pulp & paper 2010 q3 update

Sector update 2010 Q3

12 November 2010

Analyst: Einar Kilde Evensen+47 2294 [email protected]

Company Top pick Trigger / comment

Holmen (SWE)

Norske Skog (NOR) Who dares? High debt, low margins and high exposure to newsprint. Share is not very cheap either.

SCA (SWE) Can gain materially if pulp price falls back, but is otherwise a stable (and good) 4-5% dividend yield case

b

b

Well-diversified, but share is expensive. Start-up of sawmill in 4Q could see teething problems.

TP upgraded; 2010-11 EBITDA up ~50% after blow-out 3Q

TP upgraded. Strong FCF, decent share price. Will benefit from EUR weakness. Strong balance sheet.

Stora Enso (FIN)

UPM (FIN)

Our coverage universe

Mcap Price Target Poten- EV/EBITDA ratioTicker Curr. Rec. (EURm) (curr.) (curr.) tial 2010e 2011e 2012eHOLMB SS SEK SELL 1,935 213.90 190.00 -11 % 9.5x 8.1x 6.5xNSG NO NOK SELL 269 11.45 6.00 -48 % 8.6x 5.9x 4.1xSCA B SS SEK HOLD 7,836 103.20 110.00 7 % 7.5x 6.3x 6.1xSTERV FH EUR BUY 5,812 7.37 9.00 22 % 6.6x 5.6x 5.3xUPM1V FH EUR BUY 6,364 12.24 15.00 23 % 7.4x 6.1x 5.5x

2

Sector update12 November 2010

PULP AND PAPER SECTOR

Paper 3Q 2010 update

What's new 2010 third quarter Pulp & Paper update

Holmen recommendation reduced to Sell (PT unchanged at SEK 190)NSG reiterated at Sell, NOK 6.00SCA reiterated at Hold, SEK 110.00Stora Enso reiterated at Buy, with PT up to EUR 9.00 from EUR 7.00UPM reiterated at Buy, with PT up to EUR 15.00 from EUR 13.00

Our assessment 1: Newsprint "bull story" of rising 2011 prices is over. It's all over.The market already expects and has to a large extent discounted NP price increases in Europe next year of 10%-15%.European newsprint demand is in structural decline, implying deteriorating market conditions for 2012 and forwardInvestors should avoid NSG and also Holmen who have the highest exposure to European newsprint (Holmen is also positively exposed to packaging).

Investment conclusion Pair trades recommendedShort Holmen: Trading near historically high multiples. Startup of new SEK 1.1bn Braviken sawmill in 4Q may have teething problemsShort NSG (if possible): Bullish story on 2011 NP prices is discounted.Long Stora Enso: Lowest EV/EBITDA multiple, best exposure (packaging)Long UPM: Lowest EV/EBITDA multiple, strong balance sheet

2: Packaging is the place to beMarket is growing, but with stable prices. If the general economy and consumer spending remain fair, packaging should be an attractive growth market.

3



3Q roundup: Publication paper disappointed; Pulp and packaging better

Sales EBITCompany Reported vs DNM vs cons. Reported vs DNM vs cons.HolmenHolmen Paper 1,982 -4 % -3 % -129 6 % 10 % On parIggesund Paperboard 1,225 0 % 1 % 243 12 % 23 % BetterHolmen Timber 162 2 % - 8 -49 % n.a. WorseHolmen Skog 1,281 8 % 7 % 212 21 % 27 % BetterHolmen Energi 419 9 % - 96 50 % n.a. BetterNorske SkogNewsprint Europe 1,374 1 % - -174 -107 % -40 % WorseNewsprint Ex-Europe 1,495 12 % - 153 220 % 3 % BetterMagazine 1,606 3 % - -90 n.m. -100 % WorseSCAPersonal Care 6,125 -6 % -5 % 697 -7 % -5 % WorseTissue 9,924 -5 % -3 % 753 -14 % -6 % WorsePackaging 7,392 1 % -2 % 512 47 % 20 % BetterForest Products 4,415 3 % 2 % 685 -1 % -7 %

Publication Products 2,131 -1 % - -38 n.m. n.a. On parPulp, Timber & Wood 2,284 8 % - 723 8 % n.a. Better Better

Stora EnsoNewsprint and Book Paper 323 -0 % -0 % 0 n.m. n.m. On parMagazine Paper 541 3 % -1 % 46 79 % 69 % BetterFine Paper 563 7 % 5 % 71 38 % 16 % BetterConsumer Board 594 -2 % 3 % 78 -4 % 21 % On parIndustrial Packaging 225 -12 % -9 % 19 158 % 25 % BetterUPMEnergy 124 4 % 3 % 44 12 % 17 % BetterPulp 489 10 % 8 % 199 38 % 24 % BetterForest and Timber 387 5 % 7 % 68 107 % 331 % BetterPaper 1,672 7 % 2 % -64 -195 % -228 % WorseLabel 284 3 % 3 % 24 13 % 17 % BetterBetter 2 of 8 3 of 4 2 of 4 2 of 2 3 of 4 2 of 2On par 3 of 8 1 of 4 - - - - Worse 3 of 8 - 2 of 4 - 1 of 4 -

* Note: ' 'On par'' if reported within +/- 5 % range of estimates

Wood & forest Energy

Publ. paper

Board & pack.

Other paper Pulp

Apart from SCA'sdisappointments in Personal Care and Tissue, the main disappointments came within Publication paper

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Board &pack.

Otherpaper

Pulp Wood &forest

Worse

On par

Better

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Agenda

Case: Newsprint

Other key considerations

Valuation

3Q updates and changes of estimates

Appendix

5



The subject of this update

The end of newsprint (as we know it)?Newsprint is continuously losing advertising market share

Newsprint's key strengths"Coffee table effect". Multiple readers per paperMedia choice #1 for baby boomersPurchaser "owns" newspaperLocalPortability

Newsprint's key weaknessesDistributionHeavily dependent upon advertising from real estate, employment and autosDeclining circulation and subscription

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Can you pick the choice of the future?

This? Or this?

7



An analogy to newspaper as media habits change: Blockbuster Inc.

Blockbuster Inc. factsFirst store opened in Dallas, TX, 1985IPO in 1999, for USD 560m5,000 stores in US (Jan 2010)

PeaksShare price: April 2002, at USD 30 (Market cap: USD 5,300m)Yearly revenues: 2004, at USD 6,053mEBIT margin: 2003, at 8%NIBD: 2005, at USD 882m

BUST

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Blockbuster is now bust (no pun intended)

Blockbuster Inc filed for Chapter 11 in September 2010

We believe newsprint is a structural sunset industry, just like video rental (with physical stores), and LPs, music

cassettes and CDs.

There will be niche markets, but market demand is going to continue falling.

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What's going on with New York Times?

Arthur Sulzberger Jr, CoB of NYT Co.

We will stop printing the

New York Times some time in the future.

(Sept 2010)

Our print product is alive

and well(Sept 2010)

Janet Robinson, CEO of NYT

New York Times factsPublished since 1851Has won 104 Pulitzer prizes, more than any other mediaCurrent circulation: 950', down >10% from peakFirst major newspaper to launch iPod/iPhone application in 2008 Third largest newspaper in US after WSJ and USA Today

Question: Will this newspaper bellwether also be the first to stop printing on paper?

http://commons.wikipedia.org/wiki/File:Janet_L._Robinson_at_the_I_Love_My_Librarian_awards.jpg

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Newsprint demand is falling – North America leads

US demand is now less than half what it was in 2000.

-51%

-10%

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Which are the companies most exposed to Newsprint?

