Goldman, Sachs

1
Goldman, Sachs Co2004 Annual Cyclicals and
Specialty Materials Forum

• Kai Korhonen
• Senior Executive Vice President
• Stora Enso Paper

2

• 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 Groups 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 Groups
  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 Groups 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 Groups principal geographic
  markets or fluctuations in exchange and interest
  rates.

3
During our time together

1. Stora Enso at a Glance
2. Q1 2004 Snapshot
3. The World of Paper
4. Stora Enso North America
5. Mergers Acquisitions
6. Stora Ensos Emerging Market Strategy
7. Market Outlook
8. Appendix for Added Value

4
Stora Enso in Brief
Paper
Forest Products
Packaging Boards

• A world leader
• 15.7 million tonnes of paper and board
• 7.4 million m3 of sawn and processed wood
  products
• Three core product areas
• Paper, Packaging Boards and Forest Products
• Sales EUR 12.2 billion
• Approximately 43 000 employees in 40 countries
• Market capitalisation EUR 8.9 billion
• Shares listed on Helsinki, Stockholm and New York
  stock exchanges

5
Key Financial Targets
ROCE gt 13 over the cycle Debt / Equity ratio
0.8 Capex annual depreciation over the cycle
Financial Targets
Efficient usage of capital Incentive schemes
linked to profitability measures
Financial Approach
Strive to pay stable dividends linked to the
long-term performance Half of net profits over a
business cycle
DividendPolicy
6
15.7 million tonnes of pulp, paper and board per
annum worldwide
Stora Enso Global Trade Flows
Within Europe 11 million t
Within North America 2.3 million t
Inter-continental 2.4 million t
7
Stora Enso - Core Business Drivers
Core Business Drivers
Stora Enso, Sales 2003
Other 2
Other 10
Construction11
PublicationPaper 34
Advertising 52
Wood Products 11
IndustrialProduction 6
Non-durableGoods 18
Packaging Boards 21
GDP / Office IT 11
Fine Paper 24
Total EUR 12.2 billion
8
Q1 2004 Results
9
Highlights
IV/2003 I/2004 Sales, EUR million 3
028.8 3 017.9 Operating profit1), EUR million
77.4 103.4 EPS, EUR -0.05 0.49 EPS1),
EUR 0.00 0.06 Cash EPS1), EUR 0.35 0.41 Debt/E
quity 0.49 0.39

• Operating profit was improved by
• Higher production
• Mix changes between segments
• Seasonal improvement in Packaging Boards
• Operating profit was decreased by
• Declining prices
• The rebuild of Wisconsin Rapids PM 16

1) excluding non-recurring items
10
The World of Paper
11
Stora Enso Paper in Brief

• A world leader in communication papers
• 12.5 million tonnes of paper from 55 production
  lines
• Newsprint and book papers, uncoated and coated
  magazine papers, graphic, office, and speciality
  papers
• Sales EUR 8 billion to 153 countries
• Manufacturing in 10 countries

12
Stora Enso PressSelection Reaching Customers
Worldwide through Global Sales Network

WFC
MWC
Value added
LWC
MFC
SC
MFS
NEWS
55 production lines in 10 countries Sales to 153
countries
Brightness
13
Stora Enso Paper2003 figures

• Leading in publishing papers
• in North America
• Sales EUR 1,600 million
• Capacity 2.7 million metric tonnes

• Number 1 in Europe
• Sales EUR 6,200 million
• Capacity 9.7 million metric tonnes

53
14
Business EnvironmentDemand/Capacity Balance for
PW Papers
The present oversupply situation for PW papers
in Europe and Asia will remain and lead to
increased global trade and possibly global
prices
Million metric tonnes
Asia
Western Europe
North America
Source RISI
15
Stora Enso PaperRecent Asset Restructuring
Tonnes
New Machines
Modernisations
Shutdowns
Beginning 2000
End 2004E
Time
Compared with total capacity
16
Major Factors Expected to Shape the Future Demand
for Printing Papers

• Overall ad spend growing
• More targeted and effective marketing spend
• New subscription-based television formats will
  challenge TV as a broad-reach medium
• New, more targeted print products appealing to
  advertisers
• Tele-marketing will decrease

• New technologies have increased consumption of
  entertainment resulting in fewer casual readers
• New technologies offer better features for
  certain applications like classified
  ads/directories
• Younger generations have developed new media
  consumption patterns Accelerated declining
  readership

Annual Growth 2004-2008 2-3 (RISI)
17
Business driversAdvertising Expenditures
DevelopmentBy Main Media in US billion
1980-2006 (current prices)
North America
Asia Pacific
Europe

• Growth adspend 2004 2006
• Total 5.1 p.a.
• Print 5.1 p.a.
• TV 5.2 p.a.

