Suominen Oyj
OMXH:SUY1V
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2.32
2.89
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Good day, everybody. My name is Julia Koivulanaho. I'm the Interim Head of Communications at Suominen. Next, Suominen's President and CEO, Tommi Björnman; and CFO, Janne Silonsaari, will present the result. And after that, there will be time for questions.
Tommi, Janne, the floor is yours. Thank you. Thank you, Julia.
Okay. Welcome also on my behalf to this third quarter, quarterly review. So first, we will start with a brief introduction of the third quarter in main points. After that, Janne will take over and look at the financial reviews. Then I will look at a little bit in depth a little bit the strategy implementation as well as we will comment on the outlook for 2024.
So the third quarter in brief, there was a positive progress, we were able to improve our sales volume, sales prices and sales margins, which were mainly driven by the good initiatives done in the commercial excellence side. Also, we had some improvements in our operational excellence, which led to the situation that we had a little bit higher asset utilization. Unfortunately, we faced a couple of unexpected operational issues, which had roughly EUR 3 million negative impact in our third quarter EBITDA, which totaled in the quarter EUR 3.3 million, which is at a level which is not satisfactory for us. But of course, we continue to work in order to improve it.
Naturally, this had also an impact on our cash flow from the operations, which was slightly negative of EUR 2.6 million. In the year-to-date numbers, there is a clear reflection to the third quarter in it. We had a slightly better top line and we were a little bit ahead of last year with EUR 2.3 million. And of course, the cash flow from the operations remained due to the fact what happened in the third quarter on the slightly negative level of EUR 2.6 million. So Janne, maybe you would walk through the financial numbers.
All right. Good morning from my behalf as well. And we'll start from the -- with the net sales. And we had some positive impact on the top line. We have seen sales volumes, sales prices as well as sales margin increased from the comparison period from last year in Q3. The currencies impacted negatively EUR 1.4 million in Q3 and the share of new products exceeded 30% in Q3, which is still on a high level, but down from the year-to-date average, which is 35%. Drop in Q3 is mainly related to the issues in operations that Tommi just mentioned.
On EBITDA, comparable EBITDA in Q3 was EUR 3.3 million and EUR 12.8 million after 3 quarters. So Q3 EBITDA was naturally lower than expected and as said, not on a satisfactory level. As mentioned by Tommi, we had approximately worth of EUR 3 million negative impact from a couple of major issues in operations in our production plants that impacted through both lost margin due to the downtime and additional costs involved. This is naturally very unfortunate, and we have taken immediate corrective actions to address the issues. On year-to-date level, we are ahead of last year, roughly EUR 2.3 million despite of lower Q3, main contribution coming from higher volumes and sales margins. Currencies have impacted negatively on Q3 and year-to-date, as you can see on the slide.
So brief look on the consolidated statement of profit or loss. So no major items on Q3. We had a roughly EUR 100,000 positive impact from provision reversal set for the Mozzate plant closure. And on year-to-date level, net impact is roughly EUR 1 million negative. This is mostly related to the restructuring process we had and those restructuring costs have been partly offset by the Mozzate plant closure provision reversal. All right.
And then the cash flow from the operations. In Q3, the lower EBITDA naturally impacted the cash flow from operations, which totaled EUR 2.6 million negative, which is the same amount on year-to-date level. And last year, we achieved good level of working capital on total full year level. Main impact this year on this area is coming from the slightly increased inventory levels, especially on raw material side where we have minimized our supply risk by increasing buffer stocks due to the global geopolitical uncertainty and reflection on the logistics side. We will follow this, and we are following this closely and adjust if and when needed and possible. Back to you, Tommi.
Okay. Thank you, Janne. So that, of course, this is a slide which we have used many times, but maybe I will focus on the next slide, just mainly for the growth initiatives what we have in place and the work what we have done around the sustainability leadership. we actually achieved during the third quarter, a gold medal level in EcoVadis assessment, which is actually driving us that we would be among the top 1 companies in the manufacture of other textiles industries as well as top 5% in overall industries. This is a great achievement from the continuous work on the sustainability leadership and thanks to the teams done in this, inside.
And then, of course, the other one is something that also during the quarter, we announced the capacity investment increase in Alicante. We added one new line, which is supposed to be completed the second half of 2025, which would mean, in other words, that we will start up the qualification processes during the fourth quarter 2025. And then in order to look at the outlook. So despite of the unexpected operational issues in the third quarter, we keep the current outlook so that the outlook has remained the same through the whole year, and we are expected that our EBITDA will be better than last year.
