stora enso interim review q2 2012

Financial Results Q2 2012

CEO Jouko Karvinen

20 July 2012

It should be noted that certain statements herein which are not historical facts. including. without

limitation those regarding expectations for market growth and developments; expectations for growth

and profitability; and statements preceded by “believes”. “expects”. “anticipates”. “foresees”. or similar

expressions. are forward-looking statements within the meaning of the United States Private Securities

Litigation Reform Act of 1995. Since these statements are based on current plans. estimates and

projections. they involve risks and uncertainties which may cause actual results to materially differ from

those 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 of

efficiencies therein. continued success of product development. acceptance of new products or services

by 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 protection

created by the Group’s patents and other intellectual property rights. the availability of capital on

acceptable 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 the

Group. 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 geographic

markets or fluctuations in exchange and interest rates.

Financial results Q2 2012 20 July 2012 2

Cash flow and liquidity improved

• Operational EBIT EUR 141 million

• Cash flow from operations EUR 246 million

• Strong liquidity at EUR 1 240 million


Operational EBIT on the similar level as Q1 2012 as

anticipated


Strategic investments to transform the Group

20 July 2012 Financial results Q2 2012 5

35% personnel increase in growth markets 2007 –H1 2012


Montes del Plata Pulp Mill

• Montes del Plata pulp mill 1.3

million tonnes annually

• Approximately 60% of the

construction work completed

• Mill expected to start-up

approximately mid-year 2013


Timing of Strategic Projects

20 July 2012 Financial results Q2 2012

Skoghall,

Sweden

Investment

start-up end

Q4 2012

Ostroleka,

Poland

Container

board

machine start-

up

Q1 2013

Montes del Plata,

Uruguay

Pulp mill, start-up

mid-year 2013

Guangxi,

China

Pulp and Board

mill, start-up

Q4 2014

8

Summary financials Q2 2012

EUR million Q2/2012 Q1/2012 Q2/2011 Change %

Q2 12/Q2 11

Change %

Q2 12/Q1 12

Sales 2 720.4 2 673.3 2 817.1 -3.4 1.8

Operational EBITDA 248.1 262.1 357.6 -30.6 -5.3

Operational EBIT 141.2 147.4 239.1 -40.9 -4.2

Profit before tax. excl. NRI 31.8 101.0 177.6 -82.1 -68.5

Profit before tax 85.9 89.9 145.9 -41.1 -4.4

EPS excl. NRI (EUR) 0.02 0.10 0.21 -90.5 -80.0

EPS (basic). EUR 0.09 0.09 0.17 -47.1 -

Operational ROCE. % 6.5 6.8 10.9 -40.4 -4.4

Cash flow from operations 245.6 223.7 207.2 18.5 9.8

Cash flow after investing

activities 74.5 111.4 110.8 -32.8 -33.1

Debt/equity 0.54 0.46 0.41 31.7 17.4


Net Financial Items


Q212/Q211

Change %

Q212/Q112

Net interest expense -42.0 -37.7 -28.3 -48.4 -11.4

Foreign exchange gains and losses -18.2 8.0 -0.7 n/m n/m

Other financial items. of which -6.6 -4.3 -5.6 -17.9 -53.5

PIK notes 2.5 2.0 1.9

Fair valuation of interest rate derivatives* -14.3 -3.3 -3.3

Fair valuation of long-term debt -0.3 -0.5 0.4

NewPage lease provision 9.5 13.6 -

Other items -4.0 -16.1 -4.6

Total net financial items -66.8 -34.0 -34.6 -93.1 -96.5

*Not hedge accounted interest rate derivatives.


