Quarterly Report • Oct 25, 2017
Quarterly Report
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January–September 2017
Q4/2017 sales are estimated to be similar to or slightly higher than the amount of EUR 2 509 million recorded in the third quarter, and operational EBIT is expected to be somewhat lower than or even in line with the EUR 290 million recorded in Q3/2017. The operational EBIT estimate for Q4/2017 includes the negative EUR 7 million impact of the ramp-up of the Beihai operations. As earlier announced, the Beihai Mill is expected to reach operational EBITDAbreakeven during Q4/2017. The impact of annual maintenance shutdowns is expected to be approximately EUR 10 million higher than in Q3/2017, and it is included in the above guidance.
| Change % Q3/17– |
Change % Q3/17– |
Change % Q1-Q3/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | Q1-Q3/16 | 2016 |
| Sales | 2 509 | 2 393 | 4.8% | 2 528 | -0.8% | 7 534 | 7 364 | 2.3% | 9 802 |
| Operational EBITDA | 410 | 343 | 19.5% | 341 | 20.2% | 1 103 | 1 061 | 4.0% | 1 371 |
| Operational EBITDA margin | 16.3% | 14.3% | 13.5% | 14.6% | 14.4% | 14.0% | |||
| Operational EBIT | 290 | 219 | 32.4% | 219 | 32.4% | 724 | 693 | 4.5% | 884 |
| Operational EBIT margin | 11.6% | 9.2% | 8.7% | 9.6% | 9.4% | 9.0% | |||
| Operating profit (IFRS) | 270 | 196 | 37.8% | 205 | 31.7% | 668 | 638 | 4.7% | 783 |
| Profit before tax excl. IAC | 244 | 170 | 43.5% | 153 | 59.5% | 588 | 465 | 26.5% | 575 |
| Profit before tax | 224 | 161 | 39.1% | 145 | 54.5% | 533 | 465 | 14.6% | 541 |
| Net profit for the period | 191 | 119 | 60.5% | 143 | 33.6% | 441 | 351 | 25.6% | 407 |
| Capital expenditure | 149 | 150 | -0.7% | 116 | 28.4% | 373 | 535 | -30.3% | 729 |
| Capital expenditure excluding investments in biological assets |
127 | 127 | 0.0% | 94 | 35.1% | 309 | 468 | -34.0% | 638 |
| Depreciation and impairment charges excl. IAC |
124 | 124 | 0.0% | 119 | 4.2% | 382 | 371 | 3.0% | 502 |
| Net interest-bearing liabilities | 2 476 | 2 899 | -14.6% | 2 724 | -9.1% | 2 476 | 2 899 | -14.6% | 2 726 |
| Operational return on capital employed (ROCE) |
13.9% | 10.1% | 10.3% | 11.4% | 10.6% | 10.2% | |||
| Earnings per share (EPS) excl. IAC, EUR |
0.27 | 0.17 | 0.19 | 0.63 | 0.48 | 0.65 | |||
| EPS (basic), EUR | 0.24 | 0.16 | 0.19 | 0.57 | 0.47 | 0.59 | |||
| Return on equity (ROE) | 13.3% | 8.4% | 9.8% | 10.0% | 8.3% | 7.2% | |||
| Debt/equity ratio | 0.43 | 0.52 | 0.49 | 0.43 | 0.52 | 0.47 | |||
| Net debt/last 12 months' operational EBITDA ratio |
1.8 | 2.1 | 2.0 | 1.8 | 2.1 | 2.0 | |||
| Fixed costs to sales | 23.8% | 25.5% | 25.6% | 24.5% | 25.1% | 25.3% | |||
| Equity per share, EUR | 7.35 | 7.13 | 3.1% | 7.12 | 3.2% | 7.35 | 7.13 | 3.1% | 7.36 |
| Average number of employees | 27 001 | 26 819 | 0.7% | 26 581 | 1.6% | 26 371 | 26 372 | 0.0% | 26 269 |
| TRI rate1 2 | 8.6 | 10.4 | -17.3% | 7.03 | 22.9% | 8.1 | 12.0 | -32.5% | 11.7 |
| LTA rate1 2 | 6.4 | 4.5 | 42.2% | 4.83 | 33.3% | 5.7 | 4.4 | 29.5% | 4.4 |
Operational key figures: see chapter Non-IFRS measures at the beginning of the Financials section.
Items affecting comparability (IAC): see chapter Non-IFRS measures at the beginning of the Financials section.
TRI (Total recordable incidents) rate = number of incidents per one million hours worked.
LTA (Lost-time accident) rate = number of lost-time accidents per one million hours worked.
1 For Stora Enso employees, excluding joint operations.
2 As of January 2017 Stora Enso applies new Occupational Health and Safety Administration (OHSA) definitions in the reporting of TRI and LTA rates to better align with international standards. Due to this change, Q3 figures are not fully comparable with historical figures.
³ Recalculated due to additional data after the Q2/2017 Interim Report.
| Change % Q3/17– |
Change % Q3/17– |
Q1– | Q1– | Change % Q1-Q3/17– |
|||||
|---|---|---|---|---|---|---|---|---|---|
| Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q3/17 | Q3/16 | Q1-Q3/16 | 2016 | |
| Consumer board deliveries, 1 000 tonnes | 718 | 650 | 10.5% | 702 | 2.3% | 2 104 | 1 868 | 12.6% | 2 507 |
| Consumer board production, 1 000 tonnes | 730 | 647 | 12.8% | 697 | 4.7% | 2 137 | 1 891 | 13.0% | 2 554 |
| Containerboard external deliveries, 1 000 tonnes | 256 | 214 | 19.6% | 247 | 3.6% | 749 | 632 | 18.5% | 869 |
| Containerboard production, 1 000 tonnes | 342 | 306 | 11.8% | 324 | 5.6% | 994 | 900 | 10.4% | 1 221 |
| Corrugated packaging deliveries, million m2 | 282 | 274 | 2.9% | 275 | 2.5% | 824 | 806 | 2.2% | 1 082 |
| Market pulp external deliveries, 1 000 tonnes | 552 | 525 | 5.1% | 521 | 6.0% | 1 609 | 1 498 | 7.4% | 2 068 |
| Wood product deliveries, 1 000 m3 | 1 207 | 1 143 | 5.6% | 1 325 | -8.9% | 3 789 | 3 586 | 5.7% | 4 814 |
| Paper deliveries, 1 000 tonnes | 1 177 | 1 272 | -7.5% | 1 185 | -0.7% | 3 567 | 3 934 | -9.3% | 5 141 |
| Paper production, 1 000 tonnes | 1 152 | 1 243 | -7.3% | 1 158 | -0.5% | 3 513 | 3 936 | -10.7% | 5 155 |
"During the quarter, we have made a step change in our transformation towards a renewable materials growth company. I am very pleased to announce the third consecutive quarter of sales growth, with an increase of almost 5%. This is mainly driven by our steady progress in the transformation projects in China, Varkaus and Murów. Additionally, a favourable price development had a positive impact. If we look at sales excluding the paper business, it increased over 11%.
Operational EBIT increased over 32% to EUR 290 million, primarily due to favourable sales prices, increased volumes from strategic investments and efficient cost control. The balance sheet continued to strengthen, as net debt to operational EBITDA improved to 1.8 (2.1).
The transformation projects continue to deliver and contribute to solidifying our position in the bioeconomy.
The ramp-up of Beihai Mill remains ahead of plan with a production volume of 105 000 (52 000) tonnes of consumer packaging board during the quarter. I am also satisfied that we have reached our targeted operational EBITDA run-rate for the Varkaus kraftliner mill. We expect full production in the fourth quarter this year. Another positive development is the turnaround in China Packaging, where we have seen increased deliveries coupled with operational improvements.
Today, we are happy to announce two important investments in Finland. We continue to invest in Finland, while expecting that the competitiveness of its export industry is ensured and further improved globally.
We will invest EUR 52 million to increase our total dissolving pulp capacity, from 150 000 tonnes to 430 000 tonnes annually at Enocell Mill. Our dissolving pulp is used in the production of viscose fibres for the textile industry. It is a renewable raw material which can replace fossil-based products, such as polyester.
We will also invest EUR 42 million to enhance our chemithermomechanical pulp (CTMP) annual production volume and drying capacity at Imatra Mills. This will boost our competitiveness in the liquid packaging board and food service board segments. It will also enable us to take the next steps in the commercialisation of micro-fibrillated cellulose (MFC). MFC can be used for lighter, more durable packaging that requires less raw material. The investments will support our competitiveness and contribute to sustainable growth.
I am proud that we have been top ranked in a study by Mistra Center for Sustainable Markets at the Stockholm School of Economics. The study explored how Sweden's largest companies communicate their sustainability aspirations, implementation and evaluation.
As always, I would like to thank our customers for their business, our employees for their dedication, and our investors for their trust."
Operational EBIT margin
11.6%
Operational ROCE
13.9 (Target % >13%)
Net debtto operational EBITDA
1.8 (Target <3.0)
| Change % Q3/17– |
Change % Q3/17– |
Q1– | Change % Q1-Q3/17– |
||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q1–Q3/17 | Q3/16 | Q1-Q3/16 | 2016 |
| Operational EBITDA | 410 | 343 | 19.5% | 341 | 20.2% | 1 103 | 1 061 | 4.0% | 1 371 |
| Equity accounted investments (EAI), operational1 |
20 | 17 | 17.6% | 15 | 33.3% | 49 | 49 | 0.0% | 80 |
| Operational decrease in the value of biological assets |
-16 | -17 | 5.9% | -18 | 11.1% | -46 | -46 | 0.0% | -65 |
| Depreciation and impairment excl. IAC | -124 | -124 | 0.0% | -119 | -4.2% | -382 | -371 | -3.0% | -502 |
| Operational EBIT | 290 | 219 | 32.4% | 219 | 32.4% | 724 | 693 | 4.5% | 884 |
| Fair valuations and non-operational items2 |
0 | -14 | 100.0% | -6 | 100.0% | -1 | -55 | 98.2% | -67 |
| Items affecting comparability (IAC)3 | -20 | -9 | -122.2% | -8 | -150.0% | -55 | 0 | n/m | -34 |
| Operating profit (IFRS) | 270 | 196 | 37.8% | 205 | 31.7% | 668 | 638 | 4.7% | 783 |
1 The group's share of operational EBIT of equity accounted investments (EAI).
2 Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the group's share of tax and net financial items of EAI.
