Very strong report from Stora Enso Fourth Quarter

February 4, 2010 by timbercommunity

Forest group Stora Enso reported a profit of 80.6 million euros for the fourth quarter. During the same period in 2008 was there a loss of 846 million euros.

Analysts had very wrong about the outlook from Stora Enso. Stora Enso reports a profit before tax of 123 million euros (28) for the fourth quarter of 2009. An analyst poll was expected that this figure would stop at 70 million. It would appear that as the largest newsprint producers will not see the image too bright for Stora Enso. Falling newsprint prices and raw material prices starting to move up is not particularly funny and tools like Ipad beginning to appear not directly improve the situation.

Interesting is that 15% of its turnover comes from the pellet thus it is quite important that these activities are going well. Pellets are made of by-products from sawmills. Production takes place in an integrated, all-new Stora Enso plants. In order to minimize unnecessary transport.

It was also announced by the company's Election Committee that Claes Dahlback leaving the Board after twelve years in the presidency.
 

STORA ENSO OYJ ANNUAL FINANCIAL STATEMENT RELEASE 4 February 2010 at 07.00 GMT
 - EUR 496 million quarterly cash flow from operations - full year EUR 1 261
million
- EUR 138 million quarterly operating profit excluding NRI and fair valuations
- EUR 109 million improvement on a year ago
- Consumer Board back on stable earnings path - focus on further growth
- Strong Newsprint earnings due to solid and improving cost base
- Group will continue to seek pricing quality through managing business mix and
optimising production - including necessary capacity reductions

Summary of Fourth Quarter Results 
 

Fair valuations include synthetic options net of realised and open hedges, CO2
emission rights, and valuations of biological assets related to forest assets in
equity accounted investments.
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, provisions for planned restructuring and
penalties. Non-recurring items are normally specified individually if they
exceed one cent per share.

Message from CEO Stora Enso Jouko Karvinen:
“The year 2009 ended on a strong note for Stora Enso. The highlight of the year
- EUR 1 261 million cash flow from operations - is the result of active working capital management that we started already in late 2008. In light of the dramatic drop in demand, we promised a year ago that we would finance at least two thirds of our capital expenditure of about EUR 400 million through working capital improvement - the improvement was actually a lot more, EUR 500 million.
 he second significant achievement is the cost improvements that we also started early. That allowed us not only to maintain our margin level year on year with volumes one fifth less, but more importantly enabled us to achieve margins and absolute earnings clearly higher in the second half than the first half of the year. Finally, net debt reduction of EUR 530 million in the most difficult operating environment in decades should demonstrate to our stakeholders that our +strategy of acting early on things we can control, and not waiting for better times or for others to act, has been and remains the right strategy.
 
“After three consecutive years of very significant if different challenges, we could have hoped for an easier 2010. The good news is that, after implementation of several improvement actions, Consumer Board is not only strong, but also positioned for continued and further improving performance. We believe Industrial Packaging is also well positioned for further growth with improvement actions such as power plant investment in Poland, and the efforts to divest laminating paper will improve the situation further. At the same time, we see that following our early actions, our graphics paper businesses (newsprint, magazine paper and coated fine paper) are now well positioned to get through yet another challenging year in 2010. As we indicated already in October 2009, the underlying structural supply and demand imbalances in newsprint and some other graphical grades are putting pressure on pricing. This just underlines how crucial our early actions were, such as significant cost and capacity cuts, as well as cost-improving investments in for example power plants in Langerbrugge and Maxau, which will be completed in the next few months.
 
“We will now not only make sure that already announced programmes will produce the benefits promised, we will also take new measures when needed to stay on our path of defending earnings quality through proactive business mix and capacity management. Our production capacity needs to be in line with sustainably profitable demand for our products, and we will therefore not hesitate to take further temporary or permanent capacity cuts if necessary. We will also continue our working capital ratio improvements that we started five quarters ago, even though the completion of our power plant investments and seasonality will have a limiting impact on absolute short-term cash flow. We are determined to stay on our path and move even faster where possible. This, and only this, will enable us to continue to build our future growth in fibre-based packaging, low-cost pulp and other areas where we can create a sustainable earnings capability.”
 
 
Near-term Outlook
Global economic recovery is underway, but any pickup in demand for the Group's products is forecast to be slow and insufficient to restore supply and demand balance in the short term and alleviate overcapacity.

Demand for graphic paper is predicted to be somewhat better
than in the exceptionally poor first quarter of 2009, but the outlook still remains weak. In Europe seasonal weakness in demand for newsprint and magazine paper is expected to be partially offset by the anticipated gradual improvement in the economy. A further seasonal improvement in demand for fine paper, especially uncoated fine paper, is foreseen in the current quarter. Demand is forecast to be better than a year ago for consumer board, industrial packaging and wood products.
 
In Europe market prices for publication paper grades are expected to remain under pressure due to structural supply and demand imbalance. Uncoated fine paper prices seem to have bottomed out, but coated fine paper prices remain challenging. Prices are expected to improve slightly in consumer board and industrial packaging, and stay unchanged in wood products, supported by improved market balance and low product inventories.

In China demand for uncoated magazine paper is forecast to be weaker
than a year ago, and also seasonally weaker than in the fourth quarter of 2009 due to the Chinese New Year holiday. Prices are expected to be higher than in the previous quarter. Demand for coated fine paper is predicted to be stronger than a year earlier with prices similar to the last quarter.

In Latin America demand for coated magazine paper is forecast to be stronger
than a year ago due to the recovery in national economies, but seasonally weaker than in the previous quarter. Prices seem to have bottomed out and price increases are foreseen.
The Group's cost deflation forecast before own actions is approximately 1% for 2010.

For further information, please contact:
Jouko Karvinen, CEO, tel. +358 2046 21410
Markus Rauramo, CFO, tel. +358 2046 21121
Lauri Peltola, Head of Group Communications, tel. +358 2046 21380
Ulla Paajanen-Sainio, Head of Investor Relations, tel. +358 2046 21242
Stora Enso's first quarter results 2010 will be published on 22 April 2010.
Annual General Meeting 31 March 2010