Suominen Oyj ($SUY1V)

[Audio Gap] But also a bit the Latin American markets, mainly Brazil at this point. And then 3 factories in Europe, in Spain, in Alcante, in Italy near Milano and then one in Finland in Nakila. And as Anu was saying, our head office is [Audio Gap] operating close to customers in very relevant markets. And then that drives me to explain you also a bit more in detail what I was meaning with we are an innovation leader in this industry [Audio Gap] more hygiene in the world and the recent pandemic in 2020, 2021 was there to remind the importance of hygiene for personal use, for home use and all other industrial use. But the second trend that is really important in this industry is the sustainability trend and Suominen is very clearly a pioneer in sustainable products. It actually started 20 years ago with -- or almost 20 years ago in 2007 with the launch of our first sustainable product portfolio under the brand name BIOLACE We also launched -- invented in the market the dispersable wetlaid spunlace category for MTT. MTT stands for moisturized toilet tissue. And this is an extremely relevant category because this is the one that is most growing in the mature world, if I may say, particularly growing very rapidly in the U.S., but also in Europe from a much lower base. [Audio Gap] over time, a strong R&D leg into the company, a capability that is basically across all our different operations. So we have a global management of R&D, but with local applications. We have 13 R&D professionals. We have 2 pilot lines, which means that we also co-develop and offer co-development to our and co-testing to our customers. For instance, we are one of the most advanced in pulp, in fiber solutions, and we offer to our customers testing new applications with them. And as I said, we have capabilities for R&D basically in all our 7 plants with particularly this pulp capability that is extremely important as we are engaging strongly on the sustainability with pulp renewable materials. So summarizing Suominen today in a couple of words. Suominen as an investment, I would say, is summarized in 4 really important points. First of all, we are in a resilient growing market with low-cost competition, however. Second, we have, as I said, a leadership position. Third, we are at a turning point where we have renewed or changed our operating model. We have renewed our company management, and we have reset our strategic focus. And then point number four, we have a comprehensive full potential program that has been launched at the end of January this year in order to deliver much higher profitability than we have been delivering in the recent past. So what do I mean with resilient growing market? Well, this market has [Audio Gap] so that creates solid tailwinds. Second, we have also the search for more hygiene, more convenient and more sustainability. At the same time, we see production rising from low-cost countries. with today a relative overcapacity when we look globally at the entire global map of the nonwoven, which obviously requires from a leader in nonwoven like Suominen to become more and more competitive. Therefore, also the search and the program that we have launched at the end of January. We have a leading position because we are located into the right countries and countries where there is a need for more local supply. Customers are looking more and more. This is not just linked to the -- after COVID, if I may say, where the supply chains have been much more regionalized to localized. But we really have markets which are locally undersupplied. I'll take an example. Brazil, for instance, is at 60% supplied with imports, which means that local supply -- local domestic production is too short of the local demand. And therefore, there is space for growth in the future. We have renewed the management, as I said. Why? Because we have raised this transformational agenda, and we need a new leadership and a new operating model to drive this transformation. It's not -- it's extremely important, obviously, people in business. It's not only about people, it's also about what we are going to do and how we're going to do it. And for instance, while there has been probably a tendency of volume over margin over the past, we have shifted to margin over volume. Scaling the company will come, but it will come later once we have reset our profitability. And the Full Potential program is what I would like to now explain you in more details. It's really around 3 pillars. The operational performance improvement is number one. Second, we will go over the next couple of years for a couple of targeted investments in low-risk areas and then some structural profitability measures complement this program. So let me take you now through this profitability resetting program that we have. We call it the Suominen Full Potential program. Very quickly, the -- why we are doing that? Well, it's relatively simple. The performance of the company in the -- after pandemic. So if you start from 2022, and this is pretty visible in the chart, which you see projected on the slide, it shows that after the extremely high demand of the COVID pandemic period, then the company went down in profitability because of this oversupplied market and also oversupplied capacity at Suominen, which has meant last year to shut down one production line. The growth has been -- if we look at the long term, so almost 10 years time frame has been a minus 4% CAGR, which is obviously not the right trend. And then the profitability went from a 10%-ish level in terms of EBITDA margin to 3% over the last 4 years. And that's where we said we need to change this trajectory. It is extremely important because our customers want to work with Suominen. They value Suominen as an innovation and sustainability leader. But at the same time, they want to play and work and partner with a supplier that is reliable in production and consistent in supply, which probably has not been the case in the recent past. We have the chance to have almost 700 employees who have a strong