Earnings Release • Feb 9, 2018
Earnings Release
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January–December 2017
Dividend proposal EUR 0.41per share
Q1/2018 sales are estimated to be similar to or slightly higher than the amount of EUR 2 511 million recorded in the fourth quarter 2017, and operational EBIT is expected to be somewhat higher than the EUR 280 million recorded in Q4/2017. There are no major scheduled annual maintenance shutdowns during Q1/2018.
| Change % | Change % | ||||||
|---|---|---|---|---|---|---|---|
| Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q3/17 | 2017 | 2016 | Change % 2017–2016 |
| 2 511 | 2 438 | 3.0% | 2 509 | 0.1% | 10 045 | 9 802 | 2.5% |
| 427 | 343 | 24.5% | 432 | -1.2% | 1 587 | 1 463 | 8.5% |
| 17.0% | 14.1% | 17.2% | 15.8% | 14.9% | |||
| 280 | 191 | 46.6% | 290 | -3.4% | 1 004 | 884 | 13.6% |
| 11.2% | 7.8% | 11.6% | 10.0% | 9.0% | |||
| 236 | 145 | 62.8% | 270 | -12.6% | 904 | 783 | 15.5% |
| 238 | 110 | 116.4% | 244 | -2.5% | 826 | 575 | 43.7% |
| 209 | 76 | 175.0% | 224 | -6.7% | 742 | 541 | 37.2% |
| 173 | 56 | 208.9% | 191 | -9.4% | 614 | 407 | 50.9% |
| 267 | 194 | 37.6% | 149 | 79.2% | 640 | 729 | -12.2% |
| -12.2% | |||||||
| 125 | 131 | -4.6% | 124 | 0.8% | 507 | 502 | 1.0% |
| 2 253 | 2 726 | -17.4% | 2 476 | -9.0% | 2 253 | 2 726 | -17.4% |
| 13.5% | 8.9% | 13.9% | 11.9% | 10.2% | |||
| 0.26 | 0.17 | 0.27 | 0.89 | 0.65 | |||
| 0.22 | 0.12 | 0.24 | 0.79 | 0.59 | |||
| 11.6% | 3.9% | 13.3% | 10.3% | 7.2% | |||
| 0.38 | 0.47 | 0.43 | 0.38 | 0.47 | |||
| 3.5% | |||||||
| -0.2% | |||||||
| 4 | -34.2% | ||||||
| 4 | 20.5% | ||||||
| 251 1.4 26.9% 7.62 26 116 7.6 4.6 |
170 1.9 25.8% 7.36 26 135 10.9 4.3 |
Q4/17– 47.6% 3.5% -0.1% -30.3% 7.0% |
127 1.6 23.8% 7.35 27 001 7.6 6.0 |
Q4/17– 97.6% 3.7% -3.3% 0% -23.3% |
560 1.4 25.1% 7.62 26 206 7.7 5.3 |
638 1.9 25.3% 7.36 26 269 11.7 4.4 |
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 Restated due to a change in group's operational EBITDA definition to include the operational EBITDA of its equity accounted investments (EAI). See chapter Change in the operational EBITDA definition in the beginning of the Financials section.
2 For Stora Enso employees, excluding joint operations.
3 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, Q4 figures are not fully comparable with historical figures.
4 Recalculated due to additional data after the Q3/2017 Interim Report.
| Change% Q4/17– |
Change% Q4/17– |
Change% | ||||||
|---|---|---|---|---|---|---|---|---|
| Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q3/17 | 2017 | 2016 | 2017–2016 | |
| Consumer board deliveries, 1 000 tonnes | 712 | 639 | 11.4% | 718 | -0.8% | 2 816 | 2 507 | 12.3% |
| Consumer board production, 1 000 tonnes | 734 | 663 | 10.7% | 730 | 0.5% | 2 871 | 2 554 | 12.4% |
| Containerboard external deliveries, 1 000 tonnes | 274 | 237 | 15.6% | 256 | 7.0% | 1 023 | 869 | 17.7% |
| Containerboard production, 1 000 tonnes | 339 | 321 | 5.6% | 342 | -0.9% | 1 333 | 1 221 | 9.2% |
| Corrugated packaging deliveries, million m2 | 279 | 276 | 1.1% | 282 | -1.1% | 1 103 | 1 082 | 1.9% |
| Market pulp external deliveries, 1 000 tonnes | 526 | 570 | -7.7% | 552 | -4.7% | 2 135 | 2 068 | 3.2% |
| Wood product deliveries, 1 000 m3 | 1 308 | 1 228 | 6.5% | 1 207 | 8.4% | 5 097 | 4 814 | 5.9% |
| Paper deliveries, 1 000 tonnes | 1 146 | 1 207 | -5.1% | 1 177 | -2.6% | 4 713 | 5 141 | -8.3% |
| Paper production, 1 000 tonnes | 1 159 | 1 219 | -4.9% | 1 152 | 0.6% | 4 672 | 5 155 | -9.4% |
Operational key figures, items affecting comparability and other non-IFRS measures
The list of Stora Enso's non-IFRS measures and the calculation of the key figures are presented at the end of this report. See also the chapter Non-IFRS measures at the beginning of the Financials section.
In November 2017, Stora Enso introduced a change in its operational EBITDA calculation. For definition, see chapter Change in the operational EBITDA definition in the beginning of the Financials section. The restated historical figures were published in a press release on 7 November 2017.
We have reached a new level as a renewable materials company. The transformation has proven successful as we exceeded ten billion euros in sales and one billion in operational EBIT for the year. At the same time, we have strengthened our position in the bioeconomy for the future.
In four consecutive quarters, we have achieved growth, reaching a 3.0% increase in sales and 6.2% excluding paper in the fourth quarter. This is primarily due to the ramp-up of strategic investments in Beihai, Varkaus and Murów, and favourable prices. Higher volumes, higher sales prices and a better product mix enabled us to reach operational EBIT margin of 11.2% and ROCE of 13.5%, above our long-term financial targets. Strong cash flow strengthened the balance sheet and net debt to operational EBITDA improved to 1.4. Our innovation strategy is paying off. In 2017, 7% of our products and services were new which is a considerable increase compared to 2016.
After finalising our strategic investments, our balance sheet and cash flow are strengthening. This enables us to reward our shareholders. The Board of Directors proposes to the Annual General Meeting a dividend of 0.41 euros per share which is the third year in a row with an increase.
We continue to deliver on our promises related to the transformation. The ramp-up of Beihai Mill is ahead of schedule and its consumer board machine reached its designed capacity level and operational EBITDA break-even as planned. Also, Varkaus kraftliner mill reached its designed capacity level and exceeded its profitability target.
Securing raw material long term is crucial in the bioeconomy. As a consequence, we have signed a letter of intent aiming at structural changes in Bergvik Skog.
Stora Enso has made two important announcements during the first quarter this year that I'd like to highlight. We have signed a global framework agreement with three global unions to uphold fundamental labour rights. This is in line with our continuous efforts to provide a safe and rewarding workplace for our employees and contractors, and to be an attractive employer.
I am also very proud that we are the first forestry company to commit to a science based target to further reduce our CO2 and other greenhouse gas emissions. This in line with the 2°C limit set for global warming by the Paris Agreement, and is a natural step for us as the renewable materials company.
As to the outlook, our sales for the first quarter 2018 are estimated to be similar to or slightly higher than the amount of 2 511 million euros recorded in the fourth quarter 2017, and operational EBIT is expected to be somewhat higher than the 280 million euros recorded in the fourth quarter. There are no major scheduled annual maintenance shutdowns during the first quarter.
As always, I would like to thank our customers for their business, our employees for their dedication, and our investors for their trust.
Operational ROCE(Q4/2017)
13.5 (Target % >13%)
| Change % Q4/17– |
Change % Q4/17– |
Change % | ||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q3/17 | 2017 | 2016 | 2017–2016 |
| Operational EBITDA1 | 427 | 343 | 24.5% | 432 | -1.2% | 1 587 | 1 463 | 8.5% |
| Depreciation and depletion of equity accounted investments (EAI) |
-2 | -2 | 0.0% | -2 | 0.0% | -10 | -12 | 16.7% |
| Operational decrease in the value of biological assets |
-20 | -19 | -5.3% | -16 | -25.0% | -66 | -65 | -1.5% |
| Depreciation and impairment excl. IAC | -125 | -131 | 4.6% | -124 | -0.8% | -507 | -502 | -1.0% |
| Operational EBIT | 280 | 191 | 46.6% | 290 | -3.4% | 1 004 | 884 | 13.6% |
| Fair valuations and non-operational items2 |
-15 | -12 | -25.0% | 0 | n/m | -16 | -67 | 76.1% |
| Items affecting comparability (IAC) | -29 | -34 | 14.7% | -20 | -45.0% | -84 | -34 | -147.1% |
| Operating profit (IFRS) | 236 | 145 | 62.8% | 270 | -12.6% | 904 | 783 | 15.5% |
1 Restated due to a change in group's operational EBITDA definition to include the operational EBITDA of its equity accounted investments (EAI).See chapter Change in the operational EBITDA definition in the beginning of the Financials section.
