Stora Enso second quarter results 2013
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Stora Enso second quarter results 2013 Presentation Transcript

  • 1. Financial Results Q2 2013 CEO Jouko Karvinen and EVP Karl-Henrik Sundström 19 July 2013
  • 2. It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similar expressions, are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Since these statements are based on current plans. estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the Group’s targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group’s patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group’s products and the pricing pressures thereto. price fluctuations in raw materials, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group’s principal geographic markets or fluctuations in exchange and interest rates. Stora Enso Q2 2013 Financial Results 19 July 2013 2
  • 3. Q2 results as expected • Operational EBIT EUR 124 million • Cash flow from Operations EUR 344 million • Liquidity EUR 1.8 billion • Net debt/Operational EBITDA LTM 2.7x 19 July 2013Stora Enso Q2 2013 Financial Results 3
  • 4. Continued Solid Cash Flow from Operations Reduced working capital 19 July 2013Stora Enso Q2 2013 Financial Results 4
  • 5. All business areas contributed to cash flow generation in Q2 2013 19 July 2013Stora Enso Q2 2013 Financial Results 5
  • 6. European paper seasonally adjusted demand trend development and y-o-y change Source: Euro-GraphSA = seasonally adjusted Latest data point: Jun-2013 19 July 2013Stora Enso Q2 2013 Financial Results 6
  • 7. Progress report: Streamlining and structure simplification programme EUR 200 million of annual net fixed cost savings, compensating also for inflation EUR million Fixed Costs Annualized (Qx4) Progress Q2 2012 703 2 812 Q2 2013 677 2 708 Change -26 -104 Programme impact -7 -28 14% Other change -19 -76 19 July 2013Stora Enso Q2 2013 Financial Results 7 • The new divisional organizations announced • EUR 200 million of annual fixed cost savings - full impact from Q2 2014 • EUR 43 million NRIs announced year to date - rest mainly planned in Q3 2013 • Other change represents impact of capacity closures, previously announced programmes, new businesses, significant currency movements and M&A
  • 8. Progress report: Montes del Plata • Estimated to begin the start-up at the end of Q3 2013 • Slightly negative impact on operational EBIT in 2013 19 July 2013Stora Enso Q2 2013 Financial Results 8
  • 9. Progress report: Ostrołęka mill PM 5 • Proceeding according to plan • EBITDA margin approximately 20% during the latter part of 2013 as targeted 19 July 2013Stora Enso Q2 2013 Financial Results 9
  • 10. Accelerating transformation: Guangxi, China • Final approval from Chinese NDRC received • Faster access to the Chinese consumer board market • Two phase implementation – First phase consumer board machine operational in the beginning of 2016 – Second phase chemical pulp mill • Project clearly exceeds the ROCE target of 13% 19 July 2013Stora Enso Q2 2013 Financial Results 10
  • 11. Accelerating innovation: Biorefinery at Sunila • EUR 32 million investment • Replacing fossil raw materials: – Insulation – Adhesive for construction materials • Scalable technology • Start-up Q1 2015 19 July 2013Stora Enso Q2 2013 Financial Results 11
  • 12. 19 July 2013Stora Enso Q2 2013 Financial Results 12
  • 13. Printing and Reading Structural Paper Demand Decline Operational EBITDA Q2 2012 vs Q2 2013 19 July 2013 13 • Year-on-Year demand decline 6% • Structural decline continues Paper Market Stora Enso Printing and Reading • Lower pricing mainly in News and SC • Sales volume decline 6% or [110 kt] despite 3 PM closures • No fixed cost improvement – announced cost reduction top priority • Limited savings impact from Hylte PM2 and Kvarnsveden PM11 during Q2 • Solid cash flow generation Q2 – needed for the transformation Stora Enso Q2 2013 Financial Results
