Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — Q4 2023 Earnings Presentation
47 slides from Stora Enso Oyj Class A's earnings presentation, Feb 1, 2024
Slide 1: Financial results Q4 2023: Focus on profit improvement, competitiveness and cash flow
Financial results Q4 2023 Focus on profit improvement, competitiveness and cash flow President and CEO Hans Sohlström CFO Seppo Parvi 1 February 2024
Slide 2: Full-year 2024 guidance and dividend
Full-year 2024 guidance and dividend Guidance • The full-year 2024 operational EBIT is expected to be higher than for the full-year 2023, €342 million Dividend • The Board of Directors proposes at the AGM on 20 March dividend distribution of €0.10 per share to be paid in April • Additionally, it is
Slide 3: Continued market headwinds pressured Packaging and Wood Products businesses
Continued market headwinds pressured especially Packaging and Wood Products businesses – easing on the cost side MEUR Sales MEUR Operational EBIT % MEUR Cash Flow 500 3,000 2,864 427 2,721 20 400 400 2,374 355 323 2,500 2,127 2,174 15 300 254 2,000 300 231 202 234 200 146 1,500 10 200 100 38 1,000 1
Slide 4: Lower sales prices and volumes, and increased fiber costs adversely affected profitability
Lower sales prices and volumes, and increased fiber costs adversely affected profitability despite relief from other variable and fixed costs Other variable costs: • Energy: €-8 million • Logistics: €47 million • Chemicals and fillers: €37 million • Change in inventory and other variable costs: €-36
Slide 5: Packaging Materials
Packaging Materials Low market demand continued, price pressure in all segments MEUR Sales MEUR Operational EBIT % 1,500 75 1,335 1,300 59 10 1,250 1,155 50 41 1,057 1,045 5 1,000 25 750 0 0 500 -25 -22 -5 -50 -34 250 -43 -75 -10 0 Q422 Q123 Q223 Q323 Q423 Q422 Q123 Q223 Q323 Q423 Sales Operational
Slide 6: Packaging Solutions
Packaging Solutions Weak market conditions and price pressure continued on all markets MEUR Sales MEUR Operational EBIT % 10 350 20 300 276 288 266 8 247 15 14 250 15 6 200 177 10 8 150 4 5 6 100 5 2 50 0 0 0 Q422 Q123 Q223 Q323 Q423 Q422 Q123 Q223 Q323 Q423 Sales Operational EBIT margin • Sales inc
Slide 7: Biomaterials
Biomaterials Modest improvement from Q3/2023, underlying demand continued at a weak level MEUR Sales MEUR Operational EBIT % 800 300 40 700 649 249 250 600 30 488 200 500 379 375 150 20 400 345 91 100 300 10 50 35 200 5 0 100 0 0 -13 -50 -10 Q422 Q123 Q223 Q323 Q423 Q422 Q123 Q223 Q323 Q423 Sales Op
Slide 8: Wood Products
Wood Products Continued weaker overall demand and low margins MEUR Sales MEUR Operational EBIT % 700 5 600 25 500 471 454 436 0 0 400 349 341 300 -6 -11 -14 200 -25 -5 -21 -27 100 0 -50 -10 Q422 Q123 Q223 Q323 Q423 Q422 Q123 Q223 Q323 Q423 Sales Operational EBIT margin • Sales decreased by 28%, or €
Slide 9: Forest: Strong performance in the Group's forest assets
Forest Strong performance in the Group’s forest assets MEUR Sales MEUR Operational EBIT % 800 80 75 687 20 700 664 650 620 62 62 59 60 57 600 534 15 500 400 40 10 300 200 20 5 100 0 0 0 Q422 Q123 Q223 Q323 Q423 Q422 Q123 Q223 Q323 Q423 Sales Operational EBIT margin • Sales decreased by 2%, or €14 mi
Slide 10: Forest valuation continues to rise, driven by market price increases
Forest valuation continues to rise, driven by market price increases Group forest assets BEUR 10.0 9.0 8.3 8.3 8.7 • Fair value* of €8.7 billion equivalent 8.2 8.1 8.3 8.0 7.4 7.4 8.0 8.0 8.1 to €11 per share 7.2 2.6 7.0 2.7 2.6 6.0 2.3 2.4 2.4 2.5 2.5 2.9 2.8 2.6 2.6 • €393 million higher valuation
Slide 11: Unlocking wind power potential with strategic initiatives
Unlocking wind power potential with strategic initiatives Our ambition is to The total potential Our aim is to reach 5–10 Our recent agreement develop and for wind power TWh of wind power with OX2 on a joint significantly production on Stora production, ramping up wind power increase our Enso’s fore
Slide 12: Focus on profit improvement, competitiveness and cash flow
Focus on profit improvement, competitiveness and cash flow • New profit improvement programme targeting annualised €80 million improvement of operational EBIT • Potential reduction of approximately 1,000 employees across all divisions and group functions but without any production site closures • Th
Slide 13: Development of long-term Group financial targets
Development of long-term Group financial targets Group long-term financial targets Q4/22 Q4/23 2022 2023 Dividend (annual) in EUR/share To distribute 50% of EPS excluding 0.10* N/A N/A 0.60 fair valuation over the cycle (0.20)** Growth YoY > 5% 5% -24% 17%*** -20% Net debt to operational EBITDA < 2.