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.
| Sales Q4/2016, EUR million | 2 438 |
|---|---|
| Price and mix | 4% |
| Currency | -1% |
| Volume | -2% |
| Other sales1 | 0% |
| Total before structural changes | 1% |
| Structural changes2 | 2% |
| Total | 3% |
| Sales Q4/2017, EUR million | 2 511 |
1 Wood, energy, paper for recycling, by-products etc.
2 Asset closures, major investments, divestments and acquisitions
Group sales at EUR 2 511 million grew EUR 73 million or 3.0% compared to same period a year ago and excluding paper 6.2%. Sales prices in local currencies were higher, especially in Biomaterials and Packaging Solutions divisions. They were only partly offset by lower deliveries, especially in Paper division, due to the incident in the drying section at Veitsiluoto Mill paper machine 2 during Q3 and a negative currency impact. The ramp-up of the Beihai consumer board mill in China, Varkaus laminated veneer lumber (LVL) line in Finland, China Packaging unit, and Murów sawmill in Poland increased sales further.
Operational EBIT at EUR 280 (191) million increased clearly by EUR 89 million or 46.6%. The operational EBIT margin increased over 3%-points to 11.2% (7.8%).
Clearly higher sales prices and better mix, and ramp up of strategic investments improved operational EBIT by EUR 111 million, especially in Biomaterials and Packaging Solutions divisions. Higher volumes increased operational EBIT by EUR 23 million or 12%, despite the incident at Veitsiluoto Mill and related lower volumes in Paper division.
Variable costs increased EUR 30 million, mainly due to increased chemical and filler costs, higher cost for paper for recycling (PfR) in Paper and Packaging Solutions divisions, and higher raw material costs for corrugated packaging. Fixed costs had a EUR 6 million negative impact, clearly higher maintenance costs were partly offset by lower other fixed costs. The increased costs were largely offset by good cost management through the Profit Improvement Programme. The net foreign exchange impact decreased operational EBIT by EUR 23 million. The positive impact from depreciation, closed units and operational result from equity accounted investments was EUR 14 million.
The planned and unplanned production downtime was 9% (6%) for paper, 4% (7%) for board, and 0% (0%) for wood products.
The average number of employees in the fourth quarter of 2017 was approximately 26 100, which was at the same level than in the same quarter a year ago. The average number of employees during the quarter in Europe was approximately 19 500, which was 100 higher than in the same quarter a year ago. In China, the average number of employees was approximately 5 500, which was 100 lower than a year ago.
Fair valuations and non-operational items had a negative EUR 15 (negative EUR 12) million net impact on operating profit. There was a negative impact of EUR 8 million from the decrease in fair valuation of forests and valuation of financial instruments of the Nordic equity accounted investment Tornator, and a negative impact of EUR 6 million from the valuation of emission rights.
Earnings per share were EUR 0.22 (0.12) and earnings per share excluding items affecting comparability (IAC) were EUR 0.26 (0.17).
The group recorded items affecting comparability (IAC) with a negative impact of approximately EUR 29 (negative EUR 34) million on its operating profit and a positive impact of approximately EUR 4 million (negative EUR 11) on income tax in the fourth quarter of 2017. The IAC relate mainly to the disposal of Puumerkki, a specialised wholesaler of wooden building materials, and environmental provisions in various locations.
Net financial expenses at EUR 27 million were EUR 42 million lower than a year ago. The net interest expenses decreased by EUR 9 million due to significantly reduced debt levels, partly offset by lower capitalised interest and lower interest income from loan receivables. Other net financial expenses in the fourth quarter were EUR 6 (6) million. The net foreign exchange impact in the fourth quarter in respect of cash, interest-bearing assets and liabilities and related hedges amounted to a gain of EUR 10 (loss of EUR 23) million, mainly due to the revaluation of foreign currency loans in subsidiaries and joint-operations.
| EUR million | Capital employed |
|---|---|
| 31 December 2016 | 8 594 |
| Capital expenditure less depreciation | 126 |
| Impairments and reversal of impairments | -21 |
| Fair valuation of biological assets | -6 |
| Costs related to growth of biological assets | -66 |
| Available-for-sale: operative (mainly PVO) | 66 |
| Equity accounted investments | 52 |
| Net liabilities in defined benefit plans | 56 |
| Operative working capital and other interest-free items, net | -69 |
| Net tax liabilities | -34 |
| Translation difference | -394 |
| Other changes | 4 |
| 31 December 2017 | 8 308 |
The operational return on capital employed (ROCE) in the fourth quarter of 2017 was 13.5% (8.9%). Excluding the Beihai operations in the Consumer Board division, the operational ROCE would have been 15.7% (12.1%).
Sales were slightly, EUR 2 million or 0.1%, higher at EUR 2 511 million. Operational EBIT decreased slightly to EUR 280 million from EUR 290 million. Favourable sales prices, especially in Packaging Solutions, Paper, and Biomaterials divisions, improved operational EBIT by EUR 35 million. Volumes had a EUR 28 million negative impact, mainly related to higher maintenance activity and some production problems in Biomaterials, as well as the incident at Veitsiluoto Mill in Q3. Fixed costs were EUR 33 million higher, mainly due to higher maintenance activity and seasonality. EUR 16 million higher variable costs were partly offset by positive EUR 12 million net foreign exchange impact. Positive impact from depreciation, closed units and equity accounted investments improved the result by EUR 20 million.
| Sales 2016, EUR million | 9 802 |
|---|---|
| Price and mix | 2% |
| Currency | -1% |
| Volume | 2% |
| Other sales1 | -1% |
| Total before structural changes | 2% |
| Structural changes2 | 0% |
| Total | 2% |
| Sales 2017, EUR million | 10 045 |
1 Wood, energy, paper for recycling, by-products etc.
2 Asset closures, major investments, divestments and acquisitions
Sales at EUR 10 045 (9 802) million were 2.5% higher than a year earlier, mainly due to higher volumes in all divisions except Paper, favourable pulp prices in all grades and also favourable prices in Packaging Solutions and Wood Products divisions. The impact of the foreign exchange rate movements on sales was EUR 55 million negative. Sales excluding the paper business increased by 8.5%. The higher volumes are primarily driven by the ramp-ups at Beihai consumer board mill, Murów sawmill, Varkaus laminated veneer lumber (LVL) and kraftliner mills, higher pulp production output and operational improvements in China Packaging. In addition, the share of new products and services increased significantly.
Operational EBIT reached a significant milestone at 1 004 EUR (884) million and increased 13.6%, mainly due to higher volumes, higher sales prices and better mix. Net foreign exchange rate movements, higher variable and fixed costs had a negative impact on operational EBIT. The increased costs were largely offset by good cost management through the Profit Improvement Programme. Operational EBIT margin was 10.0% (9.0%).
Net financial expenses at EUR 162 million were EUR 80 million lower than a year ago. The net interest expenses decreased by EUR 2 million, due to significantly reduced debt levels, partly offset by lower capitalised interest and lower interest income from loan receivables. The net foreign exchange impact in 2017 in respect of cash, interest-bearing assets and liabilities and related hedges was a gain of EUR 34 (loss EUR 43) million mainly due to the revaluation of foreign currency loans in subsidiaries and joint-operations. Other net financial expenses were EUR 1 million lower.
| EUR million | 31 Dec 17 | 30 Sep 17 | 30 Jun 17 | 31 Mar 17 | 31 Dec 16 |
|---|---|---|---|---|---|
| Operative fixed assets1 | 6 554 | 6 441 | 6 465 | 6 728 | 6 785 |
| Equity accounted investments | 1 600 | 1 594 | 1 590 | 1 602 | 1 594 |
| Operative working capital, net | 729 | 906 | 961 | 955 | 825 |
| Non-current interest-free items, net | -490 | -554 | -570 | -536 | -554 |
| Operating Capital Total | 8 393 | 8 387 | 8 446 | 8 749 | 8 650 |
| Net tax liabilities | -85 | -64 | -60 | -70 | -56 |
| Capital Employed | 8 308 | 8 323 | 8 386 | 8 679 | 8 594 |
| Equity attributable to owners of the Parent | 6 008 | 5 799 | 5 612 | 5 914 | 5 806 |
| Non-controlling interests | 47 | 48 | 50 | 54 | 62 |
| Net interest-bearing liabilities | 2 253 | 2 476 | 2 724 | 2 711 | 2 726 |
| Financing Total | 8 308 | 8 323 | 8 386 | 8 679 | 8 594 |
1 Operative fixed assets include property, plant and equipment, goodwill, biological assets, emission rights, available-for-sale operative shares and other intangible assets.
During the fourth quarter, Stora Enso signed a new sustainability linked EUR 600 million revolving credit facility agreement with a syndicate of 13 banks to refinance its existing EUR 700 million facility. Part of the pricing for the facility agreement is based on Stora Enso's Science Based Targets to combat global warming by reducing greenhouse gases, including CO2. The new facility matures in January 2023 and will be used as a backup for short-term facilities. The facility has no financial covenants.
Cash and cash equivalents net of overdrafts increased by EUR 190 million to EUR 603 million. In addition, Stora Enso has access to various long-term sources of funding up to EUR 950 (900) million.
