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Stora enso financial result q2 2014
- Stora Enso reported financial results for Q2 2014, with sales of EUR 2.579 billion and operational EBIT margin of 8.1%, up from 4.5% in Q2 2013. - All business divisions improved operational EBIT significantly compared to Q2 2013. Renewable Packaging achieved record results with operational EBIT up almost 50%. - The fixed costs reduction program was completed, exceeding its target by 22%. Transformation to renewable materials continues with the Virdia acquisition and machine conversion in Varkaus.
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Stora enso financial result q2 2014
- 1. Financial Results Q22014 CEO Jouko Karvinen, Karl-Henrik Sundström (CEO as of 1 August) and CFO Seppo Parvi 21 July 2014
- 2. It should benoted 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 Q2 2014 Financial Results 221 July 2014
- 3. Significant operational earningsimprovement continues Q2 2014 year-on-year • Sales EUR 2 579 (EUR 2 726) million, structural paper demand decline • Operational EBITDA margin of 12.6 (9.4) %, EUR 326 (EUR 257) million • Operational EBIT margin of 8.1 (4.5) %, EUR 209 (EUR124) million • Net debt to Operational EBITDA 2.8 (3.2) • Operational ROCE 9.8 (5.4)% • Fixed costs reduction programme completed – Savings of MEUR 244 million, exceeding target by 22% • Transformation to renewable materials company continues – Virdia acquisition and Varkaus packaging materials conversion • Corbehem Mill closure plan announced Stora Enso Q2 2014 Financial Results 321 July 2014
- 4. Global Responsibility New sectionin quarterly reports • Health and safety • TRI 11 (13.4) and LTA 4.3 (5.7) Q2/14 year-on-year • Safety campaign in Guangxi • Human rights • Collaboration agreement with Save the Children signed early July • Group-wide human rights assesment ready by the end of 2014 • Bulleh Shah in Pakistan conducted 123 on-site supplier audits during H1 2014 – 7 child labour cases and 5 young worker cases were identified in the OCC chain – No children identified in the wheat straw chain within the audit scope • Global Responsibility in China • Correction of social land lease contracts in Guangxi on-going • Three shared value projects in Guangxi • Stora Enso ranked number one among paper industry in IPE’s CITI report in terms of green supply chain performance in China Stora Enso Q2 2014 Financial Results 421 July 2014
- 5. Operational EBIT up69% Record Renewable Packaging Performance, Fixed Cost Take Out Target Exceeded Stora Enso Q2 2014 Financial Results 5 MEUR 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 0 50 100 150 200 250 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Operational EBIT Operational EBIT margin 21 July 2014
- 6. Fixed costs reductionprogramme target exceeded by EUR 44 million or 22% Quarterly fixed cost development Q2 2012–Q2 2014, annualised impact Stora Enso Q2 2014 Financial Results 21 July 2014 6 *Restated in accordance with IFRS11
- 7. Fixed cost decreasecontinued Fixed cost 4 quarter rolling average Stora Enso Q2 2014 Financial Results 7 MEUR 21 July 2014 620 630 640 650 660 670 680 690 700 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Fixed costs, 4Q rolling average
- 8. Virdia acquisition –enabling step-change entry into high value renewable materials technologies Stora Enso Q2 2014 Financial Results 821 July 2014
- 9. Fine paper machineto be converted to light-weight containerboard in Varkaus Mill • EUR 110 million for transformation • EBITDA margin above 15% • Start up Q4 2015 • Capacity 390 000 tonnes 21 July 2014 9Stora Enso Q2 2014 Financial Results
- 10. 38 % 32 % 18 % 10 % 2 % 2014 H1 66 % 24 % 11 % ‐1 % 2006* The Journey To becontinued Stora Enso Q2 2014 Financial Results 1021 July 2014 Breakdown of sales *Including North America and Merchants. Pulp produced was used internally. 2006* 2014 H1
