Suominen (Helsinki:SUY1V) Q3 2025 Earnings Call

0:01 Hello and good morning from Espoo and welcome to the Suomenen Q3 results presentation. My name is Anu Ilvonen and I am the head of communications and marketing here at Suomenen. Joining me today are our president and CEO Charles Ölme and CFO Janne Silonsaari who will present our results and afterwards as usual there will be time for questions and answers. First I would like to hand over to Charles.

0:29 Thank you, good morning to all of you and thank you for joining our call regarding our Q3 results of Suominen. My name is Charles Eolme, I'm the CEO of Suominen since the 11th of August 2025, so almost three months ago. I'd like to give a few words about my background without taking too much time. I was previously the CEO of Hutemaki, the packaging global company based in Finland. I was the CEO of Hutemaki from 2019 to 2025. and prior to that I was working in many different leadership positions at Tetra Pak for 20 years, the Swedish global packaging company across many different geographies in the world including Europe, Latin America also.

1:30 I'm very happy to join Suominen and to be today addressing you with our Q3 results together with Yane, our CFO. So going straight into our results summary for the third quarter under the headline that our profitability was affected by exceptional events. which drove us to on October 15 decide based on the forecast we were seeing for the full year to reduce our outlook. I'd like to now give a few words on the results of the third quarter specifically.

2:16 Our net size of close to €100 million decreased by 11% in the quarter compared to €111.6 million last year, comparable period of last year. Yane will give us much more granularity on the variations and the reasons for this decline. The comparable EBITDA increased slightly from 3.3 to 3.4 million euro. And then the cash flow from the operations was 15.7 million euro during the quarter three. As I said, the performance in Q3 was significantly affected by exceptional events at two of our US factories. And I'd like to give also a few words of context for those results of Q3. Number one, regarding the market, I'd like to mention that the market in Europe was relatively flat in terms of demand, while the market in the U.S., which is another, of course, very relevant geography for us, the market was growing, particularly in the category so-called MTTA, which is the moist toilet tissue.

3:41 Second point. We have had a solid performance across Europe, but as mentioned, our volume in the U.S. was suffering two major incidents during the third quarter, which are exceptional in their nature. One is a significant mechanical failure in one of our production line in the US on the structural part of the production line, which has meant that that production line was out of production for two full month. and it includes also of course now the ramping up in terms of re-qualification of the nine into the commercial production and that ramp up has happened during the month of October.

4:32 The second one, the second exceptional event is a floating in another of our U.S. factories, which has meant two things, an interaction of a couple of days in the production, but also the disposal and write-down of a significant amount of our local inventory, which was on the shop floor. events at an impact of 2.8 million euro on the on the results of the three. And that means that if you exclude these two impact, then we could say that the ability of the three would have been a relatively solid, you know, above six million euro.

5:24 Also, I would like to mention that our cost savings program has gained traction. This cost savings program that was announced in the end of the quarter two, it has gained traction, and we will have implemented the majority of the actions by the end of the year. Second thing I would like to mention is the announcement that came out this morning that you probably have already seen that we are welcoming François Guetta as our new Chief Operating Officer and he will be joining and starting in the role on next Monday, November 3. François will be based in Espoo in Finland and he comes with a very strong international experience in manufacturing and supply chain leadership for instance with more than 20 years at Volvo in different geographies and then more recently he was leading the operational transformation of the company Calamar for about three years. he has worked as i said he brings international experience he has worked in france in poland in u.s and in sweden what he brings really to swimming is a very strong aspects i would summarize in three points number one transformational

6:56 leadership number two a very systematic approach to continuous improvement methodologies and three a great people skills and leadership so we are very pleased to um to to let you know that he has accepted to join us and starting immediately therefore um comes at a very good point as we want to transform um our profitability in in the company going With this, I will hand over now to Janne, who will take us through more details on the financial report.

7:36 All right, thanks, Charles, and good morning on my behalf as well. So for the net sales, as it says, the sales decreased 11% during Q3 from the comparison period and amounted to 99.8 million euro. since volume decreased naturally driven by the incidents we faced that just opened up the margins increased. Currency impact coming basically from the USD euro conversion was negative 3.7 million on the top line. And share of the new products continued on rather stable level at 30% of the net sales. And your today's level, of course, you will see that after three quarters, our net sales have amounted at 317 million euro.

8:31 and here we have net sales bridge on both third quarter and year to date level and we have opened the top line impact between organic exceptional events referring for the incident we faced during the quarter and then the currency and and similarly on the year to date level and our penalty impact basically includes volume price and mix impacts excluding the currency impact and then the exceptional items have been have been then separated on the analysis. Showing from where the comparison period quarter or year to date level and items impacting and leading to the actual 2025.

