2014-07-21 12:00:00 CEST
2014-07-21 12:00:13 CEST
REGULATED INFORMATION
Stora Enso Oyj - Interim report (Q1 and Q3)
Stora Enso Interim Review January–June 2014
Significant operational earnings improvement continues; fixed cost reduction
programme target clearly exceeded
Helsinki, Finland, 2014-07-21 12:00 CEST (GLOBE NEWSWIRE) -- STORA ENSO OYJ
INTERIM REVIEW 21 July 2014 at 13.00 EET
Q2/2014 (compared with Q2/2013)*
-- Sales EUR 2 579 (EUR 2 726) million, EUR 147 million lower than a year ago,
partly due to structural decline in demand for paper.
-- Operational EBIT EUR 209 (EUR 124) million, an increase of EUR 85 million
due to lower fixed and variable costs. Renewable Packaging and Building and
Living continued to perform strongly.
-- Non-recurring items EUR -106 million including planned closure of Corbehem
Mill and divestment of Uetersen Mill.
-- EPS excluding NRI EUR 0.13 (EUR 0.05).
-- Cash flow from operations EUR 288 (EUR 317) million, cash flow after
investing activities EUR 29 (EUR 117) million.
-- Net debt to operational EBITDA 2.8 (3.2), liquidity remained strong at EUR
1.6 (1.9) billion.
-- Operational ROCE 9.8 (5.4)%.
Q1-Q2/2014 (compared with Q1-Q2/2013)*
-- Sales EUR 5 147 (EUR 5 398) million, operational EBIT EUR 391 (EUR 242)
million due to lower costs and lower depreciation.
Transformation
-- Montes del Plata Pulp Mill in Uruguay started up in early June, with first
shipments to customers in mid-July. In 2014 Stora Enso's share of its
production expected to be 300 000-350 000 tonnes, about 50 000 tonnes less
than previously anticipated.
-- Consumer board machine investment in Guangxi, China proceeding as planned.
-- Varkaus Mill fine paper machine in Finland to be converted to produce
virgin-fibre-based containerboard.
-- Stora Enso acquired 100% of the US-based biotechnology company Virdia for
Biomaterials in order to enable a step-change entry into high-value
renewable materials technologies.
Restructuring
-- The streamlining and structure simplification programme announced in April
2013 completed and annualised cost savings of EUR 244 million versus 2012
cost base achieved exceeding the original target by EUR 44 million or 22%.
-- Non-core asset divestments are proceeding. Divestment of Uetersen Mill in
Germany announced, subject to approval from regulatory authorities.
-- Social plan for Corbehem Mill in France agreed and mill closure plan
announced.
Global Responsibility
-- New quarterly Global Responsibility section on pages 10-12.
Outlook
Q3/2014 sales are forecast to be roughly similar to the EUR 2 579 million and
operational EBIT similar to or slightly lower than the strong EUR 209 million
in Q2/2014. All segments are scheduled to have maintenance shutdowns during
Q3/2014. The maintenance impact in Q3/2014 is expected to be approximately EUR
30 million higher than in Q2/2014.
* Data for the comparative periods in 2013 have been restated following
adoption of the new IFRS 10 Consolidated Financial Statements, IFRS 11 Joint
Arrangements and IFRS 12 Disclosure of Interests in Other Entities standards.
Data for the comparative periods have been restated in all tables affected. For
further details, see Basis of Preparation on page 16.
Key Figures*
EUR Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
million % % 14 13 %
Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14-
Q1-Q2/
13
--------------------------------------------------------------------------------
Sales 2 579 2 726 -5.4 2 568 0.4 5 147 5 398 -4.6 10 563
Operatio 326 257 26.8 302 7.9 628 511 22.9 1 090
nal
EBITDA
Operatio 12.6 9.4 11.8 12.2 9.5 10.3
nal
EBITDA
margin,
%
Operatio 209 124 68.5 182 14.8 391 242 61.6 578
nal EBIT
Operatio 8.1 4.5 7.1 7.6 4.5 5.5
nal EBIT
margin,
%
Operatin 85 83 2.4 195 -56.4 280 104 169.2 50
g profit
(IFRS)
Operatin 3.3 3.0 7.6 5.4 1.9 0.5
g margin
(IFRS),
%
Profit 145 57 154.4 106 36.8 251 113 122.1 350
before
tax
excl.
NRI
Profit/l 39 24 62.5 130 -70.0 169 -11 n/m -189
oss
before
tax
Net 1 21 -95.2 100 -99.0 101 5 n/m -71
profit/
loss for
the
period
Capital 173 184 -6.0 101 71.3 274 314 -12.7 760
expendi
ture
Deprecia 134 154 -13.0 139 -3.6 273 310 -11.9 603
tion and
impairm
ent
charges
excl.
NRI
Operatio 9.8 5.4 8.6 9.2 5.3 6.5
nal
ROCE, %
Earnings 0.13 0.05 0.09 0.22 0.12 0.40
per
share
(EPS)
excl.
NRI,
EUR
EPS 0.00 0.02 0.13 0.13 0.00 -0.07
(basic)
, EUR
Cash 0.30 0.25 0.27 0.57 0.52 1.16
earning
s per
share
(CEPS)
excl.
NRI,
EUR
CEPS, 0.19 0.21 0.31 0.50 0.44 1.21
EUR
Return 0.1 1.5 7.5 3.8 0.2 -1.3
on
equity
(ROE),
%
Debt/equ 0.66 0.68 0.60 0.66 0.68 0.61
ity
ratio
Net 2.8 3.2 2.8 2.8 3.2 2.9
debt/la
st
twelve
months'
operati
onal
EBITDA
Equity 6.46 6.67 6.70 6.46 6.67 6.61
per
share,
EUR
Equity 40.3 38.7 39.7 40.3 38.7 39.2
ratio,
%
Average 29 704 29 357 1.2 28 813 3.1 29 162 29 011 0.5 28 921
number
of
employe
es
Average
number
of
shares
(millio
n)
periodic 788.6 788.6 788.6 788.6 788.6 788.6
cumulati 788.6 788.6 788.6 788.6 788.6 788.6
ve
cumulati 789.5 788.6 789.6 789.0 788.6 788.6
ve,
diluted
TRI 11.0 13.4 -17.9 13.8 -20.3 12.4 15.4 -19.5 14.0
rate*
LTA 4.3 5.7 -24.6 5.8 -25.9 5.1 6.7 -23.9 6.0
rate*
--------------------------------------------------------------------------------
* Data for the comparative periods in 2013 have been restated following
adoption of the new IFRS 10 Consolidated Financial Statements, IFRS 11 Joint
Arrangements and IFRS 12 Disclosure of Interests in Other Entities standards.
Data for the comparative periods have been restated in all tables affected. For
further details, see Basis of Preparation on page 16.
Operational EBIT comprises the operating profit excluding NRI and fair
valuations of the segments and Stora Enso's share of the operating profit
excluding NRI and fair valuations of its equity accounted investments (EAI).
Fair valuations and non-operational items include equity incentive schemes,
synthetic options net of realised and open hedges, CO2 emission rights and
valuations of biological assets and the Group's share of tax and net financial
items of EAI.
NRI = Non-recurring items. These are exceptional transactions that are not
related to normal business operations. The most common non-recurring items are
capital gains, additional write-downs or reversals of write-downs, provisions
for planned restructuring and penalties. Non-recurring items are normally
disclosed individually if they exceed one cent per share.
TRI (Total recordable incident) rate = number of incidents per one million
hours worked.
LTA (Lost-time accident) rate = number of lost-time accidents per one million
hours worked.
Stora Enso Deliveries and Production
Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
% % 14 13 %
Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14-
Q1-Q2/
13
--------------------------------------------------------------------------------
Paper and 2 363 2 508 -5.8 2 395 -1.3 4 758 5 004 -4.9 9 898
board
deliveries
(1 000
tonnes)
Paper and 2 352 2 496 -5.8 2 458 -4.3 4 810 5 015 -4.1 9 911
board
production
(1 000
tonnes)
Wood 1 265 1 345 -5.9 1 159 9.1 2 424 2 492 -2.7 4 930
products
deliveries
(1 000 m3)
Market pulp 299 303 -1.3 310 -3.5 609 591 3.0 1 180
deliveries
(1 000
tonnes)*
Corrugated 272 271 0.4 262 3.8 534 531 0.6 1 086
packaging
deliveries
(million
m2)
--------------------------------------------------------------------------------
Reconciliation of Operational Profitability
EUR million Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
% % 14 13 %
Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14-
Q1-Q2/
13
--------------------------------------------------------------------------------
Operational 326 257 26.8 302 7.9 628 511 22.9 1 090
EBITDA
Equity 17 21 -19.0 19 -10.5 36 41 -12.2 91
accounted
investments
(EAI),
operational
*
Depreciation -134 -154 13.0 -139 3.6 -273 -310 11.9 -603
and
impairment
excl. NRI
-------------------------------------------------------------------
Operational 209 124 68.5 182 14.8 391 242 61.6 578
EBIT
Fair -18 -8 -125.0 -11 -63.6 -29 -14 -107.1 11
valuations
and
non-operati
onal items**
Non-recurrin -106 -33 -221.2 24 n/m -82 -124 33.9 -539
g items
-------------------------------------------------------------------
Operating 85 83 2.4 195 -56.4 280 104 169.2 50
Profit
(IFRS)
--------------------------------------------------------------------------------
* Group's share of operational EBIT of equity accounted investments (EAI).
** Fair valuations and non-operational items include equity incentive
schemes, synthetic options net of realised and open hedges, CO2 emission rights
and valuations of biological assets and Group's share of tax and net financial
items of EAI.
SECOND QUARTER 2014 RESULTS (compared with second quarter 2013)
Breakdown of Sales Change Q2/2013 to Q2/2014
Sales
-----------------------------------------
Q2/13, EUR million 2 726
-----------------------------------------
-----------------------------------------
Price and mix, % -
Currency, % -1
Volume, % -1
Other sales*, % -1
-----------------------------------------
Total before structural changes, % -3
Structural changes**, % -2
Total, % -5
-----------------------------------------
Q2/14, EUR million 2 579
-----------------------------------------
* Wood, energy, paper for recycling, by-products etc.
** Asset closures, major investments, divestments and acquisitions
Group sales at EUR 2 579 million were EUR 147 million lower than a year ago
partly due to structural changes in Printing and Reading. Operational EBIT at
EUR 209 million was EUR 85 million higher than a year ago due to the successful
fixed cost reduction programme clearly exceeding the target and lower variable
costs. The operational EBIT margin in the quarter was 8.1% (4.5%).
Slightly higher sales prices in local currencies, mainly in Renewable
Packaging, increased operational EBIT by EUR 12 million. Lower volumes, mainly
due to paper machine closures, decreased operational EBIT by EUR 16 million.
