Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — FY2004 Earnings Presentation
55 slides from Stora Enso Oyj Class A's earnings presentation, Feb 3, 2005
Slide 1: Financial Results 2004
Financial Results 2004 Jukka Härmälä, CEO Björn Hägglund, DCEO Esko Mäkeläinen, CFO 3 February 2005
Slide 2: Forward-looking statements
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
Slide 3: Contents
Contents • IV Quarter 2004 Results • Year 2004 Review • North America H2 2004 • Shareholder information • Market Outlook • Summary and Conclusions 3 3 February 2005 Full Year 2004 Result/UPS
Slide 4: IV Quarter 2004 Results
STORAENSom™ Focus on the future IV Quarter 2004 Results
Slide 5: Highlights Q4 2004
Highlights Q4 2004 IV/2003 I/2004 II/2004 III/2004 IV/2004 Sales, EUR million 3 028.8 3 017.9 3 102.9 3 033.1 3 241.9 Operating profit*, EUR million 77.4 103.4 58.5 131.6 42.9 EPS, EUR -0.05 0.49 0.06 0.16 0.18 EPS*, EUR 0.00 0.06 0.06 0.10 0.03 Cash EPS*, EUR 0.35 0.41 0.43 0.45 0.38 Debt/Equity 0.
Slide 6: Factors Affecting Profitability during the Fourth Quarter
Factors Affecting Profitability during the Fourth Quarter Profitability negatively impacted by about: • EUR 40 million of higher fixed costs related to holiday season shutdowns • EUR 15 million of higher wood costs • EUR 10 million energy-related costs • EUR 15 million effect of the weakening of US
Slide 7: Development of USD against EUR
Development of USD against EUR One dollar in euros 1,00000 Annual Change 0,95000 in 2004 • Average -9.0% 0,90000 • Closing -7.3% 0,85000 0,80000 0,75000 • Average -6.8% • Average -5.7% • Average +1.1% • Average -5.4% • Average -4.9% • Average +3.7% • Average -1.5% • Average -5.8% 0,70000 • Closing -
Slide 8: Summary Financials
Summary Financials EUR million 2003 2004 I/04 II/04 III/04 IV/04 Sales 12 172 12 396 3 018 3 103 3 033 3 242 EBITDA* 1 711 1 508 394 363 418 333 Operating profit* 526 336 103 59 132 43 Operating profit 471 706 219 59 206 223 Profit before tax* 319 269 81 49 115 25 Net profit 138 740 407 52 131 150 E
Slide 9: Transaction Risk and Hedges in 2004
Transaction Risk and Hedges in 2004 EUR million EUR USD GBP SEK CAD Other Total Sales 2004 6 200 3 300 900 1 100 100 800 12 400 Costs 2004 - 6 200 -1 800 -200 -2 000 -200 -500 -10 900 Net operating cash flow 0 1 500 700 -900 -100 300 1 500 Transaction hedges as at 31 Dec 222 136 -103 -28 Hedging per
Slide 10: Net Financial Items
Net Financial Items EUR million I/04 II/04 III/04 IV/04 Net interest -42.0 -34.9 -31.8 -32.6 Foreign exchange profit/loss 4.8 -1.6 -1.5 -2.8 Valuation of financial instruments 13.6 5.9 5.7 7.1 Other financial items 3.3 4.4 0.6 -4.2 Total -20.3 -26.2 -27.0 -32.5 excluding non-recurring items 10 3 Feb
Slide 11: Change in EPS III/2004 vs IV/2004
Change in EPS III/2004 vs IV/2004 EUR 0.04 -0.02 0,14 -0.01 0,12 -0.06 0.10 0,10 0,08 0,06 -0.02 0,04 0.03 0,02 0,00 GROUP Sales volume Wood Costs Energy Fixed Costs Other GROUP TOTAL III/04 and mix TOTAL IV/04 excluding non-recurring items 11 3 February 2005 Full Year 2004 Result/UPS
Slide 12: EPS by Quarter
EPS by Quarter EUR 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 0.00 IV/02 I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 excluding non-recurring items 12 3 February 2005 Full Year 2004 Result/UPS
Slide 13: ROCE by Quarter
ROCE by Quarter % 13 11 9 7 5 3 1 -1 IV/02 I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 Target > 13% over the cycle (current WACC 8.7 %) excluding non-recurring items 13 3 February 2005 Full Year 2004 Result/UPS
Slide 14: Operating Profit by Quarter
Operating Profit by Quarter EUR million 250 200 150 100 50 0 IV/02 I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 excluding non-recurring items 14 3 February 2005 Full Year 2004 Result/UPS
Slide 15: Debt/Equity
