Stora Enso Interim Review January ? Marc
STORA ENSO OYJ Stock Exchange Release 28 April 2004 at 13.00
Stora Enso Interim Review January March 2004
Profitability remained weak, outlook improving
First Quarter Results (compared to previous quarter)
Stora Enso's earnings per share excluding non-recurring items were
EUR 0.06 (EUR 0.00). Operating profit excluding non-recurring items was
EUR 103.4 (EUR 77.4) million, which is 33.6% more than in the previous
quarter and 3.4% of sales. Profit before taxes and minority interests
excluding non-recurring items amounted to EUR 80.8 (EUR 4.8) million.
Sales at EUR 3 017.9 million were similar to the previous quarter's
EUR 3 028.8 million. Cash flow from operations was EUR 173.2 (EUR 579.7)
million and cash flow after investing activities EUR -54.2 (EUR 190.5)
million. Cash earnings per share excluding non-recurring items were
EUR 0.41 (EUR 0.35). Net financial items were EUR -20.3
(EUR -121.7) million. Market-related production curtailments totalled
125 000 tonnes (210 000 tonnes).
EUR million 2002 2003 Q1/03 Q4/03 Q1/04
Sales 12 782.6 12 172.3 3 099.1 3 028.8 3 017.9
EBITDA1)2) 2 145.9 1 710.6 497.5 376.3 394.0
Operating profit2) 900.4 525.8 208.0 77.4 103.4
Non-recurring items -1 078.1 -108.4 - -68.5 3) 115.7
Operating margin2), % 7.0 4.3 6.7 2.6 3.4
Operating profit -177.7 471.4 208.0 62.9 219.1
Profit before tax and
minority interests2) 708.8 319.2 126.2 4.8 80.8
Profit before tax and
minority interests -369.3 210.8 126.2 -63.7 196.5
Net profit for the period -240.7 137.9 83.1 -44.4 406.9
EPS2), Basic, EUR 0.55 0.24 0.10 0.00 0.06
EPS, Basic, EUR -0.27 0.16 0.10 -0.05 0.49
CEPS2)4), EUR 1.95 1.63 0.43 0.35 0.41
ROCE2), % 7.0 4.5 7.0 2.6 3.7
1) EBITDA = Earnings before Interest, Taxes, Depreciation and
Amortisation
2) Excluding net non-recurring items. Exceptional transactions that
are not related to normal business operations are accounted for
as non-recurring items. The most common non-recurring items are
capital gains, additional write-downs, restructuring provisions
and penalties. Non-recurring items are normally specified
individually if they exceed one cent per share.
3) EUR -54.0 million included in net financial items
4) CEPS = (Net profit for the period + depreciation and
amortisation)/average number of shares
Outlook
Commenting on the outlook, Stora Enso's CEO Jukka Härmälä said, "In
Europe economic recovery has been slow. However, demand for paper has
increased and this seems to be stabilising prices for most paper grades
and making some price increases possible. Packaging board prices are
generally firm. In wood products there is good demand for whitewood and
prices are stable, but an oversupply of redwood is causing prices to
fall."
In North America demand for paper is improving gradually. Despite the low
value of the dollar, imports from Europe and Asia continue, though at a
slower rate than earlier. The coated fine paper market is expected to
improve slowly and price increases have been announced. The magazine
paper market is improving and price increases are expected to be
implemented during the second quarter.
Asian economies are growing rapidly and sustaining good levels of paper
and packaging consumption. Prices for some grades are increasing in local
currencies.
Provided that market conditions continue to improve, the Group's results
are expected to benefit, but only in the latter part of the year. The net
effect of the restructuring of forestland ownership in Sweden will be
about EUR -40 million after net financial items on an annual basis.
The second quarter results will as usual be adversely impacted by
Midsummer holiday shutdowns, especially in Finland, and by a major
rebuilding of fine paper machine 97 at Kimberly Mill as part of Stora
Enso North America's Profit Enhancement Programme.
For further information, please contact:
Jukka Härmälä, Chief Executive Officer, tel. +44 20 7016 3110
Björn Hägglund, Deputy Chief Executive Officer, tel. +46 70 528 2785
Esko Mäkeläinen, CFO, tel. +44 20 7016 3115
Kari Vainio, EVP, Corporate Communications, tel. +44 7799 348 197
Keith B Russell, SVP, Investor Relations, tel. +44 20 7016 3146
www.storaenso.com
www.storaenso.com/investors
The full-length version of the Stora Enso interim review is available on
the Stora Enso website at www.storaenso.com/investors
An image bank of pictures that may be freely used to illustrate articles
about Stora Enso is available at www.storaenso.com/images
Stora Enso Interim Review January March 2004
Summary of first quarter results
* Sales were EUR 3 017.9 million; previous quarter
EUR 3 028.8 million.
* Operating profit excluding non-recurring items was
EUR 103.4 million; previous quarter EUR 77.4 million.
* Profit before tax and minority interests excluding non-recurring
items was EUR 80.8 million; previous quarter EUR 4.8 million.
* Earnings per share excluding non-recurring items were EUR 0.06;
previous quarter EUR 0.00.
* The effect of the restructuring of the Group's Swedish forestland
ownership on EPS was EUR 0.43
* Cash earnings per share excluding non-recurring items were
EUR 0.41; previous quarter EUR 0.35.
The previous years' financial statements have been restated in line
with the change of the accounting treatment of disability pensions under
the Finnish statutory employment pension scheme (TEL) as a defined
benefit plan.
Markets for the Group's products continued to recover slowly in the first
quarter with a modest improvement in demand for advertisingdriven paper
and seasonal strength in packaging grades. European mills increased sales
of fine paper and packaging boards in Europe and exports to Asia. Prices
of all paper grades declined at the start but were stabilising towards
the end of the quarter. In wood products demand for whitewood improved
and market conditions for redwood were challenging.
In North America demand for coated and uncoated magazine paper increased.
Coated fine paper markets remained seasonally weak with prices at low
levels. Some price increases have recently been announced.
Market-related production curtailments totalled 125 000 tonnes in Europe
and none in North America. This compares with the previous quarter's
205 000 tonnes in Europe and 5 000 tonnes in North America.
