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Suominen Corporation’s Interim Report for January 1– September 30, 2019: Strong cash flow and improved operating profit
22.10.2019 klo 13:00 Suominen Corporation’s Interim Report for January 1– September 30, 2019: Strong cash flow and improved operating profit
Suominen Corporation Interim Report October 22, 2019 at 1:00 p.m. (EEST)
Suominen Corporation’s Interim Report for January 1– September 30, 2019:
Strong cash flow and improved operating profit
KEY FIGURES7-9/ 7-9/ 1-9/ 1-9/ 1-12/ 2019 2018 2019 2018 2018 Net sales, EUR million 103.4 104.8 317.0 321.3 431.1 Comparable operating profit, EUR million 1.1 0.5 6.7 5.0 4.6 Operating profit, EUR million 1.1 0.5 6.7 5.0 4.6 Profit for the period, EUR million -0.1 -1.1 1.4 0.3 -1.7 Earnings per share, basic, EUR 0.00 -0.02 0.02 0.01 -0.03 Earnings per share, diluted, EUR 0.00 -0.02 0.02 0.01 -0.03 Cash flow from operations per share, EUR 0.30 0.13 0.42 0.41 0.56 Return on invested capital, rolling 12 months, % − − 3.0 2.3 2.3 Gearing, % * − − 52.1 58.1 65.9 *
In this financial report, figures shown in brackets refer to the comparison period last year if not otherwise stated.
July–September 2019 in brief:
- Net sales remained on the same level as last year and amounted to EUR 103.4 million (104.8).
- Operating profit improved to EUR 1.1 million (0.5).
- Cash flow from operations strengthened to EUR 17.4 million (7.7).
January–September 2019 in brief:
- Net sales were on the same level as in the comparison period and amounted to EUR 317.0 million (321.3).
- Operating profit increased by 36% and was EUR 6.7 million (5.0).
- Cash flow from operations was EUR 24.2 million (23.7).
Outlook for 2019 unchanged
Suominen reiterates the outlook presented on January 31, 2019, in which Suominen expects that in 2019, its net sales will be at the level of 2018 (EUR 431.1 million) and comparable operating profit, excluding the positive effect of applying IFRS 16 Leases, will improve from 2018 (EUR 4.6 million).
Petri Helsky, President & CEO:
“Suominen´s net sales were EUR 103.4 million in the third quarter, remaining on the same level as last year. Our sales volumes decreased slightly from the comparison period, and sales prices were on the same level. The strengthening of the USD compared to EUR increased the net sales by EUR 2.7 million.
Operating profit improved from the comparison period and amounted to EUR 1.1 million (0.5), mainly due to improvement in gross profit from raw material prices and raw material efficiency. Foreign exchange rates impacted the result negatively by approximately EUR 0.6 million. We succeeded in reducing inventories significantly during the quarter, which improved our cash flow but had a negative impact on the result. Following the inventory and other net working capital reduction the cash flow from operations was strong in the third quarter, amounting to EUR 17.4 million (7.7).
I am confident that with our new business areas, Europe and Americas, we now have clear responsibilities and accountabilities and I strongly believe that this will result in improved performance in the future. We can also already see results from our variable cost optimization program launched in early 2019.
At our new manufacturing line in Bethune, SC, US, the systematic improvement plan that we put in place earlier this year has resulted in a clear improvement in operational performance. We have conducted several customer qualification runs during the quarter, and we will continue broadening the product and customer portfolio of this line. Our investment project at our plant in Green Bay, WI, US, has proceeded smoothly and is nearing completion. The customer feedback on the enhancement of the line has been positive.
We can see that customers are more and more interested in our sustainable product portfolio. We are preparing for the growing demand of sustainable alternatives by continuously developing new products into our portfolio consisting of products made of renewable, recycled, compostable and plastic-free raw materials.
I can see improvement on many fronts of Suominen´s performance. The main focus for us now is to grow our sales volumes.”
In July–September 2019, Suominen’s net sales were on the same level as in the comparison period, decreasing by 1% to EUR 103.4 million (104.8). The strengthening of the USD compared to EUR increased the net sales by EUR 2.7 million.
Since July 1, Suominen has two new business areas, Americas and Europe. Net sales of the Americas business area amounted to EUR 66.2 million (63.9) and net sales of the Europe business area EUR 37.2 million (40.9).
In January–September 2019, Suominen’s net sales were on the same level as in the comparison period and amounted to EUR 317.0 million (321.3). The strengthening of the US dollar compared with euro increased the net sales by EUR 10.8 million.
Net sales of the Americas business area amounted to EUR 199.5 million (194.0) and net sales of the Europe business area to EUR 117.5 million (127.4).
In January–September, the share of nonwovens for baby wipes was 40% (38%), for household wipes 23% (20%), for personal care wipes 18% (23%), for workplace wipes 9% (9%) and for medical & hygiene applications 8% (9%).
OPERATING PROFIT AND RESULT
Operating profit improved from the comparison period and amounted to EUR 1.1 million (0.5), mainly due to improvement in gross profit from raw material prices and raw material efficiency. The negative impact of foreign exchange rates was approximately EUR -0.6 million. Due to the reorganization the third quarter operating profit included EUR 0.2 million restructuring costs.
