financial results q2 2015

Financial Results for Q2 2015

CEO Karl-Henrik Sundström and CFO Seppo Parvi 21 July 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 Q2 2015 Results 2 21 July 2015

Strong cash flow, despite some operational challenges Q2 2015 year-on-year

• Sales down by 0.7% to 2 562 MEUR

– Sales excluding the structurally

declining paper and divested

businesses increased by 4.8%

• Operational EBIT margin unchanged

at 8.1%

– Operational challenges in

Consumer Board

– Cost increase in preparation for

Guangxi mill start

• Strong cash flow from operations

489 MEUR

• Operational ROCE 9.4% (9.8%)

– Excluding transformational investment

project 10.9%

21 July 2015 Stora Enso Q2 2015 Results 3

Operational EBIT margin unchanged Q2 y-o-y


-0,9%

Packaging Solutions

Q2 2015Wood Products

Paper OtherConsumer Board excl. Operational

challenges and Guangxi start-

up costs

-0,4%-0,5%

Operational challenges,Consumer

Board

Q2 2014

1,9%

-0,5%0,4%

0,0%0,0%

Biomaterials

8,1%

Guangxi start-up

costs

8,1%

Strongest cash flow in 10 quarters Cash flow from operations 489 MEUR


0%

5%

10%

15%

20%

25%

0

100

200

300

400

500

600

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

Cash flow from operations, MEUR Cash flow to sales

Montes del Plata pulp mill

- Performed at the nominal capacity level in June

- Annual capacity of 1.3 Mt of which Stora Enso’s share 50%

Murow sawmill

- Started in Q2 2015 as planned

- Capacity increase to 140 000 m³/shift/year

Sunila Biorefinery

- Investment completed in Q1 2015

- Expected to be commercialised during H2 of 2015

Virdia acquisition

- Acquired in June 2014

- Extraction and separation technologies for conversion of cellulosic

biomass into highly refined sugars and lignin

Transformation steps completed


Consumer Board Imatra de-bottlenecking 27 MEUR Sept 2015

Packaging Solutions Varkaus conversion 110 MEUR Q4 2015

Consumer Board Guangxi consumer board mill 800 MEUR Mid-2016

Wood Products Varkaus wooden building elements 43 MEUR Q2 2016

Biomaterials Xylose demonstration and market

development plant 32 MEUR Early 2017

Transformation in progress


Guangxi consumer board machinery installations started


Board machine plant Inside the board machine plant

Power boiler installation Roof of the board machine plant

6 %

29 %

11 %

49 %

5 %

36 %

14 %17 %

32 %

1 %

62 %

6 %

35 %

-3 %

70 %

12 %

21 %

-3 %

Transformation journey continues Growth businesses with 64% of sales and 94% of operational EBIT

