Financial results for Q3 2017

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 Solid Performance Q year-on-year Sales MEUR, +4.8%, excl. Paper +11.1% Growth third quarter in a row y-o-y Operational EBIT 290 MEUR, EBIT margin 11.6% (9.2%) Due to favourable price development, strategic investments and good cost management Cash flow from operations 430 MEUR (390 MEUR) Operational ROCE was 13.9% (10.1%), above long-term target of 13% Operational ROCE excluding the Beihai operations 16.3% (13.5%) Net debt to operational EBITDA continued strengthening to 1.8 The 50 MEUR profit improvement programme Proceeding according to plan One third of the cost-savings achieved Full effect end of

4 A step change in our transformation Operational EBIT Q3 y-o-y MEUR % % Q Consumer Board excl. Beihai Beihai operations Packaging Solutions Biomaterials Wood Products Paper Other Q

5 Investing 94 MEUR to grow in renewable materials Enocell mill 52 MEUR investment to dissolving pulp production capacity increase by tonnes tonnes total dissolving capacity Expected to be completed during second half of 2019 Targeted ROOC over 15% Imatra mill 42 MEUR investment to increase CTMP drying and repulping capacity The objective is to improve the CTMP availability at Imatra mills to further enable the commercialisation of MFC Expected to be completed during first half of 2019 Targeted ROOC over 20% 5

6 Transformation steps since 2016 Investments Beihai Mill start-up Gruvön CLT production unit Ongoing Varkaus LVL start-up Tychy corrugated plant Ongoing Murów inauguration Dissolving pulp capacity increase at Enocell Mill Ongoing Varkaus kraftliner EBIT break-even CTMP drying capacity at Imatra Mill Ongoing Beihai PE coating line Ongoing Capacity expansion and quality upgrade in China Packaging Ongoing Skoghall Mill, chemical plant Ongoing Divestment and closure announcements Skutskär Mill, environmental investment Ongoing Hartola production unit, Finland Imatra PE coating line and automated roll warehouse Ongoing Kabel Mill, Germany Skutskär pulp mill, fluff Ongoing Suzhou Mill, China Lahti corrugated packaging investment Ongoing Heinola corrugated planned closure Imatra, Ingerois and Fors MFC Heinola Fluting Mill capacity increase Ongoing Ongoing Packaging machine manufacturing company Formeca, Finland SC 100kt paper machine at Kvarnsveden Mill closed Hylte biocomposite granules Ongoing Re-board business divested in Sweden Divestment of holding in Bulleh Shah Packaging in Pakistan

7 Beihai Board mill ramp-up ahead of plan kt EBITDA break-even in Q4/17 The consumer board machine in Beihai is expected to reach operational EBITDA break even in Q4/2017 Production volume was (52 000) tonnes in Q3/2017 Total production since the start up of the mill tonnes Full production expected 0 in the first half of E 2018E 2019E 2020E 2021E 2022E Liquid packaging board (LPB), Coated unbleached kraftboard (CUK), Food service board (FSB) Folding box board (FBB) 2nd grade and waste 7

8 Transformation journey Growth businesses 71% of sales and 90% of operational EBIT Sales 2006 Sales Q3/2017-3% 21% 1% 30% 71% 25% 29% 12% 13% 70% 17% 15% Operational EBIT 2006 Operational EBIT Q3/2017 Consumer Board Packaging Solutions (1) Biomaterials Wood Products Paper (2) Other & eliminations -3% 38% 90% 10% 3% (1) In 2006 included in Consumer Board (2) In 2006 includes merchants 35% 10% 30% 62% 6% 30% 17% 8

9 Sales grew for third consecutive quarter; operational ROCE above strategic target Summary financials Q EUR million Q3/17 Q3/16 Change% Q3/17- Q3/16 Q2/17 Change% Q3/17- Q2/17 Sales % % Operational EBITDA % % Operational EBITDA margin 16.3% 14.3% 13.5% Operational EBIT % % Operational EBIT margin 11.6% 9.2% 8.7% Profit before tax excl. IAC % % EPS excl. IAC, EUR EPS (basic), EUR Operational ROCE 13.9% 10.1% 10.3% Operational ROCE excl. Beihai operations 16.3% 13.5% 12.4% Cash Flow from Operations % % Net debt/last 12 months operational EBITDA

