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Financial Results Q1 2013CEO Jouko Karvinen and CFO Karl-Henrik Sundström23 April 2013
It should be noted that certain statements herein which are not historical facts, including, withoutlimitation those regar...
Q1 Performance as expected in a structurally declining    European paper market•    Operational EBIT EUR 118 million•    C...
Low operational EBIT due to Printing & ReadingperformanceCash Flow from Operations        *Operational EBIT comprises the ...
Seasonally higher working capitalQ2 2010 – Q1 2013                                               Higher wood inventories (...
European paper* demand 2007–2013/Mar2007/Jan = 100%                                                               *Paper: ...
European Paper Capacity utilization rates after capacityclosures31 March 2013                                             ...
Time to rethink structuresFocus, simplification and clarity• Plan to create a platform for transformation    – Divisions w...
Rethink organisation• Building and Living with Printing and Reading to one Division  planned   – Led by Karl-Henrik Sundst...
Guangxi, China preparations going forwardPlantation-based integrated board and pulp mills project•   The project approval ...
Strategic investments proceedingOstroleka, Bulleh Shah, and Montes del Plata                                              ...
Business Area ROOC, %Excl. and incl. strategic projects Montes del Plata, Ostroleka and Guangxi  Renewable Packaging      ...
Summary financials    Q1 2013                                                                                             ...
Group Variance – Operational EBITQ1 2012 vs Q1 2013                                             Q4 2012 vs Q1 2013        ...
Guidance for Q2 2013• Compared to Q1 2013:  – Sales slightly higher  – Operational EBIT in    line or slightly higher    t...
Strategic projects financial impact• Ostroleka PM5   – Immaterial impact to Group Sales, mainly used as internal raw mater...
Summary• Transformation continues• Short term focus:   – Plan to create a platform for     transformation       • Division...
Stora Enso Q1 2013 Financial Results   23 April 2013   18
Timeline for the restructuring announcements in 2013February 2013Announcement of Hylte PM 2 and Kvarnsveden PM 11 closures...
Permanent pulp, paper and board capacity reductionssince 2006Mill                          Date                      Grade...
Permanent sawn wood capacity reductionssince 2006Mill                                  Date                               ...
Operational EBIT by segments                                                                                     Change % ...
Net Financial Items                                                                                                       ...
Transaction risk and hedgesas at 31 March 2013 EUR million                                                                ...
Capital expenditure and depreciationQ1 2008 – Q1 2013                    Stora Enso Q1 2013 Financial Results   23 April 2...
Curtailmentsof capacity               Stora Enso Q1 2013 Financial Results   23 April 2013   26
Softwood pulp pricesStora Enso’s market pulp is softwood                                                                  ...
Wood prices in Sweden                                                                      Pulpwood includes pine. spruce ...
Paper for Recycling prices                                                                              German RCP price d...
Maturity profile Q1 2013                Stora Enso Q1 2013 Financial Results   23 April 2013   30
Energy balance* Q1 2013                                                                                        Impact** on...
Stora Enso Electricity procurement* Q1 2013    *) Pulp. paper and board mills. Europe and overseas                        ...
