2007-07-25 07:30:02 CEST
2007-07-25 07:30:02 CEST
REGULATED INFORMATION
Ahlstrom - Half Year financial report
Ahlstrom s Interim report January-June 2007 - Implementation of growth actions continued in the second quarter
Ahlstrom Corporation STOCK EXCHANGE RELEASE 25.7.2007
Ahlstrom, a leader in high performance fiber-based materials, reports
net sales of EUR 436.9 million (Q2/2006: EUR 409.6 million).
Operating profit amounted to EUR 21.0 million (EUR 28.9 million,
excl. non-recurring items EUR 26.0 million), representing a 4.8%
margin (7.1%, excl. non-recurring items 6.4%). Profit before taxes
was EUR 16.4 million (EUR 25.2 million, excl. non-recurring items EUR
22.3 million) and return on capital employed (ROCE) 8.0% (11.7%,
excl. non-recurring items 10.6%). Earnings per share (EPS) amounted
to EUR 0.26 (EUR 0.36). Q2/2007 did not include non-recurring items.
April-June 2007 in brief
- Net sales (adjusted for currency effect) grew by 8.7% from the
second quarter of 2006
- Operating profit improved by 7.4% from the first quarter of 2007
due to increased sales volumes
- Integration of the three acquisitions in the FiberComposites
segment was started
- The rebuild of the release base paper machine in France was
completed at the end of June. The investment standstill impacted the
operating profit negatively by approximately EUR 3.5 million.
Key figures
+-------------------------------------------------------------------+
| EUR million | Q2/2007 | Q2/2006 | Q1-Q2/ | Q1-Q2/ | |
| | | | 2007 | 2006 | 2006 |
|-------------------+---------+---------+--------+--------+---------|
| Net sales | 436.9 | 409.6 | 853.3 | 824.2 | 1,599.1 |
|-------------------+---------+---------+--------+--------+---------|
| Operating profit | 21.0 | 28.9 | 44.4 | 58.5 | 96.1 |
|-------------------+---------+---------+--------+--------+---------|
| Operating profit | 21.0 | 26.0 | 40.6 | 52.3 | 87.3 |
| excl. | | | | | |
| non-recurring | | | | | |
| items | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Profit before | 16.4 | 25.2 | 36.7 | 50.3 | 81.2 |
| taxes | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Profit before | 16.4 | 22.3 | 32.9 | 44.1 | 72.5 |
| taxes excl. | | | | | |
| non-recurring | | | | | |
| items | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Profit for the | 11.9 | 16.6 | 25.3 | 32.4 | 57.6 |
| period | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Net cash flow | 9.0 | 11.3 | -3.0 | 37.2 | 119.2 |
| from operating | | | | | |
| activities | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Gearing ratio, % | 50.9 | 30.0 | 50.9 | 30.0 | 20.3 |
|-------------------+---------+---------+--------+--------+---------|
| Return on capital | 8.0 | 11.7 | 8.5 | 12.4 | 10.4 |
| employed (ROCE),% | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Return on capital | | | | | |
| employed (ROCE),% | | | | | |
| excl. | | | | | |
| non-recurring | | | | | |
| items | 8.0 | 10.6 | 7.8 | 11.2 | 9.5 |
|-------------------+---------+---------+--------+--------+---------|
| Cash earnings per | 0.20 | 0.21 | -0.06 | 0.89 | 2.72 |
| share, EUR | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Earnings per | 0.26 | 0.36 | 0.55 | 0.77 | 1.31 |
| share, EUR | | | | | |
|-------------------+---------+---------+--------+--------+---------|
| Average number of | | | 46,279 | 41,977 | |
| shares | | | | | |
| during the | | | | | |
| period, 1000s | 46,636 | 45,587 | | | 43,802 |
+-------------------------------------------------------------------+
Jukka Moisio, President & CEO, comments on Ahlstrom's second quarter:
- During the second quarter we worked intensively with several growth
actions. We completed three acquisitions and started the integration
work to consolidate them with our operations and we expect to
finalize the integration process by the end of 2007. Furthermore, we
continued to ramp up several new manufacturing lines to be able to
develop new products and deliver new volumes for our customers. At
the end of the quarter, we completed our European capacity expansion
program in release base papers through an investment at the La Gère
plant in France. This new capability as well as our announced joint
venture in Brazil will strengthen our ability to serve the growing
labeling markets globally. I am satisfied with the progress of the
growth actions so far and look forward to an active second half of
2007.
- Ahlstrom's currency-adjusted net sales grew by 9% which is a result
of implementing our growth strategy. We expect to see a boost in top
line in the coming quarters when organic growth accelerates and
acquisitions are included in our figures for full quarters. Despite
the negative impact on our operating profit due to investments and
temporary acquisition-related higher fixed costs, our operating
profit grew by 7% from Q1/2007. Our ROCE of 8.0% is below our long
term target 13%, and we will work to improve margins and control
fixed costs.
Ahlstrom Group: Interim report January-June, 2007
All comparable figures in this report refer to the same period last
year unless otherwise stated.
Operating environment
The demand for Ahlstrom's products was good in most geographic areas.
Growth in demand in Asia and Latin America improved from last year
and the markets in Europe continued to show good development. Overall
the North American market was stable, however the housing markets
continued to slow down which affected the market for air filtration
products.
Prices for raw materials and energy, especially pulp remained very
high. The average USD market price for NBSK pulp, the main raw
material, increased further and was approximately 19% higher than in
the second quarter of 2006 and 4% higher than in the first quarter of
2007. The prices for synthetic fibers and chemicals remained at a
high level but did not increase from the first quarter of 2007.
Energy costs remained high, although electricity costs in Europe
decreased slightly due to the return to the regulated electricity
tariff in France and the cancellation of energy taxes in Germany.
Ahlstrom's main energy sources are natural gas and electricity.
Financial performance in April-June 2007
The Group's net sales amounted to EUR 436.9 million (EUR 409.6
million). Exchange rate fluctuations, mainly the weakened USD,
decreased Ahlstrom's net sales by EUR 8.5 million. The three
acquisitions (Fabriano, Orlandi and Fiberweb's consumer wipes
business) added sales of EUR 22.3 million in the second quarter.