Slide 14: Committed growth investments proceeding as planned
Committed growth investments proceeding as planned Returning to average capex range of €600 - 800 million after 2024 Average capex split for 2014–2024 1,200 1,125 Depending on investment decisions 1,000-1,100 989 1,000 781 729 778 800 687 666 640 656 574 600 400 200 0 2014 2015 2016 2017 2018 2019 2
Slide 15: Focusing on improving cash flow
Focusing on improving cash flow Significant improvement in working capital reduction MEUR Cash flow development • Stora Enso has implemented restructuring actions during the second half of 2023 to 2,100 1,991 protect its margins and cash flow 1,873 1,900 1,700 1,752 • These actions will benefit fina
Slide 16: Maintaining a strong liquidity position
Maintaining a strong liquidity position MEUR Liquidity position at the end of 2023 • Liquidity at the end of 2023: 3,500 100 − €2.5 billion cash and cash equivalents 3,000 200 − €700 million committed revolving credit 700 200 facility fully undrawn 2,500 400 700 − €100 million committed credit facil
Slide 17: Progressing towards our sustainability targets and initiatives
Progressing towards our sustainability targets and initiatives Committed to reaching net-zero CO2 emissions by 2040 through signing The Climate Pledge Climate change Circularity Biodiversity -50% 100% Net positive Targets reduction in absolute emissions Recyclable products by 2030 Impact on biodiver
Slide 18: Market demand development from Q4/2023 to Q1/2024
Market demand development from Q4/2023 to Q1/2024 Packaging • Demand for consumer board and containerboard expected to remain stable Materials • Value chain destocking is coming to an end during the first half of 2024 Packaging • Demand for corrugated packaging in Europe expected to be stronger main
Slide 19: Key takes – Building a stronger future
Key takes – Building a stronger future Restructuring • Focus on profit improvement, competitiveness and cash flow • New profit improvement programme targets €80m annualised operational EBIT improvement • Completed restructuring programme resulting in an annual operational EBIT improvement of €110m D
Slide 20: Disclaimer
Disclaimer It should be noted that Stora Enso and its business are exposed to various risks and uncertainties and certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profi
Slide 21: Stora Enso Q4 2023 results
al storaenso QD OO & & THE RENEWABLE MATERIALS COMPANY 21 Stora Enso Q4 2023 results
Slide 22: Weak packaging demand reduced prices for containerboard and Folding Box Board
Weak packaging demand reduced prices for containerboard and Folding Box Board Containerboard price development €/tonnes Folding Box Board price development €/tonnes 1,600 1,400 1,500 1,200 1,400 1,000 1,300 EUR (average) per ton EUR (average) per ton Price decline 800 1,200 of ~9% from peak 600 Pric
Slide 23: Pulp restocking is over, slight recovery in pulp prices
Pulp restocking is over, slight recovery in pulp prices Inventory levels Price development USD/tonne Europe NBSK/USD, Delivered 90 Bleached softwood kraft pulp 1,600 Europe BHKP/USD, Delivered 85 Bleached hardwood kraft pulp -15% 80 China BHKP/USD NET, Delivered 1,400 75 Highest China NBSK/USD NET,
Slide 24: Continued weak construction and housing market weighs on Wood Products' performance
Continued weak construction and housing market weighs on Wood Products’ performance 24 Stora Enso Q4 2023 results
Slide 25: Strategic growth areas represented 55% of Group sales in Q4/2023
Strategic growth areas represented 55% of Group sales in Q4/2023 Sales 2006 Sales Q4/2023 Sales in ~2025 Sales in ~2030 30%* 55%* 60%* 80%* Strategic growth areas Strategic growth areas Strategic growth areas Strategic growth areas Paper Foundation sales Foundation sales Foundation sales 25 *Strateg
