Stora Enso Oyj Half-year Report January–June 2019

STORA ENSO OYJ, Helsinki, Finland HALF-YEAR FINANCIAL REPORT 19 July 2019 at 9.30 EEST

Fit for the future, protecting profit and cash flow
Bergvik Skog transaction completed

Q2/2019 (compared with Q2/2018)

  • Sales decreased by 2.1% to EUR 2 608 (2 664) million.
  • Operational EBIT margin was 11.0% (12.3%), above 10% for the eighth consecutive quarter. Operational EBIT was EUR 287 (327) million.
  • Operating profit (IFRS) was EUR 142 (317) million.
  • EPS decreased to EUR 0.08 (0.28) and EPS excl. IAC was EUR 0.22 (0.31).
  • Strong cash flow from operations amounted to EUR 548 (357) million.
  • The net debt to operational EBITDA ratio at 2.2 (1.3) increased temporarily slightly over the target level of 2.0, due to the restructuring of Bergvik Skog (impact 0.6) and the adoption of IFRS 16 Leases (impact 0.3).
  • Operational ROCE was 11.3% (15.5%)

Q1–Q2/2019 (year-on-year)

  • Sales were EUR 5 242 (5 243) million, similar to the comparison period.
  • Operational EBIT of EUR 610 million decreased by 12.3%, mainly due to increased wood costs.

Outlook for 2019
Further deteriorating trading conditions caused by geopolitical uncertainties related to trade wars and a possible hard Brexit are expected to impact Stora Enso negatively. Demand growth is forecast to slow down for Stora Enso’s businesses in general and demand decline is escalating for European paper. Costs are forecast to increase in 2019 compared to 2018. Stora Enso will implement additional Profit Protection measures to mitigate these cost increases and the geopolitical uncertainties. Due to the current uncertainties in the business environment Stora Enso will not comment on estimated sales development in the outlook.

Guidance for Q3/2019
Q3/2019 operational EBIT is expected to be in the range of EUR 200–280 million. During the third quarter, there will be annual maintenance shutdown at the Beihai, Imatra, Heinola, Ostrołęka, Enocell and Veitsiluoto mills. The total maintenance impact is estimated to be on the same level as in Q3/2018 and EUR 30 million more than in Q2/2019.

Key figures

EUR million Q2/19  Q2/18  Change % Q2/19–Q2/18  Q1/19  Change % Q2/19–Q1/19  Q1–Q2/19  Q1–Q2/18 Change % Q1-Q2/19–Q1-Q2/18 2018
Sales 2 608  2 664 -2.1% 2 635 -1.0% 5 242 5 243 0.0% 10 486
Operational EBITDA 435 466 -6.6% 471 -7.6% 907 970 -6.5% 1 878
Operational EBIT 287  327 -12.3% 324 -11.4% 610 696 -12.3% 1 325
Operational EBIT margin 11.0% 12.3% 12.3% 11.6% 13.3% 12.6%
Operating profit (IFRS) 142 317 -55.3% 313 -54.7% 454 672 -32.4% 1 390
Profit before tax excl. IAC 214 285 -25.0% 286 -25.2% 499 618 -19.2% 1 190
Profit before tax (IFRS) 93 257 -63.8% 282 -66.9% 375 590 -36.5% 1 210
Net profit for the period (IFRS) 52 213 -75.6% 226 -76.9% 278 486 -42.9% 988
Net interest-bearing liabilities 3 973  2 442 62.7% 3 093 28.4% 3 973 2 442 62.7% 2 092
Operational ROCE 11.3% 15.5% 14.0% 12.5% 16.5% 15.5%
Earnings per share (EPS) excl. IAC, EUR 0.22 0.31 -27.5% 0.30 -25.8% 0.52 0.66 -21.7% 1.29
EPS (basic), EUR 0.08 0.28 -73.2% 0.29 -74.5% 0.37 0.63 -41.2% 1.28
Net debt/last 12 months’ operational EBITDA ratio 2.2  1.3 1.7 2.2 1.3 1.1
Average number of employees 26 553  26 155 1.5% 26 036 2.0% 26 352 25 798 2.1% 26 067

Stora Enso’s CEO Karl-Henrik Sundström comments on the second quarter 2019 results:

“We continued our transformation with two major steps during the quarter. Firstly, we finalised restructuring of our Swedish forest holdings by dividing Bergvik Skog with its shareholders. Currently we have a direct holding of 1.4 million hectares of forest in Sweden. This transaction increased our forestland holding by over 250 000 hectares and gives us better access to competitive raw material supply for the future. The direct ownership of forestlands improves our opportunities to further develop sustainable forest management, thus strengthening our competitiveness and self-sufficiency. This is important for us, as we strongly believe in the bioeconomy and the future business opportunities it offers to us. The average value per hectare in our balance sheet is 2 000 euros in Sweden. In the restructuring of Bergvik Skog AB, we decided to increase our part of the Swedish forest holdings, while one of the other major owners recently decided to sell with the price of 3 700 euros per hectare. Further, using the price statistics from LRF Konsult for smaller lots, the price per hectare has been 5 700 euros.

