Munksjö Oyj – First phase of combination completed, business performing steadily
MUNKSJÖ OYJ, INTERIM REPORT
Munksjö Oyj was created as a result of the combination of Munksjö AB, Sweden and the Label and Processing business area of Ahlstrom Corporation, Finland. Aside from the financial performance during the reporting period January-June 2013, this interim report provides pro forma figures reflecting the business combination for informative purposes. A more detailed description of how the pro forma figures were arrived at is provided in the notes to the Financial Statements under the heading ‘Business combination’.
Unless otherwise indicated, the figures in parentheses refer to the figures for the equivalent period in 2012. The figures provided in this interim report are unaudited. The interim report is published in Swedish, Finnish and English. In case of any discrepancies between the three versions, the Swedish text shall prevail.
Highlights of the first half of 2013:
- At the end of May, the first phase of the combination of Munksjö AB and Ahlstrom’s Label and Processing business area was completed and Munksjö Oyj commenced operations.
- Trading with Munksjö Oyj’s shares commenced on the Helsinki Stock Exchange at the beginning of June.
- Net sales increased to EUR 362,5 (301,7) million primarily as a result of the business combination and increased volumes.
- Adjusted EBITDA was EUR 28,0 (23,4) million.
- Operating profit adjusted for non-recurring items reached EUR 13,3 (11,2) million. Most of the non-recurring items totalling EUR -30,6 (-2,6) million were related to the business combination. Operating loss was EUR 17,3 (profit of 8,6) million.
- Earnings per share (EPS), were EUR -1,4 (0,0).
- Interest-bearing net debt at the end of the reporting period stood at EUR 268,2 (249,7) million, equivalent to a gearing of 68,9% (119,9%).
Highlights of the second quarter of 2013:
- Net sales increased to EUR 208,0 (154,1) million, primarily as a result of the completion of the first phase of the business combination.
- Adjusted EBITDA was EUR 16,5 (11,4) million.
- Operating profit adjusted for non-recurring items reached EUR 8,3 (5,2) million. Most of the non-recurring items totalling EUR -27,6 (-2,3) million were related to the business combination. Operating loss was EUR 19,3 (profit of 2,9) million.
- Earnings per share (EPS), were EUR -1,0 (0,0).
| Key Figures | Apr-Jun | Jan-Jun | Full year | ||
| MEUR | 2013 | 2012 | 2013 | 2012 | 2012 |
| Net sales | 208,0 | 154,1 | 362,5 | 301,7 | 607,1 |
| EBITDA (adj*) | 16,5 | 11,4 | 28,0 | 23,4 | 42,3 |
| EBITDA margin, % (adj*) | 8,0 | 7,4 | 7,7 | 7,8 | 7,0 |
| Operating profit | -19,3 | 2,9 | -17,3 | 8,6 | 7,5 |
| Operating margin, % | -9,3 | 1,9 | -4,8 | 2,9 | 1,2 |
| Operating profit (adj*) | 8,3 | 5,2 | 13,3 | 11,2 | 16,9 |
| Operating margin, % (adj*) | 4,0 | 3,3 | 3,7 | 3,7 | 2,8 |
| Net profit | -22,0 | 0,0 | -23,9 | 0,9 | -10,4 |
| Earnings per share (EPS), EUR | -1,0 | 0,0 | -1,4 | 0,0 | -0,9 |
| Interest-bearing net debt | 268,2 | 249,7 | 268,2 | 249,7 | 217,3 |
*Adjusted for non-recurring items
Munksjö’s President and CEO, Jan Åström:
“One of the world’s leading manufacturers of specialty papers, Munksjö Oyj was established as a result of the combination of Munksjö AB with Ahlstrom's specialty paper business. After several months of preparations and a thorough antitrust process by the European Commission, the business combination was completed smoothly without any problems or surprises. Subsequently, Munksjö Oyj was listed on the Helsinki Stock Exchange on 7 June as planned.
Integration is now under way and intensive efforts are being made throughout the Group to deliver the foreseen synergy benefits. In terms of money, the annual synergy outcomes will reach EUR 20 to 25 million, and 60% of the target synergy level should be achieved during the first twelve months. The final synergy benefit level is to be achieved in 36 months.
The second phase of the transaction, in which Ahlstrom's specialty papers business in Brazil is combined with Munksjö, will be completed during the second half of 2013. As part of the completion of the first phase of the combination, Munksjö reorganised its external loan portfolio. As a result, the company is on a sound footing with a financing at market rates.
The new management team is complete and formally appointed by the company’s Board of Directors. I am looking forward to working with my new committed, result-oriented and highly experienced management team which is now beginning its work.
Faced with challenging market conditions in its main markets, primarily Europe, Munksjö has succeeded to re-inforce its position. In the Decor and Industrial Applications business areas, we have been able to deliver double-digit adjusted EBITDA margins. Primarily, this was achieved through growing volumes and the steady prices of the end products. At the same time, we were able to establish a competitive cost structure. A programme to improve profitability in Graphics and Packaging is currently under preparation for deployment during the third quarter. Our goal is to substantially improve profitability in this business area in accordance with the financial objectives communicated by the company.”
