Financial Insights. Finnish and Swedish Forest Industry Q Tieto Forest Industry Consulting.

Transcription

1 Financial Insights Finnish and Swedish Forest Industry Q Tieto Forest Industry Consulting

2 Executive summary A dramatic slowdown in global trade growth. One of the main element of the slowdown is weaker import growth in China. However, the global trade and GPD are expected to recover in The global economic uncertainty and changes in the currency market has been seen to have an effect on companies operating environment. However, demand for pulp has remained stable, and there are no signs of significant changes in the market. Demand for global chemical pulp continued strong. The total consumption of market pulp is expected to gradually increase in line with global growth. Hardwood pulp inventories, which are generally higher than softwood pulp inventories, declined slightly. Inventories of purchased pulp were historically low. The demand for paperboards continued at a good level in both Europe and the Americas and price levels were stable. In 2015 the Finnish forestry industry s production and export did not increase compared to The demand is expected to recover in the world market next year says Forestry Sector Economic Outlook Which will be in line with the Finnish economic activity, which was broadly flat in 2015, but is projected to strengthen in In Europe, demand increased for kraftliner and solid-wood products. Demand in Europe for publication papers continued to fall in Q1.

3 Tieto s view of tomorrow Personalized for every individual Infinite possibilities The world of information A world, rapidly developing with every new bit of information Industries are increasingly interconnected Data is everywhere technology enabling new business models

4 The European Tissue Symposium (ETS) Helsinki, Finland 27 May 2016 The journey into digital is twofold Businesses are facing dual challenges: 1. Need to digitalize tools and processes in order to grow 2. Improve service innovation and customer experience while reducing costs of operations Tieto can support you on the journey: Mill excellence as a service expand the centre of your business Supply chain hub collect and share information and orchestrate access to external sources. Cloud ecosystem based on open interfaces Superior customer experience ecommerce Intelligent transformation agility in business changes and M&A Tieto for tissue industry

5 Content Sales and EBIT margin development on Group Level EBIT Margin and Sales development on Product level Forest Operations Pulp Packaging Paper Wood Products Tissue Special Papers EBIT Margin development Group Level including non recurring items Contacts

6 Financial Insights Tieto Forest Industry Consulting

7 Swedish and Finnish companies have grown in sales after The Ministry of Employment and Economy have set the key growth areas for Finland: bio-economy, clean tech and digitalization. The inherent possibilities for Finland are innovative industries and the raw material resources exploitation business sectors. This can already be seen in companies' patent applications. UPM has filed patents on the following topics: biofuels, bio-chemicals and biocomposites Average sales growth all companies Swedish companies GDP Commonwealth of Independent States GDP ASEAN-5 Source: Annual Reports, International Monetary Fund Excluding Billerudkorsnäs and Munksjö. Finnish companies GDP European union GDP Latin America and the Caribbean GDP Africa Finnish companies: Ahlstrom sales development is compared to 2010 (than 2009) In Q1 of 2016, the consumer confidence index in the euro zone fell compared to the same period last year. Despite the fall, consumers are more optimistic that the economy will improve in 2016, especially in Finland Many of the Swedish and Finnish forest industry companies show quite flat sales development since 2009, despite growing economies can bee seen as a starting point for sales growth among Swedish and Finnish companies.

8 EBIT Margin EBIT Margin Development Group Level excl. IAC (Items Affecting Comparability) 30% Yearly trend Quarterly Margin trend UPM s growth projects are expected to contribute positively to the company s earnings in 2016, compared to 2015, mainly due to increasing deliveries in pulp, biofuels, label papers and fine papers in Asia 20% 10% 0% -10% Q In Q1, Suominen s net sales decreased (7,2%) from the comparison period mainly due to lower demand For Stora Enso s the margin was record high (10.1%). Operational EBIT increased 12.7% from the comparison period mainly due to the declining paper business and divested Barcelona Mill Even Metsä Group s net sales was 7,9% lower than the compared period in previous year. The development of Metsä Group's business operations was as expected -20% Source: Annual Reports All companies excl. Munksjö and Billerudkorsnäs Total SCA Group Years Ebit margin average On January 21, 2016, SCA announced the acquisition of Wausau Paper Corp., a leading North American Awayfrom-Home tissue company. Cost MUSD 513 8

