q1/2013 interim review, investor presentation

Financial Results Q1 2013 CEO Jouko Karvinen and CFO Karl-Henrik Sundström

23 April 2013

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.

Stora Enso Q1 2013 Financial Results 23 April 2013 2

Q1 Performance as expected in a structurally declining

European paper market

• Operational EBIT EUR 118 million

• Cash flow from Operations EUR 101

million

• Liquidity EUR 1.7 billion

• Operational ROCE % 5.4

23 April 2013 Stora Enso Q1 2013 Financial Results 3

Low operational EBIT due to Printing & Reading

performance Cash Flow from Operations


*Operational EBIT comprises the operating profit excluding NRI and fair valuations of the segments and Stora Enso’s share of the operating

profit excluding NRI and fair valuations of its equity accounted investments (EAI). Fair 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 EAI.

Seasonally higher working capital Q2 2010 – Q1 2013

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


Higher wood inventories (EUR 50 million)

Higher trade receivables (EUR 120 million)

European paper* demand 2007–2013/Mar 2007/Jan = 100%

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

Source: EuroGraph & PPPC

SA = seasonally adjusted


European Paper Capacity utilization rates after capacity

closures 31 March 2013


* Potential restart of Alizay mill not taken into account (Jun-2013)

Time to rethink structures Focus, simplification and clarity

• Plan to create a platform for transformation – Divisions with clear accountability focusing on growth and cost

competitiveness

– Simplified corporate structures

• Driving towards a value creating growth markets

renewable materials company

• Expected cost savings of some EUR 200 million* – Full impact starting from Q2 2014


*including a EUR 30 million reduction in Building and Living

Rethink organisation

• Building and Living with Printing and Reading to one Division

planned

– Led by Karl-Henrik Sundström, currently Chief Financial Officer

• The leadership of Renewable Packaging and Biomaterials

remains unchanged

• Divisions and corporate functions planned to go through

organisational streamlining.

• Plan for further outsourcing alternatives in group shared

services and sale of non-core assets.

• Divisional changes planned to be effective 1 July, 2013


Guangxi, China preparations going forward Plantation-based integrated board and pulp mills project

• The project approval is still pending at NDRC

in Beijing and we follow the development of the

approval process on regular basis

• Preparations proceeding:

– Wood supply ramp up and training for running

mechanized harvesting

– Detailed technical and commercial discussions

with main machinery suppliers in progress, no

commercial commitments nor supplier selections

– Key position holders in place and next level

recruitments planned


Ostroleka

Investment started up in Jan 2013

Bulleh Shah JV

Delayed and expected to be completed during Q2/2013

Montes del Plata

Commissioning of the main equipment initiated and start-up process during Q3/2013

Strategic investments proceeding Ostroleka, Bulleh Shah, and Montes del Plata


Business Area ROOC, % Excl. and incl. strategic projects Montes del Plata, Ostroleka and Guangxi

Renewable Packaging Biomaterials


Summary financials Q1 2013

EUR million Q1/13 Q4/12 Q1/12 Change % Change %

Q1 13 / Q1 12 Q1 13 / Q4 12

Sales 2 667 2 727 2 673 -0.2 -2.2

Operational EBITDA 240 276 265 -9.4 -13.0

Operational EBITDA, % 9.0 10.1 9.9 -9.1 -10.9

Operational EBIT 118 158 150 -21.3 -25.3

Operational EBIT margin, % 4.4 5.8 5.6 -21.4 -24.1

Profit before tax excl. NRI 55 83 101 -45.5 -33.7

EPS excl. NRI, EUR 0.07 0.11 0.10 -30.0 -36.4

EPS (basic), EUR -0.02 0.33 0.09 -122.2 -106.1

Operational ROCE, % 5.4 7.3 6.9 -21.7 -26.0

Operational ROCE, % excl. transformation

investments 6.2 8.8 7.8 -20.5 -29.5

Cash Flow from Operations 101 473 223 -54.7 -78.6

Net debt/last 12 months’ operational

EBITDA 2.7 2.5 2.3 17.4 8.0


Group Variance – Operational EBIT

Q1 2012 vs Q1 2013 Q4 2012 vs Q1 2013


Guidance for Q2 2013

• Compared to Q1 2013:

– Sales slightly higher

– Operational EBIT in

line or slightly higher

than Q1 2013


Strategic projects financial impact

• Ostroleka PM5 – Immaterial impact to Group Sales, mainly used as internal raw material

