Stora Enso Financial Results Q3/2013 presentation

Financial Results Q3 2013 CEO Jouko Karvinen and acting CFO Jyrki Tammivuori

22 October 2013

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 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 protection

created by the Group’s 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 Group’s 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 Group’s principal geographic

markets or fluctuations in exchange and interest rates.

22 October 2013 Stora Enso Q3 2013 Financial Results 2

Significantly higher Operational EBIT compared to Q2

• Operational EBIT EUR 184 million

• Cash flow from Operations EUR 331

million

• Liquidity EUR 2.1 billion

• ROCE 9.0%

• Net debt/Operational EBITDA LTM 2.5x


EBITDA improved quarter-on-quarter and year-on-year Solid Cash Flow from Operations


200

220

240

260

280

300

320

340

360

11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3

EU

R m

illio

n

Cash flow from operations, 4Q rolling Operational EBITDA, 4Q rolling

European overcapacity persists in all other grades

except newsprint


Source: Euro-GraphSA = seasonally adjusted

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

30000

31000

32000

33000

34000

35000

36000

37000

38000

39000

40000

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Y-o

-Y c

han

ge %

An

nu

aliz

ed

de

man

d [

kt/a

]

Y-o-Y Paper

Annualized Paper

Decreasing fixed cost


580

600

620

640

660

680

700

720

11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3

Fixed cost 4 Quarter rolling average

Transformation projects up-date MDP pulp mill, Uruguay and consumer board machine in Guangxi, China

• Montes del Plata pulp mill:

– Start-up during first months of 2014

– Expected production half a million

tonnes for Stora Enso in 2014

• Guangxi consumer board mill:

– MOFCOM approvals expected to be

received before end of 2013

– The mill start-up expected in the

beginning of 2016


Transformation from European pulp and paper company

towards a value-creating renewable materials company


Printing and

Reading

Building and Living

Biomaterial

Renewable Packaging

Sales 2008

Printing and

Reading

Building and Living

Biomaterial

Renewable Packaging

Sales Q3/13

Summary financials Q3 2013


EUR million Q3/13 Q2/13 Q3/12Change % Change %

Q3 13 / Q3 12 Q3 13 / Q2 13

Sales 2 556 2 717 2 694 -5.1 -5.9

Operational EBITDA 311 247 302 3.0 25.9

Operational EBITDA, % 12.2 9.1 11.2 8.9 34.1

Operational EBIT 184 124 178 3.4 48.4

Operational EBIT margin, % 7.2 4.6 6.6 9.1 56.5

Profit before tax excl. NRI 125 60 102 22.5 108.3

EPS excl. NRI, EUR 0.13 0.05 0.10 30.0 160.0

EPS (basic), EUR 0.11 0.02 0.11 0.0 n/m

Operational ROCE, % 9.0 5.8 8.2 9.8 55.2

Operational ROCE, % excl. transformation

investments 10.4 7.3 9.5 9.5 42.5

Cash Flow from Operations 331 344 312 6.1 -3.8

Net debt/last 12 months’ operational EBITDA 2.5 2.7 2.8 -10.7 -7.4

Profit generation relatively stable year-on-year Group operational EBIT

Q3 2012 vs Q3 2013


Variable

costs

VolumeSales price

& mix

Q3 2012

178

Q3 2013

184

OtherFixed

costs

The biggest EBIT contribution from Renewable

Packaging Operational EBIT Q3 2013

EUR million Q3/13 Q2/13 Q3/12 Change % Change %

Q3 13 / Q3 12 Q3 13 / Q2 13

Printing and Reading 13 -17 53 -75.5 176.5

Biomaterials 17 14 32 -46.9 21.4

Building and Living 24 28 1 n/m -14.3

Renewable Packaging 100 77 83 20.5 29.9

Other 30 22 9 233.3 36.4

Group Total 184 124 178 3.4 48.4


Guidance Compared to Q4 2012

– Sales expected to be lower

– Operational EBIT clearly lower

– Strong contributions in Q3 from

Renewable Packaging and Building

and Living cause exceptional

seasonality to occur in Q4

Operational EBIT


Summary

• Q3 operational EBIT significantly higher

• Solid cash flow – further improved liquidity

• Fixed costs savings proceeding

• European paper market remains weak

• Transformation proceeding



Operational EBIT by segments


Change % Change %

Q3 13 / Q3 12 Q3 13 / Q2 13

Printing and Reading 13 -17 53 -75.5 176.5

% of sales 1.2 -1.5 4.3 -72.1 180.0

Biomaterials 17 14 32 -46.9 21.4

% of sales 7.0 5.4 11.9 -41.2 29.6

Building and Living 24 28 1 n/m -14.3

% of sales 5.2 5.6 0.2 n/m -7.1

Renewable Packaging 100 77 83 20.5 29.9

% of sales 12.1 9.2 10.2 18.6 31.5

Other 30 22 9 233.3 36.4

% of sales 4.9 3.2 1.4 250.0 53.1

EUR million Q3/13 Q2/13 Q3/12

Capex and Equity Injections for 2013 decreased

EUR million Forecast 2013

Capital expenditure* 400-450

Equity injections 75

Total 475-525

Depreciation 580-600

*Capital expenditure includes approximately EUR 40-80 million for project in Guangxi, China


