Financial results Q2 2011Financial results Q2 2011

21 July 2011

It h ld b t d th t t i t t t h i hi h t hi t i l f t i l di ith tIt should be noted that certain statements herein which are not historical facts, including, withoutlimitation those regarding expectations for market growth and developments; expectations for growthand profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similarexpressions, are forward-looking statements within the meaning of the United States Private SecuritiesLiti ti R f A t f 1995 Si th t t t b d t l ti t dLitigation Reform Act of 1995. Since these statements are based on current plans, estimates andprojections, they involve risks and uncertainties which may cause actual results to materially differ fromthose 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

ffi i i th i ti d f d t d l t t f d t iefficiencies therein, continued success of product development, acceptance of new products or servicesby 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 protectioncreated by the Group’s patents and other intellectual property rights, the availability of capital onacceptable terms (2) ind str conditions s ch as strength of prod ct demand intensit of competitionacceptable 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 theGroup, 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 geographicgeneral economic conditions, such as rates of economic growth in the Group’s principal geographicmarkets or fluctuations in exchange and interest rates.

21 July 2011Financial results Q2 2011 2

Continued solid performance year on yearContinued solid performance year-on-year

EUR 228 illi t l• EUR 228 million quarterly operating profit excl. NRI and FV

• Up by 7% year-on-year– significantly higher sales prices– offset by cost inflation and y

unfavourable exchange rates

• Balance sheet (debt/equity 0.41)Balance sheet (debt/equity 0.41) and liquidity (EUR 996 million) remained strong

21 July 2011Financial results Q2 2011 3

Good quarter in increasingly uncertain environmentGood quarter in increasingly uncertain environment

10 %300EBIT excl NRI and fair valuation EBIT margin*, % 4 Q avg

6 %

8 %

180

240

ion

4 %120EU

R m

ill

0 %

2 %

0

60

*excluding NRI and fair valuation

0 %0

21 July 2011Financial results Q2 2011 4

g

Demand of the Group’s products was mixedDemand of the Group s products was mixed

2007 Q avg = 100115

Folding boxboard Std Newsprint Uncoated magazine Coated fine paper

100

X

85

IND

EX

70

European demandSource: CEPI PPPC CEPIFINE

21 July 2011Financial results Q2 2011 5

Source: CEPI, PPPC, CEPIFINE

Prices continued stablePrices continued stable

115

Newsprint (std 45 gsm) SC (roto 56 gsm) WFC (sheets 100 gsm) FBB

2007 Q avg = 100

105

110

90

95

100

IND

EX

80

85

90

75

6

Market price – Germany, monthly avgSource: PPI Europe Price Watch

21 July 2011Financial results Q2 2011

Outlook Uncertainty in European markets increasingOutlook – Uncertainty in European markets increasing

C t i fl ti h d t• Cost inflation unchanged at approximately 4%

Demand development Q3/11 vsQ3/10

Price development Q3/11 vsQ2/11

• Actions continue to mitigate cost inflation

Consumer Board

Industrial• FX rates to have a negative

impact on the Q3 results

Industrial Packaging

Newsprint and Book Paper

• Geographic mix changes Coated Magazine Paper

UncoatedM i P• EBIT excl. NRI and FV in Q3

forecasted to be approximately in the same range as Q2 2011

Magazine Paper

Fine Paper

Wood Products

21 July 2011Financial results Q2 2011 7

Wood Products

Productivity increased yPricing over volumes

120 000

100 000

oyee

, EU

R

80 000

s pe

r em

plo

60 000Sal

es

40 00007Q2 08Q2 09Q2 10Q2 11Q2

21 July 2011Financial results Q2 2011 8

Flexibility increased yFixed costs developing to the right direction

0,30

0,28

ts/S

ales

0,26

Fixe

d C

ost

0,24

0,22FY2007 FY2008 FY2009 FY2010 H12011

21 July 2011Financial results Q2 2011 9

Net Debt to EBITDA improved strongly year on yearNet Debt to EBITDA improved strongly year-on-year

