stora enso financial result q1 2015

Financial Results for Q1 2015

CEO Karl-Henrik Sundström and CFO Seppo Parvi 22 April 2015

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 2015 Results 2 22 April 2015

Solid quarter supported by FX tailwinds Q1 2015 year-on-year

• Sales decreased by 3%

– Sales excluding the structurally

declining paper and divested

businesses increased by 3% mainly

due to Montes del Plata ramp-up

• Operational EBIT EUR 220 million

– 21% increase due to FX gains and

lower costs

• Net debt to EBITDA 2.6 (2.8)

• Operational ROCE 10.1% (8.6%)

– Excluding transformational

investment project 11.3%

22 April 2015 Stora Enso Q1 2015 Results 3

Operational EBIT increased by 21% in Q1 y-o-y


MEUR

+17

+220

+182

+52

0

50

100

150

200

250

15Q1Other

-5

Paper

-17

Wood Products

-5

BiomaterialsPackaging

Solutions

-4

Consumer Board14Q1

Sensitivity analysis 10% change, impact on operational EBIT


10% increase in Impact*

Market pulp price, total Positive EUR 120 million

*Impact on operational EBIT for the next twelve months.

An increase of energy, wood or chemical and filler prices or decrease of pulp prices, as well as weakening of

the currencies would have the opposite impact.

10% decrease in Impact*

Energy prices Positive EUR 8 million

Wood prices Positive EUR 173 million

Chemical and filler prices Positive EUR 66 million

10% strengthening against Euro

in the value of Impact*

US dollar Positive EUR 116 million

Swedish krona Negative EUR 82 million

British pound Positive EUR 46 million

Guangxi proceeding as planned


Transformation in Progress Consumer Board

Guangxi consumer board mill

• 800 MEUR (phase one), increase of 40

MEUR due to FX rates

• Construction of the consumer board mill

is in full speed

• Start up in mid-2016

Investment in Imatra mills

• 27 MEUR to improve quality and cost-

competitiveness

• Increases consumer board capacity by

20 000 tonnes

• Start up in Sep 2015


Transformation in Progress Packaging Solutions and Wood Products

Varkaus conversion

• 110 MEUR for conversion

• EBITDA margin above 15%

• Capacity 390 000 tonnes of

kraftliner

• Uncoated fine paper capacity

to reduce by 280 000 tonnes

• Start up Q4 2015

Murow Sawmill

• 28 MEUR to modernise and

develop Murow Sawmill in

Poland

• Increases consumption of

Polish saw logs

• Capacity increase to

140 000 m³/shift/year



Wooden elements

• 43 MEUR investment in a new

production line for wooden

building elements

• Based on peeling technology

• Yearly capacity ~100 000 m3

• Sales 50 MEUR, ROOC >13%


Transformation in Progress Biomaterials


Montes del Plata

• Total investment 1 721

MEUR, of which Stora Enso’s

50% share 850 MEUR

• Annual capacity 1.3 million

tonnes, Stora Enso’s 50%

share 650 000 tonnes

• Ramp-up proceeding

according to plan

Virdia & demonstration plant

• Virdia acquisition 17 MEUR with

potential payouts maximum of

21 MEUR by 2017

• The construction of 32 MEUR

Xylose Demo Plant in the US is

proceeding well and on schedule

Sunila Mill

• Biorefinery investment

32 MEUR completed

• Lignin extracted from

the black liquor

• Commercialization is

expected to begin in

the second half of 2015

70 %

12 %

21 %

-3 %

8 %

33 %

7 %

48 %

4 %

37 %

14 %16 %

32 %

2 %

30 %

70 %

Paper Growth businesses

62 %

6 %

35 %

-3 %

63%

92%

30%

38%

In 2006, all pulp used internally

Q1/2015 Operational EBIT 2006 Operational EBIT

Transformation journey continues Growth businesses with 63% of sales and 92% of operational EBIT

2006 Sales


Q1/2015 Sales 20XX Sales

Summary financials Q1 2015

EUR million

Q1/15

Q1/14

Change% Change %

Q1 15 /

Q1 14 Q4/14

Q1 15 /

Q4 14

Sales 2 491 2 568 -3.0% 2 552 -2.4%

Operational EBITDA 340 302 12.6% 308 10.4%

Operational EBITDA, % 13.6% 11.8% 12.1%

Operational EBIT 220 182 20.9% 209 5.3%

Operational EBIT margin, % 8.8% 7.1% 8.2%

Profit before tax excl. NRI 154 106 45.3% 32 n/m

EPS excl. NRI, EUR 0.15 0.09 0.06

EPS (basic), EUR 0.16 0.13 -0.15

Operational ROCE, % 10.1% 8.6% 9.7%

Operational ROCE, % excl. transformation

projects 11.3% 10.9% 13.1%

Cash Flow from Operations 171 152 12.5% 442 -61.3%

Net debt/last 12 months’ operational

EBITDA 2.6 2.8 2.6

11 Stora Enso Q1 2015 Results 22 April 2015

• Net FX impact of 64 MEUR mainly due to a stronger US dollar and a weaker Brazilian real

