Suominen, the Finland-based provider of flexible packaging, has announced a drop in both its sales and its profits for the first six months of this year, however sales of food packaging have remained bouyant.
The company reported that it nonwovens business area recorded an operating profit of €3.6 million, compared to €6.1 million the previous year, while its Flexible Packaging division reported an operating profit of €1.8 million, compared to €3.2 million the previous year. Its newly formed webbing products division reported an operating profit of -€0.2 million compared to -€0.5 million the previous year.
The financial results and profitability of Nonwovens declined on the previous year. Net sales declined compared with the same period of the previous year, due to low second-quarter invoicing.
The company reported that net sales for the flexible packaging division were on the level of the previous year, although financial results decreased considerably because of higher raw material costs at the beginning of the year. Sales of food packaging increased clearly, sales of hygiene product packaging were on the level of the previous year, and sales of retail and special packaging declined on the previous year. Deliveries to Russia and Poland continued to increase significantly, the company said. Suominen's also said that its cost reduction programme in the business area had proceeded according to plan, with an estimated €500,000 to be saved in comparison with 2002.
Webbing Products continued to show a loss but because of cost cuts made in the business area the loss was smaller than that of the previous year. Sales of narrow fabrics declined on the previous year. Sales of materials handling products also decreased, as demand remained slack.
The Company's gross investments in production totalled €3.4 million (€3.8 million). Of the total investments Nonwovens represented €1.5 million and Flexible Packaging €1.7 million. Modernisation of the fourth hydroentanglement line began in the Nonwovens business area. The company says that the modernisation will improve product quality and increase the efficiency of production. In Flexible Packaging, expansion of the company's plant in Poland has begun. Printing and converting capacity will be doubled. The total investment amounts to a €7 million, and it is scheduled for completion in May 2004.
The company added that the uncertainty of the world economy has affected overall consumer demand and hence sales of its products. Therefore, it said that growth this year will be slower than in recent years. Suominen's net sales for 2003 are expected to fall somewhat short of those for 2002. On the basis of contracts with key Nonwovens customers and the customers' own updated estimates of need, total sales for the entire year by Nonwovens are expected to be down 10 per cent on the previous 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. In Webbing Products, sales for the entire year are expected to remain on the level of 2002.
Special attention will be focused on the cost effectiveness of the company's operations and measures to improve the cost structure will continue. The company believes that the results for the first six months indicate that financial results for the entire year are expected to fall short of the 2002 figure.
Suominen Flexible Packaging produces consumer packaging out of plastics for industrial and retail purposes. It is one of the leading suppliers of flexible packaging in Northern Europe in its product groups, which include food packaging, hygiene products packaging, special products and retail packaging. In 2002, the company's turnover was €72.1 million. The company's factories are located in Finland, Sweden and Poland and sales offices are located in Russia and Germany.