Stora Enso Annual General Meeting, 2009-04-01

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Stora Enso Annual General Meeting, 2009-04-01

  1. 1. Annual General Meeting 1 April 2009
  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. Annual General Meeting 1/4/2009 2
  3. 3. CEO’s report
  4. 4. 2008 summary • First half – High cost inflation – Stable markets • Second half – Weakening markets – Inflation still a burden • Our actions – Cut capacity – Preserve cash flow Annual General Meeting 1/4/2009 4
  5. 5. Paper deliveries in Western Europe 2000–2/2009 Tonnes 4 300 000 4 100 000 3 900 000 3 700 000 3 500 000 3 300 000 3 100 000 2 900 000 2 700 000 2 500 000 01.00 07.00 01.01 07.01 01.02 07.02 01.03 07.03 01.04 07.04 01.05 07.05 01.06 07.06 01.07 07.07 01.08 07.08 01.09 Sources: PPPC (Magazine paper and Newsprint) Cepifine (Fine Paper) Annual General Meeting 1/4/2009 5
  6. 6. Income statement Continuing operations EUR million 2008 2007 Change Change % EUR million Sales 11 028.8 11 848.5 -819.7 -6.9 EBITDA excl. NRI and fair valuations 1 027.2 1 569.9 -542.7 -34.6 Operating profit excl. NRI and 388.4 861.1 -472.7 -54.9 fair valuations Operating profit / loss (IFRS) -726.6 176.9 -903.5 n/m Net profit / loss excl. NRI 142.8 747.3 -604.5 -80.9 Net profit / loss -679.0 12.8 -691.8 n/m ROCE excl. NRI and fair valuations, % 4.1 8.6 -4.5 -52.3 ROCE excl. NRI, % 3.4 11.3 -7.9 -69.9 EPS excl. NRI, EUR 0.18 0.94 -0.76 -80.9 EPS, EUR -0.86 0.01 -0.87 n/m Annual General Meeting 1/4/2009 6
  7. 7. Change in EPS (Continuing operations) 2007–2008, including closed units EUR million excluding non-recurring items 1.0 +0.94* 0.9 0.8 +0.10 -0.17 0.7 0.6 -0.27 0.5 0.4 -0.12 0.3 +0.09 -0.03 -0.05 +0.18 +0.12 -0.11 0.2 0.1 0.0 2007 2008 Sales Sales Sales Fixed Assoc Energy Fibre Depr Other Price FX Volume Costs * 2007 includes 0.32 EUR impact of fair valuations and related items, which include Total Return Swaps (TRS), synthetic options and CO2 emission rights, and fair valuations of biological assets mainly related to associated companies’ forest assets Annual General Meeting 1/4/2009 7
  8. 8. Total cost comparison, 2008 vs 2006 Cost increase Cost savings in 2008 compared to 2006 cost level in 2008 compared to 2006 cost level • Fibre • Personnel 22%  -4.6 margin points 10%  +1.5 margin points • Energy • Other fixed 17%  -1.3 margin points 18%  +2.3 margin points • Chemicals • Production services 14%  -1.2 margin points 14%  +1.3 margin points • TOTAL • Depreciation 19%  -7.0 margin points 22%  +1.5 margin points Sales volume & price • TOTAL 4%  -3.3 margin points 15%  +6.5 margin points Total costs difference 2006 vs 2008 -3.8 margin points Total costs in million Euros. / Continuing operations = Excluding discontinued operations (SENA, Merchants) Excluding non-recurring items Annual General Meeting 1/4/2009 8
  9. 9. Capital structure EUR million 31 Dec 08 31 Dec 07 Change Change % EUR million Fixed assets 6 853.7 8 493.2 -1 639.5 -19.3 Associated companies 1 042.5 1 154.5 -112.0 -9.7 Operative working capital 1 674.7 2 084.4 -409.7 -19.7 Non-current interest-free items, net -513.6 -493.3 -20.3 4.1 Operating capital 9 057.3 11 238.8 -2 181.5 -19.4 Net tax liabilities -282.8 -618.6 335.8 -54.3 Capital employed 8 774.5 10 620.2 -1 845.7 -17.4 Equity 5 594.0 7 593.6 -1 999.6 -26.3 Minority Interest 56.5 71.9 -15.4 -21.4 Net interest-bearing liabilities 3 124.0 2 954.7 169.3 5.7 Financing total 8 774.5 10 620.2 -1 845.7 -17.4 Debt/Equity ratio 0.56 0.39 0.17 43.5 Annual General Meeting 1/4/2009 9
  10. 10. Reclassification of equity components • Incorrect classification related to the cancellation of repurchased shares in 2001, repeated in 2002–2006 • EUR 1 512 million reclassified from retained earnings to share premium account • No impact on the total equity in the Parent Company or in the Group Annual General Meeting 1/4/2009 10
  11. 11. Operating cash flow Continuing operations, rolling 4 quarters Cash flow from operations excl provision payments EUR million 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Annual General Meeting 1/4/2009 11
  12. 12. Actions 1. Divestment of SENA and Papyrus 2. Reduction short term debt 3. Removal Russian wood dependency 4. Two restructuring programs – Support for employees made redundant 5. Reduction of Capital Expenditures 6. Pricing push 7. Drive for cash Annual General Meeting 1/4/2009 12