9 Sales Development Group Level Recovery Depression Source: Annual Reports 20% 10% SCA Sales Development Q vs. Q Boom 0% Stora Enso // -70% -50% -30% -10% 10% 30% 50% 70% Setra UPM BillerudKorsn Ahlstrom Sveaskog äs Holmen Metsä -10% Suominen -20% Slowdown Moelven Sales 260% Development 2015 vs UPM group level sales in Q were 2% lower compared to Q Sales grew in UPM Biorefining, UPM Paper Asia and UPM Raflatac business areas Metsä Group s operating result decreased in Q1 mainly due to the slight decrease in price of pulp and the company being in the start-up phase of a new folding boxboard production line at Metsä Board s Husum mill For Moeleven the demand from the building products trade in Scandinavia was satisfactory. The volume of deliveries was higher, but at prices lower than for the same period last year For Holmen the operating profit for the first quarter of 2016 was SEK 580 million, excluding items affecting comparability, which were SEK 184 million higher than in the first quarter of 2015 and SEK 204 million higher than in the fourth quarter 9 *)Ahlstrom has adjusted their net sales and operating profit, starting from Q1/2015.

10 EBIT Margin Average Average EBIT Margin Development Q vs. Q % Demand for logs and pulpwood in Sweden was normal during the first quarter. Sales prices were largely unchanged 25% 20% Q4 Q1 The market for consumer board was stable in the first quarter. Demand decreased by 2% compared to the same period last year. Prices were stable 15% 10% 5% 0% Q4 Q1 Forest Operations Source: Annual Reports Q4 Q1 Q4 Q1 Q4 Q1 Pulp Packaging Paper Wood Product Q4 Q1 Tissue Q4 Q1 Special Papers Demand for printing paper in Europe decreased by 4% during January February compared to the same period in Selling prices increased slightly for some products in the first quarter Market conditions for wood products stabilised in the first quarter and prices were largely unchanged following significant decreases in 2015 Some reasons for profitability decrease among Tissue were the increased cost of pulp and the strengthening of the euro. 10

11 Tieto Industry Consulting Tietoto create innovation index in Q4: Digitalization gives more space for innovation As digitalization gains speed, demand for new datadriven innovations and renewal of customers business and IT increases rapidly Innovation has a power that extends beyond imagination. A power to create new and change current ways of working, also to create new networks. Tieto s innovation index levels shows forest industries innovation in different business areas Now YOU have chance to be part of the innovation index. This innovation index will be measured by conducting interviews with YOU and forest industry companies operating in Finland and Sweden By participating in this interview process you can win an innovation workshop conducted by Tieto Forest Industry Consulting team (free of charge) For further information contact: allan.flink@tieto.com

12 Product Group: Forest Operations 12

13 EBIT Margin Public EBIT Margin Development Forest operations excl. IAC (Items Affecting Comparability) 30% Yearly trend Quarterly Margin trend Metsä Forest EBIT margin in Q1 was at the same level in year Metsä Forest s wood supply in Finland was steady and stumpage prices remained stable 15% While the Baltic countries had a good supply of pulpwood continuing into Q1/201 the demand of pulpwood exceeded in Sweden, according to Metsä 0% -15% Q Years Demand for logs and pulpwood in Sweden was normal in the first quarter. Sales prices were largely unchanged For Holmen Skog earnings from operations for January March decreased by SEK 11 million to SEK 205 million compared with the same period last year, owing mainly to lower harvesting volumes. Holmen Skog Södra Skog EBIT Margin Average Sveaskog Metsä Forest Source: Annual Reports 13

