Ahlstrom Financial Statements Release 2016: Record high profitability in 2016 with accelerated sales growth in the last quarter of the year

Ahlstrom Corporation FINANCIAL STATEMENTS RELEASE January 27, 2017 at 08:30 EET

This is a summary of the Financial Statements Release 2016. The complete report with tables is attached to this release and available at www.ahlstrom.com

Ahlstrom Financial Statements Release 2016

Record high profitability in 2016 with accelerated sales growth in the last quarter of the year

October-December 2016 compared with October-December 2015

• Net sales EUR 266.1 million (EUR 255.0 million).At constant currency rates, growth was 4.9%.
• Adjusted EBITDA EUR 26.4 million (EUR 21.6 million), representing 9.9% (8.5%) of net sales
• Operating profit EUR 8.0 million (EUR 16.4 million loss)
• Adjusted operating profit EUR 14.4 million (EUR 7.6 million), representing 5.4% (3.0%) of net sales
• Profit before taxes EUR 4.8 million (EUR 20.5 million loss)
• Earnings per share EUR 0.00 (EUR -0.46)
• Net cash flow from operating activities EUR 26.9 million (EUR 23.3 million)

                  
January-December 2016 compared with January-December 2015

• Net sales EUR 1,085.9 million (EUR 1,074.7 million).At constant currency rates, growth was 2.6%.
• Adjusted EBITDA EUR 130.9 million (EUR 104.8 million), representing 12.1% (9.7%) of net sales
• Operating profit EUR 70.8 million (EUR 21.9 million)
• Adjusted operating profit EUR 80.6 million (EUR 47.5 million), representing 7.4% (4.4%) of net sales
• Profit before taxes EUR 56.3 million (EUR 22.6 million. The comparison figure includes a capital gain of EUR 20.3 million from share sales.)
• Earnings per share EUR 0.61 (EUR 0.06)
• Net cash flow from operating activities EUR 125.8 million (EUR 60.0 million)

                  
Major events

• Ahlstrom announced a plan to merge with Munksjö Oyj to create a leader in sustainable and innovative-fiber solutions. In conjunction, Sakari Ahdekivi was appointed interim President & CEO of Ahlstrom. He replaced Marco Levi, who left the company in November as a consequence of the merger announcement.
• The Extraordinary General Meetings of Ahlstrom and Munksjö approved the merger on January 11, 2017. The transaction is expected to be completed at the beginning of the second quarter of 2017.
• The EGM of Ahlstrom also authorized the Board of Directors to distribute an extraordinary dividend of EUR 0.49 per share in lieu of an annual payout

Sakari Ahdekivi, interim President & CEO

"In 2016, we achieved an all-time high profitability in the current structure of the company and our balance sheet is much stronger than before. During the latter part of the year we also demonstrated our ability to grow, something we have lacked in the past few years, and achieved remarkable growth in net sales of close to 5% at constant currency rates in the last quarter of the year. In addition to higher sales, we also benefited from improved operational efficiency and lower variable costs. Our business units made good progress and the majority improved their sales and operating profits throughout the year.

We have executed on our strategy at an accelerated pace. Our margins have clearly increased thanks to improved commercial excellence, a leaner operating model, higher capacity utilization and our ability to capture new growth opportunities. As a result, we came close to achieving our 2018 profitability target of above 8% adjusted operating profit margin already in 2016.

The planned merger with Munksjö Oyj is a major strategic milestone in the recent history of Ahlstrom. This combination will create a leader in innovative and sustainable fiber-based solutions. The deal will create substantial value to our stakeholders by offering further opportunities for growth and improved operational efficiency. A strong balance sheet and cash generation will support growth of the combined company. The focus will now be on completing the merger and the subsequent integration of the two companies."

Outlook

Ahlstrom does not provide an outlook for the year 2017 due to the planned merger with Munksjö, which is expected to be completed at the beginning of the second quarter of 2017.

Key figures

Ahlstrom has adopted the European Securities and Markets Authority (ESMA) guidelines on Alternative Performance Measures, which became effective on July 3, 2016. The company uses alternative performance measures to reflect the underlying business performance and to improve comparability. These alternative performance measures should, however, not be considered as a substitute for measures of performance in accordance with IFRS.
Ahlstrom has used revised terminology since the beginning of 2016. In accordance, the previously used term "Operating profit excluding non-recurring items" has been replaced by "Adjusted operating profit" and the term "EBITDA excluding non-recurring items" by "Adjusted EBITDA".

Adjusted items affecting comparability and alternative performance measures used by Ahlstrom are defined:

Adjustment items: restructuring costs, impairment charges, capital gains or losses
EBITDA = Operating profit + depreciation and amortizations + impairments
Adjusted EBITDA = EBITDA - Adjustment items
Adjusted operating profit = Operating profit - Adjustment items

Ahlstrom and Munksjö to combine

On November 7, 2016, Ahlstrom Corporation and Munksjö Oyj announced a plan merge the two companies. The combination will create a global leader in sustainable and innovative fiber-based solutions. The combination is expected to create significant value for the stakeholders in the combined company through stronger global growth opportunities and improved operational efficiency. The combined company's growth ambitions will be supported by a strong balance sheet and strong cash flow generation.

