Suominen Corporation IR Presentation August 2014suominen.studio.crasman.fi/pub/Sisältö/Group/Investors... · Suominen manufactures nonwovens as roll goods 8/5/2014 Suominen is a

Suominen Corporation

IR Presentation

August 2014

Contents

• Suominen at a glance

• Suominen as an investment

- Global operations

- Growing markets

- Strategy delivering results

- Long-term customer relationships and leading market position

• Financial review

• Appendices

Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 2 8/5/2014

Suominen at a glance

• Main end use areas:

- Hygiene products

(femcare, incontinence,

diapers)

- Medical nonwovens (e.g.

swabs, undercast pads,

face masks)

• Net sales of the business

area (Q2 2014) 7.7 M€

• Main end use areas:

- Wiping (baby, household, personal care ,

industrial wipes

- Travel & catering applications

• Suominen is the global leader in nonwovens for

wiping applications

• Net sales of the business area (Q2/2014): 87.6 M€

Convenience business area

Suominen as of 14 July: 100 % nonwovens company

92% of Suominen net sales 8% of Suominen net sales


Care business area Care business area

Eight nonwovens plants in three continents serving both business areas

Suominen manufactures nonwovens as roll goods


Our nonwovens are converted into consumer as well

as professional applications


Ahlstrom

Brazil 2008

Our history stems from 1767

J.W.

Suominen

1898

C.H. Dexter

& Sons

1767

Part of

Ahlstrom

since 2000

Tecnofibra/

Fiberweb

1971

Part of

Ahlstrom

since 2007

Orlandi

1933

Part of

Ahlstrom

since 2007

Green Bay

Nonwovens

1997

Part of

Ahlstrom

since 2004

Part of Lassila

& Tikanoja

since 1982

Part of

Suominen

since 2001 Part of Suominen since 2011

Suominen 2014

NAKKILA WINDSOR LOCKS MOZZATE, ALI,CANTE, CRESSA GREEN BAY PAULINIA

BETHUNE


Part of

Suominen

since 2014

Net sales by product area and by region (H1 2014)

Net sales by product area

Net sales by region

8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 8

40%

22%

17%

12%

8% 1%

Baby Personal care

Household Industrial

Hygiene and Medical Other

63 %

34 %

3 %

Americas Europe ROW

Suominen as an investment

Four reasons to invest in Suominen

We have locations in the main

market regions in three continents,

close to customers

We operate at growing markets

We partner with global

long-term customers – average

customership over 10 years

We have a clear focus

and strategy –

with promising track record


Locations in three continents close to customers

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy

Paulínia plant part of

Suominen since Feb 2014


The global demand for wiping nonwovens is growing

5% 3%

5%

6%

4% 10%

Source: Freedonia, world wipes market for nonwoven fabrics, market growth (CAGR) by region from 2010 to 2020 in thousand tons.

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy

7%


Global megatrends accelerate the demand for

Suominen’s products

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


We have a clear focus and strategy

• Following the divestments, we focus purely on nonwovens.

• Our strategy is clear and it is linked with ambitious mid-term financial

targets.

• The strategy has delivered the desired results:

- Cost structure rationalized

- Gearing ratio and ROI of continuing operations - two out of three

strategic targets, that are reviewed on quarterly basis - reached their

target levels both in Q1 and Q2 2014

- The share of products with higher value add is growing, which is

reflected in the improved level of profitability of the company.

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


Fast transformation into a nonwovens company with

operations in three continents

18.7.2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 15

2011

Three lines of

business :

Nonwovens

Flexibles

Codi Wipes

11/1/2011

Ahlstrom

Home&Personal

acquisition

7/15/2013

Divestment of

Codi Wipes

2/10/2014

Acquisition

of Brazilian unit

7/14/2014

Divestment of

Flexibles

business area

Net sales by line of business and geographical coverage from 2011 to date.

