Stora Enso strategy and Q3 results
SVP, Head of Investor Relations, Ulla Paajanen-Sainio 24–27 October 2014
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 24–27 October 2014 Stora Enso
Renewable materials – more than 60% in growth mode*
3
Consumer
Board
Biomaterials
Sales 1 033 m
Op EBITDA 153 m
Op ROOC 3.8%
Capex 368 m
Packaging Solutions
Building and Living
Sales 1 867 m
Op EBITDA 115 m
Op ROOC 13.9 %
Capex 28 m
Printing and Reading
Sales 4 319 m
Op EBITDA 290 m
Op ROOC 1.4 %
Capex 137 m
Renewable Packaging
Sales 3 272 m
Op EBITDA 522 m
Op ROOC 13.3%
Capex 204 m
All figures full year 2013, m=MEUR
*Growth businesses: Renewable Packaging, Biomaterials and Building and Living. Cash focus: Printing and Reading
24–27 October 2014 Stora Enso
Mega and market trends
4
Substitutes for
non-fiber • Increased demand for
sustainable solutions
combined with intensified
regulatory requirements
regarding extended
producer responsibility
• Increased awareness of
sustainability issues drives
the demand for renewable
products and solutions on a
global level
• Increased demand for smart
fibre-based solutions to
improve cost efficiency in
the supply chain
Digitalisation • Increased demand for
intelligent and safe packaging
solutions to serve the
demands of online retail
• Increased use of digital media
which affects demand for
graphic paper
• Increased use of digital
printing which opens up
potential for new swift cost
efficient print processes and
on-demand production
processes
Income growth
and change of
lifestyle • Increased purchase power
in emerging markets and
especially in Asia
• Increased demand for
smaller packages to allow
for smaller volume
purchases
• Growing mobile lifestyle
which triggers demand for
prepared and small
packaged meals – ”on the
go”
Urbanisation • Demand for affordable
construction materials and
solutions to meet the need
for increased demand for
urban housing
• Lack of space increases the
demand for smart living and
efficient land use
• Smaller households drive
demand for small packages
• Densely populated areas
increase demand for
renewable solutions to cut
waste
24–27 October 2014 Stora Enso
Snapshot of current demand for our products
5
Sawn timber Graphic paper
Packaging
Hardwood BHK pulp
Carton board
Softwood BSK pulp
Disposable income
Housing starts Digitalisation
Tissue and packaging demand
Growing population
Tissue and packaging demand
24–27 October 2014 Stora Enso
Time for us to reclaim the market!
Stora Enso’s business strategy is to transform from a
traditional paper and board producer to a customer focused
renewables materials company.
Our business idea is to replace non-renewable materials with
products and solutions based on renewable materials. We are
proud to be actively involved in the transformation of the value
chain. Our market driven products and solutions are
sustainable and innovative – and now it is time for us to align –
and reclaim the market.
