Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — Q3 2014 Earnings Presentation
36 slides from Stora Enso Oyj Class A's earnings presentation, Oct 22, 2014
Slide 1: Financial Results Q3 2014
Financial Results Q3 2014 CEO Karl-Henrik Sundström and CFO Seppo Parvi 22 October 2014
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: Solid quarterly performance – transformation journey continues
Solid quarterly performance –transformation journey continues Q3 2014 year-on-year • Renewable Packaging continued its strong performance for the third quarter in a row – Operational EBIT increased by 30% • Biomaterials improved its performance despite Montes del Plata ramp-up • Building and Living
Slide 4: Quarterly sales at EUR 2 514 million up by 3% y-o-y, excluding structurally declining paper
Quarterly sales at EUR 2 514 million up by 3% y-o-y, excluding structurally declining paper Group sales, MEUR Group sales, MEUR 2800 8500 2 553 -1.5% 7 951 -3.6% 2600 2 514 8000 7 661 2400 7500 2200 7000 2000 6500 1800 6000 1600 5500 1400 5000 1200 4500 1000 4000 13Q3 14Q3 Q3 2013 YTD Q3 2014 YTD Sa
Slide 5: Operational EBIT increased sequentially by 14% and YTD y-o-y by 41%
Operational EBIT increased sequentially by 14% and YTD y-o-y by 41% MEUR 700 601 600 41.1% 500 426 400 300 14.1% 210 200 184 100 0 13Q3 14Q3 Q3 2013 YTD Q3 2014 YTD Stora Enso Q3 2014 Financial Results 22 October 2014 5
Slide 6: Investing in sustainable business
Investing in sustainable business Montes del Plata Varkaus conversion EUR 110 million for conversion Pulp mill investment of EUR 1 721 million in Uruguay, joint operation EBITDA margin above 15% Annual production capacity 1.3 million tonnes Start up Q4 2015 - Stora Enso’s share 650 000 tonnes Capaci
Slide 7: Non-core asset divestment and restructuring
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
Slide 8: Transformation journey continues
Transformation journey continues Sales and operational EBIT 2006 Sales Q3 2014 Sales 20XX Sales -3 % 0% 21 % 34 % 38 % 30 % 12 % 70 % 70 % 17 % 11 % Paper Growth businesses -3 % 1 % 16 % 35 % 11 % 62 % 62 % 10 % 6% 2006 Operational EBIT Q3 2014 Operational EBIT Stora Enso Q3 2014 Financial Results 2
Slide 9: Stora Enso
stordenso
Slide 10: Summary financials
Summary financials Q3 2014 Change % Change % EUR million Q3/14 Q3/13 Q3 14 / Q2/14 Q3 14 / Q3 13 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 bef
Slide 11: Renewable Packaging operational EBIT increased by 30%
Renewable Packaging operational EBIT increased by 30% Q3 2014 year-on-year Sales, MEUR • Sales increased by 2.7% 3000 1.6% 2 523 2 484 – Higher volumes, especially 2500 Consumer board 2000 – Higher wood sales in Guangxi 1500 2.7% 1000 851 829 • Operational EBIT EUR 130 million 500 – Higher volumes a
Slide 12: Biomaterials operational EBIT improved by 41%
Biomaterials operational EBIT improved by 41% Q3 2014 year-on-year • Sales increased by 18.8% Sales, MEUR – Mainly due to MdP 900 800 767 3.0% 790 700 600 • Operational EBIT EUR 24 million 500 400 – Higher volumes 300 239 18.8% 284 – Activity in innovation (lignin and 200 100 Virdia) increased fixed
Slide 13: Building and Living operational EBIT
Building and Living operational EBIT EUR 22 million Q3 2014 year-on-year Sales, MEUR • Sales decreased by 6.7% 1600 Millions 1 401 -2.6% 1 364 – Lower volumes in Japanese market 1400 1200 1000 • Operational EBIT EUR 22 million 800 – Lower volumes and slightly lower 600 460 -6.7% 429 prices 400 – Low
Slide 14: Printing and Reading cash flow to sales improved from 5.4% to 7.5%
Printing and Reading cash flow to sales improved from 5.4% to 7.5% Q3 2014 year-on-year Sales, MEUR • Sales declined by 7.9% 3500 3 265 3000 2 928 – Corbehem and Veitsiluoto PM1 closure 2500 -10.3% – Structural paper demand decline 2000 1500 1 041 -7.9% 959 1000 • 500 Operational EBITDA EUR 84 milli
Slide 15: Sensitivity analysis
Sensitivity analysis 10% change, impact on operational EBIT 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% increase in Impact* Market pulp price, total Positive EUR 95 million 10% strengthening
Slide 16: Forecast for capex in 2014
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. Stora Enso Q3 2014 Fi
Slide 17: Stora Enso
stordenso
Slide 18: Guidance for Q4 2014
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 Stora Enso Q3 2014 Fin
Slide 19: Conclusion
Conclusion y-o-y comparison • Transformation journey continues • Solid third quarter – Operational EBIT increased by 14% – Net debt /EBITDA improved from 3.1 to 2.8 – Operational ROCE improved from 8.3% to 9.7% Stora Enso Q3 2014 Financial Results 22 October 2014 19
