Stora Enso Interim Review January-March 2011

Financial results Q1 2011

20 April 2011

It should be noted that certain statements herein which are not historical facts, including, withoutlimitation those regarding expectations for market growth and developments; expectations for growthand profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similarexpressions, are forward-looking statements within the meaning of the United States Private SecuritiesLitigation Reform Act of 1995. Since these statements are based on current plans, estimates andprojections, they involve risks and uncertainties which may cause actual results to materially differ fromthose expressed in such forward-looking statements. Such factors include, but are not limited to: (1)operating factors such as continued success of manufacturing activities and the achievement ofefficiencies therein, continued success of product development, acceptance of new products or servicesefficiencies therein, continued success of product development, acceptance of new products or servicesby the Group’s targeted customers, success of the existing and future collaboration arrangements,changes in business strategy or development plans or targets, changes in the degree of protectioncreated by the Group’s patents and other intellectual property rights, the availability of capital onacceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition,prevailing and future global market prices for the Group’s products and the pricing pressures thereto,price fluctuations in raw materials, financial condition of the customers and the competitors of theGroup, the potential introduction of competing products and technologies by competitors; and (3)general economic conditions, such as rates of economic growth in the Group’s principal geographicmarkets or fluctuations in exchange and interest rates.

20 April 2011Financial results Q1 2011 2

Q1 2011 Strong – Earnings more than doubled

Sales up 19%


EBIT excl NRI and fair valuations up 108%

EPS excl NRI up 47%

Q1 2011 compared to Q1 2010

Earnings improvingHigher prices and continued productivity improvement

6 %

8 %

10 %

180

240

300

EU

R m

illio

n

EBIT excl NRI and fair valuation EBIT margin*, % 4 Q avg


*excluding NRI and fair valuation

0 %

2 %

4 %

6 %

0

60

120

180

EU

R m

illio

n

Increased productivityPricing over volumes, managing assets

100 000

120 000

EU

R


40 000

60 000

80 000

07Q1 08Q1 09Q1 10Q1 11Q1

EU

R

Sales per employee

RCP continued to drive inflation

120

160

200

EU

R/to

nn

e Mixed

OCC


German RCP price development, free deliveredSource: Verband Deutscher Papierfabriken/Stora Enso

0

40

80EU

R/to

nn

e

OCC

De-inking

Higher pulp prices positive Due to 1 mill. tonnes net market pulp position

600

800

1 000

1 200

US

D/to

nn

e

Bleached softwood kraft pulp


Source: FOEX

0

200

400

600

US

D/to

nn

e

Bleached softwood kraft pulp

Bleached hardwood kraft pulp

Summary financials Q1 2011

EUR million I/2011 IV/2010 I/2010Change %Q111/Q110

Change %Q111/Q410

Sales 2 727 2 685 2 296 18.8 1.6

EBITDA, excl. NRI and fair valuations 368 289 232 58.6 27.3

Operating profit, excl. NRI and fair valuations 248 167 119 108.4 48.5

Profit before tax, excl. NRI 213 187 137 55.5 13.9

Earnings per share, excl. NRI (EUR) 0.22 0.19 0.15 46.7 15.8

ROCE, excl. NRI and fair valuations (%) 11.4 7.9 7.2 58.3 44.3

Cash flow from operations 163 265 119 37.0 -38.5

Cash flow after investing activities 106 126 6 n/m -15.9

Debt/equity 0.38 0.39 0.54 -29.6 -2.6


NRI = Non-recurring itemsFair valuations include equity incentive schemes, synthetic options net of realised and open hedges,

CO2 emission rights, and valuations of biological assets related to forest assets in equity accounted investments

