Unsatisfactory Quarter - Benefits of Corrective Actions to Show in Second Half
STORA ENSO OYJ - INTERIM REVIEW RELEASE 24 April 2008 at 06.00 GMT
Summary of First Quarter Results
--------------------------------------------------------------------------------
| Continuing Operations: | | Q1/07 | Q4/07 | Q1/08 |
--------------------------------------------------------------------------------
| Sales | EUR | 3 001.2 | 2 980.7 | 2 831.8 |
| | million | | | |
--------------------------------------------------------------------------------
| Operating Profit excl. NRI and | EUR | 294.9 | 144.1 | 140.1 |
| Fair Valuations | million | | | |
--------------------------------------------------------------------------------
| Operating Profit (IFRS) | EUR | 298.6 | -60.6 | 125.0 |
| | million | | | |
--------------------------------------------------------------------------------
| Profit Before Tax excl. NRI | EUR | 274.5 | 284.2 | 83.1 |
| | million | | | |
--------------------------------------------------------------------------------
| Profit Before Tax | EUR | 262.5 | -104.3 | 83.1 |
| | million | | | |
--------------------------------------------------------------------------------
| Net Profit excl. NRI | EUR | 209.2 | 219.6 | 66.5 |
| | million | | | |
--------------------------------------------------------------------------------
| Net Profit | EUR | 197.2 | -60.2 | 66.5 |
| | million | | | |
--------------------------------------------------------------------------------
| EPS excl. NRI | EUR | 0.26 | 0.28 | 0.08 |
--------------------------------------------------------------------------------
| EPS | EUR | 0.25 | -0.07 | 0.08 |
--------------------------------------------------------------------------------
| CEPS excl. NRI | EUR | 0.53 | 0.50 | 0.30 |
--------------------------------------------------------------------------------
| ROCE excl. NRI | % | 12.6 | 13.0 | 5.0 |
--------------------------------------------------------------------------------
| ROCE excl. NRI and Fair | % | 12.0 | 5.7 | 5.6 |
| Valuations | | | | |
--------------------------------------------------------------------------------
Message from CEO Jouko Karvinen:
“In the first quarter of 2008 we continued to face the same challenges as in the
last quarter of 2007: continuing year-on-year increases in wood costs and the
strong euro. Wood Products accounted for more than half of the decline in our
earnings due to deteriorating demand and prices for wood products, as well as
inventory write-downs. Wood costs continued to increase year-on-year, with the
latest increases entirely in pulpwood prices, which put particular pressure on
the Consumer Board and Fine Paper segments. The drop in Newsprint earnings was
due to sales price declines and unfavourable currency impacts.
“The results are clearly unsatisfactory, but they also show that the
restructuring plans announced in the third quarter of 2007 that we are rapidly
completing were absolutely necessary to reverse the downward trend as fast as we
ever can. We are committed to compensating for the 2.5% to 3% expected inflation
in total unit costs for the full year 2008. We now foresee our wood costs
levelling off toward the end of the second quarter, partly due to reduction in
imported wood purchases through reductions in pulp and paper capacity. This
means that nearly half of our forecast full-year cost inflation has already
occurred in the first quarter of 2008. As the compensating action plans of the
business areas will have their greatest positive impact in the second half of
2008, we are as prepared as we can be for the uncertainties of the coming
quarters.
“In the next few months we plan to curtail pulp production at our Sunila and
Enocell mills to keep down marginal wood costs and optimise our earnings. We
also plan further curtailments of production at our Finnish sawmills due to high
log prices. It goes without saying that a long-awaited solution on Russian
duties is now more urgent than ever before, even though we do have a clear plan
for how to reduce capacity and operate if the duties are imposed in full. In the
short term, we are deeply concerned about the low level of activity in the
domestic wood markets in Finland - in a market situation where wood prices in
Finland are already on a high level in a European comparison. The industry needs
the domestic wood now, at a cost that allows reasonable returns on the end
products - not in a year.
“Our short-term market outlook has not changed essentially since February.
However, the uncertainty beyond the present quarter has further increased due to
macroeconomic concerns. Most of the deterioration in the cash flow in the first
quarter was due to a one-time change in the timing of payment of Finnish pension
contributions and payments in relation to restructuring programmes.
Nevertheless, because of the weak cash flow and uncertainty in the market
outlook, we have decided to reduce our capital investment expenditure for 2008
from EUR 900 million to EUR 700-750 million.
“Our programme to support the employees affected by our restructuring measures
in Finland and Sweden continues. Summa Mill has been closed, and Kemijärvi Mill
will be closed down by the end of April as previously announced. The overall
programme to help the 1 485 people affected has resulted in new job
opportunities and other solutions for about 850 employees thus far.
Unfortunately, there are significant differences in the number of potential
job-creating initiatives between the locations, with the greatest interest in
Summa and Norrsundet, and relatively little in Kemijärvi. This obviously makes
it even more important for the Kemijärvi employees that the Anaika business
proposal is successful.”
