Quarterly Report • Jul 26, 2017
Quarterly Report
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January–June 2017
Q3/2017 sales are estimated to be similar to the amount of EUR 2 528 million recorded in the second quarter, and operational EBIT is expected to be somewhat or even clearly higher than the EUR 219 million recorded in Q2/2017. The operational EBIT estimate for Q3/2017 includes the negative EUR 17 million impact of the ramp-up of the Beihai operations. The impact of annual maintenance shutdowns is expected to be approximately EUR 10 million lower than in Q2/2017, and it is included in the above guidance.
The consumer board machine in Beihai is expected to reach operational EBITDA break-even in Q4/2017, one quarter earlier than previously forecast.
| Change % | Change % | Change % | |||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/17– Q2/16 |
Q1/17 | Q2/17– Q1/17 |
Q1–Q2/17 | Q1–Q2/16 | Q1-Q2/17– Q1-Q2/16 |
2016 |
| Sales | 2 528 | 2 526 | 0.1% | 2 497 | 1.2% | 5 025 | 4 971 | 1.1% | 9 802 |
| Operational EBITDA | 341 | 355 | -3.9% | 352 | -3.1% | 693 | 718 | -3.5% | 1 371 |
| Operational EBITDA margin | 13.5% | 14.1% | 14.1% | 13.8% | 14.4% | 14.0% | |||
| Operational EBIT | 219 | 226 | -3.1% | 215 | 1.9% | 434 | 474 | -8.4% | 884 |
| Operational EBIT margin | 8.7% | 8.9% | 8.6% | 8.6% | 9.5% | 9.0% | |||
| Operating profit (IFRS) | 205 | 248 | -17.3% | 193 | 6.2% | 398 | 442 | -10.0% | 783 |
| Profit before tax excl. IAC | 153 | 112 | 36.6% | 191 | -19.9% | 344 | 295 | 16.6% | 575 |
| Profit before tax | 145 | 149 | -2.7% | 164 | -11.6% | 309 | 304 | 1.6% | 541 |
| Net profit for the period | 143 | 118 | 21.2% | 107 | 33.6% | 250 | 232 | 7.8% | 407 |
| Capital expenditure | 116 | 197 | -41.1% | 108 | 7.4% | 224 | 385 | -41.8% | 729 |
| Capital expenditure excluding investments in biological assets |
94 | 174 | -45.9% | 88 | 6.8% | 182 | 341 | -46.7% | 638 |
| Depreciation and impairment charges excl. IAC |
119 | 123 | -3.3% | 139 | -14.4% | 258 | 247 | 4.5% | 502 |
| Net interest-bearing liabilities | 2 724 | 3 178 | -14.3% | 2 711 | 0.5% | 2 724 | 3 178 | -14.3% | 2 726 |
| Operational return on capital employed (ROCE) |
10.3% | 10.3% | 10.0% | 10.2% | 10.8% | 10.2% | |||
| Earnings per share (EPS) excl. IAC, EUR |
0.19 | 0.12 | 0.17 | 0.36 | 0.31 | 0.65 | |||
| EPS (basic), EUR | 0.19 | 0.16 | 0.14 | 0.33 | 0.31 | 0.59 | |||
| Return on equity (ROE) | 9.8% | 8.4% | 7.2% | 8.7% | 8.4% | 7.2% | |||
| Debt/equity ratio | 0.49 | 0.58 | 0.46 | 0.49 | 0.58 | 0.47 | |||
| Net debt/last 12 months' operational EBITDA ratio |
2.0 | 2.2 | 2.0 | 2.0 | 2.2 | 2.0 | |||
| Fixed costs to sales | 25.6% | 25.4% | 24.1% | 24.8% | 24.9% | 25.3% | |||
| Equity per share, EUR | 7.12 | 6.96 | 2.3% | 7.50 | -5.1% | 7.12 | 6.96 | 2.3% | 7.36 |
| Average number of employees | 26 581 | 26 088 | 1.9% | 25 591 | 3.9% | 25 999 | 25 911 | 0.3% | 26 269 |
| TRI rate1 2 | 7.2 | 13.5 | -46.7% | 8.73 | -17.2% | 7.9 | 12.7 | -37.8% | 11.7 |
| LTA rate1 2 | 4.9 | 4.9 | 0.0% | 5.73 | -14.0% | 5.3 | 4.4 | 20.5% | 4.4 |
Operational key figures: see chapter Non-IFRS measures at the beginning of the Financials section.
Items affecting comparability (IAC): see chapter Non-IFRS measures at the beginning of the Financials section.
TRI (Total recordable incidents) rate = number of incidents per one million hours worked.
LTA (Lost-time accident) rate = number of lost-time accidents per one million hours worked.
1 For Stora Enso employees, excluding joint operations.
2 As of January 2017 Stora Enso applies new Occupational Health and Safety Administration (OHSA) definitions in the reporting of TRI and LTA rates to better align with international standards. Due to this change, Q2 figures are not fully comparable with historical figures.
3 Recalculated due to additional data after the Q1/2017 Interim Report.
| Change % Q2/17– |
Change % Q2/17– |
Change % Q1-Q2/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | Q1-Q2/16 | 2016 | |
| Board deliveries, 1 000 tonnes | 949 | 839 | 13.1% | 930 | 2.0% | 1 879 | 1 636 | 14.9% | 3 376 |
| Board production, 1 000 tonnes | 1 021 | 912 | 12.0% | 1 038 | -1.6% | 2 059 | 1 838 | 12.0% | 3 775 |
| Corrugated packaging deliveries, million m2 | 275 | 273 | 0.7% | 267 | 3.0% | 542 | 532 | 1.9% | 1 082 |
| Market pulp deliveries, 1 000 tonnes | 521 | 507 | 2.8% | 536 | -2.8% | 1 057 | 973 | 8.6% | 2 068 |
| Wood product deliveries, 1 000 m3 | 1 325 | 1 319 | 0.5% | 1 257 | 5.4% | 2 582 | 2 443 | 5.7% | 4 814 |
| Paper deliveries, 1 000 tonnes | 1 185 | 1 322 | -10.4% | 1 205 | -1.7% | 2 390 | 2 662 | -10.2% | 5 141 |
| Paper production, 1 000 tonnes | 1 158 | 1 298 | -10.8% | 1 203 | -3.7% | 2 361 | 2 693 | -12.3% | 5 155 |
"Our transformation towards a renewable materials growth company accelerates, and I am confident in our progress. Sales increased marginally, and excluding the paper business sales increased 7.1%. This is primarily due to the ramp-up of strategic investments – the Beihai, Murów and Varkaus mills – and higher pulp and containerboard prices.
Operational EBIT decreased from EUR 226 million to EUR 219 million. This is mainly related to extensive maintenance and a change of maintenance calendar compared to last year, amounting to EUR 15 million. The balance sheet continued to strengthen further, net debt to operational EBITDA has gone from 3.2 to 2.0 during the last four years.
The positive contribution from the transformation projects continues. I am very pleased that we continue to be ahead of plan with the ramp-up of Beihai Mill. We expect the consumer board machine to reach operational EBITDA break-even in the fourth quarter 2017, which is one quarter earlier than previously forecast. We have also made good progress in the ramp-up of the Varkaus kraftliner mill. This quarter, we reached a positive operational EBIT.
During the period, Paper Machine 8 at Kvarnsveden Mill in Sweden was permanently shut down. Our restructuring plan for Kvarnsveden Mill is anticipated to result in annual cost savings of EUR 12 million.
In July, we announced exciting news: we will invest EUR 45 million in a new cross-laminated timber production unit at Gruvön sawmill in Sweden. This investment supports our strategy to grow in the construction industry and increase the use of wood as a building material. We are investing to meet growing customer demand globally, and expect this investment to generate annual sales of approximately EUR 50 million when run at full capacity. Over time, this investment will significantly enable the Wood Products division to exceed its profitability target.
Today, we announce that we have signed an agreement to divest our 35% holding in the minority investment Bulleh Shah Packaging Ltd. to the main owner Packages Ltd. Due to the changing business environment in Pakistan, the Bulleh Shah Packaging asset with its product mix and related future outlook is a non-strategic fit in our consumer board roadmap. Our focus is on high quality virgin-fibre products. We are committed to making a responsible divestment and intend to leave a positive contribution to the society.
As to outlook, sales for the third quarter 2017 are estimated to be similar to the amount of EUR 2 528 million recorded in the second quarter, and operational EBIT is expected to be somewhat or even clearly higher than the EUR 219 million recorded in the second quarter of 2017. The operational EBIT estimate for the third quarter of 2017 includes the negative EUR 17 million impact of the ramp-up of Beihai operations. The impact of annual maintenance shutdowns is expected to be approximately EUR 10 million lower than in the second quarter of 2017, and it is included in the above guidance.
As always, I would like to thank our customers for their business, our employees for their dedication, and our investors for their trust."
Operational EBIT margin
8.7%
Operational ROCE
10.3% (Target >13%)
Net debt to operational EBITDA
2.0 (Target <3.0)
| Change % Q2/17– |
Change % Q2/17– |
Q1– | Change % Q1-Q2/17– |
||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q1–Q2/17 | Q2/16 | Q1-Q2/16 | 2016 |
| Operational EBITDA | 341 | 355 | -3.9% | 352 | -3.1% | 693 | 718 | -3.5% | 1 371 |
| Equity accounted investments (EAI), operational1 |
15 | 16 | -6.3% | 14 | 7.1% | 29 | 32 | -9.4% | 80 |
| Operational decrease in the value of biological assets |
-18 | -22 | 18.2% | -12 | -50.0% | -30 | -29 | -3.4% | -65 |
| Depreciation and impairment excl. IAC | -119 | -123 | 3.3% | -139 | 14.4% | -258 | -247 | -4.5% | -502 |
| Operational EBIT | 219 | 226 | -3.1% | 215 | 1.9% | 434 | 474 | -8.4% | 884 |
| Fair valuations and non-operational items2 |
-6 | -15 | 60.0% | 5 | -220.0% | -1 | -41 | 97.6% | -67 |
| Items affecting comparability (IAC)3 | -8 | 37 | -121.6% | -27 | 70.4% | -35 | 9 | n/m | -34 |
| Operating profit (IFRS) | 205 | 248 | -17.3% | 193 | 6.2% | 398 | 442 | -10.0% | 783 |
1 The group's share of operational EBIT of equity accounted investments (EAI).
2 Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the group's share of tax and net financial items of EAI.
