Stora Enso investor kit

Transcription

1 investor kit strategy and market environment, and financial performance

2 Disclaimer It should be noted that and its business are exposed to various risks and uncertainties and 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. 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. All statements are based on management s best assumptions and beliefs in light of the information currently available to it and assumes no obligation to publicly update or revise any forward-looking statement except to the extent legally required. 2

3 Content SECTION 1: INTRODUCTION & BUSINESSES SECTION 2: INNOVATIONS SECTION 3: FINANCIALS & GOVERNANCE SECTION 4: LATEST INTERIM REPORT Strategy Businesses and capacities Markets Innovation in packaging Innovation in Biomaterials Innovation in Wood Products Financial performance Balance sheet strength Cost structure Capital expenditure Dividend policy Ownership structure Management & the Board ADR programme 3

4 in brief Leading global provider of renewable solutions in packaging, biomaterials, wooden constructions and paper Sales EUR 10.0 billion in 2017 Operational EBIT EUR million in 2017 shares are listed on NASDAQ OMX Helsinki and Stockholm. In addition, the shares are traded in the USA as ADRs Some employees in 30 countries 4

5 Progress in a few snapshots Beihai Mill reached EBITDA break-even in Q4/2017 Transformation is nearly completed 8.5% Sales growth from previous year excluding the paper business 1.4 Net debt/ EBITDA further strengthened balance sheet EUR 0.41 Dividend 14.3% Operational ROCE excluding Beihai operations Varkaus kraftliner reached its designed capacity level in Q4/2017 5

6 Majority of the portfolio is aimed at growth group 2017: Sales MEUR / Operational EBIT MEUR / Operational ROCE 11.9% / Operational ROCE excluding Beihai 14.3% + Consumer Board Expansion of relative market share in profitable niches + Packaging Solutions Selective profitable growth Biomaterials Strengthening current business and creating new profitable growth Wood Products Accelerating growth Paper Strategy for maximum cash generation 6

7 Our road to success in the bioeconomy Introducing Addressing Delivering Generating xxxx xxxx new products xxxx superior xxxx and services ROCE attractive end-use segments sustainable profitable growth 7

8 Our transformation strategy continues s strategy is about sustainable profitable growth based on customer insights and innovation, supported by structured processes and motivated employees Innovation Focus on bio-based materials and chemicals, digitalisation, intelligent packaging and new packaging solutions. Customer insight Developing offerings according to customers requirements to create value and growth, with sales excellence. Sustainable profitable growth Structured processes Clear roles and responsibilities, standardised and harmonised working methods, operational excellence. Motivated employees Focus on inspiring leadership, good communication, performance management and target setting. 8

9 delivering sustainable profitable growth Continued strategic growth investments Sustainable profitable growth Strong balance sheet Dividend Dividend To distribute 50% of net income over the cycle. Consecutive increase of 10%, 12% and 11% between Strategic growth investments Capex at or below depreciation and depletion* over the business cycle Cash flow from operations Sustainable profitable growth Business and CAPEX driven by ROCE Strong balance sheet Net debt to EBITDA down to 1.3 Net debt 2.4 BEUR *Operational decrease in the value of biological assets 9

10 Profitable growth Improving sales and innovation Montes del Plata Mill investment Beihai Mill investment Varkaus Mill conversion Murów sawmill investment Varkaus LVL investment Imatra de-bottlenecking Sunila bio-refinery Innovation Centre Helsinki Innovation Centre Stockholm NXP JDA Launch of first MFC product Intelligent packaging Launches of: Performa Brilliance by CKB Nude by Natura Life by Fibre Cup Multicopy Zero by FlyoBrite by Bio-based lignin Lineo by Biocomposites - DuraSense by Product & Sales Management, S&OP, CRM Accelerator programme Asset transformation Innovation & customer focus 10

11 Developing further in the bioeconomy PRODUCT / TECHNOLOGY CUSTOMER USE EXAMPLES R&D PILOTING SCALING FULLY ADOPTED BY MARKETS ADOPTED BY MARKETS 1. BIO-BASED CHEMICALS INDUSTRIAL INTERMEDIATES Lignin Xylose Biomass polymers Dissolving pulp Modified fibres Replace phenol Sweetener, personal care Replace oil-based plastic Textiles, packaging Performance chemicals REPLACING FOSSIL MATERIALS IN PRODUCTS 2. ENABLING 3. INNOVATIONS OF NEW CONSUMER EXPERIENCES 11 Micro-fibrillated cellulose (MFC) Biocomposites Lignin carbon fibre Building systems Modified wood Nano cellulose Digitalisation Biobarriers in food cartons Light-weight board Strengthening liner Compounding wood fibre with polymers Lightweight structures, energy storage, transportation High rise buildings Cladding, decking Transparent / electronic programmable / foam / spheres Material with in-built monitoring and tracking capabilities for intelligent packaging

12 These are our drivers for accelerating renewable growth Biocomposites Intelligent packaging 7% of our sales came from NEW products and services in 2017 High-quality packaging solutions Bio barriers Building components and systems Future biochemicals Next generation liquid and food packaging 12

