Stora Enso Oyj Interim Report January–March 2020

Strengthening our resilience for the headwinds

Dividend proposal EUR 0.15 per share, additional max. EUR 0.35 to be decided later

Q1/2020 (compared with Q1/2019)

• Sales decreased by 16.2% to EUR 2 207 (2 635) million, due to significantly lower prices and volumes.
• Operational EBIT decreased to EUR 180 (335) million.
• Operational EBIT margin was 8.1% (12.7%).
• Operating profit (IFRS) was EUR 262 (313) million.
• EPS was EUR 0.19 (0.29) and EPS excl. IAC and fair valuations was EUR 0.12 (0.32).
• Cash flow from operations amounted to EUR 146 (223) million. Cash flow after investing activities was EUR -32 (94) million.
• The net debt to operational EBITDA ratio at 2.3 (1.6) was above the target level of less than 2.0.
• Operational ROCE was 6.8% (14.5%), below the strategic target of over 13%.

Managing uncertainties
The health and safety of Stora Enso’s employees is a key priority. A healthy workforce ensures uninterrupted operations and customer deliveries. Stora Enso has secured the health and safety of its workforce by imposing a global travel ban since early February, prohibiting all physical meetings, strongly advising personnel to work remotely whenever feasible, restricting access to mill sites, quarantining the affected workforce, and closely monitoring the Covid-19 situation within Stora Enso. Thanks to Stora Enso's proactive approach so far, there has been minimal impact on the Group's ability to run mills and serve customers.

Stora Enso's liquidity and funding position is strong. At the end of Q1/2020, cash and cash equivalents were at EUR 756 million. Additionally, the Company has a fully undrawn EUR 600 million Revolving Credit Facility and access to EUR 950 million statutory pension premium loans in Finland. Furthermore, during April, Stora Enso signed bilateral loan and credit facility agreements for EUR 400 million to increase liquidity. There are no financial covenants on Stora Enso Oyj's debt.To address costs and mitigate negative market demand impacts, Stora Enso has started to implement additional cost reduction actions including capital expenditure and recruitment restrictions, as well as co-determination negotiations on possible temporary layoffs currently in all the divisions and Group functions in various countries following local labour laws and regulations.

Due to the cross-border travel restrictions and safety concerns associated with Covid-19, most of Stora Enso’s annual mill maintenance shutdowns have been postponed to the second half of 2020. Only Heinola Mill annual maintenance shutdown is scheduled for the second quarter of 2020.

Guidance and outlook
Stora Enso is discontinuing its quarterly guidance and annual outlook until further notice due to the uncertainty in the global economy. The current situation has accelerated the decline in demand for European paper, and the market conditions for the Group's other products continue to be mixed. 

The Group continues to put focus on ensuring liquidity and cash flow, cost and working capital management to stay resilient and ensure quick recovery after the pandemic is over.

Key figures

¹ Earnings per share (EPS) excl. IAC and FV was added to the list of non-IFRS measures replacing the key figure of EPS excl. IAC. Comparatives are recalculated.
 

Stora Enso’s President and CEO Annica Bresky comments on the first quarter 2020 results:

“The first quarter of the year has been marked by challenging harvesting conditions, strikes in Finland and the start of the Covid-19 pandemic. Lower prices and volumes during the quarter had a negative impact on sales and operational EBIT, compared to the record levels in the first quarter of last year. Under these conditions, “a new normal” where historical references are no longer valid, I am satisfied with our performance for the quarter. We delivered a result of EUR 180 million, in the upper end of our guidance range. Our continued focus is on building business resilience and putting our efforts in the areas we can impact, that is serving our customers by keeping our operations running and mitigating supply chain challenges, securing liquidity and managing costs, margins and cash flow. Ultimately, we want to ensure our ability for a quick recovery once the tide turns.

