Stora Enso in transformation and expansion. Mats Nordlander, Executive Vice President Renewable Packaging

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1 Stora Enso in transformation and expansion Mats Nordlander, Executive Vice President Renewable Packaging

2 The strategic shift 2

3 Transforming from a European pulp and paper company to a renewable materials growth market company 3

4 Stora Enso portfolio FY 2013 Group Sales, EUR million Operational EBIT, EUR 578 million 31% 0% 41% 13% 6% 13% 13% 18% 10% 55% 20 May 2013

5 Cash engines Printing and Reading Nordic market pulp Low cost base saw milling Growth engines Renewable Packaging Plantation based pulp Building and living 5

6 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Annualized demand [kt/a] Y-o-Y change % Paper demand decline continue in Europe % 4% 2% 0% % -4% -6% -8% Y-o-Y Paper Annualized Paper -10% -12% % SA = seasonally adjusted Source: Euro-Graph 6

7 Rethinking structures EUR 200 million cost savings Focus, simplification and clarity Plan to create a platform for transformation Divisions with clear accountability focusing on growth and cost competitiveness Simplified corporate structures Driving towards a value creating growth markets renewable materials company Plan for further outsourcing alternatives in group shared services and sale of non-core assets. 7

8 Fixed cost decreased by EUR 60 million in 2013 compared to 2012 Fixed cost 4 quarter rolling average Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 4 Quarter rolling average 8

9 Growth markets 9

10 Stora Enso forest assets are increasingly global Bergvik Skog, Sweden 2,3 million ha of land in Sweden, ha in Latvia (ownership of 43%), Tornator, Finland ha of forestland in Finland, ha in Romania, and ha in Estonia (ownership 41%) Guangxi, Southern China ha of land of which ha eucalyptus, ha other species Veracel plantations, Brazil ha of land of which ha eucalyptus plantations Rio Grande do Sul, Brazil ha of land of which ha eucalyptus plantations Montes del Plata, Uruguay ha of land of which ha planted 10

11 New investments transforming to value creating growth Skoghall, Sweden, woodyard logistics, investment started up on time, on 8 Nov 2012 Sunila, Finland, lignin extraction plant and dryer, lignin dust burners in the lime kilns and a packing line, start up during Q1 of 2015 Ostroleka, Poland Container board machine, investment started up in Jan 2013, 6 weeks ahead of schedule Montes del Plata. Uruguay Start-up first months of 2014 Bulleh Shah Packaging Limited, Pakistan JV, Q Inpac acquisition: India and China, Q Guangxi, China Pulp and Board mills, investment in two phases Completed In implementation Source: Ipsos business consulting interviews and analysis 11

12 1,1 1,5 6,0 0,5 0,7 11,6 6,2 6,3 3,8 4,4 0,9 1,5 Strongest growth in packaging will be in Asia Increasing demand of consumer board in China CAGR 0,2 % CAGR 1,4 % CAGR 4,6 % CAGR 6,9 % Eastern Europe North America Western Europe CAGR 3,3 % Middle East & Africa Million tonnes CAGR 3,5 % South America Fibre-based consumer board consumption CAGR China 9% Pakistan 9% India 6% Middle East 4% Asia Source: Ipsos business consulting interviews and analysis Source: Pöyry and Stora Enso 12

13 Driver: The emergence of a middle class - Consuming hygienically packed food as a prime priority Share of Chinese urban households by income class, % 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Actual Emergence of lower middle class segment Forecast Emergence of upper middle class segment 0% Low Income (<CNY66K) Lower Middle Class (CNY66K-117K) Upper Midde Class (CNY117K-253K) Affluent (>CNY253K) Source: McKinsey 13

14 Stora Enso has established a strong presence in China Guangxi World-class pulp and paperboard Fiber from self-managed eucalyptus plantations Total investment EUR 1.6 billion 1,080 employees Inpac Focus on consumer packaging Serving international brand owners Four plants in China and one in India 2,400 employees Current growth projects Core plants Inpac Growth projects Paper mills Beijing Shanghai Paper Mills Suzhou fine paper mill with 550 employees Dawang magazine paper mill with 220 employees Hong Kong & Shanghai Business development, sales and M&A have teams located in Hong Kong 16 employees Stora Enso China head office in Shanghai 20 employees Guangxi Hong Kong 14

15 Large growth project in Guangxi with two phases of implementation 1. Establish a world-class pulp and paperboard integrate with fibre from self-managed eucalyptus plantations 2. Build a long-term profitable business by meeting the growing demand in China and neighbouring markets 3. Apply responsible practices in the whole supply chain; forest operations, pulp and board production 4. Industrialization Guangxi forestry, Beibu Gulf economy development and China pulp and paper modernization Consumer board machine operational in the beginning of 2016, followed by chemical pulp mill construction later. This approach gives faster access to the Chinese consumer board market and give more time to handle the land issues. Presenter name February 12,

16 Bringing economic and social value to the region One of the largest foreign investments in expanding Guangxi Province Will generate about 30,000 jobs, more than 3,000 directly in Stora Enso Recruiting students and recent graduates to work in Beihai Will improve infrastructure and transfer industrial knowledge to the region Will contribute to increased tax income and increase income in local rural regions Special Shared Value strategy that benefits local stakeholders 16

17 A strong agenda of change in Guangxi 17

18 .and in our packaging plant in Chennai, India Source: Ipsos business consulting interviews and analysis 18

19 .and in our new joint venture Bulleh Shah in Pakistan Source: Ipsos business consulting interviews and analysis 19