Norske Skog most exposedNewsprint: >50% of revenue (but ~50/50 split Europe vs ex-Europe)Magazine: ~40% (all in Europe, and ~50/50 split SC/LWC)

HolmenSignificant SC exposure

Note: Magazine grades: SC = ''Un-coated''; LWC = ''Light-weight''; CWF = ''Heavy' '

Implicit revenue exposure to paper grades

-

10%

20%

30%

40%

50%

60%

Un-coated Light-weight Heavy

Newsprint Magazine Office paper

Holmen NSG SCA Stora Enso UPM

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What does this exposure mean in terms of EBITDA and EPS

EBITDA sensitivities if NP price rises 10%:

• NSG: +60%

• Holmen: +12%

EPS sensitivities vs last share price if NP price rises 10%:

• NSG: +34%

• Others: +1% or lower

Pulp <------- Graphic paper -------> Packaging OtherMagazine paper Corrugating

Company Mkt pulp NP SC LWC CWF UWF Fluting Liner FBB Tissue OtherGlobal exposure ('000 tonnes/year)Holmen -80 825 1,045 170 - - - - 580 - -NSG -220 2,945 815 675 - - - - - - 6SCA -1,000 375 505 470 - - 665 1,655 - 2,555 45Stora Enso 900 2,650 1,405 1,630 1,780 1,215 375 115 2,313 - 645UPM 600 2,090 2,010 3,000 1,630 1,785 - - - - 550

Delta revenues if price +10% (fixed f/x)Holmen (SEKm) -52 331 550 103 - - - - 270 - -NSG (NOKm) -124 1,025 373 355 - - - - - - 2SCA (SEKm) -650 150 266 285 - - 235 728 - 2,143 21Stora Enso (EURm) 63 114 79 106 126 104 14 5 116 - 32UPM (EURm) 42 90 114 195 116 154 - - - - 28

Delta EBITDA, % of 2011 estimateHolmen (SEK 2,830m) -2% 12% 19% 4% - - - - 10% - -NSG (NOK 1,716m) -7% 60% 22% 21% - - - - - - 0%SCA (SEK 17,385m) -4% 1% 2% 2% - - 1% 4% - 12% 0%Stora Enso (EUR 1,392m) 5% 8% 6% 8% 9% 8% 1% 0% 8% - 2%UPM (EUR 1,572m) 3% 6% 7% 12% 7% 10% - - - - 2%

Delta EPS, assuming 28% taxHolmen (SEK) -0.45 2.83 4.72 0.88 - - - - 2.32 - -NSG (NOK) -0.47 3.89 1.41 1.35 - - - - - - 0.01SCA (SEK) -0.66 0.15 0.27 0.29 - - 0.24 0.74 - 2.19 0.02Stora Enso (EUR) 0.06 0.10 0.07 0.10 0.12 0.10 0.01 0.00 0.11 - 0.03UPM (EUR) 0.06 0.12 0.16 0.27 0.16 0.21 - - - - 0.04

Delta EPS, assuming 28% tax, % of 2011 estimateHolmen (SEK 11.59) -4% 24% 41% 8% - - - - 20% - -NSG (NOK -4.24) n.m. n.m. n.m. n.m. - - - - - - n.m.SCA (SEK 10.07) -7% 2% 3% 3% - - 2% 7% - 22% 0%Stora Enso (EUR 0.70) 8% 15% 10% 14% 16% 14% 2% 1% 15% - 4%UPM (EUR 1.04) 6% 12% 15% 26% 15% 21% - - - - 4%

Delta EPS, % of last priceHolmen (SEK 213.90) -0% 1% 2% 0% - - - - 1% - -NSG (NOK 11.45) -4% 34% 12% 12% - - - - - - 0%SCA (SEK 103.20) -1% 0% 0% 0% - - 0% 1% - 2% 0%Stora Enso (EUR 7.37) 1% 1% 1% 1% 2% 1% 0% 0% 1% - 0%UPM (EUR 12.24) 0% 1% 1% 2% 1% 2% - - - - 0%

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OCC

ONP/OMG

But lower RP prices are a positive trigger

Recovered paper prices

-€20?

-€40?

-€60?

-€80??

NSG's 2011 EBITDA to gain 12% if RP price falls by EUR 20/tonne (year average).

We currently do not model major shifts in the RP price, which to a large extent is pulled by strong demand from China/Asia

Implications from EUR -20/tonne lower RP price:Exposure: NP RP Chg. cost Revenue Impact EBITDA EBITDALong (short) prod. exposure @ €-20/t 2011e (margin 2011e gainCompany (kt/year) (kt/year) (EUR m) (EUR m) impr.) (EUR m)Holmen 825 -750 -15 1,833 0.8 % 304 5 %NSG 2,945 -1,300 -26 2,336 1.1 % 213 12 %SCA 375 -3,800 -76 11,800 0.6 % 1,867 4 %Stora Enso 2,650 -2,400 -48 10,197 0.5 % 1,451 3 %UPM 2,090 -3,000 -60 8,900 0.7 % 1,572 4 %

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Agenda

Case: Newsprint


Valuation


Appendix

15



Debt levelsAGENDA

Key considerations

Market update

Valuation and estimates

Appendix

Best:

• Holmen, SCA

Worst:

• Norske Skog

EURm Revenues EBITDACompany 2009 2010e 2011e 2012e 2009 2010e 2011e 2012eHolmen 1,946 1,838 1,946 2,035 315 271 305 353Norske Skog 2,519 2,332 2,412 2,460 270 160 212 265SCA 11,938 11,834 12,222 12,408 1,771 1,715 1,872 1,876Stora Enso 8,945 10,211 9,703 9,618 434 1,256 1,392 1,400UPM 7,719 8,900 8,904 8,923 1,062 1,411 1,572 1,587

percent Revenue growth EBITDA %Company 2009 2010e 2011e 2012e 2009 2010e 2011e 2012eHolmen -7 % -6 % 6 % 5 % 16 % 15 % 16 % 17 %Norske Skog -23 % -7 % 3 % 2 % 11 % 7 % 9 % 11 %SCA 0 % -1 % 3 % 2 % 15 % 14 % 15 % 15 %Stora Enso -22 % 14 % -5 % -1 % 5 % 12 % 14 % 15 %UPM -18 % 15 % 0 % 0 % 14 % 16 % 18 % 18 %

EURm Net interest bearing debt (EoP) NIBD/12m tr. EBITDACompany 3Q 2010 2010e 2011e 2012e 3Q 2010 2010e 2011e 2012eHolmen 670 629 523 372 2.3x 2.3x 1.7x 1.1xNorske Skog 1,101 1,116 982 812 5.4x 7.0x 4.6x 3.1xSCA 4,288 4,254 3,910 3,550 2.5x 2.5x 2.1x 1.9xStora Enso 2,559 2,693 2,256 1,839 2.7x 2.1x 1.6x 1.3xUPM 3,306 3,554 2,849 2,081 2.5x 2.5x 1.8x 1.3x

NIBD/EBITDA ratios

-1.0x2.0x3.0x4.0x5.0x6.0x7.0x8.0x

Holmen NorskeSkog

SCA Stora Enso UPM

3Q 2010 2010e 2011e 2012e

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FCF

Best:

• UPM, SCA, Holmen

Worst:

• Stora Enso (NSG FCF needed for debt)

Last Market NIBD EV Free cash flow *Company Crncy price cap. (m) (m) (m) 2009 2010e 2011e 2012eHolmen SEK 213.90 17,967 6,257 24,224 1,430 1,205 2,054 2,545Norske Skog NOK 11.45 2,175 8,925 11,100 686 -21 402 1,035SCA SEK 103.20 72,766 40,048 112,815 7,733 7,246 8,405 8,554Stora Enso EUR 7.37 5,812 2,559 8,371 -133 615 758 792UPM EUR 12.24 6,364 3,306 9,670 590 937 1,123 1,157* FCF: 1) EBITDA, less 2) Capex, less 3) net interest costs (see tables below)

FCF / Market cap. FCF / EVCompany 2009 2010e 2011e 2012e 2009 2010e 2011e 2012eHolmen pct. 8 % 7 % 11 % 14 % 6 % 5 % 8 % 11 %Norske Skog pct. 32 % -1 % 18 % 48 % 6 % 0 % 4 % 9 %SCA pct. 11 % 10 % 12 % 12 % 7 % 6 % 7 % 8 %Stora Enso pct. -2 % 11 % 13 % 14 % -2 % 7 % 9 % 9 %UPM pct. 9 % 15 % 18 % 18 % 6 % 10 % 12 % 12 %

Compound FCFs FCF / Market cap. FCF / EVCompany 2010e 2011e 2012e 2010e 2011e 2012eHolmen pct. 7 % 18 % 32 % 5 % 13 % 24 %Norske Skog pct. -1 % 18 % 65 % 0 % 3 % 13 %SCA pct. 10 % 22 % 33 % 6 % 14 % 21 %Stora Enso pct. 11 % 24 % 37 % 7 % 16 % 26 %UPM pct. 15 % 32 % 51 % 10 % 21 % 33 %

FCF / Market cap.

