Stora Enso Oyj - Interim report (Q1 and Q3)

Stora Enso Oyj Interim Report January-March 2024

STORA ENSO OYJ INTERIM REPORT 25 April 2024 at 8:30 EEST

Continuous efforts to improve profits, competitiveness, and cash flow
Q1/2024 (year-on-year)

•      Sales decreased by 20% to EUR 2,164 (2,721) million.

•      Adjusted EBIT decreased to EUR 156 (234) million.

•      Adjusted EBIT margin was 7.2% (8.6%).

•      Operating result (IFRS) decreased to EUR 148 (258) million.

•      EPS was EUR 0.11 (0.24) and EPS excl. fair valuations (FV) was EUR 0.09
(0.23).

•      Cash flow from operations amounted to EUR 269(254) million. Cash flow
after investing activities was EUR -104 (1) million.

•      Net debt increased by EUR 601 million to EUR 3,518 (2,917) million,
mainly due to the board investment at the Oulu site.

•      The net debt to adjusted EBITDA ratio (last 12 months) was 4.0 (1.3). The
target is to keep the ratio below 2.0.

•      Adjusted ROCE (last 12 months) excluding the Forest division decreased to
0.0% (16.5%), the target being above 13%.

Key highlights

•      The profit improvement programme, initiated in the first quarter, has
progressed well and the annual profit improvement target has been increased to
EUR 120 million, from the initial EUR 80 million, driven by additional fixed
cost reductions. The programme does not include site closures and may result in
the reduction of approximately 1,000 employees.

•      Operating working capital decreased by EUR 551 million year-on-year,
driven by our continued focus to improve working capital efficiency.

•      The consumer board investment at the Oulu site in Finland is progressing
on schedule. Production is expected to start in the first half of 2025, with
full capacity estimated to be reached during 2027.

•      The plan to divest the Beihai site in China is proceeding according to
plan. The site is classified as assets held for sale from the end of 2023
onwards.

Guidance
Stora Enso's full year 2024 adjusted EBIT is expected to be higher than for the
full year 2023, EUR 342 million.

Outlook
Market outlook:
Stora Enso anticipates a gradual recovery in market conditions in 2024, with
increased demand for consumer board, higher pulp demand and prices. However,
profits are expected to be adversely impacted in the second quarter, mainly due
to the sequentially higher maintenance costs in the quarter, higher wood costs,
and the recent political strikes in Finland. Market uncertainties such as a
continued high inflationary environment, strikes, demand and price development,
and other external disruptions which may impact the Group's profits, are
expected to persist towards the end of the year.
Packaging Materials:
The Packaging Materials market has stabilised and orderbooks have improved,
though the weak macroeconomy, including sluggish retail markets, is still
slowing the recovery. Demand for consumer board is stable to positive,
especially in liquid packaging board. Demand is expected to continue to recover
in kraftliner and testliner, and announced price increases in the containerboard
market are filtering through. For recycled board, demand has improved but
underlying demand remains weak.
Packaging Solutions:
The Packaging Solutions division expects a stronger sequential demand in the
second quarter due to seasonal effects. However, heavy overcapacity in the
market, mainly in Eastern Europe, will continue to pose challenges, together
with increasing containerboard prices.
Biomaterials:
The European demand is expected to slightly increase due to the ongoing Red Sea
Crisis, which benefits board and paper producers in Europe. However, new
capacities could impact the market later in the year.
Wood Products:
The Wood Products division continues to face challenges due to low demand,
prices, volumes, and high wood costs. A seasonal demand improvement is expected
in the classic sawn market during the second quarter of this year. The
construction sector is still not improving.
Forest:
The Forest division expects a gradual rise in wood demand as markets in the
second quarter remain tight in Finland, Sweden, and the Baltics. Wood prices are
estimated to rise throughout the rest of 2024 in both Finland and Sweden.
Long-term growth opportunities:
Despite current challenges, Stora Enso sees long-term growth opportunities in
sustainable packaging, wood construction, and innovative biomaterials.
Regulations and sustainability megatrends support these developments.
Key figures

EUR million               Q1/24   Q1/23   Change   Q4/23   Change %     2023
                                          %
                                                           Q1/24-Q4/23
                                          Q1/24-Q
                                          1/23
Sales                     2,164   2,721   -20.5%   2,174   -0.4%        9,396
Adjusted EBITDA           298     399     -25.3%   212     40.3%        989
Adjusted EBIT             156     234     -33.1%   51      209.7%       342
Adjusted EBIT margin      7.2%    8.6%             2.3%                 3.6%
Operating result (IFRS)   148     258     -42.4%   -326    145.5%       -322
Result before tax (IFRS)  101     228     -55.6%   -378    126.8%       -49
Net result for the        84      185     -54.5%   -325    125.9%       -431
period (IFRS)
Forest assets1            8,626   8,269   4.3%     8,731   -1.2%        8,731
Adjusted return on        1.9%    11.5%            2.4%                 2.4%
capital employed (ROCE),
LTM2
Adjusted ROCE excl.       0.0%    16.5%            1.0%                 1.0%
Forest division, LTM2
Earnings per share (EPS)  0.09    0.23    -60.6%   -0.64   114.2%       -0.73
excl. FV, EUR
EPS (basic), EUR          0.11    0.24    -55.2%   -0.36   129.6%       -0.45
Net debt to LTM2          4.0     1.3              3.2                  3.2
adjusted EBITDA ratio
Average number of         19,412  21,144  -8.2%    20,047  -3.2%        20,822
employees (FTE)