The fair value of PVO shares accounted for as available-for-sale investments increased in the quarter by EUR 42 million to EUR 308 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 net debt was EUR 2 253 million, a decrease of EUR 223 million from the previous quarter as a result of strong cash flow from operations in the quarter. Net debt to operational EBITDA was 1.4 compared to 1.6 in the previous quarter. The debt/equity ratio at 31 December 2017 was 0.38 (0.43).
| Change % Q4/17– |
Change % Q4/17– |
Change % | ||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q3/17 | 2017 | 2016 | 2017–2016 |
| Operational EBITDA1 | 427 | 343 | 24.5% | 432 | -1.2% | 1 587 | 1 463 | 8.5% |
| IAC on operational EBITDA | -24 | -27 | 11.1% | -20 | -20.0% | -76 | -61 | -24.6% |
| Other adjustments | -38 | -35 | -8.6% | -5 | n/m | -56 | -52 | -7.7% |
| Change in working capital | 154 | 180 | -14.4% | 23 | n/m | 37 | 283 | -86.9% |
| Cash Flow from Operations | 519 | 461 | 12.6% | 430 | 20.7% | 1 492 | 1 633 | -8.6% |
| Cash spent on fixed and biological assets | -257 | -220 | -16.8% | -138 | -86.2% | -658 | -798 | 17.5% |
| Acquisitions of equity accounted investments | - | -1 | 100.0% | -9 | 100.0% | -9 | -1 | n/m |
| Cash Flow after Investing Activities | 262 | 240 | 9.2% | 283 | -7.4% | 825 | 834 | -1.1% |
1 Restated due to a change in group's operational EBITDA definition to include the operational EBITDA of its equity accounted investments (EAI).See chapter Change in the operational EBITDA definition in the beginning of the Financials section.
Fourth quarter 2017 cash flow after investing activities was EUR 262 million. Working capital decreased by EUR 154 million, due to higher trade payables and continuous working capital management. Cash spent on fixed and biological assets was EUR 257 million. Payments related to the previously announced provisions were EUR 15 million.
Additions to fixed and biological assets in the fourth quarter of 2017 totalled EUR 267 million, of which EUR 251 million were fixed assets and EUR 16 million biological assets. Depreciations and impairment charges totalled EUR 125 million. Additions in fixed and biological assets had a cash outflow impact of EUR 257 million.
The main projects ongoing in the fourth quarter of 2017 were the new polyethylene extrusion (PE) coating plant, an automated roll warehouse, malodorous gas handling and chemi-thermomechanical pulp (CTMP) flash drying at Imatra Mills in Finland, the upgrading of Heinola Fluting Mill in Finland, the consolidation of manufacturing of corrugated packaging in Finland, the fluff pulp investment at Skutskär Mill in Sweden, and the new production unit for cross laminated timber (CLT) at Gruvön sawmill in Sweden.
| EUR million | Forecast 2018 |
|---|---|
| Capital expenditure | 550–600 |
| Depreciation | 485–505 |
| 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 ongoing projects:
The ambition of the Consumer Board division is to be the global benchmark in high-quality virgin fibre cartonboard and the preferred partner to customers and brand owners in the premium end-use packaging and graphical segments. Our wide board and barrier coating selection is suitable for the design and optimisation of packaging for liquid, food, pharmaceutical and luxury goods.
| EUR million | Q4/17 | Q4/16 | Change % Q4/17–Q4/16 |
Q3/17 | Change % Q4/17–Q3/17 |
2017 | 2016 | Change % 2017–2016 |
|---|---|---|---|---|---|---|---|---|
| Sales | 636 | 580 | 9.7% | 639 | -0.5% | 2 516 | 2 342 | 7.4% |
| Operational EBITDA1 | 119 | 93 | 28.0% | 128 | -7.0% | 477 | 452 | 5.5% |
| Operational EBITDA margin1 | 18.7% | 16.0% | 20.0% | 19.0% | 19.3% | |||
| Operational EBIT | 69 | 38 | 81.6% | 86 | -19.8% | 285 | 254 | 12.2% |
| Operational EBIT margin | 10.8% | 6.6% | 13.5% | 11.3% | 10.8% | |||
| Operational ROOC | 14.2% | 7.4% | 17.7% | 14.6% | 12.7% | |||
| Cash flow from operations | 140 | 114 | 22.8% | 111 | 26.1% | 458 | 453 | 1.1% |
| Cash flow after investing activities | 73 | 13 | n/m | 62 | 17.7% | 218 | 40 | n/m |
| Board deliveries, 1 000 tonnes | 712 | 639 | 11.4% | 718 | -0.8% | 2 816 | 2 507 | 12.3% |
| Board production, 1 000 tonnes | 734 | 663 | 10.7% | 730 | 0.5% | 2 871 | 2 554 | 12.4% |
1 Restated due to a change in group's operational EBITDA definition to include the operational EBITDA of its equity accounted investments (EAI). See chapter Change in the operational EBITDA definition in the beginning of the Financials section.
| Markets | |||||
|---|---|---|---|---|---|
| Product | Market | Demand Q4/17 compared with Q4/16 |
Demand Q4/17 compared with Q3/17 |
Price Q4/17 compared with Q4/16 |
Price Q4/17 compared with Q3/17 |
| Consumer board | Europe | Stronger | Stable | Stable | Stable |
Operational ROOC (Q4/2017)
Operational ROOC excl. Beihai (Q4/2017) 32.1%
14.2%
(Target: >20%)
Scheduled annual maintenance shutdowns
| 2017 |
|---|
| – |
| – |
| Imatra and Ingerois mills |
| Skoghall and Fors mills |
| Beihai Mill Imatra and Ingerois mills Skoghall and Fors mills |
Packaging Solutions division provides fibre-based board materials and corrugated packaging products and services designed for a wide array of applications. Our renewable high-end packaging solutions serve leading converters, brand owners, and retailers across multiple industries looking to optimise performance and drive innovation.
| Change % Q4/17– |
Change % Q4/17– |
Change % | ||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q3/17 | 2017 | 2016 | 2017–2016 |
| Sales | 334 | 282 | 18.4% | 318 | 5.0% | 1 255 | 1 044 | 20.2% |
| Operational EBITDA1 | 74 | 36 | 105.6% | 66 | 12.1% | 240 | 131 | 83.2% |
| Operational EBITDA margin1 | 22.2% | 12.8% | 20.8% | 19.1% | 12.5% | |||
| Operational EBIT | 58 | 19 | 205.3% | 48 | 20.8% | 170 | 64 | 165.6% |
| Operational EBIT margin | 17.4% | 6.7% | 15.1% | 13.5% | 6.1% | |||
| Operational ROOC | 26.9% | 8.8% | 22.4% | 19.6% | 7.6% | |||
| Cash flow from operations | 82 | 44 | 86.4% | 83 | -1.2% | 249 | 132 | 88.6% |
| Cash flow after investing activities | 39 | 23 | 69.6% | 60 | -35.0% | 156 | 63 | 147.6% |
| Board deliveries (external), 1 000 tonnes | 274 | 237 | 15.6% | 256 | 7.0% | 1 023 | 869 | 17.7% |
| Board production, 1 000 tonnes | 339 | 321 | 5.6% | 342 | -0.9% | 1 333 | 1 221 | 9.2% |
| Corrugated packaging deliveries, million m2 | 279 | 276 | 1.1% | 282 | -1.1% | 1 103 | 1 082 | 1.9% |
| Corrugated packaging production, million m2 | 277 | 274 | 1.1% | 286 | -3.1% | 1 102 | 1 073 | 2.7% |
1 Restated due to a change in group's operational EBITDA definition to include the operational EBITDA of its equity accounted investments (EAI). See chapter Change in the operational EBITDA definition in the beginning of the Financials section.
| Product | Market | Demand Q4/17 compared with Q4/16 |
Demand Q4/17 compared with Q3/17 |
Price Q4/17 compared with Q4/16 |
Price Q4/17 compared with Q3/17 |
|---|---|---|---|---|---|
| Virgin fibre-based containerboard Recycled fibre based |
Global | Slightly stronger | Stable | Significantly higher | Higher |
| (RCP) containerboard | Europe | Stronger | Stable | Significantly higher | Higher |
| Corrugated packaging | Europe | Stronger | Stable | Higher | Slightly higher |
(Target: >20%)
Scheduled annual maintenance shutdowns
| 2018 | 2017 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Heinola and Varkaus mill | Ostrołęka Mill |
| Q3 | Ostrołęka Mill | Varkaus Mill |
| Q4 | – | Heinola Mill |
Biomaterials division offers a wide 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 the wood as well as other kinds of lignocellulosic biomasses. The extracted sugars and lignin hold potential for use in a range of applications.
| Change % Q4/17– |
Change % Q4/17– |
Change % | ||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q3/17 | 2017 | 2016 | 2017–2016 |
| Sales | 364 | 349 | 4.3% | 379 | -4.0% | 1 483 | 1 376 | 7.8% |
| Operational EBITDA | 95 | 75 | 26.7% | 124 | -23.4% | 409 | 361 | 13.3% |
| Operational EBITDA margin | 26.1% | 21.5% | 32.7% | 27.6% | 26.2% | |||
| Operational EBIT | 61 | 40 | 52.5% | 88 | -30.7% | 264 | 224 | 17.9% |
| Operational EBIT margin | 16.8% | 11.5% | 23.2% | 17.8% | 16.3% | |||
| Operational ROOC | 10.4% | 6.1% | 14.8% | 10.5% | 8.5% | |||
| Cash flow from operations | 106 | 79 | 34.2% | 92 | 15.2% | 404 | 419 | -3.6% |
| Cash flow after investing activities | 59 | 37 | 59.5% | 61 | -3.3% | 271 | 278 | -2.5% |
| Pulp deliveries, 1 000 tonnes | 623 | 651 | -4.3% | 666 | -6.5% | 2 597 | 2 508 | 3.5% |
| Product | Market | Demand Q4/17 compared with Q4/16 |
Demand Q4/17 compared with Q3/17 |
Price Q4/17 compared with Q4/16 |
Price Q4/17 compared with Q3/17 |
|---|---|---|---|---|---|
| Softwood pulp | Europe | Slightly stronger | Stable | Significantly higher | Higher |
| Hardwood pulp | Europe | Slightly stronger | Stronger | Significantly higher | Higher |
10.4 %
(Target: > 15%)
| 2018 | 2017 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Enocell Mill | Montes del Plata and Sunila mills |
| Q3 | Sunila Mill | – |
| Q4 | Montes del Plata and Skutskär mills |
Veracel and Skutskär mills |
Wood Products division provides versatile wood-based solutions for building and housing. Our product range covers all areas of construction, including massive wood elements, wood components and sawn goods. We also offer pellets for sustainable heating. Our customers are mainly merchants and retailers, industrial integrators and construction companies.