14 Sales Development Forest Operations* 10% Recovery Boom 5% 0% -40% -30% -20% -10% 0% 10% 20% 30% 40% Sales Development 2015 vs Electronically purchasing and sales remain part of Metsä Forest operations. In Q4 Metsä Forest started to enhance their digitalization. In Q1 around 20% of wood acquired by Metsä came from private forest owners and in the sales of forest management services the figure was 25%. Compared with the fourth quarter Holmen s earnings from operations rose by SEK 47 million mainly as a result of seasonally lower costs and higher earnings from timber trading than usual Depression -5% -10% Metsä Forest Sveaskog Slowdown Holmen Skog Sveaskog's operating profit for the first quarter amounted to 349 MSEK (420). Delivery volumes from own forests decreased by 2% and timber prices by an average of 3%. Source: Annual Reports Sales Development Q vs. Q *) Concerns only companies that clearly distinguish forest operations

15 Product Group: Pulp 15

16 EBIT Margin Public EBIT Margin Development Pulp excl. IAC (Items Affecting Comparability) 40% 30% 20% Yearly trend Quarterly Margin trend Starting in 2016 the demand for global chemical pulp remained strong in all major regions but the strongest growth was recorded in Asia. Hardwood pulp demand were slightly stronger in Q1/2016 compared to Q1/2015 while softwood demand were stable in Europe 10% 0% -10% -20% Q Södra Cell Metsä Fibre EBIT Margin Average Years Stora Enso Biomaterials UPM Biorefining During Q1 the market price of both northern bleached softwood kraft and bleached hardwood kraft pulp decreased. In China the market price for the hardwood pulp was marked more as declining trend Stora Enso s Operational EBIT increased mainly due to lower wood costs and higher sales volumes from Montes del Plata Mill During Q1 UPM Biorefining increased their production capacity and improved both their production and cost efficiency which affect UPM s EBIT in a positive way Source: Annual Reports 16

17 Sales Development Pulp 40% Recovery Boom 30% Metsä Fibre's operating result in Q1 was 1% lower than in Q1/2015. Decreased price of mainly long-fibre pulp pushed the result lower than in the corresponding period previous year 20% 10% Stora Enso Biomaterials (Sales development 2014 vs % -80% -50% -20% 10% 40% 70% Metsä Fibre -10% -20% -30% UPM Biorefining // Sales Development 260% 2015 vs The market prices of long-fibre pulp decreased by 13% in Q1 compared to the corresponding period in the 2015 while the average market prices of short-fibre pulp increased by 2%. Currency changes has effect on the prices of long-fibre while the higher supply and lower demand have affect on price of short-fibre pulp UPM Biorefining s EBIT increased mainly due to lower variable costs and higher delivery volumes in Q1/2016 compared to Q1 in previous year Depression Source: Annual Reports -40% Sales Development Q vs. Q Slowdown 17

18 Product Group: Packaging 18

19 EBIT Margin Public EBIT Margin Development Packaging excl. IAC (Items Affecting Comparability) 25% Yearly trend Quarterly Margin trend Stora Enso s Beihai consumer board mill in China is expected to start up in May % Stora Enso s Ebit margin were lower in Q1/2016 (10%) compared to Q1/2015 (13%). 5% -5% Q Source: Annual Reports Billerudkorsnäs financial data from Years Billerudkorsnäs Consumer Board BillerudKorsnäs Packging paper BillerudKorsnäs Corrugated Solutions Metsä Board Stora Enso packaging solutions & consumer board Holmen Iggesund Paperboard EBIT Margin Average The operating result was weakened by the start-up of Metsä Board s new folding boxboard machine in Husum in February, which caused the production volumes of pulp and paperboard to decrease. The decreased price of market pulp also affect the operating result negatively. Holmen s consumer board deliveries amounted to tones during January March, which was in the same level as last year BillerudKorsnäs Packaging Paper had lower sales volumes of brown sack paper, unfavourable development of currency exchange rates and lower pulp prices. Net sales decreased with 4% compared to Q

