Munksjö Oyj's Interim Report for January-March 2014 - Positive profitability development

MUNKSJÖ OYJ, INTERIM REPORT, 8 May 2014 7.30 am CEST

Highlights of the first quarter 2014

-Net sales amounted to EUR 287.9 (154.5) million. The significant net sales improvement was primarily a result of the business combination between Munksjö AB and Ahlstrom Corporation’s business area Label and Processing completed in 2013.

-Adjusted EBITDA was EUR 27.4 (11.5) million corresponding to an adjusted EBITDA margin of 9.5% (7.5%).

-Operating result adjusted for non-recurring items was EUR 13.7 (5.0) million. Non-recurring items amounted to EUR -1.0 (-3.0) million and were costs for achieving synergy benefits and for the work in connection with the Statement of Objections from the European Commission.

-Operating result was EUR 12.7 (2.0) million and the net result was EUR 4.3 (-1.9) million.

-Earnings per share (EPS) were EUR 0.08 (-0.15).

-Interest-bearing net debt at the end of the reporting period was EUR 237.6 million (31 Dec 2013: 229.3, 31 March 2013: 218.3), equivalent to a gearing of 55.3% (31 Dec 2013: 54.1%, 31 March 2013: 109.2%).

-Operating cash flow was EUR -2.6 (3.5) million.

*  Adjusted for non-recurring items
** Restated to reflect the adoption of IFRS 11 as explained in the notes to the interim report

Unless otherwise indicated, the figures in parentheses refer to the figures for the equivalent period in 2013. This interim report is unaudited. It is published in Swedish, Finnish and English. In case of any discrepancies between the three versions, the Swedish text shall prevail.

Comments from Munksjö’s President and CEO, Jan Åström

“The newly formed specialty paper company Munksjö has now completed its first full quarter. At the end of 2013, the business combination between Munksjö AB and Ahlstrom Corporation’s business area Label and Processing was completed when the Brazilian operation was incorporated into the Group and the business area Release Liners. The organisation has delivered a good profitability growth and has also already achieved the lower synergy benefits target level.

Prices were stable during the first quarter of 2014. In the business area Decor and Industrial Applications, the growth in volumes was good compared to the same period in 2013. With adjusted EBITDA margins in the region of 14 to 15 per cent, these two business areas are generating improved results. The business areas Release Liners and Graphics and Packaging are showing the results of the company’s increased focus on profitability as both business areas have improved their results compared to previous quarters.

I am proud of this organisation which is delivering a level of performance that will take us another step closer to achieving our EBITDA margin goal of 12 per cent over a business cycle.”

Outlook

During the second quarter of 2014, demand for Munksjö’s products is expected to remain stable after a relatively strong first quarter. Prices in local currency are expected to remain at the same level as in the first quarter.

As previously communicated, the synergy benefits of EUR 20-25 million will be achieved earlier than originally planned, as the related synergy activities are expected to be completed already 2014, and realised during 2015.

The previously communicated prolonged intervals between the maintenance stops from 12 to 18 months at the pulp production facility in Aspa, Sweden will impact the result for the business area Release Liners negatively in the second quarter instead of in the fourth quarter this year. The effect on the result is expected to be EUR -4 million.

During the Easter holiday shorter scheduled maintenance shutdowns were carried out. Otherwise the yearly holiday shutdowns, during which planned maintenance operations are scheduled, are expected to be carried out to the same extent as in 2013.

Forming a global leader in specialty paper – combining Munksjö AB with Ahlstrom Corporation’s business area Label and Processing

Munksjö Oyj was formed when the Swedish company Munksjö AB and the business area Label and Processing of the Finnish company Ahlstrom Corporation were combined. The company consists of four business areas: Decor, Release Liners, Industrial Applications and Graphics and Packaging. The business areas are also the reporting segments.

