Stora Enso's Q4 and Full Year 2013 Results

Financial Results Q4 2013 CEO Jouko Karvinen and CFO Seppo Parvi

5 February 2014

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.

2 5 February 2014 Stora Enso Q4 2013 Financial Results

Strong cash flow, dividend proposal EUR 0.30 Q4 2013

• Operational EBIT EUR 152 million Q4, margin 5.8%

• Cash flow from Operations EUR 470 million, after investing activities EUR 310

million

• New Ostrołęka containerboard machine reached its targeted profitability of

EBITDA margin 20% by the end of 2013

• Net debt/Operational EBITDA LTM 2.3x, net debt reduced by EUR 320 million

year-on-year

• Net Non-recurring items EUR 392 million


Strong cash flow maintained in 2013 due to operative

working capital reduction

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


15.0 %

17.0 %

19.0 %

21.0 %

23.0 %

25.0 %

27.0 %

100

150

200

250

300

350

Cash flow from operations, 4Q rolling OWC%, 4 Q rolling

Fixed cost decreased by EUR 60 million in 2013

compared to 2012 Fixed cost 4 quarter rolling average


650

655

660

665

670

675

680

685

690

695

700

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

4 Quarter rolling average

Thiele Kaolin divestment

• Capital gain of EUR 37 million

recorded as NRI to Q1 2014

• Proceeds EUR 56 million paid fully in

cash


Printing and Reading 2013

• Weak earnings

• Continued strong cash generation

EUR 382 million

• Three machines closed

• Further capacity restructuring

plans in early 2014


MEUR

0

100

200

300

400

500

600

2011 2012 2013

CF from Operations CF after Capex

Biomaterials 2013

• Softwood pulp prices increased in

2013

• Hardwood pulp prices stable

towards the end of the year

• Montes del Plata start-up during

first months of 2014

• Biorefinery investment to Sunila


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2011 2012 2013

ROOC - % ROOC - % excl Str. Projects

Building and Living 2013

• Sales price and mix improved

• Fixed costs savings started early

• Building Solutions growing rapidly

in Finland

• Stora Enso is working with

feasibility study to start the

production of CLT in Finland

MEUR


0

10

20

30

40

50

60

70

80

2011 2012 2013

Op. EBIT

Renewable Packaging 2013

• 3-5% demand growth continues

• Record operational EBIT and

strong cash flow

• Ostrołęka in full swing

• Inpac growing in fast moving

consumer goods by 30%

• Guangxi project in implementation

• Bulleh Shah started LPB

deliveries

MEUR


0

50

100

150

200

250

300

350

2011 2012 2013

Op. EBIT

Summary financials Q4 2013

EUR million Q4/13 Q3/13 Q4/12 Change % Change %

Q4 13 / Q4 12 Q4 13 / Q3 13

Sales 2 604 2 556 2 727 -4.5 1.9

Operational EBITDA 246 311 276 -10.9 -20.9

Operational EBITDA, % 9.4 12.2 10.1 -6.9 -23.0

Operational EBIT 152 184 158 -3.8 -17.4

Operational EBIT margin, % 5.8 7.2 5.8 - -19.4

Profit before tax excl. NRI 110 125 83 32.5 -12.0

EPS excl. NRI, EUR 0.15 0.13 0.11 36.4 15.4

EPS (basic), EUR -0.18 0.11 0.33 -154.5 -263.6

Operational ROCE, % 7.6 9.0 7.3 4.1 -15.6

Operational ROCE, % excl. transformation

investments 9.1 10.4 8.4 8.3 -12.5

Cash Flow from Operations 470 331 473 -0.6 42.0

Net debt/last 12 months’ operational EBITDA 2.3 2.5 2.5 -8.0 -8.0


Transformation continues Group operational EBIT 2012 vs 2013 in EUR million

EUR

million


EUR

million

Building

and Living

BiomaterialsPrinting

and

Reading

2012

630

2013

578

OtherRenewable

Packaging

Change in Net Debt from 2012 to 2013

5 February 2014 Stora Enso Q4 2013 Financial Results 14

76

219

23766

42476

377

1 044

2 434

2 757

Net debt Dec 2013Other

Tax and net financials

paidDividendEAI

injectionsCAPEX

Cash restructuring

payments

Change in working capital

Operational EBITDA

Net debt Dec 2012

Capex and Equity Injections

EUR million Actual 2013 Forecast 2014*

Capital expenditure 425 820-900

Equity injections 66 30

Total 491 850-930

Depreciation 564 550-580

* Capital expenditure includes approximately EUR 300 million for the project in Guangxi, China and approximately EUR 150

million for Montes del Plata Pulp Mill. As of 2014 Stora Enso will consolidate Veracel and Montes del Plata line-by-line in

accordance with IFRS11.


