Stora Enso has today successfully tapped its two five-year bonds due in June 2017. Both bonds are issued under Stora Enso’s EMTN (Euro Medium Term Note) programme.

The SEK 1 350 million bond that pays a floating coupon of three-month Stibor plus 390 basis points was tapped with SEK 850 million of new notes issued with a yield of Stibor + 3.70% at a price of 100.866. The settlement date of the transaction is 3 September 2012. Following the tap, a total of SEK 2 200 million of the bond is outstanding.

The SEK 350 million 5.75% fixed coupon bond was tapped with SEK 150 million of new notes issued with a 5.57% yield at a price of 100.719. The settlement date of the transaction is 3 September 2012. Following the tap, a total of SEK 500 million of the bond is outstanding.

Sole arranger and bookrunner for these transactions was Skandinaviska Enskilda Banken AB (publ) (SEB).

“The tap was made to strengthen Stora Enso’s liquidity even further. We last issued Swedish krona bonds in June 2012, and we have now decided to benefit from the continuing strong demand from Swedish investors,” says Jyrki Tammivuori, SVP, Group Treasurer.

“On our way into growth markets supported by strong cash flow”

“We close the second quarter of 2012 with a mixed report. Both cash flow and liquidity continued to improve year-on-year whereas operational EBIT remained at about the level of the first quarter, as we also guided in April. 

“In operations we had significant scheduled maintenance stoppages in Biomaterials, and late in the quarter we added production curtailments in Printing and Reading and Building and Living to fight the clearly weakening market conditions. It is clear that the continuing issues in the eurozone started to have a more material impact on our key markets during the later part of the second quarter, especially in the Building and Living and Printing and Reading Business Areas. In Printing and Reading the cyclical weakness is amplified by the ongoing structural change towards digitalisation of media and advertising that we have seen in Europe since 2007. 

“The reality, as for most of the past five years since 2007, is that the environment is not going to get any easier. We need to double our own efforts to get through the short-term and long-term challenges. Operationally, every Business Area needs not only to complete the announced restructuring programmes, and the literally hundreds of cost and productivity improvement efforts, but also to add more of them and implement them faster. We also must and will continue to adjust our manufacturing capacity to the market demand, as we have been doing since late in the second quarter. This is crucial not only to maximise our margins with a focused market and product mix, but also to further demonstrate that we can get through the market cycles with continued solid cash generation. 

“This cash flow is critical for us to continue to move the Group into higher-return growth markets with strong and defendable competitive positions. Completion of the Ostrołęka light-weight board machine, Skoghall Mill upgrade and Montes del Plata Pulp Mill are all steps on this transformation path. They will be followed by the strategic consumer board investment in Guangxi, China. This is our road into a new, growth market future.” 

Stora Enso Interim Review January–June 2012 

Stora Enso has successfully issued two five-year bonds with total nominal value SEK 1 700 million under its EMTN (Euro Medium Term Note) programme. Both bonds are due on 26 June 2017. One SEK 1 350 million bond pays a floating coupon of three months Stibor + 390 basis points and has an issue/reoffer price of 100.000. The other SEK 350 million bond pays a fixed coupon of 5.75% and has an issue/reoffer price of 99.010 to give a spread of 390 basis points over five-year mid swap which equals the yield of 5.985%. The bonds have no financial or change of control covenants. The arrangers and bookrunners for the transaction were SEB and Nordea.

“With these new bonds Stora Enso continues proactive actions to maintain its liquidity at a strong level. Our funding sources are well diversified and the maturity profile is well balanced. We last issued Swedish krona bonds in 2010, and we have now decided to benefit from the current strong demand from Swedish investors,” says Jyrki Tammivuori, SVP, Group Treasurer.

 One of the top corporate social responsibility experts in the Nordic countries specialising in human rights issues, Parul Sharma, will join Stora Enso as Vice President, Global Responsibility, for the Renewable Packaging Business Area on 18 June 2012. Renewable Packaging, headed by Mats Nordlander, is the Business Area responsible for instance for Stora Enso’s integrated pulp and board mill investment in Guangxi, southern China.

Since 2004 Parul Sharma has been working on CSR issues and human rights strategies for Swedish companies operating in Asia. She has acted as Human Rights Advisor to Amnesty Business Group, the European Commission and the European Public Law Centre. Three books on human rights and economic and social rights issues written by Parul Sharma have been published. In 2011 she was ranked as the most influential CSR expert in Sweden.

“We warmly welcome Parul Sharma to our team as she complements our current competences and can help us better understand our challenges, identify actions needed and implement changes in our demanding investment environments, especially in Asia. Social and human rights aspects of corporate responsibility are becoming increasingly important for all global companies, and openness and transparency are key issues for obtaining licences to operate in growth markets,” says Mats Nordlander, Executive Vice President, Renewable Packaging.

Parul Sharma joins Stora Enso from Sandvik AB, where she has worked as Global Head of CSR Auditing. She has trained and advised more than forty Swedish companies, investors and government agencies on how to integrate CSR practices into business operations.