  13. 13. Balance Sheet Net Debt / EBITDA Debt/Equity 0.8 5,0x 4,5x 0.7 4,0x 0.6 3,5x 0.5 3,0x 0.4 2,5x 2,0x 0.3 1,5x 0.2 1,0x 0.1 0,5x 0.0 0,0x 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Annual General Meeting 1/4/2009 13
  14. 14. Balance Sheet without Actions (Pro Forma) Net Debt / EBITDA Debt/Equity 5.0X 1.0 4.5X 0.9 4.0X 0.8 3.5X 0.7 3.0X 0.6 2.5X 0.5 2.0X 0.4 1.5X 0.3 1.0X 0.2 0.5X 0.1 0.0X 0.0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Annual General Meeting 1/4/2009 14
  15. 15. Year 2009
  16. 16. Safeguard cash flow & customer volumes Newsprint and Book Paper Magazine Paper Fine Paper Wood Products Order flow to lowest cost machine • independent of country • also within a country Annual General Meeting 1/4/2009 16
  17. 17. Changes in selected cost components 2007 to 2008 Energy Costs % Personnel Costs % Wood Costs % 35 35 35 25 25 25 15 15 15 5 5 5 -5 -5 -5 -15 -15 -15 -25 -25 -25 FI DE SE SE FI DE SE SE FI DE SE SE (SEK) (EUR)* (SEK) (EUR)* (SEK) (EUR)* Underlying costs for paper and board (incl pulp) Euro per tonne, excluding non-recurring items Excluding discontinued (SENA, Merchants), closed and divested operations FX-rates in 2007 / 2008 / March 2009: EUR/SEK 9,2517 / EUR/SEK 9,6280 / EUR/SEK 10,9565 * 2008 cost level in SEK converted to EUR with current FX-rate (EUR/SEK 10,9565) Annual General Meeting 1/4/2009 17
  18. 18. Northern pulp lines are at great risk Cost Competitiveness in Rotterdam (BHKP) - Hard Wood Net Sales Price = FOEX Reference Market Price – 13 % Discount 2008/IV Operating rate 100% EUR/t 1 USD=0.744 EUR 1 EUR=1.344 USD 900 800 700 600 Net Sales Price July 2008 464 EUR/t 500 400 300 Net Sales Price March 2009 341 EUR/t 200 100 0 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 Cumulative capacity, 1000 t/a Source: Pöyry Annual General Meeting 1/4/2009 18
  19. 19. Finland • Industry situation in Europe traumatic • Finland in a dangerous situation – total cost increase in Finland 11% from 2006 to 2008, almost double compared to the total cost increase of the Group • The problem is too big for anybody to solve alone • Now it is time to work together • We all win or we all lose Annual General Meeting 1/4/2009 19
  20. 20. Top 15 producers of chemical pulp International Paper Stora Enso Domtar APP/Sinar Mas VCP Georgia-Pacific Nippon Paper Group RGM/APRIL Botnia Oji Sappi Arauco Suzano Weyerhaeuser Capacity UPM 1 000 t/a 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 Source: JPsmartterminal Includes SW and HW, bleached and semi-bleached, kraft, sulfite, semichemical Annual General Meeting 1/4/2009 20
  21. 21. 2009 • Pricing quality and cash preservation • CAPEX reduced to EUR 400 million (EUR 700 million in 2008) • Order flow to lowest cost production units • Temporary lay-offs & other cost measures must continue Annual General Meeting 1/4/2009 21
  22. 22. Our Promise – Vision and Mission Vision: • Today we as a company, people and planet face new challenges never before seen. The world needs a new approach to materials. Mission: • We will win with solutions based on renewable materials. Annual General Meeting 1/4/2009 22
  23. 23. Carbon footprint of beverage cartons and plastic bottles in Spain kg CO2 equivalents per 1000 L beverage carton 200 175 150 125 100 75 50 25 0 1 L PET bottle 1 L HDPE 1 L aseptic brick carton Source: IFEU Carbon Footprint of milk and juice containers in Spain, 2008 The carbon footprint calculation uses a “cradle-to-grave” approach. It covers all relevant process steps from raw material sourcing to the final waste treatment or recycling of the used packaging. Certain allocation assumptions have been made in the study. Annual General Meeting 1/4/2009 23
  24. 24. Paperboard food tray
  25. 25. Long-term Demand Growth by Region through 2025 Paper and Paperboard Demand growth, %/a 7 India 6 5 China Russia Middle East 4 Africa Eastern Europe 3 Latin America Rest of Asia 2 Average 1.9%/a 1 Oceania Western Europe 0 North America Japan -1 0 20 40 60 80 100 Share of consumption in 2006, % Source: Pöyry Annual General Meeting 1/4/2009 25
  26. 26. Towards the future with Biofuel development
  27. 27. Our planet
  28. 28. We do not convert native forests into plantations.
