January March 2005 Results

1
January - March 2005Results

• 27 April 2005

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.

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Highlights Q1 2005
IV/2004 I/2005 Sales, EUR million 3
241.9 3 144.9 Operating profit, EUR million
41.4 112.7 EPS, EUR 0.18 0.07 EPS,
EUR 0.03 0.07 Cash EPS, EUR 0.38
0.41 Debt/Equity 0.38 0.51

• Continued strength in demand
• Moderate price increases
• In Publication Papers 134 000 tonnes production
  lost due to rebuilds
• EBIT effect EUR -32 million
• Higher deliveries in Fine Paper and Packaging
  Boards
• Non-cash items regarding emission rights and
  share-based payments amounted to EUR -6.6 million

) excluding non-recurring items
4
Main Events in Q1 2005

• New syndicated credit facility EUR 1.75 billion
• Replacement of existing EUR 2.5 billion
  syndicated facility in order to save costs while
  extending maturity
• Acquisition of the remaining 34 minority
  shareholding in former Sylvester
• Stora Enso gained 100 ownership of the company
• Purchase price EUR 41.8 million
• Announcement of the acquisition of UPMs 29
  minority shareholding in Corenso
• Stora Enso gained 100 ownership of the company
• To develop a strategic business area independently

5
Events after the Period

• Closing of the previously announced acquisition
  of Papeteries de France (PdF)
• Announcement of the acquisition of Schneidersöhne
  Group
• Enterprise value EUR 450 million
• Will create one of Europes leading merchants
• Completion of the acquisition expected during the
  third quarter of 2005, subject to due diligence,
  and regulatory, competition authority as well as
  other required approvals

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Financial Figures
7
Summary Financials

• EUR million 2004 I/04 IV/04 I/05
• Sales 12 396 3 018 3 242 3 145
• EBITDA 1 511 393 331 389
• Operating profit 339 102 41 113
• Operating profit 709 218 221 113
• Profit before tax 272 80 23 84
• Net profit 741 405 149 59
• EPS, EUR 0.26 0.06 0.03 0.07
• EPS, basic, EUR 0.89 0.49 0.18 0.07
• CEPS, EUR 1.67 0.41 0.38 0.41
• ROCE, 3.0 3.7 1.5 4.1
• Debt/Equity 0.38 0.39 0.38 0.51

excluding non-recurring items
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Net Financial Items

• EUR million I/04 II/04 III/04 IV/04 I/05
• Net interest -42.0 -34.9 -31.8 -32.6 -27.6
• Foreign exchange profit/loss 4.8 -1.6 -1.5 -2.8 5.
  7
• Valuation of financial instruments 13.6 5.9 5.7 7.
  1 -19.2
• Other financial items 3.3 4.4 0.6 -4.2 -2.0
• Total -20.3 -26.2 -27.0 -32.5 -43.1

excluding non-recurring items
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Market-Related Production Curtailments

• Tonnes 2004 I/04 II/04 III/04 IV/04 I/05
• Publication Paper
• Europe 240 000 93 000 74 000 21 000 52 000 9
  000
• North America
• Fine Paper
• Europe 36 000 12 000 8 000 3 000 13 000 1 000
• North America 7 000 7 000
• Packaging 81 000 20 000 16 000 37 000 8 000 2
  000
• Total 364 000 125 000 98 000 61 000 80 000 12
  000

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Change in EPS IV/2004 vs I/2005
EUR
-0.01
0.07
-0.03
0.03
-0.04
0.04
0.07
0.3
-0.02
excluding non-recurring items
11
Operating Profit by Quarter
EUR million





excluding non-recurring items no goodwill
amortisation in 2005 structural effect from
Swedish forestland
12
Debt/Equity
Target lt 0.8
13
Capital Expenditure and Depreciation
Capital expenditure
Depreciation
EUR million
Capital expenditure as of sales
14
Share Buy-Back Programme

• Current programme approved by AGM 2005 to end 21
  March 2006. Allows repurchase up to
• A shares 17 900 000
• R shares 62 150 000
• Status through 12 April 2005
• Number of Average of Shares shares
  purchased purchase price authorisation
• A shares 19 000 10.86 0.1
• R shares 4 877 600 10.86 7.9
• 2002 2003 2004 15 Apr 2005
• Total shares in issue 899 778 299 864 262 499
  837 243 399 812 977 099

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Market Outlook
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Near-term Market OutlookWestern Europe

• Price Demand Comments

Magazine Papers
SC
Demand good prices have increased 3-5 in local
currencies
CMR
Demand good prices have increased 3-5 in local
currencies
Newsprint
Demand good prices have increased 5-8 in local
currencies
Fine Papers
WFC
Demand improving price increases for some
segments announced
WFU
Demand improving sheet prices under pressure due
to overcapacity
Packaging Boards
Firm demand outlook price increases in consumer
boards, corrugated boards prices under pressure
Wood Products
Demand improving seasonally prices stable
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Near-term Market OutlookNorth America

• Price Demand Comments

Magazine Papers
SC
Demand strong price increasesexpected in Q2
CMR
Demand good price increasesexpected in Q2
Newsprint
Demand rather weak
Fine Papers
WFC
Demand good price increasesexpected in Q2 for
reels
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Improving Profitability
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Continuing Profit Enhancement