engagement, a strong passion for the company, a strong tenure also in the company for many, and they have faith into the management and into the direction that we are giving to the company now to revert to better days. And also, well, to you, shareholders, investors, well, obviously, investors expect a return to a share price increase and a return to dividend, which has not been given for now 2 years in a row, and that is what is due. And therefore, this full potential program is aiming at transforming the company in terms of how we do things, but also what we deliver. So looking at it in a very schematic way, what are we seeing for the mid- to long term? We're seeing basically 2 periods. And we're going to talk specifically today about the Phase 1, not about the Phase 2. The Phase 2, which is going to be about scaling the company in the future will come, but it will come once we have reset the company to the right profitability level into a healthy cash generation and into delivering consistently to our customers, to our employees and to our shareholders. Our ambition through this period, which we are calling the period of resetting the profitability level, aiming at 10% EBITDA margin. The ambition is not only profitability is number one, as a license to operate to become a zero accident company. I want to say that our performance in safety is really good. We had only 7 accidents altogether in 2025 that that's a good performance. But we want also to be delivering profitable growth and number one, profitable, particularly in cooperation with our customers, we have some successful development or co-development with some key customers around the world and particularly in sustainability matters. As I said, if we do all this or when we do all this in the midterm, then we will offer return to our shareholders. I have mentioned now a couple of times that we have renewed our operating model and renewed our leadership. So let's be concrete. -- renewed the operating model, what does that mean? We were organized in an operating model, actually, I would say, even recommendable in a company where the name of the game is continuous improvement. That's the best way to be well aligned between production, supply to customers. Now we are not in that situation today of January to change the operating model by giving -- by creating an engine into the company, a global engine into the company between operations and commercial operations, manufacturing operations, commercial operations. So we have created with this -- with a new leader, Francois Guetat in terms of Chief Operating Officer. We have created this line of command, direct line of command to procurement, production and supply is managing directly and working hand in hand, I have to say. So the choice of people was extremely important in this case to make sure that we have [Audio Gap] and Technology Officer. And the title may surprise, but I think it's very powerful because Chief Commercial Officer has a very clear resonance of managing globally the sales for our global accounts, but also in terms of [Audio Gap] to remember. But then [ Marcu ] with a past in technology is also our technology Officer -- and this is a fantastic combination. And the reason I believe it's fantastic combination is because every time I have been at customers, and it has been many times since I joined Suominen back in August 2025, well, the agenda at the table in our discussion with customers is, of course, all the commercial matters that usually customers and suppliers have to discuss. But also, it's all about what innovations for the future, what does it mean convenience? What does it mean hygiene? What does it mean quality improvement? What does it mean sustainability development. Therefore, the technology aspect is permanently at the table with customers. And I thought this was a natural while surprising, a very natural and powerful association. The other executives in the team, -- as introducing at the beginning of the meeting is our new CFO. He joined actually yesterday, the company. Very pleased to welcome Kimo in the company while thanking Jane for amazing job until now and until mid-June. Lisa Persumo, who is our new Chief Human Resources Officer. She joined on the 21st of April this year. And Marika Vaciarta, who is our Chief Strategy and Transformation Officer. She is also very powerful, streamlined team. It's a small team acting together, knowing well for many of us, the U.S. market, but we are all basically centered around Esport, which means that the work is fluid, meeting together is fluid. But for instance, Francois Guetat, [Audio Gap] We represent well in our geographies. So that's for the platform suggested at the beginning, combining 3 pillars, 3 very complementary pillars. Number one is what I would call the sanity. It is how do we improve to the best of the current structure, the operational performance. The second is we will go through some targeted investments, which are framed already, but nothing is decided, and we'll come back later to this when it is relevant in time and also when the operational performance will have started to deliver better results. And third, some structural profitability measures. What do we mean with operational performance? I'll come back to the content covering end-to-end operations, procurement, pricing, commercial excellence structural cost reduction and of course, manufacturing efficiency. In the targeted investments, I'll come back also to explain or suggest the frame of what we are seeing also in the structural profitability measures. Those are the 3 pillars which will bring us to the 10% EBITDA that we have as an ambition from the 3% where we are today. We have, of course, a business plan, meaning we have evaluated each and every single initiative under these 3 pillars to estimate how much the impact will be. We believe at this point, that operational performance will provide us 3 percentage points, sorry, of EBITDA increase. The targeted investments at least 1% and the structural profitability measures, 2%. That is on top of