Suominen Corporation’s Interim report for January 1 – September 30, 2013: Net sales and operating profit from continuing operations better than in the comparison period
Helsinki, Finland, 2013-10-23 07:30 CEST (GLOBE NEWSWIRE) --
Suominen Corporation Interim Report 23 October 2013 at 8:30am (EEST)
Net sales, EUR million,
Operating profit before
non-recurring items, EUR million, continuing operations
|Operating profit, EUR million, continuing operations||5.3||6.2||14.6||8.6||7.4|
Profit/loss for the period,
EUR million, continuing operations
|Profit/loss for the period, EUR million, discontinued operations||-1.5||0.0||-18.5||0.3||-6.6|
Profit/loss for the period,
EUR million, total
|Earnings/share, EUR, total||-0.00||0.01||-0.06||0.00||-0.05|
Cash flow from operations/share,
|Return on invested capital (ROI), % *||-5.8||3.1||-5.8||3.1||0.4|
|Gearing, % *||112.5||99.4||112.5||99.4||101.0|
* Including discontinued operations.
All figures in this interim report refer to continuing operations of the Group unless otherwise stated. The figures are compared with those of the corresponding period in 2012 unless otherwise stated. In accordance with IFRS 5, the comparison data of the balance sheets have not been revised and, consequently, include both non-allocated items and discontinued operations.
Highlights in July – September 2013:
-Net sales from the continuing operations declined by 2% and amounted to EUR 108.6 million (110.5)
-Operating profit excluding non-recurring items from the continuing operations decreased by 15% to EUR 5.3 million (6.7)
-The divestment of Codi Wipes business unit was closed on 15 July 2013. In this interim report, Codi Wipes is reported in discontinued operations.
- Suominen decided to renew its corporate structure, organization and management system as of 1 January 2014.
- Suominen repeats its previous estimate, announced on 17 July 2013, according to which Suominen expects its net sales of the continuing operations for the full year 2013 to remain at or slightly exceed the level of 2012. Operating profit excluding non-recurring items is expected to improve from year 2012. In 2012, Suominen’s net sales from continuing operations were EUR 410.4 million. Group operating profit excluding non-recurring items, as reported in the Financial Statements of 2012, was EUR 13.7 million
Nina Kopola, President and CEO, commenting on Suominen’s third quarter:
“According to the Consumer Confidence Index, consumers’ confidence in their personal finances continued to strengthen in Europe during the third quarter. The sustained increase in the Consumer Confidence Index seen in the U.S. in the first half of the year leveled off, and the index began to show a slight decline towards the end of the third quarter.
Although both net sales and operating profit fell short of the strong level of the comparison period in the third quarter, Suominen’s business development for the January-September reporting period on the whole has been positive and in line with our plans.
Net sales from the Group’s continuing operations were EUR 108.6 million in the third quarter, and operating profit excluding non-recurring items amounted to EUR 5.3 million. In the Wiping segment, net sales from continuing operations declined 4% from the strong level of the comparison period and were EUR 93.5 million (97.9). The segment’s operating profit, excluding non-recurring items, was EUR 3.7 million (8.1), which corresponded to 4.0% of net sales. Exceptional costs, which were recognized during the third quarter, arising from challenges related to customer deliveries, as well as from adjustments to Group charges, weakened the operating profit of the Wiping segment. Operating profit of the comparison period was also boosted by an exceptionally favorable product mix.
Net sales of the Flexibles segment grew 19%, despite a tough competitive environment, and totaled EUR 15.1 million. The segment’s operating profit excluding non-recurring items weakened, however, from the comparison period, and remained negative. We are looking into the possibilities of intensifying the business recovery program of the Flexibles segment.
We continued with our steadfast work to implement our In the Lead strategy. The divestment of the Codi Wipes unit was closed in July. The transaction reinforced our position as the leading nonwovens manufacturer in the wiping products value chain, and we can now, in keeping with our strategy, focus on strengthening this position with even greater intensity.
With the renewal of our corporate structure, our organization, our management system, and our operating model from 1 January 2014, we will be creating new prerequisites for quicker execution of our strategy than before. With these renewals, Suominen will become an even more focused and agile company. Our ability to create new business and develop products with increased added value will also be strengthened. In this way, we will accelerate both our own and our customers’ business and can improve Suominen’s profitability.
Suominen’s current Nonwovens business unit will be divided into two new business areas as of 1 January 2014. The Convenience business area will focus on serving customers that manufacture wiping products and travel and catering products. The Care business area will serve customers that manufacture healthcare and hygiene products. The strategy of the Flexibles has also been sharpened and its operations have been reorganized in order to improve and bolster customer service. In the future, Flexibles will concentrate on four businesses: bread packaging, tissue wrapping, retail carrier bags and special products.
The strategic development programs in the nonwovens business which were started earlier this year continued in the third quarter as planned. The objectives of the programs are to harmonize and boost the efficiency of our supply chain processes and to further improve our product development.”
GROUP NET SALES AND FINANCIAL RESULT (CONTINUING OPERATIONS)
In the third quarter of 2013, Suominen’s net sales from continuing operations reduced by 2% from the comparison period and amounted to EUR 108.6 million (110.5). Operating profit before non-recurring items from continuing operations was EUR 5.3 million (6.7) and after them EUR 5.3 million (6.2). Suominen did not report any non-recurring items during the reporting period. Profit before taxes from continuing operations was EUR 3.6 million (3.3) and profit after taxes EUR 1.7 million (2.3).
