U.S. Markets closed

Edited Transcript of STERV.HE earnings conference call or presentation 29-Oct-19 1:00pm GMT

Q3 2019 Stora Enso Oyj Earnings Call

Helsinki 00101 Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Stora Enso Oyj earnings conference call or presentation Tuesday, October 29, 2019 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Karl-Henrik Sundström

Stora Enso Oyj - CEO

* Seppo Parvi

Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland

* Ulla Paajanen-Sainio

Stora Enso Oyj - Senior VP & Head of IR

================================================================================

Conference Call Participants

================================================================================

* Antti Koskivuori

Danske Bank Markets Equity Research - Analyst

* Cole Hathorn

Jefferies LLC, Research Division - Equity Associate

* Harri Taittonen

Nordea Markets, Research Division - Senior Director & Sector Coordinator

* Justin Joseph Jordan

Exane BNP Paribas, Research Division - Analyst

* Lars F. Kjellberg

Crédit Suisse AG, Research Division - Research Analyst

* Linus Larsson

SEB, Research Division - Analyst

* Mikael Doepel

UBS Investment Bank, Research Division - Executive Director & Analyst

* Robin Santavirta

Carnegie Investment Bank AB, Research Division - Financial Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2019 Stora Enso Earnings Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, Tuesday, 29th of October 2019.

I would now like to hand the conference over to first speaker today, Ms. Ulla Paajanen. Thank you. Please go ahead.

--------------------------------------------------------------------------------

Ulla Paajanen-Sainio, Stora Enso Oyj - Senior VP & Head of IR [2]

--------------------------------------------------------------------------------

Thank you, Marie. Good afternoon, everyone. I'm Ulla Paajanen, Head of Investor Relations at Stora Enso, and welcome to our Q3 2019 conference call.

I will hand it over now to our CEO, Karl-Henrik Sundström; then he will be followed with our CFO, Seppo Parvi. And after that, we will be hosting a Q&A session. Karl, please?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [3]

--------------------------------------------------------------------------------

Thank you. And good morning or good afternoon, depending on where you are in the world. Today, we published the quarterly results for the third quarter of 2019. This is a quarter like previous quarter, where we had focused a lot on cash and costs, and that is because of the kind of downturn that we're seeing in the markets.

As you can see, sales decreased by 7% versus a year ago and sales excluding Paper decreased by 5%. Basically, all divisions are negative in sales and it's basically only Consumer Board is kind of flattish. We came in with an EBIT of EUR 231 million, which is just below a double-digit EBIT margin we came in at EUR 9.6 million. We have generated a strong cash flow of almost EUR 490 million, which is better than previous years. And we have kept net debt-to-EBITDA flat compared to the second quarter of 2019, and it's obviously up compared to last year because of the restructuring of Bergvik Skog and the implementation of IFRS 16.

So if you look upon what happened during the quarter, as you can see, we have had huge effects of sales and volume. We have seen some increased costs, but that has been more than compensated by the EUR 41 million of profit protection that is included in this quarter results. That means that we basically, right now, are having a cost base that is lower than a year ago. And that is a very important factor to have in your head when we are preparing for the change in the cycle that will come one day. And if you just add those EUR 28 million in less cost they're having, comparing that to what we had last year, you can see that we are moving the EBIT margin from 13.8% to 16.1%.

So we also announced in this quarter that we are increasing both the time and the scope of the profit protection program. We are now increasing it from previous EUR 200 million to EUR 275 million, but we're extending it by 1 year from 2020 to 2021. We have so far basically achieved year-to-date about EUR 100 million of cost savings in the 9 first months of 2019. We've reached approximately cumulative of EUR 200 million by the end of 2020. And the last EUR 75 million will come in 2021. We have now included also the effect of the marketing and the sales as well as of distribution structure because of the Oulu conversion, which will greatly simplify the setup of the Paper division. We will also consolidate the Finnish sawmills regarding spruce to Varkaus, which means that there we'll have an integrated board machine with a pulp mill, 1 LVL machine and a spruce sawmill, which means that we are actually saving on sites. And that is a part of the consolidation that we have done.

During the quarter, we announced that when I'm leaving the company, I will be replaced by Annica Bresky as of the 1st of December 2019, and Annica is working within Stora Enso today and is leading the Consumer Board division. I am extremely proud to announce that my predecessor will come within the company. And I think that's showing our strength of the bench and the competencies we have built in Stora Enso.

We have had a number of important events during the third quarter. And as we published at the Capital Markets Day, we will now, from the beginning of January 2020, we will have a separate Forest division. This is to drive the transparency but also focus the value creation or owning for it. This is a direct effect of the restructuring of Bergvik Skog and this gives us an opportunity to actually also demonstrate that we are the second biggest private forest owners in the world today with EUR 3.6 billion of biological assets.

We have concluded the conversion of the Enocell pulp mill to become a dissolving pulp mill, and we are ramping it up during the fourth quarter. We have sold our last paper mill in China, Dawang. We have acquired a minority stakes in China Packaging. We have launched a paperboard tube, and that is an important part in our strategy to replace plastic or fossil-based materials with a fiber substitute that is competitive as well as environmentally friendly.

With that, I would like to hand over to Seppo to give some highlights on the numbers.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [4]

--------------------------------------------------------------------------------

Thank you, Karl. And I will start by looking at key figures for the quarter that we have reported today.

First of all, going to the top line. Sales reached EUR 2.4 billion, that is reduction of 7.1% versus third quarter a year ago. Operational EBIT was EUR 231 million, down from EUR 358 million in Q3 2018. Operational return on capital employed 8.7%, and cash flow from operations continues to be very strong and cash flow for the quarter was EUR 488 million. That is up from EUR 457 million a year ago. Net debt to last 12 months operational EBITDA was 2.2%, and that is slightly above the targeted maximum level of 2.0%.

