Industria
Stora Enso Interim Report January-September 2024: Continued growth and earnings improvement
Stora Enso's full year 2024 adjusted EBIT is expected to be significantly higher than for the full year 2023,
EUR 342 million .
Stora 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.
The 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.
Market 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.
Demand 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.
Demand 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 timber, is anticipated to drive higher volumes. Raw material costs in the fourth quarter are expected to align with third-quarter levels on average, although fixed costs may increase with volume growth. Elevated wood costs are projected to continue, with a year-on-year increase.
Wood markets in the Baltic Rim are forecasted to remain constrained due to a shortage of wood, driven by heightened demand for industrial wood (pulpwood and sawlogs). A robust and sustainable financial performance is expected to continue from the first three quarters into the fourth quarter. General cost inflation, particularly affecting logistics and harvesting costs from the third quarter, is also expected to impact the fourth quarter.
Stora Enso maintains leading market positions in sectors positioned for long-term growth, including high-end consumer packaging, wood construction, and innovative biomaterials. The Group is set to capitalise on sustainability trends and regulatory advancements which favour its product offerings, enhancing its market presence and driving continuous progress.
"I am pleased to report that our value creation and profit improvement programmes are progressing well across all divisions. These initiatives, designed to optimise our processes and enhance our competitive edge, remain on track. Improvements in profitability, along with more favourable market conditions in some segments during the third quarter, continued to support a positive earnings trend. Our team is diligently managing operations, sales, sourcing, working capital, and refining processes to ensure operational efficiency, cost competitiveness and financial strength. And our profit improvement programme, initiated earlier this year with a goal of
120 million euro in fixed cost savings, is set to deliver its full impact from 2025.
We have seen a strong increase in our Group financial performance this quarter compared to last year, driven by higher prices and volumes, particularly in Packaging Materials. The Biomaterials division demonstrated strong performance, though demand weakened during the quarter with rapidly decreasing pulp prices. Our Forest division delivered a record high third quarter result, driven by increased wood prices. This resulted in a Group sales increase to
2,261 million euro from
2,127 million euro . The adjusted EBIT rose for the fourth consecutive quarter, reaching
175 million euro , up from
21 million euro in 2023, due to price hikes and cost cuts. This improved our margin to 7.8% from 1%. Challenges persist in the Wood Products division due to a weak construction sector and our Packaging Solutions face price lags and market overcapacity. Despite these challenges, our cost-saving measures have effectively reduced both fixed and variable costs.
On 23 October, we announced that after a thorough review and negotiations, we decided to stop the divestment process and instead retain our Beihai packaging production site and forestry business, recognising that the value in own use of these assets exceeds achievable sale proceeds. This decision supports our strategic aim to strengthen our leadership in the fiber-based packaging market and by optimising the product mix, this site will continue to enhance our position as a leading global supplier, especially in the Asia Pacific region. We are committed to financial prudence, with no significant capital expenditure expected in the mid-term as we pursue these strategic enhancements.
In our continuous pursuit of financial stability, we are preparing for the sale of approximately 12% of our forest assets in
Sweden , covering 1.4 million hectares valued at
6.3 billion euro . This divestment aims to strengthen our balance sheet, underscoring the economic value and resilience of our forest holdings.
In our ongoing commitment to prioritise financial stability through strategic decisions such as the divestment of forest assets in
Sweden , we remain equally dedicated to maintaining the highest environmental standards in all operational areas.
Looking ahead, we are intensifying our focus on capital allocation and asset strategy in growing market segments, laying the foundation for enhanced competitiveness and profitable growth across the Group. Our focused profitability improvement initiatives over the past year have strengthened Stora Enso's financial standing. However, we anticipate a slower market recovery for the remainder of the year to adversely impact profits due to the effect from declining pulp prices, subdued board demand and a changed mix of packaging products, together with continued high wood costs. We confirm our annual guidance for adjusted EBIT to be significantly higher than for the full year 2023 and remain committed to delivering exceptional service to our customers and robust value growth for our shareholders."
Analysts, investors, and media are invited to participate in the webcast with a teleconference today at
11:30 am EEST ( 10:30 CEST ,
9:30 BST , 4:30 EDT ). The results will be presented by President and CEO
Hans Sohlström and CFO
Seppo Parvi . The presentation can be followed live via the link:
stora-enso-oyj-q3-earnings-presentation-2024.open-exchange.net/registration
During the webcast presentation, analysts and investors will also have the possibility to ask questions. To participate in the teleconference, please choose the "Teleconference" option on the homepage of the webcast. Recording of the webcast will be available shortly after the event at the same address and at
storaenso.com/en/investors/interim-report
Media representatives who wish to ask questions after the publication of the report may contact
Carl Norell , SVP Corporate Communications at Stora Enso on +46 72 241 0349.
This release is a summary of Stora Enso's Interim Report January–September 2024. The complete report is attached to this release as a pdf file. It is also available on the company website at
storaenso.com/en/investors/interim-report .
Part of the global bioeconomy, Stora Enso is a leading provider of renewable products in packaging, biomaterials, and wooden construction, and one of the largest private forest owners in the world. Stora Enso has approximately 20,000 employees and our sales in 2023 were EUR 9.4 billion . Stora Enso shares are listed on Nasdaq Helsinki Oy (STEAV, STERV) and Nasdaq Stockholm AB (STE A, STE R). In addition, the shares are traded in the
USA on OTC Markets (OTCQX) as ADRs and ordinary shares (SEOAY, SEOFF, SEOJF).
storaenso.com/investors
STORA ENSO OYJ
Carl Norell
SVP Corporate Communications
tel. +46 72 241 0349
Anna-Lena Åström
SVP Investor Relations
tel. +46 70 210 7691
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