13 group 2013 Q1-Q2/2018 Note: * Excluding paper and Barcelona Mill. 13

14 Strategic targets in good progress still more potential Group strategic targets Q2 17 Q2 18 Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 7.1% (YoY) 5.4% (YoY) Net debt to operational EBITDA <2.0x new target Fixed costs to sales <20% 25.6% 23.5% Debt to equity <60% new target 49% 40% Operational ROCE >13% 10.3% 15.5% Divisional strategic targets Q2 17 Q2 18 Consumer Board Operational ROOC > 20% 13.9% 13.1% Packaging Solutions Operational ROOC > 20% 18.3% 25.6% Biomaterials Operational ROOC > 15% 9.8% 18.6% Wood Products Operational ROOC > 20% 25.5% 31.7% Paper Cash flow after investing activities to sales > 7% 10.6% 5.7% * Excluding Paper 14

15 Capacities by grade Grade Capacity t Consumer Board Containerboards Corrugated Packaging (Mm 2 ) Grade Capacity t Newsprint Uncoated Magazine (SC) Sawn goods 5.6 Mm3 Coated Magazine 250 Total Magazine Paper Short-fibre pulp 900 Long-fibre pulp 600 Fluff pulp 250 Dissolving pulp 150 Unbleached kraft pulp 50 Net market pulp Coated Fine Uncoated Fine Total Fine Paper Paper Total

16 Global position capacity and biological asset allocation Board capacity by country 2018 Paper capacity by country 2018 Chemical Pulp capacity by country 2017 Finland 49% Finland 43% Finland 54% Finland 17% Finland 30% Biological assets by country as at Dec 2017 Total assets by country as at Dec 2017 Sweden 28% Sweden 28% Sweden 22% Sweden 70% Sweden 23% Poland 5% Poland 2% Poland 14% Germany 16% Germany 3% Brazil 4% Brazil 3% Brazil 10% China 9% China China 3% 3% China China 10% 5% China 11% Other countries 10% Other countries 10% Uruguay 14% Uruguay 5% Uruguay 12% 16

17 responds to global megatrends Major global trends drive the world s demand for renewable materials Global warming Growing population Urbanisation Digitalisation Changing lifestyles Growing middle class Eco-awareness Bio-based products are not only reusable, but also renewable 17

18 The renewable materials growth company Everything that s made with fossil-based materials today can be made from a tree tomorrow 18

19 Bioeconomy 100 % utilised renewable raw material The smallest pieces of wood are used to make particleboard and chipboard, or can be used as biofuel. Small trunk parts are used to make paper and paperboard. We are innovating to develop tomorrow s products made of tree Thicker parts of the trunk are sawn. Sawmill by-products are used to make paper and particle board. 30% of the wood can be used for sawn products. 70% for pulp and paper. 19

20 Latest transformation steps Completed investments during the quarter MFC Ingerois Improving quality and increasing production capacity of AvantFlute SC products in Heinola Fluting Mill Skutskär fluff pulp Announced investments during the quarter Launkalne sawmilling and planing increase Maxau boiler green energy generation Ongoing acquisitions Letter of intent aiming at structural changes in Bergvik Skog signed 20

21 Transformation journey Growth businesses 72% of sales and 83% of operational EBIT Consumer Board Packaging Solutions 1 Biomaterials Wood Products Paper 2 Other & eliminations 1 In 2006 included in Consumer Board 2 In 2006 includes merchants 21

22 Financial performance - divisions Sales, EBITDA margins, EBIT margins and ROOC Sales Operational EBIT margin Operational EBITDA margin Operational ROOC, 4Q rolling 22

23 Consumer Board The ambition of the Consumer Board division is to be the global benchmark in high-quality virgin fibre cartonboard and the preferred partner to customers and brand owners in the premium enduse packaging and graphical segments A wide board and barrier coating selection suitable for the design and optimisation of packaging for liquid, food, pharmaceutical and luxury goods Serves converters and brand owners globally Expanding in growth markets to meet rising demand for high-quality, functional and safe packaging 23

24 Consumer Board geared towards growth Divisional strategic target Q2/17 Q2/18 Consumer Board Operational ROOC > 20% 13.9% 13.1% Sample product categories Liquid Packaging: Natura Food Service Board: Cupforma, Tamfold General Packaging and graphical board: CKB, Trayforma, Performa, Ensocoat, Tambrite Chocolate and confectionary Cosmetics and luxury Pharmaceuticals Food Packaging Drinks, wines and spirits Cigarette board: Koppar Speciality paper: Lumiflex, LumiLabel Main competitors include BillerudKorsnäs, Metsä Board, Klabin and International Paper 24

25 Geographical exposure Consumer Board Production Facilities Sales Worldwide sales network R&D: Karlstad, Sweden and Imatra, Finland Sweden Fors Mill Sweden Skoghall Mill Finland Imatra Mill Finland Ingerois Mill China Beihai Mill Grade Capacity t Consumer Board

26 2.6% CAGR until 2030 for virgin fibre board grades +1.8% (5.3 mt) +1.2% (6.9 mt) +4.3% (7.3 mt) +3.3% (1.4 mt) +2.5% (0.2 mt) +3.4% (3.3 mt) Virgin fibre board grades: Coated Unbleached Kraft (CUK) Solid Bleached Sulphate (SBS) Liquid Packaging Board (LPB) Folding Box Board (FBB) Food Service Boards (FSB) Source: Pöyry 26

27 We have a strong position with global customers Top 10 customers account for 53% of sales and 60% of EBITDA Market share per product vs. competitors Market position Relative market share CUK SE Europe kt 1 131% SBS SE 1 103% LPB SE 1 110% FBB SE 2 56% CUK SE Global kt 5 13% LPB SE 1 110% SBS SE 7 23% FBB SE 5 29% Coated Unbleached Kraft (CUK), Solid Bleached Sulphate (SBS), Liquid Packaging Board (LPB), Folding Box Board (FBB) SE = Source:, Pöyry 27

