2014-04-23 12:00:00 CEST
2014-04-23 12:00:10 CEST
REGULATED INFORMATION
Stora Enso Oyj - Interim report (Q1 and Q3)
Stora Enso First Quarter Results 2014
Clearly higher operational EBIT due to lower costs
Helsinki, Finland, 2014-04-23 12:00 CEST (GLOBE NEWSWIRE) -- STORA ENSO OYJ
INTERIM REVIEW 23 April 2014 at 13.00 EET
Q1/2014 (compared with Q1/2013)*
-- Operational EBIT EUR 182 (EUR 118) million, an increase of EUR 64 million
and margin of 7.1% (4.4%).
-- Clearly higher operational EBIT due to lower costs and lower depreciation.
-- EPS excluding NRI EUR 0.09 (EUR 0.07).
-- Cash flow from operations EUR 152 (EUR 126) million, cash flow after
investing activities EUR 20 (EUR -46) million.
-- Net debt to operational EBITDA 2.8 (3.1), liquidity remained strong at EUR
2.0 (1.8) billion.
Q1/2014 (compared with Q4/2013)*
-- Operational EBIT higher at EUR 182 (EUR 152) million, mainly due to
seasonally lower maintenance costs, higher production volumes and progress
in fixed cost reduction.
-- Operational ROCE 8.6% (7.0%).
Transformation
-- Montes del Plata (MdP) Pulp Mill ready for start-up, subject to granting of
the operation permit by the local authorities in the coming weeks. In 2014
Stora Enso's share of MdP's production expected to be approximately 350
000-400 000 tonnes, a reduction from the earlier estimate of half a million
tonnes.
-- Consumer board machine investment in Guangxi, China proceeding as planned:
approximately 2/3 of mill site levelling work completed, plantation
harvesting building up, key equipment selected and equity injected together
with IFC into the companies in early April. Board machine expected to be
operational in early 2016, as previously announced.
Restructuring
-- The EUR 200 million streamlining and structure simplification programme
announced a year ago is progressing faster than initially expected and
nearly all the originally targeted annualised cost reductions are already
apparent in the financial results. Finalisation of the programme is
continuing in the second quarter.
-- Veitsiluoto Mill PM 1 has been permanently shut down as planned.
-- As earlier announced, Stora Enso will invest EUR 28 million in modernising
and developing Murow Sawmill in Poland to increase its capacity and improve
its competitiveness. Sollenau Sawmill in Austria was permanently shutdown
at the end of the first quarter as planned.
Outlook
-- Second quarter 2014 sales are forecast to be similar to the EUR 2 568
million and operational EBIT in line with the EUR 182 million in the first
quarter of 2014. Biomaterials is expected to be negatively impacted by
maintenance costs at Veracel and Sunila pulp mills and Renewable Packaging
by maintenance at Imatra Pulp Mill and Ostrołęka Mill, where a one-time
maintenance shutdown in the Polish national electricity grid will extend
the mill maintenance shutdown to two weeks.
* Data for the comparative periods have been restated. For further details, seeBasis of Preparation on page 12.
Key Figures*
EUR million Q1/14 Q1/13 Change Q4/13 Change 2013
% %
Q1/14- Q1/14-
Q1/13 Q4/13
--------------------------------------------------------------------------------
Sales 2 568 2 672 -3.9 2 612 -1.7 10 563
Operational EBITDA 302 254 18.9 260 16.2 1 090
Operational EBITDA margin, % 11.8 9.5 10.0 10.3
Operational EBIT 182 118 54.2 152 19.7 578
Operational EBIT margin, % 7.1 4.4 5.8 5.5
Operating profit (IFRS) 195 21 n/m -210 192.9 50
Operating margin (IFRS), % 7.6 0.8 -8.0 0.5
Profit before tax excl. NRI 106 56 89.3 111 -4.5 350
Profit/loss before tax 130 -35 n/m -281 146.3 -189
Net profit/loss for the period 100 -16 n/m -160 162.5 -71
Capital expenditure 101 130 -22.3 278 -63.7 760
Depreciation and impairment 139 156 -10.9 136 2.2 603
charges excl. NRI
Operational ROCE, % 8.6 5.1 7.0 6.5
Earnings per share (EPS) excl. 0.09 0.07 0.15 0.40
NRI, EUR
EPS (basic), EUR 0.13 -0.02 -0.18 -0.07
Cash earnings per share (CEPS) 0.27 0.27 0.31 1.16
excl. NRI, EUR
CEPS, EUR 0.31 0.23 0.46 1.21
Return on equity (ROE), % 7.5 -1.1 -11.9 -1.3
Debt/equity ratio 0.60 0.61 0.61 0.61
Net debt/last twelve months' 2.8 3.1 2.9 2.9
operational EBITDA
Equity per share, EUR 6.70 7.32 6.61 6.61
Equity ratio, % 39.7 40.7 39.2 39.2
Average number of employees 28 813 28 887 -0.3 28 453 1.3 28 921
Average number of shares
(million)
periodic 788.6 788.6 788.6 788.6
cumulative 788.6 788.6 788.6 788.6
cumulative, diluted 789.6 788.6 788.6 788.6
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* Data for the comparative periods 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 12.
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.
