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Stora Enso strategy and Q3 results

SVP, Head of Investor Relations, Ulla Paajanen-Sainio 24–27 October 2014

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 24–27 October 2014 Stora Enso

Renewable materials – more than 60% in growth mode*

3

Consumer

Board

Biomaterials

Sales 1 033 m

Op EBITDA 153 m

Op ROOC 3.8%

Capex 368 m

Packaging Solutions

Building and Living

Sales 1 867 m

Op EBITDA 115 m

Op ROOC 13.9 %

Capex 28 m

Printing and Reading

Sales 4 319 m

Op EBITDA 290 m

Op ROOC 1.4 %

Capex 137 m

Renewable Packaging

Sales 3 272 m

Op EBITDA 522 m

Op ROOC 13.3%

Capex 204 m

All figures full year 2013, m=MEUR

*Growth businesses: Renewable Packaging, Biomaterials and Building and Living. Cash focus: Printing and Reading

24–27 October 2014 Stora Enso

Mega and market trends

4

Substitutes for

non-fiber • Increased demand for

sustainable solutions

combined with intensified

regulatory requirements

regarding extended

producer responsibility

• Increased awareness of

sustainability issues drives

the demand for renewable

products and solutions on a

global level

• Increased demand for smart

fibre-based solutions to

improve cost efficiency in

the supply chain

Digitalisation • Increased demand for

intelligent and safe packaging

solutions to serve the

demands of online retail

• Increased use of digital media

which affects demand for

graphic paper

• Increased use of digital

printing which opens up

potential for new swift cost

efficient print processes and

on-demand production

processes

Income growth

and change of

lifestyle • Increased purchase power

in emerging markets and

especially in Asia

• Increased demand for

smaller packages to allow

for smaller volume

purchases

• Growing mobile lifestyle

which triggers demand for

prepared and small

packaged meals – ”on the

go”

Urbanisation • Demand for affordable

construction materials and

solutions to meet the need

for increased demand for

urban housing

• Lack of space increases the

demand for smart living and

efficient land use

• Smaller households drive

demand for small packages

• Densely populated areas

increase demand for

renewable solutions to cut

waste


Snapshot of current demand for our products

5

Sawn timber Graphic paper

Packaging

Hardwood BHK pulp

Carton board

Softwood BSK pulp

Disposable income

Housing starts Digitalisation

Tissue and packaging demand

Growing population

Tissue and packaging demand


Time for us to reclaim the market!

Stora Enso’s business strategy is to transform from a

traditional paper and board producer to a customer focused

renewables materials company.

Our business idea is to replace non-renewable materials with

products and solutions based on renewable materials. We are

proud to be actively involved in the transformation of the value

chain. Our market driven products and solutions are

sustainable and innovative – and now it is time for us to align –

and reclaim the market.

Glocal position

– capacity and biological asset allocation

7

Finland

40% Finland

56%

Sweden

26% Sweden

22%

Brazil

2% Brazil

11%

Germany

13%

China

3%

Other

countries

16%

Uruguay

9%

Paper and board capacity by country 2014

Chemical Pulp capacity by country 2014

Poland

2%

Brazil

6%

China

14%

Biological assets by country as at Dec 2013

Finland

39%

Sweden

27%

Germany

6%

China

5%

Other

countries

11%

Uruguay

4%

Brazil

5%

Poland

5%

Total assets by country as at Dec 2013


Sweden

61%

Finland

15%

Uruguay

4%

Strongest growth in packaging will be in Asia – Increasing demand of consumer board in China

China and

Asia Pacific

Rest of the

world

Eastern

Europe

Western

Europe North

America

South

America

2013–2025

Million tonnes

Source: Pöyry, June 2014:

Cartonboard market update and outlook

Includes SBS, FBB, CUK, LPB and FSB

6,1

6,4

3,7

4,3

0,5

0,9

1

,2

1,9

1,3

1,9

8

7,9

14

,8

CAGR

3.8% CAGR

0.4%

CAGR

1.1%

CAGR

3.4%

CAGR

5.4%

CAGR

3.3%


Corrugated packaging grows also in Europe

760 840

0

200

400

600

800

1000

2013 2020

Nordic SC Fluting Global market size (kt) RCP–based containerboard Europe (kt)

Kraftliner Europe (kt) Corrugated packaging* (kt)

Source: Pöyry 2013, ICCA, PIRA, Stora Enso Analysis

(Kt)

Market

19061 21575

0

5000

10000

15000

20000

25000

2013 2020

(Kt)

+ 2 514 Kt

+ 1.8%

5240

6138

0

1000

2000

3000

4000

5000

6000

7000

2013 2020

(Kt)

+ 898 Kt

+ 2.3% 3978

4818

0

1000

2000

3000

4000

5000

6000

2013 2020

(Kt)

+ 840 Kt

+ 2.8%

+ 80 Kt

+ 1.4%

*Sweden, Finland, Poland, Russia, Baltic, Hungary 9

Chemical market pulp demand to increase from 55 to

60 Mt in 2013–2018

Source: Pulp and Paper Products Council, 2014

(Kt)

70%

75%

80%

85%

90%

95%

100%

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

2013 2014 2015 2016 2017 2018

Capacity Demand Supply/Demand balance


Major biomass’ components – half of this is burnt now


Investing in sustainable business

24–27 October 2014 12

Guangxi

Partnering with IFC (equity and loan)

FSC and PEFC certified plantation

Key equipment selected

Site levelling work mainly completed, next steps

waiting for the permits

Phase one: board machine operational early 2016

as previously announced

Montes del Plata

Pulp mill investment of EUR 1 721 million in

Uruguay, joint operation

Annual production capacity 1.3 million tonnes

- Stora Enso’s share 650 000 tonnes

- Stora Enso’s share of 2014 production

245 000 - 275 000 tonnes, due to typical

instability of the ramp-ups

Virdia – demonstration plant

New investment in a demonstration and market

development plant in the USA for the extraction

and separation of highly pure sugars from

biomass to be converted into differentiated

biochemicals.

