Financial results for Q4 and full year 2016

Transcription

1 Financial results for Q4 and full year 2016 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 ramp-up of Beihai Mill and hardwood pulp prices impact negatively a solid quarter (1/2) Q year-on-year Sales MEUR increased 4.5% excluding structurally declining paper business Varkaus kraftliner and Beihai consumer board mills ramp-up Operational EBIT 191 MEUR, EBIT margin 7.8% Hardwood pulp, Beihai and Enocell Strong cash flow from operations 461 (412) MEUR, after investing activities 240 (75) MEUR Operational ROCE 8.9% (11.3%), excluding Beihai Mill investment 12.1% (13.3%) Net debt to operational EBITDA down to 2.0 (2.3) Stora Enso will start a profit improvement programme targeting to decrease the annual costs by 50 MEUR with full annualised impact in 2018 Dividend proposal 0.37 EUR 3

4 Accelerated ramp-up of Beihai Mill and hardwood pulp prices impact negatively a solid quarter (2/2) Operational EBIT Q4 y-o-y MEUR 4

5 We continue to build strength Net debt/ebitda from above 3.0 to 2.0 in 48 months MEUR 5

6 Transformation steps since beginning of 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 6

7 Transformation Beihai board mill is ramping up ahead of plan kt End of the year situation EBITDA break-even in Q1/18 Ramp-up proceeding ahead of plan relating both to quality and production volumes Full production expected in months from the start up in May 2016 Production tonnes in 2016 EBITDA break-even expected in Q BCTMP plant started up in Q PE coating investment ready by mid-2017 Beihai Pulp mill decision to be reconsidered 7

8 Transformation journey Growth businesses 69% of sales and 67% of operational EBIT Sales 2006 Sales Q4/ % -3% 21% 12% 30% 69% 3% 24% 31% 12% 16% 14% EBIT 2006 EBIT Q4/2016 Consumer Board Packaging Solutions (1) Biomaterials Wood Products Paper (2) Other & eliminations -3% 35% 38% 67% 7% 20% (1) In 2006 included in Consumer Board (2) In 2006 includes merchants 33% 10% 62% 6% 9% 21% 8

9 Cash flow strong and balance sheet further strengthened Summary financials Q EUR million Q4/16 Q4/15 Change % Q4/16 / Q4/15 Q3/16 Change % Q4/16 / Q3/ Change % 2016/ 2015 Sales % % % Operational EBITDA % % % Operational EBITDA margin 12.7% 14.1% 14.3% 14.0% 14.0% Operational EBIT % % % Operational EBIT margin 7.8% 9.7% 9.2% 9.0% 9.1% Profit before tax excl. IAC % % % EPS excl. IAC, EUR EPS (basic), EUR Operational ROCE 8.9% 11.3% 10.1% 10.2% 10.6% Operational ROCE excl. Beihai project 12.1% 13.3% 13.5% 13.0% 12.2% Cash Flow from Operations % % % Net debt/last 12 months operational EBITDA

10 Consumer Board Ramping up Beihai Mill, improved underlying performance Q4 y-o-y Sales growth 3.6%, mainly driven by Beihai MEUR Sales Operational EBIT increased 10 MEUR excluding the Beihai operations Improved efficiency and lower wood prices Beihai operational EBIT loss 38 (13) MEUR in Q4 Expected to be approximately 34 (21) MEUR in Q1 Operational ROOC 7.4% (10.6%) Excluding Beihai Mill 30.8% (24.0%) MEUR * Excluding Barcelona Operational EBIT Investment of 9 MEUR to MFC production in Imatra, Ingerois and Fors mills 10

11 Packaging Solutions Ramp-up of Varkaus Mill at final stage Q4 y-o-y Sales +18% Varkaus kraftliner mill, Inpac in China and higher volumes from containerboard mills and corrugated Russia unit Operational EBIT 3 MEUR lower due to lower recycled containerboard sales prices and higher RCP prices Varkaus kraftliner mill ramp-up proceeding and EBIT breakeven expected to be reached in Q2 Ostrołęka feasibility study at final stage 28 MEUR investment at Heinola Fluting Mill, Finland announced Expected to be completed in Q ROOC expected to be above 20% 11

12 Biomaterials Impacted by low hardwood pulp prices Q4 y-o-y Sales decreased Hardwood pulp prices -35 MEUR Operational EBIT decreased Historically low hardwood pulp prices Enocell power generator problem -5 MEUR Start-up phase at the bagasse-to-xylose demonstration plant in Raceland, USA initiated First batches of xylose expected to be delivered in 2017 First commercial contract for xylose deliveries signed Enocell power generator repair expected to have 10 MEUR negative impact in Q1 12

