Stora Enso Financial Statement Release 2016
STORA ENSO OYJ, Helsinki, Finland
FINANCIAL STATEMENT RELEASE 3 February 2017 at 13.00 EET
Accelerated ramp-up of Beihai Mill and low hardwood pulp prices impact negatively a solid quarter. Proposal to increase dividend to EUR 0.37 per share
Q4/2016 (compared with Q4/2015)
- Sales EUR 2 438 (EUR 2 487) million decreased 2.0%. Sales excluding the structurally declining paper business increased 4.5%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai consumer board mills.
- Operational EBIT decreased 21.1% to EUR 191 (EUR 242) million, mainly due to historically low hardwood pulp prices in Biomaterials with an impact of EUR 35 million, a negative impact of EUR 25 million from the ramp-up of Beihai operations, slightly more than expected, and a power generator failure at Enocell Mill of EUR -5 million. Operational EBIT margin was 7.8% (9.7%).
- EPS EUR 0.12 (EUR 0.53). EPS excl. IAC decreased to EUR 0.17 (EUR 0.78).
- Strong cash flow from operations continued and was EUR 461 (EUR 412) million, cash flow after investing activities EUR 240 (EUR 75) million.
- Balance sheet continued to strengthen; net debt to operational EBITDA 2.0 (2.3); liquidity EUR 949 (EUR 807) million.
- Operational ROCE 8.9% (11.3%), operational ROCE excluding the Beihai investment 12.1% (13.3%).
Q4/2016 (compared with Q3/2016)
- Sales at EUR 2 438 (EUR 2 393) million, increased 1.9%. Sales excluding the structurally declining paper business increased 4.9%.
- Operational EBIT at EUR 191 (EUR 219) million decreased 12.8%, mainly due to historically low hardwood pulp prices and higher fixed costs.
Full year 2016 (compared with 2015)
- Sales at EUR 9 802 (EUR 10 040) million, declined 2.4%. Sales excluding the structurally declining paper businesses and the divested Barcelona Mill, increased 3.1%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai consumer board mills.
- Operational EBIT at EUR 884 (EUR 915) million, decreased 3.4% largely due to historically low hardwood pulp prices, a negative impact of EUR 74 million from the ramp-up of Beihai operations, and higher fixed costs due to other transformation projects and increased innovation activities in Biomaterials. The Paper division had a positive impact of EUR 134 million on operational EBIT.
- EPS EUR 0.59 (EUR 1.02). EPS excl. IAC decreased to EUR 0.65 (EUR 1.24).
- Strong cash flow from operations was EUR 1 633 (EUR 1 556) million, cash flow after investing activities EUR 834 (EUR 599) million.
- The Board of Directors proposes dividend to increase from EUR 0.33 to EUR 0.37 per share
Transformation
- Beihai Mill ramp-up is proceeding ahead of plan relating to both quality and production volumes. The consumer board machine is expected to reach full production within 18‒24 months from the start-up in May 2016. The bleached chemi-thermomechanical pulp (BCTMP) plant started during the fourth quarter. The mill is expected to reach EBITDA break-even in Q1/2018.
- Stora Enso is reconsidering its plans to build a chemical pulp mill in Beihai, China.
- Varkaus kraftliner mill ramp-up is proceeding. Full production is expected during the second half of 2017. EBIT break-even is expected in Q2/2017.
- The production line for wooden building components (LVL) at Varkaus Mill is ramping up. Full production is expected in mid-2018.
Outlook
Q1/2017 sales are estimated to be similar to the amount of EUR 2 438 million, and operational EBIT is expected to be in line with the EUR 191 million recorded in Q4/2016. The Q1/2017 operational EBIT estimate includes the negative impacts of the ramp-up of Beihai operations and the power generator failure at Enocell Mill of EUR 34 million and EUR 10 million, respectively. There are no major scheduled annual maintenance shutdowns during Q1/2017.
Stora Enso will start a profit improvement programme targeting to decrease the annual costs by EUR 50 million with full annualised impact in 2018.
