2017-07-25 12:15:08 CEST

2017-07-25 12:15:08 CEST


REGULATED INFORMATION

English
Ahlstrom-Munksjö Oyj - Half Year financial report

Ahlstrom-Munksjö half-year report January-June 2017: Good start for the combined company with solid quarterly result


AHLSTROM-MUNKSJÖ HALF-YEAR REPORT RELEASE, JULY 25, 2017 AT 12:15 CEST

This release is a summary of Ahlstrom-Munksjö’s’ half-year financial report
January-June 2017. The complete report is attached to this release as a pdf
-file. It is also available at www.ahlstrom-munksjo.com.

In this half-year 2017 report, the January-June 2017 figures as well as all
comparison figures are presented on a pro forma basis to illustrate the
financial impact of the merger between Ahlstrom and Munksjö as if it had been
completed at the beginning of 2015. Only the April-June 2017 figures are
presented according to International Financial Reporting Standards (IFRS). The
appendix including unaudited consolidated financial statements has been prepared
according to IFRS standards.

April-June 2017 compared with April-June 2016

  ·  Net sales EUR 576.9 million (EUR 561.0 million), showing a gain of 2.8%.
Comparable net sales increased by 1.8% at constant currency rates.
  ·  Comparable EBITDA EUR 77.4 million (EUR 77.3 million), representing 13.4%
(13.8%) of net sales
  ·  EBITDA* EUR 75.0 million (EUR 76.0 million)
  ·  Operating result* EUR 43.3 million (EUR 42.5 million)
  ·  Net result* EUR 27.5 million (EUR 23.7 million)
  ·  Earnings per share* EUR 0.28 (EUR 0.25)
  ·  Comparable EPS excluding merger related items (PPA) EUR 0.39 (0.25)
  ·  Net cash flow from operating activities EUR 41.2 million (EUR 89.1 million)

January-June 2017 compared with January-June 2016

  ·  Net sales EUR 1,143.8 million (EUR 1,096.9 million), showing a gain of
4.3%. Comparable net sales increased by 2.7% at constant currency rates.
  ·  Comparable EBITDA EUR 156.8 million (EUR 137.2 million), representing 13.7%
(12.5%) of net sales
  ·  EBITDA* EUR 150.5 million (EUR 111.6 million)
  ·  Operating result* EUR 86.2 million (EUR 43.1 million)
  ·  Net result* EUR 51.7 million (EUR 13.3 million)
  ·  Earnings per share* EUR 0.54 (EUR 0.14)
  ·  Comparable EPS excluding merger related items (PPA) EUR 0.64 (0.33)
  ·  Net cash flow from operating activities EUR 84.1 million (EUR 84.5 million)

Major events

  ·  The merger of Ahlstrom Corporation into Munksjö Oyj was completed on April
1, 2017
  ·  The company redeemed the EUR 100 million hybrid bond with an annual fixed
interest rate of 7.875% and issued a EUR 250 million bond with an annual fixed
coupon of 1.875% as part of a refinancing package to lower financing costs.
Furthermore, the EUR 100 million bond with an annual fixed coupon of 4.125%
maturing in 2019 was tendered and EUR 89.2 million was offered for purchase by
noteholders.

Key figures

EUR          Q2/201  Q2/201  Change,  1-6/2017  1-6/2016  Change,   FY/
million                      %                            %         20
             7       6                                              16
Net sales    576.9   561.0   2.8%     1,143.8   1,096.9   4.3%    2,147.9
Comparable   77.4    77.3    0.2%     156.8     137.2     14.3%   268.7
EBITDA
Comparable   13.4    13.8             13.7      12.5              12.5
EBITDA
margin,
%
EBITDA*      75.0    76.0    -1.3%    150.5     111.6     34.9%   239.9
Operating    43.3    42.5    1.9%     86.2      43.1      100.0%  104.7
result*
Comparable   53.7    52.5    2.3%     108.2     86.6      24.9%   168.7
operating
result
excluding
merger
related
items
(PPA)
Net result*  27.5    23.7    15.9%    51.7      13.3      N/A     49.8
Earnings     0.28    0.25    13.8%    0.54      0.14      N/A     0.51
per
share*
Comparable   0.39    0.25    56.0%    0.64      0.33      94.0%   0.71
EPS
excluding
merger
related
items
(PPA)
Cash         41.2    89.1    -53.7%   84.1      84.5      -0.4%   232.1
generated
from
operating
activities
Capital      15.4    15.4    -0.2%    31.8      30.2      5.3%    77.7
expenditure
Net debt**   420.3   N/A     N/A      420.3     N/A       N/A     N/A
Gearing      41.3    N/A              41.3      N/A               N/A
ratio,
%**
Average      5,903   5,984   -1.4%    5,914     5,970     -0.9%   5,974
number
of
employees,
FTE

