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1Presentation of the groupPresentation of SequanaLeveraging innovation to cement leadershipInnovation is a vital part of the sales strategy pursued byArjowiggins’ divisions, which all have their own research anddevelopment teams.To anticipate and meet consumers’ needs, each R&D departmentworks closely with operational teams in order to develop new,highly innovative products. Partnerships developed with outsideresearch institutes and laboratories help transfer fixed costs outof the Group and provide access to highly specialised resources.Arjowiggins’ divisions put innovation at the centre of their strategy,helping to forge powerful brands and giving them a real edgein their respective markets. These innovation efforts continued in2012, resulting in the launch of various new products includingPowercoat paper for printed electronic applications and DiamoneXtra highly resistant paper used for banknotes.Research and development expenses totalled €12 million in 2012,or 0.8% of sales (2011: €11.7 million).Arjowiggins – Results and strategy2012 highlights■■Production model optimised and capacity adjusted in line withdemand, with the closure of three plants.■■Product innovation efforts stepped up.Improved operating performance2012 witnessed a slump in volumes of printing and writingpapers in Europe, North America and in the creative papers segmentcoupled with strong downward pressure on selling prices.However, specialty businesses remained buoyant, particularlythe security solutions and medical/hospital activities. Sales weredown by 3.2% on 2011 to €1,419 million (down 5.4% at constantexchange rates).Arjowiggins benefited from the drop in raw material prices overthe year. Waste paper prices fell sharply and the price of pulp wasbelow its 2011 levels but remained higher than expected. Cottonprices also fell back to near-2010 levels. The cost of energy andchemical products remained high. The fall in raw material pricesalong with an improved product mix for specialty businesses andcost savings helped Arjowiggins offset the volume downturn.EBITDA came in at €64 million, up 29.2% year-on-year, andrepresented 4.5% of sales.Recurring operating income came in at €14 million compared to€22 million in 2011 (which included a gain of €17 million arisingon pension funds in the UK, with no impact on EBITDA).Operating margin came in 0.5 points lower at 1% of sales.Optimisation of production modelIn the face of structural decline and overcapacity in the marketfor printing and writing papers, Arjowiggins is constantly adaptingits production capacity in line with demand. In August, itclosed a paper machine at its Chartham plant in the UK. Thedeteriorating economic environment during the summer acceleratedthe decline in volumes, and the company decided to shutdown three further plants to optimise efficiency and reduce costs.The Witcel plant in Argentina and Dalum Papir A/S plant inDenmark closed in the second half of 2012. Together with themachine shut down at Chartham, this represents a total capacityof 114,000 tonnes (including 103,000 tonnes for Dalum PapirA/S). Closure of the Ivybridge plant in the UK with a capacityof 14,000 tonnes should be effective in the first quarter of 2014.These measures will reduce Arjowiggins’ total production capacityby around 10%, making it easier to manage and improve plantefficiency and achieve a capacity utilisation rate of above 90%.Thanks to the flexibility of its production facilities, all productranges were able to be transferred to the company’s other sites inFrance, the UK and Brazil.Key figures(€ millions) 2012 20112010managementpro formaSales 1,419 1,465 1,489EBITDA 64 50 112Recurring operating income 14 22 (1) 66Operating margin 1.0% 1.5%Cash flow from operating activities 55 43 45Capital employed 357 472 561 (2)Recurring operating income/Capital employed (ROCE) 3.9% 4.8% 13.6% (2)Net debt 275 313 353 (2)(1) Including gains of €17 million arising on changes to pension plans in the UK (unallocated to divisional operating income). Adjusted for these items, recurring operatingincome amounted to €5 million instead of €22 million and operating margin came in at 0.3% instead of 1.5%.(2) 2010 published data.34 | Sequana | 2012 Document de référence (English version)
