Business News

Stora Enso Fourth Quarter and Full Year Results 2009

Thursday 04. February 2010 - Strong cash flow through working capital management and improved quarterly earnings despite lower volumes due to reduced cost base; distribution to shareholders EUR 0.20

– EUR 496 million quarterly cash flow from operations – full year EUR 1 261
million
– EUR 138 million quarterly operating profit excluding NRI and fair valuations
– EUR 109 million improvement on a year ago
– Consumer Board back on stable earnings path – focus on further growth
– Strong Newsprint earnings due to solid and improving cost base
– Group will continue to seek pricing quality through managing business mix and
optimising production – including necessary capacity reductions

Summary of Fourth Quarter Results

Continuing Operations

Q4/09
2009
Q4/08
2008
Sales
EUR million
2 398.8
8 945.1
2 602.5
11 028.8
EBITDA excl. NRI and fair valuations
EUR million
242.1
822.7
163.3
1 027.2
Operating Profit excl. NRI and Fair Valuations
EUR million
137.5
320.5
28.4
388.4
Operating profit/loss (IFRS)
EUR million
105.3
-607.6
-784.2
-726.6
Profit/loss before tax excl. NRI
EUR million
122.7
194.2
-81.0
151.6
Profit/loss before tax
EUR million
80.6
-886.8
-845.6
-893.8
Net profit/loss excl. NRI
EUR million
76.0
153.2
-67.2
142.8
Net profit/loss
EUR million
45.9
-878.2
-654.6
-679.0
EPS excl. NRI
EUR
0.09
0.19
-0.08
0.18
EPS
EUR
0.05
-1.12
-0.82
-0.86
CEPS excl. NRI
EUR
0.31
0.94
0.06
0.99
ROCE excl. NRI
%
7.5
3.9
-0.8
3.4
ROCE excl. NRI and fair valuations
%
7.0
3.9
1.2
4.1
Fair valuations include synthetic options net of realised and open hedges, CO2
emission rights, and valuations of biological assets related to forest assets in
equity accounted investments.
NRI = Non-recurring items. These are exceptional transactions that are not
related to normal business operations. The most common non-recurring items are
capital gains, additional write-downs, provisions for planned restructuring and
penalties. Non-recurring items are normally specified individually if they
exceed one cent per share.

Message from CEO Jouko Karvinen:
“The year 2009 ended on a strong note for Stora Enso. The highlight of the year
– EUR 1 261 million cash flow from operations – is the result of active working
capital management that we started already in late 2008. In light of the
dramatic drop in demand, we promised a year ago that we would finance at least
two thirds of our capital expenditure of about EUR 400 million through working
capital improvement – the improvement was actually a lot more, EUR 500 million.
The second significant achievement is the cost improvements that we also started
early. That allowed us not only to maintain our margin level year on year with
volumes one fifth less, but more importantly enabled us to achieve margins and
absolute earnings clearly higher in the second half than the first half of the
year. Finally, net debt reduction of EUR 530 million in the most difficult
operating environment in decades should demonstrate to our stakeholders that our
strategy of acting early on things we can control, and not waiting for better
times or for others to act, has been and remains the right strategy.

“After three consecutive years of very significant if different challenges, we
could have hoped for an easier 2010. The good news is that, after implementation
of several improvement actions, Consumer Board is not only strong, but also
positioned for continued and further improving performance. We believe
Industrial Packaging is also well positioned for further growth with improvement
actions such as power plant investment in Poland, and the efforts to divest
laminating paper will improve the situation further. At the same time, we see
that following our early actions, our graphics paper businesses (newsprint,
magazine paper and coated fine paper) are now well positioned to get through yet
another challenging year in 2010. As we indicated already in October 2009, the
underlying structural supply and demand imbalances in newsprint and some other
graphical grades are putting pressure on pricing. This just underlines how
crucial our early actions were, such as significant cost and capacity cuts, as
well as cost-improving investments in for example power plants in Langerbrugge
and Maxau, which will be completed in the next few months.

“We will now not only make sure that already announced programmes will produce
the benefits promised, we will also take new measures when needed to stay on our
path of defending earnings quality through proactive business mix and capacity
management. Our production capacity needs to be in line with sustainably
profitable demand for our products, and we will therefore not hesitate to take
further temporary or permanent capacity cuts if necessary. We will also continue
our working capital ratio improvements that we started five quarters ago, even
though the completion of our power plant investments and seasonality will have a
limiting impact on absolute short-term cash flow. We are determined to stay on
our path and move even faster where possible. This, and only this, will enable
us to continue to build our future growth in fibre-based packaging, low-cost
pulp and other areas where we can create a sustainable earnings capability.”

Near-term Outlook
Global economic recovery is underway, but any pickup in demand for the Group’s
products is forecast to be slow and insufficient to restore supply and demand
balance in the short term and alleviate overcapacity.

Demand for graphic paper is predicted to be somewhat better than in the
exceptionally poor first quarter of 2009, but the outlook still remains weak. In
Europe seasonal weakness in demand for newsprint and magazine paper is expected
to be partially offset by the anticipated gradual improvement in the economy. A
further seasonal improvement in demand for fine paper, especially uncoated fine
paper, is foreseen in the current quarter. Demand is forecast to be better than
a year ago for consumer board, industrial packaging and wood products.

In Europe market prices for publication paper grades are expected to remain
under pressure due to structural supply and demand imbalance. Uncoated fine
paper prices seem to have bottomed out, but coated fine paper prices remain
challenging. Prices are expected to improve slightly in consumer board and
industrial packaging, and stay unchanged in wood products, supported by improved
market balance and low product inventories.

In China demand for uncoated magazine paper is forecast to be weaker than a year
ago, and also seasonally weaker than in the fourth quarter of 2009 due to the
Chinese New Year holiday. Prices are expected to be higher than in the previous
quarter. Demand for coated fine paper is predicted to be stronger than a year
earlier with prices similar to the last quarter.

In Latin America demand for coated magazine paper is forecast to be stronger
than a year ago due to the recovery in national economies, but seasonally weaker
than in the previous quarter. Prices seem to have bottomed out and price
increases are foreseen.

The Group’s cost deflation forecast before own actions is approximately 1% for
2010.