Report on operations, ended March 31, 1998

STORA's first-quarter results will be presented at a press conference to be held at 2 p.m. today in the Group's Stockholm office, Västra Trädgårdsgatan 15. REPORT ON OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 * Net sales: SEK 11,500 million (10,682) + 8% * Profit after financial items: SEK 875 million (560) +56% * Net profit after tax: SEK 586 million (369) +58% * Earnings per share: SEK 1.80 (1.15) +58% Significant events - At the Annual General Meeting on March 12, Björn Hägglund took over as STORA's new President and Chief Executive Officer. At the same time, Claes Dahlbäck was elected new Board Chairman. - A productivity enhancement program is being initiated. - A profit-sharing scheme and options program have been introduced. - The sulphite pulp plant at Stora Port Hawkesbury was shut down at the end of February. - The new SC paper machine at Stora Port Hawkesbury was started up in the middle of April. Net sales and earnings The Group's net sales for the first three months of 1998 amounted to SEK 11,500 million, compared with SEK 10,682 million for the corresponding period of 1997. Net sales were in line with the SEK 11,465 million reported for the final quarter of 1997. Profit after financial items totaled SEK 875 million (560), compared with SEK 629 million in the final quarter of 1997. The trend of sulphite pulp production in Canada did not match expectations and the plant was shut down earlier than planned. Including the costs of the premature closure, this operation showed a loss of SEK 70 million during the quarter. For comparable units, delivery volumes of pulp, paper and board rose by 7 percent, compared with the first quarter of the preceding year, and matched the level of the fourth quarter of 1997. With a few exceptions, prices were higher than during 1997. The financial net declined to an expense of SEK 245 million (expense: 165), due to increased net indebtedness resulting from the program of investments. No interest was capitalized in connection with ongoing investment projects. Net profit for the period, after tax and minority shares, amounted to SEK 586 million (369). Tax for the period was SEK 282 million (185), which corresponded to 32 percent (33) of profit before tax. Group earnings per share were SEK 1.80 (1.15), compared with SEK 1.30 during the preceding quarter. The return on capital employed, after deductions for tax liabilities, was 8 percent (5) for the period April 1997 to March 1998, compared with 7 percent for full-year 1997. The corresponding return on shareholders' equity was 6 percent (4) and 5 percent. The operating cash flow was negative in an amount of SEK 98 million. After deductions for net financial items, taxes and dividends, the Group's interestbearing net indebtedness rose by SEK 1,787 million to SEK 17,344 million. Market and deliveries Western Europe, STORA's main market, showed volume growth during the period in most of the Group's product areas. STORA's deliveries to Western Europe increased slightly more than shown in the below table. Sales prices improved without exception. Market trend (based on European supplier information) Source: CEPI Percentage change Deliveries to Sales prices in Western Europe Germany* Full year Jan/March Full year Q4 97 96 vs. 97- 96 versus Q1 full year Jan/March vs. full 98 97 98 year 97 Newsprint 6 6 - 18 6 SC paper 8 10 - 18 13 LWC paper 25 3 - 11 6 Uncoated fine papers 5 3 5 4 Coated fine papers 12 19 4 7 Packaging board 8 9 1 4 Fluting (Semi- 4 3 - 4 0 chemical) White Top Liner 7 - 5 2 0 *) Relates solely to a specific product within a product area in certain instances. Power Earnings declined compared with both the first and final quarters of 1997. Good access to water supplies and a mild winter led to lower electricity prices. During the period, prices in the Nord Pool system declined and are now at about SEK 0.13/kWh. Electricity consumption in Sweden has risen by 2.6 percent on a rolling 12-month basis. In Norway, the increase was even greater. Forest Earnings were better than in the corresponding period of 1997 due to lower costs, among other factors. Felling in the Group's own forests remained at an unchanged level. The decline in earnings compared with the final quarter of 1997 