-10 %

0 %

10 %

20 %

30 %

40 %

50 %

60 %

Holmen NorskeSkog

SCA StoraEnso

UPM

2009 2010e

2011e 2012e

FCF / EV

-2 %0 %2 %4 %6 %8 %

10 %12 %14 %

Holmen NorskeSkog

SCA StoraEnso

UPM

2009 2010e 2011e 2012e

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Per end-3Q 2010EURm Undrawn Funds* / Maturities AverageCompany Cash facilites debts 2010e 2011e 2012e Later maturityHolmen 12 792 117 % 210 63 44 368 2.4Norske Skog 552 - 33 % 12 266 483 896 5.1SCA - 3,306 77 % 1,007 972 175 2,155 2.8Stora Enso 1,121 1,400 69 % 190 650 140 2,700 5.6UPM 484 1,200 44 % 180 400 1,030 2,180 5.4Exchange rates used: EURSEK 9.295, EURNOK 8.078Assuming even spread of maturities over each calendar year* Cash + undrawn facil ities

Maturities: Holmen and SCA have the most solid balances; Stora Ensoand UPM the longest maturities

x

!b

Best:

• Holmen, Stora Enso

Worst:

• Norske Skog – critical for 2012

x

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Pulp price seems to have peaked, at 66% over the trough in April 2009

Lower pulp price will help Norske Skog through lower costs on magazine paper production (not newsprint).

NBSK Europe is down 2% from the peak in July 2010, which was 7% above the previous peak in June 2008

Pulp markets remain tight due to the absence of shipments from Chile and Indonesia as well as the gradual improvement in paper demand and production in Europe

Stora Enso and UPM are net producers of pulp, while the rest are net buyers, SCA being the largest

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NP prices are higher in US than in Europe by a margin of 7%

It costs EUR 40-50/tonne to ship newsprint across the Atlantic

Jan-Apr 2010 European shipments are up 4% YoY

Announced NP closures in Europe for 2010 amount to 295kt or ~2.3% of total capacity (~13mt), while demand is up 4.1% YoY first nine months.

Lower recovered paper prices (ONP/OMG) will help P&Ls (9% of NSG'scosts are RP!)

European shipments YTD

-800

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1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

2006 2007 2008 2009 2010 2011

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cap

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)

Volga JSCUPMStora EnsoSolikamsky Pulp & Paper JSCSCAPerlen PapierPapierfabrik PalmPapeteries de TurckheimOsnovaNorske Skog IndustriesMatussière & ForestInvestlesprom GroupHolmenFabryka Papieru MyszkówBurgo GroupBelarus GovernmentAbitibiBowater

Category Graphic Grade NEWS Region Europe

Sum_Change

Year Q

Parent

European capacity closures 2006-2010

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NP N.Am (USD)

Diff: EUR 31 / ton (7%)

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jmmjsnjmmjsnjmmjsnjmmjsnjmmjsnjmmjsnjmmjsnjmmjs

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YTD ShipmentsAcc. YoY Growth

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1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

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VertarisUPMStora EnsoSaber PaperPapierfabrik GolzernPapierfabrik am NeckarPapeteries des Deux-GuiersPapeteries des AlpesNorske Skog IndustriesMyllykoskiMatussière & ForestJIP-PapirnyHolmenCartiere Paolo PignaBurgo GroupArctic Paper

Category Graphic Grade UM Region Europe

Sum_Change

Year Q

Parent

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1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

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acity

) UPMStora EnsoSappi LimitedPerlen PapierPapierfabrik am NeckarMyllykoskiMatussière & ForestKübler & NiethammerInvestlesprom GroupHolmenBurgo Group

Category Graphic Grade CM Region Europe

Sum_Change

Year Q

Parent

Magazine paper: Picking up … slowly

Jan-Sept 2010 shipments

• SC: +2.0% YoY

• CM: +8.7% YoY

• CWF: +12.1% YoY

Announced 2010 capacity growth:

• UM: -1.2% of cap.

• CM: +0.3% of cap.

• CWF: none

Largest exposures:

• UM: Holmen, NSG

• CM: NSG, UPM

• CWF: STERV, UPM

European UM capacity closures 2006-2010 European CM capacity closures 2006-2010

400

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CWF (heavy, coated mag. paper)

LWC (lightweight coated mag. paper)

21



Packaging prices – peaking out already??

Largest exposures:

• Liner: SCA

• Fluting: only minor

• FBB: STERV, Holmen

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Agenda

Case: Newsprint


Valuation


Appendix

23



STERV and UPM have the lowest EV/EBITDAs in the group*, and are also the cheapest vs own history

Holmen vs rebased peers from jan 1999Rebased to price per 15.01.1999

#REF!

2.0x

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EV/EBITDA

Holmen Norske Skog SCA Stora Enso UPM

EV/EBITDA observation summaryLast, Average

Company 10.11.10 2 year 5 yearHolmen 7.5x 8.3x 7.9xNorske Skog 5.7x 6.2x 6.4xSCA 6.1x 6.4x 6.6xStora Enso 5.9x 7.3x 6.9xUPM 5.9x 6.7x 6.8xMedian 5.9x 6.7x 6.8x

Last vs averageCompany 2 year 5 yearHolmen 91 % 95 %Norske Skog 93 % 89 %SCA 95 % 92 %Stora Enso 81 % 86 %UPM 87 % 86 %Median 91 % 89 %