1 Total forest assets value, including leased land and Stora Enso's share of
Tornator.
2 LTM=Last 12 months

Stora Enso's President and CEO Hans Sohlström comments on the first quarter 2024
results:
“In a continuous weak market, I am encouraged by Stora Enso's sequential
financial performance improvement.
However, our year-on-year sales decreased by 20% to 2,164 million euro. Adjusted
EBIT decreased to 156 million euro from 234 million in the same period last
year, and the adjusted EBIT margin decreased to 7.2% from 8.6%. The political
strikes in Finland had an adverse impact of approximately 25 million euro on our
results. But we estimate the impact on our second quarter results to be lower.
Net debt increased by 601 million euro to 3,518 million euro, due to the board
investment at the Oulu site. We will continue our capital expenditure at 1.0 to
1.1 billion euro this year as this investment proceeds according to schedule,
aiming to be back towards the average levels of 600 to 800 million euro per year
from 2025.
The dividend of 0.10 euro per share was paid in April 2024. And the AGM
authorised the Board of Directors to decide on a second dividend payment of up
to 0.20 euro per share, no later than the fourth quarter this year.
A strong balance sheet is crucial for the future. Our net debt to adjusted
EBITDA ratio was 4.0 in the first quarter. We recognise that this is higher than
our target of remaining below 2.0 and are taking steps to manage our debt levels
effectively and bring our ratio back in line with our target. Despite facing
weak market conditions and making strategic investments, we were able to improve
our cash flow by reducing our operating working capital. In fact, we were able
to reduce it by 551 million euro compared to the previous year. We aim to
release capital through working capital management and divestments to further
reduce debt and increase liquidity, which remains strong.
Last year's poor performance emphasised the need for efficiency, decisiveness,
and focus on essentials. We therefore launched a profit improvement programme
this year, designed to strengthen our long-term competitiveness and financial
sustainability. I am pleased to share that the programme is progressing well,
and we have raised the potential improvement to 120 million euro annual adjusted
EBIT from the initial target of 80 million euro. While we remain committed to
our employees, the programme may result in the reduction of approximately 1,000
employees. Laying off people is a last resort, but it is necessary to improve
our financial performance.
We have moved to a new, decentralised operating model and performance-driven
organisation across the Group. We are building a culture centred around
ambitious goal setting, agility, analytics, and accountability. This is linked
to our expectations as an employer, and to the benefit of our customers and
owners. Our commercial and operational excellence will benefit from a leaner
approach where the responsibility for results is divided between divisions and
business units to improve decision-making.
Our actions also focus on improving profitability through more efficient
sourcing, production, and sales; freeing up capital, including working capital;
strategy and execution; and ensuring we have the right people in the right jobs.
The acquisition of De Jong Packaging Group and ongoing investment at our Oulu
site support the Group's long-term strategy to build market share in renewable
and circular packaging solutions that matter most to our customers.
Looking ahead, we anticipate a gradual recovery in 2024, with increased demand
and higher prices for board and pulp. However, we anticipate adverse profit
impacts in the second quarter due to higher maintenance costs and strikes in
Finland. Cost inflation pressure has started to come down in general, but wood
cost increases, especially on the Finnish market, continue to challenge
profitability also this year. Ongoing market uncertainties, such as high
inflation, demand and price development, and external disruptions, may persist
throughout the year and could affect our profits.
While we face short-term challenges, we remain confident in our ability to focus
on long-term growth opportunities in sustainable packaging, wood construction
and innovative biomaterials.
Finally, I am pleased to report that we are on track and committed to meet our
full year 2024 adjusted EBIT guidance to be higher than the full year 2023
adjusted EBIT of 342 million euro. And we are confident that our actions will
build a more profitable, competitive, and valuable Stora Enso.”
Webcast for analysts, investors, and media
Analysts, investors, and media are invited to participate in the webcast with a
teleconference today at 11:00 am EEST (10:00 CEST, 9:00 BST, 4:00 EDT). The
results will be presented by President and CEO Hans Sohlström and CFO Seppo
Parvi. The presentation can be followed live via the link: https://stora-ensos
-q1-2024-results-webcast.open-exchange.net/
During the webcast presentation, analysts and investors will also have the
possibility to ask questions. To participate in the teleconference, please
choose the “Teleconference” option on the homepage of the webcast.  Recording of
the webcast will be available shortly after the event at the same address and at
storaenso.com/en/investors/interim
-report (https://www.storaenso.com/en/investors/interim-report)
Media representatives who wish to ask questions after the publication of the
report may contact Carl Norell, SVP Corporate Communications at Stora Enso on
+46 72 241 0349.
This release is a summary of Stora Enso's Interim Report January-March 2024. The
complete report is attached to this release as a pdf file. It is also available
on the company website at storaenso.com/en/investors/interim
-report (https://www.storaenso.com/en/investors/interim-report).

Media enquiries:
Carl Norell
SVP Corporate Communications
tel. +46 72 241 0349
Investor enquiries:
Anna-Lena Åström
SVP Investor Relations
tel. +46 70 210 7691
Part of the global bioeconomy, Stora Enso is a leading provider of renewable
products in packaging, biomaterials, and wooden construction, and one of the
largest private forest owners in the world. Stora Enso has approximately 20,000
employees and our sales in 2023 were EUR 9.4 billion. Stora Enso shares are
listed on Nasdaq Helsinki Oy (STEAV, STERV) and Nasdaq Stockholm AB (STE A, STE
R). In addition, the shares are traded in the USA on OTC Markets (OTCQX) as ADRs
and ordinary shares (SEOAY, SEOFF, SEOJF).
storaenso.com/investors (https://www.storaenso.com/en/investors/)
STORA ENSO OYJ

Media enquiries:
Carl Norell
SVP Corporate Communications
tel. +46 72 241 0349
Investor enquiries:
Anna-Lena Åström
SVP Investor Relations
tel. +46 70 210 7691

Attachments:

04257708.pdf