Suominen Corporation: Profitable growth through product leadership 1 September 2015 Nina Kopola, President & CEO Tapio Engström, CFO
Contents
• Suominen in a nutshell • Markets • Financials Q2/2015 • Strategy 2015–2017 and the growth investment program
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 2
Suominen in a nutshell
Key facts
8 plants in 3 continents 600 employees
Net sales 401.8 M€ in 2014
Over 60 % of sales from Americas
2 business
areas
100% nonwovens
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 4
Suominen manufactures nonwovens as roll goods
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 5
Our nonwovens are converted into consumer as well as professional applications
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 6
We executed a fast transformation into a nonwovens company with operations in three continents
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.
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 7
• Main end use areas:
- Hygiene products (femcare, incontinence, diapers)
- Medical nonwovens (e.g. swabs, undercast pads, surgical drapes and masks)
• Net sales of the business area (2014) 32.3 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
(2014): 369.4 M€
Convenience business area
Today, Suominen is a 100% nonwovens company with two business areas
Care business area
Eight nonwovens plants in three continents serving both business areas
~90% of Suominen’s net sales ~10% of Suominen’s net sales
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 8
Locations in three continents close to customers
Green Bay, WI, USA
Windsor Locks, CT, US
Bethune, SC, US
Paulínia, Brazil
Alicante, Spain
Mozzate, Italy
Nakkila, Finland
Cressa, Italy
Ställdalen, Sweden
Port-Audemer, France
Brignoud, France
Trading plants (not owned by Suominen)
Helsinki, Finland (Head office)
Sales representatives present in several locations in Asia Pacific
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 9
Markets
Historically, growth in demand for nonwovens has exceeded the growth of the GDP
USA Europe
-4%
-2%
0%
2%
4%
6%
8%
10%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
GDP Nonwoven demand
2014–2016 GDPs are forecasted. In Europe, GDP growth is for euro area. For nonwovens demand, the graphs illustrate the change in the value (USD) of nonwoven demand; 2006-2010 actual, 2011-2015 forecasted.
-10%
-5%
0%
5%
10%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
GDP Nonwoven demand
11 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 9/1/2015
Demand for Suominen nonwovens is expected to grow globally
+2%
+7%
+2–6%
+7% +8%
Global growth rate ~5% Growth rate for Suominen regions ~3%
Aging population Everyday convenience Health and well-being trends
Growing population and middle class
Growing population and middle class
12 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 9/1/2015
Household wipes
Incontinence products
Baby wipes
Disposable diapers
Feminine care products
Demand for Suominen’s products is growing both in emerging and developed markets
USD 14 000+
USD 7 000+
USD 10 000+
USD 4 000+
GDP per capita
USD 1 000+
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 13
We are the global leader in nonwovens for wipes
Suominen 18%
Kimberly-Clark 11%
Jacob Holm 9%
Sandler 8% Avintiv
(ex-PGI) 5%
Other 49%
Suominen #1 Wiping ~2.1 billion euros
Global nonwovens market totaling ~26 billion euros
Other key producers • Kimberly-Clark • Avintiv (ex-PGI) • Fiberweb • First Quality Nonwovens • Pegas Nonwovens
Other key producers • Kimberly-Clark • Ahlstrom • Freudenberg • DuPont • First Quality Nonwovens
Upholstery 10%
Other 27%
Building/roofing 7%
Filtration 9%
Floor coverings 6%
Automotive 5%
Wiping 8%
Medical 3%
Hygiene 25%
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 14
Financials Q2/2015
Q2: Net sales increased by 19%
Net sales, M€
Net sales, M€
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 16
93.1 93.5 89.8
98.4 95.3 103.3 104.8
111.9 112.9
0
20
40
60
80
100
120
55.7 98.3
356.9 373.7 401.8
050
100150200250300350400450
2010 2011 2012 2013 2014
- Net sales grew by 19% in Q2. The strengthening of the USD and improved demand in the European market (compared to Q2 2014) had a positive impact on net sales.
Continuing operations. Continuing operations.
H1: No significant changes in the portfolio
H1/2014: 193.7 M€
H1/2015: 224.9 M€
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 17
40%
17%
12%
22%
8% 1%
40%
16% 11%
23%
8% 2%
Baby wipes Household wipes Industrial wipes Personal care wipes Hygiene and medical products Others
Convenience 92%, Care 8% Convenience 92%, Care 8%
Typically higher value-add products
Q2: Operating profit improved to record-high level
Operating profit excl. NRI, M€ and %
Operating profit excl. NRI, M€ and %
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 18
- Growth in net sales and further strengthened gross profit improved operating profit. - Strengthening of the USD compared to euro increased the operating profit by
nearly 14%.
