Risks and uncertainties
Manufacturing risks
Suominen has production plants in several European countries, the United States and Brazil. Interruptions at the plants caused, for example, by machinery breakdown can cause production losses and delivery problems. Ongoing maintenance and investments aiming to extend the lifetime of the assets are an essential part of ensuring the operational efficiency of the existing production lines.
Suominen’s operations could be disrupted due to abrupt and unforeseen events beyond the company’s control, such as power outages or fire and water damage. Suominen may not be able to control such events through predictive actions, which could lead to interruptions in business. Risks of this type are insured against in order to guarantee the continuity of operations. As Suominen has valid property damage and business interruption insurances, it is expected that the damage would be compensated, and the direct financial losses caused by the interruption of business would be covered.
Suominen uses certain technologies in its production. In the management’s view, the chosen technologies are competitive and there is no need to make major investments in new technologies. However, it cannot be excluded that the company’s technology choices could prove to be wrong, and the development of new or substitute technologies would then require investments.
Competition
Suominen has numerous regional, national and global competitors in its different product groups. Products based on new technologies and imports from countries with lower production costs may reduce Suominen’s competitive edge. If Suominen is not able to compete with an attractive product offering, it may lose some of its market share. Competition may lead to increased pricing pressure on the company’s products.
Price and availability of raw materials
Suominen purchases significant amounts of pulp- and oil-based raw materials. Raw materials are the largest cost item for operations. Changes in the global market prices of raw materials can have an impact on the company’s profitability. Suominen’s stocks equal two to four weeks’ consumption, and it generally takes two to five months for raw material price changes to be reflected in Suominen’s customer pricing, either through automatic pricing mechanisms or negotiated price changes.
Extended interruptions in the supply of Suominen’s main raw materials could disrupt production and have a negative impact on the Group’s overall business operations. As Suominen sources most of its raw materials from a number of major international suppliers, significant interruptions in the production of the majority of Suominen’s products are unlikely.
Price and availability of energy
Energy costs represent a significant portion of Suominen’s production costs. Suominen consumes mainly electricity and gas. Higher prices as well as reduced availability of energy, could have an impact on Suominen’s profitability through increased production costs.
Market and customer risks
Suominen’s customer base is fairly concentrated, which increases the potential impact of changes in customer-specific sales volumes. In 2025, the Group’s ten largest customers accounted for 69.5% (69.4%) of the Group’s net sales. Long-term contracts are preferred with the largest customers. In practice, the customer relationships are long-term and last for several years. Customer-related credit risks are managed in accordance with a credit policy approved by the Board of Directors. Credit limits are confirmed for customers on the basis of credit ratings and customer history.
The demand for Suominen’s products depends on possible changes in consumer preferences. Historically, such changes have had mainly a positive impact on Suominen, as they have resulted in growing demand for products made of nonwovens. However, certain factors, including consumers’ attitude towards the use of products made even partially of oil-based raw materials, or their perception of the sustainability of disposable products in general, might change consumers’ buying habits. Suominen monitors the consumer trends proactively and develops its product offering accordingly. The company has had biodegradable, 100% plant-based nonwovens in its portfolio for over 15 years and hence is well positioned to respond to changes in customer preferences related to sustainability and climate change.
Generally, the demand for nonwovens for wipes has been resilient to changing economic conditions. However, it is conceivable that high consumer price inflation could lead to a decline in end consumer demand for wiping products as the consumers’ available income effectively decreases.
Regarding the war in Ukraine, the direct impact on Suominen’s business is minor as the company has no customers or suppliers in Russia, Belarus or Ukraine.
Suominen is mostly affected by the indirect economic impacts of the war. Instability in different parts of the world continues to cause general uncertainty.
Changes in legislation, political environment, or economic conditions
Suominen’s business and products can be affected directly or indirectly by political decisions and changes in government regulations, for example, in areas such as environmental policy or waste legislation. An example of such legislation is the EU’s Single-Use Plastics Directive, which focuses on reducing marine litter. The potential exists for similar regulations to expand worldwide. This creates demand for more sustainable products, and Suominen is well placed to respond to this increasing demand.
Global political developments could have an adverse effect on Suominen. For instance, a political decision that constrains global free trade may significantly impact the availability and price of certain raw materials, which would in turn affect Suominen’s business and profitability. Suominen’s geographical and customer-industry diversity provide partial protection against this risk. The relevance of the United States in Suominen’s business operations increases the significance of the exchange rate risk related to the USD in the Group’s total foreign exchange position. Suominen manages its foreign exchange position in accordance with its hedging policy.
The risks that are characteristic to the South American region, including significant changes in the political environment or exchange rates, could have an impact on Suominen’s operations in Brazil.
Investments
Suominen continuously invests in its manufacturing facilities. The deployment of the investments may be delayed from what was planned, the costs of the investments may increase from what was expected or the investments may create fewer business benefits than anticipated. The deployment phase of investments may cause temporary interruptions in operation.
Cyber and information security
Suominen’s operations are dependent on the integrity, security and stable operation of its information and communication systems and software as well as on the successful management of cyber-attack risks. If Suominen’s information and communication systems and software were to become unusable or significantly impaired for an extended period of time, or the cyber-attack risks were realized, Suominen’s reputation as well as its ability to deliver products at the appointed time, order raw materials, and handle inventory could be adversely impacted.
Financial risks
The Group is exposed to several financial risks, such as foreign exchange, interest rate, counterparty, liquidity and credit risks. The Group’s financial risks are managed in line with a policy confirmed by the Board of Directors. The financial risks are described in Note 3 of the consolidated financial statements.
Suominen is subject to corporate income taxes in numerous jurisdictions. Significant judgment is required to determine the total amount of corporate income tax at Group level. There are many transactions and calculations that leave room for uncertainty as to the final amount of the income taxes. Tax risks relate also to changes in tax rates or tax legislation or misinterpretations, and the materialization of the risks could result in increased payments or sanctions by the tax authorities, which in turn could lead to financial loss. Deferred tax assets included in the statement of financial position require that the deferred tax assets can be recovered against future taxable income.
Suominen performs goodwill impairment testing annually. In impairment testing, the recoverable amounts are determined as the value in use, which comprises the discounted projected future cash flows. Actual cash flows can differ from the discounted projected future cash flows. Uncertainties related to the projected future cash flows include, among others, the long economic useful life of the assets and changes in the forecasted sales prices of Suominen’s products, production costs, as well as the discount rates used in testing. Due to the uncertainty inherent in the future, it is possible that Suominen’s recoverable amounts will be insufficient to cover the carrying amounts of assets, particularly goodwill. If this happens, it will be necessary to recognize an impairment loss, which, when implemented, will weaken the result and equity. Goodwill impairment testing has been described in the consolidated financial statements.