Stora Enso Interim Review January-March 2007
Strong operating profit improvement driven by Fine Paper and Wood Products;
challenging quarters ahead
Summary of First Quarter Results (compared with Q1/2006)
* Sales were EUR 3 855.4 (EUR 3 607.7) million.
* Operating profit was EUR 307.3 (EUR 247.0) million excluding non-recurring
items. Operating profit was EUR 339.3 (EUR 223.8) million including non-
recurring items.
* Profit before tax was EUR 274.8 (EUR 210.9) million excluding non-recurring
items. Profit before tax was EUR 306.8 (EUR 317.7) million including non-
recurring items.
* Net profit excluding non-recurring items was EUR 207.2 (EUR 158.3) million.
Net profit including non-recurring items was EUR 222.5 (EUR 226.4) million.
* Earnings per share were EUR 0.26 (EUR 0.20) excluding non-recurring items.
Cash earnings per share were EUR 0.59 (EUR 0.54) excluding non-recurring
items.
Earnings per share including non-recurring items were EUR 0.28 (EUR 0.29).
* ROCE excluding non-recurring items was 10.8% (8.5%).
Message from CEO Jouko Karvinen:
Group earnings strongly improved, but challenging quarters ahead"We are delighted to report strong earnings improvements in Fine Paper and Wood
Products, and a good performance by Packaging Boards. There was a slight decline
in Publication Paper's profitability in very challenging market conditions for
magazine paper. However, in the next few months we are planning to curtail
production at some of our Finnish pulp mills owing to wood supply constraints
resulting from an unusually short winter harvesting season in Baltic Sea region
and in Russia, and uncertainties around the Russian wood export tax. These
stoppages, together with increased wood costs and a higher level of seasonal
holiday and maintenance stoppages will negatively impact earnings in the second
quarter, although earnings should remain higher than a year earlier. We are
working rigorously to increase wood supply around the Baltic Sea basin and to
solve the issues concerning Russian wood export tax in good co-operation with
our
stakeholders.
Overall market situation is relatively good, with a few exceptions"The overall market situation and outlook are relatively healthy. Conditions do
vary, however, between customer segments and regions. Currently, two of the
biggest challenges in our industry are weak magazine paper prices worldwide and
the uncertain trend in demand for printing and writing papers and newsprint in
North America. On a positive note, prospects for our Fine Paper, Newsprint and
Wood Products divisions in Europe are good, and Packaging Boards continues to
perform well""Cost inflation remains a real issue for our industry, particularly for wood.
The
additional export duties on roundwood announced by Russia, the European Union's
drive to increase the utilisation of wood fibre as biofuel and the pressure from
Non-Governmental Organisations with environmental concerns about wood harvesting
in certain areas are all contributing to concerns over wood supply. We are
convinced that all stakeholders, not least in Finland and Russia, understand the
seriousness of the situation and will work with us to find positive solutions to
these challenges acceptable to all parties concerned in the coming months and
years.
Group's ROCE target of 13% over the cycle remains"As we stated at our Annual General Meeting, we remain committed to our target
of
achieving a ROCE of 13% over the cycle. Our business and geographical portfolio
review is progressing well. As stated before, we do not intend to announce
a single multi-year plan or lists of businesses under scrutiny. Rather we will
announce key decisions and actions when appropriate. The result will be a more
focused Group, with businesses that all contribute to our financial improvement
and strategic goals."Another imperative is continual cost improvement to be realised primarily
through
structural simplification and choices. We will also be building upon our
successful strategy in new growth markets, such as further development of our
Latin American operations."We will also emphasise our customer-driven product innovations, such as media
packaging solutions and the positive results from the never-ending drive for
operational excellence evidenced by the world speed record in production at our
Kvarnsveden SC Paper Machine 12 in the first quarter."Even with some short-term challenges and lots of decisions and choices to make,
we are convinced that we will find our way to long-term, sustainable value
creation. Based on track record of 2006 and the first quarter of 2007, even in a
challenging environment, our goal in the future is to stay on the year-on-year
improvement path.
Near-term market outlook"In Europe the positive economic outlook is expected to support the consumption
of
advertising-driven paper grades. Stable prices for newsprint are anticipated but
in magazine paper price pressure persists in non-contractual business. The
outlook
for fine paper remains healthy and prices are forecast to rise. Demand for
packaging boards is expected to remain firm with prices rising in some business
segments. Good, stable demand for wood products should keep the outlook for
prices
relatively steady."In North America the demand outlook for publication paper grades and coated
fine
paper is uncertain. Prices may remain under pressure."In Latin America demand for coated magazine paper is predicted to strengthen,
but
competition is expected to remain intense. In China a slight improvement in
demand
for coated fine paper is anticipated, keeping prices stable."
Markets
Compared with Q1/06
In Europe market demand was stable for newsprint but improved for magazine
paper,
fine paper, packaging boards and wood products. Prices were higher than a year
ago
in newsprint and lower in magazine paper. Prices were unchanged in coated fine
paper, but higher in uncoated fine paper. Prices for most packaging boards and
wood products were higher.
In North America market demand for newsprint was clearly weaker than a year ago,
but virtually unchanged for coated magazine paper and stronger for uncoated
magazine paper. Prices declined in newsprint and magazine paper markets. Demand
for coated fine paper weakened slightly during the year and prices were lower.
In Latin America demand for coated magazine paper increased, whereas prices
decreased.
In China demand for coated fine paper also increased, but prices decreased.
Compared with Q4/06
In Europe market demand was somewhat stronger than in the previous quarter in
fine
paper, packaging boards and wood products, but seasonally weaker in publication
paper. Prices rose in newsprint, uncoated fine paper, some packaging grades and
wood products. Coated fine paper prices were stable, but magazine paper prices
declined.
In North America demand for all publication papers weakened and prices declined.
In coated fine paper demand increased slightly, mainly for seasonal reasons, but
prices decreased.
In Latin America market demand for coated magazine paper weakened slightly, but
prices remained unchanged.
In China demand for coated fine paper was stable, but prices declined slightly.
Stora Enso Deliveries and Inventories
Changes
Q4 Q1 Q1 Q1/07- Q1/07-
2006 2006 2007 Q1/06 Q4/06
Paper and Board deliveries
(1 000 tonnes) 3 735 3 619 3 790 171 55
Wood Products deliveries (1 000 m3) 1 670 1 563 1 666 103 -4
Paper and Board Production
(1 000 tonnes) 3 740 3 751 3 833 82 93
January-March 2007 Results (compared with Q1/2006)
Sales at EUR 3 855.4 million were 6.9% higher than in the first quarter of 2006,
mainly due to higher average prices for fine paper and wood products, and
increased deliveries of publication paper, packaging boards and wood products.
The
net impact on sales of the acquisition of Arapoti Mill in Brazil together with
the
divestment of Pankakoski, Celbi and Grycksbo mills was EUR -42.7 million.
Operating profit excluding non-recurring items increased by EUR 60.3 million to
EUR 307.3 million, which is 8.0% of sales. Profitability was higher in all
segments except Publication Paper. Prices rose in wood products and uncoated
fine
paper. In Publication Paper, operating profit decreased as higher newsprint
prices
only partly offset lower magazine paper prices. Wood and energy costs were
materially higher in the first quarter of 2007 than a year earlier.