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Q1/2013 Interim Review, Investor presentation

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Q1/2013 Interim Review, Investor presentation

  1. 1. Financial Results Q1 2013CEO Jouko Karvinen and CFO Karl-Henrik Sundström23 April 2013
  2. 2. It should be noted that certain statements herein which are not historical facts, including, withoutlimitation those regarding expectations for market growth and developments; expectations for growthand profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similarexpressions, are forward-looking statements within the meaning of the United States Private SecuritiesLitigation Reform Act of 1995. Since these statements are based on current plans. estimates andprojections, they involve risks and uncertainties which may cause actual results to materially differ fromthose 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 ofefficiencies therein, continued success of product development, acceptance of new products or servicesby 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 protectioncreated by the Group’s patents and other intellectual property rights, the availability of capital onacceptable 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 theGroup, 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 geographicmarkets or fluctuations in exchange and interest rates. Stora Enso Q1 2013 Financial Results 23 April 2013 2
  3. 3. Q1 Performance as expected in a structurally declining European paper market• Operational EBIT EUR 118 million• Cash flow from Operations EUR 101 million• Liquidity EUR 1.7 billion• Operational ROCE % 5.4 Stora Enso Q1 2013 Financial Results 23 April 2013 3
  4. 4. Low operational EBIT due to Printing & ReadingperformanceCash Flow from Operations *Operational EBIT comprises the operating profit excluding NRI and fair valuations of the segments and Stora Enso’s share of the operating profit excluding NRI and fair valuations of its equity accounted investments (EAI). Fair valuations include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights and valuations of biological assets related to forest assets in EAI. Stora Enso Q1 2013 Financial Results 23 April 2013 4
  5. 5. Seasonally higher working capitalQ2 2010 – Q1 2013 Higher wood inventories (EUR 50 million) Higher trade receivables (EUR 120 million) *Operative working capital = trade receivables + inventories – trade payables Stora Enso Q1 2013 Financial Results 23 April 2013 5
  6. 6. European paper* demand 2007–2013/Mar2007/Jan = 100% *Paper: News, UMO, UMI, SC, CM, WFC & WFU Source: EuroGraph & PPPC SA = seasonally adjusted Stora Enso Q1 2013 Financial Results 23 April 2013 6
  7. 7. European Paper Capacity utilization rates after capacityclosures31 March 2013 * Potential restart of Alizay mill not taken into account (Jun-2013) Stora Enso Q1 2013 Financial Results 23 April 2013 7
  8. 8. Time to rethink structuresFocus, simplification and clarity• Plan to create a platform for transformation – Divisions with clear accountability focusing on growth and cost competitiveness – Simplified corporate structures• Driving towards a value creating growth markets renewable materials company• Expected cost savings of some EUR 200 million* – Full impact starting from Q2 2014 *including a EUR 30 million reduction in Building and Living Stora Enso Q1 2013 Financial Results 23 April 2013 8
  9. 9. Rethink organisation• Building and Living with Printing and Reading to one Division planned – Led by Karl-Henrik Sundström, currently Chief Financial Officer• The leadership of Renewable Packaging and Biomaterials remains unchanged• Divisions and corporate functions planned to go through organisational streamlining.• Plan for further outsourcing alternatives in group shared services and sale of non-core assets.• Divisional changes planned to be effective 1 July, 2013 Stora Enso Q1 2013 Financial Results 23 April 2013 9