Paper and board deliveries totalled 3 467 000 tonnes, which is 23 000
tonnes less than the previous quarter's 3 490 000 tonnes. Deliveries of
wood products totalled 1 597 000 cubic metres, compared with the previous
quarter's 1 558 000 cubic metres.
EUR million 2002 2003 Q1/03 Q4/03 Q1/04
Sales 12 782.6 12 172.3 3 099.1 3 028.8 3 017.9
EBITDA1)2) 2 145.9 1 710.6 497.5 376.3 394.0
Operating profit2) 900.4 525.8 208.0 77.4 103.4
Non-recurring items -1 078.1 -108.4 - -68.5 3) 115.7
Operating margin2), % 7.0 4.3 6.7 2.6 3.4
Operating profit -177.7 471.4 208.0 62.9 219.1
Profit before tax and
minority interests2) 708.8 319.2 126.2 4.8 80.8
Profit before tax and
minority interests -369.3 210.8 126.2 -63.7 196.5
Net profit for the period -240.7 137.9 83.1 -44.4 406.9
EPS2), Basic, EUR 0.55 0.24 0.10 0.00 0.06
EPS, Basic, EUR -0.27 0.16 0.10 -0.05 0.49
CEPS2)4), EUR 1.95 1.63 0.43 0.35 0.41
ROCE2), % 7.0 4.5 7.0 2.6 3.7
1) EBITDA = Earnings before Interest, Taxes, Depreciation and
Amortisation
2) Excluding net non-recurring items. Exceptional transactions that
are not related to normal business operations are accounted for
as non-recurring items. The most common non-recurring items are
capital gains, additional write-downs, restructuring provisions
and penalties. Non-recurring items are normally specified
individually if they exceed one cent per share.
3) EUR -54.0 million included in net financial items
4) CEPS = (Net profit for the period + depreciation and
amortisation)/average number of shares
First Quarter Results (compared with previous quarter)
Sales at EUR 3 017.9 million were similar to the previous quarter's
EUR 3 028.8 million.
Operating profit excluding non-recurring items was EUR 103.4 (EUR 77.4)
million, which is 33.6% more than in the previous quarter and 3.4% of
sales. The rise in operating profit was mainly due to higher production,
mix changes between the segments and seasonal improvement in packaging
boards, but this was partly offset by a decline in prices. The rebuilding
of paper machine 16 at Wisconsin Rapids reduced the operating profit by a
total of USD 20 (EUR 16) million, of which more than half was related to
lost volumes.
Operating profit includes gains on cash flow currency hedge contracts,
mainly for the US dollar and British pound, of EUR 9.3 million.
Profit before taxes and minority interests excluding non-recurring items
amounted to EUR 80.8 (EUR 4.8) million.
The share of associated company results was EUR -2.3 (EUR -5.0) million,
including EUR -3.6 million due to Tornator.
Net financial items were EUR -20.3 (EUR -121.7) million, or EUR -0.02 per
share. Net interest expenses amounted to EUR -42.0 (EUR -50.1) million
and net foreign exchange gains were EUR 4.8 (loss of EUR 10.5) million.
Other financial items totalled EUR 16.9 (EUR -61.1) million, most of
which was unrealised changes in fair values of financial instruments.
Net taxes totalled a positive EUR 214.6 (EUR 21.4) million, the gain
resulting from the release of EUR 240.8 million in deferred tax
liabilities on the fair valuation of biological assets relating to the
restructuring of forestland ownership in Sweden. The tax charge excluding
this restructuring was EUR -26.2 million, representing a rate of 31.9%
(33.6%).
The minority interest in profits was EUR -4.2 (EUR -2.0) million, leaving
a net profit for the period of EUR 406.9 (loss of EUR 44.4) million.
Earnings per share excluding non-recurring items were EUR 0.06 (EUR 0.00)
and cash earnings per share excluding non-recurring items EUR 0.41
(0.35). The effect of the restructuring of forestland ownership in Sweden
on EPS was EUR 0.43.
The return on capital employed excluding non-recurring items was 3.7%
(2.6%). Capital employed was EUR 10 578.5 million at the end of the
period, a net decrease of EUR 1 034.6 million.
The results for the first quarter include the effects of biological
transformation (growth and price) amounting to EUR 29.6 (EUR 23.5)
million and biological produce (harvesting) amounting to EUR -25.2
(EUR -26.5) million, resulting in a net effect of EUR 4.4
(EUR -3.0) million.
Capital Structure
EUR million 31.12.2003 31.3.2003 31.3.2004
Fixed assets 12 676.1 12 906.5 11 059.5
Working capital 872.1 1 055.9 948.6
Operating Capital 13 548.2 13 962.4 12 008.1
Net tax liabilities -1 935.1 -2 091.2 -1 429.6
Capital Employed 11 613.1 11 871.2 10 578.5
Associated companies 319.0 204.9 498.1
Total 11 932.1 12 076.1 11 076.6
Shareholders equity 7 952.9 8 062.7 7 908.9
Minority interests 60.3 45.1 62.8
Interest-bearing net liabilities 3 918.9 3 968.3 3 104.9
Financing Total 11 932.1 12 076.1 11 076.6
Financing
Cash flow from operations was EUR 173.2 (EUR 579.7) million and cash flow
after investing activities EUR -54.2 (EUR 190.5) million. Cash earnings
per share excluding non-recurring items were EUR 0.41 (EUR 0.35).
At the end of March, interest-bearing net liabilities were
EUR 3 104.9 million, a decrease of EUR 814.0 million on the year-end that
includes a decrease of EUR 1 212.8 million due to the restructuring of
forestland ownership in Sweden and an increase of EUR 375.7 million due
to the 2003 dividends deducted from equity and entered into the current
interest-bearing liabilities for the dividend payment on the 2 April.
Unutilised credit facilities and cash plus cash-equivalent reserves
totalled EUR 3.0 billion.
The debt/equity ratio at 31 March was 0.39 (0.49) and equity per share
EUR 9.48 (EUR 9.49). The change was due to the decrease in net interest-
bearing liabilities as explained in the previous paragraph. Share buy-
backs decreased equity by EUR 42.7 million. The net profit effect of the
restructuring of forestland ownership in Sweden was EUR 356.5 million.
