Q1/2013 Interim Review, Investor presentation
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Transcript of Q1/2013 Interim Review, Investor presentation
Financial Results Q1 2013 CEO Jouko Karvinen and CFO Karl-Henrik Sundström
23 April 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.
Stora Enso Q1 2013 Financial Results 23 April 2013 2
Q1 Performance as expected in a structurally declining
European paper market
• Operational EBIT EUR 118 million
• Cash flow from Operations EUR 101
million
• Liquidity EUR 1.7 billion
• Operational ROCE % 5.4
23 April 2013 Stora Enso Q1 2013 Financial Results 3
Low operational EBIT due to Printing & Reading
performance Cash Flow from Operations
23 April 2013 Stora Enso Q1 2013 Financial Results 4
*Operational EBIT comprises the operating profit excluding NRI and fair valuations of the segments and Stora Enso’s share of the operating
profit excluding NRI and fair valuations of its equity accounted investments (EAI). Fair valuations include equity incentive schemes, synthetic
options net of realised and open hedges, CO2 emission rights and valuations of biological assets related to forest assets in EAI.
Seasonally higher working capital Q2 2010 – Q1 2013
*Operative working capital = trade receivables + inventories – trade payables
Stora Enso Q1 2013 Financial Results 23 April 2013 5
Higher wood inventories (EUR 50 million)
Higher trade receivables (EUR 120 million)
European paper* demand 2007–2013/Mar 2007/Jan = 100%
*Paper: News, UMO, UMI, SC, CM, WFC & WFU
Source: EuroGraph & PPPC
SA = seasonally adjusted
23 April 2013 Stora Enso Q1 2013 Financial Results 6
European Paper Capacity utilization rates after capacity
closures 31 March 2013
23 April 2013 Stora Enso Q1 2013 Financial Results 7
* Potential restart of Alizay mill not taken into account (Jun-2013)
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
• Expected cost savings of some EUR 200 million* – Full impact starting from Q2 2014
23 April 2013 Stora Enso Q1 2013 Financial Results 8
*including a EUR 30 million reduction in Building and Living
Rethink organisation
• Building and Living with Printing and Reading to one Division
planned
– Led by Karl-Henrik Sundström, currently Chief Financial Officer
• The leadership of Renewable Packaging and Biomaterials
remains unchanged
• Divisions and corporate functions planned to go through
organisational streamlining.
• Plan for further outsourcing alternatives in group shared
services and sale of non-core assets.
• Divisional changes planned to be effective 1 July, 2013
23 April 2013 Stora Enso Q1 2013 Financial Results 9
Guangxi, China preparations going forward Plantation-based integrated board and pulp mills project
• The project approval is still pending at NDRC
in Beijing and we follow the development of the
approval process on regular basis
• Preparations proceeding:
– Wood supply ramp up and training for running
mechanized harvesting
– Detailed technical and commercial discussions
with main machinery suppliers in progress, no
commercial commitments nor supplier selections
– Key position holders in place and next level
recruitments planned
23 April 2013 Stora Enso Q1 2013 Financial Results 10
Ostroleka
Investment started up in Jan 2013
Bulleh Shah JV
Delayed and expected to be completed during Q2/2013
Montes del Plata
Commissioning of the main equipment initiated and start-up process during Q3/2013
Strategic investments proceeding Ostroleka, Bulleh Shah, and Montes del Plata
23 April 2013 Stora Enso Q1 2013 Financial Results 11
