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, everyone, and welcome to Suominen's Q4 and Full Year 2022 Results Publication. My name is Emilia Peltola, and I'm heading Suominen's Communications and Investor Relations. Today, our Interim President and CEO, Klaus Korhonen; and CFO, Toni Tamminen, will present the results. And after the presentation, there is time for questions. So please, Klaus, floor is yours.
Thank you, Emilia. This is Klaus Korhonen, Interim President and CEO of the company. Let's start with a snapshot to the year '22, after which Toni can then elaborate on the financials.
Our net sales in '22 were EUR 493.3 million. Comparable EBITDA was EUR 15.3 million, and cash flow from the operations totaled EUR 14 million. And the Board of Directors decided to propose to the Annual General Meeting that a dividend of EUR 0.10 per share would be paid. But that's it in a nutshell. So Toni, would you please then continue on the financial review.
Thank you, Klaus. Good morning, everybody, from my behalf as well. Yes, so looking in a bit more detail on Q4. So Q4 sales were on a high level, actually the highest quarterly sales in the history of Suominen, However, this was mainly driven by the high sales prices, which were a result of the raw material and other input cost inflation as well as tailwind from currencies, mainly stronger USD. Also, the sales for the year as a whole were the highest ever.
Again, the main contributors are the same as for the Q4. Sales volumes, as such in Q4 were in line with the comparison period, Q4 '21 as well as the previous quarter, i.e., Q3. And perhaps to comment on those as we have been commenting that we expect the volumes to improve. And of course, we are not completely happy with how Q4 turned out. We were expecting somewhat higher volumes.
I would say the main drivers for this are twofold. So of course, in general, in this kind of deflationary raw material environment, the customers are a bit cautious with their purchases. So obviously, if everybody is expecting prices to go down, you tend to postpone your purchases. The second, let's say, a more operational thing was, especially in the United States. You remember this phenomenon that has been up, The Great Resignation, which started in the latter stages, I think 2020 and continued last year. It seems now that this has moved from white collar employees to blue collars. So many of our customers have been having challenges with their workforce, i.e., they have not been able to run their plants at full speed due to the lack of people.
At Suominen, we have seen a bit of that as well. I would say that did not impact our volumes, then perhaps there was some impact on the profitability as obviously, we need it more temporary labor and overtime. But this is a phenomenon that we see, especially in the U.S., most likely, it will be temporary, and it will stabilize, but one shall see how long that takes.
Back regarding the volumes, currencies, as said, almost EUR 10 million positive impact in the quarter. And again, a very positive thing. We have been reporting that we have generally been above 25% in the share of new products of total sales. Now both in the quarter and actually for the full year, we exceeded even 30%. So that is a positive thing. We have been able to renew our portfolio and keep this share of new products of total net sales on a very high level.
Then if we move on to the results or EBITDA. So there we -- the EBITDA declined from the comparison period, we had EUR 9 million Q4 in '21 and was in line with Q3. So if you think of the underlying business in Q3, we had a quite sizable positive onetime items impacting the results. So in that sense, the underlying business did improve.
Again, as commented regarding the volumes, still we were perhaps expecting a bit higher numbers. The reasons mostly coming from the volumes, the pricing versus input costs, the raw materials are declining. Perhaps the realization of the raw material price decline in our financials was not yet that pronounced in Q4. Obviously, also the sales mix has a significant impact on that.
Then of course, as you have seen reported, we had a change of CEO. So Petri Helsky left the company, the new CEO was appointed in these cases. As you know, obviously, there are some costs related to this.
And then looking at the comparison period, this EUR 9 million is also not perhaps completely comparable. We had some positive onetime items at the end of '21, which impacted that quarter result positively. On the sales side, we had a very high positive impact from the currencies on EBITDA, it was significantly less. So EUR 0.7 million in the quarter.
Looking at the full product -- sorry, profit and loss. So nothing special to be honest, beyond what I have already been mentioned. On the reported numbers, there is obviously a significant hit from impairment of assets in Italy. So that impacted reported gross profit and operating profit by EUR 4.8 million negative. So you can see the impact there on those roles. Overall, for the full year, we posted a negative net profit, which obviously is something we are not at all happy about.
And finally, if we move to cash flow. So -- the cash flow in Q4 developed extremely well. The positive impact is coming from net working capital. So we could release cash from net working capital, and this came from all the elements. So payables increased, receivables decreased and inventories decreased. And thinking about inventories there, we started to see slowly the impact of the declining raw material prices, but there were also lower volumes. We commented in Q4 that we have been building a bit of safety stocks in raw materials due to the logistic challenges we have been seeing for the past 2 years. Now as those challenges are easing up, we could reduce the stock levels, especially in raw materials. Full year cash flow from operations reached EUR 14 million, which is slightly above last year in rough terms aligned. I think that concludes my short presentation on the financials. So Klaus, back to you.