The demand for nonwovens materials continued favorable in North American market. The continued fierce competition in Europe put pressure on the sales prices. The net sales of the Flexibles segment increased by nearly one fifth in a very tight competitive environment. The segment’s operating profit remained negative also in the third quarter.
Cash flow from operations in July–September normalized and amounted to EUR 4.3 million (7.8).
In January-September, Suominen’s net sales from continuing operations grew by 5% from the comparison period to EUR 328.0 million (312.2). Operating profit before non-recurring items from continuing operations was EUR 14.6 million (11.3) and after them EUR 14.6 million (8.6). Suominen did not report any non-recurring items during the reporting period. Profit before taxes from continuing operations was EUR 8.8 million (0.5) and profit after taxes EUR 3.4 million (-1.0).
Cash flow from operations was EUR 5.0 million (13.2) in January - September. As of the beginning of the year, EUR 7.1 million (3.2) in working capital has been tied up. The increase in the tied working capital reflects the growth in sales. Capital expenditure was kept at a low level.
DIVESTMENT OF CODI WIPES BUSINESS UNIT AND REPORTING IN DISCONTINUED OPERATIONS
In June 2013, Suominen agreed to sell its Codi Wipes business unit, focused on wet wipes manufacturing, to Value Enhancement Partners investment company. The deal was closed on 15 July 2013. Due to the divestment, Codi Wipes business unit has been reported in discontinued operations as of and including the Interim report for January–June 2013 2013. In the previous financial reports, Codi Wiped was reported as part of Suominen’s Wiping segment.
Due to the divestment, Suominen recognized a non-recurring loss of EUR 16.8 million in the second quarter and a non-recurring loss of EUR 1.5 million in the third quarter result in its discontinued operations. The profit after taxes from discontinued operations was EUR -1.5 million (-0.0) in July-September, and EUR -18.5 million (0.3) in January-September.
GROUP RESULT (INCLUDING DISCONTINUED OPERATIONS)
The Group result in July–September including the discontinued operations was EUR 0.3 million (2.3).
The Group result in January–September including the discontinued operations was EUR -15.2 million (-0.7).
COMPLETION OF THE HOME AND PERSONAL BUSINESS ACQUISITION
The acquisition of the Brazilian unit belonging to the Home and Personal business operations acquired from Ahlstrom at the end of 2011 has been delayed. Suominen and Ahlstrom are continuing to examine the prerequisites and alternatives for completing the transaction.
The Group’s interest-bearing net liabilities amounted to EUR 89.8 million (107.5) at the end of the review period. In accordance with the company’s financing agreements, the net debt to EBITDA ratio was not to exceed 4.1 and the gearing ratio not to exceed 135% in the end of the third quarter. At the end of the third quarter, on 30 September 2013, the net debt to EBITDA was 2.6 and the gearing ratio 112.5%.
In January–September, net financial expenses were EUR 5.8 million (8.1), or 1.8% (2.6%) of net sales. A total of EUR 7.1 million was tied up in working capital (3.2). Trade receivables amounting to EUR 8.8 million (16.0) were sold to the bank. The equity ratio was 33.1% (35.8%). Cash flow from operations was EUR 5.0 million (13.2), representing a cash flow of EUR 0.02 per share (0.05).
The gross investments of the continued operations totaled EUR 2.4 million (1.2). Planned depreciation amounted to EUR 12.5 million (13.2). Wiping segment accounted for EUR 0.7 million (0.8), Flexibles segment for EUR 1.0 million (0.2) and the parent company for EUR 0.7 million (0.6) of the total capital expenditure. The investments in Wiping segment were in maintenance. The capital expenditure of discontinued operations, i.e. Codi Wipes business unit, amounted to EUR 0.2 million (0.3) and were for maintenance.
NET SALES AND FINANCIAL RESULT IN SEGMENTS
Wiping segment (continuing operations)
The Wiping segment of Suominen consists of one business unit, Nonwovens. The business unit supplies nonwovens as roll goods for wiping products and medical applications. Until and including the Interim report for January-March 2013, the Codi Wipes business unit, focused on converting nonwovens into wet wipes, was reported in the Wiping segment.
July - September 2013
The net sales of the Wiping segment from continuing operations decreased by 4% and totaled EUR 93.5 million (97.5) in July -September 2013. The Wiping segment generated 86% of the Group net sales. The operating profit of the segment from the continuing operations before non-recurring items was EUR 3.7 million (8.1) and after them 3.7 (7.1). The segment did not report any non-recurring items during the reporting period. If calculated with the average USD exchange rate of July-September 2012, the operating profit of the segment from the continuing operations before non-recurring items would have been EUR 4.0 million (8.1) and after them 4.0 (7.1).
Demand for nonwovens materials continued favorable in North American market. The continued fierce competition put pressure on the sales prices in Europe. Exceptional cost items, which were recognized during the third quarter, arising from challenges related to customer deliveries, as well as from adjustments to Group charges, weakened the operating profit of the Wiping segment. Operating profit of the comparison period was also boosted by an exceptionally favorable product mix.
The investment in capacity expansion of high value added nonwovens at the Windsor Locks plant in the United States was started in the end of the reporting period. The value of the investment is approximately EUR 2.5 million and it will increase Suominen’s production capacity, particularly in the growing segment of flushable products. The investment decision was made and announced in June 2013.