the underlying business performance improvements that we are going. It means that altogether, it is a relatively safe bet to say that our ambition is reachable to get to the industry median profitability of 10% EBITDA that we are putting in place and with the capabilities that we are embarking, we are setting the company up for success within the next couple of years. So now I'd like to take you through quickly, not in too much detail, each of these 3 pillars so that you get a better understanding of what is it that is going to contribute. First pillar, operational performance, and that is foundational for the rest, if I may say, because if we don't have the sanity, obviously, well, it probably doesn't make sense to put more money into other [Audio Gap] At the next levels in the organization, but it's basically 80% executed. So -- and that is currently working well. You see many companies changing operating model, and it is relatively messy or at least confusing for many months. I have to say this has been, I think, beyond my expectations in terms of how smooth [Audio Gap] This is exactly what Suominen needed to do [Audio Gap] activities, fixed cost savings. You may have heard of by the company that in May 2025, a EUR 10 million cost saving program was launched. I'm pleased to say that this fixed cost savings program is well underway. It's basically executed at 80%. We are confident that the EUR 10 million will be reached within 2026. Some of it has been saved in 2025 Some of it has been saved in 2025. Most of is a broad initiative, which starts obviously pricing management process in having -- the impact of the commercial excellence has been in not an--, but it's kind of such a broad type of activities that we believe better under promise and over deliver. already in the past a well-managed aspect of the company. Where we have probably more, how should I say, opportunities for savings is on indirect supplies and materials and contracts. But of course, we are uncovering all the stones and looking at all possibilities to reduce our procurement cost and the raw material, energy and other supplies cost for the company. And then finally, operations, which is like the fixed cost looks into our business plan, the bigger part of the impact. Well, bigger part because it's also where this has been the lowest performance over the last, let's say, quite many years that we can analyze. There has been a lack of maintenance of equipment in the past, and we are restoring the -- I'll come back to that. We are restoring the equipment back to basic conditions in order to make our equipment more reliable in terms of output. I mentioned about procurement objectives to reduce cost or to create more savings in terms of raw materials, but it's also important that -- to note that the biggest saving in terms of raw material cost is actually coming from the operations in the way we operate and manufacture our products by reducing relatively high upside, if I may put it like this. And to do that, we're going to -- or we have started to introduce the well-known TPM methodology, so total productive maintenance, which is very well known in many industries, started in the automotive in the '70s. That methodology is proven. It is a very effective methodology and it builds -- so that's about the chapter of operational performance improvement for the company. Second pillar is targeted investments. And I think I mentioned already that we are low impact -- so low-cost CapEx in low-risk areas where we know that the return is a very high probability of success. we have 3 categories. And all are linked to problems we want to solve. The first one goes through all the factories, but some particularly more than others, particularly in the U.S., where we need to restore the factories, the equipment back to the basic conditions of manufacturing and operational reliability. We have had in the past too many operational instability. The proof is in one of the factories for the ones who were following already the company in 2025, in July last year, we had a relatively dramatic incident in one of our U.S. factories where one line was interrupted in production for 2.5 months. And that should not happen if we have the equipment restored to basic conditions. And second, if we have preventive maintenance, which we didn't have in terms of manufacturing process. That will require, obviously, some limited, but still increased investments, but it will drive much higher output and much higher output while also improving that this is an initiative that will take time. It's not an investment that you plug and then overnight, it changes the condition. It is much more of taking probably the next 3 years to do. But we have started already and with focus in the U.S. Second, we want to unlock growth in the highest profitability unit. I suggested Brazil before saying that, for instance, Brazil is a country which is undersupplied by domestic production. We are the leader with more than 20% market share in Brazil, but we could be growing more in Brazil, for instance, if we add more capacity. We're looking into solutions to upgrade our equipment without putting new lines in place. So there is no plan for a huge capacity expansion, which would mean huge CapEx also. We are looking for intelligent ways of increasing our possibility to grow, and we believe that we have a path to it. So that's the second chapter in this investment pillar. And then the third one is about improving through some targeted investment, improving our raw material efficiency, particularly when the setup, the production setup is today not the optimal one from a way to reduce waste mathematically a lot by changing -- so all of these are relatively limited investments when it comes to CapEx level. It is very targeted 2 years. And that's why we have chosen to focus on those investments going performance improvement. And then the third pillar, the structural profitability measures will be particularly about focusing on reducing our low profitability volumes. We have some low profitability portfolio