Thank you, Toni. Let's then have a few words on our strategy and progress in sustainability. As a reminder, our current strategy was launched in the beginning of 2020, and it really aims at growth and profitability through sustainability, customer focus and efficiency. Our vision is to be the front runner for nonwovens innovation and sustainability.
We continue executing our strategy and our strategic access during '22. And here are some highlights from that. In June, we announced that we are investing in our plant in Nakkila, Finland to upgrade and enhance one of the production lines. This is in line with our sustainability targets.
As Tony mentioned, the share of new products exceeded 30% of our net sales in '22. In many of the targets, we use 2019 as the baseline year compared to that year, we have increased sales of sustainable products by almost 100%. And in '22, we launched 12 sustainable products.
Then in August, we announced that we had completed for the first time, the EcoVadis sustainability assessment and received a silver rating in that assessment. And then it was in June, we announced that we have opened a compostability test center also in the Nakkila plant that is for studying the biodegradability of nonwovens made of renewable raw materials, and it is there to support our R&D work.
And then lastly, to the outlook for '23, we expect that our comparable EBITDA in '23 will increase from '22. And as a reminder, in '22, the EBITDA was EUR 15.3 million.
With that, Emilia,I think we are ready for Q&A.
Yes. Thank you, Klaus, and Toni and now it is time for questions. So please, operator, do we have any questions?
[Operator Instructions] The next question comes from Harri Taittonen from Nordea.
Yes. And -- just a couple of questions. I mean, one on the cost side. I mean, if you can -- it would be interesting to hear some more color on the cost like -- for the main types of cost like value so that -- you indicated that the inflation has kind of gone past its peak. And where we are on that curve, whether there are still some costs that are rising and a bit of color on that?
And then the second is about the -- you mentioned in the text can sort of report about the sort of uncertainty for demand for wiping in this sort of environment but pointing that usually demand is quite stable. But what is your feel or what are you seeing at the moment in the U.S. in that regard now that the inventory situation is normalized? And perhaps with some -- third question. With some more color on sequential. You gave guidance for the full year, but what's the feel of the Q1 or the drivers for Q1 versus Q4 results that you now reported? I mean those 3 questions, please.
Thanks, Harri. So starting from cost question. In general, we have been facing -- sorry, why it's -- why I'm struggling a bit is that there was an echo. So now, it's gone, so I can get back to answering. So on the cost side, our main costs, of course, are raw materials, energy and freight costs and then, of course, various fixed type of costs. On the fixed type, of course, we are not yet seeing inflation. And generally, we do not expect a huge inflation there.
But on that direct input costs, so raw materials in general, are declining across the board. So all categories are really declining. And let's say, if you think about where we were 3 months ago, so they seem to be now declining faster than what the outlook was at our previous results presentation. So raw materials declining energy as you are all probably very aware of is also declining, it's stabilized. Energy surge that was expected for the winter did not materialize due to warm weather and lower natural gas pricing and so energy also developing favorably. Freight costs have already come down a bit earlier. So all cost elements now on a downward trend. Perhaps the most speedy one is the biggest, which is the raw materials.
Now what was the second question -- was about this inflation impact to the consumer demand?
Exactly, exactly. I mean that's the one that you're [indiscernible].
That is, of course, a bit of a tricky question. So as we commented, always before, this has been very resilient business. So these wiping products have not seen. If anything, this has been anticyclical. But then again, this kind of inflation, we have not seen since the '80s. So if I look at our market separately, so we are perhaps seeing a bit more of that right now in Europe than in the Americas, especially North America. No, nothing major in North America so far. Also in Europe, I would say that our main customers in Central Europe, they are expecting this to be very temporary. So they expect this to normalize. The impact as such is not huge, and they are expecting a normalization of even that even towards the end of Q1. So no -- at the moment, we do not expect that to have a huge impact.
And now what was the third one, if you could, please?
Well, yes, I mean I know that you don't really guide for quarterly estimates but you just give that [Indiscernible] sort of kind of the feel of the sequence. Now you had a flat EBITDA quarter-on-quarter. And just kind of give kind of some building blocks for thinking about how to kind of look at the start of the year earnings-wise?
Yes, I don't know, Klaus, if you want to comment on do we -- we don't -- as said, we do not generally give out quarterly guidance, especially at this stage. But obviously, when you are in this kind of upward -- expected upward trends, all the development actions take time. So I would say that if you look at the year as a whole, we expect the latter part of the year, let's say, improvement to come throughout the year. So if you take the average quarter, so then perhaps for the full year, Q1 would be lower than the average. And then the second half will be higher than the average.
