MUNKSJÖ OYJ, FINANCIAL STATEMENTS BULLETIN, Helsinki, Finland, 16 February 2017 at 07:30 AM CET
Munksjö Oyj’s Financial Statements Bulletin 2016: Profitability target of 12% reached, record high full-year results and cash flow
Highlights of the fourth quarter 2016
· Net sales were EUR 282.4 (290.0) million.
· Adjusted EBITDA was EUR 36.1 (22.1) million and the adjusted EBITDA margin was 12.8% (7.6%). Items affecting comparability (IAC) amounted to EUR -6.6 (0.0) million, mainly related to the planned combination.
· Operating result was EUR 16.4 (8.5) million and net result EUR 11.8 (7.2) million.
· Earnings per share (EPS) were EUR 0.23 (0.14).
· Operating cash flow was EUR 41.3 (44.5) million.
· On 7 November 2016, Munksjö announced the plan to combine with Ahlstrom Corporation and create a global leader in sustainable innovative fiber-based solutions.
Highlights of January-December 2016
· Net sales were EUR 1,142.9 (1,130.7) million.
· Adjusted EBITDA was EUR 136.7 (93.6) million and the adjusted EBITDA margin was 12.0% (8.3%). Items affecting comparability (IAC) amounted to EUR -6.6 (-7.3) million, mainly related to the planned combination.
· Operating result was EUR 74.9 (32.7) million and net result EUR 43.3 (22.8) million.
· Earnings per share (EPS) were EUR 0.85 (0.44).
· Operating cash flow was EUR 114.3 (55.5) million.
· The Extraordinary General Meeting (EGM) approved the combination with Ahlstrom on 11 January 2017.
· The EGM also authorised the Board of Directors to resolve on an extra payment of funds from the company's reserve for invested unrestricted equity as return of equity of maximum EUR 0.45 per share.
KEY FIGURES Oct-Dec Jan-Dec
MEUR 2016 2015 Change, % 2016 2015 Change, %
Net sales 282.4 290.0 -3% 1,142.9 1,130.7 1%
EBITDA 36.1 22.1 63% 136.7 93.6 46%
(adj.*)
EBITDA 12.8 7.6 12.0 8.3
margin, %
(adj.*)
EBITDA 29.5 22.1 33% 130.1 86.3 51%
EBITDA 10.4 7.6 11.4 7.6
margin, %
Operating 23.0 8.5 171% 81.5 40.0 104%
result (adj.*)
Operating 8.1 2.9 7.1 3.5
margin, %
(adj.*)
Operating 16.4 8.5 93% 74.9 32.7 129%
result
Operating 5.8 2.9 6.6 2.9
margin, %
Net result 11.8 7.2 64% 43.3 22.8 90%
Earnings per 0.23 0.14 66% 0.85 0.44 93%
share (EPS),
EUR
Interest 169.5 227.4 -25% 169.5 227.4 -25%
-bearing net
debt
*Adjusted for items affecting comparability (IAC)
Unless otherwise indicated, the figures in parentheses refer to the figures for the equivalent period in 2015. This financial 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.
Comment from Munksjö’s President and CEO, Jan Åström
“I am proud of our team and what we have achieved in 2016. We reached our ambitious target, set in 2013, of an EBITDA margin of 12 per cent. We announced the plan to combine Munksjö and Ahlstrom through a merger to create a global leader in sustainable and innovative fiber-based solutions, and we communicated new expected targets including an EBITDA margin target of above 14 per cent for the combined company. The combination is expected to create significant value for the stakeholders through stronger global growth opportunities and improved operational efficiency.
During 2016, the adjusted EBITDA reached EUR 136.7 (93.6) million, an improvement of EUR 43 million or 46 per cent. All four business areas have executed on their respective profitability improvement plans and approximately half of the result improvement is based on our own actions to increase efficiency. The rest was mainly attributable to favourable cost conditions. Market demand has remained stable on a good level in all key businesses. Some geographical markets, such as Brazil, have still been impacted by macroeconomic uncertainty during 2016 but we have been able to compensate this with exports to other markets. Our long-term market growth expectation remains intact at between 2-4 per cent annually, as the demand for several of the end-use applications of our solutions is supported by global megatrends such as urbanization and globalisation.
Our strong performance in 2016 has strengthened the company. I am now looking forward to the next big step in the development through the merger with Ahlstrom that is expected to be completed early in the second quarter of 2017. The preparations for the integration process are proceeding according to plan and together we will improve our competitiveness further and create a strong growth platform for the future.”
