Hello, everyone, and a warm welcome to Stora Enso's Q3 results presentation. Welcome also to those of you who are joining us via the web. My name is Ulrika Lilja. I am head of communications, and I am standing here with our CEO, Karl-Henrik Sundström, and our CFO, Seppo Parvi. After their presentation, we will open up for Q&As. For those of you who are joining via the web, please post your questions online. With that, I hand over to you, Kalle.
Thank you very much, Ulrika, and it is a pleasure to announce another quarter of profitable growth. I will go through some of the higher details, and then we will go division by division and some of the targets that we have published before by Seppo, and then we end up with the Q&A session in the end. Another quarter of profitable growth, and sales continue to grow. If you exclude the divested Puumerkki, we grew with almost 5% in this quarter, and we had an impressive improvement of operating EBIT by 23%. That is mainly driven of favorable prices, but also very active price management. Cash flow continue to be strong, and we continue to deliver the business. We are now down to a net debt to EBITDA at 1.1 versus 1.6 a year ago.
For the 5th consecutive quarter, we are actually delivering well above our strategic target of 13% in return on capital employed, actually almost 17 at 16.7. Going into a bit of a snapshot of what happened in the quarter. We have three record results in three of our divisions. We have a record in packaging solutions. We have a record on operating EBIT in biomaterials. We have an all-time high in wood products regarding its 3rd quarter result, and we are having 125% improvement in paper division. In Consumer Board, where more than 75% of the contracts are longer than one year, we are basically hit by increased variable costs from chemicals, pulp, wood, and logistics. All in all, we increased the costs of the variable kind by EUR 40 million, of which pulp and wood is EUR 30 million, and we get a slight improvement in the prices.
We are moving in the right direction, but most of the price increases will start to come later on. Our own fixed costs, we kept in line. As I said before, 5th consecutive quarter with a return on capital employed well above 13%. We are establishing a new level, and as you can see on the chart here, we have actually left the level of 6%-8% that we were in some years ago, and we are now moving steadily over 13%. The transformation steps are continuing. We are upgrading and expanding our corrugated packaging plant in Riga, in Latvia. We have invested in a new competence center in Sweden for biocomposite, as well as additional production capabilities. Stora Enso and Gasum have also announced that we are going to build a biogas plant.
That's very interesting because that means that we can use some of that biogas for the trucks coming in and going out of the plant. Bergvik Skog restructuring is ongoing. This is a very complicated structure and legal structure to do the restructuring on Bergvik, and we are now expecting to conclude this during the first half of 2019. Have no impact whatsoever on existing wood prices. The Oulu conversion feasibility study is ongoing, and we probably will get our answers early next year. Before handing over to Seppo, I would like just to point out that our journey continues.
This is a slide that we've been having for a couple of years, and as you can see, the progress is being made going from basically a totally paper-dominated company when it comes to profit and sales to a more balanced view, and also where we have the profit growth coming from the four growth divisions. With that, I would like to hand over to Seppo.
Thank you, Kalle. I start by commenting some of the key figures from the report that we have published today. First of all, sales line went up 3% compared to same period a year ago. Our operational EBITDA margin increased significantly from 17.2% a year ago to 19.4% in Q3 this year. Also, operational EBIT increased 23.4% and was EUR 358 million, and our operational EBIT margin was 13.8%. Earnings per share increased 12.9% and was EUR 0.27 a share. Operational return on capital employed was 16.7%, and that is a fifth consecutive quarter above 13% targeted level. Also, positive good cash flow continues, and our balance sheet is strengthening. Net debt to operational EBITDA decreased from 1.6 a year ago to 1.1 end of Q3 this year.
Moving to divisions, I'm commenting first our Consumer Board division, where sales growth continues, and sales increased to record high Q3. That is thanks to higher volumes, but also we are getting through the first price increases now to get compensation for the higher variable costs that we have been facing earlier this year. Also, ramp-up of Beihai Mill operations is supporting sales line. Operational EBIT decreased to EUR 50 million. That's mainly due to the fact that the variable costs, especially for pulp and chemicals and woods, have been increasing during the year, and it's only recently now that we have been starting to be able to increase the prices because of the contract structures. Demand and market conditions remain good, and we are confident that we are able to increase selling prices also going further. Return on capital 10.3%.
Also important step on our transformation and replacing plastics is the rebuild of a machine at Imatra Mills in Finland for industrial production of MFC for barrier films, and the ramp-up is starting now during the Q4. Moving to packaging solutions, where we had another all-time high quarter. Sales increased 4% to record high Q3 of EUR 330 million. Operational EBIT increased to another record all-time high of EUR 68 million, and return on capital at all-time high level of 30.4%, and clearly above the strategic target of 20%. We also announced EUR 9 million investment to upgrade and expand our corrugated packaging plant in Latvia. Moving to biomaterials. The strong pulp market continues. Sales increased 9% to another all-time high of EUR 430 million, and also operational EBIT reached all-time high level of EUR 125 million. Both all-time highs, despite the fact that we had maintenance shutdown at Sunila Mill, reducing the volumes.
