Stora Enso's Q4 and Full Year 2013 Results

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Stora Enso's Q4 and Full Year 2013 Results

  1. 1. Financial Results Q4 2013 CEO Jouko Karvinen and CFO Seppo Parvi 5 February 2014
  2. 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 Q4 2013 Financial Results 5 February 2014 2
  3. 3. Strong cash flow, dividend proposal EUR 0.30 Q4 2013 • Operational EBIT EUR 152 million Q4, margin 5.8% • Cash flow from Operations EUR 470 million, after investing activities EUR 310 million • New Ostrołęka containerboard machine reached its targeted profitability of EBITDA margin 20% by the end of 2013 • Net debt/Operational EBITDA LTM 2.3x, net debt reduced by EUR 320 million year-on-year • Net Non-recurring items EUR 392 million Stora Enso Q4 2013 Financial Results 5 February 2014 3
  4. 4. Strong cash flow maintained in 2013 due to operative working capital reduction 350 27.0 % 300 25.0 % 23.0 % 250 21.0 % 200 19.0 % 150 17.0 % 100 15.0 % Cash flow from operations, 4Q rolling OWC%, 4 Q rolling *Operative working capital = trade receivables + inventories – trade payables Stora Enso Q4 2013 Financial Results 5 February 2014 4
  5. 5. Fixed cost decreased by EUR 60 million in 2013 compared to 2012 Fixed cost 4 quarter rolling average 700 695 690 685 680 675 670 665 660 655 650 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 4 Quarter rolling average Stora Enso Q4 2013 Financial Results 5 February 2014 5
  6. 6. Thiele Kaolin divestment • Capital gain of EUR 37 million recorded as NRI to Q1 2014 • Proceeds EUR 56 million paid fully in cash Stora Enso Q4 2013 Financial Results 5 February 2014 6
  7. 7. Printing and Reading 2013 MEUR • Weak earnings 600 • Continued strong cash generation EUR 382 million 500 400 • Three machines closed • Further capacity restructuring plans in early 2014 300 200 100 0 2011 CF from Operations Stora Enso Q4 2013 Financial Results 5 February 2014 2012 2013 CF after Capex 7
  8. 8. Biomaterials 2013 • • • Softwood pulp prices increased in 2013 18% 16% 14% Hardwood pulp prices stable towards the end of the year Montes del Plata start-up during first months of 2014 12% 10% 8% 6% 4% • Biorefinery investment to Sunila 2% 0% 2011 ROOC - % Stora Enso Q4 2013 Financial Results 5 February 2014 2012 2013 ROOC - % excl Str. Projects 8
  9. 9. Building and Living 2013 MEUR • Sales price and mix improved 80 70 • • Fixed costs savings started early 60 50 Building Solutions growing rapidly in Finland 40 30 • Stora Enso is working with feasibility study to start the production of CLT in Finland 20 10 0 2011 2012 2013 Op. EBIT Stora Enso Q4 2013 Financial Results 5 February 2014 9
  10. 10. Renewable Packaging 2013 • 3-5% demand growth continues MEUR 350 • Record operational EBIT and strong cash flow 300 250 • Ostrołęka in full swing • Inpac growing in fast moving consumer goods by 30% • Guangxi project in implementation 200 150 100 50 0 • 2011 Bulleh Shah started LPB deliveries Stora Enso Q4 2013 Financial Results 2012 2013 Op. EBIT 5 February 2014 10
  11. 11. Summary financials Q4 2013 Change % Change % EUR million Q4/13 Q3/13 Q4/12 Sales 2 604 2 556 2 727 -4.5 1.9 Operational EBITDA 246 311 276 -10.9 -20.9 Operational EBITDA, % 9.4 12.2 10.1 -6.9 -23.0 Operational EBIT 152 184 158 -3.8 -17.4 Operational EBIT margin, % 5.8 7.2 5.8 - -19.4 110 0.15 -0.18 7.6 125 0.13 0.11 9.0 83 0.11 0.33 7.3 32.5 36.4 -154.5 4.1 -12.0 15.4 -263.6 -15.6 9.1 10.4 8.4 8.3 -12.5 470 331 473 -0.6 42.0 2.3 2.5 2.5 -8.0 -8.0 Profit before tax excl. NRI EPS excl. NRI, EUR EPS (basic), EUR Operational ROCE, % Operational ROCE, % excl. transformation investments Cash Flow from Operations Net debt/last 12 months’ operational EBITDA Stora Enso Q4 2013 Financial Results 5 February 2014 Q4 13 / Q4 12 Q4 13 / Q3 13 12