• Growth adspend 2004 2006
• Total 4.3 p.a.
• Print 3.6 p.a.
• TV 5.1 p.a.

• Growth adspend 2004 2006
• Total 5.9 p.a.
• Print 4.9 p.a.
• TV 7.0 p.a.

Newspapers Magazines
TV Direct Mail
Internet
Total adspend main media 2006 in bln US()
139 (111) 223 (178) 81
(65)
World adspend to increase from US 327bln in 2003
to US 376bln in 2006
Source Zenith adspend forecasts Dec. 2003
18
Stora Enso North America
19
Stora Enso North AmericaBusiness Results
USD million 2002 2003 H1/03 H2/03 Sales (1 000
tonnes) 2 655 2 707 1 345 1 362 Sales 1 871 1
887 933 954 EBITDA 1 153 95 39 56 EBITA 1
-155 -184 -98 -86 Capital Expenditure 82 182 74
109 Cash flow after Capex 138 2 -121
-71 -50 Market-related downtime (1 000 tonnes)
219 79 49 30
1 excluding non-recurring items 2 excluding
forest asset sale
20
Stora Enso North America Strategic Actions Since
2000
Whiting PM 64 Rebuild (May 2005)
Capacity 1,000 tonnes 2.700 ? 2.800 Number of
PMs 23 ? 17 Number of Employees 7500
? 5000
Biron PM 26 Phase 1 (Feb. 2005)
2005
Port Hawkesbury New TMP (July 2004)
Pulp Conversion (June 2004)
Kimberly 97 Rebuild (June 2004)
W. Rapids PM16 rebuild (Feb 2004)
2004

Divestment of Ontario forestlands (Feb 2004)
Biron PM26 Phase I rebuild (June 2003)
Closure of Biron PM24 (Sep 2003)
Kimberly PM96 rebuild (May 2003)
Closure of St.Point PM32 (Sep 2003)
Port H TMP expansion (Jan June 2003)
2003
Closure of W.Rapids PM12 (Jan 2003)
Whiting PM64 winder (Nov 2002)
US forest divestment (Dec 2002)
Duluth PM1 Dry-end upgrade (June 2002)
Closure of Biron PM23 (Feb 2002)
Closure of Kimberly gw plant (Jan 2002)
-
Closure of cartonboard (Jan 2002)
2002
Closure of Kimberly recycled fiber plant (Jan
2002)
2001
W. Rapids PM16 rebuild (Dec 2000)
2000
Closure of W. Rapids PM15 (Oct 2000)
Closure of Whiting PM61 (Oct 2000)
21
Stora Enso North AmericaAsset Quality Position
in 2005
High
Low
Average Technical Age 1)

• Through a major asset and cost restructuring
  programme Stora Enso North America will by summer
  2005 have
• Reduced head count by 2,500
• Changed product portfolio to
• more value added products
• Enhanced EBITDA by
• USD 145 million

SC NA
High
WFC Europe
WFC NA
NP Europe

WFC 2) NA
WFU Europe
Average PM capacity
SC Europe
LWC Europe
LWC NA
Low
1) The absolute scale differs between products
and regions 2) Before completion of asset
restructuring programme
Source Jaakko Pöyry
22
Mergers Acquisitions
23
MA Strategy Guided by Discipline

• Must support core business development
• Provide customer, production or other synergies
• Asset quality company average
• EPS and CEPS accretive, post synergies, after
  year one
• In the near term, returns must surpass our
  weighted average cost of capital (_at_8.5 pre-tax)
• In the longer term, must clearly support our
  continuing ROCE target of 13 over the cycle

24
Stora Ensos Emerging Market Strategy
25
Growth of Paper and PaperboardDemand by Region
2000-2015
Eastern Europe and China drive future growth
aspirations
Source JP World Paper Demand 2015
26
Paper and Board Production 1980 2015