3 Items affecting comparability detailed in the Financials section.
| Sales Q3/2016, EUR million | 2 393 |
|---|---|
| Price and mix | 3% |
| Currency | -1% |
| Volume | 2% |
| Other sales1 | 0% |
| Total before structural changes | 4% |
| Structural changes2 | 1% |
| Total | 5% |
| Sales Q3/2017, EUR million | 2 509 |
1 Wood, energy, paper for recycling, by-products etc.
2 Asset closures, major investments, divestments and acquisitions
Group sales at EUR 2 509 million grew EUR 116 million or 4.8% compared to same period a year ago. Higher sales prices in local currencies, especially in Biomaterials and Packaging Solutions divisions and higher deliveries in Biomaterials, Wood Products and Packaging Solutions divisions improved sales. The negative impact of the divestments of Kabel Mill and the Suzhou Mill site was more than offset by the ramp-up of the Beihai consumer board mill in China, Varkaus kraftliner mill and LVL (laminated veneer lumber) line in Finland and Murów sawmill in Poland.
Operational EBIT at EUR 290 (EUR 219) million increased clearly by EUR 71 million or 32.4%. The operational EBIT margin increased over 2 %-points to 11.6% (9.2%).
Higher sales prices improved operational EBIT by EUR 61 million, mainly in Packaging Solutions, Biomaterials and Wood Products divisions. Higher volumes in all divisions except for Paper increased operational EBIT by EUR 68 million.
Variable costs increased EUR 33 million, mainly due to increased wood costs in Wood Products and Paper divisions, higher cost for paper for recycling (PfR) in Paper and Packaging Solutions divisions, and higher energy costs. Fixed costs had a EUR 5 million negative impact, as lower maintenance costs, partly related to the change in the maintenance sequence compared to last year, were more than offset by higher other fixed costs. The increased costs were partially offset by good cost management through our Profit Improvement Programme. The net foreign exchange impact decreased operational EBIT by EUR 20 million. The positive impact from depreciation, closed units and operational result from equity accounted investments was EUR 1 million.
The planned and unplanned production downtime was 7% (10%) for paper, 4% (6%) for board, and 0% (0%) for wood products.
The average number of employees in the third quarter of 2017 was approximately 27 000, which was 200 higher than in the same quarter a year ago. The average number of employees during the quarter in Europe was approximately 20 200, which was 100 lower than in the same quarter a year ago. In China, the average number of employees was approximately 5 700, which was 300 higher than a year ago.
Fair valuations and non-operational items had a negative EUR 1 (negative EUR 14) million net impact on operating profit. There was a positive impact of EUR 7 million from the increase in fair valuation of forests of the Nordic equity accounted investment Tornator, and a negative impact of EUR 4 million from the valuation of biological assets in the joint operation Veracel in Brazil.
Earnings per share were EUR 0.24 (EUR 0.16) and earnings per share excluding items affecting comparability (IAC) were EUR 0.27 (EUR 0.17).
The group recorded an item affecting comparability (IAC) with a negative impact of approximately EUR 20 (negative EUR 9) million on its operating profit in the third quarter of 2017. The IAC relates to the disposal of Stora Enso's 35% minority holding in the equity accounted investment Bulleh Shah Packaging Ltd. (BSP) in Pakistan to the main owner Packages Ltd.
Net financial expenses at EUR 46 million were EUR 11 million higher than a year ago. The net interest expenses decreased by EUR 4 million, due to further reduced debt levels, partly offset by lower capitalised interest and lower interest income from deposits. Other net financial expenses in the third quarter were EUR 15 (EUR 5) million and included expenses of EUR 11 million in connection with loan repayments. The net foreign exchange impact in the third quarter in respect of cash, interestbearing assets and liabilities and related hedges amounted to a gain of EUR 1 (gain of EUR 6) million, mainly due to the revaluation of foreign currency loans in subsidiaries and joint-operations.
| EUR million | Capital employed |
|---|---|
| 30 September 2016 | 8 618 |
| Capital expenditure less depreciation | -34 |
| Impairments and reversal of impairments | -107 |
| Fair valuation of biological assets | -113 |
| Costs related to growth of biological assets | -141 |
| Available-for-sale: operative (mainly PVO) | 44 |
| Equity accounted investments | 147 |
| Net liabilities in defined benefit plans | -55 |
| Operative working capital and other interest-free items, net | 105 |
| Net tax liabilities | 20 |
| Translation difference | -160 |
| Other changes | -1 |
| 30 September 2017 | 8 323 |
The operational return on capital employed (ROCE) in the third quarter of 2017 was 13.9% (10.1%). Excluding the Beihai operations in the Consumer Board division, the operational ROCE would have been 16.3% (13.5%).
Sales increased EUR 170 million or 2.3% to EUR 7 534 million. Operational EBIT increased EUR 31 million to EUR 724 million. Clearly higher volumes increased operational EBIT by EUR 133 million in all divisions except for Paper. Higher sales prices, mainly in Packaging Solutions, Biomaterials and Wood Products divisions improved operational EBIT by EUR 52 million. Variable costs were EUR 53 million higher, mainly due to higher costs for Paper for Recycling (PfR), logistic, energy and chemicals. Fixed costs increased EUR 59 million, primarily due to ramp-up of strategic investments and partly due to changes in the maintenance sequence. Depreciations were EUR 11 million higher than a year ago, mainly related to the start-up of Beihai Mill. The net foreign exchange impact decreased operational EBIT by EUR 24 million. Impact from the closed units was EUR 8 million negative.
Sales were EUR 19 million or 0.8% lower at EUR 2 509 million. Operational EBIT increased clearly by EUR 71 million to EUR 290 million. Higher sales prices, especially in Biomaterials and Packaging Solutions divisions, improved operational EBIT by EUR 36 million. Volumes had a EUR 22 million and fixed costs a EUR 39 million positive impact on operational EBIT, respectively. Variable costs were EUR 8 million higher and negative net foreign exchange impact EUR 14 million. Higher depreciation and negative impact from the closed units were only partly offset by EUR 5 million higher result from the equity accounted investments.
| EUR million | 30 Sep 17 | 30 Jun 17 | 31 Dec 16 | 30 Sep 16 |
|---|---|---|---|---|
| Operative fixed assets1 | 6 441 | 6 465 | 6 785 | 6 941 |
| Equity accounted investments | 1 594 | 1 590 | 1 594 | 1 455 |
| Operative working capital, net | 906 | 961 | 825 | 801 |
| Non-current interest-free items, net | -554 | -570 | -554 | -494 |
| Operating Capital Total | 8 387 | 8 446 | 8 650 | 8 703 |
| Net tax liabilities | -64 | -60 | -56 | -85 |
| Capital Employed | 8 323 | 8 386 | 8 594 | 8 618 |
| Equity attributable to owners of the Parent | 5 799 | 5 612 | 5 806 | 5 624 |
| Non-controlling interests | 48 | 50 | 62 | 95 |
| Net interest-bearing liabilities | 2 476 | 2 724 | 2 726 | 2 899 |
| Financing Total | 8 323 | 8 386 | 8 594 | 8 618 |
1 Operative fixed assets include property, plant and equipment, goodwill, biological assets, emission rights, available-for-sale operative shares and other intangible assets.
Total unutilised committed credit facilities were unchanged at EUR 700 million, and cash and cash equivalents net of overdrafts decreased by EUR 82 million to EUR 413 million as a result of further reduction in gross debt and partly offset by strong cash flow from operations in the quarter. In addition, Stora Enso has access to various long-term sources of funding up to EUR 900 (900) million.
The net debt was EUR 2 476 million, a decrease of EUR 248 million from the previous quarter. During the third quarter, Standard & Poor's raised Stora Enso's long-term corporate credit rating to BB+ from BB, mentioning successful transformation into a growth-oriented company with improved profitability and reduction of execution risks as the basis for the rating action.
The fair value of PVO shares accounted for as available-for-sale investments increased in the quarter by EUR 51 million to EUR 266 million. The change in fair value is mainly caused by the increase in electricity prices. The changes in fair valuation are included in the Other Comprehensive Income in equity.
The ratio of net debt to the last twelve months' operational EBITDA was 1.8 (2.0). The debt/equity ratio at 30 September 2017 was 0.43 (0.49).
| Cash flow | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Change % Q3/17– |
Change % Q3/17– |
Q1– | Change % Q1-Q3/17– |
||||||
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q1–Q3/17 | Q3/16 | Q1-Q3/16 | 2016 |
| Operational EBITDA | 410 | 343 | 19.5% | 341 | 20.2% | 1 103 | 1 061 | 4.0% | 1 371 |
| IAC on operational EBITDA | - | -3 | 100.0% | -8 | 100.0% | -32 | -51 | 37.3% | -77 |
| Dividends received from equity | |||||||||
| accounted investments | - | - | - | 8 | -100.0% | 20 | 58 | -65.5% | 58 |
| Other adjustments | -3 | -7 | 57.1% | -3 | 0.0% | -1 | 1 | -200.0% | -2 |
| Change in working capital | 23 | 57 | -59.6% | 27 | -14.8% | -117 | 103 | -213.6% | 283 |
| Cash Flow from Operations | |||||||||
| (non-IFRS) | 430 | 390 | 10.3% | 365 | 17.8% | 973 | 1 172 | -17.0% | 1 633 |
| Cash spent on fixed and biological assets |
-138 | -213 | 35.2% | -128 | -7.8% | -401 | -578 | 30.6% | -798 |
| Acquisitions of equity accounted investments |
-9 | - | - | - | - | -9 | - | - | -1 |
| Cash Flow after Investing Activities | |||||||||
| (non-IFRS) | 283 | 177 | 59.9% | 237 | 19.4% | 563 | 594 | -5.2% | 834 |
Third quarter 2017 cash flow after investing activities was EUR 283 million. Working capital decreased by EUR 23 million, mainly due to continuous working capital management. Cash spent on fixed and biological assets was EUR 138 million. Payments related to the previously announced provisions were EUR 7 million.
Additions to fixed and biological assets in the third quarter 2017 totalled EUR 149 million, of which EUR 127 million were fixed assets and EUR 22 million biological assets. Depreciations and impairment charges totalled EUR 124 million. Additions in fixed and biological assets had a cash outflow impact of EUR 138 million.