  12. 12. Transformation continues Group operational EBIT 2012 vs 2013 in EUR million EUR million EUR million 630 2012 578 Printing Biomaterials Building Renewable and and Living Packaging Reading Stora Enso Q4 2013 Financial Results 5 February 2014 Other 2013 13
  13. 13. Change in Net Debt from 2012 to 2013 76 424 66 377 237 219 76 2 434 2 757 1 044 Net debt Operational Dec 2012 EBITDA Change in Cash working restructuring capital payments CAPEX Stora Enso Q4 2013 Financial Results EAI injections 5 February 2014 Dividend Tax and net financials paid Other Net debt Dec 2013 14
  14. 14. Capex and Equity Injections EUR million Actual 2013 Forecast 2014* Capital expenditure 425 820-900 Equity injections 66 30 Total 491 850-930 Depreciation 564 550-580 * Capital expenditure includes approximately EUR 300 million for the project in Guangxi, China and approximately EUR 150 million for Montes del Plata Pulp Mill. As of 2014 Stora Enso will consolidate Veracel and Montes del Plata line-by-line in accordance with IFRS11. Stora Enso Q4 2013 Financial Results 5 February 2014 15
  15. 15. Guidance Compared to Q4 2013 • Sales expected to be similar • Operational EBIT from similar to somewhat higher • Pricing improving • Fixed cost decreasing • Renewable Packaging affected by Guangxi project and Skoghall Mill boiler incident Stora Enso Q4 2013 Financial Results 5 February 2014 16
  16. 16. Strategy in action 2013 EUR 1.25 billion cash flow, fixed costs down and a lot more to come • Ostrołęka • • • • at 20% EBITDA Q4/13 coming real soon growing 30%+ in focused segments world class LPB delivered accelerating growth Montes del Plata Inpac Packaging Bulleh Shah Building Solutions • Guangxi Packaging • Sunila Biorefinery implementation started implementation started Nothing is ever good enough - endless focus on productivity, working capital, capacity management & cash generation, never stop Stora Enso Q4 2013 Financial Results 5 February 2014 17
  17. 17. Stora Enso Q4 2013 Financial Results 5 February 2014 18
  18. 18. Operational EBIT by segments Change % EUR million Printing and Reading % of sales Biomaterials % of sales Building and Living % of sales Renewable Packaging % of sales Other % of sales Q4/13 Q3/13 36 3.4 24 9.3 19 4.1 73 9.3 - Stora Enso Q4 2013 Financial Results 13 1.2 17 7.0 24 5.2 100 12.1 30 4.9 5 February 2014 Q4/12 59 4.9 28 10.9 7 1.5 55 6.9 9 1.3 Change % Q4 13 / Q4 12 Q4 13 / Q3 13 -39.0 -30.6 -14.3 -14.7 171.4 173.3 32.7 34.8 -100.0 -100.0 176.9 183.3 41.2 32.9 -20.8 -21.2 -27.0 -23.1 -100.0 -100.0 19
  19. 19. Solid cash flow across businesses in Q4 2013 Cash flow from Operations Cash flow after investments 200 180 160 EUR million 140 120 100 80 60 40 20 0 Printing and Reading Biomaterials Stora Enso Q4 2013 Financial Results Building and Living 5 February 2014 Renewable Packaging 20
  20. 20. All businesses contributed to cash flow generation in 2013 Cash flow from Operations Cash flow after investments 600 EUR million 500 400 300 200 100 0 Printing and Reading Biomaterials Stora Enso Q4 2013 Financial Results Building and Living 5 February 2014 Renewable Packaging 21
  21. 21. Paper demand decline continued in Europe 4% 38000 2% 37000 0% 36000 -2% 35000 -4% 34000 -6% 33000 -8% 32000 -10% Y-o-Y change % 6% 39000 Y-o-Y Paper 31000 -12% Annualized Paper SA = seasonally adjusted Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 -14% Apr-11 30000 Jan-11 Annualized demand [kt/a] 40000 Source: Euro-Graph Stora Enso Q4 2013 Financial Results 5 February 2014 22
  22. 22. Despite lower EBIT cash flow remained strong in 2013 Active working capital management Cash flow from operations 1300 1250 EUR million 1200 1150 1100 1050 1000 950 900 850 800 2009 2010 Stora Enso Q4 2013 Financial Results 2011 5 February 2014 2012 2013 23
  23. 23. Fixed costs to sales 110% 108% 106% 104% 102% 100% 98% 96% 94% 92% 90% 88% 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 Fixed costs to Sales 11Q1 = 100 Stora Enso Q4 2013 Financial Results 5 February 2014 24