Paper and board production was curtailed by 8% (9%) to manage inventories.
Variable costs decreased by EUR 34 million due to good operational efficiency
and lower energy prices. Completion of the streamlining and structure
simplification programme reduced fixed costs by EUR 37 million. Depreciation
was EUR 20 million lower, mainly due to fixed asset impairments recorded in the
fourth quarter of 2013.
The average number of employees in the second quarter was 1 750 lower in
Europe, excluding the increase of 1 000 people due to the Efora acquisition in
2013, and 1 170 higher in China than a year earlier. The average number of
employees in the second quarter of 2014 was 350 higher than a year earlier at
29 700.
The Group recorded non-recurring items (NRI) with a negative net impact of
approximately EUR 106 million on operating profit and a positive impact of
approximately EUR 1 million on income tax in its second quarter 2014 results.
The NRI include a EUR 81 million cost related to planned permanent closure of
the loss-making Corbehem Mill in France, based on the French legal
requirements. The total operational EBITDA of the unit since Stora Enso began
seeking a purchaser for the mill in October 2012, prior to the planned closure,
was negative EUR 34 million. The other NRI are a cost due to the ongoing
disposal of Uetersen Mill in Germany (EUR 34 million), a cost due to
termination of an agreement in logistics operations (EUR 9 million) and an
income due to land swap arrangements in the Group's equity accounted investment
Bergvik Skog (EUR 18 million).
Net financial expenses at EUR 46 million were EUR 13 million lower than a year
ago. Net interest expenses were EUR 8 million lower due to lower debt levels
and higher interest income from deposits in China. The fair valuation of
interest rate derivatives had a negative impact of EUR 16 million. The net
foreign exchange impact in the second quarter in respect of cash,
interest-bearing assets and liabilities and related hedges was a gain of EUR 15
(loss EUR 22) million. A gain of EUR 12 million from the sale of a loan
receivable from the equity accounted investments Bergvik Skog and Tornator was
recorded in the second quarter of 2013.
Breakdown of Capital Employed Change 30 June 2013 to 30 June 2014
Capital
Employed
--------------------------------------------------------------------
30 Jun 13, EUR million 8 906
-------------------------------------------------------------------
Capital expenditure less depreciation 142
Impairments and reversal of impairments -581
Valuation of biological assets 185
Available-for-sale: operative (mainly PVO) 97
Equity accounted investments 138
Net liabilities in defined benefit plans 62
Operative working capital and other interest-free items, net -226
Net tax liabilities 38
Translation difference -216
Other changes 35
-------------------------------------------------------------------
30 Jun 14, EUR million 8 580
-------------------------------------------------------------------
The operational return on capital employed was 9.8% (5.4%). Excluding the
ongoing strategic investments in Biomaterials and Renewable Packaging the
operational return on capital employed would have been 12.7% (6.7%).
January-June 2014 Results (compared with January-June 2013)
Sales at EUR 5 147 million were EUR 251 million lower year-on-year mainly due
to structural changes in Printing and Reading. Operational EBIT increased by
EUR 149 million to EUR 391 million due to clearly lower variable and fixed
costs. Depreciation was EUR 40 million lower due to fixed asset impairments
recorded in the fourth quarter of 2013, but this impact was offset by lower
paper sales volumes.
SECOND QUARTER 2014 RESULTS (compared with first quarter 2014)
Sales were EUR 11 million higher at EUR 2 579 million and operational EBIT was
EUR 27 million higher at EUR 209 million, as anticipated. Variable costs,
especially for energy, decreased seasonally by EUR 18 million due to better
operating efficiency and lower prices. Fixed costs were unchanged. Sales prices
in local currencies were seasonally higher in wood products, and sales volumes
were higher in packaging products but lower in paper products.
Capital Structure
EUR million 30 Jun 14 31 Mar 14 31 Dec 13 30 Jun 13
--------------------------------------------------------------------------------
Operative fixed assets* 6 856 6 770 6 824 7 130
Equity accounted investments 1 068 980 1 013 982
Operative working capital, net 1 340 1 337 1 179 1 518
Non-current interest-free items, net -543 -467 -466 -535
-------------------------------------------
Operating Capital Total 8 721 8 620 8 550 9 095
Net tax liabilities -141 -101 -86 -189
-------------------------------------------
Capital Employed 8 580 8 519 8 464 8 906
-------------------------------------------
Equity attributable to owners of the 5 093 5 286 5 213 5 261
Parent
Non-controlling interests 151 68 60 88
Net interest-bearing liabilities 3 336 3 165 3 191 3 557
-------------------------------------------
Financing Total 8 580 8 519 8 464 8 906
--------------------------------------------------------------------------------
* Operative fixed assets include property, plant and equipment, goodwill,
biological assets, emission rights, available-for-sale operative shares and
other intangible assets.
Financing for Second Quarter 2014 (compared with first quarter 2014)
Total unutilised committed credit facilities were unchanged at EUR 700 million,
and cash and cash equivalents net of overdrafts remained strong at EUR 1 552
million, which is EUR 464 million less than for the previous quarter. In
addition, Stora Enso has access to various long-term sources of funding up to
EUR 1 050 (EUR 1 100) million. The decrease in cash and cash equivalents during
the quarter is due mainly to repayment of bond notes with a nominal value of
EUR 258 million, payment of EUR 237 million of dividend, acquisition of
additional shares in the equity accounted investment Bergvik Skog for EUR 97
million, acquisition of the US-based biotechnology company Virdia for EUR 17
million and capital expenditure for the quarter of EUR 162 million, partly
offset by cash flow generation from operating activities.
The ratio of net debt to the last twelve months' operational EBITDA was 2.8
(2.8).
The net debt/equity ratio at 30 June 2014 was 0.66 (0.60). The increase is
primarily due the EUR 237 million dividend payment made during the second
quarter of 2014 and EUR 97 million spent on acquisition of additional Bergvik
Skog shares. This transaction underlines Stora Enso's long-term engagement in
Bergvik Skog and the importance to Stora Enso of securing stable access to wood
raw material near the Swedish mills.
Cash Flow
EUR million Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
% % 14 13 %
Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14- Q1-Q2/
13
--------------------------------------------------------------------------------
Operational 326 257 26.8 302 7.9 628 511 22.9 1 090
EBITDA
NRI on -111 -43 -158.1 -18 n/m -129 -94 -37.2 37
operational
EBITDA
Dividends 17 7 142.9 - 100.0 17 18 -5.6 38
received
from equity
accounted
investments
Other 10 8 25.0 6 66.7 16 -11 245.5 -178
adjustments
Change in 46 88 -47.7 -138 133.3 -92 19 n/m 265
working
capital
-------------------------------------------------------------------
Cash Flow 288 317 -9.1 152 89.5 440 443 -0.7 1 252
from
Operations
Cash spent -162 -170 4.7 -132 -22.7 -294 -342 14.0 -740
on fixed
and
biological
assets
Acquisitions -97 -30 -223.3 - -100.0 -97 -30 -223.3 -31
of equity
accounted
investments
-------------------------------------------------------------------
Cash Flow 29 117 -75.2 20 45.0 49 71 -31.0 481
after
Investing
Activities
--------------------------------------------------------------------------------
Cash Flow for Second Quarter 2014
Second quarter 2014 cash flow after investing activities remained positive at
EUR 29 million. Inventories decreased by EUR 60 million, receivables decreased
by EUR 40 million and payables decreased by EUR 100 million. New restructuring
provisions decreased working capital by EUR 70 million. Payments related to the
previously announced restructuring provisions were EUR 20 million.
Capital Expenditure for January-June 2014
Additions to fixed and biological assets in the first half of 2014 totalled EUR
274 million, which is equal to depreciation in the same period. Investments in
fixed assets and biological assets had a cash outflow impact of EUR 294 million
in the first half of 2014.
The main projects ongoing during the first half of 2014 were Montes del Plata
(MdP) Pulp Mill in Uruguay and the board machine project in Guangxi, China.
Additional capital expenditure related to MdP of approximately EUR 30 million
is expected in addition to the EUR 95 million already spent in the first half
of 2014.
Capital Expenditure, Equity Injections and Depreciation Forecast 2014*
EUR million Forecast 2014
----------------------------------
Capital expenditure 760-840
Equity injections 30
--------------
Total 790-870
Depreciation 550-580
----------------------------------
* Capital expenditure includes approximately EUR 300 million for the project in
Guangxi, China. These figures do not include the acquisition of Bergvik Skog
and Virdia shares.
Streamlining and Structure Simplification Programme
The streamlining and structure simplification programme announced in April 2013
has been completed. The annualised cost savings of EUR 244 million versus 2012
cost base exceeded the original target by EUR 44 million or 22%. The targeted
EUR 200 million savings were already reached during the first quarter of 2014,
one quarter earlier than originally planned.
Due to the programme, about 2 270 employees left the Group by the end of the
second quarter of 2014.
Near-term Outlook
In the third quarter of 2014 sales are forecast to be roughly similar to the
EUR 2 579 million and operational EBIT similar to or slightly lower than the
strong EUR 209 million in the second quarter of 2014. All segments are
scheduled to have maintenance shutdowns during the third quarter. The
maintenance impact in the third quarter of 2014 is expected to be approximately
EUR 30 million higher than in the second quarter.
SEGMENTS IN SECOND QUARTER 2014 (compared with second quarter 2013)
Printing and Reading
Printing and Reading, part of the Printing and Living Division, is a
world-class responsible supplier of paper from renewable sources for print
media and office use. Its wide offering serves publishers, retailers, printing
houses, merchants, converters and office suppliers, among others. Printing and
Reading produces newsprint, book paper, SC paper, coated paper and office
paper.
EUR million Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
% % 14 13 %
Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14-
Q1-Q2/
13
--------------------------------------------------------------------------------
Sales 970 1 101 -11.9 999 -2.9 1 969 2 224 -11.5 4 319
Operational 83 51 62.7 85 -2.4 168 123 36.6 290
EBITDA
Operational 8.6 4.6 8.5 8.5 5.5 6.7
EBITDA
margin, %
Operational 36 -17 n/m 35 2.9 71 -15 n/m 34
EBIT
% of sales 3.7 -1.5 3.5 3.6 -0.7 0.8
Operational 7.1 -2.4 6.8 7.1 -1.1 1.4
ROOC, %*
Paper 1 483 1 652 -10.2 1 523 -2.6 3 006 3 336 -9.9 6 525
deliveries,
1 000 t
Paper 1 466 1 641 -10.7 1 580 -7.2 3 046 3 324 -8.4 6 501
production,
1 000 t
--------------------------------------------------------------------------------
* Operational ROOC = 100% x Operational EBIT/Average operating capital
-- Operational EBIT improved by EUR 53 million as clearly lower fixed costs
due to the structure simplification programme and lower variable costs due
to enhanced operational efficiency partly offset lower paper volumes due to
machine closures. Depreciation was EUR 20 million lower due to fixed asset
impairments recorded in the fourth quarter of 2013.