Outlook for 2013
Market trends and the demand for Munksjö’s Release Liners and Graphics and Packaging products are expected to remain challenging for the rest of the year. Profits in the third quarter will be affected by the planned shutdown of production facilities in the summer, which will be similar in duration to last year. A range of pre-defined maintenance operations will be completed during the shutdown. Financial performance during the second half of the year will be impacted by non-recurring items arising from the efforts to achieve the foreseen synergy benefits and the programme to improve profitability in the Graphics and Packaging business area.
| The Munksjö Group | Apr-Jun | Jan-Jun | Full year | ||
| MEUR | 2013 | 2012 | 2013 | 2012 | 2012 |
| Reported 1) | |||||
| Net sales | 208,0 | 154,1 | 362,5 | 301,7 | 607,1 |
| EBITDA (adj*) | 16,5 | 11,4 | 28,0 | 23,4 | 42,3 |
| EBITDA margin, % (adj*) | 8,0 | 7,4 | 7,7 | 7,8 | 7,0 |
| Operating profit | -19,3 | 2,9 | -17,3 | 8,6 | 7,5 |
| Operating margin, % | -9,3 | 1,9 | -4,8 | 2,9 | 1,2 |
| Operating profit (adj*) | 8,3 | 5,2 | 13,3 | 11,2 | 16,9 |
| Operating margin, % (adj*) | 4,0 | 3,3 | 3,7 | 3,7 | 2,8 |
| Net profit | -22,0 | 0,0 | -23,9 | 0,9 | -10,4 |
| Capital expenditure | 4,6 | 2,4 | 6,8 | 4,7 | 14,8 |
| Employees, FTE | 1 970 | 1 684 | 1 814 | 1 683 | 1 679 |
Pro forma I (incl. LP Europe) 2)
| Net sales | 275,1 | 272,8 | 543,5 | 534,7 | 1 055,6 |
| EBITDA** | 12,5 | 14,0 | 28,9 | 5,7 | 32,9 |
| Non-recurring items | 3,0 | 2,1 | 3,7 | 29,5 | 36,3 |
| EBITDA** (adj*) | 15,5 | 16,1 | 32,6 | 35,2 | 69,2 |
| Delivery volumes, tonnes | 204 300 | 203 592 | 408 802 | 405 014 | 796 900 |
Pro forma II (incl. LP Europe and Coated Specialties) 3)
| Net sales | 299,6 | 298,1 | 590,0 | 585,1 | 1 154,6 |
| EBITDA** | 13,3 | 16,3 | 31,5 | 10,1 | 39,8 |
| Non-recurring items | 3,0 | 2,1 | 3,7 | 30,0 | 36,8 |
| EBITDA** (adj*) | 16,3 | 18,4 | 35,2 | 40,1 | 76,6 |
| Delivery volumes, tonnes | 231 000 | 229 580 | 458 065 | 455 845 | 897 371 |
* Adjusted for non-recurring items
** Does not include stand-alone cost savings or synergy benefits as described in the section Pro forma information in the notes to the interim report
1) Includes LP Europe from 27 May, 2013
2) Includes LP Europe from 1 January, 2012
3) Includes LP Europe and Coated Specialties from 1 January, 2012
First half of 2013
Munksjö’s net sales increased to EUR 362,5 (301,7) million, primarily due to the completion of the first phase of the combination with Ahlstrom’s Label and Processing business area and increased volumes in Decor and Industrial Applications. The acquired business contributed an additional EUR 46,9 million to net sales. Pro forma II net sales increased marginally to EUR 590,0 (585,1) million.
Operating profit adjusted for non-recurring items reached EUR 13,3 (11,2) million. Non-recurring items totalled EUR -30,6 (-2,6) million. Munksjö has made a commitment to Ahlstrom to pay certain costs arising from the divestiture of some of Ahlstrom’s business in Osnabrück, Germany, required by the EU Commission as a condition for regulatory approval. The non-recurring items include an expense of EUR 13,5 million related to said commitment. Other non-recurring items related to the business combination amounted to EUR 16,3 million.
Pro forma II EBITDA adjusted for non-recurring items was EUR 35,2 (40,1) million exclusive of any cost savings or synergy benefits. The operating loss was EUR 17,3 (profit of 8,6) million and net loss EUR 23,9 (profit of 0,9) million.
Second quarter 2013
Munksjö’s net sales increased to EUR 208,0 (154,1) million, primarily as a result of the completion of the first phase of the business combination and continued growth in volumes. The acquired business contributed an additional EUR 46,9 million to net sales. Pro forma II net sales increased marginally to EUR 299,6 (298,1) million.
Operating profit adjusted for non-recurring items reached EUR 8,3 (5,2) million. Most of the non-recurring items totalling EUR -27,6 (-2,3) million were due to the business combination. Operating loss was EUR 19,3 (profit of 2,9) million.
Webcast and conference call
A combined news conference, conference call and live webcast for investors, analysts and media will be arranged on the publishing day, 22 August, 2013, at 10.00 am CET (11.00 am EET, 9.00 am UK time) at restaurant Savoy, room Salikabinetti (Eteläesplanadi 14, 7th floor, Helsinki). The report will be presented by President and CEO Jan Åström. The event will be held in English.
The conference call and live webcast can be followed on the Internet and an on-demand version of the webcast will be available on the same webpage later the same day. To join the conference call, participants are requested to dial one of the numbers below 5 to 10 minutes prior to the start of the event.
Webcast and conference call information:
Finnish callers: +358 (0)9 2313 9201
Swedish callers: +46 (0)8 5052 0110
US callers: +1 334 323 6201
UK callers: +44 (0)20 7162 0077
Conference ID: 934525
Munksjö Oyj
For more information:
Jan Åström, President and CEO, tel. +46 10 250 1001
Kim Henriksson, CFO, tel. +46 10 250 1015