  29. 29. We protect rainforest.
  30. 30. Sustainably managed forests remove CO2 from the atmosphere and our products are carbon storages.
  31. 31. All our products are 100% recyclable.
  32. 32. Through the storm Past two years • Unforeseen challenges • Secure vital strengths • Capable, loyal, resilient personnel 2009 • Traumatic weakening of markets • Strong cash flow, pricing quality • Cost savings efforts Future • Fibre-based, recyclable packaging • Cost-competitive pulp from plantations • Stora Enso more efficient, more focused, ready for change Annual General Meeting 1/4/2009 32
  33. 33. Distribution of funds
  34. 34. Distribution of funds • The Board of Directors proposes to the AGM that EUR 0.20 per share, a maximum aggregate of EUR 157 907 699.80, be distributed to the shareholders from the share premium fund of the parent company. • The distribution shall be paid after the Finnish National Board of Patents and Registration has given its consent to the decrease of the share premium fund which is expected to take place in July 2009 at the earliest. • The Board of Directors proposes that it will be authorised to decide on record date and payment date after the consent. • Estimated record date 31 July 2009 • Estimated payment date 10 August 2009 Annual General Meeting 1/4/2009 34
  35. 35. Proposal by the Nomination Committee
  36. 36. Remuneration for the Members of the Board of Directors At the initiative of the BOD, the remuneration is proposed to be reduced by 50% for the year 2009. Proposal for remuneration 2009 Chairman EUR 67 500 Deputy Chairman EUR 42 500 Members EUR 30 000 • The Nomination Committee also proposes that 40% of the remuneration be paid in Stora Enso Series R shares purchased from the market. Annual General Meeting 1/4/2009 36
  37. 37. Remuneration for the Members of the Board Committees At the initiative of the BOD, the remuneration is proposed to be reduced by 50% for the year 2009. Proposal for remuneration 2009 Financial and Audit Committee Chairman EUR 10 000 Members EUR 7 000 Remuneration Committee Chairman EUR 5 000 Members EUR 3 000 Annual General Meeting 1/4/2009 37
  38. 38. Proposed Members of the Board of Directors • Gunnar Brock • Ilkka Niemi • Claes Dahlbäck • Juha Rantanen • Dominique Hériard Dubreuil • Matti Vuoria • Birgitta Kantola • Marcus Wallenberg • Hans Stråberg Annual General Meeting 1/4/2009 38
  39. 39. Hans Stråberg • President and CEO of AB Electrolux – Holds a Master’s degree in Science and Engineering from the Chalmers University of Technology in Gothenburg • Board Member of Roxtec, Swedish Engineering Industries, Confederation of Swedish Enterprise and AB Electrolux Annual General Meeting 1/4/2009 39
  40. 40. Appointment of Nomination Committee Duties • The Nomination Committee proposes that the AGM appoint a Nomination Committee to prepare proposals concerning (a) the number of members of the Board of Directors, (b) the members of the Board of Directors, (c) the remuneration for the Chairman, Vice Chairman and members of the Board of Directors and (d) the remuneration for the Chairman and members of the committees of the Board of Directors. Members: • The Chairman of the Board of Directors • The Vice Chairman of the Board of Directors • Two members appointed by the two largest shareholders (one each) as of 1 October 2009 Remuneration for 2009 • EUR 3 000/year (payable only to non-board members) Annual General Meeting 1/4/2009 40
  41. 41. Remuneration
  42. 42. Remuneration for the Members of the Board of Directors At the initiative of the BOD, the remuneration is proposed to be reduced by 50% for the year 2009. Proposal for remuneration 2009 Chairman EUR 67 500 Deputy Chairman EUR 42 500 Members EUR 30 000 • The Nomination Committee also proposes that 40% of the remuneration be paid in Stora Enso Series R shares purchased from the market. Annual General Meeting 1/4/2009 42
  43. 43. Remuneration for the Members of the Board Committees At the initiative of the BOD, the remuneration is proposed to be reduced by 50% for the year 2009. Proposal for remuneration 2009 Financial and Audit Committee Chairman EUR 10 000 Members EUR 7 000 Remuneration Committee Chairman EUR 5 000 Members EUR 3 000 Annual General Meeting 1/4/2009 43
  44. 44. Proposed Board Members