The three cornerstones of the strategy

How we win How we operate

In the Lead Step Change in

Profitability

Suominen

Way

How we work

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy

Understanding the end user is

in the heart of our strategy

Fiber

producer

Nonwoven

producer

Brand owner

Converter

Retailer

Primary

production

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


We aim at increasing the share of

products with higher added value

Today In the future

Value for

Money

Products with higher

added value: - typically nonwovens

for industrial,

household or personal

care wipes

- nonwovens for

hygiene and medical

products

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


We have renewed our ways of operation

and built shared company culture

Suominen

Way

Step Change in

Profitability In the

Lead

How we win How we operate How we work

työskentelemme

• Compensation & Benefits policy and compensation scheme emphasizes the

connection between the realization of strategic goals and compensation.

• The Behavior Matrix, a tool for ensuring a corporate culture that supports

Suominen’s strategy, was created in 2013.

• New organization, operating model and management system effective as of 1

Jan 2014.

• The visual identity of Suominen has been refreshed.

• “Behavior Based Safety” -program has been initiated.

• A Code of Conduct has been launched.

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


We have taken several important measures

to enhance our profitability

Suominen

Way

Step Change in


Lead


työskentelemme

• The Summit program, completed in March 2013, resulted in structural cost

savings of around M€ 10.

• The first phase of the strategic program to enhance the supply chain and

increase its flexibility has been completed in early 2014. Work continues as

Business Process Modeling initiative.

• Cost-conscious way of working adopted across the Group.

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


We have succeeded in increasing the share

of products with higher value add

Suominen

Way

Step Change in


Lead


työskentelemme

• The renewal of Suominen’s corporate structure and organization took effect at

the start of 2014 and considerably supports the strategic cornerstone In the

Lead.

• Suominen expanded its business to South America in February 2014.

• Suominen invested some M€ 2.5 to expand its production capacity in higher-

value-added nonwovens in the U.S.

• Product portfolio has developed in keeping with the strategic intent.

- Product offering has been expanded to hospitality business and Home & Spa

• Continued “We Love Wipes” dialogue enhances our understanding of

consumer needs.

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


We partner with long-term global customers

• Our customer base includes

- Consumer brand houses, many with global operations

- Global private label manufacturers

- Regional converters

• The average length of a customer relationship is over ten years.

• Customer relationships base typically on framework agreements of 2–3

years.

• Ten largest customers generate approximately half of Suominen’s net sales.

• Key buying criteria: consistent and high quality, continuity, proximity

(logistics, flexibility).

We have locations

in the main market

regions, close to

customers

We operate at

growing markets

We partner with

demanding, long-

term, global

customers

We have a clear

focus

and strategy


Source: Suominen 2011

Wiping 10 %*

Medical 10 %*

Hygiene 20 %*

Technical nonwovens 10 %

Liquid filtration 5 %

Air and gas filtration 5 %

Transportation filtration <5 %

Food <5 %

Wallcovers 1 %

Other 30 %

Suominen 18 %

Kimberly-Clark 13 %

PGI 9 %

Jacob Holm 8 %

Other 52 %

Suominen holds the globally leading position in nonwovens for wipes

Global nonwovens market

totaling appr. 15 bill euros

Suominen #1

Wiping

~1.5 bill euros

*Suominen’s businesses

Suominen / Care

Suominen / Care

Suominen / Convenience


Financial review Q2

Q2: Net sales grew slightly from comparison period

Net sales, M€

Net sales, M€

89.2

97.7

84.6

97.2

93.1 93.5

89.8

98.4

95.3

75

80

85

90

95

100

53.7 55.7

98.3

356.9 373.7

0

50

100

150

200

250

300

350

400

2009 2010 2011 2012 2013

- Net sales grew by 2.4 % from the comparison period.

- The growth in net sales was mainly attributable to the acquisition of the Brazilian unit

in February 2014.

Continuing operations. Continuing operations.


3.0 %

7.2 %

2,7 %

4.9 % 5.0 %

6.2 %

4.6 %

6.5 % 5.8 %

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

1

2

3

4

5

6

7

8

M€ %

Q2: Operating profit excl. non-recurring items

improved by 19%

Operating profit excl. NRI, M€ and %

Operating profit excl. NRI, M€ and %

- In this strategy period, Suominen’s operating profit has, with one exception,

consistently improved, from quarter to quarter.

- The increase in the share of products with higher added value in sales was mirrored in

gross profit and consequently, in operating profit.

Continuing operations.