The net sales of the Wiping segment from continuing operations grew by 4% to EUR 283.9 million (273.0). The main application areas for nonwoven materials were distributed to baby wipes (accounting for 41% of the sales), personal care wipes (22%), household wipes (18%), and industrial wipes (12%). The share of baby wipes declined, while the share of wipes for personal care increased from the corresponding period. The operating profit of the segment from the continuing operations before non-recurring items was EUR 13.9 million (15.3) and after them 13.9 (12.1). The segment did not report any non-recurring items during the reporting period.
The Flexibles segment produces printed plastic film materials for consumer packaging for industry and trade, as well as security and system packaging, for example for companies in the security business and for paper wholesalers.
In July–September 2013, net sales of the Flexibles segment totaled EUR 15.1 million (12.7), showing an increase of 19% from the previous year. The Flexibles segment generated 14% of the Group net sales. The segment’s operating profit was EUR -0.9 million (-0.6) excluding non-recurring items and EUR -0.9 million (-0.6) including them. The segment did not report any non-recurring items during the reporting period.
The net sales of the Flexibles segment increased by nearly a fifth in a very tight competitive environment. However, the operating profit remained negative also in the third quarter. We are looking into the possibilities of intensifying the business recovery program of the Flexibles segment.
In January–September 2013, net sales of the Flexibles segment totaled EUR 44.1 million (39.3), showing an increase of 12% from the previous year. The share of hygiene and food packaging increased to 73% of the segment’s net sales, while the sales of retail packaging and security & system packaging declined from the comparison period. The operating profit during the first half of the year was EUR -1.5 million (-2.0) before non-recurring items and EUR -1.5 million (-1.5) after them. The segment did not report any non-recurring items during the reporting period.
INFORMATION ON SHARES AND SHARE CAPITAL
The registered number of Suominen’s issued shares totals 247,934,122 shares, equaling a share capital of EUR 11,860,056.00.
Annual General Meeting
The Annual General Meeting (AGM) of Suominen Corporation was held on 26 March, 2013. The AGM decided that no dividend will be paid for the financial year 2012.
The AGM adopted the financial statements and the consolidated financial statements for the financial year 2012 and discharged the members of the Board of Directors and the President and CEO from liability.
The AGM confirmed the number of members of the Board of Directors to be five (5). The AGM re-elected Mr Risto Anttonen, Mr Jorma Eloranta, Ms Suvi Hintsanen, Mr Hannu Kasurinen and Mr Heikki Mairinoja as the members of the Board of Directors for the next term of office, that expires at the end of the first Annual General Meeting of Shareholders following their election. In its constitutive meeting, the Board of Directors elected Jorma Eloranta as its Chairman and Risto Anttonen as Deputy Chairman.
PricewaterhouseCoopers Oy, Authorized Public Accountants, was re-elected as auditor, with Heikki Lassila, Authorized Public Accountant, as the principal auditor of Suominen Corporation.
The AGM resolved to amend the section 1 of the Articles of Association of the company so that the domicile of the company is Helsinki. In addition, the AGM decided that the second sentence regarding the venue of a General Meeting will be deleted from section 10 of the Articles of Association.
The AGM resolved to establish a permanent Nomination Committee. The Nomination Committee consists of the three largest shareholders or representatives of the three largest shareholders of the company and the Chairman of the Board of Directors of Suominen Corporation.
The AGM authorized the Board of Directors to decide on the repurchase of the company’s own shares and to decide on a share issue and issuance of special rights entitling to shares.
Establishment of permanent committees
Suominen Corporation’s Board of Directors decided on April to establish audit and remuneration committees for the Board.
The main tasks of the Audit Committee relate to ensuring the company’s good governance, accounting and financial reporting, internal control systems and monitoring of third-party auditing. The Audit Committee will prepare for the Board matters that fall under its areas of responsibilities, but it does not have independent decision-making powers unless the Board resolves otherwise on certain matters. Suominen Corporation’s Board of Directors elected Hannu Kasurinen as Chairman and Suvi Hintsanen and Heikki Mairinoja as members of the Audit Committee from among the Board’s members. In future, the Chairman and members of the committee will be elected annually at the Board’s constitutive meeting. At least three members will be elected to the committee. The members of the Audit Committee must be independent of the company, and at least one member must be independent of the company’s significant shareholders. All members of the Audit Committee are independent of the company and of its significant shareholders.
The Remuneration Committee of Suominen Corporation’s Board of Directors will prepare the remuneration and appointment matters concerning the company’s President and CEO and other members of senior management, as well as principles and procedures related to remuneration of the company’s employees. The Remuneration Committee will prepare for the Board matters that fall under its areas of responsibilities, but it does not have independent decision-making powers unless the Board resolves otherwise on individual matters. Suominen Corporation’s Board of Directors elected Jorma Eloranta as Chairman and Risto Anttonen as member of the Remuneration Committee from among the Board’s members. In future, the Chairman and members of the committee will be elected annually at the Board’s constitutive meeting. The minimum number of committee members is two, which deviates from recommendation 22 of the Finnish Corporate Governance Code, which states that Board committees must have at least three members. Suominen Corporation’s Board of Directors states that, taking into consideration the number of members of the Board and the scope and nature of the company’s business operations, the Remuneration Committee is able to effectively handle the matters assigned to it with only two members. The majority of the members of the Remuneration Committee must be independent of the company. The President and CEO or a member of the company’s or Group’s management may not be a member of the Remuneration Committee. Both members of the Remuneration Committee are independent of the company and neither of them belongs to the company’s or Group’s management.
