Stora Enso Oyj

Earnings Release • Oct 26, 2018

Stora Enso’s Interim Report January–September 2018: Another quarter of profitable growth

Stora Enso’s Interim Report January–September 2018: Another quarter of profitable growth

STORA ENSO OYJ, Helsinki, Finland
INTERIM REPORT 26 October 2018 at 9.30 EEST
Q3/2018 (year-on-year)

· Sales increased 3.0% to EUR 2 585 (2 509) million, making Q3 the seventh
consecutive quarter of sales growth. The growth was primarily due to favourable
prices and active product mix management.
· Operational EBIT increased 23.4% to EUR 358 (290) million, due to favourable
prices and active product mix management.
· Balance sheet continued to strengthen, and net debt was reduced by EUR 304
million. The net debt to operational EBITDA ratio improved significantly to 1.1
(1.6).
· Operational ROCE was 16.7% (13.9%), well above the strategic target of 13%
for the fifth consecutive quarter.

Q1-Q3/2018 (year-on-year)

· Sales of EUR 7 828 (7 534) million increased 3.9%. Excluding the divested
Puumerkki, sales increased 5.4%.
· Operational EBIT of EUR 1 054 (724) million increased 45.6%, mainly due to
favourable prices and active product mix management.

Outlook

Q4/2018 sales are estimated to be slightly higher than the amount of EUR 2 585
million recorded in the third quarter of 2018, and operational EBIT is expected
to be in line with or somewhat lower than the EUR 358 million recorded in the
third quarter of 2018.
A negative EUR 10 million impact on operational EBIT in Q4/2018 is expected due
to production restrictions at uncoated fine paper mill in Nymölla, Sweden. This
is because water at a nearby lake, which supplies the water for mill operations,
is at too low a level. The impact of annual maintenance shutdowns in the fourth
quarter is expected to be similar to the third quarter of 2018. These impacts
are included in the above outlook.
Key figures

EUR million Q3/18  Q3/17  Change Q2/18  Change Q1 Q1 Change
2017
% % -Q3/18  -Q3/17  %
  Q3/18   Q3/18   Q1
-Q3/18–

                         -Q3/17           -Q2/18                     Q1
                                                                     -Q3/17

Sales 2 585 2 509 3.0% 2 664 -3.0% 7 828 7 534 3.9%
10 045
Operational 502 432 16.3% 466 7.8% 1 472 1 160 26.9%
1 587
  EBITDA
Operational 358 290 23.4% 327 9.4% 1 054 724 45.6%
1 004
EBIT
Operational 13.8% 11.6% 12.3% 13.5% 9.6%
10.0%
EBIT
margin
Operating 363 270 34.3% 317 14.3% 1 034 668 54.8%
904
profit
(IFRS)
Profit 305 244 25.0% 285 7.0% 923 588 56.9%
826
before tax

excl.
IAC
Profit 305 224 36.1% 257 18.6% 895 533 67.9%
742
before tax
Net profit 204 191 6.7% 213 -4.3% 690 441 56.4%
614
for   the
period
Net   2 172 2476 -12.3% 2 442 -11.1% 2 172 2 476 -12.3%
2 253
interest
-bearing
liabilities
Operational 17% 13.9% 15.5% 16.6% 11.4%
11.9%
ROCE
Earnings 0.31 0.27 13.3% 0.31 -2.2% 0.97 0.63 53.8%
0.89
per
  share
(EPS) excl.
IAC, EUR
EPS 0.27 0.24 12.9% 0.28 -2.5% 0.90 0.57 57.7%
0.79
(basic),
EUR
Net 1.1 1.6 1.3 1.1 1.6
1.4
debt/last
12

months’
operational
EBITDA
ratio
Average 26 545 27 001 -1.7% 26 155 1.5% 26 059 26 371 -1.2%
20 206
number of
employees

