Stora Enso Oyj Financial Statement Release 2020

Q4/2020 (year-on-year)
- Sales decreased by 10.7% to EUR 2 154 (2 411) million, due to structural changes, lower prices and volumes.
- Operational EBIT was EUR 118 (124) million, lower sales were mitigated by efficient cost management.
- Operational EBIT margin increased to 5.5% (5.1%).
- Operating profit (IFRS) decreased to EUR 289 (680) million.
- EPS was EUR 0.30 (0.66) and EPS excl. fair valuations was EUR 0.09 (0.04).
- Cash flow from operations amounted to EUR 436 (725) million. Cash flow after investing activities was EUR 223 (518) million.
- The net debt to operational EBITDA ratio was 2.3 (2.0).
- Operational ROCE excluding Forest division was 4.6% (5.0%).

Year 2020 (year-on-year)
- Sales were EUR 8 553 (10 055) million, mainly due to lower volumes and prices, and structural changes.
- Operational EBIT decreased to EUR 650 (1 003) million, due to lower sales.

Outlook for 2021
Stora Enso resumes an annual outlook even though the uncertainties due to the ongoing pandemic in the global economy are expected to remain in 2021. Provided that the vaccination programmes progress as planned and the virus is contained, there are expectations of economic recovery. Until then, demand for our products remains mixed.

Operational EBIT in 2021 is expected to be higher than the 2020 operational EBIT.

Stora Enso will conclude its EUR 400 million profit protection programme by the end of 2021. The expected fixed and variable cost savings for the year are approximately EUR 80 million. The Group will continue to focus on customer service and cash flow generation in 2021.

The Oulu Mill conversion is estimated to have approximately EUR 20 million negative impact on the Packaging Materials Q1/2021 operational EBIT. The total impact on operational EBIT is forecasted to be approximately EUR 45-55 million negative for the full year 2021. The mill is planned to reach designed capacity by the end of Q2/2021, commercialisation of product portfolio by the end of 2021 and operational EBITDA break-even in Q1/2022.

Stora Enso’s President and CEO Annica Bresky (photo) comments on the fourth quarter 2020 results:
“Looking back at 2020, my first year as CEO for Stora Enso, I can undoubtedly say that it has been extremely eventful. The year has been marked by the global pandemic and slowdown of the global economy, but also by geopolitical unrest, Brexit and – for Stora Enso during the first quarter – the strikes in Finland. So, concluding with the fourth quarter, in an environment that is still volatile, I am very satisfied that we deliver steady results in line with Q4/2019. If we exclude Paper, operational EBIT increased to EUR 122 (80) million. Sequentially quarter on quarter, we can see improved sales, an indication that the markets are moving in the right direction. We are delivering on our EUR 400 million savings promise and we have further reduced working capital to record low levels, enhancing our cash flow. Our own actions have made all the difference.

The main parts of our businesses have performed well during a quarter that is maintenance heavy. We see increased activity on the market and continued good development in Packaging Materials and Packaging Solutions. Results for the Forest division are strong, and Wood Products delivered the second best Q4 results ever. For Biomaterials, there are positive signs of price recovery, as the supply and demand situation is more balanced, and China continues to recover. The accelerated structural decline persists in the paper business, leading to overcapacity and severe price pressure. Despite this, Paper delivered good cash flow.

The conversion of Oulu Mill is in a start-up phase. Its new products will strengthen our offering in the growing packaging business. This is a major step forward in our transformation. To further establish Stora Enso as a provider of high-quality, renewable packaging materials, we have also started a feasibility study for expanding pulp and board capacity at our production site in Skoghall. Moreover, we are investing EUR 80 million to modernise the wood handling capacity at Imatra Mills, where we are one of the world’s largest producers of liquid packaging board, serving customers globally. These investments strengthen our capabilities for premium solutions for food, beverage and luxury packaging. And they are in line with our strategy: to accelerate growth in the packaging business, allowing us to meet the increasing demand for sustainable packaging among consumers.

Lignin is one of our key innovation areas for delivering growth in new applications, such as energy storage, binders and carbon fiber. As the largest producer in the world, we are investing EUR 14 million to build a granulation and packing plant for lignin. In addition to reducing both packaging and transportation costs, granulated lignin is easier to handle for our customers.

The real value of our forests, the foundation for our renewable raw material, has also been brought to light. After the new market based valuation method for our Nordic forest assets, the total value of our forest assets is over EUR 7 billion, an increase of almost EUR 2 billion. As part of our active forest management, we divested over 5 000 hectares of non-core forest for approximately EUR 90 million. This is a clear proof point of the value that the forest represents.

Following the green bonds issued in 2019 and 2020 in the Swedish market, I am also pleased that we have now issued our first euro green bond, and the interest from the market was big. This will allow us to continue strengthening our position as the leading renewable materials company and fits our sustainable finance strategy well.

On the note of sustainability and enabling a circular economy, I’d like to mention that we are joining forces with our customer TetraPak to explore the possibility of building a new recycling line in Poland. This would significantly increase the recycling of used beverage cartons in Europe and support in making our customers’ brands circular.

Lastly, in 2020 our Board of Directors changed the 2019 dividend proposal due to business impact uncertainties related to Covid-19. In Q4, the Board decided on a second dividend installment. It was paid in December to our valued shareholders, bringing the total 2019 dividend to EUR 0.30 per share. For the financial year 2020, the Board of Directors proposes to the Annual General Meeting a dividend of 0.30 euros per share. This is aligned with our new policy to pay half of the EPS excluding fair valuations as dividend over the cycle.

To summarise, I’m proud of our achievements and how our people have not only adjusted, but also stepped up to meet the challenges. We have renewed our strategy and long-term financial targets, shaping our business for accelerated growth and value. Now I am excited to continue executing our chosen direction with the whole Stora Enso team, our customers and partners.

The renewable future grows in the forest.”