28 China demand continues to grow driven by urbanization China urban population Million people % p.a China s packaged food market growth to maintain growth momentum driven by: 573 Urbanization Increasing income Approximately 780 million urban population today; 1 billion urban population by Source: IHS global insights 28

29 China continues to be one of the fastest-growing markets Chinese consumption today matches US in 1920s Nominal Private Consumption (USD, Tn) 18 Middle class and urbanisation driving the change Growth Private Consumption Source: BCG Source: McKinsey, as of Jan

30 Packaging Solutions Packaging Solutions provides fibre-based board materials and corrugated packaging products and services designed for a wide array of applications Our renewable high-end packaging solutions serve leading converters, brand owners, and retailers across multiple industries looking to optimise performance and drive innovation Modern light-weight containerboard offering Vertically integrated board production and converting Customer-centric solutions including design, packaging automation and support Grade Capacity t Containerboards Corrugated Packaging (Mm 2 ) 30

31 Packaging Solutions geared towards growth Packaging Solutions Divisional strategic target Operational ROOC > 20% Q2/17 Q2/ % 25.6% Sample product categories Containerboards: AvantFlute Recycled, AvantFlute SC, AvantKraft, AvantLiner Recycled Corrugated Packaging: Flexo-printed packaging, Offset printed packaging, Protective packaging Main competitors for containerboards include Mondi, Prinzhorn, BillerudKorsnäs and SCA and for corrugated packaging Smurfit Kappa and DS Smith 31

32 Geographical exposure Packaging Solutions Production Facilities Sales Russia Arzamas Balabanovo Lukhovitsy Sweden Jönköping Skene Vikingstad Estonia Tallinn Finland Heinola Kristiinankaupunki Lahti Varkaus Latvia Riga Lithuania Kaunas Poland Lodz Mosina Ostroleka Tychy Beijing Shanghai Dongguan 32

33 We have strong market position and growth in our home packaging markets Europe China Using virgin fibre boards from Beihai and Europe Nordics Nordics 0.7 BEUR 0 1% CAGR #1 107%* Poland & Baltics 1.5 BEUR 3 5% CAGR #2 85%* Corrugated packaging Source: analysis Note: CAGR * Relative market share, measured as a share of largest competitor Russia Russia 1.7 BEUR 3% CAGR #4 62%* China Russia 1.8 BEUR 5 6% CAGR #5 ~20%* Corrugated & consumer packaging 33

34 Packaging for online shopping has the strongest growth Europe Online retail market grows faster than other retail markets % p.a. Different retail categories face different challenges for successful online packaging. China % p.a New reality for brand owners and retailers packaging is clearly a strategic tool to gain from the growth in online retailing Excluding categories services and large travel SOURCE: Euromonitor May

35 Containerboard net balance Testliner. Recycled fluting, tonnes SC Fluting capacity tonnes Kraftliner Capacity tonnes Containerboard Production tonnes Internal consumption tonnes External purchases tonnes Balance ~ tonnes 35

36 Corrugated packaging is also growing in Europe Kraftliner global (mt) Recycled containerboard Europe (mt) Global CAGR 1-2% kt CAGR + 2 % North America Global excl. NA kt CAGR 2-3 % 36 SC Fluting global market size (mt) Source: kt Global CAGR 1 % CAGR 1% Pöyry, Risi, ICCA, analysis North America Global excl. NA Corrugated boxes packaging* (mt) kt CAGR 1-4 % *) Sweden, Finland, Poland, Russia, Baltic

37 Biomaterials Biomaterials offers a wide variety of pulp grades to meet the demands of paper, board, tissue, textile and hygiene product producers End uses: printing and writing papers, specialty papers, graphic papers, packaging paperboards and tissue Fluff pulp primarily used in diapers and hygiene products Dissolving pulp for textiles We also develop new ways to maximise the value extractable from the wood as well as other kinds of lignocellulosic biomasses. The extracted sugars and lignin hold potential for use in a range of applications 37

38 Biomaterials geared towards growth Divisional strategic target Q2/17 Q2/18 Biomaterials Operational ROOC > 15% 9.8% 18.6% Sample product categories: Paper, packaging and tissue production: Supreme (Softwood), Perform (Hardwood) and Select (Hardwood). Fluff pulp for hygiene products; diapers, and feminine care products: Care Dissolving pulp for viscose fabrics e.g textiles but also fine applications in the food and pharmaceutical industries: Pure By-products: tall oil, turpentine, lignin (adhesive for construction and cosmetics industries) Main competitors include UPM, Metsä Fibre, Södra, Fibria and Suzano 38

39 Biomaterials worldwide Grade Capacity t Short-fibre pulp 900 Long-fibre pulp 600 Fluff pulp 250 Dissolving pulp 150 Net market pulp Skutskär Capacity: 540kt/a Enocell Capacity: 490kt/a Sunila Capacity: 375kt/a Montes del Plata Capacity: 1.4Mt/a, For Mt Veracel Capacity: 1.1Mt/a Shared Ownership (50%) Biomaterials Mills 39

40 Pulp demand is growing in our strategic segments Pulp demand to 2021 in million tonnes (Mt) by end-uses CAGR: + 2.5% ~ million tonnes (Mt)/year Grade Mt Hardwood 4.2 Softwood Note: preliminary 2017 numbers indicating +2.5 Mt vs (to Mt) Fluff 1.1 Dissolving Pulp 2.4 TOTAL 8.4 Source: Hawkins Wright, Pöyry,

