Good day everyone and welcome to Suominen's Q4 and full year 2022 result 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 result and after the presentation, there is time for questions. Please Klaus, floor is yours.
Thank you, Emilia. This is Klaus Korhonen, as said, the Interim President and CEO of the company. Let's start with a snapshot to the year 2022, after which Toni can then elaborate on the financials. Our net sales in 2022 were EUR 493.3 million. Comparable EBITDA was EUR 15.3 million and cash flow from the operations totaled EUR 14 million. The board of directors decided to propose to the annual general meeting that a dividend of EUR 0.10 per share would be paid. That's it in a nutshell. Toni, would you please then continue on the financial review?
Thank you, Klaus. Good morning everybody from my behalf as well. Yes, looking in a bit more detail on Q4. 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 2021 as well as the previous quarter, i.e. Q3.
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. Of course in general in this kind of a deflationary raw material environment, the customers are a bit cautious with their purchases. 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 dubbed the Great Resignation, which started in the latter stages of I think 2020 and continued last year. It seems now that this has moved from white collar employees to blue collar.
Many of our customers have been having challenges with their workforce, i.e. they have not been able to run their plants on 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, perhaps there was some impact on the profitability as obviously we needed more temporarily labor and over time. 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. That regarding the volumes, currencies as said, almost EUR 10 million positive impact in the quarter. Again, very positive thing we have been reporting that we have generally been above 25% in the share of new products of total sales.
Both in the quarter and actually for the full year, we exceeded even 30%. 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. If we move on to the results or EBITDA. The EBITDA declined from the comparison period. We had EUR 9 million Q4 in 2021 and was in line with Q3. If you think of the underlying business, in Q3 we had quite sizable positive one time items impacting the results. 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. Also the sales mix has a significant impact on that. Of course, as you have seen reported, we had a change of CEOs. Petri Helsky left the company, the new CEO was appointed. In these cases, as you know, obviously there are some costs related to this. When looking at the comparison period, this EUR 9 million is also not perhaps completely comparable. We had some positive one-time items at the end of 2021 which impacted that quarterly result positively. On the sales side, we had a very high positive impact from the currencies. On EBITDA it was significantly less, EUR 0.7 million in the quarter. Looking at the full profit and loss. 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. That impacted reported gross profit and operating profit by EUR 4.8 million negative. You can see the impact there on those rows. Overall, for the full year, we posted a negative net profit, which obviously is something we are not at all happy about. Finally, if we move to cash flow. The cash flow in Q4 developed extremely well. The positive impact is coming from net working capital. We could release cash from net working capital, and this came from all the elements. Payables increased, receivables decreased, and inventories decreased. 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 had been building a bit of safety stocks in raw materials due to the logistic challenges we have been seeing for the past two years. 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. 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. 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 continued executing our strategy and our strategic actions during 2022. 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 that is in line with our sustainability targets. As Toni mentioned, the share of new products exceeded 30% of our net sales in 2022. In many of the targets, we used 2019 as the baseline year.
Compared to that year, we have increased the sales of sustainable products by almost 100%. In 2022 we launched 12 sustainable products. In August, we announced that we had completed for the first time the EcoVadis sustainability assessment and received a silver rating in that assessment. 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. Lastly to the outlook for 2023. We expect that our comparable EBITDA in 2023 will increase from 2022. As a reminder, in 2022, the EBITDA was EUR 15.3 million. With that, Emilia, I think we are ready for Q&A.
Yes. Thank you, Klaus and Toni. Now it is time for questions. Please, operator, do we have any questions?
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Harri Taittonen from Nordea. Please go ahead.
Yes. Thank you and good morning. Just a couple of questions. I mean, one on the cost side. I mean, it would be interesting to hear some more color on the cost, like, for the main types of cost, like where you saw that you indicated that the inflation has kind of gone past its peak, and you know, where we are on that curve. Whether there are still some costs that are rising and a bit of color on that. Then the second is about, y ou mentioned in the text in the sort of report about the sort of uncertainty for demand for wiping in this sort of environment.
Pointing that usually demand is quite stable, but what is your feel of what are you seeing at the moment in the U.S. in that regard now that the inventory situation is normalized? 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, you know, or the drivers for Q1 versus Q4 result that you now reported? I mean, those three questions please.
Thanks, Harry.
Sure.
Starting from the cost question, in general, we have been facing, s orry, why I'm struggling a bit is that there was an echo. Now it's gone, so I can get back to cost.
Okay
T he cost side.
