Hello, everyone, and a warm welcome to Stora Enso's Q4 and full year 2018 financial results presentation. A special welcome also to those of you who are joining us via the webcast. My name is Ulrika Lilja. I am head of communications. Today's presentation will, as always, be given by our CEO, Karl-Henrik Sundström, and our CFO, Seppo Parvi. After the presentation, we will open up for a Q&A session. For those of you who are joining us via the web, you can ask your questions online. With that, I hand over to you, Karl-Henrik.
Thank you, Ulrika, and good morning, or maybe good afternoon, depending on where you are in the world. I will go through the fourth quarter of 2018, plus, which is also the full year of 2018. I will start with the headlines. The headlines describes very well what have happened. We have had eight consecutive quarters of growth. This quarter we grow over 6% if you exclude the divested Puumerkki. However, the EBIT decreased. The reason why the EBIT decreased was basically two main reasons. We had a bit of a softer market coming in November and December. Then we had six mills with operational problems causing EUR 40 million in EBIT loss. All in all, sales, or volume declined 11, 40 from the six mills.
Despite that, we are also coming in with an EBIT above 10% for the sixth consecutive quarter. EPS increased 75%. Cash flow was a bit on the light side, partly because of built up of working capital. We continue to strengthen the balance sheet. The operating return on capital employed came down slightly below the 13%. The reason why what happens in Q4 is these two events. Volumes, quite a bit softer market towards the November, December. Then the six mills. The six mills are two mills in Biomaterials, Montes del Plata, as well as Skutskär, for various reasons, causing about EUR 20 million of the EUR 40 million. We had Nymölla, as you were aware of, we warned because of the water level, plus that we had a problem with the Veitsiluoto pulp mill. That was together EUR 16 million.
We had EUR 4 million from Fors and Imatra. All these mills are up and running now. These are things that happens in a process industry. I wish it wouldn't have happened. It happened. Now we need to look forward. The other part that is a very important thing is that we, for the fourth consecutive year, we are increasing the dividends, or proposing to increase the dividends. The board will propose to the AGM a EUR 0.50 per share, which is a proposed increase of 22%. We have been increasing double digits increases of dividends for four consecutive years. One of the parts that I feel very, very proud about is that we managed to take the return on capital employed for the full year well above the targeted level of 13%. Last time we were at this level were at year 2000.
It's taken 18 years to get to where we are today, you can see the development in the last years in the chart here. We today also announced a Profit Protection Program. The reason for that is that we have seen costs going up. We have seen wood costs going up, chemical going up, cost for chemicals, and logistic costs. Only wood cost we estimate will be around EUR 50 million higher in Q1 2019 versus Q1 2018. On top of that, we have a macro development in the world that is not very favorable at the moment, which might affect trade. We have decided to make a cost improvement program of EUR 120 million to be conducted during 2019, and we will get the savings during 2019 and 2020. We have also decided to take down our CapEx by EUR 50 million.
In the announcement today, we included proposed reductions in Imatra for PM6, also at Imatra, as well as in Imavere in Estonia, and Ala in Sweden. This is regretful, but we need to be proactive to make sure that we keep our competitiveness in a more uncertain world with increased costs. If you look upon some of the major events during the fourth quarter, it was a number of in-investments announced. We have done the biodegradable straw. We have decided to co-invest with IKEA and H&M in TreeToTextile. We launched the first recyclable RFID tag called ECO. We concluded the environmental impact assessment of Oulu, and we divested June and Balcas in Sweden. As a new important step, we also signed a binding agreement to, for the restructuring of Bergvik Skog.
We are talking here about a sizable plot of land that will be going out from Bergvik and into the balance sheet of Stora Enso. We're talking in total of 1.4 million hectares, and the impact will be around EUR 1 billion in the balance sheet of Stora Enso. We also benefited in the net income from sale of Latvia forest land of about EUR 47 million, and we also got additional value add through the revaluation of biological assets of EUR 49 million. The journey that we started in 2006 of converting Stora Enso or transforming Stora Enso from a basically paper-dominated company to a company more dominated by the four growth divisions continues. Today, we are presenting a good result for paper for the full year of 2018. However, it still is a more balanced part of our portfolio, being less than 20% of our profit at the moment.
With that, I would hand over to Seppo to do some presentations of the income statement, as well as the divisions.
Thank you, Kalle. First of all, top line, the sales for the quarter increased 5.8% year-on-year. Full year sales figure was 10.5 billion EUR. That is an increase of 4.4% year-on-year. Operational EBITDA margin was 15.3% and operational EBIT 271 million EUR, or 10.2%. Full year operational EBIT was 1,325 million EUR, and that is an increase of 32% compared to year before. Net profit for the period was 988 million EUR, and that is an increase of 61% compared to 2017. Earnings per share 1.28 EUR. Operational return on capital employed for the full year, 15.5% above the 13% target that we have for return on capital employed.
