Global Market outlook Tallin June 13:th 2012 Olle Berg, Senior Vice President Stora Enso Building and Living
Stora Enso Building and Living In brief Sales bn Employees # of units Production in 11 countries Global sales network Sawing capacity, Mm 3 Further processing, Mm 3 1.6 4 400 22 6.4 3.2 Nordic BU Central Europe BU Baltic & Components BU Building Solutions BU 2
Recap 2011
Especially challenging 2011 Euro crisis MENA civil unrest Japan tsunami Australian flooding 4
Development of housing starts by region, Index 2003 = 100 With continuously tough going in housing markets recovery has remained slow 140 120 Housing starts trailing 30-70% behind the levels of early 2000s 100 80 60 40 20 Japan USA Europe 2003 2004 2005 2006 2007 2008 2009 2010 2011-30% -40% -70% Source: Euroconstruct, Concensus Forecast 5
Swedish export prices for sawnwood, Index: 2000 = 100 Scaring the investors... well, some like the volatility 150 140 Great bull run, globally Crash landing Supply was boosted up, confidence & demand was not 130 and here we go again 120 110 100 2005 2006 2007 2008 2009 2010 2011 2012 Redwood export Whitewood export Source: Skogsindustrierna / Statistics Sweden Latest data: February 2012 Stora Enso Building and Living May 2012 6
Market outlook
Housing starts by region, index 2003 = 100 Demand recovery how slow could it be? 140 120 Forecast Crystal ball area 100 80 60 40 20 Japan USA Europe 2003 2005 2007 2009 2011 2013 2015 2017 2019 Source for 2003-2013 data: Euroconstruct, Concensus Forecast 8
European construction markets have bottomed out 1000 housing completions 3000 2500 2000 Eastern Europe & Baltics Southern Europe Western Europe Nordic countries German speaking area 1500 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9
Change to previous year European sawnwood demand slowly picking up 15 % 10 % 2010 M3 5 % UK 8.1 0 % Germany 18.2-5 % Italy 5.8-10 % France 9.7-15 % -20 % 41.8-25 % 2008 2009 2010 2011 2012 Western Europe Change to Prev year, m3-7.7-10.1 +5.0 +0.5 +0.6 Total volume, m3 75.4 65.3 70.2 70.8 71.4 Source: Softwood Conference October 2011 10
Interregional imports to major importing countries, Mm3 Demand growth in overseas markets have been crucial for global market balance 35 30 25 20 15 10 5 0 10,4 10,7 10,0 6,4 6,1 5,4 14,9 6,3 9,6 2009 2010 2011 MENA Japan China 11
European exports, 1000 m3 From European perspective, export dynamics have differed greatly by region 8000 7000 +60% 6000 2006 5000 2007 4000 3000 2000-20% -95% +400% 2008 2009 2010 2011 1000 0 Japan USA M-East/N-Africa* Other Asia, Oceania * Exports to Middle-East, North Africa and Other Asia/Oceania including Finland, Sweden, Austria and Germany Note: US import statistics converted from board feet to cubic meters on nominal basis (2,36) 12
Middle-East and North Africa demographics bring both opportunities and risks Egypt Morocco Algeria Saudi-Arabia Iraq? 50 years 50% Average age, years Jobless rate <25 years, % 300 million people Stora Enso Building and Living May 2012 13
Housing starts, 1000 units Reconstruction after tsunami has helped to keep housing starts up in Japan 1400 1200 1000 800 Non-wood Wooden Forecast? 600 400 200 0 Source: Ministry of Land, Infrastructure, Transportation; forecast Consensus Forecast Stora Enso Building and Living May 2012 14
Japan: share of timber frame houses continues to grow 65% 60% 55% 50% 45% Timber frame share from 40% up to 60% in 5 years 40% 2007 2008 2009 2010 2011 2012 15
Million m3 China - Strong growth in softwood sawn timber consumption reaching 42 million m3 by 2016 45 40 35 30 25 20 15 10 5 0 Chinese Softwood Sawn Timber Supply & Demand 2005 2006 2007 2008 2009 2010 2011e 2012e 2013e 2014e 2015e 2016e Consumption Production China is increasingly dependent upon imports for both softwood sawn timber and the logs used by the domestic industry Stora Enso Building and Living May 2012 16
Million Units China - The tremendous scale of the Chinese housing market is a huge opportunity for wood frame construction to grow as an affordable, safe and green housing solution 30 Chinese Housing Starts 25 20 15 10 5 0 Stora Enso Building and Living May 2012 17
European industry
Softwood sawnwood production in key countries, % change to previous year Production boosted up 2009-2010 from low levels - only marginal push up in 2011-12 20 Austria Finland Russia Germany Sweden 17 14 10 10 6 6 7 4 5 0 1 0 0 2 2-2 -1-10 -10-8 -13-20 -23-18 2008 vs. 2009 2009 vs. 2010 2010 vs. 2011 2011 vs 2012-30 Sources: Softwood Conference / ECE Timber Committee 19
Softwood sawnwood inventories in Sweden and Finland, 1000 m3 Output demand... not been matching for a while 2600 2400 2200 2000 1800 Redwood Whitewood 1600 1400 1200 1000 2009 2010 2011 2012 Source: Finnish Forest Industries, Swedish Wood Latest data: February 2012 20
Raw material challenges in most regions cost & availability Tight log markets, import sources dried up, cost pressure Finland Capacity expanded, log export tax brought down harvesting North- West Russia Capacity expanded, heavy competition South Sweden Baltic South Germany Czech Austria Poland, Belarus, Ukraine, Romania Mobilizing new areas? Stora Enso Building and Living May 2012 21
Operating margins of selected major wood products companies, % as is also clearly visible in industry results 20 15 Finland Sweden North America 10 5 0-5 -10-15 -20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2006 2007 2008 2009 2010 2011 Note: Weighted average margin for a selection of large publically traded companies. Excluding non-recurring items. 22
What are our take aways from this? 2012 demand outlook sluggish No quick recovery in any major European market Current supply-demand balance fragile Market remain supply driven with everybody waiting for the US recovery... Some positive signs: Japan, China, MENA... Raw material costs remain a challenge 23
Thank you!