3 Items affecting comparability detailed in the Financials section.
| Sales Q2/2016, EUR million | 2 526 |
|---|---|
| Price and mix | 2% |
| Currency | 0% |
| Volume | 0% |
| Other sales1 | -2% |
| Total before structural changes | 0% |
| Structural changes2 | 0% |
| Total | 0% |
| Sales Q2/2017, EUR million | 2 528 |
1 Wood, energy, paper for recycling, by-products etc.
2 Asset closures, major investments, divestments and acquisitions
Group sales at EUR 2 528 million were EUR 2 million higher than a year ago. Higher sales prices in local currencies and a better mix, especially in Packaging Solutions and Biomaterials divisions, were offset by lower Other sales, such as wood, energy, and by-products. The negative impact of the divestments of Kabel and Arapoti mills and the Suzhou Mill site divestment was offset by the ramp-up of the Beihai consumer board mill in China, Varkaus kraftliner mill and LVL (laminated veneer lumber) line in Finland and Murów sawmill in Poland.
Operational EBIT amounted to EUR 219 (EUR 226) million, a decrease of EUR 7 million. The operational EBIT margin was 8.7% (8.9%).
Higher sales prices and increased volumes improved operational EBIT by EUR 52 million. The power turbine at the Beihai Mill, damaged during Q1/2017, is expected to be back in operation in the second half of 2017. A reversal of a related provision of EUR 4 million was made in the Q2 operational EBIT based on the latest information on the repair costs.
Variable costs increased EUR 36 million, mainly due to higher costs for paper for recycling (PfR) in Paper and Packaging Solutions divisions, higher costs for chemicals and fillers, as well as higher logistic costs overall. Fixed costs were EUR 23 million higher, mainly due maintenance costs that were partly related to this year's change in the maintenance sequence and to the higher personnel costs related to the ramp-up of the strategic investments. The negative impact from net foreign exchange, closed units and operational result from equity accounted investments was EUR 5 million.
The planned and unplanned production downtime was 7% (12%) for paper, 7% (5%) for board, and 0% (1%) for wood products.
The average number of employees in the second quarter of 2017 was approximately 26 600 (26 100). The average number of employees during the quarter in Europe was approximately 20 100 (20 500). In China, the average number of employees was approximately 5 400 (4 600).
Fair valuations and non-operational items had a negative EUR 6 (negative EUR 15) million impact on operating profit.
Earnings per share were EUR 0.19 (EUR 0.16) and earnings per share excluding items affecting comparability were EUR 0.19 (EUR 0.12).
The group recorded an item affecting comparability (IAC) with a negative impact of approximately EUR 8 (positive EUR 37) million in its operating profit and a positive impact of approximately EUR 1 million (negative EUR 10 million) on income tax in the second quarter of 2017. The IAC relates to an environmental provision in the Consumer Board division's Imatra mill site, Finland.
Net financial expenses at EUR 60 million were EUR 39 million lower than a year ago. Net interest expenses increased by EUR 4 million mainly due to lower capitalised interest and lower interest income from deposits, only partly offset by lower interest expenses. Other net financial expenses in the second quarter were EUR 30 (EUR 37) million and included expenses of EUR 26 (EUR 34) million in connection with bond repurchases. The net foreign exchange impact in the second quarter regarding cash,
interest-bearing assets and liabilities and related hedges amounted to a gain of EUR 8 (loss of EUR 28) million, mainly due to the revaluation of foreign currency loans in subsidiaries and joint-operations.
| EUR million | Capital employed |
|---|---|
| 30 June 2016 | 8 776 |
| Capital expenditure less depreciation | -82 |
| Impairments and reversal of impairments | -104 |
| Fair valuation of biological assets | -113 |
| Costs related to growth of biological assets | -143 |
| Available-for-sale: operative (mainly PVO) | 23 |
| Equity accounted investments | 148 |
| Net liabilities in defined benefit plans | -89 |
| Operative working capital and other interest-free items, net | 101 |
| Net tax liabilities | 2 |
| Translation difference | -129 |
| Other changes | -4 |
| 30 June 2017 | 8 386 |
The operational return on capital employed (ROCE) in the second quarter of 2017 was 10.3% (10.3%). Excluding the Beihai operations in the Consumer Board division, the operational ROCE would have been 12.4% (12.5%).
Sales increased EUR 54 million or 1.1% to EUR 5 025 million. Operational EBIT decreased EUR 40 million to EUR 434 million. Higher sales prices and increased volumes improved operational EBIT by EUR 57 million. Variable costs increased EUR 18 million mainly due to higher logistic costs. Fixed costs increased EUR 58 million, mainly due to higher maintenance costs, partly relating to changes in the maintenance sequence. Depreciations were EUR 11 million higher than a year ago. The net foreign exchange impact decreased operational EBIT by EUR 3 million. The operational result from the equity accounted investments was EUR 3 million lower and the impact of the closed units EUR 5 million negative.
Sales were EUR 31 million or 1.2% higher at EUR 2 528 million. Operational EBIT was EUR 4 million higher at EUR 219 million. Higher sales prices, especially for Biomaterials and Packaging Solutions divisions, improved operational EBIT by EUR 36 million. The impact of volumes to operational EBIT was EUR 6 million negative, mainly related to higher maintenance activity in Biomaterials and Paper divisions. Lower depreciation and impairment had a positive impact of EUR 21 million. Fixed costs were EUR 34 million higher, mainly due to increased maintenance activity, and seasonal personnel costs in Q2/2017. Variable costs were EUR 13 million higher, mainly due to the higher cost of paper for recycling (PfR) and chemicals. The negative net foreign exchange impact of EUR 2 million was offset by the positive impact of the operational result from the equity accounted investments and from the closed units.
| EUR million | 30 Jun 17 | 31 Mar 17 | 31 Dec 16 | 30 Jun 16 |
|---|---|---|---|---|
| Operative fixed assets1 | 6 465 | 6 728 | 6 785 | 6 987 |
| Equity accounted investments | 1 590 | 1 602 | 1 594 | 1 474 |
| Operative working capital, net | 961 | 955 | 825 | 839 |
| Non-current interest-free items, net | -570 | -536 | -554 | -458 |
| Operating Capital Total | 8 446 | 8 749 | 8 650 | 8 842 |
| Net tax liabilities | -60 | -70 | -56 | -66 |
| Capital Employed | 8 386 | 8 679 | 8 594 | 8 776 |
| Equity attributable to owners of the Parent | 5 612 | 5 914 | 5 806 | 5 492 |
| Non-controlling interests | 50 | 54 | 62 | 106 |
| Net interest-bearing liabilities | 2 724 | 2 711 | 2 726 | 3 178 |
| Financing Total | 8 386 | 8 679 | 8 594 | 8 776 |
1 Operative fixed assets include property, plant and equipment, goodwill, biological assets, emission rights, available-for-sale operative shares and other intangible assets.
Total unutilised committed credit facilities were unchanged at EUR 700 million, and cash and cash equivalents net of overdrafts decreased to EUR 495 million, as a result of a significant reduction in gross debt, and a payment of dividend, partly offset by a strong cash flow from operations in the quarter. In addition, Stora Enso has access to various long-term sources of funding up to EUR 900 (900) million.
During the quarter, Stora Enso successfully issued a new 10-year EUR 300 million bond under its EMTN (Euro Medium Term Note) programme. The bond matures in June 2027 and pays a fixed coupon of 2.5%. There are no financial covenants. Alongside with the bond issuance, Stora Enso has successfully repurchased notes with a nominal value of EUR 83 million from the 2018 bond, and of EUR 216 million from the 2019 bond, issued in 2012.
Net debt was EUR 2 724 million, an increase of EUR 13 million from the previous quarter.
The fair value of PVO shares accounted for as available-for-sale investments decreased in the quarter by EUR 13 million to EUR 215 million. The change in fair value is mainly caused by the decrease in electricity prices. The changes in fair valuation are included in the Other Comprehensive Income in equity.
The ratio of net debt to the last twelve months' operational EBITDA was 2.0 (2.0). The debt/equity ratio at 30 June 2017 was 0.49 (0.46).
| Change % Q2/17– |
Change % Q2/17– |
Q1– | Change % Q1-Q2/17– |
||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q1–Q2/17 | Q2/16 | Q1-Q2/16 | 2016 |
| Operational EBITDA | 341 | 355 | -3.9% | 352 | -3.1% | 693 | 718 | -3.5% | 1 371 |
| IAC on operational EBITDA | -8 | -21 | 61.9% | -24 | 66.7% | -32 | -48 | 33.3% | -77 |
| Dividends received from equity accounted investments |
8 | 58 | -86.2% | 12 | -33.3% | 20 | 58 | -65.5% | 58 |
| Other adjustments | -3 | -6 | 50.0% | 5 | -160.0% | 2 | 8 | -75.0% | -2 |
| Change in working capital | 27 | 107 | -74.8% | -167 | 116.2% | -140 | 46 | n/m | 283 |
| Cash Flow from Operations (non-IFRS) |
365 | 493 | -26.0% | 178 | 105.1% | 543 | 782 | -30.6% | 1 633 |
| Cash spent on fixed and biological assets |
-128 | -172 | 25.6% | -135 | 5.2% | -263 | -365 | 27.9% | -798 |
| Acquisitions of equity accounted investments |
- | - | - | - | - | - | - | - | -1 |
| Cash Flow after Investing Activities (non-IFRS) |
237 | 321 | -26.2% | 43 | n/m | 280 | 417 | -32.9% | 834 |
Second quarter 2017 cash flow after investing activities was EUR 237 million. Working capital decreased by EUR 27 million, mainly due to continuous working capital management. Cash spent on fixed and biological assets was EUR 128 million. Payments related to the previously announced provisions were EUR 6 million.
