Munksjö Oyj's Interim Report for January-September 2014 - Positive organic growth and result development, synergy target achieved


Helsinki, Finland, 2014-10-29 07:00 CET (GLOBE NEWSWIRE) --
MUNKSJÖ OYJ, INTERIM REPORT, 29 October at 7:00  AM CET

Munksjö Oyj's Interim Report for January-September 2014 - Positive organic growth and result development, synergy target achieved


Highlights of the third quarter 2014

- Net sales were EUR 275.9 (245.1) million. The increase in net sales was due to organic growth and the business combination between Munksjö AB and Ahlstrom Corporation’s business area Label and Processing completed in 2013.

- Adjusted EBITDA was EUR 23.2 (11.0) million and the adjusted EBITDA margin was 8.4% (4.5%).

- Operating result adjusted for non-recurring items was EUR 9.5 (-0.2) million. Non-recurring items amounted to EUR -0.3 (-1.9) million.

- Operating result was EUR 9.2 (-2.1) million and net result EUR -3.4 (-7.3) million.

- Munksjö signed a new financing agreement in September 2014 to increase operating flexibility and reduce the cost of financing. The agreement reduces the financial expenses by approximately EUR 5 million. In connection with the repayment of the existing financing in the quarter, a previously capitalised financing cost of EUR 7.1 million was expensed, with no cash flow impact.

- The annual maintenance and vacation shutdowns, during which planned maintenance operations were scheduled, were carried out to the same extent as in 2013, with the exception of the business area Graphics and Packaging, where the shutdowns at this business area’s two production facilities were extended by approximately one week.


Highlights of January-September 2014

- Net sales were EUR 856.3 (607.6) million. The substantial increase in net sales was primarily due to the business combination completed in 2013.

- Adjusted EBITDA was EUR 76.6 (39.0) million and the adjusted EBITDA margin was 8.9% (6.4%).

- Operating result adjusted for non-recurring items was EUR 36.6 (13.1) million. Non-recurring items amounted to EUR -1.9 (-32.5) million.

- Operating result was EUR 34.7 (-19.4) million and net result EUR 5.0 (-31.2) million. Net result was affected by a previously capitalised financing cost of EUR 7.1 million, expensed in connection with the repayment of the existing financing in the third quarter of 2014. The cost had no impact on cash flow.

- Earnings per share (EPS) were EUR 0.09 (-1.28).

- Interest-bearing net debt at the end of the reporting period was EUR 240.8 million (30 September 2013: 256.6; 31 December 2013: 229.3), equivalent to a gearing of 57.2% (30 September 2013: 66.5%; 31 December 2013: 54.1%).

- Operating cash flow was EUR 24.5 (15.4) million. 

KEY FIGURES (MEUR) Jul-Sep Jan-Sep Jan-Dec
  2014 2013 2014 2013 2013
Net sales 275.9 245.1 856.3 607.6 863.3
EBITDA (adj.*) 23.2 11.0 76.6 39.0 55.0
EBITDA margin, % (adj.*) 8.4 4.5 8.9 6.4 6.4
EBITDA 22.9 9.1 74.7 6.5 5.9
EBITDA margin, % 8.3 3.7 8.7 1.1 0.7
Operating result (adj.*) 9.5 -0.2 36.6 13.1 15.7
Operating margin, % (adj.*) 3.4 -0.1 4.3 2.2 1.8
Operating result 9.2 -2.1 34.7 -19.4 -33.4
Operating margin, % 3.3 -0.9 4.1 -3.2 -3.9
Net result -3.4 -7.3 5.0 -31.2 -57.4
Earnings per share (EPS), EUR -0.07 -0.19 0.09 -1.28 -1.97
Interest-bearing net debt** 240.8 256.5 240.8 256.5 229.3
 
*  Adjusted for non-recurring items
** Restated to reflect the adoption of IFRS 11 as explained in the notes to the interim report

Unless otherwise indicated, the figures in parentheses refer to the figures for the equivalent period in 2013. This interim report is unaudited. It is published in Swedish, Finnish and English. In case of any discrepancies between the three versions, the Swedish text shall prevail.


Comment from Munksjö’s President and CEO, Jan Åström

“During the third quarter, the annual synergy benefits run rate from the business combination reached EUR 25 million, which represents the upper level of the range of EUR 20–25 million established as the target, and no further non-recurring costs for achieving synergy benefits are expected to affect the result.

The project team responsible for the monitoring of the integration efforts and synergy benefits will be able to bring the successfully executed project to conclusion by the end of the year. From now on, the efforts to develop operations and improve business efficiency will be an integral part of ongoing operations.

The annual maintenance and vacation shutdowns announced earlier were carried out according to plan. During the shutdowns, strategic investments were also made by installing and commissioning two film presses in the Graphics and Packaging business area. Commissioning was carried out on schedule, providing better resources for improving competitiveness by developing the product range.