2006 Sales


Q2/2015 Sales

30 %

70 %

Paper Growth businesses

64%

94%

30%

38%

In 2006, all pulp used internally

Q2/2015 Operational EBIT 2006 Operational EBIT

20XX Sales

Summary financials Q2 2015

MEUR

Q2/15

Q2/14

Change% Change %

Q2 15 /

Q2 14 Q1/15

Q2 15 /

Q1 15

Sales 2 562 2 579 -0.7% 2 491 2.9%

Operational EBITDA 318 326 -2.5% 340 -6.5%

Operational EBITDA margin 12.4% 12.6% 13.6%

Operational EBIT 207 209 -1.0% 220 -5.9%

Operational EBIT margin 8.1% 8.1% 8.8%

Net profit for the period 123 1 n/m 129 -4.7%

EPS (basic), EUR 0.17 0.00 0.16

Operational ROCE 9.4% 9.8% 10.1%

Operational ROCE, excl. transformation project 10.9% 12.7% 11.3%

Cash Flow from Operations 489 288 69.8% 171 186.0%

Net debt/last 12 months’ operational EBITDA 2.7 2.8 2.6

10 Stora Enso Q2 2015 Results 21 July 2015

+207+7+65+209

+28+10

0

50

100

150

200

250

Other Volumes Q2 2014

Q2 2015 FX on costs

-6

Fixed costs

-29

Variable costs FX on sales Local sales

prices and mix

-77

MEUR

Net foreign exchange impact of 59 MEUR year-on-year

• In Paper FX gains to large extend compensated the price decline

• In Biomaterials both price changes and FX contributed positively

• Other divisions no major net effects

11 21 July 2015 Stora Enso Q2 2015 Results

0 5 10 15 20 25 30 35 40

Paper

Wood Products

Biomaterials

Packaging Solutions

Consumer Board

Q2 2015 y-o-y Q1 2015 y-o-y

Biggest foreign exchange impact in Biomaterials Net FX y-o-y by divisions


Net FX impact on Operational EBIT was 64 MEUR in Q1 and 59 MEUR in Q2 y-o-y

MEUR

0

100

200

300

400

500

600

700

14Q2 15Q2

Sales, MEUR

0

10

20

30

40

50

60

70

80

90

100

14Q2 15Q2

Operational EBIT, MEUR

Consumer Board operational EBIT decreased by 14% Q2 2015 year-on-year

13 Stora Enso Q2 2015 Results

• Sales increased by 1% due to higher volumes

• Operational EBIT decreased by 13 MEUR

– Operational challenges at the Imatra and

Skoghall mills and lower Guangxi harvesting

volumes had negative effect of 12 MEUR

– Preparations ahead of the start-up of the

Guangxi mill increased fixed costs by 10 MEUR

• Expected to continue at the same level going

forward

• Operational ROOC 16.1% (22.7%)

– Operational ROOC 30.8% (31.7%) excluding

Guangxi investment

• Maintenance in Q3: Imatra and Ingerois mills

– operational EBIT increased by

21 July 2015

1.2%

-14.3%

596 603

78

91

0

5

10

15

20

25

30

14Q2 15Q2

Operational EBIT excl. Corenso, MEUR

0

50

100

150

200

250

14Q2 15Q2

Sales excl. Corenso, MEUR

Packaging Solutions operational EBIT increased by 4% Q2 2015 year-on-year


• Sales excluding Corenso increased by 6.1%

due to higher volumes

– Division sales decreased by 13% to 226 MEUR

due to Corenso divestment

• Operational EBIT excluding Corenso

increased by 4 MEUR due to higher volumes

and lower variable costs

– Division Operational EBIT increased by

1 MEUR to 24 MEUR


• Conversion of the Varkaus Mill paper

machine for kraftliner will begin in Q3

21 July 2015

6.1%

20.0%

213 226

24

20

0

10

20

30

40

50

60

70

14Q2 15Q2


0

50

100

150

200

250

300

350

400

14Q2 15Q2

Sales, MEUR

Biomaterials Q2 sales increased by 50% and

operational EBIT by 49 MEUR Q2 2015 year-on-year

• Sales increased by 50% due to the Montes

del Plata volumes and positive foreign

exchange movements

• Operational EBIT increased by 49 MEUR

– Montes del Plata pulp mill ramp-up

– Positive foreign exchange impact

– Higher hardwood pulp prices


• Maintenance in Q3: Skutskär Mill


49.8%

n/m

243

364

59

10

0

5

10

15

20

25

30

35

40

14Q2 15Q2


0

100

200

300

400

500

600

14Q2 15Q2

Sales, MEUR

Wood Products operational ROOC nearly at target of 18% Q2 2015 year-on-year

• Sales declined by 10% mainly due to lower

deliveries to Middle East market

• Operational EBIT decreased by 14 MEUR

– lower prices in local currencies

– increased fixed costs

– higher transportation costs, partly due to

change in market mix


• Curtailments 3% (1%)


