Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — Shareholder Meeting (March 2008)
56 slides from Stora Enso Oyj Class A's shareholder meeting presentation, Mar 26, 2008
Slide 1: Annual General Meeting
Annual General Meeting 26 March 2008
Slide 2: Forward-looking statements
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
Slide 3: CEO's report
STORAENSO CEO’s report
Slide 4: CEO's report agenda
• 2007 highlights • Financial performance Stora Enso Annual • Structural changes General Meeting • Proactive actions CEO’s report • Building our future • Way forward 4 26 March 2008 Annual General Meeting
Slide 5: Highlights 2007
Highlights 2007 • Financial performance burdened by fibre costs and weak USD • EPS excluding NRI and forest valuations maintained • North America and Papyrus (2008) divested • Structure simplified • Industry-experienced Group Executive Team • Proactive response to rapid increases of imported fibre c
Slide 6: CEO's report agenda
• 2007 highlights • Financial performance Stora Enso Annual • Structural changes General Meeting • Proactive actions CEO’s report • Building our future • Way forward 6 26 March 2008 Annual General Meeting
Slide 7: Income statement
Income statement Continuing operations Change EUR million 2006 2007 Change % EUR million Sales 12 957.2 13 373.6 416.4 3.2 Operating profit excluding NRI and 871.8 906.0 34.2 3.9 forest revaluations Operating profit – IFRS 741.5 246.2 -495.3 -66.8 Net profit excluding NRI 550.7 780.0 229.3 41.6 Net
Slide 8: Capital Structure
Capital Structure Change EUR million 2006 2007 EUR million Change % Fixed assets and other long-term 11 234.7 8 493.2 -2 741.5 -24.4 investments Associated companies 805.2 1 154.5 349.3 43.4 Working capital 979.6 1 473.5 493.9 50.4 Operating capital 13 019.5 11 121.2 -1 898.3 -14.6 Tax liabilities -
Slide 9: Change in EPS (Continuing operations)
Change in EPS (Continuing operations) 1-12/06 – 1-12/07 EUR 1,40 0.16 -0.25 1,20 0.44* -0.06 -0.09 0.30 0.99 1,00 0.03** -0.01 -0.13 -0.05 0,80 -0.04 0.69 0.69 0,60 0,40 0,20 0,00 EPS Sales Sales Wood RCP Fixed OptionsFinancing FX Divested Other EPS Forest EPS 2006 prices volume costs and Effect and
Slide 10: Improvement path
Improvement path ROCE Q1/2005 – Q4/2007 Quarterly – cont. ops % 4-Q moving avg cont. ops 4-Q moving avg cont. ops excl. FV* 16.0 14.0 Target: 13% ROCE over the cycle 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Based on EBIT excluding non-recu
Slide 11: 2007 EBIT % by business area
2007 EBIT % by business area % 14 12 10 8 6 Group Total 4 2 0 Newsprint & Book Industrial Wood Products Fine Paper Consumer Board Magazine Paper Paper Packaging EBIT excluding non-recurring items and forest revaluations 11 26 March 2008 Annual General Meeting
Slide 12: CEO's report agenda
• 2007 highlights • Financial performance Stora Enso Annual • Structural changes General Meeting • Proactive actions CEO’s report • Building our future • Way forward 12 26 March 2008 Annual General Meeting
Slide 13: Structural Changes
Structural Changes Focus and Choices • Sold: North-America (2007) and Papyrus (2008) • Removed one layer within organisation • Significant increase in reporting transparency • Objective: 35% cut in Group staffing • Increased domestic wood sourcing in Finland by 20% • Reduced Russian wood imported to
Slide 14: North America 2000 through 2007
North America 2000 through 2007 CASH FLOW No Sale - Impairment EUR million EUR million Initial Investment -4 974 Impairment of Goodwill -201 Cumulative Cash Flow 814 Impairment of Fixed Assets -528 Total Prior Total Impairment in -4 160 -729 Divestment Q3/2007 Divestment 2 162 Total -1 998 Cumulativ
Slide 15: Divestment of Papyrus
Divestment of Papyrus Rationale • No material EPS impact • Focus business portfolio • Enable Papyrus to continue to develop successfully • Our independence in supporting all distribution channels • Debt to equity reduced from 0.40 to 0.32 Financial impacts Sales reduction EUR 1 525 million EBITDA re
Slide 16: Simplified & lean organisation
Simplified & lean organisation Financial administrative costs to be reduced by setting up a Group-wide shared service centre • From 4 divisions to 7 business areas Organisation layer removed • Increased transparency • Group Executive Team members average New Group more than 20 years industry experie
Slide 17: Simplified organisation
Simplified organisation From To CEO Finance & Communi- Strategy cations Corporate Latin- Services America CEO Technology Market Finance , & HR, Services IT Asia Strategy Techno- Publication Packaging Wood logy, Fine Paper Paper Boards Production Opera- tions Un- Con- Timber, Industrial Consu- Graph.