The main projects ongoing in the third quarter of 2017 were the new polyethylene extrusion (PE) coating plant and an automated roll warehouse at Imatra Mills in Finland, the PE coating investment at Beihai Mill in China, the Heinola Fluting Mill upgrade in Finland, the consolidation of manufacturing of corrugated packaging in Finland and the fluff pulp investment at Skutskär Mill in Sweden.
| EUR million | Forecast 2017 |
|---|---|
| Capital expenditure | 600–650 |
| Depreciation | 490–510 |
| Operational decrease in biological asset values | 50–70 |
The capital expenditure forecast includes approximately EUR 100 million for the group's biological assets. It also includes the following major projects:
The Consumer Board division develops and provides consumer packaging boards for printing and packaging applications. A wide board and barrier coating selection is suitable for the design and optimisation of packaging for liquid, food, pharmaceutical and luxury goods. We serve converters and brand owners globally and are expanding in growth markets such as China and Asia Pacific to meet rising demand.
| Change % Q3/17– |
Change % Q3/17– |
Q1– | Q1– | Change % Q1-Q3/17– |
|||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q3/17 | Q3/16 | Q1-Q3/16 | 2016 |
| Sales | 639 | 599 | 6.7% | 630 | 1.4% | 1 880 | 1 762 | 6.7% | 2 342 |
| Operational EBITDA | 127 | 118 | 7.6% | 111 | 14.4% | 357 | 355 | 0.6% | 447 |
| Operational EBITDA margin | 19.9% | 19.7% | 17.6% | 19.0% | 20.1% | 19.1% | |||
| Operational EBIT | 86 | 67 | 28.4% | 69 | 24.6% | 216 | 216 | 0.0% | 254 |
| Operational EBIT margin | 13.5% | 11.2% | 11.0% | 11.5% | 12.3% | 10.8% | |||
| Operational ROOC1 | 17.7% | 12.9% | 13.9% | 14.7% | 13.9% | 12.7% | |||
| Cash flow from operations (non-IFRS) |
111 | 89 | 24.7% | 140 | -20.7% | 318 | 339 | -6.2% | 453 |
| Cash flow after investing activities (non-IFRS) |
62 | -30 | n/m | 81 | -23.5% | 145 | 27 | n/m | 40 |
| Board deliveries, 1 000 tonnes | 718 | 650 | 10.5% | 702 | 2.3% | 2 104 | 1 868 | 12.6% | 2 507 |
| Board production, 1 000 tonnes | 730 | 647 | 12.8% | 697 | 4.7% | 2 137 | 1 891 | 13.0% | 2 554 |
1 Operational ROOC = 100 x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
Sales increased EUR 40 million or 6.7% to EUR 639 million, as the ramp-up of Beihai Mill increased volumes and sales prices.
| Product | Market | Demand Q3/17 compared with Q3/16 |
Demand Q3/17 compared with Q2/17 |
Price Q3/17 compared with Q3/16 |
Price Q3/17 compared with Q2/17 |
|---|---|---|---|---|---|
| Consumer board | Europe | Slightly stronger | Stable | Slightly lower | Slightly lower |
Operational ROOC
Operational ROOC excl. Beihai
40.5%
17.7%
(Target: >20%)
Scheduled annual maintenance shutdowns
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | – | – |
| Q3 | Imatra and Ingerois mills | Imatra and Ingerois mills |
| Q4 | Skoghall and Fors mills | Skoghall and Fors mills |
Packaging Solutions division develops fibre-based packaging, and operates at every stage of the value chain from pulp production, material and packaging production to recycling. Our solutions serve leading converters, brand owners and retailer customers helping to optimise performance, reduce total costs and enhance sales.
| Change % Q3/17– |
Change % Q3/17– |
Change % Q1-Q3/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | Q1-Q3/16 | 2016 |
| Sales | 318 | 259 | 22.8% | 313 | 1.6% | 921 | 762 | 20.9% | 1 044 |
| Operational EBITDA | 65 | 37 | 75.7% | 56 | 16.1% | 164 | 93 | 76.3% | 129 |
| Operational EBITDA margin | 20.4% | 14.3% | 17.9% | 17.8% | 12.2% | 12.4% | |||
| Operational EBIT | 48 | 21 | 128.6% | 40 | 20.0% | 112 | 45 | 148.9% | 64 |
| Operational EBIT margin | 15.1% | 8.1% | 12.8% | 12.2% | 5.9% | 6.1% | |||
| Operational ROOC1 | 22.4% | 9.6% | 18.3% | 17.6% | 7.0% | 7.6% | |||
| Cash flow from operations (non-IFRS) Cash flow after investing activities (non |
83 | 39 | 112.8% | 53 | 56.6% | 167 | 88 | 89.8% | 132 |
| IFRS) | 60 | 23 | 160.9% | 41 | 46.3% | 117 | 40 | 192.5% | 63 |
| Board deliveries (external), 1 000 tonnes | 256 | 214 | 19.6% | 247 | 3.6% | 749 | 632 | 18.5% | 869 |
| Board production, 1 000 tonnes Corrugated packaging deliveries, million |
342 | 306 | 11.8% | 324 | 5.6% | 994 | 900 | 10.4% | 1 221 |
| m2 Corrugated packaging production, million |
282 | 274 | 2.9% | 275 | 2.5% | 824 | 806 | 2.2% | 1 082 |
| m2 | 286 | 274 | 4.4% | 272 | 5.1% | 825 | 799 | 3.3% | 1 073 |
1 Operational ROOC = 100 x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
| Product | Market | Demand Q3/17 compared with Q3/16 |
Demand Q3/17 compared with Q2/17 |
Price Q3/17 compared with Q3/16 |
Price Q3/17 compared with Q2/17 |
|---|---|---|---|---|---|
| Virgin fibre-based containerboard Recycled fibre based |
Global | Stronger | Slightly stronger | Significantly higher | Slightly higher |
| (RCP) containerboard | Europe | Significantly stronger | Stable | Significantly higher | Higher |
| Corrugated packaging | Europe | Significantly stronger | Stable | Slightly higher | Slightly higher |
22.4 %
(Target: >20%)
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Ostrołęka Mill | Ostrołęka Mill |
| Q3 | Varkaus Mill | Heinola Mill |
| Q4 | Heinola Mill | Varkaus Mill |
The Biomaterials division offers a variety of pulp grades to meet the demands of paper, board, tissue, textile and hygiene product producers. We also develop new ways to maximise the value extractable from wood, as well as other kinds of lignocellulosic biomasses. Sugars and lignin hold potential for use in applications in the specialty chemical, construction, personal care and food industries.
| Change % Q3/17– |
Change % Q3/17– |
Change % Q1-Q3/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 Q1–Q3/17 | Q1–Q3/16 | Q1-Q3/16 | 2016 | |
| Sales | 379 | 334 | 13.5% | 371 | 2.2% | 1 119 | 1 027 | 9.0% | 1 376 |
| Operational EBITDA | 124 | 79 | 57.0% | 100 | 24.0% | 314 | 286 | 9.8% | 361 |
| Operational EBITDA margin | 32.7% | 23.7% | 27.0% | 28.1% | 27.8% | 26.2% | |||
| Operational EBIT | 88 | 43 | 104.7% | 62 | 41.9% | 203 | 184 | 10.3% | 224 |
| Operational EBIT margin | 23.2% | 12.9% | 16.7% | 18.1% | 17.9% | 16.3% | |||
| Operational ROOC1 | 14.8% | 6.7% | 9.8% | 10.7% | 9.5% | 8.5% | |||
| Cash flow from operations (non-IFRS) | 92 | 97 | -5.2% | 131 | -29.8% | 298 | 340 | -12.4% | 419 |
| Cash flow after investing activities | |||||||||
| (non-IFRS) | 61 | 64 | -4.7% | 99 | -38.4% | 212 | 241 | -12.0% | 278 |
| Pulp deliveries, 1 000 tonnes | 666 | 613 | 8.6% | 646 | 3.1% | 1 974 | 1 857 | 6.3% | 2 508 |
1 Operational ROOC = 100 x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
| Product | Market | Demand Q3/17 compared with Q3/16 |
Demand Q3/17 compared with Q2/17 |
Price Q3/17 compared with Q3/16 |
Price Q3/17 compared with Q2/17 |
|---|---|---|---|---|---|
| Softwood pulp | Europe | Stable | Stable | Significantly higher | Slightly higher |
| Hardwood pulp | Europe | Stable | Stable | Significantly higher | Higher |
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Montes del Plata and Sunila mills |
Montes del Plata Mill |
| Q3 | – | Veracel and Skutskär mills |
| Q4 | Veracel and Skutskär mills | Enocell Mill |
14.8
(Target: >
%
15%)
Wood Products division provides versatile wood-based solutions for building and housing. Our product range covers all areas of urban construction including massive wood elements, wood components, and pellets. We also offer a variety of sawn timber goods. Our customers are mainly merchants and retailers, industrial integrators and construction companies.
| Change % Q3/17– |
Change % Q3/17– |
Change % Q1-Q3/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | Q1-Q3/16 | 2016 |
| Sales | 415 | 385 | 7.8% | 440 | -5.7% | 1 271 | 1 200 | 5.9% | 1 595 |
| Operational EBITDA | 37 | 30 | 23.3% | 43 | -14.0% | 111 | 94 | 18.1% | 118 |
| Operational EBITDA margin | 8.9% | 7.8% | 9.8% | 8.7% | 7.8% | 7.4% | |||
| Operational EBIT | 29 | 22 | 31.8% | 35 | -17.1% | 86 | 71 | 21.1% | 88 |
| Operational EBIT margin | 7.0% | 5.7% | 8.0% | 6.8% | 5.9% | 5.5% | |||
| Operational ROOC1 | 21.3% | 17.5% | 25.5% | 21.6% | 18.5% | 16.8% | |||
| Cash flow from operations (non-IFRS) Cash flow after investing activities |
62 | 44 | 40.9% | 28 | 121.4% | 112 | 145 | -22.8% | 142 |
| (non-IFRS) | 50 | 23 | 117.4% | 21 | 138.1% | 81 | 86 | -5.8% | 75 |
| Wood products deliveries, 1 000 m3 | 1 169 | 1 107 | 5.6% | 1 288 | -9.2% | 3 669 | 3 467 | 5.8% | 4 643 |
1 Operational ROOC = 100 x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
| Product | Market | Demand Q3/17 compared with Q3/16 |
Demand Q3/17 compared with Q2/17 |
Price Q3/17 compared with Q3/16 |
Price Q3/17 compared with Q2/17 |
|---|---|---|---|---|---|
| Wood products | Europe | Slightly stronger | Weaker | Slightly higher | Stable |
Sales and operational EBIT Operational ROOC
21.3 %
(Target: >18%)
Paper division provides best-in-class paper solutions for print media and office use. The wide selection covers papers made from recycled and fresh wood fibre. Our main customer groups include publishers, retailers, printing houses, merchants, converters and office suppliers. Three of the mills produce paper based on 100% recycled fibre.
