Munksjö Oyj's Financial Statements Bulletin 2014: Strong result and completed integration project
MUNKSJÖ OYJ, FINANCIAL STATEMENTS BULLETIN 12 February 2015 at 7:00 a.m. CET
Munksjö Oyj's Financial Statements Bulletin 2014: Strong result and completed integration project
Highlights of the fourth quarter 2014
- Net sales were EUR 281.0 (255.7) million. The increase in net sales was due to organic growth and the business combination between Munksjö AB and Ahlstrom Corporation’s business area Label and Processing completed in 2013.
- Adjusted EBITDA was EUR 28.4 (16.0) million and the adjusted EBITDA margin was 10.1% (6.3%).
- Operating result adjusted for non-recurring items was EUR 14.4 (2.6) million. Non-recurring items amounted to EUR –3.7 (-16.6) million. The majority of the non-recurring items were costs related to the reorganisation of the sales organisation, communicated in the quarter.
- Operating result was EUR 10.7 (-14.0) million and net result EUR 2.7 (-26.2) million.
- Trading in Munksjö's shares on Nasdaq Stockholm started on Monday 8 December 2014. The purpose of the secondary listing is to facilitate trading in Munksjö's shares for both current and new shareholders.
Highlights of January-December 2014
- Net sales were EUR 1,137.3 (863.3) million. The substantial increase in net sales was primarily due to the business combination between Munksjö AB and Ahlstrom Corporation’s business area Label and Processing completed in 2013.
- Adjusted EBITDA was EUR 105.0 (55.0) million and the adjusted EBITDA margin was 9.2% (6.4%). The positive result development is primarily due to the synergy benefits, volume growth and a lower cost base.
- Operating result adjusted for non-recurring items was EUR 51.0 (15.7) million. Non-recurring items amounted to EUR -5.6 (-49.1) million.
- Operating result was EUR 45.4 (-33.4) million and net result EUR 7.7 (-57.4) million. Net result was affected by a previously capitalised financing cost of EUR 7.1 million, expensed in connection with the repayment of the existing financing in the third quarter of 2014. The cost had no impact on cash flow.
- Earnings per share (EPS) were EUR 0.14 (-1.97).
- Interest-bearing net debt at the end of the reporting period was EUR 225.6 million (31 December 2013: 229.3), equivalent to a gearing of 54.5% (31 December 2013: 54.1%).
- Operating cash flow was EUR 57.8 (45.7) million.
- The project team responsible for the monitoring of the integration efforts and synergy benefits brought the project to conclusion by December 2014, one year ahead of schedule.
- The Board of Directors proposes to the AGM that EUR 0.25 per share be paid to the shareholders as return of equity from the reserve for invested non-restricted equity.
| KEY FIGURES (MEUR) | Oct-Dec | Jan-Dec | |||
| 2014 | 2013 | 2014 | 2013 | ||
| Net sales | 281.0 | 255.7 | 1,137.3 | 863.3 | |
| EBITDA (adj.*) | 28.4 | 16.0 | 105.0 | 55.0 | |
| EBITDA margin, % (adj.*) | 10.1 | 6.3 | 9.2 | 6.4 | |
| EBITDA | 24.7 | -0.6 | 99.4 | 5.9 | |
| EBITDA margin, % | 8.8 | -0.2 | 8.7 | 0.7 | |
| Operating result (adj.*) | 14.4 | 2.6 | 51.0 | 15.7 | |
| Operating margin, % (adj.*) | 5.1 | 1.0 | 4.5 | 1.8 | |
| Operating result | 10.7 | -14.0 | 45.4 | -33.4 | |
| Operating margin, % | 3.8 | -5.5 | 4.0 | -3.9 | |
| Net result | 2.7 | -26.2 | 7.7 | -57.4 | |
| Earnings per share (EPS), EUR | 0.05 | -0.61 | 0.14 | -1.97 | |
| Interest-bearing net debt** | 225.6 | 229.3 | 225.6 | 229.3 | |
* Adjusted for non-recurring items
** Restated to reflect the adoption of IFRS 11 as explained in the notes to the interim report
Comment from Munksjö’s President and CEO, Jan Åström
“During 2014 Munksjö refocused from integration and transformation to bringing the integration process to completion, increasing the cash flow and improving profitability. Three of the four business areas increased the volume reflecting the annual average growth expectation of the various product segments. In terms of volumes, the year 2014 was positive, showing an increase of about 2 per cent as compared to the previous year. For the business areas Decor, Release Liners and Industrial Applications, the total volume growth was approximately 3 per cent. The volume development within Graphics and Packaging has been affected by the continuous work with adjusting the product mix to strengthen the business area’s competitiveness. Our financial performance was positive and as expected.