Glocal position
– capacity and biological asset allocation
7
Finland
40% Finland
56%
Sweden
26% Sweden
22%
Brazil
2% Brazil
11%
Germany
13%
China
3%
Other
countries
16%
Uruguay
9%
Paper and board capacity by country 2014
Chemical Pulp capacity by country 2014
Poland
2%
Brazil
6%
China
14%
Biological assets by country as at Dec 2013
Finland
39%
Sweden
27%
Germany
6%
China
5%
Other
countries
11%
Uruguay
4%
Brazil
5%
Poland
5%
Total assets by country as at Dec 2013
24–27 October 2014 Stora Enso
Sweden
61%
Finland
15%
Uruguay
4%
Strongest growth in packaging will be in Asia – Increasing demand of consumer board in China
China and
Asia Pacific
Rest of the
world
Eastern
Europe
Western
Europe North
America
South
America
2013–2025
Million tonnes
Source: Pöyry, June 2014:
Cartonboard market update and outlook
Includes SBS, FBB, CUK, LPB and FSB
6,1
6,4
3,7
4,3
0,5
0,9
1
,2
1,9
1,3
1,9
8
7,9
14
,8
CAGR
3.8% CAGR
0.4%
CAGR
1.1%
CAGR
3.4%
CAGR
5.4%
CAGR
3.3%
24–27 October 2014 Stora Enso
Corrugated packaging grows also in Europe
760 840
0
200
400
600
800
1000
2013 2020
Nordic SC Fluting Global market size (kt) RCP–based containerboard Europe (kt)
Kraftliner Europe (kt) Corrugated packaging* (kt)
Source: Pöyry 2013, ICCA, PIRA, Stora Enso Analysis
(Kt)
Market
19061 21575
0
5000
10000
15000
20000
25000
2013 2020
(Kt)
+ 2 514 Kt
+ 1.8%
5240
6138
0
1000
2000
3000
4000
5000
6000
7000
2013 2020
(Kt)
+ 898 Kt
+ 2.3% 3978
4818
0
1000
2000
3000
4000
5000
6000
2013 2020
(Kt)
+ 840 Kt
+ 2.8%
+ 80 Kt
+ 1.4%
*Sweden, Finland, Poland, Russia, Baltic, Hungary 9
Chemical market pulp demand to increase from 55 to
60 Mt in 2013–2018
Source: Pulp and Paper Products Council, 2014
(Kt)
70%
75%
80%
85%
90%
95%
100%
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
2013 2014 2015 2016 2017 2018
Capacity Demand Supply/Demand balance
10 24–27 October 2014 Stora Enso
Investing in sustainable business
24–27 October 2014 12
Guangxi
Partnering with IFC (equity and loan)
FSC and PEFC certified plantation
Key equipment selected
Site levelling work mainly completed, next steps
waiting for the permits
Phase one: board machine operational early 2016
as previously announced
Montes del Plata
Pulp mill investment of EUR 1 721 million in
Uruguay, joint operation
Annual production capacity 1.3 million tonnes
- Stora Enso’s share 650 000 tonnes
- Stora Enso’s share of 2014 production
245 000 - 275 000 tonnes, due to typical
instability of the ramp-ups
Virdia – demonstration plant
New investment in a demonstration and market
development plant in the USA for the extraction
and separation of highly pure sugars from
biomass to be converted into differentiated
biochemicals.
Demonstration and market development plant to
be built at Raceland, Louisiana, USA
Varkaus conversion
EUR 110 million for conversion
EBITDA margin above 15%
Start up Q4 2015
Capacity 390 000 tonnes of kraftliner
Uncoated fine paper capacity to reduce
by 280 000 tonnes
Stora Enso
Non-core asset divestment and restructuring
• Non-core asset divestments:
– Corenso core and coreboard
operations to Powerflute, cash
consideration approximately EUR
75 million expected Q4, announced
Q3 2014
– Thiele Kaolin, cash consideration
EUR 56 million, Q1 2014
• Restructuring:
– Uetersen Mill sales purchase
agreement was discontinued in Q3
– Planned divestment cancelled
24–27 October 2014 13 Stora Enso
Stora Enso’s plantations and forest assets
Guangxi, Southern China (leased)
90 000 ha of land of which 75 000 ha eucalyptus,
9 000 ha other species
Montes del Plata, Uruguay
247 000 ha of land of which
136 000 ha planted
Rio Grande do Sul, Brazil
45 000 ha of land of which 21 000 ha
eucalyptus plantations
Veracel plantations, Brazil
212 000 ha of land of which 92 000 ha
