Ahlstrom Corporation 2012: Strategic transformation progressing; financial performance still weak
Ahlstrom Corporation STOCK EXCHANGE RELEASE January 31, 2013 at 12.00 noon
Financial statement release
Continuing operations October-December 2012 compared with October-December 2011
* Net sales EUR 240.1 million (EUR 242.8 million).
* Operating profit EUR 0.1 million (EUR -3.4 million).
* Operating profit excluding non-recurring items EUR -5.0 million (EUR 0.5
* Operating margin excluding non-recurring items -2.1% (0.2%).
* Profit before taxes EUR -8.2 million (EUR -9.5 million).
* Earnings per share EUR -0.23 (EUR -0.15).
October-December 2012 in brief
* The poor profitability was due to a shortfall in sales volumes across all
key markets, adverse product mix, and increased market-related downtime in
production to manage inventory levels.
* Ahlstrom's Extraordinary General Meeting approved the demerger of the Label
and Processing business, which will be combined with MunksjÃ¶ AB to form a
new global leader in specialty papers. Closing of the first phase of the
transaction is expected to take place by the end of the first quarter 2013.
It is, however, possible that the completion of the first phase of the
planned transaction will not take place until the second quarter of 2013.
* A rightsizing initiative was announced to lower costs by EUR 15 million
annually to reflect the future size and scope of the company after the
completion of the Label and Processing transaction.
* To strengthen customer relationships and focus on growth; the Filtration
business area was divided into two segments - Advanced Filtration and
Continuing operations January-December 2012 compared with January-December 2011
* Net sales EUR 1,010.8 million (EUR 1,025.8 million).
* Operating profit EUR 18.6 million (EUR 2.1 million).
* Operating profit excluding non-recurring items EUR 17.9 million (EUR 29.6
* Operating margin excluding non-recurring items 1.8% (2.9%).
* Profit before taxes EUR -5.7 million (EUR -22.3 million).
* Earnings per share EUR -0.43 (EUR -0.59).
* The Board of Directors proposes to the Annual General Meeting that a
dividend totaling EUR 0.63 per share be paid for the financial year ended on
December 31, 2012.
Outlook for 2013
* Net sales from continuing operations are expected to be EUR 980-1,140
million. The operating profit margin excluding non-recurring items from
continuing operations is expected to be 2-5% of net sales.
Jan LÃ¥ng, President & CEO
* Our financial performance during the fourth quarter and most of the year was
clearly disappointing as sales fell below our expectations. Market demand
volatility requires a more flexible and responsive cost structure than we
* We have, in line with our strategy, generated solid growth with our
strategic global key accounts. We continue our efforts to improve
responsiveness to smaller customers.
* We are going through a major transformation of our business portfolio with
the Label and Processing demerger. I am confident that our improved focus,
together with stronger customer relationships and capabilities, will bring
us back to the path of profitable growth.
Key figures from continuing operations
EUR million Q4/2012 Q4/2011 Change, % 2012 2011 Change, %
Net sales 240.1 242.8 -1.1 1,010.8 1,025.8 -1.5
Operating profit / loss 0.1 -3.4 Â 18.6 2.1
% of net sales 0.0 -1.4 Â 1.8 0.2
Operating profit excl. NRI -5.0 0.5 Â 17.9 29.6 -39.5
% of net sales -2.1 0.2 Â 1.8 2.9
Profit / Loss before taxes -8.2 -9.5 13.5 -5.7 -22.3 74.5
Profit / Loss for the
period -9.8 -5.8 -68.2 -15.9 -22.1 28.2
Earnings per share -0.23 -0.15 Â -0.43 -0.59
Return on capital
employed, % -2.1 -2.6 Â 1.6 -0.0
Capital expenditure 26.1 25.6 2.2 74.1 49.8 48.7
Number of personnel, at
the end of period 3,829 3,918 -2.3 3,829 3,918 -2.3
The operating environment changed little in the fourth quarter, as overall
demand was soft with increasing volatility. Geographically, demand in Europe
remained weak, while demand in North America slowed down during the review
period. Some signs of recovery were seen in the Asian market, and particularly
in China. Inventory destocking was visible across Ahlstrom's main markets
towards the end of the review period.
In the Building and Energy business area, demand for flooring, wallpaper and
wallcovering materials in Europe remained stable during the review period. The
wallcovering materials market in China showed some signs of improvement
following earlier declines. The demand for specialty reinforcements used by the
wind energy industry weakened.
In the Filtration business area, the market for transportation filtration
materials in North America weakened in the fourth quarter. Demand for
transportation filtration materials in Europe remained soft. For example, new
car registrations in Europe showed a decline of about 10% in the fourth quarter.
The advanced filtration material markets served by Ahlstrom, particularly gas
turbine, laboratory and life science filtration, continued to strengthen.