In Punta Pereira, Colonia department, a new chemical pulp factory is being constructed based on a joint venture of Stora Enso and Arauco.

A good performance and high flexibility during a comparable project in the years from 2006 until 2008 have for sure been important reasons for order placement of this
actual Uruguayan large scale project. Even at that time BUTTING was involved in the construction of the chemical pulp factory in Fray Bentos with more than 3,500 tons of
fabricated and delivered material.

For BUTTING the total order volume amounts to 50 km of pipes and 60 internal vessels. BUTTING Anlagenbau fabricates, delivers and assembles vessels and pipelines coming up to approx. 80 per cent of the overall required raw material.

BUTTING delivers the material (pipes and fittings) for the pipeline bridges and equips the pulp pipeline and the drying line with vessels and pipes. In this area also prefabrication of the pipelines and the subsequent assembly on site will be assumed. The appropriate pipes have been produced in Knesebeck production, prefabricated in
Schwedt works since December 2011 and will be assembled at Uruguay location starting the second quarter 2012.

For installation of the delivered parts, we actually calculate with 210 fitters in Punta Pereira – an internationally mixed team led by an experienced BUTTING management team. This order is highly sophisticated not only for the reason of a high capacity. “An on-schedule supply and a smooth organization at site – at a distance of
more than 11,000 kms – require a logistical master accomplishment” Debora Stimpel says. She works in a leading position on this project. “Another problem that cannot be
influenced can be founded in the highly unsteady weather conditions at the location – semi-tropical rainstorms are no curiosity”, she supplements.

We at BUTTING are sure to successfully perform this large-scale project as well.

BUTTING – Progress by Tradition

Stora Enso Renewable Packaging plans to improve competitiveness and respond to customer needs through restructuring its converting operations at Páty in Hungary and efficiency measures in the consumer board mill at Barcelona in Spain.

“Demand for corrugated board consumer packaging has significantly weakened in Hungary, so we plan to centralise our operations in Hungary to Komarom Mill and close down Páty Mill. As a part of the plans, Komarom Mill would be enhanced with asset transfers and recruitment so it can better meet customer and market needs. The efficiency measures planned in Barcelona are intended to improve the mill’s profitability. The plans announced today, in combination with earlier announcements, would improve Renewable Packaging’s cost competitiveness,” says Mats Nordlander, EVP, Renewable Packaging.

According to the plans, converting operations at Páty Mill in Hungary would be permanently closed down by the end of the third quarter of 2012. The planned closure would affect 79 employees at Páty. The proposed restructuring measures would reduce the number of employees at Barcelona in Spain by 15. No decisions will be taken until after the local co-determination negotiations have concluded. Stora Enso would make every effort in co-operation with local communities to help the affected personnel find new employment opportunities, and all job openings in other Stora Enso units would be available to those affected.

These restructuring measure plans, together with ongoing efficiency plans at Skoghall and Fors mills in Sweden and at Imatra in Finland, would reduce annual costs by approximately EUR 7 million, starting gradually from the fourth quarter of 2012 onwards. Stora Enso will record a restructuring provision and a fixed asset write-down as non-recurring items of approximately EUR 9 million related to the restructuring plans in the Renewable Packaging Business Area in the first quarter 2012 operating profit.

Stora Enso plans to build plantation-based integrated board and pulp mills at Beihai city in Guangxi, southern China. The mill site will initially include a 450 000 tonnes per year state-of-the-art paperboard machine and pulp capacity of 900 000 tonnes per year, including necessary energy plant and auxiliary facilities. In a unique set-up, the board and pulp mills will be self-sufficiently integrated with wood supply from 120 000 hectares of self-managed eucalyptus plantations. The ultimate target is to expand the paperboard capacity to 900 000 tonnes at a later stage. The operations will be managed by an equity joint-venture company established by Stora Enso (85%) and the Guangxi Forestry Group (15%), a state-owned company under the Guangxi provincial government. The joint venture will serve the fast-growing market for liquid packaging board and other premium consumer board grades. 

The project investment will be approximately EUR 1.6 billion. Construction at the industrial site will commence when specific preconditions have been fulfilled, which is expected to be in the second half of 2012. Production is scheduled to start in the fourth quarter of 2014. The investment will significantly support Stora Enso moving towards company’s 13% ROCE target.

The project will be financed through a combination of debt and equity on an approximately 60/40 basis. The debt financing is expected to be a mix of export credit agency, multilateral and commercial bank debt.

“Today we are taking another significant step in transforming Stora Enso into a global renewable materials company. We already have a globally leading position in renewable fibre-based packaging boards. We will now invest in a world-class integrated mill based on locally grown renewable materials for the benefit of local Chinese consumers in the fastest-growing market. Everything we do will be based on best-in-class technologies, environmental standards and sustainability practices – together with the local partners and communities” says Stora Enso CEO Jouko Karvinen.

