Report on operations for the three months ended march 31, 1997

REPORT ON OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 Net sales SEK 10,682 million (12,430) Income after net financial items SEK 560 million (1, 215) Net income after tax SEK 369 million (802) Income per share SEK 1.15 (2.50) Net sales and earnings The Group's net sales for the period amounted to SEK 10,682 million, compared with SEK 12,430 million for the corresponding three months of 1996. Stora Building Products, which was divested during 1996, accounted for SEK 826 million of the decline. The net of lower sales prices and increased delivery volumes accounted for the remainder. Income after net financial items totaled SEK 560 million (1,215). Income was adversely affected by lower prices in an amount of SEK 1,700 million. Income was improved by increased delivery volumes, currency changes and lower volume costs in amounts of SEK 450 million, SEK 100 million and SEK 400 million, respectively. Earnings were also affected by changes in the product mix, the divestment of Stora Building Products and the extensive program of investments and resultant start-up and running-in of equipment in Skoghall and Skutskär. The Group's financial net declined to an expense of SEK 165 million (expense: 140), due to increased net indebtedness resulting from the extensive program of investments. No interest was capitalized in connection with ongoing investment projects. Net income, after tax and minority shares, amounted to SEK 369 million (802). Tax for the period was SEK 185 million (407), which corresponded to 33 percent (33) of income before tax. Group income per share for the first quarter of 1997 was SEK 1.15 (2.50). On a rolling full-year basis the corresponding figure was SEK 3.50 (15.45), compared with SEK 4.85 for full-year 1996. The return on capital employed, after deductions for tax liabilities, for the period April 1996 to March 1997 was 5 percent (19), compared with 7 percent for full-year 1996. The corresponding figures for the return on shareholders' equity were 4 percent (17) and 5 percent, respectively. The operating cash flow was negative and amounted to a deficit of SEK 1,510 million (+ 1,229), of which currency translation accounted for a deficit of SEK 586 million (+ 512). After deductions for net financial items, taxes and dividends, the Group's interest-bearing net indebtedness rose by SEK 2,943 million. Market and deliveries The strong economic trend in the U.S. continues. In Europe there are signs of a recovery, with the strong USD exchange rate having a positive effect. In terms of volumes, the markets for sawn timber, paper and board improved, compared with the equivalent quarter of 1996. Part of the improvement was attributable to the customer inventory reductions which took place during 1996. Order bookings strengthened and the order backlog for most of the Group's products varies from 3 to 5 weeks. STORA's deliveries of pulp, paper and board increased by 9 percent to 1,643,000 tonnes (1,503,000). Compared with the final quarter of 1996, delivery levels remained unchanged. Expressed in tonnes, finished goods inventories increased marginally. Translated into SEK, average sales prices for the Group's paper and board products were significantly lower, down by 17 percent on levels in the first quarter of 1996. The corresponding figure, compared with the fourth quarter of 1996, was a downturn of 2 percent. Prices for printing papers and packaging paper were about 8 percent lower, while board and fine paper prices rose slightly. The price trend for sawn timber was also positive. Power The mild winter meant that electricity consumption was lower than in the corresponding period of 1996. Precipitation was higher than normal in the northern part of the country but lower in central and southern areas. The deficit in the Scandinavian system currently corresponds to about 10 TWh, compared with the seasonal norm. Levels in STORA's area are below normal. The improvement in earnings was mainly due to increased hydro power production and to the effects of the refinancing of Kopparkraft. Forest The situation in the wood market was relatively favorable during the period. A good balance was able to be maintained for the entire range in STORA's case, with the exception of a slightly excessive inflow of soft pulpwood. Wood consumption at the pulp plant in Skutskär was lower due to the start-up of various components in the ongoing investment program. Felling in the Group's own forests corresponded to one fourth of a normal year's extraction, which was more than in the first three months of 1996. Pulpwood prices were about 15 percent lower than during the preceding year, while spruce timber prices were 15 percent higher. The increase in volumes coupled with lower felling costs led to an improvement in the earnings of Forest operations. Sawn timber Demand remained strong in relation to the preceding year and the seasonal 3 norm. Deliveries totaled 187,000 m (131,000). Price levels for pine were about 10 percent higher than in the preceding year. The corresponding rise for spruce was 25 percent. Continuing rises are being shown during the second quarter. The improvement in earnings for Sawn timber operations was primarily due to increased volumes. To a large extent, the price increases for finished goods were neutralized by higher timber prices. Pulp The market was affected by inventory levels which remained high. At the end of the period, producer inventory levels within the Norscan area were just below 2 million tonnes. A decrease was noted in March. At the end of the period, price levels were USD 520 for long-fiber