Maybe back to you, Julia, if there are any questions.
Yes. So let's move to questions. Are there any questions from the lines?
[Operator Instructions] The next question comes from Joni Sandvall from Nordea.
Thanks, Tommi and Janne, for the presentation. Maybe starting with the operational issues. Have you been able to resolve this during the Q3? And could you give any comment on the -- how large the impact was on your top line?
Thank you, Joni. Excellent question. So first of all, it is something that once that happened, we analyzed that very, very quickly, and we took the corrective actions. The corrective actions includes some smaller investments as well as changes in our procedures. So at the moment, the operations have stabilized, and there is no impact on our ability to serve our customers. The size of that, of course, we shared that at the EBITDA level, which was roughly the impact was EUR 3 million, but we wouldn't like to go into the details that what type of issues and topics they were. The only thing is something that the corrective actions are taken. And at the moment, there is no impact of serving our customers.
Okay. Okay. That's clear. Then maybe a question on pulp prices have declined clearly since the summer. So when should we expect the impact on your P&L? And how should we now view the sales prices? Are these expected to start to decline already in Q4? Or should we start only in '25?
Joni, again, another good question. So if we look at, generally speaking, it's something that we focus once we run our business, we focus ourselves more on the sales margin, which means that this type of raw material input costs, they are many times passed through to our customers, but there is typically a small lag once they go up and once they go down. And typically, that lag is roughly 1 quarter plus 1 month. So depending a little bit on the -- what type of deal we have, typically, the lag is between 3 to 4 months. But we do not expect that it's going to effect on our sales margin. Yes, of course, it will impact to our sales price, but the sales price is movable in a way this respect that our key item is here to keep the sales margin because the sales margin, we do the profits.
Yes. Maybe a couple of questions for Janne also. I saw the financial expenses were actually clearly up Q-over-Q. Was there some main reason behind this?
No major reason. So I would say it's partly the timing of the expenses. So we have not seen, of course, on the financing items, any significant increase, but rather the interest levels are going down. So no, nothing major that should be disclosed, and we are expecting that to remain on, let's say, lowering trend when it comes to the interest rates.
Okay. Okay. And then on working capital, you mentioned the inventory impact on the working capital, but should we expect some lower working capital or working capital release going into Q4?
We do believe if the market demand and our operations are working as expected that we are able to save some inventory levels a little bit lower. So the main impact, as I stated, have been on -- rather on raw material side that we have been, the buffer stock on their due to the uncertainties on logistic streams globally. And we have been, let's say, preparing to maintain our supply security there. So I do believe that we are able to improve a little bit on that area. That depends on geopolitics quite a bit, that if we see that the general delivery streams and delivery times are maintained, then we have an opportunity to improve on that area.
Okay. Okay. And maybe last one for Tommi. Is there any changes on the competitive -- and if you're thinking U.S. or Europe as a separate?
I would say that if we look at the overall the market for us, it is fairly stable at least till the end of the year, which is actually giving us a good possibility because we have been quite successful in our commercial excellence side. And this way, we have been able to maintain quite high asset utilization in the company. Of course, in a general level, if you look at there is some uncertainty, of course, depending on the situation, what's going on in the United States. And this uncertainty, of course, many times, it can reflect to the market. But of course, our expectation going forward. So we believe that once the election is cleared in the United States that the market would stabilize. So we are not that much depending on the global because we have a local production in the United States and we have local production in Europe. So we are well-positioned even whatever is then the direction in the United States, what they are going to take. So most probably that is going to be positive on us.
The next question comes from Joonas Ilvonen from Evli.
It's Joonas from Evli. I have a question related to volume outlook, especially from the perspective of the United States. I think earlier this year, companies like Kimberly-Clark, they were quite positive on volume outlook. I think Kimberly-Clark's Q3 report, they had some bit softer volume development there. When it comes to other potential customers of yours, I think it has been more mixed like -- maybe I think it's generally still like rather positive from the perspective of volume outlook. So do you have any comments on these potential changes in what might have happened to this volume outlook over the course of this year?
But Joonas, your conclusion is right. So actually, the feeling is a little bit mixed. But if you look at the way how we operate, -- so we are the sustainability leader. We have 35% of our new products we sell to the market. So actually, that is typically then the driver that you have once you are able to introduce new products to the markets. Typically, the customers are really willing to promote those products, which give us a little bit more security once going forward. So we are not expecting any major changes.
