2007'04.28.Sat
Stora Enso Interim Review January-March 2007
April 27, 2007
Strong Operating Profit Improvement Driven by Fine Paper
and Wood Products; Challenging Quarters Ahead
HELSINKI, Finland, April 27 /Xinhua-PRNewswire/ --
Summary of First Quarter Results (compared with
Q1/2006)
-- Sales were EUR 3 855.4 (EUR 3 607.7) million.
-- Operating profit was EUR 307.3 (EUR 247.0) million
excluding non-
recurring items. Operating profit was EUR 339.3
(EUR 223.8) million
including non-recurring items.
-- Profit before tax was EUR 274.8 (EUR 210.9) million
excluding non-
recurring items. Profit before tax was EUR 306.8
(EUR 317.7) million
including non-recurring items.
-- Net profit excluding non-recurring items was EUR
207.2 (EUR 158.3)
million. Net profit including non-recurring items
was EUR 222.5 (EUR
226.4) million.
-- Earnings per share were EUR 0.26 (EUR 0.20)
excluding non-recurring
items. Cash earnings per share were EUR 0.59 (EUR
0.54) excluding non-
recurring items. Earnings per share including
non-recurring items were
EUR 0.28 (EUR 0.29).
-- ROCE excluding non-recurring items was 10.8%
(8.5%).
Key Figures
Change %
Q1/07- 1/07-
EUR million 2005 2006 Q4/06 Q1/06
Q1/07 Q1/06 Q4/06
Sales 13 187.5 14 593.9 3 731.8 3 607.7 3
855.4 6.9 3.3
EBITDA
excluding
non-recurring
items 1 501.1 1 872.8 472.4 516.2
568.9 10.2 20.4
Operating
profit
excluding
non-
recurring
items 371.2 782.1 187.6 247.0
307.3 24.4 63.8
Non-recurring
(operational) -417.3 -133.7 60.0 -23.2
32.0 n/a -46.7
Operating
margin
excluding
non-
recurring
items, % 2.8 5.4 5.0 6.8
8.0 17.6 60.0
Operating
profit -46.1 648.4 247.6 223.8
339.3 51.6 37.0
Net
financial
items(1) -165.3 -104.0 -38.6 62.3
-56.7 n/a -46.9
Profit
before tax
and
minority
interests
excluding
non-
recurring
items 273.1 602.5 141.4 210.9
274.8 30.3 94.3
Profit
before tax
and
minority
interests -144.2 631.8 234.4 317.7
306.8 -3.4 30.9
Net profit
for the
period
excluding
non-
recurring
items 230.3 439.4 101.4 158.3
207.2 30.9 104.3
Net profit
for the
period -107.4 589.2 264.8 226.4
222.5 -1.7 -16.0
EPS
excluding
non-
recurring
items,
Basic,
EUR 0.28 0.55 0.13 0.20
0.26 30.0 100.0
EPS, Basic,
EUR -0.14 0.74 0.33 0.29
0.28 -3.4 -15.2
CEPS
excluding
non-
recurring
items, EUR 1.70 1.94 0.49 0.54
0.59 9.3 20.4
ROCE
excluding
non-
recurring
items, % 3.4 6.8 6.7 8.5
10.8 27.1 61.2
1) Includes capital gains of EUR 130.0 million (sale
of Sampo shares)
in Q1/2006, EUR 33.0 million (sale of Finnlines
shares) in Q4/2006
totalling to EUR 163.0 million in 2006.
CEPS = (Net profit for the period + depreciation
and
amortisation)/average number of shares
Non-recurring items are exceptional transactions
that are not
related to normal business operations. The most
common non-
recurring items are capital gains, additional
write-downs,
restructuring provisions and penalties.
Non-recurring items are
normally specified individually if they exceed one
cent per share.
January-March 2007 Results (compared with Q1/2006)
Sales at EUR 3 855.4 million were 6.9% higher than in
the first quarter of 2006, mainly due to higher average
prices for fine paper and wood products, and increased
deliveries of publication paper, packaging boards and wood
products. The net impact on sales of the acquisition of
Arapoti Mill in Brazil together with the divestment of
Pankakoski, Celbi and Grycksbo mills was EUR -42.7
million.
Operating profit excluding non-recurring items
increased by EUR 60.3 million to EUR 307.3 million, which
is 8.0% of sales. Profitability was higher in all segments
except Publication Paper. Prices rose in wood products and
uncoated fine paper. In Publication Paper, operating profit
decreased as higher newsprint prices only partly offset
lower magazine paper prices. Wood and energy costs were
materially higher in the first quarter of 2007 than a year
earlier.