9:21 Then on the comparable EBITDA, And as Charles said, it increased to 3.4 million from the comparison period, 3.3 million, but was negatively impacted by the incidents at US plants by 2.8 million euro. On top of that, the currencies had 0.3 million positive impact for the quarter. We could say that we have continued rather stable, but as Charles stated, without the incidents, the impact or EBITDA would have been on, let's say, solid level comparing the trend we have seen in the past quarters. and regarding the consolidated statement of profit or loss what to bring up here are the main items affecting comparability and those are arising from the cost saving program we initiated in May and related position reductions at the end of the quarter too so nothing major items so roughly 0.8 million from the IACs and cash flow from operations that amounted to 15.7 million euro in q3 and Turning you to date on on positive by 5.2 million euro Main driver was improved networking capital naturally lower sales are visible

10:51 or at parts But we have been focusing on improving our efficiency on each working capital item and and this is visible especially now on q3 so on on this area naturally a a positive development which I'm I'm pleased to report and and then status update on the cost saving program update and and as as all know in way we announced a cost saving program with the targeted savings of 10 million euro at the annual level and in June we further announced that the program led to decrease of approximately 60 positions globally So saving action implementation has proceeded well during Q3 and we are on track to implement majority of the actions by the end of the year.

11:40 So this is generally a, let's say, positive side on our actions to support then further improvement on the profitability. And unfortunately, as Charles stated earlier, the incidents and the lower profit we have faced through that, we had to revise our outlook on October 15th. And basically statement as reading here is that the company now expects that its comparable EBITDA in 2025 will be lower compared to the 2024. And in 2024, Suominen's comparable EBITDA was 17 million euro. And now handing back for the for the studio.

12:26 So for any questions, then please go ahead. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Joni Sandvall from Nordia. Please go ahead.

12:51 Hi, it's Joni from Nordea and congrats Charles for the new position. Maybe first question related to your guidance. It seems that you are assuming let's say flat to declining EBITDA on underlying basis for Q4 looking now from Q3. So are you still expecting to incur some costs from these incidents that happened in Q3?

13:21 Yes, so good morning. The two events are now completely resolved. But obviously once particularly the mechanical failure that interrupted one line for two months was mechanically completely repaired. And by the way, I would like to say we took the opportunity of these two months of interruption to refurbish. entirely the line so to make it better than it was before the incident which is a positive outcome moving forward then once we've done that then we have to ramp up the commercial production which in a obviously any industry where quality is paramount means qualification with customers and so on and and therefore that takes time and a ramp up in the production that will have a slight impact on October but not beyond And that's also a reason why we considered being prudent on our Q4 perspective.

14:29 But the main impacts are behind us. Okay, okay, that's clear.

14:36 Then the question on accelerated cost savings measures. Can you give any indication of what is the delta going into 26 from 25 if we are thinking now that if you are implementing majority of the actions now before year end?

14:56 Yeah, thanks. Thanks a lot. Good question. It's Janne here. So I can confirm that we had roughly 2 million euro positive impact now during the Q3 if we compare to the previous year, third quarter. by that calculating the run rate is at, let's say, our targeted level. And naturally, there are cost items impacting on both ways, as we know, but as stated, we are on track with our plan comparing the announced target for the company.

15:30 If I may compliment, to make it specific to your question, because your question was about 2026, I think we take no risk by saying if you consider half of the impact on the PML 2025 and half the other half is the carryover that we will have in 2026 from the committee 10 million more or less okay okay okay that's clear hey then maybe question on the competitive landscape we know that there is over capacity in the market so have you seen any any changes in the in the market environment from the competitive landscape and

16:07 and how competitive are you currently if you consider also the imports to the market?

16:15 So, two aspects here. First of all, what we as a company, as a leader in this industry have to do and then what the market is showing or trending. Yes, there is competition in the market. Yes, at this point in time in Europe, The market is oversupplied. However, we have good reasons to believe that many different categories are growing, even though the growth in Europe is slower than in the US. In the US, I will not say that the market is oversupplied. There is demand, particularly in the category of MTT that I was mentioning in the introduction.

17:04 So, yes, we should be concerned about the oversupply in the market and about some competitive supply from markets which are low cost, let's put it like this, from a production point of view. However, this is particularly in the commoditized categories. Now, what can we do about it? Two main things. Number one is secure that we are particularly working on the non-commoditized categories. And this is what Suomen and we are pushing to do with our innovations for sustainable solutions.

