Stora Enso’s Interim Review for January - September 2011

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Stora Enso’s Interim Review for January - September 2011 published on 21 October 2011. Presentation.

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Stora Enso’s Interim Review for January - September 2011

  1. 1. Financial results Q3 201121 October 2011
  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. Financial results Q3 2011 21 October 2011 2
  3. 3. Solid quarter• EUR 204 million operating profit excl. NRI and FV• Strong cash flow after Capex EUR 282 million• Improved liquidity at EUR 1 181 million• Increased curtailments to control inventories Financial results Q3 2011 21 October 2011 3
  4. 4. Higher prices continue to support result EBIT excl NRI and fair valuation EBIT margin*, % 4 Q avg 300 10 % 240 8%EUR million 180 6% 120 4% 60 2% 0 0% *excluding NRI and fair valuation Financial results Q3 2011 21 October 2011 4
  5. 5. Early curtailments are important Operative working capital 2 800 28,0 % 2 600 26,0 % 2 400 24,0 % 2 200 22,0 %EUR million 2 000 20,0 % 1 800 18,0 % 1 600 16,0 % 1 400 14,0 % 1 200 12,0 % 1 000 10,0 % 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 Operative Working Capital at the end of Q Working Capital per Sales ratio *Operative working capital = trade receivables + inventories – trade payables Financial results Q3 2011 21 October 2011 5
  6. 6. We have jumped the curveOperating Rate % vs. EBIT %* 10 % 8%EBIT %* 6% Q3 2011 4% Q3 2008 2% 0% 90 % 91 % 92 % 93 % 94 % 95 % 96 % 97 % 98 % Operating Rate % *Excluding NRIs and FV Financial results Q3 2011 21 October 2011 6
  7. 7. Continued to increase flexibilityFY2007- Q3 YTD 2011 0,30 0,28Fixed Costs/Sales 0,26 0,24 0,22 FY2007 FY2008 FY2009 FY2010 Q3 YTD 2011 Financial results Q3 2011 21 October 2011 7
  8. 8. Our market pulp and magazine paper deliveries up Market pulp Magazine Paper*** Industrial Packaging* 120 101 110 115 105 100 110 INDEX INDEX 99 INDEX 105 100 98 100 95 95 97 90 90 96 85 Q3/10 Q2/11 Q3/11 Q3/10 Q2/11 Q3/11 Q3/10 Q2/11 Q3/11 Wood Products **** Fine Paper Consumer Board Newsprint** 110 102 108 105 100 106 105 100 104 98 INDEX INDEXINDEX INDEX 100 102 95 96 100 95 90 94 98 90 92 96 85 94 80 85 90 Q3/10 Q2/11 Q3/11 Q3/10 Q2/11 Q3/11 Q3/10 Q2/11 Q3/11 Q3/10 Q2/11 Q3/11 *Index is calculated average of paper and board deliveries (1 000 t) index and ** Includes Varkaus and Maxau mills the corrugated packaging deliveries (million m2) index. Includes Kotka mill. ***Includes Kotka mill **** Includes Kotka mill Financial results Q3 2011 21 October 2011 8
  9. 9. Summary financials Q3 2011 Change % Change %EUR million III/2011 II/2011 III/2010 Q311/Q310 Q311/Q211Sales 2 739 2 817 2 624 4.4 -2.8EBITDA, excl. NRI and fair valuations 339 358 366 -7.3 -5.1Operating profit, excl. NRI and fair valuations 204 228 255 -19.9 -10.6Profit before tax, excl. NRI 111 182 220 -49.7 -39.0Loss/profit before tax -17 150.1 225.8 -107.7 -111.5Earnings per share, excl. NRI (EUR) 0.10 0.21 0.23 -56.5 -52.4ROCE, excl. NRI and fair valuations (%) 9.3 10.4 12.4 -25.0 -10.6Cash flow from operations 362 207 304 19.1 74.7Cash flow after investing activities 282 122 230 22.4 131.5Debt/equity 0.45 0.41 0.43 4.7 9.8 NRI = Non-recurring items Fair valuations include synthetic options net of realised and open hedges, CO2 emission rights, and valuations of biological assets related to forest assets in equity accounted investments Financial results Q3 2011 21 October 2011 9