Slide 26: Stora Enso – End use geographies and segments
Stora Enso – End use geographies and segments Group sales by geography (FY/2023)* Group sales by end use (FY/2023)* Construction Consumer 10% end uses 65% 5% Construction 3% 10% 10% Other industrial 5% Food & Europe beverages 5% China 35% Rest of Asia Industrial 77% packaging North America 20% Other
Slide 27: Development of long-term targets
Development of long-term targets Financial performance Q4/2022 Q4/2023 Growth YoY > 5% 5% -24% Net debt to operational EBITDA < 2.0x 0.7 3.2 Net debt to equity < 60% 15% 29% Operational ROCE excl. Forest > 13% 20% 1% To distribute 50% of EPS excluding fair valuation over the 0.10* Dividend per share
Slide 28: Pressure on variable and fixed costs other than fiber eased during the fourth quarter
The pressure on variable and fixed costs other than the fiber costs eased during the fourth quarter - improving profitability Other variable costs: • Energy: €11 million • Logistics: €4 million • Chemicals and fillers: €10 million • Change in inventory and other variable costs: €10 million 28 Stora
Slide 29: Maintenance shutdowns impacting quarterly results
Maintenance shutdowns impacting quarterly results Maintenance shutdowns in 2023 Packaging Materials Biomaterials Group total planned maintenance Q1: - Q1: Veracel impact on operational EBIT Q2: Beihai, Ostroleka, Q2: Montes del Plata, MEUR Langerbrugge Skutskär 200 Q3: Anjalankoski, Heinola, Q3: - 1
Slide 30: Working capital improved due to restructuring actions
Working capital improved due to restructuring actions MEUR • Cash flow after investing activities was €-9 (38) million • Working capital decreased by €207 million, mainly due to lower inventories and trade receivables, and higher trade payables. • Cash spent on fixed and biological assets was €328 m
Slide 31: Cash flow by divisions in Q4/2023
Cash flow by divisions in Q4/2023 MEUR 175 155 150 125 100 71 75 54 47 50 40 26 26 25 15 0 -1 -25 -20 -50 -40 -75 -59 Packaging Materials Packaging Solutions Biomaterials Wood Products Forest Other Cash flow from operations Cash flow after investing activities 31 Stora Enso Q4 2023 results
Slide 32: Year-on-year net debt to operational EBITDA
Year-on-year net debt to operational EBITDA MEUR 3.5 3,500 3 3,000 2.5 2 2,500 1.5 2,000 1 1,500 0.5 Q419 Q120 Q220 Q320 Q420 Q121 Q221 Q321 Q421 Q122 Q222 Q322 Q422 Q123 Q223 Q323 Q423 Net debt Net debt to operational EBITDA 32 Stora Enso Q4 2023 results
Slide 33: Maturity profile 2023
Maturity profile 2023 December 2023 MEUR Bonds Loans from Financial Institutions 1300 23% 12% Joint Venture Financing 1200 23% Commercial Papers 1100 1000 Loans from Wood Suppliers 900 14% Other Loans / Liabilities 800 Committed Credit Facility 13% 700 11% 600 10% 10% 500 400 300 5% 200 100 1% 0 202
Slide 34: Division overview (sales, opEBIT and opEBIT margin)
Division overview (sales, opEBIT and opEBIT margin) Sales Packaging Materials Packaging Solutions Biomaterials Wood Products Forest MEUR MEUR MEUR MEUR MEUR 276 288 750 649 600 800 664 687 650 1,500 1,335 1,300 300 266 247 471 454 620 1,155 1,057 436 534 1,045 488 600 177 500 400 349 341 1,000 200 3
Slide 35: Operational EBIT by segments
Operational EBIT by segments Change % Change % MEUR Q4/23 Q4/22 Q3/23 Q4/23-Q4/22 Q4/23-Q3/23 Packaging Materials -43 59 -172.4% -34 -25.0% % of sales -4.1% 4.4% -3.2% Packaging Solutions 6 5 11.3% 14 -60.4% % of sales 2.3% 2.9% 5.4% Biomaterials 35 249 -86.1% 5 n/m % of sales 9.3% 38.4% 1.4% Wood P
