Stora Enso Oyj Class A · OMXHEX:STEAV
Stora Enso Oyj Class A — FY2003 Earnings Presentation
51 slides from Stora Enso Oyj Class A's earnings presentation, Feb 4, 2004
Slide 1: Financial Results 2003
Financial Results 2003 4 February 2004
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: Year 2003 Review
STORAENSom™ Creating Value Year 2003 Review
Slide 4: Key Figures
Key Figures 2001 2002 2003 Sales (1 000 tonnes) 12 858 13 149 13 551 Sales (EUR million) 13 509 12 783 12 172 EBITDA* (EUR million) 2 763 2 172 1 723 Operating income* (EUR million) 1 495 926 538 Earnings per share* (EUR) 0.94 0.57 0.25 Cash earnings per share* (EUR) 2.34 1.97 1.64 Net debt (EUR mil
Slide 5: Factors Affecting the Profitability in 2003
Factors Affecting the Profitability in 2003 • Group’s paper product prices declined • Volumes increased moderately for the year • The direct and indirect impact of the weakening US dollar, especially towards the end of the year • Higher energy costs incurred, especially in North America and Germany
Slide 6: Operating Profit
Operating Profit EUR million 2500 2000 1500 1000 500 0 1999 2000 2001 2002 2003 excluding non-recurring items 6 4 February 2004 Full Year Results 2003
Slide 7: Change in EPS from 2002 to 2003
Change in EPS from 2002 to 2003 EUR 0,60 0.57 -0.50 0,50 0,40 0.22 -0.04 0,30 -0.02 0.03 0.25 -0.01 0,20 0,10 0,00 GROUP TOTAL Sales prices Sales volume Energy Fixed cost Financing Other GROUP TOTAL 2002 costs 2003 excluding non-recurring items 7 4 February 2004 Full Year Results 2003
Slide 8: Market-related Production Curtailments
Market-related Production Curtailments Tonnes 2002 2003 I/2003 II/2003 III/2003 IV/2003 Publication Paper Europe 715 000 448 000 116 000 114 000 95 000 123 000 North America 159 000 49 000 7 000 29 000 11 000 2 000 Fine Paper Europe 214 000 146 000 64 000 19 000 23 000 40 000 North America 60 000 30
Slide 9: EPS
EPS EUR 1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00 1999 2000 2001 2002 2003 excluding non-recurring items 9 4 February 2004 Full Year Results 2003
Slide 10: Non-recurring Items Effect
Non-recurring Items Effect EUR million 2003 IAS SENA Corbehem Forestlands Cross Border 2003 excl. Restructuring Restructuring in Canada Lease non-recs. EBIT 483.7 24.6 15.3 14.5 0.0 538.1 PTP 223.0 24.6 15.3 14.5 54.0 331.4 Net Profit 146.6 14.8 10.4 8.7 32.4 212.9 EPS, EUR 0.17 0.02 0.01 0.01 0.04
Slide 11: ROCE
ROCE % 20 18 16 14 12 10 8 6 4 2 0 1999 2000 2001 2002 2003 Target > 13% over the cycle Present WACC = 8.7% before tax excluding non-recurring items 11 4 February 2004 Full Year Results 2003
Slide 12: Debt/Equity
Debt/Equity 0,90 0,80 0,70 0,60 0,50 0,40 0,30 0,20 1999 2000 2001 2002 2003 Target < 0.8 restated debt/equity ratio 12 4 February 2004 Full Year Results 2003
Slide 13: Capital Expenditure and Depreciation
Capital Expenditure and Depreciation Capital expenditure Goodwill depreciation EUR million Depreciation Capital expenditure as % of sales 1 600 12 11 1 400 10 1 200 9 8 1 000 7 800 6 5 600 4 400 3 2 200 1 0 0 1999 2000 2001 2002 2003 13 4 February 2004 Full Year Results 2003
Slide 14: Main Events in 2003
Main Events in 2003 • First Quarter: – Closing of the acquisition of Sylvester sawmilling and wood procurement operations in Baltic States • Second Quarter: – Decision taken by associated company Veracel to build 900 000 tonnes pulp mill to Brazil – New newsprint machine of 400 000 tonnes in Langerb
Slide 15: Main Events in 2003 (cont.)
