Stora Ensos Global View

1
Stora Ensos Global View

• Lehman Brothers 2004 Materials Conference
• Lars Bengtsson
• President, Stora Enso North America
• November 12, 2004

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
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 44 000 employees in 40 countries
• Market capitalisation EUR 9.1 billion
• Shares listed on Helsinki, Stockholm and New York
  stock exchanges

4
Breakdown by Location
Number of Employees
Paper and Board Capacity
1
2
10
20
33
36
15
11
17
14
20
21
Germany
Finland
Other European countries
Sweden
Asia
North America
5
Principles for IncreasingShareholder Value

• Grow profitably - through MAs, and organically
  via asset restructuring
• ROCE target 13 over the cycle current WACC
  8.7
• Debt/Equity ratio 0.8
• Capex annual depreciation over the cycle
• Dividend policy stable payout, on average
  onehalf of net profit over the cycle
• Share buy-backs

6
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
7
ROOC- and volatility of profitability of
different businesses
Period mean
Average deviation from the period mean
8
Third Quarter 2004 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
9
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 5 October 2004
• No. of shares Average of Shares
  purchased purchase price authorisation
• A shares 12 300 10.65 0.1
• R shares 12 926 600 10.69 39.5
• 2001 2002 2003 15 Sept. 2004
• Total shares in issue 906 753 299 899 778 299
  864 262 499 837 243 399

10
Recent Stora Enso Events

• Acquisition of Dutch paper merchant Scaldia
  Papier
• Cooperation agreement signed with Cham Paper
  Groups mill in Norway, to support wallpaper base
  production at Stora Ensos Wolfsheck Mill
• Divestment of Finnantara plantation in Indonesia
• Book value EUR 21 million minor gain booked
• Second phase of the North European Transport
  Supply System was approved
• 15 annual cost savings from the current level of
  EUR 80 million to be realized from 2007 onwards
• Joint venture with Shandon Huatai Paper of China
  announced
• Acquisition of majority interest of Intercell of
  Poland

11
Stora Ensos Emerging Market Strategy
12
What Do We Mean byEmerging Markets?

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

Focus areas for Stora Enso
Fibreresources
Russia
China
Large,fast-growingmarket
Brazil Chile Argentina
Low fibre costs Local markets
13
What Do We Want to Achieve?

• 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)

14
Demand Growth in Emerging Markets
China
Brazil
Russia
1 418
Increase30
Almost doublein 15 years
More thandouble
1 282
52,7
51,4
29,8
22,9
145
133
Paper andboard consumption,kg/capita
Population, mill.
Paper andboard consumption,kg/capita
Population, mill.
2000
2015E
2000
2015E
15
Near-Term Market Outlook
16
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
Demand strong price increases expected in Q4 2004
Demand strong 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
17
Near-term Market Outlook North America

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

Demand remains strong further price increases
for spot customers, contract prices up Q1 2005
Demand remains strong further price increases
for spot customers, contract prices up Q1 2005
Demand stable price increases partially
implemented
Demand remains strong further price increases
expected Q4 2004
Demand slowing down seasonally price increases
implemented
18
The Long-Term Future of Paper

• Based on Recent Proprietary Study Completed by
• Stora Enso and McKinsey Company
• Why Paper? 2003 2013

19
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
20
Newspapers increasingly challenged
Positive drivers
Display advertising still growing, although
slower than for other media
Some benefit of marketing spend effectiveness
focus, but less than magazines and commercial
print
Continuous readership loss and following decline
in circulation
Advertisers following consumers Newspapers at
risk of losing relevance
Classifieds going online
Negative drivers
21
Magazines relatively strong in Europe Weaknesses
in North America
Positive drivers
Highly targeted to interest groups attractive
for advertisers
High-quality graphical representation make
magazines strong alternative to TV for brand
building
Some loss of circulation, especially in U.S.
where magazines are weaker
Negative drivers
22
Commercial print Strongly benefits from
marketing spend trends
Positive drivers
Catalogs proven necessary for online business and
traditional retailers becoming increasingly
multi-channel
Direct mail far from saturation and will take
share from telemarketing
Inserts more cost effective and targeted than
traditional advertising

• Sales promotion
• Substituted by Internet product sheets and price
  lists
• POS1) print being replaced by other promotional
  material, e,g., samples, merchandise

Negative drivers
1) Point of Sale
23
In SummaryLong-Term Demand Growth
Expected demand growth CAGR 2003-2013 by segment
-
over 4
below 0
2 - 0
4 - 2
Commercial
Magazines
Mature Markets Emerging Markets
Office
Newspapers
Commercial
Office
Magazines
Newspapers
24
Questions DiscussionVisit www.storaenso.comfo
r more information.
25
Appendix
26
ROCE

ROCE 13
Target gt 13 over the cycle (current WACC 8.7 )
excluding non-recurring items
27
Debt/Equity
lt 0.8
Target lt 0.8
28
Capital Expenditure and Depreciation
Capital expenditure
Goodwill amortization
EUR million
Capital expenditure as of sales
Depreciation



29
Market-related CurtailmentsImprovement Continues
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
30
EPS by Quarter
EUR
0.00
excluding non-recurring items
31
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
32
Operating Profit of Main Segments