Profit before income taxes was EUR 0.0 million (-1.1), and profit for the reporting period was EUR -0.1 million (-1.1).
Operating profit increased by 36% and was EUR 6.7 million (5.0) mainly due to positive development in sales and raw material prices, offsetting lower volumes. The negative impact of foreign exchange rates was approximately EUR -1.8 million.
Profit before income taxes was EUR 2.7 million (0.9), and profit for the reporting period was EUR 1.4 million (0.3).
The Group’s net interest-bearing liabilities at nominal value amounted to EUR 71.3 million (76.1) at the end of the review period. The gearing ratio was 52.1% (58.1%) and the equity ratio 42.4% (42.3%).
In January–September, net financial expenses were EUR -4.1 million (-4.0), or -1.3% (-1.2%) of net sales. Fluctuations in exchange rates decreased the net financial expenses by EUR 0.5 million (in 2018, decreased by EUR 0.1 million).
Cash flow from operations in July-September was EUR 17.4 million (7.7) and in January–September EUR 24.2 million (23.7), representing a cash flow per share of EUR 0.42 (0.41).
In the third quarter the change in net working capital was positive by EUR 10.4 million (+4.1), coming mainly from inventory reduction, which was the main driver for improved cash flow from operations during the quarter.
The change in net working capital was EUR 0.6 million positive in January–September 2019 when in the corresponding period last year the change in net working capital was EUR 0.6 million negative. The corporate income tax refunds of EUR 7.0 million received in the second quarter of 2018 improved the cash flow from operations of the comparison period.
In September the remaining part, EUR 15.7 million, of the debenture bond issued in 2014 was repaid in accordance with the terms of the bond.
In January-September, the gross capital expenditure totaled EUR 8.6 million (9.8) and was mainly related to the growth investment initiative at Suominen’s plant in Green Bay, WI, US as well as to the investment in the group-wide renewal of ICT systems.
Other investments were mainly for maintenance. Depreciation and amortization for the review period amounted to EUR 19.5 million (15.4).
INFORMATION ON SHARES AND SHARE CAPITAL
The number of Suominen’s registered shares was 58,259,219 shares on September 30, 2019, equaling to a share capital of EUR 11,860,056.00.
Share trading and price
The number of Suominen Corporation shares traded on Nasdaq Helsinki from January 1 to September 30, 2019 was 2,992,411 shares, accounting for 5.2% of the average number of shares (excluding treasury shares). The highest price was EUR 2.70, the lowest EUR 2.04 and the volume-weighted average price EUR 2.41. The closing price at the end of review period was EUR 2.44. The market capitalization (excluding treasury shares) was EUR 140.4 million on September 30, 2019.
On September 30, 2019, Suominen Corporation held 729,351 treasury shares.
In accordance with the resolution by the Annual General Meeting, in total 33,619 shares were transferred to the members of the Board of Directors as their remuneration payable in shares during the second quarter.
The portion of the remuneration of the members of the Board of Directors which shall be paid in shares
The Annual General Meeting held on March 19, 2019 decided that the remuneration payable to the members of the Board remains unchanged. 60% of the annual remuneration is paid in cash and 40% in Suominen Corporation’s shares.
The number of shares forming the remuneration portion which is payable in shares was determined based on the share value in the stock exchange trading maintained by Nasdaq Helsinki Ltd, calculated as the trade volume weighted average quotation of the share during the one month period immediately following the date on which the Interim Report of January‒March 2019 of the company was published. The shares were given out of the treasury shares held by the company by the decision of the Board of Directors on May 31, 2019.
Share-based incentive plans for the management and key employees
The Group management and key employees participate in the company’s share-based incentive plan. The earlier plans are described in detail in the Financial Statements 2018 and in the Remuneration Statement 2018 of Suominen Corporation, available on the company’s website www.suominen.fi
Share-based Incentive Plan 2019-2021
The Board of Directors of Suominen Corporation approved on January 30, 2019 a new share-based incentive plan for the Group management and Group key employees. The aim of the new plan is to combine the objectives of the shareholders and the persons participating in the plan in order to increase the value of the company in the long-term, to bind the participants to the company, and to offer them competitive reward plans based on earning and accumulating the company´s shares. The new plan is continuation of the share-based incentive plan, resolved by the Board of Directors in December 2017.
The new three-year earnings period of the plan includes calendar years 2019–2021. The Board of Directors decides on the plan’s performance criteria and required performance levels for each criterion at the beginning of an earnings period. The plan is directed to approximately 20 people.
The potential reward of the plan from the performance period 2019–2021 will be based on the relative Total Shareholder Return (TSR). The rewards to be paid on the basis of the performance period 2019–2021 correspond to the value of an approximate maximum total of 729,000 Suominen Corporation shares (including also the proportion to be settled in cash). The Board of Directors will be entitled to reduce the rewards agreed in the Performance Share Plan if the limits set by the Board of Directors for the share price are reached.