Main Events in 2003 (cont.) • Third Quarter: – Extension to North American Profit Enhancement Programme announced – Corbehem mill restructuring programme decided • Fourth Quarter: – Announcement of plan to sell Swedish forestlands – Investment decision for Kvarnsveden SC-machine – Investments at Sko
Slide 16: North America H2
STORAENSom™ Creating Value North America H2 2003
Slide 17: Stora Enso North America Business Results
Stora Enso North America Business Results USD million 2002 2003 H1/03 H2/03 Sales (1 000 tonnes) 2 655 2 707 1 345 1 362 Sales 1 871 1 887 933 954 EBITDA *1 153 95 39 56 EBITA *1 -155 -184 -98 -86 Capital Expenditure 82 182 74 109 Cash flow after Capex 138 *2 -121 -71 -50 Market-related downtime (1
Slide 18: Stora Enso North America Activities During H2 2003
Stora Enso North America Activities During H2 2003 • Unsatisfactory financial performance continued in H2 2003 • Profitability was burdened by: – Historically low selling prices – High personnel costs relating to pensions and healthcare – Increased energy costs – Downtime from machine rebuilds • Two
Slide 19: Stora Enso North America Activities During H2 2003 (cont.)
Stora Enso North America Activities During H2 2003 (cont.) • In August an extension to the Profit Enhancement Programme was introduced which includes a further USD 65 million reduction of annual costs – Reduction of workforce:12 % (700 employees) by mid 2005 – Total number of employees will be reduc
Slide 20: IV Quarter 2003 Results
STORAENSom™ Creating Value IV Quarter 2003 Results
Slide 21: Highlights
Highlights I/2003 II/2003 III/2003 IV/2003 Sales, EUR million 3 099.1 3 057.0 2 987.4 3 028.8 Operating Profit1), EUR million 211.1 106.7 139.8 80.5 EPS, EUR 0.10 0.07 0.06 -0.05 EPS1), EUR 0.10 0.07 0.09 0.00 Cash EPS1), EUR 0.43 0.41 0.44 0.36 Debt/Equity 0.48 0.50 0.49 0.48 • Delivered volumes in
Slide 22: Weakened US Dollar against Euro
Weakened US Dollar against Euro 1,00000 One dollar in euros Annual change • Average -16.3% 0,95000 • Closing -17.0% 0,90000 0,85000 0,80000 0,75000 • Average -6.8% • Average -5.7% • Average +1.1% • Average -5.4% 0,70000 • Closing -3.7% • Closing -4.7% • Closing -1.9% • Closing -7.7% 1.1.2003 1.4.200
Slide 23: Factors Affecting the Profitability during the Fourth Quarter
Factors Affecting the Profitability during the Fourth Quarter • Higher fixed costs during the fourth quarter – EUR 13 million related to pension costs associated with the closing of UK companies – EUR 6 million paper union strike in Finland – EUR 6 million redundancy measures – EUR 6 million start-u
Slide 24: Summary Financials
Summary Financials EUR million 2002 2003 I/03 II/03 III/03 IV/03 Sales 12 783 12 172 3 099 3 057 2 987 3 029 EBITDA 1) 2 172 1 723 501 400 443 379 Operating profit 1) 926 538 211 107 140 81 Profit before tax -343 223 129 87 68 -61 Net profit -222 147 85 56 47 -42 EPS, EUR 1) 0.57 0.25 0.10 0.07 0.09
Slide 25: Indirect Impact of Euro Strength
Indirect Impact of Euro Strength • European producers are increasing their sales to European markets – pressure on prices – increased competition • Imports to Western Europe increasing • Packaging Boards experiencing increased competition versus US dollar-based suppliers 25 4 February 2004 Full Year
Slide 26: Currency Hedging
Currency Hedging • Group’s hedging policy is to hedge a maximum 75 % of net cash flow in specific currency • Operational cash flow hedges had a positive impact of EUR 22 million in Q4/2003 – Impact is expected to decrease in coming quarters at present currency exchange rates • Major net cash flows (
