Stora Enso Financial Results Q3/2013 presentation

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Stora Enso Financial Results Q3/2013 presentation

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Stora Enso Financial Results Q3/2013 presentation

  1. 1. Financial Results Q3 2013 CEO Jouko Karvinen and acting CFO Jyrki Tammivuori 22 October 2013
  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 Q3 2013 Financial Results 22 October 2013 2
  3. 3. Significantly higher Operational EBIT compared to Q2 • Operational EBIT EUR 184 million • Cash flow from Operations EUR 331 million • Liquidity EUR 2.1 billion • ROCE 9.0% • Net debt/Operational EBITDA LTM 2.5x Stora Enso Q3 2013 Financial Results 22 October 2013 3
  4. 4. EBITDA improved quarter-on-quarter and year-on-year Solid Cash Flow from Operations Cash flow from operations, 4Q rolling Operational EBITDA, 4Q rolling 360 340 EUR million 320 300 280 260 240 220 200 11Q1 11Q2 11Q3 11Q4 12Q1 Stora Enso Q3 2013 Financial Results 12Q2 12Q3 22 October 2013 12Q4 13Q1 13Q2 13Q3 4
  5. 5. European overcapacity persists in all other grades except newsprint 4% 38000 2% 37000 0% 36000 -2% 35000 -4% 34000 -6% 33000 -8% 32000 Y-o-Y change % 6% 39000 -10% Y-o-Y Paper 31000 -12% Annualized Paper SA = seasonally adjusted 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 Q3 2013 Financial Results 22 October 2013 5
  6. 6. Decreasing fixed cost 720 700 680 660 640 620 600 580 11Q1 11Q2 11Q3 11Q4 12Q1 Fixed cost Stora Enso Q3 2013 Financial Results 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 4 Quarter rolling average 22 October 2013 6
  7. 7. Transformation projects up-date MDP pulp mill, Uruguay and consumer board machine in Guangxi, China • Montes del Plata pulp mill: – Start-up during first months of 2014 – Expected production half a million tonnes for Stora Enso in 2014 • Guangxi consumer board mill: – MOFCOM approvals expected to be received before end of 2013 – The mill start-up expected in the beginning of 2016 Stora Enso Q3 2013 Financial Results 22 October 2013 7
  8. 8. Transformation from European pulp and paper company towards a value-creating renewable materials company Sales 2008 Sales Q3/13 Renewable Packaging Renewable Packaging Printing and Reading Printing and Reading Biomaterial Biomaterial Building and Living Building and Living Stora Enso Q3 2013 Financial Results 22 October 2013 8
  9. 9. Summary financials Q3 2013 Change % EUR million Q3/13 Sales Q2/13 Q3/12 Change % Q3 13 / Q3 12 Q3 13 / Q2 13 2 556 2 717 2 694 -5.1 -5.9 311 247 302 3.0 25.9 Operational EBITDA, % 12.2 9.1 11.2 8.9 34.1 Operational EBIT 184 124 178 3.4 48.4 Operational EBIT margin, % 7.2 4.6 6.6 9.1 56.5 125 0.13 0.11 9.0 60 0.05 0.02 5.8 102 0.10 0.11 8.2 22.5 30.0 0.0 9.8 108.3 160.0 n/m 55.2 10.4 7.3 9.5 9.5 42.5 331 344 312 6.1 -3.8 2.5 2.7 2.8 -10.7 -7.4 Operational EBITDA 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 Q3 2013 Financial Results 22 October 2013 10
  10. 10. Profit generation relatively stable year-on-year Group operational EBIT Q3 2012 vs Q3 2013 184 178 Q3 2012 Sales price Volume & mix Variable costs Stora Enso Q3 2013 Financial Results Fixed costs 22 October 2013 Other Q3 2013 11
  11. 11. The biggest EBIT contribution from Renewable Packaging Operational EBIT Q3 2013 Change % EUR million Printing and Reading Biomaterials Building and Living Renewable Packaging Other Group Total Q3/13 Q2/13 13 17 24 100 30 184 Stora Enso Q3 2013 Financial Results -17 14 28 77 22 124 22 October 2013 Q3/12 53 32 1 83 9 178 Change % Q3 13 / Q3 12 Q3 13 / Q2 13 -75.5 -46.9 n/m 20.5 233.3 3.4 176.5 21.4 -14.3 29.9 36.4 48.4 12
  12. 12. Guidance Compared to Q4 2012 – Sales expected to be lower – Operational EBIT clearly lower – Strong contributions in Q3 from Renewable Packaging and Building and Living cause exceptional seasonality to occur in Q4 Operational EBIT Stora Enso Q3 2013 Financial Results 22 October 2013 13
  13. 13. Summary • Q3 operational EBIT significantly higher • Solid cash flow – further improved liquidity • Fixed costs savings proceeding • European paper market remains weak • Transformation proceeding Stora Enso Q3 2013 Financial Results 22 October 2013 14
  14. 14. Stora Enso Q3 2013 Financial Results 22 October 2013 15
  15. 15. Operational EBIT by segments EUR million Printing and Reading % of sales Biomaterials % of sales Building and Living % of sales Renewable Packaging % of sales Other % of sales Q3/13 Q2/13 Q3/12 13 1.2 17 7.0 24 5.2 100 12.1 30 4.9 -17 -1.5 14 5.4 28 5.6 77 9.2 22 3.2 53 4.3 32 11.9 1 0.2 83 10.2 9 1.4 Stora Enso Q3 2013 Financial Results 22 October 2013 Change % Change % Q3 13 / Q3 12 Q3 13 / Q2 13 -75.5 -72.1 -46.9 -41.2 n/m n/m 20.5 18.6 233.3 250.0 176.5 180.0 21.4 29.6 -14.3 -7.1 29.9 31.5 36.4 53.1 16
