deutsche bank 16th annual european leveraged finance conference in london. presentation by group...

Stora Enso Investor PresentationJyrki Tammivuori SVP, Group Treasurer

London 14 June 2012

It 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 SecuritiesLitigation 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 ofefficiencies 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) 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 geographicmarkets or fluctuations in exchange and interest rates.

214 June 2012Stora Enso presentation

Stora Enso’s business

Printing and Reading Biomaterials Building and Living Renewable Packaging

What we do

Operational EBIT, 147 EUR millionGroup Sales*, EUR 2 673 million

3Stora Enso presentation

46%

9%

14%

29%26%

Printing andReading

Biomaterials Building andLiving

RenewablePackaging

Other

46%

5% 6%

42%

1%

Printing andReading

Biomaterials Building andLiving

RenewablePackaging

Other

14 June 2012

*Including inter-segment sales elimination

Q1 2012 Earnings remained moderate as expected

Operational EBIT EUR 147 million

Strong cash flow EUR 224 million

Liquidity EUR 1 251 million

14 June 2012 4Stora Enso presentation

Summary financials Q1 2012

EUR million I/2012 IV/2011 I/2011 Change %Q1 12/Q1 11

Change %Q1 12/Q4 11

Sales 2 673.3 2 681.6 2 726.9 -2.0 % -0.3 %Operational EBITDA 262.1 242.9 368.3 -28.8 % 7.9 %Operational EBIT 147.4 144.9 258.3 -42.9 % 1.7 %Profit before tax. excl. NRI 101.0 141.4 206.7 -51.1 % -28.6 %Profit before tax 89.9 110.3 179.5 -49.9 % -18.5 %EPS excl. NRI (EUR) 0.10 0.10 0.22 -54.5 % 0.0 %Operational ROCE. % 6.8 6.7 11.9 -42.9 % 1.5 %

Cash flow from operations 223.7 302.3 162.9 37.3 % -26.0 %Cash flow after investing activities 111.4 73.8 91.7 21.5 % 50.9 %Debt/equity 0.46 0.47 0.38 21.1 % -2.1 %


Operational EBIT in line with previous quarter

14 June 2012Stora Enso presentation 6

Flexibility improvements continuedFixed Cost/Sales


Printing and Reading and Renewable Packaging created the cash flow in Q1 2012


Rethink strategy

Growth markets

Renewable packaging

Biomaterials

Competitive paper


Strongest growth in demand of virgin fibre-based consumer board will be in Asia

14 June 2012 10

CAGR0,2 %

CAGR3,5 %

CAGR1,4 %

CAGR4,6 %

CAGR3,3 %

CAGR6,9 %

Asia

Middle East & Africa

Eastern Europe

Western EuropeNorth

America

South America

Fibre-based consumer board consumption CAGR

China 9%Pakistan 9%

India 6%

Middle East 4%

2010-2020 Million tonnes

Source: Pöyry and Stora EnsoStora Enso presentation

Focusing on high quality segments in China


Chinese platformfor growthUnique position

A world leading position

Technologies and specifications

Committed customers

Robust sustainability

Unique integrate

Established footprint

Innovation

Well prepared project to accelerete growth

12

Every third beverage

carton in the world is

produced from Stora Enso materials!

Accelerate what works


Stora Enso’s engines


Growth enginesRenewable Packaging

Plantation based pulp

Building and living

Cash enginesPrinting and Reading

Nordic market pulp

Low cost base saw milling

14 June 2012

GrowthOperating Capital


54 %

16 %

24 %

6 %

Printing and ReadingBiomaterialsRenewable PackagingBuilding and Living

35 %

65 %

Cash EngineGrowth Engine

2011 20XX

New investments will contribute well to cash generation


-1500-1000

-5000

500100015002000

2007 2008 2009 2010 2011 path 20XX

Capex restructuringInv for future Net cash from operationsEBITDA from new projects

Investment for future and net cash

from operations2011

Maturity profile 31 March 2012


EUR 413m 5.125% 2014

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

EUR 390m E+4.21% 2016USD 507m 6.404% 2016

USD 300m 7.25% 2036

Revolving Credit Facility € 700 million matures in January 2015 and is fully undrawn

€m Commercial paperOther loans / liabilitiesBonds

Funding sources Q1 2012

• Cash position +1251 MEUR

• Revolving Credit Facility(Jan 2015) +700 MEUR (fully undrawn)

• Other Credit Facilities+600 MEUR


Bonds

CPs

Loans

Loans fromMultilateralsand ECAs

Credit rating situation

Rating agency Long/short-term rating Valid from

Standard & Poor's BB (stable)/B 22 November 2011

Moody's Ba2 (stable)/NP 3 November 2011

Fitch BB (stable)/B 22 Jun 2010 (unsolicited)


