Stora Enso Interim Review January–June 2013

STORA ENSO OYJ INTERIM REVIEW 19 July 2013 at 13.00 EET

Q2/2013 (compared with Q2/2012)

• Operational EBIT EUR 124 (EUR 144) million. Improvement in Building and Living and in Renewable Packaging. Printing and Reading loss-making due to weak paper market.
• Solid cash flow from operations at EUR 344 (EUR 246) million due to reduction in working capital, especially in paper business. Cash flow after investing activities EUR 227 (EUR 74) million.

Q2/2013 (compared with Q1/2013)

• Operational EBIT EUR 124 (EUR 118) million.
• Ratio of net debt to the last twelve months’ operational EBITDA 2.7 (2.7).
• Cash flow from operations EUR 344 (EUR 101) million. Strong liquidity at EUR 1.8 (EUR 1.7) billion.

Q1-Q2/2013 (compared with Q1-Q2/2012)

• Operational EBIT at EUR 242 (EUR 294) million.
• Solid cash flow from operations at EUR 445 (EUR 469) million.

Transformation

• To accelerate access to the growing Chinese market, Stora Enso will launch its integrated mill project in Guangxi, China in two phases, starting with building a consumer board machine. First phase capital expenditure expected to be EUR 760 million.
• Montes del Plata Pulp Mill estimated to begin mill start-up process at the end of Q3/2013.
• Stora Enso to invest EUR 32 million in a world-class biorefinery at Sunila Mill in Finland.

Streamlining and structure simplification

• Streamlining and structure simplification plans to achieve annual net fixed cost savings of EUR 200 million proceeding on schedule.

Outlook

• Q3/2013 sales expected to be slightly lower and operational EBIT in line with or slightly higher than Q2/2013.
   

Summary of Second Quarter Results*

* Data for the comparative periods have been restated following adoption of the amended IAS 19 Employee Benefits standard. Data for the comparative periods have been restated in all tables affected by IAS 19. For further details, please see Basis of Preparation on page 14.
** Operational EBIT comprises the operating profit excluding NRI and fair valuations of the segments and Stora Enso’s share of the operating profit excluding NRI and fair valuations of its equity accounted investments (EAI). Fair valuations include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights and valuations of biological assets related to forest assets in EAI.


Stora Enso Deliveries and Production

* Stora Enso’s net market pulp position is expected to be about 1.2 million tonnes for 2013.

Key Figures

Operational EBIT comprises the operating profit excluding NRI and fair valuations of the segments and Stora Enso’s share of the operating profit excluding NRI and fair valuations of its equity accounted investments (EAI). Fair valuations include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights and valuations of biological assets related to forest assets in EAI.

NRI = Non-recurring items. These are exceptional transactions that are not related to normal business operations. The most common non-recurring items are capital gains, additional write-downs or reversals of write-downs, provisions for planned restructuring and penalties. Non-recurring items are normally specified individually if they exceed one cent per share.

Reconciliation of Operational Profitability

* Group’s share of operational EBIT of equity accounted investments (EAI).
** Fair valuations and non-operational items include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights and valuations of biological assets related to forest assets in equity accounted investments (EAI) and Group's share of tax and net financial items of EAI.

Q2/2013 Results (compared with Q2/2012)

Breakdown of Sales Change Q2/2012 to Q2/2013

* Wood, energy, paper for recycling, by-products etc.
** Asset closures, major investments, divestments and acquisitions


Sales at Group level at EUR 2 717 million were similar to a year ago. Operational EBIT at EUR 124 million was EUR 20 million lower than a year ago. This represents an operational EBIT margin of 4.6% (5.3%).

Clearly lower sales prices in local currencies and lower volumes mainly in paper grades decreased operational EBIT by EUR 40 million and EUR 8 million, respectively. Paper and board production was curtailed by 9% (8%) and sawnwood production by 7% (7%) to manage inventories.

Fibre costs were clearly lower, driven by prices for wood and paper for recycling. Variable costs in local currencies were EUR 25 million lower than a year earlier despite higher energy costs due to decreased allocation of green certificates in Sweden.

The average number of employees at 28 660 was 570 lower than a year ago. The number of employees decreased mainly in Sweden and Finland due to planned closures and restructurings. The number of employees increased by 340 in China.

The Group recorded non-recurring items (NRI) with a negative net impact of approximately EUR 33 million on operating profit and a positive impact of approximately EUR 9 million on income tax in its second quarter 2013 results.

