Small fibers Big difference Annual Report 2004 · Big difference. 2004 Annual Report Ahlstrom...

Small fibers. Big difference.2004

Annual Report

Ahlstrom CorporationP.O. Box 329 Eteläesplanadi 14 FI-00101 Helsinki, Finland www.ahlstrom.com

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1Ahlstrom Corporation

Business review

Ahlstrom & society

Financial statements

2 Ahlstrom in brief

3 Financials 2004

4 Vision & strategy

6 Success factors

10 Main events in 2004

12 President’s review

14 Financial review

22 Introduction to business review

24 FiberComposites segment

30 Specialty Papers segment

37 Summary of the Code of Business Conduct

38 Sustainability reporting within Ahlstrom

39 Sustainability management

42 Human Resources

46 Occupational health & safety

47 Economic performance

48 Environmental performance

52 Corporate governance

58 Report by the Board of Directors

62 Income statement

63 Statement of cash fl ows

64 Balance sheet

66 Notes to the fi nancial statements

78 Key fi gures

80 Shares and shareholders

81 Proposal for the distribution of profi ts

81 Auditor’s report

82 Board of Directors

84 Corporate Executive Team

86 Glossary

87 Locations & contact information

88 Financial information in 2005

Contents

2 Annual Report 2004

Nonwovens and specialty papers, made

by Ahlstrom, are used in a wide range

of everyday products, e.g. in fi lters,

wipes, fl ooring, labels, and tapes.

The company has a strong market

position in all its business areas, built

upon the company’s unique fi ber exper-

tise and innovative approach.

Ahlstrom in brief

Ahlstrom’s 5,800 employees serve

customers via sales offi ces and produc-

tion facilities in more than 20 countries

on fi ve continents.

In 2004, Ahlstrom’s net sales

amounted to EUR 1.6 billion. Half of the

net sales originates from products that

are market leaders in their respective

fi elds. Furthermore, approximately one

third of net sales comes from products

where the company is the second or

third largest market player.

Ahlstrom’s objective is for one-third

of the company’s annual growth to

come from new products.

Ahlstrom is the global leader in the development, manufacture

and marketing of high performance fi ber-based materials.

Segment FiberComposites Specialty Papers *

Net sales in 2004 EUR 664 million EUR 813 million

Share of Group’s net sales** 45% 55%

Employees 2,858 2,520

Key customer industries Filtration and automotive, Packaging & labeling industry, furniture &

consumer products, healthcare, building building, consumer products & food

Production units Belgium, Brazil, Finland, France, Italy, Finland, France, Germany, Italy

South Korea, Spain, Sweden, UK, USA

Business areas and Nonwovens Label & Packaging Papers

main applications Wipes Self-adhesive labels

Medical gowns and drapes Food packaging:

Wallcoverings coffee, dairy products, pet food

Teabags Labels for beverage bottles

Fibrous meat casings

Technical Papers

Filtration Furniture foils, abrasive paper,

Air, fuel and oil engine fi lters masking tape, engine gaskets, posters,

Industrial and laboratory fi ltration wallpaper, processing paper

Glass Nonwovens

Windmill blades, fl ooring, boat hulls

* This organizational structure has been effective as of January 1, 2005. The fi gures for the Specialty Papers segment have been calculated pro forma based on the former LabelPack and Specialties divisions. ** Excluding discontinued operations.


Financials 2004

Key fi gures, EUR million 2004 2003

Net sales 1,567.8 1,556.4

Operating profi t 51.0 48.5

Profi t before extraordinary items and taxes 34.8 33.7

Net profi t 17.5 22.4

Balance sheet, total 1,399.8 1,425.5

Capital expenditure (incl. acquisitions) 167.0 93.1

Net cash fl ow from operations 128.0 202.0

Gearing ratio (%) 53.9 42.3

Return on capital employed (ROCE) (%) 5.3 4.6

Earnings per share (EUR) 0.48 0.61

• Ahlstrom completed its structural

change from multi-business company

to a focused fi ber-based materials

supplier

• Ahlstrom’s business environment

remained challenging and the

company was faced by weak demand

in Europe

• The Specialties division improved its

fi nancial performance signifi cantly

• Healthy operating cash fl ow

Year 2004 in brief

Financial targets

1. Profi tability:

– operating profi t (EBIT) of 10%

– return on capital employed (ROCE)

of 13%

2. Financial strength: gearing ratio of

50–80% (may temporarily be

exceeded for strategic acquisitions)

3. Growth: both organically and through

acquisitions in higher value-added

businesses. Organic growth should

exceed the market average.

4. Dividends: dividend averaging

30–40% of the net profi t

04

0 5 10

03

02

%15

Target level 13%

Return on capital employed(ROCE)

04

0 20

03

02

%100

Target level 50–80%

Gearing

40 60 80

04

0 5

03

02

Target level 10%

Operating profit (EBIT)

15 %10


Ahlstrom manufactures high-quality

fi ber materials of synthetic and natural

fi bers. The company supplies these

materials to its customers as roll goods

for further processing. Converters,

such as printers or automotive industry

suppliers, deliver the products to a

marketer or seller serving consumers

or industrial customers worldwide.

Ahlstrom’s vision is

to be the global source

for fi ber-based materials

Ahlstrom in the value chain

• Natural fibers

(wood, cotton, hemp)

• Oil/petrochemicals

• Pulp producers

• Synthetic fiber

producers

(PET, PP)

• Chemical suppliers

Ahlstrom • Printers

(label, decor, poster,

wallcover...)

• Label metalizers

• Siliconizers

• Automotive industry

suppliers (filter, gasket)

• World class consumer

or industrial brands

Consumers

Industrialcustomers

Primaryproduction

Raw materialsupplier

Roll goodsproducer

Converter Marketer /seller


Vision & strategy

Strategy based on

four cornerstones

Long-term customer relationships

We focus on customer needs and work

in partnership with customers to develop

new products and improved product

features. Innovations are essential to

our long-term success and competitive

position. Our customers are signifi cant

players in their industries and, as they

develop and expand their businesses,

Ahlstrom is ready to serve their fi ber

materials needs on a global basis.

Ahlstrom Expertise

Ahlstrom’s Expertise lies in our know-

ledge of fi bers and fi ber processing.

Our teams work with a large number

of customers and with numerous

applications, products and supporting

technologies. This wide scope gives

us a unique knowledge base, which

we combine with developed market

insight, to create and manufacture

competitive fi ber materials.

Expansion in high value-added

and growth segments

We aim to serve high value-added and high

growth fi ber materials segments. We seek

to expand our operations by organic growth

to increase production capabilities

at existing sites and by acquisitions.

Competitive operations

We continuously improve our operations to

strengthen our competitiveness as a supplier

and to meet our fi nancial targets. Key elements

in competitive operations include cost effi ciency,

increased productivity, as well as streamlined

operations and support functions.


Unique fi ber expertiseAhlstrom’s business is high-quality fi ber-

based materials. Unlike most of its

competitors, Ahlstrom utilizes natural

fi bers, synthetic fi bers and various

combinations of these in its production,

whereas most manufacturers use either

natural or synthetic fi bers.

Many of Ahlstrom’s customer

relationships have lasted for decades.

Long-term cooperation is benefi cial to

both the company and its customers,

as new products and product features

are developed jointly.

Ahlstrom’s long-term

success is based on

long-lasting customer

relationships, unique

know-how of fi bers,

innovative products

and technologies, and

the continuous focus

on improving the

company’s performance.

Ensuring Ahlstrom’s

long-term success

Ahlstrom is a global company with

multi-cultural teams. They work in

close cooperation with customers, and

evaluate customer needs and market

development, understand market

trends, and adjust production

capabilities to meet the changes in

demand. Teams representing different

business operations also benefi t from

being able to utilize each other’s

competencies in, for example,

investments and innovation activities.

100% synthetic fibers100% natural fibers

Product value added

Integratedforestproducts

Polymers/textiles

Fiber based materials

Ahlstrom No. 1

• World leader in fiber based materials

• The broadest range of product offerings, utilizing fibers that vary from 100% synthetic to 100% natural, with multiplecombinations of both.

• Versatile production capability


Innovations to benefi t customers

Success factors

Ahlstrom’s innovations are strongly

customer-driven, and the actual

development work is done in close

cooperation with customers. Innovative

products are essential to Ahlstrom’s

long-term success and competitiveness.

Ahlstrom aims to effi ciently develop

new, value-adding products, product

features, and technologies. The result

of this work has created entirely new

sales possibilities both for Ahlstrom and

its customers.

Highlights in 2004The long-running competition between

paper and fi lm as packaging material

started to turn gradually to paper’s

advantage. Thanks to the ambitious

R&D work done by Ahlstrom and

within the industry new, fi lm-like but

recyclable paper products have been

developed for food packaging and

other applications.

Development work with new tech-

nologies continued in 2004. For photo

catalysis Ahlstrom has pioneered a new

and interesting end-use application for

waste treatment in paper mills. This

patented solution eliminates the odor

from paper mill sludge and will create

new sales opportunities for Ahlstrom.

Several trials conducted with

Ahlstrom’s pilot coater resulted in new

products and product features to the

company’s range. Specialty coating is

a key focus area for Ahlstrom’s innova-

tion activities, because many customer

applications require excellent printing

qualities and smooth surface facilities

for roll goods.

R&D resources in 2004Ahlstrom’s global innovation function is

organized at three levels. The Ahlstrom

Research Corporate Center, ARCC, is

based in Pont-Evêque, France. There

are also seven R&D facilities, located in

Finland, France, Germany, Italy, and in

the United States. All Ahlstrom product

line teams around the world are

Several leading companies worldwide,

such as banks, insurance companies,

and telecommunication companies, use

Ahlstrom’s Cristal Evolution windows in

their envelopes. This technical paper is

constantly gaining new market share

against polystyrene fi lms, demon-

strating that the marketing and promo-

tion efforts Ahlstrom has undertaken

are paying back.

Cristal Evolution for window envelopes

Cristal Evolution is a transparent

paper produced from wood fi bers, a

fully renewable resource. It is com-

pletely recyclable and biodegradable.

Using Cristal Evolution in the windows

of window envelopes makes the enve-

lope an all-paper product, contributing

effi ciently to sustainable development.

As environmental concern becomes

more and more part of the strategies

of Ahlstrom’s customers, the highly

technical Cristal Evolution becomes

the perfect solution for ecological

envelopes. In addition, the use of

Cristal Evolution windows allows cus-

tomers in France and Japan to print

the offi cial eco-label on the envelope.

capable of providing their customers

with day-to-day research and develop-

ment services.

At year-end, Ahlstrom had a total

of 192 (208) employees working on

its research and development activities.

The company’s expenditure on R&D

was EUR 27.6 million (EUR 32.9 million

in 2003). This fi gure equates to 1.8%

of net sales (2.2%). The decline in

fi gures is mainly attributable to the

creation of Sonoco-Alcore joint venture,

as Ahlstrom’s cores & board businesses

were excluded from corporate account-

ing as of November, 2004.


Ahlstrom’s performance improvement

program, “a plus”, aims to consolidate

the know-how and experience of

Ahlstrom employees, and to incorpo-

rate these best practices into daily

routines.

All sites now on boardWhen launched, the program involved

three selected pilot sites. Their role was

to customize the methodology to fi t

Ahlstrom’s businesses and cultures. The

success of this phase made it possible

to further develop the tool and to

expand it progressively to all Ahlstrom’s

sites.

Since then, Ahlstrom’s employees

worldwide have discovered the value

of “a plus” and adapted its tools for

”a plus” expands to all Ahlstrom sitesuse as part of their everyday working

procedures. The enthusiasm shown

by more than 1,000 employees (16%

of Ahlstrom’s total headcount) who

have so far been involved in one or

more of the program’s project teams,

gives great hope for the future of the

program.

The early starters are now well

advanced with the process and are

able to make full use of the program.

At these sites, the level of employee

involvement now exceeds 45% of

the staff.

Turnaround to Performance Excellence2004 was also a year of consolidation

at Ahlstrom’s sites. Major improve-

ments were made in the way business

is conducted and in how the company

serves its customers. At the same time,

there has been an ongoing effort both

to continue the process of improve-

ment and to consolidate the gains

resulting from earlier projects.

Ahlstrom has also developed its

own training program to strengthen

the leadership and problem solving

skills of its managers. This effort will

be intensifi ed in 2005, as will the

‘cross-fertilization’ between sites to

ensure that the benefi ts and best

practices created through “a plus”

will be shared by all. This will further

emphasize the commitment to better

serve the customers, Ahlstrom’s top

priority.

If you are a tea drinker, there’s a good

chance that Ahlstrom (formerly

Dexter) and Unilever (today under

the brand Lipton, formerly T J Lipton)

have contributed to both the quality

and taste of your last cup. In 1938,

when it was discovered that Ahlstrom’s

porous yet strong and lightweight

nonwoven material could be used to

hold tea leaves, a great idea was born:

the modern teabag. This was quite a

change from early 20th century tea

bags, made of gauze and stitched.

Over the years, a close working

relationship has resulted in further

Ahlstrom & Lipton:

Inventors of the modern teabag

developments. In 1952, Lipton launched

the fi rst ‘fl o-thru’ tea bag – a double

chambered bag allowing for more area

to be exposed to hot water. Then, in

the 1990’s a revolution: the invention

of leak proof teabags. No longer would

consumers complain of leaky bags or

tealeaves in their cup of tea! Compa-

nies’ desire to brand their teabags is

the most recent development, and

now specially developed nonwoven

materials allow teabag companies to

bear their logo directly on the bag.

Today, Ahlstrom remains one of

Unilever’s main nonwoven suppliers.

The teabags are a strategic product

for Ahlstrom, and the company cur-

rently holds a signifi cant market share

globally. The fabrication of nonwoven

materials for teabags at Ahlstrom’s

Windsor Locks, US plant currently

supplies the US and worldwide market,

while the Chirnside, Scotland plant

focuses mainly on Europe.

A long history of the two compa-

nies, and their desire to meet chal-

lenges with innovative new products,

has meant that they have been respon-

sible for producing great cups of tea for

almost 70 years.


Success factors

Ahlstrom & Voith have a lot in common.

Both are longstanding businesses with

a passion for papermaking, and they

are also suppliers to each other.

In 1957, Ahlstrom began supplying

Voith (previously Kleinewefers), a world

leader in paper machine technology,

with fi ber material used in calender

bowls. Calender bowls are made out

of cotton paper sheets stacked on

a steel shaft. The bowl is fi nished

after pressing and turning. During the

fi nishing phase of papermaking called

“supercalendering”, paper passes over

Ahlstrom & Voith:

A mutual passion for papermaking

the cylinders enhancing its surface

properties, such as glossiness and

smoothness.

Today, Ahlstrom’s material is used

in 70% of the calender bowls world-

wide. Specifi cally, Ahlstrom continues

to be Voith’s largest supplier, while

primarily serving paper mills involved in

the fi nishing of printing or high density

papers. Calender bowls are used also

to fi nish textiles, as well as in the pro-

duction of audio and video tapes.

Passionate about paper and under-

standing customer needs, Ahlstrom

strives to provide fl exible service and

quality in its products and operations.

Research and development has

enhanced Ahlstrom’s fi ller materials to

ameliorate gloss and smoothness of

printing papers plus mark resistance

or durability of the bowls.

In 1994, the relationship came full

circle when Ahlstrom purchased Voith’s

mixing and twisting machine for its

Altenkirchen, Germany plant, to fi nish

calender bowl papers in order to run in

Voith’s (Kleinewefers) calenders.

Ahlstrom & 3M: Long-lasting innovative cooperation

Ahlstrom’s relationship with 3M, one of

the world’s most diversifi ed and innova-

tive technology companies specializing

in, among other areas, consumer offi ce

products, began almost 40 years ago

at Ahlstrom’s Rottersac, France plant.

During this time, Ahlstrom’s activity has

mainly centered around two types of

products: paper used in photocopiers

and calendered paper used in the now

famous Post-it® note product.

As far back as 1966, Ahlstrom

began supplying 3M with copy and

transfer paper for photocopy machines.

However, as photocopying technology

advanced, these types of paper became

obsolete.

A turning point in the relationship

was in fact in 1980, when Ahlstrom

performed the fi rst trials for the paper

used in what is now a widely used

offi ce staple: the yellow Post-it® note.

The immense popularity of the product

led to a close cooperation between

Ahlstrom and 3M to ensure a reliable

supply and continual innovation.

Among other characteristics, the

selection of dyes and the way in which

they are incorporated into the paper

is of prime importance to ensure color

consistency and longevity. To this end,

since the launching of the original

yellow Post-it® note, Ahlstrom has been

involved in many innovative develop-

ments: white for personalization, and

multicoloured, including pastels, fl uores-

cent and other intense colors.

Today the relationship remains

strong, and regular meetings keep both

sides apprised of new objectives and

future developments.


February 12

Ahlstrom streamlines French

operationsThe Specialties division of Ahlstrom announced

plans to restructure its coreboard and crepe

paper facility in Pont-Audemer, France. The

restructuring measures included the closing

of its coreboard production line. As a result,

the headcount of Pont-Audemer plant was

reduced by 70 employees. The plant now

focuses entirely on the production of crepe

papers.

April 19

Ahlstrom and Sonoco build leading

European cores and tubes companyAhlstrom and Sonoco, a global packaging

company, signed an agreement to combine

their European paper-based core, tube and

coreboard operations. Ahlstrom will hold

35.5% and Sonoco 64.5% of the shares in

the new entity named Sonoco-Alcore.

Sonoco-Alcore is the largest European

producer of cores and tubes.

May 25

Investigation by the EU

competition authoritiesThe European Commission competition

authorities investigated Ahlstrom’s

premises at various locations. The

investigations were related to alleged

anti-competitive practices between

competitors within the release liners

and face stock product segments.

June 23

Ahlstrom acquires North American

filtration materials producerAhlstrom acquired Hollinee, L.L.C.'s US-

based filtration division that manufactures

mainly nonwoven filtration materials for

Heating, Ventilation, and Air-Conditioning

(HVAC) applications. The transaction

expands Ahlstrom's product offering

to the HVAC filtration media business,

offering promising global growth

opportunities. The acquired business

employs approximately 200 people at

two US sites.

June 24

New production line inaugurated

at Windsor Locks, USA plantAn investment of EUR 38 million was

made at Ahlstrom’s Windsor Locks plant.

The new production line serves mainly

the growing North American wipes

market, and offers more innovative

products and economies of scale.

January February March April May June

April 2

Modification of a production line

in Turin completedA production line at the Turin, Italy plant

was reconfigured in order to increase the

breadth of product offering available. In

addition to the specialty paper products the

line was previously dedicated to, it is now

capable of supporting the fast growing

nonwovens market with products designed

specifically for the engine filtration market

and for medical, wipes and general industrial

applications. The investment was valued at

EUR 11 million.

Main events


2004 in brief

July 22

Juha Rantanen appointed CEO

of Outokumpu Group Juha Rantanen, President and CEO of Ahlstrom

Corporation, was appointed CEO of the

Outokumpu Group, effective January 1, 2005.

Juha Rantanen had worked for Ahlstrom

since 1997.

July 29

Jukka Moisio appointed President

& CEO of Ahlstrom CorporationAhlstrom’s Board of Directors appointed

Jukka Moisio as President and CEO, effective

September 1, 2004. Previously, he was

President of the FiberComposites division,

Executive Vice President, and deputy

to the President & CEO of Ahlstrom

Corporation. He joined Ahlstrom in 1991.

October 1

Ahlstrom divested its remaining

packaging manufacturingTecno Jolly (Akerlund & Rausing SpA) in Italy

was sold to the Italian flexible packaging

company Sacchital SpA, and Russian ZAO

Akerlund & Rausing Kuban to Kuban AB. The

divested entities employ in total approximately

300 persons. These transactions complete

Ahlstrom’s exit from the packaging manu-

facturing business.

October 4

Ahlstrom acquired US-based Green

Bay NonwovensThe transaction strengthened Ahlstrom's

position in the wipes market and

complemented its product offering with

the addition of specialty spunlace and resin

bond technologies. The acquired business

employs 75 people at its Green Bay, Wisconsin

facility.

November 9

Ahlstrom and Sonoco complete

the creation of a European cores

and tubes companyAhlstrom announced that the conditions

set by the European Commission for the

creation of the joint venture Sonoco-

Alcore had been fulfilled. Following this

transaction, Ahlstrom’s entire focus is

now on high-performance nonwovens

and specialty papers.

July August September October November December

October 6

Organizational changesAhlstrom announced a flattening of its

organization to be more customer driven.

The new organization helps Ahlstrom

recognize customer needs more rapidly,

bringing a considerable competitive edge

to its operations.

As of January 1, 2005, Ahlstrom’s

FiberComposites division was divided into

three business areas: Nonwovens, Filtration

and Glass Nonwovens. These three areas

make up the FiberComposites segment.

Together, the LabelPack and Specialties

divisions formed the new Specialty Papers

segment as of the same date. The segment

includes both the Label & Packaging Papers

and the Technical Papers business areas.

October 21

EUR 28 million investments at

the South Korea plant completedA second production line and a new

impregnation line were inaugurated at

the Hyun Poong, South Korea plant.

These investments enable the facility to

manufacture both filtration media and

nonwovens for the growing Asian market.


Ahlstrom completed its structural

change process to become a focused

fi ber materials company in 2004. In

October, we divested the remaining

two packaging manufacturing units and

in November a joint venture for cores

and coreboard production started its

operations. This has taken six years,

with two parallel agendas: fi rst, we sold

several non-core businesses and units

to more dedicated future owners and

secondly, we invested in fi ber materi-

als know-how, trained our teams and

developed the business through organic

growth and acquisitions.

On behalf of all employees and

shareholders, I would like to take this

opportunity to thank my predecessor

Juha Rantanen for his signifi cant contri-

bution in steering Ahlstrom towards a

one focus company.

Profi tability improvement In 2004, Ahlstrom’s profi tability

remained well below our target level

for a variety of reasons. In 2005, our

major target is to deliver improved

fi nancial performance.

We made some progress over the

previous year with our operating profi t

amounting to EUR 51.0 million (EUR 48.5

million in 2003) and return on capital

employed (ROCE) to 5.3% (4.6%).

Our operating cash fl ow remained at a

good level despite two acquisitions and

several investments in new manufac-

turing lines. However, we fell short of

our group level target of 13% for ROCE.

The main reasons for the profi tability

gap were weak demand in Europe,

currency changes and low utilization of

certain assets.

Our long-term success requires a

solid foundation. We will enhance our

performance orientation and foster

“One Ahlstrom” thinking to advance

a more cohesive company culture

– a signifi cant change compared

with our multi-business history. One

Ahlstrom will enhance our team’s ability

to serve our customers, represent

Ahlstrom worldwide, and to leverage

our expertise. It will further facilitate

a dedication to serving customers

with specialty papers and nonwoven

products.

Business strategy fi ne-tunedIn order to achieve improved fi nancial

performance and to become a more

unifi ed company, we explored and fi ne-

tuned our strategic priorities in 2004.

Long-term customer

relationships

The most signifi cant element in our

business strategy is our much valued,

long-term customer relationships

encompassing often several products

and product generations sold to

one customer. We value highly our

access to leading fi ber materials roll

goods users and we will ensure that

Ahlstrom’s innovation expertise and

manufacturing capabilities meet the

expectations of our world class custom-

ers. Our customer interface consists

of product line teams serving specifi c


President’s review

customer end uses. The teams are

complemented by our own sales offi ces

or carefully chosen partners.

In 2004, we developed our sales

teams with an aim to upgrade their

skills to meet future customer expecta-

tions. At the same time, we decided to

open new sales offi ces in Poland and

India to increase our sales in emerging

markets. Currently, our products are

sold to 112 countries served by 23

Ahlstrom teams (sales offi ces or

product lines) or by 20 agents. The geo-

graphic breadth of our commercial front

line brings us closer to our customers

worldwide.

Ahlstrom Expertise

Every day, we work with a variety of

natural and synthetic fi bers, as well as

chemicals. Not only do we produce

100% natural or 100% synthetic

fi ber roll goods, but we manufacture

products with many combinations of

both in one product. The unique know-

how in applying a multitude of raw

materials, combined with versatile roll

goods manufacturing, makes Ahlstrom

an innovative partner to leading cus-

tomers worldwide. This knowledge is

our value added to customers – we call

it “Ahlstrom Expertise”.

In 2004, we continued to advance

Ahlstrom Expertise. Our research

team tested fi bers and their features

to design the most suitable products

to meet ever changing quality and

performance criteria. Operations and

engineering professionals worked

to advance proprietary manufactur-

ing solutions. Our product line teams

combine breadth of knowledge into

customer products and solutions to

meet quality and competitiveness

expectations. The dedication behind

Ahlstrom Expertise manifests itself in

initiatives such as training of our teams,

research and innovation and the Perfor-

mance Excellence (“a plus”) program,

to name just a few.

Seeking to grow

The journey from multi-business to

focused fi ber materials company has

decreased the group net sales by

divestments during the past years.

However, our fi ber materials business

has been able to grow approximately

10% annually. We aim to develop and

successfully implement attractive new

ideas, products and technologies.

In 2004, our investments in new

manufacturing capabilities and acquisi-

tions amounted to more than EUR 160

million and we allocated 1.8% of our

net sales to research and innovations.

With these actions we want to ensure

that we have our required number of

new products in the market and a full

pipeline of new ideas approaching

commercialization.

We expect these investments

to deliver growth and improve our

fi nancial performance in 2005 and

beyond. Our growth ideas are targeted

to strengthen our customer relation-

ships and to serve geographically wider

market areas.

Competitive operations

A high level of innovation and new

products characterize our business

environment. Consequently, we face

and accept the risk of product and

product line obsolescence every day.

In order to remain successful and

maintain our competitiveness we

monitor our businesses continuously

and act with determination on under-

performing businesses.

During the past several years, we

have closed down some non-compet-

itive assets. In addition, we aim to keep

costs low and our operating model lean

and effi cient. Our “a plus” program and

its success have established a solid

foundation to strive for cost effi ciency

and increased productivity.

Ahlstrom experienced challenging

structural change as it transitioned to a

dedicated fi ber materials company. In

2005, we are well positioned to deliver

improved fi nancial results with a lean

organization, a determination to better

serve our customers, and to become an

even more successful supplier of fi ber

materials.

I would like to thank our employ-

ees, customers, shareholders and other

stakeholders for their continued support

and commitment during 2004. I invite

you to join our current journey in the

fi ber materials business, where we aim

to be the world leader.

Jukka Moisio

President and CEO

In 2005, we are well positioned to deliver improved

fi nancial results with a lean organization, a determination

to better serve our customers, and to become an even

more successful supplier of fi ber materials.