Share trading and price
The number of Suominen Corporation shares traded on NASDAQ OMX Helsinki from 1 January to 30 September 2013 was 7,920,048 shares, accounting for 3.2% of the share capital and votes. The trading price varied between EUR 0.34 and EUR 0.61. The closing trading price was EUR 0.51, giving the company a market capitalization of EUR 125,464,975 on 30 September 2013.
On 1 January 2013, Suominen Corporation held 60,298 of its own shares. In August 2013, Suominen issued 2,000,000 new shares to itself without consideration. After the share issue, Suominen held in total 2 060 298 own shares. On 11 September 2013, the portion of the remuneration of the Board of Directors to be paid in shares, in total 135,931 shares, was delivered. On 30 September 2013, Suominen held 1,924,367 own shares, accounting for 0.8% of the share capital and votes.
Option right holders hold 100,000 of Suominen’s 2009B stock options. During the reporting period 100,000 2009B stock options were returned to the company. The subscription period for the 2009B stock options is from 2 May 2012 to 30 October 2013 and the subscription price is EUR 0.96.
As the registered number of Suominen’s issued shares totals 247,934,122, the number of shares may rise to a maximum of 248,034,122 after stock option subscriptions.
On 30 September 2013, the target group of Suominen’s share-based incentive plan consisted of nine employees. The rewards to be paid on the basis of the plan correspond to the value of an approximate maximum total of 5,050,000 Suominen Corporation shares, including also the cash-settled part. The aim of the plan is to combine the objectives of the shareholders and key employees in order to increase the value of the company, to commit the key employees to the company, and to offer them a competitive reward plan based on long-term shareholding in the company. The plan includes one performance period, the calendar years 2012–2014. The potential reward from the performance period will be based on Suominen Group’s cumulative Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and cumulative cash flow, and it will be paid in 2015 partly in the company’s shares and partly in cash.
Authorizations of the Board of Directors
The Annual General Meeting authorized the Board of Directors to repurchase a maximum of 3,000,000 of the company’s own shares. The authorization shall be valid until 30 June 2014. The Board of Directors is also authorized to decide on issuing new shares and/or conveying the company’s own shares held by the company and/or granting special rights entitling to shares referred to in Chapter 10, Section 1 of the Finnish Companies Act. A maximum of 50,000,000 new shares may be issued. The maximum number of new shares that may be subscribed and own shares held by the company that may be conveyed by virtue of the special rights granted by the company is 10,000,000 shares in total which number is included in the maximum number stated earlier (50,000,000). The authorization shall be valid until 30 June 2016.
The Board of Directors of Suominen Corporation has, based on the authorization granted by the Annual General Meeting of Shareholders, resolved on the issuance of 2,000,000 new shares to the company itself without consideration in accordance with chapter 9, section 20 of the Companies Act. The new shares were registered in the trade register on 15 August 2013, and were admitted to public trading on the stock exchange list of NASDAQ OMX Helsinki Ltd on 16 August 2013. The purpose of the issue of shares to the company itself was to have own shares held by the company available for the payment of the portion of the annual remuneration of the Members of the Board of Directors, which shall be paid in shares of the company, and for the payment of the share rewards possibly payable based on the company’s share based incentive plan. The share rewards possibly payable based on the company’s current share based incentive plan for the years 2012 – 2014 will be paid in the year 2015.
The portion of the remuneration of the members of the Board of Directors which shall be paid in shares
The Annual General Meeting of Suominen Corporation held on 26 March 2013 resolved on the following annual remuneration payable for the year 2013 to the Members of the Board of Directors: Chairman 50,000 euro, Deputy Chairman 37,500 euro and Member 28,000 euro and that 40% of the annual remuneration shall be paid in shares of Suominen Corporation.
The portion of the above-mentioned remuneration to be paid in shares was delivered on 11 September 2013 by transferring own shares held by Suominen Corporation without consideration. The Board of Directors of Suominen Corporation has resolved on the delivery of the shares based on the share issue authorization granted by the Annual General Meeting of Shareholders held on 26 March 2013. The shares to be transferred are of the same class as the company’s other shares. The number of shares formed by the above remuneration portion which is payable in shares has been determined based on the share value in the stock exchange trading maintained by NASDAQ OMX Helsinki Oy as follows: The share value has been determined based on the trade volume weighted average quotation of the share during the trading day immediately preceding the above mentioned day on which the shares were delivered. Based on the above the annual remuneration payable to the Members of the Board of Directors in shares for the year 2013 is 135,931 shares in the aggregate.
CHANGES IN THE GROUP MANAGEMENT
The changes in Suominen’s corporate structure, announced on 30 September 2013, will have an impact also on the company’s management model and on the composition of the Corporate Executive Team (CET), whose primary task is to support the President & CEO in her responsibilities. As of 1 January 2014, the CET will include the following members:
Nina Kopola, President & CEO and Senior Vice President, Care (acting); Chairman of the CET
Tapio Engström, Senior Vice President, CFO
Timo Hiekkaranta, Senior Vice President, Convenience; new member
Olli E. Juvonen, Senior Vice President, Flexibles
Larry Kinn, Senior Vice President, Operations North America*; new member
Mimoun Saim, Senior Vice President, Operations Europe* and Sourcing (acting); new member
Hannu Sivula, Senior Vice President, Human Resources
Further, Suominen will establish a Corporate Leadership Team (CLT), which will act as of 1 January 2014 as an extended management team supporting President and CEO in the execution of strategic programs and creating functional expertise. In addition to the members of the CET, the CLT will include the following persons: Anu Heinonen, Vice President, Corporate Communications & IR; Margareta Huldén, Vice President, R&D*; Roberto Pedoja, Vice President, Technology*; Timo Rautakorpi, Vice President, CIO; Saara Söderberg, Vice President, Marketing & Product Management*.