41 Balanced market expected in pulp Hardwood and softwood average capacity growth (Mt/year) Mt/y (90% ratios) Mt/y Announced capacity growth : 2.8 Mt (0.56 Mt/year) Cash cost CIF Europe (USD/tonne) Best in class Cash cost by country Solid Not sustainable Pulp (softwood and hardwood) delivered cost Cumulative capacity, thousand tonnes/y Softwood 0.8Mt Source: Hawkins Wright (April 2018) Hardwood 2.0Mt Pulp demand : Mt/year (2.5% CAGR) No new major projects announced 41

42 Our three focus areas Maximize value from eucalyptus pulp Continue to improve production efficiency Improve cost competitiveness in Montes del Plata Differentiate our Nordic pulp business Reduce exposure in softwood Grow in fluff and dissolving pulp Continue to improve production efficiency Innovate on pulp applications with current customers Create new platforms for growth We build and develop strong business on: -Improved pulp properties -Regenerated cellulose and MFC -Lignin -Bio-based chemicals -Extraction and separation technologies 42

43 We are differentiating our pulp mix Maximize value from eucalyptus pulp Today Target % 15% 37% 42% Improve competitiveness of our Nordic mills (Fluff and dissolving) 42% Softwood Hardwood Fluff/dissolving 43% 43

44 Innovation is key for sustainable profitable growth Product platforms 1. Improved pulp properties 2. Regenerated cellulose & MFC 3. Lignin 4. Bio-based chemicals Technology platform for extraction & separation 44

45 Forest assets Northern and Southern hemisphere Fair value of 3.3 BEUR forest areas as 1 May 2018 Bergvik Skog, Sweden 2.3 million ha of land in Sweden, ha in Latvia (ownership of 49%) Tornator, Finland ha of land in Finland, ha in Estonia, and ha in Romania (ownership 41%) Guangxi, Southern China (leased) ha of land of which ha planted Note: Fair value of Biological assets and Group s indirect share of forest assets is as of 31 Dec 2017, in total MEUR 45 Veracel plantations, Brazil ha of land of which ha eucalyptus plantations (ownership of 50%) Montes del Plata, Uruguay ha of land of which ha planted (ownership of 50%) In addition, leased plantations: - Laos: trial plantation, ha - Russia: ha

46 MEUR Forests are a strategic asset for the future Biological assets Dec 2017 Biological assets 3.3 BEUR SCA 3.2 BEUR Holmen 1.8 BEUR UPM 1.6 BEUR Klabin 1.0 BEUR SCA Holmen UPM Klabin Exchange rates, European central bank 31 Dec 2017 SEK/EUR BRL/EUR

47 intends to acquire forest assets of Bergvik Skog To secure our competitive raw material supply in the long term would transform 49% ownership of Bergvik Skog group to approximately 70% of the value of the forest assets in Bergvik Väst Financial impacts estimate for Bergvik Väst consolidated as a subsidiary Cash out effect of MEUR to Debt would increase through consolidation by 800 MEUR Net debt to operational EBITDA ratio would increase by 0.6 Capital employed would increase by 1 BEUR resulting a decrease in ROCE of 1%-point 47

48 Wood Products Products Services E-tools Cross Laminated Timber - CLT Laminated Veneer Lumber - LVL Construction beams Panel systems Building Systems Modular systems MySupply Pellet webshop E-business Industrial components Biocomposites Walls, floor, roofs etc. Building Components BIM Digital tools CLT360 Calculatis Classic sawn Classic Planed Pellets Integrated distribution concept 48

49 Massive wooden materials for modern construction Cross laminated timber (CLT) and laminated veneer lumber (LVL) fast and sustainable building solutions 49

50 Innovations taking wood to new heights in Wood Products Trafalgar Place, Elephant and Castle, London Ris de Orangis, Paris France International House, Barangaroo Sydney Peter-Rosegger Strasse, Graz, Austria Joensuu Tower, Joensuu, Finland Crome Court UK Geological Research Base Svalbard Wine Museum Bordeaux 50

51 Short construction times, high functionality and increased well being perfect for schools 51

52 Wood Products accelerating growth Wood Products Divisional strategic target Operational ROOC > 20% Q2/17 Q2/ % 31.7% Sample product categories: CLT (Cross laminated timber) Construction beams* LVL (Laminated Veneer Lumber)* Industrial components* Classic sawn Pellets* Building Solutions* Main competitors include Schweighofer, SCA and Metsä Wood *) Value added products = Building Components and Systems products 52

53 Our operations well positioned in Europe Wood Products 4 Finland 2 Russia employees Sweden Latvia Estonia Production units 20 EUR 1.7 billion Netherlands Czech Germany 3 Austria 1 Lithuania Poland Grade 5.6 Mm Capacity Sawn goods 5.6 Mm 3 Further processing 2.6 Mm 3 Sales CLTto m 3 countries LVL m 3 Pellets t 53 X Number of mills

54 Getting the right log is critical for profitability in Wood Products Customer demand Sawing pattern Log pricing Cutting Purchasing $ Demand flow Material flow 54

55 Transformation continues towards higher margin innovative solutions in Wood Products Sales 2006 Sales 2015 Target % 24% >35 % Classic sawn Building Components and System % share of Wood Products sales 55

56 Paper Paper division provides best-in-class paper solutions for print media and office use The wide selection covers papers made from virgin wood and recycled fibres Customers: publishers, retailers, printing houses, merchants, converters and office suppliers End uses: newspapers and supplements, books, magazines, advertising, note books, art books, office 56