was due to seasonal variations. A higher consumption of pulpwood was offset by increased exports. Sawn timber Earnings were down on the corresponding quarter of 1997 but were in line with the preceding quarter. The downturn was mainly due to lower prices for spruce products. Deliveries were lower than in the fourth quarter of 1997 but showed the highest volume attained during any first quarter of the 1990s. Price increases of 7-8 percent were implemented for spruce products, the prices of which are expected to continue to increase at the same rate during the second quarter. Price levels for pine goods were stable during the quarter and increases are expected during the second quarter. Pulp Adjusted for the SEK 70 million loss arising from the sulphite pulp mill in Canada, earnings totaled SEK 44 million. Extremely low prices led to the mill being shut down earlier than planned. Norscan paper pulp inventory levels declined during the period and were about 1.5 million tonnes at the end of March. Compared with the situation at year-end 1997, price levels deteriorated during the period. A stabilization has now occurred. Currently, price levels are USD 550/tonne for long-fiber pulp and ECU 450/tonne for short-fiber pulp. It is estimated that additional price increases will be possible during the second quarter. Printing papers Compared with the corresponding three months of 1997, earnings improved as a result of increased volumes and, in particular, higher sales prices. Compared with the immediately preceding quarter, price increases generated improved earnings despite lower volumes. The restructuring of the mill in Langerbrugge made a positive contribution to the improvement in earnings. The fixed costs within the product area were reduced during the period. STORA's total deliveries of newsprint rose by 1 percent. With the exception of the U.K., prices in Europe rose as of year-end 1997 by 3-7 percent, depending on market. In North America, prices are currently higher than in Europe. STORA's total deliveries of SC papers increased by 3 percent. The U.S. market continued to experience favorable demand. Price increases of 10-15 percent were implemented throughout Europe, with the exception of the U.K., at yearend 1997. STORA's total deliveries of LWC paper rose by 11 percent. A price increase of about 5 percent was implemented in Europe as of January 1, 1998. Technical office papers Earnings were unchanged from the level achieved for the year-earlier period and were slightly down compared with the fourth quarter of 1997. Compared with the first quarter of the preceding year, STORA's deliveries of carbonless paper declined by 10 percent, as a result of a strict pricing policy, and were down by 14 percent in Western Europe. The European market declined by 3 percent during the same period. STORA's deliveries of thermal papers in Europe increased by 17 percent. The European market increased by 3 percent. Prices for thermal papers were stable during the period. Fine papers Earnings were at the same level as the first quarter of 1997 but were better than the fourth quarter of the same year. The improvement was due to a combination of higher sales prices and lower pulp prices. Compared with the corresponding period of 1997, STORA's total deliveries of uncoated fine papers rose by 1 percent and coated fine papers by 8 percent. Order bookings were at the same level as the first quarter of 1997. Sales prices were raised at the beginning of the period. Declining pulp prices led to price pressure during the latter part of the quarter. Prices in Southeast Asia weakened further. Paper merchant operations Compared with the corresponding three months of 1997, earnings improved, mainly as a result of higher inventory sales volumes. Compared with the final quarter of 1997, the level of earnings remained unchanged. The Hungarian paper merchant Papirker was acquired, effective March 1, 1998. Board and packaging paper Earnings improved, compared with both the first and fourth quarters of 1997. Most of the improvement derived from operations in Skoghall, Sweden. STORA's deliveries, in relation to the corresponding period of the preceding year, and for comparable units, increased by 9 percent for general packaging board, 25 percent for liquid