Fixed costs to sales developing to the right direction


88%

90%

92%

94%

96%

98%

100%

102%

104%

106%

108%

110%

11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3

Fixed costs to Sales 11Q1 = 100

Working capital reduced Q1 2011 – Q3 2013

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


16,0 %

16,5 %

17,0 %

17,5 %

18,0 %

18,5 %

19,0 %

19,5 %

1 500

1 600

1 700

1 800

1 900

2 000

2 100

2 200

11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3

EUR

mill

ion

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

Balance Sheet strength Q1 2011 – Q3 2013

*Last twelve months’ operational EBITDA


1.81.9

2.02.1

2.3

2.72.8

2.52.7 2.7

2.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

500

1 000

1 500

2 000

2 500

3 000

3 500

11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3

EU

R m

illio

n

Net Debt Net Debt/Operational EBITDA*

Permanent pulp, paper and board capacity reductions since 2006

Mill 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 235 000

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

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 290 000

Maxau PM 7 Nov 2010 Newsprint 195 000

Hylte PM1 Dec 2012 Newsprint 180 000

Hylte PM2 May 2013 Newsprint 205 000

Kvarnsveden PM11 May 2013 Newsprint 270 000

Total 3 695 000


Permanent sawn wood capacity reductions since 2006

Mill Date Capacity reduction, m3

Veitsiluoto Sawmill 2006 100 000

Honkalahti Sawmill 2006 90 000

Sauga 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

Kopparfors Sawmill End 2011 310 000

Total 1 900 000


Net Financial Items

*Not hedge accounted interest rate derivatives.

EUR million Q3/2013 Q2/2013 Q3/2012 Change %

Q313/Q312

Change %

Q313/Q213

Net interest expense -52 -51 -44 -18 -2

Foreign exchange gains and losses 7 -12 -1 n/m n/m

Other financial items. of which -11 16 -18 39 n/m

PIK notes 3 3 2

Fair valuation of interest rate derivatives* -4 7 -16

Fair valuation of long-term debt - - -

NewPage lease provision - - -

Pension costs (IAS 19R) -4 -4 -3

Other items -6 10 -1

Total net financial items -56 -47 -63 11 -19


Transaction risk and hedges as at 30 September 2013

Operational EBIT: Currency strengthening of + 10 % EUR million

USD 102

SEK -84

GBP 50

EUR million USD SEK GBP

Estimated annual net operating cash flow exposure 1 020 -840 500

Transaction hedges as at 30 Jun 2013 -480 420 -250

Hedging percentage as at 30 Jun 2013 for the next 12 months 47% 50% 50%

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 occur

other than a single currency exchange rate movement. Weakening would have the

opposite impact.

USD and GBP have additional hedges for 13-15 months which will increase the hedging

percentage with 1% and 4% respectively.


Curtailments of capacity


0

2

4

6

8

10

12

14

16

11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3

% o

f th

e c

ap

acit

y

Paper and Board Wood Products

Softwood pulp prices Stora Enso’s market pulp is softwood

Source: FOEX


450

550

650

750

850

950

1 0500

7Q

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

11Q

3

11Q

4

12Q

1

12Q

2

12Q

3

12Q

4

13Q

1

13Q

2

13Q

3

US

D/t

onne

Bleached softwood kraftpulp

Bleached hardwood kraftpulp

Pulp wood and saw log prices Wood prices in Finland

Source: METLA


0

10

20

30

40

50

60

70

80

06

Q1

06

Q2

06

Q3

06

Q4

07

Q1

07

Q2

07

Q3

07

Q4

08

Q1

08

Q2

08

Q3

08

Q4

09

Q1

09

Q2

09

Q3

09

Q4

10

Q1

10

Q2

10

Q3

10

Q4

11

Q1

11

Q2

11

Q3

11

Q4

12

Q1

12

Q2

12

Q3

12

Q4

13

Q1

13

Q2

13

Q3

EU

R/m

3

Pulpwood, Pine Sawlogs, Pine

Paper for Recycling prices

German RCP price development. free delivered

Source: Verband Deutscher Papierfabriken/Stora Enso


0

40

80

120

160

200

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

11Q

3

11Q

4

12Q

1

12Q

2

12Q

3

12Q

4

13Q

1

13Q

2

13Q

3

EU

R/t

on

ne

Mixed OCC De-inking

Maturity profile Q3 2013

€ million Other loans / liabilities Bonds Commercial paper

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


0

100

200

300

400

500

600

700

800

900

2013 2014 2015 2016 2017 2018 2019 2020 2021-2035 2036

€ 500m 5.5% 2019

SEK 2.2 bn S+3.9% 2017SEK 500m 5.75% 2017

€ 500m 5.0% 2018

Energy balance* Q3 2013

Impact** on operating profit from

10% change in: EUR million p.a.

Electricity market price ~1

Fossil fuel price ~14

**) Remaining impact on non-hedged volume *) Pulp. paper and board mills. Europe and overseas


Stora Enso Electricity procurement* Q3 2013

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

31 22 October 2013 Stora Enso Q3 2013 Financial Results 31

Investor Relations

Stora Enso Financial Results Q3/2013 presentation