*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

The actual figures for January-June 2017 and for the corresponding comparison
periods are presented in the appendix only.

Ahlstrom-Munksjö has adopted the European Securities and Markets Authority
(ESMA) guidelines on Alternative Performance Measures 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 the items affecting
comparability (IAC), or purchase price allocation (PPA,) and they are called
Comparable.

CEO comments: Jan Åström

“We had a good quarter, our first as Ahlstrom-Munksjö, and we achieved a solid
operational result and profitability. We were able to capitalize on the strong
demand for most of our products across many regions. In addition, the
integration work is proceeding as planned and the identified synergy benefits
are already becoming clearly visible as we reached an annual run rate of about
EUR 13 million by the end of the quarter.

Our performance was driven by excellent results in the Filtration and
Performance, and Industrial Solutions business areas. Our Decor business area
experienced good demand, while enduring a sharp increase in input costs. We will
continue to work on our pricing to mitigate this. In Specialties, almost all of
our units improved and we will keep on working hard in integrating the former
Graphics and Packaging unit into that business area. This will also help us to
address the oversupplied market in coated one-sided papers.

We have also raised our estimate for investments this year to address the
several near-term growth opportunities in many of our segments, such as
filtration, food packaging and abrasives. In addition, we refinanced our funding
structure during the quarter to significantly lower our financing costs. Going
forward, we are working with full steam ahead to achieve and even exceed the
synergy targets, set at the time of the merger. I’m fully confident that we can
deliver on our long-term targets by following our strategic direction based on
profitable growth, customer value, accountability, flexibility and agility.”

Outlook for 2017

Ahlstrom-Munksjö reiterates the outlook on comparable EBITDA and shutdowns
published on May 15, 2017. The guidance on market outlook and capital
expenditure has been revised.

Market outlook: The demand outlook for 2017 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. Price increases continue
to be implemented to mitigate raw material cost inflation and they will take
effect during the rest of the year.

EBITDA: Comparable EBITDA in 2017 is expected to be higher than in the previous
year (pro forma EUR 268.7 million).

Shutdowns: The annual maintenance and vacation shutdowns in the third quarter as
well as the seasonal shutdowns at the end of 2017 are expected to be carried out
to about the same extent as in 2016. However, the maintenance shutdown usually
carried out in the third quarter in the Swedish plant Billingsfors is replaced
by shorter stops in the second and fourth quarters due to changes in the shift
form. The next maintenance shut-down at the pulp production facility in Aspa in
Sweden will be carried out in the fourth quarter of 2017.

Capital expenditure: The cash flow effect of current capital expenditure for
fixed assets in 2017 is expected to be approximately EUR 80 million, which is
higher than the previously estimated EUR 70 million, to address the good demand.
In addition, the cash flow impact of the strategic investments in Arches and
Madisonville is expected to be approximately EUR 18 million.

Completion of the merger

On April 1, 2017, Ahlstrom Corporation was merged into Munksjö Oyj, and the name
of the combined company was changed to Ahlstrom-Munksjö Oyj. The combination
created a global leader in innovative and sustainable fiber-based materials with
combined pro forma net sales of approximately EUR 2.15 billion, around 6,000
employees, and 41 production and converting facilities in 14 countries. A total
of 45,376,992 new shares in Ahlstrom-Munksjö were issued to Ahlstrom
shareholders as merger consideration, bringing the total number of shares to
96,438,573. Trading in the new shares started on April 3, 2017.

Approvals from the Extraordinary General Meetings of Ahlstrom and Munksjö as
well as the European Commission were received on January 11, 2017 and March 13,
2017, respectively. In connection with the merger, Ahlstrom and Munksjö
distributed funds in the total amount of approximately EUR 46 million,
corresponding to EUR 0.49 per share in Ahlstrom and EUR 0.45 per share in
Munksjö.