Net financial items were EUR 23 million less negative than a year ago. The net interest expense increased by EUR 9 million due to the higher gross debt level and lower interest income. The fair valuation of interest rate derivatives had a positive impact of EUR 23 million. A gain of EUR 12 million from the sale of EUR 99 million of subordinated debt of the equity accounted investments Bergvik Skog and Tornator was recorded in the second quarter of 2013. The foreign exchange loss in the second quarter was EUR 6 million less than a year earlier. A non-recurring EUR 10 million positive impact due to the NewPage lease guarantee provision reversal was recorded in the second quarter of 2012.

Breakdown of Capital Employed Change Q2/2012 to Q2/2013

The operational return on capital employed was 5.8% (6.6%). Excluding the ongoing strategic investments in Biomaterials and Renewable Packaging the operational return on capital employed would have been 7.3% (7.9%).

January–June 2013 Results (compared with January–June 2012)
Sales decreased by EUR 10 million year-on-year. Operational EBIT decreased by EUR 52 million due to notably lower prices in local currencies and lower volumes in paper grades. Fixed costs were lower and fibre costs clearly lower.

Q2/2013 Results (compared with Q1/2013)
Sales were EUR 50 million higher at EUR 2 717 million and operational EBIT was EUR 6 million higher at EUR 124 million, as anticipated. Sales prices in local currencies were higher for pulp and sawn goods, and fibre costs were lower. Fixed costs were higher mainly due to scheduled maintenance in the second quarter at several European mills. The average number of employees at 28 660 was 440 higher due to temporary summer employees.

Capital Structure

* Operative fixed assets include property, plant and equipment, goodwill, biological assets, emission rights, available-for-sale operative shares and other intangible assets.

Financing Q2/2013 (compared with Q1/2013)
Total unutilised committed credit facilities were unchanged at EUR 700 million, and cash and cash equivalents net of overdrafts remained strong at EUR 1 807 million, which is EUR 65 million more than for the previous quarter. In addition, Stora Enso has access to various long-term sources of funding up to EUR 600 million.

The ratio of net debt to the last twelve months’ operational EBITDA was 2.7 (2.7).

The debt/equity ratio at 30 June 2013 was 0.55 (0.50). The increase is primarily due to equity decrease following the EUR 237 million dividend payment made during the second quarter of 2013, EUR 128 million reduction in the value of PVO due to lower electricity prices and EUR 153 million negative currency effect on owners’ equity net of the hedging of equity translation risks, mainly due to the weaker Brazilian real and Swedish krona.

Cash Flow

Q2/2013 cash flow
Second quarter 2013 cash flow from operations was solid at EUR 344 million, mainly because working capital decreased by EUR 126 million during the quarter. Inventories decreased by EUR 60 million and receivables decreased by EUR 40 million.

Capital Expenditure for January–June 2013
Additions to fixed and biological assets in the first half of 2013 totalled EUR 147 million, which is 51% of depreciation in the same period.

The EUR 17 million equity injection into Montes del Plata, a joint venture in Uruguay, and EUR 30 million cost of acquiring a 35% shareholding in Bulleh Shah, a joint venture in Pakistan, totalled EUR 47 million in the first half of 2013.

Investments in fixed assets and biological assets had a cash outflow impact of EUR 168 million in the first half of 2013.

The main projects ongoing during the first half of 2013 were Montes del Plata and the Ostrołęka containerboard machine.

Capital Expenditure, Equity Injections and Depreciation Forecast 2013

* Capital expenditure includes approximately EUR 90 million for project in Guangxi, China

Streamlining and structure simplification programme to cut EUR 200 million from fixed costs

The streamlining and structure simplification programme, which is intended to achieve annual net fixed cost savings of EUR 200 million, i.e. compensating for inflation in addition to cost takeout in the second quarter of 2014 versus actual 2012, is proceeding according to plan. The full impact of net cost savings is expected from the second quarter of 2014 onwards. The new divisional organisations have been announced.

The net fixed costs were EUR 7 million lower in the second quarter of 2013 than the second quarter of 2012 due to this programme. Annualised this represents roughly 14% of the targeted EUR 200 million annual net cost savings. The non-recurring costs related to the programme in the first half of 2013 totalled EUR 43 million, including EUR 37 million in the second quarter of 2013. Most of the remaining non-recurring costs are expected to be announced in the third quarter of 2013. The number of employees had been reduced by 360.

