Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — Q1 2024 Earnings Presentation
45 slides from Stora Enso Oyj Class A's earnings presentation, Apr 25, 2024
Slide 1: Financial results Q1 2024
Financial results Q1 2024 Continuous efforts to improve profits, competitiveness and cash flow Photo: Rasmus Hjortshøj / World of Volvo
Slide 2: Key highlights
Key highlights • Sequential adj. EBIT improvement but year-on-year performance below a comparably strong Q1/2023 o Political strikes in Finland adversely impacted the results by approximately €25 million • €551 million reduction in operating working capital • Raised profit improvement target to €120
Slide 3: Continuous efforts to improve profits, competitiveness and cash flow
Continuous efforts to improve profits, competitiveness and cash flow Sales EBIT Cash flow MEUR MEUR % MEUR 3,000 14 2,721 250 234 500 2,374 12 400 2,500 323 2,127 2,174 2,164 200 10 300 254 269 2,000 156 231 150 8 200 146 1,500 6 100 38 100 1 1,000 4 0 51 50 37 -9 500 21 2 -100 -70 -104 0 0 -200 0 Q
Slide 4: Achieved cost reductions but wood costs continued to increase
Achieved cost reductions but wood costs continued to increase Other variable costs: • Energy: €18 million • Logistics: €31 million • Chemicals and fillers: €50 million • Change in inventory and other variable costs: €34 million 4
Slide 5: Packaging Materials
Packaging Materials Gradual demand improvements both in Consumer board and Containerboard MEUR Sales MEUR Adjusted EBIT % 1,500 75 60 10 1,300 1,155 50 41 1,250 1,100 1,057 1,045 5 1,000 25 750 0 0 500 -25 -22 -5 -50 -34 250 -43 -75 -10 0 Q123 Q223 Q323 Q423 Q124 Q123 Q223 Q323 Q423 Q124 Adjusted EB
Slide 6: Packaging Solutions
Packaging Solutions Weak market conditions, overcapacity and price pressure continued MEUR Sales MEUR Adjusted EBIT % 350 20 20 276 288 15 300 266 14 247 15 15 250 224 200 10 8 10 6 150 5 5 100 0 0 50 -1 0 -5 -5 Q123 Q223 Q323 Q423 Q124 Q123 Q223 Q323 Q423 Q124 Adjusted EBIT Adjusted EBIT % • Sales
Slide 7: Biomaterials
Biomaterials Overall stable demand with continuously increasing pulp prices MEUR Sales MEUR Adjusted EBIT % 600 150 30 488 500 91 100 379 375 374 20 400 345 57 300 50 35 10 200 5 0 0 100 -13 0 -50 -10 Q123 Q223 Q323 Q423 Q124 Q123 Q223 Q323 Q423 Q124 Adjusted EBIT Adjusted EBIT % • Sales decreased b
Slide 8: Wood Products
Wood Products Weaker overall demand with margins remaining at low levels MEUR Sales MEUR Adjusted EBIT % 700 5 600 25 500 454 436 0 0 400 349 341 349 300 -6 -11 -9 -25 -5 200 -21 -27 100 -50 -10 0 Q123 Q223 Q323 Q423 Q124 Q123 Q223 Q323 Q423 Q124 Adjusted EBIT Adjusted EBIT % • Sales decreased by 23
Slide 9: Forest
Forest Increased prices, strong wood demand and good harvesting conditions MEUR Sales MEUR Adjusted EBIT % 800 687 80 75 20 700 650 659 70 620 62 59 600 534 57 15 60 500 400 40 10 300 200 20 5 100 0 0 0 Q123 Q223 Q323 Q423 Q124 Q123 Q223 Q323 Q423 Q124 Adjusted EBIT Adjusted EBIT % • Sales decreased
Slide 10: Building a more profitable and competitive company
Building a more profitable and competitive company Oulu investment Restructuring Profit improvement ~€1 billion during programme programme 2023–2024 EBIT impact €110 million EBIT impact €120 million annually annually Decentralised P&L Oulu investment ramping divisions and up €800e million sales busi