20 Sales Development Packaging Recovery Billerudkorsnäs Consumer board (0% in short term sales) Metsä Board Depression 20% 10% 0% Sales Development Q vs. Q Source: Annual Reports Stora Enso result is calculated for packaging solutions and consumer board. Boom Stora Enso -25% -15% Billerudkorsnäs -5% 5% 15% Holmen Paperboard 25% Packaging Paper (-4% in short term -10% sales) -20% Billerudkorsnäs Container Board 8% in short term sales) Slowdown Sales Development 2015 vs In Q1 the demand for consumer board, corrugated packaging and containerboard in Europe is slightly stronger than the compared period in Q1/2015 Stora Enso s sales increased around 11% mainly due to the Varkaus kraftliner mill rampup and higher sales in the Ostrołęka containerboard mill During Q1 Metsä Board s paperboard deliveries were at a all-time-high level. Even when taking into account the increase in working capital which weakened the operative cash flow, the balance sheet remained strong In Sweden Metsä Board is beginning an efficiency improvement program at its Husum pulp and board mill aimed at reducing its costs by 10 MEUR For BillerudKorsnäs Corrugated Solutions net sales increased with 10% due to increased volume of fluting, liner and growth for solutions sales. 20

21 Product Group: Paper 21

22 EBIT Margin Public EBIT Margin Development Paper excl. IAC (Items Affecting Comparability) 15% 10% Yearly trend Quarterly Margin trend Challenging market conditions for the paper industry have reshaped commercial strategies enhancing cost efficiency, for example UPM Paper ENA announced closure of it s Madison Paper Industries in the US. 5% In Q1/2016 compared to Q1/2015 Ebit for UPM Paper Asia increased (5%) primarily due to lower variable costs and higher delivery volumes 0% -5% -10% Q Holmen Paper UPM Paper Asia EBIT Margin Average Years Stora Enso Paper UPM Paper ENA Source: Annual Reports UPM ENA & Asia financial data after 2012 and UPM Paper financial data before Stora Enso s operational Ebit increased even though the net sales were on a lower level. This was mainly possible due to lower costs. Publication paper prices and fine paper prices in Europe decreased by 1% compared to the previous quarter For Holmen, operating profit for January March was SEK 57 million (-73), excluding items affecting comparability. A better product mix following the launch of the new UNIQ product and lower depreciation had a positive effect on earnings 22

23 Sales Development Paper Recovery Depression UPM Paper Asia (5% in short term sales) 10% 8% 6% 4% 2% Stora Enso -6% Paper -8% Holmen Paper -10% Sales Development Source: Annual Reports Q vs. Q UPM ENA & Asia results are calculated. Boom 0% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -2% -4% UPM ENA (-4% in short term sales) Slowdown Sales Development 2015 vs In the fine paper segment overcapacity hold the field and price competition was intense which caused the average market price to slightly decrease in Q1 In general the demand for paper in Europe and North America was lower in Q than it was last year. In the Asia-Pacific region the demand for fine paper still remained stable The general weakening in demand for paper have a negative affect on the net sales for companies in paper industry. For example UPM ENA s net sales decreased 4% while Stora Enso paper decreased 7% Market environment for label and release paper were favourable. Demand increased globally Holmen s deliveries in the first quarter amounted to tonnes, which was 11% lower than the same period last year 23

24 Product Group: Wood Products 24

25 EBIT Margin Public EBIT Margin Development Wood Products excl. IAC (Items Affecting Comparability) 20% 10% Yearly trend Quarterly Margin trend In Q1/2016 UPM Plywood EBIT increased slightly compared with Q4/2015, mainly due to seasonally higher delivery volumes. Still the profitably growth in Q1 decreased compared to Q1 the previous year. UPM s delivery volumes were lower than the high level last year and sales prices decreased slightly 0% Q Market conditions for wood products in Europe remained stronger compered to the comparison period and Q4/ % -20% Holmen Timber Södra Timber Moelven Metsä Wood Source: Annual Reports Years Stora Enso Wood Products Setra Bergs Timber UPM Plywood In Q1/2016 Stora Enso s Operational EBIT increased (6.7%) mainly due to higher volumes in building systems and components In March Moelven decided to invest in a new production line at Moelven Byggmodul AB's production unit in Säffle. In order to meet the demand for the module building concept in addition to the need for more trational production solutions, increased capacity was needed 25