The potential rewards from the performance periods 2019–2021 will be settled partly in the company’s shares and partly in cash in 2022. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to the participant. As a rule, no reward will be paid, if a participant´s employment or service ends before the reward payment.
A member of the Corporate Executive Team must hold 50% of the net number of shares given on the basis of the plan, as long as his or her shareholding in total corresponds to the value of half of his or her annual gross salary. The President & CEO of the Company must hold 50% of the net number of shares given on the basis of the plan, as long as his or her shareholding in total corresponds to the value of his or her annual gross salary. Such number of shares must be held as long as the participant’s employment or service in a group company continues.
Matching Restricted Share Plan 2019-2021
The Board of Directors of Suominen Corporation approved on June 4, 2019 a new share-based incentive plan for selected Group key employees. The aim is to align the objectives of the shareholders and key employees in order to increase the value of the Company in the long-term, to retain key employees at the Company, and to offer them a competitive reward plan that is based on acquiring, receiving and accumulating the company´s shares.
The Matching Restricted Share Plan is directed to selected key employees in the Suominen Group. The prerequisite for receiving a reward from the plan is that a participant acquires the company’s shares, amounting to the number resolved by the Board.
If the prerequisites set for a participant have been fulfilled and his or her employment or service in a company belonging to the Suominen Group is in force at the time of the reward payment, he or she will receive matching shares as a reward.
The plan includes vesting periods, the duration of which is resolved by the Board. The potential reward will be paid partly in shares and partly in cash after a vesting period. The cash proportion is intended to cover taxes and tax-related costs arising from the rewards to the plan participants.
The prerequisite for reward payment is that a participant’s employment or service is in force upon reward payment. The plan rewards to be allocated in 2019–2021 will amount to a maximum total of 200,000 Suominen Corporation shares including also the proportion to be paid in cash.
ANNUAL GENERAL MEETING
The Annual General Meeting (AGM) of Suominen Corporation was held on March 19, 2019.
The AGM adopted the Financial Statements and the Consolidated Financial Statements for the financial year 2018 and discharged the members of the Board of Directors and the President & CEO from liability for the financial year 2018.
The AGM decided that no dividend will be distributed and no capital will be returned from the reserve for invested unrestricted equity for the financial year 2018, and the profit shall be transferred to retained earnings.
The AGM decided that the remuneration payable to the members of the Board remains unchanged. The Chair will be paid an annual fee of EUR 60,000, Deputy Chair of the Board an annual fee of EUR 37,500 and other Board members an annual fee of EUR 28,000. Further, the members of the Board will receive a fee of EUR 500 for each meeting of the Board of Directors held in the home country of the respective member and a fee of EUR 1,000 per each meeting of the Board of Directors held elsewhere than in the home country of the respective member. 60% of the remuneration is paid in cash and 40% in Suominen Corporation’s shares. Compensation for expenses is paid in accordance with the company's valid travel policy.
The AGM decided that the number of Board members remains unchanged at six (6). Jan Johansson was re-elected as Chair of the Board of Directors and Andreas Ahlström, Risto Anttonen, Hannu Kasurinen and Laura Raitio were re-elected as members of the Board of Directors. Sari Pajari was elected as a new member of the Board.
Ernst & Young Oy, Authorised Public Accountant firm, was re-elected as the auditor of the company for the next term of office in accordance with the Articles of Association. Ernst & Young Oy appointed Toni Halonen, Authorised Public Accountant, as the principally responsible auditor of the company.
The AGM authorized the Board of Directors to decide on the repurchase of the company’s own shares and to resolve the issuance of shares and granting of options and the issuance of special rights entitling to shares. The terms and conditions of the authorization are explained later in this half-year financial report.
Suominen published a stock exchange release on March 19, 2019 concerning the resolutions of the Annual General Meeting and the organizing meeting of the Board of Directors. The stock exchange release and an introduction of the Board members can be viewed on Suominen’s website at www.suominen.fi.
Authorizations of the Board of Directors
The Annual General Meeting (AGM) held on March 19, 2019 authorized the Board of Directors to decide on the repurchase a maximum of 400,000 of the company’s own shares. The company’s own shares shall be repurchased otherwise than in proportion to the holdings of the shareholders by using the non-restricted equity through trading on regulated market organized by Nasdaq Helsinki Ltd at the market price prevailing at the time of acquisition. The shares shall be repurchased and paid in accordance with the rules of Nasdaq Helsinki Ltd and Euroclear Finland Ltd. The shares shall be repurchased to be used in company’s share-based incentive programs, in order to disburse the remuneration of the members of the Board of Directors, for use as consideration in acquisitions related to the company’s business, or to be held by the company, to be conveyed by other means or to be cancelled. The Board of Directors shall decide on other terms and conditions related to the repurchase of the company’s own shares. The repurchase authorization shall be valid until June 30, 2020 and it revokes all earlier authorizations to repurchase company’s own shares.