Okay
Our main costs of course are the raw materials, energy and freight costs, and then of course various fixed type of costs. On the fixed type of costs, we are not yet seeing inflation and generally we do not expect a huge inflation there. On the direct input costs, so raw materials in general are declining across the board. All categories are really declining. Let's say if we think about where we were three months ago, so they seem to be now declining faster than what the outlook was at our previous results presentation. Raw materials declining. Energy, as you are all probably very aware of, is also declining. It's stabilized there. 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. All cost elements now on a downward trend. Perhaps the most speedy one is the biggest, which is the raw materials. What was the second question? Was about this inflation impact to the consumer demand.
Exactly. I mean, I feel what you're seeing.
That is of course a bit of a tricky question. As we commented always before, this has been very resilient business. These wiping products have not seen if anything, this has been anti-cyclical. This kind of inflation, we have not seen since the 80s. If I look at our market separately, 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. 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.
Okay.
So, at the moment, we do not expect that to have a huge impact. Now what was the third one, if you could please?
Well, Yeah. I mean, just I know that you don't really guide for quarterly estimates.
Yes
but, you know, just give that , it's a bit sort of, kind of the feel of the sequence. Now you had the flat EBITDA quarter-on-quarter and, j ust so you can just kinda give the kind of some building blocks for thinking about how to kind of look at the start of the year earnings-wise.
Yeah. I don't know, Klaus, if you want to comment on. We don't. As said, we do not generally give out quarterly guidance, especially at this stage. Obviously when you are in this kind of a expected upward trend, all the development actions take time. 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. If you take the average quarter, perhaps for the full year, Q1 would be lower than the average, and then the second half would be higher than the average. As the raw materials decline, our pricing catches up and even especially this possible temporary inflation woes dissipate. Perhaps if this helps in any way, so improvement throughout the year.
No, that's helpful. Many thanks.
The next question comes from Joonas Ilvonen from Evli. Please go ahead.
Hi, it's Joonas from Evli. If I begin with these volume issues. You said that the Q4 volumes in the US were maybe a bit soft relative to what you expected. I'm just, if you could confirm that you still continue to see improvement in the US over the course of Q1 at least? Also could you maybe discuss the European volume outlook now that you also decided to close the plant in Italy?
For the U.S., it is exactly like that. We do expect improvement in Q1 and then going forward. In Europe, as said, some inflation woes. 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. Maybe another question related to pricing. I mean, before this inflationary environment, if I'm correct, that you decided to switch to more towards mechanism pricing in anticipation of inflation. 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. Fixed pricing, it's too big of a risk both ways.
Yeah.
That what is not in the mechanisms, that is negotiated generally on a quarterly basis. 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.
Yeah.
We are happy to have a significant part of our volumes in mechanisms in this situation.
Okay, good. Thanks. That's all from me.
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 few questions more here. One from Markku Moilanen. Regarding your liquidity, you have this EUR 100 million revolving credit facility, can you tell us if it is fully undrawn, or how much of it is available?
Basically, if you look at Suominen's debt financing. We used to have an EUR 85 million bond, which matured early October 2022, and we actually issued an EUR 50 million bond, so EUR 35 million less in June 2021. Now when we repaid this EUR 85 million bond, that would indicate we. That was not refinanced separately at that time. That would indicate a gap of EUR 35 million between the bonds, so to say. We actually drew. When we repaid this bond, EUR 85 million, we drew an EUR 40 million loan from the RCF. That is how it is also today. 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 my successor to review the financing and to what extent commit 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, of course it is much quicker. You can reduce your interest cost by not or let's say repaying that loan, not drawing as much from the RCF. 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. In hindsight, it would have, could have been better to issue a bit larger bond, but hindsight is 20/20.
Thank you. We have few questions from Rauli Juva. The first one, can you elaborate a bit your decision to pay dividends given negative earnings and fairly high net debt versus EBITDA?
This is Klaus. Thank you, Rauli, for the question. I can take that. Yes, indeed. The board is proposing to the AGM a dividend of EUR 0.10 per share. Naturally, when making this proposal, the board has considered the previous year results, our financing position, and our outlook for this year. Based on this assessment, ended up on proposing this dividend to the AGM. 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. We continue with the second question from Rauli Juva. With the clear downward trend in costs, is your prices also heading down already in Q1 versus Q4? What kind of dynamics you expect there?
Yes. The very short answer is yes. 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. Now, of course, if we have now for two years moaned and complained 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 the input costs are falling and the sales prices only follow those with a lag. Yes, indeed, the pricing in Q1 will be lower than in Q4.
Thank you. There are no more questions. Before we close this session, I want to advertise that the Q1 result publication will be then on fourth of May. Thank you all for participating, and thank you, Klaus and Toni.
Thank you.
Have a good day.