Slide 36: Stora Enso's energy self-sufficiency 72% FY/2023
Stora Enso’s energy self-sufficiency 72% FY/2023 Group energy self-sufficiency excl. JVs 2023 Group wood self-sufficiency by country 2023 82% 72% 100% 68% 76% 69% 70% 65% 67% 24% Total energy Fuels Electricity Finland Sweden Uruguay Brazil China Group OL3 impact for 2023 36 Stora Enso Q4 2023 result
Slide 37: Energy balance in detail
Energy balance in detail Group energy balance estimate excl. JVs 2023 Impact on non-hedged volume on EUR operating profit from 10% change million 50 for the next 12 months in: p.a. 40 Electricity market price ~2.4 Self-sufficiency TWh/a 70% 30 Fossil fuel price ~7.9 20 Self-sufficiency 10 82% Energy
Slide 38: Biomass as primary fuel source
Biomass as primary fuel source Group fuel consumption Q4/2023 1% 3% 1% 5% 5% Biomass Coal Gas Other Fossil Fuel Oil Peat 84% Stora Enso Group’s total Q4/2023 fuel consumption was 6,9 TWh 38 Stora Enso Q4 2023 results
Slide 39: Net Financial Items
Net Financial Items Change Change MEUR Q4/23 Q4/22 Q3/23 Q4/23-Q4/22 Q4/23-Q3/23 Net interest expense -30 -21 -9 -29 -1 Average interest rate* 4.0% 3.3% 3.8% Foreign exchange gains and losses 9 -9 18 -7 16 Other financial items -31 -9 -22 -4 -27 Total net financial items -52 -39 -13 -40 -12 39 Stora
Slide 40: Net FX by division
Net FX by division Packaging Materials Packaging Solutions Biomaterials Wood Products Forest MEUR -10 -5 0 5 10 15 20 25 30 Q4/2023 y-o-y Q3/2023 y-o-y Q2/2023 y-o-y Q1/2023 y-o-y 40 Stora Enso Q4 2023 results
Slide 41: Indicators for demand development in Packaging
Indicators for demand development in Packaging Private consumption Industrial production* Annual growth rate (%) Annual growth rate (%) 10 16 8 14 6 12 4 10 2 8 0 6 -2 4 -4 2 -6 0 -8 -2 -10 -4 -12 -6 -14 -8 2020 2021 2022 2023 2024F 2020 2021 2022 2023 2024F Finland Sweden Poland Baltics Germany UK
Slide 42: Indicators for demand development in Packaging
Indicators for demand development in Packaging GDP Inflation Annual growth rate (%) Annual growth rate (%) 10 20 8 6 15 4 2 0 10 -2 -4 -6 5 -8 -10 -12 0 2020 2021 2022 2023 2024F 2020 2021 2022 2023 2024F Finland Sweden Poland Baltics Germany UK Benelux Source: Consensus, European Economic Forecast
Slide 43: Paper for recycling prices
Paper for recycling prices Mixed OCC ONP/ONG 360 320 280 240 EUR/tonne 200 160 120 80 40 0 Q116 Q316 Q117 Q317 Q118 Q318 Q119 Q319 Q120 Q320 Q121 Q321 Q122 Q322 Q123 Q323 Q423 43 Stora Enso Q4 2023 results Source: Fastmarkets FOEX
Slide 44: Pulpwood and sawlog prices in Finland
Pulpwood and sawlog prices in Finland Pulpwood, Pine Sawlogs, Pine 80 70 60 50 EUR/m3 40 30 20 10 0 Q113 Q313 Q114 Q314 Q115 Q315 Q116 Q316 Q117 Q317 Q118 Q318 Q119 Q319 Q120 Q320 Q121 Q321 Q122 Q322 Q123 Q323 44 Stora Enso Q4 2023 results Source: Luonnonvarakeskus
Slide 45: Forest property market transaction-based price development
Forest property market transaction-based price development Index Sweden 1,000 900 800 700 600 500 400 300 200 100 0 1995 2000 2005 2010 2015 2020 2023 Southern Sweden Central Sweden Northern Sweden Sweden 45 Stora Enso Q4 2023 results Source: Ludvig & Co 25 January 2024 report, based on nominal pric
Slide 46: ESG ratings and recognition in Q4/2023
ESG ratings and recognition in Q4/2023 Transition FTSE Pathway VigeoEiris*** Russell Initiative Climate A-, Highest ESG rating ESG QualityScore ESG rating ESG rating Top-ranked ESG rating Forest B and recognition 4.4 out of 5 highest possible AAA (highest 14.4* out of 100 in both 71 out of 100 Water
Slide 47: Stora Enso Q4 2023 results
al storaenso QD OO & & THE RENEWABLE MATERIALS COMPANY 47 Stora Enso Q4 2023 results