5.0 % 6.2 %
5,0 %
6.5 % 5.8 %
8.4 %
5.9 % 6.5 %
8.8 %
0%
2%
4%
6%
8%
10%
0
2
4
6
8
10
12
M€ %
-6.5 % -4.4 %
4.2 %
5.2 %
6.7 %
-8%-6%-4%-2%0%2%4%6%8%
-10-505
1015202530
2010 2011 2012 2013 2014
M€ %Continuing operations. Continuing operations.
Statement of profit or loss
Healthy cost structure
Net sales grew
Effective tax rate on Q2: 33.5%; on H1: 35.4%
EUR thousand Q2 2015 Q2 2014 FY 2014 Net sales 112,944 95,340 401,762
Cost of goods sold -97,160 -84,399 -352,091 Gross profit 15,784 10,941 49,671 Other operating income 903 539 2,655
Sales and marketing expenses -1,756 -1,712 -6,278 Research and development -736 -784 -2,877 Administration expenses -4,179 -3,440 -14,144 Other operating expenses -83 -20 -2,177 Operating profit excluding non-recurring items 9,932 5,524 26,851 Non-recurring items 530 -278 -954 Operating profit 10,462 5,246 25,897 Net financial expenses -1,076 -1,276 -8,075
Profit before income taxes 9,386 3,970 17,822 Income taxes -3,142 -1,786 -7,645
Profit for the period from continuing operations 6,244 2,184 10,177
Positive gross profit development
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 19
Statement of financial position, assets
EUR thousand 30 June 2015 30 June 2014 31 Dec 2014 Non-current assets Goodwill 15,496 15,496 15,496 Intangible assets 12,601 12,508 12,510 Property, plant and equipment 88,297 87,467 88,721 Loan receivables 8,202 − 8,202 Available-for-sale assets 806 922 1,124 Held-to-maturity investments 465 455 450 Other non-current receivables 2,389 − 2,614 Deferred tax assets 5,189 5,634 5,516 Total non-current assets 133,445 122,482 134,633
Current assets Inventories 32,322 28,878 32,380 Trade receivables 60,193 48,657 52,269 Loan receivables 350 59 600 Other current receivables 4,222 6,480 4,618 Assets for current tax 1,601 695 1,682 Cash and cash equivalents 42,778 17,331 38,430 Total current assets 141,465 102,100 129,979
Assets held for sale − 32,243 −
Total assets 274,910 256,825 264,611
Cash at elevated level
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 20
Statement of financial position, equity and liabilities
Decrease in the nominal value of the hybrid bond due to the conversions made
EUR thousand 30 Jun 2015 30 Jun 2014 31 Dec 2014 Share capital 11,860 11,860 11,860 Share premium account 24,681 24,681 24,681 Reserve for invested unrestricted equity 69,652 97,192 97,192 Treasury shares -44 -44 -44 Fair value and other reserves 107 -884 96 Exchange differences 6,011 -821 3,419 Other equity -9,824 -50,410 -46,890 Total equity attributable to owners of the parent 102,444 81,574 90,313
Hybrid bond 16,884 17,899 18,424 Total equity 119,328 99,473 108,737 Liabilities Non-current liabilities Deferred tax liabilities 9,886 6,841 8,789 Other non-current liabilities 1,610 1,872 1,729 Debentures 75,000 − 75,000 Other non-current interest-bearing liabilities 6,667 62,104 6,667
Total non-current liabilities 93,163 70,817 92,185 Current liabilities Current interest-bearing liabilities 3,333 22,940 3,347 Liabilities for current tax 1,519 376 246 Trade payables and other current liabilities 57,567 49,666 60,096
Total current liabilities 62,420 72,982 63,689 Total liabilities 155,583 143,799 155,874 Liabilities related to assets held for sale − 13,553 − Total equity and liabilities 274,910 256,825 264,611
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 21
Cash flow weakened from the comparison period, cumulatively close to comparison period level
Cash flow from operations, M€ Cash flow from operations, M€
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 22
2.9 4.3
16.3
-0.4
11.3
16.9
9.3
4.5 3.9
-202468
1012141618
-2.5 -2.9
24.9 21.3
37.1
-505
10152025303540
2010 2011 2012 2013 2014
Statement of cash flows (1/2)
The financial items were impacted by currency forward contracts hedging equity and the interests of the debenture bond paid
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications.