Slide 18: CEO's report agenda
• 2007 highlights • Financial performance • Structural changes Stora Enso Annual General Meeting • Proactive actions CEO’s report • Building our future • Way forward 18 26 March 2008 Annual General Meeting
Slide 19: Russian wood imported into Finland
Russian wood imported into Finland The tough reality Other • Starting point in 2006: a third of wood Imports 1 M m3 processed in Finland imported Russian Imports 6 M m3 • In two years fibre cost rose from 18% to 25% of Group’s total costs • Taking no action was never an option: under threat Domestic
Slide 20: Response in Finland to potential full Russian duty
Response in Finland to potential full Russian duty No integrated mills down in 2007 – target for 2008 and beyond • Actions taken or still in progress – from 1/3 to slightly over 10% dependency – Domestic sourcing increased by about 20% in 2007 – Russian imports reduced by same amount – Closing down
Slide 21: Responding to Russian wood cost hike
Responding to Russian wood cost hike Finnish fibre supply, million m3 Imported Domestic Capacity Closures 25 Further usage reduction and/or domestic sourcing at competitive costs 20 15 10 5 0 2006 Actual 2007 Domestic Sourcing 2008 Kemijarvi & Summa 2009 Addition Closures All figures for consumption
Slide 22: Industry structure
Industry structure Global Bleached Softwood Kraft Pulp (BSKP) producers - Mill Capacity, 1 000 t/a - 1000 Weighted average STRONG technical age 19.2 years Operating rate 100% 900 800 1: Enocell 2: Skutskär 700 3: Sunila 1 600 4: Norrsundet 2 5: Kemijärvi 500 Weighted average capacity 473 000 t/a 400
Slide 23: Cost competitiveness in Frankfurt
Cost competitiveness in Frankfurt Standard newsprint 45 g/m2 - Europe €/t Cost level 2007/III 600 500 Summa PM3 400 300 200 Delivered Costs Pöyry estimates to Frankfurt (excluding capital costs) SE actual costs 07 100 0 0 2 000 4 000 6 000 8 000 10 000 12 000 - Cumulative capacity, 1 000 t/a - 23 26
Slide 24: Cost competitiveness in Frankfurt
Cost competitiveness in Frankfurt SC-A/B 52 g/m2 – Europe €/t SC-B Cost level 2007/IV SC-A Summa PM2 Delivered Costs to Frankfurt Pöyry estimates (excluding capital costs) SE actual costs 07 0 1 000 2 000 3 000 4 000 5 000 6 000 - Cumulative capacity, 1 000 t/a - 24 26 March 2008 Annual General Meet
Slide 25: Status at Norrsundet
Status at Norrsundet • Unions agreed with our justification for plan to close Persons affected 325 Retirement (estimate) 40 • Excellent 100% co-operation New employer at Euromaint from all stakeholders focused mill site LOI 25 on future employment External employment 50 Employment in • Solutions tod
Slide 26: Status at Kemijärvi
Status at Kemijärvi • Decision for permanent closure at the end of April Persons affected 214 Retirement (estimate) 55 • Agreement signed with Anaika New employer at mill site 100 • Solutions today for 96% of External employment (engineering, maintenance) 15 employees affected Employment in Stora En
Slide 27: Status at Summa and Anjala PM 1
Status at Summa and Anjala PM 1 • Production stopped at the end of January 2008 Persons affected 620 Retirement (estimate) 124 • Letter of Intent signed with New employer at Empower mill site 115 External employment (chemical sector etc.) 38 • Solutions today for 51% of Employment in employees affec
Slide 28: Administration and R&D
Administration and R&D • Restructuring at all locations is expected to be completed by Persons affected 294 end of June 2009 Retirement (estimate) 49 New employer at mill site 53 • Today solutions for 67% of employees affected External employment 51 Employment in Stora Enso 43 Solutions found so far
