Stora Enso Oyj

Earnings Release • Jul 20, 2018

Stora Enso’s half-year financial report January–June 2018

Stora Enso’s half-year financial report January–June 2018

Sustainable profitable growth continues despite temporary headwinds
STORA ENSO OYJ, Helsinki, Finland
HALF-YEAR FINANCIAL REPORT 20 July 2018 at 9.30 EEST
Q2/2018 (year-on-year)

· Sales increased 5.4% to EUR 2 664 (2 528) million, despite wood shortage,
primarily due to favourable prices and active product mix management.
· Operational EBIT increased 49.4% to EUR 327 (219) million, despite temporary
headwinds in wood sourcing and Consumer Board production. The increase was due
to favourable prices and active product mix management.
· Balance sheet strengthened further despite increased dividend payout, and
net debt was reduced by 10%. The net debt to operational EBITDA ratio improved
to 1.3 (1.9).
· Operational ROCE was 15.5% (10.3%), above the strategic target of 13% for
the fourth consecutive quarter.
· Stora Enso announced today new target levels for Net Debt / Operational
EBITDA (<2.0) and Debt/equity Ratio (<0.6).

Q1–Q2/2018 (year-on-year)

· Sales of EUR 5 243 million increased by 4.3%. Excluding the divested
Puumerkki, sales increased 5.8%
· Operational EBIT of EUR 696 million increased 60.4%, mainly due to
favourable prices and active product mix management.

Outlook
Q3/2018 sales are estimated to be similar to the amount of EUR 2 664 million
recorded in the second quarter of 2018, and operational EBIT is expected to be
in line with the EUR 327 million recorded in the second quarter of 2018.
The impact of annual maintenance shutdowns is expected to be approximately EUR 5
million lower than in the second quarter of 2018. The second quarter maintenance
impact was EUR 15 million higher than initially forecast. The Nordic wood supply
situation is expected to continue tight, due to the risk of forest fires
affecting harvesting conditions. The wood supply impact is expected to be
approximately EUR 10 million negative in the third quarter of 2018. These
impacts are included in the above outlook.
Key figures

EUR million Q2/18 Q2/17 Change Q1/18 Change Q1–Q2/ Q1–Q2/ Change
2017
% % % Q1
Q2/18–Q Q2/18–Q -Q2/18–
Q1
18 17 -Q2/17
2/17 1/18

Sales 2 664 2 528 5.4% 2 579 3.3% 5 243 5 025 4.3% 10
045
Operational 466 359 29.8% 504 -7.5% 970 728 33.2% 1
587
  EBITDA
Operational 327 219 49.4% 369 -11.3% 696 434 60.4% 1
004
EBIT
Operational 12.3% 8.7% 14.3% 13.3% 8.6%
10.0%
EBIT
margin
Operating 317 205 54.5% 355 -10.8% 672 398 68.8% 904
profit
(IFRS)
Profit 285 153 86.2% 333 -14.4% 618 344 79.6% 826
before tax

excl.
IAC
Profit 257 145 77.3% 333 -22.8% 590 309 91.0% 742
before tax
Net profit 213 143 49.0% 273 -21.9% 486 250 94.4% 614
for   the
period
Net   2 442 2 724 -10.4% 2 226 9.7% 2 442 2 724 -10.4% 2
253
interest
-bearing
liabilities
Operational 15.5% 10.3% 17.7% 16.5% 10.2%
11.9%
ROCE
Earnings 0.31 0.19 64.7% 0.35 -10.6% 0.66 0.36 84.2%
0.89
per
  share
(EPS) excl.
IAC, EUR
EPS 0.28 0.19 46.3% 0.35 -20.6% 0.63 0.33 90.3%
0.79
(basic),
EUR
Net 1.3 1.9 1.3 1.3 1.9 1.4
debt/last
12

months’
operational
EBITDA
ratio
Average 26 26 -1.6% 25 2.8% 25 25 -0.8% 20
number of   155 581 442 798 999 206
employees

Stora Enso’s CEO Karl-Henrik Sundström comments on the second quarter 2018
results:
“Six consecutive quarters of sales growth prove that we have reached a level of
sustainable profitable growth. Sales increased by more than 5% during the
quarter and if we exclude the divested Puumerkki, the increase was 7%. This is
primarily due to favourable prices and our management of the product mix.
I am proud of the strong increase in operational EBIT of 50% to EUR 327 million,
despite the temporary headwinds that we have had during the quarter. Production
related issues, higher maintenance and tight wood supply had negative impacts.
If we look specifically at Consumer Board, even with headwinds in production
effecting volumes substantially, the division reached all-time high in sales.
All in all, we still have untapped potential to grab!
The Packaging Solutions division showed continued strong performance,
Biomaterials delivered all-time high sales and profitability, Wood Products
return on capital was at record level and the Paper division presented
significant profitability improvements. I see great performance across the
board.
Furthermore, I am pleased that our operational ROCE, close to 16%, was above our
strategic target for the fourth consecutive quarter. Moreover, we continue to
strengthen our balance sheet and net debt was reduced by more than 10%. All in
all, we have delivered records or solid performance in all our divisions.
Our transformation projects are progressing well. The ramp-up of the LVL
production at Varkaus Mill was completed during the quarter and the investment
to a new cross laminated timber unit at Gruvön sawmill is proceeding as planned.
Moreover, production is now up and running at the new fluff pulp line at
Skutskär Mill.
The consumer board and packaging solutions businesses are growing and we have
initiated a feasibility study to evaluate a potential conversion of Oulu paper
mill into packaging board production. A potential conversion would enable us to
take another step in our transformation journey. The other option is to continue
the current fine paper production.
I am very pleased with our new, more ambitious, financial targets regarding net
debt to EBITDA and debt to equity ratio. These are signalling our aim to reach
an investment grade credit rating.
Our Accelerator programme is paying off. We have signed a joint development
agreement with one of the programme participants, the Finnish start-up Sulapac.
Together we contribute to combat the global problem of plastic waste by
accelerating the use of fully renewable, recyclable and biodegradable materials
in packaging.
In May, we gathered 150 guests to celebrate the launch of our wood fibre-based
biocomposite plant. It is Europe’s largest and its products will contribute to
gradually replace fossil-based materials.
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) Webcast for media at 11.00 Finnish time (10.00 CEST)
The webcast for media will take place at 11.00 EEST (10.00 CEST, 09.00 UK time,
04.00 EDT). The event will be held in English and it will be hosted by CEO Karl
-Henrik Sundström, CFO Seppo Parvi, and EVP, Communications Ulrika Lilja. The
webcast may be accessed at https://storaenso.videosync.fi/2018-07-20-q2.

2) Webcast and conference call for analysts and investors at 14.00 Finnish time
The webcast and conference call for analysts and investors will take place at
14.00 EEST (13.00 CEST, 12.00 UK time, 07.00 EDT). It will be hosted by CEO Karl
-Henrik Sundström, CFO Seppo Parvi, and SVP Head of Investor Relations Ulla
Paajanen-Sainio, and may be accessed at https://edge.media
-server.com/m6/p/rdj7ikgk.

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

Live event at 14.00 EEST
UK +44 (0)330 336   9125
Finland +358 (0)9 7479   0361
Sweden +46 (0)8 5033   6574
USA +1 929 477   0324
Confirmation Code: 5039731

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:
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
This release is a summary of Stora Enso’s Half-year financial report
January–June 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

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