Ahlstrom-Munksjö Q4 2018 Results February 14, 2018 HANS SOHLSTRÖM, PRESIDENT AND CEO SAKARI AHDEKIVI, DEPUTY CEO AND CFO (AS OF MARCH 1) PIA AALTONEN-FORSELL, CFO
This is Ahlstrom-Munksjö • Fibers are at the core of what we do and the common denominator for our products and solutions. • Natural fibers represent 90% of our total fiber use. • We offer custom made specialized fiber based materials • Our value proposition is based on innovation, quality and service. • Our offering contributes to a more sustainable everyday life by providing renewable materials that are alternatives to non-renewables, and solutions that make the end product more sustainable. Key facts • Global network of sales offices and 45 plants and converting sites in 14 countries, approximately 8,000 employees • More than 7,000 customers in over 100 countries • Pro forma 2018 net sales of approximately EUR 3 billion Shares listed on Nasdaq Helsinki and Stockholm • • Head office in Helsinki
Balanced end-use and geographical exposure Health Care & Life Science Industrial KEY STRENGTHS Homebuilding Transportation • Leading position in chosen segments & Furniture • Operating on growing markets Consumer Goods • Balanced geographical exposure to a broad range of end-uses Rest of the world Asia • Designed solutions for customers South Europe America North America
Successful execution of our growth strategy in 2018 Two major acquisitions completed • Comparable EBITDA* – Expera (NASS) significantly expands our MEUR presence in North America 400 Caieiras strengthens our production platform in – Pro forma EUR 330m 350 South America 300 • EUR 3bn pro forma 2018 annual net sales and comparable EBITDA of EUR 330m 250 Actual EUR 278m • Progressing on delivering promised cost 200 synergies of EUR 8m from NASS and EUR 6m 150 from Caieiras 100 • At least EUR 10m annual business synergies 50 relating to NASS validated, a gradual impact from 0 2020 onwards 2015 2016 2017 2018 • Ramp-up of strategic investments in; Abrasive, *Years 2015-2017 Ahlstrom-Munksjö excluding NASS and Caieiras Filtration, and Food Packaging as well as NASS • Board’s dividend proposal EUR 0.52 per share 4
Dividend proposal: EUR 0.52 per share for 2018 Dividend per share and yield % Dividend Dividend per share, EUR million Yield, % EUR 60 0,60 6 50 0,50 5 0.52 0.52 0.47 40 0,40 4 30 0,30 3 Yield % 20 0,20 2 0,10 1 10 0,00 0 0 2016* 2017 2018 2016** 2017 2018 * Converted by using the same number of shares as in 2017 ** Total dividend of Ahlstrom and Munksjö 5
Challenging Q4/2018 Comparable EBITDA and margin* MEUR % • 14% increase in actual comparable EBITDA, 100 20 supported by the Expera and Caieiras 11.2% 9.7% 90 18 81 71 acquisitions 80 16 • Further improvement in gross margin per product 70 14 • Profitability impacted by lower delivery volumes 60 12 – Stronger-than-usual seasonal variations and 50 10 operational issues at two sites 40 8 Customers reacting on increased uncertainty – Pro forma 30 6 about the economic outlook 20 4 • Decline in pulp prices did not have an impact on 10 2 the results 0 0 • Proceeding with targeted measures to improve performance and competitiveness, particularly in *Years 2016-Q3/2017 Ahlstrom-Munksjö excluding underperforming businesses; C1S part of Food NASS and Caieiras Packaging, Beverage&Casing and Decor 6
Stable market demand in 2018 Stronger-than-usual seasonal variations in Q4 2018 North • Filtration and Performance America Stable demand, seasonal slowdown at year end in Filtration – Specialty Decor Solutions – Solid demand growth in glass fiber tissue for flooring applications • Decor – Inventory reduction in supply chain in the industry, increased competition outside Europe Tape – Solid demand in North and South America, as well as in Asia NASS Decor Filtration • Industrial Solutions Medical Filtration and Specialties – Softening demand towards year end, partly driven by reduction in Perfromance Advanced Liquid inventories in the supply chain Technologies Industrial – Increased competition in Release Liners Solutions Beverage & Nonwovens – Operational issues at Aspa pulp mill Casing • Specialties Building & Food Packaging Wind – Solid demand in Medical, Tape and Advanced Liquid Technologies. Accelerating demand for plastic-free and Release Liners Coated compostable solutions Specialties Insulation Abrasive • North America Specialty Solutions – Stable demand, slowdown at year end, particularly Share of sales in steel interleaving papers 7