Stora Enso has restated its financial statements for previous years under
IFRS following the change of the accounting treatment of disability
pensions under the Finnish statutory employment pension scheme (TEL) as a
defined benefit plan.
Change in Interest-bearing Net Liabilities
Cash Transl
Flow, Acquisi ation Balance
Ongoing tions and Differ Sheet
EUR million Operations Disposals ence Impact
Operating profit 99.1 115.7 4.3 219.1
Adjustments 290.6 290.6
Change in working capital -216.5 140.5 -0.5 -76.5
Cash Flow from Operations 173.2 256.2 3.8 433.2
Capital expenditure -216.1 -216.1
Acquisitions -21.3 -164.9 -186.2
Disposals 14.4 1 573.3 1 587.7
Other changes in fixed assets -4.4 -36.3 -40.7
Operating cash flow -54.2 1 664.6 -32.5 1 577.9
Net financing items (incl.
associated companies) -22.6 -22.6
Taxes paid 160.9 -441.5 -9.9 -290.5
Share issue 4.0 4.0
Dividends -375.7 -375.7
Repurchase of own shares -42.7 -42.7
Other change in shareholders
equity and minority interests -19.7 -10.3 -6.4 -36.4
Change in Interest-bearing
Net Liabilities -350.0 1 212.8 -48.8 814.0
Capital Expenditure
Capital expenditure for the first quarter totalled EUR 216.1 (235.8)
million. The main projects were rebuilding paper machine 16 rebuild at
Wisconsin Rapids in the USA (USD 22.4 million), the new boiler at
Kvarnsveden Mill in Sweden (EUR 15.5 million), upgrading paper machine 5
at Corbehem Mill in France (EUR 12.7 million), folding boxboard asset
improvements at Baienfurt Mill in Germany (EUR 11.9 million) and
rebuilding paper machine 3 at Veitsiluoto Mill in Finland
(EUR 9.1 million).
During the first quarter it was decided to upgrade and modernise the
paper machine and increase sheeting capacity at the fine paper mill in
Suzhou, China at a total budgeted cost of EUR 38 million. The project
will be completed by October 2005.
Capital expenditure in 2004 is expected to be close to the Group's
depreciation charge (approximately EUR 1.1 billion excluding goodwill
amortisation).
First Quarter Results (compared with the same period in 2003)
Operating profit excluding non-recurring items decreased by
EUR 104.6 million or 50.3%. All paper and board segments reported lower
profits, with the largest decline in Fine Paper, but operating profit
increased in Merchants and Wood Supply Europe.
Profit before taxes and minority interests, excluding non-recurring
items, decreased by EUR 45.4 million or 36%.
Sales decreased by EUR 81.2 million, or 2.6%, compared with the first
quarter of 2003 as higher volumes only partly offset significantly lower
sales prices.
First Quarter Events 2004
Restructuring of Forestlands
In March Stora Enso finalised the restructuring of forestland ownership
in Sweden and the divestment of forestland in Canada. The Group's Swedish
forests were transferred to Bergvik Skog AB with the majority of its
shares sold to institutional investors, Stora Enso retaining a 43.3%
stake. Stora Enso also finalised the divestment of its 146 000 hectares
of forestland in Ontario, Canada.
Share Capital and Ownership
On 17 February 2004 the shares in Stora Enso held by the mutual funds of
Franklin Resources, Inc. exceeded 5% of the paid-up share capital; their
shareholding was then 45 391 907 R shares, representing 5.25% of all
shares and 1.82% of votes.
During the period a total of 10 341 A shares were converted into R
shares. Converted shares are recorded monthly in the Finnish Trade
Register. The latest conversion recorded in the Finnish Trade Register
was on 16 February 2004.
The Annual General Meeting (AGM) of Stora Enso Oyj on 18 March 2004
decided to lower the Company's share capital by EUR 47.3 million through
the cancellation of 8 100 A shares and 27 800 000 R shares. These shares
had been repurchased under the authorisation of the 2003 AGM and the
reduction in share capital was registered in the Finnish Trade Register
on 5 April 2004.
The 2004 AGM also authorised the Board to repurchase and dispose of not
more than 9 000 000 A shares and 32 700 000 R shares in the Company. By
the end of March 2004 a total of 439 000 R shares had been repurchased
under the new authorisation.
During the period a total of 789 000 new R shares were issued under the
terms of the 1997 warrants, thus increasing equity by EUR 4.4 million.
According to the terms of the option programme, the exercise period was
1 December 1998 to 31 March 2004, during which the maximum of 3 000 000
new Stora Enso Series R shares were subscribed at a subscription price
of EUR 7.66 (FIM 45.57) each.
On 31 March 2004 Stora Enso had 181 172 833 A shares and 683 386 666
R shares in issue, of which the Company held 8 100 A and 30 180 447
R shares with a nominal value of EUR 51.3 million; these represented
3.5% of the share capital and 1.2% of the voting rights. On
31 March 2004 the registered share capital of the Company was
EUR 1 469.8 million.
Shareholders' equity amounted to EUR 7.9 billion, compared with a market
capitalisation on the Helsinki Stock Exchange on 31 March 2004 of
EUR 8.9 billion.
Other Decisions of the Annual General Meeting on 18 March 2004
The proposed dividend of EUR 0.45 per share was approved.
Lee A. Chaden was elected as a new member of the Board of Directors to
replace George W. Mead, who retired.
Board Committee Memberships
Stora Enso Oyj's Board of Directors elected Barbara Kux as a new member
of the Financial and Audit Committee. The other members are Ilkka Niemi,
Paavo Pitkänen, Jan Sjöqvist (chairman) and Marcus Wallenberg.
Claes Dahlbäck (chairman), Krister Ahlström and Harald Einsmann remain
members of the Compensation Committee. Ilkka Niemi was elected as a new
member of this committee.
Claes Dahlbäck, Krister Ahlström (chairman) and Harald Einsmann remain
members of the Nomination Committee. Ilkka Niemi was elected as a new
member of this committee.