57 Paper geared to cash generation Paper Divisional strategic target Cash flow after investing activities to sales >7% Q2/17 Q2/ % 5.7% Sample product categories Paper selection for print media: Newsprint and book papers, Uncoated mechanical papers (SC), Coated papers (Brands: e.g Nova, InnoPress) Paper selection for office use: transactional needs, office printing, writing and educational needs (Brands: e.g 4CC, MultiCopy, Zoom) Main competitors include UPM, Sappi, Norske Skog, Holmen and International Paper 57

58 Paper worldwide Grade Capacity t Newsprint Uncoated Magazine (SC) Coated Magazine 250 Total Magazine Paper Coated Fine Uncoated Fine Total Fine Paper Paper Total

59 We are delivering on our transformation strategy Sales excluding Paper growing 4.5% CAGR while Paper sales are decreasing 59

60 Innovations 60

61 Innovations a few snapshots 61

62 Innovation in packaging Advancing the renewable packaging industry with innovations Microfibrillated cellulose (MFC) Biobarrier coatings Replacing plastics Intelligent packaging Design driven innovation 62

63 MFC: Innovation In Cellulose The main areas of usage for Consumer Board are strength enhancement and source reduction in paperboard and in the future new barrier solutions 63

64 Biobarrier coatings - Barrier Board Provide mineral oil barrier and dispersion coating solutions for packaging Mineral oil barrier First product available Dispersion coating Proof of concept in manufacturing Customer trials Investment proposal preparations Biobarrier coating R&D phase development ongoing 64

65 Biocomposites gradually replacing plastic Use in products, such as disposable cutlery, furniture, as well as storage and logistics goods Raw material for markets where plastics dominate Can reduce the consumption of fossil-based plastic by up to 60% Always a better alternative than fossil-based plastic Reduce the carbon footprint of a product up to 80% Target market 4.5 Mt 1-5 years 65

66 Intelligent Packaging Consumer Engagement Brand Protection Supply chain management 66

67 Intelligent packaging commercialised New value creation Supply chain management Consumer Engagement Brand and counterfeit protection Partners Microsoft Azure cloud solution NXP Microchips Impinj Reader hardware and microchips Around ten pilots with large multinational customers Two commercial rollouts signed and more expected within next 12 months 8. Apps & installations 7. Analysis 6. Connectivity 5. Integration 1. Solution design 2. Package design 3. Tag design 4. Personalisation The Intelligent Packaging solution components 67

68 Digitizing supply chains for better visibility SUPPLIER 7 Shipping QC with RFIDreader gate verifies that correct RFID-tagged packages are loaded on the truck avoiding incorrect shipments WAREHOUSE REGIONAL WAREHOUSE LOCAL SERVICE VAN Automated inventory management with RFIDgates that auto-register which RFID-tagged items enter the warehouse at inbound and leave the warehouse at outbound Automated counting and scanning as RFID reader scans contents of box with RFID-tagged items, useful in receiving and picking Automated cycle count with handheld RFID-reader (or even a drone with an RFID-reader) performs cycle count of items in floor storage Forklifts with RFID-scanners enable sensing of pick/putaway locations quality controls that correct packages are picked 1 2 WAREHOUSE GLOBAL Dispatch navigation with RFIDreaders in the ceiling identify items in the dispatch area and lights guide workers to correct boxes Packaging validation with RFID-reader in pack stations verifies content of package being built verifies pack completion and warns if line items are missing 8 CONSIGNMENT STOCK Smart container with RFIDreaders at the door that register which RFID-tagged items enter and leave the container Returns management 9 RFID-reader in trunk of van keeps automated inventory count and tracks RFID-tagged equipment Anti-tamper protection of goods with sealed tag and/or unique code to identify genuine product Stock location management RFID readers on shelves sense which RFID-tagged items 68 are placed 20 July on 2018 the shelves 5 Returns management with RFID tags also on return flow from customers or other warehouses to enable full integration with other use cases 10

69 Our product offering: Tag portfolio Tag integration solution Connectivity platform solutions Professional services 69

70 From great packaging design to 3D shapes and value addition 70

71 Innovative and award-winning design Leak-tight renewable and 100% recyclable packaging for fresh fish WorldStar packaging award Sustainability award by World Packaging Organisation Original design replacing traditional pressed pulp packaging for eggs Best packaging and label award for Food at ProdExtraPack 71

72 Innovation in Biomaterials Pulp applications Cellulose modification and pulp process by-products Developing the extraction technology Further development of sugars 72

73 From wood to renewable products Extraction and separation technologies Cellulose and hemicellulose Sugars Lignin Lignin, biochemicals, bioplastics, regenerated cellulose, pulp etc 73

74 Innovation is key for sustainable profitable growth Product platforms 1. Improved pulp properties 2. Regenerated cellulose & MFC 3. Lignin 4. Bio-based chemicals Technology platform for extraction & separation 74

75 Platform 1: improving pulp properties for existing products Fluff pulp Hygiene and health, growing by 3.6% per year Life expectancy and increased disposable income in developing countries Improve fluff pulp properties to increase customer value Dissolving pulp Pulp Dissolving pulp to textiles is a 6.1 Mt market, growing 6.8% per year The increase of cellulosic fibre in textiles is driven by global brand owners Improve quality to be able to differentiate in the value chain Pulp for specialty papers Source: Smithers Pira, Hawkins Wright Flexible packaging, labels, security, décor, among others 28 Mt market, growing 1.8% per year Fibre improvements, special additives, sustainable coatings & barriers, source reduction and other innovation opportunities 75

