Stora Enso Biomaterials growth based on customer focus and innovation

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1 Stora Enso Biomaterials growth based on customer focus and innovation Juan Bueno, EVP, Biomaterials 8 March 2012

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. Stora Enso presentation 8 March

3 Stora Enso s business What we do Publication paper Fine paper Packaging Wood products Sales, EUR million Operational EBIT, EUR 145 million Stora Enso presentation 8 March

4 Full year 2011 operational EBIT improved by 9% Operational EBIT EUR 867 million Operational ROCE 10.0% Strong cash flow EUR million Dividend increased to EUR 0.3 Full year 2011 Stora Enso presentation 8 March

5 EUR million EUR million Solid year and satisfactory quarter Operational EBIT* Operational EBIT margin % Operational EBIT* Operational EBIT margin %, 4 Q avg 900 8,0 % ,0 % 850 7,9 % 7,8 % ,0 % 8,0 % 7,0 % 150 6,0 % 800 7,7 % 100 5,0 % 7,6 % 50 4,0 % 3,0 % ,5 % 0 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 2,0 % 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 include equity incentive schemes, synthetic options net of realised and open hedges, CO 2 emission rights and valuations of biological assets related to forest assets in EAI. Stora Enso presentation 8 March

6 Fixed Cost/Sales Flexibility improvements continue Fixed cost/sales 0,30 0,28 0,26 0,24 FY2007 FY2008 FY2009 FY2010 FY2011 Stora Enso presentation 8 March

7 Sales/employee Productivity continued to increase 55% per person since Continuing operations Stora Enso presentation 8 March

8 Reducing costs and improving productivity Plan to increase competitiveness in Coated Magazine Restructuring at Corbehem, Veitsiluoto and Kabel Mills Cost efficiency and productivity improvements Reduction of costs by EUR 48 million /a Full impact Q onwards Q1 cash provision about EUR 5 million Q1 fixed asset write-down about EUR 1 million Investments EUR 18 million to quality, productivity and energy savings Planned employee reduction 110 people Swedish maintenance streamlining plan To increase further efficiency and flexibility by restructuring and changing processes Impacting Renewable Packaging and Printing and Reading Reduction of costs by EUR 21 million /a Starting gradually from late 2012 onwards Cash provisions for Q1 Renewable packaging EUR 6 million Printing and reading EUR 4 million Planned employee reduction 130 people Actions completed by end 2012 Stora Enso presentation 8 March

9 Summary financials Q and Full year 2011 EUR million IV/ IV/ Change% IV11/IV10 Change% 2011/2010 Sales % 6.5 % Operational EBITDA % 7.5 % Operational EBIT % 8.7 % Profit before tax. excl. NRI % -9.4 % Profit before tax % % EPS excl. NRI (EUR) % % Operational ROCE % 3.1 % Cash flow from operations % 4.3 % Cash flow after investing activities % 5.6 % Debt/equity % 20.5 % NRI = Non-recurring items. These are exceptional transactions that are not related to normal business operations. The most common nonrecurring items are capital gains, additional write-downs or reversals of write-downs, provisions for planned restructuring and penalties. Nonrecurring items are normally specified individually if they exceed one cent per share. Stora Enso presentation 8 March

10 EUR Increased dividend Dividend proposal increased to EUR 0.30 EPS excluding NRI EUR ,00 0,80 EPS, excl NRI (EUR) Dividend and distribution (EUR) 0,60 0,40 0,20 0, Stora Enso presentation 8 March

11 Stora Enso s direction Growth markets Proof points: Inpac acquisition Growth markets Ostroleka containerboard investment Investment to Montes del Plata Plantation-based pulp Plantation-based pulp Investment to Montes del Plata pulp mill Proof point: Investment to Montes del Plata Fibre-based packaging Fibre-based packaging Maintain and develop global leadership position Proof points: Inpac acquisition Selected paper grades Ostroleka containerboard investmentselected paper grades Stora Enso presentation 8 March 8 March

12 EUR million Over 80% of investments to high-return growth EUR million Dividend Investments to other Investments to high-return growth 0 Cash flow generated by operations Cash outflow Net financial items and net income tax paid Stora Enso presentation 8 March

13 Guidance Q sales and operational EBIT approximately in line with Q Combined improvement of Business Area results offset by lower results in forest companies (EAI) Stora Enso presentation 8 March

14 Recap Strong operational cash flow Full year improved Increased dividend Strategic investments proceeding Q4 showed rethink must continue Stora Enso presentation 8 March