packaging board, 4 percent for fluting and 7 percent for White Top Liner. The level of work on hand for the KM8 board machine was good. Since year-end 1997, sales prices have increased slightly for most product types. Financial operations Earnings for the first quarter were at the same level as in the corresponding three months of 1997, but were better than in the final quarter of the year. Earnings were generated in interest-rate and currency markets, as well as in share-related instruments. Earnings do not include interest on shareholders' equity or internal margins. Financial position The Group's equity/assets ratio was 43.9 (44.7) percent and the debt/equity ratio was 0.59 times (0.53). At year-end 1997, the corresponding ratios were 45.9 percent and 0.52, respectively. Interest-bearing net indebtedness amounted to SEK 17,344 million (15,356), compared with SEK 15,557 million at the end of 1997. Interest-bearing net indebtedness included pension liabilities of SEK 3,913 million (3,981 and 3,960, respectively). At the end of the period, the Group had granted but unutilized credit lines corresponding to SEK 12.0 billion. Investments Investments in plant during the period totaled SEK 1,567 million (1,609), of which SEK 765 million (877) was in Sweden. Depreciation according to plan amounted to SEK 987 million (920). The project involving the construction of a new paper machine (PM2) at Stora Port Hawkesbury, Canada, is in the final stage. The machine was started up in mid April. To date, SEK 3,500 million has been invested in this project, of which SEK 605 million during 1998. Personnel The average number of employees in the Group during the period was 20,059 (20,969). During the preceding year, the Group had an average of 20,431 personnel. Other At the time of the 1998 Annual General Meeting on March 12, Björn Hägglund took over as STORA's new President and Chief Executive Officer. At the same time, Claes Dahlbäck was elected new Chairman of the Board. The Annual General Meeting also elected the following new members to the Board: Marcus Wallenberg, Executive Vice President of Investor AB, and Harald Einsmann, President of Procter & Gamble Europe, Middle East and Africa. The aim of the recently initiated productivity program is to concentrate on providing an increased return for shareholders by improving the profitability of the Group's operations during the next 2-3 years. The program is intended to identify and develop the unutilized profitability potential within the Group's mills and to secure a return on the strategic investments made. The goal of the program is to achieve an annual improvement in earnings of about SEK 3.5 billion, based on fixed prices, prior to the end of year 2000. As part of its program to increase profitability and shareholder value in STORA, the Board of Directors has decided to introduce a profit-sharing scheme for employees and an options program for senior executives in the Group. The profit-sharing scheme means that from the portion of profit exceeding the equivalent of a 12-percent return on capital employed, 20 percent will be set aside for employees, although the amount shall not exceed one third of the dividend paid to shareholders. The options program is being offered to up to one hundred senior executives within the Group. The extent of the call options allotted will be linked to the trend of STORA's A share in relation to a comparable group consisting of other Nordic forest products companies. On occasions when STORA's total return (share price appreciation and dividend) develops positively and outperforms the average for the comparable group, an allotment of call options will be made. The maximum value of the annual allotment of call options is SEK 50 million. Negotiations to acquire a majority holding in Suzhou Papyrus Paper Co., Ltd. are proceeding according to plan. It is estimated that final agreement will be reached within the next few months. Accounting principles This interim report has been prepared in accordance with the accounting principles applied in the preparation of the 1997 Annual Report. Falun, April 23, 1998 STORA KOPPARBERGS BERGSLAGS AB Björn Hägglund President and Chief Executive Officer This interim report has not been subject to examination by the Company's