STORA ENSO OYJ, Helsinki, Finland - FINANCIAL STATEMENT RELEASE - 1 February 2019 at 9.30 EET
Sales growth continued
Temporary operational challenges – Dividend proposal EUR 0.50 per share
- Sales increased 5.8% to EUR 2 657 (2 511) million, making Q4 the eighth consecutive quarter of sales growth.
- Operational EBIT decreased slightly to EUR 271 (280) million.
- The operational EBIT margin was 10.2% (11.2%), above 10% for the sixth consecutive quarter.
- EPS increased by 75.0% to EUR 0.39 (0.22) and EPS excl. IAC was EUR 0.33 (0.26).
- Cash flow from operations decreased to EUR 323 (519) million. Cash flow after investing activities amounted to EUR 148 (262) million.
- Balance sheet continued to strengthen, and net debt was reduced by EUR 161 million. The net debt to operational EBITDA ratio improved to 1.1 (1.4).
- Operational ROCE was 12.4% (13.5%).
Year 2018 (year-on-year)
- Sales of EUR 10 486 (10 045) million increased 4.4%.
- Operational EBIT of EUR 1 325 (1 004) million increased 32.0%.
- Operational ROCE was 15.5% (11.9%), well above the strategic target of 13%.
Outlook for 2019
Stora Enso introduces new way of giving annual outlook and quarterly guidance. The Group starts to guide absolute range for quarterly operational EBIT, instead of comparing quarterly sales and operational EBIT to the previous quarter qualitatively.
Stora Enso's year 2019 is expected to be largely in line with 2018, provided that the current trading conditions do not significantly change. Demand growth is expected to continue for Stora Enso’s other businesses except for European Paper, for which demand is forecast to continue to decline in 2019. Group’s sales are expected to be higher and costs are forecast to increase in 2019 compared to 2018. Stora Enso will implement measures to mitigate these cost increases and the increased uncertainties with a new profit protection programme.
Guidance for Q1/2019
Q1/2019 operational EBIT is expected to be in the range of EUR 260–350 million. The Group’s annual maintenance schedule has been changed from last year. During Q1/2019 there will be annual maintenance shutdowns at Veracel pulp mill and Ostrołęka containerboard mill. The total negative impact of maintenance is estimated to be EUR 20 million more compared to Q1/2018. In Q1/2018 there were no annual maintenance shutdowns.
Stora Enso’s CEO Karl-Henrik Sundström comments on the fourth quarter 2018 results:
We continue to deliver sustainable profitable growth for the eighth consecutive quarter, with a sales increase of close to 6%. This was the highest fourth quarter sales since 2012 and the growth was primarily due to favourable prices and our active work on product mix and pricing. Due to slightly weaker markets, we have had lower levels of deliveries. We have experienced temporary operational issues at six of our mills, which has resulted in an EBIT impact of approximately EUR 40 million. Our operational EBIT decreased a bit over 3%, while operational EBIT margin exceeded 10% for the sixth consecutive quarter.
Looking at the whole year of 2018, sales are again well above EUR 10 billion and our operational EBIT increased by 32%. Our operational ROCE was close to 16%, well above the strategic target of 13%. I am also very pleased with the quite significant increase in full year EPS of 62.5%. We continue to strengthen our balance sheet and net debt/EBITDA amounted to 1.1. Therefore, the Board of Directors proposes to the Annual General Meeting a dividend of 0.50 euros per share, an increase of 22% from last year. This is the fourth year in a row with an increase. This is a vote of confidence for the future of Stora Enso.
Our transformation projects are progressing well. The investment in a new cross laminated timber (CLT) unit at the Gruvön sawmill is being completed. Commercial production will begin during the first quarter of 2019 as planned. I am additionally encouraged that we have taken an important step in securing our competitive raw material supply for the long term. We, together with the other shareholders, have signed a binding agreement aiming at completing the Bergvik Skog forestry transaction during the first half of 2019.
We continue to launch new products that enable our customers to leverage digital solutions to further advance their business. The most recent one is a new sustainable RFID tag technology called ECO™ by Stora Enso. It is designed for intelligent packaging functionalities in supply chain, retail and e-commerce applications. We have also entered an interesting partnership with H&M group and Inter IKEA group to industrialise new textile fibres in a sustainable way at attractive cost levels.
As sustainability is in the core of our business, I am indeed proud that we have been top-rated in combatting global warming by the international non-profit organisation CDP. CDP has included us on its new 2018 Climate A List, which identifies the global companies that are taking leadership in climate action. Moreover, we have been acknowledged as the leading Swedish listed company on sustainability in a ranking of all companies listed on the Stockholm Stock Exchange and we have received the award of the Best sustainable brand of the year in our industry.
With reference to current geopolitical developments, there is a notable risk of escalation in protectionist measures to the extent that global trade could materially shrink. This would have major knock-on effects for inflation, business sentiment, consumer outlook and ultimately global economic growth. Therefore, we have started to implement a profit protection programme of EUR 120 million to be kicked-off immediately, to better prepare for potential market weakness.
In these times of increased uncertainty and less visibility, 2019 is expected to continue in line with 2018 for us, provided that the current trading conditions do not significantly change. I expect growth in demand to continue for all our businesses except for European paper, for which demand is forecast to continue to decline in 2019. Our sales are expected to be higher and costs are forecast to increase in 2019 compared to 2018. We will implement measures to mitigate these cost increases and the increased uncertainties with our profit protection programme.
As always, I would like to thank our customers for their business, our employees for their dedication, and our investors for their trust.
Source: Stora Enso