As a result of improved profits, we were able to enter into a long-term financing agreement in September, offering about a 1.5 percentage point reduction in annual interest rates.

While uncertainties regarding the European economy have increased, Munksjö’s market position remains stable both in terms of prices and order intake.”


Outlook

The market situation and demand for Munksjö’s products are expected to remain stable during the fourth quarter of 2014 following a third quarter with seasonally lower volumes. Prices in local currencies are expected to remain at the same level as in the third quarter. Cash flow is expected to continue to improve during the fourth quarter.

At the end of September, the annual synergy benefits run rate derived from the business combination reached EUR 25 million. Further initiatives have been planned and taken to achieve the 12 per cent EBITDA margin over a business cycle established as the goal for financial performance.

Seasonal shutdowns in December are expected to be carried out to the same extent as in 2013.
 

A global leader in specialty paper – combining Munksjö AB with Ahlstrom Corporation’s business area Label and Processing

Munksjö Oyj was formed when the Swedish company Munksjö AB and the business area Label and Processing of the Finnish company Ahlstrom Corporation were combined. The company consists of four business areas: Decor, Release Liners, Industrial Applications and Graphics and Packaging. The business areas are also the reporting segments.

In addition to the financial result for the reporting period, the report contains pro forma financial information of the business combination. As the combination was completed during 2013, pro forma information is only prepared up until the fourth quarter 2013. This information is presented for illustrative purposes only. Further information on how the pro forma information was compiled is available in the Financial Statements Bulletin, published on 13 February 2014.


Synergy benefits and integration

At the end of the third quarter, the annual synergy benefits run rate derived from the business combination was approximately EUR 25 million, which is in line with the previously communicated target level of EUR 20-25 million. The annual synergy benefits arising from the business combination are related to procurement, production efficiency, economies of scale and improved organisational performance and efficiency.

The result for the third quarter of 2014 includes realised synergies of approximately EUR 6.0 million. During the third quarter of 2014 the synergies were achieved primarily within the business area Graphics and Packaging.

The project team responsible for monitoring the integration efforts and synergy benefits will already be disbanded at the end of the current year.

Non-recurring items to achieve the synergy benefits are estimated not to exceed the already expensed EUR 11.5 million, which is at the lower end of the previously communicated range of EUR 10-15 million.

No synergy related non-recurring items were recorded during the third quarter of 2014. The cash flow effect was EUR -1.0 million in the third quarter. The table below shows the quarterly development of synergies, non-recurring items and its impact on cash flow. 

MEUR Annual synergy run rate at the end of the reporting period Realised synergies
in result
Non-recurring costs Cash flow effect of non-recurring costs
Q2-Q4/2013 11.0 5.0 11.0 -4.0
Q1/2014 20.0 5.0 0.5 -1.5
Q2/2014 23.0 5.5 - -1.0
Q3/2014 25.0 6.0 - -1.0

 

The Munksjö Group

  Jul-Sep Jan-Sep Jan-Dec     ACQUIRED OPERATIONS 27 May-Sep 27 May-Dec
MEUR 2014 2013 2014 2013 2013     MEUR 2013 2013
Reported 1)               Reported 1)    
Net sales 275.9 245.1 856.3 607.6 863.3     Net sales 152.0 257.0
EBITDA (adj.*) 23.2 11.0 76.6 39.0 55.0     EBITDA (adj.*) 3.3 6.9
EBITDA margin, % (adj.*) 8.4 4.5 8.9 6.4 6.4     EBITDA margin, % (adj.*) 2.2 2.7
EBITDA 22.9 9.1 74.7 6.5 5.9     EBITDA 0.1 -3.5
EBITDA, margin % 8.3 3.7 8.7 1.1 0.7     EBITDA, margin % 0.1 -1.4
Operating result (adj.*) 9.5 -0.2 36.6 13.1 15.7     Operating result (adj.*) -3.0 -4.9
Operating margin, % (adj.*) 3.4 -0.1 4.3 2.2 1.8     Operating margin, % (adj.*) -2.0 -1.9
Operating result 9.2 -2.1 34.7 -19.4 -33.4     Operating result -6.2 -15.3
Operating margin, % 3.3 -0.9 4.1 -3.2 -3.9     Operating margin, % -4.1 -6.0
Net result -3.4 -7.3 5.0 -31.2 -57.4     Delivery volumes, tonnes 132,500 223,400
Capital expenditure 16.4 7.6 30.5 14.4 22.6          
Employees, FTE 2,766 2,594 2,767 2,073 2,216          
Pro forma 2)
Net sales 275.9 265.1 856.3 855.1 1,120.3          
EBITDA** (adj.*) 23.2 12.1 76.6 47.3 64.1          
EBITDA** margin, % (adj.*) 8.4 4.6 8.9 5.5 5.7          
EBITDA** 22.9 9.8 74.7 41.3 42.3          
EBITDA**, margin % 8.3 3.7 8.7 4.8 3.8          
Delivery volumes, tonnes 223,800 218,300 677,800 676,400 885,300          

* Adjusted for non-recurring items
** Includes stand-alone cost savings and synergies obtained after 27 May 2013
1) Includes LP Europe from 27 May 2013 and Coated Specialties from 2 December 2013
2) Includes LP Europe and Coated Specialties from 1 January 2012. As the combination was completed during 2013, the pro forma information is only consolidated until the fourth quarter 2013. From the first quarter 2014 the reported figure is used.