Growth investments and

structural changes provide

a solid position for 2005

OverviewThe global economic environment

continued to present Ahlstrom with sig-

nifi cant challenges during 2004. Highly

competitive conditions were faced

in businesses like nonwovens. These

were balanced by, for example, strong

performance in release liners, where

Ahlstrom was able to benefi t from its

solid manufacturing expertise.

A similar contrast was seen also

geographically. The European markets

failed to provide a proper upturn for

Ahlstrom in 2004. This resulted in market-

related downtime in many plants. The

North American markets, on the other

hand, performed slightly better and

showed signs of recovery towards the

end of the year. Asia again evidenced

its potential as a platform for growth.

In 2004, Ahlstrom concluded the

restructuring measures announced at

the beginning of the year by streamlin-

ing its coreboard operations and closing

tion line and a new impregnation line

for nonwoven and fi ltration products

at the South Korea plant. Further, two

add-on acquisitions in the USA were

made to strengthen the positions of

the specialty fi ltration and nonwovens

businesses.

In November, Ahlstrom and Sonoco

fi nalized the combination of their

European paper-based core, tube and

coreboard operations.

down the coreboard production in

France. Along with other restructuring

measures implemented at the end of

2003, the Specialties division was able

to signifi cantly improve its fi nancial

performance in 2004.

The price increases in energy and

many of Ahlstrom’s key raw materials

had a negative impact on the Group’s

profi tability. Through the continued

focus on a global sourcing of raw

materials, the company was able to

partly offset this effect which had led

to margin pressure in the key markets.

Ahlstrom announced and implemented

several price increases in 2004.

Several major investments were

completed worldwide to allow for

future growth in the key markets. In

the USA, a new composites nonwoven

manufacturing line was started in

June. For the growing Asian markets,

the company built a second produc-

Net sales

2,000

1,600

1,200

800

400

0

EUR mill.

02 03 0401

Net sales by division

LabelPack 35%

Specialties 22%

Other businesses andeliminations 1%

FiberComposites 42%

Net sales by market area

USA 18%

Germany 16%

Italy 9%France 12%

UK 5%Spain 4%

Russia 3%Finland 3%

Belgium 3%Sweden 2%

Netherlands 2% Luxemburg 2%

China 2%Poland 1%

Other 18%

Industrialapplications11%

Net sales by end-use sector

Labeling, printing& office 29%

Building &furniture 10%

Filtration &automotive 19%

Consumer, food & healthcare 31%


The tough market environment

contributed to the Group making an

unsatisfying 7.1% return on capital

employed (excluding non-recurring

items) which, however, represents

improved profi tability over the previous

year. Cash fl ow remained satisfactory

and the Group’s gearing was 53.9%,

well within the target of 50–80%.

DeliveriesVolumes delivered to customers grew

by 5.1% on a comparable basis. The

increase in volumes was due to the

market growth as well as businesses

acquired and investments made by the

FiberComposites division. In addition,

the Specialties division’s pre-impreg-

nated decor papers increased their

deliveries substantially.

Sluggish demand in certain product

lines led to machine downtime. For the

whole year, market-related downtime

was 3.7% and capacity utilization 86%

of total capacity. However, the capacity

utilization rate improved towards the

end of the year.

Net sales unchangedConsolidated net sales amounted to

EUR 1,568 million (EUR 1,556 million).

The increase of EUR 12 million broke

down to the following factors:

EUR mill.

Volumes + 68

Sales prices + 6

Foreign currency - 41

Other (e.g. structural changes) - 21

+ 12

Net sales were adversely impacted by

the unfavorable currency development.

Further, the sale of the cores and core-

board operations, the Tecno Jolly and

Kuban plants, as well as the closure of

the coreboard production line in France

decreased net sales in 2004. Adjusted

for the structural changes, comparative

Financial review

net sales in fi scal year 2004 were 2%

higher than in the previous year.

Geographically, net sales looked

similar to last year. Europe remains

the Group’s most important market

area, accounting for 62% of total sales

in 2004 (62%). Net sales in North

America increased slightly to 19%,

compared to 18% a year ago, while

Asia’s share remained approximately

the same at 8% (8%). Ahlstrom’s

sales to the domestic Finnish market

accounted for 3% (3%) in 2004.

Slight improvement in profi tabilityThe Group’s operating profi t increased

to EUR 51.0 million (EUR 48.5 million),

representing a 3.3% margin (3.1%).

The operating profi t includes certain

exceptional transactions, which are not

related to normal business operations

and which are reported as non-recur-

ring items, shown below.

Operating profit

100

80

60

40

20

0

EUR mill.

02 03 0401

(excluding non-recurring items)

Profit before extraordinary items

75

60

45

30

15

0

EUR mill.

02 03 0401


Net profit

60

48

36

24

12

0

EUR mill.

02 03 0401



EUR mill. 2004 2003

Operating profi t (EBIT) 51.0 48.5

Non-recurring items:

- asset sales 5.3 - 4.6

- restructuring costs 11.5 21.7

- other non-recurring items 3.5 - 0.2

EBIT w/o non-recurring items 71.3 65.4

The sales of the Tecno Jolly and

Kuban plants (loss of EUR 10.6 million)

as well as the forming of the Sonoco-

Alcore joint venture (gain of EUR 4.3

million) are shown as asset sales.

Restructuring costs relate to write

downs of assets and provision charges

for personnel reductions in underper-

forming units.

Operating profi t excluding non-

recurring items increased by EUR 5.9

million. The change was attributable

to the divisions as follows:

EUR mill.

FiberComposites - 11

LabelPack - 5

Specialties + 16

Other units + 6

+ 6

The biggest achievement in 2004

was the solid turnaround of the

Specialties division. The result of the

FiberComposites division was hit mainly

due to the weak demand in Europe,

as well as the restructuring costs and

write-downs across the division.

The share of profi ts from opera-

tive associated companies, in particular

Jujo Thermal Oy, amounted to EUR 2.8

million (EUR 3.4 million). From 2005

onwards, Sonoco-Alcore will also be

reported as an associated company.

Profi t before extraordinary items

and taxes was EUR 34.8 million (EUR

33.7 million). Net interest expenses

increased to EUR 12.0 million (EUR 10.4

million). The increase was mainly due

to higher interest-bearing debt. The

foreign exchange loss, arising from the

conversion of foreign currency denomi-

nated assets and liabilities, was EUR

2.1 million (EUR 4.7 million). Other net

fi nancial expenses were EUR 2.8 million

(EUR 0.2 million), partly due to

fees related to the new fi nancing facilities.

Net profi t was EUR 17.5 million (EUR

22.4 million). Income taxes amounted

to EUR 17.1 million (EUR 11.1 million).

Non-recurring tax refunds lowered the

income taxes in 2003. High effective

tax rate in 2004 is partly a result of

the non-deductible divestments. The

EPS (earnings per share) decreased to

EUR 0.48, compared to EUR 0.61 a year

earlier.

Return on capital employed (ROCE)

was 5.3% (4.6%) and return on equity

(ROE) 2.7% (3.2%). As total invest-

ments more than compensated the

effects of divestments and the reduc-

tion of working capital in 2004, capital

employed increased slightly to EUR

1,009 million at December 31 (EUR

994 million).

To achieve improvements in

operating performance at our plants,

Ahlstrom continued its “a plus” perfor-

mance excellence program in 2004.

By the end of 2004, “a plus” had been

introduced in all Ahlstrom’s plants. To

learn more about “a plus”, see page 8.

Cash fl ow remained healthyAhlstrom continued to generate healthy

operating cash fl ow. Net cash from

operating activities, namely the cash

fl ow after net interest expenses, taxes

paid, and the change in working capital,

amounted to EUR 128.0 million (EUR

202.0 million) and developed positively

during the second half of the year. In

2003, the decrease in working capital

had a positive effect on the cash fl ow.

The same effect was not seen in 2004.

Interest-bearing net debt increased

by EUR 56.0 million to EUR 341.8 million

(EUR 285.8 million) mainly due to the

acquisition of Hollinee L.L.C.’s Filtration

Division and Green Bay Nonwovens, Inc.

A dividend of EUR 1.50 per share was

paid to the shareholders in 2004, total-

ling EUR 54.6 million. The strengthening

of the euro decreased the debt in the

balance sheet by approximately EUR

7 million.

Ahlstrom’s gearing (ratio of interest-

bearing net debt to equity) was 53.9%

at year-end (42.3%). Equity ratio dec-

lined to 45.3% (47.4%).

The Group’s liquidity remained

good throughout the year. At year-end,

cash and marketable securities were

EUR 19.6 million (EUR 24.1 million).

In addition, committed credit facilities

available to the Group amounted to

EUR 764 million, including a new 5-year

EUR 400 million syndicated revolving

credit facility raised in November 2004.

Return on capitalemployed (ROCE)

10

8

6

4

2

0

%

03 0402

Return on equity(ROE)

10

8

6

4

2

0

%

03 0402

Earnings per share

2.0

1.5

1.0

0.5

0

-0.5

EUR

02 03 0401


Focused capital expenditureCapital expenditure for the year

exceeded the level of depreciation and

excluding acquisitions amounted to


The biggest investments were the EUR

38 million new composites nonwoven

manufacturing line built at Windsor

Locks, USA, and the EUR 28 million

investment in a second production line

for nonwoven and fi ltration products in

South Korea.

In addition, two production lines

were rebuilt at the Turin plant in Italy

for engine fi ltration products, medical

and general industrial applications, and

wipes, totaling EUR 17 million.

Ahlstrom will lower its capital

spending for 2005 due to a decrease

in the number of large investment

projects.

Acquisitions and divestmentsThe total acquisition costs for the year

amounted to EUR 66.0 million (EUR 0.7

million).

During 2004, the FiberComposites

division completed two add-on acquisi-

tions in the USA to strengthen its

position in the fi ltration and nonwovens

businesses. In June, the Hollinee Filtra-

tion Division was acquired to expand

Ahlstrom’s air and heating fi ltration

product range. The business was sub-

sequently named Ahlstrom Air Media.

In October, Green Bay Nonwovens

was acquired to strengthen Ahlstrom’s

wipes product line.

In October 2004, Ahlstrom

completed the sale of its packaging

business, which consisted of one

production facility in Italy (Tecno Jolly)

and one production facility in Russia

(Kuban). The combined net sales

of these businesses were EUR 30

million in 2003. In the fourth quarter,

Ahlstrom recognized a EUR 10.6 million

loss related to these sales. Ahlstrom

continues to produce base materials

for fl exible packaging: calendered and

one-side coated papers, as an integral

part of its Label & Packaging Papers

business area.

Ahlstrom and Sonoco combined

their European paper-based core, tube

and coreboard operations in 2004. The

joint venture, Sonoco-Alcore, began

operations in November, 2004. Sonoco-

Alcore employs 1,800 people and its

annual net sales amount to approxi-

mately EUR 300 million, making the

company the largest European producer

of cores and tubes. Ahlstrom holds

35.5% of the shares in the new entity.

Cores and board business contributed

net sales of EUR 71 million to Ahlstrom

Group in January–October 2004.

Financial performance by divisionFiberComposites

The division’s net sales increased to

EUR 663.8 million (EUR 644.7 million)

refl ecting higher delivery volumes,

mainly due to the acquired businesses

and investments made in 2003 and

2004. Volumes grew by 11% over the

previous year. The net sales were nega-

Financial review

Interest-bearing net debtand gearing ratio %

100

80

60

40

20

0

%

02 03 0401

750

600

450

300

150

0

EUR mill.

Capital expenditure

225

180

135

90

45

0

EUR mill.

02 03 0401

(including acquisitions)

Net cash from operating activities

225

180

135

90

45

0

EUR mill.

02 03 0401


tively impacted by the strengthening

of the euro against other currencies, as

over 60% of the divisions net sales are

non-euro denominated.

The division’s result was hit by a

weak demand in Europe, price increases

in oil-based raw materials, restructuring

costs for personnel reductions, and

write-downs in several plants. The

operating profi t was EUR 33.9 million

(EUR 57.2 million), representing a 5.1%

margin (8.9%). The operating profi t for

2003 included a EUR 4.6 million gain on

the sale of the power generating facility

in the USA. Return on net assets was

6.2% (10.8%).

LabelPack

Volumes grew by 1.3% over the

previous year. The division’s net sales

remained at the level of 2003 and

totaled EUR 542.0 million (EUR 541.5

million). The lack of growth in net sales

was due to the Italian production line

being transferred from the LabelPack

division to the FiberComposites division

as of January 1, 2004. Furthermore, the

decline in the US dollar exchange rate

had a negative impact on the division’s

overseas sales. The division imple-

mented several price increases during

the year.

The capacity utilization rate of the

division was good (96%), mainly due

to the favorable market conditions

for release base papers. The division’s

profi tability was, however, affected by

the increased raw material and energy

prices as well as the higher fi xed costs

mainly due to one-time charges, result-

ing in a decline in the operating profi t


Return on net assets for the division

was 6.2% (8.3%).

Specialties

The division’s net sales remained nearly

unchanged compared to the previous

year and were EUR 343.9 million (EUR

344.7 million). Excluding the Cores &

Board business, volumes sold increased

by 13% compared with 2003, and net

sales totaled EUR 270.9 million, repre-

senting an increase of 5.4%.

Improved market conditions in

most product lines boosted the deliv-

eries and the fi nancial performance

improved considerably compared to the

previous year. The restructuring projects

in France and Germany continued to

drive reductions in fi xed costs.

The division reported a complete

turnaround, resulting in an increase

in oper ating profi t to EUR 10.8 million

(loss of EUR 23.7 million), correspond-

ing to a 3.1% (-6.9%) margin. The

result for 2003 includes non-recurring

costs of EUR 19.1 million related to the

restructuring of operations. The return

on net assets was 7.9% (-13.8%). The

improvement is attributable to higher

volumes, improved plant performance

and cost reductions.

Other operations

The major part of other operations

business relates to the Tecno Jolly

plant in Italy and the Kuban plant in

Russia, both of which were sold in

November 2004. Net sales of other

operations were EUR 27.1 million (EUR

36.2 million). Operating profi t together

with the associated company Jujo

Thermal Ltd was EUR 2.0 million (EUR

1.7 million).

Other operations include also

corporate units in Finland, France and

the USA as well as the sales offi ces

serving the customers of all businesses

through Ahlstrom’s own global sales

and marketing network, bringing the

total operating loss of other operations

to EUR 10.9 million (a loss of EUR 10.0

million). The loss is mainly due to the

loss of the sales of the Tecno Jolly and

Kuban plants.

The associated company Sonoco-

Alcore will be reported under other

operations.

Change in business structureIn October, Ahlstrom announced a

change in the external reporting

structure to refl ect the realignment of

the business. The new structure, which

took effect on January 1, 2005, is based

on two segments, FiberComposites

and Specialty Papers. The Specialty

Papers segment consists of the former

LabelPack and Specialties divisions

with annual net sales of approximately

EUR 810 million. The FiberComposites

segment, continuing with the same

lines of business as earlier, reported

annual net sales of EUR 664 million

in 2004.


Financial review

Quarterly data by division

EUR million Q1/2003 Q2/2003 Q3/2003 Q4/2003 Q1/2004 Q2/2004 Q3/2004 Q4/2004

Net sales

FiberComposites 172 166 157 151 164 166 165 169

LabelPack 147 138 132 124 138 141 133 131

Specialties (excl. Cores & Board) 71 64 62 60 69 70 68 66

Other operations and eliminations -3 -2 -3 2 -3 -2 -2 -1

Continuing operations total 387 366 348 337 368 375 364 365

Discontinued operations 30 30 29 29 29 30 29 7

Group total 417 396 377 366 397 405 393 372

Operating profi t

FiberComposites 21.7 14.5 11.6 9.4 10.9 11.8 7.3 4.0

LabelPack 11.2 4.8 5.0 3.9 3.2 3.2 5.5 5.2

Specialties (excl. Cores & Board) 2.4 -0.5 -4.8 -23.5 1.6 1.7 1.0 2.7

Other operations and eliminations -3.7 -3.0 -0.6 -1.2 -0.4 -0.4 -0.8 -2.5

Continuing operations total 31.6 15.8 11.2 -11.4 15.3 16.3 13.0 9.4

Discontinued operations 0.1 0.7 0.1 0.4 0.3 0.8 1.7 -5.8

Group total 31.7 16.5 11.3 -11.0 15.6 17.1 14.7 3.6

Quarterly income statement

EUR million Q1/2003 Q2/2003 Q3/2003 Q4/2003 Q1/2004 Q2/2004 Q3/2004 Q4/2004

Net sales 417 396 377 366 397 405 393 372

Expenses 1) -364 -354 -341 -330 -358 -363 -351 -328

Other income and expense 1) 1 1 2 1 3 3 1 -1

Depreciation and amortization 1) -27 -26 -26 -27 -25 -25 -26 -25

Non-recurring items 5 0 -1 -21 -1 -3 -2 -14

Operating profi t 32 17 11 -11 16 17 15 4

Net fi nancial items -6 -3 -2 -4 -3 -3 -4 -7

Profi t before extraordinary items 26 13 9 -15 13 14 11 -3

and taxes

Income taxes 2) -11 -7 -3 9 -6 -6 -4 -1

Minority interests 0 0 0 0 0 0 0 0

Net profi t 15 6 6 -5 7 8 7 -4

Operating profi t 1) 27 17 12 10 17 20 17 18

Operating profi t, % 1) 6.5 4.2 3.3 2.7 4.1 4.9 4.3 4.9

1) Excluding non-recurring items.

2) Taxes are stated as the tax corresponding to the result for the reported period.


Foreign currencies

A large part of the Group’s cash fl ows,

receivables, payables and loans are

denominated in currencies other than

the euro. Internationally traded pulp,

which at present is Ahlstrom’s main

raw material, is generally priced in US

dollars. In contrast, products sold are

mostly priced in local currencies.

Consequently, fl uctuations in the

US dollar and the euro have an impact

on Ahlstrom as they affect not only

the Group’s result, but also its fi nancial

development and competitiveness.

The strengthening of the euro has

had a signifi cant impact on the

FiberComposites division’s sales and

profi tability, as over 60% of the sales

are denominated in non-euro curren-

cies. Similarly, the non-euro based sales

of the other divisions were affected by

the stronger euro. In order to mitigate

this risk at Group level, Ahlstrom

operates a currency hedging policy

which is explained in the Financial Risk

Management section, on page 76.

Fibers

The main raw materials for Ahlstrom

are various wood pulps and other

natural fi bers (cotton, abaca etc.) as

well as synthetic fi bers. The Group’s

total fi ber costs in 2004 were EUR 429

million, with wood pulp accounting for

the biggest share of the total. The costs

of other natural, synthetic and glass

fi bers increased by more than 15%.

Ahlstrom does not produce wood

pulp and therefore purchases 100%

of its pulp needs. The Group’s profi t-

ability is thus exposed to variations in

pulp prices, with certain exceptions

for specialty pulps. Although the price

variations are partly passed on to

customers, Ahlstrom is sensitive to

quick changes in the highly volatile pulp

markets. Ahlstrom’s goal is to limit the

price sensitivity by setting fi rm prices,

or by agreeing fl oor and cap price level

contracts.

Chemicals

Ahlstrom uses a wide variety of chemi-

cals (latex binders, fi llers and pigments,

resins, etc) in production. The total

costs of chemicals in 2004 amounted

to EUR 179 million. Latex binders, being

the biggest single type of chemicals,

represented more than 25% of these

costs. There is high volatility in the

price of latex due to its strong histori-

cal correlation with the crude oil and

petrochemicals derivatives prices. The

target is to reach agreements based on

the lowest possible guaranteed annual

prices for each chemical.

Energy

The Group’s total energy costs in 2004

amounted to EUR 110 million, with

electricity, gas and steam constituting

more than 90% of the total.

In 2004, the European market faced

electricity price increases, and the

electricity price is expected to remain

high in 2005. However, more than half

of Ahlstrom’s electricity needs in Europe

(and some in the USA) are covered by

fi rm price purchase contracts for 2005.

The target is to further decrease price

sensitivity through coordinated purchas-

ing and fi rm price contracts, as well as

with total consumption optimization.

The CO2 emissions trading within

the EU starts in 2005. In most of the EU

countries where Ahlstrom has produc-

tion, the emission rights have already

been allocated and distributed to the

industries. However, Italy and Spain had

not announced their allocation deci-

sions by the end of 2004. Ahlstrom has

suffi cient rights to cover the present

CO2 emissions, and thus the emission

trading scheme is not expected to have

a fi nancial impact on the Group in 2005.

Capacity utilization rate

Capacity utilization has a major impact

on Ahlstrom’s profi tability. Production

volumes depend on demand and

products are manufactured mainly

against orders. In addition, the margins

vary from one product to the other,

and therefore the product mix also

has an effect on profi tability.

Factors affecting Ahlstrom’s profi tability

Invoicing by currency

EUR 65%

USD 28%

GBP 4%Other 3%

Raw material and energy costs

Fibers 57%

Chemicals 24%

Energy 15%

Others 4%

Total costs EUR 745 million

EUR/USD Exchange rate

1.40

1.30

1.20

1.10

1.00

1/03 6/03 1/04 6/04 12/04


Financial review

Adoption and effects of the IFRS

Ahlstrom begins to apply International

Financial Reporting Standards (IFRS)

in its fi rst-quarter interim report 2005,

which will be published on April 27,

2005. Prior to the publishing of the Q1,

2005 results, Ahlstrom will publish its

comparative 2004 (Q1-Q4) fi nancial

statements in order to communicate

the effects of the adoption of IFRS.

In the transition to IFRS, Ahlstrom

will apply the First-Time Adoption

standard that allows exceptions to

some of the specifi c standards at the

time of transition. January 1, 2004 is

used as the transition date to IFRS. As

for the fi nancial instruments, Ahlstrom

utilizes the exemption for a fi rst-time

adopter of IFRS not to restate compara-

tive information for 2004.

The most signifi cant effects of the

transition to IFRS relate to the treat-

ment of goodwill, pension and impair-

ment of assets. The other changes

relate mainly to the fair value mea-

surement and recognition of fi nancial

instruments as well as the reporting of

fi nance leases. The transition to IFRS

does not affect the Group’s cash fl ow.

Adoption of IFRS will have a

positive effect on the Group’s operating

profi t due to the abolition of goodwill

amortization, amounting to EUR 12

million in 2004. At the IFRS opening

balance sheet as per January 1, 2004,

Ahlstrom’s shareholders’ equity will

decrease by approximately EUR 55

million mainly due to increases in

pension obligations and impairment

write-downs of assets. The Group’s

balance sheet structure and the

gearing ratio will be slightly weakened

as a result of the IFRS transition.

Employee benefi ts

Ahlstrom has various pension and other

postretirement plans in accordance with

local practices in the countries where

it operates. Under FAS, the pension

liabilities are reported according to

local regulations. Under IFRS, all plans

are classifi ed as being either defi ned

contribution plans or defi ned benefi t

plans. The obligations of defi ned benefi t

plans are charged to income based on

the calculations made by authorized

actuaries.

At the date of transition to IFRS,

the Group’s pension obligations will

increase by approximately EUR 25

million. The largest increases by country

are as follows: EUR 14 million in UK,

EUR 8 million in Germany and EUR 4

million in Finland.

The change to the principle for

calculating disability pension liabilities

under the Finnish statutory employ-

ment pension scheme (TEL) will not

have a major effect for Ahlstrom.

The change will release the previously

made provision and enter a positive

item of approximately EUR 3 million

in operating profi t.

Business combinations

and impairment of assets

Business combinations before the date

of transition to IFRS are reported in

accordance with the same principles as

under FAS. Acquisitions after January 1,

2004 are reported in accordance with

IFRS 3. Hence, part of the goodwill rec-

ognized from the acquisitions in 2004

may be reclassifi ed as intangible assets.

Goodwill is no longer amortized

but will instead be tested periodically

for impairment. In the IFRS opening

balance sheet the total amount of

goodwill is EUR 74 million.

Ahlstrom periodically evaluates

the carrying amounts of assets to

determine whether there is any indica-

tion of impairment. If such indication

exists, the assets are written down to

a recoverable amount which is esti-

mated as being the higher of the net

selling price and the value in use.

As a result of impairment tests

performed at the date of transition to

IFRS, a total amount of approximately

EUR 60 million of impairment losses are

recognized in the IFRS opening balance

sheet.

Inventory

Changes in inventory may arise from

the reclassifi cation of spare parts.

Income taxes

Deferred taxes are entered in accor-

dance with IAS 12 for IFRS adjustments

causing temporary differences.

Consequently, deferred taxes are not

recognized for permanent differences

and non-deductible goodwill.

As a result of the transition to IFRS,

the change in Ahlstrom’s deferred

taxes are mainly a consequence of

the changes in pension obligations and

impairment write-downs of assets.

The increase in deferred tax assets on

IFRS adjustments at the date of transi-

tion amounts to approximately EUR

20 million.

Business review

FiberComposites• Nonwovens

• Filtration

• Glass Nonwovens

Specialty Papers• Label & Packaging Papers

• Technical Papers

Fiber-Composites45%

Net sales by segment

Specialty Papers 55%


Business review

The FiberComposites segment com-

prises three business areas: Nonwo-

vens, Filtration and Glass Nonwovens.

The Specialty Papers segment consists

of the former LabelPack and Specialties

divisions and is divided into the busi-

ness areas of Label & Packaging Papers

and Technical Papers.

Ahlstrom’s operations will become

even more customer-driven under

As of January 1, 2005, Ahlstrom was divided into two segments:

FiberComposites and Specialty Papers. Ahlstrom will report

its activities and performance by segment, but operatively

the segments consist of fi ve business areas.

the new organization, in which the

directors of all fi ve business areas are

members of the Corporate Executive

Team. This enables the company to

identify and respond more swiftly to

customer needs and ensures that all

business areas contribute their specifi c

expertise to decision making. The new

organization is also leaner and more

cost effective.

Financial performanceThe new organizational structure

became effective as of January 1, 2005.

The fi nancial performance of Ahlstrom

in 2004 is therefore reported in the

Report by the Board of Directors,

pages 58–61, following the earlier

divisional structure.

Other 6%

Fiber- Composites 50%

Employees by segment

SpecialtyPapers 44%

Other 7%

Fiber- Composites 56%

Capital employed by segment

SpecialtyPapers 37%

Investments and acquisitions

supported growth ambition

<< Ahlstrom’s fi ltration media is an integral component in these air fi lters. In 2004, Ahlstrom expanded its

fi ltration material product offering to the heating, ventilation and air-conditioning (HVAC) applications

through the acquisition of Hollinee, L.L.C’s Filtration Division in the USA. This transaction supports

Ahlstrom’s dedication to being a leading global supplier to fi ltration markets.