Orlandi was consolidated for May and June and Fabriano and Fiberweb's
consumer wipes business for June. Comparable net sales, adjusted for
the acquisitions, the La Gère investment standstill and the currency
effect, grew by 4.6%.
Sales volumes increased by 5.4% compared with the corresponding
period of 2006. Growth was mainly driven by acquisitions and organic
growth investments as well as good demand in most business areas.
Operating profit excl. non-recurring items for the second quarter
amounted to EUR 21.0 million (EUR 26.0 million). In addition to high
raw material costs profitability was impacted by the La Gère
investment standstill that lasted five weeks and decreased Ahlstrom's
operating profit by approximately EUR 3.5 million. The integration
costs of the acquisitions affected profitability by approximately EUR
0.5 million.
Total net financial expenses were EUR 4.3 million (EUR 4.1 million).
Net interest expenses increased to EUR 3.9 million (EUR 2.3 million)
mainly due to the increase in net debt. Net foreign exchange gains on
financial items were EUR 0.2 million (losses of EUR 1.4 million).
Ahlstrom's share of the losses of the associated company Jujo Thermal
amounted to EUR 0.3 million (profits of EUR 0.4 million).
Profit before taxes excl. non-recurring items was EUR 16.4 million
(EUR 22.3 million). Income tax expenses were EUR 4.5 million (EUR 8.6
million). Profit for the period was EUR 11.9 million (EUR 16.6
million).
ROCE excl. non-recurring items amounted to 8.0% (10.6%). Return on
equity (ROE) was 6.4% (9.0%). Earnings per share (EPS) amounted to
EUR 0.26 (EUR 0.36).
Net asset turnover was 1.7 (1.6).
Financial performance in January-June 2007
Net sales in January-June 2007 amounted to EUR 853.3 million (EUR
824.2 million). Currency fluctuations, mainly the weakened USD,
decreased net sales by EUR 20.6 million. Comparable net sales,
adjusted for acquisitions and investment standstills and the currency
effect, grew by 4.4%. Sales volumes grew by 4.3%.
The Group's operating profit in the first half of 2007 was EUR 44.4
million (EUR 58.5 million). Excluding non-recurring items the
operating profit amounted to EUR 40.6 million (EUR 52.3 million). The
non-recurring items of EUR 3.8 million were mainly related to the
sale of three power plants in Italy.
High raw material and energy costs, the investment standstills at the
La Gère, France and the Karhula, Finland plants, together with the
integration costs from the completed acquisitions impacted
profitability negatively during the period.
Total net financial expenses were EUR 7.3 million (EUR 8.6 million).
Net interest expenses totalled EUR 6.3 million (EUR 4.5 million). Net
foreign exchange gains were EUR 0.2 million (losses of EUR 3.1
million). The change was mainly attributable to the actions
implemented in 2006 to decrease the level of equity hedging.
Ahlstrom's share of the losses of the associated company Jujo Thermal
amounted to EUR 0.4 million (profits of EUR 0.4 million).
Profit before taxes was EUR 36.7 million (EUR 50.3 million).
Excluding net non-recurring items, profit before taxes amounted to
EUR 32.9 million (EUR 44.1 million). Income tax expenses totalled EUR
11.4 million (EUR 17.9 million). The cumulative tax rate for the
period was 31%. Profit for the period amounted to EUR 25.3 million
(EUR 32.4 million). Earnings per share (EPS) amounted to EUR 0.55
(EUR 0.77).
Return on capital employed (ROCE) was 8.5% (12.4%). Excluding net
non-recurring gains, ROCE amounted to 7.8% (11.2%). Return on equity
(ROE) was 6.7% (9.7%).
Financing and financial position in January-June 2007
Net cash flow from operating activities amounted to EUR -3.0 million
(EUR 37.2 million). The decrease in cash flow was mainly attributable
to the EUR 20.8 million payment to the pension fund in the United
Kingdom in the first quarter 2007. Interest-bearing net liabilities
increased by EUR 227.4 million to EUR 382.6 million due to the
implemented acquisitions and investments (December 31, 2006: EUR
155.2 million).
Gearing ratio was 50.9% (December 31, 2006: 20.3%) and the equity
ratio 47.3% (December 31, 2006: 56.5%).
On June 30, 2007 committed credit facilities available to the Group
amounted to EUR 342 million.
Capital expenditure in January-June 2007
Capital expenditure excluding acquisitions amounted to EUR 65.8
million (EUR 47.0 million). The value of acquisitions was EUR 127.8
million (EUR 8.0 million).
The full-year capital expenditure for Ahlstrom Group, excluding
acquisitions, is expected to exceed the 2006 level (EUR 120.1
million) by approximately 15-20%.
Growth strategy
Ahlstrom's strategy is to grow both organically and by acquisitions.
Ahlstrom's growth investments are targeted to expand business to fast
growing markets and serve customers globally.
Ahlstrom's growth investments are expected to generate net sales
amounting to 1.5 times the investment value in 3-5 years and reach a
return of capital employed of at least 13%.
In the first half of 2007 Ahlstrom continued its global growth
strategy by implementing acquisitions and organic growth investments
on four continents.
Acquisitions and investment decisions in January-June 2007
On May 31, 2007 Ahlstrom closed the acquisition of Fabriano Filter
Media SpA, based in Sassoferrato, Italy. Fabriano is a manufacturer
of microglass filter media, serving mainly the high efficiency air
filtration market. The acquisition price was approximately EUR 7
million. The transaction includes one manufacturing plant employing
32 people with net sales of approximately EUR 7 million. The acquired
business has been integrated with Ahlstrom's current Italian
operations in Turin.
On May 25, 2007 Ahlstrom closed the acquisition of the consumer wipes
business of Fiberweb plc. The acquisition price was approximately EUR
65 million. The acquired business includes four plants in Europe and
in the USA. In 2006, the net sales of the acquired business amounted
to EUR 110 million and it employed approximately 400 people.