In the Food and Medical business area, the markets for tape, food packaging and
beverage materials (e.g. teabag) remained weak during the review period, while
the demand for medical materials was stable.
Market pulp prices increased somewhat in the fourth quarter, while prices for
synthetic fibers such as polypropylene and polyester remained stable. Prices for
chemicals in general continued to decline. In its production, Ahlstrom uses
chemicals such as latex, titanium dioxide, starch, and clay. Natural gas prices
eased in Europe, while development was stable in North America.
Combination of the Label and Processing business and MunksjÃ¶ AB
On November 27, 2012, Ahlstrom's Extraordinary General Meeting approved the
demerger of the Label and Processing businesses, which will be combined with
MunksjÃ¶ AB to form a global leader in specialty papers through two partial
demergers: one consisting of the Label and Processing operations in Europe (LP
Europe) and one in Brazil (Coated Specialties).
Label and Processing is reported separately as discontinued operations.
The Competition Directorate-General of the EU Commission completed the first
phase of its investigation under the EU Merger Regulation into the transaction
between Ahlstrom's Label and Processing business and MunksjÃ¶ AB and opened an
in-depth (second phase) investigation into the proposed combination with respect
to abrasive backings and pre-impregnated decor paper. The Commission now has
until April 29, 2013, to take a final decision on whether the combination would
significantly impede effective competition in the European Economic Area (EEA)
or any substantial part of it.
Ahlstrom and MunksjÃ¶ AB continue to work closely with the Commission in order to
allow the Commission to complete its review as quickly as possible, aiming at a
completion of the demerger of Ahlstrom's Label and Processing business in Europe
and other related measures forming the first phase of the planned transaction
during the first quarter of 2013. It is, however, possible that the completion
of the first phase of the planned transaction will not take place until the
second quarter of 2013.
Divestment of the Home and Personal business area
Ahlstrom's former wipes fabrics business, Home and Personal, was transferred to
Suominen Corporation on October 31, 2011. As announced on September 27, 2012,
the transfer of the wipes business in Brazil to Suominen Corporation has been
postponed. Ahlstrom had previously anticipated that the transfer would have
taken place in the third quarter of 2012.
All necessary Brazilian regulatory permits for the operations in addition to
competition clearances have been received. The parties are negotiating the
prerequisites, including financing of the remaining EUR 25 million of the total
transaction value of EUR 170 million, for completing the transaction. The aim is
to transfer the operations in Brazil to Suominen as soon as possible.
Home and Personal was reported separately as discontinued operations until
October 31, 2011. For the time being, the Brazilian operation of Home and
Personal is reported as discontinued operations.
Result from discontinued operations
In October-December 2012, the profit for the period from discontinued operations
was EUR 7.5 million, compared with a EUR 9.1 million loss in the comparison
period. The fourth-quarter 2011 figure includes the Home and Personal business
area as a whole until October 31, 2011, while the fourth-quarter 2012 figure
includes the Brazilian part only. The 2011 figure includes an impairment loss
recognized on the re-measurement to fair value and costs to sell of EUR 4.9
million after tax related to the divestment of Home and Personal business.
In January-December 2012, the profit for the period from discontinued operations
was EUR 15.1 million, compared with a EUR 10.2 million loss in the comparison
period. The 2011 figure includes the Home and Personal business area as a whole
until October 31, 2011, while the 2012 figure includes the Brazilian part only.
The 2011 figure includes an impairment loss recognized on the re-measurement to
fair value and costs to sell of EUR 23.4 million after tax related to the
divestment of Home and Personal business.
Result including discontinued operations
In October-December 2012, the loss for the period including discontinued
operations was EUR 2.3 million (EUR 14.8 million loss). Earnings per share with
the effect of interest on the hybrid bond were EUR -0.07 (EUR -0.34).
Return on equity (ROE) was -1.7% (-9.6%).
In January-December 2012, the loss for the period including discontinued
operations was EUR 0.7 million (EUR 32.2 million loss). Earnings per share with
the effect of interest on the hybrid bond were EUR -0.10 (EUR -0.81).
Return on equity (ROE) was -0.1% (-4.9%).
Events after the review period
On January 17, 2013, Ahlstrom provided preliminary information on net sales and
operating profit excluding non-recurring items from continuing operations items
for 2012. Net sales were in line with the outlook Ahlstrom issued in November
2012. The operating profit excluding non-recurring items was lower than the
company had earlier anticipated because of a weaker sales mix and volumes across
all key markets towards the end of the year, as well as longer-than-expected
production downtime taken during the last quarter.
Proposal for the distribution of profits
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
The distributable funds on the balance sheet of Ahlstrom Corporation as of
December 31, 2012 amounted to EUR 526,131,945.20.
