suominen corporation results q4 and fy2016

Suominen CorporationQ4 and FY2016

Nina Kopola, President & CEOTapio Engström, CFO31 January 2017

Our purpose is to make nonwovens continuously better for people.

Agenda

• Highlights Q4 and FY2016 • Strategy execution• Financial review Q4 and FY2016• Outlook 2017• Summary

• Q&A

1/31/2017 2


Suominen’s FY 2016 in a nutshell

- The development of net sales and operating profitdid not live up to ourexpectations.

- Financial targets were notmet in financial year 2016.

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+ Cash flow from operationscontinued strong.+ Portfolio transformationcontinued in the rightdirection.+ The Bethune investmentproceeded in schedule. Oncecompleted, it will provide us new opportunities for futureprofitable growth.+ Dividend proposal is EUR 0.11 per share.


Net sales declined from the comparison period

Net sales, M€ Net sales, M€

104.8111.9112.9114.9

104.2103.9108.8 103.8100.4

0

20

40

60

80

100

120

356.9 373.7401.8

444.0416.9

0

100

200

300

400

500

2012 2013 2014 2015 2016

• Due to the tightened competitive situation, it was harder than usual to predict the development of demand. In addition, there were pricing pressure at the markets. The competitive situation toughened mainly in baby wipes in the North American and European markets and in flushable products in the European markets.

• Both in Q4 and full year, net sales were affected by both lower sales prices and volumes, approximately in equal proportions.• The revenue recognition of a larger than usual number of customer deliveries was postponed from Q4 into 2017.

In 2014: continuing operations. In 2012-2014: continuing operations.

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6.27.3

9.9 9.8

4.35.5

8.77.9

3.5

5.9 %6.5 %

8.8 %

8.5 %

4.1 %5.3 %

8.0 %

7.6 %

3.5 %

0%

2%

4%

6%

8%

10%

0

2

4

6

8

10

Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16

M€ %

Operating profit was burdened due to several factors

Comparable operating profit Comparable operating profit

• Lower sales volumes and pricing pressure caused by tightened competition had an impact on the operating profit.

• The efforts to improve our strategic capabilities, for instance in R&D resources, in the Bethune production line investment, and in the ongoing ICT systems renewal, increased our costs.

4.2 %5.2 %

6.7 % 7.0 %6.1 %

0%1%2%3%4%5%6%7%8%

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016M€ %

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Strategyexecution

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Strategy 2015–2017

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Investments in growing markets of higher value-added products with attractive prospects

Location Value Segments Market growth*

Competitivesituation

Bethune, SC, US >50 M€ Flushables +9% (NA) TighteningHouseholdwiping +7% (NA) BalancedWorkplacewiping +5-7% Balanced

Paulínia, BR

4 M€

Medical +3-5% Emergingmarket

Alicante, SP Workplacewiping +5-7%

Balanced

Nakkila, FI Severalsegments

+2% Mixed

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*Estimates based on third party forecasts and management analysis, reflecting averages.


Growth investment program soon completed:Equipment installations ready at Bethune

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• The new technological opportunities offered by the production line investment in Bethune enhance our ability to increase the share of products with higher added value in the portfolio.

• Our plan is to start customerdeliveries from the new line in the first quarter 2017.


Thanks to the investments made, we are launchingnew products with higher added value

• AIRLACE™ for Workplace nonwovenssubstrate was launched in January2017.

• The new product belongs to theSuominen@work offering and is designed for demanding professionalwiping.

• The product is novel also for Suominen, and the investment made at the Alicante plant enabled us to include it into our offering.

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https://youtu.be/DXhnEoff4uE

https://youtu.be/DXhnEoff4uE


The increase in the share of products with higheradded value* in our portfolio continued

38%

25%

18%

10%8%

2016: 416.9 M€

40%

22%

17%

11%7%

2015: 444.0 M€

*Nonwovens for personal care, household and workplace wipes as well as for hygiene and medical products typicallycarry higher added value.

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Household wipes Workplace wipesBaby wipes Personal care wipes Hygiene & medicalproducts

47%

18%

19%

10%6%

2012: 357.9 M€


Essential actions taken also in other focus areas of thestrategy

Proactive key account management and mutual value creation; new capabilities:

• The customer interface of Suominen was strengthened in 2016 through several recruitments in key positions.

• New positions were filled especially in R&D, product management and sales.