  24. 24. Balance Sheet strength Q1 2011 – Q4 2013 Net Debt Net Debt/Operational EBITDA* 3 500 3.0 3 000 2.7 EUR million 2.7 2.5 2 500 2 000 2.8 2.3 1.8 1.9 2.0 2.5 2.7 2.5 2.3 2.1 2.0 1.5 1 500 1.0 1 000 500 0.5 0 0.0 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 *Last twelve months’ operational EBITDA Stora Enso Q4 2013 Financial Results 5 February 2014 25
  25. 25. 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 Ostroleka PM2 Jan 2013 Containerboard Hylte PM2 May 2013 Newsprint 205 000 Kvarnsveden PM11 May 2013 Newsprint 270 000 Total 85 000 3 780 000 Stora Enso Q4 2013 Financial Results 5 February 2014 26
  26. 26. Permanent sawn wood capacity reductions since 2006 Capacity reduction, m3 Mill Date 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 Stora Enso Q4 2013 Financial Results 5 February 2014 27
  27. 27. Net Financial Items EUR million Change % Change % Q413/Q412 Q413/Q313 Q4/2013 Q3/2013 Q4/2012 -48 -52 -47 -2 8 9 7 -1 n/m 29 -25 -11 -2 n/m -127 - 3 3 -8 -4 -9 Fair valuation of long-term debt 1 - - NewPage lease provision - - 11 Pension costs (IAS 19R) -4 -4 -3 -14 -6 -4 -64 -56 -50 -28 -14 Net interest expense Foreign exchange gains and losses Other financial items. of which PIK notes Fair valuation of interest rate derivatives* Other items Total net financial items *Not hedge accounted interest rate derivatives. Stora Enso Q4 2013 Financial Results 5 February 2014 28
  28. 28. Transaction risk and hedges as at 31 December 2013 USD SEK GBP 950 -780 530 Transaction hedges as at 31 Dec 2013 -450 450 -260 Hedging percentage as at 31 Dec 2013 for the next 12 months 47% 58% 49% EUR million Estimated annual net operating cash flow exposure Operational EBIT: Currency strengthening of + 10 % EUR million USD 95 SEK -78 GBP 53 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. Stora Enso Q4 2013 Financial Results 5 February 2014 29
  29. 29. Curtailments of capacity Paper and Board Wood Products 20 18 16 % of the capacity 14 12 10 8 6 4 2 0 Q111 Q211 Q311 Q411 Q112 Q212 Stora Enso Q4 2013 Financial Results Q312 5 February 2014 Q412 Q113 Q213 Q313 Q413 30
  30. 30. Softwood pulp prices Stora Enso’s market pulp is softwood 1 050 950 Bleached softwood kraft pulp 750 Bleached hardwood kraft pulp 650 550 450 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 USD/tonne 850 Source: FOEX Stora Enso Q4 2013 Financial Results 5 February 2014 31
  31. 31. Pulp wood and saw log prices Wood prices in Finland Pulpwood, Pine Sawlogs, Pine 80 70 50 40 30 20 13Q4 13Q3 13Q2 13Q1 12Q4 12Q3 12Q2 12Q1 11Q4 11Q3 11Q2 11Q1 10Q4 10Q3 10Q2 10Q1 09Q4 09Q3 09Q2 09Q1 08Q4 08Q3 08Q2 08Q1 07Q4 07Q3 07Q2 07Q1 06Q4 06Q3 0 06Q2 10 06Q1 EUR/m3 60 Source: METLA Stora Enso Q4 2013 Financial Results 5 February 2014 32
  32. 32. Paper for Recycling prices Mixed OCC De-inking 200 120 80 40 0 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 EUR/tonne 160 German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso Stora Enso Q4 2013 Financial Results 5 February 2014 33
  33. 33. Maturity profile Q4 2013 € million Bonds Other loans / liabilities Commercial paper 1 000 900 800 € 500m 5.0% 2018 SEK 2.2 bn S+3.9% 2017 SEK 500m 5.75% 2017 700 600 € 500m 5.5% 2019 500 400 300 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021-2035 2036 Revolving Credit Facility € 700 million matures in January 2015 and is fully undrawn Stora Enso Q4 2013 Financial Results 5 February 2014 34
  34. 34. Energy balance* Q4 2013 Impact** on operating profit from 10% change in: EUR million p.a. Electricity market price ~1 Fossil fuel price ~12 **) Remaining impact on non-hedged volume *) Pulp. paper and board mills. Europe and overseas Stora Enso Q4 2013 Financial Results 5 February 2014 35
  35. 35. Stora Enso Electricity procurement* Q4 2013 *) Pulp. paper and board mills. Europe and overseas Stora Enso Q4 2013 Financial Results 5 February 2014 36

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