Key Figures
Change
Change
% Q1/ %
Q1/
07-
07-
EUR million 2005 2006 Q4/06 Q1/06 Q1/07 Q1/06
Q4/06
Sales 13 187.5 14 593.9 3 731.8 3 607.7 3 855.4 6.9
3.3
EBITDA excluding
non-recurring
items 1 501.1 1 872.8 472.4 516.2 568.9 10.2
20.4
Operating profit
excluding non-
recurring items 371.2 782.1 187.6 247.0 307.3 24.4
63.8
Non-recurring
items (operational) -417.3 -133.7 60.0 -23.2 32.0 n/a
-46.7
Operating margin
excluding non
recurring items, % 2.8 5.4 5.0 6.8 8.0 17.6
60.0
Operating profit -46.1 648.4 247.6 223.8 339.3 51.6 37.0
Net financial
items1) -165.3 -104.0 -38.6 62.3 -56.7 n/a
-46.9
Profit before
tax and minority
interests excluding
non-recurring items 273.1 602.5 141.4 210.9 274.8 30.3
94.3
Profit before
tax and minority
interests -144.2 631.8 234.4 317.7 306.8 -3.4
30.9
Net profit for
the period excluding
non-recurring items 230.3 439.4 101.4 158.3 207.2 30.9
104.3
Net profit for
the period -107.4 589.2 264.8 226.4 222.5 -1.7
-16.0
EPS excluding
non-recurring
items, Basic, EUR 0.28 0.55 0.13 0.20 0.26 30.0
100.0
EPS, Basic, EUR -0.14 0.74 0.33 0.29 0.28 -3.4
-15.2
CEPS excluding
non-recurring
items, EUR 1.70 1.94 0.49 0.54 0.59 9.3
20.4
ROCE excluding
non-recurring
items, % 3.4 6.8 6.7 8.5 10.8 27.1
61.2
1) Includes capital gains of EUR 130.0 million (sale of Sampo shares) in
Q1/2006,
EUR 33.0 million (sale of Finnlines shares) in Q4/2006 totalling to
EUR 163.0 million in 2006.
CEPS = (Net profit for the period + depreciation and amortisation)/average
number
of sharesNon-recurring items are exceptional transactions that are not related
to
normal business operations. The most common non-recurring items are capital
gains,
additional write-downs, restructuring provisions and penalties. Non-recurring
items are normally specified individually if they exceed one cent per share.
Deliveries of wood to the Group's mills in Europe and Brazil totalled 11.1
million
cubic metres, which is similar to the first quarter of 2006 and up 8% on the
previous quarter.
A storm at the beginning of the quarter improved wood supplies and wood prices
turned down in Continental Europe. In the Nordic countries market prices rose
and
market supplies increased. However, decreasing imports from Russia and a very
short and warm winter weakened the overall delivery balance.
Operating profit includes a positive non-operational effect of EUR 15.7 million
(positive EUR 35.3 million), comprising a positive EUR 19.4 million net due to
EUR -12.0 million and EUR 31.4 million respectively from the accounting of
share-
based compensation and Total Return Swaps (TRS), and a charge of EUR 3.7 million
from the reduced value of government grants related to CO2 emission rights.
These
non-operational items include a non-cash impact of EUR 2.4 million and they are
reported in the segment Other.
TRS instruments, which are only partially hedging cash settled synthetic
options,
do not qualify for hedge accounting under IFRS criteria, and therefore all
periodic changes to their fair value are recorded in the Income Statement; they
were previously presented in other financial items. From the first quarter of
2007
onwards, the TRS-related gains and losses, the fair value changes and cash
flows,
are presented in operating profit under personnel expenses and the comparative
years have been reclassified accordingly; the reclassification improved
operating
profit by EUR 31.4 million (EUR 52.9 million) and increased financial expenses
correspondingly.
There were two non-recurring items with a net positive impact of EUR 32.0
million
(negative EUR 23.2 million) on operating profit: the new labour agreements in
North America had a positive impact of EUR 44.0 (USD 57.7 million) million and
closure of Sauga Sawmill in Estonia had a negative impact of EUR 12.0 million.
The share of associated company results amounted to EUR 24.2 (EUR 31.6) million;
the main contributions were from Bergvik Skog, Tornator and Veracel.
Net financial items were EUR -56.7 million (positive EUR 62.3 million). Net
interest expenses increased to EUR 60.7 (EUR 52.8) million and net foreign
exchange gains on borrowings, currency derivatives and bank accounts were
EUR 3.6(losses of EUR 7.0) million. Other financial items totalled positive
EUR 0.4 (positive EUR 122.1) million, the decrease being mainly due to a non-
recurring capital gain of EUR 130.0 million from the sale of shares in Sampo Oyj
during the first quarter of 2006.
Profit before taxes and minority interests excluding non-recurring items
increased
by EUR 63.9 million to EUR 274.8 million and profit before tax amounted to
EUR 306.8 (EUR 317.7) million including non-recurring items.
Net taxes totalled EUR -84.3 (EUR -91.3) million, leaving a net profit for the
quarter of EUR 222.5 (EUR 226.4) million. The cumulative tax-rate for the first
three months was 27.5%.
The profit attributable to minority shareholders was EUR 3.3 (EUR 1.4) million,
so the profit attributable to Company shareholders was
EUR 219.2 (EUR 225.0) million.
Earnings per share excluding non-recurring items increased by
EUR 0.06 to EUR 0.26. Earnings per share including non-recurring items
were EUR 0.28 (EUR 0.29). Cash earnings per share were EUR 0.59 (EUR 0.54)
excluding non-recurring items.
The return on capital employed was 10.8% (8.5%) excluding non-recurring items.
Capital employed was EUR 11 478.5 million on 31 March 2007, approximately the
same
as a year earlier.
First Quarter Results (compared with Q4/2006)
Sales at EUR 3 855.4 million were 3.3% higher than the previous quarter's
EUR 3 731.8 million. Deliveries increased in fine paper and packaging boards and
decreased in publication paper. Prices increased in newsprint, uncoated fine
paper, wood products and somewhat in packaging boards, but decreased in magazine
paper.
Operating profit excluding non-recurring items increased by EUR 119.7 million to
EUR 307.3 (EUR 187.6) million, which is 8.0% of sales. Operating profit
increased
in all product segments except Publication Paper. Strong demand and higher
prices
increased operating profit in Fine Paper and Wood Products. Operating profit in
Packaging Boards increased mainly due to seasonally higher production and
delivery
volumes. Publication Paper operating profit decreased, mainly because decreases
in
magazine paper prices were only partly offset by increases in newsprint prices.
Wood costs were higher than in the previous quarter.
Profit before tax amounted to EUR 274.8 (EUR 141.4) million excluding
non-recurring items and EUR 306.8 (EUR 234.4) million including non-recurring
items.
Earnings per share were EUR 0.26 (EUR 0.13) excluding non-recurring items.
Earnings per share including non-recurring items were EUR 0.28 (EUR 0.33). Cash
earnings per share were EUR 0.59 (EUR 0.49) excluding non-recurring items.
The return on capital employed was 10.8% (6.7%) excluding non-recurring items.
Capital employed was EUR 11 478.5 million on 31 March 2007, a net increase of
EUR 146.7 million due to increased working capital partly offset by low capital
expenditure.
