Good morning, and welcome to Suominen's Q1 results audiocast. My name is Anu Ilvonen, and I work as the Director, Communications and Marketing for Suominen. Joining me today to discuss our January-March results are our CEO, Charles Héaulmé, and CFO, Janne Silonsaari. Without further ado, Charles, the floor is yours.
Thank you, Anu. Good morning to all of you. Thank you for joining us this morning. We will have a look at our first quarter, 2026. Janne Silonsaari, our CFO, will take us through the financial review. We'll talk about the Full Potential Program that we have announced at the end of January this year, and then at our outlook before engaging into a Q&A session. First of all, about the first quarter, 2026, a couple of words on our market. The number one market was relatively stable in the first quarter, 2026, with particularly a growth continuing at a good pace in the MTT category, so the moisturized toilet tissue, which is the growing category of nonwoven and then baby wipes being a more stable like the previous quarters.
Important to say also about the market that during the first quarter of 2026, we have seen a limited impact from the war in Iran, in the Middle East. However, that's because this war started at the end of February, so no real major impact in Q1. However, we are tightly monitoring, of course, the developments because even though we are not operating directly with manufacturing operations in the Middle East, this may have some impact in the second quarter in terms of raw material availability, in terms of cost of the raw material and energy as everyone knows and follows in the news. Therefore, we have also worked on the agility of our pricing model in order to remain competitive but at the same time protect our margins.
Second point, the results of our first quarter 2026, with net sales decreasing 19% versus the first quarter of 2025. We'll come, of course, to explaining the variance between the two quarters. This has driven a comparable EBITDA to decrease from EUR 4.1 million to EUR 2.2 million, and the cash flow from our operations was positive with EUR 4.5 million. Couple of important events to be mentioned during this first quarter. First of all, linked to some major events that happened in our U.S. plants in two of our three U.S. plants in the third quarter of 2025.
This has impacted both sales and EBITDA during the first quarter as a collateral or indirect damage, if I may put it like this, particularly because the interruption of supply during those events has driven some customers to seek other supply sources at least temporarily for some of them. Second important point is that we have continued to execute the cost-saving program that was launched back in May 2025. You may remember that we had announced a program to reduce EUR 10 million our cost over 24 month, and we have continued this execution, even accelerating this execution during Q1. We are satisfied with being now on the track of delivering this EUR 10 million within 2026.
Additionally, and very importantly, because our profitability has been disappointing for now a number of years, consecutively since 2022, we decided in January and announced on the 29th of January 2026 to initiate a three-year profitability improvement program targeting 10% EBITDA after three years of execution. This program is comprehensive, I would say end-to-end, with three pillars. One is incremental improvement in all operational performance aspect of our business. Second, we have a number of targeted investments that are not initiated yet, but that we are planning for the three years in order to improve our profitability. Footprint optimization in the sense of where do we produce what is going to be an important aspect in order also of portfolio management and improvement of our margins.
That's for the introduction to our Q1. We look now into more details at the financials with Janne.
Good morning from my behalf as well. As told by Charles, the net sales totaled EUR 95.6 million in the first quarter. Level has been quite stable during the past quarter, as you can see on the right-hand side trend graph. Net sales reflected lower volumes and currency effects, which is presented on the right-hand side graph. We have continued to be impacted by the last year third quarter incident, impact was roughly EUR 8 million, similar level as the organic negative impact. Currency impact was EUR -5.6 million, this is basically related to the USD to EUR conversion.
Share of the new products out of the total net sales was 26%, share has been decreasing lately a bit with the lower volume, this has been impacting negatively also on profit due to the negative mix impact from this. Comparable EBITDA totaled at EUR 2.2 million, slightly up from the Q4 but lower versus the comparison period. Main reason for decrease was lower sales volume and also mix impacted negatively as mentioned. As stated, the Q3 incident impacted still on the order level quite a bit and had a negative impact. Related to the incident last year, we did book EUR 0.5 million insurance compensation for the Q1 and expecting to have remaining claim to be reviewed and co-completed by the end of the Q2.
