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Stora Enso’s items affecting comparability in Q4 2016 and annual fair valuation changes in biological assets

Thursday 19. January 2017 - Items affecting comparability (IAC) in Q4 2016 had a EUR 34 million negative net impact on operating profit.

Additionally, the annual changes in fair valuations of biological assets in Guangxi, Tornator and Bergvik Skog had a positive net impact of EUR 30 million.

Items affecting comparability

Stora Enso will record IAC with a negative net impact of approximately EUR 34 million on operating profit. The IAC will increase taxes by approximately EUR 11 million in the fourth quarter 2016.

The IACs are:

a negative IAC of EUR 78 million due to fixed asset impairments in the Paper division’s Newsprint Europe unit. Future price assumptions have been lowered and consequently profitability is negatively impacted.

an impairment of EUR 12 million in the Packaging Solutions division’s Corrugated China unit. EUR 11 million of that amount is due to goodwill impairment and EUR 1 million is fixed asset impairment. The main reason for the impairment is the challenging market situation and a change in the customer base.

a negative IAC of EUR 77 million in the Consumer Board division, due to a reduction of the biological asset value below the cost base value in Guangxi, China, mainly due to reduced inventory as a result of a very high portion of over mature trees.

a negative IAC of EUR 22 million due to increases in environmental provisions at several sites in the Paper division and the segment Other.

a positive IAC of EUR 155 million in the Paper division related to the previously announced divestment of the Suzhou Mill site in China.
The impairment charges taken in the fourth quarter 2016 will reduce the annual depreciation in the Paper division by EUR 11 million, starting from Q4 2016. Depreciation in Paper division was EUR 3 million lower in Q4 2016 compared to Q3 2016.The reduction of the biological cost base in Consumer Board division will reduce annual growth costs by approximately EUR 23 million and it will have a positive effect on operational EBIT starting from Q1 2017.

Allocation of the IAC between segments

EUR million
Consumer Board -77
Packaging Solutions -12
Biomaterials –
Wood Products –
Paper 69
Other -14
Operating Profit -34
Income tax -11
Net Profit for the Period -45
Annual fair valuation changes in biological assets

At the end of 2016, the closing fair value of the group’s biological assets in Guangxi, China was EUR 174 million, compared to EUR 356 million at the end of 2015. The decrease is mainly due to reduced inventory as a result of a very high portion of over mature trees. In addition to the cost base decrease of EUR 77 million presented as an IAC above, a fair value decrease of EUR 105 million is reported as a Fair Valuation item and is not included in the group’s operational EBIT.

Additionally, as announced earlier, Stora Enso’s Nordic forest associates, the equity accounted investments Bergvik Skog AB in Sweden and Tornator Oyj in Finland, increased the fair value of their biological assets. Stora Enso’s share of the increases are SEK 490 million (EUR 52 million) in Bergvik Skog and EUR 83 million in Tornator.

The net increase in fair values of the above mentioned items will be recorded in the group’s operating profit. The increases do not impact Stora Enso’s operational EBIT.

Stora Enso’s Q4 and full year 2016 results will be published on 3 February 2017.

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