Another quarter of solid performance
STORA ENSO OYJ, Helsinki, Finland
INTERIM REPORT 25 October 2016 at 13.00 EEST
Q3/2016 (compared with Q3/2015)
· Sales EUR 2 393 (EUR 2 500) million decreased 4.3%. Sales excluding the
structurally declining paper business and divested Barcelona Mill increased
1.8%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai consumer
board mills.
· Operational EBIT was EUR 219 (EUR 246) million, including a negative impact
of EUR 35 million due to the ramp-up of Beihai. The EBIT margin was 9.2% (9.8%).
· EPS EUR 0.16 (EUR 0.16). EPS excl. IAC increased to EUR 0.17 (EUR 0.13).
· Cash flow from operations was EUR 390 (EUR 484) million, cash flow after
investing activities EUR 177 (EUR 234) million.
· Continued strengthening of the balance sheet; net debt to operational
EBITDA 2.1 (2.5); liquidity EUR 775 (EUR 797) million.
· Operational ROCE 10.1% (11.6%), operational ROCE excluding the Beihai
investment 13.5% (13.1%).
Q3/2016 (compared with Q2/2016)
· Sales at EUR 2 393 (EUR 2 526) million decreased 5.3%. Sales excluding the
structurally declining paper business declined 5.1%, mainly due to usual
seasonality in Wood Products.
· Operational EBIT at EUR 219 (EUR 226) million decreased 3.1%, mainly due to
the ramp-up of Beihai.
Q1–Q3/2016 (compared with Q1–Q3/2015)
· Sales at EUR 7 364 (EUR 7 553) million declined 2.5%. Sales excluding the
structurally declining paper business and divested Barcelona Mill increased
2.6%.
· Operational EBIT at EUR 693 (EUR 673) million increased 3.0%, mainly due to
lower variable costs.
Transformation
· Beihai Mill ramp-up is proceeding ahead of plan. Customer tests of liquid
boards are proceeding well and the first CKB board test runs are completed. The
consumer board machine is expected to reach full production within 18‒24 months
from the start-up in May 2016. The bleached chemi-thermomechanical pulp (BCTMP)
plant is expected to be operational before the end of Q4.
· Varkaus kraftliner mill reached EBITDA break-even during Q3. Full
production is expected during the second half of 2017.
· The new production line for wooden building components (LVL) at Varkaus
Mill is ramping up, and product certification is going on. Full production is
expected in mid-2018.
· Divestment of the Kabel coated magazine paper mill in Germany was completed
in September.
· Advance payments of EUR 118 million received from the divestment of the
Suzhou Mill site.
Outlook for Q4/2016
Q4/2016 sales are estimated to be slightly higher or slightly lower than the
amount of EUR 2 393 million, and operational EBIT is expected to be in line with
or somewhat lower than the EUR 219 million recorded in Q3/2016. The impact of
the annual maintenance shutdowns is expected to be approximately EUR 35 million
lower than in Q3/2016.
Stora Enso's CEO Karl-Henrik Sundström comments on the third quarter 2016
results:
“In the third quarter, sales increased 1.8%, excluding the structurally
declining paper business and divested Barcelona Mill. This was primarily due to
the ramp-ups of Varkaus kraftliner and Beihai consumer board mills. Operational
EBIT was EUR 219 million compared to EUR 246 million a year ago, negatively
affected with the ramp-up of Beihai by EUR 35 million. Cash flow from operations
was EUR 390 million thanks to reduced working capital and proceeds from
divestments. The balance sheet continued to strengthen as net debt to
operational EBITDA was 2.1.
Our transformation into a customer-focused renewable materials company is
progressing well. I am pleased that the ramp-up of the Beihai Mill is ahead of
plan and we are now conducting customer tests of liquid boards and other grades.
We have also completed our first test runs of CKB, our cartonboard which is very
competitive in terms of strength, stiffness, purity and runnability. It provides
superior food safety which is high on consumers’ minds in China. We have
launched a new product in our CKB product family during the quarter, CKB Nude by
Stora Enso. It is an uncoated carton board designed to meet the consumer
preferences for renewable packaging materials with natural look and feel.
The Varkaus kraftliner mill ramp-up is also proceeding and the mill reached
EBITDA break-even during the quarter, as planned. We are expecting full
production of virgin-fibre-based containerboard during the second half of 2017.
In addition, we have finalised the divestment of the Kabel coated magazine paper
mill in Germany. We have also received the first pre-payments for the divested
Suzhou Mill site in China. This deal was announced in the second quarter 2016.
We are planning to create a centre of excellence for corrugated packaging in
Lahti. The aim is to boost competitiveness by consolidating manufacturing of
corrugated packaging in Finland to one location. As part of the possible
consolidation, we would invest approximately EUR 19 million in new machinery and
supporting infrastructure. The proposed project is expected to be finalised by
the end of the first quarter 2018.