Near-term Market Outlook
In Europe demand for newsprint is likely to weaken slightly. However, following
significant capacity reductions in the industry, the market is expected to
remain firm with prices similar to the first quarter of 2008.
Demand for magazine paper is forecast to grow, but more slowly than in the same
quarter of last year owing to increasing macroeconomic uncertainties and their
effect on advertising. Nevertheless, the market should remain firm as supply has
decreased. The outlook for prices is cautiously favourable for non-contractual
business. Fine paper demand is expected to remain unchanged compared with the
second quarter of 2007, subject to normal slowing towards the summer. Slight
price improvements are anticipated in the second quarter of 2008.
Demand for consumer board is predicted to remain generally similar to a year ago
and the previous quarter. Some price increases to partly offset the unfavourable
currency impacts are foreseen.
Demand for industrial packaging is forecast to remain generally good, with a
slight temporary softening in the market for recycled-fibre-based (RCP)
containerboard. Prices are expected to remain stable, with some softening in
RCP-based containerboard prices.
For wood products additional supply pressure due to recent storms in Central
Europe has aggravated the oversupply situation and prices remain under pressure.
During the second quarter of 2008 there should be improvement in demand due to a
seasonal upswing in construction activity.
In Latin America demand for coated magazine paper is expected to remain firm and
further price increases are anticipated.
In China the outlook for fine paper demand and prices remains positive. The
launch of SC grades into the Chinese market has gone well and customer interest
is rapidly growing. Prices are forecast to rise.
Markets
Compared with Q1/2007
In Europe market demand was stronger for all magazine paper grades and coated
fine paper, similar to a year ago for consumer board and industrial packaging,
weaker for uncoated fine paper and newsprint, and considerably weaker for wood
products.
Market prices in local currencies were higher for all magazine paper grades,
uncoated fine paper, consumer board and industrial packaging products, slightly
lower for coated fine paper, lower for newsprint and significantly lower for
wood products.
Producer inventories were lower than a year ago in newsprint and magazine paper,
and somewhat higher in fine paper. Inventories of wood products were higher than
the first quarter of 2007.
In Latin America market demand for coated magazine paper was stronger and prices
increased considerably.
In China market demand for coated fine paper continued to grow and prices were
higher than a year ago.
Compared with Q4/2007
In Europe market demand was weaker for newsprint, magazine paper and
recycled-fibre-based containerboard, but stronger for fine paper, consumer board
and some industrial packaging products. Market demand for wood products remained
weak.
Market prices in local currencies were higher for all magazine paper grades and
consumer boards, largely unchanged for fine paper and most industrial packaging,
but lower for newsprint and recycled-fibre-based containerboard. Prices for wood
products continued to fall due to oversupply in all markets.
Producer inventories were higher in newsprint and magazine paper, lower in
uncoated fine paper and unchanged in coated fine paper.
In Latin America market demand for coated magazine paper weakened, following the
normal seasonal pattern, and prices improved.
In China market demand for coated fine paper continued to grow and prices
increased.
Stora Enso Deliveries and Production from Continuing Operations
--------------------------------------------------------------------------------
| | Q1/07 | Q4/07 | Q1/08 | Change | Change |
| | | | | % | % |
| | | | | Q1/08- | Q1/08- |
| | | | | Q1/07 | Q4/07 |
--------------------------------------------------------------------------------
| Paper and board deliveries | 3 150 | 3 147 | 3 024 | -4.0 | -3.9 |
| (1 000 tonnes) | | | | | |
--------------------------------------------------------------------------------
| Paper and board production | 3 177 | 3 056 | 3 069 | -3.4 | 0.4 |
| (1 000 tonnes) | | | | | |
--------------------------------------------------------------------------------
| Wood products deliveries (1 | 1 619 | 1 421 | 1 467 | -9.4 | 3.2 |
| 000 m3) | | | | | |
--------------------------------------------------------------------------------
January-March 2008 Results from continuing operations (compared with Q1/2007)
Sales at EUR 2 831.8 million were 5.6% lower than in the first quarter of 2007,
partly due to significantly lower average prices and deliveries for wood
products. Mill closures reduced comparative sales and deliveries as follows:
Summa Mill in January 2008 by some EUR 32 million and 62 000 tonnes, mainly
newsprint; Reisholz Mill in the fourth quarter of 2007 by some EUR 25 million
and 39 000 tonnes of magazine paper; and Berghuizer Mill's two paper machines in
April and October 2007 by some EUR 47 million and 55 000 tonnes of fine paper.
Industrial Packaging sales increased as higher average prices more than offset
slightly lower deliveries. Consumer Boards deliveries were slightly lower than
in the first quarter of 2007.