Stora Enso Deliveries and Production
Q1/14 Q1/13 Change Q4/13 Change 2013
% %
Q1/14- Q1/14-
Q1/13 Q4/13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Paper and board deliveries 2 395 2 496 -4.0 2 438 -1.8 9 898
(1 000 tonnes)
Paper and board production 2 458 2 519 -2.4 2 427 1.3 9 911
(1 000 tonnes)
Wood products deliveries 1 159 1 147 1.0 1 247 -7.1 4 930
(1 000 m3)
Market pulp deliveries 310 288 7.6 335 -7.5 1 180
(1 000 tonnes)
Corrugated packaging deliveries 262 260 0.8 277 -5.4 1 086
(million m2)
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Reconciliation of Operational Profitability
EUR million Q1/14 Q1/13 Change Q4/13 Change 2013
% %
Q1/14- Q1/14-
Q1/13 Q4/13
--------------------------------------------------------------------------------
Operational EBITDA 302 254 18.9 260 16.2 1 090
Equity accounted investments (EAI), 19 20 -5.0 28 -32.1 91
operational*
Depreciation and impairment excl. -139 -156 10.9 -136 -2.2 -603
NRI
Operational EBIT 182 118 54.2 152 19.7 578
Fair valuations and non-operational -11 -6 -83.3 30 -136.7 11
items**
Non-recurring items 24 -91 126.4 -392 106.1 -539
-------------------------------------------
Operating Profit (IFRS) 195 21 n/m -210 192.9 50
--------------------------------------------------------------------------------
* 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.
FIRST QUARTER 2014 RESULTS (compared with first quarter 2013)
Breakdown of Sales Change Q1/2013 to Q1/2014
Sales
-----------------------------------------
Q1/13, EUR million 2 672
----------------------------------------------------------------------------------
Price and mix, % -
Currency, % -2
Volume, % -
Other sales*, % -1
-----------------------------------------
-----------------------------------------
Total before structural changes, % -3
Structural change**, % -1
Total, % -4
-----------------------------------------
Q1/14, EUR million 2 568
-----------------------------------------
* Wood, energy, paper for recycling, by-products etc.
** Asset closures, major investments, divestments and acquisitions
Sales at EUR 2 568 million were EUR 104 million lower than a year ago as paper
product sales continued to decline, partly due to the strengthening euro and
the previously announced permanent shutdowns of paper machines at Kvarnsveden
and Hylte mills in Sweden. Operational EBIT was EUR 182 (EUR 118) million, an
increase of EUR 64 million. Operational EBIT margin was 7.1% (4.4%).
Clearly lower variable costs, especially for wood, chemicals and pulp, improved
operational EBIT by EUR 39 million. Sales prices in local currencies were
slightly higher than a year ago. Lower volumes, mainly in Printing and Reading,
which decreased operational EBIT by EUR 11 million, were offset by EUR 27
million lower fixed costs due to cost improvement and other restructuring
actions. The comparative period last year included a EUR 10 million capital
gain from land sales in Uruguay and Thailand. Depreciation was EUR 20 million
lower, mainly due to fixed asset impairments recorded in the fourth quarter of
2013. Paper and board production was curtailed by 7% (8%) and sawnwood
production by 2% (6%) to manage supply.
The average number of employees in the first quarter was 1 710 lower in Europe,
excluding the increase of 1 000 people due to the Efora acquisition in 2013,
and 640 higher in China than a year earlier. The average number of employees in
the first quarter of 2014 was 70 lower than a year earlier at 28 810.
The Group recorded non-recurring items (NRI) with a positive net impact of
approximately EUR 24 million on operating profit and a positive impact of
approximately EUR 6 million on income tax in its first quarter 2014 results.
The NRI are a EUR 44 million capital gain in the segment Other due to disposal
of the Group's 40.24% shareholding in the US-based processed kaolin clay
producer Thiele Kaolin Company to Thiele Kaolin Company, a EUR 13 million cost
in Building and Living due to the planned permanent closure of Sollenau Sawmill
in Austria and a EUR 7 million cost in Printing and Reading due to the
permanent shutdown of Veitsiluoto Mill paper machine 1 in Finland.
Net financial expenses at EUR 65 million were EUR 9 million higher than a year
ago. Net interest expenses were EUR 4 million lower due to lower debt levels,
and the fair valuation of interest rate derivatives had a negative impact of
EUR 9 million. The net foreign exchange impact in the first quarter of 2014 in
respect of cash, interest-bearing assets and liabilities and related hedges was
a loss of EUR 10 (EUR 4) million. A gain of EUR 4 million from the sale of EUR
20 million of subordinated debt from the equity accounted investment Bergvik
Skog was recorded in the first quarter of 2014.
Breakdown of Capital Employed Change 31 Mar 2013 to 31 Mar 2014
Capital
Employed
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31 Mar 13, EUR million 9 371
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Capital expenditure less depreciation -31
Impairments and reversal of impairments -563
Valuation of biological assets 187
Available-for-sale: operative (mainly PVO) -62
Equity accounted investments 76
Net liabilities in defined benefit plans 61
Operative working capital and other interest-free items, net -226
Net tax liabilities 94
Translation difference -366
Other changes -22
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31 Mar 14, EUR million 8 519
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The operational return on capital employed was 8.6% (5.1%). Excluding the
ongoing strategic investments in Biomaterials and Renewable Packaging the
operational return on capital employed would have been 10.9% (5.8%).
FIRST QUARTER 2014 RESULTS (compared with fourth quarter 2013)
Sales decreased by EUR 44 million to EUR 2 568 million. Operational EBIT was
EUR 30 million higher than in the previous quarter at EUR 182 million. Fixed
costs were EUR 42 million lower due to lower maintenance activity, seasonality,
and the streamlining and structure simplification programme. Energy costs were
seasonally higher due to the winter, and higher variable costs decreased
operational EBIT by EUR 30 million. Sales prices remained stable in local
currencies, but higher packaging deliveries and paper production than the low
levels of the previous quarter increased operational EBIT by EUR 20 million.
Capital Structure
EUR million 31 Mar 14 31 Dec 13 31 Mar 13
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operative fixed assets* 6 770 6 824 7 511
Equity accounted investments 980 1 013 980
Operative working capital, net 1 337 1 179 1 640
Non-current interest-free items, net -467 -466 -544
--------------------------------
--------------------------------
Operating Capital Total 8 620 8 550 9 587
Net tax liabilities -101 -86 -216
--------------------------------
Capital Employed 8 519 8 464 9 371
--------------------------------
--------------------------------
Equity attributable to owners of the Parent 5 286 5 213 5 772
Non-controlling interests 68 60 89
Net interest-bearing liabilities 3 165 3 191 3 510
--------------------------------
Financing Total 8 519 8 464 9 371
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* Operative fixed assets include property, plant and equipment, goodwill,
biological assets, emission rights, available-for-sale operative shares and
other intangible assets.