| Change % Q3/17– |
Change % Q3/17– |
Change % Q1-Q3/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | Q1-Q3/16 | 2016 |
| Sales | 727 | 792 | -8.2% | 719 | 1.1% | 2 194 | 2 485 | -11.7% | 3 245 |
| Operational EBITDA | 56 | 77 | -27.3% | 37 | 51.4% | 161 | 234 | -31.2% | 324 |
| Operational EBITDA margin | 7.7% | 9.7% | 5.1% | 7.3% | 9.4% | 10.0% | |||
| Operational EBIT | 29 | 53 | -45.3% | 11 | 163.6% | 82 | 147 | -44.2% | 211 |
| Operational EBIT margin | 4.0% | 6.7% | 1.5% | 3.7% | 5.9% | 6.5% | |||
| Operational ROOC1 | 16.0% | 19.4% | 5.4% | 12.7% | 17.6% | 19.4% | |||
| Cash flow from operations (non IFRS) |
24 | 109 | -78.0% | 91 | -73.6% | 157 | 225 | -30.2% | 351 |
| Cash flow after investing activities (non-IFRS) |
6 | 93 | -93.5% | 76 | -92.1% | 114 | 187 | -39.0% | 277 |
| Cash flow after investing activities to sales (non-IFRS) |
0.8% | 11.7% | 10.6% | 5.2% | 7.5% | 8.5% | |||
| Paper deliveries, 1 000 tonnes | 1 177 | 1 272 | -7.5% | 1 185 | -0.7% | 3 567 | 3 934 | -9.3% | 5 141 |
| Paper production, 1 000 tonnes | 1 152 | 1 243 | -7.3% | 1 158 | -0.5% | 3 513 | 3 936 | -10.7% | 5 155 |
1 Operational ROOC = 100% x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
Sales for ongoing operations decreased EUR 10 million or -1.3%, mainly due to Veitsiluoto Mill PM2 incident's impact on sales and negative foreign exchange impact. The divestments of Kabel Mill and Suzhou Mill site decreased sales by EUR 55 million.
| Product | Market | Demand Q3/17 compared with Q3/16 |
Demand Q3/17 compared with Q2/17 |
Price Q3/17 compared with Q3/16 |
Price Q3/17 compared with Q2/17 |
|---|---|---|---|---|---|
| Paper | Europe | Weaker | Stable | Stable | Slightly higher |
Sales and operational EBITDA Cash flow after investing activities to sales1
0.8 %
(Target: >7%)
Scheduled annual maintenance shutdowns
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Oulu Mill | Langerbrugge Mill |
| Q3 | Veitsiluoto Mill | Anjala, Maxau, Oulu, and Veitsiluoto mills |
| Q4 | Nymölla Mill | – |
1 The Paper division's financial target is cash flow after investing activities to sales (non-IFRS), because the division's goal is to generate cash flow for the group so that it can transform into a renewable materials growth company.
The segment Other includes the Nordic forest equity-accounted investments, Stora Enso's shareholding in the energy company Pohjolan Voima, operations supplying wood to the Nordic and Baltic mills, plantations not connected to any mill site, and group shared services and administration.
| Change % Q3/17– |
Change % Q3/17– |
Change % Q1-Q3/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q3/17 | Q3/16 | Q3/16 | Q2/17 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | Q1-Q3/16 | 2016 |
| Sales | 593 | 559 | 6.1% | 628 | -5.6% | 1 872 | 1 836 | 2.0% | 2 477 |
| Operational EBITDA | 1 | 2 | -50.0% | -6 | 116.7% | -4 | -1 | n/m | -8 |
| Operational EBITDA margin | 0.2% | 0.4% | -1.0% | -0.2% | -0.1% | -0.3% | |||
| Operational EBIT | 10 | 13 | -23.1% | 2 | n/m | 25 | 30 | -16.7% | 43 |
| Operational EBIT margin | 1.7% | 2.3% | 0.3% | 1.3% | 1.6% | 1.7% | |||
| Cash flow from operations | |||||||||
| (non-IFRS) | 58 | 12 | n/m | -78 | 174.4% | -79 | 35 | n/m | 136 |
| Cash flow after investing activities | |||||||||
| (non-IFRS) | 44 | 4 | n/m | -81 | 154.3% | -106 | 13 | n/m | 101 |
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
Operational EBIT decreased EUR 3 million to EUR 10 million.
| Q3/17 | Q3/16 | Q2/17³ | Q1–Q3/17 | Q1–Q3/16 | 2016 | Milestone | Milestone to be reached by |
|
|---|---|---|---|---|---|---|---|---|
| TRI rate | 8.6 | 10.5 | 7.0 | 8.1 | 12.0 | 11.7 | ||
| LTA rate | 6.4 | 4.4 | 4.8 | 5.7 | 4.4 | 4.4 | 4.0 | end of 2017 |
TRI (Total recordable incident) rate = number of incidents per one million hours worked.
LTA (Lost-time accident) rate = number of lost-time accidents per one million hours worked.
1 For Stora Enso employees, excluding joint operations
² As of January 2017 Stora Enso applies new Occupational Safety and Health Administration (OSHA) definitions in the reporting of TRI and LTA rates to better
align with international standards. Due to this change, the 2017 figures are not fully comparable with historical figures.
³ Recalculated due to additional data after the Q2/2017 Interim Report.
The LTA rate has increased and therefore the year-end milestone remains a challenge. Stora Enso has decided to implement a new Safety Roadmap to drive a step-change in performance. The roadmap focuses on improving governance and ways of working, control and compliance with standards, and building on leadership and best practices. The first element of the Roadmap was put in place in August.
| 30 Sep 17 | 30 Jun 17 | 31 Dec 16 | 30 Sep 16 | Target | Target to be reached by |
|
|---|---|---|---|---|---|---|
| % of supplier spend covered by the Supplier | ||||||
| Code of Conduct1 | 94% | 93% | 92% | 92% | 95% | end of 2017 |
1 Excluding joint operations.
The implementation is progressing according to plan.
| Completed | On track | Not on track | Closed1 | Regular review2 | |
|---|---|---|---|---|---|
| Implementation progress, % of all the actions | 87% | 0% | 1% | 9% | 3% |
1 Issues that were identified in the Human Rights assessments but closed following reassessment of their validity in specific local contexts.
2 Longer-term actions without a targeted end-date that require continuous review.
At the end of the quarter, 87% (87% in Q2) of the preventive and remediation actions were completed and 99% of the actions were resolved. The actions are based on the UN Guiding Principles on Business and Human Rights and criteria created in collaboration with Danish Institute for Human Rights. As reported earlier, the remaining actions will be progressed to an appropriate conclusion during 2017 and the reporting on Human Rights Action Plan progress will be stopped after the Q4 report.
Stora Enso has completed the earlier announced divestment of its 35% minority holding in the equity accounted investment Bulleh Shah Packaging (Private) Ltd. (BSP) in Pakistan to the main owner Packages Ltd. The group will continue to support its share of the two community investment programmes it has been funding in Pakistan after the divestment of BSP. The contract for the school programme is in place until 2023. Support for the mobile medical clinic continues until it is handed over to a medical facility in Lahore, which is expected before year-end.
Stora Enso will also carry on with the Public Private Partnership with the ILO to promote decent work and to combat child labour in the Punjab Province of Pakistan until the end of 2018. Quarterly reporting of the ILO Partnership in Pakistan will be stopped after this report.
| 30 Sep 17 | 30 Jun 17 | 31 Dec 16 | 30 Sep 16 | |
|---|---|---|---|---|
| Social forestland leased, ha | 29 701 | 29 831 | 30 500 | 31 127 |
| Leased area without contractual defects, ha | 16 329 | 16 341 | 16 480 | 16 583 |
| Lease contracts without contractual defects, % of all contracts | 66% | 66% | 66% | 65% |
In contracts without defects the ownership of land is clear or solved, and the contracting procedure is proven to be legal, authentic and valid. The contract correction process includes a desktop documentation review, field investigations, legal and operational risk analysis, stakeholder consultations, the collection of missing documentation and the signing of new agreements or amendments directly with the villages or households concerned, or in some cases contract termination.
Stora Enso leases a total of 82 744 hectares of land in various regions of Guangxi, of which 36% is social land leased from village collectives, individual households, and local forest farms.
As announced earlier Stora Enso is reconsidering its plans to build a chemical pulp mill in Beihai, and decrease the area of its leased forestland in the Guangxi region. As part of this process, Stora Enso aims to have only land leased that is free of contractual defects.
| 30 Sept 17 | 30 Jun 17 | 31 Dec 16 | 30 Sept 16 | |
|---|---|---|---|---|
| Area occupied by social movements not involved in | ||||
| the Sustainable Settlement Initiative, ha | 3 425 | 3 566 | 3 499 | 3 465 |
At the end of the quarter, 3 425 hectares of land owned by Veracel were occupied by social landless movements not involved in the Sustainable Settlement Initiative. During the quarter, Veracel continued to seek repossessions of occupied areas through legal processes, and the company resumed forest management on 141 hectares. Veracel has reserved 16 500 hectares to support the Sustainable Settlement Initiative. At the end of 2016, the total land area owned by Veracel was 215 000 hectares, of which 73 000 hectares are planted with eucalyptus for pulp production.
| Q3/17 | Q3/16 | Q2/17 | Q1- Q3/17 |
Q1- Q3/16 |
2016 | Target | Target to be reached by |
|
|---|---|---|---|---|---|---|---|---|
| Reduction of fossil CO₂ emissions per saleable tonne of pulp, paper and board (kg/t) |
-41% | -44% | -41% | -40% | -41% | -41% | -35% | end of 2025 |
1From baseline year 2006. Covering direct fossil CO₂ emissions from production and indirect fossil CO₂ emissions related to purchased electricity and heat (Scope 1 and 2). Historical figures recalculated due to divestments, or data completion. Excluding joint operations.
For over a decade, Stora Enso has actively reduced the energy intensity of its operations, and in many places also its dependency on fossil fuels. Today, over 75% of the energy the group generates and uses comes from Carbon Neutral sources inside and outside the company. It is Stora Enso's firm intention to drive down fossil fuel use even more over the next ten years to get as close to zero as possible using technically and commercially feasible means.
Stora Enso is ahead of the 2025 target at present. The adverse impact on the group's fossil CO2 emissions from coal use for energy production at Beihai Mill is reflected in the Q3 data. Work has already begun to define a long-term strategy to migrate away from coal at Beihai.
In October, Stora Enso received a top rating in a report on Sustainability Communication in Sweden. The study, which includes the 90 companies listed on the Nasdaq OMX Stockholm Large Cap index, is conducted with the aim of exploring and measuring sustainability communications. The report is commissioned by the Mistra Center for Sustainable Markets (MISUM) in collaboration with the Stockholm School of Economics.
