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Stora Enso Interim Review January–September 2015

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STORA ENSO OYJ INTERIM REVIEW 23 October 2015 at 13.00 EET

Q3/2015 (compared with Q3/2014)

  • Sales EUR 2 500 (EUR 2 514) million remained unchanged; sales excluding the structurally declining paper and divested businesses increased 4.9% primarily due to the Montes del Plata pulp mill volumes and favourable foreign exchange rates.
  • Operational EBIT increased by 17.1% to EUR 246 (EUR 210) million, operational EBIT margin increased to 9.8% (8.4%), mainly due to favourable foreign exchange rates, the good performance of Montes del Plata and the Nordic pulp mills, and lower fibre costs.
  • EPS excluding non-recurring items EUR 0.13 (EUR 0.12).
  • Continued strong cash flow from operations amounted to EUR 484 (EUR 257) million, cash flow after investing activities EUR 234 (EUR 28) million.
  • Net debt to operational EBITDA 2.5 (2.8), liquidity reduced as planned to EUR 0.8 (EUR 1.5) billion.
  • Operational ROCE 11.6% (9.7%), operational ROCE excluding the Guangxi project 13.1%.

Q3/2015 (compared with Q2/2015)

  • Sales decreased by 2.4%, sales excluding the structurally declining paper and divested businesses decreased by 3.5% mainly due to usual seasonality in Wood Products.
  • Operational EBIT increased by 18.8% mainly due to favourable foreign exchange rates, higher sales prices in local currencies and lower wood prices as well as better operational performance.
  • Net debt to operational EBITDA 2.5 (2.7).

Q1–Q3/2015 (compared with Q1–Q3/2014)

  • Sales decreased by 1.4%, sales excluding the structurally declining paper and divested businesses increased by 4.1%.
  • Operational EBIT increased by 12.0% primarily due to favourable foreign exchange rates and lower fibre costs.

Stora Enso's CEO Karl-Henrik Sundström comments on the third quarter 2015 results:

“Stora Enso’s transformation into a renewable materials company is showing real progress year-on-year. Sales increased by 4.9% in the quarter, excluding the structurally declining paper and divested businesses. This is mainly due to sales growth in the Biomaterials and Consumer Board divisions of 38% and over 4% respectively. Biomaterials enjoyed higher volumes from Montes del Plata. We also continued to generate strong cash flow. 

Operational EBIT increased 17.1% to EUR 246 million compared to a year ago, mainly due to strong performance in the Biomaterials division, favourable exchange rates and lower fibre costs. Return on capital employed increased from 9.7% to 11.6%. 

In the coming quarters, we are reaching several key milestones in our transformation. We have started production of kraftliner in our newly converted paper mill in Varkaus, Finland. The machine is ramping up and full production is expected in early 2017. Also in Varkaus, we will start a new production line for wooden building elements in mid next year. As announced earlier, the board machine in Guangxi is expected to be operational in mid-2016. We also continued to divest non-core assets, such as the Barcelona mill in Spain and Komárom packaging plant in Hungary.

The political strike in Finland against the government’s plans to change labour legislation resulted in a loss of EUR 5‒7 million. 

As announced on 12 October, our sales in the fourth quarter of 2015 are estimated to be similar to the amount of EUR 2 500 million and operational EBIT is expected to be in line with the EUR 246 million recorded in the third quarter. The maintenance impact is expected to be EUR 40 million lower in the fourth quarter compared to the third quarter, out of which approximately EUR 20 million comes from the Paper division.

As always, I would like to thank our employees for their commitment, our customers for their business and our investors for their trust. We work hard to keep on creating value, today and tomorrow."

KEY FIGURES

EUR million Q3/15 Q3/14 Change % Q3/15–Q3/14 Q2/15 Change % Q3/15–Q2/15 Q1–Q3/15 Q1–Q3/14 Change % Q1–Q3/15–Q1–Q3/14 2014
Sales 2 500 2 514 -0.6% 2 562 -2.4% 7 553 7 661 -1.4% 10 213
Operational EBITDA 353 333 6.0% 318 11.0% 1 011 961 5.2% 1 269
Operational EBIT 246 210 17.1% 207 18.8% 673 601 12.0% 810
Operating profit (IFRS) 237 215 10.2% 214 10.7% 666 495 34.5% 400
Profit before tax excl. NRI 128 116 10.3% 156 -17.9% 438 367 19.3% 399
Profit before tax 144 144 - 148 -2.7% 454 313 45.0% 120
Net profit for the period 124 123 0.8% 123 0.8% 376 224 67.9% 90
Net interest-bearing liabilities 3 248 3 459 -6.1% 3 479 -6.6% 3 248 3 459 -6.1% 3 274
Operational ROCE 11.6% 9.7%   9.4%   10.6% 9.3%   9.5%
Earnings per share (EPS),
excl. NRI, EUR		 0.13 0.12   0.18   0.46 0.34   0.40
EPS (basic), EUR 0.16 0.15   0.17   0.49 0.28   0.13
Debt/equity ratio 0.66 0.66   0.70   0.66 0.66   0.65
Fixed costs to sales 25.0% 24.9%   25.5%   24.8% 25.0%   25.1%
Average number of employees 27 232 29 627 -8.1% 27 173 0.2% 27 090 29 302 -7.5% 29 009
TRI rate 10.4 14.1 -26.2% 10.4 - 10.4 13.0 -20.0% 12.5
LTA rate 4.0 6.0 -33.3% 4.2 -4.8% 4.3 5.3 -18.9% 5.2

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, synthetic options net of realised and open hedges, CO2 emission rights and 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.

Webcast and conference call for analysts, investors and media
CEO Karl-Henrik Sundström, CFO Seppo Parvi, and SVP, Head of Investor Relations Ulla Paajanen-Sainio will host a combined conference call and webcast today at 14:30 EET (13:30 CET, 12:30 UK time, 06:30 EDT)
The live webcast may be accessed at http://edge.media-server.com/m/p/co3biiip

Analyst and investor conference call dial-in details:
UK                                       +44(0)20 3427 1906
Finland                                 +358 (0)9 6937 9543
Sweden                                +46 (0)8 5065 3936
USA                                     +1 646 254 3365
Confirmation Code:               2937472

The link to the webcast is also available on the Stora Enso website: www.storaenso.com/investors

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, Global Communications, tel.: +46 72 221 9228

Stora Enso’s fourth quarter and full year 2015 results will be published on 4 February 2016.

Stora Enso is a leading provider of renewable solutions in packaging, biomaterials, wood and paper on global markets. Our aim is to replace non-renewable materials by innovating and developing new products and services based on wood and other renewable materials. We employ some 27 000 people in more than 35 countries, and our sales in 2014 were EUR 10.2 billion. Stora Enso shares are listed on NASDAQ OMX Helsinki (STEAV, STERV) and Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY) in the International OTCQX over-the-counter market. www.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, Global Communications, tel.: +46 72 221 9228

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