-- The social plan for Corbehem Mill in France has been accepted and it is
planned to close the mill.
-- As announced in May, Stora Enso is divesting its Uetersen specialty and
coated fine paper mill in Germany to Brigl & Bergmeister, an Austrian
specialty paper producer. The transaction will be delayed from the original
target of mid-July due the regulatory approval process.
-- There will be maintenance stoppages at Oulu and Kvarnsveden mills and an
extensive maintenance stoppage at Veitsiluoto Mill in the third quarter.
Markets
Produc Market Demand Q2/14 Demand Q2/14 Price Q2/14 Price Q2/14
t compared with compared with compared with compared with
Q2/13 Q1/14 Q2/13 Q1/14
--------------------------------------------------------------------------------
Paper Europe Slightly weaker Slightly weaker Stable Stable
--------------------------------------------------------------------------------
Biomaterials
Biomaterials offers a variety of pulp grades to meet the demands of paper,
board and tissue producers. Pulp made from renewable resources in a sustainable
manner is an excellent raw material with many different end uses. Biomaterials
comprises mainly plantations, the Group's joint operations Veracel and Montes
del Plata pulp mills, Nordic stand-alone pulp mills, the Pulp Competence Centre
and Biorefinery.
EUR Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
million** % % 14 13 %
Q2/14- Q2/14- Q1-Q2/ Q2/13 Q1/14 14-
Q1-Q2/
13
--------------------------------------------------------------------------------
Sales 243 266 -8.6 263 -7.6 506 528 -4.2 1 033
Operational 28 32 -12.5 38 -26.3 66 74 -10.8 153
EBITDA
Operational 11.5 12.0 14.4 13.0 14.0 14.8
EBITDA
margin, %
Operational 10 14 -28.6 21 -52.4 31 36 -13.9 77
EBIT
% of sales 4.1 5.3 8.0 6.1 6.8 7.5
Operational 1.8 2.6 4.0 2.9 3.5 3.8
ROOC, %*
Pulp 462 461 0.2 503 -8.2 965 936 3.1 1 864
deliveries,
1 000 t
--------------------------------------------------------------------------------
* Operational ROOC = 100% x Operational EBIT/Average operating capital
** Data for the comparative periods have been restated. For further details,
see Basis of Preparation on page 16.
-- Operational EBIT was EUR 4 million lower due to Montes del Plata start-up
costs and increased activity in Biorefinery area.
-- Montes del Plata Pulp Mill in Uruguay started up in early June, and the
first deliveries to customers were shipped in mid-July. In 2014 Stora
Enso's share of its production is expected to be 300 000-350 000 tonnes,
about 50 000 tonnes less than previously anticipated due to the regulatory
approval process.
-- In June 2014 Stora Enso acquired 100% of the US-based company Virdia, a
leading developer of extraction and separation technologies for conversion
of cellulosic biomass into highly refined sugars and lignin.
-- Stora Enso has concluded the divestment of its 1 350 hectares of
plantations in Thailand. The process of selling these lands started in 2011
and was finalised in June 2014.
-- There will be a maintenance stoppage at Skutskär Pulp Mill during the third
quarter.
Markets
Product Market Demand Q2/14 Demand Q2/14 Price Q2/14 Price Q2/14
compared with compared with compared with compared with
Q2/13 Q1/14 Q2/13 Q1/14
--------------------------------------------------------------------------------
Softwood Europe Stable Stable Higher Stable
pulp
Hardwood Europe Slightly Slightly Lower Slightly lower
pulp stronger stronger
--------------------------------------------------------------------------------
Building and Living
Building and Living, part of the Printing and Living Division, provides
wood-based innovations and solutions for everyday living and housing needs. The
product range covers all areas of urban construction, from supporting
structures to interior design and environmental construction. Further-processed
products include massive wood elements and housing modules, wood components and
pellets, in addition to a variety of sawn timber goods.
EUR million Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
% % 14 13 % Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14-
Q1-Q2/
13
--------------------------------------------------------------------------------
Sales 490 500 -2.0 445 10.1 935 941 -0.6 1 867
Operational 47 39 20.5 30 56.7 77 52 48.1 115
EBITDA
Operational 9.6 7.8 6.7 8.2 5.5 6.2
EBITDA
margin, %
Operational 37 28 32.1 20 85.0 57 32 78.1 75
EBIT
% of sales 7.6 5.6 4.5 6.1 3.4 4.0
Operational 27.1 20.0 15.3 21.1 11.5 13.9
ROOC, %*
Deliveries, 1 221 1 303 -6.3 1 116 9.4 2 337 2 416 -3.3 4 776
1 000 m3
--------------------------------------------------------------------------------
* Operational ROOC = 100% x Operational EBIT/Average operating capital
-- Highest quarterly operational EBIT since second quarter of 2007 driven by
clearly lower fixed costs due to the structure simplification programme.
-- There will be maintenance stoppages at several sawmills during the third
quarter.
Markets
Product Market Demand Q2/14 Demand Q2/14 Price Q2/14 Price Q2/14
compared with compared with compared with compared with
Q2/13 Q1/14 Q2/13 Q1/14
--------------------------------------------------------------------------------
Wood Europe Stable Significantly Slightly Slightly
product stronger higher higher
s
--------------------------------------------------------------------------------
Renewable Packaging
Renewable Packaging offers fibre-based packaging materials and innovative
packaging solutions for consumer goods and industrial applications. Renewable
Packaging operates throughout the value chain, from pulp production to
production of materials and packaging, and recycling. It comprises three
business units: Consumer Board, Packaging Solutions and Packaging Asia.
EUR million Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
% % 14 13 %
Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14-
Q1-Q2/
13
--------------------------------------------------------------------------------
Sales 849 835 1.7 823 3.2 1 672 1 655 1.0 3 272
Operational 166 129 28.7 149 11.4 315 248 27.0 522
EBITDA
Operational 19.6 15.4 18.1 18.8 15.0 16.0
EBITDA
margin, %
Operational 114 77 48.1 92 23.9 206 145 42.1 318
EBIT
% of sales 13.4 9.2 11.2 12.3 8.8 9.7
Operational 18.3 12.7 15.0 16.6 12.2 13.3
ROOC, %*
Paper and 880 856 2.8 872 0.9 1 752 1 668 5.0 3 373
board
deliveries,
1 000 t
Paper and 886 855 3.6 878 0.9 1 764 1 691 4.3 3 410
board
production,
1 000 t
Corrugated 272 271 0.4 262 3.8 534 531 0.6 1 086
packaging
deliveries,
million m2
Corrugated 266 267 -0.4 257 3.5 523 525 -0.4 1 057
packaging
production,
million m2
--------------------------------------------------------------------------------
* Operational ROOC = 100% x Operational EBIT/Average operating capital
-- Improved operational efficiency, especially in Consumer Board, resulted in
record production and clearly lower variable costs. Fixed costs were
reduced by the structure simplification programme and sales prices in local
currencies were slightly higher.
-- Stora Enso is investing approximately EUR 110 million in converting the
Varkaus Mill fine paper machine in Finland to produce virgin-fibre-based
containerboard with start-up scheduled during the fourth quarter of 2015.
-- Consumer board machine investment in Guangxi, China proceeding as planned.
Over 90% of the levelling work completed. Board machine expected to be
operational in early 2016, as previously announced.
-- There will be maintenance stoppages at Imatra, Inkeroinen and Heinola mills
during the third quarter.
Markets
Product Market Demand Q2/14 Demand Q2/14 Price Q2/14 Price Q2/14
compared with compared compared compared
Q2/13 with with with
Q1/14 Q2/13 Q1/14
--------------------------------------------------------------------------------
Consumer Europe Stable Stable Stable Stable
board
Corrugated Europe Stable Stable Slightly Stable
packaging lower
--------------------------------------------------------------------------------
Other
The segment Other includes the Nordic forest equity accounted investments,
Stora Enso's shareholding in Pohjolan Voima, operations supplying wood to the
Nordic mills and Group shared services and administration.
EUR million Q2/14 Q2/13 Change Q1/14 Change Q1-Q2/ Q1-Q2/ Change 2013
% % 14 13 %
Q2/14- Q2/14- Q1-Q2/
Q2/13 Q1/14 14-
Q1-Q2/ 13
--------------------------------------------------------------------------------
Sales 654 685 -4.5 689 -5.1 1 343 1 406 -4.5 2 690
Operational 2 6 -66.7 - n/m 2 14 -85.7 10
EBITDA
Operational 0.3 0.9 - 0.1 1.0 0.4
EBITDA
margin, %
Operational 12 22 -45.5 14 -14.3 26 44 -40.9 74
EBIT
% of sales 1.8 3.2 2.0 1.9 3.1 2.8
--------------------------------------------------------------------------------
-- Operational EBIT declined due to the divestment of Thiele Kaolin, winding
down of the captive insurance company and lower earnings from wood supply
due to lower volumes and slightly higher costs.
-- In May Stora Enso acquired further shares in Bergvik Skog for EUR 97
million to increase its shareholding in the company to 49%.
GLOBAL RESPONSIBILITY IN SECOND QUARTER 2014 (compared with second quarter 2013)
--------------------------------------------------------------------------------
Stora Enso introduces quarterly Global Responsibility reporting to increase
transparency and to underline the fact that financial and corporate
responsibility performance are strongly integrated in Stora Enso's everyday
operations. The reporting will be developed over time.
People and Ethics
Health and Safety
Q2/14 Q2/13 Q1/14 2013
----------------------------------------------------------------
Total Recordable Incidents (TRI) rate 11.0 13.4 13.8 14.0
Lost-Time Accident (LTA) rate 4.3 5.7 5.8 6.0
----------------------------------------------------------------
TRI (Total recordable incident) rate = number of incidents per one million
hours worked. LTA (Lost-time accident) rate = number of lost-time accidents per
one million hours worked. The Group's target is to have TRI rate below 5.0 by
the end of 2015.
In Stora Enso's investment project in Guangxi, China, the key focus is on
contractors in forestry operations and at the construction site. A total of
nine lost-time accidents occurred for contractor employees in the forestry
operations during the second quarter of 2014. The levelling works at the board
mill construction site have been progressing since the third quarter of 2013
with zero lost-time accidents.
Human Rights
Stora Enso commenced a Group-wide Human Rights Assessment with the Danish
Institute for Human Rights (DIHR) during the first half of 2014 that covers all
production units, wood supply operations, their supply chain management and
relations with local communities. The assessments are expected to be ready
Group-wide by the end of 2014.