Capital Structure
Change % Change %
31 Mar 31 Mar
07 - 07 -
31 Dec 06 31 Mar 06 31 Mar 07 31 Mar 31 Dec
EUR million 06 06
Fixed assets 11 234.7 11 454.3 11 029.2 -3.7 -1.8
Operative working capital 2 174.5 2 509.6 2 388.3 -4.8 9.8
Non-current interest-free
items, net -1 204.0 -1 312.1 -1 050.7 -19.9 -12.7
Operating Capital Total 12 205.2 12 651.8 12 366.8 -2.3 1.3
Net tax liabilities -873.4 -1 125.5 -888.3 -21.1 1.7
Capital Employed 11 331.8 11 526.3 11 478.5 -0.4 1.3
Associated companies 805.2 754.7 868.3 15.1 7.8
Total 12 137.0 12 281.0 12 346.8 0.5 1.7
Equity attributable to Company
shareholders 7 799.6 7 072.4 7 642.0 8.1 -2.0
Minority interests 103.5 93.0 106.2 14.2 2.6
Net interest-bearing
liabilities 4 233.9 5 115.6 4 598.6 -10.1 8.6
Financing Total 12 137.0 12 281.0 12 346.8 0.5 1.7
Financing
Cash flow from operations was EUR 210.2 (EUR 603.9) million and cash flow after
investing activities EUR 101.3 (EUR 424.2) million compared with the fourth
quarter of 2006. Cash flow decreased due to increased working capital.
At the end of the period, interest-bearing net liabilities were
EUR 4 598.6 million, an increase of EUR 364.7 million due to the EUR 354.9
million
dividend for 2006 being deducted from equity and entered into current interest-
bearing liabilities for payment on 17 April 2007. Unutilised credit facilities
and
cash and cash-equivalent reserves totalled EUR 2.2 billion.
Shareholders' equity amounted to EUR 7 642.0 million or EUR 9.69 (EUR 9.89) per
share, compared with the market capitalisation on the Helsinki Stock Exchange on
31 March 2007 of EUR 10.2 billion.
The debt/equity ratio at 31 March 2007 was 0.60 (0.54). The currency effect on
equity was EUR -45.2 million net of the hedging of equity translation risks.
Cash Flow
Change % Change %
Q1/07 - Q1/07 -
EUR million 2006 Q1/06 Q4/06 Q1/07 Q1/06 Q4/06
Operating profit 648.4 223.8 247.6 339.3 51.6 37.0
Adjustments* 1 060.9 265.9 297.0 256.2 -3.6 -13.7
Change in working capital 199.1 -189.9 59.3 -385.3 -102.9 n/m
Cash Flow from Operations 1 908.4 299.8 603.9 210.2 -29.9 -65.2
Capital expenditure -583.4 -167.7 -179.7 -108.9 35.1 39.4
Cash Flow after Investing
Activities 1 325.0 132.1 424.2 101.3 -23.3 -76.1
*) Adjustments include depreciations, other non-cash income and expenses and
capital gains and losses which are included in proceeds from the sale of fixed
assets and shares.
Capital Expenditure for the First Quarter of 2007
Capital expenditure for the first quarter totalled EUR 108.9 million, which is
42% of scheduled depreciation and 3% of sales. The Group's capital expenditure
for 2007 is expected to be about EUR 900 million.
The main projects during the first three months were the plantation projects at
Guangxi, China (EUR 9.2 million) and in South America (EUR 6.1 million) and
paper
machine 3 at Varkaus Mill in Finland (EUR 6.7 million).
Asset Performance Review (APR)
The schedule for closing Berghuizer Mill in the Netherlands has been finalised,
with paper machine PM 7 permanently ceasing production on 16 April 2007 and
PM 8 on 31 October 2007. These machines had a total capacity of 245 000 tonnes
of uncoated fine paper per year. Approximately 80 000 tonnes of Berghuizer
Mill's annual production is expected to be transferred to Stora Enso's Nymölla
Mill in Sweden. The annual capacity of Nymölla Mill will remain unchanged at
485 000 tonnes, but the mill has upgraded some of its assets to supply higher
quality products with better margins and to improve its customer service.
Short-term risks and uncertainties
The availability and cost of pulpwood and increasing recovered fibre prices are
near-term business uncertainties. The company is taking actions to mitigate
these
risks.
Near-term market outlook
In Europe the positive economic outlook is expected to support the consumption
of
advertising-driven paper grades. Stable prices for newsprint are anticipated but
in magazine paper price pressure persists in non-contractual business. The
outlook
for fine paper remains healthy and prices are forecast to rise. Demand for
packaging boards is expected to remain firm with prices rising in some business
segments. Good, stable demand for wood products should keep the outlook for
prices
relatively steady.
In North America the demand outlook for publication paper grades and coated fine
paper is uncertain. Prices may remain under pressure.
In Latin America demand for coated magazine paper is predicted to strengthen,
but
competition is expected to remain intense. In China a slight improvement in
demand
for coated fine paper is anticipated, keeping prices stable.
First Quarter Events
January
Stora Enso signed a loan agreement with the European Investment Bank (EIB) for a
EUR 140 million loan facility to finance part of Stora Enso's investment in
research and development in Finland and Sweden for the next five years. The
facility, which is expected to be fully drawn, is the result of good long-term
co-operation between EIB and Stora Enso.
March
Stora Enso announced that it will expand its corrugated packaging business in
Eastern Europe and Russia by constructing new plants at Balabanovo in Russia and
Komarom in Hungary, and by expanding the existing plant at Lodz in Poland. The
corrugated packaging markets in Eastern Europe and Russia are developing
rapidly.
Stora Enso's expansions are targeted at meeting customers' growing demand for
value-added corrugated packaging. These developments are in line with Stora
Enso's
strategy of growing its packaging business and its operations in new growth
markets.
Stora Enso also announced that it plans to close down Sauga Sawmill in Estonia
in
June 2007 owing to a continuing shortage of raw material, resulting in higher
costs and unprofitable operations. The closure will not have a material impact
on
Stora Enso's annual sales, but it is expected to have a slightly positive impact
on the Group's full year 2007 operating profit. The Company has recorded a
write-down and restructuring provision totalling about EUR 12 million as
non-recurring items in the first quarter of 2007.
Stora Enso signed an agreement with Neste Oil to join forces to develop
technology
for producing new-generation biofuels from wood residues to replace fossil fuels
in transportation and thus cut greenhouse gases. The first step will be to
design
and build a full scale test plant at Stora Enso's Varkaus Mill in Finland. This
plant, which will be owned on a 50/50 basis by the parties, is expected to start
up in 2008.
Inspections by Competition Authorities
Concluding an investigation initiated in 2004, the US Antitrust authorities
announced on 13 December 2006 that Stora Enso North America Corp. had been
indicted for its alleged anticompetitive conduct in connection with the sale of
coated magazine paper in the USA from autumn 2002 until spring 2003. No Stora
Enso
employee was charged individually. Stora Enso denies any wrongdoing and has
entered a plea of not guilty in response to the indictment. The Group expects
the
trial to occur in 2007. Coincident with this investigation, Stora Enso has been
named in a number of class action lawsuits filed in the USA.
On 21 December 2006 Stora Enso announced that the Finnish Competition Authority,
as a result of an investigation initiated in 2004, had proposed to the Finnish
Market Court that a fine of EUR 30 million be imposed on Stora Enso for
violating
competition laws in the purchasing of wood in Finland in the period from 1997 to
2004. Stora Enso considers the proposal groundless.
No provision has been made in Stora Enso's accounts for the above-mentioned
investigations and lawsuits.