• Production balance is gradually shifting from
  Norscan countries and Japan to China, Southeast
  Asia, Eastern Europe and Latin America

Source Jaakko Pöyry
27
Emerging Markets Growth Strategy

• Fast growing markets
• Low cost production
• Appropriately cautious
• Have a clear strategy for being there
• Assess risks, existing and potential
• Conservatively estimate reward
• Find the right business model
• Commit the appropriate level of capital
• Adhere to corporate social responsibility policy
• Maintain a long-term view in support of customers
  and financial targets

28
Present Operations in Russia and Eastern Europe

• Corrugated packaging board
• mills in Riga, Balabanova and Arzamas
• 9 new packaging plants in Russia, Hungary and the
  Baltic States since1995
• Acquisition of Sylvester
• 5 sawmills in Estonia, Latvia, extensive
  procurement
• One sawmill in Alythus, Lithuania
• Sawmilling in Russia
• 2 sawmills in Russia Impilahti and Nebolchi

Sawmills
Corrugated packaging board
29
Present Operations in South America

• Veracel a joint venture together with Brazilian
  pulp maker Aracruz, based in Rio de Janeiro
• A new pulp mill now under construction with 900
  000 tonnes of annual capacity
• Production from mid-2005
• 70 000 hectares of eucalyptus plantations
• Stora Ensos share of production intended for
  captive use
• South American division office in Sao Paulo
• Sales offices in Sao Paulo, Santiago and Buenos
  Aires

Veracel
Aracruz
Sao Paulo
Division office
Sales office
30
Present Operations in China

• Fine paper mill in Suzhou
• Capacity 240 000 tonnes coated woodfree
  (including sheeting, in 2005)
• Paper sold to Chinese market
• Reliant on imported pulp
• Core factory in Hangzhou
• Capacity 10 000 tonnes
• Cores sold to different industries plastics,
  paper, etc.

Plantations
Core board
Fine paper mill
Sales office
31
Market Outlook
32
Near-term Market Outlook Western Europe

• Price Demand Comments
• Magazine Paper SC
• CMR
• Newsprint
• Fine Papers WFC
• WFU
• Speciality Papers
• Packaging Boards
• Timber

Healthy order book prices stabilising after
early 04 drop
Demand improving prices stabilising
Demand improving moderately European contracts
concluded with modest decline (ave. -3)
Price increases announced demand seasonally
levelling off
Order books good demand seasonally levelling
off prices stabilising
Demand up very low inventories
Weak US Dollar containing prices seasonal
demand pick-up
Steady demand outlook, but heavy supply redwood
prices falling
33
Near-term Market Outlook North America

• Price Demand Comments
• Magazine Paper SC
• CMR
• Newsprint
• Fine Papers WFC
• Speciality Papers

Demand increasing producer and customer
inventories low price increases announced
Order books good priceincreases announced
Announced price increases not fully implemented
yet
Demand seasonally low price increases announced
Demand very strong low inventories price
increases announced
34
Visit www.storaenso.com for more information.
35
Appendix
36
Earnings Per Share and Dividend
EPS, excluding non-recurring items
EUR
Payout ratio
Dividend

) Board proposal
37
Share Buy-Back Programme

• Current programme approved by 2004 AGM to end 17
  March 2005. Allows repurchase up to
• A shares 9 000 000
• R shares 32 700 000
• Status through 14 April 2004
• No. of shares Average of Shares
  purchased purchase price authorisation
• A shares 500 10.87 0.01
• R shares 1 808 400 10.61 5.53
• 2001 2002 2003 15 April 2004
• Total shares in issue 906 753 299 899 778 299
  864 262 499 837 243 399

38
Capital Expenditure and Depreciation
Capital expenditure
Goodwill depreciation
EUR million
Capital expenditure as of sales
Depreciation



39
Print Advertising Expenditures Recovering along
with Corporate Profits
Annual percentage changes based on current dollars
Source AFPA, Universal McCann, Bureau of
Economic Analysis
40
Operating Profit Main Business Areas