76 Platform 2: Developing new technologies for using wood fibre in textiles, non-woven and specialty papers Regenerated cellulose Participate in the development of new technologies for using wood fibre in textile Growing interest from global brand owners increases demand for renewable fibres Opportunity to leverage on existing assets to enter this new market MFC MFC has potential to be used in specialty papers and non-woven MFC is a versatile material with potential to work as strength enhancer, additive, binder and barrier material has a long history in the research of MFC and has a demonstration plant in Imatra, Finland Source: 76

77 Platform 3: Lignin big opportunities in many markets Phenol replacement Phenolic resins is a 2.8 Mt market, growing at 4% CAGR It replaces phenol in adhesives for plywood, OSB (oriented strand board), laminates, LVL and other wood construction materials The carbon footprint for lignin is roughly 1/10 of the carbon footprint of phenol Carbon fibre Lignin Light-weight high performance composites Kt market, growing at 9 12% CAGR Low-carbon-footprint carbon fibre is unoccupied market space Energy storage Source:, Carbon Composites, IDTechEx, LuxResearch, Markets and Research, Zion Research 77 Substitution of conventional hard carbon anode materials in energy storage, namely Li-Ion Batteries and Supercapacitors Market growing on average by 20% CAGR Key applications: portable consumer electronics, power tools, electrical vehicles, stationary applications and back-up systems

78 Renewable Lineo TM by can replace fossil-based materials Wood-based lignin is a renewable, nontoxic, traceable material Environment benefit, for example, in carbon fibres, energy storage and mechanical forest industry Today as a replacement for oil-based phenolic materials in glues for example in plywood and paper lamination Lignin makes up 20-30% of round wood Market size; 3Mt for Phenol replacement 78

79 Platform 4: Bio-based chemicals replacing fossil-based materials Bioplastics and intermediates C5 and C6 sugars from wood Source: PwC, Kline and Industry experts Growing interest in packaging/bottling markets for renewable solutions Reduction on carbon footprint and enhanced properties are key target areas Market clearly favoring second generation biomass as the raw material source It is a very populated market place, thus, strategic alliances will be crucial to win in this industry Xylose Key application is the xylitol (sweetener) market (approximately 120 Kt at 4 6% CAGR) Compared to C6 sugars it still is a rather undeveloped market, mainly due to lack of pure xylose availability. This is changing with the biorefinery concepts Growing interest and developments taking place in the market well positioned to be a frontrunner here 79

80 Innovation in Wood Products Product innovations Building Systems Digitalisation 80

81 From a classic sawn producer to a leading provider of innovative wood-based solutions Classic sawn Cross Laminated Timber (CLT) Laminated Veneer Lumber (LVL) Building Solutions Industrial components Construction beams Pellets Online services and e-business 81

82 Building Systems driving growth Residential multi storey panel construction Residential multi storey modular construction Find the film from s YouTube page (youtube.com/storaenso), or use a direct link youtube.com/watch?v=3ei9hhp_t5k 82

83 New ways of improving efficiency through digitalisation Forest categorisation & log value Cloud Buyer takes pictures Pictures to cloud service Calculation ProCalc data - Value of logs Quality class Value for sawmills Pricing proposal for buyer Results 83

84 Digitalisation in Wood Products Intelligent products Digital customer interaction Market information Scan each single product Markets Products Automate, robotise and mobilise production Wood Products end-to-end Digitalisation IndustriesCustomers Competitors Supplier Product demand forecast based on market Simulate production, based on demand and log info Scan each single log Optimised raw material specification based on demand Individualisation of leach log and digital data transfer to mill Trees cut based on profit optimisation Forest categorisation based on collected info 84

85 Group s financial performance, dividend policy, ownership and top management 85

86 Financial performance - Group 86

87 Cost structure 2017 % of costs 12% 11% 14% 6% 7% 34% Logistics and commissions Fibre Chemicals and fillers Energy Material Personnel Depreciation Other 7% 9% 87

88 Capex is moving towards targeted level Maintenance capex Strategic capex Biological capex Capex estimate for 2018 Depreciation and operational decrease in the value of biological assets 88

89 Targeted ROOC is driving CAPEX allocation Capex forecast in 2018 * Operational ROOC target ** Cash flow after investing activities to sales target 89

90 Year-on-year net debt/ebitda 90

91 Maturity profile Q

92 dividend policy Strive to pay stable dividends linked to the long-term performance Half of the net income over the cycle 92

93 Ownership Distribution as of 30 June 2018 % of shares % of votes % of shares held Solidium Oy* 10.7% 27.3% FAM AB 10.2% 27.3% Social Insurance Institution of Finland (KELA) 3.2% 10.1% Finnish institutions (excl. Solidium and KELA) 11.3% 8.5% Swedish institutions (excl. FAM) 4.2% 4.4% Finnish private shareholders 3.6% 2.3% Swedish private shareholders 3.0% 2.1% ADR holders 2.2% 0.7% Under nominee names (non-finnish/non-swedish shareholders) 51.6% 17.3% * Entirely owned by the Finnish State 93