Operational return on capital increased to a new all-time high of 20.9%, clearly above the strategic target level of 15%. Our lignin product, Lineo by Stora Enso, won best product innovation at the ICIS Innovation Award 2018. Another reward and recognition of the innovation work we are doing in Stora Enso. Moving to wood products, where sales, excluding divested Puumerkki, increased for 6.4%, and this is another proof point of wood-based building continuing to grow. Operational EBIT up 64% to record high Q3, and that is thanks to both good improving better prices and mix, as well as volume growth supported by strategic investments at Murów Sawmill and Varkaus LVL. Return on capital continued at record levels, now reaching 31.6%, also clearly above the strategic target of 20%.
We also were working and announcing some projects to continue to develop our product portfolio and business portfolio in wood products. We announced EUR 7 million investment in building a competence center for biocomposites in Sweden, and also about our cooperation with Finnish startup TRÄ Group to develop innovative digital services for wooden buildings. We also launched, together with Orthex, a new range of kitchen utensils made from biocomposites. Those are 98% bio-based materials. Paper. In paper, solid profitability and cash flow continues. Sales increased 7% to EUR 779 million, and operational EBIT increased 125% to EUR 65 million. Good market balance continues in paper market. Cash flow after investing activities to sales was 8.3%, and that's thanks to improving better profitability and working capital management. Together with Gasum, we have announced that we are building a biogas plant at Nymölla Paper Mill in Sweden.
That is total investment for Stora Enso of EUR 5 million. Looking at the strategic targets, where are we with those? As you can see, in most of the cases, we are, and have been, on green. There are two exceptions. One is fixed cost to sales, where we are still above the targeted maximum level of 20%, but it's moving to right direction, and now we are at 23.3%. The work continues to improve our fixed cost structure. Consumer Board, as mentioned earlier, at 10.3%, below the 20% level because of the timing lag between the cost increases and price increases of our sales prices due to the contract structure. As I said earlier, we are now getting through the first price increases. We are confident also that we are able to continue to increase prices going forward as market demand continues strong.
We changed a bit the definition for dividend policy. Now it says to distribute 50% of EPS, earnings per share, over the cycle. Earlier we said it was 50% of net income. More technical change, no change to policy itself here, but more clear by the definition. Moving back to you, Kalle, and outlook.
Thank you, Seppo. I will just go through the outlook for 2018, the last quarter, and then I will do a summary, and then we start the Q&A session. The outlook for the fourth quarter 2018. Sales are estimated to be slightly higher than the amount of EUR 2,585,000,000 recorded in the third quarter of 2018. Operational EBIT is expected to be in line with or somewhat lower than the EUR 358 million recorded in the third quarter of 2018. In the estimate, we have also included a negative EUR 10 million impact based on production restriction for Nymölla Mill. The nearby lake are having a very low water level, and in that part of Sweden, it's been very little rain, and that's included. The impact of annual maintenance shutdowns is expected to be similar amount as the third quarter of 2018.
Just going back now to a bit of a summary of the quarter. We talk about the visible strength of the portfolio. This is actually showing that we are having a timing difference in Consumer Board, while we are more compensated than these timing differences in the other divisions, and that means that we have a very strong portfolio. It's a seven consecutive quarter of growth. It's the fifth consecutive quarter of double-digit EBIT margin. It's the five consecutive quarter of operational return on capital well above the 13%. We are establishing a new level. The balance sheet continues to improve, and operation expected to be clearly higher in 2018 than compared to 2017. We are moving from asset transformation to innovation, and sales transformations continue successfully. Please, Ulrika and Seppo, join me on the stage.
Just a reminder for those of you joining via the web, please post your questions online. I can start with a question for you, Seppo. We've changed the terminology from net profit to earnings per share. Why is that?
Well, like I said, it's more technical change when it comes to dividend policy. The policy itself has not changed from the old statement of 50% of net income. We want it to be more clear and clearly linked the dividend per share to earnings per share, and that's why we wanted to make the change.
Kalle, you talk about the strength of our portfolio. Can you elaborate a bit more on this?
What I'm meaning is we have a timing difference that is affecting profitability in Consumer Board. We are managing the fixed cost well. However, we have variable costs that are going up. At the same time, we are more than compensating in that negative in the four other divisions by having records in three divisions, the Biomaterials, Packaging Solutions, Wood Products, and then extremely strong performance in paper. That's the strength of our portfolio.
We have another question here coming regarding the Bergvik deal. Billerud seems to take a different stand when it comes to forest ownership in Bergvik regarding the latest info. What is the current idea of Stora Enso's stake in Bergvik, and in what way does the orientation affect the negotiations?
I don't make any comments of any competitor or anything, what they might have said. For us, it's been clear from day one, since we are a strong believer in the bioeconomy, that means that we also want to control the raw material, and that's why our intention is to control our stake of Bergvik 100% by ourselves.
Do we have any questions from the auditorium? No questions from the auditorium. No further questions from the webcast. We thank you for your attention, and we conclude today's call. Thank you.
Thank you