EUR thousand H1 2015 H1 2014 FY 2014
Cash flow from operations Profit / loss for the period 9,726 1,062 4,973 Total adjustments to profit / loss for the period 16,378 20,485 39,953 Cash flow before changes in net working capital 26,105 21,547 44,927 Change in net working capital -9,263 -4,845 6,140 Financial items -4,966 -2,792 -6,514 Income taxes -3,468 -3,065 -7,434 Cash flow from operations 8,407 10,845 37,119
Cash flow from investments Investments in property, plant and equipment and intangible assets -4,009 -4,016 -7,740
Investments in acquired businesses − -19,261 -19,261 Cash flow from disposed businesses − − 4,736 Sales proceeds from property, plant and equipment and intangible assets 10 31 59
Cash flow from investments -4,000 -23,246 -22,206
Cash flow in 2014 includes also discontinued operations.
Net working capital slightly elevated
23
Statement of cash flows (2/2)
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications.
EUR thousand H1 2015 H1 2014 FY 2014 Cash flow from financing Drawdown of hybrid bond − 17,500 17,500 Drawdown of debenture bond − − 75,000 Drawdown of other non-current interest-bearing liabilities − − 10,000
Repayment of other non-current interest-bearing liabilities − -4,304 -78,220
Changes in current interest-bearing liabilities -14 -632 -18,324
Changes in loan receivables 417 − − Share issue 340 − − Distribution of funds -2,504 − − Cash flow from financing -1,761 12,564 5,956
Change in cash and cash equivalents 2,647 163 20,869
Cash and cash equivalents at the beginning of the period 38,430 18,585 18,585
Effect of changes in exchange rates 1,701 -103 -1,025 Change in cash and cash equivalents 2,647 163 20,869 Cash and cash equivalents at the end of the period 42,778 18,646 38,430
Assets held for sale, cash and cash equivalents − -1,315 −
Cash and cash equivalents at the end of the period, continuing operations 42,778 17,331 38,430
Cash flow in 2014 includes also discontinued operations.
Earn-out payment and repayments of loan receivables related to the divestment of Flexibles
24
Outlook for 2015 (July 17 2015)
Suominen repeats its estimate, announced on 27 April 2015, according to which Suominen expects that for the full year 2015, its net sales and operating profit excluding non-recurring items from continuing operations will improve from year 2014. Suominen’s net sales of the continuing operations in 2014 amounted to EUR 401.8 million and operating profit excluding non-recurring items was EUR 26.9 million.
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 25
Strategy 2015–2017
In this strategy period, we continue with the three cornerstones but focus on being In the Lead
How we operate
In the Lead
Step Change in Profitability
Suominen Way
How we work How we win
Understanding the end user remains in the heart of our strategy
Fiber producer
Nonwovens manufacturer
Brand owner
Converter, e.g. wet wipe manufacturer
Retailer
Primary production
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 28
In 2015–2017, we target growth, market-driven way of operating, and product leadership
Organic growth exceeding industry average
Market-driven way of
operating
Product leadership
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 29
We aim at achieving a major shift in product portfolio
41%
15%
12%
22%
8% 2%
2014 (401.8 M€)
Baby Household
Industrial Personal care
Medical and hygiene Other
2017 (approx. 500 M€)
Illustrative.
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 30
To implement the strategy, we have a focused ~60 M€ growth investment program
Extend geo-graphical
reach Acquisitions Sustain &
improve Retrofit Expand
Projected growth investments appr. 60 M€ until 2017
Not in focus in the strategy period 2015–2017
Some 1-2% of net sales
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 31
The growth investment program was launched swiftly and is proceeding as planned
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 32
Bethune, SC, US
Paulínia, Brazil
Alicante, Spain
Nakkila, Finland
Growth investment projects in Brazil, Finland and Spain
• Investments in equipment at the Paulínia plant in Brazil and the Alicante plant in Spain will broaden our product offering. - In future, the plants will be able to supply nonwovens not only to higher
added-value wiping products, but also to medical nonwovens. • At the Nakkila plant in Finland, we took into use one
previously closed production line during Q2. The plant is now able to flexibly meet the strengthened demand on the European markets.
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 33
Growth investment project in the USA
• We will invest in a new wetlaid production line at our plant in Bethune, SC, USA.
• The total value of the investment, including both equipment and facilities, will be close to EUR 50 million.
• The new line - is tailor-made for us based on our technological expertise - will focus on higher value-added nonwovens, which are used for
household and industrial wiping and flushable wiping products, to name examples
- will support our strategic target of increasing the share of products with higher value-added in our portfolio.
• The installation is expected to be finished in H2/2016.