Increasing competition, and supply and demand balances in the paper, pulp, packaging, wood products and roundwood markets may have an impact on our market share and profitability. Changes in the global economic and political environment, sharp market corrections, increasing volatility in foreign exchange rates and deteriorating economic conditions in our main markets could all have impacts on Stora Enso's profits, cash flows and financial position. A more detailed description of risks is available in Stora Enso's Annual Report at storaenso.com/annualreport.
Energy sensitivity analysis: the direct effect of a 10% increase in electricity, heat, oil and other fossil fuel market prices would have a negative impact of approximately EUR 15 million on operational EBIT for the next 12 months, after the effect of hedges.
Wood sensitivity analysis: the direct effect of a 10% increase in wood prices would have a negative impact of approximately EUR 178 million on operational EBIT for the next 12 months.
Pulp sensitivity analysis: the direct effect of a 10% increase in pulp market prices would have a positive impact of approximately EUR 120 million on operational EBIT for the next 12 months.
Chemical and filler sensitivity analysis: the direct effect of a 10% increase in chemical and filler prices would have a negative impact of approximately EUR 53 million on operational EBIT for the next 12 months.
A decrease of energy, wood, pulp or chemical and filler prices would have the opposite impact.
Foreign exchange rates sensitivity analysis for the next twelve months: the direct effect on operational EBIT of a 10% strengthening in the value of the US dollar, Swedish crown and British pound against the euro would be about positive EUR 115 million, negative EUR 89 million and positive EUR 31 million annual impact, respectively. Weakening of the currencies would have the opposite impact. These numbers are before the effect of hedges and assuming no changes occur other than a single currency exchange rate movement.
The group incurs annual unhedged net costs worth approximately EUR 120 million in Brazilian real (BRL) in its operations in Brazil. For these flows, a 10% strengthening in the value of BRL would have a EUR 12 million negative impact on operational EBIT.
Fibria and Stora Enso each own 50% of Veracel, and the joint ownership is governed by a shareholder agreement. In May 2014, Fibria initiated arbitration proceedings against Stora Enso claiming that Stora Enso was in breach of certain provisions of the shareholder agreement. Fibria has estimated that the interest to be paid regarding the dispute should be approximately USD 54 (EUR 46) million. Stora Enso denies any breach of contract and disputes the method for calculating the interest to be paid. No provisions have been made in Stora Enso's accounts for this case.
On 11 July 2008, Stora Enso announced that a federal judge in Brazil had issued a decision claiming that the permits issued by the State of Bahia for the operations of Stora Enso's joint operations company Veracel were not valid. The judge also ordered Veracel to take certain actions, including reforestation with native trees on part of Veracel's plantations and a possible fine of BRL 20 (EUR 5) million. Veracel disputes the decision and has filed an appeal against it. Veracel operates in full compliance with all Brazilian laws and has obtained all the necessary environmental and operating licences for its industrial and forestry activities from the relevant authorities. In November 2008, a Federal Court suspended the effects of the decision. No provisions have been recorded in Veracel's or Stora Enso's accounts for the reforestation or the possible fine.
In December 2009, the Finnish Market Court fined Stora Enso for competition law infringements in the market for roundwood in Finland from 1997 to 2004. Stora Enso did not appeal against the ruling. In March 2011 Metsähallitus of Finland initiated legal proceedings against Stora Enso, UPM and Metsäliitto claiming compensation for damages allegedly suffered due to competition law infringements. In its ruling issued in June 2016, the Helsinki District Court dismissed Metsähallitus' claim for damages against Stora Enso, Metsäliitto and UPM. Metsähallitus has appealed this ruling. Following reductions by Metsähallitus, the total claim against the defendants now amounts to approximately EUR 125 million and the secondary claim against Stora Enso to approximately EUR 68 million.
In addition, certain Finnish municipalities and private forest owners initiated similar legal proceedings. The total amount claimed from the defendants amounts to approximately EUR 24 million, the secondary claims solely against Stora Enso amount to approximately EUR 5 million. Stora Enso denies that the plaintiffs suffered any damages whatsoever and will forcefully defend itself. No provisions have been made in Stora Enso's accounts for these lawsuits.
In July and August 2016, six Swedish Insurance companies filed lawsuits against Stora Enso. The claimed amount is approximately SEK 300 million (EUR 31 million) attributable to insurance compensation paid to injured parties in connection with the forest fire in Västmanland, Sweden in 2014. Stora Enso denies liability and will respond within the frame of the legal proceedings.
During the third quarter of 2017, the conversions of 60 000 A shares into R shares were recorded in the Finnish trade register.
On 30 September 2017, Stora Enso had 176 446 320 A shares and 612 173 667 R shares in issue. The company did not hold its own shares. The total number of Stora Enso shares in issue was 788 619 987 and the total number votes was at least 237 663 686.
Stora Enso's Shareholders' Nomination Board was established in August.
The Shareholders' Nomination Board is composed of the following members: Jorma Eloranta (Chairman of the Board of Directors), Hans Stråberg (Vice Chairman of the Board of Directors), Harri Sailas (Chairman of the Board of Directors of Solidium Oy), and Marcus Wallenberg (Chairman of the Board of Directors of FAM AB).
The Shareholders' Nomination Board elected Marcus Wallenberg as its Chairman.
The AGM approved the proposal by the Board of Directors that the Company distributes a dividend of EUR 0.37 per share for the year 2016.
The AGM approved a proposal that of the current members of the Board of Directors – Anne Brunila, Jorma Eloranta, Elisabeth Fleuriot, Hock Goh, Mikael Mäkinen, Richard Nilsson, and Hans Stråberg – be re-elected members of the Board of Directors until the end of the following AGM and that Christiane Kuehne and Göran Sandberg be elected new members of the Board of Directors for the same term of office.
The AGM approved the proposed annual remuneration for the Board of Directors as follows:
| Chairman | EUR 170 000 |
|---|---|
| Vice Chairman | EUR 100 000 |
| Members | EUR 70 000 |
The AGM approved the proposal that the current auditor Authorised Public Accountants Deloitte Oy shall be re-elected auditor of the Company until the end of the following AGM. The AGM approved a proposal that remuneration for the auditor shall be paid according to invoice approved by Financial and Audit Committee.
The AGM approved the proposal to amend the Company's Articles of Association so that the shareholders' meeting shall decide on the election of Chairman and Vice Chairman of the Board of Directors, with the exception of a vacancy during the term of office, in which case the Board of Directors shall have the right to elect a new Chairman or Vice Chairman from among its members for the remaining term of office. It was also approved to allow for the notice to the shareholders' meetings to be published on the Company's website in addition to which details on the date and location of the meeting, together with the address of the Company's website be published in at least two Finnish and two Swedish newspapers, and to amend the terminology to that the reference to "Authorised Public Accountants approved by the Finnish Central Chamber of Commerce" be changed to "Authorised Public Accountants".
The AGM approved the proposal to amend the Charter of the Shareholders' Nomination Board so that the Shareholders' Nomination Board shall prepare and present to the shareholders' meeting a proposal regarding the Chairman and Vice Chairman of the Board of Directors in connection with its proposal regarding the members of the Board of Directors.
At its meeting held after the AGM, the Stora Enso Board of Directors elected from among its members Jorma Eloranta as its Chairman and Hans Stråberg as Vice Chairman. Richard Nilsson (chairman), Jorma Eloranta, Mikael Mäkinen and Christiane Kuehne were elected as members of the Financial and Audit Committee. Jorma Eloranta (chairman), Elisabeth Fleuriot and Hans Stråberg were elected as members of the Remuneration Committee. Anne Brunila (chairman), Hock Goh and Göran Sandberg were elected as members of the Sustainability and Ethics Committee.
The conversion of 34 000 A shares into R shares was recorded in the Finnish trade register on 16 October 2017.
This release has been prepared in Finnish, English and Swedish. If there are any variations in the content between the versions, the English version shall govern. This report is unaudited.
Helsinki, 25 October 2017 Stora Enso Oyj Board of Directors
This unaudited interim financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the group's Financial Report for 2016.
All figures in this Interim Report have been rounded to the nearest million, unless otherwise stated.
The group's key non-IFRS performance metric is operational EBIT, which is used to evaluate the performance of its operating segments and to steer allocation of resources to them. Operational EBIT comprises the operating profit excluding items affecting comparability (IAC) and fair valuations from the segments and Stora Enso's share of the operating profit of equity accounted investments (EAI), also excluding items affecting comparability and fair valuations.
Items affecting comparability are exceptional transactions that are not related to recurring business operations. The most common items affecting comparability are capital gains, additional write-downs or reversals of write-downs, provisions for planned restructuring and penalties. Items affecting comparability are normally disclosed individually if they exceed one cent per share.
Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets and the group's share of income tax and net financial items of EAI.
Cash flow from operations (non-IFRS) is a group specific way to present operative cash flow without hedging result from OCI and starting from operational EBITDA instead of operating profit.
Cash flow after investing activities (non-IFRS) is calculated as follows: cash flow from operations (non-IFRS) excluding cash spent on intangible assets, property, plant and equipment, and biological assets and acquisitions of EAIs.
The full list of the non-IFRS measures is presented at the end of this report.
Stora Enso changed its reporting regarding the costs related to the growth of biological assets (i.e. growing trees) starting from the fourth quarter of 2016.
Costs related to the development of biological assets are capitalised on the balance sheet during the growth cycle (i.e. until the time of harvesting). At harvesting, the capitalised costs are transferred from biological assets to inventory. Prior to the change, Stora Enso has included the costs related to the growth of biological assets in its operational EBITDA.
From the fourth quarter of 2016 onwards, these growth costs are excluded from operational EBITDA and presented as Operational decrease in the value of biological assets. This change affects the following non-IFRS key figures: operational EBITDA, operational EBITDA margin, and net debt to last 12 months' operational EBITDA ratio. The historical figures are restated according to the new reporting structure. Restated figures are presented in Stora Enso Oyj stock exchange release, published on 8 December 2016.
There is no impact on operational EBIT, the subtotals of the official Condensed Consolidated Income Statement or the group's other IFRS figures.
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment entities – Applying the consolidation Exception. The amendments provide an exemption from consolidation of subsidiaries for entities that meet the definition of investment entity. This change is not relevant to the group.