| Change % Q4/17– |
Change % Q4/17– |
Change % | ||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q3/17 | 2017 | 2016 | 2017–2016 |
| Sales | 398 | 395 | 0.8% | 415 | -4.1% | 1 669 | 1 595 | 4.6% |
| Operational EBITDA | 36 | 24 | 50.0% | 37 | -2.7% | 147 | 118 | 24.6% |
| Operational EBITDA margin | 9.0% | 6.1% | 8.9% | 8.8% | 7.4% | |||
| Operational EBIT | 25 | 17 | 47.1% | 29 | -13.8% | 111 | 88 | 26.1% |
| Operational EBIT margin | 6.3% | 4.3% | 7.0% | 6.7% | 5.5% | |||
| Operational ROOC | 18.5% | 13.1% | 21.3% | 20.5% | 16.8% | |||
| Cash flow from operations | 40 | -3 | n/m | 62 | -35.5% | 152 | 142 | 7.0% |
| Cash flow after investing activities | 9 | -11 | 181.8% | 50 | -82.0% | 90 | 75 | 20.0% |
| Wood products deliveries, 1 000 m3 | 1 257 | 1 176 | 6.9% | 1 169 | 7.5% | 4 926 | 4 643 | 6.1% |
• Sales excluding the divested Puumerkki and the Baltic wood supply operations transferred to the segment Other, increased 6% due to growth from strategic investments: Murów sawmill in Poland, laminated veneer lumber (LVL) line in Varkaus, Finland and pellet production at Ala sawmill in Sweden.
• This is the highest ever fourth quarter operational EBIT at EUR 25 million, an increase of EUR 8 million or 47.1%. Improved net mill price and increasing share of value added business more than offset slightly higher raw material and fixed costs.
| Product | Market | Demand Q4/17 compared with Q4/16 |
Demand Q4/17 compared with Q3/17 |
Price Q4/17 compared with Q4/16 |
Price Q4/17 compared with Q3/17 |
|---|---|---|---|---|---|
| Wood products | Europe | Stronger | Stronger | Slightly higher | Stable |
Sales and operational EBIT Operational ROOC (Q4/2017)
18.5 %
(Target: > 20%)
Paper division provides best-in-class paper solutions for the print media and office use. The wide selection covers papers made from recycled and virgin wood fibre. Our main customer groups include publishers, retailers, printing houses, merchants, converters and office suppliers. Three of our ten mills produce paper based on 100% recycled fibre.
| Change % Q4/17– |
Change % | Change % | ||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Q4/17 | Q4/16 | Q4/16 | Q3/17 | Q4/17–Q3/17 | 2017 | 2016 | 2017–2016 |
| Sales | 726 | 760 | -4.5% | 727 | -0.1% | 2 920 | 3 245 | -10.0% |
| Operational EBITDA1 | 78 | 91 | -14.3% | 55 | 41.8% | 239 | 327 | -26.9% |
| Operational EBITDA margin1 | 10.7% | 12.0% | 7.6% | 8.2% | 10.1% | |||
| Operational EBIT | 46 | 64 | -28.1% | 29 | 58.6% | 128 | 211 | -39.3% |
| Operational EBIT margin | 6.3% | 8.4% | 4.0% | 4.4% | 6.5% | |||
| Operational ROOC | 24.7% | 25.6% | 16.0% | 14.8% | 19.4% | |||
| Cash flow from operations | 102 | 126 | -19.0% | 24 | 325.0% | 259 | 351 | -26.2% |
| Cash flow after investing activities | 46 | 90 | -48.9% | 6 | n/m | 160 | 277 | -42.2% |
| Cash flow after investing activities to | ||||||||
| sales, % | 6.3% | 11.8% | 0.8% | 5.5% | 8.5% | |||
| Paper deliveries, 1 000 tonnes | 1 146 | 1 207 | -5.1% | 1 177 | -2.6% | 4 713 | 5 141 | -8.3% |
| Paper production, 1 000 tonnes | 1 159 | 1 219 | -4.9% | 1 152 | 0.6% | 4 672 | 5 155 | -9.4% |
1 Restated due to a change in group's operational EBITDA definition to include the operational EBITDA of its equity accounted investments (EAI). See chapter Change in the operational EBITDA definition in the beginning of the Financials section.
| Product | Market | Demand Q4/17 compared with Q4/16 |
Demand Q4/17 compared with Q3/17 |
Price Q4/17 compared with Q4/16 |
Price Q4/17 compared with Q3/17 |
|---|---|---|---|---|---|
| Paper | Europe | Slightly weaker | Stronger | Slightly higher | Slightly higher |
Sales and operational EBITDA Cash flow after investing activities to sales (Q4/2017)1
(Target: >7%)
Scheduled annual maintenance shutdowns
| 2018 | 2017 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Oulu Mill | Oulu Mill |
| Q3 | Veitsiluoto Mill | Veitsiluoto Mill |
| 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.
| EUR million | Q4/17 | Q4/16 | Change % Q4/17–Q4/16 |
Q3/17 | Change % Q4/17–Q3/17 |
2017 | 2016 | Change % 2017-2016 |
|---|---|---|---|---|---|---|---|---|
| Sales | 618 | 641 | -3.6% | 593 | 4.2% | 2 490 | 2 477 | 0.5% |
| Operational EBITDA1 | 25 | 24 | 4.2% | 22 | 13.6% | 75 | 74 | 1.4% |
| Operational EBITDA margin1 | 4.0% | 3.7% | 3.7% | 3.0% | 3.0% | |||
| Operational EBIT | 21 | 13 | 61.5% | 10 | 110.0% | 46 | 43 | 7.0% |
| Operational EBIT margin | 3.4% | 2.0% | 1.7% | 1.8% | 1.7% | |||
| Cash flow from operations | 49 | 101 | -51.5% | 58 | -15.5% | -30 | 136 | -122.1% |
| Cash flow after investing activities | 36 | 88 | -59.1% | 44 | -18.2% | -70 | 101 | -169.3% |
1 Restated due to a change in group's operational EBITDA definition to include the operational EBITDA of its equity accounted investments (EAI).See chapter Change in the operational EBITDA definition in the beginning of the Financials section.
| Q4/17 | Q4/16 | Q3/17³ | 2017 | 2016 | Milestone | Milestone to be reached by |
|
|---|---|---|---|---|---|---|---|
| TRI rate | 7.6 | 10.9 | 7.6 | 7.7 | 11.7 | n/a | |
| LTA rate | 4.6 | 4.3 | 6.0 | 5.3 | 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 Q3/2017 Interim Report.
The year-end milestone for the LTA rate was not reached. As announced earlier 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. In 2018 the TRI rate will be the new Group level safety KPI, which we will start reporting on in the first quarter of 2018.
Supplier Code of Conduct
| 31 Dec 17 | 30 Sep 17 | 31 Dec 16 | Target | Target to be reached by |
|
|---|---|---|---|---|---|
| % of supplier spend covered by the Supplier Code of | |||||
| Conduct1 | 95% | 94% | 92% | 95% | end of 2017 |
1 Excluding joint operations and invoicing by customs, bank fees, intellectual property rights, and leasing fees and financial trading.
The target for 2017 was reached. The target for 2018 is planned to be communicated in the Q1/2018 Interim Report.
| Completed¹ | On track | Not on track | Closed2 | Regular review3 | |
|---|---|---|---|---|---|
| Implementation progress, % of all the actions | 88% | 0% | 0% | 9% | 3% |
1 Process for completion is in place for three Group-level actions, but the completion is carried forward into 2018.
2 Issues that were identified in the Human Rights assessments but closed following reassessment of their validity in specific local contexts.
3 Longer-term actions without a targeted end-date that require continuous review.
At the end of the year, 88% of the preventive and remediation actions were completed and 100% of the actions were brought to an appropriate conclusion. 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 informed earlier, the reporting on Human Rights Action Plan progress will be stopped after this report. In 2018, the focus will be on completing the identification of Stora Enso's highest priority human rights. Once completed, a due diligence and compliance monitoring programme will be defined and implemented. The ambition is to have this work completed by the end of 2018.
| 31 Dec 17 | 30 Sep 17 | 31 Dec 16 | |
|---|---|---|---|
| Social forestland leased, ha | 29 581 | 29 701 | 30 500 |
| Leased area without contractual defects, ha | 16 267 | 16 329 | 16 480 |
| Lease contracts without contractual defects, % of all contracts | 66% | 66% | 66% |
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 82 591 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 planning to 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. Stora Enso has moved from contract correction to normal contract management and therefore the quarterly reporting on the contract correction progress will stop after this report.
| 31 Dec 17 | 30 Sep 17 | 31 Dec 16 | |
|---|---|---|---|
| Area occupied by social movements not involved in | |||
| the Sustainable Settlement Initiative, ha | 3 043 | 3 425 | 3 499 |
At the end of the year, 3 043 hectares of productive land owned by Veracel were occupied by social landless movements not involved in the Sustainable Settlement Initiative. During the fourth quarter, Veracel continued to seek repossessions of occupied areas through legal processes, and in total the company resumed forest management on 382 hectares. Veracel has reserved 16 500 hectares to support the Sustainable Settlement Initiative. At the end of 2017, the total land area owned by Veracel was 213 500 hectares, of which 75 000 hectares are planted with eucalyptus for pulp production.
| Q4/17 | Q4/16 | Q3/17 | 2017 | 2016 | Target | Target to be reached by |
|
|---|---|---|---|---|---|---|---|
| Reduction of fossil CO₂ emissions per saleable tonne of pulp, paper and board (kg/t) |
-37% | -40% | -44% | -40% | -40% | -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.
