Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — FY2007 Earnings Presentation
46 slides from Stora Enso Oyj Class A's earnings presentation, Feb 13, 2008
Slide 1: Financial Results Q4 and Full Year 2007
Financial Results Q4 and Full Year 2007 Jouko Karvinen, CEO Hannu Ryöppönen, DCEO & CFO
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: Contents
Contents • CEO Message • Year 2007 Review • Q4 2007 Results • Near-term Market Outlook • Mitigating cost inflation • Shareholder Information • Summary 3 13 Feb 2008 Stora Enso Q4 and FY 2007 Financial Results
Slide 4: CEO Message
CEO Message 2007 • A very challenging year and final quarter – Characterised by: – Solid demand – High fibre costs – Impact of weak USD Q4 Results • Underlying paper & board business’ earnings sound • Quarterly profit depressed by: – Wood Products – Segment ’Other’ 4 13 Feb 2008 Stora Enso Q4 and FY
Slide 5: Actions
Actions • Actions taken: – Divestment of Stora Enso North America – Closing pulp capacity in Finland and Sweden, to reduce wood consumption – Permanent closure of Summa Mill and one machine at Anjala Mill – Significant reduction in Group administration costs – Continued cost reduction and productivi
Slide 6: Year 2007 Review
STORAENSO Year 2007 Review
Slide 7: FY 2007 Results (Continuing Operations)
FY 2007 Results (Continuing Operations) Highlights Operating profit* compared to 2006: Business Area Result Positive Factors Negative Factors Wood Products Higher average sales Higher average wood costs prices Consumer Board Higher wood costs, production curtailments at Enocell Newsprint Higher news
Slide 8: Key annual figures (Continuing Operations)
Key annual figures (Continuing Operations) 2005 – 2007 2005 2006 2007 Sales (1 000 tonnes) 11 673 12 489 12 477 Sales (EUR million) 11 343 12 957 13 374 EBITDA* (EUR million) 1 280 1 697 1 634 Operating profit** (EUR million) 438 872 906 Operating profit (EUR million) 210 742 246 Earnings per share*
Slide 9: Improvement path
Improvement path ROCE Q1/2005 – Q4/2007 % 16.0 Target: 13 % ROCE over the cycle 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 -05 -05 -05 -05 -06 -06 -06 -06 -07 -07 -07 -07 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Quarterly - cont. ops 4-Q moving avg cont. ops 4-Q moving avg cont. ops excl. FV* Based on EBIT exclu
Slide 10: Operating profit
Operating profit 2003 – 2007 EUR million Operating margin (%) 1400 14 1200 12 1000 Effect of forest 10 revaluation 800 8 600 6 400 4 200 2 0 0 2003 2004 2005 2006 2007 Total Operations Continuing Operations Operating margin % Total Operations Comparatives excluding goodwill amortisation excluding no
Slide 11: Composition of costs (Continuing Operations)
Composition of costs (Continuing Operations) 2005 – 2007 Costs 2005 2006 2007 Variable costs 61 % 59 % 63 % Fibre 18 % 22 % 25 % Chemicals and Fillers 9% 9% 9% Energy 8% 8% 8% Production Service and Material 14 % 10 % 11 % Logistics & Commisions 12 % 10 % 10 % Fixed costs 30 % 32 % 29 % Personnel 17
Slide 12: Q4 2007 Results
STORAENSO Q4 2007 Results
Slide 13: Financial highlights (Continuing Operations)
Financial highlights (Continuing Operations) Q4 2007 IV/06 I/07 II/07 III/07 IV/07 Sales (EUR million) 3 319.9 3 410.5 3 355.9 3 234.5 3 372.7 Operating profit** (EUR million) 223.8 311.6 231.0 207.1 156.3 Operating profit (EUR million) 254.4 315.2 276.8 -297.4 -48.4 EPS (EUR) 0.38 0.26 0.22 -0.33 -
Slide 14: Change in EPS (Continuing Operations) Q4/06 – Q4/07
Change in EPS (Continuing Operations) Q4/06 – Q4/07 EUR 0.35 0.22 -0.01 0.29 0.30 0.04 -0.06 0.25 0.02 0.20 0.19 -0.02 -0.02 -0.04* 0.15 -0.03 0.10 0.05 0.00 Q4/06 Sales prices Sales Wood RCP Fixed costs Options and Financing Forest Divested Q4/07 and mix volume hedges valuation and closed units * O
Slide 15: Change in EPS (Continuing Operations) Q3/07 – Q4/07
Change in EPS (Continuing Operations) Q3/07 – Q4/07 EUR 0.35 0.16 -0. 01 0.29 0.30 0.23 0.25 -0.02 -0.01 -0.01 -0.03* 0.20 -0.02 0.15 0.10 0.05 0.00 Q3/07 Sales prices Wood Fixed costs Options and Financing Forest Other Q4/07 and mix hedges valuation * Options and hedges is a net of share-based comp