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Essential actions taken also in other focus areas of thestrategy

Demand-driven supply chain:

• Group-wide project for ICT systems renewal progressed as planned.

• The project enables Suominen to fully deploy global processes and enhances our ability to forecast demand and manage our order-supply chain.

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5.0 %

12.4 %

15.7 % 15.9 %

11.6 %

0%

5%

10%

15%

20%

2012 2013 2014 2015 2016

ROI, %6.9 %

3.5 %

0.8 %

-6.1 %-8%-6%-4%-2%0%2%4%6%8%

Organic net sales growth, %

2013 2014 2015 2016

101,0 % 96.2 %

34.7 %25.9 %

39.6 %

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016

Gearing, %

Mid-term financial targets and their realization in financial year 2016

• Organic growth of net sales , excluding currency effect, compared to previous year. Indicator is reviewed annually.

• Target level marked with dashed line.

• Figures from 2012 to 2014 concern only Suominen’s continuing operations.

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New strategy period (2017–2021) about to begin

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The investmentsand othercapability

developmentprojects have

created improvedconditions for

Suominen’s futuregrowth.

Success in theexecution of the

upcoming strategywill bring our net

sales above 600 M€in 2021.

Regarding theoperating profit, we

target to reach a clearly higher level,

over 10%.

More informationon our strategy for2017–2021 will be

disclosed on 26 April.


Financial review

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Profit for the period declined

Profit for the period, M€ Profit for the period, M€

4.8

3.5

6.25.4

1.9

3.4

5.2 4.9

1.6

0

1

2

3

4

5

6

7

-2.8

5.7

10.2

17.015.2

-5

0

5

10

15

20

1/31/2017 17

2012 2013 2014 2015 2016



Statement of profit or loss

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1,000 euros 10-12/2016 10-12/2015 1-12/2016 1-12/2015Net sales 100,365 104,244 416,862 444,042Cost of goods sold -89,413 -92,972 -364,636 -386,042Gross profit 10,952 11,272 52,226 58,000Other operating income 324 3 1,909 2,637Sales and marketing expenses -2,162 -2,410 -7,364 -7,760Research and development -1,362 -925 -4,330 -3,527Administration expenses -3,938 -3,963 -16,191 -16,709Other operating expenses -275 284 -629 -862Operating profit 3,540 4,262 25,622 31,778Net financial expenses -1,149 -1,358 -3,190 -5,302Profit before income taxes 2,391 2,903 22,432 26,476Income taxes -759 -984 -7,199 -9,456

Profit for the period 1,632 1,919 15,233 17,020

Earnings per share, EURBasic 0.03 0.03 0.29 0.32Diluted 0.03 0.03 0.26 0.29

Capitalizedborrowing costdecreased net financial expenses

In absolute terms, thefixed costs remainedat last year’s level, proportionally slightlyhigher

Effective tax rateslightly lower thanin 2015


Statement of financial position, assets

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1,000 euros 31 Dec 2016 31 Dec 2015Non-current assetsGoodwill 15,496 15,496Intangible assets 14,133 13,275Property, plant and equipment 135,510 97,931Loan receivables 6,836 7,793Available-for-sale assets 777 777Other non-current receivables 2,524 2,402Deferred tax assets 3,424 4,491Total non-current assets 178,698 142,165

Current assetsInventories 42,631 32,557Trade receivables 53,946 51,547Loan receivables 1,550 1,000Other current receivables 7,274 7,038Assets for current tax 2,008 1,874Cash and cash equivalents 29,522 55,570Total current assets 136,929 149,585

Total assets 315,628 291,750

Growth investmentprogram

Inventoriesincreased as planned as weproceed to 2017


Statement of financial position, equity and liabilities

Equity and liabilities, 1,000 euros 31 Dec 2016 31 Dec 2015Share capital 11,860 11,860Share premium account 24,681 24,681Reserve for invested unrestricted equity 70,855 69,652Treasury shares -44 -44Fair value and other reserves 10 -118Exchange differences 12,613 5,097Other equity 6,324 -3,076Total equity attributable to owners of the parent 126,300 108,052Hybrid bond 16,525 17,664Total equity 142,824 125,716LiabilitiesNon-current liabilitiesDeferred tax liabilities 11,195 10,890Liabilities from defined benefit plans 1,081 1,105Other non-current liabilities 364 651Debentures 75,000 75,000Other non-current interest-bearing liabilities 11,574 18,498Total non-current liabilities 99,214 106,144Current liabilitiesCurrent interest-bearing liabilities 7,923 3,363Liabilities for current tax 280 47Trade payables and other current liabilities 65,388 56,479Total current liabilities 73,590 59,889Total liabilities 172,804 166,034Total equity and liabilities 315,628 291,7501/31/2017 20