The segment consists of a worldwide

network of development, sales, and

marketing resources with manufactur-

ing assets on four continents. It aims to

strengthen its position among leading

nonwoven producers by offering

innovative products to customers. The

segment uses a large range of syn-

thetic and natural fi bers in its products,

which makes it possible to develop and

customize the product features and

performance to meet customer needs

and pricing expectations.

Market reviewThe business environment remained

challenging in 2004. The demand for

main products was weak in Europe

because of the slow growth in various

industrial sectors – primarily automo-

tive, windmill, building & construction

– which are the segment’s key markets

in Europe. The North American market

started slowly but improved towards

the year-end. Demand in both Asia and

South America was good.

Filtration volumes grew as a

result of investments and acquisitions,

although the automotive industry in

Europe experienced diffi culties due to

moderate growth and rising oil prices.

Nonwovens started the year slowly

but the demand improved towards

the year-end, mainly driven by the

North American market. Demand for

glass nonwovens was weak through-

out the year with the exception of

CV fl ooring tissue.

Profi tability was affected by rapidly

increasing costs of oil-based raw

materials such as synthetic fi bers and

binders, and by increased price compe-

tition. Despite the challenging business

environment, Ahlstrom succeeded

in increasing its volumes through

organic growth investments and two

add-on acquisitions. Its position as a

key supplier in the industry improved

during 2004. New production facilities

for wiping and medical fabrics, engine

fi ltration, and air fi ltration have been

added. In addition, FiberComposites

announced a line extension for glass

nonwovens.

Development measuresFiberComposites completed three major

growth investments in 2004. In Italy, a

new fi ltration materials line came

on-line in April, while in the USA,

a wiping fabrics line for the North

American market was inaugurated

in June. Similarly, a production line

for fi ltration materials and nonwovens

was started in South Korea in October.

These major investments were techni-

cally successful and completed on

schedule to serve growing customer

needs in their respective geographic

regions. Two signifi cant growth invest-

ments are on-going, namely a fi ne

fi bers production line in Italy and a

glass tissue line expansion in Finland.

These will serve customers with new

and improved products during 2005.

In addition, FiberComposites

completed two add-on acquisitions

to strengthen its positions in fi ltration

and nonwovens. Hollinee’s Filtration

Division, subsequently renamed

Ahlstrom Air Media, was acquired

in June 2004 in order to expand

Ahlstrom’s air fi ltration product range.

Green Bay Nonwovens was acquired

in October 2004 to expand Ahlstrom’s

wipes product line.

FiberComposites

Ahlstrom’s FiberComposites is one of the leading nonwoven roll

goods producers in the world, manufacturing and selling fi ltration

materials, nonwoven fabrics and glass nonwovens.


R & D activitiesIn 2004, FiberComposites launched

several new and improved products,

including dispersible wiping materials,

composite spunlace fabrics for wiping,

and new fi ltration materials. The rate

of innovation is expected to increase

in 2005 as the new lines manufacture

more advanced products.

OutlookThe business environment continues

to be challenging. North American

demand improved towards the end

of 2004 and seems likely to remain at

a good level in early 2005. European

economic growth is expected to

continue at 2004 level. Asia seems

likely to have another year of growth

ahead. Sales prices will remain under

pressure in 2005 and this, combined

with expected raw material price

increases, will make 2005 a challeng-

ing year. FiberComposites will keep its

operating costs under tight control in

2005 while seeking to benefi t from

the new production line start-ups and

acquisitions made during 2004.

FiberComposites

Business area Nonwovens Filtration Glass Nonwovens

Product line Building Food Technical Medical Wipes Engine Filtration Glass- Glassfi bre Specialty nonwovens fi ltration appli- fi bre reinforce- reinforce- cations tissues ments ments

Plants

Barcelona (E) • • Brignoud (F) • • •

Chirnside (UK) • • • •

Green Bay (USA) • • Groesbeck (USA) • Hyun Poong (ROK) • • •

Karhula (FIN) • • Louveira (BR) •

Madisonville (USA) •

Malmédy (B) • • Mikkeli (FIN) • Mt. Holly Springs (USA) •

New Windsor (USA) • Ställdalen (S) • • • Tampere (FIN) • •

Taylorville (USA) • Turin (I) • • Windsor Locks (USA) • • • • •

Other 1%

Consumer &healthcare 32%

Industrialapplications17%

Net sales by customer industry

Filtration & automotive 40%

Building 10%

Top 10 in nonwovens

300MUSD 600 900 1,200 1,500

2. DuPont

5. Ahlstrom*

3. Kimberly-Clark

6. PGI

4. BBA

7. Johns Manville8. Colbond

9. Buckeye Technologies

1. Freudenberg

10. Japan Vilene

* Including net sales of USD 70 million from Green Bay Nonwovens andHollinee L.L.C’s filtration division, both acquired in 2004.Source: Nonwovens Industry 9/2004, Ahlstrom


FiberComposites

Breathable Viral Barrier:

Better protection and comfort for medical personnel

Ahlstrom has introduced a breakthrough

fabric for medical gowns. The new

material, called Breathable Viral Barrier

(BVB), not only protects medical per-

sonnel from viral exposures but also

maintains a high level of breathability

and comfort, even as the wearer’s

temperature rises e.g. due to working

stress in the operating theater.

This unique triple-layered fabric

features a responsive, monolithic

membrane sandwiched between inner

and outer fabrics made of a continuous

fi ne fi lament nonwoven. The inner layer

provides a soft touch to the wearer’s

skin while the outer layer provides

additional repellency and strength.

The monolithic technology of the BVB

fabric has passed the American ASTM

F1671 viral penetration test for resis-

tance to bloodborne pathogens and

complies with the performance charac-

teristics of a Level 4 device as classifi ed

by AAMI and the FDA. It provides the

maximum viral protection available in

the market today.

The protection of medical person-

nel, particularly in surgery settings, from

viral exposure has never been more

important. The incidents of viruses

and contagious diseases such as HIV,

Hepatitis and SARS are increasing

throughout the world.

Ahlstrom has launched a new Web

site designed to provide information

to the medical industry about infec-

tion control and the fabrics that help

keep medical personnel safe. This new

Internet resource provides up-to-date

information on key advancements in

viral barrier protection.

For more information, please visit

www.viralbarrier.com.

ASTM: American Society for Testing and Materials

AAMI: Association for the Advancement of Medical

Instrumentation

FDA: Federal Drug Association (US)

The restructuring measures taken

at the end of 2004 will reduce fi xed

costs in 2005.

Nonwovens is well positioned for

2005 to benefi t from new capabilities

arising from organic growth investments

and by the Green Bay Nonwovens add-

on acquisition.

Additional expansion ideas are

being assessed with a view to secure

Ahlstrom’s leading position in fi ltration

media supply.

Glass Nonwovens will expand its

manufacturing capacity in the glass

tissue line and make several investments

to boost capacity and productivity.

Business area reviewsNonwovens

Ahlstrom’s nonwovens business area

serves customers in the food packag-

ing, medical, wiping, wallcover, auto-

motive, and technical nonwoven goods

sectors. The product line teams operate

globally and the business runs 15 pro-

duction lines. In 2004, the business area

completed two expansions in North

America by starting a new production

line in Windsor Locks and by acquiring

Green Bay Nonwovens. The new line

in South Korea is used for both fi ltra-

tion materials and nonwoven fabrics

production.

The North American market

conditions improved during the course

of 2004. The new capacity at Windsor

Locks as well as the Green Bay

Nonwovens acquisition developed

favorably during the second half of

the year. European demand was

sluggish throughout the year. The main

segments served by the business are

driven by overall economic activity,

which was slow in 2004. Asian demand

improved and the new capacity will

help to serve immediate growth.

However, new expansion options to

satisfy the growing needs of the region

are being considered.


The total sales volumes grew by

11%, showing strengthened market

positions. However, the business area

experienced intense price competition

which, combined with increasing raw

material prices, weakened profi tability.

In 2004, the business took several

actions to improve its overall effi ciency,

and the outcome of these measures

will be refl ected in the 2005 result.

Personnel reductions affected plants

at Windsor Locks in the USA, Chirnside

in the UK and Ställdalen in Sweden.

Edinburgh market services offi ce will

be closed and its personnel will be

relocated to production sites in 2005.

Filtration

Ahlstrom’s Filtration business area

serves customers in the engine fi ltra-

tion, air fi ltration, and specialty fi ltration

sectors. The business operates globally

with ten manufacturing sites on four

continents. In 2004, the business

completed two large organic growth

investments by starting new production

lines in South Korea and in Italy. Further,

the business expanded the capacity of

its Brazilian unit and acquired Hollinee

L.L.C’s Filtration Division, complement-

ing Ahlstrom’s air fi ltration know how

and manufacturing capabilities. In 2005,

the business will start up another new

manufacturing line in Italy for the pro-

duction of fi ne fi ber fi lter media.

Demand for fi lter materials was

reasonable throughout the year. Sales

volumes increased by 16%, which

strengthened Ahlstrom’s position as

the leading fi ltration media supplier in

the world. North American demand

slowed down towards the end of the

year but still remained good. The slow

economic activity in Europe restricted

volume growth, but Ahlstrom achieved

reasonable success in placing the

volumes from its new production

line. Demand in Asia remained good

throughout 2004.

Profi tability declined over the

previous year due to rapidly increasing

raw material prices which were not

fully offset by price increases.

Ahlstrom has for some time been

examining the photocatalytic technol-

ogy in cooperation with research insti-

tutes, universities and other companies.

This partnership has led to several

patented commercial products, mainly

for cleaning and disinfection of air and

water.

The photocatalysis technology is

used to degrade pollutants, such as

organic compounds like odors, bacteria,

and smoke either in gas or liquid effl u-

ents. To make photocatalysis happen,

the equipment needs to combine a

semiconductor, generally titanium

dioxide, and an irradiation system such

as UV lamps or sunrays. This combi-

nation catalyses the creation of free

radicals and results in the elimination

of pollutants and micro organisms.

The only residuals of the elimination

are water and some CO2, which makes

this a clean process. This technology is

applied to nonwoven material produced

by Ahlstrom.

The odor cover developed by

Ahlstrom combines photocatalysis with

the adsorbing technology of activated

carbon. The odors concentrate in the

activated carbon layer during the night

(no sunrays), and the titanium dioxide

creates free radicals during the day

(with the sunrays), which regenerate

the activated carbon, thus allowing

a longer life time. The odor cover can

be used in various outside applica-

tions, e.g. in piggeries, paper mills,

lagoons, garbage cans, and dump sites.

It totally eliminates the odors from the

air and has a life cycle of two to three

years. In addition, the odor cover is an

environmentally friendly solution, as no

masking agents are required to cover

up the pollutants.

Photocatalysis: Technology also for odor control


FiberComposites

A new award-

winning glassfi bre

composite structure

will make future

traveling safer

Ahlstrom, together with a group of

European organizations, has developed

light-weight, more cost effective and

more crash-resistant materials to be

used as a replacement for metal in

trains, buses, trailers, trucks and other

transportation applications. This multi-

national consortium of organizations,

known as Hycoprod, was funded by

the European Commission.

Ahlstrom was responsible for the

design and specifi cation of the types

of glassfi bre reinforcements that

are suitable for these applications.

There after, another Finnish company,

Fibrocom Oy, designed and manufac-

tured a prototype of a double-decker

rail car made from a composite

structure, and for collision elements for

use in trains. The prototype of a more

lightweight and safer passenger rail

car was introduced at the JEC Exhibition

in Paris in March, 2004. At that event,

the consortium received the JEC Award

which is awarded for the best innova-

tion or process in the composites fi eld.

The next step is to commercialize the

innovations, and to build a complete

train from composite structures. This

project will be carried out together with

Talgo Oy, a manufacturer of rail vehicles

and engineering shop products.

Hycoprod represents an excellent

example of a development initiative,

in which small and large companies,

materials suppliers, manufacturers

and universities from various countries

combine their expertise. The results of

the cooperation will make traveling and

freight services safer in the future.

In addition, costs related to invest-

ments and new line ramp-up burdened

the result throughout the year. In early

2005 the South Korean line is still in its

ramp-up phase, and in April Ahlstrom

will start a fi ne fi bers fi lter media line

in Italy. The business area continued

its productivity improvement program

throughout 2004, reducing costs to

meet performance targets.

Glass Nonwovens

Ahlstrom’s Glass Nonwovens serve

reinforcement, specialty reinforcement

and glass tissue goods markets. The

products are roll goods made from

Ahlstrom’s own glass fi bres, and

customers use them for windmill,

marine and transportation equip-

ment manufacturing, for example, as

reinforcement material. The business

area serves its customers globally

and operates manufacturing facili-

ties in Finland. In 2004, the business

area completed a cold repair of a

glass furnace and announced a further

expansion of its glass tissue line.

The glass nonwovens market

remained very competitive through-

out the year, and the business faced

intense price competition in its main

segments. The competitive fi ber supply

from China continued to drive prices

down. In spite of the challenging

environment, Ahlstrom increased its

volumes by 8%.

The strong price competition and

increased raw material prices had a

negative impact on the profi tability in

2004. Low demand for specialty rein-

forcements led to a personnel reduction

of 27 employees in Mikkeli, Finland.

Continuous productivity improvement

work was carried out both at the

Karhula and Mikkeli plants in Finland.


R & D efforts generated

new business opportunities

<< Labeling is an important end-use sector for Ahlstrom’s specialty papers.


The Specialty Papers segment com-

prises two business areas: Label &

Packaging Papers and Technical Papers.

The segment serves its customers

through 12 product lines. The main

plants are located in France, Germany,

and Italy.

The customers for the Specialty

Papers operate mainly in the packaging,

printing, building, health care, furniture

and automotive businesses.

The Specialty Papers segment’s

competitive advantage is the signifi cant

know-how that has been achieved

through decades of experience in this

fi eld. Ahlstrom’s product lines and sales

teams work closely with customers to

develop solutions specifi cally designed

to meet individual customer and appli-

cation needs. Further, the company’s

extensive knowledge of natural fi bers

and chemicals, as well as the ability

to adapt them for product use, are

essential factors in achieving maximum

product performance.

To further strengthen its position

as the leading specialty paper manu-

facturer, Ahlstrom will develop new

innovative products, invest in added

manufacturing capability, and target

suitable expansion acquisitions.

Label & Packaging Papers business areaThe Label & Packaging Papers business

area offers a wide range of paper

products to customers representing

several industries. Its main products

include release liners, face stock papers,

wet glue label papers, metalizing

papers, fl exible packaging papers, and

offi ce & graphic papers.

Ahlstrom produces both supercal-

endered release base papers and clay-

coated base papers for silicone coating.

The main customers for release liners

are global producers of self-adhesive

laminates. Market growth is driven

by the increasing use of self-adhesive

labels, especially in certain geographi-

cal areas such as Asia, and by new

self-adhesive applications. Ahlstrom

is a leading producer of release liner

base papers. The company’s target is to

exceed the average market growth in

this business.

The customers for wet-glue label

papers are specialized printers and

producers of metalized papers. They in

turn print and supply white or metalized

labels to major breweries worldwide,

as well as to producers of soft drinks,

mineral waters and other beverages.

Label face stock is used for self-

adhesive labeling in the packaging of

food, pharmaceuticals, cosmetics and

beverages.

Flexible packaging papers are used

by converters offering packaging solu-

tions to numerous food and non-food

segments, including among others pet

food, soap, confectionery, chocolate

bars, yogurt, and coffee packaging.

Ahlstrom holds a leading position in

these market areas.

Market review

The market for Label & Packaging

Papers was fairly soft in 2004. In the

labeling business, there was a notable

slowdown in the autumn following a

strong summer season. Nevertheless,

the market situation in some important

segments, such as release liner base

papers, remained good. Strong growth

continued also in some geographical

regions, especially in Asia.

In the beginning of 2004, the

business area was strongly affected

by increased raw material prices and

other manufacturing costs, which made

price increases necessary across all

product lines and geographical regions.

These were implemented at the end

Specialty Papers

Ahlstrom is the largest specialty paper manufacturer in the world,

producing and selling labeling materials, packaging papers, and

various technical papers as roll goods to customers for conversion

into sophisticated end-market products.

Flexpack 17%

Building & furniture 11%

Net sales by customer industry

Labeling 45%

Industrialapplications 7%

Consumer& food 11%

Printing &office 9%


of the second quarter. In addition, the

strengthening of the euro against the

US dollar and other currencies had a

negative effect on overseas sales.

The smaller release liner machine

at the Turin plant in Italy was trans-

ferred to the Filtration business area at

the beginning of 2004.

Development measures

Investments amounted to EUR 15 million.

In January 2004, the main machine at

the Turin plant was shut down whilst a

strategic investment was carried out.

This was successfully concluded on time

and within budget, and the resulting

capacity and effi ciency improvements

have clearly exceeded expectations.

This will support Ahlstrom’s growth

ambition in the release liner business.

In accordance with Ahlstrom’s

decision to strengthen the business

area’s focus on clay-coated release

liners, several new products were

developed in 2004. Consequently,

Ahlstrom will be able to enter new

market segments in this business.

R&D activities

In 2004, a new generation of improved

metalizing base papers was launched,

targeting specifi cally beer labeling

markets. The feedback from major label

converters and users has been very

encouraging.

The development of new clay-

coated release liner base papers,

coupled with the above mentioned new

capacity increase, provides a promising

possibility for Ahlstrom to enter new

self-adhesive graphic market segments.

Other R&D efforts were focused on

the development of new technologies

in the fi eld of security self-adhesive

labels, and on innovative, recyclable

barrier papers to substitute plastic as a

packaging material for food packaging

and other applications. These activities

are likely to generate signifi cant busi-

ness opportunities in the medium term.

Outlook

The demand for release liner base

papers is expected to remain at a good

level in 2005. In this business, Ahlstrom

aims to exceed the rate of market

growth. The demand for label papers

and fl exible packaging papers is not

expected to change signifi cantly from

2004.

In 2005, the business area expects

to gain market share from plastic in all

product areas, especially in the fl exible

packaging and labeling businesses.

Specialty Papers

Business area Label & Packaging Papers Technical Papers

Product line Offi ce & Metali- Face Release Wet glue Flexible Abrasive Pre- Wallpaper Crepe Vegetable Sealing graphic zing stock liners label packaging base impreg- base and paper parchment and papers papers papers papers papers paper nated poster shielding

decor paper

Plants

Altenkirchen (D) • Ascoli (I) • • • • • Bousbecque (F) • Chantraine (F) • • • Kauttua (FIN) • • • • La Gère (F) • Nümbrecht (D) •

Osnabrück (D) • • • • Pont-Audemer (F) • Rottersac (F) • • • • Saint-Séverin (F) • Stenay (F) • • • • Turin (I) • •

Top 10 in specialty papers

300 600 900 1,200 1,500

2. Stora Enso

5. Worms&Cie/Arjo Wiggins

3. MeadWestvaco

6. August Koehler

4. International Paper

7. Felix Schoeller8. UPM

9. Cham-Tenero

1. Ahlstrom

10. Wausau-Mosinee

Allocated specialty paper capacity,1,000 tons in 2004Source:Jaakko Pöyry Consulting,Ahlstrom

Specialty paper gradesinclude all papers excludingnewsprint, magazine, fine,tissue and sack papers.

1,000 tons


Decorative laminates bring style and

beauty to kitchens, bedrooms, and

living rooms. With wood or marble

decor printing, fi nish foils are used for

surface or edging decoration in the

panel and furniture industry. For a fi nal

product which keeps its original design

for years, base paper for decor printing

must ensure top class printing results

and perfect reliability during the lamina-

tion process.

Ahlstrom, the leading producer of

pre-impregnated base paper globally,

has more than 20 years of experience

in supplying base material for decor

printing. Ahlstrom’s product brings color

consistency, lay fl atness and ensures

good processing and adhesion proper-

ties on all substrates.

The use of pre-impregnated paper

in decor printing is showing healthy

growth. It allows laminate producers

to save one step in their production

process. By leaving out the impreg-

nation phase, they reach substantial

cost advantages, benefi ting the whole

value chain.

Ahlstrom has committed important

resources to the development of this

product area. With one of the most effi -

cient paper machines on the market,

Ahlstrom provides the widest range of

pre-impregnated base papers and con-

stantly works on new ideas and product

development to help the industry

achieve optimal results.

One step ahead with Ahlstrom’s

pre-impregnated decor paper

Technical Papers business areaThe Technical Papers business area

develops and manufactures specialty

products for demanding industrial

applications. Ahlstrom has a long and

successful history of innovations in

this fi eld, and it is recognized by its

customers as a provider of technical

solutions to meet complex end product

specifi cations.

The ability to provide customized

papers and converting concepts is

critical to success in the technical paper

industry. These paper products are

offered as roll goods to customers who

convert the papers into sophisticated

end market products. The main markets

of the business area are the building,

furniture, healthcare and automotive

industries.

Market review

Despite a slow start in the fi rst quarter,

the demand for most product lines in

this business area developed favorably

during the course of the year. Pre-im-

pregnated decor papers, poster papers,

abrasive base papers and sealing and

shielding materials showed particularly

good volume and revenue develop-

ment. The growth was mainly a result

of improved market conditions in

Ahlstrom’s main markets, and of the

successful introduction of new products.

Development measures

In 2004, the fi nancial performance of

the business area improved signifi cantly,

thanks to increasing sales volumes

and reduced fi xed costs. Development

measures were mainly a consequence

of the Performance Enhancement

Program, initiated in late 2003 and suc-

cessfully implemented at two German

plants, Osnabrück and Nümbrecht, and

at Pont-Audemer, France. The aim of

the program is to improve productivity,

primarily through more effi cient use of

the assets. In 2004, one paper machine

at Pont-Audemer in France was closed

down. The overall cost structure in

the German plants was substantially

improved through the rebuilding of the

main machine in 2003, better capacity

utilization, changes in working sched-

ules, and by personnel reductions. The

improvements achieved provide a solid

base for further performance enhance-

ments in 2005.

Investments in 2004 totaled EUR

10 million. The biggest investments

included the restructuring of the

Pont- Audemer plant in France, and

the improvement of the cost structure

of the pre-impregnated decor line at

the Osnabrück plant in Germany.

Production of cores and coreboard

was transferred to the joint venture

Ahlstrom formed together with Sonoco

Products. The new company, Sonoco-

Alcore, of which Ahlstrom owns 35.5%,

is the largest core and tube producer

in Europe and neighboring areas.

Sonoco-Alcore began operations in

November 2004.

Specialty Papers


R & D activities

One of the most important success

factors in the technical paper business

is the ability to generate product inno-

vations for new and present markets.

The main goals for 2004 were to

intensify the investments in product

development and to build a platform

for future organic growth.

In 2004, the business area success-

fully launched several new products for

a variety of industrial applications. A

new vegetable parchment product with

high release properties was introduced

to producers of high-pressure technical

laminates for use in building insulation

materials. This new product replaces

plastic fi lm in this application due to its

better heat resistance.

Ahlstrom also launched a special

vegetable parchment product that

can be used as a separating material

in fl exible printed circuit boards. The

advantage of the vegetable parchment

compared with plastic fi lm is its better

dimension stability. In addition, it is less

electrostatic and can be recycled.

The crepe papers product line

developed a softer biodegradable

wipes product with superior charac-

teristics as compared to traditional

creped wipes. Additionally, a new range

of paper grades for the fl at vinyl wall

covering segment was launched in

2004.

To support the fast growing

business of automotive heat shields, a

new generation of heat shielding mate-

rials was introduced. These products,

which can stand temperatures of up

to 1,000°C, exhibit other new features

such as vibration compensation proper-

ties and sound absorption.

Outlook

The growing demand for the key

products is expected to continue in

2005. Investments in growth initia-

tives, together with the launch of new

products in application segments such

as poster papers, pre-impregnated

decor papers and wallpaper base

papers, will further support top line

growth. Increased raw material costs

and the weakening of the US dollar will,

however, continue to put pressure on

margins. Product mix enhancements

and price increases, in combination with

effective cost control, are expected to

offset these external factors. In 2005,

the business area aims to continue the

performance improvement program.

Release liners

expand beyond

self-adhesive

labeling

Although self-adhesive labels and tags

represent by far the main application

for release liners, the world is full of

other self-adhesive materials or compo-

nents that require a silicone-coated

paper to protect their adhesive prior

to use.

A modern car, for example, can

contain up to 15 m2 of self-adhesive

materials including insulating foams,

soundproofi ng materials, interior linings

and various other components. Mobile

phones, laptops, assorted consumer

electronics and household appli-

ances also include many self-adhesive

components, such as printed circuits,

keyboards, or screens. Double-sided

adhesive tapes are used in factories

around the world for numerous indus-

trial processes. Also, in hospitals and

pharmacies, self-adhesive bandages,

transdermal patches, and simple pro-

tective plasters are common sights.

All of these businesses, and many

others, demand highly specifi ed release

liners and customized service. In order

to adequately serve such needs,

Ahlstrom has focused the La Gère

plant in France to produce technically

demanding silicone base papers.

Silca Industrial, a range of high perfor-

mance supercalendered silicone base

papers designed to be coated with

silicone on both sides, is available in

various shades and substances up to

130 g/m2. Already this range represents

a major share of the plant’s output.

The results speak for themselves.

Sales of Silca Industrial increased by

34% in 2004. Ahlstrom, the global

leader in specialty papers, intends to

continue to strengthen its focus on

silicone base papers and offer a wider

product range.


Specialty Papers

Posted on outdoor billboards, printed

poster paper needs to be attractive in

all weather conditions. The paper must

be dimensionally stable, have good wet

strength and wet opacity to ensure that

advertisers always get their message

through, even if rain or wind hit the

billboards.

Ahlstrom, the world’s leading

producer of poster paper, has for more

than 20 years supplied the printing

industry with the widest range of high-

performance poster papers.

High-performance poster papers

for outdoor advertising

The company has the most productive

one-side coated poster paper machine

in the industry, and it is able to provide

papers that behave very effi ciently

when posted on billboards. Further-

more, they run perfectly with all

printing methods: offset, silk screen

or digital printing. Ahlstrom has also

focused its offer on service and

logistics operations to enable the

printing industry to print large

advertising campaigns within a short

lead time; a crucial element in

a market requiring fast reactivity.

Outdoor advertising, whose biggest

segment is billboard posters, is a

powerful media attracting large audi-

ences. It is one of the fastest growing

advertising media, especially in the

emerging markets of Eastern Europe

and Asia. Urbanization, mobile lifestyle,

the growing importance of branding,

and successful outdoor advertising

campaigns support future growth.

Both leaders in their fi eld – the fi rst

for its technical packaging papers

and the second for its fl uoride resins

– Ahlstrom and Du Pont de Nemours

have pooled their talents to develop

the best solution for packaging of pet

food products. The result is a combina-

tion of Ahlstrom’s Alipack® uncoated

paper for inner liner and its GervaluxTM

one side coated paper for outer liner,

both treated with resins produced

by DuPont, which offers an excellent

grease proof barrier and represents

the ideal material for dry pet food bags.

