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Edited Transcript of STERV.HE earnings conference call or presentation 27-Apr-17 11:30am GMT

Thomson Reuters StreetEvents

Q1 2017 Stora Enso Oyj Earnings Call

Helsinki 00101 May 3, 2017 (Thomson StreetEvents) -- Edited Transcript of Stora Enso Oyj earnings conference call or presentation Thursday, April 27, 2017 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Karl-Henrik Sundström

Stora Enso Oyj - CEO

* Seppo Parvi

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

* Ulla Paajanen-Sainio

Stora Enso Oyj - SVP of IR

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Conference Call Participants

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* Justin Jordan

Jefferies LLC, Research Division - Equity Analyst

* Mikael Doepel

Handelsbanken Capital Markets AB, Research Division - Analyst

* Mikko Ervasti

DNB Markets, Research Division - Analyst

* Robin Santavirta

Carnegie Investment Bank AB, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Q1 2017 Stora Enso Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ulla Paajanen-Sainio, Head of Investor Relations. Please go ahead, ma'am.

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Ulla Paajanen-Sainio, Stora Enso Oyj - SVP of IR [2]

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Thank you. Good afternoon, everyone, and welcome to Stora Enso's Q1 2017 Conference Call. And I will hand it over now to our CEO, Karl Sundström. Karl, please go ahead.

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

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Thank you, and good afternoon or good morning depending on where you are in the world. And we would like to go into the presentation of the first quarter 2017. This is a big quarter for us. This is the first time in 5 years, where we actually ended up with the top line growth, a 2.1%. But more importantly, we are ending up with almost 10% excluding paper. That is obviously driven by Beihai, the 2 rebuilds of Varkaus, the LVL, as well as the board machine and the Murów sawmill. Operationally, EBIT ended up at EUR 215 million with an 8.6% margin. And the reason for the decline versus a year ago, and I will go into that more in detail a bit later on, is actually still lower hardwood pulp prices compared to a year ago, slightly lower paper prices and transformational cost by ramping up the Beihai, ramping up Murów, as well as ramping up LVL and the board machine in Varkaus.

In Beihai, we had EUR 12 million more cost than we had a year ago, which includes a EUR 7.5 million provision related to a turbine damage, and I would like to explain that. This came in very late in the process. It came in the 31st of March. So we have been working very hard and this is the best estimate that we have at this moment.

Cash flow from operating activities on a healthy EUR 178 million, and after investing activities, EUR 43 million. Return on capital employed, 10%, and if we exclude the Beihai Mill, it's 13%. Net debt to operational EBITDA decreased from 2.2x a year ago to 2x in the first quarter of 2017. The EUR 50 million profit improvement program is proceeding according to plan.

The underlying business is showing good progress. If you look upon it, Consumer Board came in EUR 12 million lower than a year ago. But if you look at the different parts, you can see that we had a provision as I mentioned before of the turbine of EUR 7.5 million, which means that it's actually only EUR 4.5 million lower in Beihai compared to a year ago. And on top of that, we actually had an impairment in our minority investment Bulleh Shah Packaging. So all in all, the underlying performance of Consumer Board is EUR 3.5 million better than a year ago.

If you look on Packaging Solutions, here you can see the 2 effects. One is that our Packaging business in China is going slightly better but more importantly, you see the effect of Varkaus now getting close to EBIT breakeven as we have predicted in the second quarter of 2017. Included in this is the expensed feasibility study of Ostroleka PM 6 that we have decided not to go ahead of.

Biomaterials coming down EUR 31 million versus a year ago. Included in that is EUR 16 million on lower pulp prices, mainly hardwood, pulp prices compared to a year ago and a write-down on a credit loss of EUR 4 million. Wood Product had a best first quarter in 10 years, and paper coming down EUR 9 million, partly because of less mills because we had closed down, but also price explaining about EUR 5 million of the EUR 9 million. And then you have other basically making some additional provisions for land-related issues with all sites turning out that we ended up at EUR 215 million. But if you then look upon the underlying business with slightly -- with revenue improving pulp prices and a ramp-up of Beihai that is faster than anticipated, this sends a good signal for the future.

The transformation steps since 2016, you're all aware of them, but I just want to point out, we have a number of big mills starting up, the Beihai, Varkaus, Murów. We have online. We have a number of important investments, especially when it comes to MFC and the Heinola Mill. On the other hand, we announced in the first quarter an additional proposed plant closure of paper machine in Kvarnsveden. That means that plant and actually closures to divestments or pure closures, is up to 1 million tonnes now of paper capacity. All of that have brought in around EUR 300 million in cash since the beginning of 2016.