  • 14. Summary financials Q2 2013 EUR million Q2/13 Q1/13 Q2/12 Change % Change % Q2 13 / Q2 12 Q2 13 / Q1 13 Sales 2 717 2 667 2 721 -0.1 1.9 Operational EBITDA 247 240 251 -1.6 2.9 Operational EBITDA, % 9.1 9.0 9.2 -1.1 1.1 Operational EBIT 124 118 144 -13.9 5.1 Operational EBIT margin, % 4.6 4.4 5.3 -13.2 4.5 Profit before tax excl. NRI 60 55 31 93.5 9.1 EPS excl. NRI, EUR 0.05 0.07 0.02 150.0 -28.6 EPS (basic), EUR 0.02 -0.02 0.08 -75.0 200.0 Operational ROCE, % 5.8 5.4 6.6 -12.1 7.4 Operational ROCE, % excl. transformation investments 7.3 6.2 7.9 -7.6 17.7 Cash Flow from Operations 344 101 246 39.8 240.6 Net debt/last 12 months’ operational EBITDA 2.7 2.7 2.7 - - 19 July 2013Stora Enso Q2 2013 Financial Results 14
  • 15. Fairly stable despite challenging paper market Group operational EBIT Q2 2012 vs Q2 2013 Q1 2013 vs Q2 2013 19 July 2013Stora Enso Q2 2013 Financial Results 15
  • 16. Guidance for Q3 2013 • Compared to Q2 2013: – Sales expected to be slightly lower – Operational EBIT in line with or slightly higher 19 July 2013Stora Enso Q2 2013 Financial Results 16
  • 17. Summary 19 July 2013Stora Enso Q2 2013 Financial Results 17 • Q2 result as guided • Solid cash flow - strong liquidity • EUR 200 million fixed costs savings on plan • European paper - to get ahead of the game • Accelerated transformation: – MdP – Ostrołęka – Guangxi – Sunila Biorefinery
  • 18. 19 July 2013Stora Enso Q2 2013 Financial Results 18
  • 19. Projected Capex and Equity Injections for 2013 Including China investment Capital Expenditure, Equity Injections and Depreciation Forecast 2013 EUR million Forecast 2013 Capital expenditure* 440-490 Equity injections 100-120 Total 540-610 Depreciation 590-610 19 July 2013Stora Enso Q2 2013 Financial Results 19 *Capital expenditure includes approximately EUR [90] million for project in Guangxi, China
  • 20. Working capital reduced Q1 2011 – Q2 2013 *Operative working capital = trade receivables + inventories – trade payables Stora Enso Q2 2013 Financial Results 19 July 2013 20
  • 21. Balance Sheet strength Q1 2010 – Q2 2013 Stora Enso Q2 2013 Financial Results 19 July 2013 *Last twelve months’ operational EBITDA 21
  • 22. Operational EBIT by segments EUR million Q2/13 Q1/13 Q2/12 Change % Change % Q213/Q212 Q213/Q113 Printing and Reading -17 2 43 -139.5 n/m % of sales -1.5 0.2 3.6 -141.7 n/m Biomaterials 14 22 15 -6.7 -36.4 % of sales 5.4 8.6 6.1 -11.5 -37.2 Building and Living 28 4 11 154.5 n/m % of sales 5.6 0.9 2.5 124.0 n/m Renewable Packaging 77 68 73 5.5 13.2 % of sales 9.2 8.3 8.8 4.5 10.8 Other 22 22 2 n/m - % of sales 3.2 3.1 0.3 n/m 3.2 19 July 2013Stora Enso Q2 2013 Financial Results 22
  • 23. Timeline for the restructuring announcements in 2013 Q2 2013 Hylte PM 2, Kvarnsveden PM11 closed in May Q3 2013 Impact starts Q4 2013 Q1 2014 Full impact Q2 2014 19 July 2013Stora Enso Q2 2013 Financial Results 23 February 2013 Announcement of Hylte PM 2 and Kvarnsveden PM 11 closures EUR 24 million Q2 2013 Impact starts Q3 2013 Q4 2013 Q1 2014 Q2 2014 Full impact February 2013 Building & Living EUR 30 million Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Full impact April 2013 Business structure and organisation EUR 200 million (out of which EUR 30 million B&L)
