Stora Enso Oyj - Financial Statement Release

Stora Enso Financial Statement Release 2016

STORA ENSO OYJ, Helsinki, Finland
FINANCIAL STATEMENT RELEASE 3 February 2017 at 13.00 EET

Accelerated ramp-up of Beihai Mill and low hardwood pulp prices impact
negatively a solid quarter. Proposal to increase dividend to EUR 0.37 per share
Q4/2016 (compared with Q4/2015)

  · Sales EUR 2 438 (EUR 2 487) million decreased 2.0%. Sales excluding the
structurally declining paper business increased 4.5%, primarily due to the ramp
-ups at Varkaus kraftliner and Beihai consumer board mills.
  · Operational EBIT decreased 21.1% to EUR 191 (EUR 242) million, mainly due to
historically low hardwood pulp prices in Biomaterials with an impact of EUR 35
million, a negative impact of EUR 25 million from the ramp-up of Beihai
operations, slightly more than expected, and a power generator failure at
Enocell Mill of EUR -5 million. Operational EBIT margin was 7.8% (9.7%).
  · EPS EUR 0.12 (EUR 0.53). EPS excl. IAC decreased to EUR 0.17 (EUR 0.78).
  · Strong cash flow from operations continued and was EUR 461 (EUR 412)
million, cash flow after investing activities EUR 240 (EUR 75) million.
  · Balance sheet continued to strengthen; net debt to operational EBITDA 2.0
(2.3); liquidity EUR 949 (EUR 807) million.
  · Operational ROCE 8.9% (11.3%), operational ROCE excluding the Beihai
investment 12.1% (13.3%).

Q4/2016 (compared with Q3/2016)

  · Sales at EUR 2 438 (EUR 2 393) million, increased 1.9%. Sales excluding the
structurally declining paper business increased 4.9%.
  · Operational EBIT at EUR 191 (EUR 219) million decreased 12.8%, mainly due to
historically low hardwood pulp prices and higher fixed costs.

Full year 2016 (compared with 2015)

  · Sales at EUR 9 802 (EUR 10 040) million, declined 2.4%. Sales excluding the
structurally declining paper businesses and the divested Barcelona Mill,
increased 3.1%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai
consumer board mills.
  · Operational EBIT at EUR 884 (EUR 915) million, decreased 3.4% largely due to
historically low hardwood pulp prices, a negative impact of EUR 74 million from
the ramp-up of Beihai operations, and higher fixed costs due to other
transformation projects and increased innovation activities in Biomaterials. The
Paper division had a positive impact of EUR 134 million on operational EBIT.
    · EPS EUR 0.59 (EUR 1.02). EPS excl. IAC decreased to EUR 0.65 (EUR 1.24).
    · Strong cash flow from operations was EUR 1 633 (EUR 1 556) million, cash
flow after investing activities EUR 834 (EUR 599) million.
    · The Board of Directors proposes dividend to increase from EUR 0.33 to EUR
0.37 per share

Transformation

  · Beihai Mill ramp-up is proceeding ahead of plan relating to both quality and
production volumes. The consumer board machine is expected to reach full
production within 18‒24 months from the start-up in May 2016. The bleached chemi
-thermomechanical pulp (BCTMP) plant started during the fourth quarter. The mill
is expected to reach EBITDA break-even in Q1/2018.
  · Stora Enso is reconsidering its plans to build a chemical pulp mill in
Beihai, China.
  · Varkaus kraftliner mill ramp-up is proceeding. Full production is expected
during the second half of 2017. EBIT break-even is expected in Q2/2017.
  · The production line for wooden building components (LVL) at Varkaus Mill is
ramping up. Full production is expected in mid-2018.

Outlook

Q1/2017 sales are estimated to be similar to the amount of EUR 2 438 million,
and operational EBIT is expected to be in line with the EUR 191 million recorded
in Q4/2016. The Q1/2017 operational EBIT estimate includes the negative impacts
of the ramp-up of Beihai operations and the power generator failure at Enocell
Mill of EUR 34 million and EUR 10 million, respectively. There are no major
scheduled annual maintenance shutdowns during Q1/2017.