1.6 %

-6.5 % -4.4 %

4.2 % 5.2 %

-8%

-6%

-4%

-2%

0%

2%

4%

6%

-10

-5

0

5

10

15

20

25

2009 2010 2011 2012 2013

M€ %

Continuing operations.


Q2: Return on investment (ROI) exceeded 13%

H1/2014 H1/2013 FY 2013 Target

Return on investment

(ROI), incl. discontinued

operations 8.4 % -4.4 % -0.7 > 10 %

Return on investment

(ROI), continuing

operations 13.2 % 9.3 % 12.4 % > 10 %

Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 27

- Return on investment (ROI) from continuing operations reached the target level

also in Q2.

7/18/2014

Q2: Gearing ratio at target level, continued to decline

Gearing ratio, % Gearing ratio, %

161.2

174.0

111.0 101.0 96.2

0

50

100

150

200

2009 2010 2011 2012 2013

78.6*

- Gearing ratio declined thanks to the debt

payments and the hybrid bond issued in

February.

*The calculated effect of the hybrid bond on 31

December 2013.

109.8 99.4

101.0 102.0

121.4 112.5

96.2

79.3 71.4

0

20

40

60

80

100

120

140


Q2: Profit for the period improved from

comparison period

Profit for the period, M€

Profit for the period, M€

Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 29

-2.0

2.8

-3.4

1.4 1.0

2.6

0.6

2.6 2.2

-4

-3

-2

-1

0

1

2

3

4

-2.9

-12.0 -11.8

-2.8

5.7

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

2009 2010 2011 2012 2013

Continuing operations. Continuing operations.

- Sixth consecutive quarter with a positive profit for the period.

7/18/2014

Income statement


Gross profit improved

Healthy cost structure

Financial expenses

continued to decline

Net sales grew slightly

EUR 1,000 Q2/2014 Q2/2013 Q1-Q4/2013

Net sales 95,340 93,120 373,684

Cost of goods sold -84,399 -82,857 -333,580

Gross profit 10,941 10,263 40,104

Other operating income 539 503 2,485

Sales and marketing expenses -1,712 -1,255 -5,583

Research and development -784 -774 -3,139

Administration expenses -3,440 -3,616 -13,659

Other operating expenses -20 -481 -810 Operating profit before non-recurring items 5,524 4,640 19,398

Non-recurring items -278 -482

Operating profit 5,246 4,640 18,916

Financial income and expenses -1,276 -1,526 -5,781

Profit before income taxes 3,970 3,114 13,135

Income taxes -1,786 -2,091 -7,419 Profit/loss for the period, continuing operations 2,184 1,024 5,716

Discontinued operations Profit/loss for the period 484 -832 -3,518 Impairment loss recognized on the remeasurement to fair value and cost to sell -4,499 -16,760 -18,314 Profit/loss for the period, discontinued operations -4,015 -17,592 -21,832

Profit/loss for the period -1,831 -16,568 -16,119

Relative tax rate more

moderate

Loss recognized due to

Flexibles divestment.

In comparison period,

loss recognized due to

Codi Wipes divestment.