In December, Stora Enso's Science Based Targets to combat global warming were approved by the Science Based Target Initiative. With the new targets, Stora Enso commits to reduce greenhouse gas (GHG) emissions from operations 31% per tonne of pulp, paper and board produced by 2030 from a 2010 base-year. To reduce Scope 3 emissions, Stora Enso commits to have 70% of non-fibre suppliers and downstream transportation suppliers in terms of spend set their own GHG reduction targets by 2025, towards the aim that these suppliers adopt science-based GHG reduction targets by 2030. In addition, the company will educate 100% of customer-facing staff on the advantages of setting science-based targets by 2020. Stora Enso plans to report progress on the Science Based Targets in Q1/2018, and at the same time retire the old target listed above.
In November, Stora Enso received the highest recognition level, Gold, for sustainability management by Ecovadis Supplier Sustainability Ratings. Stora Enso was rated among the top 1% performers of all suppliers assessed in all categories.
Increasing competition, and supply and demand balances in the paper, pulp, packaging, wood products and roundwood markets may have an impact on the 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 the main markets could all have impacts on Stora Enso's profits, cash flows and financial position.
Continued exceptionally mild winter conditions with more rain, less snow and reduced periods of frozen soils has impacted harvesting and wood transport , and thus affect the stability of raw material supply and increase wood costs to the Nordic mills. The Russian policy of prefering wood deliveries to the domestic forest industry instead of exporting is likely to continue. Possible limitations of birch plywood exports may cause disturbance also to pulpwood exports. A more detailed description of risks is available in Stora Enso's Financial 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 13 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 182 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 105 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 64 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 126 million, negative EUR 96 million and positive EUR 36 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.
Stora Enso has undertaken significant restructuring actions in recent years which have included the divestment of companies, sale of assets and mill closures. These transactions include a risk of possible environmental or other obligations the existence of which would be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group.
Stora Enso is party to legal proceedings that arise in the ordinary course of business and which primarily involve claims arising out of commercial law. The management does not consider that liabilities related to such proceedings before insurance recoveries, if any, are likely to be material to the group's financial condition or results of operations.
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 45) million. Stora Enso denied the claims. In December 2017 the arbitration panel delivered an award in favour of Stora Enso. Hence, Stora Enso does not plan to report further on the 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 infringement. In its judgement rendered in June 2016, the Helsinki District Court dismissed Metsähallitus' claim for damages against Stora Enso, UPM and Metsäliitto. Metsähallitus has appealed the judgement and the case is pending in the Court of Appeal. Following reductions by Metsähallitus, the total amount of claims jointly and severally against Stora Enso, UPM and Metsäliitto is now approximately EUR 125 million and the secondary claim against Stora Enso is approximately EUR 68 million.
In addition, certain Finnish municipalities and private forest owners initiated similar legal proceedings against Stora Enso, UPM and Metsäliitto. In the autumn of 2017, the Helsinki District Court dismissed the claims of 486 private forest owners and 32 municipalities. The total amount of pending claims jointly and severally against Stora Enso, UPM and Metsäliitto is approximately EUR 7 million and claims solely against Stora Enso is approximately EUR 3 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 in the Environmental Court and the District Court of Falun against Stora Enso due to damage caused by the forest fire in Västmanland, Sweden, in 2014. The claimed amount is approximately SEK 300 (EUR 30) million. Stora Enso denies liability.
In a verdict in October 2017, the Environmental Court ruled in favour of Stora Enso. The Insurance companies have appealed against the verdict. Concerning the case, in the District Court of Falun a procedural dismissal in the first instance has been reversed by the Court of Appeal but Stora Enso has appealed to the Supreme Court seeking final dismissal.
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.
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.
On 1 May 2017, Annica Bresky became Executive Vice President, Consumer Board division and a member of the Group Leadership Team. She was previously the President and CEO of Iggesund Paperboard AB, part of the Swedish Holmen Group.
On 1 June 2017, Markus Mannström became Executive Vice President, Biomaterials division. Previously, he was the group's Chief Technology Officer (CTO) and has been a member of the Group Leadership Team since 2015.
Juan Carlos Bueno, Executive Vice President, Biomaterials division, was a member of the Group Leadership Team until 31 May 2017.
On 31 December 2017, there were 25 700 (25 400) employees in the group. The average number of employees in 2017 was 26 200, which was 70 lower than the average number in 2016.
During the fourth quarter of 2017, the conversions of 54 000 A shares into R shares were recorded in the Finnish trade register. During 2017, a total of 114 770 A-shares converted into R-shares were recorded in the Finnish Trade Register.
On 31 December 2017, Stora Enso had 176 392 320 A shares and 612 227 667 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 at least 237 615 086.
On 20 June 2017, the holdings of Varma Mutual Pension Insurance Company in Stora Enso's shares fell below the threshold of 5%.
Stora Enso Oyj's Annual General Meeting (AGM) will be held at 16.00 (Finnish time) on Wednesday 28 March 2018 at the Marina Congress Center, Katajanokanlaituri 6, Helsinki, Finland.
The proposals for decisions relating to the agenda of the AGM, as well as the AGM notice, will be available on Stora Enso Oyj's website at storaenso.com/agm. Stora Enso Oyj's annual accounts, the report of the Board of Directors and the auditor's report for 2017 will be published on Stora Enso Oyj's website storaenso.com/annualreport during the week commencing on Monday 26 February 2018. The proposals for decisions and the other above-mentioned documents will also be available at the AGM. Copies of these documents and of the AGM notice will be sent to shareholders upon request. The minutes of the AGM will be available on Stora Enso Oyj's website storaenso.com/agm on Wednesday 11 April 2018 at the latest.
The Board of Directors proposes to the AGM that a dividend of EUR 0.41 per share be distributed for the year 2017.
The dividend would be paid to shareholders who on the record date of the dividend payment, 3 April 2018, are recorded in the shareholders' register maintained by Euroclear Finland Ltd. or in the separate register of shareholders maintained by Euroclear Sweden AB for Euroclear Sweden registered shares. Dividends payable for Euroclear Sweden registered shares will be forwarded by Euroclear Sweden AB and paid in Swedish crown. Dividends payable to ADR holders will be forwarded by Citibank N.A. and paid in US dollars.
The Board of Directors proposes to the AGM that the dividend be paid on or about 10 April 2018.
In January, the paper manufacturer Feldmuehle Uetersen GmbH filed for insolvency. The Uetersen mill was owned by Stora Enso until 2015. At year-end 2017, Stora Enso had open receivables from Feldmuehle Uetersen amounting to EUR 9
million. In case the Uetersen mill will be discontinued, Stora Enso has a contractual obligation to cover the costs of possible environmental remediation.
The divestment of the Consumer Board sheeting centre business in Baienfurt, Germany to Pyroll, a Finnish converting firm was completed in January. The transaction had no significant impact on the group.
The conversion of 40 710 A shares into R shares was recorded in the Finnish trade register on 16 January 2018.
On 26 January 2018, a Swedish prosecutor initiated proceedings in a District court claiming that Stora Enso and a contractor due to negligence had caused the forest fire in Västmanland in 2014. Further, the prosecutor request that Stora Enso and the contractor pay SEK 5 (EUR 0.5) million each in corporate fines. Stora Enso denies liability and disputes the claim.
The publication date for Stora Enso Oyj's Half-year report for January–June 2018 has been changed to Friday 20 July 2018.
This report 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, 9 February 2018 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 IAC are capital gains and losses relating to disposal of fixed assets, impairments or impairment reversals, disposal gains and losses relating to group companies, environmental provisions, provisions for planned restructurings, other provisions 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.
Starting from the fourth quarter of 2017, Stora Enso will include the operational EBITDA of its equity accounted investments (EAI) in the group's operational EBITDA. Previously Stora Enso has included the operational EBIT of EAIs in the group's operational EBIT only.
The new definition of the non-IFRS measure of operational EBITDA is operating profit/loss excluding operational decrease in the value of biological assets, fixed asset depreciation and impairment, IACs and fair valuations. The definition includes the respective items of subsidiaries, joint arrangements and equity accounted investments.
This change will affect the following 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 and presented in Stora Enso Oyj stock exchange release, published on 7 November 2017.
There will be no impact on operational EBIT, the subtotals of the consolidated income statement or the group's IFRS figures.
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:
• IFRS 15: Revenue from Contracts with Customers
The group evaluated the impact of IFRS 15 based on the amount and timing of revenue recognition as part of a project during 2015, 2016 and 2017. The main customer contracts for each division have been reviewed based on a standardised questionnaire that followed the five-step model for revenue recognition. In conclusion, the adoption will have no significant impact on the principles applied by the group to the amount and timing of revenue recognition. The group intends to adopt the modified retrospective application of IFRS 15 from 1 January 2018, without adjusting prior reporting periods.
