Financial Results Q1 2012 - Stora...

Financial Results Q1 2012

CEO Jouko Karvinen and SVP, IR Ulla Paajanen-Sainio

10 May 2012

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 10 May 2012 Stora Enso presentation

Stora Enso’s business

Printing and Reading Biomaterials Building and Living Renewable Packaging

What we do

Operational EBIT, 147 EUR million Group Sales*, EUR 2 673 million

3 Stora Enso presentation

46%

9%

14%

29% 26%

Printing andReading

Biomaterials Building andLiving

RenewablePackaging

Other

46%

5% 6%

42%

1%

Printing andReading

Biomaterials Building andLiving

RenewablePackaging

Other

10 May 2012

*Including inter-segment sales elimination

Earnings remained moderate as expected

Operational EBIT EUR 147 million

Strong cash flow EUR 224 million

Liquidity EUR 1 251 million

10 May 2012 4 Stora Enso presentation

Operational EBIT in line with previous quarter

10 May 2012 Stora Enso presentation 5

Flexibility improvements continued Fixed Cost/Sales


Rethink strategy

Growth markets

Renewable

packaging

Biomaterials

Competitive paper


Stora Enso’s engines


Growth engines

Renewable Packaging

Plantation based pulp

Building and living

Cash engines

Printing and Reading

Nordic market pulp

Low cost base saw milling

10 May 2012

Cash in & out


-8%

-4%

0%

4%

8%

2007-2011 % of sales

restructuring Capex Net cash from operations Inv for future

Cash in & out


-8%

-4%

0%

4%

8%

12%

Printing &Reading

Biomaterials Building &Living

RenewablePackaging

Group

Capex restructuring Inv for future Net cash from operations

2007-2011% of sales

Printing and Reading and Renewable Packaging

created the cash flow in Q1 2012


% of Group 2011


Net cash from operations

51 %

9 %

35 %

6 %

Printing and ReadingBiomaterialsRenewable PackagingBuilding and Living

22 %

26 %

43 %

9 %


Total CAPEX

Biomaterials


29 years

10 May 2012 Stora Enso presentation 15 10 May 2012

Shareholder value


1% 2% 3%

-5%

-10%

Average sales price

Lo

st vo

lum

e

Buyer

0% 1% 2% 3%

-5%

-10%

Average sales price

Ga

ine

d v

olu

me

Rest of the market

0%

Growth Operating Capital


54 %

16 %

24 %

6 %


35 %

65 %

Cash Engine

Growth Engine

2011 20XX

Focusing on high quality segments in China


Chinese platform

for growth Unique position

A world leading position

Technologies and

specifications

Committed customers

Robust sustainability

Unique integrate

Established footprint

Innovation

Well prepared project to accelerete growth

New investments will contribute well to cash generation


-1500

-1000

-500

0

500

1000

1500

2000

2007 2008 2009 2010 2011 path 20XX

Capex restructuringInv for future Net cash from operationsEBITDA from new projects

Investment for

future and net cash

from operations

2011

Sales and operational EBIT forecast for Q2 2012 Compared with Q1 2012

• Group sales slightly higher and

operational EBIT approximately in the

range of Q1 2012

• Maintenance stoppages in several

European mills with main impact in

Biomaterials

• Benefits of improving variable costs

slowly apparent in the results


Summary

• Quarterly performance as

expected

• Cost position and operational

performance improvement need

to continue

• Transformation accelerating:

Montes del Plata pulp mill, and

Chinese pulp and packaging

board mill


Summary financials Q1 2012

EUR million I/2012 IV/2011 I/2011 Change %

Q1 12/Q1 11

Change %

Q1 12/Q4 11

Sales 2 673.3 2 681.6 2 726.9 -2.0 % -0.3 %

Operational EBITDA 262.1 242.9 368.3 -28.8 % 7.9 %

Operational EBIT 147.4 144.9 258.3 -42.9 % 1.7 %

Profit before tax. excl. NRI 101.0 141.4 206.7 -51.1 % -28.6 %

Profit before tax 89.9 110.3 179.5 -49.9 % -18.5 %

EPS excl. NRI (EUR) 0.10 0.10 0.22 -54.5 % 0.0 %

Operational ROCE. % 6.8 6.7 11.9 -42.9 % 1.5 %

Cash flow from operations 223.7 302.3 162.9 37.3 % -26.0 %

Cash flow after investing

activities 111.4 73.8 91.7 21.5 % 50.9 %

Debt/equity 0.46 0.47 0.38 21.1 % -2.1 %


Business improved q-on-q, other lower Operational EBIT by segments


Q112/Q111

Change %

Q112/Q411

Printing and Reading 67.3 55.6 85.2 -21.0 % 21.0%

% of sales 5.5 4.3 7.0 -21.4 % 27.9 %

Biomaterials 7.2 27.2 53.5 -86.5 % -73.5 %

% of sales 3.0 10.6 18.3 -83.6 % -71.7 %

Building and Living 9.8 6.0 11.8 -16.9 % 63.3 %

% of sales 2.6 1.6 2.9 -10.3 % 62.5 %

Renewable Packaging 61.7 32.8 101.0 -38.9 % 88.1 %

% of sales 7.9 4.3 12.5 -36.8 % 83.7 %

Other 1.4 23.3 6.8 -79.4 % -94.0 %

% of sales 0.2 3.6 0.9 -77.8 % -94.4 %


Business improved q-on-q, other lower Operational EBIT by segment

EUR million I/2012 IV/2011 Change

Q1 12/Q4 11

Printing and Reading 67.3 55.6 11.7

Biomaterials 7.2 27.2 -20.0

Building and Living 9.8 6.0 3.8

Renewable Packaging 61.7 32.8 28.9

Other 1.4 23.3 -21.9

Group 147.4 144.9 2.5


Working capital decreased year-on-year Q1 2010 – Q1 2012

10 May 2012

*Operative working capital = trade receivables + inventories – trade payables

27 Stora Enso presentation

Transaction risk and hedges as at 31 March 2012

28

Operational EBIT: Currency strengthening of + 10% EUR million

USD 116

SEK -90

GBP 62

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 160 620 -900

Transaction hedges as at 31 March 2012 -580 -280 390

Hedging percentage as at 31 March 2012 for the next 12 months 50% 45% 43%

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

occurs other than a single currency exchange rate movement. Weakening would have

the opposite impact.

USD and GBP have additional hedges for 13-14 months which will increase the hedging

percentage by 2% and 4% respectively.

10 May 2012 Stora Enso presentation

Net Financial Items


Q112/Q111

Change %

Q112/Q411

Net interest expense -37.7 -35.1 -23.0 -63.9 -7.4

Foreign exchange gains and losses 8.0 -3.0 -11.9 n/m n/m

Other financial items. of which -4.3 -21.1 -16.3 73.6 79.6

PIK notes 2.0 2.0 1.5

Fair valuation of interest rate derivates* -3.3 -4.4 13.9

Fair valuation of long-term debt -0.5 -0.4 -0.5

NewPage lease provision 13.6 - -

Arktos writeoff - -10.2 -

Other items -16.1 -8.1 -31.2

Total net financial items -34.0 -59.2 -51.2 33.6 42.6

29

*Not hedge accounted interest rate derivatives.


Softwood pulp prices Stora Enso’s market pulp is softwood

Source: FOEX


Pulp wood and saw log prices Wood prices in Finland

Source: METLA


Wood prices in Sweden

32

Pulpwood includes pine. spruce and birch.

Sawlogs include pine and spruce.

Source: SDC. Skogsstyrelsen


RCP prices

German RCP price development. free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso


Maturity profile 31 March 2012


EUR 413m 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 paper Other loans / liabilities Bonds

Energy balance* Q1 2012

Impact** on operating profit from

10% change in: EUR million p.a.

Electricity market price ~9

Fossil fuel price ~17

Self sufficiency 47% Self sufficiency 63%

Total energy self

sufficiency 59%

**) Remaining impact on non-hedged volume


*) Pulp. paper and board mills. Europe and overseas

Lean and focused capital expenditure model


Average at

~2.5% of sales

Competitiveness

Capex of sales

Top assets with low cost; efficiency and energy

investments

Assets to be kept on current technical level

Assets for divestment or closure during the next 10 years

Strongest growth in demand of virgin fibre-based

consumer board will be in Asia

10 May 2012 37

6,2 6,3

CAGR

0,2 % 1,1 1,5

CAGR

3,5 %

3,8 4,4

CAGR

1,4 %

0.9 1.5

CAGR

4,6 %

0,5 0,7

CAGR

3,3 %

6,0

11,6

CAGR

6,9 %

Asia

Middle East

& Africa

Eastern

Europe

Western

Europe North

America

South

America

Fibre-based consumer

board consumption

CAGR

China 9%

Pakistan 9%

India 6%

Middle East 4%

2010-2020

Million tonnes

Source: Pöyry and Stora Enso Stora Enso presentation

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