Financial results for Q1 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 Transformation driving sales growth Q year-on-year Sales MEUR +2.1%, increased for the first time in 5 years, +9.7% excluding paper Beihai, Varkaus and Murów ramp-up, higher volumes Operational EBIT 215 MEUR, EBIT margin 8.6% Hardwood pulp, paper prices and transformational costs Beihai cost 12 MEUR more, including 7.5 MEUR provision related to turbine damage Cash flow from operations 178 (289) MEUR, after investing activities 43 (96) MEUR Operational ROCE 10.0% (11.3%), excluding Beihai Mill investment 12.9% (13.7%) Net debt to operational EBITDA decreased to 2.0 (2.2) 50 MEUR profit improvement programme proceeding according to plan 3

4 Underlying business showing good progress Operational EBIT Q1 y-o-y 4

5 Transformation steps since 2016 Investments Beihai Mill start-up Varkaus LVL start-up Murów inauguration Varkaus kraftliner EBITDA break-even Divestment and closure announcements Arapoti Mill, Brazil IL Recycling AB, Sweden Hartola production unit, Finland Kabel Mill, Germany Beihai PE coating line Ongoing Suzhou Mill, China Skoghall Mill, chemical plant Ongoing Heinola corrugated planned closure Skutskär Mill, environmental investment Imatra PE coating line and automated roll warehouse Skutskär pulp mill, fluff Lahti corrugated packaging investment Imatra, Ingerois and Fors MFC Heinola Fluting Mill capacity increase Hylte biocomposite granules Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Packaging machine manufacturing company Formeca, Finland Plan to shut down SC paper machine at Kvarnsveden Mill 5

6 Transformation Beihai board mill is ramping up ahead of plan First LPB and CUK commercial deliveries kt EBITDA break-even in Q1/18 Ramp-up ahead of plan and first commercial deliveries of LPB and CUK FBB deliveries have continued well with increasing prices and volumes Full production expected in the first half of 2018 Production tonnes in Q PE coating investment ready by mid-2017 * *End of the year situation 6

7 Transformation journey Growth businesses 70% of sales and 80% of operational EBIT Sales 2006 Sales Q1/2017-3% 21% 30% 2% 70% 24% 30% 12% 12% 70% 17% 15% Operational EBIT 2006 Operational EBIT Q1/2017 Consumer Board Packaging Solutions (1) Biomaterials Wood Products Paper (2) Other & eliminations -3% 38% 80% 6% (1) In 2006 included in Consumer Board (2) In 2006 includes merchants 35% 20% 28% 62% 6% 10% 11% 25% 7

8 Group sales growth 2% Summary financials Q EUR million Q1/17 Q1/16 Change% Q1/17 / Q1/16 Q4/16 Change% Q1/17 / Q4/16 Sales % % Operational EBITDA % % Operational EBITDA margin 14.1% 14.8% 12.7% Operational EBIT % % Operational EBIT margin 8.6% 10.1% 7.8% Profit before tax excl. IAC % % EPS excl. IAC, EUR EPS (basic), EUR Operational ROCE 10.0% 11.3% 8.9% Operational ROCE excl. Beihai project 12.9% 13.7% 12.1% Cash Flow from Operations Net debt/last 12 months operational EBITDA

9 Consumer Board First commercial deliveries of LPB and CUK from Beihai Mill Q1 y-o-y Sales increased 8.3%, driven by Beihai Operational EBIT stable excluding the Beihai operations Higher volumes offset by slightly lower sales prices in local currencies Beihai operational EBIT -33 (-21) MEUR including provision of 7.5 MEUR related to technical power turbine incident In Q2 expected to be approximately -18 (-18) MEUR 3.5 MEUR related to Bulleh Shah Packaging due to asset impairment Operational ROOC 12.2% (14.3%) Excluding Beihai Mill 38.0% (34.2%) Investment of 9 MEUR to MFC production in Imatra, Ingerois and Fors mills MEUR MEUR Sales Operational EBIT 9

10 Packaging Solutions Varkaus investment paying off Q1 y-o-y Sales growth 18.4% Varkaus kraftliner mill, higher volumes in containerboard and corrugated business Operational EBIT 17 MEUR higher Varkaus kraftliner improved profitability 9 MEUR China packaging profitability increased 10 MEUR Including expensed Ostrołęka feasibility study 4 MEUR Varkaus kraftliner mill ramp-up proceeding and EBIT break-even expected to be reached in Q2 Stora Enso not to proceed with the plans for the expansion of Ostrołęka RCP containerboard mill Operational ROOC 11.1% (3.2%) 28 MEUR investment for quality and capacity at Heinola Fluting Mill, Finland ROOC expected to be above 20% 10

11 Biomaterials Gradually improving pulp market Q1 y-o-y Sales increased 5.1% Higher pulp volumes supported by currency more than offset lower sales prices, especially in hardwood pulp Operational EBIT decreased 31 MEUR Lower European hardwood pulp prices, higher variable costs, a credit loss and building up innovation and R&D capabilities Turbine incident in Q at Enocell Mill in Finland caused 5 MEUR additional costs in Q Start-up process at the bagasse-to-xylose demonstration plant in Raceland, USA proceeding as planned First batches of xylose expected to be delivered in 2017 First commercial delivery of lignin from Sunila Mill shipped 11