26 Sales Development Wood Products Recovery 15% 10% 5% Boom Moelven Holmen Timber During Q1 the market environment improved slowly but surely in Europe and demand is estimated to have increased from last year Lower sales prices in local currencies and reduction in volumes of traditional sawn goods have caused a decline in Stora Enso s sales 0% Metsä Wood // -60% -40% -20% 0% 20% 40% 60% 140% Setra -5% Stora Enso -10% UPM Plywood Sales Development 2015 vs The Swedish wood products company Setra has registered lower earnings in their Q1 2016, compared to the same period in Their reported operation profit was of SEK 9 million or EUR 983 thousand (Q1 2015: SEK 24 million or EUR 2,62 million) and their net sales reached SEK 1,028 million or EUR 112,3 million (Q1 2015: SEK 1,041 million or EUR 113,7 million) Depression -15% Slowdown Source: Annual Reports Sales Development Q vs. Q

27 Product Group: Tissue 27

28 EBIT Margin Development Tissue excl. IAC (Items Affecting Comparability) 15% Yearly trend Quarterly Margin trend Metsä Tissue's profitability weakened 4% compared to the previous year primarily due to the increased cost of pulp and the weakening of the Norwegian krone and the British pound against the euro 10% 5% For consumer tissue, SCA s organic sales growth was 5%. Growth is related to high growth in emerging markets, particularly China, Latin America and Russia. In western Europe sales were stable. For AfH tissue, organic sales growth was 3%. The increase was related to Europe and Latin America. 0% Q % SCA (Tissue) Metsä (Tissue)*Including Cooking paper Source: Annual Reports 28

29 Sales Development Tissue Recovery 20% 15% Boom In Q1 Metsä Tissue s decrease in sales is mainly due to the reduction in sales volumes, which were affected by the phasing out of tissue paper operations in Russia (summer 2015) Depression Source: Annual Reports 10% 5% -15% -20% Sales Development Q vs. Q Slowdown SCA Tissue 0% -60% -30% 0% 30% 60% -5% Metsä -10% Tissue Sales Development 2015 vs Metsä Tissue started production in the Krapkowice and Kreuzau mills using the production lines moved from Vorsino during Q1 For SCA, Operating profit, excluding items affecting comparability, rose 17% (15% excluding currency translation effects and acquisition) to SEK 1,826M (1,556). A better price/mix, higher volumes, lower energy costs, cost savings and acquisition contributed to the earnings increase For SCA, the acquisition of Wausau Paper Corp. increased operating profit by 5%. Higher raw material costs had a negative earnings impact 29

30 Product group: Special Paper and Products 30

31 EBIT Margin Development Special Paper and Products excl. IAC (Items Affecting Comparability) 20% 15% 10% Yearly trend Quarterly Margin trend In Q the global demand for self-adhesive label materials increased even when the European growth continued at a lower level than last year UPM Raflatac EBIT increased mainly due to higher delivery volumes and improved sales margins, a result from improved operational efficiency and a more favourable product mix 5% 0% -5% Q Munksjö UPM Raflatac Ahlstrom Suominen EBIT Margin Average For Munksjö, net sales lowered due to a lower average price. Average price were lower as a result of less favourable product mix For Munksjö, delivery volumes remained at the same level as Q Source: Annual Reports *)Ahlstrom has adjusted their net sales and operating profit, starting from Q1/

32 Sales Development Special Papers and Products Recovery Ahlstrom 10% 5% Boom UPM Raflatac 0% -80% -30% 20% 70% -5% // Munksjö 260% Suominen Sales Development 2015 vs New capacity recently added on Suominen s main market areas causing a temporary decrease in demand in Q1 which affect Suominen s net sales In Q1 Alhstrom has their first positive operating cash flow since 2012 even though the net sales in Q1 decreased compared Q1/2015 Alhstrom s Filtration & Performance-division's net sales decreased, mostly due to lower sales volumes Especially special papers like food packaging as well as laboratory and life science products had a strong market and strong sales Depression -10% Slowdown Source: Annual Reports Sales Development Q vs. Q

