Integrated Paper System and Operational Efficiencies Tony Smurfit, Group COO

Alain Baudant, CEO, European Paper Division

SK Paper | Key Takeaways

► SKG’s integrated model sustains higher quality earnings

► The ‘Virtual Mill’ system drives efficiencies across the Group

► Well invested asset base combines the best from Smurfit & Kappa with balanced capital expenditure

► SKG’s strong position in Kraftliner offers a distinct competitive advantage

► Continued cost take-out and high-yield investments will underpin further profitability gains

Wrexen

Hoya Viersen

Townsend Hook

Mengibar

Saillat

Alfa

Rethel

Morava Zülpich

Ania

Roermond SSK

Navarra

Nervion

Nettingsdorf

Pitea

Cellulose du Pin

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Paper Sales toCorrugated

Corrugated NeedsSupplied by Paper

Division

Recycled Kraftliner

64% 60%

Two divisions | An integrated partnership

► A strategically designed system

► Benefitting from two profit margins

► Full system integration

Backwards integrated into OCC* / wood

Forward integrated into Corrugated

SKG’s Integration

83% 83%

* OCC – Old Corrugated Containers

Integrated partnership delivering mutual benefits

► For the Corrugated Division

► Guaranteed supply in any environment

► Consistent quality to highest certification standards

► Vendor Managed Inventory

► For the Paper Division

► Optimised production through cherry picking of profitable own grades

► Run the entire mill system at full capacity through the cycle

► Reduce the exposure of Kraft to overseas markets through swaps in Europe

► For SKG

► Lowest cost | Highest performance | Supporting highest possible price

► Creating a platform for consistent and superior returns

Integrated partnership sustaining higher quality earnings

5%

7%

9%

11%

13%

15%

17%

19%

21%

SKG SCA Packaging** Mondi Packaging

DS Smith UPM Stora Packaging

Source: Smurfit Kappa Note - Mondi to Dec’13 | UPM to Mar’13 | DS Smith to Apr’13 | SKG and Stora Enso to Jun’13 **SCA Packaging was acquired by DS Smith in 2012

EBITDA Margin

Source: Smurfit Kappa

Average year-on-year volatility 2007-2012

0%

10%

20%

30%

40%

50%

60%

70%

EBITDA volatility

Paper Only Corrugated Only SKG integrated model

One ‘Virtual Mill’ | A look into the RPE* powerhouse

Hoya PM2

•90-180gsm

•RF1, T3, TKL

Morava PM2

•100-200gsm

•RF1, RFHP3, T2, T3

Roermond PM1

•120-150gsm

•RFHP3, T2, T3, TKL

Roermond PM2

•80-120gsm

•CB, CG

Roermond PM3

•100-220gsm

•RF1, RFHP2, T2, T3, TKL

Viersen PM1

•90-150gsm

•RF1, RFHP3, T3

Wrexen PM3

•120-170gsm

•CG, RF1, RFHP3, T3, TWTC1

Zülpich PM4

•90-105gsm

•RF1

Zülpich PM6

•100-150gsm

•RF1, RFHP3, T2, T3

Constraints

Product

•Grade

•Grammage

•Width

Machine

•Availability

•Capacity

Mill

•Variable cost

•Transport cost

Variables

Replenish direct orders

and VMI

Customer forecast

Maximise contribution

margin

OMP carousel

Allocate order to machine

Capacity planning

*RPE – Operational cluster of mills in Germany, Benelux and Czech Republic

‘Virtual Mill’ benefits | The RPE example

► Reduction in duplication of function through fully digital order processing

► Product standardization leading to reduced stocks & optimised asset utilization

► Reduced warehousing and distribution costs

► Annual savings: € 11 million within our RPE system of mills alone

Source: Smurfit Kappa

Efficient capacity management

► Containerboard Mills restructuring

Recycled Mills 23 down to 13

Consistent output maintained

Reduced headcount | 7,760 to 5,258

Fixed costs down

► Strategic mill development

Systematic modernisation of mill system

Focus on balanced Capex to Depreciation

Positioned to match market requirements in lightweight and white paper

Best in class efficient mill system across Europe leading the market

Recycled Production Volumes 2006 - 2012

Virgin mills cluster | A unique competitive advantage

► Market leader in consolidated market

► Significant barriers to new capacity

Regulatory consents

Access to wood basins

Significant investment required

► Good fundamentals

Europe structurally short market

Global trade flows supportive

► Consistent, high profitability

Solid Fundamentals in Kraftliner

0

100

200

300

400

500

600

Thousand short tons

Brown kraft cons. White kraft cons. US imports

Virgin mills cluster | A unique competitive advantage

► Nervion (Sack Kraft) and Navarra (MG), among the top producers

► Worldwide markets

► Excellent profitability based on sound fundamentals

Lean, effective organizations

Investment prioritising energy and productivity

Potential continued development

Navarra

Nervion

Driving operational efficiences through expertise

► 2006 – 2013 | Synergies and Cost take-out of € 205m

► Benchmarking to leverage performance

► Systematic use of IT and management tools

► Outstanding technical expertise

Benchmarking Operations throughout Europe

Positive momentum | More to come

► 2006 – 2012 | The Division has fundamentally improved its offering

► Despite significant progress there is still more to come

Targeted and efficiency led programme of investments to 2015

• 2013 Hoya mill re-build | 2015 Townsend Hook refurbishment | 2015 Roermond re-build

• Full ability to respond to the demands of the corrugated division

• Implementation of innovative IT and automation solutions to further enhance the benefits of ‘Virtual Mill’

Enduring focus on reducing costs throughout the supply chain

Supportive fundamentals

SK Paper | Key Takeaways

Wrexen

Hoya Viersen

Townsend Hook

Mengibar

Saillat

Alfa

Rethel

Morava Zülpich

Ania

Roermond SSK

Navarra

Nervion

Nettingsdorf

Pitea

Cellulose du Pin

► SKG’s integrated model sustains higher quality earnings

► The Virtual Mill system drives efficiencies across the Group

► Well invested asset base combines the best from Smurfit & Kappa with balanced capital expenditure

► SKG’s strong position in Kraftliner offers a distinct competitive advantage

► Continued cost take-out and high-yield investments will underpin further profitability gains