As disclosed in Stora Enso's Financial Report 2016, we do not expect that the following standards would have any significant impact on the group:
| EUR million | Q3/17 | Q3/16 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | 2016 |
|---|---|---|---|---|---|---|
| Sales | 2 509 | 2 393 | 2 528 | 7 534 | 7 364 | 9 802 |
| Other operating income | 36 | 30 | 34 | 94 | 94 | 123 |
| Change in inventories of finished goods and WIP | 2 | -10 | -19 | 6 | -15 | 9 |
| Materials and services | -1 466 | -1 414 | -1 474 | -4 438 | -4 318 | -5 833 |
| Freight and sales commissions | -239 | -234 | -245 | -729 | -702 | -920 |
| Personnel expenses | -310 | -308 | -354 | -989 | -1 015 | -1 334 |
| Other operating expenses | -123 | -119 | -140 | -408 | -406 | -561 |
| Share of results of equity accounted investments | 5 | 10 | 14 | 35 | 32 | 156 |
| Change in net value of biological assets | -20 | -22 | -20 | -52 | -59 | -261 |
| Depreciation, amortisation and impairment charges | -124 | -130 | -119 | -385 | -337 | -398 |
| Operating Profit | 270 | 196 | 205 | 668 | 638 | 783 |
| Net financial items | -46 | -35 | -60 | -135 | -173 | -242 |
| Profit before Tax | 224 | 161 | 145 | 533 | 465 | 541 |
| Income tax | -33 | -42 | -2 | -92 | -114 | -134 |
| Net Profit for the Period | 191 | 119 | 143 | 441 | 351 | 407 |
| Attributable to: | ||||||
| Owners of the Parent | 191 | 129 | 146 | 451 | 372 | 463 |
| Non-controlling interests | 0 | -10 | -3 | -10 | -21 | -56 |
| Net Profit for the Period | 191 | 119 | 143 | 441 | 351 | 407 |
| Earnings per Share | ||||||
| Basic earnings per share, EUR | 0.24 | 0.16 | 0.19 | 0.57 | 0.47 | 0.59 |
| Diluted earnings per share, EUR | 0.24 | 0.16 | 0.19 | 0.57 | 0.47 | 0.59 |
| EUR million | Q3/17 | Q3/16 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | 2016 |
|---|---|---|---|---|---|---|
| Net profit for the period | 191 | 119 | 143 | 441 | 351 | 407 |
| Other Comprehensive Income (OCI) | ||||||
| Items that will Not be Reclassified to Profit and Loss | ||||||
| Actuarial gains and losses on defined benefit plans | 4 | -10 | 0 | 4 | -10 | -62 |
| Income tax relating to items that will not be reclassified | -1 | 0 | 0 | -1 | 0 | 15 |
| 3 | -10 | 0 | 3 | -10 | -47 | |
| Items that may be Reclassified Subsequently to Profit and Loss |
||||||
| Share of OCI of EAIs that may be reclassified | 0 | 1 | 2 | 3 | -4 | 0 |
| Currency translation movements on equity net investments (CTA) | -59 | -24 | -176 | -228 | 1 | 124 |
| Currency translation movements on non-controlling interests | -2 | -1 | -2 | -4 | -5 | -3 |
| Net investment hedges | 11 | 2 | 21 | 36 | 8 | -11 |
| Cash flow hedges | 3 | 2 | 27 | 27 | 26 | 13 |
| Non-controlling interests' share of items that may be reclassified | 0 | 0 | 1 | 0 | 0 | 0 |
| Available-for-sale investments | 37 | 31 | -22 | 1 | 108 | 138 |
| Income tax relating to items that may be reclassified | 0 | 0 | -8 | -7 | -6 | -1 |
| -10 | 11 | -157 | -172 | 128 | 260 | |
| Total Comprehensive Income | 184 | 120 | -14 | 272 | 469 | 620 |
| Attributable to: | ||||||
| Owners of the Parent | 186 | 131 | -10 | 286 | 495 | 679 |
| Non-controlling interests | -2 | -11 | -4 | -14 | -26 | -59 |
| Total Comprehensive Income | 184 | 120 | -14 | 272 | 469 | 620 |
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
EAI = Equity Accounted Investments
| Assets 237 238 247 Goodwill O 173 180 176 Other intangible assets O 5 282 5 611 5 624 Property, plant and equipment O 5 692 6 029 6 047 458 489 645 Biological assets O 15 14 17 Emission rights O 1 594 1 594 1 455 Equity accounted investments O 25 42 31 Available-for-sale: Listed securities I 276 253 232 Available-for-sale: Operative O 54 7 9 Non-current loan receivables I 154 214 192 Deferred tax assets T 48 57 58 Other non-current assets O 8 316 8 699 8 686 Non-current Assets 1 331 1 346 1 290 Inventories O 10 9 6 Tax receivables T 1 325 1 273 1 280 Operative receivables O 70 46 128 Interest-bearing receivables I 418 953 781 Cash and cash equivalents I 3 154 3 627 3 485 Current Assets 11 470 12 326 12 171 Total Assets Equity and Liabilities 5 799 5 806 5 624 Owners of the Parent 48 62 95 Non-controlling Interests 5 847 5 868 5 719 Total Equity 444 436 390 Post-employment benefit provisions O 110 114 97 Other provisions O 175 203 235 Deferred tax liabilities T 2 092 2 655 2 604 Non-current debt I 48 61 65 Other non-current operative liabilities O 2 869 3 469 3 391 Non-current Liabilities 389 552 650 Current portion of non-current debt I 557 563 588 Interest-bearing liabilities I 5 4 6 Bank overdrafts I 28 20 23 Other provisions O 1 722 1 774 1 746 Other operative liabilities O 53 76 48 Tax liabilities T 2 754 2 989 3 061 Current Liabilities 5 623 6 458 6 452 Total Liabilities 11 470 12 326 12 171 |
EUR million | 30 Sep 17 | 31 Dec 16 | 30 Sep 16 |
|---|---|---|---|---|
| Total Equity and Liabilities |
Items designated with "O" comprise Operating Capital
Items designated with "I" comprise Net Interest-bearing Liabilities
Items designated with "T" comprise Net Tax Liabilities
| EUR million | Q1–Q3/17 | Q1–Q3/16 |
|---|---|---|
| Cash Flow from Operating Activities | ||
| Operating profit | 668 | 638 |
| Hedging result from OCI | -3 | -1 |
| Adjustments for non-cash items | 422 | 431 |
| Change in net working capital | -117 | 103 |
| Cash Flow Generated by Operations | 970 | 1 171 |
| Net financial items paid | -166 | -156 |
| Income taxes paid, net | -74 | -72 |
| Net Cash Provided by Operating Activities | 730 | 943 |
| Cash Flow from Investing Activities | ||
| Acquisitions of equity accounted investments | -9 | - |
| Acquisitions of available-for-sale investments | -8 | -2 |
| Proceeds from disposal of subsidiary shares and business operations, net of disposed cash | 4 | 38 |
| Proceeds from disposal of shares in equity accounted investments | 6 | 26 |
| Proceeds from disposal of available-for-sale investments | - | 10 |
| Proceeds and advances from disposal of intangible assets and property, plant and equipment | 43 | 123 |
| Income taxes paid on disposal of property | -15 | - |
| Capital expenditure | -401 | -578 |
| Proceeds from/payment of non-current receivables, net | -45 | -5 |
| Net Cash Used in Investing Activities | -425 | -388 |
| Cash Flow from Financing Activities | ||
| Proceeds from issue of new long-term debt | 424 | 329 |
| Repayment of long-term debt | -1 007 | -606 |
| Change in short-term borrowings | 54 | 5 |
| Dividends paid | -292 | -260 |
| Buy-out of interest in subsidiaries from non-controlling interests | - | -46 |
| Equity injections from, less dividends to, non-controlling interests | - | -2 |
| Purchase of own shares1 | -3 | -2 |
| Net Cash Used in Financing Activities | -824 | -582 |
| Net Change in Cash and Cash Equivalents | -519 | -27 |
| Translation adjustment | -17 | -5 |
| Net cash and cash equivalents at the beginning of period | 949 | 807 |
| Net Cash and Cash Equivalents at Period End | 413 | 775 |
| Cash and Cash Equivalents at Period End | 418 | 781 |
| Bank Overdrafts at Period End | -5 | -6 |
| Net Cash and Cash Equivalents at Period End | 413 | 775 |
| Disposals | ||
| Cash and cash equivalents | - | 1 |
| Other intangible assets and property, plant and equipment | - | 39 |
| Working capital | - | 6 |
| Interest-bearing assets and liabilities | - | 3 |
| Non-controlling interests | - | -4 |
| Net Assets in Divested Companies | - | 45 |
| Gain on sale | - | 0 |
| Total Disposal Consideration | - | 45 |
| Cash part of consideration | - | 39 |
| Non-cash part of consideration | - | 6 |
| Total Disposal Consideration | - | 45 |
| Cash Received Regarding Previous Year Disposals | 4 | - |
1 Own shares purchased for the group's share award programme. The group did not hold any of its own shares at the end of September 2017.
