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Note 13 Equity accounted investments

Accounting principles

Consolidation principles

Associated companies over which Stora Enso exercises significant influence are accounted for using the equity method, which involves recognising the Group’s share of the equity accounted investment profit or loss for the year in the Consolidated income statement. The Group’s interest in an associated company is carried in the Consolidated statement of financial position at an amount that reflects its share of the net assets of the associate.

The Group’s share of results in equity accounted investments is reported in operating profit to reflect the operational nature of these investments, especially those in wood supply. There is no material goodwill in the Statements of financial position for equity accounted investments.

 


 

Principal equity accounted investments
As at 31 December
Proportion of ownership interest/voting rights held % EUR million
Company Reportable segment Domicile and principal place of operations 2017 2016 2017 2016
Bergvik Skog AB: forest Other Sweden 49.28/36.701 49.00/36.701 1 287 1 265
Tornator Oyj: forest Other Finland 41.00 41.00 267 246
Bulleh Shah Packaging (Private) Limited: packaging goods Consumer Board Pakistan 0.002 35.00 - 34
Arauco Florestal Arapoti S.A.: plantation Other3 Brazil 20.00 20.00 22 26
1 576 1 571
Others 24 23
Carrying Value at 31 December 1 600 1 594
1 The group's shareholding in Bergvik Skog AB is 49.28%, however, the voting rights are limited to 36.7%.
2 Stora Enso divested its 35% shareholding in Bulleh Shah Packaging (Private) Limited: packaging goods in third quarter 2017
3 Arauco Florestal Arapoti S.A.: plantation moved from Reportable segment Paper to Other in the beginning of third quarter 2017
Group share of equity accounted investment income statements
Year Ended 31 December
EUR million 2017 2016
Sales 279 297
Net operating expenses -210 -200
IAS 41 valuation 33 136
Operating Profit 102 233
Net financial items -28 -53
Net Profit before Tax 74 180
Income tax -8 -24
Net Profit for the Year 66 156

All of the above companies are accounted for using the equity method in these Consolidated financial statements.

In September 2017, Stora Enso divested its 35% shareholding in the Pakistani packaging goods company Bulleh Shah Packaging (private) Ltd. for EUR 6 million. Related to the transaction Stora Enso recorded a loss of EUR 20 million in Consumer Board division for the third quarter results in 2017.

The average number of personnel in the equity accounted investments was 1 698 in 2017, compared with 2 797 in 2016.

A summary of the financial information in respect of the Group’s material associates, Bergvik Skog AB and Tornator Oyj, is set out below. The Group’s share of these associated companies is reported under segment Other and covers the majority of the Group’s total share of results of equity accounted investments. The summarised financial information below represents amounts shown in the associate’s financial statements prepared in accordance with IFRS.

Bergvik Skog AB
EUR million 2017 2016
Current assets 57 43
Non-current assets 4 969 5 074
Current liabilities 403 362
Non-current liabilities 991 1 111
Tax liabilities 1 034 1 072
Sales 243 234
Net profit for the year 111 127
Other comprehensive income 8 -6
Total comprehensive income 119 121
Dividends received from the associate during the financial year 7 44
Net assets of the associate 2 598 2 572
Proportion of the Group's ownership interest in Bergvik Skog AB 49.28% 49.00%
Goodwill 7 5
Carrying amount of the Group's interest in Bergvik Skog AB 1 287 1 265

In 2004, 56.7% of Stora Enso’s Swedish forest holding company Bergvik Skog was divested to institutional investors leaving the Group with a minority shareholding of 43.26%. In May 2014 the Group spent SEK 891 million (EUR 97 million) to increase its shareholding in Bergvik Skog to 49%. As part of the acquisition the group recorded goodwill of EUR 5 million. In September 2017 Stora Enso AB purchased an additional 0.28% of the shareholding in Bergvik Skog AB, which also made EUR 2 million addition to goodwill which amounted to EUR 7 million.

In November 2017, Stora Enso announced that shareholders representing 98% of the owners in Bergvik Skog AB, a Swedish forest holding company, have agreed to initiate discussions, based on a non-binding letter of intent, aiming at structural changes in Bergvik Skog Group. Bergvik Skog’s Swedish forest assets are owned by its subsidiaries Bergvik Väst AB and Bergvik Öst AB, representing approximately 83% and 17% respectively. As a result of the planned restructuring, Stora Enso would transform its current ownership of 49.28% in Bergvik Skog, to a direct holding of approximately 70% of the value of the forest assets in Bergvik Väst. Bergvik Skog is currently reported as equity accounted investment. As a result of the restructuring, Bergvik Väst would be consolidated as a subsidiary.

Stora Enso’s shareholding in the company was valued at EUR 1 287 (EUR 1 265) million at the year-end in 2017. In 2017, the Group’s share of Bergvik Skog’s net profit was EUR 55 (EUR 62) million, including a forest valuation gain of EUR 26 (gain EUR 52) million.

Tornator Oyj
EUR million 2017 2016
Current assets 32 26
Non-current assets 1 478 1 355
Current liabilities 121 69
Non-current liabilities 586 579
Tax liabilities 151 132
Sales 102 97
Net profit for the year 78 173
Other comprehensive income -1 5
Total comprehensive income 77 178
Dividends received from the associate during the financial year 11 12
Net assets of the associate 652 601
Proportion of the Group's ownership interest in Tornator Oyj 41.00% 41.00%
Carrying amount of the Group's interest in Tornator Oyj 267 246

Stora Enso’s Finnish forest holdings were divested into an equity accounted investment, Tornator, in 2002. The Group’s current 41% ownership is valued at EUR 267 (EUR 246) million at the year-end for 2017. In 2017, the Group’s share of Tornator’s net profit was EUR 32 (EUR 71) million, including a forest valuation gain of EUR 8 (gain EUR 83) million.

Aggregate information of equity accounted investments that are not individually material
As at 31 December
EUR million 2017 2016
PPE1, goodwill and other intangible assets 28 74
Biological assets 18 22
Operative receivables:
Non-current - -
Current 16 24
Inventories 1 17
Cash 7 9
Total Assets 70 146
Operative Liabilities:
Non-current 4 5
Current 12 22
Debt:
Non-current 1 18
Current - 10
Tax liabilities 7 8
Total Liabilities 24 63
Net Equity in the Group Statement of Financial Position 46 83
Represented by
Capital and Reserves 45 83
OCI 1 -
Equity Accounting Value 46 83
Equity Accounting Value for Bergvik Skog AB 1 287 1 265
Equity Accounting Value for Tornator Oyj 267 246
Total Equity Accounting Value 1 600 1 594
1 PPE = Property, Plant and Equipment
Equity accounted investment company balances
As at 31 December
EUR million 2017 2016
Receivables from Equity Accounted Investments
Non-current loan receivables 3 5
Trade receivables 3 3
Current loan receivables - -
Liabilities due to Equity Accounted Investments
Trade payables 40 40
Equity accounted investment transactions
Year Ended 31 December
EUR million 2017 2016
Sales to equity accounted investments 53 53
Purchases from equity accounted investments 215 202

The Group engages in transactions with equity accounted investments such as sales and purchases of wood. All agreements are negotiated at arm’s length and are conducted on terms that the Group considers customary in the industry and generally no less favourable than would be available from independent third parties.

Total loans including interest receivable to equity accounted investments at the year-end 2017 amounted to EUR 3 (EUR 5) million.

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