Growth Engine Juan Bueno, EVP, Biomaterials
Biomaterials 2
Why? 3
Population Growth Growing Environmental Pressures Doing more with less 4
Sustainability 5
Pulp market outlook 6
Global Market Pulp demand by end use: 46mt Source: Hawkins Wright, 2010 figures 7
What does that mean in terms of market pulp? 15 8 2 2 9 63 46 46 7 9 63 2010 Paper US- Paper Tissue Packaging Fluff Integrated 2025 WE-JP Growth Capacity Countries 8
Ok. Tissue is growing. But where? Forecast tissue demand (M Tons) 9
While online advertising in China is growing, there is still room for growth in all types of media, including commercial print Advertising revenue is ~450 /capita in US ~75% of total population A large growth potential remains for advertising spend, including direct mail 10
Paper consumption clearly declining in Western Europe and North America, but what about China? China household broadband penetration Some growth expected, but China will leapfrog to Digital Life. 11
Strongest growth in demand of fibre-based consumer board will be in Asia CAGR 0.2 % CAGR 1.4 % CAGR 4.6 % CAGR 6.9 % North America CAGR 3.5 % Western Europe CAGR 3.3 % Eastern Europe 2010-2020 Million tonnes Middle East & Africa Asia South America Fibre-based consumer board consumption China 9% Pakistan 9% India 6% Middle East 4% CAGR Source: China Ministry Of Industry and Information Technology; Chinese Telecom company publications; PwC ; Bain analysis Juan Bueno March 22, 2012 12
Go where the growth is 13
BA Biomaterials 14
BA Biomaterials BA Biomaterials Capacities Ktons Sunila 370 Enocel 480 Skutskär 540 Total Own Mills 1,390 Veracel 550 Montes del Plata * 650 Total with JV's 2,590 * start up in 2013 Skutskär Oulu Nymölla Enocell Sunila Kaukopää 50% Veracel Stand alone mills Integrated mills with dried pulp 50% Montes del Plata - 2013 15
Total Chemical Pulp Balance at Stora Enso 4 385 220 100 120 3 430 Softwood Hardwood 2 340 1 655 Fluff Dissolving pulp 260 80 1 775 1 175 MdP = + 55% Market Pulp 650 1 825 785 1 705 785 260 80 260 50 80 700 Dried and wet pulp production External Purchases Internal Consumption Market pulp MdP Market Pulp incl MdP 16
BA Biomaterials compared with competition EBIT % (quarterly Ebit) 60% 50% 40% 30% 20% 10% 0% -10% Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Stora Enso Source: Quarterly financial reports 17
BA Biomaterials capacity cost competitiveness BSKP All Dried BHKP All Dried (incl. MdP) EUR/t EUR/t Costs delivered to Frankfurt EUR/t Costs delivered to Frankfurt BA Biomaterials capacity - % in each quartile BA Biomaterials capacity - % in each quartile 2nd quartile 79% 3rd quartile 21% 1st quartile 77% 4th quartile 23% BSKP: Stable position since cost curve not likely to change significantly. BHKP: Cost curve will flatten and we are driving ourselves into a strong position. For the 4th quartile mills, we are looking into other products (I.e Dissolving, Fluff etc.) Source: Poyry and Stora Enso Experts 18
Montes del Plata Pulp Mill 1.3 M Tons of BHKP 1.4 B euro Investment 19
Top 20 market pulp producers Fibria April Arauco Georgia Pacific CMPC Sodra Stora Enso Weyenhaeuser Suzano Botnia/M-Real Paper Excellence UPM-Kymmene Domtar Ilim Mercer IP Ence West Fraser Canfor Cenibra Mdp - 1 000 2 000 3 000 4 000 5 000 6 000 BSKP UKP MEC BHKP Source: Hawkins Wright 20
How do we win 21
Innovation Customer Focus Financial Discipline and Growth
Innovation Increase value added to current process BIOREFINERY Tall Oil Bio-Methanol Turpentine Lignoboost
Innovation Explore new markets RESEARCH & DEVELOPMENT MFC Bio-Tech Carbon Fibre
Customer Focus Promoters Neutrals Detractors Stora Enso Other key supplier 25
Financial Discipline Our Cash Engines Enocell Sunila Skutskär Maximize results with cash engines (Nordic Pulp mills) Operational efficiency. Add value through by products (talloil, Lignoboost etc.) Improve energy efficiency. Lean and focused capital expenditure model. Optimal working capital management. Adjust product mix as there is fit (Dissolving Pulp, Fluff). 26
Financial Discipline Our Growth Engines Montes del Plata Existing Plantations Projects Value Adding Partnerships Sustainable growth Environmental & Social responsibility Certified plantations Time to market Low production cost : only 1st quartile interests us Close to growing markets is key Value added partnerships 27
Biomaterials offers an attractive growth platform Short term with a state of the art pulp mill in Uruguay Medium term with pulp from Tiger Long term via strong focus on innovation, new technologies development and strategic partnerships. Option to do Veracel II Strong customer focus Strong financial discipline balancing cash engines that can help fund profitable growth opportunities Clear respect for the highest sustainability standards 28
Biomaterials 29
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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 forwardlooking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. 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. 31