Debt/Equity 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.20 IV/02 I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 Target < 0.8 15 3 February 2005 Full Year 2004 Result/UPS
Slide 16: Main Events in Q4/2004
Main Events in Q4/2004 • Acquisition of 66 % of the shares of Polish packaging producer Intercell S.A. – One of Poland’s biggest corrugated packaging companies – Integrated operations from waste collection to corrugated packaging production – Sales EUR 150 million, EBITDA EUR 27 million, 1 700 emplo
Slide 17: Events after the Period
Events after the Period • Announcement of the intention to buy French paper merchant Papeteries de France (PdF) from International Paper – Sales EUR 160 million and sales volumes 160 000 tonnes • New syndicated credit facility EUR 1.75 billion – Replacement of existing EUR 2.5 billion syndicated fac
Slide 18: Year 2004 Review
STORAENSom™ Focus on the future Year 2004 Review
Slide 19: Key Figures
Key Figures 2002 2003 2004 Sales (1 000 tonnes) 13 149 13 551 14 409 Sales (EUR million) 12 783 12 172 12 396 EBITDA* (EUR million) 2 146 1 711 1 508 Operating profit* (EUR million) 900 526 336 Operating profit (EUR million) -178 471 706 Earnings per share* (EUR) 0.55 0.24 0.25 Earnings per share (E
Slide 20: Factors Affecting the Financial Performance - 2004
Factors Affecting the Financial Performance - 2004 • Deliveries increased by 6.3 % • EPS excluding non-recurring items increased from 0.24 to 0.25 • Decline in average selling prices • Two major machine rebuilds in North America • Weak U.S. dollar – Declined 9 % on average vs. 2003 • Divestment of t
Slide 21: Operating Profit
Operating Profit EUR million 2000 1800 1600 1400 1200 1000 800 600 Structural change 400 (Bergvik Skog) 200 0 2000 2001 2002 2003 2004 excluding non-recurring items 21 3 February 2005 Full Year 2004 Result/UPS
Slide 22: Change in EPS from 2003 to 2004
Change in EPS from 2003 to 2004 EUR 0,30 -0.29 0.02 0.25 0,25 0.24 0.01 0.07 0,20 0.05 0,15 0.16 -0.01 0,10 0,05 0,00 -0,05 -0,10 GROUP Sales Sales Energy Associated Financing Fixed and Change in GROUP TOTAL 2003 prices volume companies costs other costs Finnish TOTAL 2004 tax law excluding non-recu
Slide 23: Market-Related Production Curtailments in 2001-2004
Market-Related Production Curtailments in 2001-2004 Tonnes 2001 2002 2003 2004 Publication Paper Europe 461 000 714 000 448 000 240 000 North America 229 000 160 000 49 000 Fine Paper Europe 504 000 190 000 146 000 36 000 North America 166 000 60 000 30 000 7 000 Packaging 180 000 133 000 109 000 81
Slide 24: EPS
EPS EUR 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2000 2001 2002 2003 2004 excluding non-recurring items 24 3 February 2005 Full Year 2004 Result/UPS
Slide 25: Non-recurring Items Effect
Non-recurring Items Effect EUR million 2004 excl. SENA Bergvik Finnish TEL 2004 IAS non-recs. divestment pension EBIT 336.4 74.1 115.7 179.9 706.1 PTP 269.3 74.1 115.7 179.9 639.0 Net Profit 211.1 44.4 356.5 127.7 739.7 EPS, EUR 0.25 0.05 0.43 0.16 0.89 25 3 February 2005 Full Year 2004 Result/UPS
Slide 26: ROCE
ROCE % 20 18 16 14 12 10 8 6 4 2 0 2000 2001 2002 2003 2004 Target > 13% over the cycle Present WACC = 8.7% before tax excluding non-recurring items 26 3 February 2005 Full Year 2004 Result/UPS
Slide 27: Debt/Equity
Debt/Equity 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.20 2000 2001 2002 2003 2004 Target < 0.8 restated debt/equity ratio 27 3 February 2005 Full Year 2004 Result/UPS
Slide 28: Capital Expenditure and Depreciation
Capital Expenditure and Depreciation Capital expenditure Goodwill depreciation EUR million Depreciation Capital expenditure as % of sales 1 600 12 11 1 400 10 1 200 9 8 1 000 7 800 6 5 600 4 400 3 2 200 1 0 0 2000 2001 2002 2003 2004 28 3 February 2005 Full Year 2004 Result/UPS
Slide 29: North America H2 2004