Organic impact was supported by the cost saving actions. Small currency impact, again, mainly from the USD-EURO conversion. Consolidated statement of profit or loss. Maybe worth highlighting is here that we did have quite high one-off costs during the Q1, and those have been related to the restructuring and profitability improvement program. Other than that, we can move on to the cash flow from the operations. As Charles mentioned, this amounted EUR 4.5 million in Q1, and main contribution coming from the working capital improvement and especially on actions on receivables and inventories. Thank you, Charles. Back to you.
Okay. The Full Potential Program, as I was suggesting in the introduction, is very much around our profitability improvement. We are going to focus during the three years, 2026- 2028, on resetting our profitability towards a 10% EBITDA level. We will not focus on scaling the company during that period because we believe that scaling should come as a second phase once our profitability is at a industry standard level.
As mentioned before, we have three main pillars in this profitability improvement program: operational performance, targeted investments, and some footprint optimization, which drives me to explain a bit more how we have designed the plan from end to end, touching all the aspects of the operational performance with the fixed cost reduction that we have engaged with a EUR 10 million reduction in 2025 and 2026. The EUR 10 million will be done within the year 2026. In terms of run rate, we will have by, let's say, the end of the year, if not a bit before the run rate of the EUR 10 million versus where it was in the first half of 2025. We have also designed to change our operating model.
This was announced back on the 29th of January. Why changing the operating model? Not because of being dogmatic about an organization being better than another one, but when we are in a transformational situation, we need to have very clear line of command, and we need to have expertise and effectiveness in the execution. This is why I decided at the time, in January, to have a clear line of command on our manufacturing operations with a new Chief Operating Officer who started in the company on the 3rd of November, 2025, and who is already transforming the way of managing the factories, the way of monitoring, targeting, monitoring the performance of the factories.
Also, it's not only about giving targets and monitoring results, it's about giving the right resources in terms of leadership, but also continuous improvement methodology, particularly using the TPM, the very well experienced TPM methodology that many industries have already proven being very successful. We are looking, of course, into direct and indirect procurement, savings potential. This is an important area. This is not as advanced today in terms of execution as the fixed cost savings I was mentioning before. We are still very much into the planning phase on this, but have good expectations over the three years. Production efficiency and output, I suggested it when mentioning the operating model. Portfolio pricing and business development, that has to do with, let's say, commercial excellence overall.
We have a portfolio that is pretty diverse between commoditized products and also high margin, new innovation, and therefore we want to manage the portfolio in a more disciplined way in order to focus on our margins. That means also that pricing it will be an important tool and is already an important tool to better use going forward. Business development, meaning how do we, how do we acquire new businesses? When I mean acquire, I'm not talking about M&As. I'm talking about how do we develop our business with new customers and eventually also new product, new categories. That's a business development activity that we have also started at the beginning of the year.
This is supported by two aspects which are extremely important, which I would summarize as the capabilities, but it includes the culture of the company and then the employee engagement competence into driving our business. The culture, we have started the deployment at the end of quarter four 2025. It's a culture of accountability that we have defined for the company, and we are planning, and we are very well advanced already today. We are planning to have 100% of our employees from management to shop floor trained and participating to workshops on the culture of accountability and what it means within the year 2026. We are already, as we speak, at 70% deployment, so an accelerated deployment in order to engage rapidly the organization to this transformation.
It resonates really well into the organization, and now we need to clearly get into quick wins in order to convince everyone that the turnaround is arriving. What are the deliverables that we have targeted? First of all, we want to be a zero accident company. Safety is number one. It's not a priority. It's a license to operate in manufacturing a company like Suominen. Second, we want to grow with our existing capacity. When I say existing capacity, I mean, of course, that we have new capacity with the investment we've done in 2024, 2025, in Alicante, Spain, in our factory in Spain. This new capacity, this new line is coming to commercial production in May this year, so just now as we speak.
We want to raise the EBITDA from 3% to 10%, reduce our leverage, which is far too high right now, and we want to get into the corridor of 2x - 2.3x the EBITDA in terms of net debt, and then raise the employee engagement from the low 60%, where we are today, to 80%, which would be up to the benchmark in the industry. That's for the targets we have with this Full Potential Program. I assume that there will be possibly some questions around this program.
If we look at now specifically 2026, our outlook, which we have explained or presented last quarter on the 29th of January, our outlook is that we expect to increase our comparable EBITDA in 2026 compared to 2025. With this, I guess we can open the Q&A session.
