Suominen reflects on average results

Related tags Packaging and labeling Retailing Marketing

Third quarter results from Finnish firm Suominen suggest that 2003
has not been a particularly great year for those operating in the
packaging industry. This years' financial performance is not
expected to reach the level of 2002.

Third quarter results from Finnish firm Suominen​ suggest that 2003 has not been a particularly great year for those operating in the packaging industry.Although Suominen is hopeful that net sales for the entire year will exceed those of last year - due largely to the acquisition of Codi - financial results as a whole are not expected to reach the level of 2002.

Suominen's profit before taxes for the ninemonth period was €9.4 million. The nonwovens business area recorded an operating profit of €5.7 million, which represents a decline on the previous year. The firm's flexible packaging sector recorded an operating profit of €3 million, representing a 3.5 per cent decline fromlast year, while the webbing products business made a loss of €300,000.

Growth in demand for the nonwovens manufactured by Suominen has slowed down, reflecting increasing competition in the European sector. Sales of hydroentangled material used in wiping and hygiene were also down from 2002. The company claims that the financial performance for the period under review was adversely affected by the high prices for plastics during the early months of the year.

Production efficiency has also declined, due largely to low capacity utilisation rates and an uneven load onproduction. Production in the business area was adjusted to current demand at the end of the period.

Sales of packaging for food products, hygiene products, and the retail sector were on the level of the previous year. Sales of special products declined a year-on-year.

There were a few rays of hope however. Sales in Russia and Poland continued to increase, while the company's cost reduction programme in this business area has proceeded according to plan. The company estimates that €500,000 will be saved in comparison with 2002.

The third quarter results also reflect a period of transition for the company. An agreement regarding the acquisition of the shares of the Dutch company Codi International from its management and the private equity firm Gilde was signed in August, and the acquisition was finalised on 2 October 2003.

The debt free acquisition price is around €62 million and the final value will be determined on the basis of the company's EBITDA for 2003 and 2004. Codi is the third largest converter of wet wipes in Europe, and in 2002, the company recorded net sales of €85.2 million.

Following the acquisition, Suominen's intends to carry out extensive restructuring. The new business areas will be Suominen Wet Wipes (Codi), Suominen Nonwovens and Suominen Flexible Packaging. Webbing Products will become part of the group's other business operations.

Nonetheless, Suominen predicts that growth this year will be slower than in previous years. On the basis of contracts with key nonwovens customers and the customers' own updated estimates of need, sales for the entire year in the nonwovens sector will in all likelihood be down 10 per cent on last year. In flexible packaging, sales for the entire year are estimated to be on the level of the previous year. Sales are expected to increase particularly in Russia and East Central Europe and to decrease slightly in Finland.

Last week, FoodProductionDaily.com​ reported that Stora Enso, another Finnish packaging firm, was also finding 2003 to be a rather tough year.

Related topics Processing & Packaging

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