  45. 45. Esitys hallituksen jäseniksi • Gunnar Brock • Ilkka Niemi • Claes Dahlbäck • Juha Rantanen • Dominique Hériard Dubreuil • Matti Vuoria • Birgitta Kantola • Marcus Wallenberg • Hans Stråberg Annual General Meeting 1/4/2009 45
  46. 46. Auditor
  47. 47. Election of Auditors • The Board of Directors proposes to the AGM that Authorised Public Accountants Deloitte & Touche Oy continue as the statutory auditor of the Company until the end of the following AGM. Annual General Meeting 1/4/2009 47
  48. 48. Appointment of Nomination Committee
  49. 49. Appointment of Nomination Committee Duties • The Nomination Committee proposes that the AGM appoint a Nomination Committee to prepare proposals concerning (a) the number of members of the Board of Directors, (b) the members of the Board of Directors, (c) the remuneration for the Chairman, Vice Chairman and members of the Board of Directors and (d) the remuneration for the Chairman and members of the committees of the Board of Directors. Members: • The Chairman of the Board of Directors • The Vice Chairman of the Board of Directors • Two members appointed by the two largest shareholders (one each) as of 1 October 2009 Remuneration for 2009 • EUR 3 000/year (payable only to non-board members) Annual General Meeting 1/4/2009 49
  50. 50. Share premium fund and reserve fund
  51. 51. Decrease of the share premium fund and the reserve fund of the parent company • The Board of Directors proposes that: – the share premium fund as shown in the balance sheet of the parent company as per 31 December 2008 will be decreased by an amount of EUR 1 688 145 310.08 – the reserve fund as shown in the balance sheet of the parent company as per 31 December 2008 by an amount of EUR 353 946 990.12 • The decreased amounts shall be transferred to the invested non- restricted equity fund. • The decrease of the share premium fund and the reserve fund become effective after the Finnish National Board of Patents and Registration has given its consent to the decrease. Annual General Meeting 1/4/2009 51
  52. 52. Proposal by shareholders Matti Ikonen, Matti Liimatainen and Annina Käppi
  53. 53. Proposal to amend Stora Enso’s policy on old-growth forests Sini Harkki April 1st 2009 Marina Congress Center
  54. 54. Value of intact forests • Less than 5% of Finnish forests are in natural state • Loss of intact forests is a global concern – Biodiversity – Adapting to climate change and mitigating it – Ecosystem services Annual General Meeting 1/4/2009 54
  55. 55. Stora Enso’s policy on old-growth forests “We do not purchase wood and fibre from protected areas or areas in the official process of designation for protection, old growth forests and high conservation value forests defined in national stakeholder processes unless the purchases are clearly in line with the national conservation regulations. “ Annual General Meeting 1/4/2009 55
  56. 56. Old-growth forests in Finland • According to scientific estimates approximately half are protected • Forests whose structure has not been significantly changed by forestry or are in a natural state • Significant to threatened species and also to other uses of forests • In Finnish North-Boreal zone the amount of protected forest in natural state is less than 7% Annual General Meeting 1/4/2009 56
  57. 57. Old-growth forests in Forest Lapland Annual General Meeting 1/4/2009 57
  58. 58. Old-growth forests in Forest Lapland • Finnish Association for Nature Conservation, Greenpeace, Luonto-Liitto 2006 • Thousands of findings of threatened species • Most of the forest in the areas is old-growth • Even medieval trees can be found, natural structure • Significant to recreation and forest based livelihoods because of their wilderness-like nature Annual General Meeting 1/4/2009 58
  59. 59. Old-growth forests in Forest Lapland • In 2007 more than 250 researchers appealed for these forests to be protected, including more than 70 professors “The natural development of Lapland's forest ecosystems is so slow that logging in its remaining old natural forests cannot be considered a sustainable use of natural resources… It can be reasonably stated that logging of natural forests causes irreversible change of habitat, and Annual General Meeting 1/4/2009 59 destroys an important part of our national