Equity ratio 45.3%

Increase due to theconversion of thehybrid bond


Cash flow from operations improved in 2016

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

9.3

4.53.9

7.9

11.0

9.17.6

8.3

3.5

0

2

4

6

8

10

12

24.921.3

37.1

27.3 28.5

05

10152025303540

2012 2013 2014 2015 2016

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Cash flow statement (1/2)

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1,000 euros 1-12/2016 1-12/2015

Cash flow from operationsProfit / loss for the period 15,233 17,020Total adjustments to profit / loss for the period 29,783 32,870Cash flow before changes in net working capital 45,016 49,890Change in net working capital -6,277 -7,921Financial items -3,895 -6,425Income taxes -6,348 -8,269Cash flow from operations 28,496 27,274

Cash flow from investmentsInvestments in property, plant and equipment and intangible assets -49,553 -22,369Cash flow from disposed businesses 313 167Adjustments of purchase consideration 161 −Sales proceeds from property, plant and equipment and intangible assets 8 10Cash flow from investments -49,072 -22,192

Strong cash flowfrom operationscontinued


Cash flow statement (2/2)

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1,000 euros 1-12/2016 1-12/2015Drawdown of other non-current interest-bearing liabilities − 15,000Repayment of other non-current interest-bearing liabilities − -3,333Changes in current interest-bearing liabilities -3,359 -14Changes in loan receivables 1,000 600Share issue − 340Paid interest on hybrid bond -624 −Dividend distribution / distribution of funds -5,030 -2,504Cash flow from financing -8,013 10,089

Change in cash and cash equivalents -28,588 15,171

Cash and cash equivalents at the beginning of the period 55,570 38,430Effect of changes in exchange rates 2,540 1,968Change in cash and cash equivalents -28,588 15,171Cash and cash equivalents at the end of the period 29,522 55,570

Payments relatedto investmentsdecreased cash


Dividend proposal by the Board of Directors

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• The Board of Directors proposes to the AnnualGeneral Meeting of Suominen that a dividend of EUR 0.11 per share will be paid fromFY2016.

• The proposal is in line withSuominen’s dividend policy.

0.19

0.320.29

0.11

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

2014 2015 2016

EPS DPS

EPS and DPS*, €

0.05

0.10

2016: Proposal to the AGM. 2014: Distribution of funds, not dividends. EPS concernsthe result of the continuing operations, not result for thefinancial year.


Outlook for 2017

• Suominen expects that for the full year 2017, its net sales will improve from year 2016.

• Also the comparable operating profit is estimated to improve from year 2016, provided that the new production line at the Bethune plant will be started up as planned.

• In 2016, Suominen’s net sales amounted to EUR 416.9 million and comparable operating profit to EUR 25.6 million.

1/31/2017 25

Our purpose is to make nonwovens continuously better for people.1/31/2017 26

• The development of net sales and operating profitdid not live up to our expectations.

Summary

• Cash flow from operation continued strong.

• Equipment installations were completed in Bethune. The growth investment program in nearly completed.

• Suominen discloses its strategy for2017 – 2021 in April.

• However, our product portfolio improved and theshare of products with higher added value grew.

>600 M€

>60 M€

28.5 M€

62%

-6%-18%

Thank you!

We are ready for yourquestions.


Appendix

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Hybrid bond

• In February 2014, Suominen issued a convertible hybrid bond of EUR 17.5 million.

• The holders of the bond notes are entitled to convert the notes and the potential accrued capitalized interest related to the notes into Suominen shares. The conversion period started on 11 February 2014 and will end on 10 February 2018.

• Bond notes and accrued interests were converted in total into 449,410 new Suominen shares in the financial year 2016.

• The number of shares in Suominen may increase in total by maximum of 7,020,320 shares on the basis of the conversion of the remaining bond notes and the potential capitalized interest, if the conversion is carried out by issuing new shares in Suominen.

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suominen corporation results q4 and fy2016

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