• Approximately 40 MEUR of this relates to Biomaterials division

• Stora Enso is primarily a euro and Swedish crown cost based company

• Selling significant volumes in other currencies such as the US dollar and British

pound causes material impacts on operational EBIT through price and currency

movements

+220+2+26

+32

+74+182

0

20

40

60

80

100

120

140

160

180

200

220

240

15Q1OtherFixed costsFX on salesLocal sales

price and mix

-86

14Q1 Variable costs

-10

Fx on costs

Net FX of EUR 64 million year-on-year


MEUR

Cash flow from operations and balance sheet strength Q1 2013 – Q1 2015

Stora Enso Q1 2015 Results 13

*Last twelve months’ operational EBITDA

22 April 2015

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

50

100

150

200

250

300

350

400

450

500

13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1

Cash flow from operations, MEUR Cash flow to sales

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

2 900

3 000

3 100

3 200

3 300

3 400

3 500

3 600

13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1

Net Debt, MEUR Net Debt to Operational EBITDA*

0

10

20

30

40

50

60

70

80

90

14Q1 15Q1

Operational EBIT, MEUR

0

100

200

300

400

500

600

14Q1 15Q1

Sales, MEUR

Consumer Board operational EBIT increased by 27% Q1 2015 year-on-year

14 Stora Enso Q1 2015 Results

• Sales increased to EUR 569 (EUR 564)

million due to higher board deliveries

• Operational EBIT improved 27% to EUR 79

(EUR 62) million

– Positive FX and lower costs

• Operational ROOC 17.3% (15.7%)

– Operational ROOC 30.0% (20.8%) excluding

Guangxi investment

22 April 2015

0.9%

27.4%

564 569

79

62

0

5

10

15

20

25

30

14Q1 15Q1

Operational EBIT excl. Corenso, MEUR

0

50

100

150

200

250

14Q1 15Q1

Sales excl. Corenso, MEUR

Packaging Solutions Q1 sales decreased due to

Corenso divestment Q1 2015 year-on-year


• Sales decreased to EUR 221 (EUR 267)

million due to Corenso divestment

– Excluding Corenso divestment the sales grew

1.2%

• Operational EBIT decreased to EUR 26

(EUR 30) million

– Excluding Corenso divestment operational

EBIT was flat

– Lower sales prices in local currencies and

lower variable costs

– Fixed costs and volumes were lower due to

Corenso divestment


• Maintenance in Q2: Ostrołęka

22 April 2015

1.2%

0%

219 221

26 26

0

10

20

30

40

50

60

70

80

14Q1 15Q1


0

50

100

150

200

250

300

350

400

14Q1 15Q1

Sales, MEUR

Biomaterials Q1 sales increased by 35% Q1 2015 year-on-year

• Sales increased to EUR 354 (EUR 263)

million mainly due to Montes del Plata

deliveries and FX impact

• Operational EBIT increased to EUR 73 (EUR

21) million

– FX impact of approximately 40 EUR million,

partly offset by lower USD based softwood

pulp prices

– Higher MdP volumes, partly offset by higher

depreciation and fixed costs

– MdP maintenance went as planned in Q1


• Maintenance in Q2: Veracel and Enocell


34.6%

247.6%

263

354

73

21

0

5

10

15

20

25

14Q1 15Q1


0

100

200

300

400

500

14Q1 15Q1

Sales, MEUR

Wood Products sales declined by 12% Q1 2015 year-on-year

• Sales declined by 12% to EUR 392

(EUR 445) million mainly due to lower

deliveries to Japanese and Middle East

market

• Operational EBIT decreased by 25% to

EUR 15 (EUR 20) million

– Lower production and delivery volumes

related to oversupply and lack of profitable

orders

– Fixed costs lower


• Curtailments 6% (3%)


-11.9%

-25.0%

445

20

15

392

0

200

400

600

800

1 000

1 200

14Q1 15Q1

Sales, MEUR

0

10

20

30

40

50

60

70

80

90

14Q1 15Q1

Operational EBITDA, MEUR

Paper cash flow to sales improved to 7% Q1 2015 year-on-year

• Sales declined by 9% to EUR 914 (EUR 999)

million

– Asset closures and demand decline

– Uetersen mill disposal completed in Q1 2015

• Operational EBITDA decreased by 28% to

EUR 61 (EUR 85) million

– Doubtful receivable provision of EUR 7 million

– Lower volumes

– Lower prices were partly offset by positive FX

impact

• Cash flow to sales improved from 1% to 7%

• Maintenance in Q2: Langerbrugge’s energy,

Oulu, Sachsen and Nymölla


-8.5%

-28.2%

914 999

85

61

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1

Cash flow from operations, MEUR Cash flow to Sales

Forecast for capex in 2015

EUR million Forecast 2015

Capital expenditure* 820–880

Depreciation 530–550

* The capital expenditure forecast includes EUR 110 million for biological assets and approximately

EUR 390 million for the project in Guangxi, China. The Guangxi forecast has increased by EUR 40

million due to the weakening of the euro against the Chinese Renminbi.