Then I move to the divisions, and I start by Consumer Board where price increases are continued. Sales decreased slightly to EUR 640 million, that is a reflection of lower board deliveries and higher pulp deliveries as well as higher board sales prices achieved during the quarter [in that area]. Strong operational EBIT. For the quarter, EBIT increased by 45% and was EUR 73 million. That is due to the higher sales prices, lower pulp costs and lower fixed costs. Also, lower volumes had an effect on the profitability.

Operational return on capital employed improved around 3 percentage points and was about 13% for the quarter. We also made trials with Fiskeby Board in Sweden to recycle used paper cups into white-lined chipboard. These tests were successful and we could demonstrate utilization of the used paper cups as valuable raw materials without any investments or changes needed for the process conditions. Earlier trials were also done at the Langerbrugge to recycle used paper cups. We also received 7 European Carton Excellence awards during the quarter.

Then moving to Packaging Solutions division. The corrugated market is benefiting from lower containerboard prices. Sales decreased 9% and was EUR 299 million, and that is due to significantly lower containerboard and kraftliner prices. Operational EBIT decreased EUR 39 million from last year's all-time high level and was EUR 29 million, driven by things like the lower port prices and higher wood costs. Positive effect from lower raw material prices for corrugated units could be seen in the result.

Operational return on capital decreased to 12.1% driven by significantly lower containerboard prices during the quarter. And Oulu mill conversion into kraftliner production is proceeding as planned, and construction work has started in all areas. Production is expected to be started by end of next year 2020.

Moving to next division, Biomaterials. And there, we can start to see the Chinese market is showing positive signs. That was also confirmed by the latest FX index released earlier today. Sales decreased 20% from last year's record high Q3 to EUR 331 million. That is mainly driven by significantly lower pulp prices. Operational EBIT decreased EUR 86 million and was EUR 39 million, but you have to remember last year's figure was at all-time high level when it comes to operational EBIT. This was driven by things like the lower pulp prices and higher wood costs and also volume impact had on effect. OpEx return on capital decreased to 5.9%, in line with the lower profitability in the quarter.

Next, we'll look at the Wood Products. There, successful margin protection continues. Sales decreased 5% to EUR 380 million due to lower classic sawn prices and slightly lower deliveries. Operational EBIT decreased EUR 21 million and was EUR 27 million. And here again, good to remember last year's Q3 was at a record high level. This was affected by lower sales prices and volumes as well as higher depreciation impacted by strategic investments. Lower wood costs in Central Europe had positive effect in the result. And operational return on capital decreased to 15.8% due to lower profitability during the quarter.

Paper division continues to generate good, strong cash flow despite the challenging market conditions. Sales for the quarter decreased 11% to EUR 690 million due to quite significantly lower paper deliveries during the quarter. Also, Dawang paper mill divestment in China had negative impact on top line. Operational EBIT decreased by EUR 15 million and was EUR 50 million. There, significantly negative effect from volume was seen. Good cost management, lower fixed cost due to profit protection program and lower variable costs, mainly from pulp had positive effect on the result.

And cash flow, like mentioned, after investing activities, the sales ratio increased to 14.4%. This is our second best ever interdivision, very good cash flow, but that's thanks to good working capital management in that division. Dawang mill divestment in China reduced annual paper capacity 540,000 tonnes. They have also reduced or reducing over 1 million tonnes paper capacity with all the mill conversion next year. They continue to produce paper until the end of September 2020 and then start the conversion. And that is about 20% of our paper capacity.

Then looking at the strategic targets, some of those already we have been commented with the interdivisional review. I will highlight a couple of additional ones like fixed cost of sales at 24.2%, so still remaining above 20% targeted maximum level, but there continues to reduce fixed costs continuously. And our profit protection program is one part of that. Our net debt-to-equity ratio at 55%, that is below the 60% maximum level defined.

Divisions, there Consumer Board, like mentioned, improved from about 10% level to slightly above 13% level. Packaging solutions coming down from record high 30.4% the year ago to 12.1% this year. And Biomaterials at 5.9% level rate when it comes to return on capital and Wood products at 15.8%. And Paper, like mentioned, very good cash flow during the quarter, 14.4% ratio when it comes to cash flow after investing activities to sales.

With that, back to you, Karl.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [5]

--------------------------------------------------------------------------------

Thank you. The outlook for the full year for 2019, deteriorating trading conditions caused by geopolitical uncertainties related to trade wars and a possible hard Brexit are expected to impact Stora Enso negatively. Demand growth is forecasted to slow for Stora Enso's businesses in general and the decline in demand for European paper will continue. Due to the profit protection program, costs are forecast to remain roughly at the same level in 2019 as in 2018. Stora Enso is still implementing additional profit protection measures to mitigate the negative financial impact of the current situation. And I think it's important here in an uncertain market situation. The only thing we can act on is on the cost structure and building a better company for when the cycle turns.

Next slide, please. So the guidance for the fourth quarter of 2019. Operational EBIT is expected to be in the range of EUR 100 million to EUR 180 million. During Q4, there will be annual maintenance shutdown at Fors, Ingerois, Skoghall, Varkaus, Montes del Plata and Skutskar mills. The total maintenance impact is estimated to be at the same level as in the fourth quarter of 2018 and in the third quarter of 2019. So we see continued deteriorating trading conditions going into Q4. We are focusing on cash generation. We are increasing the profit protection program in order to build a stronger company when the cycle turns. And we have also decided to go out with a Forest division from January 2020, focusing on increasing the transparency and a focus on value creation in our forest holdings.

With that, I open up for Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from the line of Harri Taittonen from Nordea.

