Stora Enso Q2 2011 Results
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Transcript of Stora Enso Q2 2011 Results
Financial results Q2 2011Financial results Q2 2011
21 July 2011
It h ld b t d th t t i t t t h i hi h t hi t i l f t i l di ith tIt should be noted that certain statements herein which are not historical facts, including, withoutlimitation those regarding expectations for market growth and developments; expectations for growthand profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similarexpressions, are forward-looking statements within the meaning of the United States Private SecuritiesLiti ti R f A t f 1995 Si th t t t b d t l ti t dLitigation Reform Act of 1995. Since these statements are based on current plans, estimates andprojections, they involve risks and uncertainties which may cause actual results to materially differ fromthose 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
ffi i i th i ti d f d t d l t t f d t iefficiencies therein, continued success of product development, acceptance of new products or servicesby 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 protectioncreated by the Group’s patents and other intellectual property rights, the availability of capital onacceptable terms (2) ind str conditions s ch as strength of prod ct demand intensit of competitionacceptable 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 theGroup, 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 geographicgeneral economic conditions, such as rates of economic growth in the Group’s principal geographicmarkets or fluctuations in exchange and interest rates.
21 July 2011Financial results Q2 2011 2
Continued solid performance year on yearContinued solid performance year-on-year
EUR 228 illi t l• EUR 228 million quarterly operating profit excl. NRI and FV
• Up by 7% year-on-year– significantly higher sales prices– offset by cost inflation and y
unfavourable exchange rates
• Balance sheet (debt/equity 0.41)Balance sheet (debt/equity 0.41) and liquidity (EUR 996 million) remained strong
21 July 2011Financial results Q2 2011 3
Good quarter in increasingly uncertain environmentGood quarter in increasingly uncertain environment
10 %300EBIT excl NRI and fair valuation EBIT margin*, % 4 Q avg
6 %
8 %
180
240
ion
4 %120EU
R m
ill
0 %
2 %
0
60
*excluding NRI and fair valuation
0 %0
21 July 2011Financial results Q2 2011 4
g
Demand of the Group’s products was mixedDemand of the Group s products was mixed
2007 Q avg = 100115
Folding boxboard Std Newsprint Uncoated magazine Coated fine paper
100
X
85
IND
EX
70
European demandSource: CEPI PPPC CEPIFINE
21 July 2011Financial results Q2 2011 5
Source: CEPI, PPPC, CEPIFINE
Prices continued stablePrices continued stable
115
Newsprint (std 45 gsm) SC (roto 56 gsm) WFC (sheets 100 gsm) FBB
2007 Q avg = 100
105
110
90
95
100
IND
EX
80
85
90
75
6
Market price – Germany, monthly avgSource: PPI Europe Price Watch
21 July 2011Financial results Q2 2011
Outlook Uncertainty in European markets increasingOutlook – Uncertainty in European markets increasing
C t i fl ti h d t• Cost inflation unchanged at approximately 4%
Demand development Q3/11 vsQ3/10
Price development Q3/11 vsQ2/11
• Actions continue to mitigate cost inflation
Consumer Board
Industrial• FX rates to have a negative
impact on the Q3 results
Industrial Packaging
Newsprint and Book Paper
• Geographic mix changes Coated Magazine Paper
UncoatedM i P• EBIT excl. NRI and FV in Q3
forecasted to be approximately in the same range as Q2 2011
Magazine Paper
Fine Paper
Wood Products
21 July 2011Financial results Q2 2011 7
Wood Products
Productivity increased yPricing over volumes
120 000
100 000
oyee
, EU
R
80 000
s pe
r em
plo
60 000Sal
es
40 00007Q2 08Q2 09Q2 10Q2 11Q2
21 July 2011Financial results Q2 2011 8
Flexibility increased yFixed costs developing to the right direction
0,30
0,28
ts/S
ales
0,26
Fixe
d C
ost
0,24
0,22FY2007 FY2008 FY2009 FY2010 H12011
21 July 2011Financial results Q2 2011 9
Net Debt to EBITDA improved strongly year on yearNet Debt to EBITDA improved strongly year-on-year
6,05 000
Net Debt Net Debt/EBITDA excl NRI and fair valuations
4,0
5,0
4 000
4 500
lion
2,0
3,0
3 000
3 500
EU
R m
ill
0 0
1,0
2 000
2 500
EBITDA: Continuing operationsSENA divestment closed in Q4 2007
0,02 000
21 July 2011Financial results Q2 2011 10
g pNet debt: Total operations
SENA divestment closed in Q4 2007Merchants divestment closed in Q2 2008
Variable cost developmentVariable cost development
R li d R li dRealised Q2/11 vsQ2/10
RealisedQ2/11 vsQ1/11
Pulp wood
Sawlogs
RCP
Pulp
Chemicals
Energy
21 July 2011Financial results Q2 2011 11
Softwood pulp prices record highp p p gStora Enso’s market pulp is softwood
1 100
1 000
1 100
800
900
nne
Bleached softwood
700
US
D/to
n
kraft pulp
Bleached hardwood k ft l
500
600 kraft pulp
400
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
21 July 2011Financial results Q2 2011 12
Source: FOEX
Rethink create and renewRethink – create and renew
ProgressEarlier announced strategic investmentsMontes del Plata Pulp MillMontes del Plata Pulp MillOstroleka Light Weight Containerboard MachineYbbs, Wood Based Construction ElementsSkoghall, Liquid Packaging Board C titi I t
As planned
Competitiveness Improvement
A significant step forward in renewable materialsA i l l t t I t i Fi l d t
Q1 2012A pre-commercial plant at Imatra in Finland to produce microfibrillated cellulose (MFC)
Renewable energyInvestment to Zdírec Sawmill in the Czech Republic to optimise energy production and usage
Q1 2013
13
Productivity and flexibilityProductivity and flexibility
C ti d lid f i Q2• Continued solid performance in Q2
• Multiple cost and productivity p p yimprovements to compensate inflation
• Fixed costs continued to decrease excluding maintenance impact
• Strategic investments proceeding according to plan
• Productivity and flexibility decisive in uncertain environment
21 July 2011Financial results Q2 2011 14
Rethinking continues!Rethinking continues!