Guidance for Q2 2015 Compared to Q1 2015

• Q2 Sales are estimated to be

slightly higher than the Q1 amount

of EUR 2 491 million

• Q2 Operational EBIT is expected

to be in line with the Q1 amount of

EUR 220 million

• Q2 negative maintenance impact

is expected to be EUR 30 million

higher than in Q1

– Maintenance in Veracel, Enocell,

Ostrołęka, Oulu, Sachsen,

Nymölla, and at Langerbrugge

energy production in Q2


Summary Solid quarter supported by FX tailwinds

• Transformation in progress

• Sales excluding paper and

divested businesses increased by

3% y-o-y

• Operational EBIT 21% higher y-o-y

• Net debt to EBITDA 2.6 (2.8)

• Operational ROCE 10.1% (8.6%)


Capital Markets Day (CMD)

Welcome to CMD

on 28th of May 2015

in London


Operational EBIT by segments

EUR million Q1/15 Q1/14

Change % Change %

Q1 15 /

Q1 14

Q4/14

Q1 15 /

Q4 14

Consumer Board 79 62 27.4% 44 79.5%

% of sales 13.9% 11.0% 7.9%

Packaging Solutions 26 30 -13.3% 30 -13.3%

% of sales 11.8% 11.2% 11.4%

Biomaterials 73 21 247.6% 34 114.7%

% of sales 20.6% 8.0% 10.8%

Wood Products 15 20 -25.0% 10 50.0%

% of sales 3.8% 4.5% 2.4%

Paper 18 35 -48.6% 68 -73.5%

% of sales 2.0% 3.5% 6.9%

Other 9 14 -35.7% 23 -60.9%

% of sales 1.4% 2.0% 3.6%


Cash flow by divisions in Q1


-40

-20

0

20

40

60

80

Consumer Board PackagingSolutions

Biomaterials Wood Products Paper Other

Cash flow from operations, MEUR Cash flow after investments, MEUR

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

Hylte PM1 Dec 2012 Newsprint 180 000

Ostroleka PM2 Jan 2013 Containerboard 85 000

Hylte PM2 May 2013 Newsprint 205 000

Kvarnsveden PM11 May 2013 Newsprint 270 000

Veitsiluoto PM1 Apr 2014 Coated magazine 190 000

Corbehem MIll July 2014 LWC 330 000

Total 4 300 000

22 April 2015

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

Sollenau Sawmill Mar 2014 150 000

Total 2 050 000

22 April 2015

Net Financial Items


EUR million Q1/

2015

Q1/

2014

Change %

Q115/

Q114

Q4/

2014

Change %

Q115/

Q414

Net interest expense -48 -48 - -48 -

Foreign exchange gains and losses 6 -10 n/m -31 n/m

Other financial items. of which -11 -7 -57 -18 39

Fair valuation of interest rate derivatives* -2 -7 4

Fair valuation of long-term debt -1 - -

Pension costs (IAS 19R) -2 -3 -3

Other items -6 3 -19

Total net financial items -53 -65 18 -97 45

*Not hedge accounted interest rate derivatives.

Net cash flows and foreign exchange hedges Q1 2015


€ million USD SEK GBP

Estimated annual net operating cash flow exposure 1 160 -820 460

Transaction hedges as at 31 Mar 2015 -630 430 -240

Hedging percentage for the next 12 months 54% 52% 52%

0

2

4

6

8

10

12

14

16

Paper and Board Wood Products

Curtailments of capacity


% of the

capacity

22 April 2015

Pulp price development


Source: FOEX

22 April 2015

300

400

500

600

700

800

900

1 000

1 10007

Q1

07

Q2

07

Q3

07

Q4

08

Q1

08

Q2

08

Q3

08

Q4

09

Q1

09

Q2

09

Q3

09

Q4

10

Q1

10

Q2

10

Q3

10

Q4

11

Q1

11

Q2

11

Q3

11

Q4

12

Q1

12

Q2

12

Q3

12

Q4

13

Q1

13

Q2

13

Q3

13

Q4

14

Q1

14

Q2

14

Q3

14

Q4

15

Q1

US

D/tonne

Bleached softwood kraft pulp Bleached hardwood kraft pulp

Pulp sensitivity analysis 10% change in prices, impact on operational EBIT


10% increase in Impact*

Softwood pulp prices Positive EUR 45 million

Hardwood pulp prices Positive EUR 45 million

Fluff pulp prices Positive EUR 20 million

Dissolving pulp prices Positive EUR 10 million

Market pulp price, total Positive EUR 120 million

* Impact on operational EBIT for the next twelve months. A decrease of pulp prices would have the opposite impact.