Following the acquisition, Ahlstrom estimates to become the third
largest producer of nonwoven roll goods globally. The wiping fabrics
currently produced by Fiberweb's consumer wipes business are used
mainly in personal care, baby care and household wipes applications.
On May 11, 2007 Ahlstrom announced that it will invest EUR 8 million
in a new needlepunch line for its North American filtration business,
targeting the growing dust filtration market.
The new line will be located at the current Darlington, SC, USA
facility. The targeted completion date is June 2008.
On May 9, Ahlstrom signed an agreement with Brazilian Votorantim
Celulose e Papel (VCP) to form a joint venture for specialty paper
production in Brazil. Ahlstrom will hold 60% and VCP 40% of the
shares in the joint venture. The price for Ahlstrom's shareholding is
approximately EUR 80 million. The assets in the joint venture
comprise a paper machine, an offline coater and an extensive
finishing equipment at the Jacarei mill, close to São Paulo. The net
sales of the paper machine is approximately EUR 100 million. Ahlstrom
expects to close the transaction during the third quarter of 2007.
On May 7, Ahlstrom signed a memorandum of understanding with Mundra
Special Economic Zone (SEZ) in Gujarat, India to purchase a land area
of 5 hectares in the Textile and Apparel Park. The parties have
agreed not to disclose the purchase price of the property.
On April 30, Ahlstrom closed the acquisition of the spunlace
nonwovens business of the Italian Orlandi Group. The acquisition
price was approximately EUR 60 million and the acquired business
includes two plants in Italy employing approximately 120 people in
total. The transaction expands Ahlstrom's technology portfolio with
airlace technology which is used to manufacture pulp-containing
wiping fabrics. In connection with the acquisition, Ahlstrom invested
approximately EUR 2.5 million in the airlace line at the Cressa,
Italy plant. After the investment, the acquired business will
generate net sales of approximately EUR 65 million in 2007.
On February 2, Ahlstrom decided to invest EUR 5 million in a new
drylaid nonwoven line to serve the North American air filtration
market. The new line is located at Ahlstrom's Groesbeck, TX, USA
plant and is expected to start at the beginning of 2008.
Organic growth investment start-ups in January-June 2007
In June 2007, a major release base paper capacity expansion was
started up at the La Gère, France plant. The investment standstill
lasted five weeks. The investment was valued at approximately EUR 30
million.
Ahlstrom's new specialty glassfiber reinforcement plant in
Bishopville, SC, USA serving the wind energy, marine and
transportation markets was ramping up its production in the first
half of 2007. The investment was valued at approximately EUR 10
million.
Ahlstrom's new wiping fabrics line located at the Green Bay, WI, USA
plant was started up in the end of December, 2006. The line was
ramping up during the first half of 2007. The total value of the
investment was approximately EUR 25 million.
During the first quarter of 2007 Ahlstrom repaired the existing glass
furnace and increased the production capacity of the chopped strand
mat machine at its Karhula, Finland plant. The investments were
valued at approximately EUR 6 million in total.
Divestments in January-June 2007
In March, Ahlstrom agreed to sell three hydropower plants close to
its Turin, Italy plant to a local energy company for approximately
EUR 7 million. The deal is consistent with the company's strategy to
focus on high performance fiber-based materials and to divest
non-core assets and reduce related costs.
Personnel
At the end of June 2007, Ahlstrom had 6,325 employees (5,831). The
average number of employees during the first half of the year was
5,794 (5,661).
Principal risks and uncertainties
The principal uncertainties that could affect Ahlstrom's net sales
and financial performance in the short term are related to:
- General economic conditions and changes in the demand for end-user
products
- Increases in raw material prices (e.g. pulp, chemicals and
synthetic fibers)
- Increases in energy prices
- Fluctuations in foreign currency rates
These factors are described in more detail in Ahlstrom's Annual
report 2006, on pages 22-23.
Shares and share capital
During January-June 2007, 7.0 million Ahlstrom shares were traded for
a total of EUR 156.4 million. The lowest trading price during the
review period was EUR 21.20 and the highest EUR 24.50. The closing
price on June 29, 2007 was EUR 21.75 and market capitalization was
EUR 1,015 million.
Equity per share of Ahlstrom Group was EUR 16.11 at the end of the
review period (December 31, 2006: EUR 16.79).
At the end of the review period, there were no outstanding options
entitling to subscription of Ahlstrom shares.
In January-June, a total of 1.008.871 new shares of Ahlstrom
Corporation were subscribed with option rights under the company's
stock option programs I (2001) and II (2001). After the corresponding
increases in Ahlstrom's share capital, the share capital at the end
of the review period amounted to EUR 70,005,912.00. The total number
of shares on June 30 was 46,670,608.
Ahlstrom's Board of Directors is authorized to repurchase a maximum
of 4,500,000 Ahlstrom shares, corresponding to less than 10% of all
issued Company shares. The Board of Directors is also authorized to
resolve to distribute the shares held by the company. The shares may
be used as compensation in acquisitions and in other arrangements as
well as to implement the company's share-based incentive plans. The
Board of Directors has also the right to decide on the distribution
of the shares in public trading for the purpose of financing possible
acquisitions.
Outlook for the second half of 2007
Demand in Ahlstrom's main markets Europe, USA, South America and Asia
is expected to remain good, however the visibility of demand remains
low in the USA. Ahlstrom's products are primarily used in industrial
processes which react to changes in consumer demand with a slight
delay.
The price for Ahlstrom's most important raw material, wood pulp,
continued to rise through the second quarter of 2007. Oil prices
continued to increase in the second quarter and are expected to keep
energy costs high during the outlook period and increase pressure on
chemicals and synthetic fiber costs.
Several organic growth investments are currently ramping up and the
integration of three acquisitions has started. The growth initiatives
are expected to generate additional sales volumes and net sales in
the second half of 2007. Normal summer maintenance shutdowns will
take place during the third quarter. The outlook period is marked by
intensive work related to integration of acquisitions and investment
start-ups. The largest organic growth investment at the end of the
outlook period is the commissioning of the glassfiber tissue plant in
Russia. The integration of Fabriano, Orlandi and Fiberweb's consumer
wipes business will continue and is estimated to be completed by the
end of 2007. The integration of the VCP joint venture is anticipated
to start in the third quarter of 2007. The new acquisitions and
investments will have a positive impact on Ahlstrom's financial
development from the last quarter of 2007 onwards.