And then another one is something that normally the second half of the year in nonwoven is slightly better than the first half. Of course, it was very unfortunate what happened in the third quarter that we were not able to enjoy the higher volumes in that respect. But of course, we expect that the fourth quarter should be normal if I talk about in terms of the general market, the nonwoven market and how we are positioned in that. So -- but you are right. So there is a certain uncertainty. There are some mixed feelings. There is -- especially there is some swift between brands and private labels. But luckily, we supply both of the sites. So that if brands are going to win, we will win. If the private label is going to win, we are going to win as well because we are present in both of the markets.
Yes. That's clear. And you know more report like baby wipes or office wipes or industrial wipes, those kinds of things separately, you just report your regional sales. But could you maybe comment on what kind of demand or buckets of demand do you think are most attractive at the moment? Like are there may be certain kinds of industrial applications where you see better demand versus baby wipes and stuff like that?
Yes. That is a little bit tricky question because in a way, in order to -- if you look at the baby wipes market, that market is huge. It's the biggest market, which is actually growing roughly 3% to 4% per annum at the moment globally, which means that inside the baby wipes, there are also some segments and some applications, which are growing a little bit faster than the other ones. And of course, we aim to target to those markets where we can see a good growth. This is linked to the pay market. But then if we look at the other markets that are outside baby, I mean, baby, we could consider [ wrap it out ], let's say, as a part of hygiene market. So baby personal care they are a little bit the same market. But then if your question linked to the industrial wipe side, so typically, that is something that is growing double compared to the baby business. And for sure, it is something that we are looking also at those opportunities now and also in the long term.
That's clear. And well, you already talked about the outcome of the election that it probably will have no major impact on your business. I don't know if there's anything there really to add that -- I mean, some consider that Trump is more beneficial for certain -- helpful for certain kinds of industries, but I'm not sure whether it's a very pronounced difference in your case.
Yes. That is a little bit -- it's a little bit difficult to speculate. But if we would like to just look at the situation bluntly and if we would say that because we are present in the United States, which would mean that actually we are the local supplier. If the new government will protect the market, it is very likely going to support us because we are not doing that much the cross-continent sales.
The next question comes from Joni Sandvall from Nordea.
Maybe one follow-up question regarding your profit improvement measures. Could you give any indication how much of these have been implemented and how much work is still done?
So I can generally mention about that. It is something that is a continuous work. So we work both on the commercial excellence side and also on the operational excellence side. But at this stage, it would be a little bit challenging in order to be able to quantify them. But of course, that should be visible then once we start looking at the longer-term trends. Commercial is, of course, we are -- we have been a little bit more successful on the commercial excellence side, which is visible on the improved sales tonnage, improved sales price and improved sales margin. We have a little bit more activity around the operational excellence. So that if you allow me just to say at this level, so that these are the things, which we work around, and that is roughly the situation where we are today.
Okay. Okay. And last one from me about your strategy update. When should we expect more on this front?
So it is very likely that we are working on it. So that -- because our current strategy frame is covering 2020 to 2025, it's very natural that we are going to come up with a new frame starting from 2025 to 2030. And that's very likely that we are going to come out with that during the first quarter next year.
There are no more questions at this time. So I hand the conference back to the speakers.
Okay. So there is one question in the chat. It comes from [ Rauli ] and it goes on the operational issues, you said no impact to deliveries, but is there still additional costs from those in Q4 or even more permanently?
Maybe, Janne, you could...
Well, as we said, we took the immediate actions and what type of a cost we have seen are both direct costs and in some cases, we have implemented some investments as well. In my understanding, the -- most of the investments are already completed. If we had some tail of the, let's say, investment cost for the Q4, those would be the nature of the impact for Q4. But other than that, out of these issues, we should not have a reflection for the Q4.
And maybe I can add on that, that, of course, that once you have a situation that this type of, if I may call, incident happens, typically, that is something that you analyze it, you do the corrective actions. And once you do the corrective actions, you do the corrective actions in order to improve it. So we rather see that actually, especially in certain areas, we see the positive signs of improved operational efficiency and quality performance.
Yes. Thank you. So that was the last question, and we have a little advertisement to the end. So Suominen's full year result will be published on March 5. Thank you, everybody, and have a nice day.
Thank you. Bye-bye.
Thank you all. Bye.