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 34
Mid-term financial targets
• Increase net sales organically at a rate that exceeds the average growth rate of the industry. (In 2014, Suominen’s net sales grew organically 3.5%, slightly faster than the industry average.)
• Have a solid capital structure with a gearing ratio principally between 40% and 80%. (Q2/2015: 28.2%).
• Clearly improve relative profitability. The target level of the company’s return on investment (ROI) is above 12%. (Q2/2015, rolling 12 months: 17.1%).
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 35
Suominen’s strategy 2015–2017
• Deliver superior value in thoughtfully selected market applications.
• Drive proactive key account management for mutual value creation.
• Execute demand driven supply chain.
• Evolve culture and capabilities to build strong product company.
Market Driven Product Leader
Our purpose is to make nonwovens continuously better for people.
• Organic net sales growth at a rate that exceeds the industry average (approx. 3%)
• A return on investment of more than 12% • A gearing ratio between 40% and 80%
Purpose – why?
Vision – where?
Strategy – how?
Financial targets
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 36
Summary: Suominen as an investment
Strong track record
Successful transformation, now full focus on nonwovens
Focused strategy for 2015 – 2017 & ambitious growth scenario
Financial position enables the execution
Dividend policy defined for the creation of shareholder value
100%
500 M€
60 M€
30%
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 37
Thank you!
Appendices
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 39
30%
23% 23%
21%
3% ViscosePulpPolypropene*PolyesterOther
*Including sourced PP Spunbond.
Raw material purchases in 2014
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 40
• Total raw material purchases were 138,000 tons in 2014.
Share information
Largest shareholders (26/8/15) Nr of shares %
AC Invest Two B.V. 67,724,176 26.83 Varma Mutual Pension Insurance Company 22,500,000 8.91 Ilmarinen Mutual Pension Insurance Company 18,422,103 7.30
Elo Pension Company 14,123,255 5.60
Euroclear Bank Sa/Nv 12,342,418 4.89
Oy Etra Invest Ab 12,223,320 4.84
Nordea Nordic Small Cap Fund 7,660,763 3.03
Skandinaviska Enskilda Banken AB 7,049,592 2.79
Nordea Bank Finland Plc 5,988,846 2.37
OP-Delta Fund 5,500,000 2.18
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 41
Basic share information • Trading code SUY1V • ISIN code FI0009010862 • List: NASDAQ Helsinki,
Consumer Goods (small cap) • Number of shares 252,425,616 • Share capital 11,860,056 EUR • Market cap ~270 MEUR
(end Aug 2015)
* A group company of Ahlström Capital, a private equity company
Our history stems from 1767
Orlandi 1933
Green Bay Nonwovens
1997
Tecnofibra/ Fiberweb
1971
C.H. Dexter & Sons 1767
J.W. Suominen
1898
Part of Suominen since 2001
Ahlstrom Brazil 2008
Part of Ahlstrom
since 2007
Part of Ahlstrom
since 2007
Part of Ahlstrom
since 2004
Part of Ahlstrom
since 2000
Part of Lassila
& Tikanoja since 1982
Part of Suominen since 2011
Suominen 2015
Part of Suominen since 2014
Nakkila Windsor Locks Mozzate, Alicante, Bethune Cressa Green Bay Paulínia
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 42
Sustainability agenda 2015–2017
Long-term relations
with customers & suppliers
Our purpose is to make nonwovens continuously better for people.
Innovation
Development of
sustainable products
Competence development
Non-discrimination
Material & resource
efficiency
Achieving product leadership
Fostering responsibility throughout the value chain
Operating sustainably throughout the organization
9/1/2015 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 43
Refinancing: issuance of a 75 MEUR bond in Sep 2014
• Senior unsecured bond with maturity of five years. • Fixed coupon with an interest rate of 4.375 per cent per annum. • Issue was oversubscribed by more than 40 investors. • Listed on NASDAQ OMX Helsinki. • Listing prospectus is available at www.suominen.fi > Investors >
Financials > Debt information.
Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 44 9/1/2015
Refinancing: renewed credit facilities
• In connection with issuing the bond, Suominen entered into a syndicated credit facilities agreement totaling EUR 55 million.
• The syndicated credit facilities consist of: • a multicurrency revolving credit facility of EUR 30 million with a
maturity four years • a term loan of EUR 10 million with a maturity of three years • a term loan of EUR 15 million with a maturity of four years.
• The lenders for the facilities are Nordea Bank Finland Plc and Pohjola Bank Plc.
• The bank facilities include leverage ratio and gearing as financial covenants.
Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 45 9/1/2015