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Suominen Corporation’s Half-Year Financial Report for 1 January–30 June 2018: Net sales and operating profit declined, guidance concerning operating profit specified, the new production line at Bethune, US turned positive on gross profit

Suominen Corporation   Half-Year Financial Report 3 August 2018 at 8:00 am (EEST)

Suominen Corporation’s Half-Year Financial Report for 1 January–30 June 2018: Net sales and operating profit declined, guidance concerning operating profit specified, the new production line at Bethune, US turned positive on gross profit

KEY FIGURES

 

4-6/

4-6/

1-6/

1-6/

1-12/

 

2018

2017

2018

2017

2017

Net sales, EUR million

110.0

112.0

216.6

224.9

426.0

Comparable operating profit, EUR million

2.9

4.4

4.5

10.6

15.0

Operating profit, EUR million

2.9

4.4

4.5

10.6

15.0

Profit for the period, EUR million

1.8

2.1

1.4

6.4

14.5

Earnings per share, basic, EUR

0.03

0.04

0.03

0.12

0.27

Earnings per share, diluted, EUR

0.03

0.04

0.03

0.11

0.25

Cash flow from operations per share, EUR

0.19

0.19

0.28

0.31

0.39

Return on invested capital, rolling 12 months, %

4.1

9.7

6.6

Gearing, %

59.6

53.7

59.5*

 

*restated In this financial report, figures shown in brackets refer to the comparison period last year if not otherwise stated. Highlights in April-June 2018:

- Net sales decreased by 2% and amounted to EUR 110.0 million (112.0). The impact of EUR/USD exchange rate changes decreased the reported net sales by EUR -5.2 million. - Operating profit declined by 34% to EUR 2.9 million (4.4) mainly due to tight price competition in flushable products and certain issues with delivery efficiency.

- Cash flow from operations was EUR 10.8 million (10.2), favorably impacted by tax refunds of EUR 7.0 million in the US. - The new manufacturing line at Bethune, SC, US plant line turned positive on gross profit towards the end of the quarter.

- Suominen specifies its outlook and expects that in 2018, its net sales will improve from 2017 and its comparable operating profit will be at the level of 2017. Earlier Suominen estimated that its net sales and comparable operating profit will improve from 2017.

 

In 2017, Suominen’s net sales amounted to EUR 426.0 million and operating profit to EUR 15.0 million. In financial year 2017 Suominen had no items affecting the comparability of the operating profit. The calculation of comparable operating profit is explained in the disclosures of this release.

Nina Kopola, President & CEO, comments on Suominen’s second quarter of 2018: “In Suominen’s main market areas, Europe and North America, the consumer confidence indices remained strong. Our nonwovens are, for the most part, used in daily consumer goods, and in these target markets the general economic situation and consumer confidence drive the development of consumer demand.

 

Suominen’s net sales were EUR 110.0 million. Determined measures taken in pricing as well as the favorable change in the product portfolio had a positive impact on the net sales, however counteracted by the changes in EUR/USD exchange rate. The weakening of the USD compared to EUR decreased our net sales by EUR -5.2 million in the second quarter.

 

Our operating profit declined from the second quarter of 2017 to EUR 2.9 million, mainly due to the tight price competition particularly in nonwovens for flushable products. Moreover, we still experienced some issues with the delivery efficiency, mainly deriving from freight constraints in the US. Changes in the EUR/USD exchange rate decreased the operating profit by EUR 0.3 million. However, from the first quarter of 2018, our operating profit nearly doubled, signaling that the measures we have taken in our profitability improvement program, 3P, are carrying fruit and that we have now started to gradually turn the company’s negative profitability trend around. To signal the gradual nature of the development, we now specify our guidance regarding operating profit in 2018.

 

The 3P program was launched in the end of 2017 and it focuses on improving Suominen’s profitability through Pricing, Performance and Planning.

 

In the second quarter, volumes sold decreased marginally, but we were able to further increase the average sales price compared both with the corresponding quarter last year and with the first quarter of 2018. Average price was also impacted by the product mix: the composition of our product portfolio improved and the share of products with high value added in our net sales rose to 62% at the end of the reporting period (59% in the corresponding period last year).

 

In terms of improving performance, which is the second P in our 3P program, I am very pleased to announce that our new manufacturing line at Bethune, SC, US plant turned positive on gross profit. This eagerly awaited milestone was achieved towards the end of the second quarter, thanks to the clear improvement in the stability and reliability of the new line.

 

Third P of the program is for Planning, and here our on-going group-wide ICT systems renewal plays an important role. The systems renewal continued as scheduled in the second quarter and the new systems were taken into use at both our plants in Italy. The systems renewal represents an enabler for growth as it allows us to tangibly enhance the planning and optimization of our operations. At the moment, four out of our eight plants operate through the new ICT systems and we expect most of the plants to have the new systems in place by end of 2018.

 

The profit for the reporting period stood at EUR 1.8 million. Cash flow from operations was significantly impacted by tax refunds paid in the US.

 

The ongoing growth investment initiative at our plant in Green Bay, WI, US is proceeding as planned and in schedule. We expect the enhanced capabilities to be in full utilization by end of 2019.”

 

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