• Q1 20A EBIT down 46% to EUR 180m: This was at the top end of guidance. As guided, Q1 was negatively impacted by an exceptional mild winter in the Nordics and labour union strikes in Finland (impacting Paper and Containerboard). Planned/unplanned production downtime increased to 22% (10%) for paper, 11% (9%) for board, and 6% (1%) for wood.
  • Group sales decreased by 16.2% y/y from record high in Q1 19A: This was from price declines in pulp, containerboard, sawn goods and paper. Most volumes were in the red, with containerboard -3.2% y/y (-1.6% q/q); corrugated: -2.1% (-6.2% q/q) and paper: -15.0% y/y (-10.8% q/q).
  • Paper EBITDA margin declines to 8.1%: Margin contracted by 211bps q/q, with lower volumes (-15% y/y) mainly attributed to the Finnish strikes.
  • Disclosure has improved: Containerboard and corrugated EBITDA margins are now disclosed. It appears containerboard margins collapsed y/y to 11.1% (-107 bps q/q), while corrugated expanded by 252 bps y/y to 10.3% (+60 bps q/q).
  • To date, operations have been running normally: From a demand perspective, Paper and Wood have been most impacted, with less impact on packaging.  
  • Liquidity bolstered to EUR 1.4bn as Stora not sure how deep this recession will be: Final dividend proposal lowered by 70% to EUR 0.15/share. Annual mill maintenance postponed to H2 20e and CapEx lowered by EUR 25m (range: EUR 675-725m). Gearing ticked up with net debt/EBITDA of 2.3x (no financial covenants).
  • Transformation journey continues: 1.1mt of their graphic paper capacity will be converted to Kraftliner (Oulu mill), with start-up (market dependent) expected by the end of 2020. Self-help continues, with profit protection programme upgraded by EUR 85m to EUR 350m by the end of FY 21e.  
  • Guidance for 2020 suspended due to the uncertainty from COVID: “Too difficult to predict demand for the rest of the year”. They are not bullish on pulp (high inventories) or DWP prices and are seeing collection issues for recycled fibre (they purchase c. 2,800 tons p.a.)

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