Slide 20: Stora Enso Q3 2014 Financial Results 22 October 2014
Stora Enso Q3 2014 Financial Results 22 October 2014 20
Slide 21: Operational EBIT by segments
Operational EBIT by segments Change % Change % EUR million Q3/14 Q3/13 Q3 14 / Q2/14 Q3 14 / Q3 13 Q2 14 Renewable Packaging 130 100 30.0% 114 14.0% % of sales 15.3% 12.1% 13.4% Biomaterials 24 17 41.2% 10 140.0% % of sales 8.5% 7.1% 4.1% Building and Living 22 24 -8.3% 37 -40.5% % of sales 5.1% 5.2
Slide 22: Balance sheet strength
Balance sheet strength Q1 2012 – Q3 2014 3 600 3,5 3 500 3,0 3 400 2,5 3 300 2,0 3 200 1,5 3 100 1,0 3 000 2 900 0,5 2 800 0,0 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 Net Debt, MEUR Net Debt/Operational EBITDA* *Last twelve months’ operational EBITDA Stora Enso Q3 2014 Financial Resul
Slide 23: Cash flow from operations
Cash flow from operations 500 20% 450 18% 400 16% 350 14% 300 12% 250 10% 200 8% 150 6% 100 4% 50 2% 0 0% 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 Cash flow from operations, MEUR Cash flow to sales Stora Enso Q3 2014 Financial Results 22 October 2014 23
Slide 24: Cash flow by divisions in Q3
Cash flow by divisions in Q3 200 150 100 50 0 Printing and Biomaterials Building and Renewable Other -50 Reading Living Packaging -100 Cash flow from operations, MEUR Cash flow after investments, MEUR Stora Enso Q3 2014 Financial Results 22 October 2014 24
Slide 25: Permanent pulp, paper and board capacity reductions
Permanent pulp, paper and board capacity reductions since 2006 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 p
Slide 26: Permanent sawn wood capacity reductions
Permanent sawn wood capacity reductions since 2006 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
Slide 27: Net financial items
Net financial items Change % Change % Q3/ Q3/ Q2/ EUR million Q314/ Q314/ 2014 2013 2014 Q313 Q214 Net interest expense -48 -53 9 -45 -7 Foreign exchange gains and losses -16 11 n/m 15 n/m Other financial items. of which -7 -11 36 -16 56 PIK notes - 3 - Fair valuation of interest rate derivatives* -
Slide 28: Net cash flows and foreign exchange hedges Q3 2014
Net cash flows and foreign exchange hedges Q3 2014 € million USD SEK GBP Estimated annual net operating cash flow exposure 1030 -740 460 Transaction hedges -480 390 -230 Hedging percentage for the next 12 months 47%* 53% 50% Additionally there are USD hedges for 13-15 months worth of EUR 30 million.
Slide 29: Curtailments
Curtailments of capacity % of the Paper and Board Wood Products capacity 16 14 12 10 8 6 4 2 0 11Q111Q211Q311Q412Q112Q212Q312Q413Q113Q213Q313Q414Q114Q214Q3 Stora Enso Q3 2014 Financial Results 22 October 2014 29
Slide 30: Softwood pulp prices
Softwood pulp prices Stora Enso’s market pulp is softwood 1 050 950 850 USD/tonne Bleached softwood 750 kraft pulp Bleached hardwood 650 kraft pulp 550 450 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1
Slide 31: Pulp sensitivity analysis
Pulp sensitivity analysis 10% change in prices, impact on operational EBIT 10% increase in Impact* Hardwood pulp** prices Positive EUR 35 million Softwood pulp prices Positive EUR 35 million Fluff pulp prices Positive EUR 15 million Dissolving pulp prices Positive EUR 10 million Market pulp price, t
Slide 32: Pulp wood and saw log prices
Pulp wood and saw log prices Wood prices in Finland Pulpwood, Pine Sawlogs, Pine 80 70 60 EUR/m3 50 40 30 20 10 0 08Q3 10Q3 06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 Source: MET
Slide 33: Paper for recycling prices
Paper for recycling prices Mixed OCC De-inking 200,0 160,0 EUR/tonne 120,0 80,0 40,0 0,0 08Q3 12Q1 07Q1 07Q3 08Q1 09Q1 09Q3 10Q1 10Q3 11Q1 11Q3 12Q3 13Q1 13Q3 14Q1 14Q3 German RCP price development. free delivered Source: Verband Deutscher Papierfabriken/Stora Enso Stora Enso Q3 2014 Financial Resul
Slide 34: Maturity profile Q3 2014
Maturity profile Q3 2014 (including joint arrangements according to IFRS11) Bonds Other loans / liabilities Commercial paper MEUR 1 000 900 800 700 600 500 400 300 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021-2035 2036 Revolving Credit Facility € 700 million matures in January 2017 and is fully
Slide 35: Energy balance Q3 2014
Energy balance* Q3 2014 Impact** on operating profit from EUR million p.a. 10% change in: Electricity market price ~3 Fossil fuel price ~10 *) Pulp. paper and board mills. Europe and overseas **) Remaining impact on non-hedged volume Stora Enso Q3 2014 Financial Results 22 October 2014 35
Slide 36: Stora Enso electricity procurement Q3 2014
Stora Enso electricity procurement* Q3 2014 *) Pulp. paper and board mills. Europe and overseas Stora Enso Q3 2014 Financial Results 22 October 2014 36