Stora Enso Oyj
Stora Enso Fourth Quarter and Full Year Results 2013
DGAP-News: Stora Enso Oyj / 05.02.2014 / 12:00 --------------------------------------------------------------------- Cash flow remained strong, proposed dividend unchanged at EUR 0.30 Helsinki, Finland, 2014-02-05 12:00 CET (GLOBE NEWSWIRE) -- STORA ENSO OYJ ANNUAL FINANCIAL STATEMENT RELEASE 5 February 2014 at 13.00 EET Q4/2013 (compared with Q4/2012) -- Operational EBIT EUR 152 (EUR 158) million including EUR 19 million impact of lower depreciation due to impairment charges, a margin of 5.8% (5.8%). -- Negative NRI of approximately EUR 392 million, mainly due to fixed asset impairments (EUR 556 million) and Guangxi plantations fair valuation gain (EUR 179 million). -- Renewable Packaging profitability improved by lower variable costs and production from Ostrołęka Mill's new containerboard machine, which reached its target 20% EBITDA margin by the end of the year. -- Strong cash flow from operations at EUR 470 (EUR 473) million, cash flow after investing activities EUR 310 (EUR 273) million. Full year 2013 (compared with 2012) -- Operational EBIT EUR 578 (EUR 630) million, a margin of 5.5% (5.8%). -- EPS excluding NRI EUR 0.40 (EUR 0.33). -- Strong cash flow from operations at EUR 1 246 (EUR 1 254) million, cash flow after investing activities improved to EUR 756 (EUR 578) million. -- Net debt to operational EBITDA ratio improved to 2.3 (2.5), net debt decreased to EUR 2 434 million. Transformation and divestment of non-core assets -- Montes del Plata Pulp Mill currently finalising construction works, mill commissioning and final permit process. Start-up expected to commence during the first months of 2014. -- Consumer board machine investment in Guangxi, China proceeding as planned. Machine expected to be operational in early 2016, as previously announced. -- As announced today, Stora Enso is divesting its 40% shareholding in the US processed kaolin clay producer Thiele Kaolin Company for USD 76 (EUR 56) million. A capital gain of EUR 37 million will be recorded in Q1/2014. Restructuring -- EUR 200 million streamlining and structure simplification programme announced on 23 April 2013 proceeding as planned. -- Plan to permanently shut down a coated magazine paper machine at Veitsiluoto Mill in Finland announced in January 2014. Outlook -- In Q1/2014 sales are expected to be similar to the EUR 2 604 million and operational EBIT similar or somewhat higher compared with the EUR 152 million in Q4/2013. Average prices are forecast to improve and fixed costs to decrease from Q4/2013. Renewable Packaging will be impacted by Guangxi project costs and lost production due to Skoghall Mill recovery boiler incident. Key Figures* EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change Change Change % % % Q4/13-Q Q4/13-Q 2013- 4/12 3/13 2012 -------------------------------------------------------------------------------- Sales 2 604 2 556 2 727 10 544 10 815 -4.5 1.9 -2.5 Operational 246 311 276 1 044 1 094 -10.9 -20.9 -4.6 EBITDA Operational 9.4 12.2 10.1 9.9 10.1 -6.9 -23.0 -2.0 EBITDA margin, % Operational 152 184 158 578 630 -3.8 -17.4 -8.3 EBIT Operational 5.8 7.2 5.8 5.5 5.8 - -19.4 -5.2 EBIT margin, % Operating -218 158 254 34 701 -185.8 -238.0 -95.1 loss/profit (IFRS) Operating -8.4 6.2 9.3 0.3 6.5 -190.3 -235.5 -95.4 margin (IFRS), % Profit before 110 125 83 350 317 32.5 -12.0 10.4 tax excl. NRI Loss/profit -282 102 204 -189 481 -238.2 n/m -139.3 before tax Net profit for 118 104 89 323 263 32.6 13.5 22.8 the period excl. NRI Net -160 84 266 -71 490 -160.2 -290.5 -114.5 loss/profit for the period Capital 176 102 209 425 556 -15.8 72.5 -23.6 expenditure Depreciation 128 145 150 564 583 -14.7 -11.7 -3.3 and impairment charges excl. NRI Operational 7.6 9.0 7.3 7.1 7.3 4.1 -15.6 -2.7 ROCE, % Earnings per 0.15 0.13 0.11 0.40 0.33 36.4 15.4 21.2 share (EPS) excl. NRI, EUR EPS (basic), -0.18 0.11 0.33 -0.07 0.61 -154.5 -263.6 -111.5 EUR Cash earnings 0.31 0.32 0.30 1.12 1.07 3.3 -3.1 4.7 per share (CEPS) excl. NRI, EUR CEPS, EUR 0.46 0.29 0.45 1.16 1.28 2.2 58.6 -9.4 Return on -11.9 6.2 18.2 -1.3 8.3 -165.4 -291.9 -115.7 equity (ROE), % Debt/equity 0.47 0.51 0.48 0.47 0.48 -2.1 -7.8 -2.1 ratio Net debt/last 2.3 2.5 2.5 2.3 2.5 -8.0 -8.0 -8.0 twelve months' operational EBITDA Equity per 6.61 6.82 7.32 6.61 7.32 -9.7 -3.1 -9.7 share, EUR Equity ratio, 41.3 41.1 42.8 41.3 42.8 -3.5 0.5 -3.5 % Average number 27 748 28 297 28 331 28 231 28 777 -2.1 -1.9 -1.9 of employees Average number of shares (million) periodic 788.6 788.6 788.6 788.6 788.6 cumulative 788.6 788.6 788.6 788.6 788.6 cumulative, 788.6 788.6 788.6 788.6 788.6 diluted -------------------------------------------------------------------------------- * Data for the comparative periods have been restated following adoption of the revised IAS 19 Employee Benefits standard. Data for the comparative periods have been restated in all tables affected by IAS 19. For further details, please see Basis of Preparation on page 14. Operational EBIT comprises the operating profit excluding NRI and fair valuations of the segments and Stora Enso's share of the operating profit excluding NRI and fair valuations of its equity accounted investments (EAI). Fair valuations include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights and valuations of biological assets. 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 or reversals of write-downs, provisions for planned restructuring and penalties. Non-recurring items are normally disclosed individually if they exceed one cent per share. Stora Enso Deliveries and Production Q4/13 Q3/13 Q4/12 2013 2012 Change Change Change % % % Q4/13- Q4/13- 2013-2 Q4/12 Q3/13 012 ----------------------------------------------------------- --------------------- Paper and board 2 438 2 456 2 569 9 898 10 268 -5.1 -0.7 -3.6 deliveries (1 000 tonnes) Paper and board 2 427 2 469 2 561 9 911 10 357 -5.2 -1.7 -4.3 production (1 000 tonnes) Wood products 1 247 1 191 1 175 4 930 4 750 6.1 4.7 3.8 deliveries (1 000 m3) Market pulp 335 254 284 1 180 1 058 18.0 31.9 11.5 deliveries (1 000 tonnes)* Corrugated packaging 277 278 279 1 086 1 097 -0.7 -0.4 -1.0 deliveries (million m2) -------------------------------------------------------------------------------- * Stora Enso's net market pulp position was 1.1 million tonnes for 2013. Reconciliation of Operational Profitability EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change Change Change % % % Q4/13- Q4/13- 2013- Q4/12 Q3/13 2012 -------------------------------------------------------------------------------- Operational EBITDA 246 311 276 1 044 1 094 -10.9 -20.9 -4.6 Equity accounted 34 18 32 98 119 6.3 88.9 -17.6 investments (EAI), operational* Depreciation and -128 -145 -150 -564 -583 14.7 11.7 3.3 impairment excl. NRI Operational EBIT 152 184 158 578 630 -3.8 -17.4 -8.3 Fair valuations and 22 -3 -14 -5 -59 257.1 n/m 91.5 non-operational items** Non-recurring items -392 -23 110 -539 130 n/m n/m n/m ---------------------------------------------------------- Operating Loss/Profit -218 158 254 34 701 -185.8 -238.0 -95.1 (IFRS) ---------------------------------------------------------- * Group's share of operational EBIT of equity accounted investments (EAI). ** Fair valuations and non-operational items include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights and valuations of biological assets and Group's share of tax and net financial items of EAI. Q4/2013 Results (compared with Q4/2012) Breakdown of Sales Change Q4/2012 to Q4/2013 Sales ----------------------------------------- Q4/12, EUR million 2 727 ----------------------------------------- Price and mix, % -1 Currency, % -2 Volume, % - Other sales*, % - ----------------------------------------- Total before structural changes, % -3 Structural change**, % -2 Total, % -5 ----------------------------------------- Q4/13, EUR million 2 604 ----------------------------------------- * Wood, energy, paper for recycling, by-products etc. ** Asset closures, major investments, divestments and acquisitions Sales at EUR 2 604 million were EUR 123 million lower than a year ago as sales of paper products declined, partly due to the previously announced permanent shutdowns of paper machines at Kvarnsveden and Hylte mills in Sweden. Operational EBIT was EUR 152 (EUR 158) million, an operational EBIT margin of 5.8% (5.8%). Clearly lower sales volumes, especially for newsprint due to permanent paper machine shutdowns, and slightly lower sales prices in local currencies for all paper products decreased operational EBIT by EUR 48 million. This was partly offset by slightly lower wood costs across divisions and lower pulp costs, which increased operational EBIT by EUR 23 million. Depreciation was EUR 22 million lower, mainly due to fixed asset impairments. Fixed costs remained stable. Paper and board production was curtailed by 11% (9%) and sawnwood production by 2% (5%) to manage supply. The average number of employees in the fourth quarter of 2013 was 580 lower than a year earlier at 27 750. The number of employees decreased most in Sweden due to permanent shutdowns of paper machines and restructurings, whereas decreases in Finland were offset by the acquisition of ABB's 49% shareholding in Efora Oy, which employs around 1 000 people. The average number of employees