Report from STORA's 1998 Annual General Meeting
Report from STORA's 1998 Annual General Meeting - Dividend of SEK 3.75 per share approved. March 17, 1998 adopted as record date. - New Board members: Harald Einsmann, Björn Hägglund and Marcus Wallenberg. The new Board appointed Claes Dahlbäck Chairman and Marcus Wallenberg Deputy Chairman of the Board. - Departing President and CEO, Lars-Åke Helgesson: "The program of measures during the 1990s has significantly improved the Group's opportunities to substantially boost its profitability." - Incoming President and CEO, Björn Hägglund: "During the next two to three years, STORA's operations will focus on increasing the return for shareholders by raising the company's profitability. The program is being initiated to penetrate the unutilized profit potential in our mills and secure the return on the strategic investments made. In total, the program corresponds to an improvement in EBIT of around SEK 3.5 billion per year." STORA's Annual General Meeting was held today at the Lugnet Sports Center in Falun, Sweden, with slightly more than 1,000 shareholders in attendance. Addresses delivered at the Meeting During his address, STORA's outgoing President and Chief Executive Officer, Lars-Åke Helgesson, summarized the Group's development during the 1990s: "We have worked from a program with two main points: The first was based on consolidation - we needed to streamline STORA to focus exclusively on forest products operations, to restore STORA to a strong financial position and to restructure the Group's production apparatus to increase the volume of valueadded products. The second main point, which has applied since 1997, was to prioritize growth - both in existing markets and in the emerging fast-growth markets. Organizationally, we have shifted from holding company status to a Group focusing exclusively on industrial operations." He noted that during the next few years, the total investment program implemented by STORA in 1995-97 will add approximately 900,000 tonnes of new capacity for products with a greater degree of value added. He said that 1997 was a trimming-in year for the new board machine at Stora Skoghall. Also, that during spring 1998, the Group's new SC machine in Canada will be started up. "During 1997, we also shut down and sold operations. The divestment of Arnsberg and the shut-downs made and approved during 1997 in Corbehem (two machines), in Langerbrugge (one machine), in Skoghall (CTMP fluff plant and MG paper machine) and in Port Hawkesbury (sulphite pulp plant) eliminate about 620,000 tonnes of noncompetitive products." Lars-Åke Helgesson concluded his address by summarizing his years as President and CEO of the company: "Naturally, the measures I have described, the majority of which were implemented during the most recent six years, have not solved all of our problems. For example, we have yet to catch up with the best companies in Finland in terms of the relative number of highly efficient plants. However, the program of measures has significantly improved the Group's opportunities to substantially boost its profitability and thereby generate better value growth for its shareholders. From a position of strength, STORA can now also take an active part in the continued consolidation that will probably be required within the forest products industry." During his address to the Meeting, Björn Hägglund, the incoming President and CEO, followed up by focusing on the question of shareholder value. He started by noting that the forest products industry is basically a sound industry, with the potential to make money. Hägglund then went on to describe the most important tasks facing STORA during the immediate future: "During the next two to three years, STORA's operations will focus on increasing the return for shareholders by raising the company's profitability. The company has strong market positions but the trend of productivity in current operations is weak. Accordingly, in order to raise profitability the productivity issue must be addressed first. In concrete terms, this means that we need to initiate programs to penetrate the unutilized profit potential in our mills and secure the return on the strategic investments made in recent years." Hägglund described three areas that had been singled out for productivity improvements: costs, capital and markets. Work in the latter area would include identifying those market segments offering the best profitability, optimizing the customer and product mix and systematically eliminating the unnecessary marginal losses that occur in transports and inventories. "During the next 2-3 years, we need to increase total productivity throughout all STORA's mills, which means that costs must be reduced or revenues increased more rapidly than the long-term negative trend of prices. "A review of the opportunities to be derived from the mill-productivity program indicates that STORA as a whole could achieve a rolling earnings effect of SEK 1.5 billion to SEK 2.0 billion per year, up until the end of year 2000. Preliminary estimates also show that we could increase the return on our investment portfolio by an additional approximately SEK 300 million per year through year 2000. The substantial strategic investments made, for example, in liquid packaging board and magazine paper are in a start-up phase and we estimate that they should generate an approximately 10-percent return towards the end of year 2000, in which case earnings would improve by about SEK 1.5 billion per year. "In total, this program would mean an improvement in earnings before net financial items (EBIT) of around SEK 3.5 billion per year, or an increase in return on capital employed (ROCE) of 6-7 percentage points. In other words, the estimated results of the program correspond to slightly more than a doubling of STORA's earnings per share, compared with 1997." Concluding, Hägglund described some of the activities that would be introduced, and which would involve major commitment from management to drive through the productivity process. These included work focusing on the transfer of skills and management development, and a profit-sharing system for employees and an option program for senior executives. Decisions approved by the Meeting The Annual General Meeting adopted the Board of Directors' proposal that a dividend of SEK 3.75 (Fiscal 1996: SEK 3.75) per share be paid for the 1997 fiscal year. March 17, 1998 was approved as the record date. The dividend will be distributed through the Swedish Securities Register Center (VPC AB) on March 24, 1998. The following members of the Board declined reelection: Bo Berggren, Lars-Åke Helgesson, Sven Söderberg, Tom Wachtmeister and Jacob Wallenberg. The following members of the Board were reelected: Claes Dahlbäck, Palle Marcus, Håkan Mogren, Jan Sjöqvist and Björn Svedberg. The following new members were elected to the Board: Harald Einsmann, President of Procter & Gamble Europe, Middle East and Africa, Björn Hägglund, incoming President and CEO of STORA, and Marcus Wallenberg, Executive Vice President of Investor AB. On behalf of the Board and the shareholders, Bo Berggren thanked the former members who had declined reelection. The Board's Honorary Chairman, Dr. Peter Wallenberg, thanked Bo Berggren for his work as Chairman of the Board. Employee representatives on the Board are Ingemar Falk, Roger Karlsson and Ann-Christin Käll, with Tommy Nordkvist and Kjell Westin as deputies. Statutory Board Meeting At the statutory meeting of the Board following the Annual General Meeting, Claes Dahlbäck was elected Chairman and Marcus Wallenberg Deputy Chairman of the Board. The Board elected Björn Hägglund new President and Chief Executive Officer of STORA.