Download - Stora Enso Interim Review January-March 2012
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.
2 24 April 2012 Financial results Q1 2012
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 Financial results Q1 2012
Operational EBIT in line with previous quarter
2,0 %
3,0 %
4,0 %
5,0 %
6,0 %
7,0 %
8,0 %
9,0 %
10,0 %
0
50
100
150
200
250
300
10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1
EU
R m
illio
n
Operational EBIT Operational EBIT margin %, 4 Q avg
24 April 2012 Financial results Q1 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 Financial results Q1 2012 5
Flexibility improvements continued Fixed Cost/Sales
50
60
70
80
90
100
110
120
2007 2008 2009 2010 2011 Q1/2012
IND
EX
(2
00
7=
10
0)
24 April 2012 Financial results Q1 2012 6
Still room to improve productivity Personnel cost/sales
24 April 2012 Financial results Q1 2012 7
50
60
70
80
90
100
110
120
130
140
Q1/2007 Q1/2008 Q1/2009 Q1/2010 Q1/2011 Q1/2012
IND
EX
(Q
1 2
00
7 =
10
0)
Printing and Reading and Renewable Packaging
created the cash flow in Q1 2012
24 April 2012 Financial results Q1 2012 8
-50
0
50
100
150
200
250
Printing andReading
Biomaterials Building andLiving
RenewablePackaging
Other Total
Cash flow from operations Cash flow after investing activitiesMEUR
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 %
9 24 April 2012 Financial results Q1 2012
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
10 24 April 2012 Financial results Q1 2012
Rethink strategy
Growth markets
Renewable
packaging
Biomaterials
Competitive paper
24 April 2012 Financial results Q1 2012 11
Focusing on high quality segments in China
24 April 2012 Financial results Q1 2012 12
Chinese platform
for growth Unique position
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 Financial results Q1 2012 13
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 Financial results Q1 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 Financial results Q1 2012
24 April 2012 16 Financial results Q1 2012
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 67.3 55.6 85.2 -21.0 % 21.0%
% of sales 5.5 4.3 7.0 -21.4 % 27.9 %
Biomaterials 7.2 27.2 53.5 -86.5 % -73.5 %
% of sales 3.0 10.6 18.3 -83.6 % -71.7 %
Building and Living 9.8 6.0 11.8 -16.9 % 63.3 %
% of sales 2.6 1.6 2.9 -10.3 % 62.5 %
Renewable Packaging 61.7 32.8 101.0 -38.9 % 88.1 %
% of sales 7.9 4.3 12.5 -36.8 % 83.7 %
Other 1.4 23.3 6.8 -79.4 % -94.0 %
% of sales 0.2 3.6 0.9 -77.8 % -94.4 %
17 24 April 2012 Financial results Q1 2012
Curtailments decreased sequentially % of capacity
24 April 2012 Financial results Q1 2012 18
0
5
10
15
20
25
30
Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112
% o
f c
ap
acity
Paper and Board Wood Products
Working capital decreased year-on-year Q1 2010 – Q1 2012
24 April 2012
10,0 %
12,0 %
14,0 %
16,0 %
18,0 %
20,0 %
22,0 %
24,0 %
26,0 %
28,0 %
1 000
1 200
1 400
1 600
1 800
2 000
2 200
10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1
EU
R m
illio
n
Operative Working Capital at the end of Q Working Capital per Sales ratio
*Operative working capital = trade receivables + inventories – trade payables
19 Financial results Q1 2012
Transaction risk and hedges as at 31 March 2012
20
Operational EBIT: Currency strengthening of + 10% EUR million
USD 116
SEK -90
GBP 62
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%
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.
USD and GBP have additional hedges for 13-14 months which will increase the hedging
percentage by 2% and 4% respectively.
24 April 2012 Financial results Q1 2012
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
21
*Not hedge accounted interest rate derivatives.
