Post on 12-Jan-2015
description
Jukka Härmälä
BUILDING A GLOBAL COMPANYGoldman Sachs Paper SeminarMay 11, 2000
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Contents
1. Result January - March 2000
2. Strategy
3. Acquisition of Consolidated Papers
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Sales Operating margin
* **
*) Before non-recurring items
Sales and operating margin
0
500
1000
1500
2000
2500
3000
3500
Q1/97 Q2/97 Q3/97 Q4/97 Q1/98 Q2/98 Q3/98 Q4/98 Q1/99 Q2/99 Q3/99 Q4/99 Q1/00
0
2
4
6
8
10
12
14
16
18MEUR %
*
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0
50
100
150
200
250
300
350
400
450
500
Q1/97 Q2/97 Q3/97 Q4/97 Q1/98 Q2/98 Q3/98 Q4/98 Q1/99 Q2/99 Q3/99 Q4/99 Q1/00
MEUR
372
25
78
24
Before non-recurring items
Profit before tax and minority items
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17.9
8.07.8
12.3
6.2
17.1
11.4
10.2
0
2
4
6
8
10
12
14
16
18
20
1996 1997 1998 adjusted 1999 Q1/00
*
*) Before non-recurring items
Return on capital employed
%
Target > 13% over the cycle
*
*
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0
5
10
15
20
25
30
35
40
1998 1999 Q1/2000
ROOC by product area
Magazine Paper
Fine PaperPackaging BoardsPulpTimber
Newsprint
ROCE 13%(target)WACC 9%(pretax)
%
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Debt/equity
0.840.90
1.051.051.011.03
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1995 1996 1997 1998 1999 Q1/00
Target ~ 0.80 in 2000
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0
200
400
600
800
1 000
1 200
1 400
1 600
1995 1996 1997 1998 1999 Q1/00
*
Capital expenditureDepreciation
*) Non-recurring write downs
Capital expenditure and depreciation
MEUR
Target: Should not exceed the level of depreciation
STRATEGY
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Strategy in brief
Vision: To be the leading forest products company in the world
Focus: On three core product areas:Publication papers, fine paper and packaging boards
Growth primarily through M&A’s
Target is to secure the generation of shareholder value
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Why Global ?
• To serve global customers– be global, act local
• To strengthen market position– presence in main and growing paper markets
• To enhance economies of scale– global purchasing power– market leadership– global benchmarking
• To enhance global operating flexibility– currency– resources: fibre and energy– capacity utilization– inventory management
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Growth strategy of core product areas
Future growthMarket position W.Europe* World*
opportunities
• Publication papers
– Magazine paper 2 2Europe, North-America
– Newsprint 1 2 Europe, North-America
• Fine papers 1 3 Europe, Asia
• Packaging Boards
– Consumer packaging 1 2 Europe, Asia
– Corrugated boardsBaltic Rim, Russia
*) Source Jaakko Pöyry Consulting, positions before acquisitions in 2000
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Stora Enso production, sales network and trade flows
Production plantSales officeConsolidated Papers Inc.
• Global sales networkProduction should be close to where the sales isLocal raw material supply
*
*
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Focus on core businesses
• Focus on one core area creates risks• We prefer broader asset allocation and
portfoliomanagement
– reduces cyclicality– complete product palette gives competitive
edge– customers growing biggerGraphical industry
• Magazine papers• Newsprint• Fine papers
Packaging industry• Consumer packaging
boards• Corrugated board material• Corrugated boards• Coreboards
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Information technology
• Growth industry• e-Commerce is to come
– will lower marketing costs– sales office increased focus on customer relations– speed up delivery times– working capital management
• But,– importance of quality, product identity and
efficient logistics– partnerships with key account customers will
continue
e-Dialogue
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Papyrus e-Business
• Today– long and successful experience in Sweden– fully integrated in supply chain
• On-going change program– extensive investment– focus on extended business model– Pan-European launch
• Vision– industry market leader in e-business
ACQUISITION OF CONSOLIDATED PAPERS
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Why Consolidated Papers?
• Excellent product match in fastest growing paper grades
• Leading market positions in core grades• Long-standing and high-quality customer base• Excellent sales and marketing network and
market reputation in U.S. and Canada • Strong management team with extensive
coated paper experience
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Coated Woodfree
Coated Mechanical
Uncoated Mechanical Incl. SC
21% 14%18%
Stora Enso’s Leading Positionin Europe
Total European Capacity million mt/a
9.0 8.4 6.8
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Now a Leader in North America
Coated Woodfree
Coated Mechanical
Uncoated Mechanical Incl. SC
Total North American Capacity million mt/a
18% 11%13%
5.4 5.2 5.0
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Integration Plans
• Objective is to build on Consolidated Papers’ track record and success
• Stora Enso utilizes its excellent experience from earlier mergers
• An integration team is in place to ensurea successful combination of the two businesses
a flying start once the deal is closed
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Preliminary timetable*
June Distribute proxy material (F-4)
July Extraordinary shareholder meetings ofStora Enso and Consolidated Papers
August Closing of the deal and listing of the ADRs on the New York Stock Exchange
If ADRs are not registered and listed by October 31, 2000, Stora Enso will complete the transaction with 100% cash at $44 per share
* Subject to regulatory and SEC approvals. Process is longer than typical stock transactions due to the use of a new ADR program as
acquisition consideration.
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Financial Targets and PoliciesRemain Unchanged
• Profitability– target ROCE 13% over the cycle (current WACC 9%)– Q1 ROCE 17.9%
• Financial structure– debt/equity ~ 0.8, expected to be reached in 2000– Q1 debt/equity 0.84
• Share buy back – 5%, approval from AGM, subject to board decision
• Dividend policy– 1/3 of net profit over the cycle
• Emphasis on growth: M&A’sLong term creation of shareholder value