17:49 and second reason for our cost reduction program becoming more competitive because competitiveness is one of our key structural problems because we have been having if you take a long-term perspective from the past five to ten years basically volume have been flat roughly versus cost structural costs have been increasing and that's on a long-term period of the last 10 years and therefore we need to reset we need to reset our competitiveness okay okay thanks the last question from my side now now you have started as the CEO of the company so what are the key focus areas that you are focusing going into into towards the year and and the beginning of next year So my first focus for the first couple of weeks and months has been to observe, learn, and understand.

18:52 Go around everywhere and make sure that, you know, we understand the situation well before taking actions. Now we are two and a half months after. Things start to clarify, but we are still now in a period of what I would call an intense or intensive assessment phase where the very important thing is to uncover all the stones, assess everything, acknowledge the reality of the situation, and identify all opportunities for mountain growth, and we have many, and all the improvements in terms of, for instance, what you were mentioning, competitiveness, but also operational output. So this is the focus is right now and for the next couple of weeks still on a very deep assessment of the situation.

19:55 Why is this so important? Because if we want to change the course of things and the course of things, particularly on the profitability, We need to have a very clear understanding and then move to action planning and be comprehensive in this action planning. So this is exactly what's going to happen now. The consequence of doing this thorough assessment will be a first phase that will, in terms of execution, take most likely 18 months, maybe 24 months, which I would call a phase of resetting our profitability. I can't give you the granularity of the plan of action, but as soon as we are ready with it, we will certainly want to communicate to the analysts and investors in a transparent way about what we're going to do and how much can be expected.

20:55 And then the second phase will be also to plan the long-term strategy because it's not only about resetting the profitability it will be about also mid to long term how do we scale the company to a different level in terms of growth but we should not scale the company before we have reset the profitability we are planning this a strategic 2030 strategic planning for the first semester 2026 Likely, we will come back with a thorough and comprehensive communication about it within Q2, most likely towards the end of Q2 2026. But in the meantime, as I said, once we are ready with the third phase action plan about resetting the profitability, we will invite you for some relevant communication.

21:53 Okay. Thanks a lot. That's all from me. Thank you. The next question comes from Jonas Ilvenen from Evli. Please go ahead.

22:02 Hi, Jonas from Evli. So your sales margins continue to increase year on year, but how were they quarter on quarter in Q2? Did they still increase compared to Q2?

22:18 so so the sales margin on q3 versus q2 so this is this is a little bit on on the regional level and then how the sales mix is is uh basically uh establishing so but but on on our let's say efficiency improvements not just on the let's say fixed and structural cost point of but but also on the on the variable cost meaning the raw materials and and the general production efficiency and and utilization area have been paying off in that sense that yes we have been seeing the the steady slow improvement on on the sales margins but as said naturally the the market environment is is very tough what comes to the pricing so it is it is i would say limited on that area unless we are able to to move stronger on the uh let's say that portfolio parts where our competitiveness is better. Other than that, we need to naturally improve our cost competitiveness, as Charles was just stating, and that is a key currently also at the group level.

23:31 Yeah, so in the short term, you don't really see that much pricing upside or even maybe not that much further volume recovery, just operational efficiency that supports your margin score.

23:46 Well, I would say that naturally we are looking for the volume recovery for the company on the short term. Of course, as Josh said, yes, we need to ramp up the commercial production from the incidents, etc. But that is one key lever. So we are talking about the industry where the margins are relatively low so your volume is of course the biggest lever on on going up or downside what comes to the profitability so so that is definitely one focus area the internal efficiency and it has been and continue to be and and therefore there was a announcement of the new CEO so so excuse me CEO so so naturally that is a a one of the focus areas to have the volume and and efficiency on the on the volume output and efficiency on our production sites up I would I would absolutely confirm and I will not repeat but just complement I would like to confirm what Janne is saying the operational

24:54 reliability and efficiency is our number one lever for two things. Profitability improvement, but also growth. Because with a better manufacturing efficiency and reliability, we have more demand to supply, particularly in the West. Okay, so that's our number one lever. It's our absolutely obsessed priority right now, which doesn't mean, to your question about pricing, that we're not looking at all the other things. When I answered to the previous question from Yoni from Nordea, I was mentioning that we are uncovering all stones, meaning everything around the cost structure, whether on fixed cost, variable cost on the portfolio, on the pricing, on the specific operational efficiency side by side. So we're not letting anything uncovered.

25:56 And that's why the assessment is taking quite some time because it's very easy to take one rapid action on one thing, but leaving all the rest uncovered. We want to have a very systematic approach so that we truly transform the profitability from where it is to the right industry standards.