  10. 10. Operating profit by segments Change % Change %EUR million III/2011 II/2011 III/2010 Q311/Q310 Q311/Q211Consumer Board 64 85 78 -17.0 -23.8 % of sales 10.3 12.8 13.1 -21.4 -19.5Industrial Packaging 20 20 19 7.5 3.1 % of sales 7.9 8.1 8.3 -4.8 -2.5Newsprint and Book Paper 34 28 0 n/m 22.2 % of sales 10.2 8.2 0.0 n/m 24.4Magazine Paper 48 34 46 6.2 42.5 % of sales 8.6 6.6 8.4 2.4 30.3Fine Paper 38 49 71 -46.7 -22.4 % of sales 7.1 9.2 12.6 -43.7 -22.8Wood Products 10 35 25 -61.1 -72.2 % of sales 2.4 7.6 5.9 -59.3 -68.4 excluding non-recurring items Financial results Q3 2011 21 October 2011 10
  11. 11. Solid platform for growth Net Debt Net Debt/EBITDA excl NRI and fair valuations 5 000 6,0 4 500 5,0 4 000 4,0EUR million 3 500 3,0 3 000 2,0 2 500 1,0 2 000 0,0 SENA divestment closed in Q4 2007 EBITDA: Continuing operations Merchants divestment closed in Q2 2008 Net debt: Total operations Financial results Q3 2011 21 October 2011 11
  12. 12. Near term outlook• Our production curtailments to Demand Price development development control inventory levels have Q4/11 vs Q4/11 vs increased in Q3 and will continue Q4/10 Q3/11 in Q4 Consumer Board Industrial• EBIT excl. NRI and FV in Q4 Packaging estimated to be somewhat lower Newsprint and year on year Book Paper Coated Magazine Paper Uncoated Magazine Paper Coated Fine Paper Uncoated Fine Paper Wood Products Financial results Q3 2011 21 October 2011 12
  13. 13. Solid third quarter• Strong cash flow and balance sheet• Production curtailments continue• Growth projects proceeding Financial results Q3 2011 21 October 2011 13
  14. 14. Rethinking continues!
  15. 15. Cost inflation diminishing Realised Realised Q3/11 vs Q3/11 vs Q3/10 Q2/11Pulp woodSawlogsRCPPulpChemicalsEnergy Financial results Q3 2011 21 October 2011 16
  16. 16. Net Financial Items Change % Change %EUR million III/2011 II/2011 III/2010 Q311/Q310 Q311/Q211Net interest expense -35.9 -28.3 -23.9 -50.2 -26.9Foreign exchange gains and losses -11.4 -0.7 -18.1 37.0 n/mOther financial items, of which -146.1 -5.6 -9.1 n/m n/m PIK notes 2.1 1.9 1.5 Fair valuation of interest rate derivates* -16.4 -3.3 4.3 Fair valuation of long-term debt -1.1 0.4 -2.6 NewPage lease provision -128.2 0.0 0.0 Other items -2.5 -4.6 -12.3Total net financial items -193.4 -34.6 -51.1 n/m n/m *Not hedge accounted interest rate derivatives. Financial results Q3 2011 21 October 2011 17
  17. 17. Softwood pulp prices still on high level Stora Enso’s market pulp is softwood 1 100 1 000 900 Bleached softwood kraftUSD/tonne 800 pulp Bleached hardwood kraft 700 pulp 600 500 400 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 Source: FOEX Financial results Q3 2011 21 October 2011 18