As our net currency exposure is relatively low, the recent exchange rate developments have had no significant effect on the result.
The efforts and initiatives to achieve an EBITDA margin of 12 per cent at the end of 2016 continued during the year. The four business areas announced their respective target margins and related projects in the last quarter of the year. To achieve these goals, determined efforts were made to continue organic growth; reinforce market positions in the existing product segments, strengthen positions in emerging markets, continue the adjustments of the cost structure and measures to improve efficiency in production, and further develop the technical service offering.
I feel very happy that Munksjö today is back on Nasdaq Stockholm. The dialogue with institutional and private investors in Sweden remains active and we are looking forward to also show the Swedish shareholders what intelligent paper technology is about.
The project team responsible for monitoring the integration efforts and synergy benefits brought the project to conclusion by December 2014, one year ahead of schedule. At the end of the year, the annual synergy benefits from the business combination were EUR 26 million, which exceeds the range of EUR 20-25 million established as the target.
The market prospects for the year 2015 are stable both in terms of order stocks and prices. Our efficient organisation, strong product portfolio and close customer relations create a sound basis for long-term success.”
Outlook
The demand outlook of specialty paper products for 2015 is stable.
The market situation and demand for Munksjö’s products are expected to remain stable during the first quarter of 2015 following a seasonally somewhat weaker fourth quarter of 2014. Prices of Munksjö’s specialty paper products in local currencies are expected to remain at the same level as in 2014 during the first quarter of 2015.
The annual maintenance and vacation shutdowns in the second and third quarter as well as the seasonal shutdowns at the end of 2015 are expected to be carried out to about the same extent as in 2014.
The business areas will during 2015 continue to work on the ongoing programmes to achieve their respective profitability targets at the end of 2016.
The project aiming to achieve the annual synergy benefits from the business combination was completed in December 2014 and the achieved synergy benefits level of EUR 26 million at the end of 2014 is expected to have a full effect on the financial result for the full year 2015.
The new financing agreement signed in September 2014 is expected to reduce the cost of financing in 2015. At leverage levels and financial ratios at the time of the signing, the annual saving amounts to approximately EUR 5 million of reduced financial expenses. The previously capitalised financing cost of EUR 7.1 million was expensed in 2014. No such cost is expected to occur and affect the result in 2015.
Synergy benefits and integration
At the end of the fourth quarter, the annual synergy benefits run rate derived from the business combination reached EUR 26 million, exceeding the previously communicated target of EUR 20-25 million. Of the annual synergy benefits arising from the business combination, procurement accounted for about 50 per cent, improved organisational efficiency for about 40 per cent while the rest was achieved through economies of scale and production efficiency.
The result for the fourth quarter of 2014 includes realised synergies of EUR 6.5 million. The full-year result for 2014 includes realised synergies of EUR 23.0 million. The project team responsible for monitoring the integration efforts and synergy benefits brought the project to conclusion by December 2014, one year ahead of schedule.
The non-recurring costs for implementing the integration and achieving the synergy benefits were lower than estimated with a one-off revenue of EUR 1.5 million recognised in the fourth quarter. As a result, the total non-recurring items were EUR 10.0 million, representing the lower end of the previously communicated range of EUR 10-15 million. The cash flow effect was EUR -0.5 million in the fourth quarter.
