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Another quarter of solid performance

Stora Enso's CEO Karl-Henrik Sundström comments on the third quarter 2016

Latest Interim Report

Q3/2016 (compared with Q3/2015)

• Sales EUR 2 393 (EUR 2 500) million decreased 4.3%. Sales excluding the structurally declining paper business and divested Barcelona Mill     increased 1.8%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai consumer board mills.

• Operational EBIT was EUR 219 (EUR 246) million, including a negative impact of EUR 35 million due to the ramp-up of Beihai. The EBIT margin    was 9.2% (9.8%). 

• EPS EUR 0.16 (EUR 0.16). EPS excl. IAC increased to EUR 0.17 (EUR 0.13).

• Cash flow from operations was EUR 390 (EUR 484) million, cash flow after investing activities EUR 177 (EUR 234) million.

• Continued strengthening of the balance sheet; net debt to operational EBITDA 2.1 (2.5); liquidity EUR 775 (EUR 797) million.

• Operational ROCE 10.1% (11.6%), operational ROCE excluding the Beihai investment 13.5% (13.1%).



Q3/2016 (compared with Q2/2016)

• Sales at EUR 2 393 (EUR 2 526) million decreased 5.3%. Sales excluding the structurally declining paper business declined 5.1%, mainly due to usual seasonality in Wood Products.
• Operational EBIT at EUR 219 (EUR 226) million decreased 3.1%, mainly due to the ramp-up of Beihai. 

Q1–Q3/2016 (compared with Q1–Q3/2015)

• Sales at EUR 7 364 (EUR 7 553) million declined 2.5%. Sales excluding the structurally declining paper business and divested Barcelona Mill increased 2.6%.
• Operational EBIT at EUR 693 (EUR 673) million increased 3.0%, mainly due to lower variable costs.

Stora Enso's CEO Karl-Henrik Sundström comments on the third quarter 2016 results:

 

"In the third quarter, sales increased 1.8%, excluding the structurally declining paper business and divested Barcelona Mill. This was primarily due to the ramp-ups of Varkaus kraftliner and Beihai consumer board mills. Operational EBIT was EUR 219 million compared to EUR 246 million a year ago, negatively affected with the ramp-up of Beihai by EUR 35 million. Cash flow from operations was EUR 390 million thanks to reduced working capital and proceeds from divestments. The balance sheet continued to strengthen as net debt to operational EBITDA was 2.1.

 

Our transformation into a customer-focused renewable materials company is progressing well. I am pleased that the ramp-up of the Beihai Mill is ahead of plan and we are now conducting customer tests of liquid boards and other grades. We have also completed our first test runs of CKB, our cartonboard which is very competitive in terms of strength, stiffness, purity and runnability. It provides superior food safety which is high on consumers' minds in China. We have launched a new product in our CKB product family during the quarter, CKB Nude by Stora Enso. It is an uncoated carton board designed to meet the consumer preferences for renewable packaging materials with natural look and feel.

 

The Varkaus kraftliner mill ramp-up is also proceeding and the mill reached EBITDA break-even during the quarter, as planned. We are expecting full production of virgin-fibre-based containerboard during the second half of 2017. In addition, we have finalised the divestment of the Kabel coated magazine paper mill in Germany. We have also received the first pre-payments for the divested Suzhou Mill site in China. This deal was announced in the second quarter 2016.

 

We are planning to create a centre of excellence for corrugated packaging in Lahti. The aim is to boost competitiveness by consolidating manufacturing of corrugated packaging in Finland to one location. As part of the possible consolidation, we would invest approximately EUR 19 million in new machinery and supporting infrastructure. The proposed project is expected to be finalised by the end of the first quarter 2018.

 

Wooden buildings are on the rise. Australia's first wooden office building is being built with our Cross Laminated Timber (CLT) in Sydney. The major structural components of the six storey office are made from more than 2 000 m³ of our CLT. The building is due for completion in 2017, proving that CLT is not only a renewable and sustainable choice, but also contributes to rapid construction time.

Another initiative to meet growing urban construction needs is the modernisation of the sawmill in Murów. As previously announced, the modernisation will increase yearly capacity from 70 000 m³ to 400 000 m³. In September, we inaugurated the modernised sawmill together with 200 customers.

 

I am happy that our Annual Report was awarded the best in Finland for the second consecutive year in a ranking by ReportWatch. The ranking included 1 600 companies from 65 countries. Also, the international not-for-profit organisation CDP (formerly Carbon Disclosure Project) recognises Stora Enso as a world leader for combating global warming, with a position on its 2016 Climate A List.

 

When it comes to outlook, sales for the fourth quarter 2016 are estimated to be slightly higher or slightly lower than the amount of EUR 2 393 million, and operational EBIT is expected to be in line with or somewhat lower than the EUR 219 million recorded in the third quarter of 2016. The impact of the annual maintenance shutdowns is expected to be approximately EUR 35 million lower than in the third quarter of 2016.

 

As always, I would like to thank our customers for their business, our employees for their dedication and our investors for their trust."



- Karl-Henrik Sundström-

​​​​​The interim report for the third quarter 2016 was published on 25 October​​ 2016 at 13.00 EEST.