• EUR million III/03 IV/03 I/04 II/04 III/04
• Publication Paper 39.2 42.3 8.7 -3.8 48.2
• sales 3.6 3.8 0.9 -0.4 4.4
• Fine Paper 23.1 9.4 18.1 4.6 27.9
• sales 2.9 1.2 2.3 0.6 3.5
• Packaging 87.4 50.1 82.1 67.7 84.8
• sales 12.6 7.6 11.9 9.6 12.6
• Wood Products -4.7 9.3 11.4 21.3 10.9
• sales -1.4 2.6 3.1 5.1 2.8

excluding non-recurring items
33
Non-recurring Items by Segments

• EUR million III/04
• Publication Paper 30.8
• Fine Paper 41.5
• Other 1.8
• Total 74.1

34
Change in Group Operating Profit from I-III/2003
to I-III/2004
-32.4
EUR million
48.1
23.1
448.4
-391.9
198.2
293.5
excluding non-recurring items
35
Leading Producersof Paper and Board, October 2004
Capacity in 1 000 tonnes
Source Jaakko Pöyry Consulting
36
Largest Sawn Timber ProducersIII/2004
Capacity in 1 000 m3
Source Stora Enso
37
Leading Market PositionsPaper Product Area
ProductionCapacity
Market Share
Product
Uses
Market Position
Key Markets
Europe
Global
Publication Paper
Uncoated super-calendered, uncoated
machine-finished papers, coated mechanical,
machine-finished coated papers and wallpaper.
Magazines Printed advertising material Catalogues
and direct marketing
Worlds second-largest producer, largest
producer in North America, second-largest in
Europe
Europe North America
21
4.5 million tonnes
18
Newspaper and supplements Advertising
leaflets Telephone directories Hardback Pocket
books
Worlds fourth-largest producer of newsprint and
newsprint specialities, largest producer in
Europe
Europe, North America Far East
20
3.6 million tonnes
7
Standard newsprint Newsprint specialities such as
improved newsprint, directory papers and book
papers.
Fine Paper
Worlds third-largest producer of graphic papers
Worlds sixth-largest producer of office
papers Worlds largest producer of speciality
papers
Document printing Commercial printing High-quality
books Labelling, print-on-demand applications,
and for protecting, transporting and identifying
products
Europe North America
9
4.4 million tonnes
13
Graphic papers (Coated fine paper) Office papers
(Uncoated fine paper) Speciality papers
14
4
Europe Asia
38
Leading Market PositionsPackaging Boards and
Forest Products Product Areas
ProductionCapacity
Market Share
Product
Uses
Market Position
Key Markets
Europe
Global
Packaging Boards
Liquid packaging boards, cupstock, cartonboards,
containerboards, corrugated packaging, industrial
papers, coreboards, cores
Packaging
Leading producer of consumer packaging boards
Europe, Asia, and North America
N/A
3.2 million tonnesof packaging boards and
papers,335 million m2 ofcorrugatedpackaging
and 200 000 tonnes of cores
N/A
Wood Products
Sawn and further-processed wood products
Construction Joinery Wood products trade
Worlds second-largest producer of sawn softwood,
largest producer in Europe
Europe, Asia, North Africa, Middle East and North
America
N/A
Sawn timber annual production capacity 7.4
million m3, further-processing capacity
2.8 million m3
N/A
39
Paper Price Development in Germany 2000-2004
Euro tonnes
Source PPI Germany pricewatch
40
Paper Price Development in USA2000-2004
USD/mt
Source Pulp Paper Week
41
Paper Price Development in China 2000-2004
RMB/tonne
Source PPI Asia News Paper pricewatch
42
Recycled Paper Price Development1993-2004
Euro tonnes
Source EUWID pricewatch Germany
43
Acquisition of Intercell

• Stora Enso will acquire 66 of the shares in the
  Polish packaging producer Intercell S.A. from
  private shareholders and the International
  Finance Corporation based in Washington D.C.
• Rationale for the acquisition
• Supports the expansion of Stora Ensos corrugated
  packaging business
• Strengthens the company presence in the
  fast-growing Polish market
• The acquisition is expected to be closed by
  year-end, subject to approval by regulatory
  authorities

44
Intercell Key FactsSales by Division

• Sales EUR 150 million, EBITDA EUR 27 million
  (2003)
• About 1700 employees
• Operations mainly in Poland
• Fully-owned subsidiary Intercell Recycling is the
  largest player in recovered paper business in
  Poland (mainly OCC)

Pulp Paper 40
Corrugated Board Boxes 44
Sacks 16
45
Production LocationsPoland and Serbia

• Ostroleka
• Head office
• Pulp and paper mill (250 000 tonnes)
• Corrugated board and boxes
• Sack
• Lódz
• Corrugated board and boxes
• Tychy
• Corrugated boxes
• abac
• Sack
• Mosina (in the near future)
• Corrugated boxes (sheet plant)
• Marketing office in Warsaw and
• 20 recycling locations around Poland

Ostroleka
Mosina
Warsaw
Lódz
Tychy
abac
46
Summary Intercell Financials

• EUR million 2001 2002 2003
• Net sales 140.0 149.8 149.6
• EBITDA 18.2 21.6 27.0
• EBITDA 13.0 14.4 18.0
• EBIT 4.1 7.6 14.4
• EBIT 3.0 5.1 9.6