in China increased by 520 in the fourth quarter. The Group recorded non-recurring items (NRI) with a negative net impact of approximately EUR 392 million on operating profit and a positive impact of approximately EUR 114 million on income tax in its fourth quarter 2013 results. The NRI are fixed asset impairments of EUR 556 million mainly in Printing and Reading, a fair valuation gain of EUR 179 million and related provision release of EUR 7 million on Group plantation assets in China, a production disruption cost of EUR 12 million in Renewable Packaging, EUR 12 million costs related to joint-venture establishment in China, the EUR 8 million settlement cost of a legal case with a supplier at the Group's equity accounted investment Veracel and a gain of EUR 10 million relating to the Group's share of the effect of the new tax rate on the equity accounted investment Tornator. Net financial expenses at EUR 64 million were EUR 14 million higher than a year ago. The net interest expenses and the fair valuation of interest rate derivatives were similar to the previous year. The net foreign exchange impact in the fourth quarter of 2013 in respect of cash, interest-bearing assets and liabilities and related hedges was a gain of EUR 9 (a loss of EUR 1) million. During the quarter, prepayment of loans from Finnish pension institutions and bonds resulted in a charge of EUR 11 million. A one-time EUR 11 million gain from the settlement of the NewPage lease guarantee was recorded in the fourth quarter of 2012. Breakdown of Capital Employed Change Q4/2012 to Q4/2013 Capital Employed ------------------------------------------------------------------------------ Q4/12, EUR million 8 619 ------------------------------------------------------------------------------ Capital expenditure less depreciation -179 Impairments and reversal of impairments -592 Valuation of biological assets 179 Available-for-sale: operative (mainly PVO) -89 Equity accounted investments 142 Net liabilities in defined benefit plans 98 Operative working capital and other interest-free items, net -332 Net tax liabilities 136 Translation difference -258 Other changes -17 ------------------------------------------------------------------------------ Q4/13, EUR million 7 707 ------------------------------------------------------------------------------ The operational return on capital employed was 7.6% (7.3%). Excluding the ongoing strategic investments in Biomaterials and Renewable Packaging the operational return on capital employed would have been 9.1% (8.4%). January-December 2013 Results (compared with January-December 2012) Breakdown of Sales Change 2012 to 2013 Sales ------------------------------------------ 2012, EUR million 10 815 ------------------------------------------ Price and mix, % -1 Currency, % -1 Volume, % - Other sales*, % - ------------------------------------------ Total before structural changes, % -2 Structural change**, % -1 Total, % -3 ------------------------------------------ 2013, EUR million 10 544 ------------------------------------------ * Wood, energy, paper for recycling, by-products etc. ** Asset closures, major investments, divestments and acquisitions Sales at EUR 10 544 million were EUR 271 million lower than in the previous year due to permanent machine shutdowns and deteriorating demand and prices in Printing and Reading. Operational EBIT was EUR 52 million lower at EUR 578 million. The operational EBIT margin was 5.5% (5.8%). Significantly lower sales prices in local currencies for paper were partly offset by the improved product mix and sales prices in Building and Living. Lower sales volumes in Printing and Reading were partly offset by increased deliveries in Renewable Packaging due to Ostrołęka Mill's new PM 5. Variable costs were clearly lower as wood and pulp costs decreased, and fixed costs were also lower than a year ago. Full year 2013 depreciation was EUR 19 million lower year-on-year due to fixed asset impairments. Net financial expenses at EUR 223 million were EUR 3 million higher than a year earlier. Net interest expenses increased by EUR 30 million mainly as a result of higher average gross debt during the year, lower capitalised interest and lower interest income from loans to equity accounted investments. The net foreign exchange losses in respect of cash, interest-bearing assets and liabilities and related hedges were EUR 1 (EUR 12) million. The fair valuation of interest rate derivatives had a EUR 40 million positive impact compared with 2012 due to higher long-term interest rates. A gain of EUR 12 million from the sale of EUR 99 million of subordinated debt of the equity accounted investments Bergvik Skog and Tornator was recorded in 2013, whereas a EUR 34 million gain was recorded on the reversal of NewPage lease guarantee provisions and settlement in 2012. Q4/2013 Results (compared with Q3/2013) Sales increased by EUR 48 million to EUR 2 604 million. Operational EBIT was EUR 32 million lower than in the previous quarter at EUR 152 million. The fourth quarter results include the impact of EUR 19 million lower depreciation due to fixed asset impairments. Fixed costs were higher due to seasonality and increased maintenance activity, but variable costs were lower. Renewable Packaging volumes were lower than in the previous quarter, partly due to annual maintenance stoppages at Skoghall and Fors mills. Capital Structure EUR million 31 Dec 30 Sep 30 Jun 31 Mar 31 Dec 13 13 13 13 12 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Operative fixed assets* 5 234 5 613 5 571 5 904 6 022 Equity accounted investments 1 961 1 972 1 999 2 058 1 965 Operative working capital, net 1 085 1 363 1 418 1 570 1 460 Non-current interest-free -499 -575 -580 -601 -611 items, net ------------------------------------------------ ------------------------------------------------ Operating Capital Total 7 781 8 373 8 408 8 931 8 836 Net tax liabilities -74 -181 -174 -196 -217 ------------------------------------------------ Capital Employed 7 707 8 192 8 234 8 735 8 619 ------------------------------------------------ ------------------------------------------------ Equity attributable to owners 5 213 5 381 5 261 5 772 5 770 of the Parent Non-controlling interests 60 86 88 89 92 Net interest-bearing 2 434 2 725 2 885 2 874 2 757 liabilities -------------------------------------------------------------------------------- Financing Total 7 707 8 192 8 234 8 735 8 619 -------------------------------------------------------------------------------- * Operative fixed assets include property, plant and equipment, goodwill, biological assets, emission rights, available-for-sale operative shares and other intangible assets. Financing Q4/2013 (compared with Q3/2013) Total unutilised committed credit facilities were unchanged at EUR 700 million, and cash and cash equivalents net of overdrafts remained strong at EUR 2 053 million, which is EUR 43 million less than for the previous quarter. In addition, Stora Enso has access to various long-term sources of funding up to EUR 800 million. During the fourth quarter of 2013, loans from Finnish pension institutions with a nominal value of EUR 125 million were repaid early by Stora Enso. In addition, Stora Enso repurchased EUR 77 million of the 5.125% bond notes due in June 2014. Following the repurchase, the aggregate nominal amount of the outstanding notes is EUR 270 million. In November 2013 Stora Enso signed a new EUR 700 million committed credit facility agreement with a syndicate of 14 banks to refinance its existing EUR 700 million facility. The new facility matures in January 2017 and will be used as a backup for general corporate purposes. The loan has no financial covenants. The ratio of net debt to the last twelve months' operational EBITDA was 2.3 (2.5). The debt/equity ratio at 31 December 2013 was 0.47 (0.51). The decrease is primarily due to the EUR 291 million decrease in net debt due to solid cash flow generation in the fourth quarter of 2013. Cash Flow EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change % Change % Change Q4/13-Q4 Q4/13-Q3 % /12 /13 2013- 2012 -------------------------------------------------------------------------------- Operational 246 311 276 1 044 1 094 -10.9 -20.9 -4.6 EBITDA NRI on 162 -23 -13 34 18 n/m n/m 88.9 Operational EBITDA Dividends 18 2 93 38 102 -80.6 n/m -62.7 received from equity accounted investments Other adjustments -172 -3 -24 -171 -34 n/m n/m n/m Change in working 216 44 141 301 74 53.2 n/m n/m capital -------------------------------------------------------------- Cash Flow from 470 331 473 1 246 1 254 -0.6 42.0 -0.6 Operations Cash spent on -149 -107 -184 -424 -561 19.0 -39.3 24.4 fixed and biological assets Acquisitions of -11 -8 -16 -66 -115 31.3 -37.5 42.6 equity accounted investments -------------------------------------------------------------- Cash Flow after 310 216 273 756 578 13.6 43.5 30.8 Investing Activities -------------------------------------------------------------- Q4/2013 cash flow Fourth quarter 2013 cash flow from operations remained solid at EUR 470 million. Inventories and receivables decreased by EUR 70 million and EUR 75 million, respectively. Payables increased by EUR 60 million. Payments from the previously announced restructuring provisions were EUR 20 million. Capital Expenditure