| EUR million | Q1–Q3/17 | Q1–Q3/16 | 2016 |
|---|---|---|---|
| Carrying value at 1 January | 6 518 | 6 671 | 6 671 |
| Additions in tangible and intangible assets | 309 | 468 | 638 |
| Additions in biological assets | 64 | 67 | 91 |
| Costs related to growth of biological assets | -46 | -46 | -141 |
| Disposals | -11 | -3 | -253 |
| Disposals of subsidiary companies | 0 | -39 | -39 |
| Depreciation and impairment | -385 | -337 | -398 |
| Fair valuation of biological assets | -6 | -13 | -120 |
| Translation difference and other | -293 | -76 | 69 |
| Statement of Financial Position Total | 6 150 | 6 692 | 6 518 |
| EUR million | 30 Sep 17 | 31 Dec 16 | 30 Sep 16 |
|---|---|---|---|
| Bond loans | 1 364 | 1 705 | 1 704 |
| Loans from credit institutions | 1 054 | 1 434 | 1 475 |
| Finance lease liabilities | 53 | 56 | 60 |
| Other non-current liabilities | 10 | 12 | 15 |
| Non-current Debt including Current Portion | 2 481 | 3 207 | 3 254 |
| Short-term borrowings | 479 | 452 | 499 |
| Interest payable | 36 | 54 | 44 |
| Derivative financial liabilities | 42 | 57 | 45 |
| Bank overdrafts | 5 | 4 | 6 |
| Total Interest-bearing Liabilities | 3 043 | 3 774 | 3 848 |
| EUR million | Q1–Q3/17 | 2016 | Q1–Q3/16 |
| Carrying value at 1 January | 3 774 | 4 197 | 4 197 |
| Proceeds of new long-term debt | 424 | 368 | 329 |
| Repayment of long-term debt | -1 007 | -781 | -606 |
| Change in short-term borrowings and interest payable | 9 | -50 | -13 |
| Change in derivative financial liabilities | -15 | -13 | -25 |
| Translation differences and other | -142 | 53 | -34 |
| Total Interest-bearing Liabilities | 3 043 | 3 774 | 3 848 |
| Fair Valuation Reserve | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EUR million | Share Capital |
Share Premium and Reserve fund |
Invested Non Restricted Equity Fund |
Treasury Shares |
Step Acquisition Revaluation Surplus |
Available for-Sale Investments |
Cash Flow Hedges |
OCI of Equity Accounted Investments |
CTA and Net Investment Hedges |
Retained Earnings |
Attributable to Owners of the Parent |
Non controlling Interests |
Total |
| Balance at 31 December 2015 | 1 342 | 77 | 633 | - | 4 | 27 | -24 | -19 | -147 | 3 495 | 5 388 | 125 | 5 513 |
| Profit/loss for the period | - | - | - | - | - | - | - | - | - | 372 | 372 | -21 | 351 |
| OCI before tax | - | - | - | - | - | 108 | 26 | -4 | 9 | -10 | 129 | -5 | 124 |
| Income tax relating to components of OCI | - | - | - | - | - | -1 | -4 | - | -1 | - | -6 | - | -6 |
| Total Comprehensive Income | - | - | - | - | - | 107 | 22 | -4 | 8 | 362 | 495 | -26 | 469 |
| Dividend | - | - | - | - | - | - | - | - | - | -260 | -260 | - | -260 |
| Acquisitions and disposals | - | - | - | - | - | - | - | - | - | - | - | -4 | -4 |
| Purchase of treasury shares | - | - | - | -2 | - | - | - | - | - | - | -2 | - | -2 |
| Share-based payments | - | - | - | 2 | - | - | - | - | - | 1 | 3 | - | 3 |
| Balance at 30 September 2016 | 1 342 | 77 | 633 | - | 4 | 134 | -2 | -23 | -139 | 3 598 | 5 624 | 95 | 5 719 |
| Profit/loss for the period | - | - | - | - | - | - | - | - | - | 91 | 91 | -35 | 56 |
| OCI before tax | - | - | - | - | - | 30 | -13 | 4 | 104 | -52 | 73 | 2 | 75 |
| Income tax relating to components of OCI | - | - | - | - | - | -2 | 4 | - | 3 | 15 | 20 | - | 20 |
| Total Comprehensive Income | - | - | - | - | - | 28 | -9 | 4 | 107 | 54 | 184 | -33 | 151 |
| Acquisitions and disposals | - | - | - | - | - | - | - | - | - | -1 | -1 | - | -1 |
| Share-based payments | - | - | - | - | - | - | - | - | - | -1 | -1 | - | -1 |
| Balance at 31 December 2016 | 1 342 | 77 | 633 | - | 4 | 162 | -11 | -19 | -32 | 3 650 | 5 806 | 62 | 5 868 |
| Profit/loss for the period | - | - | - | - | - | - | - | - | - | 451 | 451 | -10 | 441 |
| OCI before tax | - | - | - | - | - | 1 | 27 | 3 | -192 | 4 | -157 | -4 | -161 |
| Income tax relating to components of OCI | - | - | - | - | - | 4 | -4 | - | -7 | -1 | -8 | - | -8 |
| Total Comprehensive Income | - | - | - | - | - | 5 | 23 | 3 | -199 | 454 | 286 | -14 | 272 |
| Dividend | - | - | - | - | - | - | - | - | - | -292 | -292 | - | -292 |
| Purchase of treasury shares | - | - | - | -3 | - | - | - | - | - | - | -3 | - | -3 |
| Share-based payments | - | - | - | 3 | - | - | - | - | - | -1 | 2 | - | 2 |
| Balance at 30 September 2017 | 1 342 | 77 | 633 | - | 4 | 167 | 12 | -16 | -231 | 3 811 | 5 799 | 48 | 5 847 |
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
NCI = Non-controlling Interests
| EUR million | 30 Sep 17 | 31 Dec 16 | 30 Sep 16 |
|---|---|---|---|
| On Own Behalf | |||
| Mortgages | 6 | 9 | 9 |
| On Behalf of Equity Accounted Investments | |||
| Guarantees | 4 | 4 | 4 |
| On Behalf of Others | |||
| Guarantees | 31 | 34 | 37 |
| Other Commitments, Own | |||
| Operating leases, in next 12 months | 81 | 86 | 84 |
| Operating leases, after next 12 months | 654 | 747 | 753 |
| Pension liabilities | 1 | 1 | 1 |
| Other commitments | 6 | 9 | 10 |
| Total | 783 | 890 | 898 |
| Mortgages | 6 | 9 | 9 |
| Guarantees | 35 | 38 | 41 |
| Operating leases | 735 | 833 | 837 |
| Pension liabilities | 1 | 1 | 1 |
| Other commitments | 6 | 9 | 10 |
| Total | 783 | 890 | 898 |
The group's direct capital expenditure contracts amounted to EUR 128 million (compared with EUR 148 million on 30 September 2016 and EUR 171 million on 31 December 2016). These amounts include the group's share of direct capital expenditure contracts in joint operations.
| EUR million | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|
| Consumer Board | 639 | 630 | 611 | 2 342 | 580 | 599 | 599 | 564 |
| Packaging Solutions | 318 | 313 | 290 | 1 044 | 282 | 259 | 258 | 245 |
| Biomaterials | 379 | 371 | 369 | 1 376 | 349 | 334 | 342 | 351 |
| Wood Products | 415 | 440 | 416 | 1 595 | 395 | 385 | 433 | 382 |
| Paper | 727 | 719 | 748 | 3 245 | 760 | 792 | 839 | 854 |
| Other | 593 | 628 | 651 | 2 477 | 641 | 559 | 629 | 648 |
| Inter-segment sales | -562 | -573 | -588 | -2 277 | -569 | -535 | -574 | -599 |
| Total | 2 509 | 2 528 | 2 497 | 9 802 | 2 438 | 2 393 | 2 526 | 2 445 |
| EUR million | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|
| Consumer Board | 86 | 69 | 61 | 254 | 38 | 67 | 76 | 73 |
| Packaging Solutions | 48 | 40 | 24 | 64 | 19 | 21 | 17 | 7 |
| Biomaterials | 88 | 62 | 53 | 224 | 40 | 43 | 57 | 84 |
| Wood Products | 29 | 35 | 22 | 88 | 17 | 22 | 33 | 16 |
| Paper | 29 | 11 | 42 | 211 | 64 | 53 | 43 | 51 |
| Other | 10 | 2 | 13 | 43 | 13 | 13 | 0 | 17 |
| Operational EBIT | 290 | 219 | 215 | 884 | 191 | 219 | 226 | 248 |
| Fair valuations and non-operational items1 | 0 | -6 | 5 | -67 | -12 | -14 | -15 | -26 |
| Items affecting comparability | -20 | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| Operating Profit (IFRS) | 270 | 205 | 193 | 783 | 145 | 196 | 248 | 194 |
| Net financial items | -46 | -60 | -29 | -242 | -69 | -35 | -99 | -39 |
| Profit before Tax | 224 | 145 | 164 | 541 | 76 | 161 | 149 | 155 |
| Income tax expense | -33 | -2 | -57 | -134 | -20 | -42 | -31 | -41 |
| Net Profit | 191 | 143 | 107 | 407 | 56 | 119 | 118 | 114 |
1 Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the group's share of income tax and net financial items of EAI.
| EUR million | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|
| Impairments and reversals of intangible assets, PPE and biological assets Restructuring costs excluding fixed asset |
0 | 0 | -3 | -133 | -167 | -6 | 41 | -1 |
| impairments | 0 | 0 | -14 | -19 | 0 | -3 | -16 | 0 |
| Disposals | -20 | 0 | 0 | 144 | 155 | 0 | 16 | -27 |
| Other | 0 | -8 | -10 | -26 | -22 | 0 | -4 | 0 |
| Total IAC | -20 | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| Fair valuations and non-operational items | 0 | -6 | 5 | -67 | -12 | -14 | -15 | -26 |
| Total | -20 | -14 | -22 | -101 | -46 | -23 | 22 | -54 |
| EUR million | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|
| Consumer Board | -20 | -8 | -3 | -77 | -77 | 0 | 0 | 0 |
| Packaging Solutions | 0 | 0 | -3 | -21 | -12 | -9 | 0 | 0 |
| Biomaterials | 0 | 0 | -3 | 0 | 0 | 0 | 0 | 0 |
| Wood Products | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Paper | 0 | 0 | -18 | 78 | 69 | 0 | 37 | -28 |
| Other | 0 | 0 | 0 | -14 | -14 | 0 | 0 | 0 |
| IAC on Operating Profit | -20 | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| IAC on tax | 0 | 1 | 6 | -22 | -11 | 1 | -10 | -2 |
| IAC on Net Profit | -20 | -7 | -21 | -56 | -45 | -8 | 27 | -30 |
| Attributable to: | ||||||||
| Owners of the Parent | -20 | -7 | -21 | -47 | -37 | -8 | 27 | -29 |
| Non-controlling interests | 0 | 0 | 0 | -9 | -8 | 0 | 0 | -1 |
| IAC on Net Profit | -20 | -7 | -21 | -56 | -45 | -8 | 27 | -30 |
| EUR million | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|
| Consumer Board | 0 | -1 | -1 | -110 | -102 | -2 | -4 | -2 |
| Packaging Solutions | 0 | 0 | -1 | -1 | 0 | 0 | 0 | -1 |
| Biomaterials | -4 | -2 | -1 | -13 | -5 | -3 | -2 | -3 |
| Wood Products | 0 | 0 | -1 | 0 | 0 | 0 | 0 | 0 |
| Paper | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other | 4 | -3 | 9 | 57 | 95 | -9 | -9 | -20 |
| FV and Non-operational Items on Operating Profit |
0 | -6 | 5 | -67 | -12 | -14 | -15 | -26 |
1 Fair valuations (FV) and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the group's share of income tax and net financial items of EAI.