I just want to spend a little bit of time on the faster than planned ramp-up of the Beihai Mill. We would like to make sure that you all are aware of that we have actually shipped commercially, both liquid and CUK board in China. We have made FBB deliveries and we are continued increasing prices and volumes of the FBB volumes that we are using as a temporary training ground for the staffs. We expect full production in the first half of 2018. And so far, for a mill that is less than a year in start up, we're already producing 87,000 tonnes in the quarter. The PE Coating is expecting to be ready by mid-2017, adding additional value-added towards food service boards. And Beihai pulp mill decision to be reconsidered as announced earlier is moving along the time line that we are expecting.

Before handing over to Seppo, I would like just to remind you about our transformation journey from having a business that was basically less than 1/3 of nonpaper sales and some slightly less than 40% of the profit 10 years ago, and today, the Packaging, the Biomaterials and the Wood Products divisions stand for 70% of sales and 80% of the profit. You might think that it's a slow movement in 10 years, but I will tell you all know also that once you put the pulp mill up, the board machine, or the paper machine, they usually stay in useful for 50 to 70 years.

With that, I would like to hand over to Seppo.

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

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Thank you, Karl. And I'll start with some key figures, first of all, and sales -- reported sales line like Karl had said already is showing 2.1% growth. And this is an important milestone in our transformation, demonstrating growth for the first time in 5 years.

Operational EBIT was EUR 215 million compared to EUR 248 million a year ago in Q1. And this is a reflection of the start up cost and lower pulp and paper prices versus Q1 2016, as well as additional transformational costs like R&D and innovation costs that are adding both to fixed cost. But of course, those are -- as would be seen as investments in future, not only as costs.

Operational return on capital employed excluding Beihai was 12.9%, more or less in line with our strategic target of 13%. And net debt to last 12 months operational EBITDA was EUR 2.0 million at the same level as at the end of 2016 and down from EUR 2.2 million a year ago.

Then moving to divisions, and I'll start with Consumer Board. There, important milestone at the Beihai Mill was reached, when we made first commercial deliveries of liquid packaging for CUK from the Beihai Mill. CUK is coated unbleached kraftboard. Sales increased 8.3% driven by Beihai, and operational EBIT was stable excluding Beihai operations. Higher volumes in Consumer Board were offset by slightly lower sales prices in local currencies.

Beihai operational EBIT was negative EUR 33 million compared to EUR 21 million a year ago but you have to note that this includes provision of EUR 7.5 million related to the technical power turbine incident we had there at the end of March. So taking that into account, actually Beihai was operationally performing better than we expected as this EUR 33 million losses in line with our guidance for Beihai performance in Q1.

In Q2, we expect loss to be approximately EUR 18 million and this is at the same level as a year ago. And also this includes EUR 3.5 million asset impairment at the Bulleh Shah Packaging in Pakistan. Operational return on capital was 12.2% and excluding Beihai mill, 38%. So it's a solid excellent performance at the Consumer Board division continues.

And like Karl already mentioned, we are reconsidering the plan to build chemical pulp mill in Beihai, China as announced earlier and that negotiations and plans are going ahead as expected.

And investment of EUR 9 million was announced during the quarter. We invest more in MFC production at Imatra, Ingerois and Fors mills.

Then comments on Packaging Solutions. There, we clearly start to see the Varkaus investment is really paying off, and as demonstrated, when you look at the sales growth of 18.4% of Packaging Solutions division. In our recent Varkaus kraftliner mill ramp-up effect was the higher volumes in container for the general corrugated business is reflected there.

Operational EBIT is EUR 17 million higher than Q1 last year. Great improvement of Varkaus, that's EUR 9 million as well as China packaging, EUR 10 million improvement. You might remember that China had some issues on [profits] with the first half of last year and they are coming back nicely now. We also expensed Ostroleka feasibility study EUR 4 million. There we had decided not to go ahead and proceed with the plans for the expansion of Ostroleka RCP containerboard mill. And Varkaus kraftliner mill ramp-up is proceeding well and EBIT breakeven is expected to be reached in Q2 this year.

So including the coming weeks of March.