6,05 000

Net Debt Net Debt/EBITDA excl NRI and fair valuations

4,0

5,0

4 000

4 500

lion

2,0

3,0

3 000

3 500

EU

R m

ill

0 0

1,0

2 000

2 500

EBITDA: Continuing operationsSENA divestment closed in Q4 2007

0,02 000

21 July 2011Financial results Q2 2011 10

g pNet debt: Total operations

SENA divestment closed in Q4 2007Merchants divestment closed in Q2 2008

Variable cost developmentVariable cost development

R li d R li dRealised Q2/11 vsQ2/10

RealisedQ2/11 vsQ1/11

Pulp wood

Sawlogs

RCP

Pulp

Chemicals

Energy

21 July 2011Financial results Q2 2011 11

Softwood pulp prices record highp p p gStora Enso’s market pulp is softwood

1 100

1 000

1 100

800

900

nne

Bleached softwood

700

US

D/to

n

kraft pulp

Bleached hardwood k ft l

500

600 kraft pulp

400

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

21 July 2011Financial results Q2 2011 12

Source: FOEX

Rethink create and renewRethink – create and renew

ProgressEarlier announced strategic investmentsMontes del Plata Pulp MillMontes del Plata Pulp MillOstroleka Light Weight Containerboard MachineYbbs, Wood Based Construction ElementsSkoghall, Liquid Packaging Board C titi I t

As planned

Competitiveness Improvement

A significant step forward in renewable materialsA i l l t t I t i Fi l d t

Q1 2012A pre-commercial plant at Imatra in Finland to produce microfibrillated cellulose (MFC)

Renewable energyInvestment to Zdírec Sawmill in the Czech Republic to optimise energy production and usage

Q1 2013

13

Productivity and flexibilityProductivity and flexibility

C ti d lid f i Q2• Continued solid performance in Q2

• Multiple cost and productivity p p yimprovements to compensate inflation

• Fixed costs continued to decrease excluding maintenance impact

• Strategic investments proceeding according to plan

• Productivity and flexibility decisive in uncertain environment

21 July 2011Financial results Q2 2011 14

Rethinking continues!Rethinking continues!

21 July 2011Financial results Q2 2011 16

Summary financials Q2 2011Summary financials Q2 2011

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

Change %Q211/Q210

Change %Q211/Q111

Sales 2 817 2 727 2 692 4.6 3.3

EBITDA l NRI d f i l i 3 8 368 330 8 2EBITDA, excl. NRI and fair valuations 358 368 330 8.5 -2.7

Operating profit, excl. NRI and fair valuations 228 248 213 7.0 -8.1

Profit before tax, excl. NRI 182 213 202 -9.9 -14.6

Earnings per share, excl. NRI (EUR) 0.21 0.22 0.22 -4.5 -4.5

ROCE, excl. NRI and fair valuations (%) 10.4 11.4 10.5 -1.0 -8.8

Cash flow from operations 207 163 305 -32.1 27.0

Cash flow after investing activities 122 106 229 -46 7 15 1Cash flow after investing activities 122 106 229 46.7 15.1

Debt/equity 0.41 0.38 0.49 -16.3 7.9

NRI = Non-recurring itemsFair valuations include synthetic options net of realised and open hedges,

21 July 2011Financial results Q2 2011 17

y p p gCO2 emission rights, and valuations of biological assets related to forest assets in equity accounted investments

