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 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 2
Suominen at a glance
Suominen as of 14 July: 100 % nonwovens company Convenience business area 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 Care business area Care business area 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 Eight nonwovens plants in three continents serving both business areas 92% of Suominen net sales 8% of Suominen net sales 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 4
Suominen manufactures nonwovens as roll goods 8/5/2014 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 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 6
Our history stems from 1767 Suominen 2014 NAKKILA WINDSOR LOCKS MOZZATE, ALI,CANTE, CRESSA GREEN BAY PAULINIA BETHUNE Part of Suominen since 2001 Part of Suominen since 2011 Part of Suominen since 2014 Part of Lassila & Tikanoja since 1982 Part of Ahlstrom since 2000 Part of Ahlstrom since 2007 Part of Ahlstrom since 2007 Part of Ahlstrom since 2004 Ahlstrom Brazil 2008 J.W. Suominen 1898 C.H. Dexter & Sons 1767 Tecnofibra/ Fiberweb 1971 Orlandi 1933 Green Bay Nonwovens 1997 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 7
Net sales by product area and by region (H1 2014) Net sales by product area 8% 1% Net sales by region 3 % 12% 40% 34 % 17% 63 % 22% Baby Household Hygiene and Medical Personal care Industrial Other Americas Europe ROW 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 8
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 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 10
Locations in three continents close to customers Paulínia plant part of Suominen since Feb 2014 We have locations in the main market regions, close to customers We operate at growing markets We partner with demanding, longterm, global customers We have a clear focus and strategy 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 11
The global demand for wiping nonwovens is growing 5% 3% 5% 6% 4% 10% 7% We have locations in the main market regions, close to customers We operate at growing markets Source: Freedonia, world wipes market for nonwoven fabrics, market growth (CAGR) by region from 2010 to 2020 in thousand tons. We partner with demanding, longterm, global customers We have a clear focus and strategy 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 12
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, longterm, global customers We have a clear focus and strategy 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 13
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, longterm, global customers We have a clear focus and strategy 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 14
Fast transformation into a nonwovens company with operations in three continents 2011 11/1/2011 7/15/2013 2/10/2014 7/14/2014 Three lines of business : Nonwovens Flexibles Codi Wipes Ahlstrom Home&Personal acquisition Divestment of Codi Wipes Acquisition of Brazilian unit Divestment of Flexibles business area Net sales by line of business and geographical coverage from 2011 to date. 18.7.2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 15
The three cornerstones of the strategy Suominen Way Step Change in Profitability In the Lead How we work How we operate How we win We have locations in the main market regions, close to customers We operate at growing markets We partner with demanding, longterm, global customers We have a clear focus and strategy
Understanding the end user is in the heart of our strategy Retailer Brand owner Primary production Fiber producer Nonwoven producer Converter We have locations in the main market regions, close to customers We partner with demanding, longterm, global customers We operate at growing markets We have a clear focus and strategy 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 17
We aim at increasing the share of products with higher added value Today Value for Money In the future 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, longterm, global customers We have a clear focus and strategy 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 18
We have renewed our ways of operation and built shared company culture We have locations in the main market regions, close to customers We partner with demanding, longterm, global customers We operate at growing markets We have a clear focus and strategy Suominen Way Step Change in Profitability In the Lead How we work työskentelemme How we operate How we win 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. 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 19
We have taken several important measures to enhance our profitability We have locations in the main market regions, close to customers We partner with demanding, longterm, global customers We operate at growing markets We have a clear focus and strategy Suominen Way Step Change in Profitability In the Lead How we work työskentelemme How we operate How we win 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. 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 20
We have succeeded in increasing the share of products with higher value add We have locations in the main market regions, close to customers We partner with demanding, longterm, global customers We operate at growing markets We have a clear focus and strategy Suominen Way Step Change in Profitability In the Lead How we work työskentelemme How we operate How we win 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 highervalue-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. 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 21
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, longterm, global customers We have a clear focus and strategy 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 22