26:21 All right, got it. And I have another question on volume outlook. So you said that in Europe the volume outlook is not as good as in the U.S., but now in the U.S. this year you've had the tariff situation that kind of affected your volumes there. So do you already see this tariff situation induced stockpiling, this Chinese import situation? Do you see it already like stabilizing now that – I mean – You previously expected, we all expected that H2 would be a lot better in terms of volumes and now the recovery was kind of postponed at least a bit. So do you already see in Q4 that the volume recovery in the U.S. continues? And I think you mentioned like that moist toilet tissue that grows particularly in the U.S. Yeah.

27:12 It's a very interesting question. I think you say everything in the question. Okay, so you gave the full answer in the question. And I will rephrase it in different terms. So, yes, the U.S. tariffs had an impact, but on H1. We're not talking about the tariffs having an impact on H2, on Q3. Yes, there has been some heavy stocking. think within March April due to the u.s. to the tariffs at the time and particularly this stocking was from with imports from China for obvious reasons now this is how much you're asking you know stalking is still there how much impact is still in the value chain honestly we don't know precisely but I will not hide our performance of Q3 behind this argument of saying, yes, it's a lot of this talking from the Chinese imports of the first semester.

28:15 I will not. But do we have the data? Specific data, no. Now, to your question, the rest of your question is Q3, I'm repeating what we said before, our volume was deteriorated by these two exceptional events. The market in Europe is what it is, but we had a relatively solid versus the demand, we had a relatively solid quarter in Europe. The problem is our lack of supply in the U.S. linked to this incidence and a few other operational constraints, okay? Q4, without any incidence, is looking good from a demand point of view and particularly into the category that we mentioned before. So there is no oversupply in the U.S.

29:14 and there is a demand for domestic production. Okay, great.

29:21 That's clear. That's all from me. Thanks. Thank you. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

29:50 Thank you. There are actually questions, so let's take them sort of in an order. There is a question from Samu Wilhelmsson asking, given that the majority of the cost savings program are expected to be done by Q4, how much of these savings are realized in Q3 numbers and how much positive effect do you expect for Q4?

30:11 I think we went so much yes so so we we I can confirm what we said earlier so roughly two million euro positive impact on on on q3 so third quarter and and then actually we are aiming to push push further so that we would be reaching the 10 million but naturally there are cost items always impacting on on both ways but that is the that is the current track record or speed on on the savings

30:38 And Rauli from Inderes has asked if your adjusted EBITDA excluding the incidents would have been over 6 million euros. Why are you expecting less than that for Q4? 6 million euro would lead to a flat full year adjusted EBITDA while you are guiding lower.

30:55 Yeah, it's a very good question. First thing is Q4 is typically a lower quarter than Q3. Q4, sorry, is a lower quarter than Q3, typically. Second, we have indicated that the commercial ramp-up after this major incidence in the U.S. is also affected significantly. the month of October. That's also a reason for being about the fourth quarter. And because of those supply problems, then we have short-term customer demand allocation, which we predict to be slightly unfavorable during Q4.

31:50 It's not the future of that Q4 and that's why we have to be based on what we know through that about Q4.

32:01 Okay, then another question from Rauli. Can you specify what was the impact of pricing positive or negative and what do you expect for Q4 on pricing?

32:18 I would expect pricing to be in the competitive context relatively unchanged in Q4 versus Q3.

32:29 And then moving on to a question from Samu Wilhelmsson. Given that you faced also 3 million euro negative effects from extraordinary events also in the comparison period Q3 2024, what would you say is a reasonable run rate in your comparable EBITDA in the current market environment?

32:54 Yeah, I think that relates quite well with Rauli's question that we just answered before. The run rate would be around 5, 6 million EBITDA. But again, Q4 is not structurally the same as Q3 from a demand point of view. Also from a length point of view, many customers close early in December and so on. So it's typically a lower month. But as we said, also the underlying business performance was relatively solid in Q3 and that should be the run rate going forward.

33:40 And finally, there is a question from Rauli from Inderes regarding receivables. Did you do a factoring arrangement or similar or what enabled to drive down the receivables quite significantly?

33:51 Okay, that's a good question on the networking capital, and I can take that. So, yes, we have had certain... payment German and similar type of arrangement like a supply chain financing arrangement with the customers. One part of the AR development is of course that we have seen a reduction on the sales side, but this is one of the areas where we have focused heavily on bringing in the effectiveness and reviewing the payment terms, payment behavior and similar with the customers. coupled with certain, let's say, special arrangements in order to release the gas. But not going on the details on each of the items.

34:39 Those were the questions from the chat. So I guess we would like to thank you for participating in this Q3 presentation and see you latest next time to hear about the full year results on January 29th, 2026.