Promising start of the year Financial results for Q CEO Karl-Henrik Sundström CFO Seppo Parvi. 27 April 2018

Transcription

1 Promising start of the year 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 Accelerated profitable growth continues Q year-on-year Sales MEUR, +3.3% Sales growth excluding divested Puumerkki was 4.5% Favourable prices and ramp-ups of strategic investments Operational EBIT +72% to 369 MEUR EBIT margin 14.3% (8.6%), highest quarter since 2001 Strong operational performance Profit improvement programme under finalisation, expected savings of 70 MEUR clearly exceeding the original target of 50 MEUR EPS 0.35 (0.14) EUR Cash flow from operations 229 MEUR (178 MEUR), after investing activities 113 MEUR (43 MEUR) Balance sheet strengthened further and net debt reduced by 485 MEUR; net debt to operational EBITDA ratio improved to 1.3 (1.9) Record high operational ROCE at 17.7% (10.0%), highest since 2000 Wood situation in Nordics tight but manageable after the mild winter 3

4 Promising start of the year Operational EBIT increased 72% 4

5 Transformation steps since 2017 Ramp-up of new projects - Beihai Mill - Varkaus kraftliner - Varkaus LVL - Murów sawmill - Ala pellet Acquisitions - Letter of intent aiming at structural changes in Bergvik Skog signed Divestments and closures - Kvarnsveden SC 100 kt PM closure - Re-board business in Sweden - Bulleh Shah Packaging - Puumerkki, a wholesaler of wooden building materials in Finland - Baienfurt sheeting centre in Germany - Heinola corrugated plant closure - Rio Grande do Sul New investments Completed projects since 2017: - Beihai PE coating line - Imatra PE coating line and automated warehouse - Skoghall chemical plant - MFC Imatra and Fors - Lahti corrugated packaging - Skutskär environmental performance - Hylte biocomposite granules Ongoing projects: - Skutskär fluff pulp - Heinola Fluting Mill capacity increase - Gruvön CLT production unit - Tychy corrugated plant - China Packaging capacity extension and technology - Ingerois MFC - Enocell dissolving pulp - Imatra CTMP drying capacity 5

6 Transformation journey Growth businesses 70% of sales and 81% of operational EBIT Consumer Board Packaging Solutions 1 Biomaterials Wood Products Paper 2 Other & eliminations 1 In 2006 included in Consumer Board 2 In 2006 includes merchants 6

7 Accelerated profitable growth continues Summary financials Q Change% Change% EUR million Q1/18 Q1/17 Q1/18- Q1/17 Q4/17 Q1/18- Q4/17 Sales % % Operational EBITDA % % Operational EBITDA margin 19.5% 14.8% 17.0% Operational EBIT % % Operational EBIT margin 14.3% 8.6% 11.2% Profit before tax excl. IAC % % EPS excl. IAC, EUR EPS (basic), EUR Operational ROCE 17.7% 10.0% 13.5% Cash Flow from Operations % % Net debt/last 12 months operational EBITDA

8 Consumer Board Record operational EBIT driven by strong growth and improved operational efficiency Q1 y-o-y Sales +6% to all time high 646 MEUR Better volumes in European mills and ramp-up of Beihai Mill improving volumes, sales prices and mix Operational EBIT +49% to record high Q1 of 91 MEUR Beihai Mill ramp-up Strong operational performance increased volumes Operational ROOC improved to 18.5% (12.2%) Slightly below strategic target Baienfurt sheeting centre divestment completed in January Cash consideration 9 MEUR Gain on disposal 3 MEUR 8

9 Packaging Solutions Another record quarter Q1 y-o-y Fourth consecutive quarter with record high sales and profitability Sales +15% to record high Q1 of 333 MEUR Favourable prices and sales mix improvements in European operations and growth in China Packaging Operational EBIT all time high level of 61 MEUR, +154% Clearly higher sales prices in European units, good sales mix management and operational improvements in China Packaging Operational ROOC record high at 27.7% (11.1%) Improved business and improvements in OWC Consolidation of corrugated packaging manufacturing in Finland completed according to the plan Centre of excellence in Lahti created Corrugated plant in Heinola closed permanently 9

10 Biomaterials All time high despite head winds Q1 y-o-y Sales +7% to all time high 394 MEUR Significantly higher sales prices, partly offset by negative FX impact, due to USD, and lower deliveries due to challenges related to wood supply in the Nordics Operational EBIT +93% to all time high 102 MEUR Significantly higher pulp prices, lower volumes due to challenges in wood supply in the Nordics Operational ROOC improved to 17.6% Clearly above the target Skutskär Mill 16 MEUR environmental performance investment completed Lineo by Stora Enso, lignin, a renewable replacement for oil-based phenolic materials, was awarded Bio-Based Product of the Year at the Bio-Based World News Innovation Awards

11 Wood Products Record high first quarter Q1 y-o-y Sales increased 4% excluding the divested Puumerkki and the Baltic wood supply operations (transferred to the segment Other) to 393 MEUR Improved prices and optimised mix Growth from strategic investments Murów and Varkaus LVL Operational EBIT +32% to record high Q1 of 29 MEUR and highest since 2007 Improved prices, mix, supported by growth from strategic investments Ramp-up of the LVL production at Varkaus Mill continues EBITDA break-even reached Ramp-up expected to be completed in mid-2018 CLT investment at Gruvön, Sweden proceeding as planned Scheduled to begin during Q1/2019 Production of biocomposite granules started at Hylte Mill Commercialisation is in process with several customers 11