for January-December 2013 Additions to fixed and biological assets in 2013 totalled EUR 425 million, which is 75% of depreciation in the same period. Investments in fixed assets and biological assets had a cash outflow impact of EUR 424 million in 2013. The EUR 36 million equity injection into Montes del Plata, a joint venture in Uruguay, and EUR 30 million cost of acquiring a 35% shareholding in Bulleh Shah, a joint venture in Pakistan, totalled EUR 66 million in 2013. The main projects ongoing during 2013 were Montes del Plata Pulp Mill and the Ostrołęka containerboard machine. Capital Expenditure, Equity Injections and Depreciation Forecast 2014* EUR million Forecast 2014 ---------------------------------- Capital expenditure 820-900 Equity injections 30 -------------- -------------- Total 850-930 Depreciation 550-580 -------------- * Capital expenditure includes approximately EUR 300 million for the project in Guangxi, China and approximately EUR 150 million for Montes del Plata Pulp Mill in Uruguay. As of 2014 Stora Enso will consolidate Veracel and Montes del Plata line-by-line in accordance with IFRS 11. For further details, please see Basis for Preparation on page 14. Streamlining and structure simplification programme to cut EUR 200 million from fixed costs The streamlining and structure simplification programme, which is intended to achieve annual net fixed cost savings of EUR 200 million after compensating for inflation in addition to cost takeout in the second quarter of 2014 versus actual 2012 is proceeding according to plan. The full impact of the net cost savings is expected from the second quarter of 2014 onwards. This programme does not include capacity reductions. About 70% of the cost reduction actions specific to this programme were completed by the end of the fourth quarter of 2013. Most of the non-recurring one-time costs totalling EUR 88 million related to the programme were already announced by the end of the third quarter of 2013. Due to the programme, about 1 300 employees exited by the end of the year. Near-term Outlook In the first quarter of 2014 sales are expected to be similar to the EUR 2 604 million and operational EBIT similar or somewhat higher compared with the EUR 152 million in the fourth quarter of 2013. Average prices are forecast to improve and fixed costs to decrease compared with the fourth quarter of 2013. Renewable Packaging will be affected by Guangxi project costs and lost production due to the Skoghall Mill recovery boiler incident. Segments Q4/13 compared with Q4/12 Printing and Reading Printing and Reading, part of the Printing and Living Division, is a world-class responsible supplier of paper from renewable sources for print media and office use. Its wide offering serves publishers, retailers, printing houses, merchants, converters and office suppliers, among others. Printing and Reading produces newsprint, book paper, SC paper, coated paper and office paper. EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change % Change % Change Q4/13-Q4/12 Q4/13-Q3/1 % 3 2013- 2012 -------------------------------------------------------------------------------- Sales 1 054 1 041 1 194 4 319 4 839 -11.7 1.2 -10.7 Operational 86 81 129 290 493 -33.3 6.2 -41.2 EBITDA Operational 36 13 59 34 223 -39.0 176.9 -84.8 EBIT % of sales 3.4 1.2 4.9 0.8 4.6 -30.6 183.3 -82.6 Operational 6.1 1.9 7.9 1.4 7.4 -22.8 221.1 -81.1 ROOC, %* Paper 1 607 1 582 1 791 6 525 7 130 -10.3 1.6 -8.5 deliveries, 1 000 t Paper 1 577 1 600 1 809 6 501 7 210 -12.8 -1.4 -9.8 production, 1 000 t ------------------------------------------------------------------- * Operational ROOC = 100% x Operational EBIT/Average operating capital -- Lower sales volumes due to declining demand and related capacity reductions, and slightly lower sales prices in local currencies decreased operational EBIT. This was partly offset by lower variable costs resulting from operational improvements and lower fixed costs. -- Depreciation was EUR 19 million lower mainly due to fixed asset impairments recorded in the fourth quarter of 2013. -- As announced in January 2014, the permanent shutdown of a coated mechanical paper machine at Veitsiluoto Mill in Finland is planned. Markets Produc Market Demand Q4/13 Demand Q4/13 Price Q4/13 Price Q4/13 t compared with compared with compared with compared with Q4/12 Q3/13 Q4/12 Q3/13 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Paper Europe Weaker Slightly Slightly lower Stable stronger Biomaterials Biomaterials offers a variety of pulp grades to meet the demands of paper, board and tissue producers. Pulp made from renewable resources in a sustainable manner is an excellent raw material with many different end uses. Biomaterials comprises mainly plantations, the Group's joint-venture Veracel and Montes del Plata pulp mills, Nordic stand-alone pulp mills, the Pulp Competence Centre and Biorefinery. EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change % Change % Change Q4/13-Q4/12 Q4/13-Q3/1 % 3 2013- 2012 -------------------------------------------------------------------------------- Sales 258 242 256 1 014 1 012 0.8 6.6 0.2 Operational 28 29 33 107 99 -15.2 -3.4 8.1 EBITDA Operational 24 17 28 77 82 -14.3 41.2 -6.1 EBIT % of sales 9.3 7.0 10.9 7.6 8.1 -14.7 32.9 -6.2 Operational 7.2 4.9 7.8 5.6 5.7 -7.7 46.9 -1.8 ROOC, %* Pulp 484 444 471 1 864 1 836 2.8 9.0 1.5 deliveries, 1 000 t ------------------------------------------------------------------- * Operational ROOC = 100% x Operational EBIT/Average operating capital -- Lower variable costs, mainly for wood, were more than offset by Biorefinery Business Unit costs, and higher costs for Montes del Plata Pulp Mill. Fixed costs were similar to a year ago. -- Montes del Plata Pulp Mill is currently finalising the construction works, mill commissioning and the final permit process. The start-up process is expected to commence during the first months of 2014. Markets -------------------------------------------------------------------------------- Produc Market Demand Q4/13 Demand Q4/13 Price Q4/13 Price Q4/13 t compared with compared with compared with compared with Q4/12 Q3/13 Q4/12 Q3/13 Softwo Europe Stable Slightly weaker Significantly Slightly od higher higher pulp Hardwo Europe Slightly weaker Stronger Stable Slightly lower od pulp Building and Living Building and Living, part of the Printing and Living Division, provides wood-based innovations and solutions for everyday living and housing needs. The product range covers all areas of urban construction, from supporting structures to interior design and environmental construction. Further-processed products include massive wood elements and housing modules, wood components and pellets, in addition to a variety of sawn timber goods. EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change % Change % Change Q4/13-Q4/12 Q4/13-Q3/13 % 2013- 2012 -------------------------------------------------------------------------------- Sales 466 460 456 1 867 1 684 2.2 1.3 10.9 Operational 30 33 17 115 59 76.5 -9.1 94.9 EBITDA Operational 19 24 7 75 29 171.4 -20.8 158.6 EBIT % of sales 4.1 5.2 1.5 4.0 1.7 173.3 -21.2 135.3 Operational 14.4 17.7 4.8 13.9 5.2 200.0 -18.6 167.3 ROOC, %* Deliveries, 1 203 1 157 1 132 4 776 4 592 6.3 4.0 4.0 1 000 m3 -------------------------------------------------------------------- * Operational ROOC = 100% x Operational EBIT/Average operating capital -- Slightly lower sales prices in overseas markets were more than offset by lower log prices in the Nordic countries, clearly higher by-product income in Central Europe, lower fixed costs and higher volumes in all businesses. Markets Produc Market Demand Q4/13 Demand Q4/13 Price Q4/13 Price Q4/13 t compared with compared with compared with compared with Q4/12 Q3/13 Q4/12 Q3/13 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Wood Europe Significantly Slightly higher Stable Stable produ stronger cts Renewable Packaging Renewable Packaging offers fibre-based packaging materials and innovative packaging solutions for consumer goods and industrial applications. Renewable Packaging operates throughout the value chain, from pulp production to production of materials and packaging, and recycling. It comprises three business units: Consumer Board, Packaging Solutions and Packaging Asia. EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change % Change % Change Q4/13-Q4/ Q4/13-Q3 % 12 /13 2013- 2012 -------------------------------------------------------------------------------- Sales 788 829 798 3 272 3 216 -1.3 -4.9 1.7 Operational 122 152 106 522 476 15.1 -19.7 9.7 EBITDA Operational EBIT 73 100 55 318 273 32.7 -27.0 16.5 % of sales 9.3 12.1 6.9 9.7 8.5 34.8 -23.1 14.1 Operational 12.2 16.9 9.3 13.3 12.1 31.2 -27.8 9.9 ROOC, %* Paper and board 831 874 778 3 373 3 138 6.8 -4.9 7.5 deliveries, 1 000 t Paper and board 850 869 752 3 410 3 147 13.0 -2.2 8.4 production, 1 000 t Corrugated 277 278 279 1 086 1 097 -0.7 -0.4 -1.0 packaging deliveries, million m2 Corrugated 266 266 275 1 057 1 076 -3.3 - -1.8 packaging production, million m2 --------------------------------------------------------------- * Operational ROOC = 100% x Operational EBIT/Average operating capital -- Containerboard sales volumes were higher due to Ostrołęka Mill's new PM 5 and stronger consumer board deliveries at