Slide 29: Restructuring summary
Restructuring summary Within eight weeks of first restructuring decisions Persons affected 1 453 Retirement (estimate) 268 • Solutions for 59% of people New employers at mill site 293 affected External employment 154 Employment in • 116 more ideas already Stora Enso 140 Solutions found so far 855 •
Slide 30: CEO's report agenda
• 2007 highlights • Financial performance • Structural changes Stora Enso Annual • Proactive actions General Meeting CEO’s report • Building our future • Way forward 30 26 March 2008 Annual General Meeting
Slide 31: Focus areas in Latin America
Focus areas in Latin America Securing low-cost fibre sources Veracel Pulp Mill • One of the world’s most cost-competitive pulp mills • Short-fibre pulp shipped to Europe and China • Exploring possibility of Veracel 2 Stora Enso Arapoti • Co-operation with Chilean Arauco • LWC, plantations Land purch
Slide 32: Russian pulp mill project
Russian pulp mill project Providing Russian market with paper from Russian wood Nizhny Novgorod • Centrally located for primary market • Pre-feasibility study announced in July 2007 • LOI sets out basic principles for further pre-investment work f Stora Enso’s extensive experience of wood sourcing i
Slide 33: Plantation project in Guangxi, China
Plantation project in Guangxi, China Building a winning concept for fast growing paper & board market • Currently 90 000 ha land purchased (50% eucalyptus), target 160 000 ha (80% eucalyptus) • Mill site acquired in Beihai • Land-use rights must develop to secure a sufficient fibre base • Production
Slide 34: Bioenergy
Bioenergy Building for future opportunities Stora Enso – Neste Oil JV • Next-generation renewable crude diesel from forest residues • Stora Enso’s expertise fully used in the form of wood sourcing - global possibilities • 5 MW pilot plant being built at Varkaus Mill; start-up by spring 2009 f The pa
Slide 35: Intelligent packaging – innovative new products
Intelligent packaging – innovative new products • Pharmaceutical non- compliance blamed for deaths of over 125 000 Americans annually • Stora Enso offers innovative solutions to this problem 35 26 March 2008 Annual General Meeting
Slide 36: Fibre-based disc packaging
Fibre-based disc packaging Paperboard compared with plastic • Renewable and recyclable • Lighter and smaller • Fossil fuel CO2 emissions only 10% of those for plastic • Recent customers include SONY BMG and Elisa 36 26 March 2008 Annual General Meeting
Slide 37: Paint can made from coreboard
Paint can made from coreboard • Made of recycled paper • Fibre-based frame 100% recyclable – Recycled for energy • 45% lighter than traditional can • Does not rust • Less expensive 37 26 March 2008 Annual General Meeting
Slide 38: CEO's report agenda
• 2007 highlights • Financial performance • Structural changes Stora Enso Annual • Proactive actions General Meeting CEO’s report • Building our future • Way forward 38 26 March 2008 Annual General Meeting
Slide 39: Way forward
Way forward D Improve performance even during the brutal realities Don’t wait for “better times” or for “others to do their share” D Find structural opportunities to create shareholder value Don’t sacrifice business logic or value creation to avoid external pressure D Take action early and fully tra
Slide 40: Dividend
STORAENSO Dividend
Slide 41: Earnings per share and dividend (Cont. Operations)
