Stora Enso Oyj Financial Statement Release 2023: Focus on profit improvement, competitiveness, and cash flow

HELSINKI, Feb. 1, 2024

Q4/2023 (year-on-year)

• Sales decreased by 24% to EUR 2,174 (2,864) million.
• Operational EBIT decreased to EUR 51 (355) million.
• Operational EBIT margin decreased to 2.3% (12.4%).
• Operating profit (IFRS) decreased to EUR -326 (705) million.
• EPS was EUR -0.36 (0.74) and EPS excl. fair valuations (FV) was EUR -0.64 (0.32).
• Cash flow from operations amounted to EUR 323 (429) million. Cash flow after investing activities was EUR -9 (202) million.

Full year 2023 (year-on-year)

• Sales were EUR 9,396 (11,680) million.
• Operational EBIT was EUR 342 (1,891) million.
• Operating result (IFRS) was EUR -322 (2,009) million.
• Earnings per share (EPS) were EUR -0.45 (1.97) and EPS excl. fair valuations (FV) was EUR -0.73 (1.55).
• Net debt increased by EUR 1,314 million to EUR 3,167 (1,853) million, due to the acquisition of De Jong Packaging Group, due to the acquisition of De Jong Packaging Group, the board investment at the Oulu site, and dividend payment in 2023.
• The net debt to operational EBITDA ratio (last 12 months) was 3.2 (0.7). The target is to keep the ratio below 2.0.
• Operational ROCE (last 12 months) excluding the Forest division decreased to 1.0% (20.4%), the target being above 13%.

Key highlights

• Stora Enso finalised the restructuring actions to improve long-term competitiveness and profitability announced in June 2023. The Group closed production units and reduced the number of employees within Group functions. The restructuring actions improve Stora Enso's operational EBIT by approximately EUR 110 million annually. The headcount reduction impact from this restructuring programme was 1,150.
• Stora Enso has initiated a new profit improvement programme targeting annualised EUR 80 million improvement of the operational EBIT. This could lead to a potential reduction of approximately 1,000 employees. No site closures are planned as part of this programme.
• An all-time low level of operating working capital was achieved at year-end, a reduction of EUR 264 million from the end of the third quarter of 2023. This has resulted in a steady net debt level, with a modest increase of EUR 47 million recorded during the fourth quarter of 2023.
• The consumer board investment at the Oulu site in Finland is moving ahead according to schedule. Production is expected to start during 2025.
• The plan to divest the Beihai site in China is proceeding according to plan and the assets have been classified as held-for-sale.
• Stora Enso committed to reaching net-zero carbon emissions by 2040 and became a signatory of The Climate Pledge. 

Proposed dividend
The Board of Directors will propose a dividend of EUR 0.10 (EUR 0.60) per share at the Annual General Meeting on 20 March 2024. In addition, the Board of Directors proposes that the AGM would authorise the Board of Directors to decide at its discretion on the payment of an additional dividend up to a maximum of EUR 0.20 per share.

Guidance
Stora Enso's full year 2024 operational EBIT is expected to be higher than for the full year 2023, EUR 342 million.

Outlook
Stora Enso expects market conditions to remain uncertain in 2024, with ongoing pressure on demand, prices and margins. However, there are some positive signs such as increasing pulp prices, declining global pulp inventories, less customer destocking, and lower inflation and interest rates.

The first quarter is not expected to show a significant market improvement following a historical low fourth quarter in 2023 and a slow recovery. All variable costs continued to ease in the fourth quarter, except for wood, which are expected to follow similar trends also in the first quarter this year. The potential risk of logistical challenges from the Red Sea area could disrupt the flow of goods and increase costs.

The Packaging Materials and Wood Products divisions continue to suffer from low demand, prices and volume. Although demand for Wood Products remains stable, it is weak due to the ongoing continued slowdown in the construction industry. While there has been a slight improvement in demand for Wood Products from Europe, it is mostly driven by customer inventory build-up. Value chain destocking for Packaging Materials is coming to an end during the first half of 2024, which may support a slight recovery especially in the consumer board segment.

In Biomaterials, the pulp market is showing signs of stabilising and inventory levels are normalising. And while new capacity is ramping up in Latin America, downstream demand remains fragile. There are signs of improvement in Europe, while demand in China has weakened slightly due to oversupply and low season. Packaging grades demand is still struggling, while the tissue sector continues to perform solidly.

Packaging Solutions expects a stronger sequential demand in the first half of the year due to the greenhouse season. However, low demand leads to high price and margin pressure due to containerboard price reductions, inflation-driven fixed costs, and overcapacity. The Forest division expects no major changes in outlook from the previous quarter, with wood demand expected to start rising gradually. 

During the second half of 2023, Stora Enso implemented significant restructuring measures to enhance its financial performance going forward. These included the closure of sites and production lines, the sale of assets, the adoption of a more decentralised operating model, and a reduction of employees by approximately 1,150. These actions are expected to improve the Group's cost competitiveness and streamline its organisation, leading to a stronger financial performance in the years to come.

Building on last year's cost-saving initiative, Stora Enso will further pursue profit turnaround and cash flow improvements to reduce costs and improve competitiveness. A new profit improvement programme targeting annualised EUR 80 million improvement of the operational EBIT has been initiated. This could lead to a potential reduction of approximately 1,000 employees.

Key figures