Slide 27: Transaction Risk and Hedges in 2003
Transaction Risk and Hedges in 2003 EUR million EUR USD GBP SEK CAD Other Total Sales 2003 6 200 3 100 900 1 100 100 800 12 200 Costs 2003 - 5 800 -2 000 -200 -1 900 -200 -400 -10 500 Net operating cash flow 400 1 100 700 -800 -100 400 1 700 Transaction hedges as at 31Dec 257 260 -218 -54 Hedging pe
Slide 28: Net Financial Items
Net Financial Items EUR million I/03 II/03 III/03 IV/03 Net interest -34.6 -51.5 -49.9 -50.1 Foreign exchange profit/loss 2.9 7.9 12.2 -10.5 Valuation of financial instruments -44.1 30.0 16.8 -4.6 Other financial items -5.5 2.3 -2.5 -2.5 Total -81.3 -11.3 -23.4 -67.7 excluding non-recurring items 28
Slide 29: Operating Profit by Quarter
Operating Profit by Quarter EUR million 600 500 400 300 200 100 0 IV/00 I/01 II/01 III/01 IV/01 I/02 II/02 III/02 IV/02 I/03 II/03 III/03 IV/03 excluding non-recurring items 29 4 February 2004 Full Year Results 2003
Slide 30: Change in EPS III/2003 vs IV/2003
Change in EPS III/2003 vs IV/2003 EUR 0,12 0,10 0.09 -0.03 0.03 -0.04 0,08 0,06 -0.03 0,04 0,02 -0.02 0.00 0,00 GROUP TOTAL Sales prices Sales volume Fixed Costs Financing cost Other GROUP TOTAL III/03 and mix IV/03 excluding non-recurring items 30 4 February 2004 Full Year Results 2003
Slide 31: EPS by Quarter
EPS by Quarter EUR 0,35 0,30 0,25 0,20 0,15 0,10 0,05 0.00 0,00 IV/00 I/01 II/01 III/01 IV/01 I/02 II/02 III/02 IV/02 I/03 II/03 III/03 IV/03 excluding non-recurring items 31 4 February 2004 Full Year Results 2003
Slide 32: ROCE by Quarter
ROCE by Quarter % 16 14 12 10 8 6 4 2 0 IV/00 I/01 II/01 III/01 IV/01 I/02 II/02 III/02 IV/02 I/03 II/03 III/03 IV/03 Target > 13% over the cycle Present WACC = 8.7% before tax excluding non-recurring items 32 4 February 2004 Full Year Results 2003
Slide 33: Debt/Equity
Debt/Equity 0,70 0,65 0,60 0,55 0,50 0,45 0,40 0,35 0,30 0,25 0,20 IV/00 I/01 II/01 III/01 IV/01 I/02 II/02 III/02 IV/02 I/03 II/03 III/03 IV/03 Target < 0.8 33 4 February 2004 Full Year Results 2003
Slide 34: Main Events in the Quarter
Main Events in the Quarter • Announcement of plan to sell Swedish forestlands – Forestlands will be transferred to a company where Stora Enso will own 44.9 % of the equity – Cash proceeds EUR 1.2 billion, equity impact approximately EUR 0.3 billion – Use of proceeds could include actions in emerging
Slide 35: Main Events in the Quarter (cont.)
Main Events in the Quarter (cont.) • Veracel – Construction proceeding according to plan – Debt financing arrangements were finalised • Investment at Skoghall – EUR 211 million to enhance the mill’s energy supply – Evaporation plant start-up autumn 2005 – Recovery boiler start-up in summer 2006 35 4
Slide 36: Shareholder Information
STORAENSom™ Creating Value Shareholder Information
Slide 37: Earnings Per Share and Dividend
Earnings Per Share and Dividend EUR EPS, excluding non-recurring items Dividend Payout ratio % 1,40 200 % 180 % 1,20 160 % 1,00 140 % 120 % 0,80 100 % 0,60 80 % * 0,40 60 % 40 % 0,20 20 % 0,00 0% 1999 2000 2001 2002 2003 *) Board proposal 37 4 February 2004 Full Year Results 2003
Slide 38: Dividend Proposal
Dividend Proposal • Dividend proposal: EUR 0.45 per share • Payout ratio: 180 % excl. non-recurring items • Total dividend payment: about EUR 377.1 million (assuming 838 million shares outstanding) • Dividend yield: 4.2 % (at a share price of EUR 10.68) • Record date: 23 March 2004 • Dividend paymen
Slide 39: Total Shareholder Return