Guidance Compared to Q4 2013

• Sales expected to be similar

• Operational EBIT from similar to

somewhat higher

• Pricing improving

• Fixed cost decreasing

• Renewable Packaging affected by

Guangxi project and Skoghall Mill

boiler incident


Strategy in action 2013 EUR 1.25 billion cash flow, fixed costs down and a lot more to come

• Ostrołęka at 20% EBITDA Q4/13

• Montes del Plata coming real soon

• Inpac Packaging growing 30%+ in focused segments

• Bulleh Shah world class LPB delivered

• Building Solutions accelerating growth

• Guangxi Packaging implementation started

• Sunila Biorefinery implementation started

Nothing is ever good enough

- endless focus on productivity, working capital, capacity management &

cash generation, never stop

5 February 2014 Stora Enso Q4 2013 Financial Results 17


Operational EBIT by segments


EUR million Q4/13 Q3/13 Q4/12Change % Change %

Q4 13 / Q4 12 Q4 13 / Q3 13

Printing and Reading 36 13 59 -39.0 176.9

% of sales 3.4 1.2 4.9 -30.6 183.3

Biomaterials 24 17 28 -14.3 41.2

% of sales 9.3 7.0 10.9 -14.7 32.9

Building and Living 19 24 7 171.4 -20.8

% of sales 4.1 5.2 1.5 173.3 -21.2

Renewable Packaging 73 100 55 32.7 -27.0

% of sales 9.3 12.1 6.9 34.8 -23.1

Other - 30 9 -100.0 -100.0

% of sales - 4.9 1.3 -100.0 -100.0

Solid cash flow across businesses in Q4 2013


0

20

40

60

80

100

120

140

160

180

200

Printing andReading

Biomaterials Building and Living RenewablePackaging

EU

R m

illi

on

Cash flow from Operations Cash flow after investments

All businesses contributed to cash flow generation in

2013


0

100

200

300

400

500

600

Printing andReading

Biomaterials Building and Living RenewablePackaging

EU

R m

illi

on

Cash flow from Operations Cash flow after investments

Paper demand decline continued in Europe

Source: Euro-Graph SA = 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

Oct

-13

Y-o

-Y c

han

ge %

An

nu

aliz

ed

de

man

d [

kt/a

]

Y-o-Y Paper

Annualized Paper

Despite lower EBIT cash flow remained strong in 2013 Active working capital management


800

850

900

950

1000

1050

1100

1150

1200

1250

1300

2009 2010 2011 2012 2013

EU

R m

illio

n

Cash flow from operations

Fixed costs to sales


88%

90%

92%

94%

96%

98%

100%

102%

104%

106%

108%

110%

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

Fixed costs to Sales 11Q1 = 100

Balance Sheet strength Q1 2011 – Q4 2013

*Last twelve months’ operational EBITDA


1.81.9

2.02.1

2.3

2.72.8

2.52.7 2.7

2.52.3

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 13Q4

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

Ostroleka PM2 Jan 2013 Containerboard 85 000

Hylte PM2 May 2013 Newsprint 205 000

Kvarnsveden PM11 May 2013 Newsprint 270 000

Total 3 780 000


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

EUR million Q4/2013 Q3/2013 Q4/2012 Change %

Q413/Q412

Change %

Q413/Q313

Net interest expense -48 -52 -47 -2 8

Foreign exchange gains and losses 9 7 -1 n/m 29

Other financial items. of which -25 -11 -2 n/m -127

PIK notes - 3 3

Fair valuation of interest rate derivatives* -8 -4 -9

Fair valuation of long-term debt 1 - -

NewPage lease provision - - 11

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

Other items -14 -6 -4

Total net financial items -64 -56 -50 -28 -14

*Not hedge accounted interest rate derivatives.


Transaction risk and hedges as at 31 December 2013

Operational EBIT: Currency strengthening of + 10 % EUR million

USD 95

SEK -78

GBP 53

EUR million USD SEK GBP

Estimated annual net operating cash flow exposure 950 -780 530

Transaction hedges as at 31 Dec 2013 -450 450 -260

Hedging percentage as at 31 Dec 2013 for the next 12 months 47% 58% 49%

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.


Curtailments of capacity


0

2

4

6

8

10

12

14

16

18

20

Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413

% o

f th

e c

ap

ac

ity

Paper and Board Wood Products

Softwood pulp prices Stora Enso’s market pulp is softwood

Source: FOEX


450

550

650

750

850

950

1 050

07Q

1

07Q

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07Q

3

07Q

4

08Q

1

08Q

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08Q

3

08Q

4

09Q

1

09Q

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09Q

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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

13Q

4

US

D/t

on

ne

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

13

Q4

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

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09Q

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09Q

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09Q

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10Q

1

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10Q

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11Q

1

11Q

2

11Q

3

11Q

4

12Q

1

12Q

2

12Q

3

12Q

4

13Q

1

13Q

2

13Q

3

13Q

4

EU

R/t

on

ne

Mixed OCC De-inking

Maturity profile Q4 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

1 000

2014 2015 2016 2017 2018 2019 2020 2021-2035 2036

€ 500m 5.5% 2019

SEK 2.2 bn S+3.9% 2017

SEK 500m 5.75% 2017

€ 500m 5.0% 2018

Energy balance* Q4 2013

Impact** on operating profit from

10% change in: EUR million p.a.

Electricity market price ~1

Fossil fuel price ~12

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


Stora Enso Electricity procurement* Q4 2013

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

36 36 5 February 2014 Stora Enso Q4 2013 Financial Results

Stora Enso's Q4 and Full Year 2013 Results

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