Earnings per share and dividend (Cont. Operations) 2005 – 2007 EUR EPS, excluding non-recurring items Dividend Payout ratio % 1,20 200 % 180 % 1,00 160 % 140 % 0,80 120 % 0,60 100 % * 80 % 0,40 60 % 40 % 0,20 20 % 0,00 0% 2005 2006 2007 *Board proposal 41 26 March 2008 Annual General Meeting
Slide 42: Dividend proposal
Dividend proposal • Dividend proposal: EUR 0.45 – Payout ratio: 45.5% excl. non-recurring items – Total dividend payment: about EUR 355 million (assuming 788.6 million outstanding shares) – Dividend yield: 5.0% (at a share price of EUR 9.00) • Record date: 31 March 2008 • Payment date: 10 April 2008
Slide 43: Remuneration
STORAENSO Remuneration
Slide 44: Remuneration for the Members of the Board of Directors
Remuneration for the Members of the Board of Directors Proposal for the year 2007 Chairman EUR 135 000 Deputy Chairman EUR 85 000 Members EUR 60 000 • The Nomination Committee also proposes that 40% of the remuneration shall be paid in Stora Enso Series R shares purchased from the market. 44 26 Marc
Slide 45: Remuneration for the Members of the Board Committees
Remuneration for the Members of the Board Committees Proposal for the year 2007 Financial and Audit Committee Chairman EUR 20 000 Members EUR 14 000 Compensation Committee Chairman EUR 10 000 Members EUR 6 000 45 26 March 2008 Annual General Meeting
Slide 46: Proposed Board Members
STORAENSO Proposed Board Members
Slide 47: Proposed Members of the Board of Directors
Proposed Members of the Board of Directors • Gunnar Brock • Ilkka Niemi • Claes Dahlbäck • Jan Sjöqvist • Dominique Hériard Dubreuil • Matti Vuoria • Birgitta Kantola • Marcus Wallenberg • Juha Rantanen 47 26 March 2008 Annual General Meeting
Slide 48: Juha Rantanen
Juha Rantanen • CEO and President of Outokumpu Group • Master of Science degree in Economics from Helsinki School of Economics and a Master of Business Administration from International Management Institute, Geneva • Extensive experience of leading international business management and Finnish indus
Slide 49: Auditor
STORAENSO™ Auditor
Slide 50: Election of Auditors
Election of Auditors • The Board of Directors proposes to the AGM that Authorised Public Accountants Deloitte & Touche Oy be elected to act as the independent auditor of the Company until the end of the following AGM. • This change in independent auditors was recommended by the company's Financial a
Slide 51: Election of Auditors
Election of Auditors • Committee’s key objective was to ensure a fair and transparent selection process by openly sharing selection criteria with prospective audit firms. • Factors considered in evaluating potential audit firms included: – International expertise and global organisation – Audit team
Slide 52: Nomination Committee
STORAENSO Nomination Committee
Slide 53: Appointment of Nomination Committee
Appointment of Nomination Committee Duties • The Nomination Committee proposes that the AGM appoint a Nomination Committee to prepare proposals concerning (a) the number of members of the Board of Directors, (b) the members of the Board of Directors, (c) the remuneration for the Chairman, Vice Chair
Slide 54: Amendment to the Articles of Association
Amendment to the Articles of Association
Slide 55: Amendment to the Articles of Association
Amendment to the Articles of Association Proposal to amend the articles of association • Reducing the number of the Auditors to one entity which shall be Certified Public Account Firm approved by Finnish Central Chamber of Commerce • Removing references to minimum and maximum capital and maximum num
Slide 56: Stora Enso
STORAENSO™