Cost synergies

Ahlstrom-Munksjö is targeting annual cost synergiesof EUR 35 million to be
gradually realized and fully visible from the second quarter of 2019. The
savings comprise mainly of lower fixed costs as well as coordination of
purchases and production following the merger. The company is also working on
identifying further business synergies such as integrating the former Graphics
and Packaging business area into the new Specialties business area, to develop a
combined product and service offering.

At the end of the reporting period, the annual synergy achievement run rate was
approximately EUR 13 million, confirming the previously communicated target of
EUR 35 million, giving the program a good start and supporting the strive to
exceed the target. Of the annual synergy savings arising from the merger, the
vast majority is related to lower SG&A costs, and the remainder is related to
reduced costs of goods sold and improved operational efficiency, as well as
planned revenue synergies. The financial result for the second-quarter 2017
includes realized synergies of approximately EUR 3 million.

Non-recurring costs to achieve the synergy savings amounted to EUR 4 million at
the end of the reporting period. The previously communicated full cost related
to the achievement of synergies within two years from the merger is EUR 30
million. The cash flow effect was EUR -2 million in the second quarter of 2017.

Financial targets

The company’s Board of Directors has set the following long-term financial
targets:

  ·  EBITDA margin above 14% over a business cycle
  ·  Net gearing below 100%
  ·  A stable and annually increasing dividend, to be paid bi-annually

Short-term risks

Ahlstrom-Munksjö is exposed to changing market conditions and uncertainty caused
by both macroeconomic and industry related events and is exposed to risks that
may arise from its operations, changes in the business environment, developments
in the global economy or potential changes in the legislative framework. The
materialization of such risks could have a material adverse effect on the
company’s operations, earnings and financial position.

The company’s significant risks and uncertainty factors mainly consist of
developments in demand for and prices of sold products, the cost and
availability of significant raw materials, financial risks, as well as other
business factors including developments in the financial markets. Currently
there is a risk related to the availability of titanium dioxide, a key raw
material for decor paper, due to a shortage of supply. Ahlstrom-Munksjö’s key
financial risks include interest rate and currency risks, liquidity risk and
credit risk. The Group has exposure to tax risks due to potential changes in tax
laws or regulations or their application, or as a result of on-going and future
tax audits or claims.

Ahlstrom-Munksjö has operations in many countries, and sometimes disputes cannot
be avoided in daily operations. The company is sometimes involved in legal
actions, disputes, claims for damages and other procedures. The result of these
cannot be predicted, but taking into account all available information to date,
the impact is not expected to have a significant impact on the financial
position of the company.

More information about risks and uncertainty factors related to Ahlstrom
-Munksjö’s business and the company’s risk management is available at
www.ahlstrom-munksjo.com.

Additional information

Jan Åström, President and CEO, tel. +46 10 250 1001
Pia Aaltonen-Forsell, CFO, tel. +46 10 250 1029
Juho Erkheikki, Investor & Media Relations Manager, tel. +358 50 413 4583

Webcast and conference call

A combined news conference, call and live webcast will be arranged on the
publishing day, July 25, 2017, at 2:00 p.m. CEST (3:00 p.m. EEST) at the World
Trade Center in Stockholm (Klarabergsviadukten 70, the Conference Center). The
report will be presented in English by President and CEO Jan Åström and CFO Pia
Aaltonen-Forsell.

Webcast and conference call information

The combined webcast and teleconference can be viewed at:
http://qsb.webcast.fi/a/ahlstrommunksjo/ahlstrommunksjo_2017_0725_q2/

Finnish callers: +358 (0)9 7479 0404
Swedish callers: +46 (0)8 5065 3942
UK callers: +44 (0) 330 336 9411
US callers: +1 719 457 1036

Conference ID: 7986852

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.

Future financial reports

Interim report January-September 2017
October 25, 2017
Financial Statements Release
2017                                                  February 13, 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 2.15 billion and we employ 6,000 people. The Ahlstrom
-Munksjö share is listed on the Nasdaq Helsinki and Stockholm. The company was
formed on April 1, 2017 through the merger of Ahlstrom Corporation and Munksjö
Oyj. Read more at www.ahlstrom-munksjo.com.


07251702.pdf