Pulp wood and saw log prices Wood prices in Finland

Source: METLA


0

10

20

30

40

50

60

70

80

06

Q1

06

Q2

06

Q3

06

Q4

07

Q1

07

Q2

07

Q3

07

Q4

08

Q1

08

Q2

08

Q3

08

Q4

09

Q1

09

Q2

09

Q3

09

Q4

10

Q1

10

Q2

10

Q3

10

Q4

11

Q1

11

Q2

11

Q3

11

Q4

12

Q1

12

Q2

12

Q3

12

Q4

13

Q1

13

Q2

13

Q3

13

Q4

14

Q1

14

Q2

14

Q3

14

Q4

15

Q1

EU

R/m

3

Pulpwood, Pine Sawlogs, Pine

Paper for recycling prices


German RCP price development. free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso

22 April 2015

0

40

80

120

160

200

07

Q1

07

Q3

08

Q1

08

Q3

09

Q1

09

Q3

10

Q1

10

Q3

11

Q1

11

Q3

12

Q1

12

Q3

13

Q1

13

Q3

14

Q1

14

Q3

15

Q1

EU

R/t

onn

e

Mixed OCC De-inking

MEUR Other loans / liabilities Bonds Commercial paper

Revolving Credit Facility € 700 million matures in January 2018 and is fully undrawn

Maturity profile Q1 2015


0

200

400

600

800

1 000

1 200

2015 2016 2017 2018 2019 2020 2021 2022-2035 2036

Energy balance* Q1 2015


**) Remaining impact on non-hedged volume *) Pulp. paper and board mills. Europe and overseas

Impact** on operating profit from

10% change in: EUR million p.a.

Electricity market price ~0,4

Fossil fuel price ~7,1

Stora Enso Electricity procurement* Q1 2015


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

37

Global Responsibility update KPI results Q1 2015 – (1/2)


Focus Area Key Performance

Indicator Q1 2015

Target to be reached by end

of 2015 2014

Pe

op

le &

Eth

ics

Health &Safety

TRI rate (Incidents per 1m

working hours) 10.1 8.8 12,5

LTA rate (lost time accidents per

1m working hours) 4.8 3.6 5,2

Human Rights Extent of implementation of the

Group's approach to human

rights issues.

Group-wide planning for actions was

initiated to address the human rights

impacts identified in the Human Rights

assessments that had not been dealt

with

Human Rights Assessment to be

conducted in all countries with

production units, forestry and/or

plantation operations by end of 2014.

100 %

Ethics &

Compliance

Employees' perception of

adherence to Code of Conduct

(YourVoice)

Positive trend in annual employee

survey. 69 %

Sustainable

Leadership Leadership Index (YourVoice)

Positive trend in annual employee

survey 76,0

Responsible

Sourcing

% of supplier spend covered by

supplier Code of Conduct (CoC) 77%

90% of supplier spend covered by the

Supplier Code of Conduct by end of

2016

78%

Global Responsibility update KPI results Q1 2015 – (2/2)

Focus Area Key Performance Indicator Q1 2015** Target 2014

En

vir

on

me

nt

& E

ffic

ien

cy

Climate & Energy Reduction of CO₂ emissions per saleable

tonne of pulp, paper and board (kg/t)*** -24%

-35%

by end of 2025

-27%

Process Water

Discharges Reduction of volume per saleable tonne of

pulp, paper and board (m³/t) -5%

-6%

by end of 2015 -4%

Process Water

Discharges

Reduction of Chemical Oxygen Demand

(COD) per saleable tonne of pulp, paper

and board (kg/t) -4%

-7%

by end of 2015

-6%

39

*From baseline levels: year 2006 in CO₂ emissions, year 2005 in the volume (m³) of process water discharges, and year 2007 in the Chemical Oxygen Demand (COD)

levels of process water discharges. Historical figures recalculated due to changes in baseline or data revision.

**Including performance in January and February. The Q1 performance will be completed with performance in March in the Interim Review for the Q2.

***Covering direct fossil CO₂ emissions from production and indirect fossil CO₂ emissions related to purchased electricity and heat (Scope 1 and 2).

ENVIRONMENTAL PERFORMANCE COMPARED TO BASELINE LEVELS*

22 April 2015 Stora Enso Q1 2015 Results

stora enso financial result q1 2015

Economy & Finance

wood prices positive

operational ebit eur

stora enso q1

filler prices positive

energy prices positive

total positive eur

groups products

pulp prices