94 Major Shareholders as of 30 June 2018 By voting power A shares R shares % of shares % of votes 1 Solidium Oyj* FAM AB** Social Insurance Institution of Finland (KELA) Varma Mutual Pension Insurance Company Ilmarinen Mutual Pension Company MB-Bolangen i Vetlanda AB (incl. Stiftelsen Seydlitz Småland) Erik Johan Ljungberg's Education Foundation Swedbank Robur Funds Bergslaget's Healthcare Foundation The State Pension Fund Nordea Investment Fund SEB Investment Management Investment Fund OP Suomi Keva (Local Government Pensions Institution) Elo Mutual Pension Insurance Company Unionen (Swedish trade union) Schweizerische Nationalbank Folketrygfondet S-Stock Oy Investment Fund Säästöpankki Kotimaa largest total *Entirely owned by the Finnish State. **As confirmed to. List has been compiled by the company, based upon shareholder information from Euroclear Finland Oy and Euroclear Sweden AB share registers and a database managed by Citibank, N.A. (as the company's ADR agent bank). This information includes only direct registered holdings, thus certain holdings (which may be substantial) of ordinary shares and ADRs held in nominee or brokerage accounts can not be included. The list is therefore incomplete. 94

95 Group Leadership Team CEO Karl-Henrik Sundström CFO Seppo Parvi HR Malin Bendz Consumer Board Annica Bresky Sourcing Johanna Hagelberg Paper Kati ter Horst Communication Ulrika Lilja Legal Per Lyrvall Biomaterials Markus Mannström Sustainability Noel Morrin Packaging Solutions Gilles van Nieuwenhuyzen Wood Products Jari Suominen 95

96 Board of Directors Jorma Eloranta since April 2016 Chairman Hans Stråberg since April 2009 Vice chairman Anne Brunila since April 2013 Elisabet Fleuriot since April 2013 Hock Goh since April 2012 Christiane Kuehne since April 2017 Antti Mäkinen since March 2018 Richard Nilsson since April 2014 Göran Sandberg since April

97 ESG indices and other external recognition in

98 Sponsored ADR Programme has established a sponsored Level I ADR programme in the US. The ADRs trade on the premier tier of Over-The-Counter ( OTC ) market in the US. Details are as follows: Ticker Symbol CUSIP Ratio ADR depositary SEOAY 86210M106 1 ADR : 1 Ordinary Shares Citibank Share price information or Please contact the Citibank s dedicated ADR broker desks: Scott Pollak (New York) Mike Woods (London) Tel: Tel: scott.h.pollak@citi.com michael.woods@citi.com 98

99 Financial results for Q CEO Karl-Henrik Sundström CFO Seppo Parvi 99

100 Sustainable profitable growth continues Q year-on-year Sales MEUR, +5.4% despite wood shortage Favourable prices and active product mix management Sales growth excluding divested Puumerkki was 7.0% Operational EBIT +49% to 327 MEUR EBIT margin 12.3% (8.7%) Favourable prices and active product mix management despite temporary headwinds in wood sourcing and Consumer Board production EPS 0.28 (0.19) EUR, increase of 46% Cash flow from operations 357 MEUR (365 MEUR), after investing activities 231 MEUR (237 MEUR) Balance sheet strengthened further despite increased dividend pay-out and net debt reduced by 10%; net debt to operational EBITDA ratio improved to 1.3 (1.9) Operational ROCE at 15.5% (10.3%), above strategic target of 13% for the fourth consecutive quarter 100 Q results

101 despite temporary headwinds Operational EBIT increased 49% Q2 y-o-y 101 Q results

102 Fourth consecutive quarter above the strategic target of 13% Operational ROCE 102 Q results

103 Conversion opportunity at Oulu Mill Potential reduction of paper capacity by 20% A feasibility study to convert to board grades expected to be concluded by the end of 2018 early 2019 The potential 700 MEUR investment would include Brown-based cartonboard line ( t/a) Kraftliner line ( t/a) Integrated kraft pulp ( t/a) Integrated new CTMP plant ( t/a) Products CUK Kraftliner Production of the potential new lines would start 2020 The other option is to continue the current fine paper production 103 Q results

104 Latest transformation steps Completed investments during the quarter MFC Ingerois Improving quality and increasing production capacity of AvantFlute SC products in Heinola Fluting Mill Skutskär fluff pulp Announced investments during the quarter Launkalne sawmilling and planing increase Maxau boiler green energy generation Ongoing acquisitions Letter of intent aiming at structural changes in Bergvik Skog signed 104 Q results

105 Transformation journey Growth businesses 72% of sales and 83% of operational EBIT Consumer Board Packaging Solutions 1 Biomaterials Wood Products Paper 2 Other & eliminations 1 In 2006 included in Consumer Board 2 In 2006 includes merchants 105 Q results

106 Clear improvement year-on-year Summary financials Q Change% Change% EUR million Q2/18 Q2/17 Q2/18- Q2/17 Q1/18 Q2/18- Q1/18 Sales % % Operational EBITDA % % Operational EBITDA margin 17.5% 14.2% 19.5% Operational EBIT % % Operational EBIT margin 12.3% 8.7% 14.3% Profit before tax excl. IAC % % EPS excl. IAC, EUR % % EPS (basic), EUR % % Operational ROCE 15.5% 10.3% 50.5% 17.7% -12.4% Cash Flow from Operations % % Net debt/last 12 months operational EBITDA Q results