Business Area ROOC, % Excl. and incl. strategic projects Montes del Plata, Ostroleka and Guangxi
Renewable Packaging Biomaterials
23 April 2013 Stora Enso Q1 2013 Financial Results 12
Summary financials Q1 2013
EUR million Q1/13 Q4/12 Q1/12 Change % Change %
Q1 13 / Q1 12 Q1 13 / Q4 12
Sales 2 667 2 727 2 673 -0.2 -2.2
Operational EBITDA 240 276 265 -9.4 -13.0
Operational EBITDA, % 9.0 10.1 9.9 -9.1 -10.9
Operational EBIT 118 158 150 -21.3 -25.3
Operational EBIT margin, % 4.4 5.8 5.6 -21.4 -24.1
Profit before tax excl. NRI 55 83 101 -45.5 -33.7
EPS excl. NRI, EUR 0.07 0.11 0.10 -30.0 -36.4
EPS (basic), EUR -0.02 0.33 0.09 -122.2 -106.1
Operational ROCE, % 5.4 7.3 6.9 -21.7 -26.0
Operational ROCE, % excl. transformation
investments 6.2 8.8 7.8 -20.5 -29.5
Cash Flow from Operations 101 473 223 -54.7 -78.6
Net debt/last 12 months’ operational
EBITDA 2.7 2.5 2.3 17.4 8.0
23 April 2013 Stora Enso Q1 2013 Financial Results 13
Group Variance – Operational EBIT
Q1 2012 vs Q1 2013 Q4 2012 vs Q1 2013
23 April 2013 Stora Enso Q1 2013 Financial Results 14
Guidance for Q2 2013
• Compared to Q1 2013:
– Sales slightly higher
– Operational EBIT in
line or slightly higher
than Q1 2013
23 April 2013 Stora Enso Q1 2013 Financial Results 15
Strategic projects financial impact
• Ostroleka PM5 – Immaterial impact to Group Sales, mainly used as internal raw material
– EBITDA margin at approximately 20% from H2 2013
• Montes del Plata – Group Sales impact 2013 limited and slightly negative Operational EBIT
impact
– Group Sales impact 2014 with 650 000 tons (Stora Enso share)
– Full positive EBITDA impact in the latter part of 2014 provided that the
current market conditions prevail
23 April 2013 Stora Enso Q1 2013 Financial Results 16
Summary
• Transformation continues
• Short term focus:
– Plan to create a platform for
transformation
• Divisions with clear accountability focusing
on growth and cost competitiveness
• Simplified corporate structures
• EUR 200 million cost savings planned
– Montes del Plata has initiated the
commissioning of the main equipment and
expects to begin the mill start-up process
during Q3/2013
– Bulleh Shah to be completed in Q2/2013
– Cash flow and liquidity
23 April 2013 Stora Enso Q1 2013 Financial Results 17
23 April 2013 Stora Enso Q1 2013 Financial Results 18
Timeline for the restructuring announcements in 2013
23 April 2013 Stora Enso Q1 2013 Financial Results 19
February 2013
Announcement of Hylte PM 2 and Kvarnsveden PM 11 closures EUR 24
million
February 2013
Building & Living EUR 30 million
April 2013
Business structure and organisation EUR 200 million
(out of which EUR 30 million B&L)
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14
Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14
► Full impact Impact starts ►
Impact starts ►
Impact starts ►
► Full impact
► Full impact
Permanent pulp, paper and board capacity reductions since 2006
23 April 2013 Stora Enso Q1 2013 Financial Results
Mill Date Grade Capacity reduction, t
Corbehem PM 3 and PM 4 Jun 2006 LWC 250 000
Varkaus PM 1 End 2006 WFC 95 000
Berghuizer Mill Oct 2007 WFU 235 000
Reisholz Mill End 2007 SC 215 000
Summa Mill Jan 2008 Newsprint, uncoated mag, book paper 415 000
Anjala Mill PM1 Feb 2008 Coated magazine paper 155 000
Baienfurt Mill End 2008 FBB 190 000
Kabel Mill PM 3 End 2008 Coated magazine 140 000
Kemijärvi Pulp Mill April 2008 Long-fibre (SW) pulp 250 000
Norrsundet Pulp Mill Dec 2008 Long-fibre (SW), pulp 300 000
Varkaus Mill coreboard machine Dec 2008 Coreboard 100 000
Imatra PM 8 Mar 2010 WFU 210 000
Varkaus PM 2 and PM 4 Sep 2010 Newsprint, directory paper 290 000