  10. 10. Guangxi, China preparations going forwardPlantation-based integrated board and pulp mills project• The project approval is still pending at NDRC in Beijing and we follow the development of the approval process on regular basis• Preparations proceeding: – Wood supply ramp up and training for running mechanized harvesting – Detailed technical and commercial discussions with main machinery suppliers in progress, no commercial commitments nor supplier selections – Key position holders in place and next level recruitments planned Stora Enso Q1 2013 Financial Results 23 April 2013 10
  11. 11. Strategic investments proceedingOstroleka, Bulleh Shah, and Montes del Plata Montes del Plata Commissioning of the main Bulleh Shah JV equipment initiated and start-up process during Delayed and expected Q3/2013 to be completed during Q2/2013 Ostroleka Investment started up in Jan 2013 Stora Enso Q1 2013 Financial Results 23 April 2013 11
  12. 12. Business Area ROOC, %Excl. and incl. strategic projects Montes del Plata, Ostroleka and Guangxi Renewable Packaging Biomaterials Stora Enso Q1 2013 Financial Results 23 April 2013 12
  13. 13. Summary financials Q1 2013 Change % Change %EUR million Q1/13 Q4/12 Q1/12 Q1 13 / Q1 12 Q1 13 / Q4 12Sales 2 667 2 727 2 673 -0.2 -2.2Operational EBITDA 240 276 265 -9.4 -13.0Operational EBITDA, % 9.0 10.1 9.9 -9.1 -10.9Operational EBIT 118 158 150 -21.3 -25.3Operational EBIT margin, % 4.4 5.8 5.6 -21.4 -24.1Profit before tax excl. NRI 55 83 101 -45.5 -33.7EPS excl. NRI, EUR 0.07 0.11 0.10 -30.0 -36.4EPS (basic), EUR -0.02 0.33 0.09 -122.2 -106.1Operational ROCE, % 5.4 7.3 6.9 -21.7 -26.0Operational ROCE, % excl. transformation 6.2 8.8 7.8 -20.5 -29.5investmentsCash Flow from Operations 101 473 223 -54.7 -78.6Net debt/last 12 months’ operational 2.7 2.5 2.3 17.4 8.0EBITDA Stora Enso Q1 2013 Financial Results 23 April 2013 13
  14. 14. Group Variance – Operational EBITQ1 2012 vs Q1 2013 Q4 2012 vs Q1 2013 Stora Enso Q1 2013 Financial Results 23 April 2013 14
  15. 15. Guidance for Q2 2013• Compared to Q1 2013: – Sales slightly higher – Operational EBIT in line or slightly higher than Q1 2013 Stora Enso Q1 2013 Financial Results 23 April 2013 15
  16. 16. Strategic projects financial impact• Ostroleka PM5 – Immaterial impact to Group Sales, mainly used as internal raw material – EBITDA margin at approximately 20% from H2 2013• Montes del Plata – Group Sales impact 2013 limited and slightly negative Operational EBIT impact – Group Sales impact 2014 with 650 000 tons (Stora Enso share) – Full positive EBITDA impact in the latter part of 2014 provided that the current market conditions prevail Stora Enso Q1 2013 Financial Results 23 April 2013 16
  17. 17. Summary• Transformation continues• Short term focus: – Plan to create a platform for transformation • Divisions with clear accountability focusing on growth and cost competitiveness • Simplified corporate structures • EUR 200 million cost savings planned – Montes del Plata has initiated the commissioning of the main equipment and expects to begin the mill start-up process during Q3/2013 – Bulleh Shah to be completed in Q2/2013 – Cash flow and liquidity Stora Enso Q1 2013 Financial Results 23 April 2013 17
  18. 18. Stora Enso Q1 2013 Financial Results 23 April 2013 18
  19. 19. Timeline for the restructuring announcements in 2013February 2013Announcement of Hylte PM 2 and Kvarnsveden PM 11 closures EUR 24million ► Impact starts ► Full impact Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14February 2013Building & Living EUR 30 million ► Impact starts ► Full impact Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14April 2013Business structure and organisation EUR 200 million(out of which EUR 30 million B&L) ► Impact starts ► Full impact Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Stora Enso Q1 2013 Financial Results 23 April 2013 19