12 Wood Products New products and solutions driving growth and profitability Q1 y-o-y Sales increased 8.9% Increased sales from strategic investments Varkaus LVL and Murów sawmill Higher CLT and classic sawn volumes as well as prices Operational EBIT increased 6 MEUR Higher volumes and slightly higher sales prices, especially for spruce CLT Feasibility study at Gruvön Mill, Sweden to be finalised no later than in connection to the group s Q2 report 12 MEUR investment of biocomposite granules in Hylte Mill Sweden SE has been selected as supplier to various CLT buildings in Europe and Australia 12

13 Paper Stable sales excluding divestments Q1 y-o-y Sales increased slightly excluding the divestments of Kabel Mill, Arapoti Mill and the closure of Suzhou Mill Operational EBITDA decreased 15 MEUR Lower sales prices in euros, stable variable costs, higher comparable volumes and lower fixed costs Co-determination negotiations with employees at its Kvarnsveden Mill in Sweden started regarding a plan to reorganise the mill Includes a permanent closure of tonnes of SC paper by the end of Q The planned actions would affect a maximum of 140 employees The plan would result in annual cost savings of 12 MEUR Internal review on how to create the best conditions for the Paper division to compete under increasing cost pressures and declining market demand is proceeding as planned 13

14 Strategic targets ambitious, but reachable Group targets Q1 16 Q1 17 Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 2.4% (YoY) 9.7% (YoY) Net debt to operational EBITDA <3.0x Fixed costs to sales <20% 24.4% 24.1% Debt to equity <80% 58% 46% Operational ROCE >13% 11.3% 10.0% Operational ROCE excl. Beihai 13.7% 12.9% Divisional targets Q1 16 Q1 17 Consumer Board Operational ROOC > 20% 14.3% 12.2% Consumer Board excl. Beihai 34.2% 38.0% Packaging Solutions Operational ROOC > 20% 3.2% 11.1% Biomaterials Operational ROOC > 15% 13.1% 7.9% Wood Products Operational ROOC > 18% 12.3% 16.4% Paper Cash flow after investing activities to sales > 7% 5.3% 4.3% *Excluding Paper 14

15 Guidance for Q Compared to Q Sales are estimated to be similar to or slightly higher than the amount of MEUR recorded in Q Operational EBIT is expected to be in line with the 215 MEUR recorded in Q Operational EBIT estimate includes negative impact of the ramp-up of Beihai operations of 18 MEUR Impact of the annual maintenance shutdowns is expected to be approximately 30 MEUR higher than in Q Annual maintenance in Q2: Packaging Solutions: Biomaterials: Paper: 15 Ostrołęka Mill Montes del Plata and Sunila mills Oulu Mill

16 Promising start for 2017 transformation projects start to deliver sales growth Sales growth of 9.7% excluding Paper Underlying business shows good progress and strong promise for the future Strengthened balance sheet Healthy cash flow generation Moving from asset transformation to innovation and sales transformation 16

17 Welcome to Stora Enso CMD on 8 November 2017 in London 17

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19 Operational EBIT by segments EUR million Q117 Q116 Change% Q117/Q116 Q416 Change% Q117/Q416 Consumer Board % % % of sales 10.0% 12.9% 6.6% Packaging Solutions % % % of sales 8.3% 2.9% 6.7% Biomaterials % % % of sales 14.4% 23.9% 11.5% Wood Products % % % of sales 5.3% 4.2% 4.3% Paper % % % of sales 5.6% 6.0% 8.4% Other % % % of sales 2.0% 2.6% 2.0% 19

20 Year-on-year net debt/ebitda further strengthened MEUR 20

21 Healthy cash flow generation continues 21

22 Cash flow by divisions in Q1 22

23 Capital allocation Capex on its way to the level of depreciation 23

24 Net Financials EUR million Q Q Change MEUR Q117/ Q116 Q Change MEUR Q117/ Q416 Net interest expense Average interest rate* 4.4% 3.9% 4.3% 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. 24

25 Maturity profile Q MEUR Bonds Other loans / liabilities Commercial papers Revolving Credit Facility 700 MEUR matures in January 2019 and is fully undrawn 25

26 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 51% 49% 52% Operating Profit: Currency effect +/- 10%* Based on estimated 12 month net operating cash flow exposure million USD 125 SEK -86 GBP 31 *Before currency hedges assuming no other changes other than a single currency rate movement occurs 26

27 Sensitivity analysis Impact on operational EBIT 10% decrease in Impact* Energy prices Wood Prices Chemical and filler prices Positive 14 MEUR Positive 180 MEUR Positive 35 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 125 MEUR Negative 86MEUR Positive 31 MEUR Negative 15 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 27

28 Global bleached chemical market pulp inventories by grade in tonnes and days of supply Source: EPIS 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 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 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 ~7.2 Fossil fuel price ~8.4 *) 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 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 Kraftliner and testliner prices Source: FOEX 34

35 Pulp price development Source: FOEX 35

36 Pulp wood and saw log prices Wood prices in Finland Source: METLA 36

37 Paper for recycling prices German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 37

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