The second major step in the transformation was our announcement of converting Oulu paper mill to kraftliner packaging board production. This is another action that shows our determination to grow in the packaging sector and reduce our exposure in the declining paper business. We have quite recently completed a similar project successfully when we converted one paper machine at Varkaus Mill to kraftliner. We have a proven track record in machine conversions.

We reached double-digit operational EBIT margin for the eighth consecutive quarter, despite the further geopolitical uncertainty that impacted Stora Enso’s trading conditions. This materialised in a sales decline, and we have decided to intensify our profit protection measures. We increased the profit protection programme's target from EUR 120 million to EUR 200 million. I am impressed by the actions we have taken throughout the organisation. The programme is proceeding ahead of plan, and EUR 60 million of the cost savings have already been achieved.

Our cash flow from operations was strong at EUR 548 million and we will continue on this path. We have intensified working capital management, addressing inventories is important in this economic environment. The focus on profit protection and cash generation is an opportunity to make us more fit for the future.

The Consumer Board division improved its profitability year-on-year mainly due to successful selling price increases. The other divisions were clearly impacted by deteriorated trading conditions and they are addressing costs vigorously. The Biomaterials and Wood Products divisions were able to reach their strategic operating capital targets during the quarter. This was an especially great achievement as Stora Enso is facing challenging markets.

We continue our proactive portfolio management and evaluate expansion in Wood Products to respond to the renewable materials construction demand in line with the global megatrend of green building. Stora Enso has initiated a feasibility study for a possible cross laminated timber (CLT) unit with 120 000 m³ capacity in connection with our Ždírec sawmill in the Czech Republic and a new 60 000 m³ construction beam mill located at the Ybbs sawmill in Austria.

We are also investing in bio-based carbon materials for energy storage in Biomaterials division at Sunila Mill in Finland. We are building a pilot facility for producing bio-based carbon materials based on lignin. Wood-based carbon can be utilised as a crucial component in batteries typically used in consumer electronics, the automotive industry and large-scale energy storage systems.

In Consumer Board we introduced DuraSense White and Cupforma Natura Solo. DuraSense is a biocomposite with a lower carbon footprint suitable for replacing plastic packaging components as such caps, lids and other types of food contact closures. Cupforma Natura Solo is a new renewable paperboard for paper cups. It is applicable for hot and cold drinking cups, as well as for ice cream packaging. It is produced without a traditional plastic coating layer and designed for full fibre recovery in a recycling process. These are two good examples of replacing fossil-based materials with renewable ones in the bioeconomy.

As regards sustainability, Stora Enso was featured as a world leader in societal impact in a report by BCG (Boston Consulting Group).

As always, I would like to thank our customers for their business, our employees for their dedication, and our investors for their trust."

Events today

1) Webcast and press conference in Helsinki at 11.00 EEST
The webcast and press conference for media will take place at 11.00 EEST (10.00 CEST, 09.00 UK time, 04.00 EDT) at Stora Enso’s Head Office, Kanavaranta 1, Helsinki. The event will be held in English and it will be hosted by CEO Karl-Henrik Sundström, CFO Seppo Parvi, and SVP, Communications Satu Härkönen. The webcast may be accessed at 

2) Webcast and conference call for analysts and investors at 14.00 EEST
The webcast and conference call for analysts and investors will take place at 14.00 EEST (13.00 CEST, 12.00 UK time, 07.00 EDT). It will be hosted by CEO Karl-Henrik Sundström, CFO Seppo Parvi, and SVP, Head of Investor
Relations Ulla Paajanen, and may be accessed at
Those analysts and investors who wish to ask questions should join the conference call (details below). All participants can follow the presentation over the webcast.

Live event at 14.00 EEST 
UK  +44 (0)2071 928 000 
Finland  +358 (0)9 4245 0806 
Sweden  +46 (0)8 5069 2180 
USA  +1 631 510 7495 
Confirmation Code:  6959688

The links to the webcasts are also available on the Stora Enso website:

This release is a summary of Stora Enso’s Half-year Report January–June 2019. The complete report is attached to this release as a pdf file. It is also available on the company website at

For further information, please contact:
Satu Härkönen
SVP, Communications
tel. +358 40 832 7458

Investor enquiries:
Ulla Paajanen
SVP, Investor Relations
tel. +358 40 763 8767

Part of the bioeconomy, Stora Enso is a leading global provider of renewable solutions in packaging, biomaterials, wooden constructions and paper. We believe that everything that is made from fossil-based materials today can be made from a tree tomorrow. Stora Enso has some 26 000 employees in over 30 countries. Our sales in 2018 were EUR 10.5 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). 



For further information, please contact:
Satu Härkönen
SVP, Communications
tel. +358 40 832 7458

Investor enquiries:
Ulla Paajanen
SVP, Investor Relations
tel. +358 40 763 8767