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Suominen Corporation's Interim Report for January 1 - March 31, 2014 : Significant improvement in operating profit

Highlights in January – March 2014:

- Net sales increased by 2.2% and amounted to EUR 114.2 million (111.7).
- Operating profit excluding non-recurring items increased by 42% to EUR 7.0 million (5.0).
- Suominen extended its business operations to South America by acquiring a nonwoven manufacturing unit located in Brazil from Ahlstrom.
- The investment project for the automatization of the Tampere plant of Flexibles business area was started. The total value of the investment is approximately EUR 0.5 million.

- Suominen repeats its previous estimate, disclosed on 10 February 2014, that its net sales and operating profit excluding non-recurring items for the full year 2014 improve from year 2013. In 2013, the net sales were EUR 433.1 million and the reported operating profit excluding non-recurring items EUR 18.3 million (continuing operations).

President & CEO Nina Kopola comments on Suominen’s first quarter of 2014:

“The consumer confidence index in the euro zone strengthened towards the end of the first quarter. The upswing in the U.S. economy continued in the first quarter, although there were slight fluctuations in the consumer confidence index during the period.

Suominen kicked off 2014 on a positive note. The expansion of our business to South America through a transaction that was agreed on with Ahlstrom in January and confirmed in February was an important milestone for us. The acquisition of the plant located in Paulínia, Brazil gives us a foothold in the highly promising South American markets and further reinforces our leading position as a global manufacturer of nonwovens for wiping products. The enterprise value of the transaction was EUR 17.5 million, and we financed it through a convertible hybrid bond. The bond was issued in February and it was oversubscribed.

The first quarter of 2014 was positive for Suominen also in the light of the company’s financial figures. Suominen’s net sales increased 2% to EUR 114.2 million. Operating profit, excluding non-recurring items, grew 42% to EUR 7.0 million, which is an all-time-high operating profit for Suominen in a quarter. The improvement in profitability demonstrates the effectiveness of our chosen strategy: We have succeeded in increasing the share of products with higher added value in our portfolio. In addition, the favorable development of our operating profit was boosted by the Flexibles segment’s positive result in the first quarter and by the cost-conscious approach that has been adopted Group-wide.

Two out of three of Suominen’s medium-term financial targets reached their target level in the first quarter. Our gearing ratio declined to 79.3% (targeted range 40–80%), thanks to both the hybrid bond mentioned above and debt repayments. The return on investments (ROI) from Suominen’s continuing operations was 10.4% (target >10%).

Net sales of the Nonwovens segment was close to the level of the comparison period, at EUR 98.4 million (97.2). The segment’s operating profit, excluding non-recurring items, grew 35% to EUR 6.0 million (4.4), corresponding to 6.1% of net sales.

The Flexibles segment’s net sales grew 10%, totaling EUR 15.8 million (14.4). Flexibles’ operating profit increased to EUR 0.4 million (0.0). The effects of the rationalization measures that were implemented at the turn of the year were still not fully reflected in the segment’s key figures.

In the first quarter, we continued with our consistent work to implement our strategy In the Lead. The investment to expand production capacity of flushable nonwovens at the Windsor Locks plant in the U.S. proceeded according to plan. The roughly two-week installation shutdown for the new machinery will last until the end of April, and the expanded capacity will be in full operation by the end of May. We have also expanded our offering of flushable nonwovens in Europe. In addition, we have further reinforced the position of products with higher added value in our portfolio by introducing a new nonwoven product for hotel and restaurant industry customers.

The changes announced in September 2013 concerning Suominen’s group structure, organization, management system and operating model entered into force on 1 January 2014. As part of the changes, as of 1 January 2014, Suominen’s Nonwovens segment consists of two business areas, Convenience and Care.”

Read the full Interim Report (pdf)