| EUR million | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|
| Consumer Board | 66 | 60 | 57 | 67 | -141 | 65 | 72 | 71 |
| Packaging Solutions | 48 | 40 | 20 | 42 | 7 | 12 | 17 | 6 |
| Biomaterials | 84 | 60 | 49 | 211 | 35 | 40 | 55 | 81 |
| Wood Products | 29 | 35 | 21 | 88 | 17 | 22 | 33 | 16 |
| Paper | 29 | 11 | 24 | 289 | 133 | 53 | 80 | 23 |
| Other | 14 | -1 | 22 | 86 | 94 | 4 | -9 | -3 |
| Operating Profit (IFRS) | 270 | 205 | 193 | 783 | 145 | 196 | 248 | 194 |
| Net financial items | -46 | -60 | -29 | -242 | -69 | -35 | -99 | -39 |
| Profit before Tax | 224 | 145 | 164 | 541 | 76 | 161 | 149 | 155 |
| Income tax expense | -33 | -2 | -57 | -134 | -20 | -42 | -31 | -41 |
| Net Profit | 191 | 143 | 107 | 407 | 56 | 119 | 118 | 114 |
| One Euro is | Closing Rate | Average Rate | |||
|---|---|---|---|---|---|
| 30 Sep 17 | 31 Dec 16 | 30 Sep 17 | 31 Dec 16 | ||
| SEK | 9.6490 | 9.5525 | 9.5826 | 9.4673 | |
| USD | 1.1806 | 1.0541 | 1.1132 | 1.1066 | |
| GBP | 0.8818 | 0.8562 | 0.8725 | 0.8189 |
| EUR million | USD | SEK | GBP |
|---|---|---|---|
| Estimated annual operating cash flow exposure | 1150 | -890 | 310 |
| Transaction hedges as at 30 September 2017 | -580 | 500 | -160 |
| Hedging percentage as at 30 September 2017 for the next 12 months | 50% | 56% | 52% |
Additionally there are hedges for 13–15 months with the nominal value of EUR 20 million for USD hedges and EUR 7 million for SEK hedges.
| Operational EBIT: Currency Strengthening of + 10% | EUR million |
|---|---|
| USD | 115 |
| SEK | -89 |
| GBP | 31 |
The sensitivity is based on the estimated net operating cash flow for the next 12 months. The calculation does not take into account currency hedges, and it assumes that no changes occur other than exchange rate movement in a currency. A currency weakening would have the opposite impact.
The group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
The valuation techniques are described in more detail in the group's Financial Report.
| EUR million | Loans and Receivables |
Financial Items at Fair Value through Income Statement |
Hedging Derivatives |
Available for-Sale Investments |
Carrying Amounts |
Fair Value |
|---|---|---|---|---|---|---|
| Financial Assets | ||||||
| Available-for-sale | - | - | - | 301 | 301 | 301 |
| Non-current loan receivables | 54 | - | - | - | 54 | 54 |
| Trade and other operative receivables | 963 | - | - | - | 963 | 963 |
| Interest-bearing receivables | 10 | 9 | 51 | - | 70 | 70 |
| Cash and cash equivalents | 418 | - | - | - | 418 | 418 |
| Carrying Amount by Category | 1 445 | 9 | 51 | 301 | 1 806 | 1 806 |
| EUR million | Financial Items at Fair Value through Income Statement |
Hedging Derivatives |
Measured at Amortised Cost |
Carrying Amounts |
Fair Value | |
|---|---|---|---|---|---|---|
| Financial Liabilities | ||||||
| Non-current debt | - | - | 2 092 | 2 092 | 2 371 | |
| Current portion of non-current debt | - | - | 389 | 389 | 389 | |
| Interest-bearing liabilities | 6 | 36 | 515 | 557 | 557 | |
| Trade and other operative payables | 20 | - | 1 409 | 1 429 | 1 429 | |
| Bank overdrafts | - | - | 5 | 5 | 5 | |
| Carrying Amount by Category | 26 | 36 | 4 410 | 4 472 | 4 751 | |
| EUR million | Level 1 | Level 2 | Level 3 | Total | ||
| Derivative financial assets | - | 60 | - | 60 | ||
| Trade and other operative receivables | - | - | - | - | ||
| Available-for-sale investments | 25 | - | 276 | 301 | ||
| Derivative financial liabilities | - | 42 | - | 42 | ||
| Trade and other operative liabilities | - | - | 20 | 20 |
| Loans and | Financial Items at Fair Value through Income |
Hedging | Available for-Sale |
Carrying | ||
|---|---|---|---|---|---|---|
| EUR million | Receivables | Statement | Derivatives | Investments | Amounts | Fair Value |
| Financial Assets | ||||||
| Available-for-sale | - | - | - | 295 | 295 | 295 |
| Non-current loan receivables | 7 | - | - | - | 7 | 7 |
| Trade and other operative receivables | 870 | 3 | - | - | 873 | 873 |
| Interest-bearing receivables | 5 | 12 | 29 | - | 46 | 46 |
| Cash and cash equivalents | 953 | - | - | - | 953 | 953 |
| Carrying Amount by Category | 1 835 | 15 | 29 | 295 | 2 174 | 2 174 |
| Financial Items at Fair Value through Income Statement |
Hedging Derivatives |
Measured at Amortised Cost |
Carrying Amounts |
Fair Value | |
|---|---|---|---|---|---|
| - | - | 2 655 | 2 655 | 2 974 | |
| - | - | 552 | 552 | 552 | |
| 7 | 50 | 506 | 563 | 563 | |
| 23 | - | 1 468 | 1 491 | 1 491 | |
| - | - | 4 | 4 | 4 | |
| 30 | 50 | 5 185 | 5 265 | 5 584 | |
| Level 1 | Level 2 | Level 3 | Total | ||
| - | 41 | - | 41 | ||
| - | 3 | - | 3 | ||
| 42 | - | 253 | 295 | ||
| - | 57 | - | 57 | ||
| - | - | 23 | 23 | ||
| EUR million | Q1–Q3/17 | 2016 | Q1–Q3/16 |
|---|---|---|---|
| Opening balance at 1 January | 253 | 131 | 131 |
| Gains/losses recognised in income statement | -2 | 5 | 5 |
| Gains/losses recognised in Available-for-sale investments reserve | 18 | 125 | 104 |
| Additions | 7 | 2 | 3 |
| Disposals | - | -10 | -11 |
| Closing Balance | 276 | 253 | 232 |
The level 3 financial assets consist mainly of PVO shares for which the valuation method is described in more detail in the Annual Report. The valuation is most sensitive to changes in electricity prices and discount rates. The discount rate of 3.44% used in the valuation model is determined using the weighted average cost of capital method. A +/- 5% change in the electricity price used in the DCF would change the valuation by EUR +37 million and -37 million, respectively. A +/- 1% change in the discount rate would change the valuation by EUR -28 million and +56 million, respectively.
| Helsinki | Stockholm | |||
|---|---|---|---|---|
| A share | R share | A share | R share | |
| July | 79 447 | 52 408 156 | 135 048 | 11 487 363 |
| August | 70 864 | 50 898 253 | 107 644 | 12 911 705 |
| September | 64 948 | 41 791 108 | 82 250 | 9 262 601 |
| Total | 215 259 | 145 097 517 | 324 942 | 33 661 669 |
| Helsinki, EUR | Stockholm, SEK | ||||
|---|---|---|---|---|---|
| A share | R share | A share | R share | ||
| July | 11.50 | 11.30 | 108.90 | 107.90 | |
| August | 11.07 | 11.04 | 104.60 | 104.20 | |
| September | 11.96 | 11.95 | 115.30 | 115.30 |
| Million | Q3/17 | Q3/16 | Q2/17 | Q1–Q3/17 | Q1–Q3/16 | 2016 |
|---|---|---|---|---|---|---|
| Periodic | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 |
| Cumulative | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 |
| Cumulative, diluted | 789.9 | 790.0 | 789.9 | 789.9 | 789.9 | 789.9 |
| Calculation of key figures | ||
|---|---|---|
| Operational return on capital employed, operational ROCE (%) |
100 x | Operational EBIT Capital employed1 2 |
| Operational return on operating capital, operational ROOC (%) |
100 x | Operational EBIT Operating capital 2 |
| Return on equity, ROE (%) | 100 x | Net profit/loss for the period Total equity2 |
| Net interest-bearing liabilities | Interest-bearing liabilities – interest-bearing assets | |
| Debt/equity ratio | Net interest-bearing liabilities Equity3 |
|
| EPS | Net profit/loss for the period3 Average number of shares |
|
| Operational EBIT | Operating profit/loss excluding items affecting comparability (IAC) and fair valuations of the segments and Stora Enso's share of operating profit/loss excluding IAC and fair valuations of its equity accounted investments (EAI) |
|
| Operational EBITDA | Operating profit/loss excluding operational decrease in the value of biological assets, fixed asset depreciation and impairment, share of results of equity accounted investments, IAC and fair valuations. |
|
| Net debt/last 12 months' operational EBITDA ratio |
Net interest-bearing liabilities LTM operational EBITDA |
|
| Fixed costs | Maintenance, personnel and other administration type of costs, excluding IAC and fair valuations |
|
| Last 12 months (LTM) | 12 months prior to the reporting date | |
| TRI | Total recordable incident rate = number of incidents per one million hours worked | |
| LTA | Lost-time accident rate = number of lost-time accidents per one million hours worked | |
1 Capital employed = Operating capital – Net tax liabilities
2 Average for the financial period
3 Attributable to the owners of the Parent
| List of non-IFRS measures | ||
|---|---|---|
| -- | -- | --------------------------- |
| Operational EBITDA Operational EBITDA margin Operational EBIT Operational EBIT margin Profit before tax excl. IAC Capital expenditure |
Depreciation and impairment charges excl. IAC Operational ROCE Earnings per share (EPS), excl. IAC Net debt/last 12 months' operational EBITDA ratio Fixed costs to sales Operational ROOC |
|---|---|
| Capital expenditure excl. investments in biological assets | Cash flow from operations |
| Capital employed | Cash flow after investing activities |
FI-00101 Helsinki, Finland SE-107 24 Stockholm, Sweden Tel. +358 2046 131 Klarabergsviadukten 70
Stora Enso Oyj Stora Enso AB storaenso.com P.O.Box 309 P.O.Box 70395 storaenso.com/investors Visiting address: Kanavaranta 1 Visiting address: World Trade Center Tel. +46 1046 46 000
For further information, please contact: Seppo Parvi, CFO, tel. +358 2046 21205 Ulla Paajanen-Sainio, SVP, Investor Relations, tel. +358 40 763 8767 Ulrika Lilja, EVP, Communications, tel. +46 72 221 9228
Stora Enso's Q4 and full year 2017 results will be published on
Stora Enso is a leading provider of renewable solutions in packaging, biomaterials, wood and paper on global markets. Our aim is to replace non-renewable materials by innovating and developing new products and services based on wood and other renewable materials. We employ some 25 000 people in more than 35 countries, and our sales in 2016 were EUR 9.8 billion. Stora Enso shares are listed on Nasdaq Helsinki (STEAV, STERV) and Nasdaq Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY). storaenso.com
It should be noted that Stora Enso and its business are exposed to various risks and uncertainties and 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. 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. All statements are based on management's best assumptions and beliefs in light of the information currently available to it and Stora Enso assumes no obligation to publicly update or revise any forward-looking statement except to the extent legally required.
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