Stora Enso Investor Presentation

1
Stora Enso Investor Presentation

• Peter Nordquist, VP, Funding
• Ulla Paajanen-Sainio, VP, IR and Financial
  Communications
• 30 November 2004

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• 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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Stora Enso

• Ulla Paajanen-Sainio, VP, IR and Financial
  Communications

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Stora Enso in Brief
Vision
We will be the leading forest products company in
the world
Forest Products
Packaging Boards
Paper

• Three core product areas
• Paper, Packaging Boards and Forest Products
• 15.7 million tonnes of paper and board
• 7.4 million m3 of sawn and processed wood
  products
• Sales EUR 12.2 billion
• Approximately 44 000 employees in 40 countries
• Market capitalisation EUR 9.3 billion
• Shares listed on Helsinki, Stockholm and New York
  stock exchanges

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Core Business Drivers
Core Business Drivers
Stora Enso, Sales 2003
Other 10
Other 2
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
6
Paper Demand Trends and Strategic Responses
7
Co-existence of Media
Historically, electronic media has not threatened
the growth of paper based communication in many
cases the paper industry has benefited from it.
Million tonnes
Broadband
Newsprint and Printing Writing Paper
Consumption in Western Europe
Expansion ofInternet/www
CD-ROMs
Laser Printers
SatelliteTV
PCs
Cable TVVCR
MiniComputers
ColourTV
Printing Writing papers
MainframeComputers
RadioCinemaTV
Newsprint
Source Jaakko Pöyry
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Main forces of change in the paper and board
industry 1980 2015

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

9
Study on the Drivers forPaper Demand Trends
10
Multiple Paper Grades Used Especially in
commercial printing and magazines
8.8
11.1
6.4
3.3
WESTERN EUROPE
Newsprint
UM
CM
WFU
WFC
million tonnes, 2001
Newspapers
Magazines
Commercial printing
Office papers
Source Why Paper AMEC
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Strategic Responses Differ by segment and
geography
Expected demand growth CAGR 2003-2013 by segment
-
over 4
below 0
2 - 0
4 - 2
Mature Markets Emerging Markets
Assets
Operations
Towards value added products and continuous
productivity improvement
Marketing
Leverage Stora Ensos global marketing network
and account management
Strategic responses
12
Stora Ensos Acquisition Targets
13
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_8.7 pre-tax)
• In the longer term, must clearly support our
  continuing ROCE target of 13 over the cycle

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Stora Ensos Emerging Market Strategy
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Stora Ensos Focus in Emerging Markets

• Low-cost local resources (raw materials, labour)
• Fast economic growth, low GDP per capita

Focus areas for SE
Fibreresources
Russia
China
Large,fast growingmarket
Brazil Chile Argentina
Low fibre costs
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Emerging Markets Goals

• Geographically more balanced asset portfolio
• Cost competitiveness
• Revenue growth via Core products for local
  regional consumption (Fine papers, cores,
  corrugated, etc) Deeply integrated products,
  also for world markets (Newsprint, SC, Liquid
  Packaging Boards, etc)

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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
• Intercell in Poland and Serbia
• Sawmilling
• mill in Karelia operating since Autumn 2003
• Novgorod mill started up in April 2004
• 5 sawmills in Estonia, Latvia, extensive
  procurement
• One sawmill in Alythus, Lithuania
• Sawmills in Czech Republic
• Procurement / wood supply from Russia
• target procurement volume in 2004 7.4 Mm3/a
• 2 port terminals, 4 railway terminals
• 4 logging companies, total harvest 0.4 Mm3/a

Sawmills
Corrugated packagingboard and packaging materials
Wood procurementfocus
18
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
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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.
• Joint venture with Shandong Huatai Paper
• Plantations in Guangxi, southern China

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

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

Demand continues to improve prices expected to
increase Q1 2005
Demand continues to improve prices expected to
increase Q1 2005
Demand continues to improve prices expected to
increase Q1 2005
Firm demand moderate price increases expected in
Q4 2004
Demand strong some price increases expected in
Q4 2004
Prices expected to be stable
Firm demand outlook moderate price increases
Steady demand outlook prices expected to be
stable
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Near-term Market Outlook North America

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

Demand remains strong price increases
announced, contract prices up Q1 2005
Demand remains strong price increases
announced, contract prices up Q1 2005
Demand stable price increases partially
implemented
Demand remains strong price increase announced,
further price increases expected Q1 2005
Demand slowing down seasonally price increases
implemented
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Financial Figures