During the second quarter of 2014 more than 80 Stora Enso employees
participated in training workshops on Business and Human Rights. Stora Enso's
operations in Guangxi, China, also initiated in-depth human rights issues
mapping with DIHR.
In early July 2014 Stora Enso signed a collaboration agreement with Save the
Children to strengthen the Group's approach to ensure the rights of children
and young workers which may be affected by Stora Enso's operations and their
supply chains especially in the high risk markets. This agreement is the first
agreement of the collaboration between Stora Enso and Save the Children, with
the intention of continuing collaboration in the future.
Ethics and Compliance
During the second quarter of 2014 Stora Enso received a review from Clifford
Chance on the Group's policies and procedures under its business ethical
compliance programme. The Group's documented ethical compliance policies and
procedures were ranked excellent and no substantive gaps were found.
In March 2014 Stora Enso become a member of the Steering Committee of Business
Principles for Countering Bribery, a multi-stakeholder initiative led by
Transparency International.
Responsible Sourcing
Mitigating Child Labour in Pakistan
Bulleh Shah Packaging, Stora Enso's 35% owned equity accounted investment in
Pakistan, conducted 123 on-site audits at its suppliers' premises during the
first half of 2014. During these audits seven child labour cases and five young
worker cases were identified in the direct suppliers' operations of old
corrugated containers (OCC), based on the ILO definitions.
Bulleh Shah Packaging has been able to remedy the situation of six of these
twelve individuals by enabling them to attend school, maintaining dialogue with
them and their guardians, ensuring that their families receive monetary
compensation for the loss of their child's earnings, and conducting follow-up
procedures with due care. As of the end of the second quarter of 2014 the
situation of the rest of the identified children is either still under dialogue
with parents or social engagement was not possible as the families had moved
for personal reasons.
All the direct suppliers of OCC and wheat straw to Bulleh Shah Packaging have
signed a commitment to implement its supplier Code of Conduct, which is in line
with Stora Enso's Global Responsibility approach, as a part of the purchasing
contracts. The supplier audits were conducted by Bulleh Shah Packaging's
internal team of auditors together with external assurance provider SGS.
During the second quarter of 2014 the audit focus moved to the suppliers of
wheat straw raw material due to the harvesting season. The audit scope is
limited to suppliers and sub-suppliers whose employees collect wheat straw from
the fields. No child labour cases were identified during the wheat straw
supplier audits within the audit scope. Wheat farming in Pakistan involves
children working with their families at farms. Stora Enso recognises its
responsibility to communities in these supply chains. Bulleh Shah Packaging's
approach to this societal problem is to work together with local government,
non-governmental organisations and organisations with similar agricultural
supply chains to find long-term mitigation solutions in communities. Stora Enso
has agreed with Yunus Center AIT, Thailand, to establish three Mobile Clinics
in Bulleh Shah Packaging's operational area in order to support education,
social services and well-being of the children affected by the supply chains.
As announced at Stora Enso's Annual General Meeting in April 2014, all supplier
relationships in the used cartonboard (UCB) supply chain were terminated in
April 2014. Bulleh Shah Packaging has continued to support children and their
families who collect waste from dump sites despite terminating supplier
relationships. In April 2014 Bulleh Shah Packaging set up a school for children
aged 6-14 years. Early during the second quarter 55 children had moved from
waste collection work to school. In the beginning of the school term in August
next approximately 150 children are expected to start school and the rest of
the children are planned to start school by the end of the year. The aim is to
involve more families in this educational support in the third and fourth
quarters of 2014.
Other Issues
Stora Enso's updated Supplier Code of Conduct came into effect on 1 July 2014.
During the first half of 2014 Chennai Mill in India commenced an awareness
building programme for all the mill's 82 direct suppliers. It includes visits
to suppliers' premises with a focus on communicating Stora Enso's
sustainability requirements and creating awareness of Stora Enso's updated
Supplier Code of Conduct.
Forest and Land Use
Correction of Land Leasing Contracts in Guangxi, China
Stora Enso's operations in Guangxi advanced in the legal screening of land
lease contracts on social lands that are leased from village collectives and
households. Stora Enso leases a total of 90 200 hectares of land in various
regions of Guangxi of which 36% is social land.
Social Forestlands Leased by Stora Enso in 30 Jun 30 Jun 30 Mar 31 Dec
Guangxi 14 13 14 13
--------------------------------------------------------------------------------
Social forestland leased, ha 32 800 33 015 32 799 32 990
Leased area without contractual defects*, ha 15 200 12 899 14 498 14 366
Lease contracts without contractual defects, 58% 50% 56% 54%
% of all contracts
--------------------------------------------------------------------------------
*In the contracts without defects the ownership of land is clear or solved, and
contracting procedure is proven to be legal, authentic and valid. The contract
correction process includes a desktop documentation review, field
investigations, legal and operational risk analysis, stakeholder consultations,
the collection of missing documentation and the signing of new agreements or
amendments directly with the villages or households concerned, or in some cases
contract termination.
Creating Shared Value in Guangxi, China
The implementation of Creating Shared Value initiatives started in co-operation
with the international non-profit consulting firm FSG.
1. The Contractor Development Project focuses on the capacity building of
selected local contractors to help to improve the safety, quality and
efficiency of operations.
2. A Transportation Development Study focuses on the development of pilot
routes with improved safety and logistical solutions.
3. The Water Stewardship Project undertaken jointly with Kemira in Guangxi,
launched in November 2013, is proceeding as planned aiming at improving the
quality and quantity of water used by villagers. By the end of the second
quarter of 2014 the fieldwork of the baseline study was completed. Pilot
projects will be launched during the third quarter of 2014.
Dialogue with Landless People's Social Movements in Bahia, Brazil
Stora Enso's joint operation Veracel in Brazil continued to engage in dialogues
with the six social landless movements in Bahia. As part of this dialogue the
Sustainable Settlement Initiative was launched in 2012, aiming to provide
farming land, and technical and educational support to provide income for
hundreds of families. This initiative is facilitated by the Government of the
State of Bahia, and conducted in co-operation with the social landless
movements, the National Institute of Colonisation and Agrarian Reform (INCRA)
and Veracel.
During the second quarter of 2014 the Agricultural College of the University of
São Paulo (Esalq-USP) completed an assessment of the areas that would form the
sustainable settlements. Through this initiative, the social movements have
pledged to leave areas occupied since July 2011, while Veracel will not seek to
repossess areas occupied before that date.
The initiative involves a total of 16 500 hectares of Veracel's lands for the
settlements. INCRA has initiated the inspection of these areas and related land
transfers. The land transfers will be compensated to Veracel by INCRA as set
out in the Brazilian legislation.
At the end of the second quarter of 2014, an additional 1 873 hectares of
Veracel's land were occupied by social landless movements that are not part of
the Sustainable Settlement Initiative. Repossession of these areas is being
sought through legal processes.
Developments in Forest Certification
In May 2014 Stora Enso's equity accounted investment Bergvik Skog's FSC®1
certification for Siljan District was fully reinstated after Bergvik Skog had
conducted corrective and preventive actions requested by the certificate
provider.
In Brazil, Stora Enso's joint operation Veracel and its partner farmers are
continuing to pioneer the concept of group forest certification. By the end of
the second quarter of 2014, FSC and CERFLOR (PEFC) forest certification had
been obtained by 81 farmers for a total area of 39 913 hectares.
1) Stora Enso Global Communications' FSC® trademark licence number is
FSC-N001919.
Short-term Risks and Uncertainties
The main short-term risks and uncertainties relate to the economic situation in
Europe, even though the overall economic situation has stabilised lately, and
the persistent imbalance in the European paper market. Potential further EU and
US sanctions on Russia and Russian counter actions due to the situation in
Ukraine could have a negative impact on Stora Enso's operations in Russia,
including wood exports.
Energy sensitivity analysis: the direct effect of a 10% increase in
electricity, heat, oil and other fossil fuel market prices would have a
negative impact of approximately EUR 13 million on operational EBIT for the
next twelve months, after the effect of hedges.
Wood sensitivity analysis: the direct effect of a 10% increase in wood prices
would have a negative impact of approximately EUR 186 million on operational
EBIT for the next twelve months.
Chemicals and fillers sensitivity: the direct effect of a 10% increase in
chemical and filler prices would have a negative impact of approximately EUR 60
million on operational EBIT for the next twelve months.
A decrease of energy, wood or chemical and filler prices would have the
opposite impact.
Foreign exchange rates sensitivity analysis for the next twelve months: the
direct effect on operational EBIT of a 10% strengthening in the value of the US
dollar, Swedish krona and British pound against the euro would be about
positive EUR 95 million, negative EUR 79 million and positive EUR 47 million
annual impact, respectively. Weakening of the currencies would have the
opposite impact. These numbers are before the effect of hedges and assuming no
changes occur other than a single currency exchange rate movement.
Second Quarter Events
In June Stora Enso's Pathfinders and Pathbuilders leadership development
programme received the 2014 EFMD Excellence in Practice Gold Award in the
category of Organisational Development from the European Foundation for
Management Development. The award was granted jointly to Stora Enso and IMD
Business School in Lausanne, Switzerland, the Group's partner in running the
programme.
Legal Cases
Latin American Cases
Veracel
Fibria and Stora Enso each own 50% of Veracel, the joint ownership being
governed by a shareholder agreement. In May 2014 Fibria initiated arbitration
proceedings against Stora Enso claiming that Stora Enso was in breach of
certain provisions of the shareholder agreement. Fibria has indicated that the
interest of the case is approximately USD 50 million (EUR 35 million). Stora
Enso denies any breach of contract and disputes the method of calculating the
interest of the case. No provisions have been made in Stora Enso's accounts for
this case.
On 11 July 2008 Stora Enso announced that a federal judge in Brazil had issued
a decision claiming that the permits issued by the State of Bahia for the
operations of Stora Enso's joint-operations company Veracel were not valid. The
judge also ordered Veracel to take certain actions, including reforestation
with native trees on part of Veracel's plantations and a possible BRL 20
million (EUR 7 million) fine. Veracel disputes the decision and has filed an
appeal against it. Veracel operates in full compliance with all Brazilian laws
and has obtained all the necessary environmental and operating licences for its
industrial and forestry activities from the competent authorities. In November
2008 a Federal Court suspended the effects of the decision. No provisions have
been recorded in Veracel's or Stora Enso's accounts for the reforestation or
the possible fine.
In previous periods Stora Enso has reported on a dispute with a supplier
involved in construction of Veracel Mill relating to certain tax issues. The
case was effectively concluded during the second quarter of 2014 following
legal and arbitration proceedings as well as a settlement expensed by Veracel.
Although formal acceptance by the Brazilian authorities is still pending, the
case will not be reported in future Interim Reviews.
Montes del Plata
During the second quarter of 2014, Celulosa y Energía Punta Pereira S.A.