Slide 11: Committed growth investments proceeding as planned
Committed growth investments proceeding as planned Returning to average capex range of €600 - 800 million after 2024 MEUR Average capex split for 1,200 1,125 1,030- 1,130 2014–2024 1,000-1,100 989 Depending on investment decisions 1,000 781 729 778 800 687 666 600- 640 656 800 600 574 400 200 0 2014
Slide 12: Achieved significant reduction in operating working capital
Achieved significant reduction in operating working capital MEUR MEUR Net debt to adjusted EBITDA Operating working capital 4,000 5.0 1500 1250 3,500 4.0 1000 3,000 3.0 750 2,500 2.0 500 2,000 1.0 250 1,500 0.0 0 Q123 Q223 Q323 Q423 Q124 Q123 Q223 Q323 Q423 Q124 Net debt Net debt to adjusted EBITDA
Slide 13: Maintaining a strong liquidity position
Maintaining a strong liquidity position MEUR Liquidity position at the end of March 2024 3,500 • Liquidity at the end of March 2024: 100 3,000 − €2.1 billion cash and cash equivalents 200 100 700 − €700 million committed revolving credit facility 200 2,500 fully undrawn 400 700 700 − €100 million co
Slide 14: Development of long-term Group financial targets
Development of long-term Group financial targets Group long-term financial targets Q1/23 Q1/24 2023 Dividend (annual) in EUR/share To distribute 50% of EPS excluding 0.10* N/A N/A fair valuation over the cycle (0.20)** Growth YoY > 5% -3% -20% -20% Net debt to adjusted EBITDA < 2.0x 1.3 4.0 3.2 Net
Slide 15: Progressing towards our sustainability targets and initiatives
Progressing towards our sustainability targets and initiatives Climate change Circularity Biodiversity -50% 100% Net positive Targets reduction in absolute emissions Recyclable products Impact on biodiversity by 2030 (Scope 1,2,3) by 2030 by 2050 Committed to reaching -44% net-zero CO2 Scope 1+2 (Q1
Slide 16: Market demand development from Q1/2024 to Q2/2024
Market demand development from Q1/2024 to Q2/2024 Packaging • Demand for consumer board and containerboard is expected to be slightly stronger Materials • Value chain destocking has ended Packaging • Demand for corrugated packaging in Europe is expected to be stronger mainly due to Solutions the sea
Slide 17: Key takes – building a stronger future
Key takes – building a stronger future Powering ahead • Continued focus on profit improvement, competitiveness and cash flow through; o Procurement, operational and commercial excellence o Capital release through working capital management and divestments • Profit improvement programme target raised
Slide 18: 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 19: Appendix
Slide 20: 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 EUR (average) per ton EUR (average) per ton 1,400 1,000 1,300 Price decline 800 1,200 of ~9% Price decline from
Slide 21: Pulp restocking is over, slight recovery in pulp prices
Pulp restocking is over, slight recovery in pulp prices 90 Inventory levels Price development 85 USD/tonne Bleached softwood kraft pulp Europe NBSK/USD, Delivered 80 Bleached hardwood kraft pulp 1,600 Europe BHKP/USD, Delivered 75 -15% China BHKP/USD NET, Delivered 70 Highest 1,400 China NBSK/USD NE
Slide 22: Continued weak construction and housing market weighs on Wood Products' performance