Changes in the Group Management
As announced on 17 October 2006, Stora Enso's Board of Directors appointed Jouko
Karvinen, M.Sc. (Eng.), as the new CEO of Stora Enso. He joined the company on
1 January 2007 and took up the position of CEO following the Annual General
Meeting (AGM) on 29 March 2007.
Jukka Härmälä left the position of CEO at the AGM on 29 March 2007. He will
continue to undertake special assignments specified by the Board of Directors of
Stora Enso until the end of August 2007.
On 29 March Stora Enso's Board of Directors appointed Hannu Ryöppönen as Deputy
CEO in addition to his existing role as CFO. Certain Group-wide functional
responsibilities will also be added to his responsibilities in the future.
Divisions continue to report to the CEO, Jouko Karvinen.
On 20 March Stora Enso announced that Pekka Laaksonen, Senior Executive Vice
President, Fine Paper and member of the Executive Management Group (EMG), had
accepted the position of CEO with Valio Ltd. He will relinquish his current
duties
with Stora Enso by 15 August 2007.
Share Capital
During the quarter 450 A shares were converted into R shares. The conversion was
recorded in the Finnish Trade Register on 15 February 2007.
During the quarter the Company allocated 10 901 repurchased R shares under the
terms of the Stora Enso North America Option Plan.
On 31 March 2007 Stora Enso had 178 102 667 A shares and 611 435 832 R shares in
issue, of which the Company held no A shares and 941 726 R shares with a nominal
value of EUR 1.6 million. The holding represents 0.12% of the Company's share
capital and 0.04% of the voting rights.
Decisions of the Annual General Meeting on 29 March 2007
The proposed dividend of EUR 0.45 per share was approved.
The AGM approved a proposal that the Board of Directors shall have nine members
and that of the present members Gunnar Brock, Lee A. Chaden, Claes Dahlbäck,
Dominique Hériard Dubreuil, Birgitta Kantola, Ilkka Niemi, Jan Sjöqvist, Matti
Vuoria and Marcus Wallenberg be re-elected to continue in office.
The AGM also approved a proposal to appoint a Nomination Committee to prepare
proposals concerning (a) the number of members of the Board of Directors, (b)
the
members of the Board of Directors, (c) the remuneration for the Chairman, Vice
Chairman and members of the Board of Directors and (d) the remuneration for the
Chairman and members of the committees of the Board of Directors.
Decisions by Board of Directors
At its meeting held after the AGM, the Stora Enso Board of Directors elected
from
among its members Claes Dahlbäck as its Chairman and Ilkka Niemi as Vice
Chairman.
Jan Sjöqvist (chairman), Lee A. Chaden, Claes Dahlbäck, Birgitta Kantola and
Ilkka
Niemi will continue as members of the Financial and Audit Committee.
Claes Dahlbäck (chairman), Dominique Hériard Dubreuil, Ilkka Niemi and Matti
Vuoria will continue as members of the Compensation Committee.This report is unaudited.
Helsinki, 26 April 2007
Stora Enso Oyj
Board of Directors
Segments
Publication Paper
Change % Change %
Q1/07 - Q1/07 -
EUR million Q4/06 Q1/06 Q1/07 Q1/06 Q4/06
Sales 1 230.5 1 171.0 1 240.5 5.9 0.8
Operating profit* 69.0 70.3 63.5 -9.7 -8.0
% of sales 5.6 6.0 5.1 -15.0 -8.9
ROOC, %** 7.0 6.8 6.5 -4.4 -7.1
Deliveries, 1 000 t 1 860 1 666 1 824 9.5 -1.9
Production, 1 000 t 1 843 1 717 1 882 9.6 2.1
* Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Publication Paper sales were EUR 1 240.5 million, 5.9% up on the first quarter
of
2006 due to increased deliveries. Operating profit was lower than in the first
quarter of 2006 at EUR 63.5 million as magazine paper prices decreased, and
energy
and wood costs increased. In Europe the annual newsprint contract negotiations
were successfully concluded with price increases averaging 5% agreed for 2007.
Publication Paper has improved its average asset structure by divesting
Wolfsheck
Mill and closing down Corbehem PM 3 and PM 4, and cost reductions from the major
restructuring at Summa, Reisholz, Norrsundet and Skutskär will enhance future
competitiveness. Resumption of operations at Port Hawkesbury Mill will
strengthen
our position in North American markets again. Nevertheless, results are
unsatisfactory, so further profit improvements are needed.
Compared with Q1/2006
In Europe newsprint demand was unchanged, but magazine paper demand improved
significantly. Producer inventories increased in newsprint and uncoated magazine
paper, but decreased in coated magazine paper. Prices were higher for newsprint
and lower for magazine paper.
In North America demand was clearly weaker for newsprint, stronger in uncoated
magazine paper and fairly stable in coated magazine paper. Inventories increased
considerably and prices were lower in all product segments.
In Latin America demand for coated magazine paper improved, but prices
deteriorated.
Compared with Q4/2006
In Europe demand for all publication paper grades was seasonally weaker than in
the previous quarter and producer inventories increased. Prices were higher for
newsprint and lower for magazine paper.
In North America demand for all publication paper grades was weaker and
inventories increased. Prices were lower in all product segments.
In Latin America market demand for coated magazine was slightly weaker, but
prices
remained unchanged.
Fine Paper
Change % Change %
Q1/07 - Q1/07 -
EUR million Q4/06 Q1/06 Q1/07 Q1/06 Q4/06
Sales 718.3 776.3 738.6 -4.9 2.8
Operating profit* 34.6 52.7 61.5 16.7 77.7
% of sales 4.8 6.8 8.3 22.1 72.9
ROOC, %** 6.4 8.2 11.4 39.0 78.1
Deliveries, 1 000 t 946 994 966 -2.8 2.1
Production, 1 000 t 947 1 029 951 -7.6 0.4
* Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Fine paper sales were EUR 738.6 million, down 4.9% on the first quarter of 2006
mainly due to the sale of Grycksbo Mill and closure of Varkaus PM 1 during 2006,
and lower coated fine paper prices. Operating profit was EUR 61.5 million, up
16.7% on the first quarter of 2006 as increased sales, higher production
efficiency and improved cost efficiency more than offset the effects of lower
sales prices, divestments and closures. In the first quarter of 2006 operating
profit included Celbi pulp mill's operating profit of EUR 13.1 million. The
operational improvement in operating profit excluding the Celbi mill effect in
the first quarter of 2006 was 55.3%.
Compared with Q1/2006
In Europe coated fine paper demand was stronger than a year ago driven by solid
economic growth in Europe, but prices were almost unchanged. Industry and Stora
Enso coated fine paper inventories decreased. Uncoated fine paper demand was
slightly stronger than a year ago due to steady economic growth, and uncoated
fine
paper prices rose. Industry and Stora Enso uncoated fine paper inventories were
lower than a year ago.
In North America coated fine paper demand weakened slightly as the economy
slowed
and prices were lower than a year ago. Industry and Stora Enso coated fine paper
inventories were lower than a year ago.
In China coated fine paper demand was stronger, but prices lower than a year
ago.