Operational return on capital increased from 3.2% a year ago to 11.1%, thanks to improved profitability. And we also announced EUR 28 million investment at the Heinola Fluting Mill in Finland, to improve quality and capacity. And we expect that this investment is gaining return on capital above 20%.

Then moving to Biomaterials. Their pulp market is gradually improving. Sales increased 5.1%, thanks to currencies moving in our favor and that was more than offset in lower sales prices especially hardwood pulp. Also, our pulp volumes as such were higher than a year ago. Operational EBIT decreased EUR 31 million due to lower European hardwood pulp prices and higher variable costs. There was also a credit loss of EUR 4 million booked in Biomaterials. And as you know, we are investing in innovation and R&D capabilities in Biomaterials and that is adding costs at the moment. We all know that there has been a nice run rate, when it comes to hardwood pulp prices during the first quarter, but prices are still below the levels we had a year ago.

Turbine incident that happened at the end of last year at Enocell Mill in Finland cost EUR 5 million additional cost during the first quarter this year. That is less than we originally expected. We gave a guidance of EUR 10 million in the Q4 call. So that was managed better and with lower additional cost than we expected at the time.

Then also a start-up at the Raceland Mill is proceeding as planned. There we produce bagasse-to-xylose and that is a demonstration plant. And we expect to deliver first batches of xylose still in this year. Also first commercial deliveries of lignin from Sunila Mill shipped during the quarter.

Wood Products. They are also new products and solutions that are driving growth and profitability. Sales increased 8.9%. Growth is coming from our strategic investment at Varkaus LVL Mill and Murów sawmill in Poland. Also CLT and classic sawn volumes were higher as well as prices, improving also profitably. And operational EBIT increased EUR 6 million. And we had higher volumes and slightly higher sales prices especially for spruce.

We have also a feasibility study in progress in Sweden for new CLT feasibility facility there and we expect to finalize that no later than in connection to the group's Q2 reporting. We have announced EUR 12 million investment at the biocomposite granules production in Hylte Mill in Sweden. And we also have been selected as a supplier to various CLT buildings in Europe and Australia during the quarter, and this clearly demonstrate that the wooden buildings are huge.

In paper, we had stable sales excluding divestments and a good performance in that sense continues. Operational EBITDA decreased EUR 15 million, that's because of lower sales prices in euros, stable variable cost and higher comparable volumes and lower fixed cost. At the Kvarnsveden Mill in Sweden, we started codetermination negotiations regarding a plan to reorganize the mill. This includes a permanent closure of 100,000 tonnes of SC paper by the end of Q2 2017, is moving ahead as planned, and this would affect the maximum of 140 employees. We expect annual cost savings of EUR 12 million from the plant.

Our internal project to review how to create the best conditions for the Paper division to complete -- compete under the increasing cost pressures and declining market conditions is proceeding as planned and more (inaudible) for all of us once they are moving forward.

Then to close with a summary on strategic targets, where clearly I said also earlier, we are reaching the target to grow faster in the relevant market. Sales across was 9.7%, and also balance sheet includes a net debt to operational EBITDA is at 2.0 and debt-to-equity at 46%. So clearly below the strategic target levels.

Fixed cost to sales came down to 24.1%. We had been hopping around 25% last year, most of the year and its (inaudible) is coming down but, to me, more needs to be done and we continue and our work to continuous improvement as well as a lot of announced profit improvement program to reduce both variable and fixed cost.

Operational return on capital employed was 12.9% excluding Beihai, so in line with the strategic target of 13% and including Beihai at 10% level.

Look at the divisions. The divisional targets Consumer Board, excluding Beihai, was at 38% level and we are especially happy for Packaging Solutions improving the return on capital from 3.2% a year ago to 11.1%, thanks to improved performance for the Varkaus and in China.

Biomaterials at 7.9%. This is of course a reflection of the still low pulp wood pulp prices and Wood Products at 16.4% continues to demonstrate solid performance. Paper cash flow was seasonally low at 4.3%, but we are confident that paper business continues to generate good cash flow also going forward.

And now, I'll hand it over back to you, Karl.

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

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Thank you, Seppo. And I will now go through the guidance for the second quarter of 2017.

So sales are estimated to be similar to or slightly higher than the amount of EUR 2,497,000,000 recorded in the first quarter of 2017. Operational EBIT is expected to be in line with the EUR 215 million recorded in the first quarter of 2017. Operational EBIT estimates includes negative impacts of the ramp-up of Beihai operations of EUR 18 million.