The association of the innovation

and marketing resources of the two

companies aims at developing and

promoting innovative packaging

solutions.

To highlight that effort, a vast

European communication campaign,

started with a common advertisement

in some of the most important trade

magazines, was launched in June 2004.

This campaign – titled ”The future is

paper packaging” – stresses the fact

that paper is a highly performing and

competitive product that also respects

the environment. Something that no

end user can ignore.

In addition to the ongoing campaign,

Ahlstrom and DuPont shared a booth

at the Pet Food Forum, held in the

Netherlands in September 2004, one

of the most important international

exhibitions giving a good opportunity

to meet all the protagonists of the pet

food market and to discuss about the

future of this growing business. Several

events will in 2005 further strengthen

this collaboration.

Paper is the future of pet food packaging


Ahlstrom & society

<< Ahlstrom organized a poster

competition entitled “Innovations

that protect the planet” together

with the University of Art and

Design, Helsinki. Nine art and design

universities around the world were

invited to join the competition.

Among the 158 entries, the fi rst

prize was awarded to Marie Laure

Daubé from ESAG-Penninghen,

Paris. The second prize was awarded

to Laurent Oumezzine from the

same university, and the third prize

to Emmi Kyytsönen from University

of Art and Design, Helsinki.

Ahlstrom is the leading

producer of poster paper and will

utilize these prized posters for

example at the World Expo 2005

in Aichi, Japan.

1. 2.

3.


Summary of the Code of Business Conduct

The main areas addressed in Ahlstrom’s

Code of Business Conduct are:

Compliance with the law

Ahlstrom and its employees will abide

by the letter and the spirit of all appli-

cable laws and regulations, and will act

in such a manner that the full disclosure

of all facts related to any activity will

always refl ect favorably upon Ahlstrom.

Adherence to high ethical standards

Ahlstrom and its employees will adhere

to the highest ethical standards of

conduct in all business activities, and

will act in a manner that enhances

Ahlstrom’s standing as a vigorous and

ethical competitor within the business

community. Customer relations shall be

based on honesty and trust.

Responsible business citizenship

Ahlstrom and its employees will act as

responsible citizens in the communi-

ties where the company does business.

Ahlstrom expects its employees to

be honest in dealings with fellow

employees, the Company, its manage-

ment, suppliers, customers and other

members of the business community.

Avoidance of confl icts of interest

A confl ict of interest is a divided loyalty

between the interests of Ahlstrom and

the personal interest of the employee.

Employees must not allow personal

considerations or relationships, whether

actual or potential, to infl uence them in

any way when representing Ahlstrom

in dealings with other persons or orga-

nizations.

Completeness and accuracy

of books and records

All entries made in the books, records,

and accounts of Ahlstrom Corporation

and each of its subsidiaries and affi li-

ates must properly and fairly refl ect

the transactions being recorded, to the

best knowledge, information, and belief

of the employees making the entries.

Ahlstrom expects open and transparent

internal and external communications

of the Company’s information.

Use of Ahlstrom’s name, assets

and information

The Ahlstrom name, assets and infor-

mation belong to Ahlstrom and not

to individual employees, regardless

of position within Ahlstrom. All of the

business information generated and

used within the business is valuable

to Ahlstrom and may be valuable to

outsiders. Employees should carefully

control the release of any business

information, including confi dential

information given to Ahlstrom by a

third party.

Human rights

Ahlstrom is committed to maintain-

ing a safe, healthy workplace for all

employees. No employee shall be

subject to any form of abuse or harass-

ment, whether physical or psycho-

logical. Ahlstrom shall not discriminate

in employment on the basis of age,

gender, race, ethnicity, religious beliefs,

or political affi liation.

The environment

Ahlstrom shall employ state-of-the-art

means for environmental protection.

The Code of Business Conduct is communicated

through internal training sessions arranged

by Corporate Legal Department. The entire

Code of Business Conduct can be reviewed at

www.ahlstrom.com


Sustainability reporting

within Ahlstrom

Ahlstrom provides perform-

ance reports on all three

dimensions of sustainability:

social, economic, and

environmental performance.

When reporting on sustainability issues,

Ahlstrom follows the Global Reporting

Initiative (GRI) Guidelines to the appli-

cable level. Ahlstrom reports on sus-

tainability issues as part of its Annual

report. Since the most signifi cant issues

are linked with environmental aspects,

the sustainability section is focused on

environmental performance.

Summary of the organizational profi leAhlstrom is a leader in high-perform-

ance fi ber-based materials serving

industrial customers worldwide.

Ahlstrom has 5,800 employees and

annual net sales of EUR 1.6 billion.

Ahlstrom’s competitive edge lies in

the understanding of customer needs

and in the unique know-how of fi ber

processing technologies. The fi rst step

in the production chain is the purchase

of raw materials, namely natural and

synthetic fi bers and various chemicals.

Already at this early stage of raw

material selection, Ahlstrom takes

environmental considerations into

account. The fi bers and chemicals

are combined and processed into roll

goods, mainly nonwovens or specialty

papers. The company’s customers, for

example in the health care, packaging

and consumer industries, then convert

Ahlstrom’s products into end-user

applications that have a wide impact

on everyday life.

Scope of reported sustainability informationInformation in this sustainability section,

covering pages 36–56, follows the

boundaries of the annual accounts, with

the exception of the environmental

data, which covers all of Ahlstrom’s

31 manufacturing plants. As a principle,

plants acquired in 2004 are included in

the statistics as of the date of acquisi-

tion, and plants divested are excluded

as of the date of sale. Ahlstrom is in the

process to continuously improve and

refi ne the sustainability data gathering

systems and procedures.

Health and safety data covers all

Ahlstrom sites using the same principle.

Regarding the asset protection pro-

grams, the priorities are determined by

the asset values and the potential risks.

Changes in company structure in 2004Ahlstrom and Sonoco agreed to

combine their European paper-based

core, tube and coreboard operations.

Ahlstrom holds 35.5% and Sonoco

64.5% of the shares in the joint

venture Sonoco-Alcore. As a result of

this transaction, a board mill and 15

converting plants employing appr. 470

people were excluded from Ahlstrom’s

accounts as of November 1, 2004.

In June, Ahlstrom acquired Hollinee,

L.L.C.’s fi ltration division. The acquired

business employs appr. 200 people

at two sites in the USA. In October,

Ahlstrom acquired Green Bay

Nonwovens, a US-based manufacturer

of nonwovens. The acquired business

employs 75 people at its Green Bay,

Wisconsin facility.

As of January 1, 2005, Ahlstom’s

operations were re-organized into

two segments, FiberComposites and

Specialty Papers. To learn more about

the new organizational structure, see

Business review, page 23.

Policies and practices on data reportingData concerning health, safety and

the environment was collected at the

various Ahlstrom sites by the persons

responsible. The data was then passed

to the Health, Safety, Environment and

Assets directors of the divisions, who

work closely with the sites to make

sure that the data is collected properly

and in accordance with corporate

guidelines. Sensitivity checks are

performed twice a year.

Environmental data is measured,

calculated and reported with all facilities

utilizing common practices based on

the Best Available Technique Reference

Document (BREF) for the Industry. BREF

was issued by the European Commis-

sion in the context of the Integrated

Pollution Prevention and Control

Directive (IPPC) of the European Union.

Health and safety data is collected at all

sites and consolidated at both business

area and corporate level.

Reporting principles on environ-

mental data have been changed in

this Annual Report compared with the

previous one, as far as emissions to

air are concerned: Where steam and

power generation are outsourced,

Ahlstrom reports related CO2 emissions

only if they are allocated to Ahlstrom

facilities in the National Allocation Plan.

Where CO2 emissions have been allo-

cated to suppliers, air emissions are not

reported by Ahlstrom. For simplicity,

this principle has been backdated to

include 2003 fi gures. Where outside

partners treat Ahlstrom’s effl uents,

Ahlstrom does not report on their water

pollutants. However, the total effl uent

volume is reported by Ahlstrom.


Sustainability management

Operational

risk management

The organization is headed by the

Senior Vice President, Technology who

is a member of the Corporate Executive

Team. The corporate risk management

organization is responsible for develop-

ing and implementing risk manage-

ment strategies, setting corporate

targets and supporting business areas

and sites. The organization works also

in close cooperation with the corporate

and business area investment directors,

and the director of insurance. For some

specifi c projects in 2004, Ahlstrom used

external expertise.

In Ahlstrom’s operational risk man-

agement, site managers are respon-

sible for the compliance with local laws

and regulations, and the Corporate

Operational Risk Management Policy.

The business area directors of Health,

Safety, Environment and Asset Protec-

tion (HSEA) support site managers in

this task.

Operational Risk Management Policy StatementPeople, property, earning capacity,

customer relations and reputation are

the most important assets of Ahlstrom.

Their preservation and security are

essential for the continued growth and

long-term success of the company.

Risk management incorporates

all aspects of the health and safety of

people, and the protection of the envi-

ronment and the company’s physical

assets. The risk management process

is used to identify and assess the risks;

to implement the most appropriate

measures to avoid, reduce and control

those risks and to provide systems,

resources and support that will offset

the effects of any losses that may

occur.

An attachment to the Operational

Risk Management Policy defi nes

Operational risk

management includes

the health and safety

of people and

the protection

of the environment

and physical assets.


Ahlstrom’s goals and principles in the

context of minimizing the impact of its

operations on the environment:

• By 2006, more than 90% of

Ahlstrom’s production output shall be

covered by ISO 14001 certifi cates. This

target has been revised following the

acquisitions made in 2004.

• Ahlstrom complies with applicable

laws and regulations.

• The company develops its assets

and processes guided by the principles

of Best Available Techniques, following

the Directive of the European Union

of Integrated Pollution Prevention and

Control.

• Ahlstrom strives to minimize the

impact of its operations on the environ-

ment during all phases of production,

storage, transportation and use of its

products.

• As extensive users of water and

energy, the production units have a

continuous focus on improving their

effi ciency in the use of these fi nite

resources.

• Ahlstrom prefers to use raw

materials from sustainable resources,

and to cooperate with suppliers and

customers in managing sustainable

development.

• The company strives to conserve

resources through appropriate re-use or

recycling.

The full Operational Risk Man-

agement Policy Statement can be

reviewed at www.ahlstrom.com.

Plant asset risk managementPlant asset risk management contrib-

utes to operational risk management

policy by systematically improving

the prevention of accidents and the

protection of the company’s produc-

tion facilities. As a leading supplier of

specialized fi ber materials to customers

around the world, Ahlstrom’s target is

that all plants achieve an internationally

acknowledged high level of loss control.

In this task, Ahlstrom is supported by

the worldwide engineering capability of

its insurers. All production facilities are

examined once a year, and continuous

prevention and protection improvement

programs are set up and reviewed.

Such plans include both protective

investments and “human element” pro-

cedures such as smoking and hot work

control, regular inspections, housekeep-

ing, and fi re response training.

In 2004, the program to upgrade

sprinklered facilities and to install sprin-

klers in the remaining unsprinklered

plants, continued. Sprinkler installa-

tion was begun at the Brignoud and

Bousbecque plants in France, and it will

be completed during 2005. According to

the evaluations of company’s insurers,

Ahlstrom made signifi cant improve-

ment in all its plants and the number of

units classifi ed as Highly Protected Risk

(HPR) increased by four.

In 2004, one accident causing

material damage to plant assets

occurred in Louveira, Brazil when a

solvent fume explosion caused slight

injuries to two employees. The cost

of the damage was EUR 4.9 million.

Following this occurrence, major inves-

tigations and risk analysis of saturators

using solvent have been conducted

with the support of external experts.

This resulted in an extensive plan for

risk improvement, implementation of

which is nearly completed. The plan

will be fi nalized during 2005.

Certifi cation of management systems Ahlstrom‘s Operational Risk Manage-

ment is supported by management

systems that are committed to

continuous improvement methodology

implementation – with a wide coverage

of certifi cates provided by external

auditors.

In 2004, ISO 14001 certifi cation was

achieved by the Barcelona (E), Louveira

(BR), Saint Severin (F), Stenay (F) and

Tampere (FIN) plants. The target is

to have more than 90% of Ahlstrom’s

production output covered by ISO

People, property, earning capacity,

customer relations, and reputation are

Ahlstrom’s most important assets.


14001 by 2006. Five European plants

comply already with the IPPC Directive

(Integrated Pollution Prevention and

Control): Barcelona (E), Chirnside (UK),

Karhula (FIN), Radcliffe (UK), and Turin

(I). All European paper plants have to

comply with the directive by 2007.

In addition to the external evalu-

ations carried out in conjunction with

the management systems, internal

experts evaluate each Ahlstrom plant

every three years. The aim is to have

cross-fertilization between the sites.

Another target of the procedure is

to ensure that plants comply with

the requirements for managing their

operational risk management issues

and with the principle of continuous

improvement.

Ahlstrom is committed to comply-

ing with applicable laws and regulations

wherever it operates. The company

has also issued internal standards and

guidelines which must be applied, even

if they exceed the requirements of local

regulations.

Internal programs improving sustainability performance Ahlstrom has initiated water and

energy effi ciency programs, and aims

to reduce energy input per ton of

product by 10%, and water use per ton

of product by 17%, over a period of

fi ve years between 2002 and 2007. As

at the end of 2004, the company had

succeeded in reducing water usage by

four per cent, while energy consump-

tion did not decline due to changes in

product mix.

A long-term program is in place

to ensure that more than 70% of the

assets will be rated HPR by insurers by

2006. In addition, training sessions are

planned in order to increase employee

awareness and to ensure that best

available manufacturing processes are

constantly used.

The performance improvement

program “a plus” features occupational

health and safety as one of its key

elements.

Memberships in industry associationsAhlstrom signed the Charter of Sustain-

able Development of the International

Chamber of Commerce in 1991.

Ahlstrom actively participates in the

environmental councils of industry

associations such as the Finnish

Forest Industries Federation, Copacel

(France), Verband Deutscher Papier-

fabriken (Germany), Assocarta (Italy),

as well as the European PaperPlus and

CEPI. Ahlstrom is also a member of

nonwoven producers’ associations in

the USA (INDA) and in Europe (EDANA).

Sustainability management

ISO 14001 ISO 9001 OHSAS 18001 IPPC

Implemented 21 28 8 5

In process for certifi cation according to target 3 1 No offi cial target

Management systems


Human Resources:

Building a high performance culture


Ahlstrom’s Human Resources function

follows the principle: “Success is about

employees and teams”. To support

this principle, a number of steps were

implemented, including consistency of

processes, preparing a new organiza-

tion, measuring employee satisfaction

in Europe, and rolling out training across

the organization to reinforce a high-

performance leadership culture.

Focusing on global HR processes In 2004, Ahlstrom gave high priority to

HR processes defi ned the year before.

In particular, special attention was paid

to the implementation of the following

key processes: Performance Dialogue,

Management Planning and Manage

Reward.

As regards Performance Dialogue,

Ahlstrom desires to improve support

of this process aimed at managing

and measuring performance at the

individual level and consequently, to

further contribute to the company’s

success. Performance Dialogue is the

main tool for evaluating past perfor-

mance and, in particular, for setting

clear personal targets for the future.

For this reason, Ahlstrom expects all

managers to have constructive and

meaningful performance dialogues with

their team members. The HR function

provides training to improve the quality

of the performance dialogues and also

monitors their execution.

Management Planning aims at

ensuring that an up-to-date career and

succession plan is in place at all times,

Social performance

Ahlstrom’s Human Resources (HR) team is a globally

networked group of professionals, supporting the business

by working proactively with management to effectively

attract, retain, develop, and motivate employees.

and that Ahlstrom personnel are given

the possibility to develop by rotating

positions within the Group. Managing

Reward will be in focus annually to check

that compensation levels within the

Group are competitive in the market.

Developing the HR organization In an effort to ensure that the HR

function has effi cient resources,

a project aimed at optimizing HR

resources was undertaken. As a result,

a new HR organization was launched

as of January 1, 2005. The new HR

organization consists of Corporate

HR and the following regions: United

Kingdom, France/Belgium, Finland,

Italy/Spain, USA/South Korea/Brazil,

and Germany, and is led by regional

HR leaders. In addition, a new HR

support role was created to serve

the sales offi ces.

Employee satisfactionOne of HR’s major undertakings in 2004

was an employee survey to measure

satisfaction on everything from the

working environment to management.

In 2004, a total of 1,500 employees

in nine plants and three offi ces were

surveyed. This employee satisfaction

survey process will be repeated every

two to two-and-a-half years.

Developing leadership2004 saw the effective delivery of

a strong training portfolio, tailored

to business needs. The “Stretching

Knowledge” program is designed for

managers and professionals wishing to

enhance their knowledge and skills in

core business competencies. In 2004,

a portfolio of eight programs was

delivered internally on subjects ranging

from ‘Ahlstrom Financials’ to ‘Intellec-

tual Property’. Sixteen sessions were

organized for 322 participants, involv-

ing 44 Ahlstrom managers acting as

trainers and facilitators.

Leadership development continued.

Twenty-fi ve young potentials attended

the Junior Management Program

(JUMP) – designed for participants

to discover and infl uence their own

growth and potential within Ahlstrom.

To read more about JUMP, see the case

story on page 45.

The Leadership Triathlon program

is designed for leaders and profession-

als to measure and strengthen their

personal leadership skills. In 2004, three

International Triathlon program sessions

were held, one of them in the USA.

A total of 47 managers attended the

programs.

An Ahlstrom-tailored senior

executive program, Global Leader, was

launched at the beginning of 2004.

More than 70 senior leaders, includ-

ing the Corporate Executive Team,

comleted the program run in co-

operation with Insead, an international

business school. The program aims at

developing leadership skills, as well as

enhancing the company’s high-perfor-

mance culture.

Also in 2004, Process Kaizen

Engineer (PKE) training was given.


PKE training is a further step in support-

ing “a plus” - Ahlstrom’s performance

excellence program. The objective

of the one-year training is to train

Ahlstrom’s future site managers and

business leaders by developing their

knowledge and skills, and by preparing

them to act as internal “a plus” experts.

Managing reward With the objective of achieving a high

performance culture, Ahlstrom’s reward

plans were reviewed in 2004. Changes

were made to the corporate short-term

incentive (bonus) plan, and a new long-

term incentive plan was created to link

reward more closely to personal per-

formance and to the Group’s fi nancial

performance.

In 2004, Ahlstrom’s Board of

Directors also approved guidelines for

employee reward plans. The guidelines

include defi nitions for common reward

processes and timing. The aim of these

plans is to support continuous improve-

ment at Ahlstrom sites. Further, HR

continued job evaluations to benchmark

and improve the competitiveness of

the company’s compensation plans.

To support this, Ahlstrom participated

in a global salary survey, conducted for

the second consecutive year.

Attracting new talentIn a continuing effort to attract new

talent, HR launched a new section,

“Careers”, on the corporate website

www.ahlstrom.com. These pages were

designed primarily for potential recruits,

both students and professionals.

To complement this initiative, Ahlstrom

was present at important student

recruitment fairs in Italy, France and

Finland.

Other events The Corporate Management Meeting

(CMM) was again organized in 2004,

bringing together 50 senior managers

from across the organization to discuss

the strategic direction of the company.

For the fi rst time ever, the Sales

Network Forum (SNF) brought together

sales managers, agents, product line

managers, innovation managers and

senior management. A total of 120

participants from all Ahlstrom’s divisions

assembled under the theme ”Serving

Customers Better”. Here, participants

exchanged information on new

products and market development.

Action plans were also developed to

address sales challenges.

Changes in the number of personnelThe Specialties division restructured

its operations in 2004 with the aim to

improve profi tability by increasing

productivity and effi ciency. As a result,

the headcount of the division was

reduced by 240 employees.

In November 2004, a joint venture

involving the transfer of 15 tube and

core plants to Sonoco-Alcore became

offi cial. Approximately 470 employees

joined Sonoco-Alcore from the follow-

ing locations: Finland (three plants),

Sweden (three plants), Germany (two

plants), the Netherlands (two plants),

Estonia, France, Norway, Poland and

Russia (one plant each).

The joint venture also involved the

Karhula board mill and a service center

in Anjalankoski, Finland. In November,

Sonoco Asia purchased Ahlstrom’s core

plant in China, resulting in a headcount

reduction of 16 people.

In the Filtration business area,

Ahlstrom acquired Hollinee L.L.C’s Filtra-

tion Division in the USA, with 200 new

employees in June. In the Nonwovens

business area, Ahlstrom acquired Green

Bay Nonwovens, a US-based nonwoven

manufacturer with 70 employees in

October.

The Glass Nonwovens business

area streamlined its operations during

the fall 2004, resulting in a reduction

of 27 employees at the Mikkeli plant

in Finland, due to weak market situation.

Future focus: 2005In 2005, HR will continue the realization

of the initiatives prioritized in 2004.

Effi cient and high quality services

are the main drivers for the new HR

organization. Also, ensuring the effi cient

execution of the selected processes is

important. HR will continue the align-

ment of training and development

programs with the business needs,

and deliver said programs accordingly.

In 2005, the employee survey will be

conducted in 13 sites globally. As the

open and precise HR communication

is essential for Ahlstrom, the further

development of HR reporting continues

to be of a high priority.

Employees by age group

4

< 25

25–29

30–34

35–39

40–44

45–49

50–54

55–59

Over 60

8 12 16 20

Age

%

Key fi gures

2004 2003

Number of employees at year-end 5,755 6,486

Number of employees, annual average 6,121 6,536

Net sales per employee, thousand euros 256 238

Average length of service, years 11.2 12.5

Training hours, total* 40,445 n/a

* Includes only off-the-job training


JUMP is Ahlstrom’s leadership develop-

ment program for junior managers.

Young talents, with a few years of

experience within the company,

come from all over Ahlstrom to join

the program.

Altogether, 19 JUMP sessions have

been organized since the fi rst session

was held in 1988. Over the last eight

years, more than 150 young managers

have participated, and about 82% of

them are still working for Ahlstrom.

JUMP focuses on personal growth

and professional development. It

stimulates junior managers’ insight into

their potential and ambition to grow

in the organization. For Ahlstrom, early

identifi cation of young talent for higher

management positions is a key focus

area supporting the principle “promote

from within”.

From preparatory activities, to

follow-up discussions, JUMP requires

a strong involvement from the partici-

pants. External experts in leadership

development facilitate the training

interactions. Senior managers provide

their organizational expertise during

the process by offering mentoring

support. After the program, JUMPees

take the lead and work, together with

their leaders, on their Personal Devel-

opment Plans.

Mr. Dirk Euteneuer, currently Vice

President & General Manager for Crepe

Papers, has had a long, international

career within Ahlstrom. He has held

several managerial positions within

Ahlstrom since he joined the company

in 1991. Besides his current position,

he is also responsible for Ahlstrom’s

Technical Paper business area’s plants

in France. Dirk Euteneuer participated

in JUMP in 1993.

“For me, JUMP meant an opportu-

nity to learn more and develop myself

as a person. Indirectly, it has also sup-

ported my career development”, Mr.

Euteneuer says. “After JUMP, I could

utilize what I learned immediately in

everyday leadership situations, which

was not always the case with earlier

training programs I had participated in.”

“I see leaders as the gear box

of a company. We should be able to

combine the best of the organization

and make the most out of it. I believe

that in this task, fairness, open com-

munication, transparency, and ability

to motivate are key strengths for any

leader”, Mr. Euteneuer says.

JUMP is a long-term commitment

from all organizational levels towards

the development of the internal exper-

tise and leadership. JUMP is the starting

point of an exciting and challenging

journey within Ahlstrom.

JUMP focuses on personal growth

Social performance

Employees by country

France 25%

Italy 14% USA 19%

Finland 15%

Germany 12%

UK 5%Sweden 2%

Korea 2%

Other 4%Spain 2%

Employees by gender

Male 83%

Female 17%

Employees by employment type

Blue collar 60%

White collar27%

Management 8%

Temporary 1%Apprenticeship 1%

Working in other units 1%

Part-time 2%


In 2004, the Corporate Executive Team

re-established the ambitious goal of

reducing the number of occupational

accidents by 50% within two years.

Although the level actually achieved

did not fully meet the company’s

target in the fi rst year, the Lost Time

Accidents trend continued to improve.

Overall, in 2004 Ahlstrom achieved a

13% improvement. The actual number

of days lost through industrial injury

dropped by 26%, which means that in

addition to reducing the frequency of

accidents, the severity of the accidents

also drastically declined. Signifi cant

improvement has been achieved in the

Lost Time Accident rate in almost all

countries. In total, 50% of Ahlstrom’s

plants are already below the level

targeted by the Corporate Executive Team

(Accident Frequency Rate below 13).

Two fatal accidents, involving an

employee from two different subcon-

tractors, regrettably occured. At the

Turin plant in Italy, where one of the

fatal accidents occured, the authorities

have completed their investigations and

have exonerated the company. At

the other plant, in Bousbecque, France,

the investigation and report has not

yet been completed. Ahlstrom is cur-

rently reviewing the procedures for

dealing with contractors and subcon-

tractors to ensure that regulations are

strictly adhered to, and that Ahlstrom’s

internal rules are followed in all cases.

Every possible effort will be made by

Ahlstrom to avoid a repeat of these

unfortunate incidents.

HSEA evaluation program offers promising resultsAhlstrom’s evaluation-training program

continued with the completion of

training for a second group of Lead

Evaluators. Furthermore, an additional

Efforts towards a safer

working environment

continued

Ahlstrom’s risk management

covers all aspects of occupa-

tional health and safety.

The company made good

progress in several areas,

but the year also had its

disappointments.

training program in French was com-

pleted. This program was specifi cally

aimed at preparing evaluators from

the French speaking plants.

Ahlstrom has now determined

that its evaluator program will cover

a three-year rotation, with nine loca-

tions having been reviewed to date.

The results of these evaluations have

succeeded in offering the sites a far

clearer understanding of where they

stand in comparison with the corporate

standards. They have also provided

plant management with support and

recommendations for systems devel-

opment. In addition, these reviews

have helped to highlight the existing

expertise within Ahlstrom, which allows

‘cross fertilization’ through the sharing

of best practice procedures between

the company’s various sites.

More comprehensive role within “a plus” The ‘Health and Safety Pillar’ was

launched within “a plus”, Ahlstrom’s

performance excellence program.

Initial feedback from the pilot sites

indicate that the improvements in

Health and Safety, generated by the

“a plus” methodology, have fully met

expectations. Ahlstrom anticipates

that improvements will continue to

be generated by this important tool.

To learn more about Ahlstrom’s

“a plus” program, see page 8.