Balance sheet, assets


Flexibles assets in total

Flexibles divestment

decreased the balance sheet

1,000 e 30 Jun 2014 30 Jun 2013 31 Dec 2013

Non-current assets

Goodwill 15,496 15,496 15,496

Intangible assets 12,508 11,647 12,025

Tangible assets 87,467 106,009 98,640

Available-for-sale financial assets 922 19 939

Held-to-maturity investments 455 441 451

Other non-current receivables 511

Deferred tax assets 5,634 6,241 5,778

Non-current assets, total 122,482 139,853 133,838

Current assets

Inventories 28,878 36,494 31,908

Trade receivables 48,657 52,428 46,908

Loan receivables 59 131

Other current receivables 6,480 9,708 6,359

Income tax receivables 695 730 1,182

Cash at bank and in hand 17,331 7,318 18,585

Current assets, total 102,100 106,678 105,073

Assets held for sale 32,243 13,525

Assets, total 256,825 260,056 238,911

Balance sheet, shareholders’ equity and liabilities


Significant change in

liabilities

1,000 e 30 Jun 2014 30 Jun 2013 31 Dec 2013 Equity attributable to owners of the parent company Share capital 11,860 11,860 11,860 Share premium account 24,681 24,681 24,681 Invested non-restricted equity fund 97,192 97,054 97,123 Fair value and other reserves -928 -731 -1,042 Translation differences -821 -613 3,022 Other shareholders’ equity * -50,410 -51,555 -51,094 Shareholders’ equity 81,574 80,696 78,506 Hybrid bond 17,899 Shareholders’ equity, total 99,473 80,696 78,506 Liabilities Non-current liabilities Deferred tax liabilities 6,841 5,165 7,183 Provisions 605 132 Other non-current liabilities * 1,872 1,325 1,125 Interest-bearing liabilities 62,104 85,742 70,399 Non-current liabilities, total 70,817 92,837 78,839 Current liabilities Interest-bearing liabilities 22,940 23,570 24,071 Income tax liabilities 376 1,611 144 Trade payables and other current liabilities 49,666 55,892 57,351 Current liabilities, total 72,982 81,073 81,567 Liabilities, total 143,799 173,910 160,405

Liabilities related to assets held for sale 13,553 5,450

Shareholders’ equity and liabilities, total 256,825 260,056 238,911

Q2: Strong cash flow from operations

Cash flow from operations, M€ Cash flow from operations, M€

11.9

7.8

11.7

-2.1

2.9

4.3

16.3

-0.4

11.3

-5

0

5

10

15

2026.8

-2.5 -2.9

24.9

21.3

-5

0

5

10

15

20

25

30

2009 2010 2011 2012 2013

• Very strong cash flow from operations

in Q2, clear improvement from

comparison period.


Cash flow statement


Improved operating profit

increased the cash flow

from operations

EUR 1,000 Q1-Q2/2014 Q1-Q2/2013 Q1-Q4/2013

Operations

Operating profit 11,397 9,394 18,916

Total adjustments 10,150 3,606 7,704

Cash flow before change in working capital 21,547 13,000 26,620

Change in working capital -4,845 -5,658 6,482

Financial items -2,792 -3,884 -6,216

Taxes paid -3,065 -2,693 -5,556

Cash flow from operations 10,845 764 21,330

Investment payments

Investments in tangible and intangible assets -4,016 -1,823 -5,598

Business combinations -19,261

Proceeds from disposed business operations 3,441

Proceeds from disposal of fixed assets and other proceeds 31 48 785

Cash flow from investing activities -23,246 -1,775 -1,372

Adjustments including

depreciations, operating

profit of discontinued

operations, gains from

asset sales and changes

in provisions.

Cash flow statement, continued


Cash basically on the same

level as in year-turn.

EUR 1,000 Q1-Q2/2014 Q1-Q2/2013 Q1-Q4/2013

Financing Repayments of non-current loans -4,304 -7,625 -21,042 Repayments of capital loans -920 -920 Hybrid bond 17,500 Change in current loans -632 6,300 6,300 Cash flow from financing 12,564 -2,245 -15,662 Change in cash and cash equivalents * 163 -3,255 4,296 Cash and cash equivalents 18,585 14,301 14,301 Unrealized exchange rate differences -103 312 -13 Change in cash and cash equivalents 163 -3,255 4,296 Cash and cash equivalents 18,646 11,358 18,585 Assets held for sale, cash and cash equivalents -1,315 -4,040 Cash and cash equivalents, continuing operations 17,331 7,318 18,585

Mid-term financial targets

Suominen aims to :

• Clearly improve its relative profitability. The target level of the company’s

return on investment (ROI) is to be above 10% (Q2/2014, continuing

operations: 13.2%).

• Have a solid capital structure with a gearing ratio principally between

40% and 80% (Q2/2014: 71.4%).

• Increase its net sales at a rate that exceeds the average growth rate of the

industry. (In FY 2013, Suominen’s net sales from continuing operations grew

6%.)


Outlook

• Suominen repeats its estimate disclosed on 11 July 2014,

according to which the company expects that for the full year

2014, its net sales and operating profit excluding non-

recurring items from continuing operations will improve from

year 2013.