The Annual General Meeting (AGM) held on March 19, 2019 authorized the Board of Directors to decide on issuing new shares and/or conveying the company’s own shares held by the company and/or granting options and other special rights referred to in Chapter 10, Section 1 of the Finnish Companies Act. New shares may be issued, and the company’s own shares may be conveyed to the company’s shareholders in proportion to their current shareholdings in the company; or by waiving the shareholder’s pre-emption right, through a directed share issue if the company has a weighty financial reason to do so, such as, for example, using the shares as consideration in possible acquisitions or other arrangements related to the company’s business, as financing for investments, using shares as part of the company’s incentive program or using the shares for disbursing the portion of the Board members’ remuneration that is to be paid in shares. The new shares may also be issued without payment to the company itself. New shares may be issued and/or company’s own shares held by the company or its group company may be conveyed at the maximum amount of 5,000,000 shares in aggregate.
The Board of Directors may grant options and other special rights referred to in Chapter 10, Section 1 of the Finnish Companies Act, which carry the right to receive against payment new shares or own shares held by the company. The right may also be granted to the company’s creditor in such a manner that the right is granted on condition that the creditor’s receivable is used to set off the subscription price (“Convertible Bond”). However, options and other special rights referred to in Chapter 10, Section 1 of the Companies Act cannot be granted as part of the company’s remuneration plan.
The maximum number of new shares that may be subscribed and own shares held by the company that may be conveyed by virtue of the options and other special rights granted by the company is 5,000,000 shares in total which number is included in the maximum number stated above.
The authorizations shall revoke all earlier authorizations regarding share issue and issuance of special rights entitling to shares. The Board of Directors shall decide on all other terms and conditions related to the authorizations. The authorizations shall be valid until June 30, 2020.
On May 29, 2019 Suominen announced about the portion of the annual remuneration of the members of the Board of Directors which was paid in shares. The aggregate number of the shares that were granted out of the Company’s treasury shares was 33,619 shares. After this, the maximum amount of authorization is 4,966,381 shares in aggregate.
NOTIFICATIONS UNDER CHAPTER 9, SECTION 5 OF THE SECURITIES MARKET ACT
During the review period Suominen received no notification under Chapter 9, Section 5 of the Securities Market Act.
CHANGES IN MANAGEMENT
Toni Tamminen, D.Sc. (Tech.) M.Sc. (Econ.) started as Senior Vice President, CFO and member of Suominen Executive Team on July 30, 2019. Klaus Korhonen (LL.M) started as Senior Vice President, Human Resources and Legal Affairs and member of Suominen’s Executive Team on August 19, 2019.
BUSINESS RISKS AND UNCERTAINTIES
Global political developments and changes in consumer preferences could have an adverse effect on Suominen. For instance, a political decision that constrains the global free trade may significantly impact the availability and price of certain raw materials, which would in turn affect Suominen’s business and profitability. Suominen’s geographical and customer-industry diversity provides partial protection against this risk.
The demand for Suominen’s products depends on the development of consumer preferences. Historically, changes in global consumer preferences have had mainly positive impact on Suominen, as they have resulted in the growing demand for products made of nonwovens. However, certain factors, including consumers’ attitude towards the use of products made even partially of oil-based raw materials, or their perception on the sustainability of disposable products in general, might rapidly change the consumers’ preferences and buying habits. Suominen monitors the consumer trends proactively and develops its product offering accordingly. The company has had biodegradable, 100% plant-based nonwovens in its portfolio for over 10 years. Suominen also interacts with policymakers regarding the so-called Single-Use Plastic Directive proposal in the European Union.
The estimate on the development of Suominen’s net sales is partially based on forecasts and delivery plans received from the company’s customers. Changes in these forecasts and plans, resulting from changes in the market conditions or in customers’ inventory levels, may affect Suominen’s net sales.
Suominen’s customer base is fairly concentrated, which adds to the customer-specific risk. This may affect Suominen’s financial result if customers’ purchasing habits become more cautious as a result of a changes in consumption, or as a result of sales losses. In 2018, the Group’s ten largest customers accounted for 65% (63%) of the Group net sales. Long-term contracts are preferred with the largest customers. In practice the customer relationships are long-term and last for several years. Customer-related credit risks are managed in accordance with a risk policy approved by the Board of Directors. Credit limits are confirmed for customers on the basis of credit ratings and customer history.
The relevance of the United States in Suominen’s business operations increases the significance of the exchange rate risk related to USD in the Group’s total foreign exchange risk position. Suominen hedges this foreign exchange position in accordance with its hedging policy.
The risks that are characteristic to South American region, including significant changes in business environment or exchange rates, could have an impact on Suominen’s operations in Brazil.
Suominen purchases significant amounts of pulp- and oil-based raw materials annually. Raw materials are the largest cost item for operations. Rapid changes in the global market prices of raw materials have an impact on the company’s profitability. Suominen’s stocks equal to two to four weeks’ consumption and passing on the price changes of these raw materials to the prices Suominen charges its contract customers takes two to five months.
Extended interruptions in the supply of Suominen’s main raw materials could disrupt production and have a negative impact on the Group’s overall business operations. As Suominen sources most of its raw materials from a number of major international suppliers, significant interruptions in the production of the majority of Suominen’s products are unlikely.