--------------------------------------------------------------------------------

Harri Taittonen, Nordea Markets, Research Division - Senior Director & Sector Coordinator [2]

--------------------------------------------------------------------------------

Should we go straight to the guidance because it's so meaningfully below Q3, about EUR 90 million. If you look at the midpoint of your guidance for Q4, it's roughly EUR 90 million, lower earnings from there. And I understand about EUR 20 million comes roughly from the line Other, but still, we are looking at about 4% margin deterioration. And you mentioned that the trading conditions overall are weaker. But could you sort of break down a bit more on which parts this comes from?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [3]

--------------------------------------------------------------------------------

So the main reasons for the lower guidance for the fourth quarter are coming from the Biomaterials division, basic prices are continuing down. And the second one are coming from Paper division, where we see demand and prices coming down. Do you want to add something, Seppo?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [4]

--------------------------------------------------------------------------------

I think you summarized it, Karl, pretty well. It's mainly driven by sales price development in paper and pulp markets. Relating to Other, there are some -- like some spacing issues. If you look at the costs, how they accumulate during the quarter, that has some effect between the 2 quarters. But it's mainly sales price driven.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [5]

--------------------------------------------------------------------------------

And there also have been uncertainties because we are still having quite a wide guidance range, and that is because we don't know. But for Biomaterials, we are pretty certain because it's usually about a 90-day turnaround between orders and the deliveries.

--------------------------------------------------------------------------------

Harri Taittonen, Nordea Markets, Research Division - Senior Director & Sector Coordinator [6]

--------------------------------------------------------------------------------

Exactly. Yes. I was just going to ask if you have like included some kind of contingency for the ongoing political uncertainties and whether that's something that you have kind of baked in the numbers for the coming quarter?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [7]

--------------------------------------------------------------------------------

So what we have done is a wide assessment, and we guide on the total company. But the main reasons are Paper and Biomaterials.

--------------------------------------------------------------------------------

Harri Taittonen, Nordea Markets, Research Division - Senior Director & Sector Coordinator [8]

--------------------------------------------------------------------------------

Okay, okay. Maybe just a small question on the Biomaterials and the maintenance cost, which on a group level are probably going to be in line, as you say. But if you think that the Montes del Plata and Skutskar will be kind of -- sort of sat down in Q4 and as it was done in Q3. And how much -- given that for Enocell you probably took a bit extra, extra downtime as part of the conversion. So is that division going to be kind of affected by negative delta from maintenance?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [9]

--------------------------------------------------------------------------------

The division will be affected, yes. And remember also that we are ramping up Enocell after the conversion, which means that it takes some time, plus that you have Skutskar and Montes del Plata, yes. But also prices are coming down.

--------------------------------------------------------------------------------

Harri Taittonen, Nordea Markets, Research Division - Senior Director & Sector Coordinator [10]

--------------------------------------------------------------------------------

Yes. Sure, sure, sure. Okay. Maybe the last question, if I may. I mean, just on the Consumer Board, which has been doing well, but also the kind of the pricing outlook and that. I mean, you have been fairly positive about the pricing prospects next year for parts of the Consumer Board mix. But I mean, with the current market environment being this weak and also pulp prices down, do you see risk to these sort of statements that you have made earlier on the general outlook for pricing?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [11]

--------------------------------------------------------------------------------

For Consumer Board and the pricing going into next year, I am still positive. Hasn't changed. You can see that they are flat sales and the profit is up 45%. So I think the things we have talked about continue.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

Your next question comes from the line of Justin Jordan from Exane.

--------------------------------------------------------------------------------

Justin Joseph Jordan, Exane BNP Paribas, Research Division - Analyst [13]

--------------------------------------------------------------------------------

Can I just return to Biomaterials for a second. We're in a situation where, clearly, it would appear like softwood pulp prices in China have troughed, but hardwood is still declining even in today's data and inventory still clearly for hardwood needs some work. How long do you think that will take, if at all, for hardwood to reach some sort of stabilization? And when we think about Biomaterials' quarterly profit going forward, I appreciate the sort of 45 to 90-day lag between agreeing a contract today and delivering. But how long -- how many successful quarters of impact do you think we have going forward until potentially we see some recovery in 2020 by refining EBIT?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [14]

--------------------------------------------------------------------------------

I believe, and I don't know, we are a player, but we are not a dominant player in any sense in the pulp market. I would say that I guess, that the lowest point in the pulp prices are probably going to be Q4 this year and maybe going to next year's first quarter, but I am a believer that the prices will recover during the first half of 2020. But I don't know.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [15]

--------------------------------------------------------------------------------

Yes, no one has the crystal ball. But it's good to remember what happened a couple of years ago where we were having a low part in the pulp prices. And the change was quite fast when it started to move.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [16]

--------------------------------------------------------------------------------

And if you look also on the Chinese data, in the first quarter of 2019, volumes were down of imported pulp into China with minus 15, recovered to minus 1 by the midyear, and it's around now, by end of September, I would say it's like up 3% to 4%, with very strong growth from August and forwards. And it seems like they are emptying their inventories and -- but at the same time, it's not a lot of new capacity coming out. So I think something will happen.

--------------------------------------------------------------------------------

Justin Joseph Jordan, Exane BNP Paribas, Research Division - Analyst [17]

--------------------------------------------------------------------------------

Okay. And just switching divisions. In terms of the Oulu conversion, we're in a situation where we've got containerboard overcapacity globally, frankly, and subdued virgin containerboard demand in Europe. Would it make sense to postpone the Oulu conversion, perhaps 6 to 12 months, just given the soft demand outlook for containerboard?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [18]

--------------------------------------------------------------------------------

I think it is because once it's built, we're going to ramp it up. And I'm a believer that mono material that is pure virgin is actually having a demand. This is like a 31 million to 32 million tonnes market growing with 2 to 3 percentage points, and which means that our 450,000 is basically roughly around half of that yearly growth. So I think we need to do the conversion as speedy as we can and make sure that we can ramp it up because it will start to produce towards the end of 2020. So.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [19]

--------------------------------------------------------------------------------

And also we have to keep in mind the decline in paper market, and that's not getting any easier in the paper market. So in that sense, we are quite happy that we make the decision on moving with good speed ahead with the conversion. It's better to produce kraftliner than a coated fine.