The table below shows the quarterly development of synergies, non-recurring items and their impact on cash flow.
| MEUR | Annual synergy run rate at the end of the reporting period | Realised synergies in result per quarter | Non-recurring costs per quarter | Cash flow effect of non-recurring costs per quarter |
| Q2-Q4/2013 | 11.0 | 5.0 | 11.0 | -4.0 |
| Q1/2014 | 20.0 | 5.0 | 0.5 | -1.5 |
| Q2/2014 | 23.0 | 5.5 | - | -1.0 |
| Q3/2014 | 25.0 | 6.0 | - | -1.0 |
| Q4/2014 | 26.0 | 6.5 | -1.5 | -0.5 |
The Munksjö Group
| Oct-Dec | Jan-Dec | ACQUIRED OPERATIONS | Oct-Dec | 27 May-Dec | ||||||
| MEUR | 2014 | 2013 | 2014 | 2013 | MEUR | 2013 | 2013 | |||
| Reported 1) | Reported 1) | |||||||||
| Net sales | 281.0 | 255.7 | 1,137.3 | 863.3 | Net sales | 105.0 | 257.0 | |||
| EBITDA (adj.*) | 28.4 | 16.0 | 105.0 | 55.0 | EBITDA (adj.*) | 3.6 | 6.9 | |||
| EBITDA margin, % (adj.*) | 10.1 | 6.3 | 9.2 | 6.4 | EBITDA margin, % (adj.*) | 3.4 | 2.7 | |||
| EBITDA | 24.7 | -0.6 | 99.4 | 5.9 | EBITDA | -3.6 | -3.5 | |||
| EBITDA, margin % | 8.8 | -0.2 | 8.7 | 0.7 | EBITDA, margin % | -3.4 | -1.4 | |||
| Operating result (adj.*) | 14.4 | 2.6 | 51.0 | 15.7 | Operating result (adj.*) | -1.9 | -4.9 | |||
| Operating margin, % (adj.*) | 5.1 | 1.0 | 4.5 | 1.8 | Operating margin, % (adj.*) | -1.8 | -1.9 | |||
| Operating result | 10.7 | -14.0 | 45.4 | -33.4 | Operating result | -9.1 | -15.3 | |||
| Operating margin, % | 3.8 | -5.5 | 4.0 | -3.9 | Operating margin, % | -8.7 | -6.0 | |||
| Net result | 2.7 | -26.2 | 7.7 | -57.4 | Delivery volumes, tonnes | 90,900 | 223,400 | |||
| Capital expenditure | 4.6 | 8.2 | 35.1 | 22.6 | ||||||
| Employees, FTE | 2,757 | 2,641 | 2,765 | 2,216 | ||||||
| Pro forma 2) | ||||||||||
| Net sales | 281.0 | 265.2 | 1,137.3 | 1,120.3 | ||||||
| EBITDA** (adj.*) | 28.4 | 16.8 | 105.0 | 64.1 | ||||||
| EBITDA** margin, % (adj.*) | 10.1 | 6.3 | 9.2 | 5.7 | ||||||
| EBITDA** | 24.7 | 1.0 | 99.4 | 42.3 | ||||||
| EBITDA**, margin % | 8.8 | 0.4 | 8.7 | 3.8 | ||||||
| Delivery volumes, tonnes | 221,600 | 208,900 | 899,400 | 885,300 | ||||||
* Adjusted for non-recurring items
** Includes stand-alone cost savings and synergies obtained after 27 May 2013
1) Includes LP Europe from 27 May 2013 and Coated Specialties from 2 December 2013
2) Includes LP Europe and Coated Specialties from 1 January 2012. As the combination was completed during 2013, the pro forma information is only consolidated until the fourth quarter 2013. From the first quarter 2014 the reported figure is used.
Reported
Fourth quarter 2014
Net sales were EUR 281.0 (255.7) million. The improvement in net sales was due to organic growth and the business combination between Munksjö AB and Ahlstrom Corporation’s business area Label and Processing completed in 2013.
