Ahlstrom interim report January-June 2014: Profitability improved largely driven by better cost structure

        Print
| Source: Ahlstrom
Ahlstrom Corporation STOCK EXCHANGE RELEASE August 6, 2014 at 8.30

This is a summary of the January-June 2014 interim report. The complete report
with tables is attached to this release and available at www.ahlstrom.com

Ahlstrom interim report January-June 2014

Profitability improved largely driven by better cost structure

Continuing operations April-June 2014 compared with April-June 2013

  * Net sales EUR 253.0 million (EUR 265.0 million).
  * Operating profit EUR 9.6 million (EUR 6.4 million).
  * Operating profit excluding non-recurring items EUR 13.4 million (EUR 7.9
    million).
  * Operating margin excluding non-recurring items 5.3% (3.0%).
  * Profit / loss before taxes EUR -0.4 million (EUR -3.5 million).
  * Earnings per share EUR -0.07 (EUR -0.12).

April-June 2014 in brief

  * Reported net sales fell by 4.5%, while profitability improved. Comparable
    net sales grew 0.4% at constant currency rates and there was clear
    improvement in the profitability of four business areas: Advanced
    Filtration, Building and Energy, Food, and Transportation Filtration.
  * Marco Levi was appointed as Ahlstrom's new President & CEO.
  * New products were introduced to accelerate growth and improve the sales mix
    and profit margin. One key product launch was Ahlstrom EasyLife® Spray & Up,
    a new offering for the fast-growing digital wall décor market.

Continuing operations January-June 2014 compared with January-June 2013

  * Net sales EUR 502.2 million (EUR 520.3 million).
  * Operating profit EUR 14.0 million (EUR 14.7 million).
  * Operating profit excluding non-recurring items EUR 20.6 million (EUR 14.4
    million).
  * Operating margin excluding non-recurring items 4.1% (2.8%).
  * Profit before taxes EUR 4.8 million (EUR 0.1 million).
  * Earnings per share EUR -0.02 (EUR -0.09).

Outlook for 2014

  * The outlook published on January 30, 2014 remains unchanged. Net sales are
    expected to be EUR 930-1,090 million. The operating profit margin excluding
    non-recurring items is expected to be 2-5% of net sales.

Marco Levi, President & CEO

"We have improved our profitability for three consecutive quarters,
demonstrating our ability to enhance financial performance. In particular the
Advanced Filtration, Food, and Transportation Filtration business areas
increased their profit margins".

"I am very pleased that our ongoing rightsizing program is progressing as
planned and the benefits can already be seen in our operating result. The
program has yielded clear reductions in selling, general and administrative
costs, along with production overheads".

"Comparable net sales were flat in the second quarter, with only moderate
improvement in the overall market environment. As we cannot rely solely on an
economic recovery to boost our sales, we will strive to improve our operational
efficiency and continue to launch appealing new products such as Ahlstrom
EasyLife® Spray & Up for the digital wall décor market. Our ambition is to
swiftly position Ahlstrom in such a way that we can capture new profitable
business while operating with a more sustainable cost structure".

Key figures from continuing operations

 EUR million          Q2/2014 Q2/2013 Change. % Q1-Q2/2014 Q1-Q2/2013 Change. %
-------------------------------------------------------------------------------
 Net sales              253.0   265.0      -4.5      502.2      520.3      -3.5

 Operating profit         9.6     6.4      49.8       14.0       14.7      -5.0

    % of net sales        3.8     2.4                  2.8        2.8

 Operating profit
 excl. NRI               13.4     7.9      69.5       20.6       14.4      43.5

    % of net sales        5.3     3.0                  4.1        2.8

 Profit / Loss before
 taxes                   -0.4    -3.5      89.1        4.8        0.1       N/A

 Profit / Loss for
 the period              -2.2    -4.9      55.4        0.9       -3.0       N/A

 Earnings per share     -0.07   -0.12                -0.02      -0.09

 Return on capital
 employed, %              5.4     1.0                  4.4        3.2

 Net cash flow from
 operative activities
 *                       14.2    35.5     -59.9        8.2       14.1     -42.0

 Capital expenditure     10.3    20.7     -50.1       19.3       32.2     -40.0

 Number of personnel,
 at the end of period   3,518   3,781      -7.0      3,518      3,781      -7.0
-------------------------------------------------------------------------------
*Including discontinued operations

Operating environment

The operating environment in Ahlstrom's main markets in the second quarter of
2014 improved slightly from the comparison period and was in line with the first
quarter of this year.

