Stora Enso

1
Stora Enso

• Jukka Härmälä, CEO
• Morgan Stanley Dean Witter
• Paper, Forest Products Packaging Conference
• March 14-15, 2001

2
Cautionary Statement

• 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
Agenda

• Review of 2000 financial results
• Value Creation
• Market Outlook
• Appendix

4
Review of 2000 Financial Results
5
Strong performance in 2000

• Profit before tax and minority interests EUR
  1,653 million, up 59
• EPS EUR 1.32, up 48
• Cash EPS EUR 2.61, up 25
• Operating profit EUR 1,926 million, 15 of sales
  and49 up on the previous year
• IV quarter results affected by 280,000 tonnes of
  production downtime
• All financial targets met
• Stora Enso merger completed successfully
• Restructuring continued

Before non-recurring items of EUR 445.7 million
6
Key ratios well in line with targets

• ROCE 16.8 Target gt 13 over the cycle
• Debt/Equity 0.59 Target 0.8, in 2000
• Payout ratio 34 Target 1/3 of net profit over
  the cycle
• Capital Expenditure
• Target should not exceed the level of
  depreciation
• EUR 769.3 million v. depreciation EUR 1,129.4
  million

) Before non-recurring items
7
Value Creation
8
Strategy

• Strategic guidelines unchanged
• Goal is to strengthen our global leadership
  position and maximize shareholder value
• This means investing in and expanding activities
  that support long-term value creation
• Realizing synergies
• Achieving economies of scale and flexibility
• Restructuring production

9
Value Creation

• ROCE gt 13 over the cycle
• planning tool in divisions to evaluate whether an
  investment would yield appropriate return.
• Management/ employee compensation is calculated
  partly on the basis of ROCE.

10
Value Creation (cont.)

• Debt / Equity lt 0.8
• Strong balance sheet facilitates growthat the
  bottom of the cycle
• Demonstrated ability to maintain solid balance
  sheet through strong operational cash flow and
  divestments

11
Leading market positions
Stora Enso Products
Product Market Key Markets Market
Share Production position Europe Global capacit
y Magazine paper World 2 Europe 22 20 4.5
million tonnes North America Newsprint World
4 Europe 24 7 3.3 million tonnes Fine
paper 4.1 million tonnes Coated fine
paper World 2 Europe 15 10
(coated) (coated) Uncoated fine paper Asia
North America Packaging boards Consumer
packaging Worlds leading Europe
Asia 28 7 3.1 million tonnesboards producer of
of packaging boards consumer
packaging 0.4 million tonnesIndustrial boards
boards of industrial boards
Source Company data
12
Balanced exposure to pulp
1000 tonnes
13
Growth and Restructuring

• Growth through M A
• Integration of Stora Enso North American
  operations
• Restructuring of assets

14
Major Structural Changes 1998-2000
Close down ofNewton Kyme mill,packaging
-
Some acquisitions within Packaging boards,Timber
and Merchants divisions
-

Acquisition of Consolidated Papers
Gruvön mill Billerud
-

Power assets outside mills
-
Merger ofStora and Enso
-
Various non-core assets office buildings,
shipping line etc.
-
Dalum mill, fine papers
-
Tervakoski mill, speciality papers
Technical office papers
15
Structural Changes to Continue

• Industry consolidation will continue
• Stora Enso will be an active player and will seek
  acquisitions that
• contribute strong cash flow
• are EPS enhancing
• add high quality assets
• Internal streamlining remains a priority

16
Returning Capital to Shareholders

• Shares repurchased from March 2000 to March
  2001will be canceled
• New buy-back programme proposal for AGM
• about 9,700,000 A shares
• about 36,600,000 R shares

17
Valuation comparisons
SE Stora Enso, UPM UPM Kymmene, IP
International Paper and GP Georgia Pacific
Price/book value, 8 Mar. 2000
Cost of Capital
EUR, million
Minimum EBIT to cover cost of capital
EBIT
UPM
IP
GP
SE
1997
1998
2000
1996
1999
) Before non-recurring items
18
Stora Ensos competitive advantages

• Strong market positions
• Improved asset quality
• A strong balance sheet to support growth
• Ability to remain profitable and maintain
  dividends through a downturn
• Potential to build value through both internal
  growth and selective acquisitions

19
Outlook
20
Outlook for 2001

• Currently, the prospects look weaker for the full
  year 2001 owing to uncertainty, especially in
  coated fine paper and pulp.
• The packaging board market is anticipated to be
  slightly weaker. Paperboard grades such as raw
  material for corrugated boards might be affected
  during the months to come.
• The sawn timber market will be difficult in the
  first half of 2001 and influenced by destocking.
• We expect our main market, Europe, to remain
  fairly well balanced.
• Publication papers still enjoy a stable market
  due to a better balance between capacity and
  demand.
• Capacity utilization control to adjust to the
  market demand.