Positive contribution from transformation projects accelerates. CFO Seppo Parvi SVP, Investor Relations Ulla Paajanen-Sainio 9 August 2017

Transcription

1 Positive contribution from transformation projects accelerates CFO Seppo Parvi SVP, Investor Relations Ulla Paajanen-Sainio 9 August 2017

2 Disclaimer It should be noted that and its business are exposed to various risks and uncertainties and 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. 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. All statements are based on management s best assumptions and beliefs in light of the information currently available to it and assumes no obligation to publicly update or revise any forward-looking statement except to the extent legally required. 2 9 August 2017

3 in brief Leading global provider of renewable solutions in packaging, biomaterials, wooden constructions and paper Sales EUR 9.8 billion in 2016 Operational EBIT EUR 884 million in 2016 shares are listed on NASDAQ OMX Helsinki and Stockholm. In addition, the shares are traded in the USA as ADRs Some employees in 35 countries 3 9 August 2017

4 Have you ever thought about what a tree can do? 4 9 August 2017

5 s plantations and forest assets Bergvik Skog, Sweden 2.3 million ha of land in Sweden, ha in Latvia (ownership of 49%) Tornator, Finland ha of forestland in Finland, ha in Estonia, and ha in Romania (ownership 41%) Guangxi, Southern China (leased) ha of land of which ha eucalyptus, ha other species Veracel plantations, Brazil ha of land of which ha eucalyptus plantations Rio Grande do Sul, Brazil ha of land of which ha eucalyptus plantations Note: Fair value of Biological assets and Group s indirect share of forest assets is as of 31 Dec 2016, in total EUR million Montes del Plata, Uruguay ha of land of which ha planted In addition, leased plantations: - Laos: trial plantation, ha - Russia: ha 5 9 August 2017

6 Well-positioned for growth 6 9 August 2017

7 Consumer Board Sales increased driven by the Beihai Mill ramp-up Divisional strategic target Q2/16 Q2/17 Consumer Board Operational ROOC > 20% 14.8% 13.9% Consumer Board excl. Beihai operations 35.2% 34.3% *Excluding Barcelona Sample product categories Liquid Packaging: Natura Food Service Board: Cupforma, Tamfold General Packaging and graphical board: CKB, Trayforma, Performa, Ensocoat, Tambrite Chocolate and confectionary Cosmetics and luxury Pharmaceuticals Food Packaging Drinks, wines and spirits Cigarette board: Koppar Speciality paper: Lumiflex, LumiLabel 7 9 August 2017

8 Packaging Solutions Varkaus Mill and China Packaging driving profitable growth Packaging Solutions Divisional strategic target Operational ROOC > 20% Q2/16 Q2/17 7.7% 18.3% Sample product categories Containerboards: AvantFlute Recycled, AvantFlute SC, AvantKraft, AvantLiner Recycled Corrugated Packaging: Flexo-printed packaging, Offset printed packaging, Protective packaging 8 9 August 2017

9 Innovation in packaging Advancing the renewable packaging industry with innovations Microfibrillated cellulose (MFC) Biobarrier coatings Replacing plastics Intelligent packaging Design driven innovation 9 9 August 2017

10 MFC: Innovation in cellulose The main areas of usage for Consumer Board are strength enhancement and source reduction in paperboard and in the future new barrier solutions 10 9 August 2017

11 Biobarrier coatings - Barrier Board Provide mineral oil barrier and dispersion coating solutions for packaging Mineral oil barrier First product available Dispersion coating Proof of concept in manufacturing Customer trials Investment proposal preparations Biobarrier coating R&D phase development ongoing 11 9 August 2017

12 Intelligent Packaging Consumer Engagement Brand Protection Supply chain management 12 9 August 2017

13 Biomaterials Sales increased due to volumes and higher prices Divisional strategic target Q2/16 Q2/17 Biomaterials Operational ROOC > 15% 8.9% 9.8% Sample product categories: Paper, packaging and tissue production: Supreme (Softwood), Perform (Hardwood) and Select (Hardwood) Fluff pulp for hygiene products; diapers, and feminine care products: Care Dissolving pulp for viscose fabrics e.g. textiles but also fine applications in the food and pharmaceutical industries: Pure By-products: tall oil, turpentine, lignin (adhesive for construction and cosmetics industries) 13 9 August 2017