Profit before taxes and minority interests excluding
non-recurring items increased by EUR 63.9 million to EUR
274.8 million and profit before tax amounted to EUR 306.8
(EUR 317.7) million including non-recurring items.
There were two non-recurring items with a net positive
impact of EUR 32.0 million (negative EUR 23.2 million) on
operating profit: the new labour agreements in North
America had a positive impact of EUR 44.0 (USD 57.7
million) million and closure of Sauga Sawmill in Estonia
had a negative impact of EUR 12.0 million.
Net financial items were EUR -56.7 million (positive
EUR 62.3 million). Net interest expenses increased to EUR
60.7 (EUR 52.8) million and net foreign exchange gains on
borrowings, currency derivatives and bank accounts were EUR
3.6 (losses of EUR 7.0) million. Other financial items
totalled positive EUR 0.4 (positive EUR 122.1) million, the
decrease being mainly due to a non-recurring capital gain of
EUR 130.0 million from the sale of shares in Sampo Oyj
during the first quarter of 2006.
Earnings per share excluding non-recurring items
increased by EUR 0.06 to EUR 0.26. Earnings per share
including non-recurring items were EUR 0.28 (EUR 0.29).
Cash earnings per share were EUR 0.59 (EUR 0.54) excluding
non-recurring items.
The return on capital employed was 10.8% (8.5%)
excluding non-recurring items. Capital employed was EUR 11
478.5 million on 31 March 2007, approximately the same as a
year earlier.
First Quarter Results (compared with Q4/2006)
Sales at EUR 3 855.4 million were 3.3% higher than the
previous quarter's EUR 3 731.8 million. Deliveries
increased in fine paper and packaging boards and decreased
in publication paper. Prices increased in newsprint,
uncoated fine paper, wood products and somewhat in
packaging boards, but decreased in magazine paper.
Operating profit excluding non-recurring items
increased by EUR 119.7 million to EUR 307.3 (EUR 187.6)
million, which is 8.0% of sales. Operating profit increased
in all product segments except Publication Paper. Strong
demand and higher prices increased operating profit in Fine
Paper and Wood Products. Operating profit in Packaging
Boards increased mainly due to seasonally higher production
and delivery volumes. Publication Paper operating profit
decreased, mainly because decreases in magazine paper
prices were only partly offset by increases in newsprint
prices. Wood costs were higher than in the previous
quarter.
Profit before tax amounted to EUR 274.8 (EUR 141.4)
million excluding non-recurring items and EUR 306.8 (EUR
234.4) million including non-recurring items.
Earnings per share were EUR 0.26 (EUR 0.13) excluding
non-recurring items. Earnings per share including
non-recurring items were EUR 0.28 (EUR 0.33). Cash earnings
per share were EUR 0.59 (EUR 0.49) excluding non-recurring
items.
The return on capital employed was 10.8% (6.7%)
excluding non-recurring items. Capital employed was EUR 11
478.5 million on 31 March 2007, a net increase of EUR 146.7
million due to increased working capital partly offset by
low capital expenditure.
Message from CEO Jouko Karvinen:
Group earnings strongly improved, but challenging
quarters ahead
"We are delighted to report strong earnings
improvements in Fine Paper and Wood Products, and a good
performance by Packaging Boards. There was a slight decline
in Publication Paper's profitability in very challenging
market conditions for magazine paper. However, in the next
few months we will have to curtail production at some of
our Nordic pulp mills owing to wood supply constraints
resulting from an unusually short winter harvesting season
and a reduction in wood exports from Russia. These
stoppages, together with clearly increased wood costs and a
higher level of seasonal holiday and maintenance stoppages
will negatively impact earnings in the second quarter,
although earnings should remain higher than a year earlier.
We are working rigorously to increase wood supply around the
Baltic Sea basin and to solve the issues concerning Russian
wood supply in good co-operation with our stakeholders.
Overall market situation is relatively good, with a few
exceptions
"The overall market situation and outlook are
relatively healthy. Conditions do vary, however, between
customer segments and regions. Currently, two of the
biggest challenges in our industry are weak magazine paper
prices worldwide and the uncertain trend in demand for
printing and writing papers and newsprint in North America.