Accident Frequency Rate by country

50,0

40,0

30,0

20,0

10,0

0

AFR

D

Ahlstrom average in 2003

Ahlstrom average in 2004

USA UK F I FIN Other

Accident Frequency Rate (AFR) andAccident Severity Rate (ASR)

50,0

40,0

30,0

20,0

10,0

0

AFR

00

0,75

0,60

0,45

0,30

0,15

0

ASR

01 02 03 04 05

Accident Frequency Rate

Accident Severity Rate

target

Accident Frequency Rate: Number of accidents that result in absence x 1,000,000 / Total men hours worked

Accident Severity Rate: Number of days of absence x 1,000 / Total men hours worked


Ahlstrom has an environmental provi-

sion of 667,000 euros for landscaping

dump sites in Finland, Germany and Italy.

DonationsIn 2004, Ahlstrom Corporation donated

EUR 65,000 to communities and civil

societies within the framework appro-

ved by the Annual General Meeting of

Shareholders. This is Ahlstrom’s normal

corporate procedure for community

donations. The two biggest individual

donations were made to support

pediatric medical research, via the Juha

Rantanen-Ahlstrom-Fund, and to help

victims of the earthquakes and tsunami

in Southeast Asia, via the Disaster

Relief Fund of the Finnish Red Cross.

Subsidiaries within the Ahlstrom Group

worldwide have also made numerous

donations on a local basis.

Sustainability

in fi nancial

fi gures

Economic performance

Economic performance should be

measured, not merely by the ability

to meet shareholders’ expectations,

but also as it relates to the company’s

wider importance within the society

it operates. Ahlstrom’s manufacturing

plants are often located in smaller com-

munities, where the company is con-

sidered as being a major employer and

tax payer. Currently, Ahlstrom concen-

trates on reporting the direct economic

impacts of the Group’s operations.

In 2004, Ahlstrom’s total sales

amounted to EUR 1.6 billion, Europe

and Northern America being the most

signifi cant market areas.

The total value of raw materials,

energy and services purchased was

EUR 779.6 million (EUR 821.3 million

in 2003). Total personnel expenses

amounted to EUR 338.5 million

(EUR 357.0 million). Income taxes

booked in 2004 amounted to


Direct environmental investments In 2004, Ahlstrom invested approxi-

mately EUR 5.5 million aimed directly at

protecting the environment, of which

approximately 50% was devoted to the

reduction of water consumption and

pollution, and 50% to the reduction of

air emissions. This fi gure is consolidated

according to the best estimates of

management at the Ahlstrom sites and

the Investment Director, and refers to

clear end-of-pipe investments. In 2004,

Ahlstrom invested EUR 2.9 million to

improve plant asset protection, mainly

fi re protection, sprinklering, PCB trans-

former removals, and fl ood protection.

The most important direct environmental investments in 2004

Plant EUR mill Purpose

Hyun Poong (ROK) 2.53 Water treatment and oxidizer collecting and burning methanol from saturators

Turin (I) 0.98 Solvent recovery

Brignoud (F) 0.39 Reduction of water use and water pollution

Rottersac (F) 0.30 Emergency reservoir for waste water

Windsor Locks (USA) 0.23 Containment to avoid accidental pollution

Madisonville (USA) 0.15 Reduction of water use

Direct economic impacts in 2004(compared with 2003)

Raw materials, energy and services purchasedEUR 779.6 million (EUR 821.3 million)

Suppliers

Salaries and other personnel expensesEUR 338.5 million (EUR 357.0 million)

Employees

Interest cost and other financial itemsEUR 18.4 million (EUR 15.6 million)

Financial institutions

Dividends paid EUR 27.3 million(EUR 54.6 million)

Shareholders

Net salesEUR 1.6 billion(EUR 1.6 billion)

Subsidies receivedEUR 1.2 million(EUR 1.8 million)

Dividends received, interestand other financing incomeEUR 4.3 million(EUR 5.5 million)

Customers

Public sector

Sources of funding

Income taxes bookedEUR 17.1 million (EUR 11.1 million)

Public sector


Ahlstrom’s total gross production in

2004 was 1,145,852 tons, reaching

almost the level of 2003. The divested

capacity has been compensated by the

acquisitions made.

MaterialsThe main raw materials used by

Ahlstrom are various natural and

man-made fi bers. The most important

raw materials are natural fi bers, but

Ahlstrom also utilizes artifi cial, synthetic

and glass fi bers. In 2004, Ahlstrom used

847,000 tons of virgin raw material

fi bers. In addition, the company utilizes

a variety of chemicals, e.g. binders,

Improvement in

several areas despite

signifi cant changes

in product mix

resins, fi llers, and pigments. In 2004,

Ahlstrom purchased 351,000 tons of

chemicals.

Use of waste materials

Wherever feasible and based upon

the intended end-use of the product,

Ahlstrom uses internal recycled

material (broke) in its products. The

total amount of recovered fi bers used

in 2004 declined to 73,000 tons.

The decline in the use of waste materi-

als is due to a reduction in coreboard

production, and to the divestment of

the core & coreboard operations in

November 2004.

Protection of the environ-

ment is an important

element of Ahlstrom’s risk

management policy.

In 2004, the company

focused on improving its air

emission and wastewater

management systems, and

made signifi cant environ-

mental investments at

three plants in South Korea,

Italy, and France.

Material usage in 2004

Raw material tons

Natural fi bers 1) 751,000

Chemicals 2) 351,000

Paper and board 1) 103,000

Other fi bers 3) 96,000

Recycled paper 1) 73,000

Non-valuated material 32,000

Packaging 4) 22,000

Total 1,428,000

(excluding fuels)

The table covers more than 90% of the total

material usage.

1) All paper and fi ber materials are indicated

in their air dried weight

2) The weight of chemical as supplied

3) Includes synthetic and glass fi bers bought

as well as the raw materials used to

produce them internally

4) Excludes pallets as this information

is not available in tons

Sources of energy

Natural gas 48.6%

Oil 4.9%

Coal 8.8%

Purchasedsteam 11.4%

Secondary fuelsand recoveredmethanol 8.5%

Grid – electricalpower 17.9%

Shares of fuels

20

16

12

8

4

0

Million GJ/year

02 03 040100

Gas

Oil

Coal

Recovered methanol

Solid waste


EnergyTotal energy usage in 2004 declined

slightly to 4.4 million MWh (4.8 million

MWh in 2003). This usage includes the

three additional manufacturing facilities

acquired in 2004.

The usage of natural gas increased

from 45.1% of the total in 2003, to

48.6% in 2004. This refl ects both

market conditions and a purposeful

switch from coal and oil to cleaner

burning natural gas at a number of

facilities. Usage of secondary fuels also

increased, while oil usage decreased

as a portion of the total energy mix.

Energy effi ciency

Energy effi ciency refers to the input

of both electricity and heat for the

drying process divided by the gross

tons produced. Ahlstrom aims to reduce

energy input per ton of product by

10% between 2002 and 2007.

In 2004, energy effi ciency was

marginally weaker than in 2003.

This refl ects largely changes to the

product mix whereby more lightweight

products were produced. The overall

result masks some signifi cant progress

in energy savings achieved at the

following plants:

Plant Heat Electricity

Windsor Locks, USA - 7% - 8%

Malmédy, B - 11% - 5%

Taylorville, USA - 15% - 7%

Osnabrück, D - 7% - 10%

Altenkirchen, D - 6% - 7%

Emissions to airCO

2 emissions

Ahlstrom’s target of reducing green-

house gas emissions is focused upon

the improvement of energy effi ciency

and upon the use of cleaner burning

fuels wherever possible. The dramatic

improvement achieved in 2003 was

related principally to the sale of

Ahlstrom’s large co-generation facility

in Windsor Locks, USA. The positive

trend continued in 2004 with a further

3.6% reduction in carbon dioxide emis-

sions. In 2004, CO2 emissions totaled

788,677 tons compared to 818,020

in 2003.

Carbon dioxide emission calcula-

tions are based on fuel specifi c net

calorifi c values and associated emission

factors. These calorifi c values and

emission factors are gathered from

local energy suppliers and industry

associations. Ahlstrom reports only

its own direct combustion emissions,

and has developed its CO2 calculations

in conformance with the Emissions

Trading Program of the European Union.

Ahlstrom has 18 facilities located

in Europe which will be required to

comply with the National Allocation

Plans developed in conjunction with the

EU’s greenhouse gas reduction program.

CO2 emissions trading within the EU

commenced in 2005. In most of the EU

countries where Ahlstrom has produc-

tion facilities, the emission rights have

already been allocated and distributed

to the various industries. However,

as of the end of 2004, Italy and Spain

had not yet announced their allocation

decisions. Ahlstrom has suffi cient rights

to cover present CO2 emissions.

NOx , sulfur and particles

In 2004, emissions of nitrogen oxides

(NOx) increased slightly. This is largely

due to increased production and the

improved measurement of NOx emis-

sions at Ahlstrom’s glassfi bre manufac-

turing plant in Karhula, Finland. Emis-

sions of sulfur oxides declined dramati-

cally as a consequence of the reduced

use of fuel oil in favor of natural gas.

Emissions of particles also decreased

from 2003 levels.

Water and wastewaterThe total amount of water used in 2004

was 55.2 million m3 (57.7 million m3 in

2003), representing a reduction of 4.1%

from 2003 levels. The improvement

was driven by operating effi ciencies

and as a result of focused investments

at specifi c facilities (i.e. Barcelona, Spain

and Hyun Poong, South Korea). These

investments have enabled recycle

rates in excess of 60% to be achieved.

Wastewater is cleaned and returned

to the process to be used in lieu of the

public water supply.

Environmental performance

Energy efficiency

1.3

1.2

1.1

1.0

0.9

0.8

Electrical energyMWh/t of product

02 03 0401

11.5

11.0

10.5

10.0

9.5

9.0

Process heatGJ/t of product

Process heat GJ/t of product

Electrical energy MWh/t of product

00

Combustion related CO2 emissions

1,150

1,000

850

700

550

400

1,000 t CO2/year

02 03 0401

1,100

950

800

650

500

350

kg CO2/t of product

kg CO2/t of product

1,000 t CO2/year

00

Emissions into the air:NOx , sulfur and particles

100

80

60

40

20

0

mg/MJ

02 03 0401

50

40

30

20

10

0

mg/m3

00

Particles mg/m3

Mg NOx/MJ fuel input

Mg S/MJ fuel input


Wastewater

Total wastewater discharged in 2004

amounted to 43.3 million m3, a 3.7%

reduction from the 44.9 million m3

discharged in 2003. Ahlstrom aims

to reduce its water use per ton of

product by 17% over a period of fi ve

years between 2002 and 2007. Of the

total wastewater discharged, approxi-

mately 10% is treated by third parties,

principally municipalities. The graphs

on discharges to water contain the

effl uents of Ahlstrom’s own treatment

plants only. Pollutant loads contained in

fl ows to outside sewers are not repre-

sented here.

Total suspended solids in waste-

water effl uents totaled 470 tons in

2004 (436 tons in 2003), with a specifi c

value of 0.41 kg/ton of product. This

level is marginally higher than the level

recorded in 2003 and is driven mainly

by reduced removal effi ciencies at the

Turin wastewater treatment plant in

Italy, due to the process modifi cation

and raw material substitution. The

effl uent value of the plant remains

well below permitted requirements.

A plan has been developed to recap-

ture previous performance.

Biological and Chemical Oxygen

Demands

Biological Oxygen Demand (BOD5)

and Chemical Oxygen Demand (COD)

provide an indication of the strength

of the wastewater effl uent in terms of

its ability to deplete oxygen from the

receiving stream. The positive trend of

improved treatment effi ciency estab-

lished over the past fi ve years, contin-

ued in 2004. Ahlstrom discharged

2,548 tons of COD, 322 tons less than

in 2003. The total discharge of BOD5

was 499 tons, a reduction of 123 tons

compared to 2003. This level of effec-

tiveness was achieved by improve-

ments at wastewater treatment plants

operated by Ahlstrom, and by rerouting

some waste streams to newly opened

municipal plants.

Nitrogen and phosphorus

In 2004, Ahlstrom’s discharge of

nitrogen per ton of product was

reduced by 15.4% from the 2003

levels. Phosphorus levels, on the other

hand, increased slightly, again as a

consequence of treatment modifi -

cations at the Turin, Italy plant.

Total water use

75,000

60,000

45,000

30,000

15,000

0

1,000 m3/year

02 03 0401

Cooling waters m3/year

Process water intake m3/year

00

Effluent waters

50,000

40,000

30,000

20,000

10,000

To river, total1,000 m3/year

02 03 0401

46

44

42

40

38

36

Specific effluent flowm3/t of product

Specific effluent flow m3/t of product

To river, total 1,000 m3/year

00

Effluents to water:total suspends solids

750

600

450

300

150

0

t/year

02 03 0401

0.75

0.60

0.45

0.30

0.15

0

kg/t of product

kg/t of product

t/year

00

Environmental impacts in 2004Tons produced (gross) 1,146 kt

Discharge to riverWater 43.3 million m3

Suspended solid 470 tCOD 2,548 tBOD5 499 tPhosphorus 24 tNitrogen 76 tAOX 9 t

LandfillSludge from waste water 29,356 tLandfilled solid waste 50,225 tWater 55.2 million m3

Internal production power 810 tJ

Purchased electricity 3,169 tJPurchased fossil fuel 11,646 tJUtilized bio fuel 1,502 tJPurchased steam 2,027 tJ

Natural fibers 751 ktOther fiber raw materials 96 ktChemicals 351 ktRecovered fibers 73 ktPaper and board 103 ktPackaging 22 kt

Emissions to airCO2 788,677 tSO2 861 tNOx 1,090 t


Environmental performance

In 2002, Ahlstrom acquired the Papelera

del Besos engine fi ltration manufactur-

ing facility, located in Capellades, north

of Barcelona, Spain. While the facility’s

manufacturing capabilities matched

nicely with Ahlstrom’s needs, invest-

ment in environmental systems had

not kept pace, particularly in the areas

of wastewater treatment and control

of air emissions. Ahlstrom immediately

began the process of design and instal-

lation of state-of-the-art systems.

Prior to environmental investments

made by Ahlstrom, the wastewater

treatment facilities consisted only of

physical sedimentation. The unit was

undersized and treated only a portion

of the site’s process water. The new

system, which went on line in 2003,

incorporates fl otation, sand fi ltration,

UV disinfection and activated carbon

technologies. The system’s capabilities

exceed even the most rigid effl uent

requirements. The water is so clean,

that currently 65% is recycled back to

the operation with the goal of 75%

recycle within reach.

In order to have a better per-

formance in AOX reduction on the

wastewater, a new Ozone Treatment

was implemented in December, 2004.

The benefi t and the optimization of this

additional system are on-going.

At the time of the acquisition,

volatile organic compounds (VOC’s)

generated by the saturation process

were discharged untreated to the

atmosphere. Ahlstrom immediately

initiated discussions with local regula-

tory offi cials to design an energy-effi -

cient control technology. The result,

a regenerative thermal oxidizer (RTO),

went on-line in September 2002.

The unit achieves 99.8% elimination of

VOC emissions at a thermal effi ciency

of 95%.

Today, Ahlstrom Barcelona is a

benchmark for environmental perfor-

mance and a good neighbor to the

surrounding community. In fact, the

technologies, proven successful in

Barcelona, are now being transferred to

other Engine Filtration sites throughout

the world.

Ahlstrom Barcelona

– a benchmark for environmental performance

Landfilled solid waste

75

60

45

30

15

0

kg solidwaste/t of product

02 03 0401

75

60

45

30

15

0

1,000 t solidwaste/year

Landfilled solid waste t/year

Landfilled solid waste kg/t of product

00

COD and BOD5 in waste water

5,000

4,000

3,000

2,000

1,000

0

COD-BOD5t/year

02 03 0401

5

4

3

2

1

0

COD-BOD5kg/t of product

00

COD kg/t of product

BOD5 kg/t of product

COD t/year

BOD5 t/year

Nitrogen (N) and phosphorus (P)in waste water

150,000

120,000

90,000

60,000

30,000

0

N-P kg/year

02 03 0401

0.15

0.12

0.09

0.06

0.03

0

N-P kg/t of product

00

Specific total nitrogen kg/t

Specific total phosphorus kg/t

Total nitrogen kg/year

Total phosphorus kg/year

Waste management

In 2004, Ahlstrom was able to reduce

the amount of land-fi lled solid waste by

2.9%, from 51,709 tons to 50,225 tons.

This achievement was driven partly by

reduced waste generation, and through

increased utilization of waste-to-energy

disposal facilities, as well as by waste

recovery and re-use. The Stenay plant

in France, where ash is used for

soil stabilization, provides one such

example.


In addition to applicable laws and its

Articles of Association, in its corporate

governance, Ahlstrom complies with

the Corporate Governance Recom-

mendation for Listed Companies issued

by HEX, the Finnish Central Chamber of

Commerce and the Confederation of

Finnish Industry (2003), as well as the

OECD Principles on Corporate Gover-

nance (1999).

OrganizationEffective January 1, 2005, Ahlstrom

reports its business in two segments,

FiberComposites and Specialty Papers.

Operationally, Ahlstrom is organized

into fi ve business areas, Nonwovens,

Filtration, Glass nonwovens, Label

& Packaging Papers, and Technical

Papers which are accountable for their

business results and operations.

The governing bodies of Ahlstrom

are the General Meeting of the

Shareholders, the Board of Directors

and the President & CEO. In addition,

the company has a Corporate Execu-

tive Team, which is not a body under

the Finnish Companies Act, and which

operates within the mandate of the

President & CEO.

The parent company of the

Ahlstrom Group, Ahlstrom Corporation,

is responsible for the administrative,

business development, accounting,

fi nance and legal functions of Ahlstrom

and also provides corporate services to

the other group companies.

Annual General MeetingThe General Meeting of the Sharehold-

ers is the ultimate decision-making

body of Ahlstrom, and normally

convenes once a year. Certain impor-

tant matters, such as amending the

Articles of Association, approval of

the consolidated Financial Statements,

approval of the dividend, election of

the members of the Board of Directors

and the auditors fall within the sole

jurisdiction of the General Meeting of

Shareholders.

In 2004, Ahlstrom Corporation

held its Annual General Meeting of the

Shareholders in Noormarkku, Finland on

May 7, 2004.

In addition to publishing the notice

to the Shareholders’ Meetings in a

Finnish language as well as a Swedish

language newspaper published in

Helsinki, Finland, the company also

sends the notice, including a proxy for

those shareholders who are not able to

participate in person, by mail to all of

its shareholders. Information regarding

the General Meetings of the Sharehold-

ers is also posted on the internet site

of the company. The Annual Report

of the company is sent to all share-

holders prior to the Annual General

Meeting. In addition, the shareholders

receive the main announcements of

the company by mail on a regular basis.

The announcements are also posted on

the internet site of the company.

Board of DirectorsThe Ahlstrom Corporation Board of

Directors (Board) consists of a minimum

of fi ve (5) members and a maximum

of seven (7) members. The Annual

General Meeting confi rms the number

of members of the Board, elects them,

and decides on their compensation.

The mandate of each member of the

Board expires at the end of the Annual

General Meeting immediately following

their election. There are no limitations

as to the number of terms a person

can be member of the Board and no

maximum age. Presently the company

has seven (7) board members

among which the Board has elected

a Chairman and Vice Chairman. All of

the board members are non-executive

and a majority of them are indepen-

dent from the company and the major

shareholders of the company.

The Board has general authority to

decide on and act in any matters not

reserved by law or under the provi-

sions of the Articles of Association

to any other governing body of the

company. The Board is responsible

for the company’s administration and

the due organization of its operations.

It confi rms the company’s long-term

business strategies and approves the

company’s business plans and annual

plans. The Board decides on major

capital expenditures, acquisitions and

substantial divestments of assets as

well as approves the general frame-

work for other capital expenditures.

It also monitors the company’s perfor-

mance and human resources develop-

ment. Each board member receives a

monthly performance report from the

company, including fi nancial data and

management comments.

The Board appoints and dismisses

the President & CEO of Ahlstrom Corpo-

ration and his deputy.

Most of the Board meetings are

held at the corporate head offi ce in

Helsinki, but from time to time the

Board also visits other locations of

Corporate governance



the company and holds meetings there.

If necessary, the Board also holds tele-

phone meetings. The Board annually

holds a two-day strategy meeting.

The General Counsel of Ahlstrom acts

as Secretary to the Board. In 2004, the

Board convened twelve (12) times,

including four (4) meetings held as

telephone meetings. The average

attendance frequency was 95.2%.

The Board has established and

approved Rules of Procedure of the

Board to be a complement to the

Articles of Association and Finnish appli-

cable laws and regulations. The main

principles of such rules are described

in various parts of this Corporate Gover-

nance section.

The Board makes a self assessment

of its performance, practices and proce-

dures annually, by each board member

fi lling out a questionnaire. The response

of the board members is discussed in a

subsequent board meeting, and actions

are taken to address the issues raised.

The remuneration of the Chairman,

as decided by the 2004 Annual General

Meeting, was EUR 4,620 per month

and EUR 2,310 per month for the other

members of the Board. In addition,

each member of the committees

receives EUR 1,000 for each committee

meeting in which he participates. None

of the board members receives any

other remuneration from the company

than that based on board membership.

There is no pension scheme for board

members.

Permanent committeesThe Board may appoint permanent

committees and establish their working

procedures. These committees report to

the Board. In 2004, the Board appointed

two committees, the Compensation

Committee and the Audit Committee.

According to the Rules of Proce-

dure of the Board, the Compensation

Committee decides on the compen-

sation and benefi ts of the persons

reporting to the President & CEO. In

2004, the members of the Compensa-

tion Committee were Johan Gullichsen

(Chairman), Mikael Lilius and Willem

Zetteler. The Board in corpore decides

on the compensation and benefi ts of

the President & CEO. In 2004, the Com-

pensation Committee convened twice.

According to its Charter approved

by the Board, the Audit Committee

assists the Board in fulfi lling its over-

sight responsibilities. It reviews the

fi nancial reporting process, the system

of internal control and management of

fi nancial risks, the audit process, and

the company’s process for monitoring

compliance with laws and regulations

and its own code of business conduct.

In performing its duties, the committee

will maintain effective working relation-

ships with the Board, management,

and the internal and external auditors.

The Audit Committee shall regu-

larly update the Board about Commit-

tee activities and make appropriate

recommendations. The Committee

shall ensure that the Board is aware

of matters which may signifi cantly

impact the fi nancial condition or affairs

of the business. All Board members

receive copies of the minutes of the

Salaries, fringe benefi ts and bonus payments in 2004

EUR Salaries and fringe benefi ts Bonus payments Total

Board members 233,760 233,760

President and CEO

Juha Rantanen, President and CEO Jan 1 – Aug 31, 2004 * 444,837 71,119 515,956

Jukka Moisio, President and CEO as of Sept 1, 2004 151,861 151,861

Other members of the Corporate Executive Team 1,991,589 264,493 2,256,082

* Juha Rantanen’s employment contract with Ahlstrom Corporation ended as of September 30, 2004.

The President & CEO, as well as other Corporate Executive Team members, are also included in the company’s share and options program.

More detailed information on this is presented on pages 54–56.


Audit Committee meetings, and an oral

report from each committee meeting is

given to the board by the Chairman of

the Audit Committee.

The members of the Audit Com-

mittee in 2004 were Peter Seligson

(Chairman), Jan Inborr and Urban

Jansson. All of the members must be

independent of management and

should each be capable of making a

valuable contribution to the Audit Com-

mittee. Mr. Inborr was employed by the

company until June 30, 2001 and is as

a consequence thereof participating in

the stock option program established

before his departure. In 2004, the Audit

Committee convened six (6) times.

President & CEOThe President & CEO is in charge of the

company’s operations and administra-

tion. He is accountable to the Board for

the achievement of the goals, plans,

policies and objectives set by the Board.

He prepares matters to be decided

on by the Board and carries out the

decisions of the Board. The President &

CEO is the Chairman of the Corporate

Executive Team.

The total remuneration of the Presi-

dent & CEO’s, including fringe benefi ts

and bonuses, is set forth in the table

presented on page 53.

The President & CEO is participat-

ing in a voluntary collective pension

insurance to which both he and the

company make contributions of equal

size. The annual maximum contribution

of the company is one month’s base

salary of the President & CEO. Accord-

ing to the terms and condition of the

pension insurance the President & CEO

may retire at the age of 60, at the

earliest. The President & CEO’s contract,

which has been made in writing, may

be terminated by either the Presi-

dent & CEO or the company with six

(6) months’ notice. In the event the

company terminates the contract

without cause, the company shall pay

to the President & CEO a severance

payment corresponding to eighteen

(18) months’ salary.

Effective September 1, 2004, the

Board appointed the company’s then

Executive Vice President and Deputy

of the President & CEO, Jukka Moisio,

new President & CEO of the company,

replacing Juha Rantanen, who had

resigned from the company. As a result

of this appointment, the company

at this point of time does not have a

Deputy of the President & CEO.

Corporate Executive TeamThe Corporate Executive Team (CET)

consists of the corporate top manage-

ment as well as business area and

functional leaders. The members of

the CET are proposed by the President

& CEO and appointed by the Board.

The General Counsel of Ahlstrom acts

as Secretary to the CET. The members

of the CET report to the President &

CEO. In total, there were eleven (11)

members of the CET in the beginning

of 2005.

The role of the CET is to support

the President & CEO in performing

his duties and to align the business

organization and functions. Within the

framework given by the Board, the CET

monitors business performance, imple-

ments strategy and direction, initiates

actions and establishes policies and

procedures.

The total remuneration of the

members of the CET, including salary,

fringe benefi ts and bonus, in 2004 is set

forth in the table presented on page 53.

According to the Short Term Incentive

Plan approved by the Board on October

27, 2004, the annual bonus payable to

a member of the CET is performance-

based and can as a maximum amount

to the equivalent of 40–60% of his

annual base salary. Starting January

1, 2005, the CET members are also

participating in the Long Term Incen-

tive Plan approved by the Board on the

same date.

No separate remuneration is paid

to the President & CEO or the other

members of the CET for membership

on governing bodies of group legal

units or associated companies.

The company has not given any

guarantees or other securities on behalf

of the members of the CET or the

Board.

Stock options for management and key personsOn September 26, 2001, in conjunction

with the approval of Ahlstrom Paper

Group Oy’s merger with Ahlstrom

Corporation, the Extraordinary General

Meeting of Shareholders decided to

exchange the shares and stock options

in Ahlstrom Paper Group Oy owned by


the top management to shares and

stock options in Ahlstrom Corpora-

tion. 70,219 shares and 659,448 stock

options were issued. According to the

terms of the stock option program the

subscription period for shares starts not

earlier than May 1, 2002 and ends on

April 30, 2006. Each stock option gives

its holder the right to subscribe for one

share in Ahlstrom Corporation.