the end of the year. Increased production despite annual maintenance stoppages at Skoghall and Fors mills improved operational EBIT. Variable costs were lower. Average sales prices in local currencies remained stable. -- The consumer board machine project in Guangxi, China is proceeding as planned. Approvals from MOFCOM (Ministry of Commerce of People's Republic of China) were received in November. The machine is forecast to be operational in the beginning of 2016, as previously announced. Markets Product Market Demand Q4/13 Demand Q4/13 Price Q4/13 Price Q4/13 compared with compared with compared compared with Q4/12 Q3/13 with Q4/12 Q3/13 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Consumer Europe Slightly Slightly Slightly Stable board stronger weaker lower Corrugate Europe Weaker Stable Slightly Stable d higher packagin g Other The segment Other includes the Nordic forest equity accounted investments, Stora Enso's shareholding in Pohjolan Voima, operations supplying wood to the Nordic mills and Group shared services and administration. EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change % Change % Change Q4/13-Q4/12 Q4/13-Q3/13 % 2013- 2012 -------------------------------------------------------------------------------- Sales 672 612 673 2 690 2 684 -0.1 9.8 0.2 Operational -20 16 -9 10 -33 -122.2 -225.0 130.3 EBITDA Operational - 30 9 74 23 -100.0 -100.0 221.7 EBIT % of sales - 4.9 1.3 2.8 0.9 -100.0 -100.0 211.1 -------------------------------------------------------------------- -- Fixed costs increased due to acquisition of ABB's 49% shareholding in Efora Oy. -- Operational EBIT was EUR 51 million higher than a year earlier mainly due to inventory adjustment in Nordic wood sourcing operations in 2012 and lower expenditure in Group Functions and Group Services. -- Stora Enso divests its 40% shareholding in the US based processed kaolin clay producer Thiele Kaolin Company for USD 76 (EUR 56) million. A capital gain of EUR 37 million will be recorded in Q1/2014. Short-term Risks and Uncertainties The main short-term risks and uncertainties relate to the economic situation in Europe, and the persistent imbalance in the European paper market. Energy sensitivity analysis: the direct effect of a 10% increase in electricity, heat, oil and other fossil fuel market prices would have a negative impact of approximately EUR 13 million on operational EBIT for the next twelve months, after the effect of hedges. Wood sensitivity analysis: the direct effect of a 10% increase in wood prices would have a negative impact of approximately EUR 190 million on operational EBIT for the next twelve months. Chemicals and fillers sensitivity: the direct effect of a 10% increase in chemical and filler prices would have a negative impact of approximately EUR 69 million on operational EBIT for the next twelve months. A decrease of energy, wood or chemical and filler prices would have the opposite impact. Foreign exchange rates sensitivity analysis for the next twelve months: the direct effect on operational EBIT of a 10% strengthening in the value of the US dollar, Swedish krona and British pound against the euro would be about positive EUR 95 million, negative EUR 78 million and positive EUR 53 million annual impact, respectively. Weakening of the currencies would have the opposite impact. These numbers are before the effect of hedges and assuming no changes occur other than a single currency exchange rate movement. Fourth Quarter Events In October Stora Enso announced the appointments to its Nomination Board. Veracel On 11 July 2008 Stora Enso announced that a federal judge in Brazil had issued a decision claiming that the permits issued by the State of Bahia for the operations of Stora Enso's equity accounted investment Veracel were not valid. The judge also ordered Veracel to take certain actions, including reforestation with native trees on part of Veracel's plantations and a possible BRL 20 million (EUR 7 million) fine. Veracel disputes the decision and has filed an appeal against it. Veracel operates in full compliance with all Brazilian laws and has obtained all the necessary environmental and operating licences for its industrial and forestry activities from the competent authorities. In November 2008 a Federal Court suspended the effects of the decision. Veracel has not recorded any provision for the reforestation or the possible fine. During construction of Veracel Pulp Mill, a supplier won the international tendering to supply part of the mill. The proposal included an element to make the plant eligible for a Drawback Suspension Tax Benefit which would provide exemptions on imports. One of the conditions of the drawback was that funds used to pay the supplier be raised outside Brazil. At the same time, part of the mill construction was financed locally. Following a tax inspection at the supplier, Federal Tax Authorities issued a tax infraction note against the supplier intended to cancel the drawback benefits. The supplier presented its defence and the appeal is still pending a decision from the Administrative Tax Entity Court. In parallel, the supplier filed an arbitration proceeding against Veracel in order to determine which company shall be responsible for eventual damages if the supplier is found guilty. In September 2013 the International Chamber of Commerce Arbitration Court decided that Veracel and the supplier shall share liability for any potential damages in the ratio Veracel 75% and the supplier 25%, which decision has been challenged by Veracel. In spite of this, the supplier and Veracel entered into a settlement agreement in December 2013, agreeing that the supplier should make certain tax payments of which Veracel paid to the supplier, and expensed, BRL 45 million (EUR 16 million), of which Stora Enso's share amounts to BRL 22.5 million (EUR 8 million). The settlement is subject to formal acceptance of the payment by the Brazilian authorities and the final decision of the Chamber of Commerce Arbitration Court. Class Action Lawsuits in USA In the context of magazine paper sales in the USA in 2002 and 2003, Stora Enso Oyj (SEO) and Stora Enso North America (SENA) were sued in a number of class action (and other civil) lawsuits filed in the USA by various magazine paper purchasers that claimed damages for alleged antitrust violations. In December 2010 a US federal district court granted a motion for summary judgement dismissing the direct purchaser class action claims on SEO and SENA. Following appeal, a federal court of appeals on 6 August 2012 upheld the district court's ruling as to SEO, but reversed the district court's ruling as to SENA and referred that part of the case back to the district court for a jury trial to determine whether SENA's conduct did violate the federal antitrust laws. The trial of the case against SENA was scheduled to begin in August 2013. Because Stora Enso disposed of SENA in 2007, Stora Enso's liability, if any, would have been determined by the provisions in the SENA Sales and Purchasing Agreement. On 17 July 2013, Stora Enso reached an agreement (which is subject to approval by the US federal district court) to settle the cases filed by the direct magazine paper purchasers without any admission of liability by SENA or SEO. Stora Enso has paid into escrow USD 8 million (EUR 6 million) to cover the cost of settling those claims, which cost has been recorded in the third quarter 2013 accounts. The only remaining cases of any substance, filed on behalf of indirect purchasers of publication paper in the California (CA) and Connecticut (CT) state courts, are about to be settled as well - without any admission of liability by SENA or SEO - via payments of USD 0.1 million (EUR 0.1 million) plus proportionate cost (CA) and USD 0.1 million (EUR 0.1 million) (CT). These settlements have to be approved by the responsible courts. In previous periods the cases were disclosed as a contingent liability. Legal Proceedings in Finland In December 2009 the Finnish Market Court fined Stora Enso for competition law infringements in the market for roundwood in Finland from 1997 to 2004. Stora Enso did not appeal against the ruling. In March 2011 Metsähallitus of Finland initiated legal proceedings against Stora Enso, UPM and Metsäliitto claiming compensation for damages allegedly suffered due to the competition law infringements. The total claim against all the defendants amounts to approximately EUR 160 million and the secondary claim against Stora Enso to approximately EUR 85 million. In addition, Finnish municipalities and private forest owners initiated similar legal proceedings. The total amount claimed from all the defendants amounts to approximately EUR 45 million and the secondary claims solely against Stora Enso to approximately EUR 10 million. Stora Enso denies that Metsähallitus and other plaintiffs suffered any damages whatsoever and will forcefully defend itself. No provisions have been made in Stora Enso's accounts for these lawsuits. Kemijärvi Pulp Mill in Finland was permanently closed down in 2008. In December 2011 the Vaasa Administrative Court gave its decision concerning the environmental permit for the closure of the mill. The judgement included an obligation to remove the majority of the sludge from the bottom of the water treatment lagoon. Following