Impact of the annual maintenance shutdowns is expected to be approximately EUR 30 million higher than in the first quarter of 2017. And it's important here to understand that the mills affected by the annual maintenance shutdown is Ostroleka in Packaging Solutions; 2 Mills in Biomaterials, Montes del Plata and Sunila; and then we have the Oulu Mill for paper.

Before handing over to the Q&A, I just want to do a bit of a summary. We believe this is a promising start of 2017. The transformation project has started to deliver sales growth. And excluding paper, we're almost at 10% growth. This is a big step for us. As I demonstrated in an earlier slide, the underlying business show good progress, a strong promise for the future because with so many moving parts, it's important to understand the details. The strength in balance sheet that we have acquired and we have a healthy cash generation, and we are now really moving in from asset transformation to sales and innovation transformation.

With that, I hand over to Ulla.

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Ulla Paajanen-Sainio, Stora Enso Oyj - SVP of IR [6]

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Okay. Thank you, Karl. And here I want to remind you that we are going to arrange our Capital Markets Day in London, 8th of November 2017. So there will be further details distributed soon, but please make a reservation to your schedule already now.

And operator, please, we can now start the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will take our first question from Mikael Doepel from Handelsbanken.

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Mikael Doepel, Handelsbanken Capital Markets AB, Research Division - Analyst [2]

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First of all, I would like to ask on the CapEx or let's say growth investments. So just to be clear, first of all, on Ostroleka, is this project now totally scrapped or is it postponed?

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

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As we write in the report, we have stopped it and we have also taken the consequence that you have to do with accounting-wise by charging the feasibility study as an expense.

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Mikael Doepel, Handelsbanken Capital Markets AB, Research Division - Analyst [4]

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Okay. And in terms of the pulp mill in China, again, just to be clear there. The objective is to remove it from the investment list.

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

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It has been removed as we did in the previous and we even have, as we have announced, an MOU with the local authorities. Now it is how the deal and the return of land will be done.

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Mikael Doepel, Handelsbanken Capital Markets AB, Research Division - Analyst [6]

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Okay. And then to some extent relating to this, how do you arrive at your CapEx guidance for this year? Because you have maintenance CapEx of about EUR 250 million. And if we would assume that, that if you hit the lower end of the guidance of EUR 600 million, you have a gap of EUR 350 million. Could you give some more details on that?

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

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So the guidance we have is EUR 600 million to EUR 650 million. We are -- we started on the low level with CapEx of EUR 88 million, I think, in the first quarter (inaudible) and then biological assets of some EUR 20 million, if I remember right. But please, Seppo help me with this regard.

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Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO and Country Manager of Finland [8]

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So if you look at the EUR 600 million to EUR 650 million guidance, first of all, you have to remember it includes about EUR 100 million in total for the biological assets. That's a replanting of the plantations in Brazil, Uruguay and China. That leaves about EUR 550 million for the fixed assets. And out of that, like you said, about EUR 200 million, EUR 250 million is maintenance CapEx. That means that there is about EUR 300 million for development of growth projects. And then, where that money is going, we are filling the PE Coating plant for the Imatra mill and Beihai plus the coating capacity. We have announced the fluff project, fluff investment about EUR 18 million at Skutskär Mill in Sweden. We are working in Finland for the consolidation of corrugated packaging business, that's about EUR [19 million], Heinola Fluting Mill investment that I mentioned, MFC investment et cetera. So that would have sort of -- because small and medium-sized investments, where the money is. And of course, we haven't allocated all the money yet. So there might be some new small interesting opportunities popping up still.

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

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And then, don't forget the Skoghall chemical plant.

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Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO and Country Manager of Finland [10]

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Yes, exactly.

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Mikael Doepel, Handelsbanken Capital Markets AB, Research Division - Analyst [11]

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Okay. And then just a final question on Beihai. You're guiding for a net operating loss of EUR 18 million in the second quarter. And there you have a depreciation of EUR 10 million, so that's an EBITDA of only minus EUR 8 million. And still, you guide for reaching EBITDA breakeven in Q1 2018. Is there some reason to assume that you wouldn't make step-wise progress now towards that target? Are there some costs coming up in, let's say, Q3 or Q4 that we should be aware of? Because I think if you continue on this path, you should reach that breakeven much faster.

