Poor earnings but strong cash flow from operations following aggressive
production curtailments; operating profit excluding NRI and fair valuations EUR
28.4 million, cash flow from operations EUR 236.7 million for the fourth quarter
STORA ENSO OYJ ANNUAL FINANCIAL STATEMENT RELEASE 5 February 2009 at 07.00 GMT
Summary of Fourth Quarter Results
|
Continuing Operations:
|
|
Q4/08
|
2008
|
Q4/07
|
2007
|
|
Sales
|
EUR million
|
2 602.5
|
11 028.8
|
2 980.7
|
11 848.5
|
|
EBITDA excl. NRI and
fair valuations
|
EUR million
|
163.3
|
1 027.2
|
306.8
|
1 569.9
|
|
Operating Profit excl.
NRI and Fair Valuations
|
EUR million
|
28.4
|
388.4
|
144.1
|
861.1
|
|
Operating profit / loss (IFRS)
|
EUR million
|
-784.2
|
-726.6
|
-60.6
|
176.9
|
|
Profit / loss before tax excl. NRI
|
EUR million
|
-81.0
|
151.6
|
284.2
|
970.1
|
|
Profit / loss before tax
|
EUR million
|
-845.6
|
-893.8
|
-104.3
|
20.2
|
|
Net profit / loss excl. NRI
|
EUR million
|
-67.2
|
142.8
|
220.2
|
747.3
|
|
Net profit / loss
|
EUR million
|
-654.6
|
-679.0
|
-59.6
|
12.8
|
|
EPS excl. NRI
|
EUR
|
-0.08
|
0.18
|
0.28
|
0.94
|
|
EPS
|
EUR
|
-0.82
|
-0.86
|
-0.07
|
0.01
|
|
CEPS excl. NRI
|
EUR
|
0.06
|
0.99
|
0.50
|
1.94
|
|
ROCE excl. NRI
|
%
|
-0.8
|
3.4
|
12.8
|
11.3
|
|
ROCE excl. NRI and
fair valuations
|
%
|
1.2
|
4.1
|
5.6
|
8.6
|
Fair valuations include synthetic options net of realised and open hedges, CO2
emission rights, and valuations of biological assets mainly related to
associated companies' forest assets.
Message from CEO Jouko Karvinen:
“The drop in customer demand in the last quarter of 2008 turned out to be as
severe as we expected and warned in our third quarter 2008 results announcement.
We also responded as planned by aggressively curtailing our production by 15% to
30% of capacity by segment. These robust actions had a large negative impact on
operating profit, but at the same time reduced our working capital by some EUR
200 million, cut our capital expenditure by 25-30% below the original plan in
the fourth quarter to a total of EUR 700 million for the year, and made sure we
started 2009 with minimum inventory levels in all Business Areas as well as
throughout our supply chain. These measures also helped us to agree with our
customers meaningful price increases in several critical areas - including
Newsprint, Magazine Paper, Consumer Board and Coated Fine Paper - that we so
clearly needed as we started this new year.
“The operating environment for at least the early part of 2009 will be as
challenging as at the end of 2008. We continue to focus on pricing quality and
cash flow. We will only manufacture when customers buy our product, rather than
building our inventory. We have also revised our capital expenditure budget for
2009 to EUR 500 million, and very importantly, it is intended to finance the
majority of that by further reductions in our working capital. This dramatic
reduction of capital spending for 2009 does not fundamentally change our
strategy: you do not change strategy with every downturn - but you do reschedule
some of your projects in order to safeguard the company and its freedom to
operate. That is exactly what we are doing. In the same spirit, Stora Enso has
also proactively reduced the liquidity risk and reliance on short-term
borrowings since mid 2007, when the first wave of the financial crisis hit the
markets.
“We forecast our overall unit cost inflation for the full year 2009 to be close
to zero. Some costs - notably wood and natural gas - will start to decrease
significantly only in the second half of the year because of the nature of our
purchasing contracts.
“To adjust capacity in response to lower demand, we have started negotiations
concerning large-scale temporary lay-offs in Finland, and are also in
negotiations and dialogues in Germany, Sweden and elsewhere to find
opportunities for rapidly adjusting our capacity and costs. We will extend
temporary curtailments for as long as necessary. We, the senior management of
Stora Enso, will participate in the effort to control costs through limitations
in our compensation.
"As disclosed in detail in a separate release today Stora Enso has during the
audit process identified an incorrect accounting 2001-2006 between restricted
and distributable equity, with no impact on total equity of the Group or parent
company, but a need to reclassify EUR 1 512 million from distributable to
restricted equity. This will lead to the fact that the boards proposal to pay a
return of EUR 0.20 per share to our shareholders is subject to not only AGM
approval but also a consent from Finnish National Board of Patents and
Registration - and will be delayed at least until July 2009. We will correct
this accounting issue in a transparent way, and intend to pay a return, if
reduced, to our shareholders also in 2009."
Near-term Outlook
In Europe market demand is forecast to remain weak and clearly less than a year
ago for all the Group's products, at least throughout the first half of 2009,
due to the current economic downturn. Advertising expenditure started to decline
steeply in the fourth quarter of 2008 and is expected to remain weak,
considerably reducing demand for paper.
Seasonal factors and destocking by customers following announced price increases
are likely to reduce demand for newsprint in the first quarter of 2009. However,
temporary and permanent reductions in production capacity have improved the
supply and demand balance, especially in magazine paper and coated fine paper
markets. A slight seasonal pickup in demand for some packaging products is
anticipated towards the end of the first quarter. Very weak markets for wood
products are foreseen as construction activity has rapidly slowed in all key
markets.
In Europe some prices in local currencies are being raised in the first quarter
above levels in the fourth quarter of 2008, particularly in newsprint, magazine
paper, coated fine paper and consumer board; however, uncoated fine paper prices
are likely to remain under pressure. Prices for wood products and most
industrial packaging products are expected to be under continued pressure. Lower
prices are predicted for newsprint in export markets outside Europe.
In China soft demand for uncoated magazine paper and fine paper is expected due
to slowing economic growth and customer de-stocking. Persistent weakness in the
coated magazine paper market is affecting the uncoated magazine paper market.
Lower prices for magazine paper are anticipated, with fine paper prices
remaining under pressure. The outlook for consumer board market is uncertain
following last year's milk scandal in China.
In Latin America seasonal factors and high customer inventories are expected to
restrain market demand for coated magazine paper, keeping prices flat.
For further information, please contact:
Jouko Karvinen, CEO, tel. +358 2046 21410
Markus Rauramo, CFO, tel. +358 2046 21121
Keith B Russell, SVP, Investor Relations, tel. +44 7775 788 659
Ulla Paajanen-Sainio, VP, Investor Relations and Financial Communications,
tel. +358 40 763 8767
www.storaenso.com
www.storaenso.com/investors
STORA ENSO OYJ
The full Interim Review January–December 2008 is attached .
Stora Enso’s first quarter results 2009 will be published on 23 April 2009.