Ahlstrom continues to see promising growth opportunities in the
fiber-based materials business and we are optimistic about the
company's development in 2007 and 2008.
Financial information in 2007
Ahlstrom Corporation will publish its interim report for
January-September on Friday, October 26.
This interim report has been prepared in accordance with the
International Financial Reporting Standards (IFRS). The report is
unaudited.
Comparable figures refer to the same period last year unless
otherwise stated.
Helsinki, July 25, 2007
Ahlstrom Corporation
Board of Directors
For additional information, please contact:
Jukka Moisio, President and CEO, tel. +358 (0)10 888 4700
Jari Mäntylä, CFO, tel. +358 (0)10 888 4768
Anna Ahlberg, Investor Relations Manager, tel. +358 (0)10 888 4718
A conference call for analysts and investors regarding the second
quarter results will be held on Wednesday, July 25, 2007 at 11.00
Finnish time. To participate in the teleconference, please dial +44
(0) 20 7162 0025 a few minutes before the call. Use the password:
Ahlstrom. A replay of the conference is available until August 1,
2007. The number for the replay is + 44 (0) 20 7031 4064, access
code: 756617.
The presentation material will be available at www.ahlstrom.com >
Investors > IR presentations on July 25, 2007 after the interim
report has been published.
Ahlstrom's stock exchange and press releases can be ordered on
www.ahlstrom.com > Media. Releases are delivered by e-mail.
This report contains certain forward-looking statements that reflect
the present views of the company's management. Due to the nature of
these statements, they contain uncertainties and risks and are
subject to changes in the general economic situation and in the
company's business.
Distribution:
Helsinki Stock Exchange
www.ahlstrom.com
Main media
Ahlstrom in brief
Ahlstrom is a global leader in the development, manufacture and
marketing of high performance fiber-based materials. Nonwovens and
specialty papers, made by Ahlstrom, are used in a large variety of
everyday products, e.g. in filters, wipes, flooring, labels, and
tapes. The company has a strong market position in several business
areas in which it operates, built upon the company's unique fiber
expertise and innovative approach. Ahlstrom's 6,200 employees serve
customers via sales offices and production facilities in more than 20
countries on six continents. In 2006, Ahlstrom's net sales amounted
to EUR 1.6 billion. Ahlstrom's share is listed on the Helsinki Stock
Exchange. The company website is www.ahlstrom.com.
Appendices
1. Segment reviews
2. Financial statements
Appendix 1
Segment reviews April-June 2007
FiberComposites segment
+---------------------------------------------------------------------+
|Key figures, EUR million | | | |Q1-Q2|Q1-Q2| |
| |Q2/2007|Q2/2006|Change, %| 2007| 2006| 2006|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Net sales | 235.5| 204.9| 15.0|441.9|417.6|808.2|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Operating profit excl. | | | | 30.7| 29.7| |
|non-recurring items | 17.3| 13.9| 24.9| | | 54.1|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Operating profit, % excl.| | | | 6.9| 7.1| |
|non-recurring items | 7.3| 6.8| | | | 6.7|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Return on net asses | | | | 8.7| 9.7| |
|(RONA), % | | | | | | |
|excl. non-recurring items| 9.5| 9.0| | | | 8.9|
+---------------------------------------------------------------------+
Net sales of the FiberComposites segment increased by 15.0% and
amounted to EUR 235.5 million (EUR 204.9 million). The three
acquisitions (Fabriano, Orlandi and the Fiberweb's consumer wipes
business) increased net sales by EUR 22.3 million in the second
quarter. Sales volumes increased by 19.5%. Currency fluctuations,
mainly the weakened USD, had a EUR 6.7 million negative impact on the
segment's net sales.
The operating profit improved significantly from the corresponding
period last year and amounted to EUR 17.3 million. The improvement in
profitability was achieved by good demand in all product areas.
Nonwovens business area (25% of the Group's net sales)
The Nonwovens business area serves customers in the food packaging,
medical, wiping, building and technical goods sectors.
The good market situation in nonwovens continued in the second
quarter. Sales volumes increased by 46.4% driven by investments,
acquisitions and good demand particularly in wiping fabrics and
industrial nonwovens. Net sales increased by 29.4% and amounted to
EUR 119 million. Comparable net sales adjusted for acquisitions grew
by 5.8%. Exchange rate fluctuations impacted net sales negatively.
Approximately 50% of the business area's sales is denominated in USD.
Prices for certain synthetic fibers such as rayon continued to
increase. Rayon and polyester are the most important synthetic fibers
in the nonwovens business area. Energy costs were slightly lower than
in the first quarter but on a higher level than in the same quarter
last year.
The business area continues to ramp-up the new spunlace wiping
fabrics line at the Green Bay plant which was started in December
2006.
Ahlstrom closed the acquisition of Fiberweb's consumer wipes business
on May 25, 2007 and the nonwovens business of the Orlandi Group on
April 30, 2007. The integration of the acquisitions are well under
way and is expected to be completed by the end of 2007. The annual
net sales of the acquisitions are approximately EUR 170 million.
Demand for nonwoven products is expected to remain good in the second
half of the year.
Filtration business area (20 % of the Group's net sales)
Filtration media produced by Ahlstrom are used in the transportation
industry and in liquid and air filtration applications.
The overall market situation for filtration material continued to
develop favorably in the second quarter. Demand was strong in Asia,
Latin America and Europe while the North American market showed mixed
development. The housing markets in the USA continued to slow down
which affected the North American market for air filtration. Net
sales for the second quarter rose by 1.6% and amounted to EUR 87
million while sales volumes grew by 3.4%. Exchange rate fluctuations
had a negative impact on net sales.
Raw materials and energy costs remained on a high level particularly
for methanol and related raw materials. Price increases were
implemented in most product areas to partially offset the effect of
higher costs.