  20. 20. Permanent pulp, paper and board capacity reductionssince 2006Mill Date Grade Capacity reduction, tCorbehem PM 3 and PM 4 Jun 2006 LWC 250 000Varkaus PM 1 End 2006 WFC 95 000Berghuizer Mill Oct 2007 WFU 235 000Reisholz Mill End 2007 SC 215 000Summa Mill Jan 2008 Newsprint, uncoated mag, book paper 415 000Anjala Mill PM1 Feb 2008 Coated magazine paper 155 000Baienfurt Mill End 2008 FBB 190 000Kabel Mill PM 3 End 2008 Coated magazine 140 000Kemijärvi Pulp Mill April 2008 Long-fibre (SW) pulp 250 000Norrsundet Pulp Mill Dec 2008 Long-fibre (SW), pulp 300 000Varkaus Mill coreboard machine Dec 2008 Coreboard 100 000Imatra PM 8 Mar 2010 WFU 210 000Varkaus PM 2 and PM 4 Sep 2010 Newsprint, directory paper 290 000Maxau PM 7 Nov 2010 Newsprint 195 000Hylte PM1 Dec 2012 Newsprint 180 000Total 3 220 000 Stora Enso Q1 2013 Financial Results 23 April 2013 20
  21. 21. Permanent sawn wood capacity reductionssince 2006Mill Date Capacity reduction, m3Veitsiluoto Sawmill 2006 100 000Honkalahti Sawmill 2006 90 000Sauga Sawmill Jun 2007 130 000Sollenau Sawmill 2007 110 000Näpi Sawmill 2007-2008 100 000Kotka Sawmill 2007-2008 70 000Paikuse Sawmill End 2008 220 000Zdirec Sawmill 2008 120 000Ybbs Sawmill 2008 & Jun 2009 200 000Kitee Sawmill 2008 & Jun 2009 130 000Varkaus Sawmill Jun 2009 60 000Tolkkinen Sawmill End 2009 260 000Kopparfors Sawmill End 2011 310 000Total 1 900 000 Stora Enso Q1 2013 Financial Results 23 April 2013 21
  22. 22. Operational EBIT by segments Change % Change %EUR million Q1/13 Q4/12 Q1/12 Q1 13 / Q1 12 Q1 13 / Q4 12Printing and Reading 2 59 68 -97.1 -96.6 % of sales 0.2 4.9 5.5 -96.4 -95.9Biomaterials 22 28 7 214.3 -21.4 % of sales 8.6 10.9 2.9 196.6 -21.1Building and Living 4 7 10 -60.0 -42.9 % of sales 0.9 1.5 2.6 -65.4 -40.0Renewable Packaging 68 55 62 9.7 23.6 % of sales 8.3 6.9 8.0 3.8 20.3Other 22 9 3 n/m 144.4 % of sales 3.1 1.3 0.4 n/m 138.5 Stora Enso Q1 2013 Financial Results 23 April 2013 22
  23. 23. Net Financial Items Change % Change %EUR million Q1/2013 Q4/2012 Q1/2012 Q113/Q112 Q113/Q412Net interest expense -50 -47 -38 -32 -6Foreign exchange gains and losses -5 -1 8 n/m n/mOther financial items. of which -1 -2 -7 86 50 PIK notes 3 3 2 Fair valuation of interest rate derivatives* 2 -9 -3 Fair valuation of long-term debt -1 - -1 NewPage lease provision - 11 14 Pension costs (IAS 19R) -3 -3 -3 Other items -2 -4 -16Total net financial items -56 -50 -37 -51 -12 *Not hedge accounted interest rate derivatives. Stora Enso Q1 2013 Financial Results 23 April 2013 23
  24. 24. Transaction risk and hedgesas at 31 March 2013 EUR million USD SEK GBP Estimated annual net operating cash flow exposure 1 110 -910 540 Transaction hedges as at 31 Mar 2013 -550 420 -280 Hedging percentage as at 31 Mar 2013 for the next 12 months 50 46 52 Additional GBP hedges for 13-15 months increase the hedging percentages by 2 %. Operational EBIT: Currency strengthening of + 10 % EUR million USD 111 SEK -91 GBP 54 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 2013 Financial Results 23 April 2013 24
  25. 25. Capital expenditure and depreciationQ1 2008 – Q1 2013 Stora Enso Q1 2013 Financial Results 23 April 2013 25
  26. 26. Curtailmentsof capacity Stora Enso Q1 2013 Financial Results 23 April 2013 26
  27. 27. Softwood pulp pricesStora Enso’s market pulp is softwood Source: FOEX Stora Enso Q1 2013 Financial Results 23 April 2013 27
  28. 28. Wood prices in Sweden Pulpwood includes pine. spruce and birch. Sawlogs include pine and spruce. Source: SDC. Skogsstyrelsen Stora Enso Q1 2013 Financial Results 23 April 2013 28
  29. 29. Paper for Recycling prices German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso Stora Enso Q1 2013 Financial Results 23 April 2013 29
  30. 30. Maturity profile Q1 2013 Stora Enso Q1 2013 Financial Results 23 April 2013 30
  31. 31. Energy balance* Q1 2013 Impact** on operating profit from EUR million p.a. 10 change in: Electricity market price ~7 Fossil fuel price ~13 *) Pulp. paper and board mills. Europe and overseas **) Remaining impact on non-hedged volume Stora Enso Q1 2013 Financial Results 23 April 2013 31
  32. 32. Stora Enso Electricity procurement* Q1 2013 *) Pulp. paper and board mills. Europe and overseas Stora Enso Q1 2013 Financial Results 23 April 2013 32

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