The members of the CLT will report to Nina Kopola, President & CEO. The members marked with an asterisk (*) will focus on Convenience and Care business areas.
Jean-Marie Becker, Executive Vice President of Nonwovens business unit, will step aside from the Corporate Executive Team as of 1 January 2014.
BUSINESS RISKS AND UNCERTAINTIES
Suominen and Ahlstrom continue to negotiate the prerequisites and alternatives for completing the transaction of the Brazilian unit of Ahlstrom’s Home and Personal business. The conditions for achieving a solution are that a common agreement be reached on the acquisition and that financers approve of the acquisition and its financing. However, the delay or cancellation of the acquisition of the Brazilian unit would not cause financial losses for Suominen.
The estimate on the development of Suominen’s net sales is in part based on forecasts and delivery plans received from customers. Changes in these forecasts and plans resulting from changes in the market conditions or in customers’ inventory levels may affect Suominen’s net sales. Due to the continued uncertainty in the general economic situation and the cautious consumer purchasing habits, the forecasts include uncertainty.
Suominen’s customer base is fairly concentrated, which adds to the customer-specific risk. Long-term contracts are preferred in the case of the largest customers. In practice the customer relationships are long-term and last for several years.
The continued positive development of Suominen’s business operations in the United States increases the relevance of the exchange rate risk related to USD in the Group’s total exchange risk position. Suominen hedges this foreign exchange position in accordance with its hedging policy.
Suominen purchases significant amounts of oil and pulp-based raw materials annually. Raw materials are the largest cost item for operations. Rapid changes in the global market prices of raw materials affect the company’s profitability. 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 its raw materials from a number of major international suppliers, significant interruptions are unlikely.
Suominen has numerous regional, national and international competitors in its different product groups. There is currently oversupply in several product groups, particularly in Europe. If Suominen is not able to compete through an attractive product offering, it may lose some of its market share, and the competition may lead to increased pricing pressure on the company’s products.
The Group’s damage risks are insured in order to guarantee the continuity of operations. Suominen has valid damage and business interruption insurance according to which it is estimated that the damages can be covered and the financial losses caused by an interruption compensated.
Suominen’s credit arrangements include covenants that the company must meet. At the end of 2013, Suominen’s net debt to EBITDA ratio may not exceed 3.6 and the company’s gearing ratio must be less than 125%. In this interim report, these key figures are 2.6 and 112.5%.
The sensitivity of Suominen’s goodwill to changes in business conditions is described in the notes to the financial statements 2012. Actual cash flows may deviate from the forecasted future discounted cash flows, as the long economic lifetime of the company’s non-current assets, and changes in the estimated product prices, production costs, and interest rates used in discounting may result in write-downs. The fair value based on the value in use of assets or businesses in total or in part does not necessarily correspond to the price that a third party would pay for them.
General risks related to business operations are described in the Report of the Board of Directors 2012.
Suominen’s products are used in daily consumer goods, such as wet wipes and plastic packaging. The general economic situation determines the development of consumer demand, even though the demand for consumer goods is not very cyclical in nature. Europe and North America are the main market regions for Suominen.
In the European markets, the consumer confidence index continued to improve slightly in the euro area. In North America, the increase seen in the consumer confidence index during the first half of the year turned into a slight decline in the end of the third quarter. The development prospects of the general economic situation remain uncertain, especially in Europe.
Suominen assesses the trend in demand for its products on the basis of both the general market situation and, above all, on the basis of the framework agreements drawn up with its clients. Suominen estimates that in 2013, demand for its products will remain at the level of 2012.
OUTLOOK FOR 2013
Suominen repeats its previous estimate, announced on 17 July 2013, according to which Suominen expects its net sales of the continuing operations for the full year 2013 to remain at or slightly exceed the level of 2012. Operating profit excluding non-recurring items is expected to improve from year 2012. In 2012, Suominen’s net sales from continuing operations were EUR 410.4 million. Group operating profit excluding non-recurring items, as reported in the Financial Statements of 2012, was EUR 13.7 million
SUOMINEN GROUP CONSOLIDATED 1 JANUARY – 30 SEPTEMBER 2013
This interim report has been prepared in compliance with IAS 34 Interim Financial Reporting. The principles for preparing the interim report are the same as those used for preparing the financial statements for 2012, and this interim report should be read parallel to the financial statements for 2012. Changes to published accounting standards and interpretations, together with the new accounting standards that came into force on 1 January 2013, are presented in the financial statements for 2012.
All calculations in this interim report have been prepared in compliance with the revised IAS 1 standard, ‘Presentation of Financial Statements’. This standard is aimed at improving users’ ability to analyze and compare the information given in financial statements by separating changes in equity of an entity arising from transactions with owners from other changes in equity. Non-owner changes in equity will be presented in the statement of comprehensive income.