Net debt down 15% y-o-y

4,0

5,0

6,0

4 000

4 500

5 000

EU

R m

illio

n

Net Debt Net Debt/EBITDA excl NRI and fair valuations


EBITDA: Continuing operationsNet debt: Total operations

SENA divestment closed in Q4 2007Merchants divestment closed in Q2 2008

0,0

1,0

2,0

3,0

2 000

2 500

3 000

3 500

EU

R m

illio

n

Strong pricing improvement, inflation unfavourable

+1

+26+257

300

350

400

450

+248


Change in operating profit excl. NRI and fair valuationsQ1 2010 – Q1 2011

+1

+119

0

50

100

150

200

250

Q111

+248

Other

-12

Equity acc investments

FX net

-13

Costs

-130

VolumeSales price & Mix

Q110

Only European board demand above pre-crisis level

2007 Q avg = 100

100

115

IND

EX

Folding boxboard Std Newsprint Uncoated magazine Coated fine paper


European demandSource: CEPIPRINT, PPPC, CEPIFINE

70

85

IND

EX

Project On target Other progress

Montes del Platapulp mill, Uruguay �

Machinery and portsuppliers selected and contracted for MdP

Implementing strategyHigh return growth businesses

Ostrolekacontainerboard machine, Poland

�Proceeding as planned

CLTinvestment, Ybbs, Austria �

All permits received, main machine supplier selected

Skoghallinvestment �

Support wood handling in Sweden and further develop Skoghall mill

Outlook - increasing concerns on cost inflation

• Inflation and maintenance limit Q2 earnings improvement y-o-y

• Inflation estimate increased to ~4% for the full year 2011 compared to 2010

Demand development Q2/11 vsQ2/10

Price development Q2/11 vsQ1/11

Consumer Board

Industrial


• Actions to fight inflation continue to be even more important

Industrial Packaging

Newsprint and Book Paper

Coated Magazine Paper

UncoatedMagazine Paper

Fine Paper

Wood Products

Summary

• Strong quarter

• Inflation pressure

• 80% of CAPEX for strategic high return growth areas in 2011return growth areas in 2011

• Investments in strategic high-return growth areas

– Montes del Plata– Ostroleka– Ybbs– Skoghall


Rethinking continues!


Operating profit by segments


Change %Q111/Q410

Consumer Board 96 52 71 35.2 84.6

% of sales 14.8 8.5 13.6 8.8 74.1

Industrial Packaging 19 22 8 137.5 -13.6

% of sales 8.0 9.1 3.6 122.2 -12.1

Newsprint and Book Paper 26 -3 -2 n/m n/m

% of sales 8.3 -0.8 -0.7 n/m n/m

Magazine Paper 28 20 4 n/m 40.0

% of sales 5.9 3.6 0.9 n/m 63.9

Fine Paper 80 68 42 90.5 17.6

% of sales 14.2 12.7 8.9 59.6 11.8

Wood Products 12 10 5 140.0 20.0

% of sales 2.9 2.5 1.5 93.3 16.0


excluding non-recurring items

Capital expenditure and depreciationQ1 2008 – Q1 2011

6 %

8 %

10 %

150

200

250

EU

R m

illio

n

Forecast:Capex FY 2011approximately

EUR 550 m


Total operations

0 %

2 %

4 %

0

50

100EU

R m

illio

n

Capex Depreciation and impairment excl NRI Capex % of sales

Operative working capital Q1 2008 – Q1 2011

20,0 %

22,0 %

24,0 %

26,0 %

28,0 %

2 000

2 200

2 400

2 600

2 800

EU

R m

illio

n


Operative W/Cap = inventories + trade receivables – trade payables

10,0 %

12,0 %

14,0 %

16,0 %

18,0 %

20,0 %

1 000

1 200

1 400

1 600

1 800

2 000

08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1

EU

R m

illio

n

Operative Working Capital at the end of Q Working Capital per Sales ratio

Debt/equity2005 – Q1 2011

0,70

0,54 0,560,51

0,6

0,7

0,8

0,9


Total operations

0,39

0,51

0,39 0,38

0

0,1

0,2

0,3

0,4

0,5

2005 2006 2007 2008 2009 2010 Q1 2011

Pressure on variable costsWood pricing in Finland and in Sweden

40

50

60

70

80

EU

R/m

3

300

400

500

600

SE

K/m

3


Pulpwood includes pine, spruce and birch. Sawlogs include pine and spruce.

Source: SDC, Skogsstyrelsen

Source: METLA

0

10

20

30

40

06Q

106

Q2

06Q

306

Q4

07Q

107

Q2

07Q

307

Q4

08Q

108

Q2

08Q

308

Q4

09Q

109

Q2

09Q

309

Q4

10Q

110

Q2

10Q

310

Q4

11Q

1

EU

R/m

Pulpwood, Pine Sawlogs, Pine

0

100

200

300

06Q

106

Q2

06Q

306

Q4

07Q

107

Q2

07Q

307

Q4

08Q

108

Q2

08Q

308

Q4

09Q

109

Q2

09Q

309

Q4

10Q

110

Q2

10Q

310

Q4

11Q

1

SE

K/m

Pulpwood Sawlogs

Net Financial Items


Change %Q111/Q410

Net interest expense -23.0 -25.6 -16.5 -39.4 10.2

Foreign exchange gains and losses -11.9 1.8 11.1 n/a n/a

Other financial items, of which -16.3 2.1 -0.1 n/m n/a

PIK notes 1.5 1.6 1.4

Fair valuation of interest rate derivates* 13.9 4.4 -0.7

Fair valuation of long-term debt -0.5 0.1 0.1

Other items -31.2 -4.0 -0.9

Total net financial items -51.2 -21.7 -5.5 n/m -135.9


*Not hedge accounted interest rate derivatives.

