2015 capital markets day presentation by Karl Henrik Sundström

Capital Markets Day, London, 28 May 2015

Profitable growth

Karl-Henrik Sundström

CEO, Stora Enso

The renewable materials company

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.


Disclaimer


A changing world - Global trends drivers for renewable materials


Growing population Urbanisation Digitalization

Income Growth Eco awareness New lifestyles

A changing world - Global trends drivers for renewable materials

From a traditional paper and board producer to a global renewable growth materials company

The renewable materials company The renewable materials company

“Everything that’s made with fossil fuels

today can be made from a tree tomorrow”

Consumer Board

Profitable growth

Packaging Solutions

Value creation

to customers

Biomaterials

Transformation from a pure pulp

producer to a biochemical

company

Wood Products

Increase growth in the value

added wood products area

Paper

Maintaining cash flow generation

Sales 2 297 m

Op EBITDA 439 m

Op ROOC 17.8%

Capex 332 m

Sales 1 065 m

Op EBITDA 183 m

Op ROOC 14.1%

Capex 52 m

Sales 1 104 m

Op EBITDA 173 m

Op ROOC 3.9%

Capex 236 m

Sales 1 779 m

Op EBITDA 126 m

Op ROOC 17.3%

Capex 29 m

Sales 3 912 m

Op EBITDA 361 m

Cash flow from

operations 354 m

Capex 108 m

+ + + + -

FY 2014: Sales 10 213 EUR m / Op EBITDA 1 269 EUR m / Op ROCE 9.5% / Capex 781 EUR m

Majority of the portfolio is aimed at growth


20XX Sales 2006 Sales

Q1/2015 Operational EBIT 2006 Operational EBIT

Q1/2015 Sales

63%

92%

30%

38%

In 2006, all pulp used internally

Growth businesses: 63% of sales

– 92% of operational EBIT Q1 2015

21%

12%

70%

-3% 2%

32%

16%

37%

14%

30%

70%

Paper Growth businesses

Paper businesses, including Merchants

Biomaterials

Wood products business

Packaging business

Other and eliminations

4%

48%

7%

33%

8% -3%

35%

6%

62%

Countries where Stora Enso has production facilities

Countries where Stora Enso has sales

Countries where Stora Enso has sales agents

Production and sales worldwide


Ongoing and recent investments with Capex, MEUR

Montes del Plata, Uruguay 850 Virdia acquisition, USA 17 + 21

Sunila, Finland 32 Guangxi, China 800

Murow sawmill 28 Varkaus wooden building elements, Finland 43

Varkaus conversion, Finland 110 Demonstration plant, Louisiana, USA 32

Imatra, Finland 27

Non-core asset

divestments

Closures 2013

4 PMs + 1 Mill

1 Sawmill

Capex for growth investments

Capital allocation

MEUR


-2000

-1500

-1000

-500

0

500

1000

1500

2012 2013 2014

Cash flow from operations Capital expenditure Net financial items paid

Income taxes paid Dividends Net Cash flow

From asset transformation to sales transformation P

rofi

tab

le g

row

th

Asset transformation Innovation & customer focus

More innovative use of raw material

• Our raw material is not competing

with food

• New technologies enable to

fractionate the incoming biomass

better and create solutions for all the

fractions, new biochemicals and

biomaterials that can serve several

industries.


35-45%

Cellulose

Fiber

Sugar

25-35%

Hemi cellulose

Various sugars

20-30%

Lignin

Binder

Stora Enso biomaterials innovation path

Biomass • Nordic Forest

• Plantations for fast growing species

• Other non food competing feedstock

New technologies

• Virdia

• MFC

• Lignoboost

Components • Cellulose

• Lignin

• Hemi cellulose

• MFC

Products and applications • Bio barriers and

chemicals

• Bio materials

• Bio composites

• Xylitol

• Composites

• Liquid packaging without al-foil

• etc.


Housing starts – main driver for Wood Products

0

20

40

60

80

100

120

140

160

Ind

ex 2

00

3 =

10

0

USA

Europe

Japan

Europe, USA, Japan, Australia CAGR CAGR

03-13 13-18

USA -6.7% +10.9%

Europe -5.7% +3.6%

Japan -1.7% -5.2%

Australia -0.1% +0.8%

Australia

Sources: Euroconstruct, Consensus Forecasts, NAHB, HIA


From sawmilling to value added products

20%

80%

Value-added products

Basic sawn

32 %

68 %


Basic sawn

50 % 50 %


Segment focused wood products

2007 Today Our Target


Paper consumption, capacity

and growth projections

North America

CAGR 14-20 -4.5%

Europe

CAGR 14-20 -3.3%

Global

Capacity 14 [Mt]

Demand 14 [Mt]

Growth 14-20

[Mt]

Growth 14-20

134.2

116.1

-8.1

-7%

-1.2%

Latin America

CAGR 14-20 +0.0%

Africa

CAGR 14-20 +2.0%

Asia

(incl. Middle East &

Oceania)

CAGR 14-20 +0.9%

Only wood based paper included

Source: SE analysis, PPPC, Euro-Graph

Paper cash generation maintained on a high level year-on-year

• Optimising paper cash flow in

the future

– Working capital

– Variable and fixed costs

– Right segment of paper

– High machine capacity

utilisation

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

0%

2%

4%

6%

8%

10%

12%

2007 2008 2009 2010 2011 2012 2013 2014

Capacity c

losure

s, to

nnes

Capacity closure Cash flow after capex to sales

MEUR


• Human Rights Assessment action plans

proceeding

• Responsible sourcing

– The supplier code of conduct covered 77%

of Group’s spending on materials and

services end of Q1 2015

– Implementation continues as planned

• M&A due diligence process

– New checklist for M&A implemented in 2014

– Project leader is responsible

– Global Responsibility actions calculated to

the implementation cost

Global responsibility



From a traditional paper and board producer

to a global renewable materials growth company

World of packaging

Investor Relations

2015 capital markets day presentation by Karl Henrik Sundström