--------------------------------------------------------------------------------

Justin Joseph Jordan, Exane BNP Paribas, Research Division - Analyst [20]

--------------------------------------------------------------------------------

No, I don't dispute the decision to produce less graphic paper. I guess what I'm questioning is the logic of spending EUR 450 million converting rather than closing.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [21]

--------------------------------------------------------------------------------

EUR 350 million.

--------------------------------------------------------------------------------

Justin Joseph Jordan, Exane BNP Paribas, Research Division - Analyst [22]

--------------------------------------------------------------------------------

Sorry, EUR 350 million. Okay.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [23]

--------------------------------------------------------------------------------

No. I think -- and this can turn and I'm not so worried about that. It will be time to ramp it up, as we know.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [24]

--------------------------------------------------------------------------------

It's a growing market (inaudible) have not changed. There's [coatings] in demand for replacing plastics and not the fossil-based packaging materials. And I think that's hitting the market at the right time.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [25]

--------------------------------------------------------------------------------

And it is a new kraftliner that doesn't exist, which has its advantages.

--------------------------------------------------------------------------------

Justin Joseph Jordan, Exane BNP Paribas, Research Division - Analyst [26]

--------------------------------------------------------------------------------

Okay. And just one final question, just switching divisions again to Consumer Board. Am I right in thinking that you have essentially a contract reset with your major customer as of January 2020 in terms of a positive pricing opportunity potentially that may bring...

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [27]

--------------------------------------------------------------------------------

Well, we have some major contracts still to be renewed at the end of this year [and without taking out with mix] without going too much into specifics. But we are at the final stages of the renewal of that, also it's a longer-term contract. And obviously, the falling boxboard related contracts are coming to renew. Those are more annual now towards the end of the year again.

--------------------------------------------------------------------------------

Justin Joseph Jordan, Exane BNP Paribas, Research Division - Analyst [28]

--------------------------------------------------------------------------------

Sure. And then, so can you give us any outlook for folding boxboard prices for 2020, which, as you say, tend to be annual contracts? I'm just wondering given...

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [29]

--------------------------------------------------------------------------------

I don't want to give any outlook on 2020, but I think economy is going to come back probably, and that means that in 2020, that prices will also come back.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

Your next question comes from the line of Antti Koskivuori from Danske Bank.

--------------------------------------------------------------------------------

Antti Koskivuori, Danske Bank Markets Equity Research - Analyst [31]

--------------------------------------------------------------------------------

A few questions from my side. First, on Consumer Board. And going to Q4 and the seasonality that typically is seen in Q4 there. Should we expect kind of similar seasonal EBIT than in earlier years in this division? Or is this year somehow different?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [32]

--------------------------------------------------------------------------------

You have to remember 2 things. We have 2 -- we have actually 3 mills in maintenance shutdown in Q4 2019. We have Fors, Ingerois and Skoghall. Then you also -- if you look historically how we have -- and this has been a problem. We have usually had a little bit of too high expectations on Consumer Board in the fourth quarter. Because in last year, we had only 2 of the Consumer Board mills in maintenance shutdown. We have Skoghall and Fors. But now we're also having Ingerois. I think you get what I'm trying to say.

--------------------------------------------------------------------------------

Antti Koskivuori, Danske Bank Markets Equity Research - Analyst [33]

--------------------------------------------------------------------------------

Yes, absolutely. Very helpful. Then second question on costs. You talked about -- a lot about taking down fixed costs and then you have got quite big plans on that side. But then on variable costs, what do you see from there coming in Q4? And I guess for a little bit longer period as well early next year, what's the outlook on variable costs?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [34]

--------------------------------------------------------------------------------

Yes, I would say, in general, that there's not a lot of pressure from costs. It has not been during the year or going forward. Sequentially, of course, look at the wood cost, that is the key for us. We see that it's easing. Of course, compared to year ago, they are still at the higher level on average for this year as I remember how it has developed, but that is, of course, key driver to us and the same for the other key inputs. Due to the same reasons, markets have been softer and it's affecting other markets and players. So no major pressures from there. When it comes to cost improvement and cutting program that we are running successfully, roughly half of the savings are coming from variable costs and half from fixed costs. And then, of course, as I say, we did not take into account normal price changes in good or bad, but then it will be [in consulting] for variable cost. It must be something, like changes in recipes or changes in the materials themselves or reducing consumption in the recipes.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [35]

--------------------------------------------------------------------------------

Or qualification of new suppliers. It has to be something that is sustainable.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [36]

--------------------------------------------------------------------------------

And active.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [37]

--------------------------------------------------------------------------------

Active, yes.

--------------------------------------------------------------------------------

Antti Koskivuori, Danske Bank Markets Equity Research - Analyst [38]

--------------------------------------------------------------------------------

Sure. Then thirdly, just on net working capital, if you could give us a kind of an indication what to expect on Q4 from that?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [39]

--------------------------------------------------------------------------------

Yes, we started to put extra effort of focus on working capital after Q1 and Q2 and have continued the same in Q3. Working capital came down EUR 100 million plus in Q3, and we continue to work. We have set a project. Project office to look at this and to keep the pressure on businesses and wood supply to ensure that we can push down working capital different component. So I'm confident they will continue. We have not set any targets or we are not commenting on any targets when it comes to working capital levels, where to go. But I'm sure that there are opportunities to knock out a couple of percentage points from the net working capital net sales ratio compared to where we are now. It came up somewhat or some [time] last year especially, and now we are working to bring it back to the levels where we were earlier. I think it's potentially realistic that we can and should be below 11% to net sales if you look at the ratio as such. So I think that gives you some perspective. But of course, it's a long-term action, so it's not such short-term access. But it's one of the key areas in addition to profit protection program that we are running now because cash is very important in these times when economy is turning a bit sour. And I think it's important to take care of your balance sheet and cash flow.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

And your next question comes from the line of Linus Larsson from SEB.