In June, Ahlstrom announced the closure of the Bellingham, USA plant
and the consolidation of some of the assets to its Darlington, USA
facility. The cost related to the closure and the consolidation of
assets will be approximately EUR 2 million and will be booked in the
second half of 2007. Ahlstrom also decided to add a new needlepunch
line for the Darlington site with start-up scheduled by the end of
June 2008.
On May 31, 2007 Ahlstrom closed the acquisition of Fabriano Filter
Media SpA, Italy. Annual net sales of the acquired business is
approximately EUR 7 million.
The outlook for the second half remains good, with steady demand
expected for transportation and liquid filtration products, however,
uncertainty continues for the air filtration products in North
America.
Glass Nonwovens business area (7% of the Group's net sales)
Ahlstrom's glass nonwovens products are used in the building
materials, marine, transportation, windmills, and sporting goods
sectors.
In the second quarter, the demand developed favorably in all main
product areas (construction, windmill, marine and transportation) and
geographic regions. Net sales increased by 9.8% and amounted to EUR
31 million while sales volumes grew by 6.8%. Especially sales to
Russia and USA continued to grow strongly and the start-up of the new
glass specialty reinforcement plant in Bishopville, USA, contributed
positively to net sales in USA. In addition, the change in product
mix had a positive impact on net sales.
Price increases were implemented during the second quarter in certain
product areas to partially offset the continued high raw material and
energy costs.
The construction work of the new glassfiber tissue plant in Tver,
Russia is proceeding according to plan and the plant is estimated to
start production in the last quarter of 2007.
Demand is anticipated to remain good in all product areas and
geographic regions in the second half of 2007.
Specialty Papers segment
+---------------------------------------------------------------------+
|Key figures, EUR million | | | |Q1-Q2|Q1-Q2| |
| |Q2/2007|Q2/2006|Change, %| 2007| 2006| 2006|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Net sales | 202.7| 205.2| -1.2%|414.1|408.5|794.0|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Operating profit excl. | | | | 14.0| 23.3| |
|non-recurring items | 5.4| 10.3| -47.6| | | 36.4|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Operating profit, % excl.| | | | 3.4| 5.7| |
|non-recurring items | 2.7| 5.0| | | | 4.6|
|-------------------------+-------+-------+---------+-----+-----+-----|
|Return on net asses | | | | 8.5| 15.2| |
|(RONA), % | | | | | | |
|excl. non-recurring items| 6.4| 13.1| | | | 11.8|
+---------------------------------------------------------------------+
Net sales of the Specialty Papers segment decreased by 1.2% and
amounted to EUR 202.7 million (EUR 205.2 million). Sales volumes were
on the same level as in the corresponding period last year. Sales
volumes were negatively impacted by the La Gère, France investment
standstill in the Label and Packaging Papers business area whereas
the Technical Papers business area experienced strong growth.
The average sales prices decreased slightly in the Label and
Packaging Papers business area due to temporary excess supply of
release base papers.
Operating profit was EUR 5.4 million (EUR 10.3 million). The decrease
in the segment's profit was mainly due to the La Gère investment
standstill which impacted the operating profit by EUR 3.5 million.
Label & Packaging Papers business area (30% of the Group's net sales)
The Label & Packaging Papers business area manufactures a number of
different specialty papers for use in the self-adhesive industry, as
well as in the labeling, packaging and graphic industries.
In the second quarter, demand remained unchanged in release base
papers but the temporary excess supply put pressure on prices. Demand
for wet glue and metallized labels was good due to the peak season of
the beverage label industry, however the peak season started later
than usual. The demand for packaging papers improved from last year,
but the pressure on prices continued.
Total sales volumes of the business area were 4.2% lower than in the
corresponding quarter last year mainly due to the investment
standstill at the La Gère, France plant. Net sales of the business
area decreased by 6.8% to EUR 126 million.
The price for pulp, the business area's main raw material continued
to increase and was at a higher level than last year. Energy costs
declined slightly compared to the first quarter but remained at the
same level as in the corresponding period in 2006.
The investment to increase release base paper capacity at the La
Gère, France plant was completed at the end of June. The investment
standstill lasted five weeks. Full scale industrial production is
expected to be achieved during August 2007.
The joint venture with Brazilian Votorantim Celulose e Papel (VCP)
for specialty paper production in Brazil is expected to be closed in
the third quarter of 2007. Ahlstrom will hold 60% and VCP 40% of the
shares in the joint venture. The annual net sales of the joint
venture is approximately EUR 100 million and it will strengthen
Ahlstrom's position in the label and packaging paper markets outside
Europe.
The demand for release base papers is expected to strengthen towards
the end of the year. In label papers, demand is expected to remain
good in the coming months but slow down towards the end of the third
quarter as the peak season in the beverage industry ends. The market
situation for packaging papers remains unchanged.
Technical Papers business area (18% of the Group's net sales)
The main products of the Technical Papers business area are abrasive
base papers, crepe papers (such as masking tape base, wipes, medical
applications), pre-impregnated decor papers, sealing & shielding
materials (for gaskets, heat shields, calender bowls), coated papers
(e.g. wallpaper base and poster papers) as well as vegetable
parchment papers. The business area's main markets include the
furniture and home decoration, healthcare, food and automotive
industries.
Overall demand in the business area remained strong in the second
quarter. Net sales increased by 9.5% compared to the corresponding
quarter of 2006 and amounted to EUR 77 million. Sales volumes
increased by 10.2% mainly driven by strong demand in posters, crepe
papers, vegetable parchment and decor papers.
The price for pulp, the main raw material of the business area,
continued to increase in the second quarter. Productivity
improvements partly compensated for higher raw material costs and
price increases were achieved in some product areas despite strong
competition. Price increases for the third quarter have been
announced in crepe papers and decor papers.
The market situation for most product areas is expected to remain
good in the second half of the year.
APPENDIX 2
Consolidated Financial Statements
ACCOUNTING PRINCIPLES
This report has been prepared in accordance with the International
Financial Reporting Standards (IFRS) and the accounting policies set
out in IAS 34 (Interim Financial reporting) as adopted by the EU and
in the Group's Financial Statements for 2006.