13 Wood Products Strategic investments ramping up, focusing on value creation Q4 y-o-y Sales stable Increased sales from strategic investments Varkaus LVL and Murów sawmill Operational EBIT decreased 4 MEUR Increased costs and depreciations due to strategic investments LVL at Varkaus Mill ramping up, over 70% of products certificated, remaining certificates expected in Q1 CLT Feasibility study at Gruvön Mill, Sweden to be finalised during the spring 12 MEUR investment of biocomposite granules in Hylte Mill Sweden announced Expected to be completed Q

14 Paper Strong performance in declining market, cash generation at record level Q4 y-o-y Sales remained flat excluding the divestments of Kabel Mill, Arapoti Mill and the Suzhou Mill site Operational EBIT increased 56% Due to active cost management, lower depreciation and strong operational performance Strong cash flow after investing activities to sales clearly above target level second quarter in a row at 11.8% Divestment of Suzhou Mill site in China completed 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 MEUR Cash flow 14

15 Strategic targets ambitious, but reachable Group targets Q Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 4.5% (YoY) 3.1% (YoY) Net debt to operational EBITDA <3.0x Fixed costs to sales <20% 25.8% 25.3% Debt to equity <80% 47% 47% Operational ROCE >13% 8.9% 10.2% Operational ROCE excl. Beihai 12.1% 13.0% Divisional targets Q Consumer Board Operational ROOC > 20% 7.4% 12.7% Consumer Board excl. Beihai 30.8% 36.2% Packaging Solutions Operational ROOC > 20% 8.8% 7.6% Biomaterials Operational ROOC > 15% 6.1% 8.5% Wood Products Operational ROOC > 18% 13.1% 16.8% Paper Cash flow after investing activities to sales > 7% 11.8% 8.5% *Excluding Paper 15

16 Guidance for Q Compared to Q Sales are estimated to be similar to the amount of MEUR recorded in Q Operational EBIT is expected to be in line with the 191 MEUR recorded in Q Operational EBIT estimate includes negative impacts of the ramp-up of Beihai operations and the power generator failure at Enocell Mill of 34 MEUR and 10 MEUR, respectively No major scheduled annual maintenance shutdowns in Q Stora Enso will start a profit improvement programme targeting to decrease the annual costs by 50 MEUR with full annualised impact in

17 Dividend proposal Dividend policy: Strive to pay stable dividends linked to the long-term performance One half of net profits over a business cycle Earnings and dividend per share Dividend proposal of 0.37 EUR per share for 2016 totalling 292 MEUR *Dividend proposal 17

18 Well prepared for 2017 and beyond 2016 a year of transformation Strengthened balance sheet Strong cash generation A solid performance despite historically low hardwood pulp prices and Beihai start-up costs Moving from asset transformation to innovation and sales transformation 18

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20 Operational EBIT by segments EUR million Q416 Q415 Change% Q416/Q415 Q316 Change% Q416/Q Change % 2016/2015 Consumer Board % % % % of sales 6.6% 9.5% 11.2% 10.8% 12.4% Packaging Solutions % % % % of sales 6.7% 9.2% 8.1% 6.1% 9.9% Biomaterials % % % % of sales 11.5% 21.7% 12.9% 16.3% 21.1% Wood Products % % % % of sales 4.3% 5.3% 5.7% 5.5% 5.1% Paper % % % % of sales 8.4% 4.6% 6.7% 6.5% 2.1% Other % % % % of sales 2.0% 3.8% 2.3% 1.7% 2.6% 20

21 Net Financials EUR million Q Q Change MEUR Q416/ Q415 Q Change MEUR Q416/ Q316 Net interest expense Average interest rate* 4.3% 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. 21

22 Strong cash flow continued 22

23 Cash flow by divisions in Q4 23

24 Net FX by division 24

25 Capex and Depreciation MEUR 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% 52% 53% Operating Profit: Currency effect +/- 10%* Based on estimated 12 month net operating cash flow exposure million USD 129 SEK -87 GBP 32 *Before currency hedges assuming no other changes other than a single currency rate movement occurs 26

27 Global bleached chemical market pulp inventories by grade in tonnes and days of supply Source: EPIS 27

28 Stora Enso energy balance * Q Impact on non-hedged volume on operating profit from 10% change in: EUR million p.a. Electricity market price ~5.0 Fossil fuel price ~5.2 *) Pulp, paper and board mills in Europe and overseas, excl. Beihai 28

29 Stora Enso electricity procurement * Q *) Pulp, paper and board mills in Europe and overseas, excl. Beihai 29

30 Sensitivity analysis Impact on operational EBIT 10% decrease in Impact* Energy prices Wood Prices Chemical and filler prices Positive 8 MEUR Positive 183 MEUR Positive 46 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 110 MEUR Impact* Positive 129 MEUR Negative 87 MEUR Positive 32 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 30

31 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 40 MEUR Positive 45 MEUR Positive 15 MEUR Positive 10 MEUR Positive 110 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 31

32 Maturity profile Q million Bonds Other loans / liabilities Commercial papers Revolving Credit Facility 700 million matures in January 2019 and is fully undrawn 32

33 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

34 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

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: METLA 37

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

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