Near-term Outlook
In the third quarter of 2013 Group sales are expected to be slightly lower and operational EBIT in line with or slightly higher than the second quarter of 2013. 

Segments Q2/13 compared with Q2/12

Printing and Reading
Printing and Reading is a world-class responsible supplier of paper from renewable sources for print media and office use. Its wide offering serves publishers, retailers, printing houses, merchants, converters and office suppliers, among others. Printing and Reading produces newsprint, book paper, SC paper, coated paper and office paper.

* Operational ROOC = 100% x Operational EBIT/Average operating capital

• Sales prices in local currencies were lower and deliveries and production lower than a year ago as demand weakened. Lower prices for paper for recycling reduced variable costs slightly and fixed costs remained stable.
• As is now evident, the continuing deterioration in demand for paper products required the further streamlining and structure simplification actions announced on 23 April 2013 to adjust to the new supply and demand balance.
• Hylte Mill PM 2 and Kvarnsveden Mill PM 11 in Sweden were permanently shut down in May.

Markets

Biomaterials
Biomaterials offers a variety of pulp grades to meet the demands of paper, board and tissue producers. Pulp made from renewable resources in a sustainable manner is an excellent raw material with many different end uses. Biomaterials comprises mainly tree plantations, the Group’s joint-venture Veracel and Montes del Plata pulp mills, and Nordic stand-alone pulp mills.

* Operational ROOC = 100% x Operational EBIT/Average operating capital

• Slightly lower sales prices in local currency were offset by higher sales volumes year-on-year, mainly due to Enocell.
• Fixed costs were negatively impacted by the biorefinery and in addition, operational EBIT by the strategic investment in Montes del Plata.
• Montes del Plata Pulp Mill is estimated to begin the mill start-up process at the end of third quarter of 2013. Montes del Plata Pulp Mill is expected to have limited impact on the Group’s sales and slightly negative impact on operational EBIT in 2013. In 2014 the Group’s sales are expected to be affected by 650 000 tonnes of Montes del Plata pulp with full positive EBITDA impact in the latter part of the year 2014 provided that the current market conditions prevail.

• Stora Enso is investing EUR 32 million in a world-class biorefinery at Sunila Mill in Finland.
• There will be an annual maintenance stoppage at Enocell Mill in Finland during the third quarter of 2013.

Markets

Building and Living
Building and Living provides wood-based innovations and solutions for everyday living and housing needs. The product range covers all areas of urban construction, from supporting structures to interior design and environmental construction. Further-processed products include massive wood elements and housing modules, wood components and pellets, in addition to a variety of sawn timber goods.

* Operational ROOC = 100% x Operational EBIT/Average operating capital

• Sales prices in local currencies were higher than a year ago, especially in overseas markets.
• The performance improvement was mainly due to exceptionally strong seasonal market conditions and improved cost performance resulting from the early start of the streamlining programme.
• Stora Enso has agreed to supply modular CLT-based elements for residential buildings of five to seven storeys in Helsinki constructed in co-operation with SRV Yhtiöt Oyj.

Markets

Renewable Packaging
Renewable Packaging offers fibre-based packaging materials and innovative packaging solutions for consumer goods and industrial applications. Renewable Packaging operates throughout the value chain, from pulp production to production of materials and packaging, and recycling. It comprises three business units: Consumer Board, Packaging Solutions and Packaging Asia.

* Operational ROOC = 100% x Operational EBIT/Average operating capital

• Sales volumes were higher, driven by consumer board and the new Ostrołęka Mill PM 5, but average sales prices in local currencies were slightly lower. Lower fixed and variable costs more than offset slightly higher depreciation due to Ostrołęka Mill PM 5. Exchange rates had a positive net impact on sales and costs after hedges.
• Stora Enso and Packages Ltd. completed the process of establishing a joint venture called Bulleh Shah Packaging (Private) Limited in Pakistan in May.
• To accelerate access to the growing Chinese market, Stora Enso will launch its integrated mill project in Guangxi, China in two phases, starting with building a consumer board machine. The first-phase capital expenditure is expected to be EUR 760 million.
• The new Ostrołęka Mill PM 5 production is proceeding according to plan and the EBITDA margin is expected to be approximately 20% during the latter part of 2013.
• In June Stora Enso announced that it is investing approximately EUR 32 million in Skoghall Mill in Sweden. The investment primarily pertains to rebuilding of a fibre line in the sulphate pulp mill and its chemical recovery operations, thereby increasing the mill’s pulp production capacity by 45 000 tonnes per year.
• In June Stora Enso decided to commence a feasibility study with the aim of converting the Varkaus Mill fine paper machine in Finland to produce virgin-fibre-based containerboard.
• There will be an annual maintenance stoppage at Imatra Mills in Finland during the third quarter of 2013.

