Stora Enso Q4 and full year results 2015

STORA ENSO OYJ FINANCIAL STATEMENT RELEASE 4 February 2016 at 13.00 EET

Q4/2015 (compared with Q4/2014)

· Sales EUR 2 487 (EUR 2 552) million decreased 2.5%; sales excluding the structurally declining paper business and divested Corenso and Barcelona Mill increased 5.4%, primarily due to the Montes del Plata pulp mill and Varkaus Mill kraftliner volumes.

· Operational EBIT increased 15.8% to EUR 242 (EUR 209) million, mainly due to strong performance in Biomaterials, lower variable costs, and favourable FX.

· EPS EUR 0.53 (EUR -0.15), supported by Bergvik Skog forest fair valuation gain.

· Cash flow from operations amounted to EUR 412 (EUR 442) million, cash flow after investing activities EUR 75 (EUR 178) million.

· Continued improvement of the balance sheet; net debt to operational EBITDA 2.4 (2.6), liquidity reduced to EUR 0.8 (EUR 1.4) billion, as planned.

· Operational ROCE 11.3% (9.7%), operational ROCE excluding the Beihai Mill project in Guangxi 13.3% (13.1%).

Q4/2015 (compared with Q3/2015)

· Sales remained unchanged, sales excluding the structurally declining paper business and the divested Barcelona Mill increased 2.2%, due to small improvements across businesses.

· Operational EBIT decreased EUR 4 million, due to seasonally increased fixed costs, lower hardwood pulp prices, and unfavourable FX.

Full year 2015 (compared with 2014)

· Sales EUR 10 040 (EUR 10 213) decreased 1.7%; sales excluding the structurally declining paper business and divested Corenso and Barcelona Mill increased 4.6%, primarily due to Montes del Plata pulp mill volumes.

· Operational EBIT EUR 915 (810) million increased 13.0%, mainly due to strong performance in Biomaterials, favourable FX, and lower variable costs.

· EPS EUR 1.02 (EUR 0.13)

· Strong cash flow from operations amounted to EUR 1 556 (EUR 1 139) million, cash flow after investing activities EUR 599 (EUR 255) million.

· The Board of Directors proposes dividend to increase from EUR 0.30 to EUR 0.33.

Transformation

· Varkaus Mill kraftliner ramp-up proceeding, full production expected in early 2017 as earlier announced.

· The construction of the Beihai consumer board mill in China is proceeding, and the board machine is expected to be operational during Q2.

· In October, Stora Enso completed the divestment of the Barcelona consumer board mill in Spain.

· In December, Stora Enso announced plans to divest its ownership in the Arapoti paper mill in Brazil.

Outlook

· Q1/2016 sales are estimated to be similar to the amount of EUR 2 487 million and operational EBIT is expected to be in line with the EUR 242 million recorded in Q4/2015. There are no major scheduled annual maintenance shutdowns during Q1/2016.

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

“Stora Enso has shown its ability to transform into a renewable materials growth company. In the fourth quarter, sales excluding the structurally declining paper business and divestments increased 5.4%. This was mainly driven by the Montes del Plata pulp mill and kraftliner from Varkaus Mill. We also continued to generate strong cash flow during the quarter.

Operational EBIT in the fourth quarter increased 15.8% to EUR 242 million year-on-year, mainly due to strong performance in the Biomaterials division, lower variable costs and favourable foreign exchange. Division Wood Products delivered its highest fourth quarter operational EBIT ever, mainly due to lower wood costs and positive foreign exchange impact. Group return on capital employed excluding our board mill project in Beihai, China exceeded our strategic target 13%.

We are dedicated to be a driving force of innovation in our industry. During the quarter, we have opened two innovation centres to tap into new opportunities. The Innovation Centre for packaging in Helsinki is designed to drive innovation in packaging. It will be a venue for innovation and R&D, where we will develop innovative and sustainable packaging concepts together with customers and other stakeholders. The Innovation Centre for biomaterials in Stockholm will host research, application, business development and strategic marketing. Its purpose is to create renewable solutions and products from biomass in order to replace fossil-based products.

We are investing for growth. The construction of the Beihai consumer board mill in China is proceeding, and the board machine is expected to be operational during the second quarter in 2016. We have also taken new investment decisions during the quarter. Division Wood Products will invest EUR 16 million to start pellet production and to build a new the boiler at Ala Sawmill in Sweden, and EUR 10 million to renew the boiler at our Honkalahti Sawmill in Finland.

In December, we announced plans to divest our ownership in the Arapoti paper mill in Brazil. The divestment is part of our transformation into a renewable materials growth company.

I am proud that our Sustainability Report 2014 has won four awards, including best sustainability report. The awards are the result of an annual sustainability report review, commissioned by Finland’s leading non-profit corporate responsibility network FIBS. We have recently completed a three-year corporate responsibility initiative on water stewardship run by us and the global chemicals company Kemira in the Guangxi Province in Southern China. The projects have given almost 2 600 villagers better access to clean water.

Stora Enso is among the few companies globally to publicly report on group-wide human rights findings covering production units, wood supply operations, supply chain management and local community relations.

We have set action plans based on a group-wide Human Rights assessment consolidated by the Danish Institute for Human Rights. Due to better than expected progress, we started implementation early and achieved 69% completion by the end December of preventive and remediation actions.

A lot of work remains, but we have now shown our ability to transform into a renewable materials growth company. The transformation is visible in the value we bring to our customers, and it has started to be reflected in our improved operational EBIT and ROCE. We have exciting opportunities ahead.

The Board of Directors proposes a dividend of EUR 0.33 per share for 2015, up EUR 0.03 per share compared with the preceding year.

When it comes to the outlook for the first quarter of 2016, our sales are estimated to be similar to the amount of EUR 2 487 million. Operational EBIT is expected to be in line with the EUR 242 million recorded in Q4/2015. There are no major scheduled annual maintenance shutdowns during Q1/2016.

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

KEY FIGURES

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.

EVENTS TODAY

Press conference and webcast
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 Stora Enso’s Head Office, Kanavaranta 1, Helsinki at 14:00 EET (13:00 CET) today. The live webcast may be accessed at http://cloud.magneetto.com/storaenso/2016_0204_q4_press_conference/angular

Webcast and conference call for analysts and investors
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 16:00 EET (15:00 CET, 14:00 UK time, 09:00 EST).  The live webcast may be accessed at http://edge.media-server.com/m/p/85m7ijyf.

Analyst and investor conference call dial-in details:
UK                                                                +44(0)20 3427 0503
Finland                                                          +358 (0)9 6937 9590
Sweden                                                         +46 (0)8 5352 6408
US                                                                +1 646 254 3366
Confirmation Code:                                        5557440

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 2046 21242
Ulrika Lilja, EVP, Communications, tel. +46 72 221 9228

Stora Enso’s first quarter 2016 results will be published on 28 April 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:
Seppo Parvi
CFO
tel. +358 2046 21205

Ulla Paajanen-Sainio
SVP, Investor Relations
tel. +358 2046 21242

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