pulp and ECU 400 for short-fiber pulp. A number of suppliers in North America and Europe have announced price increases to USD 580 and ECU 450, respectively. Pulp operations continued to show a loss, which was greater than for the corresponding quarter of 1996 due to lower sales prices. On the other hand, results were somewhat better than in the final quarter of 1996 because of higher volumes. Printing papers Total deliveries of newsprint in Western Europe decreased by 1 percent. STORA's deliveries decreased slightly. The abundant supplies available in Europe led to price reductions of approximately 15 percent, as of year-end 1996. Translated into SEK, the price decrease was only 10 percent. Producers in North America have announced price hikes of USD 75 per tonne, effective from May 1. Based on current USD rates, this means that the price difference between Europe and North America has been leveled out. Total deliveries of SC papers in Europe remained unchanged. STORA's deliveries increased by 3 percent. The U.S. market was characterized by weak demand. Prices in SEK declined by around 8 percent, compared with the final quarter of 1996. Total deliveries of LWC paper in Western Europe rose by 33 percent. STORA's total deliveries increased by 45 percent. Prices are at about the same level as in the final quarter of 1996. The announced price increases will become effective as of April. In relation to the first and fourth quarters of 1996, the downturn in earnings was mainly due to reduced prices. Technical office papers Total deliveries of carbonless paper to Western Europe increased by 3 percent. STORA's deliveries rose by 10 percent. Price increases were implemented during the latter part of 1996 and in February 1997. The increases led to an improvement in earnings. Further price increases have been announced for implementation in May. Total deliveries of thermal papers in Europe increased by 12 percent. STORA's deliveries in Europe rose by 33 percent, while total deliveries remained at an unchanged level. Earnings improved as a result of the price increases implemented during the latter half of 1996 and in February 1997. Fine papers Compared with the first quarter of 1996, deliveries to European markets increased, with uncoated fine papers up 14 percent and coated fine papers up 20 percent (the percentages relate to the Jan-Feb period). Some of the increase in volume is assumed to be due to inventory build-ups in the supply chain to the end customers. The capacity being added in Finland and Austria during the year has not yet had an effect on deliveries. STORA's deliveries rose by 14 percent. Capacity utilization was high during the period, with the exception of recycled-fiber-based grades. Average prices remained unchanged in Scandinavia and the U.K., and strengthened slightly in Central Europe. Some pressure on prices was noted in the U.K and Germany towards the end of the period. The improvement in earnings was attributable to higher volumes and improved margins. Compared with the final quarter of 1996, the improvement was due to price increases. Wholesale operations The lower level of sales is explained in part by the fact that certain direct shipments are now invoiced directly by the mills. Average price levels in the Group's wholesaling operations were about 10 percent down on the preceding year. Earnings remained at an unchanged level. Board and packaging paper Demand for board and packaging paper increased favorably, up 9 percent for packaging board, 20 percent for White Top Liner and 4 percent for fluting. It is estimated that only a limited proportion was due to the build-up of inventories. Sales prices were lower than for the corresponding three months of the preceding year and remained at the same level as the final quarter of 1996. Price increases were implemented for WTL and fluting, effective April. Currently, price increases are being implemented for board products. The new board machine, KM8, started up according to plan. Test runs of new products and trimming-in of the new machine had an adverse effect on earnings during January and February. Deliveries of commercial quantities to customers commenced during March. Financial operations 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. Activity was slightly higher than during the second half of 1996. Financial position The Group's equity/assets ratio was 44.7 (49.5) percent and the debt/equity ratio was 0.53 times (0.37). At year-end 1996, the corresponding figures were 48.0 and 0.42. Interest-bearing net indebtedness amounted to SEK 15,356 million (11,193), compared with SEK 12,413 million at year-end 1996. Interest-bearing net indebtedness included pension liabilities of SEK 3,981 million (4,029) and SEK 3,949 million, respectively. At the end of the period, the Group had granted but unutilized credit lines corresponding to SEK 10.4 billion. Capital expenditures Investments in plant during the period totaled SEK 1,609 million (1,833), of which SEK 877 million (1,453) was in Sweden. Depreciation according to plan amounted to SEK 920 million (912). The magazine paper machine project in Nova Scotia (Canada) is proceeding according to plan. To date, SEK 1,120 million has been invested in this project, including SEK 509 million this year. Personnel The average number of employees in the Group as at March 31, 1997 was 20,969 (24,778). During 1996 the number was 22,716. Falun, April 24, 1997 STORA KOPPARBERGS BERGSLAGS AB Lars-Åke Helgesson President and Chief Executive Officer This interim report has not been subject to examination by the Company's auditors.

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