* Except Norske Skog

24



Prices as of close 10.11.10 Local Shrs EV / EBITDA EV / EBIT P/E adj. Price / bookName price (m) 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012Diversified GroupsBillerud SE SEK 58.00 106.7 666 4.1x 4.5x 4.3x 6.4x 7.9x 7.6x 8.7x 11.3x 10.9x 1.30x 1.22x 1.15xHolmen AB SE SEK 213.90 62.1 1,947 9.5x 7.2x 6.9x 18.9x 12.2x 11.1x 25.6x 15.0x 13.8x 1.09x 1.04x 1.01xInternational Paper Co. US USD 25.96 437.5 8,290 5.6x 4.7x 4.0x 10.0x 7.5x 5.9x 12.8x 9.4x 8.0x 1.75x 1.51x 1.39xM-Real Oyj FI EUR 2.57 291.8 864 5.3x 4.8x 4.1x 8.6x 8.0x 6.6x 12.2x 7.9x 7.1x 0.86x 0.78x 0.71xMondi PLC UK GBP 510 367.2 2,189 4.2x 3.4x 2.8x 7.5x 5.5x 4.4x 14.2x 9.9x 8.9x 1.20x 1.12x 1.03xNippon Paper Group Inc. JP JPY 2,017 116.3 2,068 8.6x 8.4x 8.4x 26.4x 23.0x 22.4x 14.0x 11.7x 10.9x 0.52x 0.51x 0.50xOji Paper Co. Ltd. JP JPY 375 1,064.4 3,520 7.8x 7.5x 7.4x 16.3x 16.1x 13.8x 11.5x 10.6x 8.8x 0.79x 0.75x 0.70xStora Enso Oyj FI EUR 7.37 612.4 5,837 6.6x 5.8x 5.3x 11.1x 9.2x 8.3x 10.1x 9.6x 9.1x 1.05x 0.99x 0.93xUPM FI EUR 12.24 520.0 6,364 6.7x 5.7x 5.1x 13.8x 11.2x 9.7x 12.9x 11.8x 10.5x 0.93x 0.89x 0.85xPlantations, Wood & PulpCMPC CL CLP 27,798 220.0 9,284 13.5x 12.5x 11.5x 20.9x 18.0x 16.2x 23.9x 21.8x 19.7x 1.70x 1.59x 1.52xFibria Celulose S.A. ADS BR USD 17.93 390.2 5,384 7.9x 7.6x 7.0x 15.9x 13.5x 13.2x 23.5x 27.8x 17.7x 0.96x 0.90x 0.87xRottneros AB SE SEK 4.98 153.4 82 3.0x 3.6x 7.6x 5.2x 8.0x 76.5x 6.1x 10.8x 32.1x 0.63x 0.62x 0.67xWeyerhaeuser Co. US USD 17.63 535.9 6,898 13.1x 10.5x 7.8x 25.7x 17.7x 11.7x 44.1x 35.3x 16.6x 1.23x 2.04x 1.13xGraphic PaperBoise Inc. US USD 7.94 84.8 491 4.2x 3.6x 3.6x 7.2x 6.0x 6.1x 8.6x 7.2x 7.0x 0.98x 0.89x 0.78xDomtar Corp. US USD 82.00 41.6 2,490 3.7x 3.8x 3.0x 5.8x 6.6x 5.2x 7.2x 10.3x 10.8x 1.29x 1.13x 1.01xNorske Skog NO NOK 11.45 189.9 269 9.5x 5.3x 4.3x n.a. n.a. 36.7x n.a. n.a. n.a. 0.22x 0.24x 0.25xSappi Ltd. SA ZAR 3,767 537.1 2,142 6.9x 5.1x 4.2x 15.3x 9.7x 6.9x 58.4x 14.7x 9.1x 1.51x 1.35x 1.18xPackagingCascades Inc. CA CAD 6.84 96.6 480 5.3x 4.5x n.a. 11.4x 8.2x n.a. 8.9x 7.5x 7.1x 0.52x 0.48x 0.45xLee & Man Paper Manuf. HK HKD 6.35 4,556.3 2,725 12.0x 10.3x 8.7x 14.4x 11.7x 9.7x 14.9x 11.8x 9.5x 2.49x 2.22x 1.96xMayr-Melnhof Karton AG AT EUR 77.00 20.0 1,540 5.3x 4.6x 4.1x 8.1x 6.9x 6.2x 14.1x 12.6x 12.0x 1.63x 1.53x 1.39xMeadWestvaco Corp. US USD 26.43 168.3 3,246 6.2x 5.5x 5.4x 11.4x 9.6x 9.2x 17.9x 14.7x 13.2x 1.39x 1.31x 1.25xPackaging Corp of Am. US HKD 12.60 4,654.1 5,523 16.0x 12.4x 9.5x 20.7x 15.3x 11.2x 22.5x 16.3x 12.5x 2.60x 2.31x 2.01xDS Smith PLC UK USD 25.38 102.6 1,900 6.8x 5.4x 4.7x 10.2x 7.5x 6.4x 15.6x 11.8x 9.7x 2.66x 2.10x 1.64xSmurfit Kappa Group PLC EI GBP 182.70 433.4 926 5.9x 5.0x 4.5x 9.5x 7.8x 6.9x 11.7x 9.0x 8.0x 1.40x 1.27x 1.15xNine Dragons Paper HldgsHK EUR 7.78 218.7 1,701 5.3x 4.0x 3.4x 9.6x 6.2x 5.3x 14.4x 5.2x 4.2x 0.99x 0.85x 0.75xTemple-Inland Inc. US USD 20.89 107.8 1,644 7.0x 4.5x 3.9x 13.4x 6.6x 5.2x 23.2x 11.6x 8.2x 2.59x 2.10x 2.40xTissue & Other PaperKimberly-Clark Corp. US USD 61.86 407.8 18,415 8.1x 7.7x 7.3x 10.4x 9.9x 9.2x 13.5x 12.3x 11.4x 4.74x 4.42x 4.17xProcter & Gamble Co. US USD 64.57 2,799.2 131,944 10.7x 10.2x 9.6x 12.8x 12.0x 11.3x 15.7x 16.1x 14.8x 3.20x 3.06x 2.90xSCA SE SEK 103.20 603.6 7,840 7.0x 6.0x 5.5x 11.6x 9.4x 8.4x 11.7x 9.9x 9.0x 1.03x 0.97x 0.91xSchweitzer-Mauduit Intern US USD 65.06 18.0 856 7.6x 6.5x 4.4x 10.2x 8.5x 5.5x 15.2x 13.3x 8.8x 2.48x n.a. n.a.Wausau Paper Corp. US USD 8.49 49.0 304 n.a. n.a. n.a. n.a. n.a. n.a. 19.3x 14.2x 10.6x 1.74x n.a. n.a.Median, Diversified Groups 2,189 6.6x 5.7x 5.1x 11.1x 9.2x 8.3x 12.8x 10.6x 9.1x 1.05x 0.99x 0.93xMedian, Plantations, Wood & Pulp 6,141 10.5x 9.0x 7.7x 18.4x 15.6x 14.7x 23.7x 24.8x 18.7x 1.10x 1.25x 1.00xMedian, Graphic Paper 1,316 5.5x 4.4x 3.9x 7.2x 6.6x 6.5x 8.6x 10.3x 9.1x 1.13x 1.01x 0.90xMedian, Packaging 1,701 6.2x 5.0x 4.6x 11.4x 7.8x 6.6x 14.9x 11.8x 9.5x 1.63x 1.53x 1.39xMedian, Tissue & Other Paper 7,840 7.8x 7.1x 6.4x 11.0x 9.6x 8.8x 15.2x 13.3x 10.6x 2.48x 3.06x 2.90x

Source: Factset, DnB NOR Markets estimatesData as of 10.11.2010

Coun-try Curr.

MCap. (EURm)

Trading multiples (consensus estimates)

25



Consensus EPS revisions

Price MCap. # of Share Target prices 2010 EPS 2011 EPS(local (EUR ana- change (local curr.) Rev's since… Rev's since…

