Stora Enso s transformation to renewable materials company Acting CFO Jyrki Tammivuori 09 September 2013
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. 21 August 2013 2
Stora Enso portfolio FY 2012 Group Sales, EUR 10 815 million Operational EBIT, EUR 630 million Printing and Reading Biomaterials Building and Living Renewable Packaging Other 1% 4% 30% 45% 43% 35% 16% 9% 5% 13% Stora Enso Q4 and Full Year 2012 Results 28 February 2013 3
Strategy Transformation from a European pulp and paper company to a value creating, growth markets renewable materials company 21 August 2013 4
Stora Enso s assets have a defined roles Cash Printing and Reading Nordic market pulp Low cost base saw milling Growth Renewable Packaging Plantation based pulp Building and living Stora Enso presentation 19-20 June 2013 5
Megatrends supporting the growth for Renewable Packaging and Biomaterials Need for new solutions to raw materials Population growth Ageing population Middle-class growth in spending Need to preserve natural resources Importance of renewable energy sources Need for lighter and safer materials Challenge to do more with less Revolutionary technologies will enable better use of existing natural resources Stora Enso presentation 28 February 2012 6
Biomaterials focus on growing customer segments Main growth opportunities in tissue, hygiene and board applications Average yearly growth expected in tissue 4% and in board 3% for the next 15 years Growth directly linked with population growth as well as GDP evolution in developing countries Demand of pulp is growing China, Eastern Europe, Latin America and other Asian countries Stora Enso presentation 28 February 2012 7
Recovered paper Commonly used furnish mixes and expected recovery rates would lead to 23 million tonnes gap alternative uses chemical pulp or kraftliners 23Mt gap We assume that ½ of the gap will be covered with virgin fiber, ½ with even higher recovery rates Source: Paper and board demand (Bain paper demand model, phased digital life scenario); Furnish (Poyry World fiber Outlook 2025); Recovery rates (RISI July 2011 Update)
Progress report: Montes del Plata Estimated to begin the start-up at the end of Q3 2013 Slightly negative impact on operational EBIT in 2013 21 August 2013 9
Accelerating innovation: Biorefinery at Sunila EUR 32 million investment Replacing fossil raw materials: Insulation Adhesive for construction materials Scalable technology Annual capacity 50 000 tonnes Start-up Q1 2015 21 August 2013 10
1,1 1,5 6,0 0,5 0,7 11,6 6,2 6,3 3,8 4,4 0.9 1.5 Strongest growth will be in Asia - Increasing demand of virgin fibre-based consumer board CAGR 0,2 % CAGR 1,4 % CAGR 4,6 % CAGR 6,9 % Eastern Europe North America Western Europe CAGR 3,3 % Middle East & Africa 2010-2020 Million tonnes CAGR 3,5 % South America Fibre-based consumer board consumption CAGR China 9% Pakistan 9% India 6% Middle East 4% Asia Source: Pöyry and Stora Enso Stora Enso Renewable Packaging 24 May 2013 11
North America C&S America W=Europe C&E Europe SE Asia & India China Pacific rim Other region World SQM Source: Bobst Group Corrugated board consumption Per capita consumption 2012 200 000 Consumption per capita 2012 120 160 000 120 000-9 95-3 81 87-11 100 80 60 80 000 40 000 20 +7 +11 37 38 30 40 20 0 9 5 0 Million sqm Capita consumption Arrow indicates change since 2007 Presenter name September 9, 2013 12
Strategic growth areas in Renewable Packaging Virgin-fibre based consumer board Global #1 Premium products Corrugated packaging Growth markets Global partner customers Stora Enso Renewable Packaging 24 May 2013 13
Accelerating transformation: Guangxi, China Final approval from Chinese NDRC received Faster access to the Chinese consumer board market Two phase implementation First phase consumer board machine operational in the beginning of 2016 Second phase chemical pulp mill Project clearly exceeds the ROCE target of 13% 21 August 2013 14
Progress report: Ostrołęka mill PM 5 Proceeding according to plan EBITDA margin approximately 20% during the latter part of 2013 as targeted 21 August 2013 15
Stora Enso s transformation from 2006 to 2012 Sales by businesses FY 2006 Group Sales EUR 14 594 million FY 2012 Group Sales EUR 10 815 million 11% -2% 1% 30% 24% 53% 45% 13% 16% 9% Publication Paper and Fine Paper Paper Merchants Packaging Boards Wood Products Wood Supply and Other Printing and Reading Biomaterials Building and Living Renewable Packaging Other 21 August 2013 16
Time to rethink structures Focus, simplification and clarity Plan to create a platform for transformation Divisions with clear accountability focusing on growth and cost competitiveness Simplified corporate structures Driving towards a value creating growth markets renewable materials company Plan for further outsourcing alternatives in group shared services and sale of non-core assets. 21 August 2013 17
Progress report: Streamlining and structure simplification programme EUR 200 million of annual net fixed cost savings, compensating also for inflation EUR million Fixed Costs Annualized (Qx4) Progress Q2 2012 703 2 812 Q2 2013 677 2 708 Change -26-104 Programme impact -7-28 14% Other change -19-76 The new divisional organizations announced EUR 200 million of annual fixed cost savings - full impact from Q2 2014 EUR 43 million NRIs announced year to date - rest mainly planned in Q3 2013 Other change represents impact of capacity closures, previously announced programmes, new businesses, significant currency movements and M&A 21 August 2013 18
EUR million All business areas contributed to cash flow generation in Q2 2013 140 120 100 Cash flow from Operations Cash flow after investments 80 60 40 20 0 Printing and Reading Building and Living Biomaterials Renewable Packaging 21 August 2013 19
Projected Capex and Equity Injections for 2013 Including China investment Capital Expenditure, Equity Injections and Depreciation Forecast 2013 EUR million Forecast 2013 Capital expenditure* 440-490 Equity injections Total 100-120 540-610 Depreciation 590-610 *Capital expenditure includes approximately EUR [90] million for project in Guangxi, China 21 August 2013 20
Guidance for Q3 2013 Compared to Q2 2013: Sales expected to be slightly lower Operational EBIT in line with or slightly higher 21 August 2013 21
Summary Growth expected in Renewable Packaging and Biomaterials Accelerated transformation: MdP Ostrołęka Guangxi Sunila Biorefinery European paper - to get ahead of the game EUR 200 million fixed costs savings on plan 21 August 2013 22
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