Additions to fixed and biological assets in the second quarter 2017 totalled EUR 116 million, of which EUR 94 million were fixed assets and EUR 22 million biological assets. Depreciations totalled EUR 119 million. Additions in fixed and biological assets had a cash outflow impact of EUR 128 million.
The main projects ongoing in the second quarter of 2017 were the new polyethylene extrusion (PE) coating plant and an automated roll warehouse at Imatra Mills in Finland, the PE coating investment at Beihai Mill in China, the Heinola Fluting Mill upgrade in Finland and the consolidation of manufacturing of corrugated packaging in Finland.
| EUR million | Forecast 2017 |
|---|---|
| Capital expenditure | 600–650 |
| Depreciation | 490–510 |
| Operational decrease in biological asset values | 50–70 |
The capital expenditure forecast includes approximately EUR 100 million for the group's biological assets. It also includes the following major projects:
The Consumer Board division develops and provides consumer packaging boards for printing and packaging applications. A wide board and barrier coating selection is suitable for the design and optimisation of packaging for liquid, food, pharmaceutical and luxury goods. We serve converters and brand owners globally and are expanding in growth markets such as China and Asia Pacific to meet rising demand.
| Change % Q2/17– |
Change % Q2/17– |
Q1– | Q1– | Change % Q1-Q2/17– |
|||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q2/17 | Q2/16 | Q1-Q2/16 | 2016 |
| Sales | 630 | 599 | 5.2% | 611 | 3.1% | 1 241 | 1 163 | 6.7% | 2 342 |
| Operational EBITDA | 111 | 127 | -12.6% | 119 | -6.7% | 230 | 237 | -3.0% | 447 |
| Operational EBITDA margin | 17.6% | 21.2% | 19.5% | 18.5% | 20.4% | 19.1% | |||
| Operational EBIT | 69 | 76 | -9.2% | 61 | 13.1% | 130 | 149 | -12.8% | 254 |
| Operational EBIT margin | 11.0% | 12.7% | 10.0% | 10.5% | 12.8% | 10.8% | |||
| Operational ROOC1 | 13.9% | 14.8% | 12.2% | 13.3% | 14.7% | 12.7% | |||
| Cash flow from operations (non-IFRS) |
140 | 168 | -16.7% | 67 | 109.0% | 207 | 250 | -17.2% | 453 |
| Cash flow after investing activities (non-IFRS) |
81 | 73 | 11.0% | 2 | n/m | 83 | 57 | 45.6% | 40 |
| Board deliveries, 1 000 tonnes | 702 | 630 | 11.4% | 684 | 2.6% | 1 386 | 1 218 | 13.8% | 2 507 |
| Board production, 1 000 tonnes | 697 | 620 | 12.4% | 710 | -1.8% | 1 407 | 1 244 | 13.1% | 2 554 |
1 Operational ROOC = 100% x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
| Markets | |||||
|---|---|---|---|---|---|
| Product | Market | Demand Q2/17 compared with Q2/16 |
Demand Q2/17 compared with Q1/17 |
Price Q2/17 compared with Q2/16 |
Price Q2/17 compared with Q1/17 |
| Consumer board | Europe | Stable | Stable | Slightly lower | Stable |
Operational ROOC excl. Beihai
13.9%
34.3%
(Target: >20%)
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | – | – |
| Q3 | Imatra and Ingerois mills | Imatra and Ingerois mills |
| Q4 | Skoghall and Fors mills | Skoghall and Fors mills |
Packaging Solutions division develops fibre-based packaging, and operates at every stage of the value chain from pulp production, material and packaging production to recycling. Our solutions serve leading converters, brand owners and retailer customers helping to optimise performance, reduce total costs and enhance sales.
| Change % Q2/17– |
Change % Q2/17– |
Change % Q1-Q2/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | Q1-Q2/16 | 2016 |
| Sales | 313 | 258 | 21.3% | 290 | 7.9% | 603 | 503 | 19.9% | 1 044 |
| Operational EBITDA | 56 | 33 | 69.7% | 43 | 30.2% | 99 | 56 | 76.8% | 129 |
| Operational EBITDA margin | 17.9% | 12.8% | 14.8% | 16.4% | 11.1% | 12.4% | |||
| Operational EBIT | 40 | 17 | 135.3% | 24 | 66.7% | 64 | 24 | 166.7% | 64 |
| Operational EBIT margin | 12.8% | 6.6% | 8.3% | 10.6% | 4.8% | 6.1% | |||
| Operational ROOC1 | 18.3% | 7.7% | 11.1% | 14.9% | 5.6% | 7.6% | |||
| Cash flow from operations (non-IFRS) Cash flow after investing activities (non |
53 | 39 | 35.9% | 31 | 71.0% | 84 | 49 | 71.4% | 132 |
| IFRS) | 41 | 27 | 51.9% | 16 | 156.3% | 57 | 17 | 235.3% | 63 |
| Board deliveries (external), 1 000 tonnes | 247 | 209 | 18.2% | 246 | 0.4% | 493 | 418 | 17.9% | 869 |
| Board production, 1 000 tonnes Corrugated packaging deliveries, million |
324 | 292 | 11.0% | 328 | -1.2% | 652 | 594 | 9.8% | 1 221 |
| m2 Corrugated packaging production, million |
275 | 273 | 0.7% | 267 | 3.0% | 542 | 532 | 1.9% | 1 082 |
| m2 | 272 | 272 | 0.0% | 267 | 1.9% | 539 | 525 | 2.7% | 1 073 |
1 Operational ROOC = 100% x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
| Product | Market | Demand Q2/17 compared with Q2/16 |
Demand Q2/17 compared with Q1/17 |
Price Q2/17 compared with Q2/16 |
Price Q2/17 compared with Q1/17 |
|---|---|---|---|---|---|
| Virgin fibre-based containerboard Recycled fibre based |
Global | Slightly stronger | Slightly stronger | Slightly higher | Slightly higher |
| (RCP) containerboard | Europe | Stronger | Slightly stronger | Significantly higher | Significantly higher |
| Corrugated packaging | Europe | Slightly stronger | Slightly stronger | Slightly higher | Slightly higher |
18.3%
(Target: >20%)
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Ostrołęka Mill | Ostrołęka Mill |
| Q3 | Varkaus Mill | Heinola Mill |
| Q4 | Heinola Mill | Varkaus Mill |
The Biomaterials division offers a variety of pulp grades to meet the demands of paper, board, tissue, textile and hygiene product producers. We also develop new ways to maximise the value extractable from wood, as well as other kinds of lignocellulosic biomasses. Sugars and lignin hold potential for use in applications in the specialty chemical, construction, personal care and food industries.
| Change % Q2/17– |
Change % Q2/17– |
Change % Q1-Q2/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 Q1–Q2/17 | Q1–Q2/16 | Q1-Q2/16 | 2016 | |
| Sales | 371 | 342 | 8.5% | 369 | 0.5% | 740 | 693 | 6.8% | 1 376 |
| Operational EBITDA | 100 | 92 | 8.7% | 90 | 11.1% | 190 | 207 | -8.2% | 361 |
| Operational EBITDA margin | 27.0% | 26.9% | 24.4% | 25.7% | 29.9% | 26.2% | |||
| Operational EBIT | 62 | 57 | 8.8% | 53 | 17.0% | 115 | 141 | -18.4% | 224 |
| Operational EBIT margin | 16.7% | 16.7% | 14.4% | 15.5% | 20.3% | 16.3% | |||
| Operational ROOC1 | 9.8% | 8.9% | 7.9% | 9.0% | 10.9% | 8.5% | |||
| Cash flow from operations (non-IFRS) | 131 | 128 | 2.3% | 75 | 74.7% | 206 | 243 | -15.2% | 419 |
| Cash flow after investing activities (non-IFRS) |
99 | 96 | 3.1% | 52 | 90.4% | 151 | 177 | -14.7% | 278 |
| Pulp deliveries, 1 000 tonnes | 646 | 627 | 3.0% | 662 | -2.4% | 1 308 | 1 244 | 5.1% | 2 508 |
1 Operational ROOC = 100% x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
• Sales increased 8.5% or EUR 29 million to EUR 371 million. That was driven by higher sales prices in all pulp grades, favourable currency impact and higher delivery volumes, especially from the Latin American pulp mills.
| Product | Market | Demand Q2/17 compared with Q2/16 |
Demand Q2/17 compared with Q1/17 |
Price Q2/17 compared with Q2/16 |
Price Q2/17 compared with Q1/17 |
|---|---|---|---|---|---|
| Softwood pulp | Europe | Slightly weaker | Slightly weaker | Higher | Higher |
| Hardwood pulp | Europe | Stable | Slightly stronger | Significantly higher | Significantly higher |
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Montes del Plata and Sunila mills |
Montes del Plata Mill |
| Q3 | – | Veracel and Skutskär mills |
| Q4 | Veracel and Skutskär mills | Enocell Mill |
9.8%
(Target: >15%)
Wood Products division provides versatile wood-based solutions for building and housing. Our product range covers all areas of urban construction including massive wood elements, wood components, and pellets. We also offer a variety of sawn timber goods. Our customers are mainly construction and joinery companies, merchandisers and retailers.