• EUR million I/03 II/03 III/03 IV/03 I/04
• Publication Paper 35.6 -6.0 39.2 42.3 8.7
• sales 3.4 -0.6 3.6 3.8 0.9
• Fine Paper 80.7 40.3 23.1 9.4 18.1
• sales 9.5 5.1 2.9 1.2 2.3
• Packaging 89.4 65.5 87.4 50.1 82.1
• sales 12.8 9.2 12.6 7.6 11.9
• Wood Products 7.0 14.9 -4.7 9.3 11.4
• sales 2.2 3.9 -1.4 2.6 3.1

excluding non-recurring items
41
Market-related Curtailments
1000 tonnes 2003 Q1/03 Q2/03 Q3/03
Q4/03 Q1/04 Publication Papers 497 123 143
106 125 93 Fine Papers 176 64 32
37 43 12 Packaging Boards 109 15 25
27 42 20 Paper and Board Total 782 202
200 170 210 125 Europe
703 195 158 145 205 125 USA 79 7 42
25 5 - Paper and Board Total 782 202
200 170 210 125
42
Summary Financials

• EUR million 2003 I/03 IV/03 I/04
• Sales 12 172 3 099 3 029 3 018
• EBITDA 1) 1 711 498 376 394
• Operating profit 1) 526 208 77 103
• Profit before tax 211 126 -64 197
• Net profit 138 83 -44 407
• EPS, EUR 1) 0.24 0.10 0.00 0.06
• EPS, basic, EUR 0.16 0.10 -0.05 0.49
• CEPS, EUR 1) 1.63 0.43 0.35 0.41
• ROCE, 1) 4.5 7.0 2.6 3.7
• Debt/Equity 0.49 0.49 0.49 0.39

1) excluding non-recurring items
43
Net Financial Items

• EUR million I/03 II/03 III/03 IV/03 I/04
• Net interest -34.6 -51.5 -49.9 -50.1 -42.0
• Foreign exchange profit/loss 2.9 7.9 12.2 -10.5 4.
  8
• Valuation of financial instruments -44.1
  30.0 16.8 -4.6 13.6
• Other financial items -5.5 2.3 -2.5 -2.5 3.3
• Total -81.3 -11.3 -23.4 -67.7 -20.3

excluding non-recurring items
44
Non-recurring Items Effect
EUR million I/2004 IAS Swedish I/2004 excl.
Forestland non-recs. EBIT 219.1 115.7 103
.4 PTP 196.5 115.7 80.8 Net profit 406.9 356
.5 50.4 EPS, EUR 0.49 0.43 0.06
45
Change in EPS IV/2003 vs I/2004
EUR
0.06
0.01
0.04
0.04
-0.04
0.00
0.02
-0.01
excluding non-recurring items
46
Change in Group Operating Profit from I/2003 to
I/2004
EUR million
208.0
-175.0
-1.7
4.2
-17.2
85.1
103.4
excluding non-recurring items
47
EPS by Quarter
EUR
0.00
excluding non-recurring items
48
ROCE

ROCE target 13
Target gt 13 over the cycle (current WACC 8.7 )
excluding non-recurring items
49
Debt/Equity
Target lt 0.8
50
Veracel Project Potential

• Industrial investment of approximately USD 1
  billion
• Construction of largest single line pulp mill in
  the world (900 000 tonnes per year)
• Approximately USD 500 million per year in exports
• Positive exchange flow of more than USD 8 billion
  during the first 20 years, including initial
  investment and loan amortisation
• Plantations divided among 8 municipal districts
  in the state of Bahia, potential benefit to
  around 300 000 inhabitants

51
Veracel Project Potential (cont.)

• During construction generation of 10 000
  temporary direct and indirect jobs in the region
  
• After construction generation of 2 000 direct
  permanent jobs and 8 000 indirect jobs
• Own forest programme with 70 000 hectares of
  eucalyptus and another 23 000 hectares of tree
  farming
• Preservation and recuperation of 70 000 hectares
  of Atlantic Forest
• During the peak of the Mill construction
• Based on Bahia Sul experience

52
Restructuring of Swedish Forestlands

• Stora Enso restructured its Swedish forestland
  ownership in March 2004
• Retaining 43.3 ownership in Bergvik Skog
• Financial effects
• Capital employed decreased by EUR 1 272.3 million
  
• Improved debt/equity ratio with 0.15 at 31
  December 2003
• Wood Supply Europes operating profit will
  decrease by EUR 100 million on annual basis
• Annual EUR 40 million effect on Groups result
  after net financial items