Operating profit by segmentsOperating profit by segments

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

Change %Q211/Q210

Change %Q211/Q111

Consumer Board 85 96 77 10.4 -11.5

% of sales 12 8 14 8 13 1 2 3 13 5% of sales 12.8 14.8 13.1 -2.3 -13.5

Industrial Packaging 20 19 17 17.6 5.3

% of sales 8.1 8.0 6.6 22.7 1.3

Newsprint and Book Paper 28 26 -7 n/m 7.7

% of sales 8.2 8.3 -2.0 n/m -1.2

Magazine Paper 34 28 22 54.5 21.4

% of sales 6.6 5.9 4.1 61.0 11.9

Fine Paper 49 80 79 -38.0 -38.8

% of sales 9.2 14.2 14.3 -35.7 -35.2% of sales 9.2 14.2 14.3 35.7 35.2

Wood Products 35 12 30 16.7 191.7

% of sales 7.6 2.9 7.1 7.0 162.1

21 July 2011Financial results Q2 2011 18

excluding non-recurring items

Capital expenditure and depreciationp p pQ1 2008 – Q2 2011

8 %

10 %

200

250

Forecast:Capex FY 2011approximately

6 %

8 %

150

200

illio

n

approximatelyEUR 500 m

4 %100EU

R m

0 %

2 %

0

50

0 %0

Capex Depreciation and impairment excl NRI Capex % of sales

21 July 2011Financial results Q2 2011 19

Total operations

Operative working capital p g pQ1 2008 – Q2 2011

28 0 %2 800

24,0 %

26,0 %

28,0 %

2 400

2 600

2 800

20,0 %

22,0 %

2 000

2 200

R m

illio

n

14 0 %

16,0 %

18,0 %

1 400

1 600

1 800

EU

R

10,0 %

12,0 %

14,0 %

1 000

1 200

1 400

Operative W/Cap = inventories + trade receivables – trade payables

08Q108Q208Q308Q409Q109Q209Q309Q410Q110Q210Q310Q411Q111Q2

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

21 July 2011Financial results Q2 2011 20

p p p y

Debt/equityq y2005 – Q2 2011

0,700,7

0,8

0,54 0,560,51

0,5

0,6

0,39 0,39 0,380,41

0,3

0,4

0,1

0,2

02005 2006 2007 2008 2009 2010 Q1 2011 Q2 2011

21 July 2011Financial results Q2 2011 21

Total operations

Net Financial ItemsNet Financial Items

Ch % Ch %EUR million II/2011 I/2011 II/2010

Change %Q211/Q210

Change %Q211/Q111

Net interest expense -28.3 -23.0 -24.3 -16.5 -23.0

Foreign exchange gains and losses -0.7 -11.9 6.2 n/a 94.1

Other financial items, of which -5.6 -16.3 -4.5 -24.4 65.6

PIK notes 1.9 1.5 1.5

Fair valuation of interest rate derivates* 3 3 13 9 4 0Fair valuation of interest rate derivates -3.3 13.9 -4.0

Fair valuation of long-term debt 0.4 -0.5 0.9

Other items -4.6 -31.2 -2.9

Total net financial items -34.6 -51.2 -22.6 -53.1 32.4

21 July 2011Financial results Q2 2011 22

*Not hedge accounted interest rate derivatives.

Transaction risk and hedgesgas at 30 June 2011

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 070 540 -820

Transaction hedges as at 30 June 2011 -500 -250 550

Hedging percentage as at 30 June 2011 for the next 12 months 47% 46% 67%

Operating Profit: Currency strengthening of + 10%Based on estimated next 12 months net operating EUR million

g g p g

Based on estimated next 12 months net operating cash flow exposure.

EUR million

USD 107

SEK -82

GBP 54

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.

21 July 2011Financial results Q2 2011 23

Maturity profiley p30 June 2011

800900

1 000 SEK 500m 3.5% 2015SEK 1.4 bn S+3.7% 2015SEK 2.4 bn 5.75% 2015

500600700800

mill

ion

EUR 750m 5.125% 2014EUR 390m E+4.21% 2016USD 507m 6.404% 2016

300400500

EU

R m

USD 300m 7.25% 2036

0100200

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

21 July 2011Financial results Q2 2011 24

g y y y

Energy balance Q2 2011Energy balance Q2 2011

TWh/a

Impact*on operating50Self sufficiency 62%Total energy self

Impact on operating profit from 10% change in:

EUR million p.a.

Electricity market price ~1120

30

40

50

Self sufficiency 53%

sufficiency 60%

*) Remaining impact on non hedged volume

Electricity market price 11

Fossil fuel price ~15 ‐10

0

10

Electricity Fuels

*) Remaining impact on non-hedged volumeInternal External (hedged) External (non-hedged)

21 July 2011Financial results Q2 2011 25

Stora Enso electricity procurementStora Enso electricity procurement

16 000

18 000

GWh/a

Sales to market

10 000

12 000

14 000Sales to market

Open position

Local tariff

6 000

8 000

10 000 Financial contracts

Physical contracts

PVO production

0

2 000

4 000 Own production

-2 000

0

2011 2012 2013 2014

21 July 2011Financial results Q2 2011 26

Permanent pulp, paper and board capacity reductions p p, p p p ysince 2006

Mill D t G d C it d ti tMill 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 000Berghuizer 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

f (S )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 000Varkaus PM 2 and PM 4 Sep 2010 Newsprint, directory paper 290 000

Maxau PM 7 Nov 2010 Newsprint 195 000

Totals % of capacity as at end 2005 (adjusted for disposals)

P d b d 2 490 000 t/ 15%

21 July 2011Financial results Q2 2011 27

Paper and board 2 490 000 t/a 15%Pulp 550 000 t/a 9%

Permanent sawn wood capacity reductions p ysince 2006

Mill Date Capacity reduction, m3

Veitsiluoto Sawmill 2006 100 000

Honkalahti Sawmill 2006 90 000

Sauga Sawmill Jun 2007 130 000Sauga 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

Total 1 590 000Total 1 590 000

Reductions equal 20% of capacity as at end 2005 (adjusted for disposals)

21 July 2011Financial results Q2 2011 28