Presentation of the groupPresentation of Sequana 1Changes in cash flows(€ millions) at 31 December 2012 2011EBITDA 64 50Change in working capital requirements 24 32CAPEX (34) (44)Disposals of non-current assets 1 6CASH FLOW FROM OPERATING ACTIVITIES 55 44Net debt 275 313Graphic divisionArjowiggins Graphic produces a wide range of coated anduncoated papers adapted to four-colour printing. These paperscan be white or natural with a glossy, semi-matte or matte finish,and are designed for publishing, advertising and printedcommunications.The division’s eco-friendly offering includes a comprehensive lineupof 100%-recycled papers, FSC®-certified papers, and papersproduced with a mix of FSC®-certified recycled and virgin fibres.The division’s Greenfield plant is a major asset in promoting itseco-friendly offering as the European leader in the production ofrecycled, premium extra-white pulp certified FSC® for graphicapplications.Arjowiggins Graphic also enjoys strong positions in certain nichemarkets for specialty papers such as for playing cards, labels andflexible packaging, transfer paper, posters, displays, point-ofsale(POS) advertising, tissue and fireproof papers. ArjowigginsGraphic boasts top-ranking positions on most of its markets. Itscurrent growth strategy is focused on specialty papers, where ithas launched a host of highly innovative products, for example inthe laminated segment, where FSC®-certified laminated paperis used as an alternative to plastic for gift cards and SIM cards.The division also offers a wide range of sterilised packaging solutionsfor the protection of disposable medical equipment (syringes,catheters, scalpels, compresses, gowns, etc.) as well as sterilisedsealing and wrapping solutions used in operating theatres or to protectreusable medical devices in operating theatres (surgical knives,forceps, etc.). The Propypel, Ethypel, Arjogreen and Sterisheetbrands offer a vast range of sterilised packaging solutions certifiedto the strictest medical standards and featuring high bacterial barriers,controlled permeability and suitable strength.The division has to contend with fierce competition in its numerousmarkets and has carved out a unique position on each of itssegments.Arjowiggins is Europe’s sixth largest producer of coated paper involume terms and the leading producer of recycled graphic papersin Europe (excluding LWC). The division’s main competitors areBurgo, Lecta, Leipa, Lenzing, M-real, Sappi, Steinbeis, StoraEnso and UPM. Demand for graphic papers is linked mainlyto the publishing, magazine, catalogue and illustrated bookssegments.In the healthcare sector, Arjowiggins Healthcare is among theleading producers of sterilised packaging products and papersworldwide in terms of sales. Its main competitors in this sectorare for example Ahlstrom, Billerud and Neenah. Demand in thissector has been driven by increasing demand for healthcare ingeneral, by the growing use of disposable instruments over reusableinstruments, by the development of ready-to-use productsand by stricter health regulations.2012 highlights■■Robust growth in the eco-friendly offering.■■Ongoing innovation in specialty businesses.■■Closure of the Dalum plant in Denmark.2012 results2012 witnessed a slump in volumes for graphic coated papersagainst a backdrop of strong downward pressure on selling prices.The fall in demand for graphic papers accelerated from the summeron, fuelled by the economic crisis in Europe. This preventedArjowiggins from implementing the price increases scheduled forthe second half of the year. In contrast, demand held firm in mostspecialty businesses, and particularly in laminated, medical/hospitaland recycled pulp activities. Sales came in 2.0% lower yearon year, at €569 million.The division benefited from the fall in pulp and waste paper pricesover the year. EBITDA came in at €14 million, up €12 million on2011, and represents 2.5% of sales.Arjowiggins Graphic should see a reduction in its fixed costbase as from 2013 following the closure of the Dalum plant inDenmark at the end of November.Innovative eco-friendly solutionsArjowiggins Graphic’s three-pronged eco-friendly strategy isbased on:■■the use of recycled pulp based on waste recovery, backed bystrong ties with end users and local regional authorities;■■the reduction of its carbon footprint, which helps curb greenhousegas emissions; and■■the use of FSC®-certified virgin pulp.Sequana | 2012 Document de référence (English version) | 35
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8, rue de Seine92100 Boulogne-Billa
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