IFRS 9 Financial Instruments will replace IAS 39 Financial Instruments: Recognition and Measurement. The standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. The group intends to apply it prospectively from 1 January 2018, without presenting restated comparatives in line with IFRS 1, paragraph E1 and E2. An exception to this is that in respect of the time value of currency options under hedge accounting, Stora Enso will apply the IFRS 9 treatment retrospectively for those options that were in the group's books at 1 January 2018.
The group intends to classify its equity investments in Pohjolan Voima shares, currently classified as available-for-sale investments (AFS) under IAS 39, at fair value under other comprehensive income (FVTOCI) under IFRS 9. The main difference between AFS and FVTOCI is that gains and losses resulting from changes in the fair value of equity investments accounted for under FVTOCI are not recycled to the Income Statement upon impairment or disposal, with only the dividend income recognized in the Income Statement.
Under IFRS 9, the changes in the time value of currency options used as hedges of foreign currency sales will be recognised in Other Comprehensive Income to the extent that they relate to the hedged items, and will be reclassified from equity to profit or loss in the same period or periods during which the expected future cash flows will affect the profit or loss. This will reduce Income Statement volatility compared to IAS 39.
The new impairment model for financial assets requires the recognition of doubtful receivables allowances based on expected credit losses, rather than only incurred credit losses as under current IAS 39. The new IFRS 9 impairment model will result in a non-significant increase in doubtful receivables allowances.
The adoption of IFRS 9 will not have a significant impact on group figures.
IFRS 16 replaces the current guidance in IAS 17 and is a significant change in accounting by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on the balance sheet) and an operating lease (off the balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a 'right-of-use asset' for virtually all lease contracts. There is an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. Service components of lease contracts are not required to be reported on the balance sheet.
Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The effective date for this standard is 1 January 2019. The effects of this standard on the group financial statements are under investigation. It is expected that Operating profit will somewhat increase since the interest on the lease liability will be reclassified to Financial expenses. Previously all rental payments relating to operating leases have been included in Other operating expenses. In addition, Operating assets and Financial liabilities will increase due to the adoption of IFRS 16.
| EUR million | Q4/17 | Q4/16 | Q3/17 | 2017 | 2016 |
|---|---|---|---|---|---|
| Sales | 2 511 | 2 438 | 2 509 | 10 045 | 9 802 |
| Other operating income | 53 | 29 | 36 | 147 | 123 |
| Change in inventories of finished goods and WIP | 22 | 24 | 2 | 28 | 9 |
| Materials and services | -1 507 | -1 515 | -1 466 | -5 945 | -5 833 |
| Freight and sales commissions | -239 | -218 | -239 | -968 | -920 |
| Personnel expenses | -342 | -319 | -310 | -1 331 | -1 334 |
| Other operating expenses | -143 | -155 | -123 | -551 | -561 |
| Share of results of equity accounted investments | 31 | 124 | 5 | 66 | 156 |
| Change in net value of biological assets | -20 | -202 | -20 | -72 | -261 |
| Depreciation, amortisation and impairment charges | -130 | -61 | -124 | -515 | -398 |
| Operating Profit | 236 | 145 | 270 | 904 | 783 |
| Net financial items | -27 | -69 | -46 | -162 | -242 |
| Profit before Tax | 209 | 76 | 224 | 742 | 541 |
| Income tax | -36 | -20 | -33 | -128 | -134 |
| Net Profit for the Period | 173 | 56 | 191 | 614 | 407 |
| Attributable to: | |||||
| Owners of the Parent | 174 | 91 | 191 | 625 | 463 |
| Non-controlling interests | -1 | -35 | 0 | -11 | -56 |
| Net Profit for the Period | 173 | 56 | 191 | 614 | 407 |
| Earnings per Share | |||||
| Basic earnings per share, EUR | 0.22 | 0.12 | 0.24 | 0.79 | 0.59 |
| Diluted earnings per share, EUR | 0.22 | 0.12 | 0.24 | 0.79 | 0.59 |
| EUR million | Q4/17 | Q4/16 | Q3/17 | 2017 | 2016 |
|---|---|---|---|---|---|
| Net profit for the period | 173 | 56 | 191 | 614 | 407 |
| Other Comprehensive Income (OCI) | |||||
| Items that will Not be Reclassified to Profit and Loss | |||||
| Actuarial gains and losses on defined benefit plans | 57 | -52 | 4 | 61 | -62 |
| Income tax relating to items that will not be reclassified | -9 | 15 | -1 | -10 | 15 |
| 48 | -37 | 3 | 51 | -47 | |
| Items that may be Reclassified Subsequently to Profit and Loss | |||||
| Share of OCI of EAIs that may be reclassified | 2 | 4 | 0 | 5 | 0 |
| Currency translation movements on equity net investments (CTA) | -60 | 123 | -59 | -288 | 124 |
| Currency translation movements on non-controlling interests | 1 | 2 | -2 | -3 | -3 |
| Net investment hedges | 4 | -19 | 11 | 40 | -11 |
| Cash flow hedges | 5 | -13 | 3 | 32 | 13 |
| Available-for-sale investments | 38 | 30 | 37 | 39 | 138 |
| Income tax relating to items that may be reclassified | -3 | 5 | 0 | -10 | -1 |
| -13 | 132 | -10 | -185 | 260 | |
| Total Comprehensive Income | 208 | 151 | 184 | 480 | 620 |
| Attributable to: | |||||
| Owners of the Parent | 208 | 184 | 186 | 494 | 679 |
| Non-controlling interests | 0 | -33 | -2 | -14 | -59 |
| Total Comprehensive Income | 208 | 151 | 184 | 480 | 620 |
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
EAI = Equity Accounted Investments
| EUR million | 31 Dec 17 | 31 Dec 16 | |
|---|---|---|---|
| Assets | |||
| Goodwill | O | 237 | 238 |
| Other intangible assets | O | 229 | 180 |
| Property, plant and equipment | O | 5 310 | 5 611 |
| 5 776 | 6 029 | ||
| Biological assets | O | 448 | 489 |
| Emission rights | O | 12 | 14 |
| Equity accounted investments | O | 1 600 | 1 594 |
| Available-for-sale: Listed securities | I | 21 | 42 |
| Available-for-sale: Operative | O | 318 | 253 |
| Non-current loan receivables | I | 55 | 7 |
| Deferred tax assets | T | 154 | 214 |
| Other non-current assets | O | 50 | 57 |
| Non-current Assets | 8 434 | 8 699 | |
| Inventories | O | 1 321 | 1 346 |
| Tax receivables | T | 9 | 9 |
| Operative receivables | O | 1 319 | 1 273 |
| Interest-bearing receivables | I | 80 | 46 |
| Cash and cash equivalents | I | 607 | 953 |
| Current Assets | 3 336 | 3 627 | |
| Total Assets | 11 770 | 12 326 | |
| Equity and Liabilities | |||
| Owners of the Parent | 6 008 | 5 806 | |
| Non-controlling Interests | 47 | 62 | |
| Total Equity | 6 055 | 5 868 | |
| Post-employment benefit provisions | O | 377 | 436 |
| Other provisions | O | 111 | 114 |
| Deferred tax liabilities | T | 166 | 203 |
| Non-current debt | I | 2 046 | 2 655 |
| Other non-current operative liabilities | O | 52 | 61 |
| Non-current Liabilities | 2 752 | 3 469 | |
| Current portion of non-current debt | I | 370 | 552 |
| Interest-bearing liabilities | I | 596 | 563 |
| Bank overdrafts | I | 4 | 4 |
| Other provisions | O | 23 | 20 |
| Other operative liabilities | O | 1 888 | 1 774 |
| Tax liabilities | T | 82 | 76 |
| Current Liabilities | 2 963 | 2 989 | |
| Total Liabilities | 5 715 | 6 458 | |
| Total Equity and Liabilities | 11 770 | 12 326 |
Items designated with "O" comprise Operating Capital
Items designated with "I" comprise Net Interest-bearing Liabilities
Items designated with "T" comprise Net Tax Liabilities
Financials
| EUR million | 2017 | 2016 |
|---|---|---|
| Cash Flow from Operating Activities | ||
| Operating profit | 904 | 783 |
| Hedging result from OCI | - | -1 |
| Adjustments for non-cash items | 551 | 567 |
| Change in net working capital | 37 | 283 |
| Cash Flow Generated by Operations | 1 492 | 1 632 |
| Net financial items paid | -193 | -180 |
| Income taxes paid, net | -97 | -92 |
| Net Cash Provided by Operating Activities | 1 202 | 1 360 |
| Cash Flow from Investing Activities | ||
| Acquisitions of shares in equity accounted investments | -9 | -1 |
| Acquisitions of available-for-sale investments | -8 | -2 |
| Proceeds from disposal of subsidiary shares and business operations, net of disposed cash | -4 | 40 |
| Proceeds from disposal of shares in equity accounted investments | 5 | 26 |
| Proceeds from disposal of available-for-sale investments | - | 10 |
| Proceeds and advances from disposal of intangible assets and property, plant and equipment | 45 | 220 |
| Income taxes paid on disposal of property | -15 | -13 |
| Capital expenditure | -658 | -798 |
| Proceeds from/payment of non-current receivables, net | -52 | 64 |
| Net Cash Used in Investing Activities | -696 | -454 |
| Cash Flow from Financing Activities | ||
| Proceeds from issue of new long-term debt | 425 | 368 |
| Repayment of long-term debt | -1 034 | -781 |
| Change in short-term borrowings | 76 | -46 |
| Dividends paid | -292 | -260 |
| Buy-out of interest in subsidiaries from non-controlling interests | - | -46 |
| Equity injections from, less dividends to, non-controlling interests | -1 | -2 |
| Purchase of own shares1 | -3 | -2 |
| Net Cash Used in Financing Activities | -829 | -769 |
| Net Change in Cash and Cash Equivalents | -323 | 137 |
| Translation adjustment | -23 | 5 |
| Net cash and cash equivalents at the beginning of period | 949 | 807 |
| Net Cash and Cash Equivalents at Period End | 603 | 949 |
| Cash and Cash Equivalents at Period End | 607 | 953 |
| Bank Overdrafts at Period End | -4 | -4 |
| Net Cash and Cash Equivalents at Period End | 603 | 949 |
| Disposals | ||
| Cash and cash equivalents | 7 | 1 |
| Other intangible assets and property, plant and equipment | 3 | 39 |
| Working capital | 1 | 6 |
| Interest-bearing assets and liabilities | -1 | 3 |
| Non-controlling interests | - | -4 |
| Net Assets in Divested Companies | 10 | 45 |
| Gain on sale | -9 | - |
| Total Disposal Consideration | 1 | 45 |
| Cash part of consideration | - | 41 |
| Non-cash part of consideration | 1 | 4 |
| Total Disposal Consideration | 1 | 45 |
| Cash Received Regarding Previous Year Disposals | 3 | - |
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 December 2017.