- 11. New Leadership, journeycontinues CEO as of 1 August: Karl-Henrik Sundström • EVP, Printing and Living Division • Joined in August 2012 as a CFO • Wide global experience in manufacturing industry • A solid background in financial management 21 July 2014Stora Enso Q2 2014 Financial Results 11
- 13. Summary financials Q2 2014 13StoraEnso Q2 2014 Financial Results 21 July 2014
- 14. Printing and ReadingOperational EBIT improved EUR 53 million Q2 2014 year-on-year • Operational EBIT: – Costs lower – Depreciation EUR 20 million lower – Lower volumes due to machine closures • Cash flow improved sequentially • Uetersen Mill non-core asset divestment • Corbehem Mill closure plan • Maintenance at Oulu, Kvarnsveden and Veitsiluoto Mills in Q3 Stora Enso Q2 2014 Financial Results 14 MEUR 21 July 2014 0 20 40 60 80 100 120 140 160 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Operational EBITDA Cash flow from operations, 4Q rolling
- 15. Biomaterials Operational EBITEUR 10 million Q2 2014 year-on-year 15Stora Enso Q2 2014 Financial Results • Operational EBIT : – EUR 4 million lower • MdP start-up costs • Increased activity in Biorefinery • MdP Pulp Mill – Started-up early June – First deliveries mid-July – Share of production 300 000-350 000 tonnes in 2014 • Maintenance stoppage at Skutskär Mill in Q3 21 July 2014
- 16. Building and Livinghighest quarterly Operational EBIT since Q2 2007 Q2 2014 year-on-year • Operational EBIT EUR 37 million: – Increase of 32% – Lower fixed costs due to own actions – Operational ROOC 27% • Several sawmills have maintenance stoppages during Q3 21 July 2014Stora Enso Q2 2014 Financial Results 16 MEUR 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 0 5 10 15 20 25 30 35 40 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Operational EBIT ROOC, 4Q rolling
- 17. Renewable Packaging OperationalEBIT increased by almost 50%, all time high Q2 2014 year-on-year MEUR 17Stora Enso Q2 2014 Financial Results • Operational EBIT EUR 114 million – Improved operational efficiency – Lower variable and fixed costs – Sales prices slightly higher – Operational ROOC 18.3% • Maintenance stoppages at Imatra, Inkeroinen and Heinola mills in Q3 • Guangxi consumer board machine: – Investment proceeding as planned – Over 90% levelling work completed – Expected to be operational in early 2016 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 0 20 40 60 80 100 120 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Operational EBIT ROOC, 4Q rolling 21 July 2014
- 18. Forecast for Capexand Equity Injections in 2014 Forecast unchanged * Capital expenditure includes approximately EUR 300 million for the project in Guangxi, China. These figures do not include the acquisition of Bergvik Skog and Virdia shares. 18Stora Enso Q2 2014 Financial Results 21 July 2014 EUR million Forecast 2014* Capital expenditure 760–840 Equity injections 30 Total 790–870 Depreciation 550–580
- 20. Guidance for Q32014 Compared to Q2 2014 • Sales are forecast to be roughly similar to the EUR 2 579 million • Operational EBIT similar to or slightly lower than the strong EUR 209 million in Q2 • The maintenance impact in Q3/2014 is expected to be approximately EUR 30 million higher than in Q2/2014. Stora Enso Q2 2014 Financial Results 2021 July 2014
- 21. ”We will continueon the chosen path” • To build a winning team • More resources to the Corporate Responsibility area • Company transformation with increased customer focus – MdP Pulp Mill – Virdia acquisition – Varkaus machine conversion to packaging materials – Guangxi Consumer Board Mill 21 July 2014Stora Enso Q2 2014 Financial Results 21
