THE C-LEVEL INTERVIEW

Interview by Valérie Lechiffre

Hans Sohlström: « More than ever, Ahlstrom-Munksjö’s mission is to expand the role of fiber-based solutions for a sustainable and safe everyday life »

The specialty and technical paper segment 1. What are your production and sales volumes is more buoyant than and how many mills do you operate globally? ever! In the midst of the coronavirus pandemic, HANS SOHLSTRÖM: Ahlstrom-Munksjö is a global leader in

Hans Sohlström, sustainable and innovative fiber-based solutions. Our offering

President and CEO of the includes filter materials, release liners, food and beverage pro-

Finnish group Ahlstrom- cessing materials, decor papers, abrasive and tape backings,

Munksjö, explains his electrotechnical paper, glass fiber materials, medical fiber mastrategy and positioning terials and solutions for diagnostics as well as a range of speon the market. cialty papers for industrial and consumer end-uses. In 2019, our annual net sales were around €3 billion and the Group generated an Ebitda of €313 million. In 2019, our annual net Last year, our production was about 1.5 million tonnes (- 4% compared sales were around €3 to 2018). In the last 5 years, our production volume has declined slightly as a result of increased customer and product focus in order to increase profitability. However, in our specialty business, value is much more imbillion and the Group generated an Ebitda of €313 million. portant than volume! In a nutshell, our core competence is about combining fibers into high-added value products. The more technically-advanced the product is, the better it is for us! Our key strength is that we have leading global positions in chosen segments. The Ahlstrom-Munksjö share is listed on the Nasdaq Helsinki and Stockholm. Our head office is based in Helsinki.

2. What are your main markets geographically? For which segments do you see the best prospects at the moment?

HS: In 2018, our Group has acquired the US company Expera (net sales: €616 million) as well as the Brazilian company Caieiras (net sales: €76 million). Recently, we have also sold the Glass reinforcement and Fine Art Paper Businesses. We are also in the process of acquiring Minglian, a Chinese decor paper manufacturer. We have a global network of sales office. Our group is composed of 45 plants located in 14 countries in Europe, North America, South America and Asia. We employ about 8,100 people (48 nationalities) and we serve more than 7,000 customers in over 100 countries.

Our group is composed of 45 plants located in 14 countries in Europe, North America, South America and Asia. We are operating on growing markets, very much driven by sustainability trends.

We are operating on growing markets, very much driven by sustainability trends. Our exposure is geographical balanced with a broad range of end-uses. Our consumer businesses are diverse: Medical and Health-Care products, Customer goods, Transportation, Home Building & Furniture and Industrial (steel, glass…). Our cornerstones are local accountability, efficiency and agility, customer value and profitable growth. According to me, Medical and Life Science, Safe and sustainable food packaging, Label materials, Flooring and reinforcement Industrial filtration media offer the best prospects for the time being.

3. How did you react to the

Coronavirus crisis in terms of production, organization and offer ?

HS: Our response to this unprecedented pandemic was very rapid and coordinated. At the very beginning of the crisis, all of our 45 manufacturing plants have been operating. As soon as January 23, 2020, we initiated a centralized crisis alert team to carry out a Global Pandemic Contingency and Preparedness Response Plan. We have established a COVID-19 Safety Protocol to ensure safe operations and customer service. In addition, we made local adjustments where necessary according to country level or local health & safety regulation and guidance. One-of-a-kind collaboration started also with the universities of Turin, Milan and Bologna to offer Ahlstrom-Munksjö’s materials and testing capability in Italy to support all the requests the local authorities were asking to assure good quality of masks. We have taken strong and active measures to protect the wellbeing of our employees, operate our plants and serve our customers simultaneously. We experience strong demand in the enduser segments catering to health care and life science industries, which corresponds to 9% of our net sales. Our offering includes solutions for personal protection equipment such as face

