Clearly lower variable costs, especially for wood, chemicals and pulp, improved operational EBIT by Euro 39 million. Sales prices in local currencies were slightly higher than a year ago. Lower volumes, mainly in Printing and Reading, which decreased operational EBIT by Euro 11 million, were offset by Euro 27 million lower fixed costs due to cost improvement and other restructuring actions. The comparative period last year included a Euro 10 million capital gain from land sales in Uruguay and Thailand. Depreciation was Euro 20 million lower, mainly due to fixed asset impairments recorded in the fourth quarter of 2013. Paper and board production was curtailed by 7% and sawnwood production by 2% to manage supply.
The Group recorded non-recurring items (NRI) with a positive net impact of approximately Euro 24 million on operating profit and a positive impact of approximately Euro 6 million on income tax in its 1Q 2014 results. The NRI are a Euro 44 million capital gain in the segment Other due to disposal of the Group’s 40.24% shareholding in the US-based processed kaolin clay producer Thiele Kaolin Company to Thiele Kaolin Company, a Euro 13 million cost in Building and Living due to the planned permanent closure of Sollenau Sawmill in Austria and a Euro 7 million cost in Printing and Reading due to the permanent shutdown of Veitsiluoto Mill paper machine 1 in Finland.
Net financial expenses at Euro 65 million were Euro 9 million higher than a year ago. Net interest expenses were Euro 4 million lower due to lower debt levels, and the fair valuation of interest rate derivatives had a negative impact of Euro 9 million. The net foreign exchange impact in the 1Q 2014 in respect of cash, interest-bearing assets and liabilities and related hedges was a loss of Euro 10 million. A gain of Euro 4 million from the sale of Euro 20 million of subordinated debt from the equity accounted investment Bergvik Skog was recorded in the 1Q 2014.
Stora Enso CEO Jouko Karvinen comments on 1Q 2014 results: “Our 1Q results are a testimony to our commitment to continuous improvement. Not only did our Group essentially complete the promised Euro 200 million fixed cost improvements compared with 2012 (excluding capacity reduction impacts) three months ahead of schedule, but we also saw an improvement in almost all of our businesses. This, combined with an improvement in cash flow from operations year-on-year albeit in a seasonally weak quarter, continues to be the foundation of our transformation strategy.
“With 15% return on operating capital, Renewable Packaging had yet another strong quarter, as did the Building and Living segment. Printing and Reading also improved year on year both in operational EBIT supported by lower depreciation and, in operational EBITDA due to cost reductions and capacity closures. Finally Biomaterials, where operational EBIT was similar to last year as a result of one-time land sales a year ago, is after a long delay ready to start up Montes del Plata Pulp Mill once the operating licence is received from the Uruguayan environmental authority Dinama. In China the first phase of the consumer board mill project is in full implementation and we look forward to starting adding its revenues and margins to the portfolio two years from now. We are moving on our long journey of transformation.”
Stora Enso is the global rethinker of the paper, biomaterials, wood products and packaging industry.