an appeal by Stora Enso, the Supreme Administrative Court in August 2013 gave its decision concerning the water treatment lagoon in the environmental permit related to the closure of Kemijärvi Pulp Mill. The Court ordered Stora Enso to remove the majority of the sludge, and returned the case to the Regional State Administrative Agency with an order to Stora Enso to deliver a new action plan by the end of 2014 for removal of the majority of the sludge from the basin at the Kemijärvi site. The Agency was also ordered to consider and evaluate the costs to Stora Enso against the environmental benefits achievable if the Agency ordered Stora Enso to remove the sludge. No provisions have been made in Stora Enso's accounts for this case. Changes in Organisational Structure and Group Management On 23 April 2013 Stora Enso announced that it planned to change from four Business Areas to three Divisions by integrating the Building and Living Business Area with the Printing and Reading Business Area in a new Printing and Living Division. The segment reporting has remained as before. On 31 May 2013 Stora Enso announced that from 1 July 2013 onwards the Stora Enso Group Leadership Team would comprise the following persons and roles: Jouko Karvinen, Chief Executive Officer Juan Bueno, Head of Biomaterials Division Lars Häggström, Head of Global People and Organisation Per Lyrvall, Head of Global Ethics and Compliance, General Counsel, Country Senior Executive, Sweden Mats Nordlander, Head of Renewable Packaging Division Lauri Peltola, Head of Global Identity, Country Senior Executive, Finland Karl-Henrik Sundström, Head of Printing and Living Division Jyrki Tammivuori, acting Chief Financial Officer (until 31 January 2014) Juha Vanhainen, Executive Vice President, EUR 200 million Streamlining and Structure Simplification Programme, Wood Supply Operations in Finland and Sweden, Energy, Logistics and Business Information Services Personnel On 31 December 2013 there were 27 985 employees in the Group, 218 less than at the end of 2012. The average number of employees in 2013 was 28 231, which was 546 lower than the average number in 2012. The number of employees decreased most in Sweden due to permanent shutdowns of paper machines and restructurings, whereas decreases in Finland were offset by the acquisition of ABB's 49% shareholding in Efora Oy, which employs around 1 000 people. Excluding the effects of the acquisition of Efora Oy, the number of employees in Europe decreased by approximately 1 650 during 2013. Share Capital During the quarter the conversions of a total of 50 168 A shares into R shares were recorded in the Finnish trade register on15 October and 16 December 2013. On 31 December 2013 Stora Enso had 177 096 204 A shares and 611 523 783 R shares in issue of which the Company held no A shares or R shares. Events after the Period The conversion of 25 000 A shares into R shares was recorded in the Finnish trade register on 15 January 2014. Seppo Parvi started as new Chief Financial Officer on 1 February 2014. According to Stora Enso's Corporate Governance, the CFO also acts as deputy to the CEO as defined by the Finnish Companies Act. On 5 February 2014 Stora Enso's Board of Directors appointed Seppo Parvi as deputy to the CEO. Annual General Meeting The Annual General Meeting (AGM) will be held at 16.00 (Finnish time) on Wednesday 23 April 2014 at Marina Congress Center, Katajanokanlaituri 6, Helsinki, Finland. The agenda of the AGM and proposals on the agenda of the AGM, as well as the AGM notice, will be available on Stora Enso Oyj's website at www.storaenso.com/agm. Stora Enso's annual accounts, the Report of the Board of Directors and the auditor's report for 2013 will be published on Stora Enso Oyj's website www.storaenso.com/investors during the week commencing on Monday 17 February 2014. The proposals for decisions and the other above-mentioned documents will also be available at the AGM. Copies of these documents and of this notice will be sent to shareholders upon request. The minutes of the AGM will be available on Stora Enso Oyj's website www.storaenso.com/agm from 7 May 2014. The Board of Directors' Proposal for the Payment of Dividend The Board of Directors proposes to the AGM that a dividend of EUR 0.30 per share be distributed for the year 2013. The dividend would be paid to shareholders who on the record date of the dividend payment, 28 April 2014, are recorded in the shareholders' register maintained by Euroclear Finland Oy or in the separate register of shareholders maintained by Euroclear Sweden AB for Euroclear Sweden registered shares. Dividends payable for Euroclear Sweden registered shares will be forwarded by Euroclear Sweden AB and paid in Swedish krona. Dividends payable to ADR holders will be forwarded by Deutsche Bank Trust Company Americas and paid in US dollars. The Board of Directors proposes to the AGM that the dividend be paid on 15 May 2014. This report has been prepared in Finnish, English and Swedish. In case of variations in the content between the versions, the English version shall govern. This report is unaudited. Helsinki, 5 February 2014 Stora Enso Oyj Board of Directors Financials Basis of Preparation This unaudited interim financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the Group's Annual Report for 2012. The Group has applied the following amendment effective from 1 January 2013 that requires restatement of previous financial statements: -- IAS 19 Employee Benefits (revised) eliminates the 'corridor method', streamlines the presentation of changes in assets and liabilities arising from defined benefit plans and enhances the disclosure requirements arising from the standard. The Group has not applied the 'corridor method'. The effects of this amendment on the Group financial statements are not material. The effects on the Condensed Consolidated Income Statement and the Condensed Consolidated Statement of Financial Position are the following: Effects of Changes to IAS 19 Employee Benefits EUR million As published 2012 Adjustment Restated 2012 2012 --------------------------------------------------------------------------- Operational EBIT 618 12 630 Operating profit (IFRS) 689 12 701 Net financial items -207 -13 -220 Profit before tax 482 -1 481 Income tax 9 - 9 Net profit for the period 491 -1 490 Attributable to: Owners of the Parent 481 -1 480 Non-controlling interests 10 - 10 ---------------------------------------- 491 -1 490 Total equity 5 876 -14 5 862 Post-employment benefit provisions 462 18 480 Deferred tax liabilities 344 -4 340 ---------------------------------------- The following standards have also been applicable for the first time effective from 1 January 2013: -- IAS 1 Presentation of Financial Statements (amendment) introduces changes to the presentation of items of other comprehensive income. Items that could be reclassified to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified. The amendment affected presentation only and had no impact on the Group's financial position or performance. -- IFRS 7 Financial Instruments: Enhanced disclosure requirements related to offsetting of financial assets and financial liabilities. The amendment might have some effect on presentation in the financial statements but had no impact on the Group's financial position or performance. -- IFRS 13 Fair Value Measurement establishes the definition of fair value and introduces a single IFRS framework for measuring fair value while seeking to increase consistency and comparability by requiring disclosures about fair value measurements applied in the financial statements of an entity. The application of IFRS 13 has not materially affected the fair value measurements carried out by the Group. The new standard also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards. Some of these disclosures are specifically required for financial instruments, thereby affecting the financial statement. The additional disclosures are included in this Interim Review. -- IAS 12 Income Taxes (amendment) provides additional regulation on deferred tax in the case of recovery of underlying assets. The amendment is not relevant to the Group. -- IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine introduces accounting treatment for stripping costs arising in the mining industry. The interpretation is not relevant to the Group. Stora Enso will apply the new IFRS 10 Consolidated Financial Statements, 11 Joint Arrangements and 12 Disclosure of Interests in Other Entities as of 1 January 2014. The change will affect Montes del Plata and Veracel, which will then be treated as joint operations and thus consolidated with the line-by-line method. All figures in this Interim Review have been rounded to the nearest million, unless otherwise stated. Condensed Consolidated Income Statement EUR million Q4/13 Q3/13 Q4/12 2013 2012 Change Change Change % % % Q4/13- Q4/13- 2013-2 Q4/12 Q3/13 012 -------------------------------------------------------------------------------- Sales 2 604 2 556 2 727 10 544 10 815 -4.5 1.9 -2.5 Other operating 35 29 48 122 219 -27.1 20.7 -44.3 income Materials and -1 523 -1 612 -1 782 -6 635 -6 974 14.5 5.5 4.9 services Freight and -234 -236 -260 -977 -1 008 10.0 0.8 3.1 sales commissions Personnel -344 -309 -311 -1 368 -1 349 -10.6 -11.3 -1.4 