Financial Results for Q4 and Full Year CEO Karl-Henrik Sundström and CFO Seppo Parvi

Transcription

1 Financial Results for Q4 and Full Year 2014 CEO Karl-Henrik Sundström and CFO Seppo Parvi 4 February 2015

2 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 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. 2

3 Transformation in progress and clear improvement in result dividend proposal stable at EUR 0.30 Q year-on-year Sales decreased by 2.3% Increased by 1.4% excluding structurally declining paper and divested businesses Operational EBIT EUR 209 million 37.5% increase due to cost management Supported by CO 2 sales, reversal of provision, land sales and impairment effect on depreciation Net debt/ebitda 2.6 (2.9) Operational ROCE 9.7% (7.0%) Excluding transformation projects 13.1% Dividend proposal of EUR

4 Quarterly sales up by 1.4% y-o-y, excluding structurally declining paper and divested businesses Full Group sales, MEUR % % Q4 14Q Sales excluding paper and divested businesses, MEUR % % Q4 14Q

5 Operational EBIT increased by 38% in Q4 y-o-y and by 40% in 2014 y-o-y MEUR % % Q4 14Q

6 Transformation in Progress (1/4) Investing in sustainable business Consumer Board and Packaging Solutions Guangxi 750 MEUR (phase one) Partnering with IFC (equity and loan) FSC and PEFC certified plantation Construction permits granted Construction of the consumer board mill is in full speed Start up in mid Investment in Imatra mills 27 MEUR to improve quality and costcompetitiveness Increases consumer board capacity by tonnes Start up in Sep 2015 Varkaus conversion 110 MEUR for conversion EBITDA margin above 15% Capacity tonnes of kraftliner Uncoated fine paper capacity to reduce by tonnes Execution according to plan Start up Q

7 Transformation in Progress (2/4) Investing in sustainable business - Biomaterials Montes del Plata Total investment MEUR, of which Stora Enso s share 850 MEUR Joint operation Annual production capacity 1.3 million tonnes Stora Enso s share tonnes In 2014, Stora Enso s share of production totalled tonnes Reached EBIT break even in December Sunila Mill Biorefinery investment 32 MEUR Lignin extracted from the black liquor First batches of moist lignin have been produced Virdia & demonstration plant Virdia acquisition cash consideration 17 MEUR with maximum potential payouts totalling 21 MEUR by MEUR investment in a demonstration and market development plant in the USA (Raceland, Louisiana) Extraction and separation of highly pure sugars from biomass to be converted into differentiated biochemicals 7

8 Transformation in Progress (3/4) Investing in sustainable business Wood Products Varkaus Mill: wooden building elements 43 MEUR investment in a new production line for wooden building elements located in Varkaus, Finland The investment is based on peeling technology Estimated yearly capacity around m 3 Expected annual sales of 50 MEUR when run at full capacity Over time significantly exceed ROCE target of 13% Start up Q Murow Sawmill 28 MEUR to modernise and develop Murow Sawmill in Poland Increases Stora Enso s consumption of Polish saw logs The production capacity of the sawmill will rise to m³/shift/year Investment is proceeding as planned Start up Q

9 Transformation in Progress (4/4) Non-core asset divestments and closures in 2014 Non-core asset divestments: Thiele Kaolin Q1 2014, cash consideration EUR 61 million Corenso core and coreboard operations to Powerflute in Q4 2014, cash consideration approximately EUR 103 million Uetersen Mill with cash consideration of EUR 7 million. Closing expected in Q Closures Veitsiluoto PM1 ( tonnes of coated magazine paper) in Q Corbehem Mill ( tonnes of light weight magazine paper) in Q

10 Transformation journey continues Growth businesses with 62% of sales 2006 Sales 2014 Sales 20XX Sales 30% 62% 21 % -3 % 33 % 1 % 38 % 30 % 12 % 70 % 17 % 11 % 70 % 38% 79% Paper Growth businesses -3 % 6 % 21 % 35 % 6 % 62 % 51 % 11 % 11 % 2006 Operational EBIT 2014 Operational EBIT 10

