Stora Enso Oyj Interim Report January–September 2021

Another quarter with robust growth and profitability

Q3/2021 (year-on-year)

• Sales increased by 23.9% to EUR 2 577 (2 079) million due to higher prices and deliveries.
• Operational EBIT increased to EUR 410 (175) million, driven by higher volumes and prices, especially in Biomaterials, Wood Products and Packaging Materials.
• Operational EBIT margin increased to 15.9% (8.4%).
• Operating profit (IFRS) increased to EUR 386 (145) million.
• EPS was EUR 0.38 (0.11) and EPS excl. fair valuations (FV) was EUR 0.37 (0.12).
• Strong cash flow from operations amounted to EUR 485 (399) million. Cash flow after investing activities was EUR 347 (250) million.
• The net debt to operational EBITDA ratio improved to 1.4 (2.4). The target is to keep the ratio below 2.0.
• Operational ROCE excluding the Forest division increased to 20.0% (7.8%), and was clearly above the long-term target of more than 13%.

Q1–Q3/2021 (year-on-year)

• Sales were EUR 7 445 (6 400) million.
• Operational EBIT more than doubled to EUR 1 102 (532) million.

Strategy implementation update

• Stora Enso is investing EUR 97 million to expand board production at the Skoghall site in Sweden. This is to drive profitable growth in attractive packaging end-use segments. With the completion of the feasibility study, Stora Enso has decided not to go ahead with the originally planned pulp capacity expansion.
• Following the successful conversion in Oulu from paper to kraftliner production for food applications, Stora Enso will start a pre-feasibility study to convert the second line, currently idle, at its Oulu site in Finland to a packaging board line.
• Stora Enso has set an ambitious goal of 100% regenerative solutions by 2050 and announced new 2030 sustainability targets.
• Pilot production of Lignode® by Stora Enso, wood-based carbon for batteries, is being ramped up according to plan, and work towards finding the right partners is progressing.
• Paper production at the Veitsiluoto and Kvarnsveden sites was terminated, following the conclusion of the co-determination negotiations.
• The Sachsen paper mill in Germany was divested to Model Group.
• Stora Enso is decentralising its operating model. This will strengthen execution of strategy and customer intimacy, empower divisions, enhance business specific processes and drive a performance culture. Leaner Group functions focus on strategic activities and scale synergies.

Outlook
The global economic activity remains at a healthy level with resilient demand for Stora Enso's products in key segments.

The annual outlook for the full year 2021 remains as previously guided. Operational EBIT in 2021 is expected to be higher than the 2020 operational EBIT.

Key figures

Stora Enso’s President and CEO Annica Bresky comments on the third quarter 2021 results:

“I am delighted to see us deliver yet another robust quarterly performance. Sales in our core and growth businesses were up by 32.5% year-on-year, while our operational EBIT of EUR 410 million more than doubled compared to the same period last year. This is a result of the execution of our ongoing strategic transformation and the strength of the underlying market. The strategic actions we are taking by focusing the business on key growth areas put us in a strong position to continue to drive sustainable profitability.

It is rewarding to see solid top line growth across our strategic focus areas. Packaging Materials and Wood Products divisions delivered all-time high quarterly sales, reinforcing our strong position in these segments. Packaging Solutions also had a good quarter in the established business, with new scalable innovations and services picking up speed. Biomaterials sales grew to a record high third quarter, however higher prices were partly offset by the global logistics disturbances.

The Forest division provides the foundation for our strategic business areas, by supplying raw material for our renewable products. Our forest assets are yielding well and grew sales through higher timber volumes and prices. In our Paper division, the quarter was heavily impacted by the structural closures of our sites in Kvarnsveden and Veitsiluoto. After the ongoing restructurings are finalised, the share of Paper sales will move towards 10% of the Group's total sales. We can see already now a turnaround for our remaining, more competitive Paper business. 

Stora Enso already has a leading position in the packaging segment and today we announced an expansion of board production at our site in Skoghall, Sweden. The nearly EUR 100 million investment will allow us to meet demand within the growing segments of liquid and food packaging. We are also evaluating taking the next step to convert the second production line in Oulu, Finland into packaging grades. The recent successful ramp up and positive market reception of our new premium kraftliner quality, gives us confidence to assess this opportunity as we see strong long-term demand for our sustainable packaging.

Our ongoing investments are on track: the construction of our new CLT line is proceeding and scheduled to start operating during the third quarter 2022, and our recycling facility collaboration with Tetra Pak is scheduled to be operational by the beginning of 2023. Our pilot production plant for bio-based battery components is developing according to plan. The carbon market for batteries grows by 30% annually, and an estimated 450 000 tonnes of carbon material per year will be needed already in the coming years. We are currently evaluating the best alternatives in legal structure and suitable partners to further develop this lignin-based innovation. 

To speed up our growth strategy and to move even closer to our customers and their customers, we are decentralising our operating model. This will strengthen execution of strategy and customer intimacy, empower divisions, enhance business specific processes and drive a performance culture. Leaner Group functions focus on strategic activities and scale synergies. I strongly believe that clear business ownership will help create the winning, innovation-driven culture needed in order to create value and accelerate our growth for the long-term.

Sustainability is the backbone of our business. It drives our innovation agenda and our collaborations with customers, partners and suppliers. To strengthen Stora Enso's sustainability ambitions, we announced today new 2030 targets for our key sustainability priorities: climate change, biodiversity and circularity. Furthermore, we have committed to become 100% regenerative by 2050. This means that we are shifting our focus from just minimising environmental impact, towards a net-positive contribution to climate change mitigation, materials circularity, and nature restoration. This is a very ambitious journey, and a necessary one. It puts us in the lead of the much-needed societal transformation: away from fossils and a linear economy. Our new targets will guide our renewable materials strategy and boost our ability to deliver the eco-friendly solutions that the consumers of today and tomorrow demand.

Stora Enso fully supports the European Commission’s climate goals. The EU is currently working on several pieces of regulation with relevance and impact on the forest industry. The goal of all initiatives is to enable a “green transformation” and to stay below 1.5C of climate warming. With our regenerative agenda, we will strengthen our sustainable forestry practices and accelerate the use of renewable wood fibers for carbon neutral and circular products. We are part of the solution to enable the transition of our societies away from fossil dependency.

The renewable future grows in the forest.”

Analysts, investors and media are invited to participate in the webcast and conference call today at 15:00 EEST (14:00 CEST, 13:00 BST, 08:00 EDT). The result will be presented by the 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/xgicessg.

All participants can follow the presentation over the webcast.

Analysts and investors who wish to ask questions should join the conference call (details below).

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 Stora Enso’s website: storaenso.com/investors

Dial-in details for the analyst and investor conference call

The conference call replay will be available via the dial-in number until Wednesday 27 October 2021. 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–September 2021. 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:
Carl Norell
Press officer
tel. +46 72 2410349

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 23 000 employees, and sales in over 50 countries. Our sales in 2020 were EUR 8.6 billion. Stora Enso shares are listed on Nasdaq Helsinki Oy (STEAV, STERV) and Nasdaq Stockholm AB (STE A, STE R) storaenso.com/investors

STORA ENSO OYJ

For further information, please contact:
Carl Norell
Press officer
tel. +46 72 2410349

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