Application of amended or new IFRS standards as of January 1, 2007
The Group has adopted the following new or amended standards and
interpretations as of January 1, 2007:
- IFRS 7 Financial Instruments: Disclosures
- Amendment to IAS 1 Presentation of Financial Statements - Capital
disclosures
- IFRIC 9 Reassessment of Embedded Derivatives
- IFRIC 10 Interim Financial Reporting and Impairment
The above mentioned standards and interpretations do not have a
material effect on the consolidated financial statements.
They will impact the format and extent of year-end 2007 notes to the
financial statements.
Financial Statements are unaudited.
INCOME STATEMENT Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
Eur million 2007 2006 2007 2006 2006
Net sales 436.9 409.6 853.3 824.2 1,599.1
Other operating income 1.7 8.5 13.1 18.8 36.7
Expenses -396.5 -368.7 -781.4 -744.2 -1,458.2
Depreciation, amortization and
impairment charges -21.0 -20.5 -40.6 -40.2 -81.6
Operating profit 21.0 28.9 44.4 58.5 96.1
Net financial expenses -4.3 -4.1 -7.3 -8.6 -14.9
Share of profit (loss) of
associated companies -0.3 0.4 -0.4 0.4 0.0
Profit before taxes 16.4 25.2 36.7 50.3 81.2
Income taxes -4.5 -8.6 -11.4 -17.9 -23.6
Profit for the period 11.9 16.6 25.3 32.4 57.6
Attributable to
Equity holders of the parent 11.9 16.5 25.2 32.3 57.5
Minority interest 0.0 0.1 0.1 0.1 0.1
Basic earnings per share, EUR 0.26 0.36 0.55 0.77 1.31
Diluted earnings per share, EUR 0.26 0.36 0.55 0.76 1.29
BALANCE SHEET Jun 30, Jun 30, Dec 31,
Eur million 2007 2006 2006
ASSETS
Non-current assets
Property, plant and equipment 678.4 575.7 601.7
Goodwill 143.0 103.4 101.0
Other intangible assets 39.1 35.5 32.6
Investment property - 2.8 -
Investments in associated companies 12.3 49.4 12.9
Other investments 0.2 0.2 0.2
Other receivables 12.9 6.8 6.1
Deferred tax assets 25.8 25.2 25.9
Total non-current assets 911.7 799.1 780.4
Current assets
Inventories 233.1 205.2 214.4
Trade and other receivables 419.8 372.3 328.0
Income tax receivables 3.4 5.1 8.7
Other investments 0.0 0.0 5.0
Cash and cash equivalents 21.5 17.0 20.1
Total current assets 677.9 599.6 576.1
Total assets 1,589.6 1,398.6 1,356.6
EQUITY AND LIABILITIES
Equity attributable to equity holders of the 751.2 745.0 765.8
parent
Minority interest 0.7 0.8 0.8
Total equity 751.9 745.8 766.6
Non-current liabilities
Interest-bearing loans and borrowings 149.0 69.4 44.0
Employee benefit obligations 97.2 113.1 112.4
Provisions 5.4 3.7 3.7
Other liabilities 0.8 0.5 0.6
Deferred tax liabilities 27.6 24.5 26.8
Total non-current liabilities 279.8 211.2 187.4
Current liabilities
Interest-bearing loans and borrowings 255.2 171.6 136.4
Trade and other payables 284.0 245.9 241.0
Income tax liabilities 7.9 13.0 12.4
Provisions 10.7 11.1 12.8
Total current liabilities 557.9 441.7 402.6
Total liabilities 837.7 652.9 590.0
Total equity and liabilities 1,589.6 1,398.6 1,356.6
STATEMENT OF CHANGES IN EQUITY
1) Issued capital
2) Share premium
3) Non-restricted equity reserve
4) Hedging reserve
5) Translation reserve
6) Retained earnings
7) Minority interest
Attributable to equity holders of the
parent Total
Eur million 1) 2) 3) 4) 5) 6) 7) equity
Equity at Dec 31, 590.5
2005 54.6 26.7 - 1.0 3.7 503.7 0.8
Cash flow hedges,
net of tax:
Gains and losses -0.8
taken to equity - - - -0.8 - - -
Translation -11.7
differences - - - - -11.7 - -
Gains and losses
from hedge of net
investments in
foreign operations,
net of tax - - - - 8.5 - - 8.5
Other changes - - - - - 0.0 -0.0 -0.0
Profit for the 32.4
period - - - - - 32.3 0.1
Total recognized
income and
expense for the 28.4
period - - - -0.8 -3.2 32.3 0.1
Dividends paid - - - - - -65.2 -0.1 -65.3
Share issue 13.7 182.4 - - - - - 196.1
Share options 0.2
exercised 0.0 0.2 - - - - -
Redemption of share -4.1
options - - - - - -4.1 -
13.8 182.6 - - - -69.4 -0.1 126.9
Equity at June 30, 745.8
2006 68.4 209.3 - 0.2 0.5 466.6 0.8
Equity at Dec 31, 766.6
2006 68.5 209.3 0.5 0.1 -3.1 490.4 0.8
Cash flow hedges,
net of tax:
Gains and losses -0.1
taken to equity - - - -0.1 - - -
Translation -3.9
differences - - - - -3.9 - -
Gains and losses
from hedge of net
investments in
foreign operations,
net of tax - - - - 1.6 - - 1.6
Other changes - - - - - 0.0 -0.0 0.0
Profit for the 25.3
period - - - - - 25.2 0.1
Total recognized
income
and expense
for the period - - - -0.1 -2.3 25.3 0.0 22.9
Dividends paid - - - - - -46.6 -0.1 -46.7
Share options 9.2
exercised 1.5 - 7.7 - - - -
1.5 - 7.7 - - -46.6 -0.1 -37.5
Equity at June 30, 751.9
2007 70.0 209.3 8.3 -0.0 -5.4 469.1 0.7
STATEMENT OF CASH FLOWS
Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
Eur million 2007 2006 2007 2006 2006
Cash flow from operating activities
Profit for the period 11.9 16.6 25.3 32.4 57.6
Adjustments, total 30.2 31.4 49.9 65.4 109.8
Changes in net
working capital -21.2 -16.5 -48,4*) -27.9 -14.4
Change in provisions
and pension liability -3.4 -1.7 -17,4*) -2.1 -0.5
Financial items -3.2 -1.9 -4.2 -8.8 -3.7
Taxes paid -5.3 -16.6 -8.3 -21.9 -29.6
Net cash from
operating activities 9.0 11.3 -3.0 37.2 119.2
Cash flow from investing activities
Acquisition of Group
companies -127.8 0.0 -127.8 -8.0 -7.8
Purchases of property,
plant & equipment -30.0 -22.6 -62.8 -52.1 -116.5
Other investing
activities -0.1 13.3 14.4 0.9 45.3
Net cash from investing
activities -157.9 -9.3 -176.2 -59.2 -79.0
Cash flow from financing activities
Share issue 0.5 -0.2 9.2 194.5 195.1
Dividends paid -46.8 -0.1 -46.8 -65.3 -65.3
Other financing
activities 192.7 -54.1 218.0 -106.0 -165.8
Net cash from
financing activities 146.4 -54.5 180.5 23.2 -36.0
Net change in cash
and cash equivalents -2.5 -52.5 1.4 1.1 4.3
Cash and cash
equivalents at
beginning of period 23.9 69.6 20.1 16.0 16.0
Foreign exchange
adjustment 0.1 -0.1 0.1 -0.1 -0.1
Cash and cash
equivalents
at end of period 21.5 17.0 21.5 17.0 20.1
*) Includes EUR -20,8 million payment to the pension fund to cover
approximately half of the historical deficit of the defined benefit
pension plan in the United Kingdom in Q1 2007.