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12 Summary financials Q and 2014 EUR million Q4/14 Q4/13 Change % Q4 14 / Q4 13 Q3/14 Change % Q4 14 / Q Change % 14/13 Sales % % % Operational EBITDA % % % Operational EBITDA, % 12.1% 10.0% 13.2% 12.4 % 10.3% Operational EBIT % % % Operational EBIT margin, % 8.2% 5.8% 8.4% 7.9% 5.5% Profit before tax excl. NRI % % % EPS excl. NRI, EUR EPS (basic), EUR Operational ROCE, % 9.7% 7.0% 9.7% 9.5% 6.5% Operational ROCE, % excl. transformation investments 13.1% 9.0% 13.0% 12.7% 8.1% Cash Flow from Operations % % % Net debt/last 12 months operational EBITDA

13 Reconciliation of operational profitability EUR million 2014 Q Q Q Q Q Q Q Q1 Operational EBITDA Equity accounted investments (EAI), operational Depreciation and impairment excl NRI Operational EBIT

14 Cash flow from operations Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Cash flow from operations, MEUR Cash flow to sales 14

15 Balance sheet strength Q Q Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Net Debt, MEUR Net Debt/Operational EBITDA* *Last twelve months operational EBITDA 15

16 Renewable Packaging Q4 sales increased by 3% year-on-year Q4: Sales increased to EUR 812 (EUR 788) million due to higher board deliveries Operational EBIT stable at EUR 74 (EUR 73) million Lower wood prices and energy costs partly offset by operational problems and fire at Skoghall mill Operational ROOC 11.5% (12.2%) Operational ROOC 16.9% (14.5%) excluding Guangxi investment Full year: Sales increased to EUR (EUR 3 272) million Operational EBIT increased by 29% to EUR 410 (EUR 318) million Lower costs and higher volumes Operational ROOC 16.5% (13.3%) Operational ROOC 21.7% (15.6%) excluding Guangxi investment 4 February 2015 Stora Enso Q4 and Full Year 2014 Results Sales, MEUR 1.9% % Q4 14Q Operational EBIT, MEUR % % 74 13Q4 14Q

17 Biomaterials Q4 sales increased by 18% year-on-year Q4: Sales increased to EUR 314 (EUR 266) million due to Montes del Plata deliveries Operational EBIT increased by 42% to EUR 34 (EUR 24) million Higher pulp prices and sales volumes Operational ROOC 5.6% (4.6%) Operational ROOC 13.0% (13.2%) excluding Montes del Plata investment Full year: Sales increased to EUR (EUR 1 033) million Operational EBIT increased by 15.6% to EUR 89 (EUR 77) million Mainly due to lower wood costs in Nordic pulp mills Operational ROOC 3.9% (3.8%) Operational ROOC 10.7% (9.0%) excluding Montes del Plata investment 4 February % Sales, MEUR 13Q4 14Q % 24 Operational EBIT, MEUR 6.9% % 13Q4 14Q Stora Enso Q4 and Full Year 2014 Results

18 Building and Living 2014 operational EBIT up 19% year-on-year Q4: Sales declined by 11% to EUR 415 (EUR 466) million due to lower volumes in non-european markets Operational EBIT decreased by 47.4% to EUR 10 (EUR 19) million Lower volumes and higher net raw material costs Operational ROOC 7.6% (14.4%) Curtailments 7% (3%) Full year: Sales declined by 5% to EUR (EUR 1 867) million Operational EBIT increased by 18.7% to EUR 89 (EUR 75) million Lower fixed costs Operational ROOC 17.3% (13.9%) Sales, MEUR % % Q4 14Q Operational EBIT, MEUR 18.7% % 10 13Q4 14Q

19 Printing and Reading cash generation maintained on a high level year-on-year Q4: Sales declined by 7% to EUR 984 (EUR 1 054) million Operational EBITDA increased by 26.7% to EUR 109 (EUR 86) million Lower volumes and slightly lower sales prices in EUR terms Clearly lower energy and fixed costs, including indirect CO 2 cost subsidy, and reversal of restructuring provision Operational ROOC increased from 6.1 % to 15.1% Full year: Sales declined by 9% to EUR (EUR 4 319) million Operational EBITDA increased by 24.5% to EUR 361 (EUR 290) million Cash flow after capex EUR 243 (EUR 248) million % Sales, MEUR 13Q4 14Q Operational EBITDA, MEUR 26.7% 24.5% -9.4% 13Q4 14Q Cash flow after capex Cash flow after capex to sales 12% 10% 8% 6% 4% 2% 0%

