2007'03.17.Sat
Stora Enso's Annual Report 2006 Published
March 16, 2007
HELSINKI, Finland, March 16 /Xinhua-PRNewswire/ --
Stora Enso's Annual Report 2006 was published on March 14
in English, Finnish, Swedish and German. The report
consists of three parts: Company, Financials and
Sustainability. The electronic version (pdf) can be
downloaded at the Group's website
http://www.storaenso.com/annualreports . Printed copies of
the reports can be ordered at http://www.storaenso.com/order
or by sending an e-mail to
corporate.communications@storaenso.com.
The printed Company and Sustainability reports are
distributed to those shareholders in Finland and Sweden who
have so requested, and to all registered ADR holders.
For further information, please contact Ulla
Paajanen-Sainio, VP, Investor Relations and Financial
Communications, tel. +358 2046 21242.
Stora Enso Interim Review January - December 2006
(Partial)
Annual results boosted by profit improvement actions;
proposed dividend unchanged at EUR 0.45 per share.
Fourth quarter operating profit excluding non-recurring
items largely unchanged from the third quarter. Sales
volumes and some prices rose moderately from the previous
quarter, which were offset by higher fixed costs.
Summary of Fourth Quarter Results (compared with
Q3/2006)
-- Sales were EUR 3 731.8 (EUR 3 638.1) million.
-- Operating profit was EUR 186.0 (EUR 195.2) million
excluding
non-recurring items. Operating profit was EUR 246.0
(EUR 18.0)
million including non-recurring items.
-- Profit before tax was EUR 141.4 (EUR 197.0) million
excluding
non-recurring items. Profit before tax was EUR
234.4 (EUR 19.8)
million including non-recurring items
-- Earnings per share were EUR 0.13 (EUR 0.18)
excluding non-recurring
items. Cash earnings per share were EUR 0.49 (EUR
0.52) excluding
non-recurring items. Earnings per share including
non-recurring
items were EUR 0.33 (EUR 0.07).
-- Cash flow after investing activities was EUR 415.2
(EUR 473.8)
million.
Markets
Compared with Q3/2006
In Europe market demand for the Group's products was
slightly better than in the previous quarter.
Market demand was seasonally stronger in publication
paper grades, with prices stable except for some price
erosion in coated magazine paper.
Market demand for fine paper strengthened in Europe.
Prices for uncoated fine paper rose and were unchanged for
coated fine paper during the quarter. Packaging board
demand was seasonally weaker, but the market for industrial
packaging grades was stronger and prices for packaging
boards were unchanged.
Demand for wood products remained good in Europe, Asia,
North Africa and the Middle East. Buoyant demand and low
stock levels supported further price increases in these
markets. In North America demand for wood products was
still weak and prices were depressed.
In North America demand for newsprint and uncoated
magazine paper strengthened during the quarter, mainly for
seasonal reasons, but demand for coated magazine paper
weakened. Newsprint and magazine paper prices decreased.
Market demand for coated fine paper weakened and coated
fine paper prices declined slightly.
In Latin America demand for coated magazine paper was
clearly better than in the previous quarter and prices were
stable.
In China demand for coated fine paper was weaker than
in the previous quarter and downward price pressure
intensified.
Compared with Q4/2005
In Europe market demand for the Group's products was
generally firmer than a year ago.
Demand was stronger in newsprint and uncoated magazine
paper, but somewhat weaker in coated magazine paper. Prices
were higher in newsprint and virtually unchanged in magazine
paper. Market demand was stronger than a year ago in coated
fine paper but slightly weaker in uncoated fine paper.
Uncoated fine paper prices rose slightly, whereas coated
fine paper prices remained stable. Demand for packaging
boards was steady and prices were unchanged. In wood
products, demand and prices were higher than a year ago.
In North America demand for magazine paper was firmer,
but newsprint demand was clearly weaker than a year ago.
Newsprint prices rose, uncoated magazine paper prices
remained stable and coated magazine paper prices declined.
Market demand for coated fine paper was stronger and coated
fine paper prices were higher.
In Latin America demand for coated magazine paper was
clearly better than a year ago with prices stable.
In China demand for coated fine paper strengthened
during the year and prices were unchanged.