14 Pulp demand keeps growing, especially in segments selected in strategy Pulp demand to 2025 in million tonnes (Mt) CAGR: + 2.3%~ million tonnes (Mt) /year Tissue Graphic Papers Speciality Papers Packaging Hygiene/Fluff Dissolving Pulp Grade Mt Hardwood 9.7 Softwood 1.2 Source: Hawkins Wright, Pöyry, Fluff 2 Dissolving Pulp August 2017

15 Pulp market expected to remain balanced new capacity added, old disappearing New capacities and exits (Mt) PM Capacity, 1000 t/a 1000 Softwood Strong Hardwood PM Capacity, 1000 t/a Strong 900 New ~3.6 Mt/year Increasing demand sustaining ratios above 90% Exits ~2.2 Mt/year Weakest assets 12Mt Technical age, years Weakest assets 8Mt Technical age, years 5 0 Softwood Hardwood New capacity growth *: 11Mt (2.2 Mt/year) Source: Pöyry, Hawkins Wright, RISI * Based upon existing capacity announcements 15 9 August Mt 7.9Mt

16 Biomaterials division focuses on four clusters in its innovation work Pulp applications Cellulose modification and pulp process by-products Improving current pulp grades Lignin, MFC, CCA and by-products development Developing the extraction technology Further development of sugars New technology for separating C5, C6 and lignin from biomass Transforming C5, C6 into bio-based chemicals and chemical intermediates 16 9 August 2017

17 Wood Products Profitable growth continues Wood Products Divisional strategic target Operational ROOC > 18% Q2/16 Q2/ % 25.5% Sample product categories: Cross laminated timber (CLT ) Construction beams Laminated Veneer Lumber (LVL) Industrial components Classic sawn Pellets Building Solutions 17 9 August 2017

18 Getting the right log is critical for profitability in Wood Products Customer demand Sawing pattern Log pricing Cutting Purchasing $ Demand flow Material flow 18 9 August 2017

19 Modular building material for modern buildings Examples of new products from the forest Cross laminated timber (CLT) and laminated veneer lumber (LVL) fast and sustainable building solutions Växjö, Sweden, apartment buildings, 7 000m 3 CLT International House Sydney, office building, Barangaroo, Australia, 2 000m 3 CLT Wood City, apartment buildings, Helsinki, Finland, 2 600m 3 LVL La Cité du Vin, wine museum, Bordeaux, France CLT 19 9 August 2017

20 Sustainable Packaging Components - Biocomposites Reduce plastic by 50-60% in packaging and provide biocomposite solutions to packaging materials and building components Sustainable packaging components and building solutions is investing 12 MEUR at Hylte Mill to biocomposite competence centre managed by Wood Products 20 9 August 2017

21 Paper Cash flow well above targeted level Paper Divisional strategic target Cash flow after investing activities to sales >7% Q2/16 Q2/17 5.8% 10.6% Sample product categories Paper selection for print media: Newsprint and book papers, Uncoated mechanical papers (SC), Coated papers (Brands: e.g Nova, InnoPress) Paper selection for office use: transactional needs, office printing, writing and educational needs (Brands: e.g 4CC, MultiCopy, Zoom) 21 9 August 2017

22 Transformation steps since 2016 Investments Divestment and closure announcements Beihai Mill start-up Arapoti Mill, Brazil Varkaus LVL start-up IL Recycling AB, Sweden Murów inauguration Hartola production unit, Finland Varkaus kraftliner EBIT break-even Kabel Mill, Germany Beihai PE coating line Ongoing Suzhou Mill, China Skoghall Mill, chemical plant Ongoing Heinola corrugated planned closure Skutskär Mill, environmental investment Imatra PE coating line and automated roll warehouse Skutskär pulp mill, fluff Lahti corrugated packaging investment Imatra, Ingerois and Fors MFC Heinola Fluting Mill capacity increase Hylte biocomposite granules Gruvön CLT production unit Tychy corrugated plant Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Ongoing Packaging machine manufacturing company Formeca, Finland SC 100kt paper machine at Kvarnsveden Mill closed Plan to divest Re-board business, Sweden Divestment of holding in Bulleh Shah Packaging in Pakistan announced 22 9 August 2017

23 Beihai Board mill continues ramping up ahead of plan EBITDA break-even Q kt EBITDA break-even in Q4/17 Ramp-up ahead of plan The consumer board machine in Beihai is expected to reach operational EBITDA break even in Q4/2017, one quarter earlier than previously forecast Shipments of commercial liquid packaging board to two additional customers started, YTD three customers Deliveries (4 000) tonnes in Q Full production expected in the first half of August 2017