KEY FIGURES Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
2007 2006 2007 2006 2006
Operating profit, % 4.8 7.1 5.2 7.1 6.0
Operating profit (excluding 4.8 6.4 4.8 6.4 5.5
non-recurring items), %
Return on capital employed 8.0 11.7 8.5 12.4 10.4
(ROCE), %
ROCE (excluding non-recurring 8.0 10.6 7.8 11.2 9.5
items), %
Return on equity (ROE), % 6.4 9.0 6.7 9.7 8.5
Interest-bearing net
liabilities, 382.6 224.0 382.6 224.0 155.2
EUR million
Equity ratio, % 47.3 53.3 47.3 53.3 56.5
Gearing ratio, % 50.9 30.0 50.9 30.0 20.3
Earnings per share, EUR 0.26 0.36 0.55 0.77 1.31
Earnings per share, diluted, EUR 0.26 0.36 0.55 0.76 1.29
Equity per share, EUR 16.11 16.36 16.11 16.36 16.79
Cash earnings per share, EUR 0.20 0.21 -0.06 0.89 2.72
Average number of shares during
the 46,636 45,587 46,279 41,977 43,802
period, 1000s
Number of shares at the end of
the 46,671 45,592 46,671 45,592 45,662
period, 1000s
Capital expenditure, EUR million 36.6 18.9 65.8 47.0 120.1
Capital employed, at the end of
the 1,156.1 986.8 1,156.1 986.8 946.9
period, EUR million
Number of employees, average 5,888 5,740 5,794 5,661 5,687
CHANGES OF PROPERTY, PLANT AND EQUIPMENT
Q1-Q2 Q1-Q2 Q1-Q4
Eur million 2007 2006 2006
Book value at Jan 1 601.7 577.4 577.4
Acquisitions through business 56.5 4.7 4.6
combinations
Additions 64.9 46.0 117.0
Disposals -0.6 -0.1 -1.0
Depreciations and impairment charges -38.4 -37.2 -75.7
Translation adjustment and other changes -5.6 -15.1 -20.6
Book value at end of the period 678.4 575.7 601.7
TRANSACTIONS WITH RELATED PARTIES Q1-Q2 Q1-Q2 Q1-Q4
Eur million 2007 2006 2006
Transactions with associated companies
Sales and interest income 0.3 0.8 1.3
Purchases of goods and services -3.0 -5.0 -10.9
Trade and other receivables 0.2 1.1 0.5
Trade and other payables 0.5 0.9 0.8
Interest-bearing loans and borrowings 3.9 1.4 6.6
Market prices have been used in transactions with associated
companies.
OPERATING LEASES Jun 30, Jun 30, Dec 31,
Eur million 2007 2006 2006
Current portion 5.7 12.8 6.1
Non-current portion 11.4 19.9 18.2
Total 17.0 32.7 24.3
CONTINGENT LIABILITIES Jun 30, Jun 30, Dec 31,
Eur million 2007 2006 2006
For own liabilities
Loans from financing institutions
Amount of loans - - -
Amount of mortgages - 0.0 -
Other loans
Amount of loans 1.2 1.7 1.5
Book value of pledges 1.3 2.0 1.6
For other own commitments
Guarantees 19.5 21.9 29.1
For commitments of associated companies
Guarantees 7.3 8.3 8.3
For commitments of third parties
Guarantees - - -
Capital expenditure commitments 49.3 61.5 50.6
Other contingent liabilities 5.1 4.6 5.3
Acquisitions in 2007
In January-June 2007 Ahlstrom made several acquisitions in line with
its strategy.
In April, Ahlstrom acquired the spunlace nonwovens business of the
Italian Orlandi Group. The transaction expands Ahlstrom's technology
portfolio with airlace technology which is used to manufacture
pulp-containing wiping fabrics. In May, Ahlstrom acquired the
consumer wipes business of Fiberweb plc, serving mainly the personal
care, baby care and household wipes applications. With these two
acquisitions, Ahlstrom became the leading wiping fabrics producer in
the world. Further in May, Ahlstrom acquired Italian Fabriano Filter
Media SpA, a manufacturer of microglass filter media, serving mainly
the high efficiency air filtration market.
Management estimates that the consolidated net sales for January-June
2007 would have been approximately EUR 937 million, if the
acquisition had been accomplished on January 1, 2007.