21 July 2011Financial results Q2 2011 16
Summary financials Q2 2011Summary financials Q2 2011
Change % Change %EUR million II/2011 I/2011 II/2010
Change %Q211/Q210
Change %Q211/Q111
Sales 2 817 2 727 2 692 4.6 3.3
EBITDA l NRI d f i l i 3 8 368 330 8 2EBITDA, excl. NRI and fair valuations 358 368 330 8.5 -2.7
Operating profit, excl. NRI and fair valuations 228 248 213 7.0 -8.1
Profit before tax, excl. NRI 182 213 202 -9.9 -14.6
Earnings per share, excl. NRI (EUR) 0.21 0.22 0.22 -4.5 -4.5
ROCE, excl. NRI and fair valuations (%) 10.4 11.4 10.5 -1.0 -8.8
Cash flow from operations 207 163 305 -32.1 27.0
Cash flow after investing activities 122 106 229 -46 7 15 1Cash flow after investing activities 122 106 229 46.7 15.1
Debt/equity 0.41 0.38 0.49 -16.3 7.9
NRI = Non-recurring itemsFair valuations include synthetic options net of realised and open hedges,
21 July 2011Financial results Q2 2011 17
y p p gCO2 emission rights, and valuations of biological assets related to forest assets in equity accounted investments
Operating profit by segmentsOperating profit by segments
Change % Change %EUR million II/2011 I/2011 II/2010
Change %Q211/Q210
Change %Q211/Q111
Consumer Board 85 96 77 10.4 -11.5
% of sales 12 8 14 8 13 1 2 3 13 5% of sales 12.8 14.8 13.1 -2.3 -13.5
Industrial Packaging 20 19 17 17.6 5.3
% of sales 8.1 8.0 6.6 22.7 1.3
Newsprint and Book Paper 28 26 -7 n/m 7.7
% of sales 8.2 8.3 -2.0 n/m -1.2
Magazine Paper 34 28 22 54.5 21.4
% of sales 6.6 5.9 4.1 61.0 11.9
Fine Paper 49 80 79 -38.0 -38.8
% of sales 9.2 14.2 14.3 -35.7 -35.2% of sales 9.2 14.2 14.3 35.7 35.2
Wood Products 35 12 30 16.7 191.7
% of sales 7.6 2.9 7.1 7.0 162.1
21 July 2011Financial results Q2 2011 18
excluding non-recurring items
Capital expenditure and depreciationp p pQ1 2008 – Q2 2011
8 %
10 %
200
250
Forecast:Capex FY 2011approximately
6 %
8 %
150
200
illio
n
approximatelyEUR 500 m
4 %100EU
R m
0 %
2 %
0
50
0 %0
Capex Depreciation and impairment excl NRI Capex % of sales
21 July 2011Financial results Q2 2011 19
Total operations
Operative working capital p g pQ1 2008 – Q2 2011
28 0 %2 800
24,0 %
26,0 %
28,0 %
2 400
2 600
2 800
20,0 %
22,0 %
2 000
2 200
R m
illio
n
14 0 %
16,0 %
18,0 %
1 400
1 600
1 800
EU
R
10,0 %
12,0 %
14,0 %
1 000
1 200
1 400
Operative W/Cap = inventories + trade receivables – trade payables
08Q108Q208Q308Q409Q109Q209Q309Q410Q110Q210Q310Q411Q111Q2
Operative Working Capital at the end of Q Working Capital per Sales ratio
21 July 2011Financial results Q2 2011 20
p p p y
Debt/equityq y2005 – Q2 2011
0,700,7
0,8
0,54 0,560,51
0,5
0,6
0,39 0,39 0,380,41
0,3
0,4
0,1
0,2
02005 2006 2007 2008 2009 2010 Q1 2011 Q2 2011
21 July 2011Financial results Q2 2011 21
Total operations
Net Financial ItemsNet Financial Items
Ch % Ch %EUR million II/2011 I/2011 II/2010
Change %Q211/Q210
Change %Q211/Q111
Net interest expense -28.3 -23.0 -24.3 -16.5 -23.0
Foreign exchange gains and losses -0.7 -11.9 6.2 n/a 94.1
Other financial items, of which -5.6 -16.3 -4.5 -24.4 65.6
PIK notes 1.9 1.5 1.5
Fair valuation of interest rate derivates* 3 3 13 9 4 0Fair valuation of interest rate derivates -3.3 13.9 -4.0
Fair valuation of long-term debt 0.4 -0.5 0.9
Other items -4.6 -31.2 -2.9
Total net financial items -34.6 -51.2 -22.6 -53.1 32.4
21 July 2011Financial results Q2 2011 22
*Not hedge accounted interest rate derivatives.
