The merger of Ahlstrom Corporation and Munksjö Oyj was completed on April 1, 2017 and created a global leader in innovative and sustainable fiber-based materials with combined pro forma net sales of approximately EUR 2.15 billion, around 6,000 employees, and 41 production and converting facilities in 14 countries.
Outlook for 2017
Ahlstrom-Munksjö expects its comparable EBITDA in 2017 to be higher than in the previous year (Pro forma EUR 268.7 million). The full outlook is as follows:
Market outlook: The demand outlook for 2017 for Ahlstrom-Munksjö’s fiber-based products is expected to remain stable at the current good level for most of the product segments and to reflect the seasonal pattern. Price increases are implemented as customer contracts expire to mitigate for raw material price increases in certain segments, particularly in the Decor and Release Paper Europe businesses. The price increases will take effect towards the end of the second quarter.
EBITDA: comparable EBITDA in 2017 is expected to be higher than in the previous year.
Shutdowns: The annual maintenance and vacation shutdowns in the second and third quarter as well as the seasonal shutdowns at the end of 2017 are expected to be carried out to about the same extent as in 2016. However the maintenance shutdown usually carried out in the third quarter in the Swedish plant Billingsfors, will be replaced by shorter stops in the second and fourth quarter, due to changes in the shift form. The next maintenance shut down at the pulp production facility in Aspa in Sweden will be carried out in the fourth quarter of 2017.
Capital expenditure: The cash flow effect of current capital expenditure for fixed assets in 2017 is expected to be approximately EUR 70 million. In addition, the cash flow impact of the strategic investments in the Arches mill and in Madisonville is expected to be approximately EUR 10 million and EUR 8 million respectively.
Ahlstrom-Munksjö offers a broad range of fiber-based materials and products and has leading global positions in areas such as filtration, decor papers, release liners, and compostable food and beverage packaging. The company has four business areas that it reports separately: Decor, Filtration and Performance, Industrial Solutions and Specialties.
Its main customer segments include the automotive, construction and home decoration, fast-moving consumer goods, energy, printing, medical, and diagnostics industries. In 2016, Ahlstrom-Munksjö derived about 60% of its total net sales from Europe, 24% from the Americas and 16% from the Asia-Pacific region. Know-how in fiber-based technology, an efficient manufacturing platform and ability to serve global customers locally form its competitive advantage.
The company uses predominantly renewable fibers as raw materials, including hardwood and softwood pulp as well various specialty pulps, abaca and viscose, and wood. Other input materials include titanium dioxide, chemicals such as methanol, resins and latex. To a lesser extend synthetic fibers such as polyester and polypropylene are used. The company’s main energy sources include electricity from the grid, natural gas and heat from its sites.
Ahlstrom-Munksjö has a strong balance sheet and cash generation abilities to support strategic growth. As a result of the merger, Ahlstrom-Munksjö’s total assets on a pro forma basis amount to EUR 2,527.9 million as at March 31, 2017. Non-current assets of EUR 1,751.3 million consist mainly of tangible assets of EUR 882.3 million, goodwill of EUR 442.4 million and other intangible assets of EUR 332.9 million. The most material fair value adjustments to non-current assets resulting from purchase accounting adjustments consists of a fair value adjustment of EUR 138.5 million to Ahlstrom’s property plant and equipment, additional intangible assets amounting to EUR 279.7 million including Ahlstrom trademark, customer relationships and technology and the goodwill arising from the merger, totaling to EUR 216.2 million.
Total equity amounts to EUR 1,062.6 million on the pro forma combined balance sheet as at March 31, 2017, representing an increase mainly from Munksjö stand-alone equity by EUR 632.6 million resulting from the issuance of new Ahlstrom-Munksjö shares as merger consideration for Ahlstrom’s shareholders.
Ahlstrom-Munksjö’s interest bearing pro forma net debt was EUR 432.4 million and pro forma gearing stood at 40.7% as of March 31, 2017.
A new financing was arranged for Ahlstrom-Munksjö following the merger. It includes multicurrency term facilities and a revolving credit facility as well as a bridge facility. The effective date for the amendments to the terms and conditions of the EUR 100 million senior unsecured callable fixed rate notes due 2019, originally issued by Ahlstrom and transferred to Ahlstrom-Munksjö in the merger, occurred on April 1, 2017. In addition, Ahlstrom-Munksjö redeemed the EUR 100 million (nominal amount) hybrid bond, originally issued by Ahlstrom, on May 3, 2017 as the merger also constituted a corporate restructuring event as defined under the terms and conditions. The measures are expected to lower the financial costs of Ahlstrom-Munksjö.