10 Consumer Board Beihai Mill ramp-up continues ahead of plan Q3 y-o-y Sales +7% to 639 MEUR Due to the ramp-up of Beihai Mill Operational EBIT 86 MEUR +28% Due to the ramp-up of Beihai Mill Beihai development The power turbine is back in operation Beihai operations operational EBIT -7 MEUR (-38 MEUR) in Q4/2017 EBITDA break even expected during Q4/2017 Operational ROOC 17.7% (12.9%) Excluding Beihai operations 40.5% (42.3%) 42 MEUR investment at Imatra Mills in Finland for additional drying capacity for CTMP and an extension of the pulp warehouse MEUR MEUR Sales 639 7% 599 Q316 Q317 Operational EBIT 86 28% 67 Q316 Q317 10

11 Packaging Solutions Profitable growth continues Q3 y-o-y Sales +23% to 318 MEUR Varkaus Kraftliner ramp-up, favourable prices and increased deliveries Operational EBIT record high at 48 MEUR Clearly higher sales prices, better volumes and operational improvements in China Packaging and Varkaus kraftliner Varkaus kraftliner mill Full production expected to be reached during Q4/2017 Reached targeted operational EBITDA run-rate of 15% Investment of 16 MEUR was decided in capacity expansion and quality upgrade in China Investment is expected to be completed by mid-2019 MEUR MEUR Sales % 259 Q316 Q317 Operational EBIT % 21 Q316 Q317 11

12 Biomaterials Favourable pulp cycle continues Q3 y-o-y Sales +14% to 379 MEUR Increased deliveries and higher sales prices Operational EBIT more than doubled to 88 MEUR Higher pulp prices, increased volumes and lower maintenance costs mainly due to changed sequence of maintenance shutdowns Operational ROOC 14.8% Target 15% MEUR Q316 Sales 14% 379 Q317 An 52 MEUR investment at Enocell Mill to increase its dissolving pulp capacity from 150k tonnes to 430k tonnes MEUR 100 Operational EBIT % Q316 Q317 12

13 Wood Products Continued solid performance Q3 y-o-y Sales increased 10.5% excluding the transfer of Baltic wood sourcing - Sales growth in Building Components and Systems 14% - Mainly due to increased volumes, higher prices and product mix The highest third quarter operational EBIT in 10 years - Higher wood costs were more than offset by higher sales prices and volumes Operational ROOC 21.3% - Target 18% CLT investment at Gruvön, Sweden proceeding according to plan Scheduled to begin during Q1/2019 MEUR MEUR Sales 415 8% 385 Q316 Q317 Operational EBIT 29 32% 22 0 Q316 Q317 13

14 Paper Temporary headwinds effecting profitability and cash flow Q3 y-o-y Sales of ongoing operations stable -1% Veitsiluoto Mill PM2 incident and negative FX impact. The divestments of Kabel Mill and Suzhou Mill site decreased sales by 55 MEUR MEUR Sales -8% 727 Operational EBIT decreased by 24 MEUR Higher cost of paper for recycling, energy, wood and chemicals and negative net FX Q316 Q317 Cash flow after investing activities to sales ratio for the first 9 months 5.2%, for Q3 0.8% Mainly due to lower EBITDA and normalised level for operative working capital after a low level at the end of Q2/2017 Negotiations at Kvarnsveden Mill regarding the closure of paper machine 8 concluded 122 people affected Annual cost savings of 12 MEUR MEUR Cash flow Q116 Q216 Q316 Q416 Q117 Q217 Q317 Cash flow after investing activities Cash flow after investing activities to sales 14% 12% 10% 8% 6% 4% 2% 0% 14

15 Strategic targets Group targets Q3 16 Q3 17 Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 1.8% (YoY) 11.1% (YoY) Net debt to operational EBITDA <3.0x Fixed costs to sales <20% 25.5% 23.8% Debt to equity <80% 52% 43% Operational ROCE >13% 10.1% 13.9% Operational ROCE excl. Beihai op. 13.5% 16.3% Divisional targets Q3 16 Q3 17 Consumer Board Operational ROOC > 20% 12.9% 17.7% Consumer Board excl. Beihai op. 42.3% 40.5% Packaging Solutions Operational ROOC > 20% 9.6% 22.4% Biomaterials Operational ROOC > 15% 6.7% 14.8% Wood Products Operational ROOC > 18% 17.5% 21.3% Paper Cash flow after investing activities to sales > 7% 11.7% 0.8% *Excluding Paper 15

16 Guidance for Q Compared to Q Sales are estimated to be similar to or slightly higher than the amount of MEUR recorded in Q3/2017 Operational EBIT is expected to be somewhat lower than or even in line with the 290 MEUR recorded in Q3/2017 The operational EBIT estimate for Q4/2017 includes the negative 7 MEUR impact of the ramp-up of the Beihai operations. Beihai Mill expected to reach operational EBITDA break even in Q The impact of annual maintenance shutdowns is expected to be approximately 10 MEUR higher than in Q3/2017, and it is included in the above guidance. Annual maintenance Q Consumer Board Q Q Skoghall and Fors mills Imatra and Ingerois Mills Packaging Solutions Heinola Mill Varkaus Mill Biomaterials Veracel and Skutskär mills Paper Nymölla Mill Veitsiluoto Mill - 16