  16. 16. Capex and Equity Injections for 2013 decreased EUR million Forecast 2013 Capital expenditure* 400-450 Equity injections 75 Total 475-525 Depreciation 580-600 *Capital expenditure includes approximately EUR 40-80 million for project in Guangxi, China Stora Enso Q3 2013 Financial Results 22 October 2013 17
  17. 17. Fixed costs to sales developing to the right direction 110% 108% 106% 104% 102% 100% 98% 96% 94% 92% 90% 88% 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 Fixed costs to Sales 11Q1 = 100 Stora Enso Q3 2013 Financial Results 22 October 2013 18
  18. 18. Working capital reduced Q1 2011 – Q3 2013 19,5 % 2 100 19,0 % 2 000 EUR million 2 200 18,5 % 1 900 18,0 % 1 800 17,5 % 1 700 17,0 % 1 600 16,5 % 1 500 16,0 % 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 Operative Working Capital at the end of Q Working Capital per Sales ratio *Operative working capital = trade receivables + inventories – trade payables Stora Enso Q3 2013 Financial Results 22 October 2013 19
  19. 19. Balance Sheet strength Q1 2011 – Q3 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 2.5 2.7 2.5 2.3 1.8 1.9 2.0 2.0 2.1 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 *Last twelve months’ operational EBITDA Stora Enso Q3 2013 Financial Results 22 October 2013 20
  20. 20. 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 Stora Enso Q3 2013 Financial Results 22 October 2013 21
  21. 21. 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 Q3 2013 Financial Results 22 October 2013 22
  22. 22. Net Financial Items EUR million Change % Change % Q313/Q312 Q313/Q213 Q3/2013 Q2/2013 Q3/2012 -52 -51 -44 -18 -2 7 -12 -1 n/m n/m -11 16 -18 39 n/m 3 3 2 -4 7 -16 Fair valuation of long-term debt - - - NewPage lease provision - - - Pension costs (IAS 19R) -4 -4 -3 Other items -6 10 -1 -56 -47 -63 11 -19 Net interest expense Foreign exchange gains and losses Other financial items. of which PIK notes Fair valuation of interest rate derivatives* Total net financial items *Not hedge accounted interest rate derivatives. Stora Enso Q3 2013 Financial Results 22 October 2013 23
  23. 23. Transaction risk and hedges as at 30 September 2013 EUR million USD SEK GBP Estimated annual net operating cash flow exposure 1 020 -840 500 Transaction hedges as at 30 Jun 2013 -480 420 -250 Hedging percentage as at 30 Jun 2013 for the next 12 months 47% 50% 50% USD and GBP have additional hedges for 13-15 months which will increase the hedging percentage with 1% and 4% respectively. Operational EBIT: Currency strengthening of + 10 % EUR million USD 102 SEK -84 GBP 50 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 Q3 2013 Financial Results 22 October 2013 24
  24. 24. Curtailments of capacity 16 14 12 % of the capacity 10 8 6 4 2 0 11Q1 11Q2 11Q3 11Q4 12Q1 Paper and Board Stora Enso Q3 2013 Financial Results 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 Wood Products 22 October 2013 25
  25. 25. 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 USD/tonne 850 Source: FOEX Stora Enso Q3 2013 Financial Results 22 October 2013 26
  26. 26. Pulp wood and saw log prices Wood prices in Finland Pulpwood, Pine Sawlogs, Pine 80 70 50 40 30 20 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 Q3 2013 Financial Results 22 October 2013 27
  27. 27. Paper for Recycling prices Mixed OCC De-inking 200 120 80 40 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 0 07Q1 EUR/tonne 160 German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso Stora Enso Q3 2013 Financial Results 22 October 2013 28
  28. 28. Maturity profile Q3 2013 € million Bonds Other loans / liabilities Commercial paper 900 800 € 500m 5.0% 2018 SEK 2.2 bn S+3.9% 2017 SEK 500m 5.75% 2017 700 600 500 € 500m 5.5% 2019 400 300 200 100 0 2013 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 Q3 2013 Financial Results 22 October 2013 29
  29. 29. Energy balance* Q3 2013 Impact** on operating profit from 10% change in: EUR million p.a. Electricity market price ~1 Fossil fuel price ~14 **) Remaining impact on non-hedged volume *) Pulp. paper and board mills. Europe and overseas Stora Enso Q3 2013 Financial Results 22 October 2013 30
  30. 30. Stora Enso Electricity procurement* Q3 2013 *) Pulp. paper and board mills. Europe and overseas Stora Enso Q3 2013 Financial Results 22 October 2013 31

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