| Change % Q2/17– |
Change % Q2/17– |
Change % Q1-Q2/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | Q1-Q2/16 | 2016 |
| Sales | 440 | 433 | 1.6% | 416 | 5.8% | 856 | 815 | 5.0% | 1 595 |
| Operational EBITDA | 43 | 41 | 4.9% | 31 | 38.7% | 74 | 64 | 15.6% | 118 |
| Operational EBITDA margin | 9.8% | 9.5% | 7.5% | 8.6% | 7.9% | 7.4% | |||
| Operational EBIT | 35 | 33 | 6.1% | 22 | 59.1% | 57 | 49 | 16.3% | 88 |
| Operational EBIT margin | 8.0% | 7.6% | 5.3% | 6.7% | 6.0% | 5.5% | |||
| Operational ROOC1 | 25.5% | 25.6% | 16.4% | 21.0% | 19.1% | 16.8% | |||
| Cash flow from operations (non-IFRS) Cash flow after investing activities |
28 | 67 | -58.2% | 22 | 27.3% | 50 | 101 | -50.5% | 142 |
| (non-IFRS) | 21 | 53 | -60.4% | 10 | 110.0% | 31 | 63 | -50.8% | 75 |
| Wood products deliveries, 1 000 m3 | 1 288 | 1 274 | 1.1% | 1 212 | 6.3% | 2 500 | 2 360 | 5.9% | 4 643 |
1 Operational ROOC = 100% x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
| Product | Market | Demand Q2/17 compared with Q2/16 |
Demand Q2/17 compared with Q1/17 |
Price Q2/17 compared with Q2/16 |
Price Q2/17 compared with Q1/17 |
|---|---|---|---|---|---|
| Wood products | Europe | Stable | Stronger | Slightly higher | Slightly higher |
Sales and operational EBIT Operational ROOC
25.5% (Target: >18%)
Paper division provides best-in-class paper solutions for print media and office use. The wide selection covers papers made from recycled and fresh wood fibre. Our main customer groups include publishers, retailers, printing houses, merchants, converters and office suppliers. Three of the mills produce paper based on 100% recycled fibre.
| Change % Q2/17– |
Change % Q2/17– |
Change % Q1-Q2/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | Q1-Q2/16 | 2016 |
| Sales | 719 | 839 | -14.3% | 748 | -3.9% | 1 467 | 1 693 | -13.3% | 3 245 |
| Operational EBITDA | 37 | 74 | -50.0% | 68 | -45.6% | 105 | 157 | -33.1% | 324 |
| Operational EBITDA margin | 5.1% | 8.8% | 9.1% | 7.2% | 9.3% | 10.0% | |||
| Operational EBIT | 11 | 43 | -74.4% | 42 | -73.8% | 53 | 94 | -43.6% | 211 |
| Operational EBIT margin | 1.5% | 5.1% | 5.6% | 3.6% | 5.6% | 6.5% | |||
| Operational ROOC1 | 5.4% | 14.6% | 17.7% | 12.5% | 15.9% | 19.4% | |||
| Cash flow from operations (non IFRS) |
91 | 63 | 44.4% | 42 | 116.7% | 133 | 116 | 14.7% | 351 |
| Cash flow after investing activities (non-IFRS) |
76 | 49 | 55.1% | 32 | 137.5% | 108 | 94 | 14.9% | 277 |
| Cash flow after investing activities to sales (non-IFRS) |
10.6% | 5.8% | 4.3% | 7.4% | 5.6% | 8.5% | |||
| Paper deliveries, 1 000 tonnes | 1 185 | 1 322 | -10.4% | 1 205 | -1.7% | 2 390 | 2 662 | -10.2% | 5 141 |
| Paper production, 1 000 tonnes | 1 158 | 1 298 | -10.8% | 1 203 | -3.7% | 2 361 | 2 693 | -12.3% | 5 155 |
1 Operational ROOC = 100% x Operational EBIT/Average operating capital
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
| Product | Market | Demand Q2/17 compared with Q2/16 |
Demand Q2/17 compared with Q1/17 |
Price Q2/17 compared with Q2/16 |
Price Q2/17 compared with Q1/17 |
|---|---|---|---|---|---|
| Paper | Europe | Slightly weaker | Slightly weaker | Slightly lower | Stable |
Sales and operational EBITDA Cash flow after investing activities to sales1
10.6%
(Target: >7%)
Scheduled annual maintenance shutdowns
| 2017 | 2016 | |
|---|---|---|
| Q1 | – | – |
| Q2 | Oulu Mill | Langerbrugge Mill |
| Q3 | Veitsiluoto Mill | Anjala, Maxau, Oulu, and Veitsiluoto mills |
| Q4 | Nymölla Mill | – |
1 The Paper division's financial target is cash flow after investing activities to sales (non-IFRS), because the division's goal is to generate cash flow for the group so that it can transform into a renewable materials growth company.
The segment Other includes the Nordic forest equity-accounted investments, Stora Enso's shareholding in the energy company Pohjolan Voima, operations supplying wood to the Nordic and Baltic mills, plantations not connected to any mill site, and group shared services and administration.
| Change % Q2/17– |
Change % Q2/17– |
Change % Q1-Q2/17– |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q2/17 | Q2/16 | Q2/16 | Q1/17 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | Q1-Q2/16 | 2016 |
| Sales | 628 | 629 | -0.2% | 651 | -3.5% | 1 279 | 1 277 | 0.2% | 2 477 |
| Operational EBITDA | -6 | -12 | 50.0% | 1 | n/m | -5 | -3 | -66.7% | -8 |
| Operational EBITDA margin | -1.0% | -1.9% | 0.2% | -0.4% | -0.2% | -0.3% | |||
| Operational EBIT | 2 | 0 | n/m | 13 | -84.6% | 15 | 17 | -11.8% | 43 |
| Operational EBIT margin | 0.3% | 0.0% | 2.0% | 1.2% | 1.3% | 1.7% | |||
| Cash flow from operations | |||||||||
| (non-IFRS) | -78 | 28 | n/m | -59 | -32.2% | -137 | 23 | n/m | 136 |
| Cash flow after investing activities | |||||||||
| (non-IFRS) | -81 | 23 | n/m | -69 | -17.4% | -150 | 9 | n/m | 101 |
For non-IFRS measures, see chapter Non-IFRS measures at the beginning of the Financials section.
• Sales remained stable, despite the transfer of the Baltic wood sourcing operations from Wood Products to the segment Other.
• Operational EBIT increased slightly to EUR 2 million.
| Q2/17 | Q2/16 | Q1/17³ | Q1–Q2/17 | Q1–Q2/16 | 2016 | Milestone | Milestone to be reached by |
|
|---|---|---|---|---|---|---|---|---|
| TRI rate | 7.2 | 13.5 | 8.7 | 7.9 | 12.7 | 11.7 | ||
| LTA rate | 4.9 | 4.9 | 5.7 | 5.3 | 4.4 | 4.4 | 4.0 | end of 2017 |
| TRI (Total recordable incident) rate = number of incidents per one million hours worked. |
LTA (Lost-time accident) rate = number of lost-time accidents per one million hours worked.
1 For Stora Enso employees, excluding joint operations
² As of January 2017 Stora Enso applies new Occupational Safety and Health Administration (OSHA) definitions in the reporting of TRI and LTA rates to better align with international standards. Due to this change, the 2017 figures are not fully comparable with historical figures.
³ Recalculated due to additional data after the Q1/2017 Interim Report.
During the quarter, safety performance improved slightly, but the LTA milestone remains a challenge. Stora Enso will continue to implement its Safety Leadership training programme and the updated Safety Toolbox, a collection of tools proven to make mills and units safer.
| 30 Jun 17 | 31 Mar 17 | 31 Dec 16 | 30 Jun 16 | Target | Target to be reached by |
|
|---|---|---|---|---|---|---|
| % of supplier spend covered by the Supplier | ||||||
| Code of Conduct1 | 93% | 93% | 92% | 92% | 95% | end of 2017 |
1 Excluding joint operations.
As announced today, Stora Enso will divest its holding in Bulleh Shah Packaging (BSP). The group will carry on with the Public Private Partnership with ILO to promote decent work and to combat child labour in the Punjab Province until the end of 2018.
The final report by ILO on the formative ground research on child labour and decent work deficits in Punjab Province of Pakistan was not received in the second quarter. A draft report by ILO was submitted to Stora Enso and is currently under review by Stora Enso and BSP.
| Completed | On track | Not on track | Closed1 | Regular review2 | |
|---|---|---|---|---|---|
| Implementation progress, % of all the actions | 87% | 1% | 1% | 7% | 4% |
1 Issues that were identified in the Human Rights assessments but closed following reassessment of their validity in specific local contexts.
2 Longer-term actions without a targeted end-date that require continuous review.
At the end of the second quarter, 87% (Q1 87%) of the preventive and remediation actions were completed and 98% of the actions were resolved. The actions are based on the UN Guiding Principles on Business and Human Rights and criteria created in collaboration with Danish Institute for Human Rights. As reported earlier, the remaining actions will be progressed to an appropriate conclusion during 2017 and the reporting on Human Rights Action Plan progress will then be stopped.
| 30 Jun 17 | 31 Mar 17 | 31 Dec 16 | 30 Jun 16 | |
|---|---|---|---|---|
| Number of direct active suppliers | 123 | 117 | 276 | 276 |
| Audit coverage year-to-date (%)1 | 30% | 11% | 15% | 10% |
1 The share of direct suppliers of Old Corrugated Containers (OCC) and agricultural by-products that are audited during the calendar year. Excluding institutional OCC suppliers identified as low risk.
Bulleh Shah Packaging (BSP) conducted 28 (37) audits of its material and service suppliers during the second quarter. In addition, 5 (0) supplier audits were conducted by an external party. During the quarter, three proven young worker cases, unacceptable for Stora Enso and BSP, were found in the operations of suppliers providing BSP with biomass transportation services and Paper for Recycling from non-institutional sources. The young workers were not conducting hazardous work. Two young workers have left the job. For the other a remediation action plan is under development.
The operational activities of the mobile medical clinic were piloted in the field in early July. The clinic concept was created together with the Yunus Center of the Asian Institute of Technology and will be operated by a medical facility in Lahore to provide basic health care services to local communities linked to the supply chains.
| 30 Jun 17 | 31 Mar 17 | 31 Dec 16 | 30 Jun 16 | |
|---|---|---|---|---|
| Social forestland leased, ha | 29 831 | 29 856 | 30 500 | 31 410 |
| Leased area without contractual defects, ha | 16 341 | 16 333 | 16 480 | 16 621 |
| Lease contracts without contractual defects, % of all contracts | 66% | 66% | 66% | 65% |
In contracts without defects the ownership of land is clear or solved, and the contracting procedure is proven to be legal, authentic and valid. The contract correction process includes a desktop documentation review, field investigations, legal and operational risk analysis, stakeholder consultations, the collection of missing documentation and the signing of new agreements or amendments directly with the villages or households concerned, or in some cases contract termination.