• Suominen’s net sales of the continuing operations in 2013

amounted to MEUR 373.7 and operating profit excluding non-

recurring items was MEUR 19.4. Both figures refer to

continuing operations and include Nonwovens segment and

unallocated items.

• Earlier, the comparison figures used in the outlook statement

were, respectively, MEUR 433.1 and MEUR 18.3, as reported in

the Financial Statements of 2013.


Thank you!

Appendices: Flexibles divestment Expansion to SA Share data

Divestment of Flexibles business area in a nutshell

• Suominen divested its Flexibles business area on 14 July 2014 to a

UK-based private equity firm Lonsdale Capital Partners and to the

management.

• Enterprise value was 20 M€, with an additional earn-out of 1M€.

• Due to the divestment, Suominen recognized a non-recurring loss of

appr. EUR 4.5 million in the Q2 result of its discontinued operations.

• After the transaction Suominen concentrates on nonwovens, in

keeping with its strategic focus.

- Suominen is now able to concentrate on executing its

nonwovens strategy, along with further strengthening its

capability to serve nonwovens customers and grow together with

them.

• Suominen’s corporate structure and financial reporting simplified

due to the divestment.


Expansion to South America in a nutshell

• Suominen acquired Ahlstrom’s Paulínia unit in Brazil on 10 Feb 2014.

Formerly the plant was part of Ahlstrom’s Home and Personal business.

• The deal provided Suominen a foothold in a new, growing market

region and made Suominen a truly global player.

• The enterprise value, 17.5 M€, was financed through a convertible

hybrid bond. The final consideration was 19.6 M€.

• Paulínia plant is the only nonwovens facility in Brazil utilizing modern

spunlace technology in manufacturing nonwovens for wipes.

• The annual sales of the plant is currently some 20 M€, there is free

capacity available for future growth.

• The profitability of the plant is above the average of other Suominen’s

plants increases the share of products with higher value add in our

portfolio.

• The plant is built in 2008 and it employes appr. 40 people.


South America: A new, dynamic and growing market

region for Suominen

Nonwovens demand in Brazil 2010

Demand growth in Brazil

Hygiene* Wiping* Construction

Filtration Medical* Other

Suominen

market

share

15-20%

20

30

40

50

60

0

100

200

300

400

500

600

2010 2015 2020

Demand for nonwovens

Demand for wipes

*) Suominen markets. Market data from

2010.

Sources: Freedonia, Suominen.

Demographic factors (including the

growth of middle class) increase the

demand for nonwovens products, such as

baby wipes and hygiene products.


Amount / Status

Issue date

Maturity

First call date/step up date

Coupon rate

Conversion right

Conversion price

Dividend protection

Listing

Coupon step-up

EUR 17.5m / Hybrid bond

Preliminarily February 10, 2014

Perpetual

4 years

Fixed coupon of 5.95% (PIK before first call date, thereafter cash interest)

American; conversion right expires on the first call date

EUR 0.50 per share

No. If dividends will be paid, same proportion will be paid as a cash interest

No

If not called on First Call Date +100bp (i.e. 6.95%), after 5th year additional +100bp (i.e.

7.95%)

Underwriting Fully underwritten by Ahlstrom

Subscription period Preliminarily February 3–4

Principal terms of the convertible hybrid bond


Suominen share: basic information and major

shareholders on 30 June 2014

Shareholder %

Ahlstrom Corporation 26.89

Ilmarinen Mutual Pension

Insurance Company 10.66

Varma Mutual Pension Insurance

Company 9.07

Finnish Industry Investment Ltd 8.88

Mandatum Life Insurance

Company Limited 5.97

Elo Pension Company 5.70

Oy Etra Invest Ab 4.93

Evald and Hilda Nissi´s Foundation 2.80

Bergholm Heikki 1.87

The Finnish National Fund for

Research and Development Sitra 1.75

• Trading code: SUY1V

• ISIN: FI0009010862

• Sector: Consumer Goods

• Number of shares:

247,934,122

• Share capital: 11,860,056 €


More information: www.suominen.fi>Investors>Shares and shareholders

Documents

Suominen Corporation IR Presentation August 2014suominen.studio.crasman.fi/pub/Sisältö/Group/Investors... · Suominen manufactures nonwovens as roll goods 8/5/2014 Suominen is a