On a positive note, prospects for our Fine Paper, Newsprint
and Wood Products divisions in Europe are good, and
Packaging Boards continues to perform well"
"Cost inflation remains a real issue for our
industry, particularly for wood. The additional export
duties on roundwood announced by Russia, the European
Union's drive to increase the utilisation of wood fibre as
biofuel and the pressure from Non-Governmental
Organisations with environmental concerns about wood
harvesting in certain areas are all contributing to
concerns over wood supply. We are convinced that all
stakeholders, not least in Finland and Russia, understand
the seriousness of the situation and will work with us to
find positive solutions to these challenges acceptable to
all parties concerned in the coming months and years.
Group's ROCE target of 13% over the cycle remains
"As we stated at our Annual General Meeting, we
remain committed to our target of achieving a ROCE of 13%
over the cycle. Our business and geographical portfolio
review is progressing well. As stated before, we do not
intend to announce a single multi-year plan or lists of
businesses under scrutiny. Rather we will announce key
decisions and actions when appropriate. The result will be
a more focused Group, with businesses that all contribute
to our financial improvement and strategic goals.
"Another imperative is continual cost improvement
to be realised primarily through structural simplification
and choices. We will also be building upon our successful
strategy in new growth markets, such as further development
of our Latin American operations.
"We will also emphasise our customer-driven
product innovations, such as media packaging solutions and
the positive results from the never-ending drive for
operational excellence evidenced by the world speed record
in production at our Kvarnsveden SC Paper Machine 12 in the
first quarter.
"Even with some short-term challenges and lots of
decisions and choices to make, we are convinced that we
will find our way to long-term, sustainable value creation.
Based on track record of 2006 and the first quarter of 2007,
even in a challenging environment, our goal in the future is
to stay on the year-on-year improvement path.
Near-term market outlook
"In Europe the positive economic outlook is
expected to support the consumption of advertising-driven
paper grades. Stable prices for newsprint are anticipated
but in magazine paper price pressure persists in
non-contractual business. The outlook for fine paper
remains healthy and prices are forecast to rise. Demand for
packaging boards is expected to remain firm with prices
rising in some business segments. Good, stable demand for
wood products should keep the outlook for prices relatively
steady.
"In North America the demand outlook for
publication paper grades and coated fine paper is
uncertain. Prices may remain under pressure.
"In Latin America demand for coated magazine paper
is predicted to strengthen, but competition is expected to
remain intense. In China a slight improvement in demand for
coated fine paper is anticipated, keeping prices
stable."
The full-length version of the Stora Enso interim
review is available on the Stora Enso website at
http://www.storaenso.com/investors .
Stora Enso's second quarter results for 2007 will be
published on 26 July 2007.
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 similar expressions, are
forward-looking statements within the meaning of the United
States Private Securities Litigation Reform Act of 1995.
Since these statements are based on current plans,
estimates and projections, they involve risks and
uncertainties, which may cause actual results to materially
differ from those expressed in such forward-looking
statements. Such factors include, but are not limited to:
(1) operating factors such as continued success of
manufacturing activities and the achievement of
efficiencies therein, continued success of product
development, acceptance of new products or services by the
Group's targeted customers, success of the existing and
future collaboration arrangements, changes in business
strategy or development plans or targets, changes in the
degree of protection created by the Group's patents and
other intellectual property rights, the availability of
capital on acceptable terms; (2) industry conditions, such
as strength of product demand, intensity of competition,
prevailing and future global market prices for the Group's
products and the pricing pressures thereto, price
fluctuations in raw materials, financial condition of the
customers and the competitors of the Group, the potential
introduction of competing products and technologies by
competitors; and (3) general economic conditions, such as
rates of economic growth in the Group's principal
geographic markets or fluctuations in exchange and interest
rates.
About Stora Enso
Stora Enso is an integrated paper, packaging and forest
products company producing publication and fine paper,
packaging board and wood products - all areas in which the
Group is a global market leader. Stora Enso's sales
totalled EUR 14.6 billion in 2006. The Group has some 44
000 employees in more than 40 countries on five continents.
Stora Enso has an annual production capacity of 16.5 million
tonnes of paper and board and 7.4 million cubic metres of
sawn wood products, including 3.2 million cubic metres of
value-added products. Stora Enso's shares are listed in
Helsinki, Stockholm and New York.
For more information, please contact:
Jouko Karvinen, CEO,
Tel: +358-2046-21404
Hannu Ryopponen, CFO
Tel: +358-2046-21450
Kari Vainio, EVP, Corporate Communications
Tel: +44-7799-348-197
Keith B Russell, SVP, Investor Relations
Tel: +44-7775-788-659
Ulla Paajanen-Sainio, VP,
Investor Relations and Financial Communications
Tel: +358-40-763-8767
PR
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