Outlook
The demand outlook for 2017 for Munksjö’s specialty paper products is expected to remain stable at the current good level and to reflect the seasonal pattern.
The annual maintenance and vacation shutdowns in the second and third quarter as well as the seasonal shutdowns at the end of 2017 are expected to be carried out to about the same extent as in 2016. The next maintenance shut down at the pulp production facility in Aspa in Sweden will be carried out in the fourth quarter of 2017.
The cash flow effect of current capital expenditure for fixed assets in 2017 is expected to be approximately EUR 40 million and, in addition, the cash flow impact of the strategic investment in the Arches mill is expected to be approximately EUR 14 million.
The outlook for the financial year 2017 is given for Munksjö as a stand-alone company with its current operations.
The Munksjö Group
Oct-Dec Jan-Dec
MEUR 2016 2015 Change, % 2016 2015 Change, %
Net sales 282.4 290.0 -3% 1,142.9 1,130.7 1%
EBITDA 36.1 22.1 63% 136.7 93.6 46%
(adj.*)
EBITDA 12.8 7.6 12.0 8.3
margin, %
(adj.*)
EBITDA 29.5 22.1 33% 130.1 86.3 51%
EBITDA, 10.4 7.6 11.4 7.6
margin %
Operating 23.0 8.5 171% 81.5 40.0 104%
result (adj.*)
Operating 8.1 2.9 7.1 3.5
margin, %
(adj.*)
Operating 16.4 8.5 93% 74.9 32.7 129%
result
Operating 5.8 2.9 6.6 2.9
margin, %
Net result 11.8 7.2 64% 43.3 22.8 90%
Capital 10.7 8.9 20% 39.2 39.8 -2%
expenditure
Employees, 2,752 2,749 0% 2,755 2,774 -1%
FTE
* Adjusted for items affecting comparability (IAC)
Fourth quarter 2016
· Total group delivery volumes decreased. The positive volume development in most of the product segments, especially the Brazilian paper business in Business Area Release Liners, did not compensate for the lower volume for the specialty pulp business and the Decor business, where the comparison period was historically strong and included a large year-end delivery.
· EBITDA adjusted for IAC increased to EUR 36.1 (22.1) million and the adjusted EBITDA margin was 12.8% (7.6%). The positive result effect was driven by profitability improvement actions, lower variable costs and higher production.
· The seasonal shutdowns in the fourth quarter were shorter compared to 2015 particularly in the Business Area Graphics and Packaging and in the Brazilian paper business in Business Area Release Liners where seasonal shutdowns in 2015 were prolonged.
· IAC amounted to EUR -6.6 (0.0) million, whereof approximately EUR 4 million were related to the planned merger with Ahlstrom. Furthermore, approximately EUR 2 million were related to the terminated long-term share-value-based incentive program.
· The operating result was EUR 16.4 (8.5) million and net result EUR 11.8 (7.2) million.
· In the reporting period the currency hedging result impacting operating profit amounted to EUR -0.8 (-0.2) million. Exchange gains on financial assets and liabilities were EUR 1.6 (1.4) million and are reported in financial items.
January-December 2016
· Total group delivery volumes increased in most of the product segments and were stable in decor papers. The delivery volume development was particularly strong in the specialty pulp business and the Brazilian paper business in Business Area Release Liners.
· Net sales increased to EUR 1,142.9 (1,130.7) million, as higher volumes compensated for the lower average price, mainly driven by the lower sales price for long fibre specialty pulp and a different product mix compared to last year.
· EBITDA adjusted for IAC increased to EUR 136.7 (93.6) million and the adjusted EBITDA margin was 12.0% (8.3%). Higher delivery volumes had a positive effect of EUR 10 million. This was offset by EUR 11 million as an effect of the lower average price. Lower variable costs, driven mainly by operational efficiency related actions, the lower energy price and lower raw material prices had a positive result effect of EUR 54 million. Higher fixed costs had a negative result effect of EUR 10 million, mainly as a result of accruals for incentive plans and increased manning related to higher production volumes.
· Out of the total profitability improvement, amounting to EUR 43 million, approximately half was related to actions related to the plan to reach the profitability target.
· The annual maintenance and vacation shutdowns in the second and third quarter were carried out to about the same extent as in 2015. The seasonal shutdowns in the fourth quarter were shorter compared to 2015 particularly in the Business Area Graphics and Packaging and in the Brazilian paper business in Business Area Release Liners where seasonal shutdowns in 2015 were prolonged.