Name Curr. curr.) mill.) lysts 1 w 1 m 6 m Min Mean Max Min Mean Max 6 m 1 m 1 w Min Mean Max 6 m 1 m 1 wDiversified GroupsBillerud SEK 58.00 666 8 4 % 13 % 16 % 55 61 65 6.35 6.65 6.99 17% 13% - 4.18 5.27 6.78 8% 10% -Holmen AB SEK 213.90 1,947 15 0 % 2 % 20 % 150 218 250 6.87 8.61 10.40 28% 8% - 11.23 14.69 19.45 32% 9% 2%International Paper Co. USD 25.96 8,290 14 3 % 17 % 5 % 27 33 44 1.92 2.02 2.06 18% 8% - 1.05 2.61 3.37 13% 7% -M real EUR 2.57 864 18 8 % -11 % 0 % 2.50 3.34 4.50 0.14 0.22 0.28 20% -9% - 0.21 0.32 0.45 83% -4% -Mondi GBP 510 2,189 7 -2 % -5 % 19 % 544 606 681 34.19 37.54 42.74 31% 1% -2% 46.10 53.25 67.53 24% -2% -2%Nippon Paper JPY 2,017 2,068 6 1 % -8 % -25 % 2,100 2,463 2,850 118.3 148.3 181.0 -12% -14% - 114.8 170.2 224.0 -8% -7% -Oji Paper JPY 375 3,520 5 2 % -3 % -15 % 430 498 600 29.30 31.73 33.40 7% -2% -1% 29.74 34.85 38.00 2% -4% -0%Stora Enso EUR 7.37 5,837 21 2 % -1 % 29 % 6.0 8.3 9.4 0.65 0.73 0.82 83% 18% - 0.56 0.77 1.02 57% 13% 0%UPM EUR 12.24 6,364 24 1 % -5 % 19 % 9.0 13.5 15.3 0.70 0.93 1.10 pos. 7% - 0.76 1.04 1.42 49% -3% -Plantations, Wood & PulpCMPC CLP 27,798 9,284 5 3 % 12 % 26 % 22.1k 25.1k 28.1k 967 1,168 1,375 6% -0% -1% 1,167 1,336 1,620 -17% -6% -1%Fibria Celulose USD 17.93 5,384 12 -5 % 3 % -4 % 12 19 23 0.26 0.77 1.11 -32% -10% - 0.35 0.75 1.31 -48% -8% -Rottneros AB SEK 4.98 82 2 8 % -5 % -28 % 5.40 5.73 6.05 0.70 0.81 0.92 -11% 3% - 0.30 0.46 0.62 -19% -14% -Weyerhaeuser Co. (US ListiUSD 17.63 6,898 16 7 % 11 % -6 % 14 20 33 0.20 0.40 0.56 pos. 90% 3% 0.25 0.59 1.13 9% -17% -Graphic PaperBoise Inc. USD 7.94 491 4 3 % 22 % 24 % 8.5 9.4 10.0 0.87 0.91 0.94 15% 21% - 1.05 1.12 1.20 6% 6% -Domtar USD 82.00 2,490 15 4 % 21 % 23 % 60 94 125 9.63 11.32 11.85 75% 23% - 3.45 7.94 11.60 50% 28% -Norske Skog NOK 11.45 269 18 -1 % -7 % 35 % 6.0 12.0 20.0 -13.24 -7.20 -2.54 neg. neg. - -5.58 -2.74 -0.50 pos. pos. pos.Sappi ZAR 3,767 2,142 10 12 % 10 % 28 % 2,807 3,662 4,452 26 63 105 pos. -1% -2% 127 266 424 14% 4% 3%PackagingCascades Inc. CAD 6.84 480 8 3 % 7 % -8 % 9 10 13 0.51 0.77 1.13 2% - - 0.51 0.91 1.24 -16% - -Lee & Man Paper ManufactuHKD 6.35 2,725 11 -8 % -8 % -1 % 5 8 10 0.39 0.44 0.57 -6% -7% -6% 0.46 0.53 0.61 0% -3% -1%Mayr-Melnhof Karton AG (A EUR 77.00 1,540 8 -2 % 0 % 10 % 76 85 103 4.97 5.40 5.69 -2% - - 5.63 6.13 6.81 2% - -MeadWestvaco Corp. USD 26.43 3,246 12 2 % 7 % 4 % 28 30 32 1.39 1.48 1.57 7% 5% - 1.50 1.77 1.98 18% 3% -Nine Dragons Paper HoldingHKD 12.60 5,523 12 -4 % -8 % 3 % 9 16 20 0.55 0.57 0.61 -7% 0% 1% 0.71 0.77 0.83 -4% 0% 1%Packaging Corp. of AmericaUSD 25.38 1,900 11 2 % 11 % 12 % 26 30 40 1.59 1.63 1.66 11% 2% - 1.95 2.17 2.75 13% 3% -DS Smith PLC GBP 182.70 926 5 3 % 13 % 44 % 169 185 200 15.03 15.88 17.32 14% -0% - 20.00 20.27 20.58 12% -0% -Smurfit Kappa Group PLC (IEUR 7.78 1,701 8 -4 % 3 % 8 % 9 10 11 0.26 0.53 0.83 31% -5% -5% 1.15 1.46 1.69 17% - -2%Temple-Inland Inc. USD 20.89 1,644 10 1 % 14 % -2 % 23 26 33 0.85 0.90 0.93 -28% -8% - 1.35 1.79 2.30 -11% -9% -Tissue & Other PaperKimberly-Clark Corp. USD 61.86 18,415 15 -2 % -7 % -2 % 60 67 74 4.36 4.55 4.78 -1% -2% - 4.90 5.06 5.27 -4% -4% -Procter & Gamble Co. USD 64.57 131,944 25 0 % 4 % 3 % 62 71 76 4.11 4.11 4.11 -0% - - 3.95 3.99 4.04 -1% 1% -SCA SEK 103.20 7,840 19 1 % 1 % 14 % 107 120 135 7.58 8.72 9.35 8% 4% - 8.77 10.43 11.48 2% -2% -Schweitzer-Mauduit InternatUSD 65.06 856 5 2 % 7 % 14 % 65 78 96 4.25 4.29 4.35 -7% - - 4.75 5.22 6.00 -4% - -Wausau Paper Corp. USD 8.49 304 4 2 % -1 % -4 % 9 11 13 0.42 0.43 0.44 -23% -9% - 0.55 0.60 0.65 -17% -12% -

Median, Diversified Groups 2,189 14 2 % -3 % 16 % 19% 7% - 24% -2% -Median, Plantations, Wood & Pulp 6,141 9 5 % 7 % -5 % -11% 1% - -18% -11% -Median, Graphic Paper 1,316 13 4 % 15 % 26 % 45% 21% - 14% 6% -Median, Packaging 1,701 10 1 % 7 % 4 % 2% - - 2% - -Median, Tissue & Other Paper 7,840 15 1 % 1 % 3 % -1% - - -4% -2% -

Source: FactsetData as of 10.11.2010

26



Trading multiples (DnB NOR Markets estimates)

Prices as of close 10.11.10 Local Shrs EV / EBITDA EV / EBIT P/E adj. Price / bookName Rec. price (m) 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012

Holmen SELL…on last price SEK 213.90 62.1 1,947 7.6x 6.4x 5.1x 14.6x 12.5x 8.7x 25.4x 18.6x 13.4x 0.91x 0.90x 0.86x...on DNM target SEK 190.00 1,729 7.0x 5.9x 4.6x 13.4x 11.5x 7.9x 22.6x 16.5x 11.9x 0.82x 0.81x 0.78x

Norske Skog SELL…on last price NOK 11.45 189.9 269 8.6x 5.9x 4.1x n.m. n.m. 27.9x n.m. n.m. 7.6x 0.28x 0.31x 0.31x...on DNM target NOK 6.00 141 7.8x 5.3x 3.6x n.m. n.m. 24.6x n.m. n.m. 4.0x 0.16x 0.18x 0.17x

SCA HOLD…on last price SEK 103.20 603.6 7,840 6.4x 5.7x 5.5x 11.9x 9.1x 9.0x 11.3x 10.2x 10.9x 0.90x 0.85x 0.82x...on DNM target SEK 110.00 8,356 6.6x 5.9x 5.7x 12.4x 9.5x 9.4x 12.0x 10.9x 11.6x 0.96x 0.91x 0.87x

Stora Enso BUY…on last price EUR 7.37 612.4 5,837 5.7x 4.9x 4.5x 9.9x 8.1x 7.5x 9.1x 9.7x 9.3x 1.09x 1.02x 0.96x...on DNM target EUR 9.00 7,128 6.5x 5.6x 5.3x 11.3x 9.3x 8.7x 11.1x 11.8x 11.4x 1.26x 1.19x 1.12x

UPM BUY…on last price EUR 12.24 520.0 6,364 7.0x 5.9x 5.3x 14.0x 11.3x 10.0x 14.4x 12.1x 11.3x 1.10x 1.05x 1.00x...on DNM target EUR 15.00 7,800 8.0x 6.8x 6.2x 16.0x 13.1x 11.7x 17.7x 14.8x 13.9x 1.30x 1.26x 1.20x

Median on last price 7.1x 5.7x 4.9x 12.6x 10.3x 12.6x 15.1x 12.6x 10.5x 0.85x 0.83x 0.79x

Median on DNM target 7.2x 5.9x 5.1x 13.3x 10.9x 12.5x 15.8x 13.5x 10.5x 0.90x 0.87x 0.83x

MCap. (EURm)Curr.

