Financial Results Q1 2012 CEO Jouko Karvinen and CFO Markus Rauramo 24 April 2012
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 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. 24 April 2012 2
Earnings remained moderate as expected Operational EBIT EUR 147 million Strong cash flow EUR 224 million Liquidity EUR 1 251 million 24 April 2012 3
EUR million Operational EBIT in line with previous quarter 300 Operational EBIT Operational EBIT margin %, 4 Q avg 10,0 % 250 200 150 100 50 9,0 % 8,0 % 7,0 % 6,0 % 5,0 % 4,0 % 3,0 % 0 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 2,0 % 24 April 2012 4
Year-on-year earnings Lower prices in Printing & Reading and Biomaterials Lower volume in Renewable Packaging Strong cash flow and liquidity further improved Profit improvement actions continue China investment decision 24 April 2012 5
INDEX (2007=100) Flexibility improvements continued Fixed Cost/Sales 120 110 100 90 80 70 60 50 2007 2008 2009 2010 2011 Q1/2012 24 April 2012 6
INDEX (Q1 2007 = 100) Still room to improve productivity Personnel cost/sales 140 130 120 110 100 90 80 70 60 50 Q1/2007 Q1/2008 Q1/2009 Q1/2010 Q1/2011 Q1/2012 24 April 2012 7
Printing and Reading and Renewable Packaging created the cash flow in Q1 2012 MEUR 250 Cash flow from operations Cash flow after investing activities 200 150 100 50 0-50 Printing and Reading Biomaterials Building and Living Renewable Packaging Other Total 24 April 2012 8
Summary financials Q1 2012 EUR million I/2012 IV/2011 I/2011 Change % Q1 12/Q1 11 Change % Q1 12/Q4 11 Sales 2 673.3 2 681.6 2 726.9-2.0 % -0.3 % Operational EBITDA 262.1 242.9 368.3-28.8 % 7.9 % Operational EBIT 147.4 144.9 258.3-42.9 % 1.7 % Profit before tax. excl. NRI 101.0 141.4 206.7-51.1 % -28.6 % Profit before tax 89.9 110.3 179.5-49.9 % -18.5 % EPS excl. NRI (EUR) 0.10 0.10 0.22-54.5 % 0.0 % Operational ROCE. % 6.8 6.7 11.9-42.9 % 1.5 % Cash flow from operations 223.7 302.3 162.9 37.3 % -26.0 % Cash flow after investing activities 111.4 73.8 91.7 21.5 % 50.9 % Debt/equity 0.46 0.47 0.38 21.1 % -2.1 % 24 April 2012 9
Business improved q-on-q, other lower Operational EBIT by segment EUR million I/2012 IV/2011 Change Q1 12/Q4 11 Printing and Reading 67.3 55.6 11.7 Biomaterials 7.2 27.2-20.0 Building and Living 9.8 6.0 3.8 Renewable Packaging 61.7 32.8 28.9 Other 1.4 23.3-21.9 Group 147.4 144.9 2.5 24 April 2012 10
Rethink strategy Growth markets Renewable packaging Biomaterials Competitive paper 24 April 2012 11
Focusing on high quality segments in China Unique position Chinese platform for growth A world leading position Technologies and specifications Committed customers Robust sustainability Unique integrate Established footprint Innovation Well prepared project to accelerete growth 24 April 2012 12
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Sales and operational EBIT forecast for Q2 2012 Compared with Q1 2012 Group sales slightly higher and operational EBIT approximately in the range of Q1 2012 Maintenance stoppages in several European mills with main impact in Biomaterials Benefits of improving variable costs slowly apparent in the results 24 April 2012 14
Summary Quarterly performance as expected Cost position and operational performance improvement need to continue Transformation accelerating: Montes del Plata pulp mill, and Chinese pulp and packaging board mill 24 April 2012 15
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Business improved q-on-q, other lower Operational EBIT by segments EUR million I/2012 IV/2011 I/2011 Change % Q112/Q111 Change % Q112/Q411 Printing and Reading % of sales Biomaterials % of sales Building and Living % of sales Renewable Packaging % of sales Other % of sales 67.3 55.6 85.2-21.0 % 21.0% 5.5 4.3 7.0-21.4 % 27.9 % 7.2 27.2 53.5-86.5 % -73.5 % 3.0 10.6 18.3-83.6 % -71.7 % 9.8 6.0 11.8-16.9 % 63.3 % 2.6 1.6 2.9-10.3 % 62.5 % 61.7 32.8 101.0-38.9 % 88.1 % 7.9 4.3 12.5-36.8 % 83.7 % 1.4 23.3 6.8-79.4 % -94.0 % 0.2 3.6 0.9-77.8 % -94.4 % 24 April 2012 17
% of capacity Curtailments decreased sequentially % of capacity 30 Paper and Board Wood Products 25 20 15 10 5 0 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 24 April 2012 18