– EBITDA margin at approximately 20% from H2 2013

• Montes del Plata – Group Sales impact 2013 limited and slightly negative Operational EBIT

impact

– Group Sales impact 2014 with 650 000 tons (Stora Enso share)

– Full positive EBITDA impact in the latter part of 2014 provided that the

current market conditions prevail


Summary

• Transformation continues

• Short term focus:

– Plan to create a platform for

transformation

• Divisions with clear accountability focusing

on growth and cost competitiveness

• Simplified corporate structures

• EUR 200 million cost savings planned

– Montes del Plata has initiated the

commissioning of the main equipment and

expects to begin the mill start-up process

during Q3/2013

– Bulleh Shah to be completed in Q2/2013

– Cash flow and liquidity


Timeline for the restructuring announcements in 2013


February 2013

Announcement of Hylte PM 2 and Kvarnsveden PM 11 closures EUR 24

million

February 2013

Building & Living EUR 30 million

April 2013

Business structure and organisation EUR 200 million

(out of which EUR 30 million B&L)

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14

► Full impact Impact starts ►

Impact starts ►

Impact starts ►

► Full impact

► Full impact

Permanent pulp, paper and board capacity reductions since 2006

23 April 2013 Stora Enso Q1 2013 Financial Results

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

Hylte PM1 Dec 2012 Newsprint 180 000

Total 3 220 000

20

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

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

Kopparfors Sawmill End 2011 310 000

Total 1 900 000

21

Operational EBIT by segments

EUR million Q1/13 Q4/12 Q1/12 Change % Change %

Q1 13 / Q1 12 Q1 13 / Q4 12

Printing and Reading 2 59 68 -97.1 -96.6

% of sales 0.2 4.9 5.5 -96.4 -95.9

Biomaterials 22 28 7 214.3 -21.4

% of sales 8.6 10.9 2.9 196.6 -21.1

Building and Living 4 7 10 -60.0 -42.9

% of sales 0.9 1.5 2.6 -65.4 -40.0

Renewable Packaging 68 55 62 9.7 23.6

% of sales 8.3 6.9 8.0 3.8 20.3

Other 22 9 3 n/m 144.4

% of sales 3.1 1.3 0.4 n/m 138.5


Net Financial Items

EUR million Q1/2013 Q4/2012 Q1/2012 Change %

Q113/Q112

Change %

Q113/Q412

Net interest expense -50 -47 -38 -32 -6

Foreign exchange gains and losses -5 -1 8 n/m n/m

Other financial items. of which -1 -2 -7 86 50

PIK notes 3 3 2

Fair valuation of interest rate derivatives* 2 -9 -3

Fair valuation of long-term debt -1 - -1

NewPage lease provision - 11 14

Pension costs (IAS 19R) -3 -3 -3

Other items -2 -4 -16

Total net financial items -56 -50 -37 -51 -12

*Not hedge accounted interest rate derivatives.


Transaction risk and hedges as at 31 March 2013

Operational EBIT: Currency strengthening of + 10 % EUR million

USD 111

SEK -91

GBP 54

EUR million USD SEK GBP

Estimated annual net operating cash flow exposure 1 110 -910 540

Transaction hedges as at 31 Mar 2013 -550 420 -280

Hedging percentage as at 31 Mar 2013 for the next 12 months 50 46 52

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 GBP hedges for 13-15 months increase the hedging percentages by 2 %.


Capital expenditure and depreciation Q1 2008 – Q1 2013


Curtailments of capacity


Softwood pulp prices Stora Enso’s market pulp is softwood

Source: FOEX


Wood prices in Sweden

Pulpwood includes pine. spruce and birch.

Sawlogs include pine and spruce.

Source: SDC. Skogsstyrelsen


Paper for Recycling prices

German RCP price development. free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso


Maturity profile Q1 2013


Energy balance* Q1 2013

Impact** on operating profit from

10 change in: EUR million p.a.

Electricity market price ~7

Fossil fuel price ~13

**) Remaining impact on non-hedged volume


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

31

Stora Enso Electricity procurement* Q1 2013


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

32 32

q1/2013 interim review, investor presentation

Documents

financial results q1

adjustedstora enso q1

livingstora enso q1

financial condition

q1 performance

actual results

chief financial officer

operations eur