Stora Enso will start a profit improvement programme targeting to decrease the
annual costs by EUR 50 million with full annualised impact in 2018.

Stora Enso's CEO Karl-Henrik Sundström comments on the fourth quarter 2016
results:

Year 2016 was an important milestone in our transformation. We completed a large
part of our heavy investment programme, and we continue to maintain a strong
focus on customers and innovation. With this, we are well prepared for 2017 and
beyond.

In the fourth quarter, our sales excluding the structurally declining paper
business increased 4.5%, primarily due to the ramp-ups at Varkaus kraftliner and
Beihai consumer board mills. Operational EBIT was EUR 191 million compared to
EUR 242 million a year ago. This is mainly due to historically low hardwood pulp
prices with an impact of EUR 35 million, a negative impact from the ramp-up of
Beihai operations of EUR 25 million, and a power generator failure at Enocell
Mill of EUR -5 million. For the second quarter in the row, we had a strong cash
flow from operations of EUR 461 million. Balance sheet continued to strengthen
as net debt to operational EBITDA was 2.0.

Our transformation continues to progress and the Beihai Mill ramp-up is ahead of
plan. I am happy to see that this regards both quality and production volumes.
Furthermore, as announced during the quarter, we are reconsidering our plans to
build a chemical pulp mill in Beihai. This decision would not affect our
operations at Beihai Mill. It is a viable option for us to source the chemical
pulp to Beihai Mill from the market or utilise our current captive global
hardwood pulp supply.

The Varkaus kraftliner mill ramp-up is progressing and we are expecting EBIT
break-even in the second quarter 2017. Also, the line for wooden building
components (LVL) at Varkaus Mill is ramping up and production optimisation is
ongoing. Over 70% of the products obtained certificates during the fourth
quarter, and the remaining certificates are expected during the first quarter of
2017. The installation of the first residential building of Wood City in
Helsinki, started in December. Wood City will be built in massive wood and the
multi-storey buildings will be built using LVL from our Varkaus Mill.

We are further investing to accelerate our transformation into a renewable
materials company. In January, we announced that we are investing a total of EUR
9.1 million in further commercialisation of micro-fibrillated cellulose (MFC) in
paperboard packaging. The investment goes to consumer board mills in Finland and
Sweden. MFC is a material we believe in strongly. Due to its high strength
properties and 100% renewable raw materials, it can replace fossil-based
materials, such as plastics, in different applications. Moreover, we are
investing EUR 12 million to build a new production line for biocomposite
granules in Sweden. This is yet another example that demonstrates our ability to
provide an innovative and more sustainable alternative to plastics. The Paper
division ended the year on a very strong note, despite continued market
challenges.

I am pleased that we have received an award for global leadership for our
actions and strategies in response to global warming. We have been listed on the
Supplier Climate A List by CDP, the international not-for-profit organisation
that drives sustainable economies. We have also been awarded for the best
sustainability report in Finland for the second consecutive year, by Finland’s
leading non-profit corporate responsibility network. It is satisfying that the
report was also top ranked by the media and by corporate sustainability
students.

I am happy to say that even though we are investing in the future of Stora Enso,
we are also able to increase the contribution to our shareholders. Our Board of
Directors proposes a dividend of 0.37 euros per share for 2016, up 0.04 euros
compared with the preceding year.

As always, I would like to thank our customers for their business, our employees
for their dedication and our investors for their trust.”

Karl-Henrik Sundström, CEO

Key figures

EUR million    Q4/16  Q4/15   Change  Q3/16   Change   2016   2015   Change %
                                   %               %                2016–2015
                             Q4/16–Q         Q4/16–Q
                                4/15            3/16