Slide 16: Near-term Market Outlook
STORAENSO Near-term Market Outlook
Slide 17: Near-term market outlook
Near-term market outlook Business Area Demand development Price development Contract negotiations are still on-going; Newsprint Demand should remain steady overseas prices have increased in the first quarter Prices for coated and SC grades are Magazine Paper Market has strengthened rising Demand is
Slide 18: Mitigating cost inflation
STORAENSO Mitigating cost inflation
Slide 19: Mitigating cost inflation
Mitigating cost inflation Examples of on-going actions • Energy cost reduction and efficiency improvement, especially in Newsprint and Magazine Business Areas • Production optimisation: – Lower wood consumption ratio and RCP yield increase – More focus on predictive maintenance • Increase customer p
Slide 20: Marginal wood costs
Marginal wood costs Assuming full Russian export duty implementation Mill gate cost Economically unviable (EUR/m3) Softwood Hardwood Supply Volume 20 13 Feb 2008 Stora Enso Q4 and FY 2007 Financial Results
Slide 21: Shareholder Information
STORAENSO Shareholder Information
Slide 22: Earnings per share and dividend
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 22 13 Feb 2008 Stora Enso Q4 and FY 2007 Financial Result
Slide 23: 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 24: Annual general meeting (AGM)
Annual general meeting (AGM) AGM to be held at 16:00 Finnish time on Wednesday 26 March 2008 Marina Congress Centre, Katajanokanlaituri 6, Helsinki, Finland 24 13 Feb 2008 Stora Enso Q4 and FY 2007 Financial Results
Slide 25: Summary
STORAENSO Summary
Slide 26: Summary
Summary • Economic outlook and business environment is challenging • Robust actions taken to counter challenges • Rising export duties on Russian wood is a serious threat • Business units have concrete plans to reduce costs and improve margins: – Should largely offset 2.5-3% estimated unit cost infl
Slide 27: www.storaenso.com
STORAENSO™ www.storaenso.com
Slide 28: Appendix
STORAENSO Appendix
Slide 29: Earnings per share
Earnings per share 2002 – 2007 EUR 1.00 0.90 Effect of forest 0.80 revaluation 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2002 2003 2004 2005 2006 2007 Total Operations Continuing Operations excluding non-recurring items 29 13 Feb 2008 Stora Enso Q4 and FY 2007 Financial Results
Slide 30: 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 0.30 -0.05 0.31 -0.04 0.99 1.00 -0.06 -0.09 0.03* -0.01 0.80 0.69 0.60 0.40 0.20 0.00 2006 Sales Sales Wood RCP Fixed Options Financing Forest Divested Other 2007 prices and volume costs and valuation and mix hedges clo
Slide 31: Summary financials (Continuing Operations)
Summary financials (Continuing Operations) EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales (EUR million) 12 957.2 13 373.6 3410.5 3 355.9 3 234.5 3 372.7 EBITDA* (EUR million) 1 697.4 1 634.3 518.2 445.1 382.6 288.4 Operating profit* (EUR million) 884.4 1 171.7 327.2 252.4 252.0 340.1 Operating
Slide 32: Debt/Equity
Debt/Equity 2005 – 2007 Objective < 0.8 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.50 0.45 0.40 0.35 0.30 0.25 0.20 I/05 II/05 III/05 IV/05 I/06 II/06 III/06 IV/06 I/07 II/07 III/07 IV/07 32 13 Feb 2008 Stora Enso Q4 and FY 2007 Financial Results
Slide 33: Financial performance and rating development (Standard & Poor's)
Financial performance and rating development (Standard & Poor’s) ROCE % D/E 14,0 1 BBB+ (Stable) BBB+ (neg) 0,9 12,0 BBB (stable) 0,8 BBB (neg) 10,0 0,7 BBB- (neg) 0,6 8,0 0,5 6,0 0,4 4,0 0,3 0,2 2,0 0,1 0,0 0 -03 -04 -04 -04 -04 -05 -05 -05 -05 -06 -06 -06 -06 -07 -07 -07 -07 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q
Slide 34: Net Financial Items from Continuing Operations 2007
Net Financial Items from Continuing Operations 2007 EUR million Q1/2007 Q2/2007 Q3/2007 Q4/2007 Total 2007 Interest income, deposits* 19.0 18.9 18.1 17.8 73.8 Interest expenses, borrowings* -62.6 -60.4 -57.1 -59.3 -239.4 Interest rate swaps* 0.9 3.0 0.1 -0.9 3.1 Net Interest Expense -42.7 -38.5 -38.
