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Note 22 Other provisions

Accounting principles

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Environmental provisions for site reinstatement are made when a project starts production with the capitalised cost of the provision being depreciated over the useful life of the asset. Provisions are discounted back to their current net present value if the effect of the time value of money is material.

Environmental obligations

Environmental expenditures resulting from the remediation of an existing condition caused by past operations, and which do not contribute to current or future revenues, are expensed as incurred. Environmental liabilities are recorded when it is probable, based on current interpretations of environmental laws and regulations, that a present obligation has arisen and the amount of such liability can be reliably estimated.

Restructuring obligations

A restructuring provision is recognised in the period in which the Group becomes legally or constructively committed to the plan. The relevant costs are those that are incremental to, or incurred as a direct result of, the exit plan, or are the result of a continuing contractual obligation with no ongoing economic benefit, or represent a penalty incurred to cancel the obligation. 

Other obligations

Other obligatory provisions are recognised regarding different legal or constructive obligations as guarantees to customers, ongoing lawsuits, claims or similar.


 

Other provisions
EUR million Environmental Restructuring Other Obligatory Total Provisions
Carrying Value at 1 January 2016 91 55 14 160
Translation difference -2 - 4 2
Company disposed -7 -6 -7 -20
Charge in Income Statement
New provisions 11 13 1 25
Increase in existing provisions 17 1 3 21
Reversal of existing provisions -1 -3 -3 -7
Payments -9 -36 -2 -47
Carrying Value at 31 December 2016 100 24 10 134
Translation difference -2 -3 - -5
Charge in Income Statement
New provisions 8 17 - 25
Increase in existing provisions 14 1 3 18
Reversal of existing provisions -1 -2 - -3
Payments -11 -20 -4 -35
At 31 December 2017 108 17 9 134
Allocation between Current and Non-current Liabilities
Current liabilities: Payable within 12 months 8 13 2 23
Non-current liabilities: Payable after 12 months 100 4 7 111
Total at 31 December 2017 108 17 9 134

 

Environmental obligation

Provisions for environmental remediation amounted to EUR 108 million at 31 December 2017, which was a net increase of EUR 8 million compared with 31 December 2016, mainly due to increase in dismantling provision of EUR 7 million related to a closed operation at Oulu Mill and needed coverage of an un-capped landfill in Imatra Mill of EUR 4 million. Other provision increases are related to closed operation sites and old landfill areas.

Details of the principal provisions are: 

  • Following an agreement between Stora Enso and the City of Falun, the Group is obliged to purify runoff from the Kopparberg mine before releasing the water into the environment. The provision at year end amounted to EUR 43 (EUR 47) million.
  • The total environmental provision in Finland amounted to EUR 22 (EUR 11) million. The increase of EUR 11 million compared with 31 December 2016 is mainly caused by above mentioned Oulu and Imatra provisions. The largest provisions relate to the dismantling provision of EUR 12 (EUR 5) for a closed operation at Oulu Mill and to the cleaning of aerated water basin at closed Kemijärvi Pulp Mill of EUR 5 (EUR 6) million. Other environmental provisions include EUR 1 (EUR 1) million related to the site of the former Summa Mill.
  • Skoghall Mill site contains ground pollutants that must be removed. The provision for this at year end amounted to EUR 15 (EUR 16) million.
  • Hylte Mill and the Hylte Commune have a contract on the restoration and leakage water handling. This provision amounted to EUR 7 (EUR 5) million.
  • Stora Enso Pulp AB has been removing mercury from the harbour basin at Skutskär for a number of years in co-operation with local authorities. In addition, the Company is obliged to upgrade an old landfill previously used by the mill to comply with revised environmental regulations. At year end Stora Enso Pulp AB had environmental provisions of EUR 6 (EUR 6) million.
  • Baienfurt Mill real estate in Germany was divested during 2010 and there is a remaining environmental obligation related to landfills that were not disposed. This environmental provision amounted to EUR 5 (EUR 6) million.

Restructuring provisions

The Group has undergone major restructuring in recent years, from divestments to mill closures and administrative cost-saving programmes. New restructuring provisions by divisions are: Paper EUR 12 million, Consumer Board EUR 3 million, Wood Products EUR 1 million and Biomaterials EUR 1 million.

The liability at the end of 2017 for restructuring provisions amounted to EUR 17 (EUR 24) million and covered the costs of closing down operations, demolition, clearance and redundancy costs for reducing staff numbers.

The total cash payments made during the year in respect of established restructuring provisions amounted to EUR 20 (EUR 36) million.

In February 2017 Stora Enso announced a plan to permanently shut down paper machine 8 at Kvarnsveden Mill in Sweden with an annual capacity of 100 000 tonnes of uncoated magazine paper due to structural weakening of magazine paper demand in Europe. The increase in provision amounted to EUR 11 million.

In June 2016 Stora Enso announced the divestment of the Kabel Coated Mechanical Paper Mill in Germany to a German based investor group. The new provision amounted to EUR 2 million.

In September 2016 Packaging Solutions announced plans to consolidate manufacturing of corrugated packaging in Finland to improve profitability and competitiveness and to close Heinola Corrugated Mill permanently. The provision amounted to EUR 3 million.

Details of intangible asset and property, plant and equipment impairments relating to restructurings can be found in Note 10 Depreciation, amortisation and impairment charges. 

Other obligatory provisions

Other obligatory provisions amounted to EUR 9 million at 31 December 2017, which is a decrease of EUR 1 million compared with 31 December 2016.

 

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