• Asset Restructuring in Europe
• Kvarnsveden PM 12 still to be completed
• North American Profit Enhancement Programme
• Almost completed
• European Profit Improvement Programme to be
  initiated

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Programme for Profit Improvement

• Having completed a major asset restructuring
  programme of Stora Ensos European units, it is
  time to gain the benefits
• Capex to be kept at or below depreciation
  opportunities in emerging markets will be
  emphasized
• In an environment of low industry profitability,
  tighter competition and a weaker US dollar, Stora
  Enso is intensifying its efforts for improving
  profitability mainly at its European operations

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Main Targets for the Programme

• Target to improve profit before tax by EUR 300
  million based on 2005 price and cost levels
• The programme consists of
• Efficiency improvements in production, sales and
  logistics
• Improvement in working capital management
• Cost cuttings in sourcing and administration
• There may be closures or disposals of units with
  specifically high costs or low long-term earnings
  potential redundancies may occur
• The programme will start immediately and have the
  full targeted impact on profit by mid 2007 onwards

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Summary and Conclusions
23
Summary

• Demand is expected to stay good
• In Europe
• Publication paper prices are likely to stay on
  the increased level
• Uncoated woodfree sheet prices under pressure due
  to over-capacity
• Price increases announced for certain coated fine
  paper segments
• In North America
• Prices are expected to increase in magazine
  papers and coated fine paper
• In Asia
• Prices are increasing
• Unsettled labour market situation in Finland
• If all of Stora Ensos paper and board mills in
  Finland are shutdown the negative effect on EBIT
  level is EUR 3 million per day
• Profit improvement programme initiated

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Appendix
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Existing Asset Restructuring Programme

• Programme includes
• Targeted investments
• Machine specialisation measures
• Elimination of less-competitive production assets
• Focus on gaining benefits from rebuilt, modified
  and new machines
• Maxau, Langerbrugge, Kvarnsveden, Corbehem,
  Summa, Veitsiluoto and Nymölla
• Kvarnsveden PM 12 start up at the end of 2005

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Stora Enso North America Profit Enhancement
Programme

• Programme includes
• Restructuring selected manufacturing assets
• Targeted capital investments
• Permanent shutdowns of production units
• Workforce reduction
• Current status
• Programme proceeding according to plan
• Three paper machine shutdowns
• Four paper machines modernised
• PM 64 Whiting Mills early 2006
• Workforce reduced to some 5 000 people by mid
  2005 from 7 300 in 2000
• Savings of USD 145 million p.a. to be realised by
  mid-year 2005

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Stora Enso Strengthens its Distribution Channels

• Closing of the previously announced acquisition
  of Papeteries de France (PdF)
• Announcement of the acquisition of Schneidersöhne
  Group
• Stora Enso has signed a memorandum of
  understanding to acquire 100 of the shares in
  the German paper merchant Schneidersöhne Group
• The strategic aim of the acquisitions is to bring
  Stora Enso closer to the customer and end-user in
  the value chain and to improve the profitability
  of its merchant business
• All-cash acquisition is expected to be completed
  during the third quarter of 2005, subject to due
  diligence and approval by regulatory and
  competition authorities

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Combined Operations of Papyrus and Schneidersöhne
Papyrus
Schneidersöhne
Papyrus Schneidersöhne
Source Eugropa
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Schneidersöhne Group In brief

• By sales volume the second-largest paper merchant
  in Germany and the fifth-largest in Europe
• Net sales EUR 1 130 million in 2004
• Sales volume 1 100 000 tonnes of coated and
  uncoated fine paper in 2004
• Operations in 11 countries
• Biggest markets Germany and Switzerland
• 38 branch offices, including 20 in Germany
• 2 100 employees

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Schneidersöhne GroupFinancial Effects

• Enterprise value of the company is estimated to
  be EUR 450 million
• Stora Ensos EPS will initially be improved by
  EUR 0.02 and CEPS EUR 0.03
• Stora Enso debt will increase by the enterprise
  value of Schneidersöhne, approximately EUR 450
  million
• The debt/equity ratio will increase by 0.06

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Operating Profit of Main Business Areas

• EUR million I/04 II/04 III/04 IV/04 I/05
• Publication Paper 8.7 -3.8 48.2 38.2 20.0
• sales 0.9 -0.4 4.4 3.3 1.9
• Fine Paper 18.1 4.6 27.9 13.7 47.8
• sales 2.3 0.6 3.5 1.7 5.7
• Packaging Boards 82.1 67.7 84.8 43.0 73.7
• sales 11.9 9.6 12.6 6.1 10.2
• Wood Products 11.4 21.3 10.9 -8.9 -4.0
• sales 3.1 5.1 2.8 -2.3 -1.1

excluding non-recurring items
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EPS by Quarter
EUR
0.00
excluding non-recurring items
33
ROCE by Quarter

Target gt 13 over the cycle (current WACC 8.7)
excluding non-recurring items
34
Change in Group Operating Profit from IV/2004 to
I/2005
EUR million
24.0
-18.8
83.3
44.6
-41,6
112.7
-20.2
41.4
excluding non-recurring items
35
Change in EPS I/2004 vs I/2005
EUR
-0.06
0.07
0.03
-0.02
-0.01
-0.02
0.02
0.07
0.06
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Change in Group Operating Profit from I/2004 to
I/2005
EUR million
81.4
-72,9
-2.8
22.7
-25,0
26.4
-19.2
102.1
112.7
excluding non-recurring items
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