Financing for First Quarter 2014 (compared with fourth quarter 2013)
Total unutilised committed credit facilities were unchanged at EUR 700 million,
and cash and cash equivalents net of overdrafts remained strong at EUR 2 016
million, which is EUR 45 million less than for the previous quarter. In
addition, Stora Enso has access to various long-term sources of funding up to
EUR 1 100 million.
During the quarter, Stora Enso concluded the long-term external financing for
the first phase development of the plantation, board and pulp mill project in
Guangxi, China. The USD 460 million funding package is provided under an IFC
syndicate loan structure. It comprises a USD 88 million loan with twelve years
tenor from IFC and a USD 372 million loan with eight years tenor provided by
commercial banks through IFC. The funding package has an average interest rate
of approximately LIBOR +2.4%. At the end of the first quarter of 2014 the
facility remained fully undrawn.
The ratio of net debt to the last twelve months' operational EBITDA was 2.8
(2.9).
The debt/equity ratio at 31 March 2014 was 0.60 (0.61).
Cash Flow
EUR million Q1/14 Q1/13 Change Q4/13 Change 2013
% %
Q1/14- Q1/14-
Q1/13 Q4/13
--------------------------------------------------------------------------------
Operational EBITDA 302 254 18.9 260 16.2 1 090
NRI on Operational EBITDA -18 -51 64.7 154 -111.7 37
Dividends received from equity - 11 -100.0 18 -100.0 38
accounted investments
Other adjustments 6 -19 131.6 -168 103.6 -178
Change in working capital -138 -69 -100.0 198 -169.7 265
-------------------------------------------
-------------------------------------------
Cash Flow from Operations 152 126 20.6 462 -67.1 1 252
Cash spent on fixed and biological -132 -172 23.3 -216 38.9 -740
assets
Acquisitions of equity accounted - - - - - -31
investments
-------------------------------------------
Cash Flow after Investing Activities 20 -46 143.5 246 -91.9 481
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Cash Flow for First Quarter 2014
First quarter 2014 cash flow from operations was EUR 152 million. Receivables
and inventories increased by EUR 120 million and EUR 70 million, respectively.
Payables increased by EUR 85 million. Payments relating to the previously
announced restructuring provisions were EUR 35 million.
Capital Expenditure for January-March 2014
Additions to fixed and biological assets in the first quarter of 2014 totalled
EUR 101 million, which is 73% of depreciation in the same period. Investments
in fixed assets and biological assets had a cash outflow impact of EUR 132
million in the first quarter of 2014.
The main projects ongoing during the first quarter 2014 were Montes del Plata
Pulp Mill in Uruguay and the board machine project in Guangxi, China.
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 260 million for the project in
Guangxi, China and approximately EUR 125 million for Montes del Plata Pulp Mill
in Uruguay.
Streamlining and structure simplification programme
The streamlining and structure simplification programme announced a year ago,
intended to achieve annual net fixed cost savings of EUR 200 million after
compensating for inflation in addition to cost takeout in the second quarter of
2014 versus actual 2012, is progressing faster than initially expected. Nearly
all the originally targeted annualised cost reductions are already apparent in
the financial results, three months ahead of the target schedule. Finalisation
of the programme is continuing in the second quarter.
Due to the programme, about 1 850 employees exited by the end of the quarter.
The total reduction in the workforce is expected to be 2 200.
Near-term Outlook
Second quarter 2014 sales are forecast to be similar to the EUR 2 568 million
and operational EBIT in line with the EUR 182 million in the first quarter of
2014. Biomaterials is expected to be negatively impacted by maintenance costs
at Veracel and Sunila pulp mills and Renewable Packaging by maintenance at
Imatra Pulp Mill and Ostrołęka Mill, where a one-time maintenance shutdown in
the Polish national electricity grid will extend the mill maintenance shutdown
to two weeks.
SEGMENTS IN FIRST QUARTER 2014 (compared with first 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 Q1/14 Q1/13 Change % Q4/13 Change % 2013
Q1/14- Q1/14-
Q1/13 Q4/13
-------------------------------------------------------------------------
Sales 999 1 123 -11.0 1 054 -5.2 4 319
Operational EBITDA 85 72 18.1 86 -1.2 290
Operational EBIT 35 2 n/m 36 -2.8 34
% of sales 3.5 0.2 3.4 0.8
Operational ROOC, %* 6.8 0.3 6.1 1.4
Paper deliveries, 1 000 t 1 523 1 684 -9.6 1 607 -5.2 6 525
Paper production, 1 000 t 1 580 1 683 -6.1 1 577 0.2 6 501
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* Operational ROOC = 100% x Operational EBIT/Average operating capital
-- Significantly lower costs and lower depreciation were offset by lower
deliveries, partly due to capacity closures.
-- The coated mechanical paper machine PM 1 at Veitsiluoto Mill in Finland has
been permanently shut down as planned.
-- Corbehem Mill in France has been at standstill since January 2014.
Negotiations with employee representatives and evaluation of the
possibility of selling the mill continue.
Markets
Produc Market Demand Q1/14 Demand Q1/14 Price Q1/14 Price Q1/14
t compared with compared with compared with compared with
Q1/13 Q4/13 Q1/13 Q4/13
--------------------------------------------------------------------------------
Paper Europe Slightly weaker Weaker Slightly lower Stable
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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 million** Q1/14 Q1/13 Change % Q4/13 Change % 2013
Q1/14- Q1/14-
Q1/13 Q4/13
------------------------------------------------------------------------
Sales 263 262 0.4 266 -1.1 1 033
Operational EBITDA 38 42 -9.5 42 -9.5 153
Operational EBIT 21 22 -4.5 24 -12.5 77
% of sales 8.0 8.4 9.0 7.5
Operational ROOC, %* 4.0 4.2 4.6 3.8
Pulp deliveries, 1 000 t 503 475 5.9 484 3.9 1 864
------------------------------------------------------------------------
* 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 12.
