Ahlstrom. The global source for fiber-based materials. SEB Enskilda Nordic Seminar Copenhagen, January 10, 2007 Jari Mäntylä, CFO - PDF

1 Ahlstrom The global source for fiber-based materials SEB Enskilda Nordic Seminar Copenhagen, January 10, 2007 Jari Mäntylä, CFO 2 Table of contents I Ahlstrom in brief II Achieving profitable growth

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1 Ahlstrom The global source for fiber-based materials SEB Enskilda Nordic Seminar Copenhagen, January 10, 2007 Jari Mäntylä, CFO 2 Table of contents I Ahlstrom in brief II Achieving profitable growth III Improving competitiveness IV Financial performance 3 Section I Ahlstrom in brief 4 Investment highlights Investment highlights Financial overview (1) Leading specialty materials supplier Operating in global growth businesses Innovative products with leading market positions Well positioned for growth outside Europe Efficient use of capital Sales split, 2005 Asia 9 % Ot hers 5 % Q1-Q3 Q1-Q Sales ( 'm) EBIT EBIT margin % 5.5 % 6.4 % 6.6 % 6.0 % Asset turnover ROCE % 9.1% 10.5% 10.8 % 10.4 % Attractive dividend policy North America 22 % Europe 64 % Notes: 1) Continuing business excluding non-recurring items IFRS 5 Ahlstrom materials are found in everyday applications Business areas Example applications Sales 2005 FiberComposites Nonwovens Filtration Glass Nonwovens Wipes, medical gowns and drapes, wallcovering and tea bags Engine, indoor air, industrial and laboratory filtration Windmill blades, flooring and boat hulls 23% 18% 6% Specialty Papers Label & Packaging Technical Papers Self-adhesive labeling, food packaging and beverage labels Furniture foils, abrasive paper, masking tape and engine gaskets 35% 17% 6 Ahlstrom has a clear focus in the value chain Primary production Natural fibers (wood, cotton, hemp) Oil/petrochemicals Raw material supplier Pulp producers Synthetic fiber producers (PET, PP, glass) Chemical suppliers Roll goods producer Other roll goods producers: BBA PGI Arjo Wiggins Converter Healthcare and consumer goods suppliers Transportation industry suppliers Air and liquid filter manufacturers Packaging industry Printers and siliconizers (label, decor, poster, wallcover) Marketer/ seller Consumer or industrial brands Consumers Industrial customers 7 Leading specialty materials supplier in the world Specialty papers market positions (1) Nonwovens market positions (3) Ahlstrom (2) Freudenberg Stora Enso DuPont Mead Westvaco IP BBA Kimberly- Clark Arjo Wiggins PGI August Koehler Ahlstrom Felix- Schoeller Johns Manville UPM Cham Paper Group Wausau- Mosinee Buckeye Companhia Providencia Owens- Corning Tons' $'m Notes: 1) Source: Jaakko Pöyry Consulting 2) Ahlstrom Specialty Papers volume 3) Source: Nonwovens Industry 2006 8 Substantial share of new sales through innovation Innovation in brief New products as % of sales (1) Customer focused Business area learning and cross-fertilization Serving shared market segments (e.g. transportation, building, packaging) Expertise based on broad market and technology exposure % of sales Target range 3.4% of total personnel focusing on innovation (187 professionals) YTD 2006 New products Other innovations Notes: 1) 3M definition applied: New product perceived by customer as new, not older than 3 years; Other innovations represent a significant technical contribution, not older than 3 years Well positioned for growth outside Europe through organic investments and acquisitions 9 Sales offices Production sites New wipes line, USA Q4/2006 Glassfiber tissue plant, Russia, Q4/2007 Filtration and nonwovens plant, South Korea, 2004 Specialty reinforcement line, USA, Q1/2007 Filtration plant, China, 2005 Engine filtration converting, 2006 Dust filtration line, Q4/2007 Filtration plant, Brazil, 1995 Wipes line, Q1/2008 10 Section II Achieving profitable growth 11 Operating in businesses with high growth Growth FiberComposites 6-7% growth Specialty papers 3-4% growth Drivers Substitution of products traditionally made from textiles, paper or plastic Convenience and hygiene Product development and new applications Driven by growth in release base and décor paper Increased demand of product labelling in Eastern Europe and Asia Interior decoration boom (i.e. IKEA type of furniture) High growth areas are wiping fabrics, filtration media, glass nonwoven for marine and windmill markets and release base and décor papers On average Ahlstrom markets are growing 4-5% per year Product offering spans from technical papers to technical textiles 12 Hybrid functional materials Transportation filter media Décor paper Medical fabrics Wiping fabrics Release base paper Air filter media Labels and flexible packaging Glass nonwovens Paper Textiles 30 billion market opportunity 13 Organic investments driving future sales growth Volume growth yoy 1 Ahlstrom actions Glassfiber tissue* *Russia 10% Machine speed-up, Finland, 2005 New plant, Russia, 2007 Wipes Glassfiber reinforcements Industrial nonwovens 9-10% Windmill + 10% Marine +5% New plant, Brazil, 2008 New lines, USA, 2004, 2006 Acquisition of Greenbay, USA 2004 Expansion, Finland, 2006 New line, USA, % New line, France, 2007 Release base paper Infusion products 5% 