masks, drapes and gowns, as well as diagnostics materials for rapid test kits and venting filters for devices used in the treatment of patients with respiratory disorders. We fight the epidemic also by increasing production of face mask materials with machines used for filtration and nonwoven materials. Our technology is unique and generates protection that is better than what was available in the market at that time. For decades, our medical business has been making fabrics used to construct surgical gowns and drapes, pleated surgical face masks, protective apparel and sterile barrier systems. These high performing medical fabrics are used around the world in operating rooms and clinical environments to protect health care workers and patients against viruses, bacteria and fluids. In addition, our medical business unit’s average coverstock fabric production contributes to an estimated 50-60 million finished face masks per month. As a result of the increased demand from the COVID-19 pandemic, that number has nearly tripled. In April, Ahlstrom-Munksjö has produced the coverstock fabric being used to make over 150 million face masks per month. Besides, our Liquid Technologies business produces high-quality filters for laboratory sample preparation and life science diagnostics materials, used by laboratories and manufacturers of rapid test kits, in addition to high-performance media for water purification devices. This activity also produces components used in rapid test kits for fast detection (for blood samples) and medical conditions, filter media for artificial respiratory device used in respirators, screening of infection disease, virus and contaminants removal for safe drinking water. Developing a rapid test for COVID-19 is one of the key areas that researchers around the world are targeting in order to quickly isolate those infected. Some of these tests are based on the lateral flow immunochromatographic assays prin-

In one way or another, around €260 million in our global sales are connected to medical and health activities.

ciple, where simple cellulose-based devices are intended to detect the presence of a target analyte in liquid samples, blood for instance, without the need for specialized and costly equipment. Our Medical and Liquid Technologies Business Units generate, respectively, an annual TO of €90 million and €70 million. But other products that are serving the medical life and healthcare segments, such as release liners or packaging materials, are also included in our portfolio. These activities generate an additional turn-over of €100 million. As a result, in one way or another, around €260 million in our global TO are connected to medical and health activities, which represents around 9% of our global sales.

4. What have been the latest innovations introduced in your products lately?

HS: Our Group offers tailor-made customer solutions. Our value proposition is based on innovation, quality and service. Around €300 million (10% of our turn-over) come from products which have been developed in the market over the last 3 years. For instance, in our French Research Centers in Pont-Evêque and Apprieu, we have indepth information about 30,000 different fibers (95% are natural whereas 5% are synthetic). Recently, we have developed many value-added products in various segments, such as : TrustShieldTM, a single use fabrics for ultimate protection; CelluStrawTM, a fiber-based solution for paper drinking straws; LamiBakTM, a release base paper certified for food-contact or Tex-StyleTM, an extra resistant composite abrasive backing.

5. What are your current preoccupations and what could make your life easier at the moment?

HS: Last year we experienced some contraction in global demand and consequently in our volumes. This was also the main factor impacting our profitability. But our deliveries and comparable EBITDA in Q1/2020 are expected to be higher than in Q1/2019. Moreover, the company’s liquidity is strong with no major refinancing needs before 2022. The early signs of improving demand that we experienced in the beginning of 2020, has also turned into year-over-year growth in deliveries in January and February. However, due to the current market circumstances, the Group had to move to a quarterly guidance.

6. Sustainability is definitely a concern for consumers these days, and thus your clients by extension. How do you respond to these requirements?

HS: All of our businesses are very much driven by sustainability. We have implemented 30 Sustainable KPI within our group. In terms of sustainable environment, we are oriented towards several objectives: better performance, safer materials, less resources and less impact. For instance, Ahlstrom-Munksjö is involved in the United Nations program (UN Global Compact) as well as in EcoVadis (we received gold for the 3rd consecutive year). What is also important is considering sustainability in our product offering. All of our products have an important sustainability aspect. In addition to the solutions we offer in medical matters as we have seen previously, our offer includes many other products which take into account the environmental dimension. For instance, AhlsWe have implemented 30 Sustainable KPI within our group.

trom-Munksjö was the first company in the world to produce a formaldehyde free abrasive backings and fluor free food packaging materials. We were also the first company in the world to launch complete plastic free and compostable tea and coffee materials. Finally, we have also developed a special tool, EcoDesign. For each product that we launch, this tool allows us to verify that it is more sustainable than the previous one in our offer and that the one it will replace on the market.

7. What kind of technological breakthrough would be a game changer for your activities?

HS: Not one single actually because we have such a wide exposure and broad offering! Generally speaking, our product complexity is good because we have a lot of knowledge in fiberbased materials, e.g. we have, for instance, a large offering that supports in combating COVID. We also give a large offering in sustainable solutions.

8. Are you planning any investments in the near future?

HS: We have invested heavily in our production facilities during recent years. We are implementing an organic program of 13 major strategic investments of almost €200 million in four years from end 2017 to end 2021. In the current environment which is much more uncertain today than in 2019, we believe our operating model based on a common global platform and local accountability, as well as our balanced exposure to a broad range of end-uses in multiple industries and geographies, provides us clear strength.