Stora Enso Interim Report January–March 2016
Another quarter of progress
STORA ENSO OYJ INTERIM REPORT 28 April 2016 at 13.00 EET
Q1/2016 (compared with Q1/2015)
- Sales EUR 2 445 (EUR 2 491) million decreased 1.8%. Sales excluding the structurally declining paper business and divested Barcelona Mill increased 2.4%, primarily due to increasing volumes from Montes del Plata Mill and the ramp-up of Varkaus kraftliner mill.
- Operational EBIT increased 12.7% to EUR 248 (EUR 220) million, and the margin was record high at 10.1%.
- EPS EUR 0.15 (EUR 0.16)
- Cash flow from operations amounted to EUR 289 (EUR 171) million, due to increased profitability and continued good working capital management; cash flow after investing activities was EUR 96 (EUR 29) million.
- Continued improvement of the balance sheet; net debt to operational EBITDA 2.3 (2.6), liquidity reduced to EUR 604 (EUR 1 320) million, as planned.
- Operational ROCE 11.3% (10.1%), operational ROCE excluding the Beihai Mill investment 13.7% (11.3%).
- Sales declined by 1.7%. Sales excluding the structurally declining paper business decreased 0.7%, mainly due to lower sales in Biomaterials and Wood Products divisions.
- Operational EBIT increased 2.5%, mainly due to lower maintenance costs.
- Varkaus Mill kraftliner ramp-up proceeding despite some operational challenges, full production expected in early 2017, as earlier announced. The new production line for wooden building elements (LVL) is scheduled to start up in June 2016.
- Beihai consumer board mill in China is expected to start up in May 2016. It is forecast to take approximately 18 to 24 months for the mill to reach full production.
- The divestment of Arapoti Mill in Brazil was completed in March.
- On 8 April, Stora Enso announced plans to divest its 33.33% ownership in the Swedish recycled materials company IL Recycling AB.
Q1/2016 (compared with Q4/2015)
Outlook for Q2/2016
Sales are estimated to be slightly higher than the amount of EUR 2 445 million recorded in Q1/2016. Operational EBIT is expected to be in line with or somewhat lower than the EUR 248 million recorded in Q1/2016. These estimates include the negative impact of the scheduled annual maintenance shutdowns at Montes del Plata pulp mill, Ostrołęka containerboard mill and Langerbrugge paper mill during Q2/2016. The negative impact from maintenance is expected to be approximately EUR 25 million higher than in Q1/2016.
Stora Enso's CEO Karl-Henrik Sundström comments on the first quarter 2016 results:
“In the first quarter of 2016, sales excluding the structurally declining paper business and divested Consumer Board Barcelona Mill increased 2.4%. This was primarily due to increasing volumes at Montes del Plata pulp mill and ramp-up of Varkaus kraftliner mill.
Cash flow year-on-year continued to be strong, due to increased profitability and improved working capital. Furthermore, we had a record high operational EBIT margin of 10.1%.
We continue to make progress in transforming into a renewable materials growth company. The Beihai consumer board mill in China is expected to be operational next month, i.e. in May 2016, ahead of schedule. The mill will be inaugurated in June. We expect full production in 18 to 24 months from the start up. The Varkaus Mill kraftliner ramp-up is proceeding and the market acceptance for brown kraftliner and its quality have been good from the beginning. Full production is expected in early 2017. The work on a new production line for wooden building elements (LVL) at Varkaus Mill is proceeding according to plan and production is scheduled to begin in June.
We invest in China and Sweden to further improve competitiveness in strategic growth areas. The investment in a new polyethylene coating line in the new consumer board mill in Beihai will enable us to be more responsive to our customers’ demands in high quality food safety. The investments in a new chemical plant at the consumer board mill in Skoghall, and at Skutskär Mill to reduce its sulphur emissions, shows our orientation towards minimizing environmental impact.
We progress with our set action plans based on the group-wide Human Rights assessment consolidated by the Danish Institute for Human Rights. At the end of the quarter, 79% (69% by the end of 2015) of the preventive and remediation actions were completed.
During the quarter, Stora Enso was granted the award of Bio-based brand of the year, based on our transformation story. The award positions us well in the bioeconomy sphere and shows our commitment towards developing new sustainable solutions.
When it comes to outlook for the second quarter of 2016, sales are estimated to be slightly higher than the amount of EUR 2 445 million recorded in the first quarter of 2016. Operational EBIT is expected to be in line with or somewhat lower than the EUR 248 million recorded in the first quarter of 2016. These estimates include the negative impact of the scheduled annual maintenance shutdowns at Montes del Plata pulp mill, Ostrołęka containerboard mill and Langerbrugge paper mill during the second quarter of 2016. The negative impact from maintenance is expected to be approximately EUR 25 million higher than in the first quarter of 2016.
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
|EUR million||Q1/16||Q1/15||Change %
|Sales||2 445||2 491||-1.8%||2 487||-1.7%||10 040|
|Operational EBITDA||356||340||4.7%||341||4.4%||1 352|
|Operational EBIT margin||10.1%||8.8%||9.7%||9.1%|
|Operating profit (IFRS)||194||215||-9.8%||393||-50.6%||1 059|
|Profit before tax excl. NRI||183||154||18.8%||610||-70.0%||1 048|
|Profit before tax||155||162||-4.3%||360||-56.9%||814|
|Net profit for the period||114||129||-11.6%||407||-72.0%||783|
|Net interest-bearing liabilities||3 185||3 444||-7.5%||3 240||-1.7%||3 240|
|Earnings per share (EPS), excl. NRI, EUR||0.19||0.15||0.78||1.24|
|EPS (basic), EUR||0.15||0.16||0.53||1.02|
|Fixed costs to sales||24.4%||23.9%||25.7%||25.0%|
|Average number of employees||25 521||26 781||-4.7%||26 080||-2.1%||26 783|
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 and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the group’s share of tax and net financial items of EAI.
NRI = Non-recurring items. These are exceptional transactions that are not related to normal business operations. The most common non-recurring items are capital gains, additional write-downs or reversals of write-downs, provisions for planned restructuring and penalties. Non-recurring items are normally disclosed individually if they exceed one cent per share.
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) Press conference and webcast at 13.15 EET (12.15 CET)
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 the Marina Congress Center, Katajanokanlaituri 6, Helsinki at 13.15 EET (12.15 CET). The webcast may be accessed at
2) Webcast and conference call for analysts and investors at 14.30 EET (13.30 CET)
The webcast and conference call for analysts and investors will take place at 14.30 EET (13.30 CET, 12.30 UK time, 07.30 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 http://edge.media-server.com/m/p/ohin4v2r. 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.
Analyst and investor conference call dial-in details at 14.30 EET (13.30 CET):
UK +44(0)20 3427 1904
Finland +358 (0)9 6937 9543
Sweden +46 (0)8 5033 6538
USA +1 212 444 0896
Confirmation Code: 7227642
The links to the webcasts are also available on the Stora Enso website: storaenso.com/investors
For further information, please contact:
Seppo Parvi, CFO, tel. +358 2046 21205
Ulla Paajanen-Sainio, SVP, Investor Relations, tel. +358 40763 8767
Ulrika Lilja, EVP, Communications, tel. +46 72 221 9228
Stora Enso’s second quarter 2016 results will be published on 21 July 2016.
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 26 000 people in more than 35 countries, and our sales in 2015 were EUR 10.0 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) on the International OTCQX over-the-counter market. storaenso.com/investors
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.
STORA ENSO OYJ
For further information, please contact:
tel. +358 2046 21205
SVP, Investor Relations
tel. +358 40763 8767
tel. +46 72 221 9228