Operational EBIT by segments


Q212/Q211

Change %

Q212/Q112

Printing and Reading 41.7 67.3 72.2 -42.2 -38.0

% of sales 3.5 5.5 5.8 -39.7 -36.4

Biomaterials 14.7 7.2 31.2 -52.9 104.2

% of sales 6.0 3.0 11.6 -48.3 100.0

Building and Living 11.5 9.8 35.2 -67.3 17.3

% of sales 2.6 2.6 7.6 -65.8 0.0

Renewable Packaging 72.5 61.7 93.9 -22.8 17.5

% of sales 8.8 7.9 11.3 -22.1 11.4

Other 0.8 1.4 6.6 -87.9 -42.9

% of sales 0.1 0.2 0.9 -88.9 -50.0


Western European paper* demand 2006 – 2012/May Seasonally adjusted

20 July 2012

* Paper: News, UMO, UMI, SC, CM, WFC & WFU

Source: EuroGraph & PPPC

Financial results Q2 2012 12

Corrugated packaging growth - Eastern Europe and

Asia


2010-2020

Million tonnes

Asia

CAGR

4.4%

Eastern

Europe

CAGR

4.1%

Western

Europe

CAGR

1.0%

Middle East &

Africa

CAGR

4.3%

South

America

CAGR

2,7 %

North

America

CAGR

0.5%

Source: Pöyry and Stora Enso

13

Liquid dairy products significant driver for Consumer

Board growth – Asia 7% (CAGR 2010-2020)


-5%

-2,8%

-0,3%

2%

3%

1%

-1%

-2%

-3%

-4%

9%

10%

8%

7%

6%

5%

4%

1,2%

-0,4%

1,5%

3,2% 2,8%

-0,1%

9,0%

2,1%

Total Global LDP

average

growth rate:

2.4%

57.4 33.7 25.9 22.6

CA

GR

201

0 -

2012

Volume

2012

Bil Litres

12.8 11 7.7 6.7 5.6 5.1

Source: Tetra Pak Dairy Index 2009

Consumption estimate for Liquid Dairy Products

14

Guidance for Q3 2012

• Sales in Q3 2012 roughly similar

level than Q2 2012

• Operational EBIT close to the

similar level or somewhat higher

than in Q2 2012


Summary

Financial results Q2 2012

• European paper and wood

products markets continue to

weaken

• Additional cost reductions and

temporary production curtailments

planned in H2 2012

• Strategic investments progressing

to transform the Group

20 July 2012 16

Operational EBIT by segments

EUR million Q2/2012 Q1/2012 Change %

Q212/Q112

Printing and Reading 41.7 67.3 -38.0

Biomaterials 14.7 7.2 104.2

Building and Living 11.5 9.8 17.3

Renewable Packaging 72.5 61.7 17.5

Other 0.8 1.4 -42.9

Group 141.2 147.4 -4.2


Printing and Reading and Renewable Packaging

created the cash flow in Q2 2012


Transforming the Company

Q1-Q2 2012


Curtailments increased year-on-year % of capacity


Working capital improved Q2 2010 – Q2 2012

*Operative working capital = trade receivables + inventories – trade payables


Transaction risk and hedges as at 30 June 2012

Operational EBIT: Currency strengthening of + 10% EUR million

USD 120

SEK -92

GBP 60

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 200 600 -920

Transaction hedges as at 30 June 2012 -600 -270 450

Hedging percentage as at 30 June 2012 for the next 12 months 50% 45% 49%

The sensitivity is based on estimated next 12 months net operating cash flow. 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.

Additional USD and GBP hedges for 13-16 months increase the hedging percentages by

4 % and 7 % respectively.


Softwood pulp prices Stora Enso’s market pulp is softwood

Source: FOEX


Pulp wood and saw log prices Wood prices in Finland

Source: METLA


RCP prices

German RCP price development. free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso


Capital expenditure and depreciation Q1 2008 – Q2 2012


Debt/equity ratio 2009 – Q2 2012


Net Debt /Operational EBITDA


Energy balance* Q2 2012

Impact** on operating profit from

10% change in: EUR million p.a.

Electricity market price ~11

Fossil fuel price ~17

Self sufficiency 46% Self sufficiency 63%

Total energy self

sufficiency 59%

**) Remaining impact on non-hedged volume


*) Pulp. paper and board mills. Europe and overseas

31

Stora Enso Electricity procurement* Q2 2012


*) Pulp. paper and board mills. Europe and overseas

32

stora enso interim review q2 2012

Business

group financial results

financial condition

actual results

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total net financial

operational ebit eur

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