(“CEPP”), a joint-operations company in the Montes del Plata group formed by
Stora Enso and Arauco, was notified of arbitration proceedings initiated
against it by Andritz Pulp Technologies Punta Pereira S.A., a subsidiary of
Andritz AG, claiming EUR 200 million. The arbitration relates to contracts for
the delivery, construction, installation, commissioning and completion by
Andritz of major components of the Montes del Plata pulp mill project located
at Punta Pereira in Uruguay. CEPP disputes the claims brought by Andritz and is
also actively pursuing claims of its own amounting to USD 110 million (EUR 80
million) against Andritz for breach by Andritz of its obligations under the
contracts. No provisions have been made in Montes del Plata's or Stora Enso's
accounts for these claims.
Class Action Lawsuits in USA
In previous periods Stora Enso has reported on class action lawsuits in the USA
relating to alleged antitrust violations. Following legal proceedings,
settlements have been reached in all substantive cases and without any
admission of guilt by Stora Enso, and the settlement amounts have been paid.
For the majority of these cases necessary approvals were also given by the
responsible court during the second quarter of 2014. The cases will therefore
not be reported in future Interim Reviews.
Legal Proceedings in Finland
In December 2009 the Finnish Market Court fined Stora Enso for competition law
infringements in the market for roundwood in Finland from 1997 to 2004. Stora
Enso did not appeal against the ruling. In March 2011 Metsähallitus of Finland
initiated legal proceedings against Stora Enso, UPM and Metsä Group claiming
compensation for damages allegedly suffered due to the competition law
infringements. The total claim against all the defendants amounts to
approximately EUR 160 million and the secondary claim against Stora Enso to
approximately EUR 85 million. In addition, Finnish municipalities and private
forest owners initiated similar legal proceedings. The total amount claimed
from all the defendants amounts to approximately EUR 35 million and the
secondary claims solely against Stora Enso to approximately EUR 10 million.
Stora Enso denies that Metsähallitus and other plaintiffs suffered any damages
whatsoever and will forcefully defend itself. In March 2014 the Helsinki
District Court dismissed 13 private forest owners' claims as time-barred. The
decision was appealed by all claimants. No provisions have been made in Stora
Enso's accounts for these lawsuits.
Kemijärvi Pulp Mill in Finland was permanently closed down in 2008. Following
court proceedings the Supreme Administrative Court in August 2013 gave its
decision concerning the water treatment lagoon in the environmental permit
related to the closure of Kemijärvi Pulp Mill. The Court ordered Stora Enso to
remove the majority of the sludge, and returned the case to the Regional State
Administrative Agency with an order to Stora Enso to deliver a new action plan
by the end of 2014 for removal of the majority of the sludge from the basin at
the Kemijärvi site. The Agency was also ordered to consider and evaluate the
costs to Stora Enso against the environmental benefits achievable if the Agency
later orders Stora Enso to remove the sludge. No provisions have been made in
Stora Enso's accounts for this case.
Changes in Organisational Structure and Group Management
On 30 June 2014 Stora Enso's Board of Directors appointed Karl-Henrik Sundström
as the new CEO of the Company as of 1 August 2014. He is currently Executive
Vice President and Head of the Stora Enso Printing and Living Division. He
replaces Jouko Karvinen, who announced in April 2014 a desire to leave his
position.
Stora Enso is postponing the reorganisation of its Renewable Packaging Division
that was announced on 21 March 2014 and was originally intended to be
implemented as of 1 July 2014 until the CEO transition has been completed.
Share Capital
On 30 June 2014 Stora Enso had 177 071 204 A shares and 611 548 783 R shares in
issue of which the Company held no A shares or R shares.
During the second quarter 15 000 A shares were converted into R shares. The
conversion was recorded in the Finnish Trade Register on 15 July 2014.
Changes in Shareholdings
In April-June 2014 the number of shares in Stora Enso Oyj held by Norges Bank
(The Central Bank of Norway) was once temporarily less than 5% of the paid-up
share capital and the number of shares in Stora Enso Oyj due to a share lending
transaction.
Decisions of Annual General Meeting on 23 April 2014
The AGM approved the proposal by the Board of Directors that the Company
distributes a dividend of EUR 0.30 per share for the year 2013.
The AGM approved a proposal that the current members of the Board of Directors,
Gunnar Brock, Anne Brunila, Elisabeth Fleuriot, Hock Goh, Birgitta Kantola,
Mikael Mäkinen, Juha Rantanen and Hans Stråberg shall be re-elected members of
the Board of Directors until the end of the following AGM and that Richard
Nilsson be elected a new member of the Board of Directors for the same term of
office.
The AGM approved a proposal by the Nomination Committee to keep the annual
remuneration for the Board of Directors unchanged.
The AGM approved a proposal that the current auditor Authorised Public
Accountants Deloitte & Touche Oy shall be re-elected auditor of the Company
until the end of the following AGM. The AGM approved a proposal that
remuneration for the auditor shall be paid according to invoice approved by
Financial and Audit Committee.
The AGM approved a proposal to appoint a Nomination Board to prepare proposals
concerning
(a) the number of members of the Board of Directors, (b) the members of the
Board of Directors, (c) the remuneration for the Chairman, Vice Chairman and
members of the Board of Directors and (d) the remuneration for the Chairman and
members of the committees of the Board of Directors.
Decisions by the Board of Directors
At its meeting held after the AGM, the Stora Enso Board of Directors re-elected
from among its members Gunnar Brock as its Chairman and Juha Rantanen as Vice
Chairman.
Birgitta Kantola (chairman), Gunnar Brock, Juha Rantanen and Mikael Mäkinen
were re-elected as members of the Financial and Audit Committee.
Gunnar Brock (chairman) and Hans Stråberg were re-elected and Juha Rantanen
elected as members of the Remuneration Committee.
Anne Brunila (chairman) and Birgitta Kantola were re-elected as members of the
Global Responsibility and Ethics Committee.
This release has been prepared in Finnish, English and Swedish. In case of
variations in the content between the versions, the English version shall
govern. This report is unaudited.
Helsinki, 21 July 2014
Stora Enso Oyj
Board of Directors
FINANCIALS
Basis of Preparation
This unaudited interim financial report has been prepared in accordance with
the accounting policies set out in International Accounting Standard 34 on
Interim Financial Reporting and in the Group's Annual Report for 2013.
Effects of Changes to IFRS 11 Joint Arrangements
Stora Enso adopted the new IFRS 10 Consolidated Financial Statements, IFRS 11
Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities as of
1 January 2014.
-- IFRS 10 Consolidated Financial Statements establishes principles for the
presentation and preparation of consolidated financial statements when an
entity controls one or more other entities. The standard provides
additional guidance on the process of determining possible control of an
entity, especially in challenging cases.
-- IFRS 11 Joint Arrangements introduces core principles for determining the
type of joint arrangement in which the party to the joint arrangement is
involved by assessing its rights and obligations and accounts for those
rights and obligations in accordance with that type of joint arrangement.
-- IFRS 12 Disclosure of Interests in Other Entities requires the disclosure
of information that enables users of financial statements to evaluate the
nature of, and risks associated with its interests in other entities as
well as the effects of the interests on the financial position, performance
and cash flow of the entity.
The changes affect the accounting treatment of Montes del Plata and Veracel,
which are now treated as joint operations and thus Stora Enso's 50% ownership
is consolidated with the proportionate line-by-line method. Montes del Plata is
controlled jointly with partner Arauco and Veracel is controlled jointly with
partner Fibria. Stora Enso's interpretation is that the contractual
arrangements in both joint operations provide the partners with the rights to
and obligations of the annual output of the relevant activities and
substantially all the economic benefits of the joint operations. Previously
these two entities were consolidated using the equity method.
The proportionate line-by-line consolidation of Stora Enso's 50% ownership of
Montes del Plata and Veracel has no effect on published operational EBIT, net
profit, equity or earnings per share. The proportionate line-by-line
consolidation affects all the primary statements in the consolidated financial
statements. The effects are summarised below:
-- Increase in operational EBITDA
-- Increase in property, plant and equipment, biological assets and net debt
-- Decrease in equity accounted investments
-- Increase in capital expenditure and decreases in equity injections to
equity accounted investments.
Historical figures have been restated according to the new IFRS 11 standard and
presented in the tables. The restated comparatives were presented in full in a
press release on 19 March 2014. Additionally, the Group has revised the
presentation of the cash flow statement to reflect better the underlying cash
movements. The table below summarises the effects of the IFRS 11 restatement.
--------------------------------------------------------------------------------
Restated Change As published
EUR million 2013 2012 2013 2012 2013 2012
--------------------------------------------------------------------------------
Sales 10 563 10 837 19 22 10 544 10 815
Operational EBITDA 1 090 1 154 46 60 1 044 1 094
Operational EBIT 578 630 - - 578 630
Operating profit (IFRS) 50 716 16 15 34 701
Net profit/loss for the period -71 490 - - -71 490
Capital expenditure 760 1 012 335 456 425 556
Depreciation and impairment 603 623 39 40 564 583
charges excl. NRI
Operational ROCE, % 6.5 6.9 -0.6 -0.4 7.1 7.3
Return on equity (ROE), % -1.3 8.3 - - -1.3 8.3
Debt/equity ratio 0.61 0.58 0.14 0.10 0.47 0.48
Net debt/last twelve months' 2.9 2.9 0.6 0.4 2.3 2.5
operational EBITDA
Equity ratio, % 39.2 41.0 -2.1 -1.8 41.3 42.8
Capital structure
Operative fixed assets 6 824 7 520 1 590 1 498 5 234 6 022
Equity accounted investments 1 013 941 -948 -1 024 1 961 1 965
Operative working capital, net 1 179 1 526 94 66 1 085 1 460
Non-current interest-free items, -466 -551 33 60 -499 -611
net
----------------------------------------------
Operating Capital Total 8 550 9 436 769 600 7 781 8 836
Net tax liabilities -86 -237 -12 -20 -74 -217
Capital Employed 8 464 9 199 757 580 7 707 8 619
----------------------------------------------
Equity attributable to owners of 5 213 5 770 - - 5 213 5 770
the Parent
Non-controlling interests 60 92 - - 60 92
Net interest-bearing liabilities 3 191 3 337 757 580 2 434 2 757
----------------------------------------------
Financing Total 8 464 9 199 757 580 7 707 8 619
--------------------------------------------------------------------------------
Other standard changes effective from 1 January 2014:
-- IAS 27 Consolidated and Separate Financial Statements was reissued and
consolidation requirements previously stated in IAS 27 Consolidated and
Separate Financial Statements have been revised and stated in IFRS 10
Consolidated Financial Statements.