27



Agenda

Case: Newsprint

Key considerations

Valuation


Appendix

28



Changes to estimates and recommendations

Main changes

• Norske Skog PT down from NOK 8 to NOK 7

• Stora Enso PT down from EUR 5.00 to EUR 4.60, recommendation changed from Sell to Hold

Revenue(million) New estimates Old estimates ChangeCompany Curr. 2010 2011 2012 2010 2011 2012 2010 2011 2012Holmen SEK 17,067 18,067 18,894 17,200 18,317 19,199 -133 -250 -305Norske Skog NOK 18,848 19,493 19,884 18,382 18,491 18,777 466 1,002 1,107SCA NOK 109,891 113,489 115,217 110,993 114,207 115,984 -1,102 -718 -767Stora Enso € 10,211 9,703 9,618 9,106 8,647 8,536 1,105 1,056 1,081UPM € 8,900 8,904 8,923 8,791 8,766 8,787 109 138 136

EBITDA(million) New estimates Old estimates ChangeCompany Curr. 2010 2011 2012 2010 2011 2012 2010 2011 2012Holmen SEK 2,516 2,830 3,283 2,395 2,825 3,146 121 5 137Norske Skog NOK 1,295 1,716 2,141 1,461 1,801 2,227 -166 -85 -86SCA SEK 15,926 17,385 17,422 15,330 17,119 17,226 595 266 195Stora Enso € 1,256 1,392 1,400 808 992 980 447 400 420UPM € 1,411 1,572 1,587 1,268 1,357 1,792 143 215 -205

EPS adj.New estimates Old estimates Change

Company Curr. 2010 2011 2012 2010 2011 2012 2010 2011 2012Holmen SEK 8.42 11.50 15.98 7.58 11.28 14.66 0.84 0.22 1.32Norske Skog NOK -3.21 -3.53 1.50 -2.54 -2.99 1.86 -0.67 -0.54 -0.36SCA SEK 9.16 10.11 9.45 8.19 9.48 9.17 0.97 0.63 0.28Stora Enso € 0.81 0.76 0.79 0.37 0.40 0.40 0.44 0.36 0.39UPM € 0.85 1.01 1.08 0.70 0.81 1.34 0.15 0.20 -0.26

Recommendation changesNew Old Change

Company Rec. PT Rec. PT Rec. PTHolmen SELL 190 HOLD 185 Downgrade + 5.00Norske Skog SELL 6.00 SELL 6.00 - -SCA HOLD 110 BUY 110 Downgrade -Stora Enso BUY 9.00 BUY 7.00 - + 2.00UPM BUY 15.00 BUY 13.00 - + 2.00

29



Changes to estimates

Main changes

• Only minor adjustments

PAPER SECTOR - HOLMEN

New estimates Old estimates ChangeSEKm 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E

Revenues 17,067 18,067 18,894 17,200 18,317 19,199 -133 -250 -305EBIT (ex ass.co's) 1,314 1,449 1,923 1,125 1,438 1,755 189 12 167Pre-tax profit 1,129 1,334 1,895 933 1,298 1,704 195 36 191Net profit 758 974 1,371 637 948 1,231 121 26 140

EBITDA margin 14.7% 15.7% 17.4% 13.9% 15.4% 16.4% -1 %p -0 %p -1 %p EBIT margin 7.7% 8.0% 10.2% 6.5% 7.8% 9.1% -1 %p -0 %p -1 %p Pre-tax margin 6.6% 7.4% 10.0% 5.4% 7.1% 8.9% -1 %p -0 %p -1 %p

EPS 9.02 11.59 16.33 7.58 11.28 14.66 1.44 0.31 1.67EPS adjusted 8.42 11.50 15.98 7.54 11.23 14.61 0.88 0.26 1.37

Revenue by segmentHolmen Paper 8,004 8,204 8,292 8,070 8,153 8,290 -66 51 1Iggesund Paperboard 4,766 4,649 4,850 4,686 4,693 4,896 81 -44 -47Holmen Skog 5,400 5,553 5,940 5,309 5,553 5,940 92 - -Holmen Energi 1,860 1,864 1,930 1,864 1,928 1,995 -3 -64 -65

EBIT by segment 11.11.10 12.08.10Holmen Paper -560 -336 -150 -606 -436 -409 47 99 259Iggesund Paperboard 793 710 800 699 775 867 94 -65 -67Holmen Skog 796 788 844 759 787 843 36 1 1Holmen Energi 489 470 508 477 503 542 12 -33 -34

EBIT margin by segmentHolmen Paper -7% -4% -2% -8% -5% -5% 1 %p 1 %p 3 %pIggesund Paperboard 17% 15% 16% 15% 17% 18% 2 %p -1 %p -1 %pHolmen Skog 15% 14% 14% 14% 14% 14% 0 %p 0 %p 0 %pHolmen Energi 26% 25% 26% 26% 26% 27% 1 %p -1 %p -1 %p

Source: DnB NOR Markets

30



Changes to estimates: 2011 EBITDA up 10%, 2012 up 7%

PAPER SECTOR - NORSKE SKOG

New estimates Old estimates ChangeNOKm 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E

Revenues 18,848 19,493 19,884 18,382 18,491 18,777 467 1,002 1,107EBITDA 1,295 1,716 2,141 1,461 1,801 2,227 -166 -85 -86EBIT -3,618 -425 313 -3,245 -344 398 -374 -81 -85Pre-tax profit -4,542 -1,189 -232 -4,412 -1,043 -122 -130 -146 -111Net prof it -3,589 -805 165 -3,496 -709 227 -93 -96 -62

EBITDA margin 6.9% 8.8% 10.8% 7.9% 9.7% 11.9% 1 %p 1 %p 1 %p EBIT margin -19.2% -2.2% 1.6% -17.7% -1.9% 2.1% 2 %p 0 %p 1 %p Pre-tax margin -24.1% -6.1% -1.2% -24.0% -5.6% -0.6% 0 %p 0 %p 1 %p

EPS -18.89 -4.24 0.87 -18.41 -3.73 1.20 -0.49 -0.50 -0.33EPS adjusted -3.21 -3.53 1.50 -2.54 -2.99 1.86 -0.67 -0.54 -0.36

Revenue by segmentNewsprint Europe 5,590 5,921 6,107 5,469 5,521 5,749 121 400 358Newsprint Ex-Europe 5,570 5,657 5,487 5,338 5,357 5,196 232 300 291Magazine 6,218 6,045 6,306 6,041 5,849 6,106 177 196 200

EBIT by segment 40493 40396Newsprint Europe -633 -452 -457 -515 -386 -362 -117 -66 -95Newsprint Ex-Europe 248 455 638 127 387 595 122 68 43Magazine -295 -144 221 -127 -69 288 -168 -75 -67

EBIT margin by segmentNewsprint Europe -11.3% -7.6% -7.5% -9.4% -7.0% -6.3% -2 %p -1 %p -1 %pNewsprint Ex-Europe 4.5% 8.1% 11.6% 2.4% 7.2% 11.4% 2 %p 1 %p 0 %pMagazine -4.7% -2.4% 3.5% -2.1% -1.2% 4.7% -3 %p -1 %p -1 %p

Key figures 40493 40032NIBD -9,022 -7,936 -6,563 -8,479 -7,242 -5,793 -544 -694 -770Net interest cost -789 -768 -550 -773 -714 -535 -16 -54 -15Capex (net) -528 -546 -557 -515 -518 -526 -13 -28 -31Change, W orking Cap. 381 -35 -62 -40 -75 -61 421 40 -1Source: DnB NOR Markets