33 Contacts Adam Aljaraidah Heidi Metsola Associate Management Consultant Associate Management Consultant

34 Notes Public

35 Notes 1. Alhstrom 1. group level 2. Starting from Q1/2015 Ahlstrom has adjusted their net sales and operating profit. These tables and figures are updated based on change: Adjusted net sales starting from Q1/2015. Before Q1/2015 Operating profit excluding non-recurring items was used. The adjusted operating profit margin excludes restructuring costs, impairment charges, capital gains or losses, and discontinued operations. This might case differ to the numbers In 2015 Operating profit excluding non-recurring items was reported 47,5 MEUR (Q1/2015:12MEUR) and in Q release the adjusted operating profit margin shows 41.6MERU (Q1/2015:10,3) annual report is used for the financial figures and 2013 annual report is used for the financial figures 4. On slide 7, we are comparing Alhstrom sales development to 2010 sales (not 2009) 2. Bergs Timber 1. Bergs Timber has fiscal financial year and reports from 1/9-31/8 3. BillerudKorsnäs 1. On Group level BillerudKorsnäs was excluded 2. On Product level from Korsnäs and Billerud sales figures is added to BillerudKorsnäs 3. BillerudKorsnäs adjusted result Holmen 1. Excluding changes in forest value for Holmen 5. Mellanskog 1. On group level revenues from affiliated companies are included 2. On group level other revenues are excluded 1

36 Notes 6. Metsä Group 1. On group level adjusted result in On group level other revenues excluded 3. On product level Metsä Tissue includes cooking paper 7. Moelven 8. Munksjö 1. On group level Munksjö was excluded 9. SCA 1. Forest swap is excluded 2. Adjusted result for SCA in 2012 and SCA is excluded in product level evaluation 4. SCA Group incl. total financial numbers 10. Setra 1. Other revenues excluded 2

37 Notes 11. Stora Enso 1. Adjusted result in 2012 (Operational EBIT) 2. On group level revenues from affiliated companies are included 3. Stora Enso (Packaging) is packaging solutions & consumer board 4. Between the paper product level for the Stora Enso result include news print paper + book paper + fine paper + magazine paper 5. Stora Enso packaging result includes industrial packaging and consumer board 6. On product level Stora Enso Packaging is consumer board + packaging solutions 7. Stora Enso reorganised its divisional and reporting structure as of 1 January The IFRS reporting segments are formed by the divisions and the segment Other. Henceforth, Stora Enso will report financial figures for the divisions Consumer Board, Packaging Solutions, Biomaterials, Wood Products and Paper and the segment Other. 12. Sveaskog 1. On group level revenues from affiliated companies are included 2. Excluding changes in forest value for Sveaskog 13. Södra 1. Other revenues included for Södra 2. Södra has a Tertial report Q2 (2015) May-Aug 14. Suominen 1. On group level 2. November 2011 Suominen acquired Ahlstrom s Home and Personal business operations. Net sales were more than doubled. 3

38 Notes 15. UPM 1. Group level revenues from affiliated companies are included Sales figure (EURm) Includes a fair value increase of biological assets in Finland totalling EUR 265 million, due to adjusted long-term wood price estimates and a change in the discount rate 3. Annual reports UPM Biorefining data includes: UPM Biorefining 2013-Q3/2015 financial data and Pulp division financial data before year UPM Paper division data includes: UPM Paper division financial data and after the division in 2012 financial data from UPM ENA and Asia divisions 3

39 Financial Reporting Frequency SCA Mellan Skog Södra Setra Metsä BK Holmen Munksjö Stora Enso Moelven Bergs Rörvik UPM Suominen Ahlström Yearly x x x x x x x x x x x x x x x Quarterly x x x x x x x x x x x Other Fourmonthly report 4

40 Tieto strategy We aim to be our customers first choice for business renewal Services to accelerate customer value Build solutions and capabilities to accelerate our customers business performance and renewal. Nordic leadership and international expansion Further accelerate our strong market position in the Nordics and expand industry solutions internationally. Openness and co-innovation Co-innovate with customers and partners, access open talent networks and drive continuous skill and capability development. Business choices building on our strengths Vertical industry solutions Technology services and modernization New data-driven businesses

41 Our purpose Value for life Value for people Value for business Value for society

42 Tieto strategy We aim to be our customers first choice for business renewal

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