expenses Other operating -123 -134 -162 -602 -578 24.1 8.2 -4.2 expenses Share of results 51 9 91 100 108 -44.0 n/m -7.4 of equity accounted investments Depreciation and -684 -145 -97 -1 150 -532 n/m n/m -116.2 impairment --------------------------------------------------------------- Operating -218 158 254 34 701 -185.8 -238.0 -95.1 Loss/Profit Net financial -64 -56 -50 -223 -220 -28.0 -14.3 -1.4 items --------------------------------------------------------------- Loss/Profit -282 102 204 -189 481 -238.2 n/m -139.3 before Tax Income tax 122 -18 62 118 9 96.8 n/m n/m --------------------------------------------------------------- Net Loss/Profit -160 84 266 -71 490 -160.2 -290.5 -114.5 for the Period Attributable to: Owners of the -137 82 262 -53 480 -152.3 -267.1 -111.0 Parent Non-controlling -23 2 4 -18 10 n/m n/m -280.0 interests --------------------------------------------------------------- -160 84 266 -71 490 -160.2 -290.5 -114.5 --------------------------------------------------------------- --------------------------------------------------------------- Earnings per Share Basic earnings -0.18 0.11 0.33 -0.07 0.61 -154.5 -263.6 -111.5 per share, EUR Diluted earnings -0.18 0.11 0.33 -0.07 0.61 -154.5 -263.6 -111.5 per share, EUR Consolidated Statement of Comprehensive Income EUR million 2013 2012 -------------------------------------------------------------------------------- Net loss/profit for the period -71 490 Other Comprehensive Income Items that will Not be Reclassified to Profit and Loss Actuarial gains/losses on defined benefit plans 74 -184 Share of other comprehensive income of equity accounted investments -1 -5 that will not be reclassified Income tax relating to items that will not be reclassified -27 35 ----------- 46 -154 Items that may be Reclassified Subsequently to Profit and Loss Share of other comprehensive income of equity accounted investments 15 1 that may be reclassified Currency translation movements on equity net investments (CTA) -227 -29 Currency translation movements on non-controlling interests -6 -3 Net investment hedges 23 -17 Currency and commodity hedges -28 34 Available-for-sale financial assets -101 -178 Income tax relating to items that may be reclassified 2 -3 ----------- ----------- -322 -195 ----------- Total Comprehensive Income -347 141 ----------- ----------- Total Comprehensive Income Attributable to: Owners of the Parent -323 134 Non-controlling interests -24 7 ----------- -347 141 ----------- Condensed Consolidated Statement of Cash Flows EUR million 2013 2012 -------------------------------------------------------------------------------- Cash Flow from Operating Activities Operating profit 34 701 Hedging result from OCI -23 34 Adjustments for non-cash items 911 479 Change in net working capital 285 56 ------------- Cash Flow Generated by Operations 1 207 1 270 Net financial items paid -176 -230 Income taxes paid, net -43 -104 ------------- Net Cash Provided by Operating Activities 988 936 ------------- ------------- Cash Flow from Investing Activities Acquisitions of subsidiaries and business operations, net of 25 -11 acquired cash Acquisitions of equity accounted investments -66 -115 Acquisitions of available-for-sale investments -9 - Proceeds from sale of fixed assets and shares, net of disposed 23 8 cash Proceeds from disposal of available-for-sale investments 42 - Capital expenditure -424 -561 Proceeds from/payments of non-current receivables, net 96 -5 ------------- Net Cash Used in Investing Activities -313 -684 ------------- ------------- Cash Flow from Financing Activities Proceeds from issue of new long-term debt 151 1 472 Long-term debt, payments -371 -571 Change in short-term borrowings 20 -179 Dividends paid -237 -237 Dividend to non-controlling interests -7 -3 ------------- Net Cash Used in/Provided by Financing Activities -444 482 ------------- ------------- Net Increase in Cash and Cash Equivalents 231 734 Translation adjustment -23 -23 Net cash and cash equivalents at the beginning of period 1 845 1 134 ------------- Net Cash and Cash Equivalents at Period End 2 053 1 845 ------------- Cash and Cash Equivalents at Period End 2 065 1 850 Bank Overdrafts at Period End -12 -5 ------------- Net Cash and Cash Equivalents at Period End 2 053 1 845 ------------- ------------- Acquisitions Cash and cash equivalents, net of bank overdraft 32 2 Intangible assets and property, plant and equipment 1 6 Working capital -22 8 Tax assets and liabilities - 1 Interest-bearing liabilities and receivables - -5 ------------- Fair Value of Net Assets Acquired 11 12 Value of previously held equity interests -4 -3 ------------- Total Purchase Consideration 7 9 Less cash and cash equivalents in acquired companies -32 -2 ------------- Net Purchase Consideration -25 7 ------------- Cash part of the consideration, net of acquired cash -25 11 Payment concerning unfinished 2011 acquisition - -4 ------------- Net Purchase Consideration -25 7 ------------- Disposals Cash and cash equivalents 1 - Property, plant and equipment 2 - Interest-bearing liabilities -2 - Non-controlling interests -1 - ------ Net Assets in Divested Companies - - Gain on sale - - ------ Total Net Assets Sold - - ------ Property, Plant and Equipment, Goodwill, Biological Assets and Other Intangible Assets EUR million 2013 2012 ---------------------------------------------------------- Carrying value at 1 January 5 541 5 437 Acquisition of subsidiary companies 1 6 Additions in tangible and intangible assets 406 536 Additions in biological assets 19 20 Disposals -26 -2 Disposals of subsidiary companies -2 - Depreciation and impairment -1 150 -532 Valuation of biological assets 179 - Translation difference and other -116 76 -------------- Statement of Financial Position Total 4 852 5 541 -------------- Borrowings EUR million 31 Dec 13 31 Dec 12 ---------------------------------------------------------------- Bond loans 3 177 3 378 Loans from credit institutions 859 788 Financial lease liabilities 77 99 Other non-current liabilities 94 257 --------------------- --------------------- Non-current Debt including Current Portion 4 207 4 522 Short-term borrowings 391 332 Interest payable 87 84 Derivative financial liabilities 141 191 Bank overdrafts 12 5 --------------------- Total Interest-bearing Liabilities 4 838 5 134 --------------------- EUR million 2013 2012 ------------------------------------------------------------------ ------------------------------------------------------------------ Carrying Value at 1 January 5 134 4 373 Proceeds of new long-term debt 151 1 472 Repayment of long-term debt -371 -571 Change in short-term borrowings and interest payable 62 -200 Change in derivative financial liabilities -50 28 Translation differences and other -88 32 ------------- Total Interest-bearing Liabilities 4 838 5 134 ------------- Condensed Consolidated Statement of Financial Position EUR million 31 Dec 13 31 Dec 12 ------------------------------------------------------------------- Assets Non-current Assets PPE*, goodwill and other intangible assets O 4 453 5 319 Biological assets O 399 222 Emission rights O 21 30 Equity accounted investments O 1 961 1 965 Available-for-sale: Interest-bearing I 10 96 Available-for-sale: Operative O 361 451 Non-current loan receivables I 80 134 Deferred tax assets T 229 143 Other non-current assets O 16 23 --------------------- 7 530 8 383 --------------------- --------------------- Current Assets Inventories O 1 376 1 458 Tax receivables T 13 19 Operative receivables O 1 521 1 687 Interest-bearing receivables I 249 297 Cash and cash equivalents I 2 065 1 850 --------------------- --------------------- 5 224 5 311 --------------------- Total Assets 12 754 13 694 --------------------- --------------------- Equity and Liabilities Owners of the Parent 5 213 5 770 Non-controlling Interests 60 92 --------------------- Total Equity 5 273 5 862 --------------------- --------------------- Non-current Liabilities Post-employment benefit provisions O 378 480 Other provisions O 121 142 Deferred tax liabilities T 300 340 Non-current debt I 3 702 4 341 Other non-current operative liabilities O 16 12 --------------------- 4 517 5 315 --------------------- --------------------- Current Liabilities Current portion of non-current debt I 505 181 Interest-bearing liabilities I 631 612 Operative liabilities O 1 812 1 685 Tax liabilities T 16 39 ----------- ---------- 2 964 2 517 --------------------- Total Liabilities 7 481 7 832 --------------------- --------------------- Total Equity and Liabilities 12 754 13 694 --------------------- * PPE = Property, Plant and Equipment Items designated with 'O' comprise Operating Capital Items designated with 'I' comprise Interest-bearing Net Liabilities Items designated with 'T' comprise Net Tax Liabilities Statement of Changes in Equity CTA = Cumulative Translation Adjustment OCI = Other Comprehensive Income NCI = Non-controlling Interests EAI = Equity Accounted Investments EUR Share Share Invest Treasu Step Availa Curren OCI of CTA Retain Attrib Non-co Total milli Capita Premiu ed ry Acquis ble-fo cy and Equity and ed utable ntroll on l m and Non-Re Shares ition r-Sale Commod Accoun Net Earnin to ing Reserv strict Revalu Financ ity ted Invest gs Owners Intere e fund ed ation ial Hedges Invest ment of the sts Equity Surplu Assets ments