Raw material cost escalation in 2018 Other fixed 8% Fibers 33% • Raw material costs increased by EUR 145m, almost offset by selling price increases Personnel 21% • Snapshot of market prices – Hardwood pulp +26% – Softwood pulp +32% Other – Tio2 +13% variable 8% – Natural gas +22% – Electricity +36% Energy 8% Other raw materials 22% Pro forma breakdown of operating costs 8
Key raw materials price development Europe North America China USD per ton USD per ton USD per ton 1300 1300 1000 1000 1500 1500 1400 1400 1200 1200 Softwood Softwood Softwood 1300 1300 900 900 1100 1100 1200 1200 1000 1000 1100 1100 Hardwood 800 800 1000 1000 900 900 Hardwood 900 900 800 800 Hardwood 700 700 800 800 700 700 700 700 600 600 600 600 600 600 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Source: RISI 9
Key raw materials European forward electricity and gas prices Titanium dioxide EUR per ton EUR MWh 60 3000 2800 50 Electricity 2600 2400 40 2200 30 2000 1800 20 1600 Gas 1400 10 1200 1000 0 Jan-16 Aug-16 Mar-17 Oct-17 May-18 Dec-18 Source: E&C consultants Source: ICIS Europe FD 10
Sales growth driven by price increases Sales* Comparable EBITDA and margin* MEUR MEUR % 800 100 20 735 719 90 18 700 81 80 16 71 600 70 14 500 60 12 400 50 10 11.2% 9.7% 40 8 300 30 6 200 Pro forma Pro forma 20 4 100 10 2 0 0 0 *Years 2016-Q3/2017 Ahlstrom-Munksjö excluding NASS and Caieiras 11
Comparable EBITDA and margin by business area* MEUR Decor MEUR MEUR % Filtration and Performance Industrial Solutions % % 20 20 40 20 15.4% 40 20 15.6% 18 18 18 35 35 16 16 16 15 10.2% 30 10.0% 30 14 14 14 15.1% 25 25 12 12 12 10.8% 10 10 20 10 20 10 8 8 8 15 15 6 6 6 Q418 vs Q417 Q418 vs Q417 5 10 10 4 4 4 Q418 vs Q417 + gross margin improved + fixed costs decreased 5 5 2 2 2 - volumes decreased - fixed costs increased - volumes decreased 0 0 0 0 0 0 MEUR Specialties % MEUR North America % *Years 2016-Q3/2017 Ahlstrom-Munksjö 20 20 20 20 Specialty Solutions excluding NASS and Caieiras 18 18 16 16 15 15 7.3% 9.5% 14 14 8.0% 5.6% 12 12 10 10 10 10 8 8 6 6 Q418 vs Q417 5 Q418 vs Q417 5 4 4 - volumes decreased in C1S** - volumes decreased 2 **C1S: one-side coated 2 + gross margin improved 0 0 0 0 12
Operating cash flow impacted by working capital and transaction related costs in 2018 Net debt to MEUR Operating cash flow Net debt EBITDA Net debt, MEUR 1000 4,0 90 Net debt EUR 971m 900 77 3,5 80 800 70 3,0 Impacted by 700 Net debt to comparable transaction 60 2,5 Gearing 52 600 EBITDA 2.9 and 50 at 84% 500 2,0 43 41 integration 40 related costs, 400 1,5 28 28 31 and lower 300 30 1,0 result 200 20 0,5 100 10 5 0 0,0 0 13
Capital generation and allocation Capital allocation Net debt Comparable EBITDA** MEUR 350 Net debt to EBITDA MEUR Pro forma 300 1 000 4,0 MEUR Net debt EUR 971m 900 3,5 250 250 800 3,0 Dividend 700 200 200 proposal Net debt to EBITDA 2.9 2,5 600 150 150 500 2,0 400 Capex 1,5 100 100 300 1,0 200 50 50 0,5 100 0 0 0,0 0 2017* 2018* 2019E 2015 2016 2017 2018 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 **Years 2015-2017 Ahlstrom- * Pro forma Munksjö excluding NASS and Caieiras 14
Strategic transformation supporting profitable growth Continued Acquisition shareholder value Growth driven growth creation and Targeting global focus, Creating a growth deleveraging leadership in increased Ahlstrom and Munksjö Caieiras platform through the chosen growth separately focused on capex Expera merger of Ahlstrom segments profitability improvement and Munksjö and deleveraging 2013-2016 2017 2018 2019 Measures underway to improve competitiveness and drive growth 1) Comparable EBITDA (illustrative) Comparable EBITDA margin-% 8% 2) 11% 3) Planned Business Annual Remaining Cost synergies closure synergies impact Ahlstrom-Munksjö from Expera of PM1 from Expera from organic and Caieiras Merger synergies in Stenay investments 2015 2018 1) Illustrative (not necessarily in scale), not to be considered as guidance 2) Munksjö’s reported adjusted EBITDA margin for 2015 3) Pro forma comparable EBITDA margin in 2018 15
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