As the raw materials decline, our pricing catches up and even especially this possible temporary inflation was dissipate. So perhaps if this helps in any way, so improvement throughout the year.
The next question comes from Joonas Ilvonen from Evli.
It's Joonas from Evli. If I begin with the volume issues. So you said that the Q4 volumes in the U.S. were maybe bit soft relative to what you expected. So I'm just -- if you could confirm that you still continue to see improvement in the U.S. in -- during -- over the course of Q1, at least? And also, could you maybe discuss the European volume outlook now that you also decided to close the plant in Italy?
Yes. So for the U.S., it is exactly like that. So we do expect improvement in Q1 and then going forward. In Europe, as said, some inflation was. And obviously, when you have this kind of a major change in your manufacturing portfolio, there might be some hiccups especially in the early part of the year. I'm not sure if it was reported widely, but there was a strike at the Mozzate plant that we expected and have made preparations accordingly. It will not have a major impact. But as said, generally, you might have some impact to volumes.
All right. And maybe another question related to pricing. So I mean, before this inflatory environment, during the COVID you decided to switch to more towards mechanism pricing in anticipation of inflation. And now that the situation is basically the reverse, have you made any changes to your pricing portfolio like have you maybe tilted towards more fixed pricing or made any such changes?
No. There is really no opportunity for fixed pricing in this business. So it's either mechanism or spot. So fixed pricing it's too big of a risk both ways. So that one is not in the mechanisms, that is negotiated generally on a quarterly basis. And of course, in this kind of a deflationary environment, you are generally happy to have the mechanism pricing as the spot business is much more open to price competition from the competitors. So we are happy to have a significant part of our volumes in mechanisms in this situation.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Thank you. We have a few questions more here. So one from Markku Moilanen. Regarding your liquidity you have this EUR 100 million revolving credit facility. But can you tell us is it fully undrawn or how much of it is available?
Yes. So basically, if you look at Suominen's debt financing, so we used to have an EUR 85 million bond, which matured early October '22. And we actually issued a EUR 50 million bond, so EUR 35 million less in June 2021. And now when we repaid this EUR 85 million bond that would indicate -- and that was not refinanced separately at that time. So that would indicate a gap of EUR 35 million between the bonds, so to say. So we actually draw -- when we repaid this bond, EUR 85 million, we grew a EUR 40 million loan from the RCF. So -- and that is how it is also today. So we have drawn EUR 40 million from the RCF, and we have EUR 60 million available.
Now of course, as you all know, I am leaving the company. So obviously, it will then be a task for the -- my successor to review debt financing. And what -- to what extent commits to longer financing sources. This, of course, gives us now flexibility having this EUR 40 million from the RCF that when the results improve and the cash situation improves. So of course, it is much quicker. You can reduce your interest cost by not or, let's say, repaying that loan, not growing as much from the RCF. So there are pros and cons.
On the other hand, if you think about the EUR 50 million bond, the coupon rate is 1.5%, which you can only dream about these days. So in hindsight, it could have been better to issue a bit larger bond, but hindsight is 2020.
Thank you. Then we have a few questions from Rauli Juva. And the first one, can you elaborate a bit your decision to pay dividends given negative earnings and fairly high net debt versus EBITDA?
Yes. This is Klaus. Thank you, Rauli, for the question. I can take that. Yes, indeed. So the Board is proposing to the AGM a dividend of EUR 0.10 per share. And naturally, when making this proposal, the Board has considered the previous year results, our financing position and our outlook for this year. And based on this assessment ended up on proposing this dividend to the AGM. So not much to add or comment on it, it's based on the full assessment of our position and how we look also to this year.
Thank you. Then we continue with the second question from Rauli Juva. With the clear downward trend in costs, is your pricing also heading down already in Q1 versus Q4 or what kind of dynamics you expect there?
Yes. The very short answer is yes. So especially, let's say, the spot pricing is obviously heading down, but also the mechanism prices are on a downward trend following the input costs. So -- but now, of course, if we have now for 2 years, moaned and complain that we have this pricing lag, which is impacting our results. Now the trend has turned. And now obviously, we should be in the mechanism pricing benefiting from that, that the input costs are falling and the sales prices only follow those with a lag. But yes, indeed, the pricing in Q1 will be lower than in Q4.
Thank you. There are no more questions. And before we close this session, I want to advertise that the Q1 result publication will be then on 4th of May. Thank you all for participating, and thank you, Klaus, and Toni.
Thank you.
Have a good day.
Thank you.