Slide 35: Non-recurring items effect (Continuing Operations)
Non-recurring items effect (Continuing Operations) 2007 Excluding non- Non-recurring recurring items items IFRS EBITDA (EUR million) 1 634.3 -178.9 1 455.4 EBIT (EUR million) 1 171.7 -925.5 246.2 Profit after financial items 1 002.8 -925.5 77.3 (EUR million) Tax effect -222.8 217.0 -5.8 Net profit (
Slide 36: Transaction risk and hedges in 2007
Transaction risk and hedges in 2007 (Continuing Operations) EUR million EUR USD GBP SEK JPY Other Total Sales 2007 7 800 1 500 900 1 400 300 1 400 13 300 Costs 2007 -7 300 -600 -200 -2 400 0 -1 200 -11 700 Net operating cash flow * 500 900 700 -1 000 300 200 1 600 Transaction hedges 395 327 -563 85
Slide 37: Newsprint
Newsprint EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales 1 704.0 1734.9 438.7 429.9 430.0 436.3 Operating profit* 232.1 211.9 61.1 50.2 52.2 48.4 % of sales 13.6 12.2 13.9 11.7 12.1 11.1 ROOC, %** 16.7 15.7 17.6 14.7 15.6 15.2 Deliveries, 1 000 t 3 091 3 061 756 749 753 803 Production, 1 000 t
Slide 38: Magazine Paper
Magazine Paper EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales 2 220.3 2 296.3 566.6 552.9 587.3 589.5 Operating profit* 70.7 52.2 13.0 9.6 17.0 12.6 % of sales 3.2 2.3 2.3 1.7 2.9 2.1 ROOC, %** 3.5 2.7 2.6 1.9 3.6 2.9 Deliveries, 1 000 t 2 765 2 993 717 717 774 785 Production, 1 000 t 2 772 2 9
Slide 39: Fine Paper
Fine Paper EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales 2 261.8 2 156.2 577.0 522.8 529.7 526.7 Operating profit* 152.7 208.6 60.2 34.6 38.6 75.2 Operating profit*** 152.7 169.6 60.2 34.6 38.6 36.2 % of sales 6.8 9.7 10.4 6.6 7.3 14.3 ROOC, %** 7.1 9.8 11.7 6.5 7.3 14.1 ROOC, %*** 7.1 8.0 11.
Slide 40: Merchants
Merchants EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales 1 907.2 2 006.0 532.9 479.4 474.4 519.3 Operating profit* 32.7 44.9 16.6 8.2 7.9 12.2 % of sales 1.7 2.2 3.1 1.7 1.7 2.3 ROOC, %** 5.5 8.6 12.3 6.2 6.1 9.6 Continuing Operations *excluding non-recurring items **100 % x Operating profit/Op
Slide 41: Consumer Board
Consumer Board EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales 2 331.9 2 300.9 589.6 570.1 562.1 579.1 Operating profit* 240.9 158.0 72.4 29.0 27.0 29.6 % of sales 10.3 6.9 12.3 5.1 4.8 5.1 ROOC, %** 11.9 8.4 14.6 5.9 5.9 6.9 Deliveries, 1 000 t 2 537 2 532 638 640 632 622 Production, 1 000 t 2
Slide 42: Industrial Packaging
Industrial Packaging EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales 970.7 1 083.5 266.1 274.2 267.8 275.4 Operating profit* 85.0 112.1 29.3 29.7 24.9 28.2 % of sales 8.8 10.3 11.0 10.8 9.3 10.2 ROOC, %** 13.6 17.1 18.5 18.3 15.1 16.6 Deliveries, 1 000 t 1 006 1 065 279 273 257 256 Production, 1
Slide 43: Wood Products
Wood Products EUR million 2006 2007 I/07 II/07 III/07 IV/07 Sales 1 673.0 1 853.1 472.3 525.7 461.4 393.7 Operating profit* 63.4 151.2 54.8 59.3 37.1 0.0 % of sales 3.8 8.2 11.6 11.3 8.0 0.0 ROOC, %** 8.0 18.8 27.3 28.6 18.9 0.0 Deliveries, 1 000 t 6 551 6 348 1 619 1 763 1 545 1 421 Continuing Oper
Slide 44: Events during Q4
Events during Q4 • Intention to close Summa, Kemijärvi and Norrsundet mills; divestment of Kotka mill announced • Reduction of administrative staff by 300 in Group and Shared Service functions in the UK, Finland, Sweden and Germany announced • Finalisation of the partial divestment of Stora Enso Ara
Slide 45: Events during Q4, cont
Events during Q4, cont • In co-operation with local employment and business centres in Finland, Stora Enso launched actions to support employees affected by planned restructuring measures in Kymenlaakso and Kemijärvi • Additional temporary curtailments in glue-laminated products during Q4 2007 and e
Slide 46: www.storaenso.com
STORAENSO™ www.storaenso.com