Stora Enso's CEO Karl-Henrik Sundström comments on the fourth quarter 2016 results:
Year 2016 was an important milestone in our transformation. We completed a large part of our heavy investment programme, and we continue to maintain a strong focus on customers and innovation. With this, we are well prepared for 2017 and beyond.
In the fourth quarter, our sales excluding the structurally declining paper business increased 4.5%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai consumer board mills. Operational EBIT was EUR 191 million compared to EUR 242 million a year ago. This is mainly due to historically low hardwood pulp prices with an impact of EUR 35 million, a negative impact from the ramp-up of Beihai operations of EUR 25 million, and a power generator failure at Enocell Mill of EUR -5 million. For the second quarter in the row, we had a strong cash flow from operations of EUR 461 million. Balance sheet continued to strengthen as net debt to operational EBITDA was 2.0.
Our transformation continues to progress and the Beihai Mill ramp-up is ahead of plan. I am happy to see that this regards both quality and production volumes. Furthermore, as announced during the quarter, we are reconsidering our plans to build a chemical pulp mill in Beihai. This decision would not affect our operations at Beihai Mill. It is a viable option for us to source the chemical pulp to Beihai Mill from the market or utilise our current captive global hardwood pulp supply.
The Varkaus kraftliner mill ramp-up is progressing and we are expecting EBIT break-even in the second quarter 2017. Also, the line for wooden building components (LVL) at Varkaus Mill is ramping up and production optimisation is ongoing. Over 70% of the products obtained certificates during the fourth quarter, and the remaining certificates are expected during the first quarter of 2017. The installation of the first residential building of Wood City in Helsinki, started in December. Wood City will be built in massive wood and the multi-storey buildings will be built using LVL from our Varkaus Mill.
We are further investing to accelerate our transformation into a renewable materials company. In January, we announced that we are investing a total of EUR 9.1 million in further commercialisation of micro-fibrillated cellulose (MFC) in paperboard packaging. The investment goes to consumer board mills in Finland and Sweden. MFC is a material we believe in strongly. Due to its high strength properties and 100% renewable raw materials, it can replace fossil-based materials, such as plastics, in different applications. Moreover, we are investing EUR 12 million to build a new production line for biocomposite granules in Sweden. This is yet another example that demonstrates our ability to provide an innovative and more sustainable alternative to plastics. The Paper division ended the year on a very strong note, despite continued market challenges.
I am pleased that we have received an award for global leadership for our actions and strategies in response to global warming. We have been listed on the Supplier Climate A List by CDP, the international not-for-profit organisation that drives sustainable economies. We have also been awarded for the best sustainability report in Finland for the second consecutive year, by Finland’s leading non-profit corporate responsibility network. It is satisfying that the report was also top ranked by the media and by corporate sustainability students.
I am happy to say that even though we are investing in the future of Stora Enso, we are also able to increase the contribution to our shareholders. Our Board of Directors proposes a dividend of 0.37 euros per share for 2016, up 0.04 euros compared with the preceding year.
As always, I would like to thank our customers for their business, our employees for their dedication and our investors for their trust.”
