Financial results for Q3 2016

Transcription

1 Financial results for Q CEO Karl-Henrik Sundström CFO Seppo Parvi

2 Disclaimer 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. 2

3 Another quarter of solid performance Q year-on-year Sales MEUR decreased by 4.3% Increased by 1.8% excluding structurally declining paper business and divested Barcelona Mill Varkaus kraftliner and Beihai consumer board mills ramp-up Operational EBIT was 219 MEUR, representing EBIT margin of 9.2% Including a negative impact of 35 MEUR due to Beihai ramp-up Cash flow from operations 390 (484) MEUR Operational ROCE 10.1% (11.6%), excluding Beihai Mill investment 13.5% (13.1%) Balance sheet strong 3 Net debt to operational EBITDA 2.1 (2.5) Payment of 118 MEUR from Suzhou paper mill site divestment

4 Operational EBIT Q3 y-o-y 4

5 ROCE target reached excluding Beihai Mill investment Operational ROCE 10.1%, excluding Beihai Mill investment 13.5% ROCE target of 13% *Excluding Montes del Plata until end of 2014 and excluding Beihai Mill project in Guangxi 5

6 Deleveraging continues 6

7 Transformation steps since 2015 Investments Murow sawmill Sunila Biorefinery Imatra de-bottlenecking Varkaus conversion Beihai board mill Varkaus wooden building elements Divestment and closure announcements Uetersen Mill, Germany Packaging unit in Chennai, India Barcelona Mill, Spain Packaging plant in Komárom, Hungary Arapoti Mill, Brazil IL Recycling AB, Sweden Beihai BCTMP plant Ongoing Hartola production unit, Finland Virdia demo plant Ongoing Kabel Mill, Germany Beihai PE coating line Ongoing Suzhou Mill, China Ala sawmill, boiler and pellets Ongoing Heinola planned closure Imatra PE coating line and ARW Skutskär pulp mill, fluff Skoghall Mill, chemical plant Scandinavian corrugating restructuring plans Ongoing Ongoing Ongoing Ongoing 7

8 Transformation Beihai board mill is ramping up ahead of plan Prime quality reached. Customer tests of liquid boards are proceeding well and the first CKB board test runs are completed Full production expected in months from the start up in May 2016 BCTMP (mechanical) plant operational before end of Q tonnes annual capacity Chemical pulp sourced mainly internally tonnes hardwood from Veracel tonnes softwood from the market PE coating line investment project proceeding as planned. Investment expected to be completed in mid

9 Transformation Varkaus kraftliner reached EBITDA break-even Varkaus kraftliner ramp-up proceeding Reached EBITDA break-even in Q3 Full production expected during second half of 2017 New production line for wooden building components (LVL) ramping up in Varkaus Product certification on-going Full production expected mid

10 Transformation journey Growth businesses 67% of sales and 76% of operational EBIT 2006 Sales 30% 67% Q3/2016 Sales 2006 Packaging business Wood products business Paper business, incl. Merchants Other and eliminations In 2006, all pulp used internally 2006 Operational EBIT Q3/2016 Operational EBIT Q3/2016 Consumer Board Packaging Solutions 38% 76% Biomaterials Wood Products Paper Other and eliminations 10

11 Balance sheet strengthened Summary financials Q EUR million Q3/16 Q3/15 Change% Change % Q3/16 / Q3/16 / Q3/15 Q2/16 Q2/16 Sales % % Operational EBITDA % % Operational EBITDA margin 13.6% 14.1% 13.2% Operational EBIT % % Operational EBIT margin 9.2% 9.8% 8.9% Profit before tax excl. IAC % % EPS excl. IAC, EUR EPS (basic), EUR Operational ROCE 10.1% 11.6% 10.3% Operational ROCE excl. Beihai project 13.5% 13.1% 12.5% Cash Flow from Operations % % Net debt/last 12 months operational EBITDA

12 Consumer Board Operational ROOC excl. Beihai 42% Q3 y-o-y Sales growth 3.2% excluding the divested Barcelona Mill Operational EBIT increased 20 MEUR or 23.3% excluding the Beihai operations Due to increased efficiency and improved product mix Operational ROOC 12.9% (16.4%) Excluding Beihai Mill 42.3% (30.0%) Beihai operational EBIT loss was 42 MEUR (7 MEUR) in Q3 Expected to be approximately 33 MEUR in Q4 Investment of 14 MEUR to renew and modernise malodorous gas processing at Imatra mills in Finland was announced CKB Nude launched Uncoated carton board designed to meet the consumer preferences with natural look and feel MEUR MEUR Sales excl. Barcelona Operational EBIT 12