Sales and operational EBIT forecast for Q2 2012 Compared with Q1 2012

• Group sales slightly higher andoperational EBIT approximately in the range of Q1 2012

• Maintenance stoppages in several European mills with main impact in Biomaterials

• Benefits of improving variable costs slowly apparent in the results


Summary

• Quarterly performance as expected

• Cost position and operational performance improvement need to continue

• Transformation accelerating: Montes del Plata pulp mill, and Chinese pulp and packaging board mill

• Strong liquidity, good access to funding and balanced maturity profile


Debt increase due to large investments for the future

Net Debt/Equity2009 – Q4 2011

0,51

0,39

0,47

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

2009 2010 2011

Net Debt/Operational EBITDA


3,2

2,0 2,1

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

1 500

2 000

2 500

3 000

2009 2010 2011

EUR

milli

on

Net DebtNet Debt/Operational EBITDA

Cash in & out


-8%

-4%

0%

4%

8%

12%

Printing &Reading

Biomaterials Building &Living

RenewablePackaging

Group

Capex restructuring Inv for future Net cash from operations

2007-2011% of sales

Business improved q-on-q, other lowerOperational EBIT by segments

EUR million I/2012 IV/2011 I/2011 Change %Q112/Q111

Change %Q112/Q411

Printing and Reading 67.3 55.6 85.2 -21.0 % 21.0%% of sales 5.5 4.3 7.0 -21.4 % 27.9 %

Biomaterials 7.2 27.2 53.5 -86.5 % -73.5 %% of sales 3.0 10.6 18.3 -83.6 % -71.7 %

Building and Living 9.8 6.0 11.8 -16.9 % 63.3 %% of sales 2.6 1.6 2.9 -10.3 % 62.5 %

Renewable Packaging 61.7 32.8 101.0 -38.9 % 88.1 %% of sales 7.9 4.3 12.5 -36.8 % 83.7 %

Other 1.4 23.3 6.8 -79.4 % -94.0 %% of sales 0.2 3.6 0.9 -77.8 % -94.4 %


Business improved q-on-q, other lowerOperational EBIT by segment

EUR million I/2012 IV/2011 Change Q1 12/Q4 11

Printing and Reading 67.3 55.6 11.7

Biomaterials 7.2 27.2 -20.0

Building and Living 9.8 6.0 3.8

Renewable Packaging 61.7 32.8 28.9

Other 1.4 23.3 -21.9

Group 147.4 144.9 2.5


Working capital decreased year-on-yearQ1 2010 – Q1 2012

14 June 2012

*Operative working capital = trade receivables + inventories – trade payables

26Stora Enso presentation

Transaction risk and hedgesas at 31 March 2012

27

Operational EBIT: Currency strengthening of + 10% EUR millionUSD 116

SEK -90

GBP 62

EUR million USD GBP SEK

Estimated annual net operating cash flow exposure 1 160 620 -900

Transaction hedges as at 31 March 2012 -580 -280 390

Hedging percentage as at 31 March 2012 for the next 12 months 50% 45% 43%

The sensitivity is based on estimated next 12 months net operating cash flow. The calculation does not take into account currency hedges, and assumes no changes occurs other than a single currency exchange rate movement. Weakening would have the opposite impact.

USD and GBP have additional hedges for 13-14 months which will increase the hedging percentage by 2% and 4% respectively.


Net Financial Items

EUR million I/2012 IV/2011 I/2011Change %Q112/Q111

Change %Q112/Q411

Net interest expense -37.7 -35.1 -23.0 -63.9 -7.4

Foreign exchange gains and losses 8.0 -3.0 -11.9 n/m n/m

Other financial items. of which -4.3 -21.1 -16.3 73.6 79.6

PIK notes 2.0 2.0 1.5

Fair valuation of interest rate derivates* -3.3 -4.4 13.9

Fair valuation of long-term debt -0.5 -0.4 -0.5

NewPage lease provision 13.6 - -

Arktos writeoff - -10.2 -

Other items -16.1 -8.1 -31.2

Total net financial items -34.0 -59.2 -51.2 33.6 42.6

28

*Not hedge accounted interest rate derivatives.


Softwood pulp prices Stora Enso’s market pulp is softwood

Source: FOEX


Pulp wood and saw log pricesWood prices in Finland

Source: METLA


Wood prices in Sweden

31

Pulpwood includes pine. spruce and birch. Sawlogs include pine and spruce.