Stora Enso leases a total of 82 891 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 on 19 January, Stora Enso is reconsidering its plans to build a chemical pulp mill in Beihai, and decrease the area of its leased forestland in the Guangxi region. As part of this process, Stora Enso aims to have only land leased that is free of contractual defects.
| 30 Jun 17 | 31 Mar 17 | 31 Dec 16 | 30 Jun 16 | |
|---|---|---|---|---|
| Area occupied by social movements not involved in | ||||
| the Sustainable Settlement Initiative, ha | 3 566 | 3 616 | 3 499 | 4 239 |
At the end of the second quarter, 3 566 hectares of land owned by Veracel were occupied by social landless movements not involved in the Sustainable Settlement Initiative. During the quarter, Veracel continued to seek repossessions of occupied areas through legal processes, and the company resumed forest management on 50 hectares. Veracel has reserved 16 500 hectares to support the Sustainable Settlement Initiative. At the end of 2016, the total land area owned by Veracel was 215 000 hectares, of which 73 000 hectares are planted with eucalyptus for pulp production.
| Q2/17 | Q2/16 | Q1/17 | Q1– Q2/17 |
Q1– Q2/16 |
2016 | Target | Target to be reached by |
|
|---|---|---|---|---|---|---|---|---|
| Reduction of fossil CO₂ emissions per saleable tonne of pulp, paper and board (kg/t) |
-42% | -47% | -38% | -40% | -40% | -41% | -35% | end of 2025 |
1From baseline year 2006. Covering direct fossil CO₂ emissions from production and indirect fossil CO₂ emissions related to purchased electricity and heat (Scope 1 and 2). Historical figures recalculated due to divestments, or data completion. Excluding joint operations.
For over a decade, Stora Enso has actively reduced the energy intensity of its operations, and in many places also its dependency on fossil fuels. Today, over 75% of the energy the group generates and uses comes from Carbon Neutral sources inside and outside the company. It is Stora Enso's firm intention to drive down fossil fuel use even more over the next ten years to get as close to zero as possible using technically and commercially feasible means.
Despite being ahead of the 2025 target at present, the full adverse impact on the group's fossil CO2 emissions from coal use for energy production at Beihai Mill is yet to be seen in the data. This will become clear as the year progresses. Work has already begun to define a long-term strategy to migrate away from coal at Beihai.
Increasing competition, and supply and demand balances in the paper, pulp, packaging, wood products and roundwood markets may have an impact on our market share and profitability. Changes in the global economic and political environment, sharp market corrections, increasing volatility in foreign exchange rates and deteriorating economic conditions in our main markets could all have impacts on Stora Enso's profits, cash flows and financial position. A more detailed description of risks is available in Stora Enso's Annual Report at storaenso.com/annualreport.
Energy sensitivity analysis: the direct effect of a 10% increase in electricity, heat, oil and other fossil fuel market prices would have a negative impact of approximately EUR 14 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 175 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 115 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 49 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, the Swedish crown and the British pound against the euro would be about positive EUR 121 million, negative EUR 88 million and positive EUR 32 million annual impact, respectively. Weakening of the currencies would have the opposite impact. These numbers are before the effect of hedges and assuming no changes occur other than a single currency exchange rate movement.
The group incurs annual unhedged net costs worth approximately EUR 120 million in Brazilian real (BRL) in its operations in Brazil. For these flows, a 10% strengthening in the value of BRL would have a EUR 12 million negative impact on operational EBIT.
Fibria and Stora Enso each own 50% of Veracel, and the joint ownership is governed by a shareholder agreement. In May 2014, Fibria initiated arbitration proceedings against Stora Enso claiming that Stora Enso was in breach of certain provisions of the shareholder agreement. Fibria has estimated that the interest to be paid regarding the dispute should be approximately USD 54 (EUR 51) million. Stora Enso denies any breach of contract and disputes the method for calculating the interest to be paid. No provisions have been made in Stora Enso's accounts for this case.
On 11 July 2008, Stora Enso announced that a federal judge in Brazil had issued a decision claiming that the permits issued by the State of Bahia for the operations of Stora Enso's joint operations company Veracel were not valid. The judge also ordered Veracel to take certain actions, including reforestation with native trees on part of Veracel's plantations and a possible fine of BRL 20 (EUR 6) million. Veracel disputes the decision and has filed an appeal against it. Veracel operates in full compliance with all Brazilian laws and has obtained all the necessary environmental and operating licences for its industrial and forestry activities from the relevant authorities. In November 2008, a Federal Court suspended the effects of the decision. No provisions have been recorded in Veracel's or Stora Enso's accounts for the reforestation or the possible fine.
In December 2009, the Finnish Market Court fined Stora Enso for competition law infringements in the market for roundwood in Finland from 1997 to 2004. Stora Enso did not appeal against the ruling. In March 2011 Metsähallitus of Finland initiated legal proceedings against Stora Enso, UPM and Metsäliitto claiming compensation for damages allegedly suffered due to competition law infringements. In its ruling issued in June 2016, the Helsinki District Court dismissed Metsähallitus' claim for damages against Stora Enso, Metsäliitto and UPM. Metsähallitus has appealed this ruling. Following reductions by Metsähallitus, the total claim against the defendants now amounts to approximately EUR 126 million and the secondary claim against Stora Enso to approximately EUR 69 million.
In addition, certain Finnish municipalities and private forest owners initiated similar legal proceedings. The total amount claimed from the defendants amounts to approximately EUR 24 million, the secondary claims solely against Stora Enso amount to approximately EUR 5 million. Stora Enso denies that the plaintiffs suffered any damages whatsoever and will forcefully defend itself. No provisions have been made in Stora Enso's accounts for these lawsuits.
In July and August 2016, six Swedish Insurance companies filed lawsuits against Stora Enso. The claimed amount is approximately SEK 300 million (EUR 31 million) attributable to insurance compensation paid to injured parties in connection with the forest fire in Västmanland, Sweden in 2014. Stora Enso denies liability and will respond within the frame of the legal proceedings.
Annica Bresky became Executive Vice President, Consumer Board division and a member of the Group Leadership Team on 1 May 2017. She was previously the President and CEO of Iggesund Paperboard AB, part of the Swedish Holmen Group.
Markus Mannström became Executive Vice President for the Biomaterials division on 1 June 2017. Previously, he was the group's Chief Technology Officer (CTO) and has been a member of the Group Leadership Team since 2015. Mannström succeeds Juan Carlos Bueno, who had led the Biomaterials division since its creation in 2012.
During the second quarter of 2017, the conversion of 750 A shares into R shares was recorded in the Finnish trade register.
On 30 June 2017, Stora Enso had 176 506 320 A shares and 612 113 667 R shares in issue. The company did not hold its own shares. The total number of Stora Enso shares in issue was 788 619 987 and the total number votes was at least 237 717 686.
The holdings of Varma Mutual Pension Insurance Company in Stora Enso's votes fell below the threshold of 5% on 20 June 2017.
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.
On 4 July, Stora Enso announced that it is investing in a new production unit for cross-laminated timber (CLT) at its Gruvön sawmill in Sweden.
On 5 July, Stora Enso signed an agreement to divest its Swedish subsidiary Stora Enso Re-board AB.
On 26 July, Stora Enso signed an agreement to divest its holdings in Bulleh Shah Packaging Ltd. (BSP) to the main owner Packages Ltd.
This release has been prepared in Finnish, English and Swedish. If there are any variations in the content between the versions, the English version shall govern. This report is unaudited.
Helsinki, 26 July 2017 Stora Enso Oyj Board of Directors
This unaudited interim financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the group's Financial Report for 2016.
All figures in this Interim Report have been rounded to the nearest million, unless otherwise stated.
The group's key non-IFRS performance metric is operational EBIT, which is used to evaluate the performance of its operating segments and to steer allocation of resources to them. Operational EBIT comprises the operating profit excluding items affecting comparability (IAC) and fair valuations from the segments and Stora Enso's share of the operating profit of equity accounted investments (EAI), also excluding items affecting comparability and fair valuations.
Items affecting comparability are exceptional transactions that are not related to recurring business operations. The most common items affecting comparability are capital gains, additional write-downs or reversals of write-downs, provisions for planned restructuring and penalties. Items affecting comparability are normally disclosed individually if they exceed one cent per share.
Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets and the group's share of income tax and net financial items of EAI.
Cash flow from operations (non-IFRS) is a group specific way to present operative cash flow without hedging result from OCI and starting from operational EBITDA instead of operating profit.
Cash flow after investing activities (non-IFRS) is calculated as follows: cash flow from operations (non-IFRS) excluding cash spent on intangible assets, property, plant and equipment, and biological assets and acquisitions of EAIs.
The full list of the non-IFRS measures is presented at the end of this report.
Stora Enso changed its reporting regarding the costs related to the growth of biological assets (i.e. growing trees) starting from the fourth quarter of 2016.
Costs related to the development of biological assets are capitalised on the balance sheet during the growth cycle (i.e. until the time of harvesting). At harvesting, the capitalised costs are transferred from biological assets to inventory. Prior to the change, Stora Enso has included the costs related to the growth of biological assets in its operational EBITDA.
From the fourth quarter of 2016 onwards, these growth costs are excluded from operational EBITDA and presented as Operational decrease in the value of biological assets. This change affects the following non-IFRS key figures: operational EBITDA, operational EBITDA margin, and net debt to last 12 months' operational EBITDA ratio. The historical figures are restated according to the new reporting structure. Restated figures are presented in Stora Enso Oyj stock exchange release, published on 8 December 2016.
There is no impact on operational EBIT, the subtotals of the official Condensed Consolidated Income Statement or the group's other IFRS figures.
• Amendments to IFRS 10, IFRS 12 and IAS 28: Investment entities – Applying the consolidation Exception. The amendments provide an exemption from consolidation of subsidiaries for entities that meet the definition of investment entity. This change is not relevant to the group.
