Stora Enso’s Interim Review for January - September 2011

Financial results Q3 2011

21 October 2011

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.

221 October 2011Financial results Q3 2011

Solid quarter

• EUR 204 million operating profit

excl. NRI and FV

• Strong cash flow after Capex

EUR 282 million

• Improved liquidity at EUR 1 181

million

• Increased curtailments to control

inventories


Higher prices continue to support result

*excluding NRI and fair valuation


0 %

2 %

4 %

6 %

8 %

10 %

0

60

120

180

240

300

EU

R m

illio

n

EBIT excl NRI and fair valuation EBIT margin*, % 4 Q avg

Early curtailments are importantOperative working capital

21 October 2011

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

5Financial results Q3 2011

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

2 400

2 600

2 800

09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3

EU

R m

illio

n

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

0 %

2 %

4 %

6 %

8 %

10 %

90 % 91 % 92 % 93 % 94 % 95 % 96 % 97 % 98 %

EB

IT %

*

Operating Rate %

Q3 2011

Q3 2008

We have jumped the curve Operating Rate % vs. EBIT %*

21 October 2011Financial results Q3 2011 6

*Excluding NRIs and FV

Continued to increase flexibilityFY2007- Q3 YTD 2011

21 October 2011 7Financial results Q3 2011

0,22

0,24

0,26

0,28

0,30

FY2007 FY2008 FY2009 FY2010 Q3 YTD 2011

Fix

ed

Co

sts

/Sa

les

Our market pulp and magazine paper deliveries up

21 October 2011Financial results Q3 2011 8

*Index is calculated average of paper and board deliveries (1 000 t) index and

the corrugated packaging deliveries (million m2) index. Includes Kotka mill.

** Includes Varkaus and Maxau mills

***Includes Kotka mill

**** Includes Kotka mill

90

95

100

105

110

115

120

Q3/10 Q2/11 Q3/11

IND

EX

Market pulp

85

90

95

100

105

110

Q3/10 Q2/11 Q3/11IN

DE

X

Magazine Paper***

96

97

98

99

100

101

Q3/10 Q2/11 Q3/11

IND

EX

Industrial Packaging*

85

90

95

100

105

110

Q3/10 Q2/11 Q3/11

IND

EX

Wood Products ****

90

92

94

96

98

100

102

Q3/10 Q2/11 Q3/11

IND

EX

Fine Paper

949698

100102104106108

Q3/10 Q2/11 Q3/11

IND

EX

Consumer Board

80

85

90

95

100

105

Q3/10 Q2/11 Q3/11

IND

EX

Newsprint**

Summary financials Q3 2011

EUR million III/2011 II/2011 III/2010Change %

Q311/Q310

Change %

Q311/Q211

Sales 2 739 2 817 2 624 4.4 -2.8

EBITDA, excl. NRI and fair valuations 339 358 366 -7.3 -5.1

Operating profit, excl. NRI and fair valuations 204 228 255 -19.9 -10.6

Profit before tax, excl. NRI 111 182 220 -49.7 -39.0

Loss/profit before tax -17 150.1 225.8 -107.7 -111.5

Earnings per share, excl. NRI (EUR) 0.10 0.21 0.23 -56.5 -52.4

ROCE, excl. NRI and fair valuations (%) 9.3 10.4 12.4 -25.0 -10.6

Cash flow from operations 362 207 304 19.1 74.7

Cash flow after investing activities 282 122 230 22.4 131.5

Debt/equity 0.45 0.41 0.43 4.7 9.8


NRI = Non-recurring items

Fair valuations include synthetic options net of realised and open hedges,

CO2 emission rights, and valuations of biological assets related to forest assets in equity accounted investments