In the same Shareholders’ Meeting

it was decided to issue 1,092,620 new

stock options to management and key

employees that did not participate in

the fi rst stock option program. Accord-

ing to the terms of the stock option

program the subscription period for

shares starts not earlier than May

1, 2003 and ends on April 30, 2006.

The subscription period does not,

however, commence before the shares

in Ahlstrom Corporation have been

listed on the HEX, Helsinki Exchanges

or another stock exchange for two

months. Each stock option gives its

holder the right to subscribe for one

share in Ahlstrom Corporation.

According to the terms of both

stock option programs the subscription

price of a share subscribed with a stock

option is EUR 16.13 decreased by the

amount of dividends per share distrib-

uted after January 1, 2002 and prior to

the share subscription. Accordingly, as

of December 31, 2004, the subscription

price was EUR 12.73.

If Ahlstrom has not been listed by

January 2006, the option holders may

request the company to redeem their

options, whereupon the company has

an obligation to redeem the options

of the option holders who have made

such a request. The redemption price is

the difference between the fair market

value of the Ahlstrom share, as estab-

lished by an independent expert, and

the subscription price.

On October 27, 2004, the Board

approved a new Long Term Incentive

Plan for key employees. During the

period 2005-2007, each participant in

the plan will each calendar year have

the possibility to earn a predetermined

maximum number of synthetic stock

options based on which category the

person in question belongs to. The

actual number of options received for

each year separately is based both on

the performance of the Group (EPS)

and the personal performance of the

participant. The value of the options

is based on the development of the

value of the Ahlstrom share during a

three-year period. The pay-out, which is

made in cash during the third year fol-

lowing the year for which the options

have been earned, is determined by

multiplying the number of options

received with the change in the value

of the Ahlstrom share. The value of

the Ahlstrom share is determined by

an independent expert if the Ahlstrom

share is not publicly listed.

The maximum aggregate number

of options to be earned during 2005-

2007 is 2,002,500, and the dilution

is 5%. The number of participants

approved by the Board in its December

16 meeting is 99. The President & CEO

has the possibility to earn maximum


40,000 options per year while the other

members of the CET have the possibil-

ity to earn maximum 20,000 options

annually. If the Ahlstrom share is

publicly listed, the recipient shall invest

at least 20% of the annual pay-out in

Ahlstrom shares. Each CET member

shall invest 20% of the pay-out until

the value of the shares owned by the

CET member amounts to his annual

base salary.

Audit and internal auditThe Annual General Meeting of the

Shareholders re-elected KPMG Oy Ab

as the company’s auditor and Sixten

Nyman, Authorized Public Accountant,

as the auditor in charge. The fees of

the statutory audit for 2004 were

EUR 850,572 in total in the Group.

Other fees charged by the fi rm of

auditors amounted to EUR 546,737

in the Group. The other fees were

primarily related to tax advice, acqui-

sitions and the adoption of the IFRS

accounting principles.

The Ahlstrom Internal Audit is

responsible for assessing and assuring

the adequacy and effectiveness of

internal control in the company.

The Internal Audit is granted free and

unrestricted access to all relevant

company units, functions, processes,

records, property and personnel.

The Head of the Internal Audit admin-

istratively reports to the Chief Finan-

cial Offi cer, but on audit matters, the

Internal Audit reports to the manage-

ment and to the Audit Committee.


Shareholdings and stock options of the Board and management on December 31, 2004

Board of Directors Shares Stock optionsJohan Gullichsen 634,451 - Sebastian Bondestam 100 - Jan Inborr 9,159 82,431 Urban Jansson - - Mikael Lilius - - Peter Seligson 225,538 - Willem F. Zetteler - - 869,248 82,431

Corporate Executive Team Jukka Moisio 15,265 137,385 Svante Adde 9,159 82,431Gustav Adlercreutz 3,053 27,477Risto Anttonen 3,053 27,477Diego Borello 3,053 27,477Leif Frilund 3,053 27,477Patrick Jeambar 3,053 27,477Christer Pihl * 3,053 27,477Timo Vuorio 3,053 27,477 45,795 412,155

The Board of Directors and management in total 915,043 494,586

* Christer Pihl retired in January, 2005.


58 Report by the Board of Directors

62 Income statement

63 Statement of cash fl ows

64 Balance sheet

66 Notes to the fi nancial statements

66 Accounting principles

69 Notes to the income statement

71 Notes to the balance sheet

75 Shareholdings in major subsidiaries

76 Financial risk management

78 Key fi gures

79 Calculation of key fi gures

80 Shares and shareholders

81 Proposal for the distribution of profi ts

81 Auditor’s report

Financial statements for 2004


58 Financial statements 2004

Overview The global economic environment

continued to present Ahlstrom with

signifi cant challenges during 2004.

The demand in the European markets

was low and failed to provide a proper

upturn for Ahlstrom in 2004. This

resulted in market-related downtime

in many plants. The North American

markets, on the other hand, performed

slightly better and showed signs of

recovery towards the end of the year.

The Asian markets again continued to

grow rapidly in 2004.

The price increases in energy and

many of Ahlstrom’s key raw materials

had a negative impact on Ahlstrom in

2004. The company was able to partly

offset this effect by implementing price

increases in several product areas.

Ahlstrom completed several major

investments worldwide to allow for

future growth in its key markets.

Further, two add-on acquisitions in

the USA were made to strengthen

the positions of specialty fi ltration and

nonwovens businesses.

Full-year results for 2004Ahlstrom Group’s net sales in 2004

amounted to EUR 1,567.8 million (EUR

1,556.4 million). The strengthening of

the euro had a negative effect of EUR

41 million on Ahlstrom’s net sales. On

the other hand, volumes sold grew

by 5.1% on a comparable basis. The

increase in volumes was due to the

market growth, businesses acquired

and investments made by the Fiber-

Composites division. In addition, the

Specialties division’s technical papers

business area enjoyed a healthy

volume growth.

The Group’s operating profi t was

EUR 51.0 million (EUR 48.5 million),

representing a 3.3% margin (3.1%).

The share of profi ts from associated

companies was EUR 2.8 million (EUR

3.4 million).

Profi t before extraordinary items

and taxes was EUR 34.8 million (EUR

33.7 million). Net interest expenses

totaled EUR 12.0 million (EUR 10.4

million). The increase was mainly due

to higher interest-bearing net debt.

Foreign exchange loss, mainly arising

from the translation of trade receiv-

ables denominated in US dollars, was

EUR 2.1 million (EUR 4.7 million). Other

net fi nancial expenses were EUR

2.8 million (EUR 0.2 million).

Net profi t was EUR 17.5 million (EUR

22.4 million). Income taxes amounted


Earnings per share were EUR 0.48,

compared with EUR 0.61 a year earlier.

Return on capital employed (ROCE)

was 5.3% (4.6%) and return on equity

(ROE) 2.7% (3.2%). Capital employed

was EUR 1,008.9 million at 31

December, a net increase of EUR 14.4

million for the year.

In 2004, non-recurring net costs


16.9 million). These items include

provisions and write-downs related to

restructuring of operations as well as

gains and losses resulting from asset

sales.

Operating profi t, excluding non-

recurring items, was EUR 71.3 million

(EUR 65.4 million).

Financial position Ahlstrom continued to generate healthy

operating cash fl ow. Net cash fl ow from

operations (the cash fl ow after net

interest expenses, taxes paid and the

change in working capital) amounted to


The change was due to the working

capital.

Interest-bearing net debt increased

by EUR 56.0 million to EUR 341.8 million

(EUR 285.8 million), mainly due to the

acquisitions of the US-based Hollinee

L.L.C. and Green Bay Nonwovens and

higher capital expenditure.

Ahlstrom’s gearing (ratio of interest-

bearing net debt to equity) remained

well within the long-term target of

50-80%, and was 53.9% at year-

end (42.3%). Equity ratio was 45.3%

(47.4%).

The Group’s liquidity remained good

throughout the year. At year-end, cash

and marketable securities stood at EUR

19.6 million (EUR 24.1 million).

Business development by division in 2004 FiberComposites

The division’s volume growth was 11%

in 2004 while net sales increased by

3.0%. The main reason for the modest

top line growth was the continued

strengthening of the euro, as more

than 60% of the division’s net sales are

denominated in other currencies, the

US dollar being the largest single

currency in the division. Demand

improved during the second half of

the year in the USA, while demand in

Europe remained modest throughout

Report by the

Board of Directors


the year. Market-related downtime

was taken in a number of European

sites to keep inventory levels low.

Net sales in 2004 amounted to EUR

663.8 million (EUR 644.7 million) and

operating profi t was EUR 33.9 million


margin (8.9%). Return on net assets

(RONA) was 6.2% (10.8%). Operating

profi t for 2004 includes restructuring

costs worth EUR 7.3 million for person-

nel reductions and asset write-offs

across several sites. The 2003 operat-

ing profi t included a one-time gain of

EUR 4.6 million from the divestment of

the Windsor Locks (USA) co-generation

asset.

The low profi tability was also due

to weak demand in Europe, three

new manufacturing lines in ramp-up

phase during the course of the year,

and increasing raw material prices

which the division was not able to fully

pass on to sales prices. In addition,

the restructuring measures reduced

earnings in 2004, while they are

expected to yield returns in 2005

and beyond.

Market development

Nonwoven fabrics

Sales volumes of nonwoven fabrics

grew by 11% in 2004. The highest

growth was seen in the wipes

business. In the USA, a new spunlace

composite line was installed in the

Windsor Locks plant and Green Bay

Nonwovens was acquired. Both

wallcover and medical applications

volumes continued to progress.

Demand in North America was weak

at the beginning of 2004, but improved

towards the end of the year. European

markets were soft throughout the year

and business visibility will remain low

also in the beginning of 2005.

Price competition and increases

in raw material prices decreased

profi tability. The division therefore

implemented cost-cutting measures

throughout the year. During the fi rst

half of 2004, the division completed

the restructuring of Ställdalen plant in

Sweden, which reduced the manufac-

turing capacity of the plant. Further, the

plant’s medical converting facility was

closed. The division also announced

workforce reductions in the Windsor

Locks plant in the USA, and in the

Chirnside plant in the UK. In addition, it

was decided that the Edinburgh market

services offi ce will be closed during

2005. The costs of these measures

had a negative impact on the division’s

2004 result.

The division continued its expansion

in wiping materials as a spunlace com-

posite line was inaugurated in Windsor

Locks with the production ramp-up

progressing on schedule towards the

year-end.

Filtration materials

Filtration materials progressed well and

volumes grew by 16% in 2004. The

volume increase is mainly attributable

to the start-up of new manufactur-

ing lines in Turin, Italy and in Huyn

Poong, South Korea. The ramp-up of

both lines progressed on schedule. In

2004, Ahlstrom’s fi ltration business was

expanded into the HVAC segment by

acquiring the fi ltration operations of the

US-based Hollinee, Inc.

Despite the volume progress, the

markets were characterized by low visi-

bility throughout the year. Fluctuations

in demand, as well as rapidly increasing

raw material prices, decreased gross

margins and profi tability. The division

completed several actions to cut costs

both in Europe and in North America.

Glass nonwovens

Glass nonwovens recorded an 8%

volume growth in 2004. The devel-

opment of vinyl fl ooring continued

positively and deliveries to marine and

transport applications also increased.

However, the business area faced

intense price competition and increases

in raw material prices. Cost-cutting

measures were completed both in

Karhula and Mikkeli plants in Finland

to improve profi tability.

LabelPack

The market for label and packaging

papers was relatively soft in 2004.

However, the market conditions in

some important segments, such as

release liner base papers, remained at

an encouraging level. Strong growth

also continued in certain geographical

regions such as Asia.

In 2004, the division’s net sales


541.5 million). Volumes sold increased

by 1.3% on the previous year. Operat-

ing profi t declined to EUR 17.1 million


margin (4.6%). Return on net assets

(RONA) was 6.2% (8.3%).

The division’s profi tability was

negatively impacted by increased raw

material and energy prices as well as

higher fi xed costs due to one-time

charges. Margins started to improve

as a result of price increases. However,

higher sales prices only partly compen-

sated the effect of cost increases.

As of January 1, 2004, a production

line, producing release base papers in

Italy, was transferred from the Label-

Pack division to the FiberComposites

division.

Market development

Release liners

The market for release liners, used by

the worldwide self-adhesive labeling

business as well as in other specialty

applications, provided the division with

strong demand during 2004. Market

growth exceeded general economic

growth and was reinforced, particularly

in the fastest developing geographic al

areas, by the increasing use of self-

adhesive labels in substitution of other

labeling technologies. As a conse-



quence, both production and sales

volumes remained good throughout

the year.

In January 2004, Ahlstrom’s biggest

release liner machine underwent a stra-

tegic investment at the Turin plant in

Italy. The project was successfully fi nal-

ized on schedule, resulting in a capacity

expansion and effi ciency improve-

ments. This will support Ahlstrom’s

target to exceed market growth in the

release liners business.

In 2004, the division strengthened

its focus on clay-coated release liners

by launching new products.

Self-adhesive face stock

The markets for self-adhesive face

stock were soft throughout 2004, most

of the growth in the self-adhesive

labeling business being attributable

to non-paper labels. The division was

able to improve effi ciency at the plants

in 2004. However, low demand led to

market-related downtime taken during

the fourth quarter. Due to the diffi cult

market conditions, the sales volumes

remained low.

Flexible Packaging & Labels

The product line supplies papers for

fl exible packaging, for white and metal-

lized wet-glue labels for bottles and

cans, plus a number of specialty papers

for offi ce and graphic niches. Demand

in these segments remained weak,

with pressure on prices. Sales volumes

improved slightly over the previous

year, but an unfavorable product mix

reduced profi tability. Additionally, the

strong euro negatively impacted the

profi tability of the wet-glue label busi-

ness, due to the high share of sales in

non-euro denominated markets.

As of January 1, 2005, the Label-

Pack division is part of Ahlstrom’s

Specialty Papers segment.

Specialties

The division combined its core and

coreboard operations with Sonoco in

2004. The new joint venture named

Sonoco-Alcore started operations in

November, 2004. Following the trans-

action, the business focus is now

entirely on technical papers. As of

January 1, 2005 the division is part of

Ahlstrom’s Specialty Papers segment.

Demand for the division’s main

products improved considerably over

the previous year. The division’s net

sales amounted to EUR 343.9 million

(EUR 344.7 million). Excluding the Cores

& Board business, volumes sold in -

creased by 13% compared with 2003,

and net sales totaled EUR 270.9 million,

representing an increase of 5.4%.

The division reported an operating

profi t of EUR 10.8 million (a loss

of EUR 23.7 million), corresponding to

a 3.1% (-6.9%) margin. This shows

an improvement of EUR 34.5 million

from the previous year. Return on net

assets (RONA) was 7.9% (-13.8%).

The improvement has primarily

been driven by productivity gains and

higher volumes. As a result of the

restructuring measures fi xed costs

declined signifi cantly. Increases in raw

material and energy costs were to a

great part compensated by improved

production effi ciency and improved

sales prices.

The continued weakening of the

US dollar had a negative impact on the

US dollar-based exports.

Market development

Printing and furnishing

Demand improved during the course

of the year. Manufacturing operated

at full capacity with the exception of

the seasonally weak Christmas period.

Total deliveries increased strongly, by

21%. Pre-impregnated decor papers,

in particular, showed a signifi cant

growth, thereby further strengthen-

ing Ahlstrom’s position in this market

segment. In addition, demand for

heavy one-side coated grades, like

poster papers, developed favorably.

Processing and protection

Demand for crepe papers was stable

during the year and a small volume

increase was recorded. Towards the

end of the year, demand for vegetable

parchment improved and volumes

increased by 4%. The product line

sealing & shielding was able to increase

the volumes by 6%, despite inconsis-

tent demand and competitive market

conditions.

Other operations Ahlstrom Group’s other operations

contributed EUR 27.1 million (EUR 36.2

million) to net sales in 2004. A major

part of these fi gures is attributable to

the divested businesses (packaging

units Tecno Jolly and Kuban). The oper-

ating profi t of these operations and the

associated company Jujo Thermal Ltd

was EUR 2.0 million (EUR 1.7 million).

In addition, other operations include

holding, fi nance and sales companies

bringing the total operating loss of

other operations to EUR 10.9 million

(a loss of EUR 10.0 million).

Capital expenditure Capital expenditure including acquisi-

tions in 2004 amounted to EUR 167.0

million (EUR 93.1 million). In 2004,

the biggest growth investments were

made within the FiberComposites

division.

Divestments and acquisitions in 2004 Ahlstrom and Sonoco combined their

European paper-based core, tube and

coreboard operations in 2004. The joint

venture, named Sonoco-Alcore, started

its operations in November, 2004.

Sonoco-Alcore employs 1,800 people

and its annual net sales amount to

approximately EUR 300 million, making

the company the largest European

producer of cores and tubes.

The FiberComposites division com-

pleted two add-on acquisitions

in the USA to strengthen its position

in the fi ltration and nonwovens busi-

nesses. In June, the Hollinee Filtra-

tion division was acquired to expand

Ahlstrom’s air fi ltration product range.

The business was subsequently

named Ahlstrom Air Media. In October,


Green Bay Nonwovens was acquired

to expand Ahlstrom’s wipes product

line and North American spunlacing

capacity.

In October, 2004 Ahlstrom

announced the divestments of its two

remaining fl exible packaging units.

Tecno Jolly (Akerlund & Rausing SpA)

in Italy was sold to the Italian fl exible

packaging company Sacchital SpA. ZAO

Akerlund & Rausing Kuban in Russia

was sold to Kuban AB. The parties

agreed not to disclose the transaction

values. Ahlstrom continues to produce

base materials for fl exible packaging:

calendered and one-side coated papers,

as an integral part of its Label & Pack-

aging Papers business area.

Research and development In 2004, the company’s expenditure

on research and development was

EUR 27.6 million (EUR 32.9 million),

representing 1.8% (2.2%) of net sales.

Special R & D efforts were focused on

the development of recyclable paper

products, photo catalysis and specialty

coating.

Personnel At the year-end, Ahlstrom had 5,755

employees, 731 less than at the end

of 2003 (6,486). The headcount reduc-

tion is mainly attributable to the joint

venture, Sonoco-Alcore, as 483 employ-

ees from Ahlstrom’s core and coreboard

production were transferred to the joint

venture as of November 1, 2004. The

average number of employees in 2004

was 6,121 (6,536).

Change in top management The Board of Directors of Ahlstrom

Corporation appointed Mr Jukka Moisio,

(M.Sc., Econ., MBA) President and CEO

of Ahlstrom Corporation as of Septem-

ber 1, 2004.

New organizational structure and appointments in the Corporate Executive TeamIn October Ahlstrom announced its

decision to fl atten the operative orga -

nization to make it more customer and

business oriented. The aim was also

to streamline the company and make

it more cost effective.

As of January 1, 2005, the Fiber-

Composites division was divided into

three business areas: Nonwovens,

Filtration Materials and Glass non-

wovens. These three business areas

form the FiberComposites segment.

Nonwovens is led by Claudio Ermondi,

Filtration Materials by Randal Davis and

Glass Nonwovens by Tommi Björnman.

These business area leaders were

appointed to the Corporate Executive

Team (CET) as of January 1, 2005. In

addition, the previous LabelPack and

Specialties divisions form the Specialty

Papers segment as of 1 January, 2005.

The Specialty Papers segment includes

Label and Packaging Papers as well as

Technical Papers business areas led by

Diego Borello and Leif Frilund. They will

continue as CET members.

As of January 1, 2005 Ahlstrom’s

external reporting is based on the

FiberComposites and Specialty Papers

segments.

Shares and share capital At the end of 2004, the share capital

of Ahlstrom Corporation was EUR 54.6

million and the total number of shares

was 36,418,419, with a nominal value

of EUR 1.50 per share.

The equity per share of Ahlstrom

Group was EUR 17.38 (EUR 18.50).

Board of Directors and Auditors Shareholders of Ahlstrom Corporation

convened on May 7, 2004 for the

Annual General Meeting. Johan

Gullichsen (Chairman of the Board),

Mikael Lilius (Vice Chairman), Sebastian

Bondestam, Jan Inborr, Urban Jansson,

Peter Seligson and Willem F. Zetteler

were re-elected to the Board. KPMG Oy

Ab was re-elected as the company’s

auditor and Sixten Nyman, Authorized

Public Accountant as the auditor in

charge. The AGM resolved to distribute

a dividend of EUR 1.50 per share for

2003 as proposed by the Board

of Directors.

Adoption of International Finan-cial Reporting Standards (IFRS) Ahlstrom will adopt the International

Financial Reporting Standards (IFRS)

in its fi nancial reporting starting with

the fi rst quarter in 2005, which will

be published on April 27, 2005. In the

transition to IFRS, Ahlstrom will apply

the First-Time Adoption standard that

allows exceptions to some of the

specifi c standards at the time of transi-

tion. January 1, 2004 is used as the

transition date to IFRS.

Prior to the publishing of the Q1,

2005 results, Ahlstrom will publish its

comparative 2004 (Q1-Q4) fi nancial

statements in order to communicate

the effects of the adoption of IFRS.

The outlook for 2005 The current market situation allows

Ahlstrom to expect a small volume

growth in 2005.

Increasing raw material (pulp,

synthetic fi bers, chemicals) and energy

costs will continue to have a negative

impact on Ahlstrom in 2005. The

company has initiated price increases to

compensate the production cost esca-

lation. On-going actions to improve

manufacturing productivity and orga-

nizational effi ciency – combined with

increased cost control – are expected

to improve Ahlstrom’s operating profi t,

based on the current global economic

outlook.



Group Parent company EUR million (Note) 2004 2003 2004 2003 Net sales (1,2) 1,567.8 1,556.4 32.4 27.3

Change in inventories of fi nished goods and work in process -6.8 10.3 Production for own use 0.7 0.8 Share of net profi t of associated companies 2.8 3.4 Other operating income (3) 19.4 19.1 2.3 3.2

Materials and services Purchases -779.6 -821.3 Change in inventory -60.2 -4.3 External services -46.5 -76.1 Personnel costs (4) -338.5 -357.0 -10.8 -8.0Depreciation, amortization and write-downs (11) -104.1 -112.4 -0.8 -0.8Other operating expense -204.0 -170.4 -41.8 -27.3 -1,532.9 -1,541.5 -53.3 -36.1 Operating profi t/loss (2) 51.0 48.5 -18.6 -5.6 Financing income and expense Dividend income (6) 0.7 0.5 22.6 61.9 Interest and other fi nancing income (7) 3.6 5.0 17.2 22.3 Interest and other fi nancing expense (8) -18.4 -15.6 -16.4 -15.2 Write-downs of subsidiary shares -28.0 -2.0 Gains and losses on foreign currency -2.1 -4.7 8.5 38.6 -16.2 -14.8 3.9 105.6 Profi t/loss before extraordinary items 34.8 33.7 -14.7 100.0 Extraordinary items (9)

Extraordinary income 5.8 9.9 5.8 9.9 Profi t/loss after extraordinary items 34.8 33.7 -8.9 109.9 Provisions Change in depreciation difference 0.1 0.1 Income taxes (10) -17.1 -11.1 -3.4 -14.3 Profi t/loss before minority interest 17.7 22.6 -12.2 95.7 Minority interest -0.2 -0.2 Net profi t/loss 17.5 22.4 -12.2 95.7

Income statement


Group Parent company EUR million 2004 2003 2004 2003

Cash fl ow from operating activities Operating profi t/loss 51.0 48.5 -18.6 -5.6 Depreciation, amortization and write-downs 104.1 112.4 0.8 0.8 Other adjustments -9.1 -8.8 -1.7 -4.9Operating profi t/loss before change in net working capital 146.0 152.1 -19.5 -9.7 Change in net working capital 1.1 39.8 4.2 -0.1Cash generated from operations 147.1 191.9 -15.3 -9.8

Interest income 3.7 1.5 16.3 20.8 Interest and other fi nancing expense -19.7 -14.2 -16.7 -14.8 Gains and losses on foreign currency 4.2 40.0 7.5 44.0 Income taxes -7.3 -17.1 -12.4Net cash from operating activities 128.0 202.0 -8.2 27.8 Cash fl ow from investing activities Capital expenditures -101.0 -92.5 -0.7 Acquisitions of Group companies -64.9 -0.5 -2.2 -51.6 Investments in other shares -1.2 -0.2 -0.1 Proceeds from disposal of shares in Group companies 1.4 38.8 158.6 Proceeds from sale of noncurrent assets 2.2 44.1 0.2 0.6 Dividends received 2.9 4.2 21.7 56.0 Group contributions 14.0 12.6 Change in other receivables 0.1 Net cash used in investing activities -160.5 -44.8 72.4 175.5 Cash fl ow from fi nancing activities Change in notes receivable and short-term investments 12.3 -4.7 6.5 50.5 Change in long-term debt -14.7 -58.6 -38.7 -63.9 Change in short-term debt 84.8 -46.6 20.5 -134.8 Dividends paid -54.6 -56.4 -54.7 -56.5

Net cash used in fi nancing activities 27.8 -166.4 -66.4 -204.7 Net change in cash and cash equivalents -4.7 -9.1 -2.2 -1.4 Cash and cash equivalents at beginning of period 24.1 35.3 2.6 Foreign exchange adjustment 0.2 -2.0 4.0

Cash and cash equivalents at end of period 19.6 24.1 0.4 2.6

Statement of cash fl ows



Balance sheetGroup Parent company

EUR million (Note) Dec 31, 2004 Dec 31, 2003 Dec 31, 2004 Dec 31, 2003 Assets Non-current assets Intangible assets (11) Intangible rights 22.9 26.6 0.9 1.3 Goodwill 99.9 77.7 Other intangible assets 3.0 6.6 125.9 111.0 0.9 1.3Tangible assets (11) Land and water areas 21.2 24.0 0.6 0.6 Buildings and constructions 120.4 133.7 Machinery and equipment 429.7 412.8 0.2 0.7

Other tangible assets 9.5 10.8 0.2 0.4 Advances paid and construction in progress 19.8 50.7 600.5 632.0 1.1 1.7Long-term investments (12) Shares in Group companies 467.2 531.8 Shares in associated companies 49.7 13.3 2.8 2.8 Shares in other companies 3.3 3.3 3.1 3.1 Other receivables 0.5 53.0 17.2 473.0 537.7

Current assets Inventories Material and supplies 82.1 86.1 Work in process 13.2 14.8 Finished goods 126.4 137.2 Advances paid 1.0 0.7 222.7 238.9 Long-term receivables Receivables from Group companies (19) 33.9 48.0 Notes receivable 3.7 1.2 2.6 0.1 Deferred tax assets (18) 11.8 16.6 1.3 1.5 Other long-term receivables 3.3 3.6 Prepaid expenses and accrued income (13) 0.5 0.8 19.2 22.1 37.8 49.6 Short-term receivables Accounts receivable 272.0 283.4 0.2 Receivables from Group companies (19) 509.8 511.6 Receivables from associated companies (20) 1.9 1.7 0.4 0.2 Notes receivable 1.7 3.0 Deferred tax assets (18) 14.6 19.5 0.3 0.8 Other short-term receivables 22.3 21.5 0.2 0.5 Prepaid expenses and accrued income (13) 32.6 41.2 14.2 18.7 345.2 370.4 525.0 531.8 Short-term investments 13.6 9.8 13.5 9.5Cash and cash equivalents 19.6 24.1 0.4 2.6 33.3 34.0 14.0 12.1 Total assets 1,399.8 1,425.5 1,051.8 1,134.2


Group Parent companyEUR million (Note) Dec 31, 2004 Dec 31, 2003 Dec 31, 2004 Dec 31, 2003

Shareholders’ equity and liabilities Shareholders’ equity (14) Share capital 54.6 54.6 54.6 54.6 Other reserves 26.7 26.7 Retained earnings 534.1 570.1 628.6 587.7 Net profi t/loss 17.5 22.4 -12.2 95.7 632.9 673.8 671.1 738.0 Minority interest 0.9 1.0

Untaxed reserves Accumulated depreciation difference 0.1 Liabilities Provisions for contingencies (17) 37.0 47.9 6.0 7.7 Long-term liabilities (16) Loans from fi nancial institutions 187.7 167.0 150.4 123.6 Liabilities to Group companies (19) 14.5 44.3 Deferred tax liabilities (18) 25.5 28.7 Other long-term liabilities 72.4 71.5 285.7 267.2 164.9 167.9Short-term liabilities Loans from fi nancial institutions 176.6 145.8 86.0 95.5 Other advances received 0.2 0.7 Accounts payable 166.9 182.9 0.7 0.9 Liabilities to Group companies (19) 107.1 115.1 Liabilities to associated companies (20) 3.9 1.2 3.0 0.9 Deferred tax liabilities (18) 1.1 0.3 Other short-term liabilities 23.4 29.3 4.5 0.6 Accrued expenses and deferred income (21) 71.1 75.5 8.7 7.5 443.2 435.7 209.9 220.5 Total liabilities 765.9 750.7 380.8 396.1

Total shareholders’ equity and liabilities 1,399.8 1,425.5 1,051.8 1,134.2



Description of businessAhlstrom Group (the “Group”) is a

multinational group headquartered in

Helsinki, Finland operating in the fi ber-

based materials business. The Group’s

FiberComposites business operates

in fi ltration media, consumer, medical

and industrial nonwovens and glass

nonwoven reinforcement products.