| EUR million | 2017 | 2016 |
|---|---|---|
| Carrying value at 1 January | 6 518 | 6 671 |
| Additions in tangible and intangible assets | 560 | 638 |
| Additions in biological assets | 80 | 91 |
| Costs related to growth of biological assets | -66 | -141 |
| Disposals | -12 | -253 |
| Disposals of subsidiary companies | -3 | -39 |
| Depreciation and impairment | -515 | -398 |
| Fair valuation of biological assets | -6 | -120 |
| Translation difference and other | -332 | 69 |
| Statement of Financial Position Total | 6 224 | 6 518 |
| EUR million | 31 Dec 17 | 31 Dec 16 |
|---|---|---|
| Bond loans | 1 352 | 1 705 |
| Loans from credit institutions | 1 029 | 1 434 |
| Finance lease liabilities | 29 | 56 |
| Other non-current liabilities | 6 | 12 |
| Non-current Debt including Current Portion | 2 416 | 3 207 |
| Short-term borrowings | 525 | 452 |
| Interest payable | 35 | 54 |
| Derivative financial liabilities | 36 | 57 |
| Bank overdrafts | 4 | 4 |
| Total Interest-bearing Liabilities | 3 016 | 3 774 |
| EUR million | 2017 | 2016 |
| Carrying value at 1 January | 3 774 | 4 197 |
| Proceeds of new long-term debt | 425 | 368 |
| Repayment of long-term debt | -1 034 | -781 |
| Change in short-term borrowings and interest payable | 54 | -50 |
| Change in derivative financial liabilities | -21 | -13 |
| Translation differences and other | -182 | 53 |
| Total Interest-bearing Liabilities | 3 016 | 3 774 |
| 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 | - | - | - | - | - | - | - | - | - | 463 | 463 | -56 | 407 |
| OCI before tax Income tax relating to components |
- | - | - | - | - | 138 | 13 | - | 113 | -62 | 202 | -3 | 199 |
| of OCI | - | - | - | - | - | -3 | - | - | 2 | 15 | 14 | - | 14 |
| Total Comprehensive Income | 135 | 13 | - | 115 | 416 | 679 | -59 | 620 | |||||
| Dividend | - | - | - | - | - | - | - | - | - | -260 | -260 | - | -260 |
| Acquisitions and disposals | - | - | - | - | - | - | - | - | - | -1 | -1 | -4 | -5 |
| Purchase of treasury shares | - | - | - | -2 | - | - | - | - | - | - | -2 | - | -2 |
| Share-based payments | - | - | - | 2 | - | - | - | - | - | - | 2 | - | 2 |
| 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 | - | - | - | - | - | - | - | - | - | 625 | 625 | -11 | 614 |
| OCI before tax Income tax relating to components |
- | - | - | - | - | 39 | 32 | 5 | -248 | 61 | -111 | -3 | -114 |
| of OCI | - | - | - | - | - | 4 | -6 | - | -8 | -10 | -20 | - | -20 |
| Total Comprehensive Income | - | - | - | - | - | 43 | 26 | 5 | -256 | 676 | 494 | -14 | 480 |
| Dividend | - | - | - | - | - | - | - | - | - | -292 | -292 | -1 | -293 |
| Purchase of treasury shares | - | - | - | -3 | - | - | - | - | - | - | -3 | - | -3 |
| Share-based payments | - | - | - | 3 | - | - | - | - | - | - | 3 | - | 3 |
| Balance at 31 December 2017 | 1 342 | 77 | 633 | - | 4 | 205 | 15 | -14 | -288 | 4 034 | 6 008 | 47 | 6 055 |
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
NCI = Non-controlling Interests
| EUR million | 31 Dec 17 | 31 Dec 16 |
|---|---|---|
| On Own Behalf | ||
| Mortgages | 2 | 9 |
| On Behalf of Equity Accounted Investments | ||
| Guarantees | 4 | 4 |
| On Behalf of Others | ||
| Guarantees | 26 | 34 |
| Other Commitments, Own | ||
| Operating leases, in next 12 months | 81 | 86 |
| Operating leases, after next 12 months | 644 | 747 |
| Pension liabilities | - | 1 |
| Other commitments | 6 | 9 |
| Total | 763 | 890 |
| Mortgages | 2 | 9 |
| Guarantees | 30 | 38 |
| Operating leases | 725 | 833 |
| Pension liabilities | - | 1 |
| Other commitments | 6 | 9 |
| Total | 763 | 890 |
The group's direct capital expenditure contracts amounted to EUR 152 million (compared with EUR 171 million on 31 December 2016). These amounts include the group's share of direct capital expenditure contracts in joint operations.
| EUR million | 2017 | Q4/17 | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|---|---|
| Consumer Board | 2 516 | 636 | 639 | 630 | 611 | 2 342 | 580 | 599 | 599 | 564 |
| Packaging Solutions | 1 255 | 334 | 318 | 313 | 290 | 1 044 | 282 | 259 | 258 | 245 |
| Biomaterials | 1 483 | 364 | 379 | 371 | 369 | 1 376 | 349 | 334 | 342 | 351 |
| Wood Products | 1 669 | 398 | 415 | 440 | 416 | 1 595 | 395 | 385 | 433 | 382 |
| Paper | 2 920 | 726 | 727 | 719 | 748 | 3 245 | 760 | 792 | 839 | 854 |
| Other | 2 490 | 618 | 593 | 628 | 651 | 2 477 | 641 | 559 | 629 | 648 |
| Inter-segment sales | -2 288 | -565 | -562 | -573 | -588 | -2 277 | -569 | -535 | -574 | -599 |
| Total | 10 045 | 2 511 | 2 509 | 2 528 | 2 497 | 9 802 | 2 438 | 2 393 | 2 526 | 2 445 |
| EUR million | 2017 | Q4/17 | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|---|---|
| Consumer Board | 285 | 69 | 86 | 69 | 61 | 254 | 38 | 67 | 76 | 73 |
| Packaging Solutions | 170 | 58 | 48 | 40 | 24 | 64 | 19 | 21 | 17 | 7 |
| Biomaterials | 264 | 61 | 88 | 62 | 53 | 224 | 40 | 43 | 57 | 84 |
| Wood Products | 111 | 25 | 29 | 35 | 22 | 88 | 17 | 22 | 33 | 16 |
| Paper | 128 | 46 | 29 | 11 | 42 | 211 | 64 | 53 | 43 | 51 |
| Other | 46 | 21 | 10 | 2 | 13 | 43 | 13 | 13 | 0 | 17 |
| Operational EBIT | 1 004 | 280 | 290 | 219 | 215 | 884 | 191 | 219 | 226 | 248 |
| Fair valuations and non-operational items1 | -16 | -15 | 0 | -6 | 5 | -67 | -12 | -14 | -15 | -26 |
| Items affecting comparability | -84 | -29 | -20 | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| Operating Profit (IFRS) | 904 | 236 | 270 | 205 | 193 | 783 | 145 | 196 | 248 | 194 |
| Net financial items | -162 | -27 | -46 | -60 | -29 | -242 | -69 | -35 | -99 | -39 |
| Profit before Tax | 742 | 209 | 224 | 145 | 164 | 541 | 76 | 161 | 149 | 155 |
| Income tax expense | -128 | -36 | -33 | -2 | -57 | -134 | -20 | -42 | -31 | -41 |
| Net Profit | 614 | 173 | 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 | 2017 | Q4/17 | 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 |
-8 | -5 | 0 | 0 | -3 | -133 | -167 | -6 | 41 | -1 |
| asset impairments | -14 | 0 | 0 | 0 | -14 | -19 | 0 | -3 | -16 | 0 |
| Disposals | -28 | -8 | -20 | 0 | 0 | 144 | 155 | 0 | 16 | -27 |
| Other | -34 | -16 | 0 | -8 | -10 | -26 | -22 | 0 | -4 | 0 |
| Total IAC | -84 | -29 | -20 | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| Fair valuations and non-operational | ||||||||||
| items | -16 | -15 | 0 | -6 | 5 | -67 | -12 | -14 | -15 | -26 |
| Total | -100 | -44 | -20 | -14 | -22 | -101 | -46 | -23 | 22 | -54 |
| EUR million | 2017 | Q4/17 | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|---|---|
| Consumer Board | -30 | 1 | -20 | -8 | -3 | -77 | -77 | 0 | 0 | 0 |
| Packaging Solutions | -3 | 0 | 0 | 0 | -3 | -21 | -12 | -9 | 0 | 0 |
| Biomaterials | -3 | 0 | 0 | 0 | -3 | 0 | 0 | 0 | 0 | 0 |
| Wood Products | -9 | -9 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Paper | -22 | -4 | 0 | 0 | -18 | 78 | 69 | 0 | 37 | -28 |
| Other | -17 | -17 | 0 | 0 | 0 | -14 | -14 | 0 | 0 | 0 |
| IAC on Operating Profit | -84 | -29 | -20 | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| IAC on tax | 11 | 4 | 0 | 1 | 6 | -22 | -11 | 1 | -10 | -2 |