-- Deliveries were higher and variable costs clearly lower. The first quarter
results in 2013 included income from land sales in Uruguay and Thailand.
-- Montes del Plata (MdP) Pulp Mill is ready for start-up, subject to granting
of the operation permit by the local authorities in the coming weeks. In
2014 Stora Enso's share of MdP's production is expected to be approximately
350 000-400 000 tonnes, a reduction from the earlier estimate of half a
million tonnes.
-- Biomaterials is expected to be negatively impacted in the second quarter
2014 by higher maintenance costs due to maintenance stoppages at Veracel
and Sunila pulp mills.
Markets
Product Market Demand Q1/14 Demand Q1/14 Price Q1/14 Price Q1/14
compared with compared with compared with compared with
Q1/13 Q4/13 Q1/13 Q4/13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Softwood Europe Slightly Slightly Higher Slightly
pulp weaker stronger higher
Hardwood Europe Slightly Weaker Slightly lower Stable
pulp weaker
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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 Q1/14 Q1/13 Change % Q4/13 Change % 2013
Q1/14- Q1/14-
Q1/13 Q4/13
--------------------------------------------------------------------
Sales 445 441 0.9 466 -4.5 1 867
Operational EBITDA 30 13 130.8 30 - 115
Operational EBIT 20 4 n/m 19 5.3 75
% of sales 4.5 0.9 4.1 4.0
Operational ROOC, %* 15.3 2.8 14.4 13.9
Deliveries, 1 000 m3 1 116 1 113 0.3 1 203 -7.2 4 776
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* Operational ROOC = 100% x Operational EBIT/Average operating capital
-- Lower fixed costs and slightly lower net raw material costs were the main
reasons behind the significant profit improvement.
-- As announced in February, Stora Enso will invest EUR 28 million in
modernising and developing Murow Sawmill in Poland to increase its capacity
and improve its competitiveness. Sollenau Sawmill in Austria was
permanently shutdown at the end of the first quarter as planned.
Markets
Product Market Demand Q1/14 Demand Q1/14 Price Q1/14 Price Q1/14
compared with compared with compared with compared with
Q1/13 Q4/13 Q1/13 Q4/13
--------------------------------------------------------------------------------
Wood Europe Stronger Slightly Slightly Slightly
product weaker higher higher s
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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 Q1/14 Q1/13 Change Q4/13 Change 2013
% %
Q1/14- Q1/14-
Q1/13 Q4/13
--------------------------------------------------------------------------------
Sales 823 820 0.4 788 4.4 3 272
Operational EBITDA 149 119 25.2 122 22.1 522
Operational EBIT 92 68 35.3 73 26.0 318
% of sales 11.2 8.3 9.3 9.7
Operational ROOC, %* 15.0 11.4 12.2 13.3
Paper and board deliveries, 1 000 872 812 7.4 831 4.9 3 373
t
Paper and board production, 1 000 878 836 5.0 850 3.3 3 410
t
Corrugated packaging deliveries, 262 260 0.8 277 -5.4 1 086
million m2
Corrugated packaging production, 257 258 -0.4 266 -3.4 1 057
million m2
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* Operational ROOC = 100% x Operational EBIT/Average operating capital
-- Higher sales prices in local currencies and clearly lower costs were the
main reasons for profit improvement.
-- IFC has agreed to invest in an equity stake of RMB 356 million (EUR 43
million) in Stora Enso's board and pulp mill project in Guangxi, China,
representing a 5% shareholding in the project. IFC contributed the first
equity payment in April. Approximately 2/3 of mill site levelling work has
been completed, plantation harvesting is building up and key equipment has
been selected.
-- There will be annual maintenance stoppages at Ostrołęka Mill and Imatra
Pulp Mill during the second quarter of 2014.
Markets
Product Market Demand Q1/14 Demand Q1/14 Price Q1/14 Price Q1/14
compared with compared compared compared
Q1/13 with with with
Q4/13 Q1/13 Q4/13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Consumer Europe Stable Slightly Stable Slightly
board stronger higher
Corrugated Europe Stable Stable Stable Stable
packaging
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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 Q1/14 Q1/13 Change % Q4/13 Change % 2013
Q1/14- Q1/14-
Q1/13 Q4/13
------------------------------------------------------------------
Sales 689 721 -4.4 672 2.5 2 690
Operational EBITDA - 8 -100.0 -20 100.0 10
Operational EBIT 14 22 -36.4 - n/m 74
% of sales 2.0 3.1 - 2.8
------------------------------------------------------------------
-- Operational EBIT decreased due to the divestment of Thiele Kaolin and
winding down of the captive insurance company.
Short-term Risks and Uncertainties
The main short-term risks and uncertainties relate to the economic situation in
Europe, and the persistent imbalance in the European paper market. Potential
further EU 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 15 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 192 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 52
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 98 million, negative EUR 77 million and positive EUR 48 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.
First Quarter Events
In March Stora Enso announced plans to reorganise its Renewable Packaging
Division, comprising Consumer Board, Packaging Solutions and Packaging Asia,
into three separate businesses reporting to the CEO. The reorganisation is
planned to be implemented by 1 July 2014.
Legal Cases
Veracel
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 equity accounted investment 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. Veracel has not
recorded any provision for the reforestation or the possible fine.