-- IAS 28 Investments in Associates and Joint Ventures supersedes IAS 28
Investments in Associates and provides consequential amendments to the
standard in response to the new standard IFRS 11 Joint Arrangements.
-- IAS 36 Impairment of Assets amendment clarifies disclosure requirements
related to the recoverable amount of non-financial assets. The
clarification might have minor effects on disclosures of Stora Enso.
-- IAS 39 Financial Instruments: Recognition and Measurement amendment
clarifies that there is no need to discontinue hedge accounting if a
hedging derivative is novated, provided certain criteria are met. This
amendment is not relevant to the Group.
All figures in this Interim Review have been rounded to the nearest million,
unless otherwise stated.
Virdia Inc. acquisition
In the second quarter of 2014 Stora Enso acquired 100% of the shares of the
US-based company Virdia, a leading developer of extraction and separation
technologies for conversion of cellulosic biomass into highly refined sugars
and lignin. The acquisition of Virdia supports the vision of Stora Enso's
Biomaterials Division in becoming a significant player in biochemicals and
biomaterials. The technology enables more efficient extraction of different
valuable fractions of the biomass, allowing the possibility to develop and
commercialise cost-effective renewable solutions to address well-identified
market-driven needs.
The cash consideration was approximately EUR 17 million with additional
potential payouts totalling approximately EUR 21 million following completion
of specific technical and commercial milestones by 2017. Virdia's impact on
Stora Enso's 2014 sales and earnings is expected to be limited.
As the business was acquired near the end of the quarter, the fair values of
the acquired assets, liabilities and goodwill as at 30 June 2014 have been
determined on a provisional basis pending finalisation of the post-combination
review of the fair value of the acquired assets.
EUR million
------------------------------
Cash consideration 17
Contingent consideration 21
Total assets acquired 3
Total liabilities acquired 9
Provisional goodwill 44
------------------------------
Uetersen Mill Disposal
On 8 May 2014 Stora Enso announced that it had signed an agreement to divest
its Uetersen specialty and coated fine paper mill in Germany to Brigl &
Bergmeister, an Austrian specialty paper producer. Following the agreement, the
Group has recorded a EUR 34 million fixed asset impairment and inventory
write-down in its second quarter 2014 accounts. Uetersen Mill is not presented
as held for sale in the Group's 30 June 2014 statement of financial position
due to immaterial impact on the Group's financial statements.
Condensed Consolidated Income Statement*
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 16.
EUR million Q2/14 Q2/13 Q1/14 Q1-Q2/1 Q1-Q2/1 2013
4 3
--------------------------------------------------------------------------------
Sales 2 579 2 726 2 568 5 147 5 398 10 563
Other operating income 52 37 33 85 76 140
Materials and services -1 618 -1 765 -1 573 -3 191 -3 477 -6 550
Freight and sales commissions -231 -251 -237 -468 -510 -982
Personnel expenses -367 -368 -361 -728 -727 -1 390
Other operating expenses -203 -165 -144 -347 -354 -644
Share of results of equity 20 13 50 70 38 102
accounted
investments
Depreciation and impairment -147 -144 -141 -288 -340 -1 189
-------------------------------------------------
Operating Profit 85 83 195 280 104 50
Net financial items -46 -59 -65 -111 -115 -239
-------------------------------------------------
Profit/Loss before Tax 39 24 130 169 -11 -189
Income tax -38 -3 -30 -68 16 118
-------------------------------------------------
Net Profit/Loss for the Period 1 21 100 101 5 -71
-------------------------------------------------
Attributable to:
Owners of the Parent 1 19 99 100 2 -53
Non-controlling interests - 2 1 1 3 -18
-------------------------------------------------
1 21 100 101 5 -71
-------------------------------------------------
Earnings per Share
Basic earnings per share, EUR 0.00 0.02 0.13 0.13 0.00 -0.07
Diluted earnings per share, 0.00 0.02 0.13 0.13 0.00 -0.07
EUR
--------------------------------------------------------------------------------
Consolidated Statement of Comprehensive Income*
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 16.
EUR million Q2/14 Q2/13 Q1/14 Q1-Q2/ Q1-Q2/ 2013
14 13
--------------------------------------------------------------------------------
Net profit/loss for the period 1 21 100 101 5 -71
Other Comprehensive Income
Items that will Not be Reclassified
to Profit and Loss
Actuarial losses and gains on defined -1 - - -1 - 74
benefit plans
Share of OCI of EAI that will not be - - - - -1 -1
reclassified
Income tax relating to items that - - - - - -27
will not be reclassified
------------------------------------------
-1 - - -1 -1 46
Items that may be Reclassified
Subsequently to Profit and Loss
Share of OCI of EAI that may be -6 8 -3 -9 11 13
reclassified
Currency translation movements on 15 -174 -4 11 -97 -227
equity net investments (CTA)
Currency translation movements on 1 -4 - 1 -1 -6
non-controlling interests
Net investment hedges 10 27 5 15 14 23
Currency and commodity hedges -5 -17 -9 -14 -28 -26
Available-for-sale financial assets 37 -135 -12 25 -176 -101
Income tax relating to items that may -3 -2 - -3 2 2
be reclassified ------------------------------------------
49 -297 -23 26 -275 -322
------------------------------------------
Total Comprehensive Income 49 -276 77 126 -271 -347
------------------------------------------
Total Comprehensive Income
Attributable to:
Owners of the Parent 48 -274 76 124 -273 -323
Non-controlling interests 1 -2 1 2 2 -24
------------------------------------------
49 -276 77 126 -271 -347
--------------------------------------------------------------------------------
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
EAI = Equity Accounted Investments
Condensed Consolidated Statement of Cash Flows*
EUR million Q1-Q2/14 Q1-Q2/13
--------------------------------------------------------------------------------
Cash Flow from Operating Activities
Operating profit 280 104
Hedging result from OCI 7 10
Adjustments for non-cash items 252 320
Change in net working capital -92 19
-------------------
Cash Flow Generated by Operations 447 453
Net financial items paid -99 -86
Income taxes paid, net -10 -20
-------------------
Net Cash Provided by Operating Activities 338 347
-------------------
Cash Flow from Investing Activities
Acquisitions of subsidiaries and business operations -16 -
Acquisitions of equity accounted investments -97 -30
Acquisitions of available-for-sale investments - -9
Proceeds from disposals of shares in equity accounted 61 -
investments
Proceeds from sale of fixed assets 10 81
Capital expenditure -294 -342
Proceeds from non-current receivables, net 28 98
-------------------
Net Cash Used in Investing Activities -308 -202
-------------------
-------------------
Cash Flow from Financing Activities
Proceeds from issue of new long-term debt 136 66
Long-term debt, payments -457 -44
Change in short-term borrowings -77 47
Dividends paid -237 -237
Sale of interest in subsidiaries to non-controlling 28 -
interests
Equity injections from, less dividends to, non-controlling 53 -6
interests
Purchase of own shares** -4 -
-------------------
Net Cash Used in Financing Activities -558 -174
-------------------
Net Decrease in Cash and Cash Equivalents -528 -29
Translation adjustment 19 -20
Net cash and cash equivalents at the beginning of period 2 061 1 917
-------------------
Net Cash and Cash Equivalents at Period End 1 552 1 868
-------------------
Cash and Cash Equivalents at Period End 1 553 1 869
Bank Overdrafts at Period End -1 -1
-------------------
Net Cash and Cash Equivalents at Period End 1 552 1 868
-------------------
Acquisitions
Cash and cash equivalents, net of bank overdrafts 1 -
Intangible assets and property, plant and equipment 2 -
Working capital -2 -Interest-bearing liabilities and receivables -7 -
-------------------
Fair Value of Net Assets Acquired -6 -
Goodwill (provisional for 2014) 44 -
-------------------
Total Purchase Consideration 38 -
Less cash and cash equivalents in acquired companies -1 -
-------------------
Net Purchase Consideration 37 -
-------------------
Cash part of consideration, net of acquired cash 16 -
Non-cash part of consideration 21 -
-------------------
Net Purchase Consideration 37 -
-------------------
Disposal
Cash and cash equivalents 1 -
-------------------
Net Assets in Divested Companies 1 -
-------------------
Total Disposal Consideration 1 -
-------------------
Cash part of consideration 1 - -------------------
Total Disposal Consideration 1 -
--------------------------------------------------------------------------------
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 16.
** Own shares purchased for the Group's share award programme. The Group did
not hold any own shares at the end of June 2014.
Property, Plant and Equipment, Goodwill, Biological Assets and
Other Intangible Assets
EUR million Q1-Q2/14 Q1-Q2/13 2013
-----------------------------------------------------------------------
Carrying value at 1 January 6 442 7 039 7 039
Acquisition of subsidiary companies 46 - 1
Additions in tangible and intangible assets 245 292 710
Additions in biological assets 29 22 50
Harvesting in biological assets -16 -7 -20
Disposals -6 -68 -80
Disposals of subsidiary companies - - -2
Depreciation and impairment -288 -340 -1 189
Valuation of biological assets -4 -4 185
Translation difference and other 3 -98 -252
---------------------------
Statement of Financial Position Total 6 451 6 836 6 442
-----------------------------------------------------------------------
Borrowings
EUR million 30 Jun 14 31 Dec 13 30 Jun 13
---------------------------------------------------------------------------
Bond loans 2 865 3 177 3 351
Loans from credit institutions 1 394 1 398 1 308
Finance lease liabilities 73 77 96
Other non-current liabilities 82 93 237
--------------------------------
Non-current Debt including Current Portion 4 414 4 745 4 992
Short-term borrowings 434 510 499
Interest payable 69 93 73
Derivative financial liabilities 131 141 154
Bank overdrafts 1 12 1
--------------------------------
Total Interest-bearing Liabilities 5 049 5 501 5 719
---------------------------------------------------------------------------
EUR million Q1-Q2/14 2013 Q1-Q2/13
-------------------------------------------------------------------------------
Carrying value at 1 January 5 501 5 699 5 699
Proceeds of new long-term debt 136 239 66
Repayment of long-term debt -457 -377 -44
Change in short-term borrowings and interest payable -100 101 70
Change in derivative financial liabilities -10 -51 -38
Translation differences and other -21 -110 -34
--------------------------
Total Interest-bearing Liabilities 5 049 5 501 5 719
-------------------------------------------------------------------------------
Condensed Consolidated Statement of Financial Position*
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 16.