13 Packaging Solutions Sales +15% Q3 y-o-y Sales +15% driven by Varkaus kraftliner mill and higher volumes from Ostrołęka containerboard mill Operational EBIT 3 MEUR higher Improved result of Varkaus Mill was partly offset by continued challenges with Stora Enso Inpac in China Varkaus kraftliner mill ramp-up proceeding EBITDA break-even reached in Q3 Plans to consolidate corrugated packaging production in Finland to Lahti plant announced 13

14 Biomaterials operational EBITDA margin 21.3% Q3 y-o-y Sales decrease due to lower hardwood pulp selling prices and slightly lower volumes due to maintenance Operational EBIT decreased Significantly lower hardwood pulp prices Slightly lower deliveries mainly due to maintenance Veracel annual maintenance during Q3 2016, year ago during Q Customer trials for commercial purposes of lignin proceeding well R&D ramp-up continues in Q4 14

15 Wood Products sales increased by 3% Q3 y-o-y Sales increased Mainly due to higher volumes Investment at Murow sawmill in Poland Varkaus LVL plant in Finland Operational EBIT remained stable Lower log costs and higher sales volumes were offset by higher fixed costs and lower income from saw dust and wood chips Wooden building components (LVL) at Varkaus Mill ramping up as planned Product certification going on Operational ROOC continue stable at 17.5% 15

16 Paper Operational EBITDA improved 75% Q3 y-o-y Stable prices and stable volumes in declining market, sales remained flat excluding the structural changes Operational EBITDA increased 75% Tight cost management and good production efficiencies Lower variable costs, especially in energy, wood, chemicals and pulp Lower fixed costs, due to active cost management Included 7 MEUR asset disposal Cash flow after investing activities to sales record high at 11.7% Well above the long term target of 7% Divestment of Kabel Mill in Germany completed and divestment of Suzhou Mill site proceeding according to the plan Stora Enso is reviewing how to create the best conditions for the Paper division to compete under increasing cost pressures and declining market demand The internal project is proceeding as planned 16

17 Strategic targets ambitious, but reachable Group targets Q3 15 Q3 16 Status Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 4.9% (YoY) 1.8% (YoY) Net debt to operational EBITDA <3.0x Fixed costs to sales <20% 25.0% 25.5% Debt to equity <80% 66% 52% Operational ROCE >13% 11.6% 10.1% Operational ROCE excl. Beihai 13.1% 13.5% Divisional targets Q3 15 Q3 16 Status Consumer Board Operational ROOC > 20% 16.4% 12.9% Consumer Board excl. Beihai 30.0% 42.3% Packaging Solutions Operational ROOC > 20% 8.7% 9.6% Biomaterials Operational ROOC > 15% 15.5% 6.7% Wood Products Operational ROOC > 18% 17.5% 17.5% Paper Cash flow after investing activities to sales > 7% 9.2% 11.7% *Excluding Paper and Barcelona Mill 17

18 Guidance for Q Compared to Q Sales are estimated to be slightly higher or slightly lower than the amount of MEUR recorded in Q3/2016 Operational EBIT is expected to be in line with or somewhat lower than the 219 MEUR recorded in Q3/2016 The impact of the annual maintenance shutdowns expected to be approximately 35 MEUR lower than in Q3/

19 Another quarter of solid performance Transformation into customer-focused renewable materials company progressing well Beihai consumer board mill is ramping-up ahead of the plan Customer tests of liquid board ongoing Test runs of CKB board completed Varkaus kraftliner mill reached EBITDA break-even Centre of excellence for corrugated packaging in Lahti under consideration Wooden buildings on rise Australia s first wooden office building from Stora Enso CLT Murow sawmill in Poland inaugurated CKB Nude launched 19

20 Welcome to Stora Enso CMD on 17 November 2016 in London 20

21 Thank you!

22 Operational EBIT by segments EUR million Q316 Q315 Change% Q316/Q315 Q216 Change % Q316/Q216 Consumer Board % % % of sales 11.2% 13.2% 12.7% Packaging Solutions % % % of sales 8.1% 8.0% 6.6% Biomaterials % % % of sales 12.9% 25.5% 16.7% Wood Products % % % of sales 5.7% 5.9% 7.6% Paper 53 6 n/m % % of sales 6.7% 0.7% 5.1% Other % % % of sales 2.3% 3.6% 0.0% 22

23 Net Financials EUR million Q Q Change MEUR Q316/ Q315 Q Change MEUR Q316/ Q216 Net interest expense Average interest rate* 4.2% 4.4% 4.1% Foreign exchange gains and losses Other financial items of which Fair valuation of interest rate derivatives** Fair valuation of long-term debt Pension costs (IAS 19R) Other items Total net financial items * Quarterly gross interest expense divided by average gross debt ** Not hedge accounted interest rate derivatives. 23