| IAC on Net Profit | -73 | -25 | -20 | -7 | -21 | -56 | -45 | -8 | 27 | -30 |
| Attributable to: | ||||||||||
| Owners of the Parent | -73 | -25 | -20 | -7 | -21 | -47 | -37 | -8 | 27 | -29 |
| Non-controlling interests | 0 | 0 | 0 | 0 | 0 | -9 | -8 | 0 | 0 | -1 |
| IAC on Net Profit | -73 | -25 | -20 | -7 | -21 | -56 | -45 | -8 | 27 | -30 |
| EUR million | 2017 | Q4/17 | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|---|---|
| Consumer Board | -2 | 0 | 0 | -1 | -1 | -110 | -102 | -2 | -4 | -2 |
| Packaging Solutions | -1 | 0 | 0 | 0 | -1 | -1 | 0 | 0 | 0 | -1 |
| Biomaterials | -7 | 0 | -4 | -2 | -1 | -13 | -5 | -3 | -2 | -3 |
| Wood Products | 0 | 1 | 0 | 0 | -1 | 0 | 0 | 0 | 0 | 0 |
| Paper | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other | -6 | -16 | 4 | -3 | 9 | 57 | 95 | -9 | -9 | -20 |
| FV and Non-operational Items on Operating Profit |
-16 | -15 | 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 | 2017 | Q4/17 | Q3/17 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|---|---|---|
| Consumer Board | 253 | 70 | 66 | 60 | 57 | 67 | -141 | 65 | 72 | 71 |
| Packaging Solutions | 166 | 58 | 48 | 40 | 20 | 42 | 7 | 12 | 17 | 6 |
| Biomaterials | 254 | 61 | 84 | 60 | 49 | 211 | 35 | 40 | 55 | 81 |
| Wood Products | 102 | 17 | 29 | 35 | 21 | 88 | 17 | 22 | 33 | 16 |
| Paper | 106 | 42 | 29 | 11 | 24 | 289 | 133 | 53 | 80 | 23 |
| Other | 23 | -12 | 14 | -1 | 22 | 86 | 94 | 4 | -9 | -3 |
| Operating Profit (IFRS) | 904 | 236 | 270 | 205 | 193 | 783 | 145 | 196 | 248 | 194 |
| Net financial items | -162 | -27 | -46 | -60 | -29 | -242 | -69 | -35 | -99 | -39 |
| Profit before Tax | 742 | 209 | 224 | 145 | 164 | 541 | 76 | 161 | 149 | 155 |
| Income tax expense | -128 | -36 | -33 | -2 | -57 | -134 | -20 | -42 | -31 | -41 |
| Net Profit | 614 | 173 | 191 | 143 | 107 | 407 | 56 | 119 | 118 | 114 |
| One Euro is | Closing Rate | Average Rate | ||||
|---|---|---|---|---|---|---|
| 31 Dec 17 | 31 Dec 16 | 31 Dec 17 | 31 Dec 16 | |||
| SEK | 9.8438 | 9.5525 | 9.6369 | 9.4673 | ||
| USD | 1.1993 | 1.0541 | 1.1293 | 1.1066 | ||
| GBP | 0.8872 | 0.8562 | 0.8761 | 0.8189 |
| EUR million | EUR | USD | SEK | GBP | Other | Total |
|---|---|---|---|---|---|---|
| Sales during 2017 | 5 773 | 1 737 | 1 100 | 400 | 1 035 | 10 045 |
| Costs during 2017 | -4 689 | -416 | -2 080 | -53 | -1 382 | -8 620 |
| Net amount | 1 084 | 1 321 | -980 | 347 | -347 | 1 425 |
| Estimated annual operating cash flow exposure | 1 260 | -960 | 360 | |||
| Transaction hedges as at 31 December 2017 | -630 | 510 | -180 | |||
| Hedging percentage as at 31 December 2017 for the next 12 months | 50% | 53% | 50% |
| Operational EBIT: Currency Strengthening of + 10% | EUR million |
|---|---|
| USD | 126 |
| SEK | -96 |
| GBP | 36 |
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 | - | - | - | 339 | 339 | 339 |
| Non-current loan receivables | 55 | - | - | - | 55 | 55 |
| Trade and other operative receivables | 965 | - | - | - | 965 | 965 |
| Interest-bearing receivables | 15 | 16 | 49 | - | 80 | 80 |
| Cash and cash equivalents | 607 | - | - | - | 607 | 607 |
| Carrying Amount by Category | 1 642 | 16 | 49 | 339 | 2 046 | 2 046 |
| 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 | - | - | 2 046 | 2 046 | 2 357 | |
| Current portion of non-current debt | - | - | 370 | 370 | 370 | |
| Interest-bearing liabilities | 4 | 32 | 560 | 596 | 596 | |
| Trade and other operative payables | 20 | - | 1 576 | 1 596 | 1 596 | |
| Bank overdrafts | - | - | 4 | 4 | 4 | |
| Carrying Amount by Category | 24 | 32 | 4 556 | 4 612 | 4 923 | |
| EUR million | Level 1 | Level 2 | Level 3 | Total | ||
| Derivative financial assets | - | 65 | - | 65 | ||
| Trade and other operative receivables | - | - | - | - | ||
| Available-for-sale investments | 21 | - | 318 | 339 | ||
| Derivative financial liabilities | - | 36 | - | 36 | ||
| 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 | 2017 | 2016 |
|---|---|---|
| Opening balance at 1 January | 253 | 131 |
| Gains/losses recognised in income statement | -2 | 5 |
| Gains/losses recognised in Available-for-sale investments reserve | 60 | 125 |
| Additions | 7 | 2 |
| Disposals | - | -10 |
| Closing Balance | 318 | 253 |
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 3.43% 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 +38 million and -38 million, respectively. A +/- 1% point change in the discount rate would change the valuation by EUR -32 million and +42 million, respectively.
| Helsinki | Stockholm | |||
|---|---|---|---|---|
| A share | R share | A share | R share | |
| October | 140 439 | 48 052 585 | 231 890 | 11 947 956 |
| November | 92 414 | 43 417 899 | 134 838 | 9 734 873 |
| December | 99 786 | 37 592 012 | 110 379 | 5 477 897 |
| Total | 332 639 | 129 062 496 | 477 107 | 27 160 726 |
| Helsinki, EUR | Stockholm, SEK | |||
|---|---|---|---|---|
| A share | R share | A share | R share | |
| October | 13.48 | 13.43 | 132.00 | 131.30 |
| November | 12.98 | 12.86 | 128.40 | 128.10 |
| December | 13.20 | 13.22 | 130.00 | 129.50 |
| Million | Q4/17 | Q4/16 | Q3/17 | 2017 | 2016 |
|---|---|---|---|---|---|
| Periodic | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 |
| Cumulative | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 |
| Cumulative, diluted | 790.0 | 790.0 | 789.9 | 790.0 | 789.9 |
| Operational return on capital employed, 100 x Operational EBIT Capital employed1 2 operational ROCE (%) Operational return on operating capital, 100 x Operational EBIT Operating capital 2 operational ROOC (%) 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 Net profit/loss for the period3 Earnings per share (EPS) 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, IACs and fair valuations. The definition includes the respective items of subsidiaries, joint arrangements and equity accounted investments. |
| Net debt/last 12 months' operational Net interest-bearing liabilities EBITDA ratio 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
| Operational EBITDA | Depreciation and impairment charges excl. IAC |
|---|---|
| Operational EBITDA margin | Operational ROCE |
| Operational EBIT | Earnings per share (EPS), excl. IAC |
| Operational EBIT margin | Net debt/last 12 months' operational EBITDA ratio |
| Profit before tax excl. IAC | Fixed costs to sales |
| Capital expenditure | Operational ROOC |
| Capital expenditure excl. investments in biological assets | Cash flow from operations |
| Capital employed | Cash flow after investing activities |
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 FI-00101 Helsinki, Finland SE-107 24 Stockholm, Sweden 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 Q1/2018 results will be published on
Part of the bioeconomy, Stora Enso is a leading provider of renewable solutions in packaging, biomaterials, wooden constructions and paper globally. 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 Oy (STEAV, STERV) and Nasdaq Stockholm AB (STE A, STE R). 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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