EUR million 30 Jun 14 31 Dec 13 30 Jun 13 1 Jan 13
--------------------------------------------------------------------------------
Assets
Non-current Assets
PPE*, goodwill and other O 5 799 5 808 6 370 6 565
intangible assets
Biological assets O 652 634 466 474
Emission rights O 30 21 15 30
Equity accounted investments O 1 068 1 013 982 941
Available-for-sale: I 20 10 105 96
Interest-bearing
Available-for-sale: Operative O 375 361 279 451
Non-current loan receivables I 63 80 37 134
Deferred tax assets T 190 229 162 143
Other non-current assets O 87 63 69 85
------------------------------------------
8 284 8 219 8 485 8 919
------------------------------------------
Current Assets
Inventories O 1 446 1 445 1 510 1 510
Tax receivables T 13 13 15 18
Operative receivables O 1 637 1 555 1 787 1 714
Interest-bearing receivables I 77 147 151 211
Cash and cash equivalents I 1 553 2 073 1 869 1 921
------------------------------------------
4 726 5 233 5 332 5 374
------------------------------------------
Total Assets 13 010 13 452 13 817 14 293
------------------------------------------
Equity and Liabilities
Owners of the Parent 5 093 5 213 5 261 5 770
Non-controlling Interests 151 60 88 92
Total Equity 5 244 5 273 5 349 5 862
------------------------------------------
Non-current Liabilities
Post-employment benefit provisions O 398 378 461 480
Other provisions O 188 127 133 145
Deferred tax liabilities T 294 312 337 358
Non-current debt I 4 254 4 201 4 276 4 799
Other non-current operative O 44 24 10 11
liabilities
------------------------------------------
5 178 5 042 5 217 5 793
------------------------------------------
Current Liabilities
Current portion of non-current I 160 544 716 202
debt
Interest-bearing liabilities I 635 756 727 698
Operative liabilities O 1 743 1 821 1 779 1 698
Tax liabilities T 50 16 29 40
------------------------------------------
2 588 3 137 3 251 2 638
------------------------------------------
Total Liabilities 7 766 8 179 8 468 8 431
------------------------------------------
Total Equity and Liabilities 13 010 13 452 13 817 14 293
--------------------------------------------------------------------------------
* PPE = Property, Plant and Equipment
Items designated with “O” comprise Operating Capital
Items designated with “I” comprise Interest-bearing Net Liabilities
Items designated with “T” comprise Net Tax Liabilities
Statement of Changes in Equity*
CTA = Cumulative Translation Adjustment OCI = Other
Comprehensive Income NCI
= Non-controlling Interests EAI =
Equity Accounted Investments
EUR Share Share Invest Treasu Fair Valuation CTA Retain
Attrib Non-co Total
milli Capita Premiu ed ry Reserve and ed
utable ntroll
on l m and Non-Re Shares Net Earnin
to ing
Reserv strict Invest gs
Owners Intere
e Fund ed ment of
the sts
Equity Hedges
Parent
Fund
--------------------------------------------------------------------------------
----------------
Step Availa Curren OCI of
Acquis ble-fo cy and Equity
ition r-Sale Commod Accoun
Revalu Financ ity ted
ation ial Hedges Invest
Surplu Assets ments
s
-------------------------------
--------------------------------------------------------------------------------
---------
Balanc 1 342 77 633 -10 4 362 12 -34 -10 3 394 5
770 92 5 862
e at
31
Dec
2012
Profit - - - - - - - - - 2
2 3 5
for
the
perio
d
OCI - - - - - -176 -28 10 -83 -
-277 -1 -278
befor
e tax
Income - - - - - -1 6 - -3 -
2 - 2
tax
relat
ing to
compo
nents
of
OCI
--------------------------------------------------------------------------------
---------
Total - - - - - -177 -22 10 -86 2
-273 2 -271
Compr
ehensi
ve
Incom
e
--------------------------------------------------------------------------------
---------
Divide - - - - - - - - - -237
-237 -6 -243
nd
Share- - - - - - - - - - 1
1 - 1
based
payme
nts
Cancel - - - 10 - - - - - -10
- - -
lation
of
treas
ury
share
s
--------------------------------------------------------------------------------
---------
Balanc 1 342 77 633 - 4 185 -10 -24 -96 3 150 5
261 88 5 349
e at
30
Jun
2013
--------------------------------------------------------------------------------
---------
Loss - - - - - - - - - -55
-55 -21 -76
for
the
perio
d
OCI - - - - - 75 2 2 -121 74
32 -5 27
befor
e tax
Income - - - - - 2 -1 - -1 -27
-27 - -27
tax
relat
ing to
compo
nents
of
OCI
--------------------------------------------------------------------------------
---------
Total - - - - - 77 1 2 -122 -8
-50 -26 -76
Compr
ehensi
ve
Incom
e
--------------------------------------------------------------------------------
---------
Divide - - - - - - - - - -
- -1 -1
nd
Dispos - - - - - - - - - -
- -1 -1
als
Share- - - - - - - - - - 1
1 - 1
based
payme
nts
NCI - - - - - - - - - 1
1 - 1
trans
action
in
EAI
--------------------------------------------------------------------------------
---------
Balanc 1 342 77 633 - 4 262 -9 -22 -218 3 144 5
213 60 5 273
e at
31
Dec
2013
--------------------------------------------------------------------------------
---------
Profit - - - - - - - - - 100
100 1 101
for
the
perio
d
OCI - - - - - 25 -14 -9 26 -1
27 1 28
befor
e tax
Income - - - - - -2 2 - -3 -
-3 - -3
tax
relat
ing to
compo
nents
of
OCI
--------------------------------------------------------------------------------
---------
Total - - - - - 23 -12 -9 23 99
124 2 126
Compr
ehensi
ve
Incom
e
--------------------------------------------------------------------------------
---------
Divide - - - - - - - - - -237
-237 -2 -239
nd
Acquis - - - - - - - 15 - -15
- 86 86
itions
and
dispo
sals
Loss - - - - - - - - - -5
-5 5 -
on
NCI
buy-i
n
Purcha - - - -4 - - - - - -
-4 - -4
se of
treas
ury
share
s
Share- - - - 4 - - - - - -2
2 - 2
based
payme
nts
--------------------------------------------------------------------------------
---------
Balanc 1 342 77 633 - 4 285 -21 -16 -195 2 984 5
093 151 5 244
e at
30
Jun
2014
--------------------------------------------------------------------------------
----------------
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 16.
Commitments and Contingencies
EUR million 30 Jun 14 31 Dec 13 30 Jun 13
--------------------------------------------------------------------------
On Own Behalf
Mortgages 4 18 6
On Behalf of Equity Accounted Investments
Guarantees 18 18 18
On Behalf of Others
Guarantees 5 5 5
Other Commitments, Own
Operating leases, in next 12 months 75 71 97
Operating leases, after next 12 months 851 510 549
Other commitments 45 5 5
--------------------------------
Total 998 627 680
--------------------------------
Mortgages 4 18 6
Guarantees 23 23 23
Operating leases 926 581 646
Other commitments 45 5 5
--------------------------------
Total 998 627 680
--------------------------------------------------------------------------
Capital Commitments
The Group's direct capital expenditure contracts, excluding acquisitions,
amounted to EUR 278 million (compared with EUR 197 million at 30 June 2013 and
EUR 142 million at 31 December 2013). These include the Group's share of direct
capital expenditure contracts in joint operations.
Sales by Segment
EUR million Q2/14 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
----------------------------------------------------------------------
Printing and Reading 970 999 4 319 1 054 1 041 1 101 1 123
Biomaterials 243 263 1 033 266 239 266 262
Building and Living 490 445 1 867 466 460 500 441
Renewable Packaging 849 823 3 272 788 829 835 820
Other 654 689 2 690 672 612 685 721
Inter-segment sales -627 -651 -2 618 -634 -628 -661 -695
-------------------------------------------------
Total 2 579 2 568 10 563 2 612 2 553 2 726 2 672
----------------------------------------------------------------------
Operational EBIT by Segment
EUR million Q2/14 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
--------------------------------------------------------------------------------
Printing and Reading 36 35 34 36 13 -17 2
Biomaterials 10 21 77 24 17 14 22
Building and Living 37 20 75 19 24 28 4
Renewable Packaging 114 92 318 73 100 77 68
Other 12 14 74 - 30 22 22
-----------------------------------------------
Operational EBIT 209 182 578 152 184 124 118
Fair valuations and -18 -11 11 30 -5 -8 -6
non-operational items*
Non-recurring Items -106 24 -539 -392 -23 -33 -91
-----------------------------------------------
Operating Profit/Loss (IFRS) 85 195 50 -210 156 83 21
Net financial items -46 -65 -239 -71 -53 -59 -56
-----------------------------------------------
Profit/Loss before Tax 39 130 -189 -281 103 24 -35
Income tax expense -38 -30 118 121 -19 -3 19
-----------------------------------------------
Net Profit/Loss 1 100 -71 -160 84 21 -16
--------------------------------------------------------------------------------
* Fair valuations and non-operational items include equity incentive schemes,
synthetic options net of realised and open hedges, CO2 emission rights,
valuations of biological assets and Group's share of tax and net financial
items of EAI.
NRI by Segment
EUR million Q2/14 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
--------------------------------------------------------------------------------
Printing and Reading -115 -7 -644 -538 8 -30 -84
Biomaterials - - 2 -8 -1 11 -
Building and Living - -13 -7 - - - -7
Renewable Packaging - - 120 144 -28 4 -
Other 9 44 -10 10 -2 -18 -
-----------------------------------------------
NRI on Operating Profit -106 24 -539 -392 -23 -33 -91
NRI on tax 1 6 145 114 3 9 19
-----------------------------------------------
NRI on Net Profit -105 30 -394 -278 -20 -24 -72
-----------------------------------------------
NRI on Net Profit attributable
to
Owners of the Parent -105 30 -369 -253 -20 -24 -72
Non-controlling interests - - -25 -25 - - -
-----------------------------------------------
-105 30 -394 -278 -20 -24 -72
--------------------------------------------------------------------------------
Fair Valuations and Non-operational Items* by Segment
EUR million Q2/14 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
--------------------------------------------------------------------------------
Printing and Reading 1 -2 2 3 -1 - -
Biomaterials -2 -3 5 13 -4 -2 -2
Building and Living - -1 - - - - -
Renewable Packaging - 1 -1 - -1 - -
Other -17 -6 5 14 1 -6 -4
-----------------------------------------------
FV and Non-operational Items on -18 -11 11 30 -5 -8 -6
Operating Profit
--------------------------------------------------------------------------------
* Fair valuations (FV) and non-operational items include equity incentive
schemes, synthetic options net of realised and open hedges, CO2 emission
rights, valuations of biological assets and Group's share of tax and net
financial items of EAI.
