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Suominen Corporation’s Interim Report for 1 January – 31 March 2018: Sales volumes continued to grow, net sales and operating profit declined

Suominen Corporation   Interim Report   26 April 2018 at 8:00 am (EEST)

Suominen Corporation’s Interim Report for 1 January – 31 March 2018: Sales volumes continued to grow, net sales and operating profit declined

 

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2018

2017

2017

Net sales, EUR million

106.6

112.9

426.0

Comparable operating profit, EUR million

1.5

6.3

15.0

Operating profit, EUR million

1.5

6.3

15.0

Profit for the period, EUR million

-0.4

4.2

14.5

Earnings per share, basic, EUR

-0.01

0.08

0.27

Earnings per share, diluted, EUR

-0.01

0.07

0.25

Cash flow from operations per share, EUR

0.09

0.12

0.39

Return on invested capital, rolling 12 months, % 

4.6

11.7

6.6

Gearing, %

68.2

50.2

59.5*

*restated

In this financial report, figures shown in brackets refer to the comparison period last year if not otherwise stated.

Highlights in January–March 2018:


- Net sales decreased by 6% and amounted to EUR 106.6 million (112.9). The impact of EUR/USD exchange rate changes on net sales was exceptionally high, EUR -9 million.
- Operating profit declined by 75% to EUR 1.5 million (6.3) mainly due to pressure on sales prices. Moreover, we experienced certain issues with delivery efficiency.

- Cash flow from operations remained healthy and was EUR 5.2 million (6.1).

- Optimization of the output of the new manufacturing line at Bethune, SC, USA plant line continued. The customer deliveries continued to develop positively, even though the progress was still slower than anticipated.


- The Annual General Meeting decided to distribute in total EUR 6.3 million (EUR 0.11 per share) as return of capital.

- Suominen repeats its estimate, disclosed on 30 January 2018, and expects that in 2018, 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 first quarter of 2018:

“Consumer confidence remained strong in the beginning of 2018 both in the United States as well as in the euro zone. North America and Europe are Suominen’s main market areas.

Consumers’ optimism in the first quarter was also reflected in the demand of nonwoven products. Our volumes sold increased to a level that represents one of the highest in Suominen’s history. However, despite of achieving volume growth for the fifth consecutive quarter, Suominen’s financial development in the first quarter was a disappointment. Due to the weakening of USD compared to EUR and the pressure on sales prices, our net sales declined to EUR 106.6 million. The total impact of the changes in currency rates was EUR 9 million negative in the first quarter compared to the corresponding period last year.

Suominen’s operating profit decreased to EUR 1.5 million. The unacceptable level of profitability was mainly attributable to the downward pressure on sales prices that has continued since mid-2017. As raw material prices have in general increased, this has therefore strongly affected our profitability. Unfortunately, we also experienced certain issues with delivery efficiency, including unplanned production downtime due to disruptions in power supply and technical difficulties at the new line at the Bethune plant. In spite of very challenging market situation, we were able to slightly increase our average sales prices in Q1.

The loss for the reporting period was EUR -0.4 million. Despite the weakened profitability, Suominen’s cash flow from operations remained healthy, at EUR 5.2 million.

We continued to optimize the output from the new manufacturing line at Bethune, SC, USA. The customer deliveries continued to develop positively, even though the progress was still slower than anticipated. We did not see the anticipated turn to positive gross profit during Q1 from the new manufacturing line.

To correct the course of the profitability development, we initiated already in the end of 2017 an improvement program called 3P. The program focuses on improving the profitability through Pricing, Performance and Planning. On top of those, we carry on our determined work with the product portfolio transformation. The tools to mitigate the raw material price increases include the price mechanism -based sales as well as our own separate pricing measures. Both tools have an impact with a certain lag. The increase in average sales prices mentioned above represents the first tangible results of the program. Going forward, our intention is to continue capturing the full value of our products and be more firm in pricing, aiming to improve profitability.

The Group-wide renewal of ICT systems continued in the first quarter as the new systems were taken into use at our Green Bay, WI, USA plant. The ICT systems renewal represents an enabler for growth. With the new ICT systems, we are able to clearly improve our planning and optimization of the operations in line with our Changemaker strategy. We expect that most of Suominen’s plants run with the new systems by end of 2018.

To further enhance our capability to supply high added value nonwovens, we decided to invest in new carding machinery representing the latest technology at our plant in Green Bay, WI, USA. The investment is valued at approximately EUR 6 million and it is again one step forward in the implementation of our strategy.

Another important milestone for Suominen was the launch of the Sustainability Agenda in the beginning of 2018. The agenda spans until 2021 and defines Suominen's stance on sustainability through its three focus areas, connecting our activities to the Changemaker strategy and to the United Nations’ Sustainable Development Goals. Moreover, the agenda includes concrete longer-term goals related to environmental and social responsibility.

The Annual General Meeting held on 15 March 2018 decided that a return of capital of EUR 0.11 per share was to be paid for the financial year 2017. I am satisfied that despite the decline in profitability in 2016 and 2017, we have been able to maintain solid distribution of funds to our shareholders.”

Click to open the full Interim Report (pdf).