Jukka Härmälä BUILDING A GLOBAL COMPANY

Jukka Härmälä

BUILDING A GLOBAL COMPANYGoldman Sachs Paper SeminarMay 11, 2000

JH Goldman Sachs /MH/mik 1


Contents

1. Result January - March 2000

2. Strategy

3. Acquisition of Consolidated Papers


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 %

*


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


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

*

*


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)

%


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


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



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


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


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


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

*

*


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


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


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



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


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


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


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


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.


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

Jukka Härmälä BUILDING A GLOBAL COMPANY

Documents

Transcript of Jukka Härmälä BUILDING A GLOBAL COMPANY