If you wish to ask a question please dial pound key five on your telephone keypad to enter the cue if you wish to withdraw your question please dial pound key six on your keypad. As a reminder if you wish to ask a question please dial pound key five on your telephone keypad. There are no phone questions at this time. I hand the conference back to the speakers for any written questions and closing comments.
Thank you. We have a question from Rauli from Inderes. Did an increase in factoring or similar support the cash release from receivables?
Yes, I can take this. Thanks, Rauli, for the question. It's Janne here. Yes, there was a increase on the AR selling balance, which supported partly the decreasing AR balance. This did have indeed a impact on that area.
Thank you, Janne. Then we have a question from Joonas Ilvonen from Evli. How is your volume outlook for the rest of the year? Could improved volumes in the U.S. start to make sales mix more favorable soon? To what extent do you think your mentioned agile pricing approach can protect margins in Q2? This is probably separate questions. Do you see the new Alicante production line being accretive to margins already in Q2, or will it take longer than that?
The first question was regarding the volume outlook for the year. The volume outlook for the rest of the year is clearly higher than the first quarter. The first quarter profit generation is disappointing. The main driver for it is low volume. Low volume in January, but also low volume in February and March, particularly in the U.S. linked to the consequence of the events we had, the flooding we had in September in our factory in Connecticut, back in September last year. This specific gap is recovered at half already in the order intake in Q2. We expect relatively solid demand in the rest of the year.
Actually, during Q2, I mean, at the beginning of Q2, the order intake, because also of the situation in the Middle East, clearly increased. Will it be sustainable? Not sure. Once the conflict is resolved, maybe, this additional order intake is linked to a stocking process happening in the industry. Clearly, volume will be better and will support a better profit generation. The third question was on the-
Um-
The Alicante Line, the second?
Yeah. The second question was, could improved volumes in the U.S. start to make sales mix more favorable soon?
Absolutely. Yes, our margins are slightly better in the U.S. and therefore, because the main positive gap on volume will be in the U.S., that will have a positive mix impact. Alicante, will it be? I think the question was really specific.
Yes
can remember.
Yes. Will it be-
Saying, will it be accretive to margins in Q2 already? I would say no, not in Q2, because we start commercial production in May. As you can imagine, you don't start overnight with full utilization of a line. The full utilization will take up to 2027. Gradually we're going to increase. Yes, there will be some positive benefits in the second semester, but not in the second quarter.
Jonas also asked about the agile pricing approach. To what extent do you think it can protect margins in Q2?
Yeah. The agile pricing means, you know, we are in the industry a relatively established process to have a pricing per quarter, with the exception of the spot orders or negotiations. Otherwise, this was a quarterly pricing process, which we immediately, well, started in Iran and then Middle East. We immediately said we cannot stand with a quarterly commitment on pricing because we don't have a visibility to a quarter on the cost, raw material cost, energy cost, availability, and so forth. Therefore, we have moved to a, at max, a monthly pricing process, which means that it has enabled us so far to protect the margins and pass through the relevant cost increases.
We have a question from Markku Moilanen from Nordea, and a very closely related question from Joni Sandvall from Nordea on the same topic, so I will read them back to back. You mentioned that some customers in the U.S. have temporarily sought other sources due to the incidents in the U.S. plants last year. What makes you sure that these customers will return to Suominen later? Joni was asking, following U.S. incidents in 2025, are you expecting to recover lost customers still during 2026?
Yes. This is basically the same question in different words. The lost volume happened to be very temporarily driven at the beginning. Today, we can say that within the first semester, or the second quarter, we will recover half of this gap. The second half of this gap is still a question mark. Why? Because when you have, when you seek an alternative supply, obviously you enter into some, you know, contracting for some period of time, either volume and/or a period of time, can be six months or so. Therefore, there is a question mark on the second half. We are actively working on getting this volume back, knowing that this is with long-term partners.
So from that point of view, where we have very good strategic alignment, from that point of view, we are not pessimistic. Of course, we should not be also over-optimistic on this. We need to get this volume back, not at whatever pricing. That is in the equation why half of this volume gap is not yet recovered for sure, but in half of it in the second quarter.