- 23. Operational EBIT bysegments 23Stora Enso Q2 2014 Financial Results 21 July 2014 EUR million Q2/14 Q2/13 Change % Change % Q2 14 / Q2 13 Q1/14 Q2 14 / Q1 14 Printing and Reading 36 -17 n/m 35 2.9 % of sales 3.7 -1.5 3.5 Biomaterials 10 14 -28.6 21 -52.4 % of sales 4.1 5.3 8.0 Building and Living 37 28 32.1 20 85.0 % of sales 7.6 5.6 4.5 Renewable Packaging 114 77 48.1 92 23.9 % of sales 13.4 9.2 11.2 Other 12 22 -45.5 14 -14.3 % of sales 1.8 3.2 2.0
- 24. Cash flow inQ2 2014 Stora Enso Q2 2014 Financial Results 24 MEUR 21 July 2014 ‐100 ‐50 0 50 100 150 Printing and Reading Biomaterials Building and Living Renewable Packaging Other Cash flow from Operations Cash flow after investments
- 25. Balance Sheet strength Q22012 – Q2 2014 Stora Enso Q2 2014 Financial Results 25 *Last twelve months’ operational EBITDA MEUR 2,6 2,7 2,8 2,9 3,0 3,1 3,2 3,3 2 900 3 000 3 100 3 200 3 300 3 400 3 500 3 600 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Net Debt Net Debt/Operational EBITDA* 21 July 2014
- 26. Permanent pulp, paperand board capacity reductions since 2006 Stora Enso Q2 2014 Financial Results 2621 July 2014 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
- 27. Permanent sawn woodcapacity reductions since 2006 Stora Enso Q2 2014 Financial Results 2721 July 2014 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 150 000 Total 2 050 000
- 28. Net Financial Items StoraEnso Q2 2014 Financial Results 28 *Non hedge accounted interest rate derivatives. 21 July 2014 EUR million Q2/ 2014 Q2/ 2013 Change % Q214/ Q213 Q1/ 2014 Change % Q214/ Q114 Net interest expense -45 -53 15 -48 6 Foreign exchange gains and losses 15 -22 n/m -10 n/m Other financial items. of which -16 16 n/m -7 -129 PIK notes - 3 - Fair valuation of interest rate derivatives* -9 7 -7 Fair valuation of long-term debt - - - Pension costs (IAS 19R) -3 -4 -3 Other items -4 10 3 Total net financial items -46 -59 22 -65 29
- 29. Transaction risk andhedges as at 30 June 2014 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 Q2 2014 Financial Results USD has additional hedge for 13-18 months which will increase the hedging percentage with 7%. 2921 July 2014 EUR million USD SEK GBP Estimated annual net operating cash flow exposure 950 -790 470 Transaction hedges as at 30 Jun 2014 -440 410 -250 Hedging percentage as at 30 Jun 2014 for the next 12 months 46% 52% 53% Operational EBIT: Currency strengthening of + 10 % EUR million USD 95 SEK -79 GBP 47
- 30. 0 2 4 6 8 10 12 14 16 11Q1 11Q2 11Q311Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Paper and Board Wood Products Curtailments of capacity 30Stora Enso Q2 2014 Financial Results % of the capacity 21 July 2014
- 31. Softwood pulp prices StoraEnso’s market pulp is softwood Stora Enso Q2 2014 Financial Results 31 Source: FOEX 21 July 2014
- 32. Pulp wood andsaw log prices Wood prices in Finland Source: METLA 32Stora Enso Q2 2014 Financial Results 21 July 2014 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 14Q2 EUR/m3 Pulpwood, Pine Sawlogs, Pine
- 33. Paper for Recyclingprices Stora Enso Q2 2014 Financial Results 33 German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 21 July 2014 0,0 40,0 80,0 120,0 160,0 200,0 07Q1 07Q3 08Q1 08Q3 09Q1 09Q3 10Q1 10Q3 11Q1 11Q3 12Q1 12Q3 13Q1 13Q3 14Q1 EUR/tonne Mixed OCC De-inking
- 34. MEUR Other loans/ liabilitiesBondsCommercial papers Revolving Credit Facility € 700 million matures in January 2017 and is fully undrawn Maturity profile Q2 2014 21 July 2014Stora Enso Q2 2014 Financial Results 34 0 100 200 300 400 500 600 700 800 900 1 000 2014 2015 2016 2017 2018 2019 2020 2021- 2035 2036
- 35. Energy balance* Q22014 Stora Enso Q2 2014 Financial Results 35 **) Remaining impact on non-hedged volume*) Pulp. paper and board mills. Europe and overseas 21 July 2014 Impact** on operating profit from 10% change in: EUR million p.a. Electricity market price ~3 Fossil fuel price ~10
- 36. Stora Enso Electricityprocurement* Q2 2014 Stora Enso Q2 2014 Financial Results 36 *) Pulp. paper and board mills. Europe and overseas 3621 July 2014