Stora Enso CEO Jouko Karvinen's message to shareholders at the Company's AGM
STORA ENSO OYJ STOCK EXCHANGE RELEASE 1 April 2009 at 13.25 GMT
“Stora Enso faced high cost inflation, especially in wood and energy costs, throughout the whole of 2008. The markets were firm during the first half, but towards the end of the year they started to deteriorate rapidly. We took swift action, curtailing paper and board production by 15% already in the fourth quarter. We have since stepped up the curtailments to an estimated about 20% in the first quarter of 2009 to safeguard our operating cash flow,” said CEO Jouko Karvinen. “We continue to take a proactive approach to the challenges we are facing. We divested our North American operations and our merchant business Papyrus, which enabled us to reduce our short-term debt and strengthen our balance sheet considerably. We have made Stora Enso's Finnish assets strategically independent of Russian wood and undertaken two permanent capacity reduction programmes. We have also done our utmost to support the employees and communities affected by restructuring, and believe we have a good track record of finding new business creating new employment at former paper or board production sites. The latest success was the sale of our Summa mill site in Finland to Google for about EUR 40 million in February. “The paper industry is now in a critical situation, especially in Finland. Our variable costs have escalated - even faster than we have been able to cut our fixed costs through the aggressive programmes. The reasons are many - from the impact of the Russian duty threats to energy taxation. Now, with the dramatic downturn of the markets, the issue is so big we believe that nobody can solve this issue alone. We now need to find new operating models and flexibility in all fields - we either argue forever how we split a shrinking cake, or we work together to start making it bigger again and sharing it. “In this situation of dramatically reduced demand, Stora Enso is guiding customer orders irrespective of the country and also within a country to the lowest-cost mills and machines to safeguard cash flow - and critical customer volumes. In sawmilling and some paper grades, this has meant keeping our mills in Sweden, Belgium, the Czech Republic and Russia in production whilst taking downtime in Finland and Germany. “Pricing and cash preservation will remain top priorities for Stora Enso in 2009. Earlier this year, we said we would reduce capital expenditure from EUR 700 million in 2008 to EUR 400 million. Also, the temporary lay-offs and other cost improvement measures must continue. “We have to restore the Company's profitability and that means we have to continue with decisive actions. We will not just wait for better times to come, we will continue ourselves to take responsibility for our future in the prevailing tough business environment. We must find a solution - and when I say here “we”, I mean everyone with a stake in the industry.” For further information, please contact: Ulla Paajanen-Sainio, VP, Investor Relations and Financial Communications, tel. +358 2046 21242 www.storaenso.com www.storaenso.com/investors Stora Enso is a global paper, packaging and forest products company producing newsprint and book paper, magazine paper, fine paper, consumer board, industrial packaging and wood products. The Group has 32 000 employees and 85 production facilities in more than 35 countries worldwide, and is a publicly traded company listed in Helsinki and Stockholm. Our annual production capacity is 12.7 million tonnes of paper and board, 1.5 billion square metres of corrugated packaging and 6.9 million cubic metres of sawn wood products, including 3.2 million cubic metres of value-added products. Our sales in 2008 were EUR 11.0 billion. STORA ENSO OYJ Jari Suvanto Ulla Paajanen-Sainio