“Generating sustainable returns from any business requires a unique offering to the customers, be it product or process benefits, in a cost-efficient way – or something that is very difficult for the competitors to copy, like integrating the operation from the plantations to the technically advanced product. This is exactly why we have chosen to differentiate ourselves through a range of specialised world-class board products and end-to-end integration – with the most cost-efficient solution for the Chinese market and at a globally competitive total cost,” says Stora Enso EVP for Renewable Packaging Mats Nordlander.

The investment is subject to regulatory approvals, the signing of final documentation and other customary conditions precedent.

Growth together with customers – strong growth forecast in fibre-based packaging in China

The fibre-based liquid packaging board segment is one of Stora Enso’s strategic focus areas and this investment is consistent with the Group’s announced strategic guidelines. Through this investment, Stora Enso seeks to benefit from the forecast future growth in demand for fibre-based packaging solutions for food in China, which is forecast by several researchers to grow at a compound annual rate of over 10% during the next ten years. This investment will also enable Stora Enso to provide excellent service with cost-competitive, locally produced high quality liquid packaging boards on a regional basis for its global key customers that are already well established in China.

Impact study supports the project

The United Nations Development Programme (UNDP) conducted an Environmental and Social Impact Assessment (ESIA) of the project for Stora Enso in 2006, and at Stora Enso’s request made an additional, integrated ESIA summary report which will be independently reviewed and published in 2012. The studies give a supporting view for the board and pulp mill project. When the project began, Stora Enso established a Community Development Fund to provide financial support for development of education and infrastructure in local villages, and in 2011 the Group revised its stakeholder engagement and community development plans. Stora Enso will co-operate with local authorities, universities, organisations and villagers to find long-term sustainable solutions for development. 

Stora Enso’s present operations in China

Stora Enso has been establishing plantations in Guangxi since 2002. The Group currently holds approximately 90 000 hectares, and is to establish sustainable eucalyptus plantations with an effective fibre base of 120 000 hectares to support the new pulp mill in Guangxi. The Group’s other operations in China include a 245 000 tonnes per year coated fine paper mill in Suzhou, a 170 000 tonnes per year uncoated magazine paper mill at Dawang, two core factories, five sales offices and the newly acquired majority shareholding in Inpac International, a packaging company with production operations in China and India, and service operations in Korea. The total number of employees in China is currently about 4 500. 

Stora Enso is appointing three new members to its Group Executive Team. At the same time three current members will leave the team to take new positions inside and outside the Company.

Karl-Henrik Sundström has been appointed Chief Financial Officer with effect from 1 August 2012. He joins Stora Enso from the Dutch semiconductor company NXP, the former Philips semiconductors business located in Eindhoven. Karl-Henrik Sundström has spent most of his career with the Swedish telecommunications company Ericsson, building his career from Latin America and managing the company’s business in Australia to finally first becoming head of Global Services and later Executive Vice President and CFO of Ericsson AB.

“In his last two roles, as CFO of one of Sweden’s largest companies for almost five years, and currently as CFO of NXP, Karl-Henrik Sundström has proved to be a world-class CFO. His additional experience of running a business will greatly contribute to our efforts to renew Stora Enso. We all warmly welcome Karl-Henrik to our team with high expectations,” says Stora Enso CEO Jouko Karvinen.

Head of Stora Enso Global Identity Lauri Peltola, and General Counsel Per Lyrvall are also appointed as new members of the Group Executive Team as of today.

“With Lauri Peltola joining the Group Executive Team, we underline the importance of our Global Stora Enso Identity, Global Responsibility and Rethink in the Executive Team work. With Per Lyrvall's appointment, we further emphasise the importance of our values, our transparency and our Code of Conduct, as well as one of our key Leadership Themes, ‘Do what’s right’,” emphasises Jouko Karvinen.

The new Group Executive Team is as follows:

Jouko Karvinen, Chief Executive Officer
Juan Bueno, Executive Vice President, Biomaterials Business Area
Lars Häggström, Executive Vice President, Global People and Organisation
Hannu Kasurinen, Executive Vice President, Building and Living Business Area
Per Lyrvall, Executive Vice President, Global Ethics and Compliance, General Counsel
Mats Nordlander, Executive Vice President, Renewable Packaging Business Area
Lauri Peltola, Executive Vice President, Global Identity
Karl-Henrik Sundström, Executive Vice President, Chief Financial Officer (as of 1 August 2012)
Juha Vanhainen, Executive Vice President, Printing and Reading Business Area

The following three members are leaving the Group Executive Team: Hannu Alalauri, formerly head of the Fine Paper Business Area, has been appointed as the head of the Packaging Solutions Business Unit and joins the Renewable Packaging Management Team. Bernd Rettig, currently responsible for energy, logistics, R&D and capital investments, will continue with R&D and capital investments, but will also increase his focus on managing Stora Enso’s large capital investment projects. He continues to report to the CEO. The current CFO, Markus Rauramo, has been appointed as CFO of Fortum Corporation. He will remain with Stora Enso and in the Group Executive Team until Karl-Henrik Sundström joins the company.