24 Asset transformation nearly completed now the focus is on sales and innovation Profitable growth MdP Mill investment Beihai Mill investment Varkaus Mill conversion Murów sawmill investment Varkaus LVL investment Imatra de-bottlenecking Sunila bio-refinery Innovation Centre Helsinki Innovation Centre Stockholm Rennovia JDA Launch of first MFC product Intelligent packaging Launch of Performa Brilliance Launch of CKB Nude Asset transformation Innovation & customer focus 24 9 August 2017

25 Transformation journey Growth businesses 72% of sales and 95% of operational EBIT Consumer Board Packaging Solutions (1) Biomaterials Wood Products Paper (2) Other & eliminations (1) In 2006 included in Consumer Board (2) In 2006 includes merchants 25 9 August 2017

26 Balance sheet remains strong despite dividend Summary financials Q EUR million Q2/17 Q2/16 Change% Q2/17 / Q2/16 Q1/17 Change% Q2/17 / Q1/17 Sales % % Operational EBITDA % % Operational EBITDA margin 13.5% 14.1% 14.1% Operational EBIT % % Operational EBIT margin 8.7% 8.9% 8.6% Profit before tax excl. IAC % % EPS excl. IAC, EUR EPS (basic), EUR Operational ROCE 10.3% 10.3% 10.0% Operational ROCE excl. Beihai operations 12.4% 12.5% 12.9% Cash Flow from Operations Net debt/last 12 months operational EBITDA August 2017

27 Capital allocation Capex on its way to the level of depreciation 27 9 August 2017

28 Capex allocation 2017 Both strategic and maintenance MEUR 28 9 August 2017

29 Guidance for Q Compared to Q Sales are estimated to be similar to the amount of MEUR recorded in Q Operational EBIT is expected to be somewhat or even clearly higher than the 219 MEUR recorded in Q Operational EBIT estimate includes negative 17 MEUR impact of the ramp-up of Beihai operations Impact of the annual maintenance shutdowns is expected to be approximately 10 MEUR lower than in Q2 2017, and is included in the above guidance Beihai board machine expected to reach operational EBITDA break even in Q4 2017, one quarter earlier than previously forecast Annual maintenance in Q3 Consumer Board Imatra and Ingerois mills Packaging Solutions Varkaus Mill Paper Veitsiluoto Mill 29 9 August 2017

30 Strategic targets ambitious, but reachable Wood Products and Paper reached their targets Group targets Q2 16 Q2 17 Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 3.6% (YoY) 7.1% (YoY) Net debt to operational EBITDA <3.0x Fixed costs to sales <20% 25.4% 25.6% Debt to equity <80% 58% 49% Operational ROCE >13% 10.3% 10.3% Operational ROCE excl. Beihai op. 12.5% 12.4% Divisional targets Q2 16 Q2 17 Consumer Board Operational ROOC > 20% 14.8% 13.9% Consumer Board excl. Beihai op. 35.2% 34.3% Packaging Solutions Operational ROOC > 20% 7.7% 18.3% Biomaterials Operational ROOC > 15% 8.9% 9.8% Wood Products Operational ROOC > 18% 25.6% 25.5% Paper Cash flow after investing activities to sales > 7% 5.8% 10.6% *Excluding Paper 30 9 August 2017

31 Positive contribution from transformation projects accelerates Sales growth of 7.1% excluding Paper Total sales growth, excluding divestments and closures 3.7% Accelerated profitable growth by: Beihai Varkaus (Kraftliner & LVL) China Packaging Murów Moving from asset transformation to innovation and sales transformation Strengthened balance sheet by solid cash generation 31 9 August 2017

32 Sponsored ADR Programme has established a sponsored Level I ADR programme in the US. The ADRs trade on the premier tier of Over-The-Counter ( OTC ) market in the US. Details are as follows: Ticker Symbol CUSIP Ratio ADR depositary SEOAY 86210M106 1 ADR : 1 Ordinary Shares Citibank Share price information or Please contact the Citibank s dedicated ADR broker desks: Scott Pollak (New York) Mike Woods (London) Tel: Tel: scott.h.pollak@citi.com michael.woods@citi.com 32 9 August 2017

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34 Welcome to CMD on 8 November 2017 in London 34 9 August 2017

35 More information in s Investor kit storaenso.com downloads Strategy Businesses Capacities Markets Financial performance Cost structure Capex Dividend policy Ownership structure Management Most recent quarterly results 35 9 August 2017