As disclosed in Stora Enso's Financial Report 2016, we do not expect that the following standards would have any significant impact on the group:
| EUR million | Q2/17 | Q2/16 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | 2016 |
|---|---|---|---|---|---|---|
| Sales | 2 528 | 2 526 | 2 497 | 5 025 | 4 971 | 9 802 |
| Other operating income | 34 | 34 | 24 | 58 | 64 | 123 |
| Change in inventories of finished goods and WIP | -19 | -41 | 23 | 4 | -5 | 9 |
| Materials and services | -1 474 | -1 441 | -1 498 | -2 972 | -2 904 | -5 833 |
| Freight and sales commissions | -245 | -237 | -245 | -490 | -468 | -920 |
| Personnel expenses | -354 | -365 | -325 | -679 | -707 | -1 334 |
| Other operating expenses | -140 | -141 | -145 | -285 | -287 | -561 |
| Share of results of equity accounted investments | 14 | 25 | 16 | 30 | 22 | 156 |
| Change in net value of biological assets | -20 | -30 | -12 | -32 | -37 | -261 |
| Depreciation, amortisation and impairment charges | -119 | -82 | -142 | -261 | -207 | -398 |
| Operating Profit | 205 | 248 | 193 | 398 | 442 | 783 |
| Net financial items | -60 | -99 | -29 | -89 | -138 | -242 |
| Profit before Tax | 145 | 149 | 164 | 309 | 304 | 541 |
| Income tax | -2 | -31 | -57 | -59 | -72 | -134 |
| Net Profit for the Period | 143 | 118 | 107 | 250 | 232 | 407 |
| Attributable to: | ||||||
| Owners of the Parent | 146 | 125 | 114 | 260 | 243 | 463 |
| Non-controlling interests | -3 | -7 | -7 | -10 | -11 | -56 |
| Net Profit for the Period | 143 | 118 | 107 | 250 | 232 | 407 |
| Earnings per Share | ||||||
| Basic earnings per share, EUR | 0.19 | 0.16 | 0.14 | 0.33 | 0.31 | 0.59 |
| Diluted earnings per share, EUR | 0.19 | 0.16 | 0.14 | 0.33 | 0.31 | 0.59 |
| EUR million | Q2/17 | Q2/16 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | 2016 |
|---|---|---|---|---|---|---|
| Net profit for the period | 143 | 118 | 107 | 250 | 232 | 407 |
| Other Comprehensive Income (OCI) | ||||||
| Items that will Not be Reclassified to Profit and Loss | ||||||
| Actuarial gains and losses on defined benefit plans | 0 | 0 | 0 | 0 | 0 | -62 |
| Income tax relating to items that will not be reclassified | 0 | 0 | 0 | 0 | 0 | 15 |
| 0 | 0 | 0 | 0 | 0 | -47 | |
| Items that may be Reclassified Subsequently to Profit and Loss |
||||||
| Share of OCI of EAIs that may be reclassified | 2 | -2 | 1 | 3 | -5 | 0 |
| Currency translation movements on equity net investments (CTA) | -176 | 57 | 7 | -169 | 25 | 124 |
| Currency translation movements on non-controlling interests | -2 | 1 | 0 | -2 | -4 | -3 |
| Net investment hedges | 21 | -8 | 4 | 25 | 6 | -11 |
| Cash flow hedges | 27 | 1 | -3 | 24 | 24 | 13 |
| Non-controlling interests' share of items that may be reclassified | 1 | 0 | -1 | 0 | 0 | 0 |
| Available-for-sale investments | -22 | 77 | -14 | -36 | 77 | 138 |
| Income tax relating to items that may be reclassified | -8 | 2 | 1 | -7 | -6 | -1 |
| -157 | 128 | -5 | -162 | 117 | 260 | |
| Total Comprehensive Income | -14 | 246 | 102 | 88 | 349 | 620 |
| Attributable to: | ||||||
| Owners of the Parent | -10 | 252 | 110 | 100 | 364 | 679 |
| Non-controlling interests | -4 | -6 | -8 | -12 | -15 | -59 |
| Total Comprehensive Income | -14 | 246 | 102 | 88 | 349 | 620 |
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income EAI = Equity Accounted Investments
| EUR million | 30 Jun 17 | 31 Dec 16 | 30 Jun 16 |
|---|---|---|---|
| Assets | |||
| Goodwill O |
237 | 238 | 247 |
| Other intangible assets O |
185 | 180 | 147 |
| Property, plant and equipment O |
5 337 | 5 611 | 5 722 |
| 5 759 | 6 029 | 6 116 | |
| Biological assets O |
465 | 489 | 648 |
| Emission rights O |
15 | 14 | 20 |
| Equity accounted investments O |
1 590 | 1 594 | 1 474 |
| Available-for-sale: Listed securities I |
31 | 42 | 30 |
| Available-for-sale: Operative O |
226 | 253 | 203 |
| Non-current loan receivables I |
4 | 7 | 11 |
| Deferred tax assets T |
191 | 214 | 220 |
| Other non-current assets O |
50 | 57 | 58 |
| Non-current Assets | 8 331 | 8 699 | 8 780 |
| Inventories O |
1 351 | 1 346 | 1 336 |
| Tax receivables T |
11 | 9 | 9 |
| Operative receivables O |
1 335 | 1 273 | 1 289 |
| Interest-bearing receivables I |
63 | 46 | 138 |
| Cash and cash equivalents I |
499 | 953 | 519 |
| Current Assets | 3 259 | 3 627 | 3 291 |
| Total Assets | 11 590 | 12 326 | 12 071 |
| Equity and Liabilities | |||
| Owners of the Parent | 5 612 | 5 806 | 5 492 |
| Non-controlling Interests | 50 | 62 | 106 |
| Total Equity | 5 662 | 5 868 | 5 598 |
| Post-employment benefit provisions O |
452 | 436 | 365 |
| Other provisions O |
119 | 114 | 105 |
| Deferred tax liabilities T |
197 | 203 | 263 |
| Non-current debt I |
2 315 | 2 655 | 2 688 |
| Other non-current operative liabilities O |
49 | 61 | 46 |
| Non-current Liabilities | 3 132 | 3 469 | 3 467 |
| Current portion of non-current debt I |
395 | 552 | 646 |
| Interest-bearing liabilities I |
607 | 563 | 534 |
| Bank overdrafts I |
4 | 4 | 8 |
| Other provisions O Other operative liabilities O |
24 1 701 |
20 1 774 |
32 1 754 |
| Tax liabilities T |
65 | 76 | 32 |
| Current Liabilities | 2 796 | 2 989 | 3 006 |
| Total Liabilities | 5 928 | 6 458 | 6 473 |
| Total Equity and Liabilities | 11 590 | 12 326 | 12 071 |
Items designated with "O" comprise Operating Capital
Items designated with "I" comprise Net Interest-bearing Liabilities
Items designated with "T" comprise Net Tax Liabilities
| EUR million | Q1–Q2/17 | Q1–Q2/16 |
|---|---|---|
| Cash Flow from Operating Activities | ||
| Operating profit | 398 | 442 |
| Hedging result from OCI | -4 | 10 |
| Adjustments for non-cash items | 285 | 294 |
| Change in net working capital | -140 | 46 |
| Cash Flow Generated by Operations | 539 | 792 |
| Net financial items paid | -127 | -127 |
| Income taxes paid, net | -46 | -54 |
| Net Cash Provided by Operating Activities | 366 | 611 |
| Cash Flow from Investing Activities | ||
| Acquisitions of available-for-sale investments | - | -2 |
| Proceeds from disposal of subsidiary shares and business operations, net of disposed cash | 4 | 14 |
| Proceeds from disposal of shares in equity accounted investments | - | 26 |
| Proceeds from disposal of available-for-sale investments | - | 10 |
| Proceeds and advances from disposal of intangible assets and property, plant and equipment | 39 | 2 |
| Income taxes paid on disposal of property | -15 | - |
| Capital expenditure | -263 | -365 |
| Proceeds from non-current receivables, net | 5 | - |
| Net Cash Used in Investing Activities | -230 | -315 |
| Cash Flow from Financing Activities | ||
| Proceeds from issue of new long-term debt | 359 | 329 |
| Repayment of long-term debt | -752 | -545 |
| Change in short-term borrowings | 112 | -59 |
| Dividends paid | -292 | -260 |
| Buy-out of interest in subsidiaries from non-controlling interests | - | -46 |
| Equity injections from, less dividends to, non-controlling interests | - | -2 |
| Purchase of own shares1 | -3 | -2 |
| Net Cash Used in Financing Activities | -576 | -585 |
| Net Change in Cash and Cash Equivalents | -440 | -289 |
| Translation adjustment | -14 | -7 |
| Net cash and cash equivalents at the beginning of period | 949 | 807 |
| Net Cash and Cash Equivalents at Period End | 495 | 511 |
| Cash and Cash Equivalents at Period End | 499 | 519 |
| Bank Overdrafts at Period End | -4 | -8 |
| Net Cash and Cash Equivalents at Period End | 495 | 511 |
| Disposals | ||
| Cash and cash equivalents | - | 1 |
| Working capital | - | 19 |
| Non-controlling interests | - | -4 |
| Net Assets in Divested Companies | - | 16 |
| Gain on sale | - | - |
| Total Disposal Consideration | - | 16 |
| Cash part of consideration | - | 15 |
| Non-cash / not received part of consideration | - | 1 |
| Total Disposal Consideration | - | 16 |
| Cash Received Regarding Previous Year Disposals | 4 | - |
1 Own shares purchased for the group's share award programme. The group did not hold any of its own shares at the end of June 2017.