Sales          2 438  2 487    -2.0%  2 393     1.9%  9 802     10      -2.4%
                                                               040
Operational      310    351   -11.7%    343    -9.6%  1 371  1 408      -2.6%
EBITDA¹
Operational      191    242   -21.1%    219   -12.8%    884    915      -3.4%
EBIT
Operational     7.8%   9.7%            9.2%            9.0%   9.1%
EBIT margin
Operating        145    393   -63.1%    196   -26.0%    783  1 059     -26.1%
profit/loss
(IFRS)
Profit before    110    610   -82.0%    170   -35.3%    575  1 048     -45.1%
tax excl. IAC
Profit/loss       76    360   -78.9%    161   -52.8%    541    814     -33.5%
before tax
Net               56    407   -86.2%    119   -52.9%    407    783     -48.0%
profit/loss
for the
period
Net interest   2 726  3 240   -15.9%  2 899    -6.0%  2 726  3 240     -15.9%
-bearing
liabilities
Operational     8.9%  11.3%           10.1%           10.2%  10.6%
ROCE
Earnings per    0.17   0.78            0.17            0.65   1.24
share (EPS)
excl. IAC,
EUR
EPS (basic),    0.12   0.53            0.16            0.59   1.02
EUR
Debt/equity     0.47   0.60            0.52            0.47   0.60
ratio
Net debt/last    2.0    2.3             2.1             2.0    2.3
twelve
months’
operational
EBITDA
ratio¹
Fixed costs    25.8%  25.7%           25.5%           25.3%  25.0%
to sales
Average           26     26     0.2%     26    -2.6%     26     26      -1.9%
number of       135    080              819            269    783
employees
TRI rate        10.9   12.6   -13.5%   10.5     3.8%   11.7   11.0       6.4%
LTA rate         4.3    5.6   -23.2%    4.4    -2.3%    4.4    4.7      -6.4%

TRI (Total recordable incidents) 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 The data for the comparative periods have been restated according to the new
reporting structure. See chapter Change in the reporting of costs related to
growth of biological assets in the attached pdf.

Events today

1) Press conference in Helsinki 14.00 EET.
Stora Enso’s CEO Karl-Henrik Sundström and CFO Seppo Parvi will present the
results in a press conference which will be webcast. The event will be held in
English and take place at Stora Enso’s Head Office, Kanavaranta 1, Helsinki at
14.00 EET. The webcast may be accessed at storaenso.videosync.fi/2017-02-03-q4/
2) Webcast and conference call for analysts and investors 15.30 EET

The webcast and conference call for analysts and investors will take place at
15.30 EET (14.30 CET, 13.30 UK time, 09.30 EST). It will be hosted by CEO Karl
-Henrik Sundström, CFO Seppo Parvi, and SVP Head of Investor Relations Ulla
Paajanen-Sainio, and may be accessed at edge.media-server.com/m/p/i56xkqab


Those analysts and investors who wish to ask questions should join the
conference call (details below). All participants can follow the presentation
over the webcast.

Dial-in details for the analyst and investor conference call 15.30 EET


UK                           +44(0)20 3427 1914
Finland                    +358 (0)9 6937 9590
Sweden                    +46 (0)8 5065 3938
USA                         +1 646 254 3388

Confirmation Code:   3016583

The links to the webcasts are also available on the Stora Enso website:
storaenso.com/investors (http://www.storaenso.com/investors)

Stora Enso’s first quarter 2017 results will be published on 27 April 2017.

For further information, please contact:
Seppo Parvi, CFO, tel. +358 2046 21205
Ulla Paajanen-Sainio, SVP, Investor Relations, tel. +358 2046 21242
Ulrika Lilja, EVP, Communications, tel. +46 72 221 9228
Stora Enso is a leading provider of renewable solutions in packaging,
biomaterials, wooden constructions and paper on global markets. Our aim is to
replace fossil-based materials by innovating and developing new products and
services based on wood and other renewable materials. We employ some 25 000
people in more than 35 countries, and our sales in 2016 were EUR 9.8 billion.
Stora Enso shares are listed on Nasdaq Helsinki (STEAV, STERV) and Nasdaq
Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs
(SEOAY). storaenso.com (http://www.storaenso.com)

STORA ENSO OYJ
For further information, please contact:
Seppo Parvi
CFO
tel. +358 2046 21205
Ulla Paajanen-Sainio
SVP, Investor Relations
tel. +358 2046 21242
Ulrika Lilja
EVP, Communications
tel. +46 72 221 9228

Attachments:

02032248.pdf