According to the revised IAS 19 standard ‘Employee Benefits’, which came into force on January 1, 2013, the corridor method is not applied to actuarial gains and losses, and changes in actuarial gains and losses are recognized in other comprehensive income. Net interest expenses are determined by multiplying the net debt (or receivables) with the interest rate used in discounting, and the difference between the real return on assets and the return calculated using the interest rate used in discounting is recognized in other comprehensive income. Previously unrecognized actuarial gains and losses are also recognized in other comprehensive income. The same applies to other long-term employee benefits, although changes in recognized items are recorded through profit or loss. The process concerning termination benefits, particularly the date when the entity recognizes its liability for termination benefits, is also defined in more detail.
The IAS 19 standard is not expected to have a material impact on Suominen’s financial statements or operating result. The standard does, however, require retroactive application for the financial statement figures of comparison years. Thus, the net debt of the Group’s defined benefit pensions and the statement of comprehensive income from the 2012 comparison year has, as a result of the elimination of the corridor approach to recognize actuarial gains and losses, been changed to reflect the retroactive application. As a result of the revision to IAS 19, the Group’s pension liabilities increased from EUR 845 thousand to EUR 1,092 thousand as of the December 31, 2012 financial statements, and actuarial losses of EUR 247 thousand for the comparison period have been recognized in the other comprehensive income statement items of the 2012 comparison data.
The figures in this interim report have not been audited.
|BALANCE SHEET EUR 1,000||30 Sep 2013||30 Sep 2012||31 Dec 2012|
|Available-for-sale financial assets||25||19||19|
|Other non-current receivables||511|
|Deferred tax assets||6,105||3,941||6,067|
|Non-current assets, total||135,428||176,390||163,816|
|Other current receivables||7,373||10,284||11,772|
|Income tax receivables||1,260||4,023||1,293|
|Cash at bank and in hand||9,504||16,382||14,301|
|Current assets, total||105,801||125,868||115,125|
|Shareholders’ equity and liabilities|
|Equity attributable to owners of the parent company|
|Share premium account||24,681||24,681||24,681|
|Invested non-restricted equity fund||97,054||97,054||97,054|
|Fair value and other reserves||-837||-1,066||-1,253|
|Other shareholders’ equity *||-51,048||-24,365||-35,782|
|Shareholders’ equity, total *||79,752||108,130||96,011|
|Deferred tax liabilities||5,471||1,558||5,653|
|Other non-current liabilities *||1,197||1,375||1,282|
|Non-current liabilities, total||82,537||104,925||97,242|
|Income tax liabilities||1,500||4,975||737|
|Trade payables and other current liabilities||53,369||62,035||63,460|
|Current liabilities, total||78,940||89,203||85,688|
Shareholders’ equity and liabilities, total
* Data from comparison period revised.
STATEMENT OF INCOME
|Cost of goods sold||-98,087||-98,568||-295,057||-285,034||-376,269|
|Other operating income||366||1,648||1,374||6,144||6,838|
|Sales and marketing expenses||-1,755||-1,633||-5,348||-4,979||-6,878|
|Research and development||-751||-679||-2,486||-1,868||-3,593|
|Other operating expenses||-151||-19||-701||-259||-568|
|Operating profit before non-recurring items||5,308||6,665||14,580||11,290||12,942|
|Financial income and expenses||-1,689||-2,928||-5,812||-8,106||-10,474|
|Profit before income taxes||3,618||3,292||8,768||523||-3,031|
|Profit/loss for the period, continuing operations||1,747||-2,266||3,352||-991||-5,231|
Profit/loss for the period
|Impairment loss recognized on the remeasurement to fair value and cost to sell||-1,436||-18,196||-7,278|
|Profit/loss for the period, discontinued operations||-1,464||-12||-18,535||309||-6,641|
|Profit/loss for the period||283||-2,254||-15,183||-682||-11,872|
STATEMENT OF COMPREHENSIVE INCOME
|Profit/loss for the period||283||2,254||-15,183||-682||-11,872|
Other comprehensive income:
|Items that may be reclassified subsequently to profit or loss:|
Currency translation differences on
|Fair value changes of cash flow hedges||-140||-807||551||-760||-1,007|
|Items that will not be reclassified subsequently to profit or loss:|
|Actuarial gains and losses *||61||61||-247|
|Income tax on other comprehensive income||171||-152||107||744||765|
|Total other comprehensive income||-1,141||-1,354||-1,010||68||-933|
|Total comprehensive income for the period||-857||900||-16,193||-614||-12,805|
|Total comprehensive income arises from:|
|Total comprehensive income for the period||-857||900||-16,193||-614||-12,805|
* Data from comparison period revised.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
- Share capital
- Share premium account
- Invested non-restricted equity fund
- Own shares
- Translation differences
- Fair value reserves
- Retained earnings
Total equity at
1 Jan 2013
|Profit/loss for the period||-15,183||-15,183|
|Conveyance of own shares||-69||-69|
Total equity at
30 Sep 2013
Total equity at
1 Jan 2012
|Profit/loss for the period||-682||-682|
Total equity at
30 Sep 2012
Total equity at
1 Jan 2012
|Profit/loss for the period||-11,872||-11,872|
Total equity at
31 Dec 2012
* Data from comparison period revised.