20 Forecast for capex in 2015 EUR million Forecast 2015* Capital expenditure Depreciation Capital expenditure includes approximately EUR 350 million for the project in Guangxi, China. 20

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22 Guidance for Q Compared to Q Q1 Sales are estimated to be roughly similar compared to the Q4 amount of EUR million Q1 Operational EBIT is expected to be in line with the Q4 amount of EUR 209 million 22

23 Dividend proposal of EUR 0.30 per share Strive to pay stable dividends linked to the long-term performance One half of net profits over a business cycle Dividend proposal of EUR 0.30 per share for 2014 totaling EUR 237 million EUR 1 0,8 0,6 0,4 0,2 0-0,2-0,4-0,6-0,8-1 -1,2 Earnings and distribution per share * 2009* ** Earnings per share (basic) Dividend per share *Distribution of capital ** Dividend proposal 23

24 Conclusion Transformation in progress Sales excluding paper and divested businesses Q4 increased by 1.4% y-o-y 2014 increased by 1.3% y-o-y Operational EBIT Q4 y-o-y 38% higher 2014 y-o-y 40% higher Net debt /EBITDA 2.6 Operational ROCE excluding transformation investment 13.1% Dividend proposal EUR

25 Capital Markets Day (CMD) Welcome to CMD on 28 th of May 2015 in London 25

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27 Fair valuations EUR -79 million impact Mainly Guangxi plantations Fair valuations and non-operational items had a negative EUR 79 (positive EUR 30) million impact mainly due to a fair valuation of forest assets in Guangxi Project related to a change in the harvesting plan and increased future cost estimates EPS excluding NRI was EUR 0.06 (EUR 0.15) EUR million Q4/14 Q4/13 Change Q4/14 Q4/13 Q3/14 Change Q4/14 Q3/ Change Operational EBITDA % % % Equity accounted investments (EAI), operational* % % % Depreciation and impairment excl. NRI % % % Operational EBIT % % % Fair valuations and non-operational items** n/m % n/m Non-recurring items % 28 n/m % Operating Profit (IFRS) % % n/m 27

28 Operational EBIT by segments EUR million Q4/14 Q4/13 Change % Q4 14 / Q4 13 Change % Q3/14 Q4 14 / Q Change % 14/13 Renewable Packaging % % % % of sales 9.1% 9.3% 15.3% 12.3% 9.7% Biomaterials % % % % of sales 10.8% 9.0% 8.5% 8.1% 7.5% Building and Living % % % % of sales 2.4% 4.1% 5.1% 5.0% 4.0% Printing and Reading % % n/m % of sales 6.9% 3.4% 3.4% 4.4% 0.8% Other 23 - n/m 1 n/m % % of sales 3.6% - 0.2% 1.9% 2.8% 28

29 Cash flow by divisions in Q Renewable Packaging Biomaterials Building and Living Printing and Reading Other -100 Cash flow from operations, MEUR Cash flow after investments, MEUR 29

30 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 Total

31 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 Mar Total

32 Net Financial Items EUR million Q4/ 2014 Q4/ 2013 Change % Q414/ Q413 Q3/ 2014 Change % Q414/ Q314 Net interest expense Foreign exchange gains and losses n/m Other financial items. of which PIK notes Fair valuation of interest rate derivatives* Fair valuation of long-term debt Pension costs (IAS 19R) Other items Total net financial items *Not hedge accounted interest rate derivatives. 32

33 Net cash flows and foreign exchange hedges Q million USD SEK GBP Estimated annual net operating cash flow exposure Transaction hedges as at 31 Dec Hedging percentage for the next 12 months 53% 55% 52% 33

34 Curtailments of capacity % of the capacity Paper and Board Wood Products Stora Enso Q4 and Full Year 2014 Results 4 February

35 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 USD/tonne Softwood pulp prices Stora Enso s market pulp is softwood Bleached softwood kraft pulp Bleached hardwood kraft pulp Source: FOEX 35

36 Sensitivity analysis 10% change, impact on operational EBIT 10% decrease in Impact* Energy prices Wood prices Chemical and filler prices Positive EUR 9 million Positive EUR 182 million Positive EUR 67 million 10% increase in Impact* Market pulp price, total Positive EUR 105 million 10% strengthening against Euro in the value of US dollar Swedish krona British pound Impact* Positive EUR 112 million Negative EUR 84 million Positive EUR 46 million *Impact on operational EBIT for the next twelve months. 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. 36