Moving to the divisions, I start with Consumer Board, where challenging market conditions continued, and we had there increased and achieved price increases. This is now actually second quarter in a row. We already started to increase prices during the Q3. Sales increased slightly to record high Q4, and that was 637 million EUR. That's thanks to higher local prices having 10 million EUR positive effect, but that was offset by lower volumes. Operational EBIT decreased 45 million EUR to 24 million EUR. That was negatively affected by significantly higher variable costs, especially when it comes to wood, pulp, and chemicals, like we already have mentioned earlier last year. Carton board production was lower. We had some operational issues and challenges at Imatra and Fors mills, and those had negative impact on profitability. Return on capital employed was 5% during the quarter.
Moving to Packaging Solutions, where we continue with record sales and profitability. Sales increased 5% to all-time high of 352 million EUR. There, improved prices and active sales mix management in European-based operations had positive effect on the result and sales line. Total container board deliveries were stable. Operational EBIT increased to record high for Q4, and that was for 59 million EUR. We have clearly higher sales prices and good mix management in the European-based operations, but that was offset by lower sales volumes in China. Also, higher raw material costs overall have some negative effect, as well as some spare part write-offs that were taken. Operational return on capital was at 25.7%, and that is significantly above the long-term target of 20%. This is driven by improved profitability in our Packaging Solutions business. Moving to Biomaterials division, where good market continues despite signs of price pressure.
Sales increased 14% to another all-time high of 415 million EUR, and that's thanks to higher sales prices, even though that volumes were slightly lower. Operational EBIT was at record high for Q4, at 91 million EUR. That's an increase of 30 million EUR. There, higher pulp prices were partly offset by higher variable costs, especially wood and energy costs. We had some production issues at Montes del Plata mill and Skutskär mills during the quarter. Operational return on capital at the strategic target level of 15% for the quarter. Our Lineo by Stora Enso was awarded for Innovative Product Award 2018 by Institution of Chemical Engineers, another proof point for the successful R&D work that we have been doing in Stora Enso during the past years. Moving to Wood Products division, where we had another record quarter. Sales excluding divested Puumerkki increased 3.5%.
That is thanks to improved sales prices in Classic Sawn. Operational EBIT was up 66% to record high Q4 of EUR 42 million. Clearly higher and better prices improved mix partly offset by higher fixed costs related to increase in operations. Operational return on capital continued at record level at 27.1%, also clearly above the strategic target of 20%. Our latest investment in CLT at the Gruvön sawmill is being completed at the moment, and we expect to start the commercial production during the quarter that has just started. Moving to our paper division, where we had solid quarter impacted by some operational challenges. Sales increased 5% to EUR 761 million. Clearly higher sales prices in all grades and better mix were partly offset by lower sales volumes. Operational EBIT was stable at EUR 45 million. That's significantly higher sales prices in all grades.
They were partly offset by higher variable costs, especially in wood pulp and chemicals. Like Kalle mentioned already, we had production reductions caused by water shortage at the Nymölla mill in Sweden, and we had some technical issues and problems at Veitsiluoto Pulp Mill. Those had EUR 16 million negative effect on the result. Also, we have to take some market curtailments at Oulu Mill due to softness of the coated wood-free market. Cash flow after investing activities to sales ratio was 2.5%. That was negatively impacted by temporary working capital challenges. Here it's good to remember that Q3 cash flow was very strong. That was 8.3% to net sales. The two quarters together were above 5%, but still behind the targeted 7% level.
To summarize our strategic targets, where we stand there, and we can still see some more potential, even though that most of the targets are on green. We still have three, four that are red or yellow. We still need to work on the fixed cost to sales ratio to bring it to targeted 20% level or below. We were at the full year figures at 23.6%. It's moving to right direction. A year ago, we were at 25.1, but we need to put focus there. Today announced Profit Protection Program is one way to address this also going forward. Of course, we also will need to work on the top-line growth. Operating return on capital for the quarter that we reported today was 12.4%, below the 13% level we target, not much, but still below, but full year as said already at 15.5%.
Look at the divisions and division targets, Consumer Board for the quarter at 5% and for full year at 11.9. Below the targeted level, mainly because of the reasons we have also mentioned earlier. We still need more time to increase prices to match the cost increases that we have faced during the past year. Packaging Solutions clearly above the targeted level at 27% for the full year, 25.7% for the quarter. Also Biomaterials for the quarter at 15%, exactly at the targeted level, and full year at 17.9%. Wood Products continues a strong performance, having reached now 27.1% level for the quarter and 28.1% for the full year result. That's clearly also above the 20% targeted level. Paper cash flow, like I already mentioned, 2.5% for the quarter and full year at 5.7%.