Compared with Q4/2006
In Europe coated fine paper demand was slightly stronger than in the previous
quarter, stimulated by economic growth, and prices were stable. Industry and
Stora
Enso coated fine paper inventories decreased to normal levels. Uncoated fine
paper
demand was clearly stronger than in the previous quarter due to seasonal factors
and economic growth, and prices continued to rise. Industry and Stora Enso
uncoated fine paper inventories continued to fall to extremely low levels.
In North America coated fine paper demand was slightly stronger, mainly for
seasonal reasons, but prices for reels decreased. Industry and Stora Enso coated
fine paper inventories increased slightly, but were still normal.
In China coated fine paper demand continued to grow, but prices declined
slightly.
Merchants
Sales were EUR 532.9 million, up 7.3% on the first quarter of 2006 mainly due to
increased sales volumes. Operating profit was EUR 16.6 million, up 72.9% on the
first quarter of 2006 due to successful integration of acquired operations.
Integration of recent acquisitions is proceeding well according to plan.
Structural cost savings have been achieved and internal efficiency improved.
Customers have been retained and sales have continued to increase during these
internal changes.
Packaging Boards
Change % Change %
Q1/07 - Q1/07 -
EUR million Q4/06 Q1/06 Q1/07 Q1/06 Q4/06
Sales 871.7 869.0 919.8 5.8 5.5
Operating profit* 59.4 99.5 106.5 7.0 79.3
% of sales 6.8 11.4 11.6 1.8 70.6
ROOC, %** 8.6 13.9 15.4 10.8 79.1
Deliveries, 1 000 t 929 959 1 000 4.3 7.6
Production, 1 000 t 950 1 005 1 000 -0.5 5.3
*)Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Packaging board sales were EUR 919.8 million, up 5.8% on the first quarter of
2006
mainly due to increased deliveries. The impacts of divestment of Pankakoski Mill
and closure of PM 31 at Stevens Point were offset by several improvement
actions.
Operating profit was EUR 106.5 million, up 7.0% on the first quarter of 2006,
mainly due to increased sales volumes and improved sales mix. In addition to the
successful implementation of Profit 2007 improvement initiatives, major energy
efficiency improvement projects at Skoghall and Fors started to contribute to
results.
Demand for consumer boards was generally good with volumes higher than in the
previous quarter and similar to a year ago. Prices improved slightly.
Demand for industrial packaging was good with volumes and prices higher than in
the previous quarter and a year ago.
Wood Products
Change % Change % Q1/07 - Q1/07 -
EUR million Q4/06 Q1/06 Q1/07 Q1/06 Q4/06
Sales 443.0 377.1 479.8 27.2 8.3
Operating profit* 19.0 3.8 53.7 n/m 182.6
% of sales 4.3 1.0 11.2 n/m 160.5
ROOC, %** 11.6 2.3 32.9 n/m 183.6
Deliveries, 1 000 m3 1 670 1 563 1 666 6.6 -0.2
* Excluding non-recurring items **ROOC = 100% x Operating profit/Operating
capital
Wood product sales were EUR 479.8 million, up 27.2% on the first quarter of 2006
mainly due to higher sales prices. Operating profit was EUR 53.7 million, up
EUR 49.9 million on the first quarter of 2006 due to higher sales prices,
internal
restructuring measures and successful actions to improve product and sales mix.
Compared with Q1/2006
Market demand improved except in the USA, where the housing market was booming a
year ago. The slowdown in the US housing market has reduced sawnwood demand and
prices have fallen in the USA. In all other markets good demand, low stock
levels
and rapid raw material cost escalation supported sharp rises in market prices.
Compared with Q4/2006
Demand remained strong in most product categories in Europe, Asia, North Africa
and the Middle East, and prices continued to rise. North American markets
remained
depressed with weak demand and low prices, but they accounted for only a small
proportion of sales.
Financials
Key Ratios
Change Change
% %
Q1/07- Q1/07-
2005 2006 Q4/06 Q1/06 Q1/07 Q1/06 Q4/06
Earnings per share
(basic), EUR -0.14 0.74 0.33 0.29 0.28 -3.4 -15.2
Earnings per share excl.
non-recurring items, EUR 0.28 0.55 0.13 0.20 0.26 30.0 100.0
Cash earnings per share
(CEPS), EUR 1.65 2.34 0.73 0.63 0.62 -1.6 -15.1
CEPS excl. non-
recurring items, EUR 1.70 1.94 0.49 0.54 0.59 9.3 20.4
Return on capital
employed (ROCE), % -0.4 5.6 8.9 7.7 11.9 54.5 33.7
ROCE excl. non-
recurring items, % 3.4 6.8 6.7 8.5 10.8 27.1 61.2
Return on equity (ROE), % -1.4 7.7 14.0 12.5 11.4 -8.8 -18.6
Debt/equity ratio 0.70 0.54 0.54 0.72 0.60 -16.7 11.1
Equity per share, EUR 9.16 9.89 9.89 8.97 9.69 8.0 -2.0
Equity ratio, % 41.0 45.3 45.3 40.2 44.1 9.7 -2.6
Operating profit, % of
sales -0.3 4.4 6.6 6.2 8.8 41.9 33.3
Operating profit excl.
non-recurring items,
% of sales 2.8 5.4 5.0 6.8 8.0 17.6 60.0
Capital expenditure,
EUR million 1 145.3 583.4 179.7 167.7 108.9 -35.1 -39.4
Capital expenditure,
% of sales 8.7 4.0 4.8 4.6 2.8 -39.1 -41.7
Capital employed,
EUR million 11 678 11 332 11 332 11 526 11 478 -0.4 1.3
Interest-bearing net
liabilities,
EUR million 5 084 4 234 4 234 5 116 4 599 -10.1 8.6
Average number of
employees 46 166 45 631 45 631 46 056 43 504 -5.5 -4.7
Average number of
shares (million)
periodic 798.7 788.6 788.6 788.6 788.6
cumulative 798.7 788.6 788.6 788.6 788.6
cumulative, diluted 799.2 788.9 788.9 789.1 788.9
Key Exchange Rates for the Euro
One Euro is Closing Rate Average Rate
31 Dec 06 31 Mar 07 31 Dec 06 31 Mar 07
SEK 9.0404 9.3462 9.2517 9.1892
USD 1.3170 1.3318 1.2563 1.3112
GBP 0.6715 0.6798 0.6819 0.6707
CAD 1.5281 1.5366 1.4247 1.5363
Transaction Risk and Hedges in Main Currencies as at 31 March 2007
EUR million USD GBP SEK JPY
Estimated annual net operating cash flow
exposure 1 450 600 -1 000 300