During construction of Veracel Pulp Mill, a supplier won the international
tendering to supply part of the mill. The proposal included an element to make
the plant eligible for a Drawback Suspension Tax Benefit which would provide
exemptions on imports. One of the conditions of the drawback was that funds
used to pay the supplier be raised outside Brazil. At the same time, part of
the mill construction was financed locally. Following a tax inspection at the
supplier, Federal Tax Authorities issued a tax infraction note against the
supplier intended to cancel the drawback benefits. The supplier presented its
defence to the Administrative Tax Entity Court and in parallel filed an
arbitration proceeding against Veracel to determine which company shall be
responsible for any eventual damages in case the supplier is found guilty. In
September 2013 the International Chamber of Commerce Arbitration Court decided
that Veracel and the supplier shall share liability for any potential damages
in the ratio Veracel 75% and the supplier 25%. This decision was challenged by
Veracel in a submission to the Arbitration Court. Nevertheless, the supplier
and Veracel entered into a settlement agreement in December 2013, agreeing that
the supplier would join a Brazilian authorities' incentive programme allowing
the supplier to end this case and pay the existing debts obtaining significant
discounts on interests and fines, of which Veracel paid to the supplier and
expensed BRL 45 million (EUR 16 million), of which Stora Enso's share amounts
to BRL 22.5 million (EUR 8 million). In February 2014 the Arbitration Court
decided to reject Veracel's claims. The settlement with the supplier is still
subject to formal acceptance of the payment by the Brazilian authorities.
Class Action Lawsuits in USA
In the context of magazine paper sales in the USA in 2002 and 2003, Stora Enso
Oyj (SEO) and Stora Enso North America (SENA) were sued in a number of class
action (and other civil) lawsuits filed in the USA by various magazine paper
purchasers that claimed damages for alleged antitrust violations. In December
2010 a US federal district court granted a motion for summary judgement
dismissing the direct purchaser class action claims on SEO and SENA. Following
appeal, a federal court of appeals on 6 August 2012 upheld the district court's
ruling as to SEO, but reversed the district court's ruling as to SENA and
referred that part of the case back to the district court for a jury trial to
determine whether SENA's conduct did violate the federal antitrust laws. The
trial of the case against SENA was scheduled to begin in August 2013. Because
Stora Enso disposed of SENA in 2007, Stora Enso's liability, if any, would have
been determined by the provisions in the SENA Sales and Purchasing Agreement.
On 17 July 2013, Stora Enso reached an agreement (which is subject to approval
by the US federal district court) to settle the cases filed by the direct
magazine paper purchasers without any admission of liability by SENA or SEO.
Stora Enso has paid into escrow USD 8 million (EUR 6 million) to cover the cost
of settling those claims, which cost has been recorded in the third quarter
2013 accounts. The only remaining cases of any substance, filed on behalf of
indirect purchasers of publication paper in the California (CA) and Connecticut
(CT) state courts, have been settled as well - without any admission of
liability by SENA or SEO - via payments of USD 0.1 million (EUR 0.1 million)
plus proportionate cost (CA) and USD 0.1 million (EUR 0.1 million) (CT). These
settlements, however, have to be approved by the responsible courts. The cases
were disclosed as contingent liability in the previous periods until the third
quarter of 2013.
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 Metsäliitto 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 45 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. No
provisions have been made in Stora Enso's accounts for these lawsuits.
Kemijärvi Pulp Mill in Finland was permanently closed down in 2008. In December
2011 the Vaasa Administrative Court gave its decision concerning the
environmental permit for the closure of the mill. The judgement included an
obligation to remove the majority of the sludge from the bottom of the water
treatment lagoon. Following an appeal by Stora Enso, 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.
Share Capital
During the quarter the conversion of a total of 25 000 A shares into R shares
was recorded in the Finnish trade register on 15 January 2014.
On 31 March 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.
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, 23 April 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.
Condensed Consolidated Income Statement*
EUR million Q1/14 Q1/13 Q4/13 2013
--------------------------------------------------------------------------------
Sales 2 568 2 672 2 612 10 563
Other operating income 33 39 34 140
Materials and services -1 573 -1 712 -1 488 -6 550
Freight and sales commissions -237 -259 -235 -982
Personnel expenses -361 -359 -349 -1 390
Other operating expenses -144 -189 -141 -644
Share of results of equity accounted investments 50 25 49 102
Depreciation and impairment -141 -196 -692 -1 189
-------------------------------
-------------------------------
Operating Profit/Loss 195 21 -210 50
Net financial items -65 -56 -71 -239
-------------------------------
-------------------------------
Profit/Loss before Tax 130 -35 -281 -189
Income tax -30 19 121 118
-------------------------------
-------------------------------
Net Profit/Loss for the Period 100 -16 -160 -71
Attributable to:
Owners of the Parent 99 -17 -137 -53
Non-controlling interests 1 1 -23 -18
-------------------------------
100 -16 -160 -71
-------------------------------
-------------------------------
Earnings per Share
Basic earnings per share, EUR 0.13 -0.02 -0.18 -0.07
Diluted earnings per share, EUR 0.13 -0.02 -0.18 -0.07
--------------------------------------------------------------------------------
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 12.
Consolidated Statement of Comprehensive Income*
EUR million Q1/14 Q1/13 Q4/13 2013
--------------------------------------------------------------------------------
Net profit/loss for the period 100 -16 -160 -71
Other Comprehensive Income
Items that will not be Reclassified to
Profit and Loss
Actuarial gains and losses on defined benefit plans - - 76 74
Share of OCI of EAI that will not be reclassified - -1 - -1
Income tax relating to items that will not be - - -28 -27
reclassified
--------------------------
--------------------------
- -1 48 46
Items that may be Reclassified Subsequently to Profit
and Loss
Share of OCI of EAI that may be reclassified -3 3 1 13
Currency translation movements on equity net -4 77 -98 -227
investments (CTA)
Currency translation movements on non-controlling - 3 -2 -6
interests
Net investment hedges 5 -13 17 23
Currency and commodity hedges -9 -11 -5 -26
Available-for-sale financial assets -12 -41 6 -101
Income tax relating to items that may be reclassified - 4 -1 2
--------------------------
--------------------------
-23 22 -82 -322
--------------------------
Total Comprehensive Income 77 5 -194 -347
--------------------------
--------------------------
Total Comprehensive Income Attributable to:
Owners of the Parent 76 1 -169 -323
Non-controlling interests 1 4 -25 -24
--------------------------
77 5 -194 -347
--------------------------------------------------------------------------------
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 12.