Slightly better than the year before, like I said, slightly also below the targeted 7% level still. Like we mentioned, I mentioned earlier now, we believe that it's a temporary hiccup in Q4, and we are confident that now during the year that has started, the cash flow in Paper division will be back on track. With that, I hand back to you, Kalle.
Thank you, Seppo, for your description of the full status of the company and the divisions. As of this year, we have decided to give out an outlook, which is our best view how the full year is going to look like. For 2019, we expect to be largely in line with 2018, providing that the current trading condition do not significantly change. Demand growth is expected to continue for Stora Enso's all other business except European paper, for which we estimated demand declined. We expect sales to be higher. We also see costs being higher, and that's the reason why we are launching the Profit Protection Program. Also to deal with the uncertainties in the macroeconomic environment. We have also chosen to change the guidance for the next quarter, not using adjective, but more give a numerical range.
We have also eliminated the sales guidance. Operational EBIT is expected to be in the range of EUR 260 million-EUR 350 million for the first quarter of 2019. What is important to remember is that first quarter of 2018 was maintenance free. We had no annual maintenance shutdowns. In this quarter, we will have two, Ostrołęka PM5 as well as Veracel. The impact of that is estimated to be about EUR 20 million compared to 2018 in the first quarter. Before heading into Q&As, I would like to conclude and summarize the fourth quarter of 2018 and also the full year. We have had eight consecutive quarters of sales growth, six consecutive quarters of double-digit EBIT margin. We grew EBIT by 32% in 2018, and we had an annual operating return on capital employed of 15.5%.
We have strengthened the balance sheet, the proposed dividend is an increase by 22%, sends a strong signal about how the board feels about the future of Stora Enso. We are also directly now combating with a Profit Protection Program costs and potential market weakness. With that, I would like to invite Ulrika and Seppo back for the Q&A session.
Thank you, Kalle, and thank you, Seppo. Again, for those of you who join us via the web, please post your questions online. Before I open up for the audience, I have two questions for you. Seppo, what happens now when CapEx will go down with EUR 50 million?
Well, what we need to do first is to revisit our original capital expenditure plan that we made for this year and set our priorities, make sure that where we invest, we get the best possible return on the money we spend. This is also a typical way to ensure continuous positive development of our cash flow.
Kalle, how will the Profit Protection Program impact the Oulu investment?
First of all, we are ready with the environmental impact assessment that was done in December. We are still not ready with the feasibility study, obviously we are looking into the impacts of that, and once, if we take a decision, it will be in this environment that we're doing right now.
Do we have any questions from the audience here in Helsinki? We will take one from the webcast, or actually three. They are coming from Tarmo Virki, and he is asking: "The Q4 EBIT was burdened by EUR 40 million cost from 6 mills. Is it safe to call them temporary? How much of such temporary but typical process industry costs do you expect to see in 2019? How much will wood costs increase in Q1 from a year ago?" If we start with, is it safe to call them temporary?
Yes, I think so. Everybody who works in the process industry are well aware of things happening, and having 6 of these incidents in 1 quarter is quite a lot. One was the water shortage in the lake supporting Nymölla. That's one of the biggest. That's very unusual. It's coming back to the dry summer in Sweden. The other one that was fairly big was the problem in Montes del Plata. It's a fairly new mill. I think it was inaugurated in September 2014, and there was some equipment there we needed to change out, and it took a longer time. The third one, which was quite big, was Skutskär. Skutskär we just converted into 100% fluff, and when they started up the first maintenance up after the conversion, they had problems coming up.
Usually you have some of them, but not 6 in a very short period. That I would call it temporary, and we all sorted it out, so they're up and running full now. The second question about the wood cost, I actually mentioned that in the call. We are estimating that the wood cost for the totality of Stora Enso will be around EUR 50 million higher in the first quarter of 2019 versus the same quarter in 2018.
You've actually responded to a question from Mikko Ervasti in SEB, I will just read it out to recognize his question. "How is it possible to experience significant operation issues at 6 mills at the same time? What drives this? Underinvestment, lower than design capacity production due to market conditions, or what?" This was what you were talking about. Oscar Söderman is asking, when are you going to decide on the proposed dividend?
That will be in the AGM, which is in March. It's not we who decides. The board propose to the AGM, and the AGM decides. This is the proposal from the board to the AGM, to the shareholders in basic.
The shareholders will decide.
No questions in Helsinki. No further questions from the webcast. We conclude this session, and we thank you for your attention. Thank you.
Thank you.
Thank you.