• Peter Nordquist, VP, Funding

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Highlights
I/2004 II/2004 III/2004 Sales, EUR million
3 017.9 3 102.9 3 033.1 Operating profit1), EUR
million 103.4 58.5 131.6 EPS, EUR
0.49 0.06 0.16 EPS1), EUR 0.06 0.06 0.10 Cash
EPS1), EUR 0.41 0.43 0.45 Debt/Equity 0.39 0.42
0.41

• Demand continues to strengthen
• Profitability improved
• Greater production volumes
• In North America
• Higher product prices
• Positive impact from the Profit Enhancement
  Programme

1) excluding non-recurring items
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Change in EPS I-III/2003 vs I-III/2004
EUR
0.01
0.04
0.04
0.04
0.23
0.02
0.24
-0.33
0.17
excluding non-recurring items
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Indirect Impact of Euro Strength

• European producers are increasing their sales to
  European markets
• pressure on prices
• increased competition
• Imports to Western Europe increasing
• Packaging Boards experiencing increased
  competition versus US dollar-based suppliers
• However, Stora Enso has a natural hedge with
  20 of its production base in North America

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Funding Strategy and Outlook
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Funding Strategy

• Background
• Consolidating industry
• Stora Enso strategy is to continue to participate
  in the consolidation
• Average maturity on debt portfolio 4 7 Yrs
• Committed credit facilities to cover short term
  debt and maturities
• Targets
• Secure access to liquidity
• Competitively priced funding
• Tight and stable credit spreads
• Strategy
• Short term liquidity management with CP Programs
• Back up facility from bank market
• Bond markets used for long term financing
• Focus on public issuance
• Communication and transparency
• Relationship building

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Funding Sources
Break down of Stora Enso Debt Structure

• Capital markets (Bonds and CPs) 75 80 of
  total funding

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Commitment To Market Communication
-Banks credit analysts are being updated and kept
informed. Emphasis on relationship with syndicate
and sales.

• Annual non-deal shows to give investors
  opportunity to meet with Stora Enso

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Light Maturity Profile
EUR million
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Strengths
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Stora Enso Strengths

• People
• Moving steadily with profitable targets
• Joint venture in China and acquisition of
  Intercell
• Attractive partner to our customers
• Balanced product portfolio
• More investments in assets
• Financial strengths
• Strong balance sheet
• Good credit ratings
• Steady dividend

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Questions DiscussionVisit www.storaenso.comfo
r more information.
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Appendix
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Transaction Risk and Hedges as at30 September
2004

• EUR million EUR USD GBP SEK CAD Other Total
• Sales 4 700 2 300 700 800 100 600 9 200
• Costs -4 400 -1 500 -200 -1 400 -200 -300 -8 000
• Net operating cash flow (annual) 300 800 500 -600
  -100 300 1 200
• Hedges
• Currency unit 222 136 987 49
• EUR 179 199 109 40
• Hedging ratio per 30.9.2004 22 40 18 40
• Policy hedge up to 75 of annual net transaction
  exposure

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Market-related Curtailments
1000 tonnes 2003 Q1/03 Q2/03 Q3/03
Q4/03 Q1/04 Q2/04 Q3/04 Publication Papers
497 123 143 106 125 93 74 21 Fine Papers
176 64 32 37 43 12 8 3 Packaging Boards
109 15 25 27 42 20 16 37 Paper and Board
Total 782 202 200 170 210 125 98 61
Europe 703 195 158 145 205 125 98 61 U
SA 79 7 42 25 5 - - - Paper and Board Total
782 202 200 170 210 125 98 61
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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 22 November 2004
• No. of shares Average of Shares
  purchased purchase price authorisation
• A shares 12 300 10.65 0.1
• R shares 13 205 300 10.70 40.4
• 2001 2002 2003 15 Nov. 2004
• Total shares in issue 906 753 299 899 778 299
  864 262 499 837 243 399

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Stora Enso Debt Structure

• Eurobond
• EUR 375m 2007
• EUR 518m 2014

• Global bond
• USD 750m 2011

• SEK
• 4.0bn 2006

Public Issues
Private Placements
EUR 176m
USD 517m
SEK 1.5bn
ECP Finnish CP
Short Term
ECP
SEK CP
Back-up facility
EUR 2.5bn Multi-Currency Revolving Credit
Facility 2008
Loan Programs
EMTN EUR 4bn
Swedish MTN SEK 10bn
Commercial Paper Programs in Europe (USD 1bn),
Finland (EUR 750m) and Sweden (SEK 10bn).