  • 24. Permanent pulp, paper and board capacity reductions since 2006 Mill Date Grade Capacity reduction, t Corbehem PM 3 and PM 4 Jun 2006 LWC 250 000 Varkaus PM 1 End 2006 WFC 95 000 Berghuizer Mill Oct 2007 WFU 235 000 Reisholz Mill End 2007 SC 215 000 Summa Mill Jan 2008 Newsprint, uncoated mag, book paper 415 000 Anjala Mill PM1 Feb 2008 Coated magazine paper 155 000 Baienfurt Mill End 2008 FBB 190 000 Kabel Mill PM 3 End 2008 Coated magazine 140 000 Kemijärvi Pulp Mill April 2008 Long-fibre (SW) pulp 250 000 Norrsundet Pulp Mill Dec 2008 Long-fibre (SW), pulp 300 000 Varkaus Mill coreboard machine Dec 2008 Coreboard 100 000 Imatra PM 8 Mar 2010 WFU 210 000 Varkaus PM 2 and PM 4 Sep 2010 Newsprint, directory paper 290 000 Maxau PM 7 Nov 2010 Newsprint 195 000 Hylte PM1 Dec 2012 Newsprint 180 000 Hylte PM2 May 2013 Newsprint 205 000 Kvarnsveden PM11 May 2013 Newsprint 270 000 Total 3 695 000 2419 July 2013Stora Enso Q2 2013 Financial Results
  • 25. Permanent sawn wood capacity reductions since 2006 Mill Date Capacity reduction, m3 Veitsiluoto Sawmill 2006 100 000 Honkalahti Sawmill 2006 90 000 Sauga Sawmill Jun 2007 130 000 Sollenau Sawmill 2007 110 000 Näpi Sawmill 2007-2008 100 000 Kotka Sawmill 2007-2008 70 000 Paikuse Sawmill End 2008 220 000 Zdirec Sawmill 2008 120 000 Ybbs Sawmill 2008 & Jun 2009 200 000 Kitee Sawmill 2008 & Jun 2009 130 000 Varkaus Sawmill Jun 2009 60 000 Tolkkinen Sawmill End 2009 260 000 Kopparfors Sawmill End 2011 310 000 Total 1 900 000 19 July 2013Stora Enso Q2 2013 Financial Results 25
  • 26. Net Financial Items EUR million Q2/2013 Q1/2013 Q2/2012 Change % Q213/Q212 Change % Q213/Q113 Net interest expense -51 -50 -42 -21 -2 Foreign exchange gains and losses -12 -5 -18 33 -140 Other financial items, of which 16 -1 -10 n/m n/m PIK notes 3 3 3 Fair valuation of interest rate derivatives* 7 2 -15 Fair valuation of long-term debt - -1 - NewPage lease provision - - 9 Pension costs (IAS 19R) -4 -3 -3 Other items 10 -2 -4 Total net financial items -47 -56 -70 33 16 *Not hedge accounted interest rate derivatives. Stora Enso Q2 2013 Financial Results 19 July 2013 26
  • 27. Transaction risk and hedges as at 30 June 2013 Operational EBIT: Currency strengthening of + 10 % EUR million USD 104 SEK -81 GBP 51 EUR million USD SEK GBP Estimated annual net operating cash flow exposure 1 040 -810 510 Transaction hedges as at 30 Jun 2013 -500 450 -250 Hedging percentage as at 30 Jun 2013 for the next 12 months 48% 56% 49% The sensitivity is based on estimated next 12 months net operating cash flow. The calculation does not take into account currency hedges and assumes no changes occur other than a single currency exchange rate movement. Weakening would have the opposite impact. Additional USD and GBP hedges for 13-15 months increase the hedging percentages by 1% and 3% respectively. Stora Enso Q2 2013 Financial Results 19 July 2013 27
  • 28. Curtailments of capacity 19 July 2013Stora Enso Q2 2013 Financial Results 28
  • 29. Softwood pulp prices Stora Enso’s market pulp is softwood Source: FOEX Stora Enso Q2 2013 Financial Results 19 July 2013 29
  • 30. Pulp wood and saw log prices Wood prices in Finland Source: METLA Stora Enso Q2 2013 Financial Results 19 July 2013 30
  • 31. Paper for Recycling prices German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso Stora Enso Q2 2013 Financial Results 19 July 2013 31
  • 32. Maturity profile Q2 2013 19 July 2013Stora Enso Q2 2013 Financial Results 32
  • 33. Energy balance* Q2 2013 Impact** on operating profit from 10% change in: EUR million p.a. Electricity market price ~2 Fossil fuel price ~13 **) Remaining impact on non-hedged volume 19 July 2013Stora Enso Q2 2013 Financial Results *) Pulp, paper and board mills, Europe and overseas 33
  • 34. Stora Enso Electricity procurement* Q2 2013 19 July 2013Stora Enso Q2 2013 Financial Results *) Pulp, paper and board mills, Europe and overseas 3434