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 Other 30 % Wallcovers 1 % Food <5 % Transportation filtration <5 % Air and gas filtration 5 % Liquid filtration 5 % Technical nonwovens 10 % Other 52 % Jacob Holm 8 % PGI 9 % Hygiene 20 %* Suominen / Care Kimberly-Clark 13 % Medical 10 %* Wiping 10 %* Suominen / Care Suominen / Convenience *Suominen s businesses Suominen 18 % Source: Suominen 2011 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 23
Financial review Q2
Q2: Net sales grew slightly from comparison period Net sales, M Net sales, M 100 95 90 85 80 75 89.2 97.7 Continuing operations. 84.6 97.2 93.1 93.5 89.8 98.4 95.3 400 350 300 250 200 150 100 50 0 53.7 55.7 Continuing operations. - Net sales grew by 2.4 % from the comparison period. 98.3 356.9 373.7 2009 2010 2011 2012 2013 - The growth in net sales was mainly attributable to the acquisition of the Brazilian unit in February 2014. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 25
Q2: Operating profit excl. non-recurring items improved by 19% Operating profit excl. NRI, M and % Operating profit excl. NRI, M and % 8 7 6 5 4 3 2 1 0 3.0 % 7.2 % 4.9 % 5.0 % 2,7 % 6.2 % 4.6 % 6.5 % 5.8 % 8% 7% 6% 5% 4% 3% 2% 1% 0% 25 20 15 10 5 0-5 -10 4.2 % 5.2 % 1.6 % 2009 2010 2011 2012 2013-6.5 % -4.4 % 6% 4% 2% 0% -2% -4% -6% -8% Continuing operations. M % Continuing operations. M % - 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. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 26
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 % - Return on investment (ROI) from continuing operations reached the target level also in Q2. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 27
Q2: Gearing ratio at target level, continued to decline Gearing ratio, % Gearing ratio, % 140 120 100 80 60 40 20 0 109.8 99.4 101.0 102.0 121.4 112.5 96.2 79.3 71.4 200 150 100 50 0 161.2 174.0 111.0 101.0 96.2 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. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 28
Q2: Profit for the period improved from comparison period Profit for the period, M Profit for the period, M 4 8 2.8 5.7 3 2.6 2.6 6 2.2 2 4 1.4 1.0 1 0.6 2 2009 2010 2011 2012 2013 0 0-2 -1-4 -2.9-2.8-2 -6-3 -2.0-8 -4-3.4-10 -12-14 -12.0-11.8 Continuing operations. Continuing operations. - Sixth consecutive quarter with a positive profit for the period. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 29
Income statement 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 Net sales grew slightly Gross profit improved Healthy cost structure Financial expenses continued to decline Relative tax rate more moderate Loss recognized due to Flexibles divestment. In comparison period, loss recognized due to Codi Wipes divestment. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 30
Balance sheet, assets 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 Flexibles divestment decreased the balance sheet 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 Flexibles assets in total Assets, total 256,825 260,056 238,911 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 31
Balance sheet, shareholders equity and 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 Significant change in liabilities Shareholders equity and liabilities, total 256,825 260,056 238,911 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 32
Q2: Strong cash flow from operations Cash flow from operations, M Cash flow from operations, M 20 30 26.8 16.3 24.9 25 15 21.3 11.9 11.7 11.3 20 10 7.8 15 5 0-5 -2.1 2.9 4.3-0.4 10 5 0-5 -2.5-2.9 2009 2010 2011 2012 2013 Very strong cash flow from operations in Q2, clear improvement from comparison period. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 33
Cash flow statement 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 Improved operating profit increased the cash flow from operations Adjustments including depreciations, operating profit of discontinued operations, gains from asset sales and changes in provisions. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 34
Cash flow statement, continued 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 Cash basically on the same level as in year-turn. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 35
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%.) 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 36
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 nonrecurring 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 nonrecurring 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. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 37
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. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 40
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. 7/18/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 41
South America: A new, dynamic and growing market region for Suominen Nonwovens demand in Brazil 2010 Suominen market share 15-20% Demand growth in Brazil 600 500 400 300 200 100 0 2010 2015 2020 60 50 40 30 20 Hygiene* Wiping* Construction Filtration Medical* Other 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. 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 42
Principal terms of the convertible hybrid bond Amount / Status EUR 17.5m / Hybrid bond Subscription period Preliminarily February 3 4 Issue date Maturity Preliminarily February 10, 2014 Perpetual First call date/step up date Coupon rate Conversion right Conversion price Dividend protection Listing Coupon step-up Underwriting 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 5 th year additional +100bp (i.e. 7.95%) Fully underwritten by Ahlstrom 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 43
Suominen share: basic information and major shareholders on 30 June 2014 Shareholder % Ahlstrom Corporation 26.89 Ilmarinen Mutual Pension Insurance Company Varma Mutual Pension Insurance Company 10.66 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 More information: www.suominen.fi>investors>shares and shareholders Trading code: SUY1V ISIN: FI0009010862 Sector: Consumer Goods Number of shares: 247,934,122 Share capital: 11,860,056 8/5/2014 Suominen is a globally leading supplier of nonwovens for wiping, hygiene and medical applications. 44