17 A step change in our transformation Sales growth three consecutive quarters Strategic projects in China, Varkaus and Murów drive sustainable profitable growth Sales growth 4.8%, excl. paper 11.1% ROCE 13.9% at the highest level since Q1/2001 Solid cash flow generation Net debt/ebitda 1.8 Moving from asset transformation to innovation and sales transformation 17

18 Welcome to Stora Enso CMD on 8 November 2017 in London 18

19

20 Operational EBIT by segments EUR million Q317 Q316 Change% Q317/Q316 Q217 Change% Q317/Q317 Consumer Board % % % of sales 13.5% 11.2% 11.0% Packaging Solutions % % % of sales 15.1% 8.1% 12.8% Biomaterials % % % of sales 23.2% 12.9% 16.7% Wood Products % % % of sales 7.0% 5.7% 8.0% Paper % % % of sales 4.0% 6.7% 1.5% Other % 2 n/m % of sales 1.7% 2.3% 0.3% 20

21 Year-on-year net debt/ebitda 21

22 Healthy cash flow generation continues % % % % % 0 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 0% Cash flow from operations, MEUR Cash flow to sales 22

23 Cash flow by divisions in Q3 MEUR 23

24 Capital allocation Capex on its way to the level of depreciation 24

25 Capex allocation 2017 Both strategic and maintenance MEUR 250 Target: Operational ROOC > 20% Target: Operational ROOC > 20% Target: Operational ROOC > 15% Target: Operational ROOC > 18% Target: cash flow after investing activities to sales > 7% 50 0 Consumer Board Packaging Solutions Biomaterials Wood Products Paper Other Unallocated 25

26 Net Financials Change Change Q3 Q3 Q2 MEUR MEUR EUR million Q317/ 2017 Q317/ Q316 Q217 Net interest expense Average interest rate* 4.1% 4.2% 4.2% 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. 26

27 Maturity profile Q MEUR 700 Bonds Other loans / liabilities Revolving Credit Facility EUR million 700 matures in January 2019 and is fully undrawn 27

28 Transaction risk and hedges Q EUR million USD SEK GBP Estimated annual operating cash flow exposure Transaction hedges as at 30 September Hedging percentage as at 30 September 2017 for the next 12 months 50% 56% 52% Operational EBIT: Currency Strengthening of + 10% * EUR million USD 115 SEK -89 GBP 31 *Before currency hedges assuming no other changes other than a single currency rate movement occurs 28

29 Sensitivity analysis Impact on operational EBIT 10% decrease in Impact* Energy prices Wood prices Chemical and filler prices Positive 15 MEUR Positive 178 MEUR Positive 53 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 115 MEUR Negative 89 MEUR Positive 31 MEUR Negative 12 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 29

30 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 50 MEUR Positive 45 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 30

31 Net FX by division Consumer Board Packaging Solutions Biomaterials Wood Products Paper MEUR Q y-o-y Q y-o-y Q y-o-y 31

32 Stora Enso energy balance* Q TWh/a Impact on non-hedged volume on operating profit from 10% change in: EUR million p.a. Electricity market price ~7.8 Fossil fuel price ~8.5 *) Pulp, paper and board mills in Europe and overseas, incl. Beihai 32

33 Stora Enso electricity procurement * Q *) Pulp, paper and board mills in Europe and overseas, incl. Beihai from year

34 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 Kvarnsveden PM8 Jun 2017 SC Total

35 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

36 Global bleached chemical market pulp inventories by grade in tonnes and days of supply Source: EPIS 36

37 Kraftliner and testliner prices Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315 Q116 Q316 Q117 Q317 Kraftliner Testliner Source: FOEX 37

38 USD/tonne Pulp price development Bleached softwood kraft pulp Bleached hardwood kraft pulp Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315 Q116 Q316 Q117 Q317 Source: FOEX 38

39 Pulp wood and saw log prices Wood prices in Finland Pulpwood, Pine Sawlogs, Pine Q306 Q307 Q308 Q309 Q310 Q311 Q312 Q313 Q314 Q315 Q316 Q317 Source: Luonnonvarakeskus 39

40 EUR/tonne Paper for recycling prices 200 Mixed OCC De-inking Q307 Q308 Q309 Q310 Q311 Q312 Q313 Q314 Q315 Q316 Q317 German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 40

41