Hedges Parent Fund s -------------------------------------------------------------------------------- ----------------------------- Balanc 1 342 77 633 -10 4 541 -17 -29 32 3 300 5 873 87 5 960 e at 31 Dec 2011 -------------------------------------------------------------------------------- ---------------------- Profit - - - - - - - - - 480 480 10 490 for the perio d OCI - - - - - -178 34 -4 -46 -184 -378 -3 -381 befor e tax Income - - - - - -1 -6 - 4 35 32 - 32 tax relat ing to compo nents of OCI -------------------------------------------------------------------------------- ---------------------- Total - - - - - -179 28 -4 -42 331 134 7 141 Compr ehensi ve Incom e -------------------------------------------------------------------------------- ---------------------- Divide - - - - - - - - - -237 -237 -2 -239 nd -------------------------------------------------------------------------------- ---------------------- Balanc 1 342 77 633 -10 4 362 11 -33 -10 3 394 5 770 92 5 862 e at 31 Dec 2012 -------------------------------------------------------------------------------- ---------------------- -------------------------------------------------------------------------------- ---------------------- Loss - - - - - - - - - -53 -53 -18 -71 for the perio d OCI - - - - - -101 -28 14 -204 74 -245 -6 -251 befor e tax Income - - - - - 1 5 - -4 -27 -25 - -25 tax relat ing to compo nents of OCI -------------------------------------------------------------------------------- ---------------------- Total - - - - - -100 -23 14 -208 -6 -323 -24 -347 Compr ehensi ve Incom e -------------------------------------------------------------------------------- ---------------------- -------------------------------------------------------------------------------- ---------------------- Divide - - - - - - - - - -237 -237 -7 -244 nd Dispos - - - - - - - - - - - -1 -1 als Share- - - - - - - - - - 2 2 - 2 based payme nts NCI - - - - - - - - - 1 1 - 1 trans action in EAI Cancel - - - 10 - - - - - -10 - - - lation of treas ury share s -------------------------------------------------------------------------------- ---------------------- Balanc 1 342 77 633 - 4 262 -12 -19 -218 3 144 5 213 60 5 273 e at 31 Dec 2013 -------------------------------------------------------------------------------- ---------------------- Commitments and Contingencies EUR million 31 Dec 13 31 Dec 12 --------------------------------------------------------------- On Own Behalf Pledges - 1 Mortgages 18 6 On Behalf of Equity Accounted Investments Guarantees 554 653 On Behalf of Others Guarantees 5 5 Other Commitments, Own Operating leases, in next 12 months 68 92 Operating leases, after next 12 months 477 497 Other commitments 5 5 --------------------- Total 1 127 1 259 --------------------- --------------------- Pledges - 1 Mortgages 18 6 Guarantees 559 658 Operating leases 545 589 Other commitments 5 5 --------------------- Total 1 127 1 259 --------------------- Capital commitments The Group's direct capital expenditure contracts, excluding acquisitions, amounted to EUR 69 million (compared with EUR 72 million at 31 December 2012). The Group's share of capital expenditure contracts in equity accounted investments, excluding acquisitions, amounted to EUR 73 million (compared with EUR 213 million at 31 December 2012) of which Stora Enso has guaranteed EUR 44 million (compared with EUR 189 million at 31 December 2012). Sales by Segment EUR 2013 Q4/13 Q3/13 Q2/13 Q1/13 2012 Q4/12 Q3/12 Q2/12 Q1/12 million -------------------------------------------------------------------------------- Printing 4 319 1 054 1 041 1 101 1 123 4 839 1 194 1 227 1 191 1 227 and Reading Biomater 1 014 258 242 257 257 1 012 256 268 246 242 ials Building 1 867 466 460 500 441 1 684 456 403 444 381 and Living Renewabl 3 272 788 829 835 820 3 216 798 812 827 779 e Packagi ng Other 2 690 672 612 685 721 2 684 673 645 663 703 Inter-se -2 618 -634 -628 -661 -695 -2 620 -650 -661 -650 -659 gment sales ----------------------------------------------------------------------- Total 10 544 2 604 2 556 2 717 2 667 10 815 2 727 2 694 2 721 2 673 ----------------------------------------------------------------------- Operational EBIT by Segment EUR million 2013 Q4/13 Q3/13 Q2/13 Q1/13 2012 Q4/12 Q3/12 Q2/12 Q1/12 -------------------------------------------------------------------------------- Printing and 34 36 13 -17 2 223 59 53 43 68 Reading Biomaterials 77 24 17 14 22 82 28 32 15 7 Building and 75 19 24 28 4 29 7 1 11 10 Living Renewable 318 73 100 77 68 273 55 83 73 62 Packaging Other 74 - 30 22 22 23 9 9 2 3 ------------------------------------------------------------------- Operational 578 152 184 124 118 630 158 178 144 150 EBIT Fair -5 22 -3 -17 -7 -59 -14 -13 -34 2 valuations and non-operati onal items* Non-recurrin -539 -392 -23 -33 -91 130 110 - 45 -25 g Items ------------------------------------------------------------------- Operating 34 -218 158 74 20 701 254 165 155 127 Profit/Loss (IFRS) Net -223 -64 -56 -47 -56 -220 -50 -63 -70 -37 financial items Loss/Profit -189 -282 102 27 -36 481 204 102 85 90 before Tax Income tax 118 122 -18 -6 20 9 62 -21 -16 -16 expense ------------------------------------------------------------------- Net -71 -160 84 21 -16 490 266 81 69 74 Loss/Profit ------------------------------------------------------------------- * Fair valuations and non-operational items include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights, valuations of biological assets and Group's share of tax and net financial items of EAI. NRI by Segment EUR million 2013 Q4/13 Q3/13 Q2/13 Q1/13 2012 Q4/12 Q3/12 Q2/12 Q1/12 -------------------------------------------------------------------------------- Printing and -644 -538 8 -30 -84 70 67 - 13 -10 Reading Biomaterials 2 -8 -1 11 - -7 -7 - - - Building and -7 - - - -7 - - - - - Living Renewable 120 144 -28 4 - -53 -38 - - -15 Packaging Other -10 10 -2 -18 - 120 88 - 32 - ------------------------------------------------------------------- NRI on -539 -392 -23 -33 -91 130 110 - 45 -25 Operating Loss/Profit NRI on - - - - - 34 11 - 9 14 Financial items NRI on tax 145 114 3 9 19 63 56 - 2 5 ------------------------------------------------------------------- NRI on Net -394 -278 -20 -24 -72 227 177 - 56 -6 Loss/Profit ------------------------------------------------------------------- ------------------------------------------------------------------- NRI on Net Loss/Profit attributabl e to Owners of -369 -253 -20 -24 -72 221 175 - 52 -6 the Parent Non-controll -25 -25 - - - 6 2 - 4 - ing interests ------------------------------------------------------------------- -394 -278 -20 -24 -72 227 177 - 56 -6 ------------------------------------------------------------------- Fair Valuations and Non-operational Items* by Segment EUR million 2013 Q4/13 Q3/13 Q2/13 Q1/13 2012 Q4/12 Q3/12 Q2/12 Q1/12 -------------------------------------------------------------------------------- Printing and 2 3 -1 - - -1 - - - -1 Reading Biomaterials -11 5 -2 -11 -3 -29 6 -7 -24 -4 Building and - - - - - -3 -1 - - -2 Living Renewable -1 - -1 - - -1 - - - -1 Packaging Other 5 14 1 -6 -4 -25 -19 -6 -10 10 ------------------------------------------------------------------- Fair -5 22 -3 -17 -7 -59 -14 -13 -34 2 Valuations and Non-operati onal Items on Operating Loss/Profit ------------------------------------------------------------------- * Fair valuations and non-operational items include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights, valuations of biological assets and Group's share of tax and net financial items of EAI. Operating Profit/Loss by Segment EUR million 2013 Q4/13 Q3/13 Q2/13 Q1/13 2012 Q4/12 Q3/12 Q2/12 Q1/12 -------------------------------------------------------------------------------- Printing and -608 -499 20 -47 -82 292 126 53 56 57 Reading Biomaterials 68 21 14 14 19 46 27 25 -9 3 Building and 68 19 24 28 -3 26 6 1 11 8 Living Renewable 437 217 71 81 68 219 17 83 73 46 Packaging Other 69 24 29 -2 18 118 78 3 24 13 ------------------------------------------------------------------- Operating 34 -218 158 74 20 701 254 165 155 127 Profit/Loss (IFRS) Net -223 -64 -56 -47 -56 -220 -50 -63 -70 -37 financial items ------------------------------------------------------------------- Loss/Profit -189 -282 102 27 -36 481 204 102 85 90 before Tax Income tax 118 122 -18 -6 20 9 62 -21 -16 -16 expense ------------------------------------------------------------------- Net -71 -160 84 21 -16 490 266 81 69 74 Loss/Profit ------------------------------------------------------------------- Key Exchange Rates for the Euro One Euro is Closing Rate Average Rate ------------------------------------------------------- 31 Dec 13 31 Dec 12 31 Dec 13 31 Dec 12 ------------------------------------------- ------------------------------------------- SEK 8.8591 8.5820 8.6505 8.7067 USD 1.3791 1.3194 1.3281 1.2856 GBP 0.8337 0.8161 0.8493 0.8111 ------------------------------------------- Transaction Risk and Hedges in Main Currencies as at 31 December 2013 EUR million EUR USD SEK GBP Other Total -------------------------------------------------------------------------------- Sales during 2013 6 270 1 430 1 180 550 1 114 10 544 Costs during 2013 -5 580 -580 -2 220 -70 -1 010 -9 460 -------------------------------------------- Net amount 690 850 -1 040 