Transaction hedges as at 31 Mar. 360 255 -556 48
Hedging percentage as at 31 Mar. for the next
12 months 25 % 43 % 56 % 16 %
Condensed Consolidated Income Statement
Change
%
Q1/07-
EUR million 2006 Q1/2006 Q1/2007
Q1/06
Sales 14 593.9 3 607.7 3 855.4
6.9
Other operating income 364.9 50.2 16.7
-66.7
Materials and services -8 111.5 -1 987.7 -2 160.0
-8.7
Freight and sales commissions -1 751.4 -392.7 -430.7
-9.7
Personnel expenses -2 200.9 -544.4 -483.7
11.1
Other operating expenses -988.9 -240.1 -185.0
22.9
Depreciation and impairment -1 257.7 -269.2 -273.4
-1.6
Operating Profit / (Loss) 648.4 223.8 339.3
51.6
Share of results of associated
companies 87.4 31.6 24.2
-23.4
Net financial items -104.0 62.3 -56.7
n/a
Profit / (Loss) before Tax 631.8 317.7 306.8 -3.4
Income tax -42.6 -91.3 -84.3
7.7
Net Profit / (Loss) for the Period 589.2 226.4 222.5
-1.7
Attributable to:
Equity holders of the Parent Company 585.0 225.0 219.2
-2.6
Minority interests 4.2 1.4 3.3
135.7
589.2 226.4 222.5
-1.7
Earnings per share
Basic earnings per share, EUR 0.74 0.29 0.28
-3.4
Diluted earnings per share, EUR 0.74 0.29 0.28
-3.4
Consolidated Statement of Recognised
Income & Expense EUR million 2006 Q1/2006 Q1/2007
Defined benefit plan actuarial gains / (losses) 135.1 - -
Tax on actuarial movements -46.6 - -
Aggregate fair value movements in Available
for-Sale assets 251.6 -103.7 51.1
Currency and commodity hedges -45.3 88.7 -37.5
Associate hedges 11.1 3.5 -0.1
Tax on Other Comprehensive Income Movements
(OCI) 50.2 2.1 10.2
Currency translation movements on equity net
investments (CTA) -86.4 -39.9 -69.0
Equity net investment hedges 118.0 38.6 32.1
Tax on equity hedges -30.7 -10.1 -8.3
Net Income & Expense Recognised directly in
Equity 357.0 -20.8 -21.5
Net profit / (loss) for the period 589.2 226.4 222.5
Total Recognised Income & Expense for the
Period 946.2 205.6 201.0
Attributable to:
Equity holders of the Parent Company 942.0 204.2 197.7
Minority interests 4.2 1.4 3.3
Total Recognised Income & Expense for the
Period 946.2 205.6 201.0
Condensed Consolidated Cash Flow Statement
EUR million 2006 Q1/2006 Q1/2007
Cash Flow from Operating Activities
Operating profit 648.4 223.8 339.3
Adjustments 1 060.9 265.9 256.2
Change in net working capital 199.1 -189.9 -385.3
Change in short-term interest-bearing
receivables 89.9 32.2 49.0
Cash Flow Generated by Operations 1 998.3 332.0 259.2
Net financial items -335.4 -45.1 -41.3
Income taxes paid -215.4 -10.3 -45.0
Net Cash Provided by Operating Activities 1 447.5 276.6 172.9
Cash Flow from Investing Activities
Acquisitions of subsidiaries -329.8 -7.4 -0.4
Acquisitions of associated companies -19.4 0.0 -65.9
Proceeds from sale of fixed assets and
shares 700.8 206.3 7.1
Capital expenditure -583.4 -167.7 -108.9
Proceeds from (payment of) the non
current receivables, net -21.4 -14.6 18.9
Net Cash Used in Investing Activities -253.2 16.6 -149.2
Cash Flow from Financing Activities
Change in long-term liabilities -11.6 97.8 113.1
Change in short-term borrowings -623.5 -586.1 20.3
Dividends paid -354.9 0.0 0.0
Minority equity injections less dividends 6.6 -0.5 0.4
Options exercised -2.0 -1.3 -0.5
Repurchase / Sale of own shares 0.2 0.0 0.1
Net Cash Used in Financing Activities -985.2 -490.1 133.4
Net Increase (Decrease) in Cash and Cash
Equivalents 209.1 -196.9 157.1
Cash and bank in acquired companies 1.6 0.7 0.0
Cash and bank in sold companies -20.2 -0.6 0.0
Translation adjustment -30.4 -3.8 -0.3
Net cash and cash equivalents at the
beginning of period 149.5 351.4 309.6
Net Cash and Cash Equivalents at Period
End 309.6 150.8 466.4
Cash and Cash Equivalents at Period End 609.0 352.7 525.5
Bank Overdraft at Period End -299.4 -201.9 -59.1
Net Cash and Cash Equivalents at Period
End 309.6 150.8 466.4
Acquisitions of Subsidiary Companies
Cash and cash equivalents 1.6 0.7 -
Working capital 47.2 -1.2 -
Operating fixed assets 281.1 1.8 0.3
Interest-bearing assets 0.0 - -
Tax liabilities 1.2 0.3 -
Interest-bearing liabilities -4.4 -0.6 -
Non-cash share exchange - - -
Minority interests 1.1 -0.2 0.1
Fair Value of Net Assets 327.8 0.8 0.4
Goodwill 2.0 6.6
Total Purchase Consideration 329.8 7.4 0.4
Disposal of Subsidiary Companies
Cash and cash equivalents 20.2 0.6 -
Working capital 59.5 6.5 -
Operating fixed assets 217.9 44.1 -
Interest-bearing assets 1.2 0.9 -
Tax liabilities -18.0 -13.5 -
Interest-bearing liabilities -12.0 -1.5 -
Minority interests -0.2 - -
Net Assets in Divested Companies 268.6 37.1 0.0
Income Statement capital gain (goodwill
realised) 197.9 - -
Total Disposal Consideration 466.5 37.1 0.0
Property, Plant and Equipment, Intangible Assets and Goodwill
EUR million 2006 Q1/2006 Q1/2007
Carrying value at 1 January 11 213.2 11 213.2 10 440.4
Acquisition of subsidiary companies 283.1 8.4 0.3
Additions 559.1 165.1 96.7
Additions in biological assets 24.3 2.6 12.2
Change in emission rights 54.4 80.2 4.2
Disposals -237.3 -61.0 -6.4
Depreciation, amortisation and impairment -1 257.7 -269.2 -273.4
Translation difference and other -198.7 -87.9 -90.0
Balance Sheet Total 10 440.4 11 051.4 10 184.0
Borrowings
EUR million 2006 Q1/2006 Q1/2007
Non-current borrowings 4 081.0 4 392.1 4 141.0
Current borrowings 1 166.5 1 667.5 1 350.2
5 247.5 6 059.6 5 491.2
Carrying value at 1 January 6 083.9 6 083.9 5 247.5
Debt acquired with new subsidiaries 4.4 0.6 -
Debt disposed with sold subsidiaries -12.0 -4.3 -
Proceeds from / payments of borrowings
(net) -692.4 -327.9 -95.9
Translation difference and other*) -136.4 307.3 339.6
Total Borrowings 5 247.5 6 059.6 5 491.2
*) includes dividend liability of EUR 354.9 million in Q1/2007 and in Q1/2006.