Suominen has numerous regional, national and international competitors in its different product groups. There is currently oversupply in some product groups in Suominen’s both principal market regions. Products based on new technologies and imports from countries of lower production costs may reduce Suominen’s competitive edge. If Suominen is not able to compete with an attractive product offering, it may lose some of its market share. Competition may lead to increased pricing pressure on the company’s products.
Suominen has identified also other business risks and uncertainties, for example risks related to production technologies, product liability, investments and financial risks. These risks are described in more detail in the Interim Report January–March 2019 and Financial Statements 2018.
Suominen’s nonwovens are, for the most part, used in daily consumer goods, such as wet wipes as well as in hygiene and medical products. In these target markets of Suominen, the general economic situation determines the development of consumer demand, even though the demand for consumer goods is not very cyclical in nature. North America and Europe are the largest market areas for Suominen. In addition, the company operates in South American markets. The growth in the demand for nonwovens has typically exceeded the growth of gross domestic product by a couple of percentage points.
The consumer confidence index decreased both in the euro area and in the United States in the third quarter, however the consumer confidence index is still strong in both geographical areas. Suominen assesses the trend in the demand for its products on the bases of both the general market situation and, above all, on the basis of the framework agreements drawn up with its customers. There is currently overcapacity on the market, mainly in nonwovens for baby wipes and flushables.
At large, the growth in the demand in Suominen’s target markets is expected to continue in 2019, on average, at the pace of 2018.
OUTLOOK FOR 2019
Suominen repeats its estimate, disclosed on January 31, 2019, that Suominen expects that in 2019, its net sales will be at the level of 2018 and comparable operating profit, excluding the positive effect of applying IFRS 16 Leases, will improve from 2018. In 2018, Suominen´s net sales amounted to EUR 431.1 million and operating profit to EUR 4.6 million. In 2018 Suominen had no items affecting the comparability of the operating profit. The calculation of comparable operating profit is explained in the disclosures of this release.
ANALYST AND PRESS CONFERENCE
Petri Helsky, President & CEO, and Toni Tamminen, CFO, will present the Q3 financial result in Finnish at an analyst and press conference in Helsinki on Tuesday, October 22 at 3:00 p.m. (EEST). The conference will take place at Suominen´s Head Office, Ultimes Business Garden, Karvaamokuja 2 B, Helsinki. The presentation material will be available after the analyst and press conference at www.suominen.fi.
NEXT FINANCIAL REPORT
Suominen Corporation will publish its Financial Statement Release 2019 on Wednesday January 29, 2020.
SUOMINEN GROUP 1 JANUARY–30 SEPTEMBER 2019
The figures in this interim report are mainly presented in EUR thousands. As a result of rounding differences, the figures presented in the tables do not necessarily add up to total.
This interim report has not been audited.
This interim report has been prepared in accordance with the principles defined in IAS 34 Interim Financial Reporting. The principles for preparing the interim report are the same as those used for preparing the consolidated financial statements for 2018, with the exception of the effect of the new accounting standards and interpretations which came into force on January 1, 2019.
The new standards, amendments and interpretations, which have been applied from January 1, 2019 and which have a material effect on Suominen have been disclosed in Suominen’s January–March 2019 Interim Report. Other new or amended standards or interpretations applicable from January 1, 2019 are not material for Suominen Group. Also the effects of the changes in accounting principles on Suominen’s opening balances in the statement of financial position are presented separately in Suominen’s January–March 2019 Interim Report.
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONRestated EUR thousand 30.9.2019 30.9.2018 31.12.2018 Assets Non-current assets Goodwill 15,496 15,496 15,496 Intangible assets 20,780 20,439 21,231 Property, plant and equipment 126,352 130,539 129,391 Right-of-use assets 15,384 − 16,797 Loan receivables 3,348 3,072 3,348 Equity instruments 777 777 777 Other non-current receivables 43 1,291 1,393 Deferred tax assets 2,097 4,933 2,540 Total non-current assets 184,277 176,547 190,972 Current assets Inventories 41,561 50,601 51,583 Trade receivables 52,905 56,051 58,097 Loan receivables 4,017 4,105 4,017 Other current receivables 4,747 3,902 4,118 Assets for current tax 996 913 974 Cash and cash equivalents 34,717 17,639 27,757 Total current assets 138,943 133,210 146,545 Total assets 323,220 309,757 337,517 Equity and liabilities Equity Share capital 11,860 11,860 11,860 Share premium account 24,681 24,681 24,681 Reserve for invested unrestricted equity 81,269 81,185 81,185 Treasury shares -44 -44 -44 Fair value and other reserves 264 264 264 Exchange differences 3,944 -2,457 -669 Retained earnings 14,897 15,492 13,237 Total equity attributable to owners of the parent 136,871 130,981 130,513 Liabilities Non-current liabilities Deferred tax liabilities 12,928 15,002 12,373 Liabilities from defined benefit plans 769 898 847 Provisions 1,595 − 1,511 Non-current lease liabilities 11,371 100 12,706 Other non-current liabilities 17 17 17 Debentures 81,428 80,341 80,615 Total non-current liabilities 108,107 96,358 108,067 Current liabilities Debentures − 15,672 15,687 Current lease liabilities 2,990 92 2,742 Other current interest-bearing liabilities 14,000 − 5,000 Liabilities for current tax 362 141 121 Trade payables and other current liabilities 60,890 66,513 75,386 Total current liabilities 78,242 82,418 98,936 Total liabilities 186,349 178,776 207,003 Total equity and liabilities 323,220 309,757 337,517
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
2018 Net sales 103,363 104,768 316,953 321,344 431,109 Cost of goods sold -95,677 -98,178 -290,597 -296,852 -399,826 Gross profit 7,687 6,589 26,356 24,493 31,283 Other operating income 694 936 2,297 2,131 2,528 Sales and marketing expenses -1,885 -1,599 -5,673 -5,210 -7,048 Research and development -860 -883 -2,582 -2,692 -3,515 Administration expenses -4,397 -4,207 -13,040 -13,228 -17,599 Other operating expenses -130 -348 -633 -539 -1,055 Operating profit 1,108 488 6,724 4,955 4,594 Net financial expenses -1,080 -1,626 -4,072 -4,010 -5,557 Profit before income taxes 28 -1,138 2,652 945 -963 Income taxes -108 -7 -1,232 -649 -757 Profit / loss for the period -80 -1,145 1,420 296 -1,720
Earnings per share, EUR Basic 0.00 -0.02 0.02 0.01 -0.03 Diluted 0.00 -0.02 0.02 0.01 -0.03
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2018 Profit for the period -80 -1,145 1,420 296 -1,720 Other comprehensive income: Other comprehensive income that will be subsequently reclassified to profit or loss Exchange differences 4,116 169 5,130 1,039 2,936 Income taxes related to other comprehensive income -455 -70 -517 -345 -454 Total 3,661 99 4,614 694 2,482 Other comprehensive income that will not be subsequently reclassified to profit or loss Remeasurements of defined benefit plans − − − − -41 Income taxes related to other comprehensive income − − − − 11 Total − − − − -29 Total other comprehensive income 3,661 99 4,614 694 2,452 Total comprehensive income for the period 3,581 -1,046 6,034 990 732
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYEUR thousand Share capital Share premium account Reserve for invested unrestricted equity Treasury shares Equity 1 January 2019 11,860 24,681 81,185 -44 Profit / loss for the period − − − − Other comprehensive income − − − − Total comprehensive income − − − − Share-based payments − − − − Conveyance of treasury shares − − 84 − Equity 30 September 2019 11,860 24,681 81,269 -44
CONSOLIDATED STATEMENT OF CASH FLOWS
KEY RATIOSRestated 7-9/
2018 Change in net sales, % * -1.3 2.3 -1.4 -1.8 1.2 Gross profit, as percentage of net sales, % 7.4 6.3 8.3 7.6 7.3 Operating profit, as percentage of net sales, % 1.1 0.5 2.1 1.5 1.1 Comparable operating profit, as percentage of net sales, % 1.1 0.5 2.1 1.5 1.1 Net financial items, as percentage of net sales, % -1.0 -1.6 -1.3 -1.2 -1.3 Profit before income taxes, as percentage of net sales, % 0.0 -1.1 0.8 0.3 -0.2 Profit for the period, as percentage of net sales, % -0.1 -1.1 0.4 0.1 -0.4 Gross capital expenditure, EUR thousand 2,277 3,081 8,566 9,758 13,580 Depreciation and amortization, EUR thousand 6,726 5,302 19,507 15,425 21,018 Return on equity, rolling 12 months, % − − -0.4 5.0 -1.3 Return on invested capital, rolling 12 months, % − − 3.0 2.3 2.3 Equity ratio, % − − 42.4 42.3 38.7 Gearing, % − − 52.1 58.1 65.9 Average number of personnel − − 689 673 676 Earnings per share, EUR, basic 0.00 -0.02 0.02 0.01 -0.03 Earnings per share, EUR, diluted 0.00 -0.02 0.02 0.01 -0.03 Cash flow from operations per share, EUR 0.30 0.13 0.42 0.41 0.56 Equity per share, EUR − − 2.38 2.28 2.27 Number of shares, end of period, excluding treasury shares − − 57,529,868 57,496,249 57,496,249 Share price, end of period, EUR − − 2.44 2.56 2.05 Share price, period low, EUR − − 2.04 2.54 1.80 Share price, period high, EUR − − 2.70 4.60 4.60 Volume weighted average price during the period, EUR − − 2.41 3.52 3.10 Market capitalization, EUR million − − 140.4 147.2 117.9 Number of traded shares during the period − − 2,992,411 2,547,703 3,643,880 Number of traded shares during the period, % of average number of shares − − 5.2 4.4 6.3 * Compared with the corresponding period in the previous year. 30.9.2019 30.9.2018 31.12.2018 Interest-bearing net debt, EUR thousands Non-current interest-bearing liabilities, nominal value 96,371 85,100 97,706 Current interest-bearing liabilities, nominal value 16,990 15,822 23,472 Interest-bearing receivables and cash and cash equivalents -42,083 -24,815 -35,122 Interest-bearing net debt 71,279 76,107 86,055
CALCULATION OF KEY RATIOS AND ALTERNATIVE PERFORMANCE MEASURES
Key ratios per share are either IFRS key ratios (earnings per share) or required by Ordinance of the Ministry of Finance in Finland or alternative performance measures (cash flow from operations per share).
