Stora Enso aims to start recycling used paper cups on a large scale at its Langerbrugge Mill in Belgium. Based on production trials, Stora Enso possesses the technical feasibility to recycle paper cups for use in other paper applications. Stora Enso is now looking into partnerships for the collection and sorting of used paper cups to ensure that this high-quality fibre material is captured and given a second life. Recycled fibre is an important raw material for Stora Enso as it is aligned with the company’s commitment towards a renewable and circular business. The paper board for cups is made of high-quality, renewable fibres, which can have several lives due to recycling. Recycling a paper cup can reduce its life cycle carbon footprint by half. Stora Enso sees this as an opportunity for driving more effective paper cup recycling by developing circular models with partners across the value chain. “With efficient recycling processes, food service companies using wood fibre-based cups can improve their environmental footprint. Recycling must be made easy for consumers, that is why we want to invite partners and customers to jointly develop business models for collecting paper cups,” says Annica Bresky, Executive Vice President of the Stora Enso Consumer Board division. Click Read More below for additional information.
Third Quarter Highlights
•Net sales of $231.8 million decreased 10 percent compared with $256.2 million in the prior year. On a constant currency basis and excluding the impact of the December 2018 sale of the Brattleboro mill, net sales were down 6 percent.
•GAAP earnings per diluted common share (E.P.S.) of $0.84 compared with earnings of $0.75 per share in 2018.
•On an adjusted basis, 2019 quarterly E.P.S. of $0.95 increased from $0.76 in the prior year period. Adjusting items in 2019 consisted primarily of accelerated depreciation and other costs related to the idling of a fine paper machine. Adjusted E.P.S. is a non-GAAP measure used to enhance understanding and comparability of year-on-year results. Details on adjusting items and a reconciliation to comparable GAAP measures are included later in this release.
•Cash generated from operations of $33.4 million increased from $23.9 million in the third quarter of 2018. Cash flows in 2019 were used to reduce debt in the quarter by $19.1 million.
•Quarterly cash dividends paid of $0.45 per share increased 10 percent from $0.41 per share in the prior year.
“We continued to improve operating margins and delivered increased profits in the quarter through our actions to manage costs and pricing as input costs began to moderate from year-ago levels. Combined, these items more than offset impacts from volume challenges that reflected weaker market conditions,” said John O’Donnell, Chief Executive Officer. “Our teams remain focused on optimizing cash flows, ensuring our solid financial position and strong balance sheet. This strategy provides Neenah with both the strength to weather a less certain global economic environment, and the ability to act prudently on value-adding investment opportunities.”
Quarterly Consolidated Results
Consolidated net sales of $231.8 million in the third quarter of 2019 decreased 10 percent compared with $256.2 million in the third quarter of 2018. The decline in revenues resulted from lower volumes, reflecting weaker global market conditions in both segments, the divestiture of the Brattleboro mill in December 2018, and unfavorable currency translation effects. These items were only partly offset by increased selling prices in both segments. On a constant currency basis and excluding the sale of Brattleboro, sales declined 6 percent compared with the prior year.
Selling, general and administrative (SG&A) expense of $23.1 million in the third quarter of 2019 decreased from $23.6 million in the prior year.
Operating income of $19.0 million in the third quarter of 2019 increased $2.5 million compared to $16.5 million in 2018. Excluding pre-tax adjusting items of $2.5 million in 2019 and $0.7 million for 2018, adjusted operating income of $21.5 million in 2019 increased $4.3 million from $17.2 million in 2018. The increase was mainly due to higher selling prices, lower input costs, a more profitable Technical Products mix and lower SG&A, partly offset by lower sales and production volumes. Both years included higher maintenance and other costs related to annual planned maintenance downs.
Net interest expense of $2.8 million in the third quarter of 2019 declined compared with $3.2 million in the third quarter of 2018 as a result of reduced debt and lower interest rates in 2019.
The effective income tax rate was 11 percent in the third quarter of 2019 and 3 percent in the third quarter of 2018. The tax rate in 2019 included a $1.2 million reversal of U.S. federal and state reserves for uncertain tax positions following expiration of statutes of limitation for audit. The tax rate in 2018 benefited from a higher amount of credits to tax expense for pension contributions and excess tax benefits on stock compensation, and the impact of these and other benefits being magnified due to lower pre-tax book income in 2018.
Cash Flow and Balance Sheet Items
Cash provided from operations in the third quarter of 2019 was $33.4 million and increased significantly compared with $23.9 million in the third quarter of 2018. Higher cash flows in 2019 resulted primarily from improvements in working capital, lower contributions to post-employment retirement plans and increased earnings.
Capital spending of $4.9 million in the third quarter of 2019 decreased from $12.3 million in the prior year, which included spending on a large safety and environmental filtration project in Germany that was completed during the plant shutdown in the fourth quarter.
Debt as of September 30, 2019 was $204.6 million and decreased $19.1 million from $223.7 million as of June 30, 2019. Cash and cash equivalents as of September 30, 2019 were $7.4 million and compared to $8.1 million as of June 30, 2019.