- Q4 19A basic EPS up 69% y/y and FY DPS flat y/y. Self-help continues through their profit protection programme (EUR 275m fixed and variable costs savings by the end of FY 21e, with EUR 105m realised in FY 19A). Gearing at 2.1x (adjusted for IFRS 16: 1.9x) was slightly ahead of strategic target of 2.0x, with an average funding cost of 3.5%. ROCE was weak at 4.2% and well below strategic target of 13%. Significant forestry FV gains.
- Lower selling prices and downtime overshadowed self-help: Sales prices continued to decline in pulp (4-5 months delayed impact on P&L), containerboard, sawn goods and most paper grades. Variable costs saw some relief (pulp, raw material for corrugated units, wood in Central Europe and paper for recycling). Planned and unplanned production downtime increased to 22% for paper, and 11% for board.
- Key commodities: Stora thinks that pulp prices are likely to remain at current levels in H1 20e with China having bottomed out. FBB prices under pressure in Europe (stable in China). Containerboard demand stable, but pricing remains under pressure. Corrugated has been unexpectedly strong.
- Key disclosure change: Containerboard business in Packaging Solutions merged with Consumer Board to form the new Packaging Materials Division.
- New CEO, Annica Bresky: Not satisfied with profitability levels.
- Outlook for 2020 subdued and mixed. European paper demand decline is expected to continue (4-5% in the MT). An exceptional mild winter in the Nordics (reduced period of frozen soil) could impact harvesting and transport of wood. Impact of various labour union strikes (min. 3 weeks) in Finland will negatively impact results. Q1 20e EBIT expected to be in the range of EUR 90-200m (top end if China picks up). Planned maintenance is scheduled at the Ostroleka Mill (PM5). Total maintenance impact is expected to be EUR 60m (EUR 10m lower y/y). Kraftliner production at Oulu mill is expected to start by the end of 2020.
FY 20e CapEx of EUR 700-750m (lowered by EUR 100m) is planned.
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