  18. 18. Pulp wood and saw log prices decreased from Q2 2011 Wood prices in Finland 80 70 60 50EUR/m 3 Pulpwood, Pine 40 Sawlogs, Pine 30 20 10 0 06Q2 06Q4 07Q2 07Q4 08Q2 08Q4 09Q2 09Q4 10Q2 10Q4 11Q2 06Q1 06Q3 07Q1 07Q3 08Q1 08Q3 09Q1 09Q3 10Q1 10Q3 11Q1 11Q3 Source: METLA Financial results Q3 2011 21 October 2011 19
  19. 19. Wood prices in Sweden 600 500 400 PulpwoodSEK/m 3 300 Sawlogs 200 100 0 06Q3 06Q4 07Q1 08Q1 08Q2 09Q2 09Q3 09Q4 10Q4 11Q1 06Q1 06Q2 07Q2 07Q3 07Q4 08Q3 08Q4 09Q1 10Q1 10Q2 10Q3 11Q2 11Q3 Pulpwood includes pine, spruce and birch. Sawlogs include pine and spruce. Source: SDC, Skogsstyrelsen Financial results Q3 2011 21 October 2011 20
  20. 20. RCP prices decreasing from Q2 2011 200 160EUR/tonne 120 Mixed OCC 80 De-inking 40 0 07Q1 07Q2 07Q3 07Q4 08Q1 09Q3 09Q4 10Q1 10Q2 08Q2 08Q3 08Q4 09Q1 09Q2 10Q3 10Q4 11Q1 11Q2 11Q3 German RCP price development, free delivered Source: Verband Deutscher Papierfabriken/Stora Enso Financial results Q3 2011 21 October 2011 21
  21. 21. Capital expenditure and depreciation Q1 2008 – Q3 2011 250 10 % 200 8%EUR million 150 6% 100 4% 50 2% 0 0% Capex Depreciation and impairment excl NRI Capex % of sales Financial results Q3 2011 21 October 2011 22
  22. 22. Debt/equity 2005 – Q3 20110,8 0,700,70,6 0,56 0,54 0,510,5 0,45 0,41 0,39 0,39 0,380,40,30,20,1 0 2005 2006 2007 2008 2009 2010 Q1 2011 Q2 2011 Q3 2011 Total operations Financial results Q3 2011 21 October 2011 23
  23. 23. Transaction risk and hedgesas at 30 September 2011 EUR million USD GBP SEK Estimated annual net operating cash flow exposure 1 040 570 -790 Transaction hedges as at 30 September 2011 -560 -250 470 Hedging percentage as at 30 September 2011 for the next 12 months 54% 44% 59% USD, GBP and SEK have additional hedges for 13-16 months which will increase the hedging percentage 8%, 4% and 7% respectively. Operating Profit: Currency strengthening of + 10% Based on estimated next 12 months net operating EUR million cash flow exposure. USD 104 SEK -79 GBP 57 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. Financial results Q3 2011 21 October 2011 24
  24. 24. Maturity profile 30 September 2011€m Bonds Other loans / liabilities Commercial paper SEK 500m 3.5% 20151 000 SEK 1.4 bn S+3.7% 2015 SEK 2.4 bn 5.75% 2015 900 800 EUR 750m 5.125% 2014 EUR 390m E+4.21% 2016 700 USD 507m 6.404% 2016 600 USD 300m 7.25% 2036 500 400 300 200 100 0 2011 2012 2013 2014 2015 2016 2017 2018 2019-2035 2036 Revolving Credit Facility € 700 million matures in January 2014 and is fully undrawn Financial results Q3 2011 21 October 2011 25
  25. 25. Energy balance Q3 2011 Total energy self sufficiency 60% Self sufficiency 53% Self sufficiency 62%50 Impact** on operating profit from40 EUR million p.a.30 10% change in:2010 0 Electricity Fuels Electricity market price ~8 Internal External (hedged) External (non-hedged) Fossil fuel price ~14 **) Remaining impact on non-hedged volume Financial results Q3 2011 21 October 2011
  26. 26. Stora Enso Electricity procurement Q3 2011 20000GWh/a 18000 16000 14000 12000 Sales to market Open position 10000 Local tariff Financial contracts 8000 Physical contracts PVO production Own production 6000 4000 2000 0 2011 2012 2013 2014 27 -2000

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