Stora Enso interim report January–September 2017

Solid performance: A step change in our transformation

STORA ENSO OYJ, Helsinki, Finland
INTERIM REPORT 25 October 2017 at 9.30 EEST

Q3/2017 (year-on-year)

  • Sales of EUR 2 509 (EUR 2 393) million increased 4.8%: the third consecutive quarter of sales growth.
  • Sales excluding the paper business increased 11.1%.
  • Operational EBIT increased 32.4% to EUR 290 (EUR 219) million. This was mainly due to favourable sales prices and increased volumes from the recent strategic investments, and good cost management.
  • Balance sheet continued strengthening; net debt to operational EBITDA was 1.8 (2.1).
  • The ramp-up of Beihai Mill continues to proceed ahead of plan, and it is expected to reach full production during the first half of 2018, and operational EBITDA break-even in Q4/2017.
  • Stora Enso announced today investments of EUR 94 million to grow in renewable materials and to increase competitiveness in consumer board and biomaterials.

Q1–Q3/2017 (year-on-year)

  • Sales at EUR 7 534 (EUR 7 364) million increased 2.3%. Sales excluding the paper business increased 9.2%.
  • Operational EBIT at EUR 724 (EUR 693) million increased 4.5%, mainly due to higher volumes.

Key figures

EUR million Q3/17 Q3/16 Change %
  Q3/17–
  Q3/16
Q2/17 Change %
  Q3/17–
  Q2/17
Q1–Q3/17 Q1–Q3/16 Change % Q1-Q3/17– Q1-Q3/16 2016
Sales 2   509 2   393 4.8% 2   528 -0.8% 7   534 7   364 2.3% 9   802
Operational EBITDA 410 343 19.5% 341 20.2% 1   103 1   061 4.0% 1   371
Operational EBIT 290 219 32.4% 219 32.4% 724 693 4.5% 884
Operational EBIT margin 11.6% 9.2% 8.7% 9.6% 9.4% 9.0%
Operating profit (IFRS) 270 196 37.8% 205 31.7% 668 638 4.7% 783
Profit before tax excl. IAC 244 170 43.5% 153 59.5% 588 465 26.5% 575
Profit before tax 224 161 39.1% 145 54.5% 533 465 14.6% 541
Net profit for the period 191 119 60.5% 143 33.6% 441 351 25.6% 407
Net interest-bearing liabilities 2   476 2   899 -14.6% 2   724 -9.1% 2   476 2   899 -14.6% 2   726
Operational ROCE 13.9% 10.1% 10.3% 11.4% 10.6% 10.2%
Earnings per share (EPS) excl. IAC, EUR 0.27 0.17 0.19 0.63 0.48 0.65
EPS (basic), EUR 0.24 0.16 0.19 0.57 0.47 0.59
Net debt/last 12 months’ operational EBITDA ratio 1.8 2.1 2.0 1.8 2.1 2.0
Average number of employees 27 001 26   819 0.7% 26 581 1.6% 26 371 26 372 0.0% 26   269

Stora Enso’s CEO Karl-Henrik Sundström comments on the third quarter 2017 results:

“During the quarter, we have made a step change in our transformation towards a renewable materials growth company. I am very pleased to announce the third consecutive quarter of sales growth, with an increase of almost 5%. This is mainly driven by our steady progress in the transformation projects in China, Varkaus and Murów. Additionally, a favourable price development had a positive impact. If we look at sales excluding the paper business, it increased over 11%.

Operational EBIT increased over 32% to EUR 290 million, primarily due to favourable sales prices, increased volumes from strategic investments and efficient cost control. The balance sheet continued to strengthen, as net debt to operational EBITDA improved to 1.8 (2.1).

The transformation projects continue to deliver and contribute to solidifying our position in the bioeconomy. The ramp-up of Beihai Mill remains ahead of plan with a production volume of 105 000 (52 000) tonnes of consumer packaging board during the quarter. I am also satisfied that we have reached our targeted operational EBITDA run-rate for the Varkaus kraftliner mill. We expect full production in the fourth quarter this year. Another positive development is the turnaround in China Packaging, where we have seen increased deliveries coupled with operational improvements.

Today, we are happy to announce two important investments in Finland. We continue to invest in Finland, while expecting that the competitiveness of its export industry is ensured and further improved globally.

We will invest EUR 52 million to increase our total dissolving pulp capacity, from 150 000 tonnes to 430 000 tonnes annually at Enocell Mill. Our dissolving pulp is used in the production of viscose fibres for the textile industry. It is a renewable raw material which can replace fossil-based products, such as polyester.

We will also invest EUR 42 million to enhance our chemi-thermomechanical pulp (CTMP) annual production volume and drying capacity at Imatra Mills. This will boost our competitiveness in the liquid packaging board and food service board segments. It will also enable us to take the next steps in the commercialisation of micro-fibrillated cellulose (MFC). MFC can be used for lighter, more durable packaging that requires less raw material. The investments will support our competitiveness and contribute to sustainable growth.

I am proud that we have been top ranked in a study by Mistra Center for Sustainable Markets at the Stockholm School of Economics. The study explored how Sweden’s largest companies communicate their sustainability aspirations, implementation and evaluation.

As always, I would like to thank our customers for their business, our
employees for their dedication, and our investors for their trust.”

Outlook
Q4/2017 sales are estimated to be similar to or slightly higher than the amount of EUR 2 509 million recorded in the third quarter, and operational EBIT is expected to be somewhat lower than or even in line with the EUR 290 million recorded in Q3/2017. The operational EBIT estimate for Q4/2017 includes the negative EUR 7 million impact of the ramp-up of the Beihai operations.

As earlier announced, the Beihai Mill is expected to reach operational EBITDA-breakeven during Q4/2017. The impact of annual maintenance shutdowns is expected to be approximately EUR 10 million higher than in Q3/2017, and it is included in the above guidance.


Events today:

1) Webcast for media at 12.00 Finnish time (11.00 CEST)
Stora Enso’s CEO Karl-Henrik Sundström and CFO Seppo Parvi will present the results in a live webcast hosted by EVP Communications Ulrika Lilja. The event will be held in English. The webcast may be accessed at storaenso.videosync.fi/2017-q3-results/register

2) Webcast and conference call for analysts and investors at 15.00 Finnish time
The webcast and conference call for analysts and investors will take place at 15.00 EEST (14.00 CEST, 13.00 UK time, 08.00 EDT). 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/m6/p/2vnrfvqa

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. The links to the webcasts are also available on the Stora Enso website: storaenso.com/investors

Dial-in details for the analyst and investor conference call 

Live event at 15.00 EEST 
UK +44(0)20 3427 1904                                                      
Finland +358 (0)9 6937 9590          
Sweden +46 (0)8 5033   6539 
USA +1 646 254 3388 
Confirmation Code: 3750266 


For further information, please contact:
Seppo Parvi, CFO, tel. +358 2046 21205
Ulla Paajanen-Sainio, SVP, Investor Relations, tel. +358
40 763 8767
Ulrika Lilja, EVP, Communications, tel.
+46 72 221 9228


This release is a summary of Stora Enso’s Interim Report January–September 2017. The complete report is attached to this release as a pdf file. It is also available on the company website at
storaenso.com/investors.

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
40 763 8767

Ulrika Lilja
EVP, Communications
tel.
+46 72 221 9228 

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