STORAENSom™ Focus on the future North America H2 2004
Slide 30: Stora Enso North America Business Results
Stora Enso North America Business Results USD million 2003 2004 H1/04 H2/04 Sales (1 000 tonnes) 2 707 2 820 1 336 1 484 Sales 1 887 1 997 918 1 079 EBITDA* 95 142 17 125 EBITA* -184 -140 -130 -10 Capital Expenditure 182 204 120 84 Cash flow after Capex -121 -61 -100 39 Market-related downtime (1 00
Slide 31: Stora Enso North America Activities During H2 2004
Stora Enso North America Activities During H2 2004 • Significant improvement in performance – Loss of USD 10 million EBITA versus USD 130 million loss in H1 2004 • Both volumes and prices increased • About USD 10 million negative effect on Port Hawksbury mill result related to the CAD appreciation •
Slide 32: Profit Enhancement Programme
Profit Enhancement Programme • Programme proceeding according to plan • Three paper machine shutdowns • Four Paper machines modernised – PM 26 at Biron Mill to be completed February 2005 – PM 64 Whiting Mills postponed until early 2006 • Workforce to be further reduced to some 5000 people by mid 200
Slide 33: Shareholder Information
STORAENSom™ Focus on the future Shareholder Information
Slide 34: Earnings Per Share and Dividend
Earnings Per Share and Dividend EUR EPS, excluding non-recurring items Dividend Payout ratio % 1.40 200 % 180 % 1.20 160 % 1.00 140 % 120 % 0.80 100 % 0.60 80 % * 0.40 60 % 40 % 0.20 20 % 0.00 0% 2000 2001 2002 2003 2004 *) Board proposal 34 3 February 2005 Full Year 2004 Result/UPS
Slide 35: Share Buy-Back Programme
Share Buy-Back Programme Current programme approved by AGM 2004 to end 17 March 2005. Allows repurchase up to : A shares 9 000 000 R shares 32 700 000 Status through 19 January 2005: Number of Average % of Shares shares purchased: purchase price: authorisation A shares 12 300 10.65 0.10 R shares 16
Slide 36: Market Outlook
&> STORAENSO™ Focus on the future Market Outlook
Slide 37: Near-term Market Outlook: Western Europe
Near-term Market Outlook Western Europe Price Demand Comments Magazine Paper Demand is strong; Prices expected to increase SC Q1 2005 Demand is strong; CMR Prices expected to increase Q1 2005 Demand is strong; Newsprint Prices expected to increase Q1 2005 Fine Papers Good demand; prices stable WFC W
Slide 38: Near-term Market Outlook: North America
Near-term Market Outlook North America Price Demand Comments Demand remains strong; price Magazine Paper increases will continue to be implemented SC Demand remains strong; price CMR increases will continue to be implemented Newsprint Demand stable; some price increases are anticipated Fine Papers D
Slide 39: Summary and Conclusions
STORAENSom™ Focus on the future Summary and Conclusions
Slide 40: Summary
Summary • Financial result for the full year 2005 is expected to exceed that of 2004 • The demand picture is generally positive • Some price increases will be implemented in Q1 2005 • Profits are expected to be influenced in Q1 2005 by: – Impact of the U.S. dollar – Costs related to rebuilds – Lange
Slide 41: Improving profitability
Improving profitability • Focus on harvesting rebuilt, modified and new machines – Maxau, Langerbrugge, Kvarnsveden, Corbehem, Summa, Biron, Veitsiluoto, Wisconsin Rapids and Nymölla • Intensifying the short and long term efforts to lower fibre costs (e.g. Veracel) • Explore possibilities to improve
Slide 42: Appendix
&> STORAENSO™ Focus on the future Appendix
Slide 43: Currency Hedging
Currency Hedging • Group’s hedging policy is to hedge a maximum 75 % of net cash flows in each major currency • Major net cash flows (2004): USD + 1 500 GBP + 700 (EUR million equivalent) • Operational cash flow hedges had a positive impact of EUR 5 million in Q4/2004 (EUR 16.4 million for 2004) 43
Slide 44: Operating Profit by Product Area
