Stora Enso CEO Jouko Karvinen comments on second quarter results announced today
“Robust second quarter performance”
STORA ENSO OYJ STOCK EXCHANGE RELEASE 22 July 2010 at 06.01 GMT “Our second quarter results are strong by all measures. Operating profit excluding NRI and fair valuations at EUR 213 million, cash flow from operations at EUR 305 million, ROCE at 10.5% and net cash position at EUR 856 million are all not only huge improvements from a year ago, but also testimony to the early and often difficult actions we have taken in the past three years. Our robust performance this quarter was facilitated by external factors, especially the significant volume recovery from the very low levels in the second quarter of 2009, our clearly lower cost base and the weaker euro. We also benefited from pulp price increases and actions we took on prices and customer mix in almost all segments. The fact that all six segments except Newsprint show a strong year-on-year improvement in earnings is another positive proof point for continuing on our path of managing those factors we can affect. “Although the second quarter performance was generally strong, the losses that have accrued in Newsprint clearly show that the structural overcapacity issues have not disappeared. This unfortunately means that the recent decision to shut down permanently two newsprint machines at Varkaus was not only necessary, but not even enough to solve the issue. We will therefore continue to actively manage pricing and customer mix to maximise our earnings, but also review the earnings performance of all of our assets, and when necessary will not hesitate to take actions. “The outlook for the third quarter is mixed and still uncertain. Although volumes have recovered from the very low levels of 2009, clearly market demand in all paper segments has still been and will for a long time remain clearly below the pre-crisis levels of 2008. To operate profitably in that environment requires continued focus on costs and capacity management - as before, waiting for the good times to return will help nobody. In addition to the price rises implemented in the second quarter, we have announced further price increases that will already have an impact in the latter part of the third quarter - and we expect sequential pricing improvements of varying degrees in practically all segments, even in Newsprint. This is absolutely essential to keep our earnings at an acceptable level as increases in wood and other costs now clearly start coming through in our operations. Specifically, we foresee Wood Products facing an issue later in the year due to rapidly rising sawlog costs, which is why we have signalled that we are planning to take temporary curtailments as required at our sawmills. At the same time, however, I am glad to see the wood trade in domestic wood in Finland has returned closer to normal levels. Now we must ensure there is no repeat of the excessive wood costs and high inventory levels of late 2007. “Stora Enso has demonstrated that it is willing and able to do difficult things to safeguard and improve the Group's performance. We will continue on our path of never-ending improvement of what we have, and in parallel building our future in new markets and new products. And we are already well on our way.” For further information, please contact: Jouko Karvinen, CEO, tel. +358 2046 21410 Markus Rauramo, CFO, tel. +358 2046 21121 Lauri Peltola, Head of Communications, tel. +358 2046 21380 Ulla Paajanen-Sainio, Head of Investor Relations, tel. +358 2046 21242 www.storaenso.com www.storaenso.com/investors Stora Enso is a global paper, packaging and wood products company producing newsprint and book paper, magazine paper, fine paper, consumer board, industrial packaging and wood products. The Group is the world leader in forest industry sustainability. We offer our customers solutions based on renewable raw materials. Our products provide a climate-friendly alternative to many non-renewable materials, and have a smaller carbon footprint. Stora Enso is listed in the Dow Jones Sustainability Index and the FTSE4Good Index. Stora Enso employs some 27 000 people worldwide, and our sales in 2009 amounted to EUR 8.9 billion. Stora Enso shares are listed on NASDAQ OMX Helsinki (STEAV, STERV) and Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY) in the International OTCQX over-the-counter market. STORA ENSO OYJ Jari Suvanto Ulla Paajanen-Sainio