In the Advanced Filtration business area, growth continued in the gas turbine
and industrial filtration applications, particularly in North America and Asia.
The markets for laboratory and life science, water and high efficiency air
applications were somewhat softer.

In the Building and Energy business area, demand for construction-related
materials such as flooring applications was stable in Europe, but continued to
soften in Russia. The market for reinforced glass fiber products for the wind
energy industry in Europe remained low, whereas it started to recover in North
America supported by tax incentives. Demand for wallpaper and wallcovering
substrates softened in Europe, while it strengthened in China.

In the Food business area, demand for beverage, food packaging and tape products
continued to be solid in all main geographical regions except for South America.
Growth continued in the single-use coffee products market.

In the Medical business area, demand for medical fabrics was stable in Europe
and North America, while it strengthened in Asia, supported by the growing trend
for single-use products.

In the Transportation Filtration business area, solid growth continued in the
transportation filtration materials markets in Asia, North America and Europe.
In South America, the market continued to show positive signs following a
slowdown in the second half of 2013.

Discontinued operations

The operative result of the Brazilian operation of the former Home and Personal
business area was included in discontinued operations until February 10, 2014,
when its sale to Suominen Corporation was completed. The comparison figures
include the operative results from the Label and Processing business as well as
the Brazilian operations of the former Home and Personal business area. All
operative figures exclude depreciation.

Result from discontinued operations

In April-June 2014, profit from discontinued operations for the period was EUR
9.2 million (EUR 66.7 million). The figure includes Munksjö Oyj's contribution
to costs to separate the Osnabrück site required by the European Commission.
 The comparison figure includes a demerger effect of approximately EUR 90.6
million as well as a net of tax EUR 30.9 million impairment loss recognized on
the re-measurement to fair value and costs to sell.

In January-June 2014, profit from discontinued operations for the period was EUR
8.0 million (EUR 72.7 million).

Result including discontinued operations

In April-June 2014, profit for the period including discontinued operations was
EUR 7.0 million (EUR 61.8 million). Earnings per share with the effect of
interest net of tax on the hybrid bond were EUR 0.13 (EUR 1.31).

Return on equity (ROE) was 8.6% (60.0%).

In January-June 2014, profit for the period including discontinued operations
was EUR 8.8 million (EUR 69.7 million). Earnings per share with the effect of
interest net of tax on the hybrid bond were EUR 0.15 (EUR 1.47).

Return on equity (ROE) was 5.3% (33.3%).

Rightsizing program

Following the completion of the Label and Processing demerger in 2013, Ahlstrom
initiated a rightsizing program to bring down costs to reflect its new size and
scope. The company aims to achieve EUR 50 million in annual cost savings, of
which approximately EUR 39 million will be derived from continuing operations
targeting both selling, general and administration (SGA) costs and production
overheads.

The majority of the planned actions related to the rightsizing program will be
completed by the end of 2014, and the full impact of the program is expected to
be visible by the end of 2015. Tthe aim is to bring the SGA costs back to a run-
rate level of 10-11% of net sales by the end of 2015.

As a result of the planned program, Ahlstrom's personnel is to be reduced by
approximately 400 people globally. The planned changes and personnel impacts are
subject to employee consultation processes according to local legislation in the
countries affected. The targeted savings will be derived from all business areas
and functions globally.

The program is moving ahead as targeted. As of June 30, 2014, approximately EUR
27 million in total cumulative cost savings were achieved, of which
approximately EUR 11 million were derived from costs transferred to Munksjö Oyj.
In continuing operations, approximately EUR 16 million in cumulative cost
savings were achieved.

In continuing operations, savings of approximately EUR 5 million on a quarterly
basis were achieved in the second quarter of 2014 compared to the corresponding
quarter in 2013. SGA costs excluding non-recurring items were EUR 2.5 million
lower than in the comparison period. In addition, production overheads were
reduced.

Ahlstrom plans to book non-recurring costs of approximately EUR 15 million
related to rightsizing during the years 2013-2015. So far, EUR 8.9 million in
non-recurring costs have been booked, of which EUR 5.8 million were booked in
the first half of 2014.

Outlook

The outlook presented on January 30, 2014 remains unchanged. Based on Ahlstrom's
view of the development of its main markets, pricing and product mix,
competitive dynamics and expected cost savings, the company anticipates net
sales in 2014 to be EUR 930-1,090 million. The operating profit margin excluding
non-recurring items is expected to be 2-5% of net sales.