Events after the Period
In April Stora Enso Timber inaugurated its second sawmill in Russia. The
new sawmill at Nebolchi is part of Stora Enso's strategy to increase
industrial operations and enhance wood procurement in Russia. The total
investment was EUR 10.3 million and the full production capacity of
100 000 cubic metres will be reached by the end of 2005.
Outlook
In Europe economic recovery has been slow. However, demand for paper has
increased and this seems to be stabilising prices for most paper grades
and making some price increases possible. Packaging board prices are
generally firm. In wood products there is good demand for whitewood and
prices are stable, but an oversupply of redwood is causing prices to
fall.
In North America demand for paper is improving gradually. Despite the low
value of the dollar, imports from Europe and Asia continue, though at a
slower rate than earlier. The coated fine paper market is expected to
improve slowly and price increases have been announced. The magazine
paper market is improving and price increases are expected to be
implemented during the second quarter.
Asian economies are growing rapidly and sustaining good levels of paper
and packaging consumption. Prices for some grades are increasing in local
currencies.
Provided that market conditions continue to improve, the Group's results
are expected to benefit, but only in the latter part of the year. The net
effect of the restructuring of forestland ownership in Sweden will be
about EUR -40 million after net financial items on an annual basis.
The second quarter results will as usual be adversely impacted by
Midsummer holiday shutdowns, especially in Finland, and by a major
rebuilding of fine paper machine 97 at Kimberly Mill as part of Stora
Enso North America's Profit Enhancement Programme.
This report is unaudited.
Helsinki, 28 April 2004
Stora Enso Oyj
Board of Directors
Segments (compared with the previous quarter)
PAPER
Publication Paper
EUR change
million 2003 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q1/Q4%
Sales 4 295.7 1 058.3 1 042.8 1 086.3 1 108.3 1 019.2 -8.0
Operating
profit 111.1 35.6 -6.0 39.2 42.3 8.7 -79.4
% of sales 2.6 3.4 -0.6 3.6 3.8 0.9
ROOC, %* 2.8 3.6 -0.6 3.9 4.2 0.9
Deliveries,
1 000 t 6 954 1 654 1 678 1 763 1 859 1 732 -6.8
Production
volumes,
1 000 t 7 011 1 739 1 663 1 812 1 797 1 830 1.8
* ROOC = 100% x Operating profit/Operating capital
Publication paper sales were EUR 1 019.2 million, 8.0% down on the
previous quarter due to lower prices and seasonally lower deliveries.
Operating profit was EUR 8.7 million, down 79.4% on the previous quarter
mainly due to lower total sales and a higher proportion of lower-margin
overseas sales, which could not be compensated by higher production
volumes. Market-related production curtailments totalled 93 000 tonnes
(123 000 tonnes) in Europe and none (2 000 tonnes) in North America.
In Europe demand for newsprint was firm and demand for coated and
uncoated magazine paper was higher than a year ago. Lower-margin overseas
shipments increased further. Prices decreased in all publication paper
grades at the beginning of the year, but have now stabilised. Producer
inventories have risen and are seasonally high, although customer
inventories have not increased much.
In North America demand for magazine paper was higher than a year ago
and prices were fairly stable. Newsprint demand and prices were stable.
Price increases for uncoated magazine paper were announced.
Fine Paper
Change
EUR million 2003 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q1/Q4 %
Sales 3 197.7 852.3 793.9 788.5 763.0 788.9 3.4
Operating
profit 153.5 80.7 40.3 23.1 9.4 18.1 92.6
% of sales 4.8 9.5 5.1 2.9 1.2 2.3
ROOC, %* 4.4 8.8 4.5 2.7 1.1 2.2
Deliveries,
1 000 t 3 591 885 895 894 917 959 4.6
Production
volumes,
1 000 t 3 624 894 889 922 919 984 7.0
* ROOC = 100% x Operating profit/Operating capital
Fine paper sales were EUR 788.9 million, up 3.4% on the previous quarter
mainly due to seasonally increased deliveries. Operating profit was
EUR 18.1 million, up 92.6% on the previous quarter. Market-related
production curtailments totalled 12 000 tonnes (40 000 tonnes) in Europe
and none (3 000 tonnes) in North America.
In Europe demand for uncoated fine paper grew throughout the first
quarter. Demand for coated fine paper was higher than in the previous
quarter mainly due to the seasonal increase in consumption. Demand for
speciality papers was also higher than in the previous quarter.
Uncoated fine paper sales prices were slightly lower than in the previous
quarter due to increased competition from Eastern European producers.
However, prices are stabilising in Europe and increasing in Asia.
Coated fine paper sales prices were also lower than in the previous
quarter, mainly due to overcapacity. Prices are stabilising in Europe and
price increases have been announced in Europe and overseas markets.
Speciality paper sales prices were similar to the previous quarter and
are expected to remain stable.
Producer inventories are at long-term average levels and order books for
uncoated and coated fine paper are healthy.
In North America demand for coated fine paper was stable. Prices
decreased at the beginning of the quarter and stabilised at low levels
towards the end. Price increases have been announced for coated fine
paper. Producer inventories are still relatively high, despite recent
reductions. Speciality paper demand and prices were stable. Order books
are fairly strong and some price increases have been announced.
In Europe demand for uncoated and coated fine paper remains fairly good,
although there may be a seasonal slowdown in demand for both grades in
the summer. In North America the outlook for coated fine paper is
gradually improving. The outlook for coated and uncoated fine paper in
Asian markets is buoyant due to good demand expectations and increasing
pulp prices.
Merchants
Sales were EUR 160.3 million, up 2.4% on the previous quarter mainly due
to increased volumes although prices were lower than in the previous
quarter. There was an operating profit of EUR 3.3 million, in contrast to
the loss of EUR 5.5 million in the previous quarter, as a result of the
cost-saving programme.
Demand has started to recover. Prices also started to increase slightly
towards the end of the quarter and Stora Enso's merchant business has
announced some price increases for the second quarter.
Modest improvements are expected in the second half of the year.