• Ahlstrom and Munksjö will merge through an absorption merger whereby Ahlstrom's shareholders will receive Munksjö shares as merger consideration
• Ahlstrom's shareholders will receive 0.9738 new shares in Munksjö for each share held in Ahlstrom as merger consideration, corresponding to an ownership in the combined company of approximately 47.2% for current Ahlstrom shareholders and approximately 52.8% for current Munksjö shareholders
• In connection with the merger Ahlstrom proposes to distribute funds in the total amount of approximately EUR 23 million, corresponding to EUR 0.49 per share before the combination is completed in lieu of the company's ordinary annual distribution
• The Extraordinary General Meetings of both companies have approved the merger, which is expected to be completed at the beginning of the second quarter of 2017

Unaudited pro forma financials of the combined company and certain other information, such as composition of the management team can be found in the merger prospectus, published on December 16, 2016.

Short-term risks

The global economic outlook varies based on region. Growth in the U.S. is expected to be the highest among developed economies, while that in Europe is expected to continue growing at a moderate pace. Britain's decision to leave the European Union as well as swings in political tendencies across several nations has increased uncertainty. China's expected shift in its economic structure towards more consumer consumption and less investment has caused some concerns, but it can also provide opportunities.

Slower-than-anticipated economic growth poses risks for Ahlstrom's financial performance. It may lead to lower sales volumes and force the company to initiate market-related shutdowns at plants, which could affect profitability. Tougher competition through competitors' increased production capacity, aggressive pricing as well as the adoption of new technologies may also affect profitability. Shifts in the pattern of demand for the company's products may strain the flexibility of its asset base and leave some assets underutilized, while others may become over-loaded.

Swings in currency exchange rates may lead to fluctuations in net sales and profitability. Ahlstrom's main raw materials are wood pulp, synthetic fibers, and chemicals. The prices of these key raw materials are volatile, and any increases may affect the company's profitability depending on its ability to mitigate the risk.

In some of the Group companies, income tax returns are under examination in tax audits or have been already disputed by the tax authorities. The main items under discussion or already disputed relate to transfer pricing and restructuring issues. Based on an evaluation of the current state of these processes, no significant tax provisions have been booked.

Ahlstrom and Munksjö have announced a plan to merge in 2017. The process may cause loss of business focus at Ahlstrom and the loss of skilled personnel and know-how.

The general risks facing Ahlstrom's business operations are described in greater detail on the company website at www.ahlstrom.com and in the report by the Board of Directors in the company's Annual Report for 2015. The risk management process is also described in the Corporate Governance Statement, also available on the company's website.

This report contains certain forward-looking statements that reflect the present views of the company's management. The statements contain uncertainties and risks and are thus subject to changes in the general economic situation and in the company's business.

Disclosure procedure

Ahlstrom publishes its Financial Statements Release 2016 enclosed to this stock exchange release. The report is attached to this release in pdf format and is also available on the company's web site at www.ahlstrom.com.

Additional information

Sakari Ahdekivi, interim President & CEO, tel. +358 (0)10 888 4768
Juho Erkheikki, Investor Relations & Financial Communications Manager, tel. +358 (0)10 888 4731

Ahlstrom's interim President & CEO Sakari Ahdekivi will present the report at an analyst and press conference in Helsinki on Friday, January 27 at 11:00 a.m. Finnish time. The event will take place at Ahlstrom's head office, Alvar Aallon katu 3 C, second floor, meeting room Antti.

The combined webcast and teleconference will be held in English and can be viewed at the following address: http://qsb.webcast.fi/a/ahlstrom/ahlstrom_2017_0127_q4

Conference call details:

In Finland +358 (0)9 7479 0404
In Sweden +46 (0)8 5065 3942
In the U.K. +44 (0)330 336 9411

To participate via telephone, please dial in a few minutes before the conference begins. A list of phone numbers for other countries is available at www.ahlstrom.com/Investors. The confirmation code is 9071340.

An on-demand webcast of the conference will be available on Ahlstrom's website for twelve months after the call.

The presentation material will be available at www.ahlstrom.com/en/Investors/Reports-and-presentations/2016/ after the report has been published.

Ahlstrom in brief

Ahlstrom provides innovative fiber-based materials with a function in everyday life. We are committed to growing and creating stakeholder value by proving the best performing sustainable fiber-based materials. Our products are used in everyday applications such as filters, medical fabrics, life science and diagnostics, wallcoverings, tapes, and food and beverage packaging. In 2016, Ahlstrom's net sales amounted to EUR 1.1 billion. Our 3,200 employees serve customers in 22 countries. Ahlstrom's share is quoted on the Nasdaq Helsinki. More information is available at www.ahlstrom.com.