EUR million Working capital decreased year-on-year Q1 2010 Q1 2012 2 200 2 000 1 800 28,0 % 26,0 % 24,0 % 22,0 % 1 600 1 400 1 200 1 000 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 Operative Working Capital at the end of Q Working Capital per Sales ratio *Operative working capital = trade receivables + inventories trade payables 20,0 % 18,0 % 16,0 % 14,0 % 12,0 % 10,0 % 24 April 2012 19
Transaction risk and hedges as at 31 March 2012 EUR million USD GBP SEK Estimated annual net operating cash flow exposure 1 160 620-900 Transaction hedges as at 31 March 2012-580 -280 390 Hedging percentage as at 31 March 2012 for the next 12 months 50% 45% 43% USD and GBP have additional hedges for 13-14 months which will increase the hedging percentage by 2% and 4% respectively. Operational EBIT: Currency strengthening of + 10% EUR million USD 116 SEK -90 GBP 62 The sensitivity is based on estimated next 12 months net operating cash flow. The calculation does not take into account currency hedges, and assumes no changes occurs other than a single currency exchange rate movement. Weakening would have the opposite impact. 24 April 2012 20
Net Financial Items EUR million I/2012 IV/2011 I/2011 Change % Q112/Q111 Change % Q112/Q411 Net interest expense -37.7-35.1-23.0-63.9-7.4 Foreign exchange gains and losses 8.0-3.0-11.9 n/m n/m Other financial items. of which -4.3-21.1-16.3 73.6 79.6 PIK notes 2.0 2.0 1.5 Fair valuation of interest rate derivates* -3.3-4.4 13.9 Fair valuation of long-term debt -0.5-0.4-0.5 NewPage lease provision 13.6 - - Arktos writeoff - -10.2 - Other items -16.1-8.1-31.2 Total net financial items -34.0-59.2-51.2 33.6 42.6 *Not hedge accounted interest rate derivatives. 24 April 2012 21
07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 USD/tonne Softwood pulp prices Stora Enso s market pulp is softwood 1 050 950 850 750 Bleached softwood kraft pulp 650 550 Bleached hardwood kraft pulp 450 Source: FOEX 24 April 2012 22
06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 Pulp wood and saw log prices Wood prices in Finland Pulpwood, Pine Sawlogs, Pine 80 70 60 EUR/m 3 50 40 30 20 10 0 Source: METLA 24 April 2012 23
06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 Wood prices in Sweden 600 Pulpwood Sawlogs 500 400 SEK/m 3 300 200 100 0 Pulpwood includes pine. spruce and birch. Sawlogs include pine and spruce. Source: SDC. Skogsstyrelsen 24 April 2012 24
07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 EUR/tonne RCP prices Mixed OCC De-inking 200 160 120 80 40 0 German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso 24 April 2012 25
EUR million Capital expenditure and depreciation Q1 2008 Q1 2012 250 10% 200 8% 150 6% 100 4% 50 2% 0 0% Capex Depreciation and impairment excl NRI Capex % of sales 24 April 2012 26
Debt/equity 2009 Q1 2012 0,8 0,7 0,6 0,5 0,51 0,47 0,46 0,4 0,39 0,3 0,2 0,1 0 2009 2010 2011 Q1 2012 24 April 2012 27
Maturity profile 31 March 2012 m Bonds Other loans / liabilities Commercial paper 1 000 900 800 700 600 EUR 413m 5.125% 2014 SEK 500m 3.5% 2015 SEK 1.4 bn S+3.7% 2015 SEK 2.4 bn 5.75% 2015 EUR 390m E+4.21% 2016 USD 507m 6.404% 2016 EUR 500m 5.5% 2019 500 400 USD 300m 7.25% 2036 300 200 100 0 2012 2013 2014 2015 2016 2017 2018 2019 2020-2035 Revolving Credit Facility 700 million matures in January 2015 and is fully undrawn 2036 24 April 2012 28
Energy balance * Q1 2012 Total energy self sufficiency 59% 50 40 30 20 10 0 Self sufficiency 47% Self sufficiency 63% Electricity Fuels Internal External (hedged) External (non-hedged) Impact** on operating profit from 10% change in: Electricity market price ~9 Fossil fuel price ~17 EUR million p.a. *) Pulp. paper and board mills. Europe and overseas **) Remaining impact on non-hedged volume 24 April 2012 29
Stora Enso Electricity procurement * Q1 2012 [GWh/a] Sales to market Open position Local tariff Financial contracts 20000 Physical contracts PVO production 18000 Own production 16000 14000 12000 10000 8000 6000 4000 2000 0-2000 2012 2013 2014 2015 *) Pulp. paper and board mills. Europe and overseas 24 April 2012 30