Transaction risk and hedgesgas at 30 June 2011
EUR million USD GBP SEK
Estimated annual net operating cash flow exposure 1 070 540 -820
Transaction hedges as at 30 June 2011 -500 -250 550
Hedging percentage as at 30 June 2011 for the next 12 months 47% 46% 67%
Operating Profit: Currency strengthening of + 10%Based on estimated next 12 months net operating EUR million
g g p g
Based on estimated next 12 months net operating cash flow exposure.
EUR million
USD 107
SEK -82
GBP 54
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.
21 July 2011Financial results Q2 2011 23
Maturity profiley p30 June 2011
800900
1 000 SEK 500m 3.5% 2015SEK 1.4 bn S+3.7% 2015SEK 2.4 bn 5.75% 2015
500600700800
mill
ion
EUR 750m 5.125% 2014EUR 390m E+4.21% 2016USD 507m 6.404% 2016
300400500
EU
R m
USD 300m 7.25% 2036
0100200
Revolving Credit Facility EUR 700 million matures in January 2014 and is fully undrawn
21 July 2011Financial results Q2 2011 24
g y y y
Energy balance Q2 2011Energy balance Q2 2011
TWh/a
Impact*on operating50Self sufficiency 62%Total energy self
Impact on operating profit from 10% change in:
EUR million p.a.
Electricity market price ~1120
30
40
50
Self sufficiency 53%
sufficiency 60%
*) Remaining impact on non hedged volume
Electricity market price 11
Fossil fuel price ~15 ‐10
0
10
Electricity Fuels
*) Remaining impact on non-hedged volumeInternal External (hedged) External (non-hedged)
21 July 2011Financial results Q2 2011 25
Stora Enso electricity procurementStora Enso electricity procurement
16 000
18 000
GWh/a
Sales to market
10 000
12 000
14 000Sales to market
Open position
Local tariff
6 000
8 000
10 000 Financial contracts
Physical contracts
PVO production
0
2 000
4 000 Own production
-2 000
0
2011 2012 2013 2014
21 July 2011Financial results Q2 2011 26
Permanent pulp, paper and board capacity reductions p p, p p p ysince 2006
Mill D t G d C it d ti tMill 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 000Berghuizer Mill Oct 2007 WFU 235 000
Reisholz Mill End 2007 SC 215 000
Summa Mill Jan 2008 Newsprint, uncoated mag, book paper 415 000
Anjala Mill PM1 Feb 2008 Coated magazine paper 155 000
Baienfurt Mill End 2008 FBB 190 000
Kabel Mill PM 3 End 2008 Coated magazine 140 000
Kemijärvi Pulp Mill April 2008 Long-fibre (SW) pulp 250 000
f (S )Norrsundet Pulp Mill Dec 2008 Long-fibre (SW), pulp 300 000
Varkaus Mill coreboard machine Dec 2008 Coreboard 100 000
Imatra PM 8 Mar 2010 WFU 210 000
Varkaus PM 2 and PM 4 Sep 2010 Newsprint directory paper 290 000Varkaus PM 2 and PM 4 Sep 2010 Newsprint, directory paper 290 000
Maxau PM 7 Nov 2010 Newsprint 195 000
Totals % of capacity as at end 2005 (adjusted for disposals)
P d b d 2 490 000 t/ 15%
21 July 2011Financial results Q2 2011 27
Paper and board 2 490 000 t/a 15%Pulp 550 000 t/a 9%
Permanent sawn wood capacity reductions p ysince 2006
Mill Date Capacity reduction, m3
Veitsiluoto Sawmill 2006 100 000
Honkalahti Sawmill 2006 90 000
Sauga Sawmill Jun 2007 130 000Sauga 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 220 000
Zdirec Sawmill 2008 120 000
Ybbs Sawmill 2008 & Jun 2009 200 000
Kitee Sawmill 2008 & Jun 2009 130 000
Varkaus Sawmill Jun 2009 60 000
Tolkkinen Sawmill End 2009 260 000
Total 1 590 000Total 1 590 000
Reductions equal 20% of capacity as at end 2005 (adjusted for disposals)
21 July 2011Financial results Q2 2011 28