Continued weak construction and housing market weighs on Wood Products’ performance 22
Slide 23: Strategic growth areas represented 56% of Group sales in Q1/2024
Strategic growth areas represented 56% of Group sales in Q1/2024 Sales 2006 Sales Q1/2024 Sales in ~2030 30%* 56%* 80%* Strategic growth areas Strategic growth areas Strategic growth areas Paper Foundation sales Foundation sales Calculations are based on external sales *Strategic growth areas includ
Slide 24: 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 10% Consumer 5% end uses 65% 3% Construction 10% 10% Other Food & industrial beverages 5% 5% 35% Industrial 77% packaging 20% Pharma & Personalcare Industrial 10% end uses
Slide 25: Development of long-term targets
Development of long-term targets Financial performance Q1/2023 Q1/2024 Growth YoY > 5% -3% -20% Net debt to adjusted EBITDA < 2.0x 1.3 4.0 Net debt to equity < 60% 25% 33% Adjusted ROCE excl. Forest > 13% 17% 0% Dividend per share (EUR) To distribute 50% of EPS excluding 0.10* 0.60 fair valuation ov
Slide 26: Volumes and fixed costs improved as no planned annual shutdowns during Q1 2024
Volumes and fixed costs improved as no planned annual shutdowns during Q1 2024 Other variable costs: • Energy: €-17 million • Logistics: €-8 million • Chemicals and fillers: €-5 million • Change in inventory and other variable costs: €50 million 26
Slide 27: Maintenance shutdowns impacting quarterly results
Maintenance shutdowns impacting quarterly results Planned maintenance shutdowns in 2024 Group total planned maintenance Biomaterials Packaging Materials impact on adjusted EBIT Q1: - Q1: - MEUR Q2: Beihai, Langerbrugge Q2: Montes del Plata, 200 Q3: Oulu, Varkaus, Heinola Skutskär 180 Q4: Fors, Imatr
Slide 28: Stable cash flow from operations
Stable cash flow from operations MEUR • Cash flow after investing activities was €-104 (1) million • Working capital decreased by €10 million • Cash spent on fixed and biological assets was €373 million, of which the majority related to strategic investments • Payments related to the previously anno
Slide 29: Cash flow by divisions in Q1/2024
Cash flow by divisions in Q1/2024 MEUR 200 175 160 150 130 125 100 87 75 50 18 25 7 8 0 -25 -6 -15 -17 -50 -30 -75 -47 -100 -125 -150 -129 Packaging Materials Packaging Solutions Biomaterials Wood Products Forest Other Cash flow from operations Cash flow after investing activities 29
Slide 30: Maturity profile 2024
Maturity profile 2024 March 2024 MEUR 24% 1300 11% Bonds 1200 23% Loans from Financial Institutions 1100 Joint Venture Financing 1000 Commercial Papers 900 Loans from Wood Suppliers 800 14% 14% Other Loans / Liabilities 700 12% Committed Credit Facility 600 10% 10% 500 400 300 6% 200 100 1% 0 2024 2
Slide 31: Division overview (sales, adj. EBIT and adj. EBIT margin)
Division overview (sales, adj. EBIT and adj. EBIT margin) Sales Packaging Materials Packaging Solutions Biomaterials Wood Products Forest MEUR MEUR MEUR MEUR MEUR 1,300 488 454 687 1,500 500 500 500 436 750 650 659 1,155 620 1,057 1,045 1,100 379 345 375 374 349 341 349 534 400 400 400 1,000 276 288
Slide 32: Adjusted EBIT by segments
Adjusted EBIT by segments MEUR Change % Change % Q1/24 Q1/23 Q4/23 Q1/24-Q1/23 Q1/24-Q4/23 Packaging Materials 60 41 46.0% -43 240.4% % of sales 5.5% 3.2% -4.1% Packaging Solutions -1 8 -113.0% 6 -117.7% % of sales -0.5% 2.8% 2.3% Biomaterials 57 91 -37.3% 35 65.1% % of sales 15.3% 18.7% 9.3% Wood P