EBITDA adjusted for non-recurring items increased to EUR 28.4 (16.0) million and the adjusted EBITDA margin was 10.1% (6.3%). Non-recurring items amounted to EUR -3.7 (-16.6) million. Of these costs, EUR 1.0 million were related to previous business combinations, primarily the commitment to pay costs arising from the divestments of certain businesses in Osnabrück, Germany (in connection with the business combination in 2013), EUR 2.7 million to costs for the reorganisation of the sales organisation communicated in the fourth quarter 2014 and EUR 1.5 million to other reorganisation activities. The non-recurring costs for implementing the integration and achieving the synergy benefits were lower than estimated and a one-off income of EUR 1.5 million was recognised.
The extent of the seasonal shutdowns at the end of December is described separately for each business area.
Operating result adjusted for non-recurring items was EUR 14.4 (2.6) million and the adjusted operating margin 5.1% (1.0%). The operating result was EUR 10.7 (-14.0) million and net result EUR 2.7 (-26.2) million.
January–December 2014
Net sales were EUR 1,137.3 (863.3) million. The substantial improvement in net sales was primarily due to the business combination between Munksjö AB and Ahlstrom Corporation’s business area Label and Processing completed in 2013.
EBITDA adjusted for non-recurring items increased to EUR 105.0 (55.0) million and the adjusted EBITDA margin was 9.2% (6.4%). The positive result development is primarily due to the synergy benefits, volume growth and a lower cost base.
Non-recurring items amounted to EUR -5.6 (-49.1) million. Of these costs, EUR 1.4 million were related to the work in connection with the Statement of Objections from the European Commission, EUR 1.0 million to previous business combinations, primarily the commitment to pay costs arising from the divestment of certain businesses in Osnabrück, Germany (in connection with the business combination in 2013) and EUR 3.2 million to costs for other reorganisation activities. Of these costs, EUR 2.7 million were related to the reorganisation of the sales organisation, communicated in the fourth quarter 2014.
The annual maintenance and vacation shutdowns in the second and third quarter, during which planned maintenance operations were scheduled, were carried out to the same extent as in 2013, with the exception of the business area Graphics and Packaging, where the shutdowns in 2014 at this business area’s two production facilities were extended by approximately one week. The extent of the seasonal shutdowns at the end of December is described separately for each business area.
Operating result adjusted for non-recurring items was EUR 51.0 (15.7) million and the adjusted operating margin 4.5% (1.8%). The operating result was EUR 45.4 (-33.4) million and net result EUR 7.7 (-57.4) million.
Net result was affected by a previously capitalised financing cost of EUR 7.1 million, expensed in connection with the repayment of the existing financing in the third quarter of 2014.
Reported figures compared to pro forma figures
Fourth quarter 2014
Net sales were EUR 281.0 (265.2) million.
Adjusted EBITDA increased to EUR 28.4 (16.8) million and the adjusted EBITDA margin was 10.1% (6.3%).
The extent of the seasonal shutdowns at the end of December is described separately for each business area.
January–December 2014
Net sales were EUR 1,137.3 (1 120.3) million.
EBITDA adjusted for non-recurring items increased to EUR 105.0 (64.1) million while the adjusted EBITDA margin was 9.2% (5.7%).
The annual maintenance and vacation shutdowns in the second and third quarter, during which planned maintenance operations were scheduled, were carried out to the same extent as in 2013, with the exception of the business area Graphics and Packaging, where the shutdowns in 2014 at this business area’s two production facilities were extended by approximately one week. The extent of the seasonal shutdowns at the end of December is described separately for each business area.
The result for the first quarter of 2013 included a positive impact on the result of around EUR 3 million which was due to the release of certain accruals related to personnel liabilities.
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 12 February 2015 at 10:00 am CET (11:00 am EET, 9:00 am UK time) at restaurant Savoy, room Kabinetti 2 (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 5-10 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: 950741
Link to the webcast: http://qsb.webcast.fi/m/munksjo/munksjo_2015_0212_q4/
For further information, please contact
Jan Åström, President and CEO, Tel. +46 10 250 1001
Kim Henriksson, CFO, Tel. +46 10 250 1015