24 April 2012 Financial results Q1 2012
Softwood pulp prices Stora Enso’s market pulp is softwood
450
550
650
750
850
950
1 050
07Q
1
07Q
2
07Q
3
07Q
4
08Q
1
08Q
2
08Q
3
08Q
4
09Q
1
09Q
2
09Q
3
09Q
4
10Q
1
10Q
2
10Q
3
10Q
4
11Q
1
11Q
2
11Q
3
11Q
4
12Q
1
US
D/t
on
ne
Bleached softwood kraftpulp
Bleached hardwood kraftpulp
Source: FOEX
22 24 April 2012 Financial results Q1 2012
Pulp wood and saw log prices Wood prices in Finland
0
10
20
30
40
50
60
70
80
06
Q1
06
Q2
06
Q3
06
Q4
07
Q1
07
Q2
07
Q3
07
Q4
08
Q1
08
Q2
08
Q3
08
Q4
09
Q1
09
Q2
09
Q3
09
Q4
10
Q1
10
Q2
10
Q3
10
Q4
11
Q1
11
Q2
11
Q3
11
Q4
12
Q1
EU
R/m
3
Pulpwood, Pine Sawlogs, Pine
Source: METLA
23 24 April 2012 Financial results Q1 2012
Wood prices in Sweden
24
0
100
200
300
400
500
600
06
Q1
06
Q2
06
Q3
06
Q4
07
Q1
07
Q2
07
Q3
07
Q4
08
Q1
08
Q2
08
Q3
08
Q4
09
Q1
09
Q2
09
Q3
09
Q4
10
Q1
10
Q2
10
Q3
10
Q4
11
Q1
11
Q2
11
Q3
11
Q4
12
Q1
SE
K/m
3
Pulpwood Sawlogs
Pulpwood includes pine. spruce and birch.
Sawlogs include pine and spruce.
Source: SDC. Skogsstyrelsen
24 April 2012 Financial results Q1 2012
RCP prices
0
40
80
120
160
200
07
Q1
07
Q2
07
Q3
07
Q4
08
Q1
08
Q2
08
Q3
08
Q4
09
Q1
09
Q2
09
Q3
09
Q4
10
Q1
10
Q2
10
Q3
10
Q4
11
Q1
11
Q2
11
Q3
11
Q4
12
Q1
EU
R/t
on
ne
Mixed OCC De-inking
German RCP price development. free delivered
Source: Verband Deutscher Papierfabriken/Stora Enso
25 24 April 2012 Financial results Q1 2012
Capital expenditure and depreciation Q1 2008 – Q1 2012
0%
2%
4%
6%
8%
10%
0
50
100
150
200
250
EU
R m
illio
n
Capex Depreciation and impairment excl NRI Capex % of sales
26 24 April 2012 Financial results Q1 2012
Debt/equity 2009 – Q1 2012
0,51
0,39
0,47 0,46
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
2009 2010 2011 Q1 2012
27 24 April 2012 Financial results Q1 2012
Maturity profile 31 March 2012
24 April 2012 Financial results Q1 2012 28
0
100
200
300
400
500
600
700
800
900
1 000
2012 2013 2014 2015 2016 2017 2018 2019 2020-2035
2036
EUR 500m 5.5% 2019
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
USD 300m 7.25% 2036
Revolving Credit Facility € 700 million matures in January 2015 and is fully undrawn
€m Commercial paper Other loans / liabilities Bonds
Energy balance* Q1 2012
Impact** on operating profit from
10% change in: EUR million p.a.
Electricity market price ~9
Fossil fuel price ~17
01020304050
Electricity Fuels
Internal External (hedged) External (non-hedged)
Self sufficiency 47% Self sufficiency 63%
Total energy self
sufficiency 59%
**) Remaining impact on non-hedged volume
24 April 2012 Financial results Q1 2012 29
*) Pulp. paper and board mills. Europe and overseas
30
Stora Enso Electricity procurement* Q1 2012
24 April 2012 Financial results Q1 2012
-2000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2012 2013 2014 2015
[GWh/a] Sales to market Open position
Local tariff Financial contracts
Physical contracts PVO production
Own production
*) Pulp. paper and board mills. Europe and overseas