Karl-Henrik Sundström, CEO
Key figures
| EUR million | Q4/16 | Q4/15 | Change % Q4/16–Q4/15 | Q3/16 | Change % Q4/16–Q3/16 | 2016 | 2015 | Change % 2016–2015 |
| Sales | 2 438 | 2 487 | -2.0% | 2 393 | 1.9% | 9 802 | 10 040 | -2.4% |
| Operational EBITDA¹ | 310 | 351 | -11.7% | 343 | -9.6% | 1 371 | 1 408 | -2.6% |
| Operational EBIT | 191 | 242 | -21.1% | 219 | -12.8% | 884 | 915 | -3.4% |
| Operational EBIT margin | 7.8% | 9.7% | 9.2% | 9.0% | 9.1% | |||
| Operating profit/loss (IFRS) | 145 | 393 | -63.1% | 196 | -26.0% | 783 | 1 059 | -26.1% |
| Profit before tax excl. IAC | 110 | 610 | -82.0% | 170 | -35.3% | 575 | 1 048 | -45.1% |
| Profit/loss before tax | 76 | 360 | -78.9% | 161 | -52.8% | 541 | 814 | -33.5% |
| Net profit/loss for the period | 56 | 407 | -86.2% | 119 | -52.9% | 407 | 783 | -48.0% |
| Net interest-bearing liabilities | 2 726 | 3 240 | -15.9% | 2 899 | -6.0% | 2 726 | 3 240 | -15.9% |
| Operational ROCE | 8.9% | 11.3% | 10.1% | 10.2% | 10.6% | |||
| Earnings per share (EPS) excl. IAC, EUR | 0.17 | 0.78 | 0.17 | 0.65 | 1.24 | |||
| EPS (basic), EUR | 0.12 | 0.53 | 0.16 | 0.59 | 1.02 | |||
| Debt/equity ratio | 0.47 | 0.60 | 0.52 | 0.47 | 0.60 | |||
| Net debt/last twelve months’ operational EBITDA ratio¹ | 2.0 | 2.3 | 2.1 | 2.0 | 2.3 | |||
| Fixed costs to sales | 25.8% | 25.7% | 25.5% | 25.3% | 25.0% | |||
| Average number of employees | 26 135 | 26 080 | 0.2% | 26 819 | -2.6% | 26 269 | 26 783 | -1.9% |
| TRI rate | 10.9 | 12.6 | -13.5% | 10.5 | 3.8% | 11.7 | 11.0 | 6.4% |
| LTA rate | 4.3 | 5.6 | -23.2% | 4.4 | -2.3% | 4.4 | 4.7 | -6.4% |
TRI (Total recordable incidents) rate = number of incidents per one million hours worked.
LTA (Lost-time accident) rate = number of lost-time accidents per one million hours worked.
¹ The data for the comparative periods have been restated according to the new reporting structure. See chapter Change in the reporting of costs related to growth of biological assets in the attached pdf.
Events today
1) Press conference in Helsinki 14.00 EET.
Stora Enso’s CEO Karl-Henrik Sundström and CFO Seppo Parvi will present the results in a press conference which will be webcast. The event will be held in English and take place at Stora Enso’s Head Office, Kanavaranta 1, Helsinki at 14.00 EET. The webcast may be accessed at storaenso.videosync.fi/2017-02-03-q4/
2) Webcast and conference call for analysts and investors 15.30 EET
The webcast and conference call for analysts and investors will take place at 15.30 EET (14.30 CET, 13.30 UK time, 09.30 EST). It will be hosted by CEO Karl-Henrik Sundström, CFO Seppo Parvi, and SVP Head of Investor Relations Ulla Paajanen-Sainio, and may be accessed at edge.media-server.com/m/p/i56xkqab
Those analysts and investors who wish to ask questions should join the conference call (details below). All participants can follow the presentation over the webcast.
Dial-in details for the analyst and investor conference call 15.30 EET
UK +44(0)20 3427 1914
Finland +358 (0)9 6937 9590
Sweden +46 (0)8 5065 3938
USA +1 646 254 3388
Confirmation Code: 3016583
The links to the webcasts are also available on the Stora Enso website: storaenso.com/investors
Stora Enso’s first quarter 2017 results will be published on 27 April 2017.
For further information, please contact:
Seppo Parvi, CFO, tel. +358 2046 21205
Ulla Paajanen-Sainio, SVP, Investor Relations, tel. +358 2046 21242
Ulrika Lilja, EVP, Communications, tel. +46 72 221 9228
Stora Enso is a leading provider of renewable solutions in packaging, biomaterials, wooden constructions and paper on global markets. Our aim is to replace fossil-based materials by innovating and developing new products and services based on wood and other renewable materials. We employ some 25 000 people in more than 35 countries, and our sales in 2016 were EUR 9.8 billion. Stora Enso shares are listed on Nasdaq Helsinki (STEAV, STERV) and Nasdaq Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY). storaenso.com
STORA ENSO OYJ
For further information, please contact:
Seppo Parvi
CFO
tel. +358 2046 21205
Ulla Paajanen-Sainio
SVP, Investor Relations
tel. +358 2046 21242
Ulrika Lilja
EVP, Communications
tel. +46 72 221 9228