Stora Enso’s CEO Karl-Henrik Sundström comments on the third quarter 2018
results:
“We have now delivered our seventh consecutive quarter of sales growth. With a
sales increase of 3%, or close to 5% excluding the divested Puumerkki, we
continue our path of sustainable profitable growth. We see the results of our
active work on product mix and pricing. Despite challenges for the Consumer
Board division, we are delivering a 23% increase in operational EBIT and an
operational EBIT margin of almost 14%. This shows the strength of our portfolio.
All things considered, operational EBIT is expected to be clearly higher in 2018
compared to 2017.
Consumer Board, Packaging Solutions, Biomaterials and Paper divisions reported
sales growth. Packaging Solutions and Biomaterials divisions delivered all-time
high operational EBIT. For Wood Products, it was a record high operational EBIT
in a third quarter. In the quarter, Paper stands out with strong sales growth,
solid profitability and cash flow.
We continue to strengthen our balance sheet and net debt/ EBITDA was reduced
from 1.6 to 1.1. For the fifth consecutive quarter, operational ROCE is well
above our strategic target. On the whole, the direction is right.
The pace of our transformation continues to be high. The investment in a new
cross laminated timber (CLT) unit at the Gruvön sawmill is proceeding on time.
We are also investing in a Biocomposite Competence Center to further accelerate
the replacement of fossil-based plastics with renewable materials.
I would like to end by highlighting three things:
We have been awarded as the most start-up-friendly company in Finland 2018. An
example of our work with start-ups is a recent agreement with TRÄ Group, who has
been part of our Accelerator programme. We have a joint ambition to improve the
construction efficiency and increase digitalisation in the building industry. We
also continue our collaboration with the start-up company Sulapac with the
ambition of replacing non-renewable packaging components with renewable ones for
liquid packaging applications. Our target is to launch new products by end of
the first quarter of 2019.
From among 3 000 public companies, we have been ranked number 1 in Finland and
number 12 globally for gender balance and gender equality. The ranking is made
by Equileap, a leading organisation providing data and insights on gender
equality in the corporate sector.
Finally, we are providing material to the world’s largest engineered timber
office building, located in Brisbane, Australia. In total, the building is using
over 6 000 cubic metres of Stora Enso CLT and glulam. With this, the amount of
carbon that will be stored equals the average annual emissions of more than 1
600 cars. We play an important role in driving a fossil-free future via the
bioeconomy.
As always, I would like to thank our customers for their business, our employees
for their dedication, and our investors for their trust.”
Events today:
1) Press conference in Helsinki at 11.00 EEST
Stora Enso’s CEO Karl-Henrik Sundström and CFO Seppo Parvi will present the
results at the press conference which will be webcast. The event, hosted by EVP,
Communications Ulrika Lilja, will be held in English and take place at Stora
Enso’s Head Office, Kanavaranta 1, Helsinki at 11.00 EEST (10.00 CEST, 9.00 UK
time, 4.00 EDT). The webcast may be accessed at
https://storaenso.videosync.fi/2018-10-26-q3/register.

2) Webcast and conference call for analysts and investors at 14.00 EEST
The webcast and conference call for analysts and investors will take place at
14.00 EEST (13.00 CEST, 12.00 UK time, 7.00 EDT). It will be hosted by CEO Karl
-Henrik Sundström, CFO Seppo Parvi, and SVP, Head of Investor Relations Ulla
Paajanen, and may be accessed at https://edge.media-server.com/m6/p/r4xcvqzh.

Those analysts and investors who wish to ask questions should join the
conference call (details below). All participants can follow the presentation
over the webcast.
Dial-in details for the analyst and investor conference call:

UK: +44 (0)330 336 9127
Finland: +358 (0)9 7479 0361
Sweden: +46 (0)8 5664 2753
USA: +1 323 794 2093
Confirmation Code: 6879660

The links to the webcasts are also available on the Stora Enso website:
storaenso.com/investors (http://www.storaenso.com/investors)

For further information, please contact:
Ulla Paajanen, SVP, Investor Relations, tel. +358 40 763 8767
Ulrika Lilja, EVP, Communications, tel. +46 72 221 9228
This release is a summary of Stora Enso’s Interim Report January–September 2018.
The complete report is attached to this release as a pdf file. It is also
available on the company website at
storaenso.com/investors (http://www.storaenso.com/investors).
Part of the bioeconomy, Stora Enso is a leading global provider of renewable
solutions in packaging, biomaterials, wooden constructions and paper. We believe
that everything that is made from fossil-based materials today can be made from
a tree tomorrow. Stora Enso has some 26 000 employees in over 30 countries. Our
sales in 2017 were EUR 10 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/investors (http://www.storaenso.com/investors)
STORA ENSO OYJ
For further information, please contact:
Ulla Paajanen
SVP, Investor Relations
tel. +358 40 763 8767
Ulrika Lilja
EVP, Communications
tel. +46 72 221 9228

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