Maxau PM 7 Nov 2010 Newsprint 195 000
Hylte PM1 Dec 2012 Newsprint 180 000
Total 3 220 000
20
Permanent sawn wood capacity reductions since 2006
23 April 2013 Stora Enso Q1 2013 Financial Results
Mill Date Capacity reduction, m3
Veitsiluoto Sawmill 2006 100 000
Honkalahti Sawmill 2006 90 000
Sauga Sawmill Jun 2007 130 000
Sollenau Sawmill 2007 110 000
Näpi Sawmill 2007-2008 100 000
Kotka Sawmill 2007-2008 70 000
Paikuse Sawmill End 2008 220 000
Zdirec Sawmill 2008 120 000
Ybbs Sawmill 2008 & Jun 2009 200 000
Kitee Sawmill 2008 & Jun 2009 130 000
Varkaus Sawmill Jun 2009 60 000
Tolkkinen Sawmill End 2009 260 000
Kopparfors Sawmill End 2011 310 000
Total 1 900 000
21
Operational EBIT by segments
EUR million Q1/13 Q4/12 Q1/12 Change % Change %
Q1 13 / Q1 12 Q1 13 / Q4 12
Printing and Reading 2 59 68 -97.1 -96.6
% of sales 0.2 4.9 5.5 -96.4 -95.9
Biomaterials 22 28 7 214.3 -21.4
% of sales 8.6 10.9 2.9 196.6 -21.1
Building and Living 4 7 10 -60.0 -42.9
% of sales 0.9 1.5 2.6 -65.4 -40.0
Renewable Packaging 68 55 62 9.7 23.6
% of sales 8.3 6.9 8.0 3.8 20.3
Other 22 9 3 n/m 144.4
% of sales 3.1 1.3 0.4 n/m 138.5
23 April 2013 Stora Enso Q1 2013 Financial Results 22
Net Financial Items
EUR million Q1/2013 Q4/2012 Q1/2012 Change %
Q113/Q112
Change %
Q113/Q412
Net interest expense -50 -47 -38 -32 -6
Foreign exchange gains and losses -5 -1 8 n/m n/m
Other financial items. of which -1 -2 -7 86 50
PIK notes 3 3 2
Fair valuation of interest rate derivatives* 2 -9 -3
Fair valuation of long-term debt -1 - -1
NewPage lease provision - 11 14
Pension costs (IAS 19R) -3 -3 -3
Other items -2 -4 -16
Total net financial items -56 -50 -37 -51 -12
*Not hedge accounted interest rate derivatives.
Stora Enso Q1 2013 Financial Results 23 April 2013 23
Transaction risk and hedges as at 31 March 2013
Operational EBIT: Currency strengthening of + 10 % EUR million
USD 111
SEK -91
GBP 54
EUR million USD SEK GBP
Estimated annual net operating cash flow exposure 1 110 -910 540
Transaction hedges as at 31 Mar 2013 -550 420 -280
Hedging percentage as at 31 Mar 2013 for the next 12 months 50 46 52
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 occur
other than a single currency exchange rate movement. Weakening would have the
opposite impact.
Additional GBP hedges for 13-15 months increase the hedging percentages by 2 %.
Stora Enso Q1 2013 Financial Results 23 April 2013 24
Capital expenditure and depreciation Q1 2008 – Q1 2013
Stora Enso Q1 2013 Financial Results 23 April 2013 25
Curtailments of capacity
23 April 2013 Stora Enso Q1 2013 Financial Results 26
Softwood pulp prices Stora Enso’s market pulp is softwood
Source: FOEX
Stora Enso Q1 2013 Financial Results 23 April 2013 27
Wood prices in Sweden
Pulpwood includes pine. spruce and birch.
Sawlogs include pine and spruce.
Source: SDC. Skogsstyrelsen
Stora Enso Q1 2013 Financial Results 23 April 2013 28
Paper for Recycling prices
German RCP price development. free delivered
Source: Verband Deutscher Papierfabriken/Stora Enso
Stora Enso Q1 2013 Financial Results 23 April 2013 29
Maturity profile Q1 2013
23 April 2013 Stora Enso Q1 2013 Financial Results 30
Energy balance* Q1 2013
Impact** on operating profit from
10 change in: EUR million p.a.
Electricity market price ~7
Fossil fuel price ~13
**) Remaining impact on non-hedged volume
23 April 2013 Stora Enso Q1 2013 Financial Results
*) Pulp. paper and board mills. Europe and overseas
31
Stora Enso Electricity procurement* Q1 2013
23 April 2013 Stora Enso Q1 2013 Financial Results
*) Pulp. paper and board mills. Europe and overseas
32 32