31



Changes to estimates: 2011 and 2012 EBIT up 3%

PAPER SECTOR - SCA

New estimates Old estimates ChangeSEKm 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E

Revenues 109,891 113,489 115,217 110,993 114,207 115,984 -1,102 -718 -767EBITDA 15,926 17,385 17,422 15,440 17,119 17,226 486 266 195EBIT 8,550 10,779 10,601 8,100 10,513 10,406 450 266 195Pre-tax profit 7,538 9,824 9,236 6,895 9,323 9,076 643 501 160Net profit 5,500 7,100 6,656 4,945 6,701 6,506 555 398 151

EBIT margin 7.8% 9.5% 9.2% 7.3% 9.2% 9.0% 0 %p 0 %p 0 %p Pre-tax margin 6.9% 8.7% 8.0% 6.2% 8.2% 7.8% 1 %p 0 %p 0 %p

EPS 7.83 10.11 9.48 7.04 9.54 9.26 0.79 0.57 0.21EPS adjusted 9.16 10.11 9.45 8.19 9.48 9.17 0.96 0.63 0.28

Revenue by segmentPersonal Care 25,365 26,887 27,424 26,311 27,890 28,447 -946 -1,003 -1,023Tissue 40,312 42,086 42,928 41,461 43,285 44,151 -1,149 -1,199 -1,223Packaging 29,712 30,694 31,645 28,540 28,704 29,593 1,172 1,990 2,052Forest Products 16,854 16,185 15,765 16,433 16,273 15,849 421 -88 -85

EBIT by segment 11.11.10 27.04.10Personal Care 2,974 3,509 3,563 3,144 3,777 3,788 -170 -269 -224Tissue 3,098 3,221 3,193 3,200 3,933 3,775 -102 -712 -582Packaging 1,505 2,277 2,342 1,040 1,571 1,708 465 706 634Forest Products 2,383 2,288 2,028 1,922 1,721 1,623 461 567 406

Publication Products -101 335 275 60 396 343 -160 -61 -68Pulp, Timber & Wood 2,484 1,953 1,753 1,863 1,325 1,280 621 628 474

Other -1,410 -515 -525 -1,205 -489 -486 -205 -27 -38

EBIT margin by segmentPersonal Care 11.7% 13.0% 13.0% 11.9% 13.5% 13.3% -0 %p -0 %p -0 %pTissue 7.7% 7.7% 7.4% 7.7% 9.1% 8.5% -0 %p -1 %p -1 %pPackaging 5.1% 7.4% 7.4% 3.6% 5.5% 5.8% 1 %p 2 %p 2 %pForest Products 14.1% 14.1% 12.9% 11.7% 10.6% 10.2% 2 %p 4 %p 3 %p

Source: DnB NOR Markets

32




PAPER SECTOR - STORA ENSO

New estimates Old estimates ChangeEURm 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E

Revenues 10,211 9,703 9,618 9,106 8,647 8,536 1,105 1,056 1,081EBITDA 1,256 1,392 1,400 808 992 980 447 400 420EBIT (ex NRI) 711 889 900 302 495 490 408 394 410EBIT 728 837 848 301 419 414 426 418 435Pre-tax profit 701 767 800 262 331 334 439 436 466Net profit 571 549 573 205 238 240 366 312 333

Net profit adj. 640 601 624 295 314 316 345 287 308

EBITDA margin 12.3% 14.3% 14.6% 8.9% 11.5% 11.5% 3 %p 3 %p 3 %p EBIT ex NRI margin 7.0% 9.2% 9.4% 3.3% 5.7% 5.7% 4 %p 3 %p 4 %p Pre-tax margin 6.9% 7.9% 8.3% 2.9% 3.8% 3.9% 4 %p 4 %p 4 %p

EPS 0.73 0.70 0.73 0.26 0.30 0.31 0.47 0.40 0.43EPS adjusted 0.81 0.76 0.79 0.37 0.40 0.40 0.44 0.36 0.39Dividend per share 0.20 0.20 0.20 0.20 0.20 0.09 - - 0.11

NRI -69 -52 -52 -90 -76 -76 21 24 24

Revenue by segmentNewsprint and Book Paper 1,238 1,307 1,281 1,048 1,043 1,022 190 264 259Magazine Paper 2,042 2,092 2,118 1,816 1,850 1,873 226 242 245Fine Paper 2,147 2,205 2,236 1,689 1,748 1,773 458 457 464Consumer Board 2,270 2,330 2,376 2,250 2,356 2,403 20 -27 -27Industrial Packaging 948 971 991 861 908 927 87 63 64

EBIT by segment (ex NRI) 11.11.10 21.05.10Newsprint and Book Paper -2 60 25 -68 -83 -113 66 143 138Magazine Paper 117 210 258 74 148 169 43 62 89Fine Paper 234 248 301 48 84 105 186 165 196Consumer Board 290 267 236 334 425 397 -44 -157 -161Industrial Packaging 64 66 71 24 85 115 39 -18 -45

EBIT margin by segmentNewsprint and Book Paper -0.2% 4.6% 2.0% -6.5% -8.0% -11.1% 6 %p 13 %p 13 %pMagazine Paper 5.7% 10.1% 12.2% 4.1% 8.0% 9.0% 2 %p 2 %p 3 %pFine Paper 10.9% 11.3% 13.4% 2.8% 4.8% 5.9% 8 %p 6 %p 8 %pConsumer Board 12.8% 11.5% 9.9% 14.8% 18.0% 16.5% -2 %p -7 %p -7 %pIndustrial Packaging 6.7% 6.8% 7.1% 2.8% 9.3% 12.4% 4 %p -2 %p -5 %pSource: DnB NOR Markets

33




PAPER SECTOR - UPM

New estimates Old estimates ChangeEURm 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E

Revenues 8,900 8,904 8,923 8,791 8,766 8,787 108 139 135EBITDA 1,411 1,572 1,587 1,268 1,357 1,792 143 214 -205EBIT 710 813 845 613 689 1,051 97 124 -206Pre-tax profit 610 742 804 539 638 998 71 105 -194Net profit 518 538 583 440 459 719 78 79 -136

EBITDA margin 15.9% 17.6% 17.8% 14.4% 15.5% 20.4% -1 %p -2 %p 3 %p EBIT margin 8.0% 9.1% 9.5% 7.0% 7.9% 12.0% -1 %p -1 %p 2 %p Pre-tax margin 6.9% 8.3% 9.0% 6.1% 7.3% 11.4% -1 %p -1 %p 2 %p

EPS 1.00 1.04 1.12 0.85 0.88 1.38 0.15 0.15 -0.26EPS adjusted 0.85 1.01 1.08 0.70 0.81 1.34 0.15 0.21 -0.26Dividend per share 0.50 0.50 0.41 0.50 0.50 0.41 - - -0.00

Revenue by segmentEnergy 545 535 664 518 506 526 27 28 138Pulp 1,743 1,178 995 1,598 1,140 1,153 145 38 -158Forest and Timber 1,502 1,628 1,673 1,465 1,541 1,545 37 88 128Paper 6,289 6,743 6,745 6,084 6,342 6,344 205 401 401Label 1,114 1,157 1,174 1,089 1,096 1,069 25 61 105

EBIT by segment 11.11.10 04.08.10Energy 215 195 276 190 177 184 25 18 92Pulp 592 269 186 449 270 271 144 -1 -85Forest and Timber 183 177 212 139 129 130 44 48 82Paper -255 91 119 -155 100 12 -100 -9 107Label 108 140 124 87 62 28 21 79 96

EBIT margin by segmentEnergy 39.5% 36.5% 41.6% 36.7% 34.9% 35.0% 3 %p 2 %p 7 %pPulp 34.0% 22.9% 18.7% 28.1% 23.7% 23.5% 6 %p -1 %p -5 %pForest and Timber 12.2% 10.9% 12.7% 9.5% 8.4% 8.4% 3 %p 2 %p 4 %pPaper -4.1% 1.4% 1.8% -2.5% 1.6% 0.2% -2 %p -0 %p 2 %pLabel 9.7% 12.1% 10.6% 8.0% 5.6% 2.7% 2 %p 7 %p 8 %pSource: DnB NOR Markets

34



Agenda

Case: Newsprint

Key considerations

Valuation


Appendix

35



P/B: Except NSG, the shares trade very close around 0.90-1.05x

Holmen vs rebased peers from nov 1994Rebased to price per 18.11.1994

#REF!

