Stora Enso's CEO Karl-Henrik Sundström comments on the fourth quarter 2016 results:
"Year 2016 was an important milestone in our transformation. We completed a large part of our heavy investment programme, and we continue to maintain a strong focus on customers and innovation. With this, we are well prepared for 2017 and beyond.
In the fourth quarter, our sales excluding the structurally declining paper business increased 4.5%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai consumer board mills. Operational EBIT was EUR 191 million compared to EUR 242 million a year ago. This is mainly due to historically low hardwood pulp prices with an impact of EUR 35 million, a negative impact from the ramp-up of Beihai operations of EUR 25 million, and a power generator failure at Enocell Mill of EUR -5 million. For the second quarter in the row, we had a strong cash flow from operations of EUR 461 million. Balance sheet continued to strengthen as net debt to operational EBITDA was 2.0.
Our transformation continues to progress and the Beihai Mill ramp-up is ahead of plan. I am happy to see that this regards both quality and production volumes. Furthermore, as announced during the quarter, we are reconsidering our plans to build a chemical pulp mill in Beihai. This decision would not affect our operations at Beihai Mill. It is a viable option for us to source the chemical pulp to Beihai Mill from the market or utilise our current captive global hardwood pulp supply.
The Varkaus kraftliner mill ramp-up is progressing and we are expecting EBIT break-even in the second quarter 2017. Also, the line for wooden building components (LVL) at Varkaus Mill is ramping up and production optimisation is ongoing. Over 70% of the products obtained certificates during the fourth quarter, and the remaining certificates are expected during the first quarter of 2017. The installation of the first residential building of Wood City in Helsinki, started in December. Wood City will be built in massive wood and the multi-storey buildings will be built using LVL from our Varkaus Mill.
We are further investing to accelerate our transformation into a renewable materials company. In January, we announced that we are investing a total of EUR 9.1 million in further commercialisation of micro-fibrillated cellulose (MFC) in paperboard packaging. The investment goes to consumer board mills in Finland and Sweden. MFC is a material we believe in strongly. Due to its high strength properties and 100% renewable raw materials, it can replace fossil-based materials, such as plastics, in different applications. Moreover, we are investing EUR 12 million to build a new production line for biocomposite granules in Sweden. This is yet another example that demonstrates our ability to provide an innovative and more sustainable alternative to plastics. The Paper division ended the year on a very strong note, despite continued market challenges.
I am pleased that we have received an award for global leadership for our actions and strategies in response to global warming. We have been listed on the Supplier Climate A List by CDP, the international not-for-profit organisation that drives sustainable economies. We have also been awarded for the best sustainability report in Finland for the second consecutive year, by Finland's leading non-profit corporate responsibility network. It is satisfying that the report was also top ranked by the media and by corporate sustainability students.
I am happy to say that even though we are investing in the future of Stora Enso, we are also able to increase the contribution to our shareholders. Our Board of Directors proposes a dividend of 0.37 euros per share for 2016, up 0.04 euros compared with the preceding year.
As always, I would like to thank our customers for their business, our employees for their dedication and our investors for their trust."