stora enso interim review january-march 2012

Financial Results Q1 2012

CEO Jouko Karvinen and CFO Markus Rauramo

24 April 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.

2 24 April 2012 Financial results Q1 2012

Earnings remained moderate as expected

Operational EBIT EUR 147 million

Strong cash flow EUR 224 million

Liquidity EUR 1 251 million

24 April 2012 3 Financial results Q1 2012

Operational EBIT in line with previous quarter

2,0 %

3,0 %

4,0 %

5,0 %

6,0 %

7,0 %

8,0 %

9,0 %

10,0 %

0

50

100

150

200

250

300

10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1

EU

R m

illio

n

Operational EBIT Operational EBIT margin %, 4 Q avg

24 April 2012 Financial results Q1 2012 4

Year-on-year earnings

• Lower prices in Printing & Reading

and Biomaterials

• Lower volume in Renewable

Packaging

• Strong cash flow and liquidity

further improved

• Profit improvement actions continue

• China investment decision


Flexibility improvements continued Fixed Cost/Sales

50

60

70

80

90

100

110

120

2007 2008 2009 2010 2011 Q1/2012

IND

EX

(2

00

7=

10

0)


Still room to improve productivity Personnel cost/sales


50

60

70

80

90

100

110

120

130

140

Q1/2007 Q1/2008 Q1/2009 Q1/2010 Q1/2011 Q1/2012

IND

EX

(Q

1 2

00

7 =

10

0)

Printing and Reading and Renewable Packaging

created the cash flow in Q1 2012


-50

0

50

100

150

200

250

Printing andReading

Biomaterials Building andLiving

RenewablePackaging

Other Total

Cash flow from operations Cash flow after investing activitiesMEUR

Summary financials Q1 2012

EUR million I/2012 IV/2011 I/2011 Change %

Q1 12/Q1 11

Change %

Q1 12/Q4 11

Sales 2 673.3 2 681.6 2 726.9 -2.0 % -0.3 %

Operational EBITDA 262.1 242.9 368.3 -28.8 % 7.9 %

Operational EBIT 147.4 144.9 258.3 -42.9 % 1.7 %

Profit before tax. excl. NRI 101.0 141.4 206.7 -51.1 % -28.6 %

Profit before tax 89.9 110.3 179.5 -49.9 % -18.5 %

EPS excl. NRI (EUR) 0.10 0.10 0.22 -54.5 % 0.0 %

Operational ROCE. % 6.8 6.7 11.9 -42.9 % 1.5 %

Cash flow from operations 223.7 302.3 162.9 37.3 % -26.0 %

Cash flow after investing

activities 111.4 73.8 91.7 21.5 % 50.9 %

Debt/equity 0.46 0.47 0.38 21.1 % -2.1 %


Business improved q-on-q, other lower Operational EBIT by segment

EUR million I/2012 IV/2011 Change

Q1 12/Q4 11

Printing and Reading 67.3 55.6 11.7

Biomaterials 7.2 27.2 -20.0

Building and Living 9.8 6.0 3.8

Renewable Packaging 61.7 32.8 28.9

Other 1.4 23.3 -21.9

Group 147.4 144.9 2.5


Rethink strategy

Growth markets

Renewable

packaging

Biomaterials

Competitive paper


Focusing on high quality segments in China


Chinese platform

for growth Unique position

A world leading position

Technologies and

specifications

Committed customers

Robust sustainability

Unique integrate

Established footprint

Innovation

Well prepared project to accelerete growth

Sales and operational EBIT forecast for Q2 2012 Compared with Q1 2012

• Group sales slightly higher and

operational EBIT approximately in the

range of Q1 2012

• Maintenance stoppages in several

European mills with main impact in

Biomaterials

• Benefits of improving variable costs

slowly apparent in the results


Summary

• Quarterly performance as

expected

• Cost position and operational

performance improvement need

to continue

• Transformation accelerating:

Montes del Plata pulp mill, and

Chinese pulp and packaging

board mill


Business improved q-on-q, other lower Operational EBIT by segments


Q112/Q111

Change %

Q112/Q411

Printing and Reading 67.3 55.6 85.2 -21.0 % 21.0%

% of sales 5.5 4.3 7.0 -21.4 % 27.9 %

Biomaterials 7.2 27.2 53.5 -86.5 % -73.5 %

% of sales 3.0 10.6 18.3 -83.6 % -71.7 %

Building and Living 9.8 6.0 11.8 -16.9 % 63.3 %

% of sales 2.6 1.6 2.9 -10.3 % 62.5 %

Renewable Packaging 61.7 32.8 101.0 -38.9 % 88.1 %

% of sales 7.9 4.3 12.5 -36.8 % 83.7 %

Other 1.4 23.3 6.8 -79.4 % -94.0 %

% of sales 0.2 3.6 0.9 -77.8 % -94.4 %


Curtailments decreased sequentially % of capacity


0

5

10

15

20

25

30

Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112

% o

f c

ap

acity

Paper and Board Wood Products

Working capital decreased year-on-year Q1 2010 – Q1 2012

24 April 2012

10,0 %

12,0 %

14,0 %

16,0 %

18,0 %

20,0 %

22,0 %

24,0 %

26,0 %

28,0 %

1 000

1 200

1 400

1 600

1 800

2 000

2 200

10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1

EU

R m

illio

n

Operative Working Capital at the end of Q Working Capital per Sales ratio

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

19 Financial results Q1 2012

Transaction risk and hedges as at 31 March 2012

20

Operational EBIT: Currency strengthening of + 10% EUR million

USD 116

SEK -90

GBP 62

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 160 620 -900

Transaction hedges as at 31 March 2012 -580 -280 390

Hedging percentage as at 31 March 2012 for the next 12 months 50% 45% 43%

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

occurs other than a single currency exchange rate movement. Weakening would have

the opposite impact.

USD and GBP have additional hedges for 13-14 months which will increase the hedging

percentage by 2% and 4% respectively.

24 April 2012 Financial results Q1 2012

Net Financial Items


Q112/Q111

Change %

Q112/Q411

Net interest expense -37.7 -35.1 -23.0 -63.9 -7.4

Foreign exchange gains and losses 8.0 -3.0 -11.9 n/m n/m

Other financial items. of which -4.3 -21.1 -16.3 73.6 79.6

PIK notes 2.0 2.0 1.5

Fair valuation of interest rate derivates* -3.3 -4.4 13.9

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

NewPage lease provision 13.6 - -

Arktos writeoff - -10.2 -

Other items -16.1 -8.1 -31.2

Total net financial items -34.0 -59.2 -51.2 33.6 42.6

21

*Not hedge accounted interest rate derivatives.


Softwood pulp prices Stora Enso’s market pulp is softwood

450

550

650

750

850

950

1 050

07Q

1

07Q

2

07Q

3

07Q

4

08Q

1

08Q

2

08Q

3

08Q

4

09Q

1

09Q

2

09Q

3

09Q

4

10Q

1

10Q

2

10Q

3

10Q

4

11Q

1

11Q

2

11Q

3

11Q

4

12Q

1

US

D/t

on

ne

Bleached softwood kraftpulp

Bleached hardwood kraftpulp

Source: FOEX


Pulp wood and saw log prices Wood prices in Finland

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

EU

R/m

3

Pulpwood, Pine Sawlogs, Pine

Source: METLA


Wood prices in Sweden

24

0

100

200

300

400

500

600

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

SE

K/m

3

Pulpwood Sawlogs

Pulpwood includes pine. spruce and birch.

Sawlogs include pine and spruce.

Source: SDC. Skogsstyrelsen


RCP prices

0

40

80

120

160

200

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

EU

R/t

on

ne

Mixed OCC De-inking

German RCP price development. free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso


Capital expenditure and depreciation Q1 2008 – Q1 2012

0%

2%

4%

6%

8%

10%

0

50

100

150

200

250

EU

R m

illio

n

Capex Depreciation and impairment excl NRI Capex % of sales


Debt/equity 2009 – Q1 2012

0,51

0,39

0,47 0,46

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

2009 2010 2011 Q1 2012


Maturity profile 31 March 2012


0

100

200

300

400

500

600

700

800

900

1 000

2012 2013 2014 2015 2016 2017 2018 2019 2020-2035

2036

EUR 500m 5.5% 2019

EUR 413m 5.125% 2014

SEK 500m 3.5% 2015

SEK 1.4 bn S+3.7% 2015

SEK 2.4 bn 5.75% 2015

EUR 390m E+4.21% 2016

USD 507m 6.404% 2016

USD 300m 7.25% 2036

Revolving Credit Facility € 700 million matures in January 2015 and is fully undrawn

€m Commercial paper Other loans / liabilities Bonds

Energy balance* Q1 2012

Impact** on operating profit from

10% change in: EUR million p.a.

Electricity market price ~9

Fossil fuel price ~17

01020304050

Electricity Fuels

Internal External (hedged) External (non-hedged)

Self sufficiency 47% Self sufficiency 63%

Total energy self

sufficiency 59%

**) Remaining impact on non-hedged volume


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

30

Stora Enso Electricity procurement* Q1 2012


-2000

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2012 2013 2014 2015

[GWh/a] Sales to market Open position

Local tariff Financial contracts

Physical contracts PVO production

Own production

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

stora enso interim review january-march 2012

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