Condensed Consolidated Balance Sheet
Change % Change %
31 Mar 31 Mar
07 - 07 -
31 Dec 31 Mar 31 Mar 31 Mar 31 Dec
EUR million 06 06 07 06 06
Assets
Fixed Assets and Other Non-
current Investments
Fixed assets O 10 230.8 10 850.0 9 957.5 -8.2 % -2.7 %
Biological assets O 111.5 77.5 124.2 60.3 % 11.4 %
Emission rights O 98.1 123.9 102.3 -17.4 % 4.3 %
Investment in associated
companies A 805.2 754.7 868.3 15.1 % 7.8 %
Available-for-sale: Listed
securities I 41.2 83.5 42.6 -49.0 % 3.4 %
Available-for-sale: Unlisted
shares O 794.3 402.9 845.2 109.8 % 6.4 %
Non-current loan receivables I 149.2 141.8 127.0 -10.4 % -14.9 %
Deferred tax assets T 53.5 65.2 60.0 -8.0 % 12.1 %
Other non-current assets O 61.1 16.1 58.2 261.5 % -4.7 %
12 344.9 12 515.6 12 185.3 -2.6 % -1.3 %
Current Assets
Inventories O 2 019.5 2 210.6 2 126.9 -3.8 % 5.3 %
Tax receivables T 124.8 112.6 118.4 5.2 % -5.1 %
Operative receivables O 2 127.9 2 260.8 2 403.5 6.3 % 13.0 %
Interest-bearing receivables I 214.2 365.8 197.5 -46.0 % -7.8 %
Cash and cash equivalents I 609.0 352.9 525.5 48.9 % -13.7 %
5 095.4 5 302.7 5 371.8 1.3 % 5.4 %
Total Assets 17 440.3 17 818.3 17 557.1 -1.5 % 0.7 %
Equity and Liabilities
Equity attributable to
Company shareholders 7 799.6 7 072.4 7 642.0 8.1 % -2.0 %
Minority interests 103.5 93.0 106.2 14.2 % 2.6 %
Total Equity 7 903.1 7 165.4 7 748.2 8.1 % -2.0 %
Non-current Liabilities
Post-employment benefit
provisions O 763.1 886.6 697.8 -21.3 % -8.6 %
Other provisions O 308.3 138.0 209.9 52.1 % -31.9 %
Deferred tax liabilities T 793.0 919.4 795.7 -13.5 % 0.3 %
Non-current debt I 4 081.0 4 392.1 4 141.0 -5.7 % 1.5 %
Other non-current operative
liabilities O 193.7 303.6 201.2 -33.7 % 3.9 %
6 139.1 6 639.7 6 045.6 -8.9 % -1.5 %
Current Liabilities
Current portion of long-term
debt I 630.2 159.5 650.6 307.9 % 3.2 %
Interest-bearing liabilities I 536.3 1 508.0 699.6 -53.6 % 30.4 %
Operative liabilities O 1 972.9 1 961.8 2 142.1 9.2 % 8.6 %
Tax liabilities T 258.7 383.9 271.0 -29.4 % 4.8 %
3 398.1 4 013.2 3 763.3 -6.2 % 10.7 %
Total Liabilities 9 537.2 10 652.9 9 808.9 -7.9 % 2.8 %
Total Equity and Liabilities 17 440.3 17 818.3 17 557.1 -1.5 % 0.7 %
Items designated with "O" comprise Operating Capital
Items designated with "I" comprise Interest-bearing Net Liabilities
Items designated with "T" comprise Net Tax Liabilities
Items designated with "A" comprise Associate Companies
Changes in Group Shareholders' Equity
Capital Trea-
Share Reser- sury Retained
EUR million Capital ves Shares OCI CTA Earnings Total
Balance at 31
December 2004 1 423.3 1 009.2 -180.8 67.6 -218.9 5 525.0 7 625.4
Repurchase of Stora
Enso Oyj shares - - -344.7 - - - -344.7
Cancellation of
Stora Enso Oyj shares -41.2 -224.4 265.6 - - - 0.0
Dividend
(EUR 0.45 per share) - - - - - -365.3 -365.3
Buy-out of minority
interests - - - - - -43.2 -43.2
Net profit for the
period - - - - 0.2 -111.1 -110.9
Net expense
recognised directly
to equity - - - 400.4 91.6 -33.2 458.8
Balance at 31
December 2005 1 382.1 784.8 -259.9 468.0 -127.1 4 972.2 7 220.1
Cancellation of
Stora Enso Oyj shares -39.9 -15.9 249.1 - - -193.3 0.0
Dividend (EUR 0.45
per share) - - - - - -354.9 -354.9
Options exercised - - - - - - 0.0
Buy-out of minority
interests - - - - - - 0.0
Net profit for the
period - - - - 4.2 225.0 229.2
Net expense
recognised directly
to equity - - - -9.4 -11.4 - -20.8
Balance at 31 March
2006 1 342.2 768.9 -10.8 458.6 -134.3 4 649.0 7 073.6
Cancellation of
Stora Enso Oyj shares - - - - - - 0.0
Dividend
(EUR 0.45 per share) - - - - - - 0.0
Options exercised - -2.0 0.3 - - - -1.7
Buy-out of minority
interests - - - - - -0.1 -0.1
Net profit for the
period - - - - -10.0 360.0 350.0
Net expense
recognised directly
to equity - - - 277.0 12.3 88.5 377.8
Balance at 31
December 2006 1 342.2 766.9 -10.5 735.6 -132.0 5 097.4 7 799.6
Cancellation of
Stora Enso Oyj shares - - - - - - 0.0
Dividend (EUR 0.45
per share) - - - - - -354.9 -354.9
Options exercised - -0.5 0.1 - - - -0.4
Buy-out of minority
interests - - - - - - 0.0
Net profit for the
period - - - - - 219.2 219.2
Net expense
recognised directly
to equity - - - 23.7 -45.2 - -21.5
Balance at 31 March
2007 1 342.2 766.4 -10.4 759.3 -177.2 4 961.7 7 642.0
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
Commitments and Contingencies
EUR million 31 Dec 06 31 Mar 06 31 Mar 07
On Own Behalf
Pledges given 1.0 1.1 0.8
Mortgages 146.8 211.9 137.0
On Behalf of Associated Companies
Mortgages 0.8 0.8 0.0
Guarantees 343.0 369.0 281.2
On Behalf of Others
Guarantees 9.5 11.7 10.3
Other Commitments, Own
Leasing commitments, in next 12 months 38.4 33.0 30.5
Leasing commitments, after next 12 months 130.3 143.0 123.4
Pension liabilities 0.2 0.5 0.2
Other commitments 17.1 90.7 18.6
Total 687.1 861.7 602.0
Pledges given 1.0 1.1 0.8
Mortgages 147.6 212.7 137.0
Guarantees 352.5 380.7 291.5
Leasing commitments 168.7 176.0 153.9
Pension liabilities 0.2 0.5 0.2
Other commitments 17.1 90.7 18.6
Total 687.1 861.7 602.0
Purchase Agreement Commitments
EUR million Scheduled Contract Payments
Contract
Type of Supply Total 2007 2008-9 2010-11 2012+
Fibre 2 361 200 447 424 1 290
Energy 810 258 341 211 -
Logistics 727 128 169 109 321
Other Production costs 139 126 6 3 4
4 037 712 963 747 1 615
Capital Expenditure 173 145 27 1 -
Total Contractual
Commitments 4 210 857 990 748 1 615
Net Fair Values of Derivative Financial Instruments
EUR million 31 Dec 06 31 Mar 06 31 Mar 07
Negative Net
Net Fair Net Fair Positive Fair Fair
Values Values Fair Values Values Values
Interest rate swaps 48.1 43.9 86.4 -28.4 58.0
Interest rate options -1.8 -7.6 0.6 -1.6 -1.0
Cross-currency swaps -1.2 -5.9 0.0 -1.0 -1.0
Forward contracts 28.2 2.5 5.5 -4.4 1.1
FX options 5.9 1.6 6.8 -1.5 5.3
Commodity contracts 63.2 210.8 48.7 -11.7 37.0
Equity swaps 7.0 39.7 38.5 -13.0 25.5
Total 149.4 285.0 186.5 -61.6 124.9
Nominal Values of Derivative Financial Instruments
EUR million 31 Dec 06 31 Mar 06 31 Mar 07