PACKAGING BOARDS
Change
EUR million 2003 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q1/Q4%
Sales 2 761.6 699.0 711.4 691.1 660.1 692.0 4.8
Operating
profit 292.4 89.4 65.5 87.4 50.1 82.1 63.9
% of sales 10.6 12.8 9.2 12.6 7.6 11.9
ROOC, %* 11.6 14.1 10.3 13.7 7.9 13.1
Deliveries,
1 000 t 3 006 756 781 755 714 776 8.7
Production
volumes,
1 000 t 3 050 788 763 767 732 771 5.3
* ROOC = 100% x Operating profit/Operating capital
Packaging boards sales were EUR 692.0 million, up 4.8% on the previous
quarter due to seasonal strength partly offset by the weaker US dollar.
Operating profit was EUR 82.1 million, up 63.9% due to increased volumes
and maintenance stoppages in the previous quarter. Marketrelated
production curtailments totalled 20 000 tonnes (42 000 tonnes).
Demand was stable for most paperboard grades and corrugated products.
Prices were generally stable. Consumer packaging board and laminating
paper markets in the Americas and Asia remain affected by the low US
dollar.
Demand is generally expected to improve slightly and prices should remain
stable in the near future. The second quarter results will, as usual,
reflect the Midsummer holiday shutdowns, especially in Finland.
FOREST PRODUCTS
Wood Products
Change
EUR million 2003 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q1/Q4%
Sales 1 400.0 316.5 385.6 335.5 362.4 373.1 3.0
Operating
profit 26.5 7.0 14.9 -4.7 9.3 11.4 22.6
% of sales 1.9 2.2 3.9 -1.4 2.6 3.1
ROOC, %* 5.1 6.1 11.0 -3.0 5.7 7.0
Deliveries,
1 000 m3 5 822 1 283 1 644 1 337 1 558 1 597 2.5
Production
volumes,
1 000 m3 6 168 1 406 1 648 1 440 1 674 1 708 2.0
* ROOC = 100% x Operating profit/Operating capital
Wood product sales were EUR 373.1 million, up 3.0% on the previous
quarter mainly due to the higher volume invoiced. Operating profit was
EUR 11.4 million, up 22.6% on the previous quarter mainly due to
increased production and lower fixed costs.
Sales volumes improved in the middle of the quarter except for Nordic
redwood. Inventories remained high, especially in Finland and Sweden.
Prices were generally stable in Europe, but slowly falling for redwood,
whereas US prices were rising.
The oversupply of redwood will continue to upset the market balance in
the second quarter. Nordic, Baltic States and Central European whitewood
markets are stable, so limited price increases are feasible. In the USA
and Japan the outlook is good. European markets will stabilise, but
redwood suffers from poor sales prospects in North Africa.
Wood Supply Europe
Sales were EUR 634.9 million, up 17.9% on the previous quarter mainly due
to the product mix change. Operating profit was EUR 31.3 million, up
EUR 6.1 million on the previous quarter.
The restructuring of the ownership of the Swedish forestland will reduce
the operating profit by about EUR 100 million on an annual basis, offset
by lower financial charges due to the reduction of interest-bearing net
liabilities and by income from the new associate.
Deliveries in Finland, Sweden, the Baltic States, Russia and Continental
Europe totalled 13.6 million cubic metres (solid wood under bark), 21% up
on the previous quarter for seasonal reasons. Deliveries to the Group's
mills in Europe totalled 10.9 million cubic metres, up 7% on the previous
quarter.
Wood supply in Stora Enso's main markets is expected to remain stable.
Financials
Key Ratios Q1/03 Q2/03 Q3/03 Q4/03 2003 Q1/04
Earnings per share
(basic), EUR 0.10 0.06 0.05 -0.05 0.16 0.49
Earnings per share
excl. non-recurring
items, EUR 0.10 0.06 0.08 0.00 0.24 0.06
Cash earnings per
share (CEPS), EUR 0.43 0.41 0.41 0.32 1.57 0.55
CEPS excl. non
recurring items, EUR 0.43 0.41 0.44 0.35 1.63 0.41
Return on capital
employed (ROCE), % 7.0 3.5 3.2 2.1 4.0 7.9
ROCE excl. non
recurring items, % 7.0 3.5 4.6 2.6 4.5 3.7
Return on equity
(ROE), % 4.1 2.8 2.1 -2.1 1.7 20.6
Debt/equity ratio 0.49 0.51 0.51 0.49 0.49 0.39
Equity per share, EUR 9.39 9.48 9.60 9.49 9.49 9.48
Equity ratio, % 43.2 43.8 44.2 44.7 44.7 47.8
Operating profit,
% of sales 6.7 3.4 3.2 2.1 3.9 7.3
Operating profit
excl. non-recurring
items, % of sales 6.7 3.4 4.6 2.6 4.3 3.4
Capital expenditure,
EUR million 235.8 324.1 303.1 385.2 1 248.2 216.1
Capital expenditure,
% of sales 7.6 10.6 10.1 12.7 10.3 7.2
Capital employed,
EUR million 11 871 11 925 12 029 11 613 11 613 10 579
Interest-bearing net
liabilities,
EUR million 3 968 4 071 4 104 3 919 3 919 3 105
Average number of
employees 43 386 44 506 44 737 44 264 44 264 42 446
Average number of
shares (million)
- periodic 866.2 852.9 844.5 841.3 851.1 836.4
- cumulative 866.2 859.5 854.4 851.1 851.1 836.4
- cumulative, diluted 866.4 860.5 855.6 852.4 852.4 837.1
Key Exchange Rates for the Euro
One Euro is Closing Rate Average Rate
31 Dec 2003 31 Mar 2004 31 Dec 2003 31 Mar 2004
SEK 9.0800 9.2581 9.1245 9.1807
USD 1.2630 1.2224 1.1320 1.2500
GBP 0.7048 0.6659 0.6921 0.6798
CAD 1.6234 1.5979 1.5822 1.6470
Condensed Consolidated Income Statement