  60. 60. Stora Enso’s policy on old-growth forests • AGM 2007: Stora Enso asked Metsähallitus to inventory the natural values of the contested areas before logging would be re-started Annual General Meeting 1/4/2009 60
  61. 61. Logging continued • No reports on the inventories or ecological values have been published • Metsähallitus classified the areas in three classes but presented no evidence or criteria: 1) natural state, 2) ”areas with earlier forestry operations”, 3) natural state, with ”no special nature values” Annual General Meeting 1/4/2009 61
  62. 62. Logging in 2009 • In Ahmatunturi and Talluskotavaara in old- growth forests that were classified ”in natural state” by Metsähallitus itself (classes 1 and 3). ->How can the logging of natural state old- growth be in line with SE’s principles? ->Why can SE/MH not publish the reports on the inventories? Annual General Meeting 1/4/2009 62
  63. 63. Logging in 2009 • Over 300 years old trees logged • Completely natural state forest • Forests important to other livelihoods and local people • In a situation where contractors have been laid off and wood storage piles are filled Annual General Meeting 1/4/2009 63
  64. 64. Annual General Meeting 1/4/2009 64
  65. 65. Annual General Meeting 1/4/2009 65
  66. 66. Stora Enso’s policy • Trying to get around it: ”individual old trees”, ”trees are 80 year old, some 140-200 years” Annual General Meeting 1/4/2009 66
  67. 67. Stora Enso’s policy • Misusing FSC Controlled Wood as proof of the sustainability of certain operations – not allowed by the FSC • Does not take into account ecological data or researchers’ appeals • Does not consider even forests classified as ”natural state” by Metsähallitus valuable enough Annual General Meeting 1/4/2009 67
  68. 68. The proposal “We propose that Stora Enso Oyj no longer procure from the Finnish state enterprise Metsähallitus any wood from forest areas in forest Lapland that nature conservation organisations have designated as rare contiguous wilderness areas formed by old-growth forests, bogs and fells.” Annual General Meeting 1/4/2009 68
  69. 69. The proposal • Ecological data supports the decision • Finally a real environmental policy decision • In the current wood procurement situation, there should be no financial impediments to taking such a responsible decision Annual General Meeting 1/4/2009 69
  70. 70. We can afford it • Proposal concerns 30,000 ha of forest land outside protected areas • This is less than 0,8 % of Lapland’s forest land outside protected areas • 10,2 million m3 of Lapland’s tree growth is in forestry use and only 1,6 million m3 in protected areas • Logging opportunities in young forests are growing and capacity is decreased at the same time Annual General Meeting 1/4/2009 70
  71. 71. Conclusions • 2010 is the year of biodiversity and natural forests (CBD, EU Countdown) • No financial impediments to sustainable policy on old-growth forests • Stora Enso has a sustainable policy in the Saami Homeland, why not in other old- growth areas as well? Annual General Meeting 1/4/2009 71
  72. 72. Stora Enso’s response to the proposal regarding protection of biodiversity in Forest Lapland
  73. 73. Stora Enso is committed to protecting biodiversity • Stora Enso is committed to protecting old-growth forests • We do not buy wood from forests which have been protected as old- growth in a national stakeholder process • We have supported many multi-stakeholder processes in northern Finland since 1996 to protect old-growth forests • Already 43% of the forests (0.5 million hectares) in Forest Lapland are protected • According to the Finnish Ministry of Environment there is no need for further protection areas in Forest Lapland Annual General Meeting 1/4/2009 73
  74. 74. Stora Enso’s position • Stora Enso can receive wood from the areas addressed by the environmental organizations – Not protected as valuable old-growth forests in the national stakeholder processes • We encourage all relevant stakeholders to participate in the dialogue – The next opportunity to make a difference is to take part in the Metsähallitus’ Natural Resource Planning process starting in fall 2009 Annual General Meeting 1/4/2009 74
  75. 75. Thank You

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