Source: SDC. Skogsstyrelsen


RCP prices

German RCP price development. free deliveredSource: Verband Deutscher Papierfabriken/Stora Enso


Energy balance* Q1 2012

Impact** on operating profit from 10% change in: EUR million p.a.

Electricity market price ~9

Fossil fuel price ~17

Self sufficiency 47% Self sufficiency 63%

Total energy self sufficiency 59%

**) Remaining impact on non-hedged volume


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

Full year 2011 operational EBIT improved by 9%

• Operational EBIT EUR 867 million

• Operational ROCE 10.0%

• Strong cash flow EUR 1 034 million,

• Good cash liquidity EUR 1 134 million

• Net debt EUR 2 746 million

• Purpose of Bond Issue is maturity extension

• Excellent access to funding– MdP, EIB


Solid year and satisfactory quarter

2,0 %

3,0 %

4,0 %

5,0 %

6,0 %

7,0 %

8,0 %

9,0 %

10,0 %

0

50

100

150

200

250

300

10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4

EU

R m

illio

n

Operational EBIT*

Operational EBIT margin %, 4 Q avg


0,0 %

1,0 %

2,0 %

3,0 %

4,0 %

5,0 %

6,0 %

7,0 %

8,0 %

9,0 %

0

100

200

300

400

500

600

700

800

900

2010 2011

EU

R m

illio

n

Operational EBIT*

Operational EBIT margin %

*Operational EBIT comprises the operating profit excluding NRI and fair valuations of the segments and Stora Enso’s share of the operating profit excluding NRI and fair valuations of its equity accounted investments (EAI). Fair valuations include equity incentive schemes, synthetic

options net of realised and open hedges, CO2 emission rights and valuations of biological assets related to forest assets in EAI.

Newsprint and Book Paper Magazine Paper Fine Paper

Consumer Board Industrial Packaging Wood Products


Breakdown by segment 2011

Operational EBIT, EUR 867 million*(Share of Group’s operational EBIT)

Sales, EUR 10 965 million

*excluding non-recurring items

12%

19% 20%

23%

15%

9% 13% 15%

31%

8% 7%

22%


Ownership distribution – by voting power31 Dec 2011

22 %

25 %

3 %6 %

27 %

3 %1 %

13 %

Finnish Institutions Solidium Oy *)Finnish private shareholders Swedish institutionsFoundation Asset Management Swedish private shareholdersADRs Under nominee names

(non-Finnish/ non-Swedish shareholders)

*) Entirely owned by the Finnish State

TOP 10 Shareholders 1 Foundation Asset Management2 Solidium Oy3 Social Insurance Institution of Finland4 Varma Mutual Pension Insurance Company5 Ilmarinen Mutual Pension Insurance Company6 MP-Bolagen i Vetlanda AB (Werner von Seydlitz)7 Erik Johan Ljungberg’s Education Foundation8 Nordea Investment Funds9 Bergslaget’s Healthcare Foundation10 The State Pension Fund, Finland

Curtailments increased to reduce inventories % of capacity


0

5

10

15

20

25

30

Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411

% o

f cap

acity

Paper and Board Wood Products

Flexibility improvements continueFixed cost/sales


0,24

0,26

0,28

0,30

FY2007 FY2008 FY2009 FY2010 FY2011

Fixe

d C

ost/S

ales

Productivity continued to increase55% per person since 2005


Continuing operations

200 000

250 000

300 000

350 000

400 000

2005 2006 2007 2008 2009 2010 2011

Sal

es/e

mpl

oyee

Over 80% of investments to high-return growth EUR million


951

254

447

92

197

0

200

400

600

800

1000

Cash flow generated by operations

Cash outflow

EU

R m

illion

Dividend

Investments to other

Investments to high-return growth

Net financial items and net income tax paid

Feb/Mar 2012 New Issue and Liability Management


• On 29 February 2012 Stora Enso issued successfully a new 7yr €500m fixed-rated EUR bond, coupon being 5.50% and yield 5.531%

• Simultaneously, Stora Enso announced a tender offer on its €750m 5.125% June 2014 bond at E+130bp. The total amount tended was €340.2m at the price of 105.97.

Rationale“We have a strong liquidity position and good access to various financing markets. We issued the bond and announced the tender offer for the Eurobond maturing in 2014 to take advantage of the good credit market conditions and extend our maturity profile”

0

200

400

600

800

1 000

1 200

2012 2013 2014 2015 2016 2017 2018 2019-2035 2036Commercial paperOther loans / liabilitiesBonds

deutsche bank 16th annual european leveraged finance conference in london. presentation by group...

Economy & Finance