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
EAI = Equity Accounted Investments
Condensed Consolidated Statement of Cash Flows*
EUR million Q1/14 Q1/13
------------------------------------------------------------------------------
Cash Flow from Operating Activities
Operating profit 195 21
Hedging result from OCI 2 -1
Adjustments for non-cash items 95 174
Change in net working capital -138 -69
-------------
-------------
Cash Flow Generated by Operations 154 125
Net financial items paid -74 -66
Income taxes paid, net -13 -3
-------------
Net Cash Provided by Operating Activities 67 56
-------------
-------------
Cash Flow from Investing Activities
Proceeds from disposal of shares in equity accounted investments 61 -
Proceeds from sale of fixed assets 6 18
Capital expenditure -132 -172
Proceeds from/payments of loan receivables, net 34 2
-------------
Net Cash Used in Investing Activities -31 -152
------------- -------------
Cash Flow from Financing Activities
Long-term debt, payments -61 -39
Change in short-term borrowings -25 -15
Proceeds from disposal of subsidiary shares 5 -
Dividend to non-controlling interests - -7
Purchase of own shares** -4 -
-------------
Net Cash Used in Financing Activities -85 -61
-------------
-------------
Net Decrease in Cash and Cash Equivalents -49 -157
Translation adjustment 4 3
Net cash and cash equivalents at the beginning of period 2 061 1 917
-------------
Net Cash and Cash Equivalents at Period End 2 016 1 763
-------------
-------------
Cash and Cash Equivalents at Period End 2 018 1 764
Bank Overdrafts at Period End -2 -1
-------------
Net Cash and Cash Equivalents at Period End 2 016 1 763
-------------
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 12.
** Own shares purchased for the Group's share award programme. The Group did
not hold any own shares at the end of March 2014.
Property, Plant and Equipment, Goodwill, Biological Assets and
Other Intangible Assets
EUR million Q1/14 Q1/13 2013
-----------------------------------------------------------------
Carrying value at 1 January 6 442 7 039 7 039
Acquisition of subsidiary companies - - 1
Additions in tangible and intangible assets 87 120 710
Additions in biological assets 14 10 50
Disposals -5 -8 -80
Disposals of subsidiary companies - - -2
Depreciation and impairment -141 -196 -1 189
Valuation of biological assets -1 -3 185
Translation difference and other -18 107 -272
---------------------
Statement of Financial Position Total 6 378 7 069 6 442
-----------------------------------------------------------------
Borrowings
EUR million 31 Mar 14 31 Dec 13 31 Mar 13
---------------------------------------------------------------------------
Bond loans 3 142 3 177 3 415
Loans from credit institutions 1 363 1 398 1 280
Finance lease liabilities 77 77 100
Other non-current liabilities 88 93 243
--------------------------------
--------------------------------
Non-current Debt including Current Portion 4 670 4 745 5 038
Short-term borrowings 496 510 408
Interest payable 70 93 81
Derivative financial liabilities 141 141 179
Bank overdrafts 2 12 1
--------------------------------
Total Interest-bearing Liabilities 5 379 5 501 5 707
---------------------------------------------------------------------------
EUR million Q1/14 2013 Q1/13
-------------------------------------------------------------------------
Carrying value at 1 January 5 501 5 699 5 699
Proceeds of new long-term debt - 239 -
Repayment of long-term debt -61 -377 -39
Change in short-term borrowings and interest payable -75 101 -13
Change in derivative financial liabilities - -51 -13
Translation differences and other 14 -110 73
--------------------
Total Interest-bearing Liabilities 5 379 5 501 5 707
-------------------------------------------------------------------------
Condensed Consolidated Statement of Financial Position*
EUR million 31 Mar 14 31 Dec 13 31 Mar 13 1 Jan 13
--------------------------------------------------------------------------------
Assets
Non-current Assets
PPE, goodwill and other intangible O 5 740 5 808 6 573 6 565
assets
Biological assets O 638 634 496 474
Emission rights O 47 21 35 30
Equity accounted investments O 980 1 013 980 941
Available-for-sale: I 14 10 100 96
Interest-bearing
Available-for-sale: Operative O 345 361 407 451
Non-current loan receivables I 60 80 137 134
Deferred tax assets T 212 229 169 143
Other non-current assets O 85 63 80 85
------------------------------------------
8 121 8 219 8 977 8 919
------------------------------------------
------------------------------------------
Current Assets
Inventories O 1 514 1 445 1 610 1 510
Tax receivables T 14 13 18 18
Operative receivables O 1 689 1 555 1 851 1 714
Interest-bearing receivables I 122 147 196 211
Cash and cash equivalents I 2 018 2 073 1 764 1 921
------------------------------------------
------------------------------------------
5 357 5 233 5 439 5 374
------------------------------------------
Total Assets 13 478 13 452 14 416 14 293
------------------------------------------ ------------------------------------------
Equity and Liabilities
Owners of the Parent 5 286 5 213 5 772 5 770
Non-controlling Interests 68 60 89 92
------------------------------------------
Total Equity 5 354 5 273 5 861 5 862
------------------------------------------
------------------------------------------
Non-current Liabilities
Post-employment benefit provisions O 403 378 470 480
Other provisions O 127 127 145 145
Deferred tax liabilities T 302 312 361 358
Non-current debt I 4 158 4 201 4 832 4 799
Other non-current operative O 22 24 9 11
liabilities
5 012 5 042 5 817 5 793
Current Liabilities
Current portion of non-current I 512 544 206 202
debt
Interest-bearing liabilities I 709 756 669 698
Operative liabilities O 1 866 1 821 1 821 1 698
Tax liabilities T 25 16 42 40
------------------------------------------
------------------------------------------
3 112 3 137 2 738 2 638
------------------------------------------
------------------------------------------
Total Liabilities 8 124 8 179 8 555 8 431
------------------------------------------
Total Equity and Liabilities 13 478 13 452 14 416 14 293
--------------------------------------------------------------------------------
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 12.