Key Figures
EUR million Q4/05 2005(4) Q1/06 Q2/06
Q3/06 Q4/06 2006
Sales 3 636.1 13 187.5 3 607.7 3 616.3 3
638.1 3 731.8 14 593.9
EBITDA(1)(2) 411.6 487.4 463.3 451.2
462.8 470.9 1 848.2
Operating
profit(2) 120.9 357.5 194.1 182.2
195.2 186.0 757.5
Non-recurring
items
(operational) -430.8 -417.3 -23.2 6.7
-177.2 60.0 -133.7
Operating
margin(2), % 3.3 2.7 5.4 5.0
5.4 5.0 5.2
Operating profit-309.9 -59.8 170.9 188.9
18.0 246.0 623.8
Net financial
items(5) -48.9 -151.6 115.2 -149.2
-8.4 -37.0 -79.4
Profit before
tax and
minority
interests(2) 96.4 273.1 210.9 53.2
197.0 141.4 602.5
Profit before tax
and minority
interests -334.4 -144.2 317.7 59.9
19.8 234.4 631.8
Net profit for
the period -239.4 -107.4 226.4 40.9
57.1 264.8 589.2
EPS(2), Basic,
EUR 0.13 0.28 0.20 0.05
0.18 0.13 0.55
EPS, Basic, EUR -0.30 -0.14 0.29 0.05
0.07 0.33 0.74
CEPS(2)(3), EUR 0.50 1.70 0.54 0.39
0.52 0.49 1.94
ROCE(2), % 4.2 3.3 6.7 6.4
7.0 6.7 6.6
(1) EBITDA = Earnings before Interest, Taxes,
Depreciation and
Amortisation
(2) Excluding net non-recurring items. Exceptional
transactions that
are not related to normal business operations are
accounted for as
non-recurring items. 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.
(3) CEPS = (Net profit for the period + depreciation
and
amortisation)/average number of shares
(4) The impact of the 7-week labour dispute in Finland
in 2005 distorts
the comparison of the year-on-year figures
Financial Results 2006 (compared with previous year)
The impact of the 7-week, industry-wide labour dispute
in Finland in 2005 distorts comparison of the year-on-year
figures. It is estimated that the dispute negatively
impacted operating profit in 2005 by approximately EUR 190
million.
In 2006 paper and board deliveries totalled 14 618 000
tonnes, which is 468 000 tonnes more than in 2005, and
production increased by 380 000 tonnes to 14 699 000
tonnes. Deliveries of wood products decreased by 169 000 m3
to 6 572 000 m3. Market-related production curtailments
totalled 467 000 (141 000) tonnes, mostly in coated
magazine paper, due to some lost market share.
Sales at EUR 14 593.9 million were EUR 1 406.4 million
or 10.7% higher than in 2005. Higher prices, especially in
newsprint, and increased deliveries accounted for two-thirds
of the sales increase. The Schneidersohne and Arapoti
acquisitions, partly offset by the divestments of Grycksbo,
Pankakoski, Celbi and Wolfsheck mills, accounted for the
remainder of sales growth.
Operating profit excluding non-recurring items
increased by EUR 400.0 million to EUR 757.5 million and was
higher in all segments. Operating profit includes a
negative non-cash effect of EUR 12.1 million (negative EUR
8.0 million) comprising EUR -17.0 million due to the fair
valuation of share-based compensation, partly offset by EUR
4.9 million from the released government grant related to
CO2 emission rights. Both these non-cash items are
reported under other operations.
Profit before taxes and minority interests excluding
non-recurring items totalled EUR 602.5 (EUR 273.1)
million.
Earnings per share were EUR 0.55 (EUR 0.28) excluding
non-recurring items.
The return on capital employed was 6.6% (3.3%)
excluding non-recurring items. Capital employed was EUR 11
331.8 million on 31 December 2006, a net decrease of EUR
346.1 million. Operative working capital was EUR 2 174.5
million, a decrease of EUR 158.5 million during the year as
inventories were reduced.
Financing
The market capitalisation on the Helsinki Stock
Exchange on 31 December 2006 was EUR 9.5 billion.
The debt/equity ratio at 31 December 2006 was 0.54
(0.66).
Fourth Quarter Events
October
Stora Enso initiated exclusive discussions with the aim
of joint-venture ownership regarding assets of Stora Enso
Arapoti in Brazil with Arauco, a Chilean forest products
company. Although the period of exclusivity expired on 31
January 2007, the negotiations continue.
Stora Enso announced investments in Finland, where the
Group is investing EUR 32.4 million in rebuilding the
finishing department at its Anjala Mill and EUR 25.3
million in a new sheeting line at its Oulu Mill, and in
Austria, where Stora Enso is investing EUR 16.8 million in
a cross-laminated element plant at Bad St. Leonhard
Sawmill.
November
Stora Enso Oyj sold all its 2 209 340 shares in
Finnlines Plc for EUR 35.5 million. The shares represented
5.43% of the total number of outstanding shares in
Finnlines. The shareholding in Finnlines Plc had been a
non-core financial investment. The sale was consistent
with Stora Enso's objective of concentrating its capital
resources on its core businesses.
