Business News
Stora Enso Interim Review January-March 2010
Thursday 22. April 2010 - Stora Enso Interim Review January-March 2010 ; Strong earnings recovery due to lower costs and slowly improving markets
Operating profit excluding NRI and fair valuations EUR 119 million, up year-on-year by EUR 116 million driven by volume recovery, active cost management and pulp price increase;
Cash flow from operations EUR 119 million despite increase in working capital;
Cash position remains very strong;
Groups market pulp net capacity is about 900 000 tonnes for 2010;
Group continues with active capacity and cost management, planned closure of two newsprint machines at Varkaus in Finland
Summary of First Quarter Results
Q1/10
Q4/09
Q1/09
Sales
EUR million
2 295.9
2 398.8
2 130.5
EBITDA excl. NRI and fair valuations
EUR million
232.1
227.21
134.3
Operating Profit excl. NRI and Fair Valuations
EUR million
119.4
137.5
3.0
Operating profit/loss (IFRS)
EUR million
123.4
105.3
-0.9
Profit/loss before tax excl. NRI
EUR million
136.8
122.7
-82.1
Profit/loss before tax
EUR million
117.9
80.6
-48.1
Net profit/loss excl. NRI
EUR million
121.0
76.0
-60.2
Net profit/loss
EUR million
102.1
45.9
-36.1
EPS excl. NRI
EUR
0.15
0.09
-0.08
EPS
EUR
0.13
0.05
-0.05
CEPS excl. NRI
EUR
0.31
0.29
0.10
ROCE excl. NRI
%
7.2
7.5
-1.6
ROCE excl. NRI and fair valuations
%
6.0
7.0
0.1
1) see Key Figures table
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.
Near-term Outlook
The economic environment is gradually improving, facilitating growth in demand for the Groups products. However, demand is forecast to remain materially weaker than two years ago, before the market downturn. Structural supply and demand imbalance persists in most paper products in Europe.
The strengthening in demand for graphic papers apparent early this year is expected to be sustained through the second quarter. In Europe demand slightly better than in the very poor second quarter of 2009 is anticipated in newsprint and magazine paper. Demand is forecast to improve more rapidly in coated than uncoated magazine paper. Prospects are also better than a year earlier for fine paper, consumer board and industrial packaging. Demand for wood products is predicted to be better than a year ago, although still weak and well below pre-crisis levels.
In Europe annual contracts indicate that market prices for newsprint are likely to remain flat, whereas prices in overseas markets are forecast to continue rising. Price increases in magazine paper have been announced for non-contractual and new business in the second quarter. Prices are expected to increase in fine paper and gradually in consumer board, where the major part of the business is based on longer-term contracts, and to continue improving in industrial packaging and wood products.
In the Newsprint and Book Paper segment, sales prices in local currencies will be on average 16 % lower in 2010 than 2009. In the Magazine Paper segment, sales prices in local currencies will be on average 7-8 % lower in the first half of 2010 than in 2009 as a whole.
In China stronger demand for uncoated magazine paper than a year ago is anticipated, boosted by Expo 2010 Shanghai, and demand for coated fine paper is also expected to improve. Market prices are forecast to increase for both grades.
In Latin America stronger demand for coated magazine paper than a year ago is predicted due to solid economic growth, especially in Brazil. Prices are expected rise.
The Groups market pulp net capacity is about 900 000 tonnes for 2010. The Group expects its cost inflation excluding internal actions to be 1% for 2010 as raw material costs are forecast to increase.
The Packaging Business Area continues to perform strongly. The situation for paper products is mixed. Stora Enso will prioritise pricing quality over volume, and manage capacity, costs and cash flow.
Production at Consumer Boards Skoghall Mill was halted on 16 April by the paper workers strike in Sweden. The Swedish Paper Workers Union has also announced further actions, including a strike at Fors Mill beginning on 26 April 2010. The Swedish employers association Svenskt Näringsliv has decided to compensate Stora Enso fully for its financial losses due to the strike.