We were out early with actions related to Covid-19, including a global travel ban, social distancing and appointed work streams to keep business momentum. So far, our operations have been running normally on a global level. We have built a strong liquidity position amounting to EUR 1.4 billion, for a potentially longer and deeper recession. We have actions in place to enhance our cash flow going forward by active working capital management and cost savings. Our profit protection programme is delivering ahead of plan and we have increased our savings target to EUR 350 million (earlier EUR 275 million) by the end of 2021. During this first quarter of 2020, we achieved cost savings amounting to EUR 40 million, including one-time cost savings. In regards to managing a potential demand decrease, we have started preparations for potential temporary layoffs or shorter working time if and when needed.

Naturally, it is fair to say that there are currently high macroeconomic uncertainties and low visibility relating to demand development. So far, our Paper and Wood Products divisions have been affected the most, while there is less impact in our packaging divisions. Biomaterials division is affected by the structural decline in paper end uses and high inventories in China, although the end uses within hygiene and tissue have good demand.

In just a short time, the Covid-19 pandemic has forced us to rethink many everyday things we have previously taken for granted. And yet, even in the most difficult of times, basic needs must be met; people need food, medicine and hygiene products. In many countries, packaging, and especially food packaging, is defined as a key or critical industry. The role and purpose of packaging - ensuring hygienic conditions and protecting e.g. food and pharmaceuticals during transportation and on the store shelves - is now as important as ever. This is among the areas where we have a solid offering.

Due the Covid-19 pandemic and its impact on trading conditions, Stora Enso’s Board of Directors (BOD) has decided to change its dividend proposal to EUR 0.15 per share. In addition, the BOD proposes to the AGM that the BOD be authorised to decide at its discretion on a dividend payment of a maximum of EUR 0.35 to be distributed in one or several instalments at a later stage when it is possible to make a more reliable estimate on the impacts of the Covid-19 pandemic on Stora Enso’s business and liquidity.

Our transformation projects are progressing well. The conversion of Oulu Mill into kraftliner is proceeding according to plan. In our constant endeavors for sustainability, we continue to launch renewable products with our customers. Unilever Finland introduced Ingman ice cream in a newly designed carton made of Performa Cream™ by Stora Enso with a plant-based PE Green™ barrier coating. Moreover, I am pleased that we were selected as the provider of wooden materials for 491 building projects around the world, using 41 000 m³ cross laminated timber (CLT) and 500 m³ laminated veneer lumber (LVL). Trees absorb CO₂, and wood stores it and keeps it out of the atmosphere!

Going forward, we will concentrate on what we can impact, stay close to our customers, drive innovation and continue building on our growth strategy to be ready when the market turns. I am proud to work with the committed Stora Enso team in these challenging times, as well as with our dedicated customers and partners globally. Together, we will ensure that we are prepared for a more profitable future when the cycle turns.

The future grows in the forest.”

Webcast and conference call for analysts, investors and media today at 15.00 EEST
The webcast and conference call for analysts, investors and media will take place at 15.00 EEST (14.00 CET, 13.00 UK time, 08.00 EST). It will be hosted by President and CEO Annica Bresky, CFO Seppo Parvi, and SVP, Head of Investor Relations Ulla Paajanen, and may be accessed at https://edge.media-server.com/mmc/p/477ufvo3.

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.

Media representatives who wish to ask questions after the Interim Report is published, may contact Carl Norell, press officer at Stora Enso at +46 72 2410349.

The link to the webcast will be also available on the Stora Enso website: storaenso.com/investors

Dial-in details for the analyst and investor conference call

The conference call replay will be available until Tuesday 28 April 2020. The webcast will be archived on storaenso.com/en/investors/reports-and-presentations.

This release is a summary of Stora Enso’s Interim Report January–March 2020. The complete report is attached to this release as a pdf file. It is also available on the company website at storaenso.com/investors.

For further information, please contact:
Ulrika Lilja
EVP, Communications
tel. +46 72 221 9228

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 25 000 employees in over 30 countries. Our sales in 2019 were EUR 10.1 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

STORA ENSO OYJ

For further information, please contact:
Ulrika Lilja
EVP, Communications
tel. +46 72 221 9228

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