Last month, Ahlstrom announced it would exit the consumer wipes business, sharply abandoning its role as the world’s largest producer of wipe substrates in the world. Executives said the sale of the business to Suominen was in sync with its plan to focus on more value-added nonwoven markets.
“We have been building our business portfolio based on offering high performance materials that allow our customers to differentiate and create value to their customers. We will continue to seek growth and global leadership in all segments in which we operate. This transaction allows us to free resources for strengthening and further developing our current businesses, especially in the fast-growing markets in Asia,” says Jan Lång, president and CEO at Ahlstrom.
In addition to its current spunlace manufacturing assets, Finland’s Suominen also has a strong presence in the wipes market through its Suominen Codi Wipes division. “Needless to say, we are truly excited about the acquisition. Together with the assets, products and technologies purchased, our ability to serve our current and future customers on a global basis has improved significantly,” says Juha Jokinen, general manager of Suominen Nonwovens Ltd.
Suominen’s philosophy in wipes has been to emphasize added value products, whichhave clearly performed better compared with low price bulk products. Among its offeringsare the Biolace range of sustainable products, a line that is attracting constant interest and demand in the market. These efforts are set to benefit from innovations in Ahlstrom’s supply chain which include a range of green wiping fabrics for a number of applications as well as Hydrospun, a truly dispersible wiping substrate that responds to the industry’s need for flushable wipe products.
According Ahlstrom executives, the divestment is in line with its strategy to steer the company towards a more focused business and product portfolio. In 2009, Ahlstrom conducted a strategic review leading to a revised organization and operating model.
However, it was not that long ago that Ahlstrom was bullish about its wipes business, which generated sales of about €291 million and an operating profit of €6.1 million in 2010. In mid-2008, the company even split its nonwovens business into two divisions, Advanced Nonwovens and Home & Personal Care (which encompassed its wipes assets). At the time, the company said the new structure would better showcase the strength of Ahlstrom’s nonwovens business, especially in wipes.
This reorganization of course came after a steady stream of wipes investments that made the company the world’s largest maker of spunlace fabrics globally. The first of these acquisitions came in mid-2007 when it acquired a one-line operation in Green Bay, WI, and promptly added a second line there; the next year, two major acquisitions, Fiberweb and Orlandi, added facilities in Italy, Spain and Bethune, SC, as well as more than €150 million in potential sales revenue to the operation.
At the time, executives said these acquisitions not only added size to the business but also diversified Ahlstrom’s offerings to the market. “In order to compete in the wipes market in the future, nonwoven material manufacturers must provide differentiated products. Ahlstrom is positioned well to compete as we have developed new equipment and processes that allow us to deliver innovation and exciting materials.”
Later that year, Ahlstrom announced it would add a spunlace operation in Louveira, Brazil—making it South America’s first maker of spunlace for wipes—in an effort to chase growth there.
The business remained status quo for a number of months after that, quietly integrating its acquisitions and focusing on growth. Then, in January 2009, it said it would permanently close its Gallarate and Carbonate, Italy, spunlace facilities as well as one line in Cressa, Italy,as part of a company wide restructuring in response to weakening demand. Later, the companyreversed the decision to close Carbonate, but in May 2010, Ahlstrom said it would close that plant in an effort to increasing capacity, efficiency and breadth of product range.
Even as recently as May, Ahlstrom continued to focus on wipes, saying that the Americas, Europe and Asia continue to provide growth opportunities for Ahlstrom in the wipes market. “Innovations in wipes underpins Ahlstrom’s business strategy and the market will continue to see new products being introduced to this important segment of the company’s business,” says marketing manager Alistair Brown.
Even as it moves out of wipes, Ahlstrom will still remained tied to the market. Under the terms of the agreement with Suominen, Ahlstrom will receive a total of €170 million in cash, of which Ahlstrom has committed to use a total of €30 million to subscribe for shares in Suominen. The deal will make Ahlstrom the largest shareholder in Suominen with a minimum stake of 20% and a maximum stake of 28.2% depending on the size of the share issue. The cash portion of the deal will be adjusted accordingly. Ahlstrom has agreed to a two-year lock-up period for a minimum of 20% ownership in holding its Suominen shares.