Transaction risk and hedgesas at 31 March 2011

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 080 580 -1 100

Transaction hedges as at 31 March 2011 -510 -250 590

Hedging percentage as at 31 March 2011 for the next 12 months 47% 43% 54%


Operating Profit: Currency strengthening of + 10%Based on estimated next 12 months net operating cash flow exposure.

EUR million

USD 108

SEK -110

GBP 58

Hedging percentage as at 31 March 2011 for the next 12 months 47% 43% 54%

The calculation does not take into account currency hedges, and assumes no changes occur other than a single currency exchange rate movement. Weakening would have the opposite impact.

Maturity profile31 March 2011

500

600

700

800

900

1 000

EU

R m

illio

n

Other loans/liabilities

EUR 750m 5.125% 2014

EUR 390m E+4.21% 2016USD 507m 6.404% 2016

SEK 500m 3.5% 2015SEK 1.4 bn S+3.7% 2015SEK 2.4 bn 5.75% 2015


Revolving Credit Facility € 700 million matures in January 2014 and is fully undrawn.

0

100

200

300

400

500

EU

R m

illio

n

Other loans/liabilities

Bonds

Commercial paperUSD 300m 7.25% 2036

Energy balance Q1 2011

20

30

40

50

Self sufficiency 54%

Self sufficiency 62%

TWh/a

Impact* on operating profit from 10% change in:

EUR million p.a.

Total energy self sufficiency 60%


-10

0

10

20

Electricity Fuels

Internal External (hedged) External (non-hedged)

Electricity market price ~6

Fossil fuel price ~11

*) Remaining impact on non-hedged volume

Stora Enso electricity procurement

12 000

14 000

16 000

18 000

20 000

GWh/a

Sales to market

Open position


-2 000

0

2 000

4 000

6 000

8 000

10 000

12 000

2011 2012 2013 2014

Local tariff

Financial contracts

Physical contracts

PVO production

Own production

Permanent pulp, paper and board capacity reductions since 2006

Mill Date Grade Capacity reduction, t

Corbehem PM 3 and PM 4 Jun 2006 LWC 250 000

Varkaus PM 1 End 2006 WFC 95 000

Berghuizer Mill Oct 2007 WFU 235 000

Reisholz Mill End 2007 SC 215 000

Summa Mill Jan 2008 Newsprint, uncoated mag, book paper 415 000

Anjala Mill PM1 Feb 2008 Coated magazine paper 155 000


Baienfurt Mill End 2008 FBB 190 000

Kabel Mill PM 3 End 2008 Coated magazine 140 000

Kemijärvi Pulp Mill April 2008 Long-fibre (SW) pulp 250 000

Norrsundet Pulp Mill Dec 2008 Long-fibre (SW), pulp 300 000

Varkaus Mill coreboard machine Dec 2008 Coreboard 100 000

Imatra PM 8 Mar 2010 WFU 210 000

Varkaus PM 2 and PM 4 Sep 2010 Newsprint, directory paper 290 000

Maxau PM 7 Nov 2010 Newsprint 195 000

Totals % of capacity as at end 2005 (adjusted for disposals)

Paper and board 2 490 000 t/a 15%Pulp 550 000 t/a 9%

Permanent sawn wood capacity reductions since 2006

Mill Date Capacity reduction, m3

Veitsiluoto Sawmill 2006 100 000

Honkalahti Sawmill 2006 90 000

Sauga Sawmill Jun 2007 130 000

Sollenau Sawmill 2007 110 000

Näpi Sawmill 2007-2008 100 000

Kotka Sawmill 2007-2008 70 000


Kotka Sawmill 2007-2008 70 000

Paikuse Sawmill End 2008 220 000

Zdirec Sawmill 2008 120 000

Ybbs Sawmill 2008 & Jun 2009 200 000

Kitee Sawmill 2008 & Jun 2009 130 000

Varkaus Sawmill Jun 2009 60 000

Tolkkinen Sawmill End 2009 260 000

Total 1 590 000

Reductions equal 20% of capacity as at end 2005 (adjusted for disposals)

Investor Relations

Stora Enso Interim Review January-March 2011