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [12]

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We are a bit conservative in the guidance here because we just had the accident with the turbine that we don't really know. And we got a bit worried about that and we have still investigation about it. We have managed to get the pulp mill up and running and we are going to do whatever we can. But that's -- we need to see and understand a bit more because it just happened a few weeks ago and this is a complicated matter.

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Operator [13]

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And we'll take our next question from Mikko Ervasti from DNB Markets.

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Mikko Ervasti, DNB Markets, Research Division - Analyst [14]

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So my question is also around the boards. So on some public sources, we've read that they -- in Imatra there had been some stoppages now in early Q2. Is that true? And is that in your maintenance guidance because you earmark your -- this maintenance costs and then that once you mention as the annual maintenances. So do you have some of these investment-related stoppages or other stoppages that could affect the Q2 results?

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [15]

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Imatra is in Q3. We have not had any strange things at Imatra. I actually been head of Consumer board as a Division Manager so I don't know who is spreading these rumors. Imatra has been running really well.

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Mikko Ervasti, DNB Markets, Research Division - Analyst [16]

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Okay. It was a recent article, 6th of April, but we can get back to that. Then on the kraftliner side, can you please comment what has been the impact from competitor supply issues and how do you expect that to impact the operating rates and prices?

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [17]

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Kraftliner has been running well. The demand is slightly stronger and we also have seen prices quarter-on-quarter to become slightly higher. So kraftliner is running well.

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Mikko Ervasti, DNB Markets, Research Division - Analyst [18]

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Okay. Then -- and finally on the Ostroleka noninvestment. So we knew about this new capacity around -- for the first communication of the feasibility study sort of said that the new capacity -- we knew at that time that the new capacity is coming from competitors as well. So were you hoping that some of that capacity would not come? And what has happened geopolitically and will this affect your current operations there, please?

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [19]

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Geopolitically, I would like to point out to talk about global geopolitical situation. And right now, that's part of it but it's a big study that we've done, and we don't take lightly on investing EUR 400 plus million. So we've done everything from recycled paper, new capacity, the geopolitical situation, which have a tendency of not favoring free trade any longer in a certain way. And based on all the inputs put together, we decided not to go ahead with the mill, and consequently, we expensed the EUR 4 million. I don't take EUR 4 million in the income statement as a light decision, but we have done that now.

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Operator [20]

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We'll take our next question from Robin Santavirta from Carnegie.

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Robin Santavirta, Carnegie Investment Bank AB, Research Division - Research Analyst [21]

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I was wondering about the guidance, the EBIT guidance for Q2. Now you report an operational EBIT of EUR 215 million but if I do the math right, if you were to deduct the extra cost of Enocell and the asset impairment, the feasibility study and also like the power turbine accident, you end up at sort of a clean EBIT of EUR 240 million. And I understand you have EUR 30 million more maintenance now going into Q2, but still I guess pulp prices are going up and you're probably enjoying those with a bit of a lag. You have less cost in Beihai, clearly less cost, ramp-up cost in Beihai, less cost in Varkaus. So where is sort of the negative delta going from Q1 to 2Q? I'll say...

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [22]

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First of all, I think the maintenance, yes. But the maintenance of that EUR 30 million, I would say, roughly 50% is coming into the pulp. So the benefits because of the annual shutdowns will come later. Then I said a little bit -- we have been a little bit worried about the effects of China even though we have estimated it to be EUR 18 million, but we're still in early phase because of the turbine.

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Robin Santavirta, Carnegie Investment Bank AB, Research Division - Research Analyst [23]

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Right. So perhaps the guidance include some sort of uncertainty related to the turbine problem in Enocell Mill?

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [24]

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Yes, it does.

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Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO and Country Manager of Finland [25]

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And that is also why we give a range in the guidance.

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [26]

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That's why we have the range.

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Robin Santavirta, Carnegie Investment Bank AB, Research Division - Research Analyst [27]

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I understand that. Still...

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [28]

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I'm sorry, but when you get to turbine problem in new mill that has been running flawlessly, you get a bit worried and we're working on it. And we don't have all the answers. Unfortunately, I have to be a little bit vague about it, but we've been a bit conservative here.

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Robin Santavirta, Carnegie Investment Bank AB, Research Division - Research Analyst [29]

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Right. Then could you comment about -- I mean, demand appears to be picking up quite well across the board. What is driving that? What markets are we talking about? And is it sort of inventory situation or is it the macroeconomics are improving?