12 Paper Profitable transformation: highest first quarter EBIT margin in 10 years Q1 y-o-y Sales increased +3% to 772 MEUR Higher sales prices were only partly offset by lower volumes and negative FX impact Operational EBIT increased +64% to 69 MEUR Higher sales prices in all grades were only partly offset by higher variable costs, mainly for pulp, logistics and chemicals and fillers Cash flow after investing activities to sales ratio 6.2% Increasing in line with higher profitability 12

13 Strategic targets in good progress Group strategic targets Q1 17 Q1 18 Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 9.7% (YoY) 3.2% (YoY) Net debt to operational EBITDA <3.0x Fixed costs to sales <20% 24.1% 22.6% Debt to equity <80% 46% 36% Operational ROCE >13% 10.0% 17.7% Divisional strategic targets Q1 17 Q1 18 Consumer Board Operational ROOC > 20% 12.2% 18.5% Packaging Solutions Operational ROOC > 20% 11.1% 27.7% Biomaterials Operational ROOC > 15% 7.9% 17.6% Wood Products Operational ROOC > 20% 16.4% 20.4% Paper Cash flow after investing activities to sales > 7% 4.3% 6.2% * Excluding Paper 13

14 Guidance for Q Compared to Q Sales are estimated to be similar to or slightly higher than the amount of MEUR recorded in Q1/2018 Operational EBIT is expected to be in line with or somewhat lower than the 369 MEUR recorded in Q1/2018 The impact of annual maintenance shutdowns is expected to be approximately 40 MEUR higher than in Q1/2018 Nordic wood supply situation expected to continue tight Impacts are expected to be at same level or lower than in Q1, approximately 10 MEUR These impacts included in above outlook Annual maintenance Q Q Consumer Board Beihai Mill - Packaging Solutions Heinola and Varkaus mills - Biomaterials Enocell Mill - Paper Oulu Mill - 14

15 Accelerated profitable growth continues Sales growth five consecutive quarters The operational EBIT margin increased to 14.3% from 8.6%, the highest quarter since 2001 Favourable prices and mix optimisation combined with continued successful ramp-ups of the strategic investments supported by strong operational performance Record high operational ROCE at 17.7%, the highest since year 2000 Balance sheet strengthened; net debt to operational EBITDA ratio 1.3, net debt reduced by 485 MEUR compared to a year ago Moving from asset transformation to innovation and sales transformation 15

16 Welcome to Stora Enso CMD on 7 November 2018 in Helsinki Followed by Packaging Solutions visit in Design Studio Lahti and SC fluting mill in Heinola on 8 November

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18 Operational EBIT by segments EUR million Q118 Q117 Change % Q118-Q117 Q417 Change % Q118-Q417 Consumer Board % % % of sales 14.1% 10.0% 10.8% Packaging Solutions % % % of sales 18.3% 8.3% 17.4% Biomaterials % % % of sales 25.9% 14.4% 16.8% Wood Products % % % of sales 7.4% 5.3% 6.3% Paper % % % of sales 8.9% 5.6% 6.3% Other % % % of sales 2.0% 2.0% 3.4% 18

19 Year-on-year net debt/ebitda 19

20 Healthy cash flow generation continues 20

21 Cash flow by divisions in Q1 21

22 Capex is moving towards targeted level Maintenance capex Strategic capex Biological capex Capex estimate for 2018 Depreciation and operational decrease in the value of biological assets 22

23 Targeted ROOC is driving CAPEX allocation Capex forecast in 2018 * Operational ROOC target ** Cash flow after investing activities to sales target 23

24 Net Financials EUR million Q Q Change MEUR Q118/ Q117 Q Change MEUR Q118/ Q417 Net interest expense Average interest rate* 4.1% 4.4% 4.3% Foreign exchange gains and losses Other financial items. of which Pension costs (IAS 19R) Other items Total net financial items * Quarterly gross interest expense divided by average gross debt 24

25 Net FX by division Net FX y-o-y impact -14 MEUR in Q1/2018 on operational EBIT 25

26 Maturity profile Q Bonds Forest owner deposits Joint Venture Financing Loans from Financial Institutions Other loans / liabilities Revolving Credit Facility MEUR 600 Revolving Credit Facility 600 MEUR matures in January 2023 and is fully undrawn 26

27 Transaction risk and hedges Q EUR Million USD SEK GBP Estimated annual operating cash flow exposure Transaction hedges as at 31 March Hedging percentage as at 31 March 2018 for the next 12 months 51% 62% 51% Operational EBIT: Currency strengthening of +10%* EUR million USD 140 SEK -98 GBP 37 * Before currency hedges assuming no other changes other than a single currency rate movement occurs 27

28 Sensitivity analysis Impact on operational EBIT 10% decrease in Impact* Energy prices Wood prices Chemical and filler prices Positive 13 MEUR Positive 185 MEUR Positive 50 MEUR 10% increase in Impact* Market pulp price, total Positive 115 MEUR 10% strengthening against Euro in the value of** Impact* US dollar Swedish krona British pound Brazilian real Positive 140 MEUR Negative 98 MEUR Positive 37 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 28

29 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 35 MEUR Positive 20 MEUR Positive 10 MEUR Positive 115 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 29

30 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 ~5.0 Fossil fuel price ~9.6 * Pulp, paper and board mills in Europe and overseas, incl. Beihai 30

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

32 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

33 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

34 Global bleached chemical market pulp inventories by grade in tonnes and days of supply Source: EPIS 34

35 Kraftliner and testliner prices Source: FOEX 35

36 Pulp price development Source: FOEX 36

37 Pulp wood and saw log prices Wood prices in Finland Source: Luonnonvarakeskus 37

38 Paper for recycling prices German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 38

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