--------------------------------------------------------------------------------

Linus Larsson, SEB, Research Division - Analyst [41]

--------------------------------------------------------------------------------

The way you guide now for the fourth quarter actually takes us back to a profitability level where we haven't been since 2013, while some of your key benchmark prices are actually somewhat higher than they were back then. So I wondered just -- is cost a very important part of the equation here? Is it so that variable costs have maybe started to decline, but they will decline only much slower than your product prices go down? And if so, what's your anticipation for variable cost development in 2020? And maybe then, in particular, on the wood raw material side, please?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [42]

--------------------------------------------------------------------------------

Yes. First of all, I think it's worth to note this. I remember that when it comes to pulp, pulp has been coming to historically low levels and that is obviously having an effect on not only Biomaterials but Stora Enso in general. When it comes to the variable cost, I think you hit the right point, Linus, when you look at the wood costs. If you look at wood cost level this year, it has been and continues to come down sequentially, but it's coming through in the figures slower than you might expect. And it's partly because of the structure of the market, those that we have been obviously making wood supply deals from the forest owners over time, and some of those have been [an habit] to old prices, so to speak. And we have been harvesting those, and it has been affecting the inventory barriers and the cost coming to the system. But that is, of course, continuous consumption of the wood. And like I said, we expect that the positive trend from the wood market continues positive, meaning that wood prices come down and then that the FX cost starts to come through, also more disciplined in the results. It takes typically a quarter or so at least when the market moves and now it has taken a bit more. So I think that has been the key driver. If you look at the wood cost somewhat higher than earlier due to the last couple of years developed still coming down now and historically low pulp prices, especially.

And also you have to remember Consumer Board where we have been doing good increase in prices, directly starting to come through. Truly now, it has been improving continuous, but now almost the whole quarter it has been renewed. Some last contracts have still to be done with those active pulp prices. So there are these kind of phasing on timing issues.

--------------------------------------------------------------------------------

Linus Larsson, SEB, Research Division - Analyst [43]

--------------------------------------------------------------------------------

Right. And so when in earnest will we start to see a sequential wood costs decline, do you expect?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [44]

--------------------------------------------------------------------------------

Sequentially, wood costs are declining already. But I think that early next year, picking up next year, we would expect that they come stronger through in the figures. So it's slightly more than a quarter if we act fast.

--------------------------------------------------------------------------------

Linus Larsson, SEB, Research Division - Analyst [45]

--------------------------------------------------------------------------------

Okay. But is that -- can you say that for basically all of your wood sourcing regions? Or is that just in certain regions? Or is it pretty much the same? I know you've had quite low-priced sawlogs in Continental Europe recently. But is there anything else to note on that or is it pretty broad-based that you will see a cost decline on wood input?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [46]

--------------------------------------------------------------------------------

It's mainly Finland, which is roughly 1/3 of the total volume and less in Sweden forest, mainly Finnish phenomena. In Central Europe, as you saw, because of the bark beetle issues, the wood costs have been coming down and have remained relatively low. And plantation-based wood, that is more -- it's our own plantation, so that is kind of -- effects are not so a lot.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [47]

--------------------------------------------------------------------------------

So in Sweden, we have a faster reaction time due to the (inaudible).

--------------------------------------------------------------------------------

Linus Larsson, SEB, Research Division - Analyst [48]

--------------------------------------------------------------------------------

Exactly. Exactly. Right. And then just one more question, if I may. If you could just provide any sort of update on how your day-high operation is going within Consumer Board? What's the latest on the ramp-up in terms of capacity and mix development? And how are you affected by what's going on overall in the Chinese packaging board market?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [49]

--------------------------------------------------------------------------------

So we all have design capacity and that we've been for a long time, and we are qualifying more and more. And what we see now is that the FBB, demand is slightly stronger in China and the prices are stable. And I would say we are affected, but not as much.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [50]

--------------------------------------------------------------------------------

We are working on bringing higher premium grades to the market and launch there successfully new products and that they improve the product portfolio and improving profitability moving forward.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [51]

--------------------------------------------------------------------------------

But that is also a new way of how we work. So it goes according to a pattern. It doesn't happen overnight.

--------------------------------------------------------------------------------

Linus Larsson, SEB, Research Division - Analyst [52]

--------------------------------------------------------------------------------

But if I put the question maybe somewhat differently. If we, for a second, remove the tailwind from cheaper pulp because the operation is buying pulp from outside the mill, are you seeing profits progress at that mill?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [53]

--------------------------------------------------------------------------------

Absolutely. With the lower chemical pulp prices that we have seen, that is absolutely helping them.

--------------------------------------------------------------------------------

Linus Larsson, SEB, Research Division - Analyst [54]

--------------------------------------------------------------------------------

Yes, But I mean, except for that factor, are you even adjusting for that particular factor? Are you seeing underlying profitability progress at Beihai?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [55]

--------------------------------------------------------------------------------

We do. Operationally, we have been running there almost since the beginning, very successful startup and good volumes and efficiencies reached already earlier. And like I said, when we are improving the product mix moving away from standard for the boxboard on lower end of the range to higher quality of grades, there is a clear improvement in the profitability. Of course, as we all know, falling boxboard market is quite crowded as there is overcapacity in China. And that is why it's extremely important that the team in China, as they have been doing, continue to move volumes to upper end of the range, and that's exactly where we get the profitability and pickup.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [56]

--------------------------------------------------------------------------------

And also, increase the direct sales to the end users and using less and less of merchants.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

Your next question comes from the line of Robin Santavirta from Carnegie.

