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Stora Enso Full Year Results: Operating Profit Weak Despite Improving Demand

Press release from the issuing company

HELSINKI, Finland, February 3 -- Stora Enso today announced that Stora Enso's earnings per share excluding non-recurring items were EUR 0.03 (EUR 0.10). Operating profit excluding non-recurring items was EUR 42.9 (EUR 131.6) million, which is 1.3% of sales. Profit before taxes and minority interests, excluding non-recurring items, amounted to EUR 24.7 (EUR 114.8) million. Non-recurring items in the operating profit totalled EUR 179.9 million due to changes in the disability pension schemes under the Finnish Statutory Employment Pension Scheme ("TEL") as approved by the Finnish Ministry of Social Affairs and Health. Sales at EUR 3 241.9 million were 6.9% higher than the previous quarter's EUR 3 033.1 million. Cash flow from ongoing operations was EUR 406.0 (EUR 448.1) million and cash flow after investing activities EUR 86.7 (EUR 127.1) million. Cash earnings per share excluding non-recurring items were EUR 0.38 (EUR 0.45). Net financial items were EUR -32.5 (EUR -27.0) million. Market-related production curtailments totalled 80 000 (61 000) tonnes. Full Year Results Full year sales increased by EUR 223.5 million to EUR 12 395.8 million, an increase of 1.8%. Operating profit excluding non-recurring items decreased by EUR 189.4 million to EUR 336.4 million. Earnings per share excluding non-recurring items increased by EUR 0.01 and were EUR 0.25. Cash flow from operations totalled EUR 1 176.6 (EUR 1 808.3) million, with cash flow after investing activities amounting to EUR -16.8 (EUR 615.0) million. Cash earnings per share excluding non-recurring items were EUR 1.67 (EUR 1.63). Outlook Commenting on the outlook, Stora Enso's CEO Jukka Harmala said, "In Europe demand for advertising-driven paper grades is expected to remain healthy. Newsprint and magazine paper prices are expected to rise as a result of the ongoing negotiations. Demand for fine paper is expected to be good, with coated fine paper prices stable, but uncoated fine paper prices are under pressure, partly due to increased competition and the weak US dollar. Demand for packaging board should remain stable, and some price increases are being implemented in consumer boards and coreboards. Demand for construction and joinery wood products is relatively stable globally, but the business suffers from overcapacity and weak currencies in main export markets." In North America print advertising expenditure remains robust. However, strong paper demand and improved selling prices are attracting additional imports mainly from Asia, especially in fine paper sheets. Stora Enso's previously announced autumn price increase for magazine paper grades will be implemented for contract customers in the first quarter of 2005. Market conditions are expected to remain favourable and operating rates high. The Profit Enhancement Programme will continue to improve performance, although the financial results for the first half of 2005 will be affected by downtime due to rebuilding paper machine 26 at Biron Mill. The shutdown will take about three weeks and 10 000 tonnes of production will be lost. Asian markets have stabilised and are expected to pick up in February, following the Chinese New Year. Although demand outlook is generally positive, Group profits are expected to be influenced in the first quarter of 2005 by the US dollar and costs related to rebuilds in the publication paper mills at Langerbrugge (40 000 tonnes of production lost), Summa (15 000 tonnes of production lost), Corbehem (31 000 tonnes of production lost) and Biron (10 000 tonnes of production lost). The shutdowns will take from three to six weeks at each mill. Furthermore, the Group's financial performance will continue to be adversely affected by rising energy-related and chemical costs. The economic consequences of the recent storms in Northern Europe cannot yet be accurately estimated. Despite the near-term challenges to Group profitability, the financial results for the full year 2005 are expected to show an improvement on 2004.