eucalyptus plantations
Bergvik Skog, Sweden
2.3 million ha of land in Sweden, 95 000 ha in
Latvia (ownership of 49%)
Tornator, Finland
595 000 ha of forestland in Finland, 12 000 ha in
Romania, and 13 000ha in Estonia (ownership 41%)
Fair value of Biological assets and Group’s indirect share of forest assets is as of 31 Dec 2013, in total EUR 2 719 million
In addition, leased plantations:
- Laos: trial plantation, 2 200 ha
- Russia: 418 000 ha
- Czech Republic: 144 000 ha
14 24–27 October 2014 Stora Enso
Summary financials Q3 2014
EUR million Q3/14 Q3/13
Change % Change %
Q3 14 /
Q3 13
Q2/14
Q3 14 /
Q2 14
Sales 2 514 2 553 -1.5 2 579 -2.5
Operational EBITDA 333 319 4.4 326 2.1
Operational EBITDA, % 13.2 12.5 12.6
Operational EBIT 210 184 14.1 209 0.5
Operational EBIT margin, % 8.4 7.2 8.1
Profit before tax excl. NRI 116 126 -7.9 145 -20.0
EPS excl. NRI, EUR 0.12 0.13 0.13
EPS (basic), EUR 0.15 0.11 0.00
Operational ROCE, % 9.7 8.3 9.8
Operational ROCE, % excl. transformation
investments 13.0 10.2 12.7
Cash Flow from Operations 257 347 -25.9 288 -10.8
Net debt/last 12 months’ operational
EBITDA 2.8 3.1 2.8
15 24–27 October 2014 Stora Enso
Financial performance - divisions Sales, EBITDA margins and EBIT margins
16
Renewable Packaging Biomaterials
Building and Living Printing and Reading
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
0
200
400
600
800
1000
1200
1400
12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3
Sales, MEUR Operational EBITDA margin Operational EBIT margin
0%
2%
4%
6%
8%
10%
12%
0
100
200
300
400
500
600
12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3
Sales, MEUR Operational EBITDA margin Operational EBIT margin
0%
5%
10%
15%
20%
25%
740
760
780
800
820
840
860
12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3
Sales, MEUR Operational EBITDA margin Operational EBIT margin
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
210
220
230
240
250
260
270
280
290
12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3
Sales, MEUR Operational EBITDA margin Operational EBIT margin
24–27 October 2014 Stora Enso
Sensitivity analysis 10% change, impact on operational EBIT
24–27 October 2014 17
10% increase in Impact*
Market pulp price, total Positive EUR 95 million
*Impact on operational EBIT for the next twelve months.
An increase of energy, wood or chemical and filler prices or decrease of pulp prices, as well as weakening of
the currencies would have the opposite impact.
10% decrease in Impact*
Energy prices Positive EUR 13 million
Wood prices Positive EUR 187 million
Chemical and filler prices Positive EUR 59 million
10% strengthening against Euro
in the value of Impact*
US dollar Positive EUR 103 million
Swedish krona Negative EUR 74 million
British pound Positive EUR 46 million
Stora Enso
Forecast for capex in 2014
EUR million Forecast 2014*
Capital expenditure 790–840
Depreciation 550–560
* Capital expenditure includes approximately EUR 260 million for the project in Guangxi, China. These figures do not include the
acquisition of Bergvik Skog and Virdia shares.
18 24–27 October 2014 Stora Enso
Guidance for Q4 2014 Compared to Q3 2014
• Sales are estimated to be roughly
similar to the EUR 2 514 million
• Operational EBIT is expected to
be somewhat lower than EUR 210
million
– Due to normal seasonal weakness
in the Renewable Packaging and
Building and Living divisions
24–27 October 2014 19 Stora Enso
30 %
70 %
Paper Growth businesses
16 %
11 %
10 %62 %
1 %
Transformation journey continues Sales and operational EBIT
20XX Sales
62 %
6 %
35 %
-3 %
70 %
12 %
21 %
-3 %
2006 Sales
20 24–27 October 2014
38 %
11 %17 %
34 %
0 %
Q3 2014 Operational EBIT 2006 Operational EBIT
Q3 2014 Sales
Stora Enso
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