Stora Enso Interim Report January-September 2024: Continued growth and earnings improvement
STORA ENSO OYJ INTERIM REPORT 24 October 2024 at 8:30 EEST
HELSINKI, Oct. 24, 2024 /PRNewswire/ --
Q3/2024 (year-on-year)
Sales increased by 6% to EUR 2,261 (2,127) million.
Adjusted EBIT increased to EUR 175 (21) million*.
Adjusted EBIT margin increased to 7.8% (1.0%).
Operating result (IFRS) was EUR 139 (-1) million*.
Earnings per share (EPS) were EUR 0.11 (-0.04) and EPS excl. fair valuations (FV) was EUR 0.10 (-0.05).
The value of the forest assets increased to EUR 8.8 (8.3) billion, equivalent to EUR 11.11 per share.
Cash flow from operations amounted to EUR 271 (231) million. Cash flow after investing activities was EUR 4 (38) million.
Net debt increased by EUR 409 million to EUR 3,528 (3,120) million, mainly due to the board investment at the Oulu site.
The net debt to adjusted EBITDA (LTM) ratio was 3.1 (2.4). The target to keep the ratio below 2.0 remains.
Q1–Q3/2024 (year-on-year)
Sales were EUR 6,727 (7,222) million.
Adjusted EBIT was EUR 478 (292) million.
Operating result (IFRS) was EUR 372 (4) million.
Earnings per share (EPS) were EUR 0.26 (-0.09) and EPS excl. fair valuations (FV) was EUR 0.25 (-0.09).
Cash flow from operations amounted to EUR 863 (631) million. Cash flow after investing activities was EUR -15 (-31) million.
Adjusted ROCE excluding the Forest division (LTM1) decreased to 2.7% (4.7%), the target being above 13%.
* The classification of the Beihai site as assets held for sale has been ceased. The previously published adjusted EBIT and IFRS operating result for January–June 2024 decreased by EUR 15 million due to the inclusion of the previously suspended depreciation into the restated results.
Key highlights
The value creation programmes, centred on sourcing, operational and commercial efficiencies, are making good progress across all divisions.
The profit improvement programme, initiated in Q1/2024 with a target of EUR 120 million in fixed cost savings, has progressed well, full impact is expected from 2025.
In October, Stora Enso announced that it is preparing to sell approximately 12% of its total forest assets of 1.4 million hectares in Sweden, valued at EUR 6.3 billion. A sale would reduce debt, confirming the financial value of the Company's forest holdings.
Stora Enso decided in October to discontinue the divestment process for its Beihai packaging board production site and forestry business. Stora Enso is of the view that the value in own use of the assets exceeds the achievable transaction value, and has therefore chosen to retain these operations within the Group. As a result of the reversal of classification as held for sale, Adjusted EBIT and IFRS operating result for Q1 to Q3/24 decreased by EUR 7.5 million per each quarter, EUR 30 million for the full year 2024, due to the inclusion of previously suspended depreciation into the restated results.
The consumer board investment at the Oulu site in Finland is progressing on schedule. Production is expected to start in the second quarter of 2025, with full capacity estimated to be reached during 2027.
GuidanceStora Enso's full year 2024 adjusted EBIT is expected to be significantly higher than for the full year 2023, EUR 342 million.
Outlook
Market and business outlookStora Enso's recent profitability improvement initiatives have positively impacted the earnings trend over the past four quarters and reduced the Group's net debt to EBITDA ratio in the last two quarters. Stora Enso anticipates that the gradual market recovery will slow down for the rest of the year, which is expected to adversely impact its profits in the fourth quarter. This sequential slowdown is attributed to factors such as weak consumer board demand, corrugated board overcapacity, and an ongoing weak construction sector. Additionally, high wood costs are likely to continue compressing margins. Stora Enso anticipates persistent market volatility, including high inflation, potential labour strikes, and slow retail growth, along with other demand and price fluctuations through year-end.Packaging MaterialsThe seasonally low fourth quarter is expected to encounter challenges, including decreased volumes due to weaker demand and annual maintenance shutdowns. The average price level across the division is expected to be lower in the fourth quarter, despite price increases in both consumer board and containerboard. This is due to product mix adjustments with a higher portion of lower-priced containerboard compared to higher-priced consumer board products. The planned annual shutdowns are at five of its production sites, of which four in consumer board including two major integrated sites, which will also elevate fixed costs. The persistent high cost of wood remains a primary concern. Weak order inflow during third quarter makes the fourth-quarter outlook uncertain. Demand for cartonboard, kraftliner, and testliner is expected to drop slightly, influenced by seasonal lows, while paper demand is forecasted to grow sequentially due to favourable seasonal effects.Packaging SolutionsMarket demand remains unpredictable and volatile, influenced by weekly fluctuations and pervasive overcapacity. Volumes in Western Europe are likely to decline sequentially due to seasonal effects, with any significant uplift from traditional peak periods like "Black week" and Christmas not anticipated. The Chinese market continues to struggle amid a weak economic environment. Despite no major anticipated cost increases in the fourth quarter, ongoing expenses related to increased containerboard prices and the ongoing ramp up of the corrugated packaging site in De Lier, NL, are expected to constrain margin growth.BiomaterialsDemand will vary across segments, but the division's average is expected to remain unchanged quarter-on-quarter. In China, fourth-quarter demand is poised to rise due to low inventories, favourable seasonal demand, and lower prices. Conversely, demand in Europe is expected to weaken slightly, primarily due to reduced demand for printing and writing paper products, and tissue, although demand for fluff is projected to remain stable. Wood prices in the Nordics are forecasted to be high, while chemical prices are likely to stabilise at third-quarter levels. Wood ProductsDemand for classic sawn products and pellets, particularly for heating, is expected to rise sequentially in the fourth quarter due to seasonal factors. Demand for building solutions, such as construction beams and cross-laminated ...