| EUR million | Q1–Q2/17 | Q1–Q2/16 | 2016 |
|---|---|---|---|
| Carrying value at 1 January | 6 518 | 6 671 | 6 671 |
| Additions in tangible and intangible assets | 182 | 341 | 638 |
| Additions in biological assets | 42 | 44 | 91 |
| Costs related to growth of biological assets | -30 | -29 | -141 |
| Disposals | -9 | -1 | -253 |
| Disposals of subsidiary companies | 0 | 0 | -39 |
| Depreciation and impairment | -261 | -207 | -398 |
| Fair valuation of biological assets | -2 | -8 | -120 |
| Translation difference and other | -216 | -47 | 69 |
| Statement of Financial Position Total | 6 224 | 6 764 | 6 518 |
| EUR million | 30 Jun 17 | 31 Dec 16 | 30 Jun 16 |
|---|---|---|---|
| Bond loans | 1 389 | 1 705 | 1 718 |
| Loans from credit institutions | 1 258 | 1 434 | 1 536 |
| Finance lease liabilities | 53 | 56 | 59 |
| Other non-current liabilities | 10 | 12 | 21 |
| Non-current Debt including Current Portion | 2 710 | 3 207 | 3 334 |
| Short-term borrowings | 547 | 452 | 452 |
| Interest payable | 32 | 54 | 35 |
| Derivative financial liabilities | 28 | 57 | 47 |
| Bank overdrafts | 4 | 4 | 8 |
| Total Interest-bearing Liabilities | 3 321 | 3 774 | 3 876 |
| EUR million | Q1–Q2/17 | 2016 | Q1–Q2/16 |
| Carrying value at 1 January | 3 774 | 4 197 | 4 197 |
| Proceeds of new long-term debt | 359 | 368 | 329 |
| Repayment of long-term debt | -752 | -781 | -545 |
| Change in short-term borrowings and interest payable | 73 | -50 | -69 |
| Change in derivative financial liabilities | -29 | -13 | -23 |
| Translation differences and other | -104 | 53 | -13 |
| Total Interest-bearing Liabilities | 3 321 | 3 774 | 3 876 |
| Fai r V alu atio |
n R ese rve |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EU R m illio Ca n |
Sh are ital p |
Sh are Pre miu m and Re ser ve Fu nd |
Inv ed est No n Re str icte d Eq uity Fu nd |
Tre asu ry Sh are s |
Ste p Ac isit ion qu Re val ion uat Su lus rp |
Av aila ble -fo r Sa le Inv est nts me |
Ca sh Flo w He dg es |
OC I of Eq uity Ac d nte cou Inv est nts me |
CT A a nd Ne t Inv est nt me He dg es |
Re tai ned Ear nin gs |
Att rib uta ble Ow f to ner s o the Pa t ren |
No n llin tro con g Inte ts res |
To tal |
| Ba lan at 3 1 D 201 5 ce ec |
1 3 42 |
77 | 633 | - | 4 | 27 | -24 | -19 | -14 7 |
3 4 95 |
5 3 88 |
125 | 5 5 13 |
| Pro fit f he iod or t per |
- | - | - | - | - | - | - | - | - | 243 | 243 | -11 | 232 |
| OC I be fore tax |
- | - | - | - | - | 77 | 24 | -5 | 31 | - | 127 | -4 | 123 |
| Inc lati f O CI e ta to c ent om x re ng om pon s o |
- | - | - | - | - | -1 | -4 | - | -1 | - | -6 | - | -6 |
| To tal Co reh ive In mp ens com e |
- | - | - | - | - | 76 | 20 | -5 | 30 | 243 | 364 | -15 | 349 |
| Div ide nd |
- | - | - | - | - | - | - | - | - | -26 0 |
-26 0 |
- | -26 0 |
| Acq uis itio and dis als ns pos |
- | - | - | - | - | - | - | - | - | - | - | -4 | -4 |
| Pur cha of t har se rea sur y s es |
- | - | - | -2 | - | - | - | - | - | - | -2 | - | -2 |
| Sh -ba sed ent are pa ym s |
- | - | - | 2 | - | - | - | - | - | - | 2 | - | 2 |
| Ba lan 0 J at 3 201 6 ce un |
1 3 42 |
77 | 633 | - | 4 | 103 | -4 | -24 | -11 7 |
3 4 78 |
5 4 92 |
106 | 5 5 98 |
| Pro fit/l for the riod oss pe |
- | - | - | - | - | - | - | - | - | 22 0 |
220 | -45 | 175 |
| OC I be fore tax |
- | - | - | - | - | 61 | -11 | 5 | 82 | -62 | 75 | 1 | 76 |
| Inc lati f O CI e ta to c ent om x re ng om pon s o |
- | - | - | - | - | -2 | 4 | - | 3 | 15 | 20 | - | 20 |
| Co To tal reh ive In mp ens com e |
- | - | - | - | - | 59 | -7 | 5 | 85 | 173 | 315 | -44 | 271 |
| Acq uis itio and dis als ns pos |
- | - | - | - | - | - | - | - | - | -1 | -1 | - | -1 |
| Ba lan at 3 1 D 201 6 ce ec |
1 3 42 |
77 | 633 | - | 4 | 162 | -11 | -19 | -32 | 3 6 50 |
5 8 06 |
62 | 5 8 68 |
| Pro fit/l for the riod oss pe |
- | - | - | - | - | - | - | - | - | 260 | 260 | -10 | 250 |
| OC I be fore tax |
- | - | - | - | - | -36 | 24 | 3 | -14 4 |
- | -15 3 |
-2 | -15 5 |
| Inc lati f O CI e ta to c ent om x re ng om pon s o |
- | - | - | - | - | 2 | -4 | - | -5 | - | -7 | - | -7 |
| To tal Co reh ive In mp ens com e |
- | - | - | - | - | -34 | 20 | 3 | -14 9 |
260 | 100 | -12 | 88 |
| Div ide nd |
- | - | - | - | - | - | - | - | - | -29 2 |
-29 2 |
- | -29 2 |
| Pur cha of t har se rea sur y s es |
- | - | - | -3 | - | - | - | - | - | - | -3 | - | -3 |
| Sh -ba sed ent are pa ym s |
- | - | - | 3 | - | - | - | - | - | -2 | 1 | - | 1 |
| Ba lan at 3 0 J 201 7 ce un |
1 3 42 |
77 | 633 | - | 4 | 128 | 9 | -16 | -18 1 |
3 6 16 |
5 6 12 |
50 | 5 6 62 |
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
NCI = Non-controlling Interests
| EUR million | 30 Jun 17 | 31 Dec 16 | 30 Jun 16 |
|---|---|---|---|
| On Own Behalf | |||
| Mortgages | 6 | 9 | 9 |
| On Behalf of Equity Accounted Investments | |||
| Guarantees | 4 | 4 | 10 |
| On Behalf of Others | |||
| Guarantees | 32 | 34 | 30 |
| Other Commitments, Own | |||
| Operating leases, in next 12 months | 81 | 86 | 83 |
| Operating leases, after next 12 months | 675 | 747 | 777 |
| Pension liabilities | 1 | 1 | 1 |
| Other commitments | 6 | 9 | 10 |
| Total | 805 | 890 | 920 |
| Mortgages | 6 | 9 | 9 |
| Guarantees | 36 | 38 | 40 |
| Operating leases | 756 | 833 | 860 |
| Pension liabilities | 1 | 1 | 1 |
| Other commitments | 6 | 9 | 10 |
| Total | 805 | 890 | 920 |
The group's direct capital expenditure contracts amounted to EUR 158 million (compared with EUR 139 million on 30 June 2016 and EUR 171 million on 31 December 2016). These amounts include the group's share of direct capital expenditure contracts in joint operations.
| EUR million | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|
| Consumer Board | 630 | 611 | 2 342 | 580 | 599 | 599 | 564 |
| Packaging Solutions | 313 | 290 | 1 044 | 282 | 259 | 258 | 245 |
| Biomaterials | 371 | 369 | 1 376 | 349 | 334 | 342 | 351 |
| Wood Products | 440 | 416 | 1 595 | 395 | 385 | 433 | 382 |
| Paper | 719 | 748 | 3 245 | 760 | 792 | 839 | 854 |
| Other | 628 | 651 | 2 477 | 641 | 559 | 629 | 648 |
| Inter-segment sales | -573 | -588 | -2 277 | -569 | -535 | -574 | -599 |
| Total | 2 528 | 2 497 | 9 802 | 2 438 | 2 393 | 2 526 | 2 445 |
| EUR million | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|
| Consumer Board | 69 | 61 | 254 | 38 | 67 | 76 | 73 |
| Packaging Solutions | 40 | 24 | 64 | 19 | 21 | 17 | 7 |
| Biomaterials | 62 | 53 | 224 | 40 | 43 | 57 | 84 |
| Wood Products | 35 | 22 | 88 | 17 | 22 | 33 | 16 |
| Paper | 11 | 42 | 211 | 64 | 53 | 43 | 51 |
| Other | 2 | 13 | 43 | 13 | 13 | 0 | 17 |
| Operational EBIT | 219 | 215 | 884 | 191 | 219 | 226 | 248 |
| Fair valuations and non-operational items1 | -6 | 5 | -67 | -12 | -14 | -15 | -26 |
| Items affecting comparability | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| Operating Profit (IFRS) | 205 | 193 | 783 | 145 | 196 | 248 | 194 |
| Net financial items | -60 | -29 | -242 | -69 | -35 | -99 | -39 |
| Profit before Tax | 145 | 164 | 541 | 76 | 161 | 149 | 155 |
| Income tax expense | -2 | -57 | -134 | -20 | -42 | -31 | -41 |
| Net Profit | 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 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|
| Impairments and reversals of intangible assets, PPE and biological assets Restructuring costs excluding fixed asset |
0 | -3 | -133 | -167 | -6 | 41 | -1 |
| impairments | 0 | -14 | -19 | 0 | -3 | -16 | 0 |
| Disposals | 0 | 0 | 144 | 155 | 0 | 16 | -27 |
| Other | -8 | -10 | -26 | -22 | 0 | -4 | 0 |
| Total IAC | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| Fair valuations and non-operational items | -6 | 5 | -67 | -12 | -14 | -15 | -26 |
| Total | -14 | -22 | -101 | -46 | -23 | 22 | -54 |
| EUR million | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|
| Consumer Board | -8 | -3 | -77 | -77 | 0 | 0 | 0 |
| Packaging Solutions | 0 | -3 | -21 | -12 | -9 | 0 | 0 |
| Biomaterials | 0 | -3 | 0 | 0 | 0 | 0 | 0 |
| Wood Products | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Paper | 0 | -18 | 78 | 69 | 0 | 37 | -28 |
| Other | 0 | 0 | -14 | -14 | 0 | 0 | 0 |
| IAC on Operating Profit | -8 | -27 | -34 | -34 | -9 | 37 | -28 |
| IAC on tax | 1 | 6 | -22 | -11 | 1 | -10 | -2 |
| IAC on Net Profit | -7 | -21 | -56 | -45 | -8 | 27 | -30 |
| Attributable to: | |||||||
| Owners of the Parent | -7 | -21 | -47 | -37 | -8 | 27 | -29 |
| Non-controlling interests | 0 | 0 | -9 | -8 | 0 | 0 | -1 |
| IAC on Net Profit | -7 | -21 | -56 | -45 | -8 | 27 | -30 |
| EUR million | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|
| Consumer Board | -1 | -1 | -110 | -102 | -2 | -4 | -2 |
| Packaging Solutions | 0 | -1 | -1 | 0 | 0 | 0 | -1 |
| Biomaterials | -2 | -1 | -13 | -5 | -3 | -2 | -3 |
| Wood Products | 0 | -1 | 0 | 0 | 0 | 0 | 0 |
