Suominen Corporation’s Half-Year Financial Report for January 1 – June 30, 2021

KEY FIGURES

April–June 2021 in brief:

• Net sales decreased by 7.0% and amounted to EUR 113.6 million (122.2)
• Comparable EBITDA decreased by 15.1% and amounted to EUR 15.3 million (18.0)
• Cash flow from operations was EUR 1.2 million (9.6)

January–June 2021 in brief:

• Net sales decreased by 1.5% and amounted to EUR 229.0 million (232.4)
• Comparable EBITDA increased by 15.5% and amounted to EUR 33.8 million (29.3)
• 
  Cash flow from operations was EUR 17.1 million (19.0)

Outlook for 2021

As announced on August 12, 2021Suominen expects that its comparable EBITDA (earnings before interest, taxes, depreciation and amortization) in 2021 will decrease from 2020 due to the slowdown in the demand for nonwovens in the second half of 2021 as well as some continuing volatility in the raw material and transportation markets. In 2020, Suominen’s comparable EBITDA was EUR 60.9 million.

Petri Helsky, President & CEO:

“In the second quarter our net sales decreased by 7.0% from the comparison period to EUR 113.6 million (122.2). Sales volumes decreased from the very high level of Q2/2020, but sales prices increased following higher raw material prices. Our comparable EBITDA (earnings before interest, taxes, depreciation and amortization) was on a good level and reached EUR 15.3 million (18.0). The result was impacted negatively by the higher raw material and logistics costs as expected as well as by the lower sales and production volumes. These were partially compensated by the higher sales prices and improved raw material efficiency.

Going forward Suominen is in a strong position both strategically and financially. The global market expectation is that in the long run the end user demand for wipes will remain above pre-COVID levels. In Europe we see that the EU Single-Use Plastics Directive (SUPD) will benefit Suominen as we are well placed to respond to the growing demand for innovative and sustainable nonwovens with our pioneering fiber-based nonwovens know-how and spunlace technology. We are the leader in sustainable nonwovens and our target is to increase the share of sustainable products by 50% by 2025 compared to 2019 and to have at least ten sustainable product launches per year. By the end of June, we have launched nine sustainable products this year.

However, towards the end of the second quarter, especially our North American customers started to experience a sudden deceleration of demand, which in combination with extraordinary stockpiling throughout the entire supply chain has created an imbalance of inventories. This has impacted also Suominen’s orders, although in several cases we have been able to benefit from our position as the preferred supplier of our customers. We expect that the demand for our products will recover once this temporary imbalance is cleared. Our current view is that the recovery will start in the fourth quarter.

In Europe, another specific factor impacting demand has been the earlier uncertainty regarding the final formulation of the SUPD that postponed our customers’ development projects and now that the formulation is clear, our orders have been affected as converters and retailers seek to sell out their existing stocks.

The investment project to upgrade and restart one of our existing production lines in Cressa, Italy neared completion during the quarter and will be finalized during the third quarter, slightly ahead of the original plan. This investment strengthens our capabilities in Europe and is made in line with our strategy aiming for growth. The two other ongoing investment projects, one in Italy and another in the US, are proceeding as planned and will be finalized during the second half of the year.

In June Suominen issued a senior unsecured 6-year bond of EUR 50 million with a coupon rate of 1.50 percent. The net proceeds from the bond offering will be used for general corporate purposes.

In the first half of the year we were able to improve our financial performance versus H1/2020. In the second half the main uncertainty is related to the customer demand, and we also continue to experience some volatility in the raw material and logistics markets. It is now clear that at least the third quarter will be very difficult in terms of sales volumes. Our current expectation is that the demand will start to recover towards the end of the year as the imbalance in the supply chain is being resolved. We are naturally taking all possible measures to mitigate the impacts from this temporary slowdown in demand.”

NET SALES

April–June 2021

In April–June 2021, Suominen’s net sales decreased by 7.0% from the comparison period to EUR 113.6 million (122.2). Sales volumes decreased from the very high level of Q2/2020, but sales prices increased following higher raw material prices. The impact of currencies on net sales was EUR -6.5 million.

Suominen’s business areas are Americas and Europe. The net sales of the Americas business area were EUR 67.4 million (77.2) and of the Europe business area EUR 46.3 million (45.0).

January–June 2021

In January–June 2021, Suominen’s net sales decreased by 1.5% from the comparison period to EUR 229.0 million (232.4). Sales volumes were in line with H1/2020 while sales prices were higher. The impact of currencies on net sales was EUR -14.6 million.

The net sales of the Americas business area were EUR 139.3 million (150.3) and of the Europe business area EUR 89.7 million (82.1). 

EBITDA, OPERATING PROFIT AND RESULT

April–June 2021

EBITDA (earnings before interest, taxes, depreciation and amortization) declined to EUR 15.3 million (18.0). This was driven by higher raw material and logistics costs as expected as well as the lower sales and production volumes. These were partially compensated by higher sales prices and improved raw material efficiency. The impact of currencies on EBITDA was EUR -0.3 million.

Operating profit decreased from the comparison period and amounted to EUR 10.3 million (12.4).

Profit before income taxes was EUR 8.7 million (10.6), and profit for the reporting period was EUR 6.1 million (8.4).

January–June 2021

EBITDA (earnings before interest, taxes, depreciation and amortization) improved to EUR 33.8 million (29.3). Raw material and logistics costs increased but this was compensated by higher sales prices, improved raw material efficiency, and a positive impact from other operating income and expenses. The impact of currencies on EBITDA was EUR -1.7 million.

Operating profit increased to EUR 23.9 million (18.1).

Profit before income taxes was EUR 25.6 million (14.3), and profit for the reporting period was EUR 19.9 million (11.9). Corporate income taxes in the comparison period were positively impacted by the US tax reliefs enacted in the first quarter of 2020 due to the COVID-19 pandemic.

Suominen reports progress in its key sustainability KPIs annually.

BUSINESS ENVIRONMENT

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 the 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 market expectation is that in the long run the end user demand for wipes will remain above pre-COVID levels. However, towards the end of the second quarter, especially our North American customers started to experience a sudden deceleration of demand, which in combination with extraordinary stockpiling throughout the entire supply chain has created an imbalance of inventories. This has impacted also Suominen’s orders, although in several cases we have been able to benefit from our position as the preferred supplier of our customers. We expect that the demand for our products will recover once this temporary imbalance is cleared. Our current view is that the recovery will start in the fourth quarter.

In Europe, another specific factor impacting demand has been the earlier uncertainty regarding the final formulation of the Single-Use Plastic Directive (SUPD) that postponed our customers’ development projects and now that the formulation is clear, our orders have been affected as converters and etailers seek to sell out their existing stocks.