Some of the other key ratios Suominen publishes are alternative performance measures. An alternative performance measure is a key ratio which has not been defined in IFRS standards. Suominen believes that the use of alternative performance measures provides useful information for example to investors regarding the Group's financial and operating performance and makes it easier to make comparisons between the reporting periods.
The link between the components of the key ratios per share and the consolidated financial statements is presented in the consolidated financial statements of 2018. The link between the components of the alternative performance measures and the consolidated financial statements is presented in Suominen’s Annual Report for 2018.
Calculation of key ratios per share
Earnings per share
Cash flow from operations per share
Equity per share
Market capitalizationMarket capitalization = Number of shares at the end of reporting period excluding treasury shares x share price at the end of period
Share turnoverShare turnover = The proportion of number of shares traded during the period to weighted average number of shares excluding treasury shares
Calculation of key ratios and alternative performance measures
Operating profit and comparable operating profitOperating profit (EBIT) = Profit before income taxes + net financial expenses Comparable operating profit (EBIT) = Profit before income taxes + net financial expenses, adjusted with items affecting comparability
In order to improve the comparability of result between reporting periods, Suominen presents comparable operating profit as an alternative performance measure. Operating profit is adjusted with material items that are considered to affect comparability between reporting periods. These items include, among others, impairment losses or reversals of impairment losses, gains or losses from the sales of property, plant and equipment or intangible assets or other assets and restructuring costs. Suominen did not have any items affecting comparability in 2019 or 2018
EBITDAEBITDA = EBIT + depreciation, amortization and impairment losses
Gross capital expenditureEUR thousand 30.9.2019 30.9.2018 31.12.2018 Increases in intangible assets 2,003 4,636 6,157 Increases in property, plant and equipment 6,563 5,122 7,423 Gross capital expenditure 8,566 9,758 13,580
Interest-bearing net debt
It is the opinion of Suominen that presenting interest-bearing liabilities not only at amortized cost but also at nominal value gives relevant additional information to the investors.Interest-bearing net debt = Interest-bearing liabilities at nominal value - interest-bearing receivables - cash and cash equivalents
Return on equity (ROE), %Return on equity (ROE), % = Profit for the reporting period (rolling 12 months) x 100 Total equity (quarterly average)
EUR thousand 30.9.2019 30.9.2018 31.12.2018 Profit for the reporting period (rolling 12 months) -595 6,610 -1,720 Total equity attributable to owners of the parent 30 September 2018 / 30 September 2017 / 31 December 2017 130,981 132,564 136,794 Total equity attributable to owners of the parent 31 December 2018 / 31 December 2017 / 31 March 2018 130,513 136,794 126,866 Total equity attributable to owners of the parent 31 March 2019 / 31 March 2018 / 30 June 2018 133,776 126,866 132,631 Total equity attributable to owners of the parent 30 June 2019 / 30 June 2018 / 30 September 2018 133,178 132,631 130,981 Total equity attributable to owners of the parent 30 September 2019 / 30 September 2018 / 31 December 2018 136,871 130,981 130,513 Average 133,064 131,967 131,557 Return on equity (ROE), % -0.4 5.0 -1.3
Invested capitalInvested capital = Total equity + interest-bearing liabilities
Return on invested capital (ROI), %Return on invested capital (ROI), % = Operating profit + financial income (rolling 12 months) x 100 Invested capital, quarterly average
Equity ratio, %Equity ratio, % = Total equity x 100 Total assets - advances received
Gearing, %Gearing, % = Interest-bearing net debt x 100 Total equity
NET SALES BY GEOGRAPHICAL MARKET AREA
QUARTERLY SALES DEVELOPMENT BY BUSINESS AREA2019 2018 EUR thousand 7-9 4-6 1-3 10-12 7-9 4-6 1-3 Americas 66,161 65,011 68,326 65,916 63,896 66,855 63,210 Europe 37,233 38,798 41,466 43,857 40,908 43,086 43,441 Unallocated exchange differences and group eliminations -30 14 -25 -9 -36 21 -35 Total 103,363 103,824 109,766 109,764 104,768 109,961 106,616
QUARTERLY DEVELOPMENT2019 2018 EUR thousand 7-9 4-6 1-3 10-12 7-9 4-6 1-3 Net sales 103,363 103,824 109,766 109,764 104,768 109,961 106,616 Comparable operating profit 1,108 2,655 2,961 -361 488 2,919 1,548 as % of net sales 1.1 2.6 2.7 -0.3 0.5 2.7 1.5 Items affecting comparability − − − − − − − Operating profit 1,108 2,655 2,961 -361 488 2,919 1,548 as % of net sales 1.1 2.6 2.7 -0.3 0.5 2.7 1.5 Net financial items -1,080 -1,695 -1,297 -1,547 -1,626 -507 -1,876 Profit before income taxes 28 960 1,665 -1,908 -1,138 2,411 -328 as % of net sales 0.0 0.9 1.5 -1.7 -1.1 2.2 -0.3
RELATED PARTY INFORMATION
The related parties of Suominen include the members of the Board of Directors, President & CEO and the members of the Corporate Executive Team as well as their family members and their controlled companies. In addition, shareholders who have a significant influence in Suominen through share ownership are included in related parties. Suominen has no associated companies.