Reported

Third quarter 2014

Net sales were EUR 275.9 (245.1) million. The improvement in net sales was due to organic growth and the business combination completed in 2013.

EBITDA adjusted for non-recurring items increased to EUR 23.2 (11.0) million and the adjusted EBITDA margin was 8.4% (4.5%).

Operating result adjusted for non-recurring items was EUR 9.5 (-0.2) million and the adjusted operating margin 3.4% (-0.1%). Non-recurring items amounted to EUR -0.3 (-1.9) million and were costs for the work in connection with the Statement of Objections from the European Commission. For more information about the Statement of Objections see the heading Other issues in this report.

The annual maintenance and vacation shutdowns, during which planned maintenance operations were scheduled, were carried out to the same extent as in 2013, with the exception of the business area Graphics and Packaging, where the shutdowns at this business area’s two production facilities were extended by approximately one week.

The operating result was EUR 9.2 (-2.1) million and net result EUR -3.4 (-7.3) million.


January–September 2014

Net sales were EUR 856.3 (607.6) million. The substantial improvement in net sales was primarily due to the business combination completed in 2013.

EBITDA adjusted for non-recurring items increased to EUR 76.6 (39.0) million and the adjusted EBITDA margin was 8.9% (6.4%).

Operating result adjusted for non-recurring items was EUR 36.6 (13.1) million and the adjusted operating margin 4.3% (2.2%). Non-recurring items amounted to EUR -1.9 (-32.5) million. Of these costs, EUR 1.4 million were related to the work in connection with the Statement of Objections from the European Commission and EUR 0.5 million to the efforts to achieve synergy benefits. For more information about the Statement of Objections see the heading Other issues in this report.

The operating result was EUR 34.7 (-19.4) million and net result EUR 5.0 (-31.2) million.
 

Reported figures compared to pro forma figures

Third quarter 2014

Net sales were EUR 275.9 (265.1) million.

Adjusted EBITDA increased to EUR 23.2 (12.1) million and the adjusted EBITDA margin was 8.4% (4.6%).

The annual maintenance and vacation shutdowns, during which planned maintenance operations were scheduled, were carried out to the same extent as in 2013, with the exception of the business area Graphics and Packaging, where the shutdowns at this business area’s two production facilities were extended by approximately one week.


January–September 2014

Net sales were EUR 856.3 (855.1) million.

EBITDA adjusted for non-recurring items increased to EUR 76.6 (47.3) million while the adjusted EBITDA margin was 8.9% (5.5%). The result for the first quarter of 2013 included a positive impact on the result of around EUR 3 million which was due to the release of certain accruals related to personnel liabilities.


Webcast and conference call

A combined news conference, conference call and live webcast for investors, analysts and media will be arranged on the publishing day 29 October 2014 at 10:00 am CET (11:00 am EET, 9:00 am UK time) at restaurant Savoy, room Kabinetti 2 (Eteläesplanadi 14, 7th floor, Helsinki). The report will be presented by President and CEO Jan Åström. The event will be held in English.

The conference call and live webcast can be followed on the Internet and an on-demand version of the webcast will be available on the same webpage later the same day. To join the conference call, participants are requested to dial one of the numbers below 5-10 minutes prior to the start of the event.

Webcast and conference call information

Finnish callers: +358 (0)9 2313 9201
Swedish callers: +46 (0)8 5052 0110
US callers: +1 334 323 6201
UK callers: +44 (0)20 7162 0077
Conference ID: 948557
Link to the webcast: http://qsb.webcast.fi/m/munksjo/munksjo_2014_1029_q3/


For further information, please contact

Jan Åström, President and CEO, Tel. +46 10 250 1001
Kim Henriksson, CFO, Tel. +46 10 250 1015

  

Munksjö – Materials for innovative product design

The Munksjö Group is an international specialty paper company with a unique product offering for a large number of industrial applications and consumer-driven products. Founded in 1862, Munksjö is among the leading producers in the world of high-value added papers within attractive market segments such as Decor paper, Release Liners, Electrotechnical paper, Abrasive backings and Interleaving paper for steel. Given Munksjö’s global presence and way of integrating with its customers’ operations, the company forms a global service organisation with approximately 2,900 employees. Production facilities are located in France, Sweden, Germany, Italy, Spain, Brazil and China. Munksjö Oyj is listed on NASDAQ OMX Helsinki. Read more at www.munksjo.com.


Attachments

Munksjö Oyj_Interim Report Q3 2014.pdf