5-7% Capacity increase, Italy, 2004, 2006 France, 2007 New line, UK, 2008 Air & liquid filtration 5% Transport filtration 2%-4% New line, China, 2007 Acquisitions: Hollinee, 2004, Lantor 2005, HRS Textiles 2005 Korea and Turin expansion, 2004, Brazil, 2003 Notes: 1) Source for FiberComposites and Specialty Papers annual volume growth: Inda/Edana, Pira International, JEC Group and Ahlstrom management 14 Investments in implementation phase Investment Business area Start-up Darlington, USA, specialty glassfiber reinforcement plant Glass nonwovens Q1/2007 La Gère, France, releaseliner capacity expansion Label & packaging Q2/2007 Wuxi, China, needlepunch line for dust filtration Filtration Q3/2007 Tver, Russia, glassfiber tissue plant Glass nonwovens Q4/2007 Brignoud, France, needlepunch line for industrial nonwovens Nonwovens Q4/2007 Louveira, Brazil, spunlace line for wipes Nonwovens Q1/2008 Chirnside, UK, spunmelt line for infusion materials Nonwovens Q4/2008 Investment commitment of approximately EUR 120 million Investment criteria: 1.5 x investment in net sales in 3-5 years 13 % ROCE target 15 Leveraging advantages of scale Fiber-based specialty materials Serving growing market of 30 billion Ahlstrom shared platform Roll goods- technical papers to technical textiles Shared manufacturing processes Global sales network Centralized raw material purchasing Common IT solutions Performance excellence- sharing of best practices Platform available to add synergistic businesses through organic and acquisitive growth 16 Section III Improving competitiveness 17 ROCE target of 13% Target ROCE 13% Growing topline Improving margins Improving capital efficiency Q1-Q ROCE*:10.4% EBIT range 6%-9% over cycle Asset turnover minimum 1.7x * excluding non-recurring items 18 Achieving good capital return Performance compared to peers (2) Average EBIT margin Notes: 18 % 17 % Kimberly Clark 15 % 14 % 13 % 12 % Holmen 11 % 10 % Buckeye 9 % BBA- Fiberweb ROCE 13% SCA 8 % Neenah Paper Huhtamaki 7 % PGI Billerud 6 % UPM Cham Ahlstrom 2005 Freudenberg 4 % 3 % Norske Skog Stora Enso 2 % 1 % 0 % M-real ) Excluding non-recurring when possible 2) Sources: Company annual reports Asset Turnover 2005 19 Slightly counter cyclical to commodities Energy 16 % Other 2 % Chemicals 25 % Natural fibers 46 % 20 0 Q1 97 Q3 97 Q1 98 Synthetic fibers 11 % Q3 98 Q1 99 Q3 99 Q1 00 Q3 00 Q1 01 Q3 01 Q1 02 Q3 02 Q1 03 Q3 03 Q1 04 Q3 04 Q1 05 Q3 05 Q1 06 Q3 06 Pulp price Gross margin Please note: Raw material and energy split based on 2005 financials 20 Cutting tail Closing non-competitive plants when cash flow dries out Minimum investment in low growth businesses Recent actions: Nümbrecht plant closure, Germany, Q2/2007 Converting of liquid filtration moved to South Carolina, Q1/2007 Three sites in Europe with close to zero book value 21 Improving competitiveness Continuous performance improvement program aplus (Kaitzen) since 2002 Rolled out to all sites by 2005 Involving 1000 teams by end of 2006 Achievements: Avoiding unnecessary investments Optimizing working capital Reducing direct costs and waste Freeing capacity on production lines Full effect of the program yet to be seen 22 Section IV Financial performance 23 Financial highlights Q1-Q3/2006 Q1-Q3/2006 Q1-Q3/ Net sales, EUR million 1, , ,552.6 Operating profit, EUR million Operating profit excl. non-recurring items, EUR million Profit before taxes, EUR million Profit before taxes excl. non-recurring items, EUR million Profit for the period, EUR million Return on capital employed (ROCE),% ROCE excl. non recurring items,% Earnings per share (EPS), EUR Cash earnings per share (CEPS), EUR Average number of shares, 1000s 43,195 36,418 36,418 Please note: Share related indicators are not fully comparable due to the dilution effect of the issue of new shares in March, 2006 30 million additional costs from raw material and energy price increases 24 Q1-Q3 Q1-Q3 Cost structure 2006 % of sales 2005 % of sales 2005 % of sales Synthetic and natural fibers % % % Chemicals % % % Energy % % % Fixed costs * % % % Total, EUR million % % % * excluding depreciation, amortisation and impairment By Q we have been able to compensate for approximately 88% of raw material price increases 25 Current focus areas Improving profit of associated companies Reducing net financial expenses Reducing income taxes Tax rate for 2006 estimated to be 32% Long term effective tax rate target is 33-35% Improving `bottom line Decreasing future pension liabilities Adopting defined contribution plans where applicable e.g. UK in 2007 26 Investments, YTD 2006 EUR million ,1 136,2 Acquisitions 64.9 million 80 30, ,6 45,6 Acquisitions 10.8 million 58,1 Acquisitions 8.1 million Q1-Q FiberComposites Specialty Papers Investments for full year 2006 expected to be ca. EUR 130 million 27 Financial targets ROCE minimum 13% Gearing 50-80% Dividend payout ratio at least 50% 28 Investment summary Operating in global growth businesses Innovative functional materials with leading market positions Well positioned for growth outside Europe through organic investments or acquisitions Efficient use of capital Attractive dividend policy
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