EUR million 2003 Q1/2003 Q1/2004
Sales 12 172.3 3 099.1 3 017.9
Other operating income 41.2 24.5 140.2
Materials & services -6 129.3 -1 476.5 -1 560.0
Freight & sales commissions -1 286.8 -390.7 -325.6
Personnel expenses -2 297.6 -560.9 -551.6
Other operating expenses -828.0 -198.0 -211.2
Depreciation, amortisation and
impairment charges -1 200.4 -289.5 -290.6
Operating Profit 471.4 208.0 219.1
Share of results of associated
companies -23.0 -0.5 -2.3
Net financial items -237.7 -81.3 -20.3
Profit before Tax and Minority
Interests 210.7 126.2 196.5
Income tax expense -67.0 -39.9 214.6
Profit after Tax 143.7 86.3 411.1
Minority interests -5.8 -3.2 -4.2
Net Profit for the Period 137.9 83.1 406.9
Key Ratios
Basic earnings per share, EUR 0.16 0.10 0.49
Diluted earnings per share, EUR 0.16 0.10 0.49
Condensed Consolidated Cash Flow Statement
EUR million 2003 Q1/2003 Q1/2004
Cash Flow from Operating Activities
Operating profit 471.4 208.0 219.1
Adjustments 1 178.3 276.4 166.2
Change in net working capital 157.9 -21.3 -216.5
Change in short-term interest-
bearing receivables 313.1 237.6 499.0
Cash Flow Generated by Operations 2 120.7 700.7 667.8
Net financial items -198.1 -28.5 -14.1
Income taxes paid -233.8 -92.6 -79.9
Net Cash Provided by
Operating Activities 1 688.8 579.6 573.8
Acquisitions -241.3 -134.6 -186.1
Proceeds from sale of fixed
assets and shares 60.2 4.8 212.3
Capital expenditure -1 226.7 -235.8 -216.1
Proceeds from the long-term
receivables, net 336.2 -23.0 -171.4
Net Cash Used in
Investing Activities -1 071.6 -388.6 -361.3
Cash Flow from Financing Activities
Change in long-term liabilities -962.5 -274.8 -4.9
Change in short-term borrowings 1 097.1 262.2 144.4
Dividends paid -387.7 - -
Proceeds from issuance of
share capital 2.3 - 4.0
Purchase of own shares -319.2 -114.6 -42.7
Net Cash Used in
Financing Activities -570.0 -127.2 100.8
Net Increase in Cash and
Cash Equivalents 47.2 63.8 313.3
Cash and bank in
acquired companies 3.0 7.4 -
Cash and bank in sold companies - - -36.4
Translation differences on
cash holdings -17.2 -2.3 1.8
Cash and bank at the beginning of
period 168.5 168.5 201.5
Cash and Cash Equivalents at
Period End 201.5 237.4 480.2
Property, Plant and Equipment, Intangible Assets and Goodwill
EUR million 2003 Q1/2003 Q1/2004
Carrying value at 1 January 12 796.7 * 12 796.7 * 12 535.3
Acquisition of subsidiary companies 206.4 168.3 -
Additions 1 248.2 235.8 216.1
Disposals -54.0 -1.6 -1 587.7
Depreciation, amortisation and
impairment -1 200.4 -289.5 -290.6
Translation difference and other -461.6 -151.7 36.3
Balance Sheet Total 12 535.3 12 758.0 10 909.4
Acquisitions of Subsidiary Companies
Property, plant and equipment 132.6 71.9 -
Borrowings -94.1 -64.6 -
Other assets, less liabilities 12.9 30.9 -
Fair value of net assets 51.4 38.2 -
Goodwill 73.8 96.4 -
Total Purchase Consideration 125.2 134.6 -
* Includes the initial IAS 41 valuation of forest of EUR 855.8 million
Borrowings
EUR million 2003 Q1/2003 Q1/2004
Non-current borrowings 3 404.6 4 279.6 3 425.5
Current borrowings 1 769.6 1 277.7 868.6
5 174.2 5 557.3 4 294.1
Carrying value at 1 January 5 175.6 5 175.6 5 174.2
Debt acquired with new subsidiaries 94.1 64.6 -
Debt disposed with sold subsidiaries - - -1 487.3
Proceeds from / -payments of
borrowings (net) 421.5 -12.6 145.3
Translation difference and other -517.0 329.7 461.9
Total Borrowings 5 174.2 5 557.3 4 294.1
Condensed Consolidated Balance Sheet
Assets
EUR million 31 Dec 2003 31 Mar 2003 31 Mar 2004
Fixed and Other Long-term Assets
Fixed assets O 12 535.3 12 758.0 10 909.4
Investment in
associated companies 319.0 204.9 498.1
Listed securities I 227.7 148.4 220.4
Unlisted shares O 140.8 148.5 150.1
Non-current loan
receivables I 44.3 487.3 216.5
Deferred tax assets T 12.1 50.0 10.9
Other non-current assets O 170.3 219.6 172.8
13 449.5 14 016.7 12 178.2
Current Assets
Inventories O 1 623.5 1 670.7 1 726.7
Tax receivables T 182.5 241.3 163.7
Operative receivables O 1 703.3 1 879.3 1 864.2
Interest-bearing
receivables I 781.8 715.9 272.0
Cash and cash
equivalents I 201.5 237.4 480.2
4 492.6 4 744.6 4 506.8
Total assets 17 942.1 18 761.3 16 685.0
Shareholders' Equity and Liabilities
EUR million 31 Dec 2003 31 Mar 2003 31 Mar 2004
Shareholders Equity 7 952.9 8 062.7 7 908.9
Minority Interests 60.3 45.1 62.8
Long-term Liabilities
Pension provisions O 911.9 909.1 927.1
Other provisions O 97.1 179.7 80.7
Deferred tax
liabilities T 1 777.3 1 853.7 1 265.9
Long-term debt I 3 404.6 4 279.6 3 425.5
Long-term operative
liabilities O 77.7 31.4 154.9
6 268.6 7 253.5 5 854.1
Current Liabilities
Current portion of
long-term debt I 359.5 344.9 103.9
Interest-bearing
liabilities I 1 410.1 932.8 764.6
Operative liabilities O 1 538.3 1 593.5 1 652.4
Tax liabilities T 352.4 528.8 338.3
3 660.3 3 400.0 2 859.2
Total Liabilities 9 928.9 10 653.5 8 713.3
Total Shareholders
Equity and Liabilities 17 942.1 18 761.3 16 685.0
Items designated with "O" are included in operating capital.