-

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

nov

94

nov

95

nov

96

nov

97

nov

98

nov

99

nov

00

nov

01

nov

02

nov

03

nov

04

nov

05

nov

06

nov

07

nov

08

nov

09

P/B

Holmen Norske Skog SCA Stora Enso UPM

Average

CompanyLast,

10.11.10 1 yearnov 94 -

nov 10Holmen 1.05x 0.98x 1.17xNorske Skog 0.24x 0.18x 0.77xSCA 0.98x 0.97x 1.17xStora Enso 0.99x 0.88x 1.05xUPM 0.90x 0.81x 1.10xAverage 0.83x 0.76x 1.05x

Last vs average

Company 1 yearnov 94 -

nov 10Holmen 107 % 90 %Norske Skog 134 % 31 %SCA 101 % 84 %Stora Enso 114 % 95 %UPM 111 % 81 %Average 113 % 76 %

36



5-yr CDS: NSG still considered most risky

0

200

400

600

800

1,000

1,200

1,400

1,600

12-2

006

03-2

007

06-2

007

09-2

007

12-2

007

03-2

008

06-2

008

09-2

008

12-2

008

03-2

009

06-2

009

09-2

009

12-2

009

03-2

010

06-2

010

09-2

010

basi

s po

ints

NSGStora EnsoUPMSCAM-real

Last, AverageComp. 05.11.10 1 yr 5 yrM-real 451 733 1,129NSG 790 1,065 712SCA 72 84 86STERV 257 321 250UPM 257 280 209

37



DISCLAIMER AND STATEMENT THAT AFFECTS YOUR RIGHTS

This report must be seen as marketing material unless the criteria for preparing investment research, according to the Norwegian Securities Trading Regulation 2007/06/29 no. 876, are met. This report has been prepared by DnB NOR Markets, a division of DnB NOR Bank ASA. The report is based on information obtained from public sources that DnB NOR Markets believes to be reliable but which DnB NOR Markets has not independently verified, and DnB NOR Markets makes no guarantee, representation or warranty as to its accuracy or completeness. Any opinions expressed herein reflect DnB NOR Markets’ judgment at the time the report was prepared and are subject to change without notice. Confidentiality rules and internal rules restrict the exchange of information between different parts of DnB NOR Markets/DnB NOR Bank ASA and this may prevent employees of DnB NOR Markets who are preparing this report from utilizing or being aware of information available in DnB NOR Markets/DnB NOR Bank ASA which may be relevant to the recipients’ decisions. This report is not an offer to buy or sell any security or other financial instrument or to participate in any investment strategy. No liability whatsoever is accepted for any direct or indirect (including consequential) loss or expense arising from the use of this report. Distribution of research reports is in certain jurisdictions restricted by law. Persons in possession of this report should seek further guidance regarding such restrictions before distributing this report. Please contact DnB NOR Markets at +47 22 94 82 72 for further information and inquiries regarding this report, such as ownership positions and publicly available/commonly known corporate advisory performed by DnB NOR Markets etc, in relation to the Norwegian Securities Trading Act 2007/06/29 no. 75 and the Norwegian Securities Trading Regulation 2007/06/29 no. 876. This report is for clients only, and not for publication, and has been prepared for information purposes only by DnB NOR Markets - a division of DnB NOR Bank ASA registered in Norway number NO 984 851 006 (the Register of Business Enterprises) under supervision of the Financial Supervisory Authority of Norway (Finanstilsynet), Monetary Authority of Singapore, and on a limited basis by the Financial Services Authority of UK. Information about DnB NOR Markets can be found at dnbnor.no.Additional information for clients in Singapore: This report has been distributed by the Singapore branch of DnB NOR Bank ASA. 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To the extent that this report is being furnished, or will be disseminated, to non-Major U.S. Institutional Investors, such distribution is being made by DnB NOR Markets, Inc., a separately incorporated subsidiary of DnB NOR that is a U.S. broker-dealer and a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. Any U.S. recipient of this report seeking to obtain additional information or to effect any transaction in any security discussed herein or any related instrument or investment should call or write DnB NOR Markets, Inc., 200 Park Avenue, New York, NY 10166-0396, telephone number 212-681-3800 or fax 212-681-4119. In Canada: This email, and any materials attached with it, has been distributed in reliance on the International Dealer Exemption pursuant to NI 31-103 subsection 8.18(2) and subsection 8.18(4)(b). Please be advised that: 1. DnB Nor Bank ASA (DnB NOR Markets) and DnB NOR Markets, Inc. are not registered in Canada. 2. DnB Nor Bank ASA (DnB NOR Markets) and DnB NOR Markets, Inc's jurisdiction of residence is Norway and the United States, respectively. 3. The name and address of the agent for service of process for DnB Nor Bank ASA (DnB NOR Markets) and DnB NOR Markets, Inc. in the local jurisdiction is: Alberta: Blake, Cassels & Graydon LLP, Attention: Pat Finnerty/Ross Bentley, 855 – 2nd Street S.W., Suite 3500, Bankers Hall East Tower, Calgary, AB T2P 4J8. British Columbia: BlakesVancouver Services, Inc., 595 Burrard Street, P.O. Box 49314, Suite 2600, Three Bentall Centre, Vancouver, BC V7X 1L3. Labrador: Stewart McKelvey, Cabot Place, 100 New Gower Street, Suite 1100, P.O. Box 5038, St. John’s, NL A1C 5V3. Manitoba: Aikins, MacAulay & Thorvaldson LLP, 30th Floor, Commodity Exchange Tower, 360 Main Street, Winnipeg, MB R3C 4G1. Newfoundland: Stewart McKelvey, Cabot Place, 100 New Gower Street, Suite 1100, P.O. Box 5038, St. John’s, NL A1C 5V3. New Brunswick: Stewart McKelvey, 10th Floor, Brunswick House, 44 Chipman Hill, Saint John, NB E2L 4S6. Nova Scotia: Stewart McKelvey, Purdy’s Wharf Tower One, 1959 Upper Water Street, Suite 900, P.O. Box 997, Halifax, NS B3J 2X2. Ontario: Blakes Extra-Provincial Services Inc., Suite 2800, 199 Bay Street, Toronto, Ontario M5L 1A9. Prince Edward Island: Stewart McKelvey, 65 Grafton Street, Box 2140, Charlottetown, PE C1A 8B9. Quebec: Services Blakes Quebec Inc., 600 de Maisonneuve Boulevard Ouest, Suite 2200, Tour KPMG, Montreal, QC H3A 3J2. Saskatchewan: MacPherson, Leslie & Tyerman LLP, 1500 Continental Bank Building, 1874 Scarth Street, Regina, SK S4P 4E9. Northwest Territories: Gerald Stang, Suite 201, 5120-49 Street, Yellowknife, NT X1A 1P8. Yukon: Grant Macdonald, Macdonald & Company, Suite 200, Financial Plaza, 204 Lambert Street, Whitehorse, YK Y1A 3T2. Nunavut: Terry Gray, P.O. Box 1779, Building 1088C, Iqaluit, NU X0A0H0. 4. There may be difficulty enforcing legal rights against DnB NOR Bank ASA (DnB NOR Markets) and DnB NOR Markets, Inc. because each is a resident outside of Canada and all or substantially all of their assets may be situated outside of Canada.

pulp & paper 2010 q3 update

Economy & Finance

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short holmen