December
Stora Enso announced that its subsidiary Corenso will
rebuild and restart paper machine (PM) 12 for coreboard
production at Wisconsin Rapids Mill. The capital
expenditure will be approximately EUR 27 million (USD 35
million). This investment also includes an upgrade of
Corenso's recycled fibre facility. As a result of this
investment, board machine (BM) 13 will be shut down. The
rebuild will start in May 2007 and is expected to be
completed during the first quarter of 2008.
Stora Enso also announced that it is investing EUR 54.8
million in rebuilding fine paper machine 3 (PM 3) at its
Varkaus Mill in Finland to improve efficiency at the mill
and profitability in the Office Paper business area. This
project, which will increase mill specialisation within the
division, is scheduled to be completed in December 2007.
Changes in Group Management during 2006
On 17 October 2006 Stora Enso announced that the Board
of Directors had appointed Jouko Karvinen, M.Sc. (Eng.), as
the new CEO of Stora Enso. He joined the company on 1
January 2007 and will take up the position of CEO following
the Annual General Meeting (AGM) on 29 March 2007. He was
previously Chief Executive Officer of Philips Medical
Systems Division and a member of the Board of Management of
Royal Philips Electronics.
Jukka Harmala will leave the position of CEO following
the AGM on 29 March 2007. He will continue to undertake
special assignments specified by the Board of Directors of
Stora Enso until the end of August 2007.
Personnel
On 31 December 2006 there were 43 887 employees, 2 777
less than at the end of 2005.
Events after the Period
On 29 January 2007 Stora Enso announced that it had
signed a loan agreement with the European Investment Bank
(EIB) for a EUR 140 million loan facility to finance part
of Stora Enso's investment in research and development in
Finland and Sweden for the next five years.
Profit Improvement Programmes
As the objectives and decisions related to the two
programmes have been successfully reached as reported
below, it is intended to discontinue specific reporting
unless significant deviations from plan occur. The Group
will complete its profit improvement programmes as earlier
announced.
Profit 2007
Stora Enso's Profit 2007 programme has proceeded well
and by the end of 2006 the annualised profit improvement
reached was EUR 310 million. The initial target of an
improvement of EUR 300 million in annual pre-tax profit
from mid 2007 onwards was based on 2005 price and cost
levels, and was net of implementation costs.
Reductions in personnel by the end of 2006 total
approximately 1 600 out of an anticipated 2 000 as part of
the programme -- half of them white-collar and half
blue-collar staff, and slightly more than half in the
Nordic countries and the rest elsewhere in Europe.
Additionally, 180 of the 600-700 potential personnel
outsourcing opportunities identified have been
implemented.
Asset Performance Review (APR) - mills under scrutiny
In October 2006, Stora Enso announced plans to close
down its Berghuizer Mill and Reisholz Mill. The closure
processes are proceeding according to plan. Berghuizer
Mill is planned to be closed during 2007 and Reisholz Mill
by the end of 2007. The timing of the closures will
optimise volume transfers to other mills.
Near-term Outlook
In Europe the demand outlook for advertising-driven
papers is fairly positive as economic growth is expected to
stimulate consumption. However, demand for publication
papers seasonally slows in the first quarter, and the
coated magazine paper market is expected to remain
competitive. Price negotiations for contracts renewing in
early 2007 are still continuing.
In Europe the outlook for fine paper remains healthy,
with demand and shipments in the first quarter predicted to
be up on a year ago and the previous quarter. Higher prices
are anticipated in uncoated fine paper, and price increases
have been announced in coated fine paper. Demand in
packaging board markets is forecast to be generally good
with prices remaining stable. In wood products the demand
outlook remains favourable despite some seasonal slowing in
the construction sector; some further firming of prices is
foreseen.
In North America markets will remain soft for
publication paper grades, at least in the short term, with
some price erosion. The coated fine paper market is
expected to remain stable with unchanged prices.
In China coated fine paper demand is forecast to
improve later in the spring and prices to firm up.
In Latin America modest demand growth is anticipated,
but downward price pressure is increasing.
The Group's operational cost inflation is forecast to
be 2-2.5% in 2007 compared with 2006 levels, primarily
because of increased wood costs.
Annual General Meeting
The Annual General Meeting will be held at 16.00
(Finnish time) on Thursday 29 March 2007 at the Marina
Congress Center, Katajanokanlaituri 6, Helsinki, Finland.
This report is unaudited.
The full-length version of the interim review is
available on the Stora Enso website at
http://www.storaenso.com/investors .
Stora Enso's first quarter results 2007 will be
published on 26 April 2007.
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 further information, please contact:
Jukka Harmala
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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