--------------------------------------------------------------------------------

Robin Santavirta, Carnegie Investment Bank AB, Research Division - Financial Analyst [58]

--------------------------------------------------------------------------------

So just a bit more on the Q4 guidance. Now I guess it's quite expected that the average pulp price is lower in Q4 compared to Q3. Also, the paper price is lower in Q4 compared to Q3. So that's probably well-known by analysts and the market. But this Other segment, seasonally, Q4 has been sort of higher earnings Q-on-Q. So is -- could Seppo specify a little bit what is going on there? And what should we expect for the Other segment now going into 2020?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [59]

--------------------------------------------------------------------------------

First of all, you have to remember that this segment, Other, includes also R&D costs and some project-related costs that are always a bit difficult, especially for you, looking outside in, to understand the phasing of those. So that is one driver there why there is some phasing issues between Q3 and Q4. And then there have been some -- if you look at the phasing of the costs, especially related to projects that some costs have been, let's say, moving from earlier quarters towards end of the year related to the finalization of those projects. So there's nothing extraordinary as such, but typical things that are there.

Going forward, of course, you have to remember that today, segment Other includes all our forest operations in Nordic, meaning all -- Bergvik Skog, that we are taking over wood supply in Finland, Sweden, Baltics and Russia. And starting from the beginning of next year, when we separate those and start to report forest divisions separately, I think it is -- the development of this segment Other will be more clear to you. When we look at the development, it will be easier to follow an estimate.

--------------------------------------------------------------------------------

Robin Santavirta, Carnegie Investment Bank AB, Research Division - Financial Analyst [60]

--------------------------------------------------------------------------------

Right. But can you provide some kind of guidance on the earnings improvement, I guess, from sort of you now reporting a little bit differently the forest assets you have 2020 over 2019?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [61]

--------------------------------------------------------------------------------

I cannot -- when it comes to forest assets, I cannot comment more than what we commented already in Forest Day in Stockholm. The guidance, as you know, we are guiding full group results next quarter, and we don't go more into details when it comes to figures as such.

--------------------------------------------------------------------------------

Robin Santavirta, Carnegie Investment Bank AB, Research Division - Financial Analyst [62]

--------------------------------------------------------------------------------

All right. Then can I just ask on -- you touched upon maybe a bit better FBB prices in China. But what are you seeing sort of in terms of activity levels, volumes when it comes to biomaterials and Consumer Board in China?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [63]

--------------------------------------------------------------------------------

So Consumer Board is FBB and it's liquid, it's CUK and it's foodservice board. So if I start with the pulp, I would -- we have seen volumes now increasing and accelerating, increasing in the second half, basically from August towards today. And we have also seen like -- we've all seen today that the NBSK is moving up for the second week in a row, even -- and we also see that the eucalyptus-based pulp has not really moved in the right direction yet. So that is one thing.

We do believe that the inventories are coming down in China. And China needs to increase pulp consumption every single year if they're going to continue with the GDP growth. At the same time, we don't know what will happen with the import in -- of recycled paper, but the quotas are coming down to recycle. So if the Chinese economy, which needs to grow, are going to grow, where they're going to buy more pulp, they are going to need more packaging materials in general. And Chinese consumer are very, very eager to make sure that they have food safety, and food safety is an area where we basically are focusing the Beihai Mill on.

And one thing more which I think is important, and that is there is a change in China. There is an increasing middle class that is growing, and they consume more and more.

--------------------------------------------------------------------------------

Robin Santavirta, Carnegie Investment Bank AB, Research Division - Financial Analyst [64]

--------------------------------------------------------------------------------

Sure, definitely. Just finally a question. Some of your peers in Sweden are writing out the book value of their forest, which apparently is having a quite positive impact on the share price development. Now what are your thoughts? I guess, initially, you have sort of said that you're fine with the way you book those forests at the moment. But I guess especially the Latin American forests are booked at very, very low levels. So are you still sort of -- are you looking into this issue? Or are you fine with the way you book the forest value? Is that, in your view, reflecting market value well enough?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [65]

--------------------------------------------------------------------------------

Well, obviously, we follow the situation on development, what our peer group is doing in Sweden and globally also, you have to remember, a lot of forest companies outside Sweden also. Typically, people are likely using discounted cash flow models. Very few of our peers are using market prices because of the market -- big-sized deals not being done frequently. But let's see how it develops.

First of all -- then if you look at Sweden and specifically our case, then you have to remember that we have recently done a big deal, and the value today in Bergvik is reflecting prices that we have paid for the additional land in the case of Bergvik Skog. And the land that we got as part of the de-merging or splitting Bergvik Skog relative with our previously owned share is not far away from that. So in that sense, we think that it is sort of gearing -- it reached a fair value. But obviously -- and we have also given out figures. The latest that we did was in Stockholm at the Forest Day, giving comparison to valuations based on the market prices paid in Sweden.

And there, you can recall that if you look at the book values today, it is at about EUR 2.8 billion in Sweden looking at our fair valuation. If you look -- use the figures from BillerudKorsnäs IMF deal, it's EUR 5.1 million, almost double. And LRF statistics, it's EUR 7.9 billion, almost triple compared to what's today in our books. I think that is, of course, some idea on the potential value and hidden values there in the balance sheet. So I think it's quite transparently communicated by us already, isn't it?

--------------------------------------------------------------------------------

Robin Santavirta, Carnegie Investment Bank AB, Research Division - Financial Analyst [66]

--------------------------------------------------------------------------------

It is. It is. It just seems that the impact on the share price if you do that on the book is hefty, but I agree with you.

--------------------------------------------------------------------------------

Operator [67]

--------------------------------------------------------------------------------

And your next question comes from the line of Mikael Doepel from UBS.

--------------------------------------------------------------------------------

Mikael Doepel, UBS Investment Bank, Research Division - Executive Director & Analyst [68]

--------------------------------------------------------------------------------

Coming back to the Consumer Board business. Just as a reminder, how big part of that business is liquid packaging board today?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [69]

--------------------------------------------------------------------------------

45%.