480 104 1 084 -------------------------------------------- Estimated annual net operating cash 950 -780 530 flow exposure Transaction hedges as at 31 Dec -450 450 -260 2013 -------------------------------------------- Hedging percentage as at 31 Dec 47% 58% 49% 2013 for the next 12 months -------------------------------------------- Changes in Exchange Rates on Operational EBIT Operational EBIT: Currency Strengthening of + 10% EUR million -------------------------------------------------------------- -------------------------------------------------- USD 95 SEK -78 GBP 53 ------------ The sensitivity is based on estimated next 12 months net operating cash flow. The calculation does not take into account currency hedges, and assumes no changes occur other than a single currency exchange rate movement. Weakening would have the opposite impact. Fair Values of Financial Instruments The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: * Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; * Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; * Level 3: techniques which use inputs which have a significant effect on the recorded fair values that are not based on observable market data. The valuation techniques are described in more detail in the Financial Statements. Carrying Amounts of Financial Assets and Liabilities by Measurement and Fair Value Categories: 31 December 2013 EUR million Loans Financial Hedging Availab Carryi Fair and Items Derivati le- ng Value Receivab at Fair ves for-Sal Amount les Value e s through Financi Income al Statement Assets -------------------------------------------------------------------------------- Financial Assets Available-for-sale - - - 371 371 371 Non-current loan 80 - - - 80 82 receivables Trade and other 1 254 2 - - 1 256 1 256 operative receivables Interest-bearing 135 82 32 - 249 249 receivables Current investments and 2 065 - - - 2 065 2 065 cash -------------------------------------------------------- Carrying Amount by 3 534 84 32 371 4 021 4 023 Category -------------------------------------------------------- --------------------------------------------------------- EUR million Financial Hedging Measured Carryi Fair Items Derivati at ng Value at Fair ves Amortise Amount Value d s through Cost Income Statement -------------------------------------------------------------------------------- Financial Liabilities Non-current debt - 4 3 698 3 702 3 870 Current portion of - - 505 505 505 non-current debt Interest-bearing 101 39 479 619 619 liabilities Trade and other - - 1 370 1 370 1 370 operative payables Bank overdrafts - - 12 12 12 --------------------------------------------------------- Carrying Amount by 101 43 6 064 6 208 6 376 Category --------------------------------------------------------- --------------------------------------------------------- EUR million Level Level 2 Level 3 Total 1 -------------------------------------------------------------------------------- Derivative Financial - 116 - 116 Assets Available-for-sale 10 - 361 371 Financial Assets Derivative Financial - 144 - 144 Liabilities --------------------------------------------------------- Reconciliation of Level 3 Fair Value Measurement of Financial Assets: 31 December 2013 EUR million Unlisted Unlisted Interest-bearing Total Shares Securities -------------------------------------------------------------------------------- Opening balance at 1 January 2013 451 90 541 Interest capitalised - 9 9 Gains (losses) recognised in 1 2 3 income statement Gains in OCI transferred to - -7 -7 income statement Losses recognised in other -97 - -97 comprehensive income Additions 9 - 9 Disposals -3 -94 -97 ---------------------------------------------- Closing Balance at 31 December 361 - 361 2013 ---------------------------------------------- Unlisted shares The unlisted shares consist mainly of PVO shares for which the valuation method is described in more detail in the Annual Report. The valuation is most sensitive to changes in electricity prices and discount rates. The discount rate of 5.01% used in the valuation model is determined using the weighted average cost of capital method. A +/- 5% change in the electricity price used in the DCF would change the valuation by +/- EUR 37 million and a +/- 1% change in the discount rate would change the valuation by -/+ EUR 46 million. Unlisted Interest-bearing Securities During the third quarter of 2013, a EUR 99 million loan note issued by Papyrus Holding AB, classified in the Statement of Financial Position as an unlisted interest-bearing security, was derecognised as a result of the Group receiving a cash prepayment of EUR 40 million, with the terms on the remaining portion of the loan being changed through mutual agreement. The new loan note has been classified in the Statement of Financial Position as a non-current loan receivable. Stora Enso Shares --------------- Trading volume Helsinki Stockholm ------------------------------------------ A share R share A share R share --------------------------------------------------------- October 128 594 77 573 305 279 783 28 709 510 November 687 350 62 914 314 309 857 17 772 810 December 81 145 44 727 753 115 924 17 297 136 ------------------------------------------ Total 897 089 185 215 372 705 564 63 779 456 ------------------------------------------ Closing Price Helsinki, EUR Stockholm, SEK ------------------------------------------ A share R share A share R share --------------------------------------------------------- October 6.97 6.85 61.45 60.25 November 7.35 7.27 65.25 64.55 December 7.31 7.30 65.30 64.55 ------------------------------------------ Calculation of Key Figures Operational return on capital 100 x Operational EBIT employed, operational ROCE (%) Capital employed1) 2) Operational return on operating 100 x Operational EBIT capital, operational ROOC (%) Operating capital1) 2) Return on equity, ROE (%) 100 x Profit before tax and non-controlling items - taxes Total equity2) Equity ratio (%) 100 x Total equity Total assets Interest-bearing net liabilities Interest-bearing liabilities - interest-bearing assets Debt/equity ratio Interest-bearing net liabilities Equity 3) Fixed Fair valuation of asset biological deprecia tion CEPS Net profit/loss for the period3) - and impairment - assets Average number of shares EPS Net profit/loss for the period3) Average number of shares Operational EBIT Operating profit/loss excluding NRI and fair valuations of the segments and Stora Enso's share of operating profit/loss excluding NRI and fair valuations of its equity accounted investments (EAI) Operational EBITDA Operating profit/loss excluding fixed asset depreciation and impairment, share of results of equity accounted investments, NRI and fair valuations Net debt to operational EBITDA ratio Interest-bearing net liabilities Operational EBITDA Last twelve months (LTM) Twelve months preceding the reporting date 1) Capital employed = Operating capital - Net tax liabilities 2) Average for the financial period 3) Attributable to owners of the Parent For further information, please contact: Seppo Parvi, CFO, tel. +358 2046 21205 Ulla Paajanen-Sainio, SVP, Investor Relations, tel. +358 2046 21242 Hanne Karrinaho, Head of Global Communications, tel. +358 2046 21446 Stora Enso's first quarter 2014 results will be published on 23 April 2014. Webcast and conference call for analysts and investors CEO Jouko Karvinen, CFO Seppo Parvi and SVP Investor Relations Ulla Paajanen-Sainio will be hosting a combined conference call and webcast today at 16.00 Finnish time (15.00 CET, 14.00 UK time, 09.00 EDT). If you wish to participate, please dial: Continental Europe and UK +44(0)20 3427 1919 Finland +358 (0)9 6937 9543 Sweden +46 (0)8 5033 6539 US +1 212 444 0412 Confirmation Code: 1382582 The live webcast may be accessed at www.storaenso.com/investors Stora Enso is the global rethinker of the paper, biomaterials, wood products and packaging industry. We always rethink the old and expand to the new to offer our customers innovative solutions based on renewable materials. Stora Enso employs some 28 000 people worldwide, and our sales in 2013 amounted to EUR 10.5 billion. Stora Enso shares are listed on NASDAQ OMX Helsinki (STEAV, STERV) and Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY) in the International OTCQX over-the-counter market. It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by 'believes', 'expects', 'anticipates', 'foresees', or similar expressions, are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties, which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group's products and the pricing pressures thereto, price fluctuations in raw materials, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group's principal geographic markets or fluctuations in exchange and interest rates. www.storaenso.com www.storaenso.com/investors STORA ENSO OYJ News Source: NASDAQ OMX End of Corporate News --------------------------------------------------------------------- 05.02.2014 Dissemination of a Corporate News, transmitted by DGAP - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Stora Enso Oyj Finland ISIN: FI0009005961 End of News DGAP News-Service --------------------------------------------------------------------- 251160 05.02.2014
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