Stora Enso Fourth Quarter and Full Year Results 2011

Financial Results Full Year and Q4 2011

8 February 2012

CEO Jouko Karvinen and CFO Markus Rauramo

Full year 2011 operational EBIT improved by 9%

Operational EBIT EUR 867 million

Operational ROCE 10.0%

Strong cash flow EUR 1 034 million

Dividend increased to EUR 0.3

8 February 2012 2Financial results Q4 2011

Full year 2011

Solid year and satisfactory quarter


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.

7,5 %

7,6 %

7,7 %

7,8 %

7,9 %

8,0 %

750

800

850

900

2010 2011

EU

R m

illio

n

Operational EBIT*

Operational EBIT margin %

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

EU

R m

illio

n

Operational EBIT*

Operational EBIT margin %, 4 Q avg

Curtailments increased to reduce inventories % of capacity

8 February 2012Financial results Q4 2011 4

0

5

10

15

20

25

30

Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411

% o

f ca

pa

city

Paper and Board Wood Products

Flexibility improvements continueFixed cost/sales


0,24

0,26

0,28

0,30

FY2007 FY2008 FY2009 FY2010 FY2011

Fix

ed

Co

st/S

ale

s

Productivity continued to increase55% per person since 2005


Continuing operations

200 000

250 000

300 000

350 000

400 000

2005 2006 2007 2008 2009 2010 2011

Sa

les/e

mplo

yee

Full year solid – rethinking continuesOperational EBIT by segments

EUR million IV/2011 2011 IV/2010 2010Change%

IV11/IV10

Change%

2011/2010

Consumer Board 28 272 52 277 -46.8 -1.7

% of sales 4.8 10.9 8.5 12.0 -43.5 -9.2

Industrial Packaging 14 73 22 66 -37.7 11.0

% of sales 5.3 7.3 9.1 6.9 -41.8 5.8

Newsprint and Book

Paper 29 116 -3 -11 n/m n/m

% of sales 8.4 8.8 -0.8 -0.9 n/m n/m

Magazine Paper 18 128 20 91 -9.2 40.9

% of sales 3.3 6.1 3.6 4.4 -8.3 38.6

Fine Paper 25 192 68 259 -62.4 -26.1

% of sales 4.8 8.9 12.7 12.2 -62.2 -27.0

Wood Products 6 63 10 71 -41.2 -11.4

% of sales 1.6 3.8 2.5 4.5 -36.0 -15.6

78 February 2012

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.

Financial results Q4 2011

Plan to increase competitiveness in Coated

Magazine

• Restructuring at Corbehem, Veitsiluoto and Kabel

Mills

• Cost efficiency and productivity improvements

– Reduction of costs by EUR 48 million /a

– Full impact Q3 2013 onwards

– Q1 cash provision about EUR 5 million

– Q1 fixed asset write-down

about EUR 1 million

• Investments EUR 18 million to quality,

productivity and energy savings

• Planned employee reduction 110 people

• Actions completed by end 2012


Swedish maintenance streamlining plan

• To increase further efficiency and flexibility by

restructuring and changing processes

• Impacting Renewable Packaging and

Printing and Reading

• Reduction of costs by EUR 21 million /a

– Starting gradually from late 2012 onwards

• Cash provisions for Q1

– Renewable packaging EUR 6 million

– Printing and reading EUR 4 million

• Planned employee reduction 130 people


Maintenance costs down in Finnish millsDecrease in unplanned shutdowns by 27% since 2008

Basic Maintenance Cost Unplanned shutdowns


Index = 2007 Index = 2007

50 %

60 %

70 %

80 %

90 %

100 %

110 %

120 %

130 %

2007 2008 2009 2010 2011

IND

EX

50 %

60 %

70 %

80 %

90 %

100 %

110 %

120 %

130 %

2007 2008 2009 2010 2011

IND

EX

Summary financials Q4 2011 and Full year 2011

EUR million IV/2011 2011 IV/2010 2010Change%

IV11/IV10

Change%

2011/2010

Sales 2 682 10 965 2 685 10 297 -0.1 % 6.5 %

Operational EBITDA 243 1 308 289 1 217 -15.9 % 7.5 %

Operational EBIT 145 867 177 797 -18.2 % 8.7 %

Profit before tax. excl. NRI 141 639 162 705 -12.7 % -9.4 %

Profit before tax 110 421 364 885 -69.7 % -52.5 %

EPS excl. NRI (EUR) 0.10 0.63 0.19 0.79 -47.4 % -20.3 %

Operational ROCE 6.7 10.0 8.4 9.7 -20.2 % 3.1 %

Cash flow from operations 302 1 034 265 992 14.3 % 4.3 %

Cash flow after investing activities 115 625 126 592 -8.3 % 5.6 %

Debt/equity 0.47 0.47 0.39 0.39 20.5 % 20.5 %

118 February 2012

NRI = Non-recurring items. These are exceptional transactions that are not related to normal business operations. The most common non-

recurring items are capital gains, additional write-downs or reversals of write-downs, provisions for planned restructuring and penalties. Non-

recurring items are normally specified individually if they exceed one cent per share.