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
--------------------------------------------------------------------------------
--------
--------------------------------------------------------------------------------
--------
Loss - - - - - - - - - -17
-17 1 -16
for
the
perio
d
OCI - - - - - -41 -11 2 64 -
14 3 17
befor
e tax
Income - - - - - -1 2 - 3 -
4 - 4
tax
relat
ing to
compo
nents
of
OCI
--------------------------------------------------------------------------------
--------
Total - - - - - -42 -9 2 67 -17
1 4 5
Compr
ehensi
ve
Incom
e
--------------------------------------------------------------------------------
--------
--------------------------------------------------------------------------------
--------
Divide - - - - - - - - - -
- -7 -7
nd
Share- - - - - - - - - - 1
1 - 1
based
payme
nts
--------------------------------------------------------------------------------
--------
Balanc 1 342 77 633 -10 4 320 3 -32 57 3 378 5
772 89 5 861
e at
31
Mar
2013
--------------------------------------------------------------------------------
--------
--------------------------------------------------------------------------------
-------- Loss - - - - - - - - - -36
-36 -19 -55
for
the
perio
d
OCI - - - - - -60 -15 10 -268 74
-259 -9 -268
befor
e tax
Income - - - - - 2 3 - -7 -27
-29 - -29
tax
relat
ing to
compo
nents
of
OCI
--------------------------------------------------------------------------------
--------
Total - - - - - -58 -12 10 -275 11
-324 -28 -352
Compr
ehensi
ve
Incom
e
--------------------------------------------------------------------------------
--------
--------------------------------------------------------------------------------
--------
Divide - - - - - - - - - -237
-237 - -237
nd
Dispos - - - - - - - - - -
- -1 -1
als
Share- - - - - - - - - - 1
1 - 1
based
payme
nts
NCI - - - - - - - - - 1
1 - 1
trans
action
in
EAI
Cancel - - - 10 - - - - - -10
- - -
lation
of
treas
ury
share
s
--------------------------------------------------------------------------------
--------
Balanc 1 342 77 633 - 4 262 -9 -22 -218 3 144 5
213 60 5 273
e at
31
Dec
2013
--------------------------------------------------------------------------------
--------
--------------------------------------------------------------------------------
--------
Profit - - - - - - - - - 99
99 1 100
for
the
perio
d
OCI - - - - - -12 -9 -3 1 -
-23 - -23
befor
e tax
Income - - - - - -1 2 - -1 -
- - -
tax
relat
ing to
compo
nents
of
OCI
--------------------------------------------------------------------------------
--------
Total - - - - - -13 -7 -3 - 99
76 1 77
Compr
ehensi
ve
Incom
e
--------------------------------------------------------------------------------
--------
--------------------------------------------------------------------------------
--------
Dispos - - - - - - - 15 - -15
- 7 7
als
Purcha - - - -4 - - - - - -
-4 - -4
se of
treas
ury
share
s
Share- - - - 4 - - - - - -3
1 - 1
based
payme
nts
Balanc 1 342 77 633 - 4 249 -16 -10 -218 3 225 5
286 68 5 354
e at
31
Mar
2014
--------------------------------------------------------------------------------
---------------
* Data for the comparative periods have been restated. For further details, see
Basis of Preparation on page 12.
Commitments and Contingencies
EUR million 31 Mar 14 31 Dec 13 31 Mar 13
--------------------------------------------------------------------------
On Own Behalf
Mortgages 6 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 70 71 101
Operating leases, after next 12 months 530 510 552
Other commitments 5 5 6
--------------------------------
Total 634 627 688
--------------------------------
--------------------------------
Mortgages 6 18 6
Guarantees 23 23 23
Operating leases 600 581 653
Other commitments 5 5 6
--------------------------------
Total 634 627 688
--------------------------------------------------------------------------
Capital commitments
The Group's direct capital expenditure contracts, excluding acquisitions,
amounted to EUR 237 million (compared with EUR 244 million at 31 March 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 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
---------------------------------------------------------------
Printing and Reading 999 4 319 1 054 1 041 1 101 1 123
Biomaterials 263 1 033 266 239 266 262
Building and Living 445 1 867 466 460 500 441
Renewable Packaging 823 3 272 788 829 835 820
Other 689 2 690 672 612 685 721
Inter-segment sales -651 -2 618 -634 -628 -661 -695
------------------------------------------
Total 2 568 10 563 2 612 2 553 2 726 2 672
---------------------------------------------------------------
Operational EBIT by Segment
EUR million Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
--------------------------------------------------------------------------------
Printing and Reading 35 34 36 13 -17 2
Biomaterials 21 77 24 17 14 22
Building and Living 20 75 19 24 28 4
Renewable Packaging 92 318 73 100 77 68
Other 14 74 - 30 22 22
----------------------------------------
----------------------------------------
Operational EBIT 182 578 152 184 124 118
Fair valuations and non-operational -11 11 30 -5 -8 -6
items*
Non-recurring Items 24 -539 -392 -23 -33 -91
----------------------------------------
----------------------------------------
Operating Profit/Loss (IFRS) 195 50 -210 156 83 21
Net financial items -65 -239 -71 -53 -59 -56
----------------------------------------
----------------------------------------
Profit/Loss before Tax 130 -189 -281 103 24 -35
Income tax expense -30 118 121 -19 -3 19
----------------------------------------
Net Profit/Loss 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 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
--------------------------------------------------------------------------
Printing and Reading -7 -644 -538 8 -30 -84
Biomaterials - 2 -8 -1 11 -
Building and Living -13 -7 - - - -7
Renewable Packaging - 120 144 -28 4 -
Other 44 -10 10 -2 -18 -
----------------------------------------
----------------------------------------
NRI on Operating Profit 24 -539 -392 -23 -33 -91
NRI on tax 6 145 114 3 9 19
----------------------------------------
NRI on Net Profit 30 -394 -278 -20 -24 -72
----------------------------------------
----------------------------------------
NRI on Net Profit attributable to
Owners of the Parent 30 -369 -253 -20 -24 -72