The Specialty Papers business, includ-

ing the former divisions LabelPack and

Specialities, operates in self-adhesive,

packaging and label papers as well

as in technical papers, which supplies

customers in abrasive materials, furni-

ture, automobile and bakery industries,

among others. The Group’s raw materi-

als are readily available and the Group

is not dependent on any single supplier.

Basis of preparationThe consolidated fi nancial statements

of the Group have been prepared in

euro and in accordance with accounting

principles generally accepted in Finland.

They include the fi nancial statements

of Ahlstrom Corporation (the “Parent

Company”) and its subsidiaries and

have been prepared under the historical

cost convention.

Use of estimatesThe preparation of consolidated fi nan-

cial statements in conformity with

generally accepted accounting prin-

ciples requires management to make

estimates and assumptions that affect

the reported amounts of assets and

liabilities, the disclosure of contingent

assets and liabilities at the dates of the

Accounting principles

fi nancial statements and the reported

amounts of revenues and expenses

during the reported period. Actual

results may differ from these amounts.

Summary of signifi cant accounting policies

a) Principles of consolidation

The consolidated fi nancial statements

include the accounts of the Parent

Company and all subsidiaries in which

it directly or indirectly owns more than

50% of the voting shares. The principal

subsidiaries are listed in Note 23.

The equity method of accounting

is used to account for investments in

associated companies in which the

Group has 20 to 50 percent of the

voting shares.

Subsidiaries acquired during the

year are included in the consolidated

income statement from the date of

acquisition, whereas companies that

have been sold during the year are

included up to the date of sale.

All intercompany transactions,

receivables and liabilities as well as

unrealized profi ts and intragroup profi t

distributions are eliminated in the

consolidation. Minority interests are

reported separately from sharehold-

ers’ equity in the consolidated balance

sheets and as a separate item in the

consolidated income statements.

Acquisitions are accounted for

under the purchase method of account-

ing and accordingly, the respective

purchase price is allocated to the assets

acquired and the liabilities assumed

based on their estimated fair values at

the date of acquisition. The excess of

the purchase price over the fair values

of the net assets acquired is recorded

on the balance sheet as goodwill.

The purchase price allocated to the

assets acquired is charged to income

in a manner applicable to the respec-

tive assets.

b) Transactions denominated

in foreign currencies

Receivables and liabilities denominated

in a foreign currency are restated at the

year end exchange rate with the result-

ing gain or loss recorded in the income

statement. Gains and losses on foreign

currency loans and other instruments

designated as hedges of a foreign sub-

sidiary’s equity are recorded directly in

shareholders’ equity.

The balance sheets of subsid-

iaries whose reporting currency is not

euro are translated into euro at the

exchange rate prevailing at the balance

sheet date while the income state-

ments of such subsidiaries are trans-

lated at the average exchange rate for

the year. The effect of such translation

is recorded directly in a separate com-

ponent of the shareholders’ equity.

c) Derivative fi nancial instruments

The Group is exposed to foreign

currency exchange and interest rate

risks arising from the business oper-

ations and fi nancing. In the normal

course of business, the Group uses

a variety of derivative fi nancial instru-

ments to manage these risks so as to

minimize their impact on the Group’s

profi tability and fi nancial position.

The derivative fi nancial instruments


used by the Group are designated as

either hedges of forecasted transac-

tions or fi rm commitments (cash fl ow

hedges) or as hedges of net invest-

ments in foreign entities. In addition,

the Group uses derivative fi nancial

instruments for trading purposes to

a very limited extent in accordance

with the Group’s Treasury Policy.

To qualify as a hedge, a derivative

fi nancial instrument must relate to

an identifi ed asset, liability or commit-

ment, to a portfolio of assets, liabilities

or commitments or to a highly probable

forecasted transaction. The instrument

must also be denominated in the same

currency as the underlying exposure,

and must reduce the respective risk

profi le of the Group.

The gains or losses on forward

foreign exchange contracts are com-

prised of an interest rate component

and a currency component. The interest

rate component is amortized over the

lifetime of the contract and is reported

in interest income or interest expense

in the income statement. The currency

component of the transaction is valued

at the end of each reporting period

based on the currency exchange rates

in effect on the last business day of the

reporting period and the resulting gain

or loss is reported in the income state-

ment under exchange gains/losses.

The fair values of all option based

derivative fi nancial instruments,

whether related to foreign exchange

rates or interest rates, are determined

on the last business day of each of

the reporting period. Changes in the

fair values are recorded as income or

expense in the income statement.

Interest rate swaps that are

designated as cash fl ow hedges are

accounted for on an accrual basis.

Interest payable and receivable under

the swap terms are accrued and

recorded as an adjustment of the

interest expense of the designated

liability.

d) Revenue recognition

The Group recognizes revenue from

product sales upon shipment, when the

customer takes ownership and when

the Group has transferred the decisive

risks and rewards to the customer and

the Group retains no effective control

of the products. The majority of the

Group’s revenue is recognized upon

delivery to the customer in accordance

with agreed terms of sale.

The Group recognizes revenue

from services when the services are

rendered.

Sales are shown net of returns,

indirect taxes, discounts and annual

rebates. The Group records provisions

for sales returns in the period of the

sale using estimates based on historical

experience.

e) Research and development costs

Research and development costs are

expensed as incurred.

f) Extraordinary items

The extraordinary items in the Parent

Company’s fi nancial statements include

group contributions granted or received.

g) Income taxes

Income tax expense consists of current

and deferred taxes. Current taxes

include taxes of the Group companies

for the year in accordance with local

regulations, as well as adjustments

to prior year taxes.

Deferred income taxes are

accounted for by the U.S. subsidiaries

under the asset and liability method.

Deferred tax assets and liabilities are

recognized for the future tax conse-

quences of differences between the

fi nancial statement carrying amounts

of existing assets and liabilities and

their respective tax bases and for

operating loss and tax credit carryfor-

wards. Deferred tax assets and liabilities

are measured using enacted tax rates

expected to apply to taxable income in

the years in which those temporary

differences are expected to be recov-

ered or settled. The effect on deferred

tax assets and liabilities of a change in

tax rates is recognized in income in the

period that includes the enactment date.

For other Group companies,

deferred taxes are provided for timing

differences between book and taxable

income.

h) Non-current assets

Property, plant and equipment are

carried at the original acquisition cost

less depreciation or amortization.

Interest costs on borrowings to fi nance

the construction of major assets are

capitalized as part of their cost during

the period required to complete the

assets for their intended use.

Depreciation on property, plant and

equipment is calculated on the straight-

line basis over the estimated useful

lives of the assets as follows: Buildings

20–40 years; heavy machinery 10–20

Notes to the fi nancial statements


years; other machinery and equipment

3–10 years.

Goodwill, which represents the

excess of purchase price over the fair

value of certain net assets acquired, is

amortized on a straight-line basis over

the periods expected to be benefi ted,

generally 10 years, but ranging up to

a maximum of 20 years, depending

on the nature of the acquisition.

Other intangible assets include

trademarks, patents and licenses which

are stated at historical cost and amor-

tized on a straight-line basis over their

expected useful lives ranging from

5 to 20 years.

Development or acquisition costs

of new software clearly associated with

an identifi able unique product which

has a probable benefi t beyond one year

are recognized as an asset. Develop-

ment costs include personnel costs

of the development team. Computer

software costs are amortized on a

straight line basis over their expected

useful lives ranging from 3 to 5 years.

Impairment of property, plant and

equipment, goodwill, and other intan-

gible assets is recognized if it is evident

that the value of the non-current asset

is expected to be permanently lower

than the historical cost, net of depre-

ciation or amortization. Impairment is

recorded as an expense. Non-current

assets, excluding goodwill, may be

revalued upwards to recover the

amounts previously recorded as im-

pairment.

i) Leasing

The Group leases certain property and

equipment under various operating and

fi nance lease arrangements. Leases are

classifi ed and accounted for as fi nance

leases if substantially all risks and bene-

fi ts of ownership of the underlying

assets have been transferred to the

lessee.

The assets related to all major

fi nance leases are capitalized at the

lower of their fair value or the esti-

mated net present value of the lease

payments. Each lease payment is

allocated between reducing the lease

liability and the fi nance charge so that

a constant rate of interest is achieved

on the balance of the lease liability.

The lease liability, net of fi nance

charges, is included in interest-bearing

liabilities. Property, plant and equipment

acquired under fi nance lease contracts

are depreciated over the lesser of the

useful life of the asset or the term of

the lease.

Payments made under operating

leases, or under rental agreements, are

expensed as incurred.

j) Inventories

Inventories are stated at the lower of

cost or net realisable value. Cost of raw

materials and supplies is determined

on a weighed average cost method.

The cost of fi nished goods and work in

process includes all direct costs as well

as an allocation of production over-

heads.

k) Accounts receivable

Accounts receivable are recorded net

of an allowance for doubtful accounts.

Management considers current infor-

mation and events regarding the cus-

tomers’ ability to repay their obligations

and makes a provision against amounts

when it is probable that the full amount

will not be collected.

l) Cash and cash equivalents

Cash and cash equivalents consist of

cash on hand, balances with banks and

highly liquid short-term investments.

Bank overdrafts in use are included in

loans from fi nancial institutions under

short-term liabilities.

m) Investments

Investments in marketable securities

held as short-term investments are

recorded at the lower of cost or market

value. Long-term investments are

recorded at cost less any permanent

declines in the value of the individual

investments.

n) Provisions

Provisions are recognised when a

present legal or constructive obligation

exists as a result of past events, it is

probable that an outfl ow of funds will

be required to settle the obligation and

a reliable estimate of the amount of

the obligation can be made.

o) Pension plans

In Finland, a statutory pension liability

and supplementary pension benefi ts

are funded through compulsory insur-

ance policies. Payments to pension

insurance institutions are determined

by the insurance institution according

to prescribed actuarial assumptions

and other rulings. Group companies

outside of Finland have pension obliga-

tions arranged and pension liabilities

recorded in accordance with local legis-

lation and practice.

Pension insurance premiums

are charged to income. The accrued

pension liabilities not covered by insur-

ance policies and changes thereof are

recorded in the balance sheet and

income statement in accordance with

local practice. Pension liabilities which

are not included in the balance sheet

under the local rules are disclosed in

the Notes to fi nancial statements.

p) Stock-based compensation

The Group does not account for

stock-based compensation as it is

not required under Finnish accounting

principles.

q) Dividends

Dividends proposed by the Board of

Directors are not recorded in the fi nan-

cial statements until they have been

approved by the shareholders at the

Annual General Meeting.


Group Parent companyEUR million 2004 2003 2004 2003

1. Distribution of net sales USA 289.3 275.1 5.3 4.3 Germany 251.9 254.9 4.0 2.8 France 180.6 173.0 8.4 7.4 Italy 143.7 141.8 5.3 4.5 United Kingdom 85.1 94.7 1.4 1.2 Spain 62.2 58.1 0.4 0.3 Russia 49.7 45.8 Finland 45.1 49.4 5.3 4.5 Belgium 44.7 43.5 0.3 0.4 Other 415.5 420.1 2.1 1.9 Total 1,567.8 1,556.4 32.4 27.3

2. Financial data by division

Net sales FiberComposites 663.8 644.7 LabelPack 542.0 541.5 Specialties (excl. Cores & Board) 270.9 256.9 Other* 67.8 58.1 Eliminations -70.9 -60.4 Total 1,473.6 1,440.8 Discontinued operations 94.2 115.6 Group 1,567.8 1,556.4 * Includes intragroup sales of services EUR 60,1 million in 2004 (EUR 58,1 million in 2003).

Earnings before interest, taxes, depreciation and amortization (EBITDA) FiberComposites 81.3 101.1 LabelPack 49.4 58.3 Specialties (excl. Cores & Board) 21.9 -3.1 Other 0.3 -3.0 Total 152.9 153.3 Discontinued operations 2.2 7.6 Group 155.1 160.9

Operating profi t/loss FiberComposites 33.9 57.2 LabelPack 17.1 24.9 Specialties (excl. Cores & Board) 7.0 -26.3 Other -3.9 -8.6 Total 54.1 47.2 Discontinued operations -3.1 1.3 Group 51.0 48.5



Group Parent company

EUR million 2004 2003 2004 2003Capital employed at Dec 31

FiberComposites 560.6 490.6 LabelPack 263.1 290.8 Specialties (excl. Cores & Board) 115.1 100.0 Other 70.1 55.9 Total 1,008.9 937.3 Discontinued operations 57.2 Group 1,008.9 994.5

Investments (including acquisitions) FiberComposites 136.2 57.5 LabelPack 15.0 14.5 Specialties (excl. Cores & Board) 8.1 14.0 Other 7.7 7.2 Group 167.0 93.2

3. Other operating income Gain on sale of shares 4.9 Gain on sale of other noncurrent assets 1.6 5.6 0.1 Insurance indemnifi cation 4.0 2.6 Rent income 1.5 1.1 Reversal of provisions 1.2 3.1 0.8 1.5 Subsidies received 1.2 1.8 Other 5.0 4.9 1.5 1.6 Total 19.4 19.1 2.3 3.2 4. Personnel costs Remuneration of board members 0.5 0.6 0.2 0.2 Remuneration of managing directors 5.2 5.1 0.8 0.6 Bonuses to managing directors 0.3 0.4 0.1 Other wages and salaries 243.9 262.5 6.8 6.1 Pension costs 32.3 33.3 1.9 0.7 Other wage-related costs 56.3 55.1 1.0 0.4 Total 338.5 357.0 10.8 8.0 Board members and managing directors of certain Group companies may be eligible for early retirement at age 60.

5. Average number of personnel Salaried 2,454 2,697 94 89 Hourly paid 3,667 3,839 Total 6,121 6,536 94 89 6. Dividend income from Group companies 18.9 56.7 from associated companies 3.1 4.7 from other companies 0.7 0.5 0.6 0.5 Total 0.7 0.5 22.6 61.9 7. Interest and other fi nancing income Interest income from Group companies 14.7 16.5 Interest income from others 3.6 2.9 2.5 3.7 Reversal of write-downs of current short-term investments 2.1 2.1 Total 3.6 5.0 17.2 22.3



EUR million 2004 2003 2004 2003

8. Interest and other fi nancing expense to Group companies -4.0 -4.4 to others -18.4 -15.6 -12.4 -10.8 Total -18.4 -15.6 -16.4 -15.2 9. Extraordinary items Group contributions 8.1 14.0 Tax related to extraordinary items -2.3 -4.1 Total 5.8 9.9 10. Income taxes Taxes for current and previous years -8.2 -14.2 -5.0 -17.0 Deferred taxes -8.9 3.1 -0.7 -1.4 Tax related to extraordinary items 2.3 4.1

Income tax in the income statement -17.1 -11.1 -3.4 -14.3

11. Intangible and tangible assets, Group

Goodwill Intangible Other Land and Buildings Machinery Other Advances

rights intangible water and con- and tangible paid and

assets areas structions equipment assets construction

EUR million in progress

Cost at Jan 1 179.8 49.5 19.8 23.8 238.3 1,245.2 30.0 50.7 Translation adjustment -4.8 -2.4 -0.1 -2.1 -12.7 -0.1 -1.1 Increases 38.5 0.4 1.1 0.3 6.9 68.2 0.9 38.6 Decreases -16.7 -4.8 -3.6 -3.1 -24.5 -102.0 -1.7 -2.3 Reclassifi cations 6.2 -6.2 5.1 60.4 0.5 -66.1 Other changes -0.6 0.5 0.1 0.2 -1.4 -0.1 Cost at Dec 31 196.3 49.5 11.1 21.0 223.9 1,257.7 29.6 19.8 Accumulated depreciation and amortization at Jan 1 102.1 23.0 13.2 0.7 104.6 832.4 19.2 Translation adjustment -1.9 -0.9 0.1 -0.6 -6.4 Depreciation and amortization for the fi scal year 11.8 5.6 0.6 9.4 71.7 2.1 Write-downs 0.6 0.5 0.3 1.5 0.1 Increases 2.8 Decreases -15.7 -4.4 -3.6 -10.4 -72.8 -1.1 Reclassifi cations 2.4 -2.4 Other changes 0.5 -0.3 0.1 -1.2 Accumulated depreciation and amortization at Dec 31 96.4 26.6 8.1 0.7 103.5 827.9 20.1 Revaluations at Jan 1 0.9 Revaluations at Dec 31 0.9 Book value at December 31, 2004 99.9 22.9 3.0 21.2 120.4 429.7 9.5 19.8



Intangible and tangible assets, parent company Intangible Land and Machinery Other

rights water and tangible

EUR million areas equipment assets

Cost at Jan 1 2.4 0.6 1.9 0.7 Increases 0.1 Decreases -0.5 -0.1 Cost at Dec 31 2.5 0.6 1.4 0.6

Accumulated depreciation and amortization at Jan 1 1.1 1.2 0.3 Depreciation and amortization for the fi scal year 0.5 0.3 0.1 Decreases -0.3 Accumulated depreciation and amortization at Dec 31 1.6 1.2 0.4

Book value at December 31, 2004 0.9 0.6 0.2 0.2

12. Long-term investments, Group Shares in Shares in Other

associated other receivables

EUR million companies companies

Cost at Jan 1 13.3 3.3 0.5 Translation adjustment -0.1 -0.1 Increases 15.7 0.1 Decreases -0.7 -0.1 Share of profi ts 2.6 Dividends received -2.2 Reclassifi cations 21.1 Write-downs -0.4 Cost at Dec 31 49.7 3.3 0.0 Book value at Dec 31, 2004 49.7 3.3 0.0

Long-term investments, parent company Shares in Shares in Shares in

Group associated other

EUR million companies companies companies

Cost at Jan 1 531.8 2.8 3.1 Increases 2.2 0.1 Decreases -38.8 -0.1 Write-downs -28.0 Cost at Dec 31 467.2 2.8 3.1 Book value at December 31, 2004 467.2 2.8 3.1


13. Prepaid expenses and accrued income Long-term 0.5 0.8 Short-term 32.6 41.2 14.2 18.7 Total 33.1 42.0 14.2 18.7

Main items: Accruals of hedging contracts 10.9 14.1 10.9 13.5 Current tax receivable 5.8 5.7 Accrued insurance indemnifi cation 0.1 1.2 Accrued interest income 0.1 0.4 0.1 1.3 Other 16.2 20.6 3.2 3.9 Total 33.1 42.0 14.2 18.7



EUR million 2004 2003 2004 2003

14. Shareholders’ equity Balance at Jan 1 673.8 725.9 738.0 698.7 Dividends paid -54.6 -56.4 -54.6 -56.4 Translation adjustment after equity hedging, net of tax -2.9 -12.9 Other -0.8 -5.2 -0.1 Net profi t 17.5 22.4 -12.2 95.7 Balance at Dec 31 632.9 673.8 671.1 738.0 Retained earnings 551.6 592.4 Depreciation difference and untaxed reserves, net of tax -33.2 -43.0 Distributable shareholders’ equity 518.4 549.4 15. Share capital of Parent Company by classes of share, December 31, 2004 The shares are divided into two classes, Series A and B. The par value of all shares is EUR 1.50. Number of EUR

shares million

Series A, 1 vote/share, with redemption clause 21,190,100 31.8 Series B, 1 vote/share 15,228,319 22.8 Total 36,418,419 54.6

EUR million 2006 2007 2008 2009 2010– Total

16. Maturities of long-term liabilities, Group Loans from fi nancial institutions 10.0 113.6 15.8 0.8 47.5 187.7 Deferred tax liabilities 1.3 3.0 4.3 2.0 14.9 25.5 Other long-term liabilities 4.0 3.2 3.2 3.6 58.4 72.4 Total 15.3 119.8 23.3 6.4 120.9 285.7


17. Provisions for contingencies Restructuring costs 10.6 19.9 0.1 Pension and other employee benefi t plan liabilities 19.1 21.4 5.0 5.2 Discontinued operations 0.9 2.5 0.9 Other 6.4 4.1 2.5 Total 37.0 47.9 6.0 7.7

18. Deferred tax assets and liabilities Long-term assets 11.8 16.6 1.3 1.5 Short-term assets 14.6 19.5 0.3 0.8 Long-term liabilities -25.5 -28.7 Short-term liabilities -1.1 -0.3 Total -0.2 7.1 1.6 2.3

Arising from: Depreciation differences and untaxed reserves -21.7 -31.1 Other timing differences 20.8 37.5 1.6 2.3 Consolidation entries 0.6 0.7 Total -0.2 7.1 1.6 2.3



Group Parent companyEUR million 2004 2003 2004 2003

19. Receivables from and liabilities to Group companies Long-term notes receivable 33.9 48.0 Accounts receivable 7.0 3.9 Notes receivable 492.7 492.3 Prepaid expenses and accrued income 10.1 15.1 Other short-term receivables 0.3 Total 543.7 559.6

Long-term liabilities 14.5 44.3 Accounts payable 1.9 2.4 Accrued expenses and deferred income 5.1 1.7 Other short-term liabilities 100.1 111.0 Total 121.6 159.4 20. Receivables from and liabilities to associated companies Accounts receivable 1.5 1.4 Short-term notes receivable 0.3 0.3 0.4 0.2 Prepaid expenses and accured income 0.1 Total 1.9 1.7 0.4 0.2

Short-term debt 2.9 0.8 2.9 Accounts payable 0.8 0.4 0.1 Accrued expenses and deferred income 0.2 Other short-term liabilities 0.9 Total 3.9 1.2 3.0 0.9

21. Accrued expenses and deferred income Short-term 71.1 75.5 8.7 7.5 Total 71.1 75.5 8.7 7.5

Main items: Accrued personnel costs 35.5 33.5 2.9 1.1 Current tax payable 9.0 14.3 3.8 4.7 Accrued interest expense 0.9 1.8 0.5 1.3 Deferred income 6.0 6.0 Accruals of hedging contracts 1.3 0.2 1.3 0.2 Other 18.4 19.7 0.2 0.2 Total 71.1 75.5 8.7 7.5

22. Commitments and contingent liabilities For own liabilities: Loans from fi nancing institutions amount of loans 0.8 9.2 amount of mortgages 9.0 30.7 Other loans amount of loans 0.6 book value of pledges 0.6 For own commitments: guarantees 36.0 38.7 34.3 38.5 book value of pledges 0.6 For commitments of Group companies: guarantees 89.3 137.5 For commitments of third parties: guarantees 30.8 98.3 30.8 76.8 Leasing commitments current portion 7.7 8.1 1.8 1.7 long-term portion 25.7 28.4 5.7 8.1 Other contingent liabilities 4.9 1.2

At December 31, the defi cit in the pension funds of the UK and the US, which according to local accounting practice can be left unrecognized, amounted to EUR 13.8 million (EUR 14.9 million in 2003) .