auditors. The interim report on the second quarter of 1998 will be published on July 23, 1998. The interim report on the third quarter of 1998 will be published on October 23, 1998. CONSOLIDATED INCOME STATEMENT (SEK m) January - March Full year 1998 1997 1996 1997 Net sales 11,500 10,682 12,430 44,464 Operating expenses - - - 9,393 9,037 10,163 37,305 Items affecting comparability - - - - 262 Planned depreciation - 987 - 920 - 912 3,683 Operating profit 1,120 725 1,355 3,214 Net financial items - 245 - 165 - 140 - 832 Profit after net financial 875 560 1,215 2,382 items Taxes - 282 - 185 - 407 - 775 Minority share - 7 - 6 - 6 - 25 Net profit for the period 586 369 802 1,582 Earnings per share, SEK 1.80 1.15 2.50 4.90 ANALYSIS OF FINANCIAL NET (SEK m) January - March Full year 1998 1997 1996 1997 Net interest items - 245 - 189 - 214 - 856 Interest difference, - 24 74 24 translation hedge Net financial items - 245 - 165 - 140 - 832 NET SALES AND OPERATING PROFIT BY PRODUCT AREA (SEK m) Net sales Operating January - March profit/loss January - March 1998 1997 1996 1998 1997 1996 Power 453 545 525 103 180 79 Forest1) 1,576 1,508 1,545 210 186 139 Sawn timber 423 409 304 - 27 8 - 34 Pulp 1,196 1,033 1,120 - 26 - 166 - 35 Eliminations - - - - - 679 666 633 Base products 2,969 2,829 2,861 260 208 149 Printing papers 3,699 3,196 3,731 579 223 832 Technical office papers 521 526 541 8 8 - 17 Fine papers 2,223 1,999 2,106 256 244 97 Paper merchant 1,604 1,462 1,728 38 24 27 operations Eliminations - - - - - 449 442 678 Graphic papers 7,598 6,741 7,428 881 499 939 Board and packaging 2,327 2,233 2,510 173 127 371 paper Financial operations - - - 51 56 64 Divested units 0 0 826 0 0 - 54 Amortization of surplus - - - - 88 - 89 - 91 values Other - - - - - 76 - 23 1,394 1,121 1,195 1572) Total 11,50 10,68 12,43 1,120 725 1,355 0 2 0 1) Operating profit includes capital gains in connection with the divestment of land in amounts of SEK 20 million, SEK8 million and SEK 9 million, respectively. 2) Includes provision for SEK 50 million for open positions in forward contracts on GBP and a SEK 25 million increase in intra-Group profit reserve. CONSOLIDATED BALANCE SHEET (SEK m) March 31, 1998 December 31, 1997 Assets Fixed assets 46,828 46,487 Current assets 15,215 14,625 Interest-bearing assets 4,769 4,387 Total assets 66,812 65,499 Liabilities and shareholders' equity Shareholders' equity 29,036 29,788 Minority interests 266 266 Tax liabilities 7,690 7,507 Interest-bearing liabilities 22,113 19,944 Operating liabilities 7,707 7,994 Total liabilities and 66,812 65,499 shareholders' equity KEY RATIOS January - March Apr 97- Full Apr 96year 1998 1997 Mar 98 1997 Mar 97 Profit for the period, 586 369 1,799 1,582 1,127 SEK m Return on shareholder's - - 6 5 4 equity, % Return on capital employed after deduction - - 8 7 5 of tax liabilities, % Earnings per share, SEK 1.80 1.15 5.60 4.90 3.50 Mar 31, Dec 31, Mar 31, 1998 1997 1997 Capital employed, SEK m 54,336 53,118 51,337 Capital employed excl. tax 46,646 45,611 44,470 liabilities, SEK m Net indebtedness, SEK m 17,344 15,557 15,356 Equity/assets ratio, % 43.9 45.9 44.7 Debt/equity ratio, multiple 0.59 0.52 0.53 Reported shareholders' equity per 90 93 90 share, SEK Adjusted shareholders' equity per 129 132 131 share1), SEK 1)Including surplus values in forest and power assets. CHANGE IN INTEREST-BEARING NET INDEBTEDNESS (SEK m) January - March 1998 Jan-Mar Ongoing Transla Items Total 1997 opera- -tion affecti Total tions diff., ng foreign compara units bility1 ) Operating profit 1,120 1,120 725 +/- Operating receivables/ - 472 27 - 290 - 735 - 579 liabilities +/- Inventories - 185 43 - 142 - 393 + Depreciation 987 987 920 Cash flow before 1,450 70 - 290 1,230 673 investments - Investments - 962 - 605 - 1,567 - 1,609 +/- Other changes in net fixed assets 18 221 239 - 574 Cash flow from 506 291 - 895 - 98 - 1,510 operations - Net financial items - 245 - 245 - 165 +/- Taxes - 55 - 44 - 99 - 253 +/- Minority interests 0 - 7 - 7 1 +/- Change in shareholders' equity, excl. net profit for - 132 - 132 190 the period Cash flow before owner transactions 206 108 - 895 - 581 - 1,737 - Dividend - 1,206 - -1,206 1,206 Change in interestbearing net - 1,000 108 - 895 - 1,787 - 2,943 indebtedness 1)Relates to investment project at Stora Port Hawkesbury, Canada. QUARTERLY DATA Consolidated income statement (SEK m) 1996 1997 1998 I II III IV I II III IV I Net sales 12,43 11,61 10,20 10,91 10,68 11,34 10,97 11,46 11,50 0 1 9 1 2 1 6 5 0 Oper. - - - - - - - - expenses 10,16 10,23 8,909 9,466 9,037 9,343 9,314 9,611 9,393 3 9 Items affecting - 71 - 30 - 78 - - 150 - - 112 comparability Planned - - - - - - - - deprec. 