24 Strong cash flow 24

25 Cash flow by divisions in Q3 25

26 Net FX by division 26

27 Capex and Depreciation 27

28 Transaction risk and hedges Q million USD SEK GBP Estimated annual net operating cash flow exposure Transaction hedges Hedging percentage for the next 12 months 55% 61% 46% Operating Profit: Currency effect +/- 10%* Based on estimated 12 month net operating cash flow exposure million USD 108 SEK -83 GBP 33 *Before currency hedges assuming no other changes other than a single currency rate movement occurs 28

29 Global bleached chemical market pulp inventories by grade in tonnes and days of supply Source: EPIS 29

30 Stora Enso energy balance * Q TWh/a 50 Total energy self sufficiency 63% Self sufficiency 66% Impact on non-hedged volume on operating profit from 10% change in: EUR million p.a. 20 Self sufficiency 54% Electricity market price ~ Electricity Fuels Fossil fuel price ~5.3 Internal External hedged External (non-hedged) *) Pulp, paper and board mills in Europe and overseas, excl. Beihai 30

31 Stora Enso electricity procurement * Q *) Pulp, paper and board mills in Europe and overseas, excl. Beihai 31

32 Sensitivity analysis Impact on operational EBIT 10% decrease in Impact* Energy prices Wood Prices Chemical and filler prices Positive 9 MEUR Positive 172 MEUR Positive 45 MEUR 10% increase in Impact* Market pulp price, total 10% strengthening against Euro in the value of** US dollar Swedish krona British pound Brazilian real Positive 120 MEUR Impact* Positive 108 MEUR Negative 83 MEUR Positive 33 MEUR Negative 13 MEUR *Impact on operational EBIT for the next twelve months. ** Before FX hedges An increase of energy, wood or chemical and filler prices or decrease of pulp prices, as well as weakening of the currencies would have the opposite impact 32

33 Pulp sensitivity analysis 10% change in prices, impact on operational EBIT 10% increase in Impact* Hardwood pulp** prices Softwood pulp prices Fluff pulp prices Dissolving pulp prices Market pulp price, total Positive 45 MEUR Positive 50 MEUR Positive 15 MEUR Positive 10 MEUR Positive 120 MEUR * Impact on operational EBIT for the next twelve months. A decrease of pulp prices would have the opposite impact. ** Includes tonnes from Montes del Plata 33

34 Maturity profile Q million Bonds Other loans / liabilities Commercial papers Revolving Credit Facility 700 million matures in January 2019 and is fully undrawn 34

35 Permanent pulp, paper and board capacity reductions since 2006 Mill Date Grade Capacity reduction, t Corbehem PM 3 and PM 4 Jun 2006 LWC Varkaus PM 1 End 2006 WFC Berghuizer Mill Oct 2007 WFU Reisholz Mill End 2007 SC Summa Mill Jan 2008 Newsprint, uncoated mag, book paper Anjala Mill PM1 Feb 2008 Coated magazine paper Baienfurt Mill End 2008 FBB Kabel Mill PM 3 End 2008 Coated magazine Kemijärvi Pulp Mill April 2008 Long-fibre (SW) pulp Norrsundet Pulp Mill Dec 2008 Long-fibre (SW), pulp Varkaus Mill coreboard machine Dec 2008 Coreboard Imatra PM 8 Mar 2010 WFU Varkaus PM 2 and PM 4 Sep 2010 Newsprint, directory paper Maxau PM 7 Nov 2010 Newsprint Hylte PM1 Dec 2012 Newsprint Ostroleka PM2 Jan 2013 Containerboard Hylte PM2 May 2013 Newsprint Kvarnsveden PM11 May 2013 Newsprint Veitsiluoto PM1 Apr 2014 Coated magazine Corbehem Mill July 2014 LWC Varkaus Aug 2015 WFU Suzhou Jun 2016 WFU Total

36 Permanent sawn wood capacity reductions since 2006 Mill Date Capacity reduction, m 3 Veitsiluoto Sawmill Honkalahti Sawmill Sauga Sawmill Jun Sollenau Sawmill Näpi Sawmill Kotka Sawmill Paikuse Sawmill End Zdirec Sawmill Ybbs Sawmill 2008 & Jun Kitee Sawmill 2008 & Jun Varkaus Sawmill Jun Tolkkinen Sawmill End Kopparfors Sawmill End Sollenau Sawmill Jul Total

37 Pulp price development Source: FOEX 37

38 Pulp wood and saw log prices Wood prices in Finland 38

39 Paper for recycling prices German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 39

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