107 Consumer Board All-time high sales despite headwinds Q2 y-o-y Sales +10% to all-time high 691 MEUR despite headwinds Clearly higher volumes in European mills and ramp-up of Beihai Mill More than half of the sales coming from long pricing contracts Operational EBIT slightly down to 65 MEUR Higher sales prices more than offset by higher variable costs, mainly wood, pulp, chemicals and fillers Production challenges in European mills and wood shortage impact -12 MEUR Beihai Mill ramp-up as planned t/a softwood pulp from market t/a captive hardwood pulp from Veracel Operational ROOC reached 13.1% slightly less than a year ago MFC investment at Ingerois Mill completed Joint development agreement with Sulapac To license its materials and technology Begin the development of fully renewable caps and closures for liquid packages 107 Q results

108 Packaging Solutions Continued solid performance despite investment shutdown Q2 y-o-y Sales +5% to record high Q2 of 329 MEUR Driven by price increases and active sales mix improvements in European based operations Operational EBIT record high Q2 of 57 MEUR, +42% Clearly higher sales prices for European based units and good sales mix management Heinola 28 MEUR investment to improve quality and increase production capacity of AvantFlute SC products successfully completed Related shutdown impacted production and delivery volumes negatively during the quarter Operational ROOC clearly above the strategic target at 25.6% (18.3%) Strong profitability 108 Q results

109 Biomaterials All-time high sales and profitability Q2 y-o-y Sales +11% to all-time high 413 MEUR Higher sales prices Operational EBIT +76% to all-time high 109 MEUR despite a maintenance shutdown at Enocell Mill reducing production volumes Higher pulp prices only partly offset by higher variable costs, and negative net currency effect Operational ROOC improved to all-time high level of 18.6% Production started as planned at the new fluff pulp line at Skutskär Mill following 26 MEUR investment First commercial deliveries shipped 109 Q results

110 Wood Products Return on capital at record level Q2 y-o-y Sales increased 7% excluding the divested Puumerkki to 430 MEUR Improved prices and active mix management driving value creation Operational EBIT +33% to record high Q2 of 47 MEUR and the highest since 2007 Improved prices and mix supported by growth from strategic investments of Murów sawmill and Varkaus LVL Ramp-up of the LVL production at Varkaus Mill completed The first commercial deliveries of biocomposite granules shipped during quarter, under the newly launched brand DuraSense by Investments CLT investment at Gruvön proceeding as planned, Q1/ MEUR investment to increase sawmilling and planing capacity at Launkalne sawmill, Q2 Q3/ Q results

111 Paper Significant profitability improvement Q2 y-o-y Sales increased +5% to 754 MEUR Significantly higher sales prices and better mix were only partly offset by lower volumes and negative currency effect Operational EBIT increased +43 MEUR to 54 MEUR Higher sales prices in all grades were only partly offset by higher variable costs, mainly for wood, pulp and logistics Cash flow after investing activities to sales ratio 5.7% Clearly higher profitability was more than offset by less favourable operative working capital movement, due to positive one-off impacts in the same quarter a year ago 25 MEUR boiler investment to reduce energy costs and boost green energy generation at Maxau Mill, to be completed in Q results

112 strengthens its strategic leverage targets 112 Stricter targets due to strong cash flow generation capabilities and higher profitability levels New Net Debt / Operational EBITDA <2.0 (old <3.0) New Debt/equity Ratio <0.6 (old <0.8) s transformation to a renewable material s growth company has been successful Balance sheet has strengthened considerably Strong cash flow generation combined with sale of non-core assets Reduction of the annual capital expenditure to or below the level of depreciation and the operational decrease in the value of biological assets over the business cycle Even with the new tighter financial policy, expects to keep the level of strategic flexibility needed. To enforce its commitment to efficient management of capital Q results

113 Strategic targets in good progress still more potential Group strategic targets Q2 17 Q2 18 Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 7.1% (YoY) 5.4% (YoY) Net debt to operational EBITDA <2.0x new target Fixed costs to sales <20% 25.6% 23.5% Debt to equity <60% new target 49% 40% Operational ROCE >13% 10.3% 15.5% Divisional strategic targets Q2 17 Q2 18 Consumer Board Operational ROOC > 20% 13.9% 13.1% Packaging Solutions Operational ROOC > 20% 18.3% 25.6% Biomaterials Operational ROOC > 15% 9.8% 18.6% Wood Products Operational ROOC > 20% 25.5% 31.7% Paper Cash flow after investing activities to sales > 7% 10.6% 5.7% * Excluding Paper 113 Q results

114 Guidance for Q Compared to Q Sales are estimated to be similar to the amount of MEUR recorded in Q2/2018 Operational EBIT is expected to be in line with the 327 MEUR recorded in Q2/2018 The impact of annual maintenance shutdowns is expected to be approximately 5 MEUR lower than in Q2/2018. Second quarter maintenance impact was 15 MEUR higher than initially forecast. The Nordic wood supply situation is expected to continue tight due to the risk of forest fires affecting harvesting conditions. The wood supply impact is expected to be approximately 10 MEUR negative in the Q3/2018. These impacts are included in the above outlook Annual maintenance Q Q Consumer Board Imatra and Ingerois mills Beihai Mill Packaging Solutions Ostrołęka Mill Heinola and Varkaus mills Biomaterials Sunila Mill Enocell Mill Paper Veitsiluoto Mill Oulu Mill 114 Q results

115 Sustainable profitable growth continues Sixth consecutive quarter of sales growth Fourth consecutive quarter of double digit operational EBIT margin Operational ROCE above the strategic target of 13% for the fourth consecutive quarter sets new targets levels for Net Debt / Operational EBITDA (<2.0) and Debt/equity Ratio (<0.6) Wood sourcing still challenging Moving from asset transformation to innovation and sales transformation 115 Q results

116