23. Shares

Major subsidiaries Country % held

Ahlstrom Australia Pty Ltd Australia 74.0Ahlstrom B.V. The Netherlands 100.0 Ahlstrom South Africa (Pty) Ltd South Africa 60.0Ahlstrom Asia Holdings Pte Ltd Singapore 100.0 Ahlstrom Seoul Co. Ltd Korea 80.0 PT Ahlstrom Indonesia Indonesia 99.0Ahlstrom Barcelona, S.A. Spain 100.0 Ahlstrom Spain SL Spain 100.0Ahlstrom Chirnside Limited UK 100.0Ahlstrom Glassfi bre Oy Finland 100.0Ahlstrom Holding GmbH Germany 100.0

Ahlstrom Neu-Isenburg GmbH Germany 100.0 Ahlstrom Osnabrück GmbH Germany 100.0 Ahlstrom Altenkirchen GmbH Germany 100.0 Ahlstrom Nümbrecht GmbH & Co. KG Germany 100.0 Homburger Papierfabrik Verwaltung GmbH Germany 100.0 Ahlstrom Papiervertrieb GmbH Germany 75.0Ahlstrom Industries France 100.0 Ahlstrom Benelux S.A. Belgium 100.0 Ahlstrom Brignoud France 100.0 Ahlstrom Tampere Oy Finland 100.0 Ahlstrom Chantraine France 100.0 Ahlstrom Labelpack France 100.0 Ahlstrom Malmédy SA Belgium 100.0 Ahlstrom Research and Services France 100.0 Ahlstrom Specialties France 100.0 Ahlstrom (UK) Limited UK 100.0Ahlstrom Japan Inc. Japan 100.0Ahlstrom Kauttua Oy Finland 100.0Ahlstrom Korea Co., Ltd Korea 100.0Ahlstrom Louveira Ltda Brazil 100.0Ahlstrom Norrköping AB Sweden 100.0Ahlstrom Sales LLC Russia 100.0Ahlstrom Ställdalen Holding AB Sweden 100.0 Ahlstrom Ställdalen AB Sweden 100.0Ahlstrom Turin S.p.A. Italy 100.0 Nordica Nord Italia Carta S.r.l. Italy 60.0Ahlstrom USA Inc. USA 100.0 Ahlstrom Capital Corporation USA 100.0 Ahlstrom Holdings, Inc. USA 100.0 Ahlstrom U.S. Industries, Inc. USA 100.0 Ahlstrom Air Media LLC USA 100.0 Ahlstrom Atlanta Inc. USA 100.0 Ahlstrom Engine Filtration, LLC USA 100.0 Ahlstrom Green Bay Inc. USA 100.0 Ahlstrom Mount Holly Springs, LLC USA 100.0 Ahlstrom Windsor Locks, LLC USA 100.0

Major associated companies Jujo Thermal Oy Finland 41.7Sonoco-Alcore SARL Luxemburg 35.5



24. Financial risk management

Ahlstrom’s approach to fi nancial risk management is to secure the availability of funds required for the fi nancing of the business operations of the Group at optimal cost, to protect the net result and balance sheet from movements in foreign exchange and interest rates as well as to minimize counterparty risks. Principles and guidelines for the treasury activities are defi ned in the Group treasury policy on the basis of which the individual members of the Group have specifi ed their own procedures, which

take into account the special aspects unique to their businesses. The treasury activities are coordinated by Group treasury.

Funding riskThe Group aims to secure the timely availability of funds by maintaining an appropriately designed mix of cash, short and medium-/long-term loans and com-mitted and uncommitted credit facilities provided by banks and other fi nancial institutions both in the domestic and international fi nancial markets. In Finland the Group also accesses short term funds under a commercial paper program. The maturity profi le of the medium and long term loans of the Group is shown in note 16 to the fi nancial statements.

Foreign exchange riskThe Group has an exposure to move-ments in foreign exchange rates relating to its operations outside the Eurozone both in terms of cross-border sales and purchases as well as foreign investments. Good management of foreign exchange transaction and translation exposures is therefore essential. Foreign currency denominated cash infl ows and outfl ows are hedged on a net exposure basis per currency against the base currency of the respective exposed Group company

in accordance with a formula defi ned in the Group treasury policy. The length of the transaction exposure periods is determined individually by the Group companies in accordance with their specifi c guidelines in order to allow for as accurate a match with the underlying risk profi les as possible. Foreign currency denominated loans, forward contracts and, to a lesser extent, options are used as hedging instruments.

Ahlstrom applies a policy of in principle hedging 100% of its foreign currency denominated equity in foreign subsi-diaries. Foreign currency denominated medium term loans, forward contracts and medium term cross-currency swaps are used as hedging instruments. Foreign exchange differences relating to these transactions are booked against trans-lation differences in the consolidated balance sheet.

Interest rate riskThe primary focus of Ahlstrom’s interest rate risk management is to maintain a sound balance between fl oating and fi xed rate obligations in respect of the interest bearing liabilities of the Group. Interest rate exposures are hedged using derivative fi nancial instruments such as interest rate swaps, forwards, futures and options. Swaps are usually of maturi-ties between two to fi ve years. The fair values of these transactions are monito-red on a continuous basis.

Counterparty riskThe Group seeks to minimize coun-terparty risks associated with foreign exchange transactions, derivatives contracts and occasional external placements by limiting its exposures to fi rst-class banks and fi nancial institutions and other highly credit rated counterparts only. Whilst counterparty risks cannot be entirely eliminated the management is confi dent that they are well under control. Customer related counterparty risks are limited by the combination of a well diversifi ed customer base and the impact of a policy of concluding risk sharing arrangements in respect of larger exposures with banks and insurance companies. Over 90 percent of Ahlstrom’s customers are industrial companies.



Derivative fi nancial instruments * Nominal values Fair values EUR million 2004 2003 2004 2003 Interest rate derivatives Interest rate swaps 109.4 116.1 0.1 -1.6Foreign exchange derivatives Foreign exchange forward contracts 193.5 137.1 2.5 1.9 Options bought 3.4 4.8 0.2 Options sold 3.4 4.8 0.2 Equity hedging Foreign exchange forward contracts 269.5 212.9 6.5 12.1

* The values illustrate the extent of the hedging activities and do not as such measure the risk exposure of Ahlstrom.

** The fair values of interest rate swaps are based on actually quoted market rates at year-ends. The fair values of all other fi nancial instruments have been calculated from prevailing market rates at year-ends.

**


GroupEUR million 2004 2003

Financial indicators

Net sales, continued operations 1,473.6 1,440.8Net sales, discontinued operations 94.2 115.6Net sales, total 1,567.8 1,556.4

Personnel costs 338.5 357.0 % of net sales 21.6 22.9

Earnings before interest, taxes, depreciation and amortization (EBITDA) 155.1 160.9 % of net sales 9.9 10.3

Depreciation 91.6 94.3Amortization of goodwill and write-offs 12.5 18.1

Operating profi t 51.0 48.5 % of net sales 3.3 3.1

Interest expense, net 12.0 10.4 % of net sales 0.8 0.7

Profi t before extraordinary items and taxes 34.8 33.7 % of net sales 2.2 2.2

Net profi t 17.5 22.4 % of net sales 1.1 1.4

Capital employed, year-end 1,008.9 994.5Interest-bearing net debt 341.8 285.8Shareholders’ equity 632.9 673.8

Return on capital employed (ROCE), % 5.3 4.6Return on equity (ROE), % 2.7 3.2Equity ratio, % 45.3 47.4Gearing ratio, % 53.9 42.3

Capital expenditure and acquisitions 167.0 93.1 % of net sales 10.7 6.0

R&D expenditure 27.6 32.9 % of net sales 1.8 2.2

Net cash from operating activities 128.0 202.0

Number of employees, year-end 5,755 6,486

Number of employees, annual average 6,121 6,536Net sales per employee, EUR thousands 256 238

Key fi gures


GroupEUR million 2004 2003

Share indicators

Earnings per share, EUR 0.48 0.61Earnings per share, diluted, EUR 0.48 0.61Cash earnings per share, EUR 3.52 5.55

Equity per share, EUR 17.38 18.50Dividend per share, EUR 0.75 1.50Dividends, EUR million 27.3 54.6Payout ratio, % 156.3 245.9

Adjusted number of outstanding shares, end of period 36,418,419 36,418,419

Adjusted number of outstanding shares, average 36,418,419 36,418,419

* The Board of Directors’ proposal to the Annual General Meeting.

Calculation of key fi gures

Return on capital Profi t/loss before extraordinary items and taxes + Interest and other fi nancing expense x 100employed (ROCE), % Total assets (annual average) – Non-interest bearing liabilities (annual average)

Return on equity (ROE), % Profi t/loss before extraordinary items and taxes – Taxes on ordinary activities x 100 Shareholders’ equity (annual average) + Minority interest (annual average)

Equity ratio, % Shareholders’ equity + Minority interest x 100

Total assets – Advances received

Gearing ratio, % Net interest bearing debt x 100

Shareholders’ equity + Minority interest Net interest bearing debt Total interest bearing liabilities – Short-term investments – Cash and cash equivalents

Earnings per share Profi t/loss before extraordinary items and taxes – Taxes on ordinary activities +/– Minority interest Average adjusted number of shares over the fi scal year

Cash earnings per share Net cash from operating activities Average adjusted number of shares over the fi scal year

Equity per share Shareholders’ equity Adjusted number of shares at the end of the fi scal year

Dividend per share Dividends paid for the fi scal year Adjusted number of shares at the end of the fi scal year

Payout ratio, % Dividend per share x 100

Earnings per share Net assets Capital employed – Cash and cash equivalents + Net tax liability(divisions only) Return on net assets (RONA), % Operating profi t/loss

x 100(divisions only) Annual average of net assets


***


Major shareholders on Dec 31, 2004 Number of shares, total % of sharesAntti Ahlströmin Perilliset Oy 3,401,471 9.3Varma Mutual Pension Insurance Company 1,416,200 3.9Mona Huber 1,079,900 3.0Jacqueline Tracewski 1,007,600 2.8Krister Ahlström 970,919 2.7Ulla Ahlström 737,738 2.0Kaj Nahi 717,538 2.0Irma Bojesen estate 705,600 1.9Niklas Lund 693,738 1.9Kim Kylmälä 663,000 1.8Others 25,024,715 68.7

Total 36,418,419 100.0

Shareholders by group on Dec 31, 2004 Number of shares, total % of sharesCompanies 3,646,171 10.0Financial and insurance institutions 579,700 1.6Public corporations 1,416,200 3.9Finnish households 24,395,426 67.0Foreign households 5,782,422 15.9Others 598,500 1.6 36,418,419 100.0

Distribution of shareholdings on Dec 31, 2004Number Number

Number % of shares of averageNumber of shares of owners of owners and votes % of shares ownership1–10,000 112 41.0 315,946 0.9 2,82110,001–50,000 45 16.5 1,061,621 2.9 23,59250,001–100,000 17 6.2 1,326,285 3.6 78,017100,001–250,000 53 19.4 7,613,842 20.9 143,657250,001–500,000 26 9.5 9,038,841 24.8 347,648500,001– 20 7.4 17,061,884 46.9 853,094 273 100.0 36,418,419 100.0 133,401

Shares and shareholders

Management’s shareholdingOn December 31, 2004 the members of the Board of Directors and the President & CEO held in total 915,043 shares of Ahlstrom Corporation, representing 2,5% of the voting rights and shares.

Shares and share capitalOn December 31, 2004 Ahlstrom Corporation’s share capital was EUR EUR 54,627,628.50. The share capital is divided into 36,418,419 shares each with a par value of EUR 1.50. Of the shares 21,190,100 were of A series and 15,228,319 of series B. All shares have one vote and an equal right to dividend,

but the shares of series A are encumbe-red with the redemption clause in § 14 of the Articles of Association. The shares are not of different kind under the Companies Act.

ISIN code: AHL AV FI0009010383 AHL BV FI0009010391


To the shareholders of Ahlstrom CorporationWe have audited the accounting records and the fi nancial statements, as well as the administration by the Board of Directors and the President and CEO of Ahlstrom Corporation for the fi nancial period 1 January – 31 December 2004. The annual accounts prepared by the Board of Directors and the President and CEO include the report of the Board of Directors, consolidated and parent company income statements, balance sheets, cash fl ow statements and notes to the fi nancial statements. Based on our audit we express an opinion on these fi nancial statements and the company’s administration. We have conducted our audit in accordance with Finnish Generally Accepted Auditing Standards. Those stan-

Auditor’s report

dards require that we plan and perform the audit in order to obtain reasonable assurance about whether the fi nancial statements are free of material missta-tement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements, assessing the accounting principles used and signifi cant estimates made by the management, as well as evaluating the overall fi nancial statement presentation. The purpose of our audit of the administration has been to examine that the Board of Directors and the President and CEO have complied with the rules of the Finnish Companies Act. In our opinion, the fi nancial state-ments have been prepared in accordance with the Accounting Act and other rules and regulations governing the prepara-tion of fi nancial statements in Finland.

The fi nancial statements give a true and fair view, as defi ned in the Accounting Act, of both the consolidated and parent

company result of operations, as well as of the fi nancial position. The fi nancial statements can be adopted and the members of the Board of Directors and the President and CEO of the parent company can be discharged from liability for the period audited by us. The proposal made by the Board of Directors on how to deal with the distributable sharehol-ders’ equity of the parent company is in compliance with the Companies Act.

Helsinki, February 4, 2005KPMG Oy AbSixten NymanAuthorized Public Accountant

Proposal for the distribution of profi ts

The consolidated balance sheet on December 31, 2004 shows: EUR Retained earnings 534,064,000Gain for the period 17,521,000Total 551,585,000

of which distributable funds total 518,357,000

The Parent Company’s balance sheet on December 31, 2004 shows:Retained earnings 628,619,807 Loss for the period -12,195,941 Total 616,423,866

The Board of Directors proposes that:- a dividend of 0.75 be paid on the 36,418,419 outstanding shares, totaling EUR 27,313,814.25 - EUR 70,000 be reserved to be used at the disposal of the Board of Directors- and the reminder be retained.

Helsinki, February 4, 2005 Johan Gullichsen

Mikael Lilius Sebastian Bondestam Jan Inborr Urban Jansson Peter Seligson Willem F. Zetteler Jukka Moisio, President & CEO



Jan InborrMikael Lilius

Peter Seligson

Johan Gullichsen

Sebastian BondestamUrban Jansson

Willem F. Zetteler


Johan GullichsenBorn 1936, M. Sc. (Chemical Eng.) 1962,

Åbo Akademi University, D.Tech h.c. 1988,

professor emeritus, Helsinki University of

Technology. Owner of Arhippainen,

Gullichsen and Co.

Chairman of the Board 1987–98 and

since 1999.

Board member 1972–98 and since 1999.

Chairman: the Walter Ahlström Foundation,

the Runar Bäckström Foundation.

Vice Chairman: the Maj and Tor Nessling

Foundation, the Walter and Andrée de

Nottbeck Foundation.

Member: the Finnish Academies of

Technology (FACTE), the Swedish Academy

of Engineering Sciences (STV), the Royal

Swedish Academy of Engineering Sciences

(IVA), the Technical Association of the Pulp

and Paper Industry (TAPPI).

Mikael LiliusBorn 1949, B.Sc. (Econ.), President and

CEO of Fortum Corporation.

Vice Chairman of the Board since 2001,

Board member since 2000.

Chairman of the Board:

Sirona Dental Systems Beteiligungs- und

Verwaltungs GmbH, Association of the

Finnish Energy Industries.

Vice Chairman of the Board: OAO Lenergero.

Board member: Hafslund ASA, OMX.

Sebastian BondestamBorn 1962, M.Sc. (Eng.), Helsinki University

of Technology. Converting Director EU,

Tetra Pak.


Jan InborrBorn 1948, B.Sc. (Econ.), President and

CEO of Ahlström Capital Oy.


Chairman of the Board: Enics AG, Vacon Plc.

Vice Chairman of the Board: Å&R Carton AB.

Board member: Nordkalk Corporation,

Stiftelsen för Åbo Akademi.

Urban JanssonBorn 1945, Higher Bank Degree, 1972.

Director.


Board member: Addtech, Anoto Group,

Eniro, Ferd, HMS, Plantasjen, SEB.

Peter SeligsonBorn 1964, Lic. Oec. (HSG), Partner of

Seligson & Co Oyj, Managing Director of

Broadius Partners Oy (previously Menire

Advisors Oy).


Board member: Endero Oyj,

Menire Oyj, Stiftelsen Blomsterfonden.

Member: Folkhälsan.

Willem F. ZettelerBorn 1945, B.Sc. (Econ.),

former President and CEO of Otra N.V.

Board member since 2001, and on the

Ahlstrom Paper Group Board 1998–2000.

Board member: SHV Holdings N.V., Trespa

International B.V., Mercurius Groep B.V.,

PontMeyer N.V., Pearle Europe B.V.,

Kon. Ahrend N.V., Hoogland & Massee

Holding B.V.

Board of Directors


Jukka Moisio

Diego Borello

Timo Vuorio

Claudio Ermondi Tommi Björnman

Svante AddeRandal Davis

Leif Frilund

Patrick JeambarGustav Adlercreutz

Risto Anttonen


Tommi BjörnmanBorn 1966, Senior Vice President, Glass

Nonwovens, M.Sc. (Eng.)

Previous major positions Various managerial

positions in Ahlstrom Glassfi bre since 1996,

when he joined Ahlstrom. Prior to that, he

worked as Planning and Sourcing Manager

for Suomen Unilever Oy in Finland, and as

Product Manager (R&D) for Wisapak Oy Ab.

Positions of trust Board member: APFE,

European Glass Fibre Producers Association

Diego BorelloBorn 1953, Senior Vice President, Label

& Packaging Papers, M.Sc. (Chemistry)

Previous major positions President of

the LabelPack division and the former

Self Adhesive Division. Prior to that, he

worked as General Manager, and earlier as

Deputy General Manager and Commercial

Director, of Ahlstrom Turin.

He joined Ahlstrom in 1979.

Positions of trust Board member:

Italian Association of the Paper Industry

(Assocarta); Industry Federation in Turin

Randal DavisBorn 1956, Senior Vice President,

Filtration, BSBA; Finance, MBA

Previous major positions Various leading

positions within Ahlstrom’s Consumer &

Medical Nonwovens. In 2000, when

Ahlstrom acquired Dexter Nonwovens, he

held the position of Vice President Sales &

Marketing for Dexter. From 1983 until 2000

he worked in several sales & marketing

positions within Dexter Corporation.

Positions of trust Board member: INDA

Nonwovens Association; US Tea Association;

New England Air Museum

Claudio ErmondiBorn 1958, Senior Vice President,

Nonwovens, M. Sc. (Theoretical Chemistry)

Previous major positions Vice President

for the Filtration business area. During

1999–2000 he was Deputy Vice President,

and from 1991 to 1998, European General

Manager for the Filtration business.


Leif FrilundBorn 1953, Senior Vice President,

Technical Papers, M. Sc. (Eng.)


the Specialties division in 2003–2004.

Prior to that, he served as Vice President

and General Manager of the Cores &

Board business area (2000–2003) and as

Managing Director of Ahlstrom Alcore Oy

(1998–2000). In addition, he has held

various managerial positions within

Ahlstrom’s specialty paper business.

In 1995–1998 he served as Managing

Director of Albany Fennofelt Oy.



AT-Spiral Oy, Tukeva (The research and

higher education committee of the Finnish

Forest Industries Federation)

Patrick JeambarBorn 1946, Senior Vice President,

Technology, M.Sc (Paper Eng.), MBA

Previous major positions From 1997 until

2003, Business Area Manager for Industrial

Nonwovens. He joined Ahlstrom in 1996

following Ahlstrom’s acquisition of Sibille

Dalle, where he had been since 1987 as

General Manager of the nonwoven activity.

From 1974 to 1986, he worked in mana-

gerial positions at the Brignoud nonwoven

plant.

Positions of trust Board member of EDANA,

the European Disposable and Nonwoven

Association

Timo VuorioBorn 1949, Senior Vice President,

Human Resources, M.Sc. (Econ.)

Previous major positions Leading positions

within Partek Oyj’s HR and Administration.

Prior to that, he worked for Rank Xerox,

fi rst as Training and Development Manager,

and later as Sales Director.



French-Finnish Chamber of Commerce.

Member of the Educational Board: Finnish

Employers’ Management Development

Institute

Corporate Executive Team as of January 1, 2005

Jukka Moisio Born 1961, President and CEO of Ahlstrom

Corporation, M.Sc. (Econ.), MBA

Previous major positions Executive Vice

President and Deputy to the President &

CEO of Ahlstrom Corporation.

In addition, he worked as President of

the FiberComposites division. Prior to that,

he was the CFO and Director of Business

planning for the Ahlstrom Paper Group.

Before joining Ahlstrom in 1991, he worked

as an Associate for McKinsey & Company.

Svante AddeBorn 1956, Chief Financial Offi cer, B.Sc. (Econ.)

Previous major positions Managing Director

of Lazard, a global investment banking

group, based in London and Stockholm.

Before that, he worked from 1979 until

1989 for Citigroup.


KCI Konecranes Plc; Sonoco-Alcore S.à r.l.

Gustav AdlercreutzBorn 1957, Senior Vice President,

General Counsel, LL.M.

Previous major positions Group Director,

General Counsel of Ahlstrom Paper Group

(1996–2000). From 1984 to 1995 he was

Corporate Legal Counsel at A. Ahlstrom

Corporation. Prior to joining Ahlstrom in

1984, he was an Associate at Roschier-

Holmberg & Waselius Attorneys-at-Law.

Positions of trust Chairman of the Board:

Jujo Thermal Oy

Board member: Oy Sandman-Nupnau Ab;

Suomen Vaimennin Oy; Suomen Autotuote Oy

Risto AnttonenBorn 1949, Senior Vice President,

Commercial Operations, B.Sc. (Econ.)


Ahlstrom’s Specialties division (2001–2003)

and of the former Industrial Products division

(1999–2001). Prior to that, he was Mana-

ging Director of Ahlstrom Alcore Oy. Before

joining Ahlstrom in 1991, he was Managing

Director of Norpe Oy.

Positions of trust Chairman of the Board:

Paperinkeräys Oy

Board member: Ensto Oy; Uusimaa Oy


“a plus” Ahlstrom’s improvement

program. The program consolidates the

know-how and experience of Ahlstrom’s

employees and converts these best

practices into daily routine. “a plus” plays

a signifi cant role in Ahlstrom’s performance

improvement.

Calender Machine used to make the

surface of paper smooth and/or glossy.

Two or more heavy cylinders impart heat

and pressure as the paper web passes

between them.

Coating Process of applying a liquid or

clay-based paste to one (or both) surface(s)

of a paper web, followed by drying or

curing. It is used to give a smoother surface

to improve the printability of paper or board.

Composite Combination of two or more

specifi c materials, that have a distinct inter-

face between them.

Crepe Characteristic added to a paper to

give a crimped surface to provide stretch

or increased absorbency.

Fiber Basic, threadlike structure that is the

basis from which nonwovens, textile yarns,

and paper are made. There are vegetable

fi bers, such as wood, cotton, and fl ax, and

natural animal fi bers, such as wool and silk.

Man-made fi bers include synthesized

polymers such as polyester and nylon,

modifi ed natural polymers such as rayon,

and mineral fi bers such as glassfi bre.

Genuine vegetable parchment

Paper that has been modifi ed by sulfuric

acid, to give it a high number of unique

natural properties such as a dense surface,

a high mechanical strength, a high degree

of resistance to grease, water, and heat.

These features make it the ideal paper for

many uses: baking, fat wrapping, graphic

art, textile tubes covering, decorative and

Glossary

technical laminates, and other industrial

processes.

GRI The Global Reporting Initiative.

A multi-stakeholder process and independent

institution, whose mission is to develop and

disseminate globally applicable Sustainability

Reporting Guidelines. These Guidelines

are for voluntary use by organizations for

reporting on the economic, environmental,

and social dimensions of their activities,

products, and services.

ISO 14001 The standard published by

the International Standards Organization,

specifying the requirements of an environ-

mental management system.

Label papers Usually one-side coated

papers for producing labels of all kinds for

application to bottles, cans and packages

of food and beverage products, as well as

for industrial and offi ce use.

Medical fabrics Nonwoven, composite

and crepe fabrics, which can be used in ster-

ilization wraps, drapes, gowns, disposable

devices, and accessories. Medical fabrics

offer uniformity, strength, absorbency or

repellency and are low-linting.

Natural fi bers Fibers that come directly

from wood, other plants or animals; such as

mechanical wood pulp, chemical pulp, silk,

wool, fl ax, and cotton.

Nonwoven A sheet, web, or batt of fabric

that is manufactured by bonding fi bers

together by other means than weaving.

Nonwovens are produced from both natural

and man-made fi bers.

OHSAS 18001 Occupational Health and

Safety Management System.

Pulp The basic raw material for producing

paper and board, derived through a cooking

process of wood chips, cotton, or other

source of cellulose with water and other

required chemicals.

Release base papers In a self-adhesive

labelstock, the back page of a label that is

removed and discarded.

Resin bonded nonwovens A nonwovens

process that involves carding fi bers, forming

a web and bonding with resins such as

acrylics or EVAs. The resins bond the fi bers

together.

Roll goods Nonwoven fabric or a paper

web rolled on core tubing after being

produced.

Specialty paper Custom-designed

coated and uncoated papers designed and

produced to meet the unique and specifi c

requirements of industrial products and

materials for packaging, printing and

other customers with diverse and highly

specialized paper needs.

Specialty pulps Modifi ed fi bers made

out of wood, different from commodity

pulp, and used in very technical applications

(fi ltration, absorbent materials, textile).

Spunlaced nonwovens A nonwovens

process that involves use of high pressure

water jets to entangle fi bers with them-

selves.

Synthetic fi bers Polymers synthesized

from chemical compounds (nylon, polyester),

transformed natural polymers (rayon,

acetates), or minerals (glassfi bre).

Wetlaid nonwovens Wetlaid web bonded

to provide fabric integrity.


Ahlstrom Corporation

Head Offi ce

P.O. Box 329, FI-00101 Helsinki

Eteläesplanadi 14, FI-00130 Helsinki

Finland

Tel. +358 (0)10 8880

Fax +358 (0)10 888 4709


Paris Offi ce

Parc de Nanteuil

6, rue de Rome

FR-93561 Rosny-sous-Bois Cedex

France

Tel. +33 (0)1 49 35 40 40

Fax +33 (0)1 49 35 40 41

Ahlstrom Research & Corporate

Center

ZI de l’Abbaye, Impasse Louis Champin

FR-38780 Pont-Evêque

France

Tel. +33 (0)4 74 57 29 29

Fax +33 (0)4 74 57 29 28

Contact information

• Sales offi ces

Australia, Belgium, Brazil, China, Finland,

France, Germany, Indonesia, Italy, Japan,

Russia, Singapore, South Africa, South

Korea, Spain, Taiwan, Thailand, United

Kingdom, United States

•• Production units

Belgium, Brazil, Finland, France,

Germany, Italy, South Korea, Spain,

Sweden, United Kingdom, United States


Ahlstrom Corporation will publish three Interim reports in 2005:

Interim report January–March April 27, 2005

Interim report January–June July 28, 2005

Interim report January–September October 31, 2005

Ahlstrom Corporation has published the Financial Statements Bulletin

for the fi nancial year 2004 on February 7, 2005.

The fi nancial reports of Ahlstrom Corporation are published in

English, Finnish and Swedish at www.ahlstrom.com.

Publications can also be ordered from:


Financial Communications

P.O. Box 329, FI-00101 Helsinki, Finland

Tel. +358 (0)10 888 4707

Fax +358 (0)10 888 4799

[email protected]

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Small fibers. Big difference.2004

Annual Report

Ahlstrom CorporationP.O. Box 329 Eteläesplanadi 14 FI-00101 Helsinki, Finland www.ahlstrom.com

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Small fibers Big difference Annual Report 2004 · Big difference. 2004 Annual Report Ahlstrom...

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