--------------------------------------------------------------------------------

Mikael Doepel, UBS Investment Bank, Research Division - Executive Director & Analyst [70]

--------------------------------------------------------------------------------

Okay. And how big part of that 45% is now being renegotiated in terms of price contracts?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [71]

--------------------------------------------------------------------------------

We have not communicated that kind of ratios. But like I said earlier, we are at the final stages now. So by end of this year, more or less done with the exception of 1 or 2 contracts. So they are -- will start to be there.

--------------------------------------------------------------------------------

Mikael Doepel, UBS Investment Bank, Research Division - Executive Director & Analyst [72]

--------------------------------------------------------------------------------

Okay. And would you say that during the year 2019, you're already seeing some effects of earlier price negotiations during the year?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [73]

--------------------------------------------------------------------------------

We have communicated basically all quarterly reports that we have had, that we have been working with the whole portfolio from -- everything from FBB, SBS, foodservice board, and we have achieved every quarter an increase in the prices.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [74]

--------------------------------------------------------------------------------

And you can see those if you look at year-on-year result development of Consumer Board. They have been improving. And we have been also quite happy. That I can say, that we have been quite happy with the increases reached. They are where we have been targeting as well. So very successful work in the team in Consumer Board division.

--------------------------------------------------------------------------------

Mikael Doepel, UBS Investment Bank, Research Division - Executive Director & Analyst [75]

--------------------------------------------------------------------------------

Okay. And then just a follow-up on Beihai, which you talked about previously. But could you give a rough split how the mix in that Beihai Mill looks today? How big part of the volumes are higher-value products today compared to, let's call it, lower grades? Just to get a feel of what's the improvement potential there.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [76]

--------------------------------------------------------------------------------

I would say that it's still quite big. We are -- like Annica said in the Capital Markets Day a year ago, that we are halfway through with the portfolio development and ramp-up in that sense, and we still need to continue. So it's too much still on low end folding boxboard. But like I said, we continuously work on launching new, higher end of the range products, and that's improved the profitability. So we are moving step by step. And also, of course, development of liquid packaging board is important there on top of chasing -- and coming with the new grades.

--------------------------------------------------------------------------------

Mikael Doepel, UBS Investment Bank, Research Division - Executive Director & Analyst [77]

--------------------------------------------------------------------------------

Okay. And then just finally on the -- switching to the corrugated box markets. What do you see currently in those markets in terms of demand and pricing? I mean we have seen containerboard coming down quite a lot, but it appears as if corrugated box pricing has held up a bit better. What do you see now in that business? Are you seeing increased pressure on the box prices? Or are they still holding up fairly well?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [78]

--------------------------------------------------------------------------------

So with the kraftliner was come down, it gives a bit more leverage for the corrugated units, and the corrugated units was a positive contributor to us. At the same time, we see on the containerboard, the board going in there from packaging solution, that the demand is stable. And also, the prices are stable. And I think that was confirmed already today with the statistics, and it's been there for a while. So that will mean, over time, that the game will probably change, that corrugated packaging might come under a little bit of pressure going forward.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [79]

--------------------------------------------------------------------------------

But (inaudible) if you look at the volumes of corrugated this year, looking at Q3 or year-to-date, so there actually is a slight increase in the volumes during the year. So I think that's an indication the market is holding pretty well and the volumes are also pretty healthy.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [80]

--------------------------------------------------------------------------------

And part of that is actually explained with the continuous growth of the e-commerce that is driving a lot of corrugated material.

--------------------------------------------------------------------------------

Mikael Doepel, UBS Investment Bank, Research Division - Executive Director & Analyst [81]

--------------------------------------------------------------------------------

Okay. And then just a final question on the pulp market. We've talked extensively about what's happening in China. But how would you describe the European pulp market right now? Has there been any change in the last month or weeks or so? What do you see there happening going forward? I guess so far this year, demand has been quite weak, declining, clearly, and inventories are very, very high. Do you see any improvements in the situation?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [82]

--------------------------------------------------------------------------------

In the fourth quarter, no improvement. It's still under pressure.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [83]

--------------------------------------------------------------------------------

But you have to also remember that in Europe, the prices started to decline later than in China. And like I said in China, it starts to stabilize and probably Europe follows a bit later.

--------------------------------------------------------------------------------

Mikael Doepel, UBS Investment Bank, Research Division - Executive Director & Analyst [84]

--------------------------------------------------------------------------------

Yes. But in terms of demand, have you seen any changes around inventory levels in Europe?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [85]

--------------------------------------------------------------------------------

Well, typically one leads to another.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [86]

--------------------------------------------------------------------------------

And it is a bit. The German economy, which is by far the biggest market in Europe, is in a way probably going into recession, as it says, which obviously will affect the level of economy, which is the driving force between the box demand so...

--------------------------------------------------------------------------------

Operator [87]

--------------------------------------------------------------------------------

And your next question comes from the line of Lars Kjellberg from Crédit Suisse.

--------------------------------------------------------------------------------

Lars F. Kjellberg, Crédit Suisse AG, Research Division - Research Analyst [88]

--------------------------------------------------------------------------------

Just a couple of questions. Consumer Board, if I can return to that. Just curious a bit what you're seeing in terms of demand trends. I mean we're seeing some stability actually in corrugated, which should be more cyclical. And in this business, you're not seeing any volume growth. And this is an area where, I guess, there's been an argument at least you should be gaining some momentum in the pack substrate change from plastics, for example, right? So can you give us a bit of color on what you see is going on in the market in terms of demand trends generally and also in overseas markets?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [89]

--------------------------------------------------------------------------------

So what we see in general is that -- we have also been very clear that we have been fighting for making sure that we do value management and not taking bad deals. We see an increased interest and discussions with customers. But you have to remember, to replace a lot of the packaging material from what is typical plastic doesn't happen overnight. And I think what we have seen is a bigger and bigger discussion with customers. And a typical thing was that the board that we can make plastic tubes, that will be very small in the beginning, and we see more and more. And all these euro packaging awards that we got is actually a reflection of that the interest is there. It's not going to be orders in a quarter or so. It's going to take some time when we talk volumes. So I think the interest is there. It's going in the right direction. And you have to remember, the single-use plastic directive is not -- is implemented on an EU level, but hasn't gone into the local legislation yet, which will drive this even faster. So I think it's early days to talk about it, but the interest is there.