| Paper | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other | -3 | 9 | 57 | 95 | -9 | -9 | -20 |
| FV and Non-operational Items on Operating Profit | -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 | Q2/17 | Q1/17 | 2016 | Q4/16 | Q3/16 | Q2/16 | Q1/16 |
|---|---|---|---|---|---|---|---|
| Consumer Board | 60 | 57 | 67 | -141 | 65 | 72 | 71 |
| Packaging Solutions | 40 | 20 | 42 | 7 | 12 | 17 | 6 |
| Biomaterials | 60 | 49 | 211 | 35 | 40 | 55 | 81 |
| Wood Products | 35 | 21 | 88 | 17 | 22 | 33 | 16 |
| Paper | 11 | 24 | 289 | 133 | 53 | 80 | 23 |
| Other | -1 | 22 | 86 | 94 | 4 | -9 | -3 |
| Operating Profit (IFRS) | 205 | 193 | 783 | 145 | 196 | 248 | 194 |
| Net financial items | -60 | -29 | -242 | -69 | -35 | -99 | -39 |
| Profit before Tax | 145 | 164 | 541 | 76 | 161 | 149 | 155 |
| Income tax expense | -2 | -57 | -134 | -20 | -42 | -31 | -41 |
| Net Profit | 143 | 107 | 407 | 56 | 119 | 118 | 114 |
| One Euro is | Closing Rate | Average Rate | |||
|---|---|---|---|---|---|
| 30 Jun 17 | 31 Dec 16 | 30 Jun 17 | 31 Dec 16 | ||
| SEK | 9.6398 | 9.5525 | 9.5954 | 9.4673 | |
| USD | 1.1412 | 1.0541 | 1.0825 | 1.1066 | |
| GBP | 0.8793 | 0.8562 | 0.8601 | 0.8189 |
| EUR million | USD | SEK | GBP |
|---|---|---|---|
| Estimated annual operating cash flow exposure | 1 210 | -880 | 320 |
| Transaction hedges as at 30 June 2017 | -600 | 450 | -170 |
| Hedging percentage as at 30 June 2017 for the next 12 months | 50% | 51% | 53% |
| Operational EBIT: Currency Strengthening of + 10% | EUR million |
|---|---|
| USD | 121 |
| SEK | -88 |
| GBP | 32 |
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 | - | - | - | 257 | 257 | 257 |
| Non-current loan receivables | 4 | - | - | - | 4 | 4 |
| Trade and other operative receivables | 939 | - | - | - | 939 | 939 |
| Interest-bearing receivables | 10 | 15 | 38 | - | 63 | 63 |
| Cash and cash equivalents | 499 | - | - | - | 499 | 499 |
| Carrying Amount by Category | 1 452 | 15 | 38 | 257 | 1 762 | 1 762 |
| Financial Items at Fair Value |
Measured at | |||||
|---|---|---|---|---|---|---|
| EUR million | through Income Statement |
Hedging Derivatives |
Amortised Cost |
Carrying Amounts |
Fair Value | |
| Financial Liabilities | ||||||
| Non-current debt | - | - | 2 315 | 2 315 | 2 614 | |
| Current portion of non-current debt | - | - | 395 | 395 | 395 | |
| Interest-bearing liabilities | 4 | 24 | 579 | 607 | 607 | |
| Trade and other operative payables | 21 | - | 1 384 | 1 405 | 1 405 | |
| Bank overdrafts | - | - | 4 | 4 | 4 | |
| Carrying Amount by Category | 25 | 24 | 4 677 | 4 726 | 5 025 | |
| EUR million | Level 1 | Level 2 | Level 3 | Total | ||
| Derivative financial assets | - | 53 | - | 53 | ||
| Trade and other operative receivables | - | - | - | - | ||
| Available-for-sale investments | 31 | - | 226 | 257 | ||
| Derivative financial liabilities | - | 28 | - | 28 | ||
| Trade and other operative liabilities | - | - | 21 | 21 |
| 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 |
| 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 | - | - | 2 655 | 2 655 | 2 974 | |
| Current portion of non-current debt | - | - | 552 | 552 | 552 | |
| Interest-bearing liabilities | 7 | 50 | 506 | 563 | 563 | |
| Trade and other operative payables | 23 | - | 1 468 | 1 491 | 1 491 | |
| Bank overdrafts | - | - | 4 | 4 | 4 | |
| Carrying Amount by Category | 30 | 50 | 5 185 | 5 265 | 5 584 | |
| EUR million | Level 1 | Level 2 | Level 3 | Total | ||
| Derivative financial assets | - | 41 | - | 41 | ||
| Trade and other operative receivables | - | 3 | - | 3 | ||
| Available-for-sale investments | 42 | - | 253 | 295 | ||
| Derivative financial liabilities | - | 57 | - | 57 | ||
| Trade and other operative liabilities | - | - | 23 | 23 |
| EUR million | Q1–Q2/17 | 2016 | Q1–Q2/16 |
|---|---|---|---|
| Opening balance at 1 January | 253 | 131 | 131 |
| Gains/losses recognised in income statement | -1 | 5 | 5 |
| Gains/losses recognised in Available-for-sale investments reserve | -26 | 125 | 75 |
| Additions | - | 2 | 3 |
| Disposals | - | -10 | -11 |
| Closing Balance | 226 | 253 | 203 |
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 3.08% 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 +35 million and -35 million, respectively. A +/- 1% change in the discount rate would change the valuation by EUR -26 million and +35 million, respectively.
| Helsinki | Stockholm | |||
|---|---|---|---|---|
| A share | R share | A share | R share | |
| April | 88 906 | 48 993 101 | 184 060 | 12 814 777 |
| May | 65 460 | 47 756 253 | 182 534 | 12 748 880 |
| June | 5 732 138 | 49 594 898 | 152 128 | 12 031 918 |
| Total | 5 886 504 | 146 344 252 | 518 722 | 37 595 575 |
| Helsinki, EUR | Stockholm, SEK | |||
|---|---|---|---|---|
| A share | R share | A share | R share | |
| April | 11.65 | 10.92 | 112.10 | 105.80 |
| May | 11.70 | 11.26 | 113.40 | 110.20 |
| June | 11.50 | 11.31 | 111.00 | 108.80 |
| Million | Q2/17 | Q2/16 | Q1/17 | Q1–Q2/17 | Q1–Q2/16 | 2016 |
|---|---|---|---|---|---|---|
| Periodic | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 |
| Cumulative | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 | 788.6 |
| Cumulative, diluted | 789.8 | 790.1 | 789.9 | 789.9 | 789.9 | 789.9 |
| Calculation of key figures | ||||
|---|---|---|---|---|
| Operational return on capital employed, operational ROCE (%) |
100 x | Operational EBIT Capital employed1 2 |
||
| Operational return on operating capital, operational ROOC (%) |
100 x | Operational EBIT Operating capital 2 |
||
| Return on equity, ROE (%) | 100 x | Net profit/loss for the period Total equity2 |
||
| Net interest-bearing liabilities | Interest-bearing liabilities – interest-bearing assets | |||
| Debt/equity ratio | Net interest-bearing liabilities Equity3 |
|||
| EPS | Net profit/loss for the period3 Average number of shares |
|||
| Operational EBIT | Operating profit/loss excluding items affecting comparability (IAC) and fair valuations of the segments and Stora Enso's share of operating profit/loss excluding IAC and fair valuations of its equity accounted investments (EAI) |
|||
| Operational EBITDA | Operating profit/loss excluding operational decrease in the value of biological assets, fixed asset depreciation and impairment, share of results of equity accounted investments, IAC and fair valuations. |
|||
| Net debt to operational EBITDA ratio Fixed costs Last 12 months (LTM) |
Net interest-bearing liabilities LTM operational EBITDA |
|||
| Maintenance, personnel and other administration type of costs, excluding IAC and fair valuations |
||||
| 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 Operational EBITDA margin Operational EBIT Operational EBIT margin Profit before tax excl. IAC Capital expenditure Capital expenditure excl. investments in biological assets |
Depreciation and impairment charges excl. IAC Operational ROCE Earnings per share (EPS), excl. IAC Net debt/last 12 months' operational EBITDA ratio Fixed costs to sales Operational ROOC Cash flow from operations |
|---|---|
| Capital employed | Cash flow after investing activities |
P.O.Box 309 P.O.Box 70395 storaenso.com/investors Tel. +358 2046 131 Klarabergsviadukten 70
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 January–September 2017 results will be published on
Stora Enso is a leading provider of renewable solutions in packaging, biomaterials, wood and paper on global markets. Our aim is to replace non-renewable materials by innovating and developing new products and services based on wood and other renewable materials. We employ some 25 000 people in more than 35 countries, and our sales in 2016 were EUR 9.8 billion. Stora Enso shares are listed on Nasdaq Helsinki (STEAV, STERV) and Nasdaq Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY). storaenso.com
It should be noted that Stora Enso and its business are exposed to various risks and uncertainties and certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by "believes", "expects", "anticipates", "foresees", or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties, which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the group's products and the pricing pressures thereto, price fluctuations in raw materials, financial condition of the customers and the competitors of the group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the group's principal geographic markets or fluctuations in exchange and interest rates. All statements are based on management's best assumptions and beliefs in light of the information currently available to it and Stora Enso assumes no obligation to publicly update or revise any forward-looking statement except to the extent legally required.
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