Non-controlling interests - -25 -25 - - -
----------------------------------------
30 -394 -278 -20 -24 -72
--------------------------------------------------------------------------
Fair Valuations and Non-operational Items* by Segment
EUR million Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
--------------------------------------------------------------------------------
Printing and Reading -2 2 3 -1 - -
Biomaterials -3 5 13 -4 -2 -2
Building and Living -1 - - - - -
Renewable Packaging 1 -1 - -1 - -
Other -6 5 14 1 -6 -4
----------------------------------------
FV and Non-operational Items on -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 Q1/14 2013 Q4/13 Q3/13 Q2/13 Q1/13
---------------------------------------------------------------------
Printing and Reading 26 -608 -499 20 -47 -82
Biomaterials 18 84 29 12 23 20
Building and Living 6 68 19 24 28 -3
Renewable Packaging 93 437 217 71 81 68
Other 52 69 24 29 -2 18
----------------------------------------
----------------------------------------
Operating Profit/Loss (IFRS) 195 50 -210 156 83 21
Net financial items -65 -239 -71 -53 -59 -56
----------------------------------------
----------------------------------------
Profit/Loss before Tax 130 -189 -281 103 24 -35
Income tax expense -30 118 121 -19 -3 19
----------------------------------------
Net Profit/Loss 100 -71 -160 84 21 -16
---------------------------------------------------------------------
Key Exchange Rates for the Euro
------------
One Euro is Closing Rate Average Rate
-------------------------------------------
31 Mar 14 31 Dec 13 31 Mar 14 31 Dec 13
-------------------------------------------------------
-------------------------------------------------------
SEK 8.9483 8.8591 8.8575 8.6505
USD 1.3788 1.3791 1.3697 1.3281
GBP 0.8282 0.8337 0.8278 0.8493
-------------------------------------------------------
Transaction Risk and Hedges in Main Currencies as at 31 March 2014
EUR million USD SEK GBP
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Estimated annual net operating cash flow exposure 980 -770 480
Transaction hedges as at 31 Mar 2014 -450 400 -230
-----------------
Hedging percentage as at 31 Mar 2014 for the next 12 months 46% 52% 48%
-----------------------------------------------------------------------------
Additional GBP hedge for 13-15 months increases the hedging percentage by 5%.
Changes in Exchange Rates on Operational EBIT
Operational EBIT: Currency Strengthening of + 10% EUR million
--------------------------------------------------------------
USD 98
SEK -77
GBP 48
--------------------------------------------------------------
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: 31 March 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 - - - 359 359 359
Non-current loan 60 - - - 60 62
receivables
Trade and other 1 382 1 - - 1 383 1 383
operative receivables
Interest-bearing 14 80 28 - 122 122
receivables
Current investments and 2 018 - - - 2 018 2 018
cash
--------------------------------------------------------
Carrying Amount by 3 474 81 28 359 3 942 3 944
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 4 153 4 158 4 367
Current portion of - - 512 512 512
non-current debt
Interest-bearing 99 42 566 707 707
liabilities
Trade and other - - 1 419 1 419 1 419
operative payables
Bank overdrafts - - 2 2 2
---------------------------------------------------------
Carrying Amount by 99 47 6 652 6 798 7 007
Category
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EUR million Level Level 2 Level 3 Total
1
---------------------------------------------------------------
Derivative Financial - 109 - 109
Assets
Available-for-sale 14 - 345 359
Financial Assets
Derivative Financial - 146 - 146
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: 31 March
2014
EUR million Unlisted Unlisted Interest-bearing Total
Shares Securities
--------------------------------------------------------------------------------
Opening balance at 1 January 2014 361 - 361
Interest capitalised - - -
Gains/losses recognised in income - - -
statement
Gains in OCI transferred to - - -
income statement
Losses recognised in other -16 - -16
comprehensive income
Additions - - -
Disposals - - -
----------------------------------------------
Closing Balance at 31 March 2014 345 - 345
--------------------------------------------------------------------------------
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 1 2 3
income 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 4.66% 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 34 million and a +/- 1% change
in the discount rate would change the valuation by -/+ EUR 26 million.
Stora Enso Shares
---------------
Trading volume Helsinki Stockholm
------------------------------------------
A share R share A share R share
---------------------------------------------------------
---------------------------------------------------------
January 152 937 67 834 472 263 738 23 080 578
February 194 602 97 734 588 239 718 38 293 050
March 165 392 61 344 424 243 333 21 003 625
------------------------------------------
Total 512 931 226 913 484 746 789 82 377 253
---------------------------------------------------------
---------------
Closing Price Helsinki, EUR Stockholm, SEK
------------------------------------------
A share R share A share R share
---------------------------------------------------------
January 7.00 6.94 63.20 61.05
February 8.35 8.26 73.20 72.85
March 7.72 7.77 69.90 69.35
---------------------------------------------------------
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)
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 second quarter 2014 results will be published on 21 July 2014.
WEBCAST AND CONFERENCE CALL FOR ANALYSTS AND INVESTORS
CEO Jouko Karvinen, CFO Seppo Parvi and SVP Investor Relations Ulla
Paajanen-Sainio will be hosting a combined conference call and webcast today at
14.30 Finnish time (13.30 CET, 12.30 UK time, 07.30 EDT).
If you wish to participate, please dial:
UK +44(0)20 7138 0815
Finland +358 (0)9 6937 9590
Sweden +46 (0)8 5065 3938
US +1 212 444 0895
Confirmation Code: 2512216
The live webcast may be accessed at http://www.media-server.com/m/p/2k65q9d7
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.
www.storaenso.com
www.storaenso.com/investors
STORA ENSO OYJ
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