Operating profit by segments


Q311/Q310

Change %

Q311/Q211

Consumer Board 64 85 78 -17.0 -23.8

% of sales 10.3 12.8 13.1 -21.4 -19.5

Industrial Packaging 20 20 19 7.5 3.1

% of sales 7.9 8.1 8.3 -4.8 -2.5

Newsprint and Book Paper 34 28 0 n/m 22.2

% of sales 10.2 8.2 0.0 n/m 24.4

Magazine Paper 48 34 46 6.2 42.5

% of sales 8.6 6.6 8.4 2.4 30.3

Fine Paper 38 49 71 -46.7 -22.4

% of sales 7.1 9.2 12.6 -43.7 -22.8

Wood Products 10 35 25 -61.1 -72.2

% of sales 2.4 7.6 5.9 -59.3 -68.4


excluding non-recurring items

Solid platform for growth

SENA divestment closed in Q4 2007

Merchants divestment closed in Q2 2008

EBITDA: Continuing operations

Net debt: Total operations


0,0

1,0

2,0

3,0

4,0

5,0

6,0

2 000

2 500

3 000

3 500

4 000

4 500

5 000

EU

R m

illio

n

Net Debt Net Debt/EBITDA excl NRI and fair valuations

Near term outlook

• Our production curtailments to

control inventory levels have

increased in Q3 and will continue

in Q4

• EBIT excl. NRI and FV in Q4

estimated to be somewhat lower

year on year

Demand

development

Q4/11 vs

Q4/10

Price

development

Q4/11 vs

Q3/11

Consumer Board

Industrial

Packaging

Newsprint and

Book Paper

Coated

Magazine Paper

Uncoated

Magazine Paper

Coated Fine

Paper

Uncoated Fine

Paper

Wood Products


Solid third quarter

• Strong cash flow and balance

sheet

• Production curtailments continue

• Growth projects proceeding


Rethinking continues!

Cost inflation diminishing

Realised

Q3/11 vs

Q3/10

Realised

Q3/11 vs

Q2/11

Pulp wood

Sawlogs

RCP

Pulp

Chemicals

Energy


Net Financial Items


Q311/Q310

Change %

Q311/Q211

Net interest expense -35.9 -28.3 -23.9 -50.2 -26.9

Foreign exchange gains and losses -11.4 -0.7 -18.1 37.0 n/m

Other financial items, of which -146.1 -5.6 -9.1 n/m n/m

PIK notes 2.1 1.9 1.5

Fair valuation of interest rate derivates* -16.4 -3.3 4.3

Fair valuation of long-term debt -1.1 0.4 -2.6

NewPage lease provision -128.2 0.0 0.0

Other items -2.5 -4.6 -12.3

Total net financial items -193.4 -34.6 -51.1 n/m n/m

17

*Not hedge accounted interest rate derivatives.


Softwood pulp prices still on high levelStora Enso’s market pulp is softwood

Source: FOEX


400

500

600

700

800

900

1 000

1 100

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

US

D/to

nn

e Bleached softwood kraft

pulp

Bleached hardwood kraft

pulp

Pulp wood and saw log prices decreased from Q2 2011Wood prices in Finland

Source: METLA


0

10

20

30

40

50

60

70

80

06Q

1

06Q

2

06Q

3

06Q

4

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

EU

R/m

3 Pulpwood, Pine

Sawlogs, Pine

Wood prices in Sweden

20

Pulpwood includes pine, spruce and birch.

Sawlogs include pine and spruce.

Source: SDC, Skogsstyrelsen


0

100

200

300

400

500

600

06Q

1

06Q

2

06Q

3

06Q

4

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

SE

K/m

3 Pulpwood

Sawlogs

RCP prices decreasing from Q2 2011

German RCP price development, free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso


0

40

80

120

160

200

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

EU

R/to

nn

e Mixed

OCC

De-inking

Capital expenditure and depreciationQ1 2008 – Q3 2011


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

2005 – Q3 2011

Total operations


0,70

0,54

0,39

0,56

0,51

0,39 0,380,41

0,45

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

2005 2006 2007 2008 2009 2010 Q1 2011 Q2 2011 Q3 2011

Transaction risk and hedgesas at 30 September 2011

24

Operating Profit: Currency strengthening of + 10%

Based on estimated next 12 months net operating

cash flow exposure.

EUR million

USD 104

SEK -79

GBP 57

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 040 570 -790

Transaction hedges as at 30 September 2011 -560 -250 470

Hedging percentage as at 30 September 2011 for the next 12 months 54% 44% 59%

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.

USD, GBP and SEK have additional hedges for 13-16 months which will increase the

hedging percentage 8%, 4% and 7% respectively.


0

100

200

300

400

500

600

700

800

900

1 000

2011 2012 2013 2014 2015 2016 2017 2018 2019-2035 2036

Maturity profile

30 September 2011

€m Other loans / liabilities

EUR 750m 5.125% 2014

USD 300m 7.25% 2036

Bonds

EUR 390m E+4.21% 2016

USD 507m 6.404% 2016

Commercial paper

SEK 500m 3.5% 2015

SEK 1.4 bn S+3.7% 2015

SEK 2.4 bn 5.75% 2015

Revolving Credit Facility € 700 million matures in January 2014 and is fully undrawn


01020304050

Electricity Fuels

Internal External (hedged) External (non-hedged)

Energy balance Q3 2011

Self sufficiency 53% Self sufficiency 62%

Total energy self

sufficiency 60%

**) Remaining impact on non-hedged volume


Impact** on operating profit from

10% change in:EUR million p.a.

Electricity market price ~8

Fossil fuel price ~14

27

Stora Enso Electricity procurement Q3 2011

-2000

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

2011 2012 2013 2014

GWh/a

Sales to market

Open position

Local tariff

Financial contracts

Physical contracts

PVO production

Own production

Economy & Finance

Stora Enso’s Interim Review for January - September 2011