In 2014, investments excluding acquisitions are estimated to be approximately
EUR 50 million (EUR 76.1 million in 2013).

Short-term risks

The global economy is expected to gain momentum this year, with regional
variations. While the European economy has shown some signs of recovery, it may
be uneven and fragile. Recent indicators for the development of the U.S. economy
are more positive. Asian economies, particularly the Chinese, may grow at a
slower pace than previously anticipated.

Slower-than-anticipated economic growth poses risks to Ahlstrom's financial
performance. It may lead to lower sales volumes and force Ahlstrom to initiate
more market-related shutdowns at plants, which could affect profitability. The
uncertainty related to global economic growth, increased volatility in our main
markets, and limited visibility, are making it more difficult to forecast future
developments.

In recent years, Ahlstrom has initiated investment projects, such as the
wallcoverings production line in Binzhou, China, that are in a start-up phase.
The company's financial performance may be negatively affected by the
commercialization of new production lines.

Ahlstrom's main raw materials are natural fibers, mainly pulp, synthetic fibers,
and chemicals. The prices of the key raw materials used by Ahlstrom are volatile
and some of them, such as softwood pulp, remain at a high level.

If global economic growth slows down, maintaining current sales prices may be at
risk and sustaining the current level of profitability may be compromised, even
if raw material prices fall at the same time.

The general risks facing Ahlstrom's business operations are described in greater
detail on the company website at www.ahlstrom.com and in the report by the Board
of Directors in the company's Annual Report 2013. The risk management process is
also described in the Corporate Governance Statement, also available on the
company's website.

This report contains certain forward-looking statements that reflect the present
views of the company's management. The statements contain uncertainties and
risks and are thus subject to changes in the general economic situation and in
the company's business.

Disclosure procedure
Ahlstrom publishes its January-March 2014 interim report enclosed to this stock
exchange release. The report is attached to this release in pdf format and is
also available on the company's web site at www.ahlstrom.com.

Additional information

Marco Levi, President & CEO, tel. +358 (0)10 888 4700

Sakari Ahdekivi, CFO, tel. +358 (0)10 888 4768

Ahlstrom's President & CEO Marco Levi and CFO Sakari Ahdekivi will present the
January-June 2014 interim report at an English-language press and analyst
conference in Helsinki today,  August 6, 2014, at 10:00 a.m. (CET+1). The
conference will take place at Ahlstrom's head office at Alvar Aallon katu 3 C
(second floor, meeting room Antti).

In addition, President & CEO Levi and CFO Ahdekivi will hold a conference call
in English for analysts, investors and representatives of the media today,
August 6, 2014, at 2:30 p.m. (CET+1). To participate in the conference call,
please call (09) 2310 1620 in Finland or +44 (0)20 7784 1036 outside Finland a
few minutes before the conference begins. The confirmation code is 5387153.

The conference call can also be listened to live on the Internet. The link to
the English-language presentation (an audio webcast) including slides is
available on the company website at www.ahlstrom.com. Questions may also be
submitted in writing via the Internet. Listening to the conference call requires
registration.

An on-demand webcast including slides is available for viewing and listening on
the company website for one year after the conference call.

Presentation material will be available on August 6, 2014, after the Interim
Report is published, at www.ahlstrom.com > Investors > Reports and presentations
> 2014. Material in Finnish will be available at www.ahlstrom.fi > Sijoittajat >
Katsaukset ja presentaatiot > 2014.

Financial information in 2014
+--------------------------------+-------------------+-------------+
|Report                          |Date of publication|Silent period|
+--------------------------------+-------------------+-------------+
|Interim report January-September|Friday, October 24 |October 1-24 |
+--------------------------------+-------------------+-------------+
During the silent period, Ahlstrom will not communicate with capital market
representatives.

Ahlstrom in brief

Ahlstrom is a high performance fiber-based materials company, partnering with
leading businesses around the world to help them stay ahead. We aim to grow with
a product offering for clean and healthy environment. Our materials are used in
everyday applications such as filters, medical fabrics, life science and
diagnostics, wallcoverings and food packaging. In 2013, Ahlstrom's net sales
from the continuing operations amounted to EUR 1 billion. Our 3,500 employees
serve customers in 24 countries. Ahlstrom's share is quoted on the NASDAQ OMX
Helsinki. More information available at www.ahlstrom.com.

[HUG#1846786]