CASH FLOW STATEMENT
|Cash flow before change in working capital||21,272||25,911||32,722|
|Change in working capital||-7,130||-3,229||4,961|
|Cash flow from operations||5,035||13,225||24,938|
|Investments in tangible and intangible assets||-2,693||-2,273||-3,619|
|Proceeds from disposed business operations||3,441|
|Proceeds from disposal of fixed assets and other proceeds||60||2,106||2,115|
|Cash flow from investing activities||807||-167||-1,504|
|Non-current loans drawn||113|
|Repayments of non-current loans||-16,848||-37,267||-38,713|
|Repayments of capital loans||-920||-920||-920|
|Change in current loans||6,300||-10,550|
|Cash flow from financing||-11,355||-38,187||-50,183|
|Change in cash and cash equivalents *||-5,513||-25,129||-26,749|
|Cash and cash equivalents||14,301||40,887||40,887|
|Unrealized exchange rate differences||715||624||164|
|Change in cash and cash equivalents||-5,513||25,129||26,749|
|Cash and cash equivalents||9,504||16,383||14,301|
* Includes discontinued operations.
|Net sales, change, % *||-1.8||289.3||5.0||245.0||150.1|
|Gross profit, % **||9.7||10.8||10.0||8.7||8.3|
|Operating profit, % **||4.9||5.6||4.4||2.8||1.8|
|Financial income and expenses, % **||-1.6||-2.6||-1.8||-2.6||-2.6|
|Profit before income taxes, % **||3.3||3.0||2.7||0.2||-0.7|
|Profit for the period, % **||0.3||2.0||-4.6||-0.2||-2.9|
|Earnings/share, EUR, continuing operations||0.01||0.01||0.01||0.00||-0.02|
|Earnings/share, EUR, discontinued operations||-0.01||0.00||-0.08||0.00||-0.03|
|Earnings/share, EUR, total||0.00||0.01||-0.06||0.01||-0.05|
|Cash flow from operations/share, EUR||0.02||0.03||0.02||0.05||0.10|
|Return on equity (ROE), % ***||-28.5||-4.9||-28.5||-4.9||-11.2|
|Return on invested capital (ROI), %||-5.8||3.1||-5.8||3.1||0.4|
|Equity ratio, % ***||33.1||35.8||33.1||35.8||34.4|
|Gearing, % ***||112.5||99.4||112.5||99.4||101.0|
|Gross investments, EUR 1,000, continuing operations||1,029||707||2,446||1,634||3,298|
|Depreciation, EUR 1,000, continuing operations||4,139||4,434||12,451||13,245||17,518|
|Impairment losses, EUR 1,000, continuing operations||2,700||5,538|
* Compared with the corresponding period of the previous year.
** As of net sales.
*** Data from comparison period revised.
|Non-current interest-bearing liabilities||75,264||101,712||75,264||101,712||90,027|
|Current interest-bearing liabilities||24,071||22,193||24,071||22,193||21,491|
|Interest-bearing receivables, continuing operations||-9,504||-16,382||-9,504||-16,382||-14,301|
|Interest-bearing net liabilities||89,831||107,523||89,831||107,523||97,217|
|Profit before income taxes from discontinued operations||-457||416||-6,432|
|Profit after income taxes from discontinued operations||-339||309||-6,641|
|Impairment loss recognized on the remeasurement to fair value and cost to sell||-18,196|
|Profit/loss for the period from discontinued operations||-18,535||309||-6,641|
|Cash flow from discontinued operations|
|Cash flow from operations||-1,697||1,927||2,584|
|Cash flow from investing activities||-297||-493||-758|
|Change in cash and cash equivalents||1,994||1,434||1,826|
|The impact of the divestment of Codi Wipes on the Group financial position|
|Trade receivables and other current receivables||2,968|
|Cash at bank and in hand||2,782|
|Trade payables and other current liabilities||3,162|
|Cash equivalents held by discontinued operations||-2,872|
|Net cash flow||3,441|
Wiping (continuing operations)
|EUR 1,000||1-9/2013||1-9/2012||Change %||1-12/2012|
|Operating profit before non-recurring items||13,923||15,272||-8.8||18,014|
|% of net sales||4.9||5.6||5.0|
|% of net sales||4.9||4.4||3.4|
|EUR 1,000||1-9/2013||1-9/2012||Change %||1-12/2012|
|Operating profit before non-recurring items||-1,498||-1,968||23.9||-2,786|
|% of net sales||-3.4||-5.0||-5.3|
|% of net sales||-3.4||-3.8||-4.4|
|Impairment losses *||7,278|
|Average personnel *||17||170||173|
* Following the IFRS 5 standard the data for the comparison periods is not restated but includes non-allocated items and discontinued operations.
NET SALES BY MARKET AREA
|North and South America||168,971||161,463||210,249|
|Net sales, total||327,964||312,237||410,458|
EUR 1 000
|Net sales, total, from continuing operations||98,121||111,670||107,691||108,603||426,083|
|% of net sales||3.2||4.6||6.2||4.0||4.5|
|% of net sales||-6.1||0.0||-4.1||-5.9||-4.0|
|Operating profit before non-recurring items||1,652||5,003||4,270||5,308||16,232|
|% of net sales||1.7||4.5||4.0||4.9||3.8|
|Operating profit, total||-1,186||5,003||4,270||5,308||13,394|
|% of net sales||-1.2||4.5||4.0||4.9||3.1|
|Net financial expenses||-2,367||-2,338||-1,785||-1,689||-8,179|
|Profit before income taxes||-3,553||2,665||2,485||3,618||5,215|
TAXES FOR THE PERIOD UNDER REVIEW
Income tax expense is calculated by country, on the basis of taxable results and income tax rates.
