On 4 December 2019 Stora Enso announced the creation of a new divisional structure. As of 1 January 2020, the divisions are Packaging Materials, Packaging Solutions, Biomaterials, Wood Products, Forest, and Paper.
Stora Enso merged its containerboard business with the Consumer Board division, creating a new Packaging Materials division. The remaining business in Packaging Solutions, together with the recently created Formed Fibre unit, constitute a more focused Packaging Solutions division.
As announced on 18 September 2019, Stora Enso established a Forest division and started reporting it separately as of 1 January 2020. The new Forest division includes Stora Enso’s Swedish forest assets (including the recently acquired Bergvik Skog Väst AB) and a 41% share of Tornator with the majority of its forest assets located in Finland. The Forest division also includes wood supply operations in Finland, Sweden, Russia and the Baltic countries. Tree plantations in Latin America and China, linked to local pulp mills, continue to be reported as before under the Biomaterials and Packaging Materials divisions. After establishing the new Forest division, remaining segment ‘other’ reporting includes group functions, logistics and other operations.
Growth in the value of forest represents an important component of the annual operative return for long term rotation forest assets, where typical annual wood sales and related costs do not reflect the total profitability of the forest assets. The long term value development of standing forests is an important driver for profitability of the forestry business.
Under previous presentation principles, all changes in fair valuation of biological assets were excluded from Operational EBIT, with the exception of depletion of capitalised silviculture costs for tree plantations in Latin America and China. From 1 January 2020 onwards, the changes in the fair valuation of biological assets will be categorised in two components: non-operational fair value changes, and operational fair value changes.
Non-operational fair value changes of biological assets reflect the changes made to valuation assumptions and parameters. Operational fair value changes of biological assets contain all other fair value changes, mainly due to inflation and differences in actual harvesting levels compared to the harvesting plan. Operational fair value changes will be reported in Operational EBITDA, whereas non-operational fair value changes will be excluded from Operational EBITDA.
In conjunction with the new segment reporting, Stora Enso will reclassify the silviculture costs of the new Forest division from Operational EBITDA to Operational EBIT. Silviculture costs mainly relate to replanting and the tending and fertilisation of trees. As per previous presentation principles, the depletion of capitalised silviculture costs in tree plantations in Latin America and China are already included in Operational EBIT, so this change aligns the presentation of Nordic forests with plantations in Latin America and China.
All of the above mentioned changes are related to the non IFRS alternative performance measures. Operating profit (IFRS) remains unchanged, with both operational and non-operational fair valuation changes to be included on the line change in the net value of biological assets.
The cash outflows regarding the silviculture costs of the group’s Swedish forests will be presented in the cash flow statement as part of the investing activities instead of as operating cash flows under the previous presentation principles.
Further information can be found on www.storaenso.com