and also reducing our fixed cost further in some other areas than our direct personnel and organization. So first of all, to reduce the exposure to low-margin volume, well, the first thing to do is to increase our installed base utilization because obviously, our -- if we have lines which are not enough utilized, or where the OE or the overall equipment effectiveness is too low, then obviously, the cost that we are sharing with the volume is not ideal and can be improved. So the increase of the installed base utilization is number one. Number two, we need to have a conscious and structured and systematic way of is relatively commoditized. I said that there is low-cost countries, supply and therefore, competition. The name of the game for Suominen is to work into value-add products, innovative products, more sustainability, more functionality, more convenience and working with reducing the exposure to low-margin volumes. And then we will also address some burden we have from some fixed costs and other contract structure that we have developed over years, which are not ideal. So we will address this through different actions, addressing those particularly those contracts through, for instance, contract renegotiations and other more structural actions on our installed base. And that is planning to -- that is planned to deliver about 2 percentage points of improvement on the EBITDA margin. So that's for the activities, what we're going to do. I said a bit also about the how we're going to do it. At the end of the day, it needs to drive the company to have also a healthier financial situation and that there, I mean, the balance sheet. The balance sheet today is not solid enough. We have --is not that we have too much that it's more that we have too little EBITDA. Therefore, all this focus on the profitability of the company. But also then short term, we need to generate more cash in order to to maneuver into our transformational plan. And that's why we have decided to offer pillar that you saw of operational performance improvement will drive better cash flow, and that should drive us midterm to be at a leverage in the corridor of 2 to 3x EBITDA. That's [Audio Gap] Could drive us to 1.5 to 2x this meeting today. We are, therefore, contemplating a rights issue to raise capital in the amount of approximately EUR 28 million gross. For that, we have made the announcement yesterday of this offering. And we have also invited yesterday for an Extraordinary General Meeting of Shareholders that will take place on the 8th of June. Obviously, the Board of Directors following the EGM authorization will work and decide on the terms and conditions of this capital raise. And the reason I explained already, but repeating that why do we need or how are we going to use this capital raise? Well, that's basically 2 things. Number one, strengthen the company's capital structure. Second, it's about accelerating the execution or enabling the execution of our full potential program and what it means for the 3 pillars that I was just explaining. Next to this is really important to say and to know that we have -- I have said many times in different anchoring shareholders in the name of the Capital and then the Eola company that represent together 49% of the shareholding. And we are blessed because they are the #1 supporters to -- first of all, because they are long-term oriented. So they are at Suominen, they believe in Suominen and they are there for the long term. But also because in this particular case, when we, as management, have presented our proposal to plan for a capital raise, they both support the idea, not only they support, but also they have decided to commit the underwriting -- I take the opportunity to thank in this meeting are Danske and Nordea, and they are arranging and supporting us, helping us with the entire process. Ending up with just a few dates, which I guess are repetitions compared to what I said. The EGM invitation was sent yesterday through stock exchange release. The EGM will take place unless otherwise on June 8 next month. And then the details are still -- the details of the rights issue are still, of course, to be decided and announced in terms of terms and conditions. And then the subscription period will be basically in June after the EGM until very early July. That's what I had planned to tell you now. And I think we kept quite some time for -- in the session for you to ask questions if you may have. And then I invite my colleagues, Kimoane and Anu to be back into the meeting so that we can take your questions if you have. Thank you for listening.

[Operator Instructions] [ Joni Sandvall ] from Nordea. Maybe one question on the commercial excellence side. You were speaking about --we could see improvement in, let's say, in your mix from this side?

Yes. Thanks for the question, Jonny. So this is -- like I said, maybe not on this particular topic, but on other topics, it's not an overnight turnaround. yes, part of the portfolio and part of the market is commoditized. So what means in commercial excellence is the #1 thing that, yes, has happened already, and that was overnight is to say we need to be much more systematic and structured into analyzing our portfolio where we make the right level of margin so that we keep our customers being competitive, but we are also us profitable. And then we need to be very clear where we are not making money or not enough in order to support the company's future. And based on this, once you have made that honest and conscious analysis and keep it as a process for the future, then some decisions have to come. And -- but a decision to exit eventually a product requires that you gain another product or another customer and so on. So that's why I'm saying it's not overnight. Your question is when are we going to see impact of this? I would say -- but where are you going to see it into the P&L [Audio Gap]

[Audio Gap] elevated gas prices for example in the market.

Elevated -- sorry elevated?

For example elevated gas prices and other raw materials. [Audio Gap]