912 915 831 830 920 962 908 893 987 Operating 1,355 528 439 537 725 886 754 849 1,120 profit Net financial - - - - - - - - items 140 133 127 110 165 222 225 220 245 Profit after net financial 1,215 395 312 427 560 664 529 629 875 items Taxes - 407 - 132- 111 - 120 - 185 - 219 - 174 - 197 - 282 Minority - 6 - 5 5 - 13 - 6 - 6 - 8 -5 - 7 share Net profit for the 802 258 206 294 369 439 347 427 586 period Net sales by product area (SEK m) 1996 1997 1998 I II III IV I II III IV I Power 525 299 280 465 545 334 313 509 453 Forest 1,545 1,3521,203 1,328 1,508 1,518 1,195 1,545 1,576 Sawn timber 304 387 338 441 409 482 374 480 423 Pulp 1,120 1,1101,064 946 1,033 1,248 1,284 1,222 1,196 Eliminations - - - - - - - - 633 540 539 624 666 664 623 656 679 Base products 2,861 2,6082,346 2,556 2,829 2,918 2,543 3,100 2,969 Printing 3,731 3,6513,799 4,038 3,196 3,618 3,809 3,812 3,699 papers Tech. off. 541 441 424 457 526 516 490 471 521 papers Fine papers 2,106 1,7061,565 1,874 1,999 2,005 1,886 2,123 2,223 Paper merchant 1,728 1,4651,322 1,382 1,462 1,458 1,344 1,471 1,604 operations Eliminations - - - - - - - - 678 366 375 456 442 428 403 539 449 Graphic 7,428 6,8976,735 7,295 6,741 7,169 7,126 7,338 7,598 papers Board and pack- 2,2152,172 1,974 2,233 2,497 2,374 2,181 2,327 aging paper 2,510 Other - - - - - - - - 1,195 1,0041,044 914 1,121 1,243 1,067 1,154 1,394 Adjusted net sales 11,60 10,71 10,20 10,91 10,68 11,34 10,97 11,46 11,50 4 6 9 1 2 1 6 5 0 Divested 826 895 - - - - - - units Total 12,43 11,61 10,20 10,91 10,68 11,34 10,97 11,46 11,50 0 1 9 1 2 1 6 5 0 Adjusted operating profit/loss by product area (SEK m) 1996 1997 1998 I II III IV I II III IV I Power 79 - 82 - 101 180 - 3 - 47 120 103 113 Forest 139 161 147 207 186 233 140 261 210 Sawn timber - 34 - 20 - 47 4 8 24 12 - 24 - 27 Pulp - - - - - - 39 149 35 392 85 191 166 72 26 Base 149 - - 98 121 208 182 144 506 260 products 333 Printing 832 696 747 455 223 396 545 449 579 papers Tech. off. - 17 - 61 - - 60 8 16 11 12 8 papers 117 Fine papers 97 6 - 78 152 244 208 68 158 256 Paper merchant 27 7 18 22 24 23 18 38 38 operations Graphic 939 648 570 569 499 643 642 657 881 papers Board and pack-aging 371 232 118 - 22 127 129 134 - 36 173 paper Financial 64 51 17 34 56 255 11 5 51 oper. Amortization of surplus - 91 - 89 - 88 - 88 - 89 - 89 - 87 - 88 - 88 values Other - - - 1 - - - - 23 39 50 76 84 90 83 157 Adjusted operating 1,40 470 469 615 725 1,03 754 961 1,12 profit 9 6 0 Oper. 12.1 4.4 4.6 5.6 6.8 9.1 6.9 8.4 9.7 margin, % Divested - 54 - 13 - - - - - - units Items affecting - 71 - - - - - - comparabilit 30 78 150 112 y Reported oper-ating 1,35 528 439 537 725 886 754 849 1,12 profit 5 0 Net fi nancia l items: Net interest - - - - - - - - items 214 227 208 175 189 222 225 220 245 Interest difference, 74 94 81 65 24 - - 0 0 translation hedge Net - - - - - - - - financial 140 133 127 110 165 222 225 220 245 items Reported profit after 1,21 395 312 427 560 664 529 629 875 net fin. 5 items Deliveries by product area (000s of tonnes) 1997 % 1998 change1) I II III IV I Q1 97 - Q1 98 Newsprint 376 361 416 398 380 1.1 SC paper 98 111 120 113 101 3.1 LWC paper 188 224 238 245 209 11.2 Technical office 43 39 38 37 41 - 4.7 papers Fine papers 260 270 265 270 276 6.2 Total graphic papers 965 1,00 1,07 1,06 1,00 4.4 5 7 3 7 Board 227 262 230 196 206 14.4 Packaging paper 141 143 145 151 153 8.5 Other grades 4 3 4 4 6 Total board and 372 408 379 351 365 12.3 packaging paper Total paper and board 1,33 1,41 1,45 1,41 1,37 6.4 7 3 6 4 2 Pulp 307 342 316 299 321 11.7 Sawn timber (000s m³) 187 207 155 221 206 10.2 1) After adjustment for sale/closure of board production in Arnsberg and Corbehem and of sulphite pulp production in Port Hawkesbury. DISTRIBUTION OF SHARES Series A Series B Total Unrestric 261,797,1 59,706,62 321,503,7 ted 00 5 25

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