The table below summarizes the acquisitions in January-June 2007. The
business combinations and purchase price allocations were accounted
for as preliminary as the determination of fair values to be assigned
to the assets, liabilities and contingent liabilities were not yet
finalized. The goodwill that arose mainly from the acquisition of
Orlandi Group reflects the synergy benefits resulting from the
expanded product offering to wipes and filtration business as well as
growth opportunities.
ACQUISITIONS OF BUSINESSES Fair values
Book values before the entered in
Eur million consolidation consolidation
Property, plant and equipment 55.8 56.6
Intangible assets 5.0 8.5
Inventories 21.5 19.8
Trade and other receivables 36.2 36.2
Cash and cash equivalents 3.0 3.0
Assets, total 121.4 124.0
Deferred tax liabilities 0.8 0.5
Employee benefit obligations 1.4 1.4
Interest-bearing loans and borrowings 9.5 9.5
Trade and other payables 26.4 26.4
Liabilities, total 38.1 37.8
Net assets 83.3 86.2
Goodwill arising in acquisition - 44.2
Acquisition price paid (in cash) - 130.4
Exchange rate differences - 0.3
Cash (acquired) - -3.0
Net cash outflow - 127.8
QUARTERLY DATA Q2 Q1 Q4 Q3 Q2 Q1
Eur million 2007 2007 2006 2006 2006 2006
Net sales 436.9 416.5 389.0 385.9 409.6 414.6
Other operating income* 1.7 2.6 4.3 4.4 5.6 7.0
Expenses* -396.5 -379.9 -359.3 -349.6 -368.7 -375.5
Depreciation,
amortization,impairment -21.0 -19.6 -19.9 -19.8 -20.5 -19.8
charges*
Non-recurring items - 3.8 -1.9 4.4 2.9 3.3
Operating profit 21.0 23.3 12.3 25.3 28.9 29.6
Net financial expenses -4.3 -3.0 -2.6 -3.7 -4.1 -4.5
Share of profit (loss) of -0.3 -0.1 -0.2 -0.2 0.4 -0.0
associated companies
Profit before taxes 16.4 20.3 9.4 21.4 25.2 25.1
Income taxes -4.5 -6.9 -0.7 -5.0 -8.6 -9.3
Profit for the period 11.9 13.4 8.8 16.4 16.6 15.8
Attributable to
Equity holders of the 11.9 13.3 8.8 16.4 16.5 15.8
parent
Minority interest 0.0 0.0 -0.0 0.0 0.1 0.0
Operating profit* 21.0 19.6 14.1 20.8 26.0 26.3
Operating 4.8 4.7 3.6 5.4 6.4 6.3
profit, %*
* Excluding non-recurring items
QUARTERLY DATA BY SEGMENT
Q2 Q1 Q4 Q3 Q2 Q1
Eur million 2007 2007 2006 2006 2006 2006
Net sales
FiberComposites 235.5 206.4 195.4 195.3 204.9 212.7
Specialty Papers 202.7 211.4 193.9 191.5 205.2 203.3
Other operations and eliminations -1.3 -1.3 -0.3 -0.9 -0.5 -1.5
Group total 436.9 416.5 389.0 385.9 409.6 414.6
Operating profit
FiberComposites 17.3 15.2 9.2 13.3 13.9 15.9
Specialty Papers 5.4 13.0 3.0 6.0 10.3 13.0
Other operations and eliminations -1.7 -4.9 0.1 6.0 4.8 0.7
Group total 21.0 23.3 12.3 25.3 28.9 29.6
Operating profit excluding non-recurring items
FiberComposites 17.3 13.4 11.0 13.3 13.9 15.9
Specialty Papers 5.4 8.6 4.4 8.7 10.3 13.0
Other operations and eliminations -1.7 -2.5 -1.2 -1.2 1.9 -2.6
Total 21.0 19.6 14.1 20.8 26.0 26.3
Non-recurring items - 3.8 -1.9 4.4 2.9 3.3
Group total 21.0 23.3 12.3 25.3 28.9 29.6
KEY FIGURES QUARTERLY
Q2 Q1 Q4 Q3 Q2 Q1
Eur million 2007 2007 2006 2006 2006 2006
Net sales 436.9 416.5 389.0 385.9 409.6 414.6
Operating profit 21.0 23.3 12.3 25.3 28.9 29.6
Operating profit (excluding 21.0 19.6 14.1 20.8 26.0 26.3
non-recurring items)
Profit before taxes 16.4 20.3 9.4 21.4 25.2 25.1
Profit before taxes
(excluding non-recurring 16.4 16.5 11.3 17.0 22.3 21.8
items)
Profit for the period 11.9 13.4 8.8 16.4 16.6 15.8
Gearing ratio, % 50.9 24.3 20.3 25.0 30.0 30.0
Return on capital 8.0 10.0 5.3 10.3 11.7 12.3
employed (ROCE), %
ROCE (excluding 8.0 8.4 6.1 8.5 10.6 11.0
non-recurring items), %
Earnings per share, EUR 0.26 0.29 0.18 0.36 0.36 0.41
Cash earnings per share, 0.20 -0.26 0.54 1.29 0.21 0.68
EUR
Average number of shares 46,636 45,918 45,602 45,592 45,587 38,326
during the period, 1000's
CALCULATION OF KEY FIGURES
Interest-bearing Interest-bearing loans and borrowings - Cash
net liabilities and cash equivalents
- Other investments (current)
Equity ratio, Total equity x 100
% Total assets - Advances received
Gearing ratio, Interest-bearing net liabilities x 100
% Total equity
Return on equity Profit (loss) for the period x 100
(ROE), % Total equity (annual average)
Return on capital Profit (loss) before taxes + Financing x 100
employed expenses
Total assets (annual average) -
(ROCE), % Non-interest bearing liabilities (annual
average)
Earnings per share, Profit for the period attributable to equity
holders of the parent
EUR Average adjusted number of shares during the period
Cash earnings Net cash from operating activities
per share,
EUR Average adjusted number of shares during the
period
Equity per share, Equity attributable to equity holders of the
parent
EUR Adjusted number of shares at the end of the
period
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