-10.0%

-37.8%

490

37

23

441

0

200

400

600

800

1 000

1 200

14Q2 15Q2

Sales, MEUR

0

10

20

30

40

50

60

70

80

90

14Q2 15Q2

Operational EBITDA, MEUR

Paper cash flow after investing activities to sales

improved to 5.1% Q2 2015 year-on-year

• Sales declined by 6%

– Volumes excluding Uetersen disposal were flat

• Operational EBITDA decreased by 31 MEUR

– Positive currency effect was not enough to offset

lower average prices in local currencies

• Cash flow after investing activities to sales

improved from 3.7% to 5.1%

• Maintenance in Q3: Major maintenance shutdown

at Oulu and smaller ones at the Anjala,

Langerbrugge, Maxau and Veitsiluoto mills


-5.7%

-37.3%

915 970

83

52

-3%

0%

3%

5%

8%

10%

13%

15%

18%

20%

- 25

0

25

50

75

100

125

150

175

200

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

Cash flow after investing activities, MEUR

Cash flow after investing activities to sales, %

Forecast for capex in 2015 remains unchanged

EUR million Forecast 2015

Capital expenditure* 820–880

Depreciation 530–550

* The capital expenditure forecast includes 110 MEUR for biological assets and approximately 390

MEUR for the project in Guangxi, China.


Challenging, but reachable strategic targets Q2/15 follow-up

Group targets Q2 2015 Status

Dividend To distribute 50% of net income over the cycle

Growth excl. Paper To grow faster than the relevant market 4.8% (YoY)

Net debt to operational EBITDA <3.0x 2.7

Fixed costs to sales <20% 25.5%

Debt to equity <80% 70%

Operational ROCE >13% 9.4%

Divisional targets Q2 2015 Status

Consumer Board Operational ROOC > 20% 16.1%

Consumer Board excl. Guangxi 30.8%

Packaging Solutions Operational ROOC > 20% 11.7%

Biomaterials Operational ROOC > 15% 8.9%

Wood Products Operational ROOC > 18% 17.9%

Paper Cash flow after investing activities to sales > 7% 5.1%


Guidance for Q3 2015 Compared to Q2 2015

• Q3/2015 sales are estimated to be

similar to the amount of the 2 562

MEUR in Q2/2015

• Operational EBIT is expected to

be in line with the 207 MEUR

recorded in Q2/2015

• The negative maintenance impact

is expected to be 15 MEUR higher

in Q3 than in Q2/2015


Summary - Transformation continues

• Transformation in progress

• Sales increased by 4.8% y-o-y

excluding paper and

divested businesses

• Operational EBIT stable at 8.1%

y-o-y, despite some operational

challenges

• Strong cash flow


Operational EBIT by segments

EUR million Q2/15 Q2/14

Change % Q1/15 Change %

Q2 15 /

Q2 14

Q2 15 /

Q1 15

Consumer Board 78 91 -14.3% 79 -1.3%

% of sales 12.9% 15.3% 13.9%

Packaging Solutions 24 23 4.3% 26 -7.7%

% of sales 10.6% 8.9% 11.8%

Biomaterials 59 10 n/m 73 -19.2%

% of sales 16.2% 4.1% 20.6%

Wood Products 23 37 -37.8% 15 53.3%

% of sales 5.2% 7.6% 3.8%

Paper 12 36 -66.7% 18 -33.3%

% of sales 1.3% 3.7% 2.0%

Other 11 12 -8.3% 9 22.2%

% of sales 1.7% 1.8% 1.4%


Permanent pulp, paper and board capacity reductions since 2006

Stora Enso Q2 2015 Results 24

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

21 July 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

21 July 2015

Net Financial Items


EUR million Q2/

2015

Q2/

2014

Change %

Q215/

Q214

Q1/

2015

Change %

Q215/

Q115

Net interest expense -47 -45 -4 -48 2

Foreign exchange gains and losses - 15 -100% 6 -100%

Other financial items. of which -19 -16 -19 -11 -73

Fair valuation of interest rate derivatives* 4 -9 -2

Fair valuation of long-term debt 1 - -1

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

Other items -22 -4 -6

Total net financial items -66 -46 -43 -53 -25

*Not hedge accounted interest rate derivatives.