Interest Rate Derivatives
Interest rate swaps
Maturity under 1 year 177.4 0.0 83.0
Maturity 2-5 years 2 152.1 1 038.6 1 758.3
Maturity 6-10 years 2 490.5 1 788.4 948.5
Maturity over 10 years - - 300.3
4 820.0 2 827.0 3 090.1
Interest rate options 318.0 1 753.6 659.9
Total 5 138.0 4 580.6 3 750.0
Foreign Exchange Derivatives
Cross-currency swap agreements 6.9 70.7 6.8
Forward contracts 1 778.4 2 129.0 - 4.4
FX Options 662.8 833.2 1 351.8
Total 2 448.1 3 032.9 1 354.2
Commodity Derivatives
Commodity contracts 635.8 414.9 568.8
Total 635.8 414.9 568.8
Equity swaps
Equity swaps 328.6 400.9 270.9
Total 328.6 400.9 270.9
Sales by Segment
EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper 1 171.0 1 145.2 1 226.7 1 230.5 4 773.4 1 240.5
Fine Paper 776.3 738.9 722.8 718.3 2 956.3 738.6
Merchants 496.3 452.6 450.1 508.2 1 907.2 532.9
Packaging Boards 869.0 881.8 909.0 871.7 3 531.5 919.8
Wood Products 377.1 437.8 418.5 443.0 1 676.4 479.8
Wood Supply 674.8 651.3 633.9 687.2 2 647.2 778.6
Other -756.8 -691.3 -722.9 -727.1 -2 898.1 -834.8
Total Sales 3 607.7 3 616.3 3 638.1 3 731.8 14 593.9 3 855.4
Operating Profit by Segment excluding Non-recurring items
EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper 70.3 55.3 57.0 69.0 251.6 63.5
Fine Paper 52.7 46.3 32.4 34.6 166.0 61.5
Merchants 9.6 2.9 7.7 12.5 32.7 16.6
Packaging Boards 99.5 70.8 93.7 59.4 323.4 106.5
Wood Products 3.8 14.9 21.4 19.0 59.1 53.7
Wood Supply 8.9 1.3 5.0 -12.4 2.8 12.2
Other 2.2 -73.3 12.1 5.5 -53.5 -6.7
Operating Profit excl.
Non-recurring Items 247.0 118.2 229.3 187.6 782.1 307.3
Non-recurring items -23.2 6.7 -177.2 60.0 -133.7 32.0
Operating Profit (IFRS) 223.8 124.9 52.1 247.6 648.4 339.3
Net financial items 62.3 -85.2 -42.5 -38.6 -104.0 -56.7
Associated companies 31.6 20.2 10.2 25.4 87.4 24.2
Profit before Tax and
Minority Interests 317.7 59.9 19.8 234.4 631.8 306.8
Income tax expense -91.3 -19.0 37.3 30.4 -42.6 -84.3
Net Profit 226.4 40.9 57.1 264.8 589.2 222.5
Non-recurring Items by Segment
EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper -2.9 4.4 -225.2 11.4 -212.3 13.3
Fine Paper -22.0 3.8 72.0 8.5 62.3 19.2
Merchants - - - 0.4 0.4
Packaging Boards - -5.5 - 4.3 -1.2 4.3
Wood Products 1.7 1.2 -24.0 0.4 -20.7 -12.0
Wood Supply - 1.5 - 0.7 2.2
Other - 1.3 - 34.3 35.6 7.2
Total Non-recurring
Items -23.2 6.7 -177.2 60.0 -133.7 32.0
Operating Profit by Segment
EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper 67.4 59.7 -168.2 80.4 39.3 76.8
Fine Paper 30.7 50.1 104.4 43.1 228.3 80.7
Merchants 9.6 2.9 7.7 12.9 33.1 16.6
Packaging Boards 99.5 65.3 93.7 63.7 322.2 110.8
Wood Products 5.5 16.1 -2.6 19.4 38.4 41.7
Wood Supply 8.9 2.8 5.0 -11.7 5.0 12.2
Other 2.2 -72.0 12.1 39.8 -17.9 0.5
Operating Profit 223.8 124.9 52.1 247.6 648.4 339.3
Net financial items 62.3 -85.2 -42.5 -38.6 -104.0 -56.7
Associated companies 31.6 20.2 10.2 25.4 87.4 24.2
Profit before Tax and
Minority Interests 317.7 59.9 19.8 234.4 631.8 306.8
Income tax expense -91.3 -19.0 37.3 30.4 -42.6 -84.3
Net Profit 226.4 40.9 57.1 264.8 589.2 222.5
Stora Enso Shares
Closing Price Helsinki, EUR Stockholm, SEK New York, USD
A share R share A share R share ADRs
January 12.71 12.77 115.50 115.50 16.74
February 12.40 12.47 115.25 115.25 16.42
March 12.91 13.00 122.00 120.75 17.27
Trading Volume Helsinki Stockholm New York
A share R share A share R share
ADRs
January 93 402 107 866 499 118 480 19 169 929 2 044
400
February 71 650 111 174 276 110 544 17 875 014 1 772
500
March 104 004 102 984 571 137 834 14 498 405 1 895
700
Total 269 056 322 025 346 366 858 51 543 348 5 712
600
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 2006.
The Group has adopted IFRS 7, Financial Instruments: Disclosures, and the
complementary Amendment to IAS 1, Presentation of Financial Statements - Capital
Disclosures which is mandatory for the Group's accounting periods beginning on
or
after 1 January 2007. The adoption of this standard and amendment will result in
additional disclosures relating to financial instruments and how an entity
manages
its capital in the Group's Annual Report.
Reclassification in 2006
Operating profit for 2006 has been reclassified. Total Return Swaps (TRS) which
are partially hedging cash settled synthetic option programmes for Management,
previously reported in other financial items, are now reported in operating
profit
under personnel expenses, with an effect of income of EUR 52.9 million and EUR
24.6 million in Q1/2006 and Q1-Q4/2006, respectively. TRS instruments do not
qualify for hedge accounting and therefore all periodic changes to their fair
value are recorded in the Income Statement.
Calculation of Key Figures
Return on capital employed,
ROCE (%) 100 x Operating
profit
----------------------
Capital employed 1)
2)
Return on operating capital, 100 x Operating
profit
-----------------------
ROOC (%) Operating capital 1)
2)
Return on equity, 100 x Profit before tax and
minority
items - taxes
------------------------------
ROE (%) Equity + minority interests
2)
Equity ratio (%) 100 x Equity + minority
interests
---------------------------
Total
assets
Interest-bearing net liabilities Interest-bearing liabilities
-
interest-bearing assets
Debt/Equity ratio Interest-bearing net
liabilities
--------------------------------
Equity
1) Capital employed = Operating capital - Net tax liabilities
2) Average for the financial period
For further information, please contact:
Jouko Karvinen, CEO, tel. +358 2046 21404
Hannu Ryöppönen, CFO, tel. +358 2046 21450
Kari Vainio, EVP, Corporate Communications, tel. +44 7799 348 197
Keith B Russell, SVP, Investor Relations, tel. +44 7775 788 659
Ulla Paajanen-Sainio, VP, Investor Relations and Financial Communications,
tel. +358 40 763 8767
Stora Enso's first quarter results 2007 will be published on 26 April 2007.
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
p.p. Jussi Siitonen Jukka Marttila