In addition to the financial result for the reporting period, the report contains pro forma financial information of the business combination. As the combination was completed during 2013, pro forma information is only prepared up until the fourth quarter 2013. This information is presented for illustrative purposes only. Further information on how the pro forma information was compiled is available in the Financial Statements Bulletin, published on 13 February 2014.

Synergy benefits and integration

As previously communicated the annual synergy benefits arising from the business combination are related to procurement, production efficiency, economies of scale and improved organisational performance and efficiency, and are still expected to be between EUR 20-25 million. The result for the first quarter of 2014 includes realised and recorded synergies of approximately EUR 5 million. At the end of the first quarter the annual synergy benefits run-rate was approximately EUR 20 million.

The synergies have primarily been achieved within procurement and improved efficiency within the organisation. It is within the area of improved efficiency within the organisation, including the improvement programme in the business area Graphics and Packaging, that the synergies are expected to be further developed during 2014.

Non-recurring items to achieve synergies are still estimated at EUR 10-15 million. In addition to the approximately EUR 11 million recorded in the result of 2013, EUR 0.5 million in costs were recorded in the result of the first quarter of 2014. The cash flow effect in the first quarter of 2014 was approximately EUR 1.5 million in addition to the EUR 4 million which affected the cash flow in 2013. The remainder of the non-recurring items are expected to affect the cash flow during the rest of 2014.

The Munksjö Group

*  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

First quarter 2014

Net sales amounted to EUR 287.9 (154.5) million. The significant net sales improvement was primarily a result of the business combination completed in 2013.

EBITDA adjusted for non-recurring items increased to EUR 27.4 (11.5) million and the adjusted EBITDA margin was 9.5% (7.5%).

Operating profit adjusted for non-recurring items was EUR 13.7 (5.0) million and the adjusted operating margin was 4.8% (3.2%). Non-recurring items amounted to EUR -1.0 (-3.0) million. Of these costs EUR 0.5 million were costs for achieving synergy benefits and EUR 0.5 million for work in connection with the Statement of Objections from the European Commission.

The operating result was EUR 12.7 (2.0) million with a net result of EUR 4.3 (-1.9) million.

Reported figures compared to pro forma figures

First quarter 2014

The reported net sales were slightly lower than the pro forma figures amounting to EUR 287.9 (290.4) million.

Adjusted EBITDA increased to EUR 27.4 (18.9) million and the adjusted EBITDA margin was 9.5% (6.5%). The result for the first quarter 2013 includes a positive impact on the result of approximately EUR 3 million which was a result of the release of certain accruals related to personnel liabilities.

Webcast and conference call

A live combined news conference, conference call and webcast for investors, analysts and media will be arranged on the publishing day, 8 May 2014 at 10 a.m. CEST (11 EEST) at the restaurant Palace in Helsinki, Finland (Eteläranta 10, 10th floor, Conference hall). The report will be presented by President and CEO Jan Åström. The event will be held in English.

The 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)8 505 201 10
US callers: +1 334 323 6201
UK callers: +44 (0)20 7162 0077
Conference ID: 943089

Link to the webcast: http://qsb.webcast.fi/m/munksjo/munksjo_2014_0508_q1

For further information, please contact

Jan Åström, President and CEO, Tel. +46 10 250 1001
Kim Henriksson, CFO, Tel. +46 10 250 1015

Munksjö – Materials for innovative product design

The Munksjö Group is an international specialty paper company with a unique product offering for a large number of industrial applications and consumer-driven products. Founded in 1862, Munksjö is among the leading producers in the world of high-value added papers within attractive market segments such as Decor paper, Release Liners, Electrotechnical paper, Abrasive backings and Interleaving paper for steel. Given Munksjö’s global presence and way of integrating with its customers’ operations, the company forms a global service organisation with approximately 3,000 employees. Production facilities are located in France, Sweden, Germany, Italy, Spain, Brazil and China. Munksjö Oyj is listed on NASDAQ OMX Helsinki. Read more at www.munksjo.com.