Net cash flows and foreign exchange hedges As at 30 June 2015


MEUR USD SEK GBP

Estimated annual net operating cash flow exposure 1 050 -850 480

Transaction hedges as at 30 June 2015 -530 430 -240

Hedging percentage for the next 12 months 50% 51% 50%

Balance sheet strenght Q1 2013 – Q2 2015


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 15Q2

Net Debt, MEUR Net Debt to Operational EBITDA*

*Last twelve months’ operational EBITDA

Cash flow by divisions in Q2


0

20

40

60

80

100

120

140

Consumer Board PackagingSolutions

Biomaterials Wood Products Paper Other

Cash flow from operations, MEUR Cash flow after investing activities, MEUR

0

2

4

6

8

10

12

14

16

11Q111Q211Q3 11Q412Q112Q212Q3 12Q413Q113Q2 13Q313Q414Q114Q2 14Q314Q415Q1 15Q2

Paper and Board Wood Products Paper Board

Curtailments of capacity


% of the

capacity

21 July 2015

Pulp price development


Source: FOEX

21 July 2015

300

400

500

600

700

800

900

1 000

1 100

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

15

Q2

US

D/tonne

Bleached softwood kraft pulp Bleached hardwood kraft pulp

Sensitivity analysis 10% change, impact on operational EBIT


10% increase in Impact*

Market pulp price, total Positive 130 MEUR

*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 7 MEUR

Wood prices Positive 172 MEUR

Chemical and filler prices Positive 58 MEUR

10% strengthening against Euro

in the value of Impact*

US dollar Positive 105 MEUR

Swedish krona Negative 85 MEUR

British pound Positive 48 MEUR

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


10% increase in Impact*

Softwood pulp prices Positive EUR 50 million

Hardwood pulp prices Positive EUR 50 million

Fluff pulp prices Positive EUR 20 million

Dissolving pulp prices Positive EUR 10 million

Market pulp price, total Positive EUR 130 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

21 July 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/tonne

Mixed OCC De-inking

MEUR

Other loans / liabilities Bonds Commercial paper

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

Maturity profile Q2 2015


0

200

400

600

800

1 000

1 200

2015 2016 2017 2018 2019 2020 2021 2022-2035

2036

Energy balance* Q2 2015

**) Remaining impact on non-hedged volume

21 July 2015 Stora Enso Q2 2015 Results

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

Impact** on operating profit from

10% change in: EUR million p.a.

Electricity market price ~0,0

Fossil fuel price ~7,2

37

Stora Enso Electricity procurement* Q2 2015


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

38 38

Global Responsibility update KPI results Q2 2015 – (1/2)


Focus Area Key Performance

Indicator Q2 2015

Target to be reached by end

of 2015 2014

Pe

op

le &

Eth

ics

Health &Safety

TRI rate (Incidents per 1m

working hours) 10.3 8.8 12,5

LTA rate (lost time accidents per

1m working hours) 4.2 3.6 5,2

Human Rights Extent of implementation of the

Group's approach to human

rights issues

Action plans for all priority findings are

in place. Moreover, action plans for

lower priority findings are also ready,

six months ahead of plan.

Action Plans in place by the end of

Q2

2015 to address prioritized

assessment

findings of the Human Rights

Assessments, and for all assessment

findings to be addressed by the end of

2015.

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) 82%

90% of supplier spend covered by the

Supplier Code of Conduct by end of

2016

78%

Global Responsibility update KPI results Q2 2015 – (2/2)

Focus Area Key Performance Indicator Q2 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)*** -32%

-35%

by end of 2025

-27%

Process Water

Discharges Reduction of volume per saleable tonne of

pulp, paper and board (m³/t) -4%

-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) -2%

-7%

by end of 2015

-6%

40

*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.

**Q2 performance includes April and May. The Q2 performance will be completed with June performance in the Interim Review for the Q3.

***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*


financial results q2 2015

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