15 Why Biomaterials? Because we believe there is more to plantations than pulp, and that we are responsible for the development of technologies that contribute for a sustainable way of life. Stora Enso presentation 28 8 March February

16 Why Now? Because the world is increasingly demanding to new solutions to raw materials that preserve our natural resources...to do more consuming less. Stora Enso presentation 28 8 March February

17 How will it work? Our immediate revenue streams will come from Plantation based pulp. Our focus will be on serving the growing demand of pulp globally, where key segments offer attractive growth opportunities Tissue Hygiene Board We will strengthen our presence in the key growth regions of the world. We will invest in R&D and Innovation resources and will seek the appropriate partnerships in order to develop new technologies with a clear focus on our customers needs. Stora Enso presentation 8 March

18 What assets are included in Biomaterials? Nordic stand-alone pulp mills: Skutskär in Sweden (540 k tons long fibre, short fibre and fluff) Enocell in Finland (480 k tons long fibre, short fibre and dissolving) Sunila in Finland (370 k ton long fibre) The JV pulp mills with their plantations : Veracel in Brazil (1.1 M tons short fibre) Montes del Plata in Uruguay (1.3 M tons short fibre; under construction) Stora Enso presentation 8 March

19 What assets are included in Biomaterials? Plantations in Brazil, Uruguay, Laos and Thailand Market pulp sales from other integrated Stora Enso mills Pulp Competence Centre Stora Enso presentation 8 March

20 Our next source of growth Montes del Plata Annual production capacity of 1.3 M tonnes Stora Enso s share 650 k tons Estimated investment EUR 1.4 billion Stora Enso s share of equity EUR 280 million Operational in the Spring of 2013 Gained 7 years and doubled value Eucalyptus pulpwood sourced mainly from own FSC certified plantations 253,500 Hectares and over 122,700 planted Stora Enso presentation 8 March

21 Innovation as a future Revenue Stream Converting Pulp Mills into Bio-refineries By-Products: Tall Oil, Turpentine, Methanol Refining By-Products into functional chemicals Apply ligning separation to produce raw materials for ligning based products such as Polyurethane foam and carbon fibers Develop pulp mill into production unit for Micro Fibrillated Cellulose products Stora Enso presentation 8 March

22 Market Pulp Demand grew 4.8% in 2011 Source: PPPC Stora Enso presentation 8 March

23 Market Pulp Growing at 2.0% AAGR % AAGR % Source: PPPC Stora Enso presentation 8 March

24 Capacity expected to grow 1.7% on average Source: PPPC Stora Enso presentation 8 March

25 Market Pulp Inventories by Grade Stora Enso presentation 8 March

26 Consumer stocks Source: PPPC Stora Enso presentation 8 March

27 Recent Price Developments - PIX Stora Enso presentation 8 March

28 Market Pulp Demand by End Use Stora Enso presentation 8 March

29 Long Term sources of Growth for Hardwood pulp NM&FP (20%) Packaging (27%) Tissue (53%) GDP is growing 4.1%, but BHKP only 2.7% due to digital subst. +2 integrated pulp mills ~1MT each China gaining share of wood trade, away from Japan -3.5 net impact of closed mills 13.4 ~7.5% p.a. BHKP share increase from 43% to 60% ~2.7% p.a. BHKP share increase from 27% to 30% ~2.6% p.a. -3% p.a. decline: -5% p.a. decline in all fiber, combined with BHKP increasing share from 25% to 34% (from BSKP) Stora Enso presentation +12.6Mt Assumes 2010 pulp mill utilization rate of 91.5% (Hawkins-Wright July 2011 Outlook) Source: Paper and board demand (Bain paper demand model, phased digital life scenario); Furnish (Poyry World fiber Outlook 2025); Mill closures (Stora Enso mill risk PPT, from Poyry); New integrated capacity (Poyry mill database); Furnish (Poyry World fiber outlook 2009) 8 March

30 World Chemical Pulp Balance Source: PPPC Stora Enso presentation 8 March

31 What can we offer to our customers Extensive product portfolio covering various fibre needs of the customers: NBSK (long-fibre) BHK (short-fibre; birch and euca) Fluff pulp Dissolving pulp Technical expertise and support via our Pulp Competence Centre Highest sustainability standards Stora Enso presentation 8 March

32 Recap on Biomaterials Enables focus on growth capture Expanding Geographic presence Entering new markets Innovating through R&D Developing applications for pulp Pulp is a product for the future sustainable and versatile Wide product portfolio offering with technical expertise Biomaterials Business Area increases transparency Stora Enso presentation 8 March

33 Stora Enso presentation 8 March