INFORMATION ON RELATED PARTIES
Suominen has related party relationships with the members of the Board of Directors, and the members of the Corporate Executive Team, and Ahlstrom Corporation, including its subsidiaries and associated companies. The company has no investments in associated companies. Salaries paid to the related parties amounted to EUR 1,307 thousand, obligatory pension payments EUR 70 thousand, voluntary pension payments EUR 52 thousand and share-based payments EUR 10 thousand.
Other related-party transactions
|Sales of goods and services||13,583||15,046||19,653|
|Purchases of goods and services||52,388||38,723||54,191|
|Trade and other receivables||1,587||1,502||1,049|
|Trade and other payables||1,383||2,626||2,165|
Other related-party transactions are transactions with Ahlstrom Corporation and its subsidiaries and associated companies.
|CHANGES IN BORROWINGS|
|Total borrowings on 1 January||111,518||161,730||161,730|
|Current loans from financial institutions on 1 January||20,571||19,929||19,929|
|Change in current loans from financial institutions||3,499||1,342||642|
|Current loans from financial institutions on 30 Sep.||24,071||21,271||20,571|
|Non-current loans on 1 January||90,027||139,961||139,961|
|Change in non-current loans||-14,763||-38,249||-49,934|
|Non-current loans on 30 September||75,264||101,712||90,027|
|Capital loans on 1 January||920||1,840||1,840|
|Change in capital loans||-920||920||-920|
|Capital loans on 30 September||0||920||920|
|Total borrowings on 30 September||99,335||123,903||111,518|
CHANGES IN FIXED ASSETS
|Book value at the beginning of the period||118,019||12,529||139,886||13,133||139,886||13,333|
|Translation differences and other changes||-1,757||-448||-1,558||7||-140||-8|
|Book value at the end of the period||101,355||11,486||124,959||12,717||118,019||12,529|
|For own debt|
|Nominal values of pledges|
|Real estate mortgages||27,039||27,045||27,045|
|Pledged subsidiary shares and loans||192,287||217,657||209,160|
|Other own commitments|
|Operating leases, real estates||21,768||30,693||27,177|
|Operating leases, machinery and equipment||2,495||3,072||2,705|
FINANCIAL ASSETS BY CATEGORY
a. Financial assets at fair value through profit or loss
b. Held-to-maturity investments
c. Loans and receivables
d. Available-for-sale financial assets
e. Derivatives held for hedge accounting
f. Book value
g. Fair value
|Classes by instruments’ nature|
|Available-for-sale financial assets||25||25||25|
|Other non-current receivables||511||511||511|
|Other current receivables||15||294||309||309|
|Cash and cash equivalents||9,504||9,504||9,504|
|Total at 30 Sep 2013||526||450||62,771||25||63,772||63,772|
|Classes by instruments’ nature|
|Available-for-sale financial assets||19||19||19|
|Cash and cash equivalents||14,301||14,301||14,301|
|Total at 31 Dec 2012||60||466||60,220||19||60,763||60,763|
Principles in estimating fair value for financial assets for 2013 are the same as those used for preparing the financial statements for 2012.
|30 Sep 2013||31 Dec 2012|
|Loans from financial institutions||74,380||74,364||88,884||88,901|
|Repayment of non-current liabilities|
|Loans from financial institutions||23,413||23,440||20,000||20,054|
|Derivatives not held for hedge accounting||48||48||62||62|
|Derivatives held for hedge accounting||1,125||1,125||1,822||1,822|
*) In the balance sheet under current liabilities.
Principles in estimating fair value for financial liabilities for 2013 are the same as those used for preparing the financial statements for 2012.
FAIR VALUE MEASUREMENT HIERARCHY
|EUR 1,000||Level 1||Level 2||Level 3|
|Assets measured at fair value|
|Assets held for sale||25|
|Derivatives measured at fair value|
|Interest rate derivatives||-997|
Principles in estimating fair value for financial assets and their hierarchies for 2013 are the same as those used for preparing the financial statements for 2012.
ANALYST AND PRESS CONFERENCE
Nina Kopola, President and CEO, and Tapio Engström, CFO, will present the financial result in Finnish at an analyst and press conference in Helsinki today, on Wednesday, 23 October at 10.00 Finnish time. The conference will take place at Event Arena Bank, Unioninkatu 20, Helsinki. The name of the meeting room will be displayed on the board in the lobby. The presentation material will be available after the analyst and press conference at www.suominen.fi/financial_presentations.
NEXT INTERIM REPORT
Suominen will publish its Financial Statement Release for 2013 on January 30, 2014.
Helsinki, 23 October 2013
Board of Directors
For additional information, please contact:
Nina Kopola, President and CEO, tel. +358 (0)10 214 300
Tapio Engström, Senior Vice President and CFO, tel. +358 (0)10 214 300
NASDAQ OMX Helsinki Ltd
Suominen in brief
Suominen supplies its industrial and retail customers with nonwovens and flexible packaging for use in consumer products worldwide. Suominen is the global market leader in nonwovens for wipes. The company employs more than 1,000 people in Europe and in the United States. Suominen’s net sales in 2012 amounted to MEUR 410.4 and operating profit excluding non-recurring items was MEUR 12.9 (continuing operations). The Suominen share (SUY1V) is listed in NASDAQ OMX Helsinki Stock Exchange. Read more at www.suominen.fi.