37 Pulp sensitivity analysis 10% change in prices, impact on operational EBIT 10% increase in Impact* Softwood pulp prices Hardwood pulp prices Fluff pulp prices Dissolving pulp prices Market pulp price, total Positive EUR 45 million Positive EUR 35 million Positive EUR 15 million Positive EUR 10 million Positive EUR 105 million * Impact on operational EBIT for the next twelve months. A decrease of pulp prices would have the opposite impact. 37

38 06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 Pulp wood and saw log prices Wood prices in Finland Pulpwood, Pine Sawlogs, Pine EUR/m Source: METLA 38

39 07Q1 07Q3 08Q1 08Q3 09Q1 09Q3 10Q1 10Q3 11Q1 11Q3 12Q1 12Q3 13Q1 13Q3 14Q1 14Q3 EUR/tonne Paper for recycling prices 200,0 Mixed OCC De-inking 160,0 120,0 80,0 40,0 0,0 German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 39

40 Maturity profile Q Bonds Other loans / liabilities Commercial paper MEUR Revolving Credit Facility 700 million matures in January 2018 and is fully undrawn 40

41 Energy balance * Q Impact** on operating profit from 10% change in: EUR million p.a. Electricity market price ~2 Fossil fuel price ~7 *) Pulp. paper and board mills. Europe and overseas **) Remaining impact on non-hedged volume Stora Enso Q4 and Full Year 2014 Results 4 February

42 Stora Enso Electricity procurement * Q *) Pulp. paper and board mills. Europe and overseas Stora Enso Q4 and Full Year 2014 Results 4 February

43 People & Ethics Global Responsibility update KPI results % on target (1/2) Focus Area Key Performance Indicator Target 2014 /LT target 2014 Status vs Target Comments Health &Safety TRI rate (Incidents per 1m working hours) LTA rate (lost time accidents per 1m working hours) < 5 by end 2015 <1 by end of ,5 5,2 The annual TRI and LTA rates continued to improve. In 2014 there were 2,5 times as many safety observations than in Actions: Safety leadership training program initiated - move from compliance driven approach to value based safety culture. Human Rights Extent of implementation of the Group's approach to human rights issues. Human Rights Assessment to be conducted in all countries with production units, forestry and/or plantation operations by end of % All units completed. Ethics & Compliance Employees' perception of adherence to Code of Conduct (YourVoice) Positive trend in annual employee survey. 69 % Clear improvement; results reviewed. Introduction of E&C index in Sustainable Leadership Leadership Index (YourVoice) Positive trend in annual employee survey 76,0 Improvement. Results reviewed. Responsible Sourcing % of supplier spend covered by supplier Code of Conduct (CoC) Cover 80% of the supplier spend on material and services with the Supplier Code of Conduct before the end of % target by end of ,9% Actions: Leadership focus / personal targets, training for purchasers, focused co-operation with suppliers. 43

44 Environment & Efficiency Forest and Land use Global Responsibility update KPI results % on target (2/2) Focus Area Key Performance Indicator Target 2014 /LT target 2014 Status vs Target Comments Sustainable forestry % of the lands owned and managed by the company covered by forest certification schemes. 96% of lands certified by end of ,0 % Veracel both FSC and PEFC; MdP FSC, Laos and Rio Grande do Sul not certification. Climate & Energy CO2 emissions per saleable ton of pulp, paper and board (kg/t) Decreasing trend towards 2025 target (35% below 2006 benchmark level) -26,5% Absolute level slightly lower than Lower production had a negative impact on relative performance. Actions: optimisation efforts on environmental performance in the production processes. Process Water Discharges Process water discharge per saleable ton of pulp, paper and board (m3/t) 10% below 2005 level by end ,3% Absolute discharges slightly higher than Lower production impact on relative performance. Actions: optimisation efforts on environmental performance in the production processes. Process Water Discharges Chemical Oxygen Demand (COD) per saleable ton of pulp, paper and board (kg/t) 10% below 2007 level by end ,7% Absolute level slightly lower than Lower production impact on relative performance. Level did not decrease as planned due to the issues related to the optimisation of environmental performance in the production processes. 44