Stora Enso Q1/2014 financial results, presentation

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Stora Enso Q1/2014 financial results, presentation

  1. 1. Financial Results Q1 2014 CEO Jouko Karvinen and CFO Seppo Parvi 23 April 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. 223 April 2014Stora Enso Q1 2014 Financial Results
  3. 3. Jouko Karvinen decides to leave his position as CEO after heading the Company for seven years “Jouko Karvinen initiated discussions with the Board of Directors late last year about his wish to retire from the Company during 2014. The Board regrets his decision and Jouko Karvinen will continue as CEO until a successor is found,” says Stora Enso Chairman Gunnar Brock. 23 April 2014Stora Enso Q1 2014 Financial Results 3
  4. 4. Lower costs improved profits Q1 2014 year-on-year • Clearly higher Operational EBIT due to lower costs, lower depreciation and restructuring – Operational EBIT EUR 182 million or 7.1% (4.4%), increase EUR 64 million • Nearly all of the original cost reductions of the EUR 200 million programme visible in the financial results, earlier than anticipated • Net debt to Operational EBITDA decreased to 2.8 (3.1) • Operational ROCE 8.6% (5.1%) 23 April 2014Stora Enso Q1 2014 Financial Results 4
  5. 5. Stora Enso portfolio – Paper sales below 40% Q1 2014 Group Sales, EUR 2 568 million Operational EBIT, EUR 182 million 23 April 2014Stora Enso Q1 2014 Financial Results 5 European paper 33% of Group sales Other and eliminations 39% 17% 32% 2% 10% 19% 12% 11% 51% 7%
  6. 6. Operational EBIT 54% improvement year-on-year Lower costs and depreciation 23 April 2014Stora Enso Q1 2014 Financial Results 6 MEUR
  7. 7. Fixed cost decrease continued Fixed cost 4 quarter rolling average 723 April 2014Stora Enso Q1 2014 Financial Results MEUR
  8. 8. European paper demand continued to decline, at slightly lower rate European paper demand trend development 23 April 2014 8 SA = seasonally adjusted Source: PPPC, Euro-Graph Stora Enso Q1 2014 Financial Results -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 30000 31000 32000 33000 34000 35000 36000 37000 38000 39000 40000 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Y-o-Ychange% Annualizeddemand[kt/a] Y-o-Y Paper Annualized Paper
  9. 9. Printing and Reading improved Operational EBIT by EUR 33 million Q1 2014 year-on-year • Operational EBIT: – Costs significantly lower – EUR 21 million lower depreciation – Capacity closures • Seasonally lower cash flow • Veitsiluoto PM 1 closure • No production at Corbehem since January 2014 23 April 2014Stora Enso Q1 2014 Financial Results 9 MEUR
  10. 10. Biomaterials generated stable operational EBIT Q1 2014 year-on-year 1023 April 2014Stora Enso Q1 2014 Financial Results • Operational EBIT at the same level: – Higher deliveries and clearly lower variable costs – Q1 2013 included gain from land sales (EUR 10 million) – Higher biorefinery R&D costs • MdP Pulp Mill ready for start-up after receiving operation permits – In 2014 Stora Enso’s share of production 350 000-400 000 tonnes • Veracel and Sunila mills in maintenance in Q2 0% 2% 4% 6% 8% 10% 12% 14% Q1 2013 Q1 2014 ROOC (%) ROOC (%) excl str. projects
  11. 11. Building and Living continued solid performance Q1 2014 year-on-year MEUR 1123 April 2014Stora Enso Q1 2014 Financial Results • Operational EBIT: – Sales prices higher – Costs clearly lower, partially due to early cost reductions • Efficiency improvement: – Closure of Sollenau, Austria and Investment to Murow, Poland
  12. 12. Renewable Packaging increased profit by EUR 24 million Q1 2014 year-on-year MEUR 1223 April 2014Stora Enso Q1 2014 Financial Results • Operational EBIT: – Higher sales prices – Clearly lower costs • Guangxi: – IFC equity and loan – 2/3 of the levelling work completed – Key equipment selected – Harvesting the plantations and selling the wood – Board machine operational early 2016 as previously announced • Q2 maintenance Ostrołęka and Imatra pulp
  13. 13. Summary financials Q1 2014 EUR million Q1/14 Q1/13 Change % Change % Q1 14 / Q1 13 Q4/13 Q1 14 / Q4 13 Sales 2 568 2 672 -3.9 2 612 -1.7 Operational EBITDA 302 254 18.9 260 16.2 Operational EBITDA, % 11.8 9.5 10.0 Operational EBIT 182 118 54.2 152 19.7 Operational EBIT margin, % 7.1 4.4 5.8 Profit before tax excl. NRI 106 56 89.3 111 -4.5 EPS excl. NRI, EUR 0.09 0.07 0.15 EPS (basic), EUR 0.13 -0.02 -0.18 Operational ROCE, % 8.6 5.1 7.0 Operational ROCE, % excl. transformation investments 10.9 5.8 9.0 Cash Flow from Operations 152 126 20.6 462 -67.1 Net debt/last 12 months’ operational EBITDA 2.8 3.1 2.9 1423 April 2014Stora Enso Q1 2014 Financial Results
  14. 14. Forecast for Capex and Equity Injections in 2014 EUR million Forecast 2014* Capital expenditure 760–840 Equity injections 30 Total 790–870 Depreciation 550–580 * Capital expenditure includes approximately EUR 260 million for the project in Guangxi, China and approximately EUR 125 million for Montes del Plata Pulp Mill in Uruguay. 1523 April 2014Stora Enso Q1 2014 Financial Results