Demonstration and market development plant to

be built at Raceland, Louisiana, USA

Varkaus conversion

EUR 110 million for conversion

EBITDA margin above 15%

Start up Q4 2015

Capacity 390 000 tonnes of kraftliner

Uncoated fine paper capacity to reduce

by 280 000 tonnes

Stora Enso

Non-core asset divestment and restructuring

• Non-core asset divestments:

– Corenso core and coreboard

operations to Powerflute, cash

consideration approximately EUR

75 million expected Q4, announced

Q3 2014

– Thiele Kaolin, cash consideration

EUR 56 million, Q1 2014

• Restructuring:

– Uetersen Mill sales purchase

agreement was discontinued in Q3

– Planned divestment cancelled

24–27 October 2014 13 Stora Enso

Stora Enso’s plantations and forest assets

Guangxi, Southern China (leased)

90 000 ha of land of which 75 000 ha eucalyptus,

9 000 ha other species

Montes del Plata, Uruguay

247 000 ha of land of which

136 000 ha planted

Rio Grande do Sul, Brazil

45 000 ha of land of which 21 000 ha

eucalyptus plantations

Veracel plantations, Brazil

212 000 ha of land of which 92 000 ha

eucalyptus plantations

Bergvik Skog, Sweden

2.3 million ha of land in Sweden, 95 000 ha in

Latvia (ownership of 49%)

Tornator, Finland

595 000 ha of forestland in Finland, 12 000 ha in

Romania, and 13 000ha in Estonia (ownership 41%)

Fair value of Biological assets and Group’s indirect share of forest assets is as of 31 Dec 2013, in total EUR 2 719 million

In addition, leased plantations:

- Laos: trial plantation, 2 200 ha

- Russia: 418 000 ha

- Czech Republic: 144 000 ha


Summary financials Q3 2014

EUR million Q3/14 Q3/13

Change % Change %

Q3 14 /

Q3 13

Q2/14

Q3 14 /

Q2 14

Sales 2 514 2 553 -1.5 2 579 -2.5

Operational EBITDA 333 319 4.4 326 2.1

Operational EBITDA, % 13.2 12.5 12.6

Operational EBIT 210 184 14.1 209 0.5

Operational EBIT margin, % 8.4 7.2 8.1

Profit before tax excl. NRI 116 126 -7.9 145 -20.0

EPS excl. NRI, EUR 0.12 0.13 0.13

EPS (basic), EUR 0.15 0.11 0.00

Operational ROCE, % 9.7 8.3 9.8

Operational ROCE, % excl. transformation

investments 13.0 10.2 12.7

Cash Flow from Operations 257 347 -25.9 288 -10.8

Net debt/last 12 months’ operational

EBITDA 2.8 3.1 2.8


Financial performance - divisions Sales, EBITDA margins and EBIT margins

16

Renewable Packaging Biomaterials

Building and Living Printing and Reading

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

0

200

400

600

800

1000

1200

1400

12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3

Sales, MEUR Operational EBITDA margin Operational EBIT margin

0%

2%

4%

6%

8%

10%

12%

0

100

200

300

400

500

600

12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3


0%

5%

10%

15%

20%

25%

740

760

780

800

820

840

860

12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

210

220

230

240

250

260

270

280

290

12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3



Sensitivity analysis 10% change, impact on operational EBIT

24–27 October 2014 17

10% increase in Impact*

Market pulp price, total Positive EUR 95 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 13 million

Wood prices Positive EUR 187 million

Chemical and filler prices Positive EUR 59 million

10% strengthening against Euro

in the value of Impact*

US dollar Positive EUR 103 million

Swedish krona Negative EUR 74 million

British pound Positive EUR 46 million

Stora Enso

Forecast for capex in 2014

EUR million Forecast 2014*

Capital expenditure 790–840

Depreciation 550–560

* Capital expenditure includes approximately EUR 260 million for the project in Guangxi, China. These figures do not include the

acquisition of Bergvik Skog and Virdia shares.


Guidance for Q4 2014 Compared to Q3 2014

• Sales are estimated to be roughly

similar to the EUR 2 514 million

• Operational EBIT is expected to

be somewhat lower than EUR 210

million

– Due to normal seasonal weakness

in the Renewable Packaging and

Building and Living divisions


30 %

70 %

Paper Growth businesses

16 %

11 %

10 %62 %

1 %

Transformation journey continues Sales and operational EBIT

20XX Sales

62 %

6 %

35 %

-3 %

70 %

12 %

21 %

-3 %

2006 Sales

20 24–27 October 2014

38 %

11 %17 %

34 %

0 %

Q3 2014 Operational EBIT 2006 Operational EBIT

Q3 2014 Sales

Stora Enso

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

2 800

2 900

3 000

3 100

3 200

3 300

3 400

3 500

3 600

12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3

Net Debt, MEUR Net Debt/Operational EBITDA*

Balance sheet strength Q1 2012 – Q3 2014

22

*Last twelve months’ operational EBITDA


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