Operating Profit by Product Area EUR million IV/03 I/04 II/04 III/04 IV/04 Publication Paper 43.0 8.7 -3.8 48.2 38.2 % sales 3.9 0.9 -0.4 4.4 3.3 Fine Paper 10.1 18.1 4.6 27.9 13.7 % sales 1.3 2.3 0.6 3.5 1.7 Packaging Boards 51.3 82.1 67.7 84.8 43.0 % sales 7.8 11.9 9.6 12.6 6.1 Wood Products 9.5 1
Slide 45: Publication Paper
Publication Paper EUR million 2003 2004 I/04 II/04 III/04 IV/04 Change % III/IV Sales 4 295.7 4 343.3 1 019.2 1 069.6 1 090.6 1 163.9 6.7 Operating profit 111.1 91.3 8.7 -3.8 48.2 38.2 -20.7 % of sales 2.6 2.1 0.9 -0.4 4.4 3.3 ROOC, %* 2.8 2.3 0.9 -0.4 4.6 3.6 Deliveries, 1000 t 6 954 7 398 1 732 1
Slide 46: Fine Paper
Fine Paper EUR million 2003 2004 I/04 II/04 III/04 IV/04 Change % III/IV Sales 3 197.7 3 173.1 788.9 786.3 791.8 806.1 1.8 Operating profit 153.5 64.3 18.1 4.6 27.9 13.7 -50.9 % of sales 4.8 2.0 2.3 0.6 3.5 1.7 ROOC, %* 4.4 1.9 2.2 0.5 3.2 1.6 Deliveries, 1000 t 3 591 3 893 959 964 974 995 2.2 Produ
Slide 47: Packaging Boards
Packaging Boards EUR million 2003 2004 I/04 II/04 III/04 IV/04 Change % III/IV Sales 2 761.6 2 771.5 692.0 704.4 674.6 700.5 3.8 Operating profit 292.4 277.6 82.1 67.7 84.8 43.0 -49.3 % of sales 10.6 10.0 11.9 9.6 12.6 6.1 ROOC, %* 11.6 10.6 13.1 10.7 13.4 6.5 Deliveries, 1000 t 3 006 3 119 776 790
Slide 48: Wood Products
Wood Products EUR million 2003 2004 I/04 II/04 III/04 IV/04 Change % III/IV Sales 1 400.0 1 566.8 373.1 419.2 388.5 386.0 -0.6 Operating profit 26.5 34.7 11.4 21.3 10.9 -8.9 N/A % of sales 1.9 2.2 3.1 5.1 2.8 -2.3 ROOC, %* 5.1 5.2 7.0 12.5 6.3 -5.2 Deliveries, 1000 m3 5 822 6 664 1 597 1 777 1 595 1
Slide 49: Market-Related Production Curtailments
Market-Related Production Curtailments Tonnes 2003 2004 I/2004 II/2004 III/2004 IV/2004 Publication Paper Europe 448 000 240 000 93 000 74 000 21 000 52 000 North America 49 000 Fine Paper Europe 146 000 36 000 12 000 8 000 3 000 13 000 North America 30 000 7 000 7 000 Packaging 109 000 81 000 20 00
Slide 50: Change in Group Operating Profit from 2003 to 2004
Change in Group Operating Profit from 2003 to 2004 EUR million 600 500 525.8 -336.9 400 300 181.4 -16.6 -4.6 -12.7 336.4 200 100 0 GROUP TOTAL Sales prices Volumes Energy Fixed costs Other GROUP TOTAL 03 04 excluding non-recurring items 50 3 February 2005 Full Year 2004 Result/UPS
Slide 51: Change in Group Operating Profit from III/2004 to IV/2004
Change in Group Operating Profit from III/2004 to IV/2004 EUR million 200 180 45.7 -20.7 160 -13.4 131.6 -5.2 -70.5 140 120 100 80 -24.6 60 42.9 40 20 0 GROUP TOTAL Sales prices Volumes Wood cost Energy Fixed costs Other GROUP TOTAL III/04 IV/04 excluding non-recurring items 51 3 February 2005 Full
Slide 52: Main Events in 2004
Main Events in 2004 First Quarter: • Stora Enso restructured its Swedish forestland ownership – Retaining 43.3 % ownership in Bergvik Skog – Financial effects: – Capital employed decreased by EUR 1 272.3 million – Wood Supply Europe’s operating profit is decreasing by EUR 100 million on annual basis
Slide 53: Main Events in 2004 (cont.)
Main Events in 2004 (cont.) Third Quarter: • Acquisition of Dutch paper merchant Scaldia Papier – Debt free transaction value EUR 30 million Fourth Quarter: • Acquisition of 66 % of the shares of Polish packaging producer Intercell S.A. • Divestment of Finnantara plantation in Indonesia 53 3 Februar
Slide 54: Dividend Proposal
Dividend Proposal • Dividend proposal: EUR 0.45 per share • Payout ratio: 180% excl. non-recurring items, 51% including non-recurring items • Total dividend payment: about EUR 370 million (assuming 820 million shares outstanding) • Dividend yield: 4.1% (at a share price of EUR 10.98) • Record date:
Slide 55: To view Stora Enso's full year results for 2004, visit www.storaenso.com
To view Stora Enso’s full year results for 2004, visit www.storaenso.com