and lower

fixed costs

11

147.3 149.5 141.2 139.8 145.9 151.1 138.3 138.9 20 40 60 80 100 120 140 160 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Net sales

15.7 19.1 16.5 13.2 17.5 14.7 10.4 10.2 10.7% 12.8% 11.7% 9.4% 12.0% 9.7% 7.5% 7.3% 0% 2% 4% 6% 8% 10% 12% 14% 0,0 5,0 10,0 15,0 20,0 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 MEUR

Comparable EBITDA and margin

Synergies are clearly visible

Benefits estimated to be above EUR 40 million

• Annual synergies are estimated to be above EUR 40 million
• Annual synergy achievement run rate was about EUR 19.3 million at the end of 2017, majority from

SG&A costs – Non-recurring costs estimated at EUR 30 million, of which EUR 19.1 million have been taken by the end of 2017 – Cash flow effect was EUR -3.6 million in Q4/17 and EUR -10.9 million in 2017

• Integration of the former Graphics and Packaging business area into Specialties to develop a combined

product and service offering

12

Financials

Strong financials and good liquidity

EUR million

• Dec. 31, 2017

April, 1, 2017* Total non-current assets 1,604.2 1,750.2 Operative net working capital 267.8 N/A Cash and cash equivalents 245.9 200.6 Equity 1,038,0 1,062.6 Net debt 375.3 432.4 Net debt / EBITDA** 1.3x 1.5x Gearing, % 36.2 40.7

Liquidity

• Total cash position EUR 245.9 million. In addition,

undrawn committed credit facilities and committed cash pool overdrafts of EUR 212.5 million available

Refinancing implemented in 2017

• EUR 100 million hybrid bond redeemed in May 2017
• Five-year EUR 250 million bond issued with 1.875%

coupon in June 2017

• To repay EUR 100 million bond with 4.125% coupon

and refinance part of term loan borrowings

* Pro forma ** Comparable

Operating cash flow

Q4/2017 vs Q4/2016

• Up 2.2%, driven by improved operational result.

Negatively impacted by higher cash taxes.

2017 vs 2016

• Impacted by higher cash taxes related to

accumulated payments from previous years as well the process to achieve the targeted synergy benefits

15

• 4.6

89.1 72.0 75.6 42.9 41.2 51.6 77.2

• 20

20 40 60 80 100 Q1/16 Q2/16 Q3/17 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 124.7 232.1 212.9 50 100 150 200 250 2015 2016 2017 MEUR MEUR

Funding structure

108 202 250

Term Loan 3y Term Loan 5y Bond

DEBT FACILITY STRUCTURE, DRAWN1

• Term Loans

− 3 year: EUR 108 million (maturity 2020) − 5 year: EUR 72 million, EUR 40 million, SEK 600 million, USD 35 million (maturity 2022)

• Bond
• EUR 250 million bond (maturity 2022)
• RCF
• 5 year: EUR 200 million, undrawn (maturity 2022)
• Other
• Local WC facilities of approx. EUR 57 million
• Local undrawn WC facilities of approx. EUR 62 million
• No active issuances in the CP market at the moment
• Cash pool limits of EUR 13 million (committed) and

EUR 11 million (uncommitted)

• FUNDING STRUCTURE, AVAILABLE FACILITIES

DEBT FACILITY MATURITY PROFILE, INCL. UNDRAWN1

MEUR MEUR

1) Local facilities not represented

16

100 200 300 400 500 600 700 2018 2019 2020 2021 2022 Term Loan Bond RCF

Dividend proposal: EUR 0.52 per share

To be paid in two installments

0.25 0.30 0.47 0.52 0,5 1 1,5 2 2,5 3 3,5 4 0,00 0,10 0,20 0,30 0,40 0,50 0,60 2014 2015 2016** 2017* Return on equity / Dividend Yield, % % * Proposal to the AGM ** Converted by using the same number of shares as in 2017 EUR

Outlook

18

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. Selling price increases will continue to be implemented to mitigate cost inflation in raw materials. The cash flow effect of current capital expenditure of fixed assets as well as strategic investments is expected to be higher than in 2017 (EUR 89.7 million). The strategic growth and profitability enhancement investments include the previously announced projects at Arches, Madisonville and Saint Severin sites. 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.

Market Outlook EBITDA Capital Expenditure

Further information, please contact Juho Erkheikki Investor Relations Manager Tel: +358 50 413 4583 juho.erkheikki@ahlstrom-munksjo.com UPCOMING EVENTS IN 2018

• Interim report January-March 2018 to be published
• n April 24
• Annual General Meeting 2018 on March 21
• Half-year report January-June 2018 to be published
• n July 26
• Interim report January-September 2018 to be

published on October 30

Key raw material price trends

Pulps

USD/ton

Source: Foex, Bloomberg, Ahlstrom-Munksjö

Titanium dioxide

EUR/ton

20

400 500 600 700 800 900 1000 1100 1200 Hardwood pulp (NKHP) Softwood pulp (NKSK) 500 1 000 1 500 2 000 2 500 3 000 3 500 2008/01 2008/06 2008/11 2009/04 2009/09 2010/02 2010/07 2010/12 2011/05 2011/10 2012/03 2012/08 2013/01 2013/06 2013/11 2014/04 2014/09 2015/02 2015/07 2015/12 2016/05 2016/10 2017/03 2017/08 DEC 2016: EUR 2,180 DEC 2017: EUR 2,845 +31% y/y