Markets

Other
The segment Other includes the Nordic forest equity accounted investments, Stora Enso’s shareholding in Pohjolan Voima, operations supplying wood to the Nordic mills and Group shared services and administration.

• Operational EBIT in Nordic wood sourcing operations continued to benefit from good harvesting conditions in the beginning of the quarter, but returned to normal towards the end of the quarter.
• Costs were lower in Group functions and services.

Short-term Risks and Uncertainties
The main short-term risks and uncertainties relate to the economic situation in Europe and further increasing imbalance in the European paper market.

Energy sensitivity analysis: the direct effect of a 10% increase in electricity, heat, oil and other fossil fuel market prices would have a negative impact of approximately EUR 15 million on operational EBIT for the next twelve months, after the effect of hedges.

Wood sensitivity analysis: the direct effect of a 10% increase in wood prices would have a negative impact of approximately EUR 200 million on operational EBIT for the next twelve months.

Chemicals and fillers sensitivity: the direct effect of a 10% increase in chemical and filler prices would have a negative impact of approximately EUR 63 million on operational EBIT for the next twelve months.

A decrease in energy, wood or chemical and filler prices would have the opposite impact.

Foreign exchange rates sensitivity analysis for the next twelve months: the direct effect on operational EBIT of a 10% strengthening in the value of the US dollar, Swedish krona and British pound against the euro would be about positive EUR 104 million, negative EUR 81 million and positive EUR 51 million annual impact, respectively. Weakening of the currencies would have the opposite impact. These numbers are before the effect of hedges and assuming no changes occur other than a single currency exchange rate movement.

Veracel
On 11 July 2008 Stora Enso announced that a federal judge in Brazil had issued a decision claiming that the permits issued by the State of Bahia for the operations of Stora Enso’s equity accounted investment Veracel were not valid. The judge also ordered Veracel to take certain actions, including reforestation with native trees on part of Veracel’s plantations and a possible BRL 20 million (EUR 7 million) fine. Veracel disputes the decision and has filed an appeal against it. Veracel operates in full compliance with all Brazilian laws and has obtained all the necessary environmental and operating licences for its industrial and forestry activities from the competent authorities. In November 2008 a Federal Court suspended the effects of the decision. Veracel has not recorded any provision for the reforestation or the possible fine.

On 30 September 2009 a judge in the State of Bahia issued an interim decision ordering the State Government of Bahia not to grant Veracel further plantation licences in the municipality of Eunápolis in response to claims by a state prosecutor that Veracel’s plantations exceeded the legal limits, which Veracel disputes. Veracel’s position is supported by documentation issued by the State environmental authority.

Class Action Lawsuits in USA
In the context of magazine paper sales in the USA in 2002 and 2003, Stora Enso Oyj (SEO) and Stora Enso North America (SENA) were sued in a number of class action (and other civil) lawsuits filed in the USA by various magazine paper purchasers that claimed damages for alleged antitrust violations. In December 2010 a US federal district court granted a motion for summary judgement dismissing the direct purchaser class action claims on SEO and SENA. Following appeal, a federal court of appeals on 6 August 2012 upheld the district court’s ruling as to SEO, but reversed the district court’s ruling as to SENA and referred that part of the case back to the district court for a jury trial to determine whether SENA’s conduct did violate the federal antitrust laws. The trial of the case against SENA was scheduled to begin in August 2013. Because Stora Enso disposed of SENA in 2007, Stora Enso’s liability, if any, would have been determined by the provisions in the SENA Sales and Purchasing Agreement. On 17 July 2013, Stora Enso reached an agreement (which is subject to approval by the US federal district court) to settle the cases filed by the direct magazine paper purchasers without any admission of liability by SENA or SEO. Stora Enso has set aside USD 8 million to cover the cost of settling those claims, which cost will be recorded in the third quarter 2013 accounts. The case has been disclosed as a contingent liability. There are no provisions related to the case in Stora Enso’s balance sheet per 30 June 2013. Furthermore, most of the indirect purchaser actions have been dismissed by a consent judgement, subject, however, to being reinstated if the plaintiffs in the direct cases would have been ultimately successful in obtaining a final judgement that SENA violated antitrust laws.