· IAC amounted to EUR -6.6 (-7.3) million, whereof approximately EUR 4 million were related to the planned merger with Ahlstrom. Furthermore, approximately EUR 2 million were related to the terminated long-term share-value-based incentive program. The IAC in the comparison period 2015 was mainly related to restructuring actions.
· The operating result was EUR 74.9 (32.7) million and net result EUR 43.3 (22.8) million.
· In the reporting period, the currency hedging result impacting operating profit amounted to EUR -1.7 (-4.9) million. Exchange losses on financial assets and liabilities were EUR 1.5 (gains of 9.5) million and are reported in financial items.
Combination with Ahlstrom
On 7 November 2016, Munksjö Oyj and Ahlstrom Corporation announced a plan to 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.
· Munksjö and Ahlstrom 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.
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 16 December 2016.
Munksjö entered on 10 November 2016 into a facilities agreement for the merger and the combined company with Nordea and SEB as the joint underwriters. The new financing consists of approximately EUR 560 million multicurrency term and revolving credit facilities with maturities ranging between three and five years; and EUR 200 million bridge facility for Ahlstrom, which will be assumed by Munksjö as from the date of completion of the merger with amended terms and commitments reduced to EUR 100 million.
The syndication of the term loan facilities and the revolving credit facility was concluded on 23 December 2016 and is provided by SEB, Nordea and Danske Bank as bookrunners. BNP Paribas, OP Corporate Bank and Swedbank joined as Mandated Lead Arrangers and Citi, Commerzbank, Crédit Agricole and DNB Bank joined as Lead Arrangers.
Financial targets for the planned combined company are expected to include an EBITDA margin above 14 per cent over a business cycle, a net gearing below 100 per cent, as well as a stable and annually increasing dividend.
Profitability target reached
Munksjö’s profitability target, set in 2013, to reach an EBITDA margin of 12 per cent at the end of 2016 was achieved according to plan. The drivers for the profitability improvement included continued operational efficiency, profitable growth, product and service quality leadership and utilising the position as a market and innovation leader. Within operational efficiency, the majority of the planned actions included measures to adjust the cost structure.
Of the realised actions in the financial result in January-December 2016, the majority were related to operational efficiency. Further information on the actions related to the profitability improvement plan and their effect on the financial result can be found under the heading Munksjö Group.
Events after the end of the reporting period
The Extraordinary General Meetings of both Munksjö Oyj and Ahlstrom Corporation were held in Helsinki on 11 January 2017. Munksjö’s EGM resolved, inter alia, to approve the combination of Ahlstrom’s and Munksjö's business operations through a statutory absorption merger of Ahlstrom into Munksjö and approve the merger plan. The EGM also resolved to authorise the Board of Directors to resolve on an extra payment of funds from the company's reserve for invested unrestricted equity as return of equity of maximum EUR 0.45 per share. The merger, which is expected to be completed at the beginning of the second quarter of 2017, is subject to among other things approval by relevant competition authorities.
Webcast and conference call
A combined news conference, conference call and live webcast will be arranged on the publishing day 16 February 2017 at 10:00 a.m. CET (11:00 a.m. EET, 8:00 a.m. GMT) at restaurant Savoy (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 7479 0404
Swedish callers: +46 (0)8 5065 3942
US callers: +1 719 457 2086
UK callers: +44 (0)330 336 9412
Conference ID: 7977721
Link to the webcast: http://qsb.webcast.fi/m/munksjo/munksjo_2017_0216_q4/#/webcast
For further information, please contact:
Jan Åström, President and CEO, tel. +46 10 250 1001
Pia Aaltonen-Forsell, CFO, tel. +46 10 250 1029
Made by Munksjö – Intelligent paper technology
Munksjö is a world-leading manufacturer of advanced paper products developed with intelligent paper technology. Munksjö offers customer-specific innovative design and functionality in areas ranging from flooring, kitchens and furnishings to release papers, consumer-friendly packaging and energy transmission. The transition to a sustainable society is a natural driving force for Munksjö's growth as the products can replace non-renewable materials. This is what "Made by Munksjö" stands for. Given Munksjö's global presence and way of integrating with the customers, the company forms a worldwide service organisation with approximately 2,900 employees and 15 facilities located in France, Sweden, Germany, Italy, Spain, Brazil and China. Munksjö's share is listed on Nasdaq in Helsinki and Stockholm. Read more at www.munksjo.com.