09 July 2008
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Strategy

CEO message from Annual Report 2007 

 

Return on capital employed

Return on capital employed (ROCE) is a key indicator of performance for a capital-intensive company such as Stora Enso. The Group’s ROCE target is 13% over the business cycle. Stora Enso’s pre-tax weighted average cost of capital (WACC) at the end of 2007 was 9.1%.

Growth

Stora Enso continues to aim for profitable growth, through both organic growth and selective mergers and acquisitions in its core businesses, mainly in new growth markets.

Acquisitions will only be made if they meet Stora Enso’s financial targets and make a positive contribution to earnings per share (EPS) and cash earnings per share (CEPS) after one year, excluding synergies. Over the medium term, returns from acquisitions must exceed the Group’s pre-tax WACC of 9.1%, and support the ROCE target of 13% over the long term.

Cash flow
Enhancing cash flow from operations is a high priority at a time of low profitability. To improve the efficiency of the management of its working capital, Stora Enso has set an internal benchmark that cash flow should exceed average capital expenditure and dividends on a three-year rolling basis.

Capital expenditure
Stora Enso’s capital expenditure (Capex) policy is to keep Capex at or below depreciation over the business cycle.

Reaching key financial targets

Target 2003 2004 2005* 2006* 2007*
ROCE, %** 13

4.2

3.3

4.7

8.7

11.3

Debt/Equity ratio

at or below 0.8

0.49  

0.40  

0.70 

0.54 

0.40

Dividend/share

 

0.45

0.45

0.45

0.45

0.45***

Payout ratio, %**

50

180

180

161

82

45

* Figures for 2005, 2006 and 2007 are for continuous operations, except for Debt/equity ratio and dividend/share, which are calcluated for total operations. ** Excluding non-recurring items  *** Board of Directors' proposal to the AGM

 

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