The Board of Directors will propose to the Annual General Meeting that for the
financial year which ended on December 31, 2012 a dividend totaling EUR 0.63 per
share be paid based on the dividend policy mentioned above.
The dividends will be paid to shareholders registered in the Register of
Shareholders held by Euroclear Finland Ltd. on the record date, April 3, 2013.
On December 31, 2012, 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 29,402,483. The Board of Directors proposes that the dividend be
paid on April 10, 2013.
In addition, the Board of Directors proposes that EUR 75,000 will be reserved
for donations at the discretion of the Board.
From 2013 onwards, Ahlstrom continues to provide its outlook on net sales as a
range in euros. The outlook for operating profit excluding non-recurring items
is given as a range in percentage of net sales instead of the euro-based range
Net sales from continuing operations are expected to be EUR 980-1,140 million in
2013. The operating profit margin excluding non-recurring items from continuing
operations is expected to be 2-5% of net sales.
In 2013, investments excluding acquisitions from continuing operations are
estimated to be approximately EUR 75 million (EUR 74.1 million in 2012). The
estimate includes investments that were already announced in 2011 and 2012, such
as the wallcovering materials line Binzhou, China, and the additional capacity
in filtration materials in Turin, Italy.
The global economic outlook remains uncertain with limited visibility. The
European economy may face a prolonged slowdown as proposed cuts in public
spending and tax increases coupled with record high unemployment reduce
disposable incomes. Recent indicators for the U.S. economy continue to be mixed.
In Asia the economy in China in particular has shown signs of recovery.
Slower economic growth, or even a temporary contraction, poses risks to
Ahlstrom's financial performance. It may lead to lower sales volumes and force
Ahlstrom 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 limited visibility are making it more
difficult to forecast future developments.
In recent years, Ahlstrom has initiated investment projects, especially in
China, that are in a start-up phase, or will be in the near future. The
company's financial performance may be negatively affected by the
commercialization of the new production lines.
Ahlstrom's main raw materials are natural fibers, mainly pulp, synthetic fibers,
and chemicals. The prices of some of the key raw materials used by Ahlstrom
remain at a high level, with volatility.
If global economic growth slows down further, maintaining current sales prices
may be at risk and sustaining the current level of profitability may be
compromised, even if raw material prices fall at the same time.
* Â * Â *
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 follows the disclosure procedure enabled by Standard 5.2b published by
the Finnish Financial Supervision Authority and hereby publishes its financial
statement bulletin enclosed to this stock exchange release. The company's
financial statement bulletin is attached to this release in pdf format and is
also available on the company's web site at www.ahlstrom.com.
Jan LÃ¥ng, President & CEO, tel. +358 (0)10 888 4700
Seppo Parvi, CFO, tel. +358 (0)10 888 4768
Ahlstrom's President & CEO Jan LÃ¥ng and CFO Seppo Parvi will present the
Financials statements bulletin 2012 at a Finnish-language press and analyst
conference in Helsinki today, January 31, 2013, at 2:00 p.m. (CET+1). The
conference will take place at Event Arena Bank, Unioninkatu 20. The meeting room
will be announced on the display board in the lobby.
In addition, President & CEO LÃ¥ng and CFO Parvi will hold a conference call in
English for analysts, investors and representatives of the media today, January
31, 2013, at 4:00 p.m. (CET+1). To participate in the conference call, please
dial (09) 6937 9543 in Finland or +44 (0)20 7136 2050 outside Finland a few
minutes before the conference begins. The access code is 2482850.
The conference call can also be listened to live on the Internet. The link to
the English-language presentation (an audio webcast) including slides is
available on the company website at www.ahlstrom.com. Questions may also be
submitted in writing via the Internet. Listening to the conference call requires
An on-demand webcast including slides is available for viewing and listening on
the company website for one year after the conference call.
Presentation material will be available on January 31 2013, after the Interim
Report is published, at www.ahlstrom.com > Investors > Reports and presentations
> 2012. Material in Finnish will be available at www.ahlstrom.fi > Sijoittajat >
Katsaukset ja presentaatiot > 2012.
Ahlstrom in brief
Ahlstrom is a high performance fiber-based materials company, partnering with
leading businesses around the world to help them stay ahead. Our products are
used in a large variety of everyday applications, such as filters, medical gowns
and drapes, diagnostics, wallcoverings, flooring and food packaging. We have a
leading market position in the businesses in which we operate. In 2012,
Ahlstrom's net sales from the continuing operations (excluding Label and
Processing business) amounted to EUR 1 billion. Our 3,800 employees serve
customers in 28 countries on six continents. Ahlstrom's share is quoted on the
NASDAQ OMX Helsinki. More information available at www.ahlstrom.com.
Ahlstrom Financial Statements Bulletin 2012 (pdf):
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Source: Ahlstrom Oyj via Thomson Reuters ONE