Operating Profit/Loss by Segment
EUR million Q2/14 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
----------------------------------------------------------------------------
Printing and Reading -78 26 -608 -499 20 -47 -82
Biomaterials 8 18 84 29 12 23 20
Building and Living 37 6 68 19 24 28 -3
Renewable Packaging 114 93 437 217 71 81 68
Other 4 52 69 24 29 -2 18
-----------------------------------------------
Operating Profit/Loss (IFRS) 85 195 50 -210 156 83 21
Net financial items -46 -65 -239 -71 -53 -59 -56
-----------------------------------------------
Profit/Loss before Tax 39 130 -189 -281 103 24 -35
Income tax -38 -30 118 121 -19 -3 19
-----------------------------------------------
Net Profit/Loss 1 100 -71 -160 84 21 -16
----------------------------------------------------------------------------
Key Exchange Rates for the Euro
------------
One Euro is Closing Rate Average Rate
-------------------------------------------
30 Jun 14 31 Dec 13 30 Jun 14 31 Dec 13
-------------------------------------------------------
SEK 9.1762 8.8591 8.9545 8.6505
USD 1.3658 1.3791 1.3705 1.3281
GBP 0.8015 0.8337 0.8214 0.8493
-------------------------------------------------------
Transaction Risk and Hedges in Main Currencies as at 30 June 2014
EUR million USD SEK GBP
------------------------------------------------------------------------------
Estimated annual net operating cash flow exposure 950 -790 470
Transaction hedges as at 30 June 2014 -440 410 -250
-----------------
Hedging percentage as at 30 June 2014 for the next 12 months 46% 52% 53%
------------------------------------------------------------------------------
Additional USD hedge for 13-18 months increases the hedging percentage by 7%.
Changes in Exchange Rates on Operational EBIT
Operational EBIT: Currency Strengthening of + 10% EUR million
--------------------------------------------------------------
USD 95
SEK -79
GBP 47
--------------------------------------------------------------
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 occur other than a single currency exchange rate movement. Weakening
would have the opposite impact.
Fair Values of Financial Instruments
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities;
• Level 2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly or
indirectly;
• Level 3: techniques which use inputs which have a significant effect on the
recorded fair values that are not based on observable market data.
The valuation techniques are described in more detail in the Financial
Statements.
Carrying Amounts of Financial Assets and Liabilities by Measurement and Fair
Value Categories: 30 June 2014
EUR million Loans Financial Hedging Availab Carryi Fair
and Items Derivati le- ng Value
Receivab at Fair ves for-Sal Amount
les Value e s
through Financi
Income al
Statement Assets
--------------------------------------------------------------------------------
Financial Assets
Available-for-sale - - - 395 395 395
Non-current loan 63 - - - 63 66
receivables
Trade and other 1 337 - - - 1 337 1 337
operative receivables
Interest-bearing 13 44 20 - 77 77
receivables
Current investments and 1 553 - - - 1 553 1 553
cash
--------------------------------------------------------
Carrying Amount by 2 966 44 20 395 3 425 3 428
Category
--------------------------------------------------------------------------------
EUR million Financial Hedging Measured Carryi Fair
Items Derivati at ng Value
at Fair ves Amortise Amount
Value d s
through Cost
Income
Statement
--------------------------------------------------------------------------------
Financial Liabilities
Non-current debt - 5 4 249 4 254 4 480
Current portion of - - 160 160 160
non-current debt
Interest-bearing 84 47 503 634 634
liabilities
Trade and other 2 - 1 319 1 321 1 321
operative payables
Bank overdrafts - - 1 1 1
---------------------------------------------------------
Carrying Amount by 86 52 6 232 6 370 6 596
Category
--------------------------------------------------------------------------------
EUR million Level Level 2 Level 3 Total
1
---------------------------------------------------------------
Derivative Financial - 64 - 64
Assets
Available-for-sale 20 - 375 395
Financial Assets
Derivative Financial - 138 - 138
Liabilities
---------------------------------------------------------------
Carrying Amounts of Financial Assets and Liabilities by Measurement and Fair
Value Categories: 31 December 2013
EUR million Loans Financial Items Hedging Available-fo Carryi Fair
and at Fair Value Derivati r-Sale ng Value
Receiv through Income ves Financial Amount
ables Statement Assets s
--------------------------------------------------------------------------------
Financial
Assets
Available-for - - - 371 371 371
-sale
Non-current 80 - - - 80 82
loan
receivables
Trade and 1 260 2 - - 1 262 1 262
other
operative
receivables
Interest-bear 31 83 33 - 147 147
ing
receivables
Current 2 073 - - - 2 073 2 073
investments
and cash
------------------------------------------------------------------
Carrying 3 444 85 33 371 3 933 3 935
Amount by
Category
--------------------------------------------------------------------------------
EUR million Financial Items at Hedging Measured Carryin Fair
Fair Value through Derivati at g Value
Income Statement ves Amortised Amounts
Cost
--------------------------------------------------------------------------------
Financial
Liabilities
Non-current - 4 4 197 4 201 4 400
debt
Current - - 544 544 544
portion of
non-current
debt
Interest-bear 101 39 604 744 744
ing
liabilities
Trade and - - 1 371 1 371 1 371
other
operative
payables
Bank - - 12 12 12
overdrafts
------------------------------------------------------------------
Carrying 101 43 6 728 6 872 7 071
Amount by
Category
----------------------------------------------------------------
----------------
----------------------------------------------------------------
EUR million Level Level 2 Level 3 Total
1
----------------------------------------------------------------
Derivative - 118 - 118
Financial
Assets
Available-for 10 - 361 371
-sale
Financial
Assets
Derivative - 144 - 144
Financial
Liabilities
----------------------------------------------------------------
Reconciliation of Level 3 Fair Value Measurement of Financial Assets: 30 June
2014
EUR million Unlisted Unlisted Interest-bearing Total
Shares Securities
--------------------------------------------------------------------------------
Opening balance at 1 January 361 - 361
2014
Interest capitalised - - -
Gains/losses recognised in - - -
income statement
Gains in OCI transferred to - - -
income statement
Gains recognised in other 14 - 14
comprehensive income
Additions - - -
Disposals - - -
-----------------------------------------------
Closing Balance at 30 June 2014 375 - 375
--------------------------------------------------------------------------------
Reconciliation of Level 3 Fair Value Measurement of Financial Assets: 31
December 2013
EUR million Unlisted Unlisted Interest-bearing Total
Shares Securities
--------------------------------------------------------------------------------
Opening balance at 1 January 2013 451 90 541
Interest capitalised - 9 9
Gains/losses recognised in income 1 2 3
statement
Gains in OCI transferred to - -7 -7
income statement
Losses recognised in other -97 - -97
comprehensive income
Additions 9 - 9
Disposals -3 -94 -97
----------------------------------------------
Closing Balance at 31 December 361 - 361
2013
--------------------------------------------------------------------------------
Unlisted Shares
The unlisted shares consist mainly of PVO shares for which the valuation method
is described in more detail in the Annual Report. The valuation is most
sensitive to changes in electricity prices and discount rates. The discount
rate of 4.29% used in the valuation model is determined using the weighted
average cost of capital method. A +/- 5% change in the electricity price used
in the DCF would change the valuation by EUR +83 million and EUR -67 million
respectively. A +/- 1% change in the discount rate would change the valuation
by EUR -49 million and EUR +144 million respectively.
Stora Enso Shares
---------------
Trading volume Helsinki Stockholm
------------------------------------------
A share R share A share R share
---------------------------------------------------------
April 183 530 63 980 917 279 526 18 414 452
May 112 364 43 712 723 179 283 11 390 964
June 81 523 43 116 686 241 511 11 693 475
------------------------------------------
Total 377 417 150 810 326 700 320 41 498 891
------------------------------------------
---------------
Closing Price Helsinki, EUR Stockholm, SEK
------------------------------------------
A share R share A share R share
---------------------------------------------------------
April 7.58 7.35 67.45 66.50
May 7.59 7.52 69.40 67.70
June 7.24 7.11 66.85 65.10
---------------------------------------------------------
Calculation of Key Figures
Operational 100 x Operational EBIT
return on Capital employed1) 2)
capital
employed,
operational ROCE
(%)
Operational 100 x Operational EBIT
return on Operating capital1) 2)
operating
capital,
operational ROOC
(%)
Return on equity, 100 x Profit before tax and non-controlling items - taxes
ROE (%) Total equity2)
Equity ratio (%) 100 x Total equity
Total assets
Interest-bearing Interest-bearing liabilities - interest-bearing
net liabilities assets
Debt/equity ratio Interest-bearing net liabilities
Equity 3)
CEPS Fixed asset Fair valuation
depreciation of biological
Net profit/loss for the period3) - and impairment -
assets
Average number of shares
EPS Net profit/loss for the period3)
Average number of shares
Operational EBIT Operating profit/loss excluding NRI and fair
valuations of the segments and Stora Enso's share of
operating profit/loss excluding NRI and fair
valuations of its equity accounted investments (EAI)
Operational Operating profit/loss excluding fixed asset
EBITDA depreciation and impairment, share of results of
equity accounted investments, NRI and fair
valuations
Net debt to Interest-bearing net liabilities
operational Operational EBITDA
EBITDA ratio
Last twelve Twelve months preceding the reporting date
months (LTM)
TRI Total recordable incident rate = number of incidents
per one million hours worked
LTA Lost-time accident rate = number of lost-time
accidents per one million hours worked
--------------------------------------------------------------------------------
1) Capital employed = Operating capital - Net tax liabilities
2) Average for the financial period
3) Attributable to owners of the Parent
For further information, please contact:
Seppo Parvi, CFO, tel. +358 2046 21205
Ulla Paajanen-Sainio, SVP, Investor Relations, tel. +358 2046 21242
Hanne Karrinaho, Head of Global Communications, tel. +358 2046 21446
Stora Enso's third quarter 2014 results will be published on 22 October 2014.
WEBCAST AND CONFERENCE CALL FOR ANALYSTS AND INVESTORS
CEO Jouko Karvinen, EVP, Stora Enso Printing and Living and CEO as of 1 August
2014 Karl-Henrik Sundström, CFO Seppo Parvi and SVP Investor Relations Ulla
Paajanen-Sainio will be hosting a combined conference call and webcast today at
16.00 Finnish time (15.00 CET, 14.00 UK time, 09.00 EDT).
To participate, please dial:
UK +44(0)20 3427 1905
Finland +358 (0)9 6937 9590
Sweden +46 (0)8 5065 3938
US +1 646 254 3366
Confirmation Code: 2223621
The live webcast may be accessed at www.media-server.com/m/p/2qnccsnu
Stora Enso is the global rethinker of the paper, biomaterials, wood products
and packaging industry. We always rethink the old and expand to the new to
offer our customers innovative solutions based on renewable materials. Stora
Enso employs some 29 000 people worldwide, and our sales in 2013 amounted to
EUR 10.6 billion. Stora Enso shares are listed on NASDAQ OMX Helsinki (STEAV,
STERV) and Stockholm (STE A, STE R). In addition, the shares are traded in the
USA as ADRs (SEOAY) in the International OTCQX over-the-counter market.
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.
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