Items designated with "I" are included in interest-bearing net
liabilities.
Items designated with "T" are included in the tax liability.
Statement of Changes in Shareholders' Equity
Treasu
EUR million Share Share ry Retained
Capital Premium shares OCI CTA Earnings Total
Balance
at 31
December
2002 1 529.6 1 554.0 -314.9 233.4 -144.4 5 299.2 8 156.9
Effect of
adopting
IAS 41
Subsidiary
companies - - - - - 615.4 615.4
Associated
companies - - - - - 44.0 44.0
Balance
at
1 January
2003
(restated) 1 529.6 1 554.0 -314.9 233.4 -144.4 5 958.6 8 816.3
Repurchase
of Stora
Enso Oyj
shares - - -319.1 - - - -319.1
Cancellati
on of
Stora
Enso Oyj
shares -60.5 -315.5 376.0 - - - 0.0
Dividend
(EUR 0.45
per share) - - - - - -387.7 -387.7
Options
exercised 0.2 -1.1 - - - - -0.9
Net profit
for the
period - - - - - 146.6 146.6
OCI entries - - - -118.8 - - -118.8
Translation
adjustment - - - - -52.7 - -52.7
Balance at
31 December
2003 1 469.3 1 237.4 -258.0 114.6 -197.1 5 717.5 8 083.7
Restatement
of opening
balance
Finnish
Statutory
Pension
Scheme - - - - - -130.9 -130.9
Balance
at
1 January
2004
(restated) 1 469.3 1 237.4 -258.0 114.6 -197.1 5 586.6 7 952.8
Repurchase
of Stora
Enso Oyj
shares - - -42.7 - - - -42.7
Dividend
(EUR 0.45
per share) - - - - - -375.7 -375.7
Options
exercised 0.5 3.5 - - - - 4.0
Net profit
for the
period - - - - -10.3 406.9 396.6
OCI entries - - - -8.0 - - -8.0
Translation
adjustment - - - - -18.1 - -18.1
Balance at
31 March
2004 1 469.8 1 240.9 -300.7 106.6 -225.5 5 617.8 7 908.9
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
Commitments and Contingencies
EUR million 31 Dec 2003 31 Mar 2003 31 Mar 2004
On own Behalf
Pledges given 3.8 1.6 3.8
Mortgages 103.5 130.9 104.5
On Behalf of Associated Companies
Mortgages 0.8 1.0 0.8
Guarantees 48.4 57.8 48.5
On Behalf of Others
Pledges given 2.2 2.6 2.2
Mortgages 10.9 4.8 10.9
Guarantees 13.1 16.9 13.5
Other Commitments, Own
Leasing commitments,
in next 12 months 34.3 38.4 36.1
Leasing commitments,
after next 12 months 171.2 214.1 165.2
Pension liabilities 3.0 3.0 2.8
Other commitments 95.9 70.2 97.4
Total 487.1 541.3 485.7
Pledges given 6.0 4.2 6.0
Mortgages 115.2 136.7 116.2
Guarantees 61.5 74.7 62.0
Leasing commitments 205.5 252.5 201.3
Pension liabilities 3.0 3.0 2.8
Other commitments 95.9 70.2 97.4
Total 487.1 541.3 485.7
Net Fair Values of Derivative Financial Instruments
31 Mar
EUR million 31 Dec 2003 2003 31 Mar 2004
Posi Negati
tive ve Net
Net Fair Net Fair Fair Fair Fair
Values Values Values Values Values
Interest rate swaps 106.8 207.6 155.6 -4.8 150.8
Interest rate options 0.5 0.1 1.5 -0.3 1.2
Cross-currency swaps -11.0 -18.5 0.0 -10.9 -10.9
Forward contracts 172.8 82.1 90.9 -43.4 47.5
FX Options 0.7 0.0 0.7 -0.5 0.2
Commodity contracts 71.5 83.9 84.0 -0.9 83.1
Equity swaps -36.0 -95.6 9.9 -47.7 -37.8
Total 305.3 259.6 342.6 -108.5 234.1
Nominal Values of Derivative Financial Instruments
EUR million 31 Dec 2003 31 Mar 2003 31 Mar 2004
Interest Rate Derivatives
Interest rate swaps
Maturity under 1 year 113.7 6.4 109.5
Maturity 2-5 years 1 080.4 899.7 759.0
Maturity 6-10 years 1 439.2 1 052.3 717.1
Maturity over 10 years - - -
2 633.3 1 958.4 1 585.6
Interest rate futures - - 125.0
Interest rate options 23.8 100.0 597.2
Total 2 657.1 2 058.4 2 307.8
Foreign Exchange Derivatives
- Cross-currency swap agreements 129.5 211.1 108.7
- Forward contracts 3 112.5 3 548.7 3 113.2
- FX Options 208.1 476.9 331.8
Total 3 450.1 4 236.7 3 553.7
Commodity derivatives
Commodity contracts 477.0 541.0 430.9
Total 477.0 541.0 430.9
Equity swaps
Equity swaps 308.4 311.9 359.5
Total 308.4 311.9 359.5
Sales by Product Area
EUR million 2002 Q1/03 Q2/03 Q3/03 Q4/03 2003 Q1/04
Publication
Paper 4 715.6 1 058.3 1 042.8 1 086.3 1 108.3 4 295.7 1 019.2
Fine Paper 3 427.4 852.3 793.9 788.5 763.0 3 197.7 788.9
Merchants 720.6 176.1 155.4 139.5 156.6 627.6 160.3
Other -289.5 -72.0 -69.0 -70.4 -69.9 -281.3 -70.4
Paper 8 574.1 2 014.7 1 923.1 1 943.9 1 958.0 7 839.7 1 898.0
Packaging
Boards 2 720.2 699.0 711.4 691.1 660.1 2 761.6 692.0
Wood