Total Shareholder Return 300 250 200 150 100 50 0 1.1.1999 1.1.2000 1.1.2001 1.1.2002 1.1.2003 1.1.2004 Stora Enso share price Value of investment in Stora Enso, dividend reinvested EUROSTOXX 50 • EUROSTOXX 50 index annual average return -3% (-14% from the beginning of 1999) • Stora Enso share price
Slide 40: Share Buy-Back Programme
Share Buy-Back Programme Current programme approved by 2003 AGM to continue through 19 March 2004. Allows repurchase up to : A shares 9 100 000 R shares 34 000 000 Status through 16 January 2004: Number of Average % of Shares shares purchased: purchase price: authorisation A shares 8 100 10.11 0.09
Slide 41: Market Outlook
&> STORAENSO™ Creating Value Market Outlook
Slide 42: Near-term Market Outlook: Western Europe
Near-term Market Outlook Western Europe Price Demand Comments Magazine Paper Strong order book, price pressure SC Demand improving; prices under CMR pressure Demand improving; prices still Newsprint under negotiation Fine Papers Prices flat; demand seasonally up WFC Order books fair;demand seasonall
Slide 43: Near-term Market Outlook: North America
Near-term Market Outlook North America Price Demand Comments Magazine Paper Demand stable, producer and merchant inventories low SC Order books strong CMR Announcement of $ 50 price increase Newsprint effective 1 February Fine Papers Demand satisfactory;prices stable WFC 43 4 February 2004 Full Year
Slide 44: Summary
Summary • General economic outlook is positive, but it is not yet materially improving demand for forest products • Volumes gradually rising, but product prices generally stable or down owing to the impact of the weak US dollar • First half of 2004 will remain challenging for the forest products ind
Slide 45: Appendix
STORAENSO™ Creating Value Appendix
Slide 46: Operating Profit by Product Area
Operating Profit by Product Area EUR million IV/02 I/03 II/03 III/03 IV/03 Publication Paper 68.2 36.4 -5.2 39.9 43.0 % sales 5.6 3.4 -0.5 3.7 3.9 Fine Paper 54.9 81.3 40.9 23.7 10.1 % sales 6.8 9.5 5.2 3.0 1.3 Packaging 79.6 90.5 66.6 88.5 51.3 % sales 11.9 12.9 9.4 12.8 7.8 Wood Products 11.8 7.3
Slide 47: Publication Paper
Publication Paper EUR million 2002 2003 I/03 II/03 III/03 IV/03 Change % III/IV Sales 4 715.6 4 295.7 1 058.3 1 042.8 1 086.3 1 108.3 2.0 Operating profit 320.1 114.1 36.4 -5.2 39.9 43.0 7.8 % of sales 6.8 2.7 3.4 -0.5 3.7 3.9 ROOC, %* 7.5 2.9 3.7 -0.5 4.0 4.3 Deliveries, 1000 t 6 807 6 954 1 654 1
Slide 48: Fine Paper
Fine Paper EUR million 2002 2003 I/03 II/03 III/03 IV/03 Change % III/IV Sales 3 427.4 3 197.7 852.3 793.9 788.5 763.0 -3.2 Operating profit 303.7 156.0 81.3 40.9 23.7 10.1 -57.4 % of sales 8.9 4.9 9.5 5.2 3.0 1.3 ROOC, %* 7.7 4.4 8.8 4.5 2.7 1.2 Deliveries, 1000 t 3 432 3 591 885 895 894 917 2.6 Pr
Slide 49: Packaging Boards
Packaging Boards EUR million 2002 2003 I/03 II/03 III/03 IV/03 Change % III/IV Sales 2 720.2 2 761.6 699.0 711.4 691.1 660.1 -4.5 Operating profit 354.7 296.9 90.5 66.6 88.5 51.3 -42.0 % of sales 13.0 10.8 12.9 9.4 12.8 7.8 ROOC, %* 13.5 11.5 13.9 10.2 13.5 7.9 Deliveries, 1000 t 2 909 3006 756 781
Slide 50: Wood Products
Wood Products EUR million 2002 2003 I/03 II/03 III/03 IV/03 Change % III/IV Sales 1 235.2 1 400.0 316.5 385.6 335.5 362.4 8.0 Operating profit 46.8 27.6 7.3 15.2 -4.4 9.5 NM % of sales 3.8 2.0 2.3 3.9 -1.3 2.6 ROOC, %* 11.1 5.1 6.1 10.9 -2.7 5.6 Deliveries, 1000 m3 5 112 5 822 1 283 1 644 1 337 1 55
Slide 51: To view Stora Enso's full year results for 2003, visit www.storaenso.com
To view Stora Enso’s full year results for 2003, visit www.storaenso.com