  15. 15. Guidance Compared to Q1 2014 • Sales expected to be similar • Operational EBIT in line with EUR 182 million • Maintenance in Biomaterials and Renewable Packaging • Ostrołęka Mill shutdown extended by Polish national electricity grid maintenance break in Q2 23 April 2014Stora Enso Q1 2014 Financial Results 16
  16. 16. Summary • 54% higher operational EBIT and improved profitability due to lower costs • Seasonally lower cash flow • Nearly all originally targeted cost reductions achieved ahead of schedule • MdP pulp ready for start-up • Guangxi proceeding according to plan 23 April 2014Stora Enso Q1 2014 Financial Results 17
  17. 17. 18
  18. 18. Operational EBIT by segments EUR million Q1/14 Q1/13 Change % Change % Q1 14 / Q1 13 Q4/13 Q1 14 / Q4 13 Printing and Reading 35 2 n/m 36 -2.8 % of sales 3.5 0.2 3.4 Biomaterials 21 22 -4.5 24 -12.5 % of sales 8.0 8.4 9.0 Building and Living 20 4 n/m 19 5.3 % of sales 4.5 0.9 4.1 Renewable Packaging 92 68 35.3 73 26.0 % of sales 11.2 8.3 9.3 Other 14 22 -36.4 - n/m % of sales 2.0 3.1 - 1923 April 2014Stora Enso Q1 2014 Financial Results
  19. 19. Cash flow in Q1 2014 2023 April 2014Stora Enso Q1 2014 Financial Results MEUR
  20. 20. Fixed costs to sales 2123 April 2014Stora Enso Q1 2014 Financial Results
  21. 21. Balance Sheet strength Q1 2012 – Q1 2014 *Last twelve months’ operational EBITDA 2223 April 2014Stora Enso Q1 2014 Financial Results MEUR
  22. 22. 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 85 000 Hylte PM2 May 2013 Newsprint 205 000 Kvarnsveden PM11 May 2013 Newsprint 270 000 Veitsiluoto PM1 Apr 2014 Coated magazine 190 000 Total 3 970 000 2323 April 2014Stora Enso Q1 2014 Financial Results
  23. 23. 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 Sollenau Sawmill Mar 2014 400 000 Total 2 300 000 2423 April 2014Stora Enso Q1 2014 Financial Results
  24. 24. Net Financial Items EUR million Q1/14 Q1/13 Change % Q1 14/ Q1 13 Q4/13 Change % Q1 14/ Q4 13 Net interest expense -48 -52 8 -50 4 Foreign exchange gains and losses -10 -4 -150 6 n/m Other financial items. of which -7 - n/m -27 74 PIK notes - 3 - Fair valuation of interest rate derivatives* -7 2 -8 Fair valuation of long-term debt - - - Pension costs (IAS 19R) -3 -3 -4 Other items 3 -2 -15 Total net financial items -65 -56 -16 -71 8 *Not hedge accounted interest rate derivatives. Stora Enso Q1 2014 Financial Results 23 April 2014 25
  25. 25. Transaction risk and hedges as at 31 March 2014 Operational EBIT: Currency strengthening of + 10 % EUR million USD 98 SEK -77 GBP 48 EUR million USD SEK GBP Estimated annual net operating cash flow exposure 980 -770 480 Transaction hedges as at 31 Mar 2014 -450 400 -230 Hedging percentage as at 31 Mar 2014 for the next 12 months 46% 52% 48% 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 Q1 2014 Financial Results 23 April 2014 Additional GBP hedge for 13-15 months increase the hedging percentage by 5%. 26
  26. 26. Curtailments of capacity 2723 April 2014Stora Enso Q1 2014 Financial Results 0 2 4 6 8 10 12 14 16 18 20 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 %ofthecapacity Paper and Board Wood Products
  27. 27. Softwood pulp prices Stora Enso’s market pulp is softwood Source: FOEX 2823 April 2014Stora Enso Q1 2014 Financial Results 450 550 650 750 850 950 1 050 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 14Q1 USD/tonne Bleached softwood kraft pulp Bleached hardwood kraft pulp
  28. 28. Pulp wood and saw log prices Wood prices in Finland Source: METLA 2923 April 2014Stora Enso Q1 2014 Financial Results 0 10 20 30 40 50 60 70 80 06Q1 06Q2 06Q3 06Q4 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 14Q1 EUR/m3 Pulpwood, Pine Sawlogs, Pine
  29. 29. Paper for Recycling prices German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 3023 April 2014Stora Enso Q1 2014 Financial Results
  30. 30. MEUR Revolving Credit Facility € 700 million matures in January 2017 and is fully undrawn Maturity profile Q1 2014 23 April 2014Stora Enso Q1 2014 Financial Results 31 0 100 200 300 400 500 600 700 800 900 1 000 2014 2015 2016 2017 2018 2019 2020 2021- 2035 2036 Commercial papers Bonds Other loans / liabilities
  31. 31. Energy balance* Q1 2014 Impact** on operating profit from 10% change in: EUR million p.a. Electricity market price ~2 Fossil fuel price ~12 **) Remaining impact on non-hedged volume 23 April 2014Stora Enso Q1 2014 Financial Results *) Pulp. paper and board mills. Europe and overseas 32
  32. 32. Stora Enso Electricity procurement* Q1 2014 23 April 2014Stora Enso Q1 2014 Financial Results *) Pulp. paper and board mills. Europe and overseas 3333

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