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [30]

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So first of all, we are in a very strange situation today. You have a geopolitical that has stabilized at least the last weeks but have been a little bit up and down, right? We are having elections in a number of important European countries and they are going in a certain way right now. We have a -- maybe change about the view on free trade coming up. Yesterday, I think it was an issue regarding, "Will NAFTA stay?" But the underlying demand in Europe, we can say, is picking up. Because if I will look upon it, so Consumer Board globally is slightly stronger. It's slightly stronger in kraftliner, in RCP containerboard, in corrugated board, it's likely stronger. And Wood Products is kind of stable on a high level, and if you look upon Europe, softwood is stable on the pulp side, hardwood is stable. Fluff is actually growing, and in China, you see stronger in every pulp grade. And in paper make, you actually say that we looked. So there is a bit of a pickup. And I think you can see that across many indices today that has been reporting recently that is surprisingly better than what you'd have expected when you just read the newspaper about the geopolitical situation. It was a lengthy answer sorry about that.

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Operator [31]

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(Operator Instructions) And we'll take our next question from Justin Jordan from Jefferies.

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Justin Jordan, Jefferies LLC, Research Division - Equity Analyst [32]

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I've just got -- sorry to be a burden (inaudible) but just on the maintenance shuts. I appreciate you previously flagged off in the Q4 results all of the shuts that you're calling out as it were in Q2. I just wanted to check, within the EUR 30 million that you are flagging, there's no additional cost for 2017 overall. This is the prior internal management's estimation, shall we say a quarter ago. So what I'm saying is for 2017 overall, are you now expecting the total maintenance impact to be higher than you did 3 months ago?

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Seppo Parvi, Stora Enso Oyj - CFO, Deputy CEO and Country Manager of Finland [33]

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This is Seppo. I'm taking that. There is no change into plans and cost because as such for the maintenance, and the phasing of the maintenance for this year is what we expected earlier already in the beginning of the year. It also reflects very much the normal cycles we have with the maintenance in the previous years.

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Justin Jordan, Jefferies LLC, Research Division - Equity Analyst [34]

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Right, okay. And just switching divisions then just to the Consumer Board division, you talk about obviously a 87,000 tonnes of production in Beihai in Q1. I'm just trying to look at your total board production in Q1 '17 versus Q1 '16. It's up 86,000 tonnes, so it would imply that everything else is actually negative. Is that actually true?

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

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So the 87,000 tonnes is totally produced. And probably in some areas, we are down a bit but we are up in Varkaus. So maybe I should take that question with me and ask Ulla to come back to you all about that.

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

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But in generally, you have to remember that especially in Consumer Boards that we have been fully loaded already for some time and that's why it's important that we ramp-up Beihai, which is then generating growth not only in China but as we are able to shift volume in Europe that gives us an opportunity to grow in Europe and in other markets in addition to China and Asia.

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Justin Jordan, Jefferies LLC, Research Division - Equity Analyst [37]

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Right. So you will be redirecting some volumes that would've gone to China back into Europe as it were, but essentially, you're basically flagging to it , you're at maximum production as within your European footprint?

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [38]

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So we have been full in Consumer Board Mills for at least, especially Imatra and Skoghall, for at least 4 years. We have been full at Ingerois and Fors. We have actually ramping up Varkaus and we've been full at Heinola for at least 2 years and we've been full at Ostroleka for at least 2 years.

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Operator [39]

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There are no further questions. I'd like to hand back to the speaker for any additional or closing remarks.

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Ulla Paajanen-Sainio, Stora Enso Oyj - SVP of IR [40]

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Okay. Thank you. Thank you, everyone, for the very active participation. And we have still our AGM today. So we will be speaking to that today, but before that I will still hand it over for Karl for the final words.

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Karl-Henrik Sundström, Stora Enso Oyj - CEO [41]

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First of all, thank you for participating. I know it's a busy day for all of you and it's a lot of reports happening this week and especially this day. But I would like just to keep mentioning for you, we have growth now. The strategies are paying off. If you look on the underlying results, it shows very good progress and a strong promise for the future. We have had an incident in Beihai, which took us a little bit by surprise at the very end of the month of March and that we have discussed, but we are going forward and I look very positive to the future. Thank you very much.

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

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Thank you.

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Ulla Paajanen-Sainio, Stora Enso Oyj - SVP of IR [43]

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Thank you.

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Operator [44]

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That will conclude today's conference. Thank you for your participation. Ladies and gentlemen, you may now disconnect.