Legal Proceedings in Finland
On 3 December 2009 the Finnish Market Court fined Stora Enso for competition law infringements in the market for roundwood in Finland from 1997 to 2004. Stora Enso did not appeal against the ruling.

On 31 March 2011 Metsähallitus of Finland initiated legal proceedings against Stora Enso, UPM and Metsäliitto claiming compensation for damages allegedly suffered due to the competition law infringements. The total claim against all the defendants amounts to approximately EUR 160 million and the secondary claim against Stora Enso to approximately EUR 85 million.

In addition, Finnish municipalities and private forest owners have initiated similar legal proceedings. The total amount claimed from all the defendants amounts to approximately EUR 75 million and the secondary claims and claims solely against Stora Enso to approximately EUR 25 million.

Stora Enso denies that Metsähallitus and other plaintiffs have suffered any damages whatsoever and will forcefully defend itself. No provisions have been made in Stora Enso’s accounts for these lawsuits.

Changes in Organisational Structure and Group Management
On 31 May 2013 Stora Enso announced that from 1 July 2013 onwards the Stora Enso Group Leadership Team would comprise the following persons and roles:

Jouko Karvinen, Chief Executive Officer
Juan Bueno, Head of Biomaterials Division
Lars Häggström, Head of Global People and Organisation
Per Lyrvall, Head of Global Ethics and Compliance, General Counsel, Country Senior Executive, Sweden
Mats Nordlander, Head of Renewable Packaging Division
Lauri Peltola, Head of Global Identity, Country Senior Executive, Finland
Karl-Henrik Sundström, Head of Printing and Living Division, Deputy CEO
Jyrki Tammivuori, acting Chief Financial Officer
Juha Vanhainen, Project Director for the recently announced EUR 200 million streamlining and structure simplification programme.

Share Capital
During the quarter 400 A shares were converted into R shares. The shares were recorded in the Finnish trade register on 15 May 2013.

Share cancellation
On 15 May 2013, 918 512 treasury R shares (approximately 0.12% of the issued shares) were cancelled in accordance with a decision of Stora Enso’s Annual General Meeting on 23 April 2013.

On 30 June 2013, Stora Enso had 177 146 372 A shares and 611 473 615 R shares in issue of which the Company held no A shares or R shares.

Changes in shareholdings
In April–June the number of shares in Stora Enso Oyj held by Norges Bank (The Central Bank of Norway) was twice temporarily less than 5% of the paid-up share capital and the number of shares in Stora Enso Oyj due to share lending transactions.

Decisions of Annual General Meeting on 23 April 2013
The AGM approved the proposal by the Board of Directors that the Company distributes a dividend of EUR 0.30 per share for the year 2012.

The AGM approved a proposal that the Board of Directors shall have ten members and that of the current members of the Board of Directors, Gunnar Brock, Hock Goh, Birgitta Kantola, Mikael Mäkinen, Juha Rantanen, Hans Stråberg, Matti Vuoria and Marcus Wallenberg shall be re-elected members of the Board of Directors until the end of the following AGM and that Elisabeth Fleuriot and Anne Brunila be elected new members of the Board of Directors for the same term of office.

The AGM approved a proposal that the current auditor Authorised Public Accountants Deloitte & Touche Oy shall be re-elected auditor of the Company until the end of the following AGM. The AGM approved a proposal that remuneration for the auditor shall be paid according to invoice approved by the Financial and Audit Committee.

The AGM approved a proposal that a Nomination Board be appointed to prepare proposals concerning (a) the number of members of the Board of Directors, (b) the members of the Board of Directors, (c) the remuneration for the Chairman, Vice Chairman and members of the Board of Directors and (d) the remuneration for the Chairman and members of the committees of the Board of Directors.

The AGM approved a proposal by the Board of Directors that 918 512 treasury R shares be cancelled.

Decisions by Board of Directors
At its meeting held after the AGM, the Stora Enso Board of Directors re-elected from among its members Gunnar Brock as its Chairman and Juha Rantanen as Vice Chairman.

Birgitta Kantola (chairwoman), Gunnar Brock and Juha Rantanen were re-elected and Mikael Mäkinen elected as members of the Financial and Audit Committee.