In its transactions with related parties Suominen follows the same commercial terms as in transactions with third parties.
The Annual General Meeting held on March 19, 2019 resolved that 40% of the annual remuneration for the Board of Directors is paid in Suominen Corporation’s shares. The number of shares transferred to the members of the Board of Directors as their remuneration payable in shares for 2019 was 33,619 shares. The shares were transferred on May 31, 2019 and the value of the transferred shares totaled EUR 83,796, or approximately EUR 2.49 per share.
CHANGES IN PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND RIGHT-OF-USE ASSETS30.9.2019 30.9.2018 31.12.2018 EUR thousand Property, plant and equipment Intangible assets Property, plant and equipment Intangible assets Property, plant and equipment Intangible assets Carrying amount at the beginning of the period 129,391 21,231 136,649 17,470 136,649 17,470 Capital expenditure and increases 6,563 2,003 5,122 4,636 7,423 6,157 Disposals and decreases -1 0 − − 0 0 Depreciation, amortization and impairment losses -14,430 -2,477 -13,790 -1,635 -18,648 -2,371 Exchange differences and other changes 4,829 23 2,559 -32 3,967 -25 Carrying amount at the end of the period 126,352 20,780 130,540 20,439 129,391 21,231
Carrying amount at the beginning of the period
Capital expenditure and increases
Application of IFRS 16
Disposals and decreases
Depreciation, amortization and impairment losses
Exchange differences and other changes
Carrying amount at the end of the period
Goodwill is not included in intangible assets.
Total interest-bearing liabilities at the beginning of the period
Current liabilities at the beginning of the period
Repayment of current liabilities, cash flow items
Drawdown of current liabilities, cash flow items
Increases in current liabilities, non-cash flow items (*
Decreases of current liabilities, non-cash flow items
Reclassification from non-current liabilities
Periodization of debenture to amortized cost, non-cash flow items
Exchange rate difference, non-cash flow item
Current liabilities at the end of the period
Non-current liabilities at the beginning of the period
Increases in non-current liabilities, non-cash flow items (*
Decreases of non-current liabilities, non-cash flow items
Reclassification to current liabilities
Exchange rate difference, non-cash flow item
Non-current liabilities at the end of the period
Non-current debentures at the beginning of the period
Periodization of debenture to amortized cost, non-cash flow items
Reclassification to current liabilities
Non-current debentures at the end of the period
Total interest-bearing liabilities at the end of the period
CHANGES IN INTEREST-BEARING LIABILITIES
(* 2018 recognition of lease liabilities to statement of financial position in IFRS 16 application.
CONTINGENT LIABILITIESRestated EUR thousands 30.9.2019 30.9.2018 31.12.2018 Other commitments Operating leases 233 15,363 525 Contractual commitments to acquire property, plant and equipment 774 1,659 1,128 Guarantees On own behalf 10,683 10,888 10,516 Other own commitments 2,371 3,021 2,863 13,054 13,910 13,378
NOMINAL AND FAIR VALUES OF DERIVATIVE INSTRUMENTS30.9.2019 30.9.2018 31.12.2018 EUR thousand Nominal value Fair
value Currency forward contracts Hedge accounting not applied 2,783 -19 2,617 -12 1,397 9
FINANCIAL ASSETS BY CATEGORY
Principles in estimating fair value of financial assets for 2019 are the same as those used for preparing the consolidated financial statements for 2018.
Principles in estimating fair value for financial liabilities for 2019 are the same as those used for preparing the consolidated financial statements for 2018.
FAIR VALUE MEASUREMENT HIERARCHY
Principles in estimating fair value of financial assets and their hierarchies for 2019 are the same as those used for preparing the consolidated financial statements for 2018.
There were no transfers in the fair value measurement hierarchy levels during the reporting period.
RESTATEMENT OF PREVIOUSLY PUBLISHED FIGURES
Restatement of previously published figures is presented in the Interim report for January–March 2019.
Board of Directors
For additional information, please contact:
Petri Helsky, President & CEO, tel. +358 (0)10 214 3080
Toni Tamminen, Senior Vice President and CFO, tel. +358 (0)10 214 3051
Suominen in brief
Suominen manufactures nonwovens as roll goods for wipes as well as for medical and hygiene products. The end products made of Suominen’s nonwovens – wet wipes, feminine care products and swabs, for instance – bring added value to the daily life of consumers worldwide. Suominen is the global market leader in nonwovens for wipes and employs nearly 700 people in Europe and in the Americas. Suominen’s net sales in 2018 amounted to EUR 431.1 million. The Suominen share (SUY1V) is listed in Nasdaq Helsinki Stock Exchange (Mid Cap). Read more at www.suominen.fi.
AttachmentSuominen Corporation Interim Report Q3 2019