Increased dividend

• Dividend proposal increased to

EUR 0.30

• EPS excluding NRI EUR 0.63


0,00

0,20

0,40

0,60

0,80

1,00

2006 2007 2008 2009 2010 2011

EU

R

EPS, excl NRI (EUR)

Dividend and distribution (EUR)

Over 80% of investments to high-return growth EUR million


951

254

447

92

197

0

200

400

600

800

1000

Cash flow generated by operations

Cash outflow

EU

R m

illio

n

Dividend

Investments to other

Investments to high-return growth

Net financial items and net income tax paid

Guidance

• Q1 2012 sales and

operational EBIT

approximately in line with Q4

2011

• Combined improvement of

Business Area results offset by

lower results in forest

companies (EAI)


Renewable EcosystemsCapital Markets Day, Langerbrugge Mill, Belgium

8 February 2012 15

Thursday 22 March 2012


Recap

• Strong operational cash flow

• Full year improved

• Increased dividend

• Strategic investments proceeding

• Q4 showed rethink must continue


Net Financial Items

EUR million IV/2011 III/2011 IV/2010Change %

Q411/Q410

Change %

Q411/Q311

Net interest expense -35.1 -35.9 -25.6 -37.1 2.2

Foreign exchange gains and losses -3.0 -11.4 1.8 -266.7 73.7

Other financial items. of which -21.1 -146.1 2.1 n/m 85.6

PIK notes 2.0 2.1 1.6

Fair valuation of interest rate derivates* -4.4 -16.4 4.4

Fair valuation of long-term debt -0.4 -1.1 0.1

NewPage lease provision - -128.2 -

Arktos writeoff -10.2 - -

Other items -8.1 -2.5 -4.0

Total net financial items -59.2 -193.4 -21.7 -172.8 69.4

18

*Not hedge accounted interest rate derivatives.

8 February 2012Financial results Q4 2011

Softwood pulp prices Stora Enso’s market pulp is softwood

Source: FOEX


450

550

650

750

850

950

1 05007Q

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

US

D/to

nn

e

Bleached softwood kraft

pulp

Bleached hardwood kraft

pulp

Pulp wood and saw log prices decreased from Q3 2011Wood prices in Finland

Source: METLA


0

10

20

30

40

50

60

70

80

06Q

1

06Q

2

06Q

3

06Q

4

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

EU

R/m

3 Pulpwood, Pine

Sawlogs, Pine

Wood prices in Sweden

21

Pulpwood includes pine. spruce and birch.

Sawlogs include pine and spruce.

Source: SDC. Skogsstyrelsen


0

100

200

300

400

500

600

06Q

1

06Q

2

06Q

3

06Q

4

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

SE

K/m

3 Pulpwood

Sawlogs

RCP prices

0

40

80

120

160

200

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

EU

R/t

on

ne Mixed

OCC

De-inking

German RCP price development. free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso


Debt/equity2009 – Q4 2011

Total operations


0,51

0,39 0,380,41

0,450,47

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

2009 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

Transaction risk and hedgesas at 31 December 2011

24

Operational EBIT: Currency strengthening of + 10% EUR million

USD 120

SEK -87

GBP 60

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 200 600 -870

Transaction hedges as at 31 December 2011 -540 -270 380

Hedging percentage as at 31 December 2011 for the next 12 months 45% 45% 44%

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 USD and GBP hedges for 13-16 months increase the hedging percentages by

7% and 4% respectively.


0

200

400

600

800

1 000

1 200

2012 2013 2014 2015 2016 2017 2018 2019-2035 2036

Maturity profile 31 December 2011

8 February 2012 25

EUR 750m 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 paperOther loans / liabilitiesBonds


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 Fourth Quarter and Full Year Results 2011

Investor Relations

Transcript of Stora Enso Fourth Quarter and Full Year Results 2011