Slide 33: Stable forest valuation
Stable forest valuation Group forest assets BEUR 10.0 8.7 8.6 9.0 8.0 8.0 8.2 8.1 8.3 8.3 8.1 8.3 • Fair value* of €8.6 billion equivalent to 8.0 7.2 7.4 7.4 €10,94 per share 7.0 2.6 2.6 2.7 2.6 6.0 2.3 2.4 2.4 2.5 2.5 2.9 2.8 2.6 2.6 • The QoQ decrease of €106 million was primarily caused by the fo
Slide 34: Stora Enso's energy self-sufficiency 73% FY/2024
Stora Enso’s energy self-sufficiency 73% FY/2024 Group energy self-sufficiency excl. JVs (2024e) Group wood self-sufficiency by country 2023 100% 73% 70% 87% 76% 65% 67% 24% Total energy Fuels Electricity Finland Sweden Uruguay Brazil China 34
Slide 35: Energy balance in detail
Energy balance in detail Group energy balance estimate excl. JVs (2024e) 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 ~-1,4 Self-sufficiency 70% TWh/a 30 Fossil fuel price ~7.8 20 Self-sufficiency 10 87% En
Slide 36: Biomass as primary fuel source
Biomass as primary fuel source Group fuel consumption Q1/2024 3% 1% 2% 4% 5% Biomass Coal Gas Other Fossil Fuel Oil Peat 85% Stora Enso Group’s total Q1/2024 fuel consumption was 7,3 TWh 36
Slide 37: Net Financial Items
Net Financial Items MEUR Change % Change % Q1/24 Q1/23 Q4/23 Q1/24-Q1/23 Q1/24-Q4/23 Net interest expense -31 -25 -6 -30 -1 Average interest rate* 4.2% 3.5% 4.0% Foreign exchange gains and losses -7 -2 -4 9 -16 Other financial items -9 -2 -8 -31 22 Total net financial items -47 -29 -18 -52 5 *Quarte
Slide 38: Net FX by division
Net FX by division Packaging Materials Packaging Solutions Biomaterials Wood Products Forest -6 -4 -2 0 2 4 6 8 10 12 MEUR Q1/2024 y-o-y Q4/2023 y-o-y Q3/2023 y-o-y Q2/2023 y-o-y 38
Slide 39: Indicators driving the demand for Packaging
Indicators driving the demand for Packaging Private consumption Industrial production* Annual growth rate (%) Annual growth rate (%) 12 10 10 8 8 6 6 4 4 2 0 2 -2 0 -4 -2 -6 -8 -4 -10 -6 -12 -14 -8 2020 2021 2022 2023 2024F 2020 2021 2022 2023 2024F EU UK US China Source: Consensus, The World Bank “
Slide 40: Indicators for demand development in Packaging
Indicators for demand development in Packaging GDP Inflation 10 Annual growth rate (%) 10 Annual growth rate (%) 8 9 6 8 4 7 2 6 0 5 -2 4 -4 3 -6 2 -8 -10 1 -12 0 2020 2021 2022 2023 2024F 2020 2021 2022 2023 2024F EU UK US China Source: Consensus 40
Slide 41: Paper for recycling prices
Paper for recycling prices 360 Mixed OCC ONP/ONG 320 280 240 200 EUR/tonne 160 120 80 40 0 Q216 Q416 Q217 Q417 Q218 Q418 Q219 Q419 Q220 Q420 Q221 Q421 Q222 Q422 Q223 Q423 Source: Fastmarkets FOEX 41
Slide 42: 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 Source: Luonnonvarakeskus 42
Slide 43: 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 Source: Ludvig & Co 25 January 2024 report, based on nominal prices 43
Slide 44: ESG ratings and recognition in Q1/2024
ESG ratings and recognition in Q1/2024 Climate A-, Forest A ESG rating AAA (highest and Water A- possible score) Highest recognition level, Platinum, Total ESG rating 14.4** out of 100 score 82 out of 100 FTSE Transition ESG rating 4.4 out of 5.0 Top-ranked in both Pathway management quality Russell
Slide 45: The renewable materials company