Still remaining on the topic of the U.S. plants and the incidents, Joonas Ilvonen from Evli is asking, when will the U.S. plants return to fully normal operations?
Linked to this-
Incidents, yeah.
U.S. events, these operational events in 2025, they are back in the factories are completely back into normal operations since already Q4. Precisely the first event was on, as I remember, on July 21st. We were back in production mid-October on that production line. I'll come back to this in a second. The second one was, if I remember, on September 21st, the flooding in another factory, and we were operating back, also mid-October in that factory. The factory's capabilities are not explaining the volume reduction in the first quarter. Now, I would like to mention the first line where we had a relatively dramatic operational failure.
We had an equipment that completely failed and required more than two months of maintenance to get back the spare parts and installation and so on. It was a very significant event. We took the opportunity to do something that we are going to gradually do on most of our lines that require it. We have taken the opportunity of this two and a half months of interruption in the third quarter until mid-October to upgrade the line. Today, that line is producing extremely well. The last three months of production on that line has been record high volume and in the range of 50% additional volume versus what that line was able to produce in average in 2025.
The reason I'm saying that is because it is showing the very good news that if we have our equipment restored to the right basic standard, which has not been done in the last years, I would say, and therefore we have part of our Full Potential Program is to restore all our equipment to the basic standards of production of our industry. If we have this first condition, second, if we have the right leadership into these lines, which is the case on that line where we have engaged a new leader back in the third quarter of 2025. Third, if we engage into the continuous improvement methodology, TPM, that I was mentioning at the beginning, then we see relatively quickly, six months later, we see already the fruits of all these actions.
This is encouraging about the Full Potential Program relevance.
Talking about production in Europe, Joni from Nordea is asking, Alicante line investment is coming online during Q2, are you able to fit these volumes to the market, or is there risk of cannibalization?
Yeah, this is a very good question. First of all, I would like to say to Joni's question that the Alicante new line, so-called Ali 55, first of all, it is an upgrade of the technology and capabilities for Suominen, meaning that that line is not just new capacity, it is new technology that we did not have and that enables producing sustainable nonwoven based on pulps. That is extremely important because many customers are looking for more sustainable solutions and therefore transition from plastic substrate or polymer substrate to pulp based substrate. That's a very important point.
The second to the specific question about how this line will be occupied, it's going to be a mix of, when I was talking about footprint optimization before, we will have a mix of internal transfers of production in order to optimize the use of our equipment in the different lines, in the different factories, and then incremental growth also. Some of it is already being contracted with new customers or existing customers. That incremental growth will be visible in H 2 2026 and in 2027.
Okay. Reverting back to sort of, figures and on top line, Markku Moilanen from Nordea is asking, you highlighted that the market environment was stable in Q1, but Suominen sales declined by 19%. What caused that? And in what product groups are you losing market share?
The 19% indeed in versus a relatively stable market can be surprising. The 19% needs to be precisely broken down. First of all, we have a -5%, which is currency related. That's the USD drop versus the same Q1 of 2025. Second, the temporary alternative supply that we were discussing before, roughly -7%, is the impact. As I said, half of this -7% is already back in Q2. The question will be on the other half going forward. Third, we have roughly -2% negative mix impact from high value products to a more, I would say commoditized categories, products. We have a negative mix impact.
5% roughly is coming from a capacity reduction that was decided in Europe in the second quarter of 2025. One line was shut down to focus on profitability, and that also has an impact on the net sales.
Okay. Finally, let's move on to financing. Both Markku and Joni from Nordea are asking about what is your plan with the upcoming bond refinancing?
All right, I can take this. As a reminder, the EUR 50 million bond matures in June 2027. In the event of any material changes to the company's existing financing arrangements, we naturally provide further details at an appropriate time. I can comment that on general level that we continuously evaluate different financing options and take into consideration, among other factors, the funding costs, prevailing market conditions, interest of the company shareholders, and naturally, the optimal balance of debt and equity in our capital structure. We do not categorically rule out any specific type of financing as of now. Highlighting again that, you know, in the event of any changes on this area, we will provide further details at appropriate time.
Okay. That was all the questions from the chat. I would like to welcome everybody to join us again for our Q2 results publication on 7th August . Thank you for this call.
Thank you.
Thank you.