Gunnar Brock (chairman), Hans Stråberg and Matti Vuoria were re-elected as members of the Remuneration Committee.

Anne Brunila (chairwoman) and Birgitta Kantola were elected as members of the new Global Responsibility and Ethics Committee that focuses on responsibility and ethics matters.


This report is unaudited.

Helsinki, 19 July 2013
Stora Enso Oyj
Board of Directors

Financials


Basis of Preparation
This unaudited interim financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the Group’s Annual Report for 2012.

The Group has applied the following amendment effective from 1 January 2013 that requires restatement of previous financial statements:

• IAS 19 Employee Benefits (amendment) eliminates the ‘corridor method’, streamlines the presentation of changes in assets and liabilities arising from defined benefit plans and enhances the disclosure requirements arising from the standard. The Group has not applied the ‘corridor method’. The effects of this amendment on the Group financial statements are not material. The effects on the Condensed Consolidated Income Statement and Statement of Financial Position are the following:
   

Effects of Changes to IAS 19 Employee Benefits

The following standards have also been applicable effective from 1 January 2013:

• IAS 1 Presentation of Financial Statements (amendment) introduces changes to the presentation of items of other comprehensive income. Items that could be reclassified to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified. The amendment affected presentation only and had no impact on the Group’s financial position or performance.
• IFRS 7 Financial Instruments: Enhanced disclosure requirements related to offsetting of financial assets and financial liabilities. The amendment might have some effect on presentation in the financial statements but had no impact on the Group’s financial position or performance.
• IFRS 13 Fair Value Measurement establishes the definition of fair value and introduces a single IFRS framework for measuring fair value while seeking to increase consistency and comparability by requiring disclosures about fair value measurements applied in the financial statements of an entity. The application of IFRS 13 has not materially affected the fair value measurements carried out by the Group. The new standard also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards. Some of these disclosures are specifically required for financial instruments, thereby affecting the interim financial statement. The additional disclosures are included in this Interim Review.
• IAS 12 Income Taxes (amendment) provides additional regulation on deferred tax in the case of recovery of underlying assets. The amendment is not relevant to the Group.
• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine introduces accounting treatment for stripping costs arising in the mining industry. The interpretation is not relevant to the Group.
   

All figures in this Interim Review have been rounded to the nearest million, unless otherwise stated.


Condensed Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Cash Flows

Property, Plant and Equipment, Intangible Assets, Goodwill and Biological Assets

Borrowings

Condensed Consolidated Statement of Financial Position

* PPE = Property, Plant and Equipment

Items designated with “O” comprise Operating Capital
Items designated with “I” comprise Interest-bearing Net Liabilities
Items designated with “T” comprise Net Tax Liabilities

Statement of Changes in Equity

CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income

Commitments and Contingencies

Capital commitments
The Group’s direct capital expenditure contracts, excluding acquisitions, amounted to EUR 58 million (compared with EUR 200 million at 30 June 2012 and EUR 72 million at 31 December 2012).

The Group’s share of capital expenditure contracts in equity accounted investments, excluding acquisitions, amounted to EUR 139 million (compared with EUR 322 million at 30 June 2012 and EUR 213 million at 31 December 2012) of which Stora Enso has guaranteed EUR 71 million (compared with EUR 189 million at 30 June 2012 and EUR 189 million at 31 December 2012).

Sales by Segment

Operational EBIT by Segment

* Fair valuations and non-operational items include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights, valuations of biological assets related to forest assets in EAI and Group’s share of tax and net financial items of EAI.


NRI by Segment

Fair Valuations and Non-operational Items* by Segment

* Fair valuations and non-operational items include equity incentive schemes, synthetic options net of realised and open hedges, CO2 emission rights, valuations of biological assets related to forest assets in EAI and Group’s share of tax and net financial items of EAI.

Operating Profit/Loss by Segment

Key Exchange Rates for the Euro

Transaction Risk and Hedges in Main Currencies as at 30 June 2013

Additional USD and GBP hedges for 13–15 months increase the hedging percentages by 1% and 3% respectively.

Changes in Exchange Rates on Operational EBIT

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.

Fair Values of Financial Instruments
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;

• Level 3: techniques which use inputs which have a significant effect on the recorded fair values that are not based on observable market data.

The valuation techniques are described in more detail in the Financial Statements.


Carrying Amounts of Financial Assets and Liabilities by Measurement and Fair Value Categories: 30 Jun 2013