Wooden buildings are on the rise. Australia's first wooden office building is
being built with our Cross Laminated Timber (CLT) in Sydney. The major
structural components of the six storey office are made from more than 2 000 m³
of our CLT. The building is due for completion in 2017, proving that CLT is not
only a renewable and sustainable choice, but also contributes to rapid
construction time.
Another initiative to meet growing urban construction needs is the modernisation
of the sawmill in Murów. As previously announced, the modernisation will
increase yearly capacity from 70 000 m³ to 400 000 m³. In September, we
inaugurated the modernised sawmill together with 200 customers.
I am happy that our Annual Report was awarded the best in Finland for the second
consecutive year in a ranking by ReportWatch. The ranking included 1 600
companies from 65 countries. Also, the international not-for-profit organisation
CDP (formerly Carbon Disclosure Project) recognises Stora Enso as a world leader
for combating global warming, with a position on its 2016 Climate A List.
When it comes to outlook, sales for the fourth quarter 2016 are estimated to be
slightly higher or slightly lower than the amount of EUR 2 393 million, and
operational EBIT is expected to be in line with or somewhat lower than the EUR
219 million recorded in the third quarter of 2016. The impact of the annual
maintenance shutdowns is expected to be approximately EUR 35 million lower than
in the third quarter of 2016.
As always, 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
EUR million Q3/16 Q3/15 Change Q2/16 Change Q1–Q3/ Q1–Q3/ Change
2015
% % % Q1
Q3/16 Q3/16 -Q3/16–
16 15
Q1
– – -Q3/15
Q3/15 Q2/16
Sales 2 393 2 500 -4.3% 2 526 -5.3% 7 364 7 553 -2.5%
10
040
Operational 326 353 -7.6% 333 -2.1% 1 015 1 011 0.4% 1
352
EBITDA
Operational 219 246 -11.0% 226 -3.1% 693 673 3.0%
915
EBIT
Operational 9.2% 9.8% 8.9% 9.4% 8.9%
9.1%
EBIT
margin
Operating 196 237 -17.3% 248 -21.0% 638 666 -4.2% 1
059
profit
(IFRS)
Profit before 170 128 32.8% 112 51.8% 465 438 6.2% 1
048
tax
excl. items
affecting
comparability
(IAC)
Profit before 161 144 11.8% 149 8.1% 465 454 2.4%
814
tax
Net profit 119 124 -4.0% 118 0.8% 351 376 -6.6%
783
for the
period
Net interest 2 899 3 248 -10.7% 3 178 -8.8% 2 899 3 248 -10.7% 3
240
-bearing
liabilities
Operational 10.1% 11.6% 10.3% 10.6% 10.6%
10.6%
ROCE
Earnings per 0.17 0.13 0.12 0.48 0.46
1.24
share
(EPS), excl.
IAC,
EUR
EPS (basic), 0.16 0.16 0.16 0.47 0.49
1.02
EUR
Debt/equity 0.52 0.66 0.58 0.52 0.66
0.60
ratio
Fixed costs 25.5% 25.0% 25.4% 25.1% 24.8%
25.0%
to sales
Average 26 27 -1.5% 26 2.8% 26 27 -2.7%
26
number of 819 232 088 372 090
783
employees
TRI rate 10.4 10.7 -2.8% 13.5 -23.0% 12.0 10.4 15.4%
11.0
LTA rate 4.5 4.3 4.7% 4.9 -8.2% 4.4 4.3 2.3%
4.7
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 at 15.00 EEST
(14.00 CEST, 13.00 BST, 08.00 EST)
The webcast and conference call for analysts, investors and media 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 http://edge.media
-server.com/m/p/8grvmu8j. Those participants who wish to ask questions should
join the conference call (details below). All participants can follow the
presentation over the webcast.
Conference call dial-in details
UK +44(0)20 3427 1901
Finland +358 (0)9 2310 1620
Sweden +46 (0)8 5065 3937
USA +1 646 254 3367
Confirmation Code: 9672195
The links to the webcasts are also available on the Stora Enso website:
storaenso.com/investors (http://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, Communications, tel. +46 72 221 9228
Stora Enso’s Capital Markets Day will take place in London on 17 November 2016.
Stora Enso’s fourth quarter and full year 2016 results will be published on 3
February 2017.
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 (http://www.storaenso.com)/investors
It should be noted that Stora Enso and its business are exposed to various risks
and uncertainties and 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. 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. All statements are based on management’s best
assumptions and beliefs in light of the information currently available to it
and Stora Enso assumes no obligation to publicly update or revise any forward
-looking statement except to the extent legally required.
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