Products 1 235.2 316.5 385.6 335.5 362.4 1 400.0 373.1
Wood Supply
Europe 1 958.7 534.2 526.7 475.0 538.4 2 074.3 634.9
Other -531.3 -143.5 -149.9 -131.7 -165.9 -591.0 -229.8
Forest
Products 2 662.6 707.2 762.4 678.8 734.9 2 883.3 778.2
Other -1 174.3 -321.8 -339.9 -326.4 -324.2 -1 312.3 -350.3
Total 12 782.6 3 099.1 3 057.0 2 987.4 3 028.8 12 172.3 3 017.9
Restated Operating Profit by Product Area excluding Non-recurring Items
and Goodwill
EUR million 2002 Q1/03 Q2/03 Q3/03 Q4/03 2003 Q1/04
Publication
Paper 313.6 35.6 -6.0 39.2 42.3 111.1 8.7
Fine Paper 298.3 80.7 40.3 23.1 9.4 153.5 18.1
Merchants 5.4 1.5 -1.2 -1.5 -5.5 -6.7 3.3
Paper 617.3 117.8 33.1 60.8 46.2 257.9 30.1
Packaging
Boards 345.3 89.4 65.5 87.4 50.1 292.4 82.1
Wood Products 44.5 7.0 14.9 -4.7 9.3 26.5 11.4
Wood Supply
Europe 94.6 34.5 33.8 23.0 25.2 116.5 31.3
Forest
Products 139.1 41.5 48.7 18.3 34.5 143.0 42.7
Other Areas -52.5 -8.6 -15.7 -6.2 -21.0 -51.5 -28.8
Goodwill
amortisation -148.8 -32.1 -28.0 -23.5 -32.4 -116.0 -22.7
Operating Profit
excl. Non-
recurring Items 900.4 208.0 103.6 136.8 77.4 525.8 103.4
Non-recurring
items -1 078.1 - - -39.9 -14.5 -54.4 115.7
Operating
Profit (IAS) -177.7 208.0 103.6 96.9 62.9 471.4 219.1
Net financial
items -206.2 -81.3 -11.3 -23.4 -121.7 -237.7 -20.3
Associated
companies 14.6 -0.5 -8.5 -9.0 -5.0 -23.0 -2.3
Profit Before Tax
and Minority
Interests -369.3 126.2 83.8 64.5 -63.8 210.7 196.5
Income tax
expense 128.5 -39.9 -27.4 -21.1 21.4 -67.0 214.6
Profit after
Tax -240.8 86.3 56.4 43.4 -42.4 143.7 411.1
Minority
interests 0.1 -3.2 -2.3 1.7 -2.0 -5.8 -4.2
Net Profit -240.7 83.1 54.1 45.1 -44.4 137.9 406.9
Goodwill Amortisation by Product Area
EUR million 2002 Q1/03 Q2/03 Q3/03 Q4/03 2003 Q1/04
Publication
Paper -56.7 -7.9 -8.2 -8.1 -10.2 -34.4 -5.7
Fine Paper -53.7 -10.9 -10.6 -10.6 -11.0 -43.1 -10.2
Merchants -5.2 -0.6 -0.5 -0.6 -0.5 -2.2 -0.4
Paper -115.6 -19.4 -19.3 -19.3 -21.7 -79.7 -16.3
Packaging
Boards -13.0 -6.5 -1.5 -1.9 -2.0 -11.9 -1.2
Wood Products -14.4 -4.0 -6.1 -1.2 -8.7 -20.0 -5.2
Wood Supply
Europe 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Forest
Products -14.4 -4.0 -6.1 -1.2 -8.7 -20.0 -5.2
Other -5.8 -2.2 -1.1 -1.1 0.0 -4.4 0.0
Operating
Profit -148.8 -32.1 -28.0 -23.5 -32.4 -116.0 -22.7
Restated Operating Profit by Product Area
EUR million 2002 Q1/03 Q2/03 Q3/03 Q4/03 2003 Q1/04
Publication
Paper -762.7 27.7 -14.2 1.6 32.1 47.2 3.0
Fine Paper 67.9 69.8 29.7 2.2 -1.6 100.1 7.9
Merchants -24.7 0.9 -1.7 -2.1 -6.0 -8.9 2.9
Paper -719.5 98.4 13.8 1.7 24.5 138.4 13.8
Packaging
Boards 332.3 82.9 64.0 85.5 48.1 280.5 80.9
Wood Products 30.1 3.0 8.8 -5.9 0.6 6.5 6.2
Wood Supply
Europe 120.5 34.5 33.8 23.0 25.2 116.5 147.0
Forest
Products 150.6 37.5 42.6 17.1 25.8 123.0 153.2
Other 58.9 -10.8 -16.8 -7.4 -35.5 -70.5 -28.8
Operating
Profit -177.7 208.0 103.6 96.9 62.9 471.4 219.1
Net financial
items -206.2 -81.3 -11.3 -23.4 -121.7 -237.7 -20.3
Associated
companies 14.6 -0.5 -8.5 -9.0 -5.0 -23.0 -2.3
Profit Before Tax
and Minority
Interests -369.3 126.2 83.8 64.5 -63.8 210.7 196.5
Income tax
expense 128.5 -39.9 -27.4 -21.1 21.4 -67.0 214.6
Profit after
Tax -240.8 86.3 56.4 43.4 -42.4 143.7 411.1
Minority
interests 0.1 -3.2 -2.3 1.7 -2.0 -5.8 -4.2
Net Profit -240.7 83.1 54.1 45.1 -44.4 137.9 406.9
Stora Enso Shares
Closing
Price Helsinki, EUR Stockholm, SEK New York, USD
Series A Series R Series A Series R ADRs
January 10.50 10.45 96.00 96.50 12.96
February 10.80 10.69 99.50 99.50 13.35
March 10.45 10.24 97.00 94.50 12.65
Trading
Volume Helsinki Stockholm New York
Series A Series R Series A Series R ADRs
January 68 842 100 116 944 238 921 38 807 547 2 042 900
February 105 197 73 469 409 154 616 24 645 727 1 722 400
March 117 780 144 210 295 325 807 34 005 087 1 978 800
Total 291 819 317 796 648 719 344 97 458 361 5 744 100
www.storaenso.com
www.storaenso.com/investors
Publication dates for financial information
Interim Review for January June 2004 28 July 2004
Interim Review for January September 2004 27 October 2004
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
p.p. Jussi Siitonen Jukka Marttila