--------------------------------------------------------------------------------

Lars F. Kjellberg, Crédit Suisse AG, Research Division - Research Analyst [90]

--------------------------------------------------------------------------------

Okay. Looking at leverage, as you've pointed, Seppo, it's been up a bit. And of course, your guidance for the fourth quarter is quite a bit down. So I guess you're approaching some 2.5x and you're stepping up CapEx spending. When are you getting concerned about the leverage? And would reconsider some of your spending for -- which you guided for 2020 at quite a high level?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [91]

--------------------------------------------------------------------------------

Yes. Obviously, follow the balance sheet carefully, and it's important to pay attention to it. Like we communicated already earlier this year when we announced the conversion project in Oulu and increased the CapEx temporarily above the earlier levels around EUR 600 million plus to EUR 800 million, we already then said that we will focus on working capital. Also, we plan to continue noncore asset disposals to improve the balance sheet. And I think those are the actions that we have in pipeline and continue to implement to ensure that our balance sheet is not getting worse.

--------------------------------------------------------------------------------

Lars F. Kjellberg, Crédit Suisse AG, Research Division - Research Analyst [92]

--------------------------------------------------------------------------------

But you're not considering any actions specifically beyond what you talked about net working capital, et cetera, but no CapEx changes at this stage?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [93]

--------------------------------------------------------------------------------

Not at this stage. I think we are confident that we can continue with the projects that we have in the pipeline. But obviously, if things get really sour and the cash flow starts to deteriorate, then we need to look at other actions, and reducing CapEx is obviously one alternative. But at the moment, we don't see any reason to go that far.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [94]

--------------------------------------------------------------------------------

And Lars, don't forget that we have -- how much have we sold of noncore assets in the last how many years?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [95]

--------------------------------------------------------------------------------

Over the 5 to 6 years, about EUR 600 million, so roughly EUR 100 million a year.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [96]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Lars F. Kjellberg, Crédit Suisse AG, Research Division - Research Analyst [97]

--------------------------------------------------------------------------------

Got it. And the final question for me and I asked the same question the last time around. Clearly, paper volumes are quite weak. And clearly, there's no doubt there's a need for capacities to be taken out. A question that I asked last time as well is, how do you -- faring with customer retention at all? Or is that a factor that comes into play because your deliveries were down more than the market generally? How should we view this?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [98]

--------------------------------------------------------------------------------

I would say so far, so good with our customers. Customer retention has been good, and we have been able to keep the volumes relatively well. But of course, tough market.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [99]

--------------------------------------------------------------------------------

But the whole competitive landscape is similar.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [100]

--------------------------------------------------------------------------------

Yes. And of course, we -- in general, we focus a lot on values than volume.

--------------------------------------------------------------------------------

Lars F. Kjellberg, Crédit Suisse AG, Research Division - Research Analyst [101]

--------------------------------------------------------------------------------

Got it. And Karl, all the best for your future.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [102]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [103]

--------------------------------------------------------------------------------

Your next question comes from the line of Cole Hathorn from Jefferies.

--------------------------------------------------------------------------------

Cole Hathorn, Jefferies LLC, Research Division - Equity Associate [104]

--------------------------------------------------------------------------------

Just following on actually on Lars' question around balance sheet. I just want to make sure on the dividend side of things, you're still comfortable on paying 50% through the cycle. So just the fact that we're probably going to a lower EPS number, do you still feel comfortable with the dividend payment as is?

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [105]

--------------------------------------------------------------------------------

Dividend policy has not been changed. It's 50% over the cycle, yes.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [106]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Cole Hathorn, Jefferies LLC, Research Division - Equity Associate [107]

--------------------------------------------------------------------------------

Okay, perfect. And then when you talk about your earnings into next year, a lot of the impact is around pricing, but you talked positively around potential opportunities for new areas of development in the next coming years. Has the softer macro environment changed your views on those type of projects or not at all?

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [108]

--------------------------------------------------------------------------------

No. I think given the trends that Lars also talked about that people want to replace fossil-based materials, we need to speed up the innovation. Because when you launch a new product over time, that is a more profitable product than the previous one. Maybe not when you start it, but when it gains volume, and that's the reason why we need to be more innovative than anybody else because demand from customers will increase. And if you are first out, you get a bit of a time monopoly. And that you -- it's always better margins.

--------------------------------------------------------------------------------

Operator [109]

--------------------------------------------------------------------------------

There are no further questions at this time. Please continue.

--------------------------------------------------------------------------------

Ulla Paajanen-Sainio, Stora Enso Oyj - Senior VP & Head of IR [110]

--------------------------------------------------------------------------------

Okay. Thank you, everyone, for the lively discussion. And now before we end, I will hand it over to Karl because he wishes to say some final words to you.

--------------------------------------------------------------------------------

Karl-Henrik Sundström, Stora Enso Oyj - CEO [111]

--------------------------------------------------------------------------------

So first of all, thank you very much. This is my last quarterly report for Stora Enso. I would like to thank you all for bearing with us. It's been a great privilege to work with Stora Enso. And I am very convinced about the future of Stora Enso. We are in the right business. We are doing profit protection program, which will make us an even better company when the cycle turns, and I'm extremely proud to be replaced by Annica, who will take over the 1st of December. So I think this is a last farewell to you all, and I thank you for being patient with me, and I have enjoyed this a lot. Thank you very much.

--------------------------------------------------------------------------------

Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO & Country Manager of Finland [112]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Ulla Paajanen-Sainio, Stora Enso Oyj - Senior VP & Head of IR [113]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Operator [114]

--------------------------------------------------------------------------------

Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.