Key Figures
--------------------------------------------------------------------------------
| EUR million | 2006 | 2007 | Q1/0 | Q4/07 | Q1/08 | Change | Change |
| | | | 7 | | | % | % |
| | | | | | | Q1/08- | Q1/08- |
| | | | | | | Q1/07 | Q4/07 |
--------------------------------------------------------------------------------
| Continuing Operations | | | | | | | |
--------------------------------------------------------------------------------
| Sales | 11 | 11 | 3 | 2 | 2 | -5.6 | -5.0 |
| | 460. | 848. | 001. | 980.7 | 831.8 | | |
| | 4 | 5 | 2 | | | | |
--------------------------------------------------------------------------------
| EBITDA excluding NRI | 1 | 1 | 496. | 271.6 | 275.7 | -44.4 | 1.5 |
| | 640. | 568. | 0 | | | | |
| | 5 | 6 | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 851. | 1 | 310. | 327.9 | 125.0 | -59.8 | -61.9 |
| excluding NRI | 7 | 126. | 6 | | | | |
| | | 8 | | | | | |
--------------------------------------------------------------------------------
| Operating Profit | 839. | 861. | 294. | 144.1 | 140.1 | -52.5 | -2.8 |
| excl. NRI and fair | 1 | 1 | 9 | | | | |
| valuations1) | | | | | | | |
--------------------------------------------------------------------------------
| NRI (operational) | -143 | -949 | -12. | -388. | - | n/a | n/a |
| | .3 | .9 | 0 | 5 | | | |
--------------------------------------------------------------------------------
| Operating margin | 7.4 | 9.5 | 10.3 | 11.0 | 4.4 | -57.3 | -60.0 |
| excluding NRI, % | | | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 708. | 176. | 298. | -60.6 | 125.0 | -58.1 | 306.3 |
| (IFRS) | 4 | 9 | 6 | | | | |
--------------------------------------------------------------------------------
| Net financial items2) | -14. | -156 | -36. | -43.7 | -41.9 | -16.1 | 4.1 |
| | 9 | .7 | 1 | | | | |
--------------------------------------------------------------------------------
| Profit before tax and | 673. | 970. | 274. | 284.2 | 83.1 | -69.7 | -70.8 |
| minority interests | 9 | 1 | 5 | | | | |
| excluding NRI | | | | | | | |
--------------------------------------------------------------------------------
| Profit before tax and | 693. | 20.2 | 262. | -104. | 83.1 | -68.3 | 179.7 |
| minority interests | 5 | | 5 | 3 | | | |
--------------------------------------------------------------------------------
| Net profit for the | 535. | 745. | 209. | 219.6 | 66.5 | -68.2 | -69.7 |
| period excluding NRI | 5 | 9 | 2 | | | | |
--------------------------------------------------------------------------------
| Net profit for the | 684. | 11.4 | 197. | -60.2 | 66.5 | -66.3 | 210.5 |
| period | 9 | | 2 | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EPS from continuing | 0.68 | 0.94 | 0.26 | 0.28 | 0.08 | -69.2 | -71.4 |
| operations excluding | | | | | | | |
| NRI, Basic, EUR | | | | | | | |
--------------------------------------------------------------------------------
| EPS from continuing | 0.87 | 0.01 | 0.25 | -0.07 | 0.08 | -68.0 | 214.3 |
| operations, Basic, | | | | | | | |
| EUR | | | | | | | |
--------------------------------------------------------------------------------
| CEPS from continuing | 1.79 | 1.94 | 0.53 | 0.50 | 0.30 | -43.4 | -40.0 |
| operations excluding | | | | | | | |
| NRI, EUR | | | | | | | |
--------------------------------------------------------------------------------
| ROCE from continuing | 8.9 | 11.4 | 12.6 | 13.0 | 5.0 | -60.3 | -61.5 |
| operations excluding | | | | | | | |
| NRI, % | | | | | | | |
--------------------------------------------------------------------------------
| ROCE from continuing | 8.8 | 8.7 | 12.0 | 5.7 | 5.6 | -53.3 | -1.8 |
| operations excl. NRI | | | | | | | |
| and fair valuations, | | | | | | | |
| % | | | | | | | |
--------------------------------------------------------------------------------
| ROCE, %, from | 7.4 | 1.8 | 12.2 | -2.4 | 5.0 | -59.0 | 308.3 |
| continuing operations | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Operations | | | | | | | |
--------------------------------------------------------------------------------
| EPS from total | 0.74 | -0.2 | 0.28 | -0.17 | 0.09 | -67.9 | 152.9 |
| operations, Basic, | | 7 | | | | | |
| EUR | | | | | | | |
--------------------------------------------------------------------------------
| EPS from total | 0.55 | 0.88 | 0.26 | 0.26 | 0.09 | -65.4 | -65.4 |
| operations, excluding | | | | | | | |
| NRI, Basic, EUR | | | | | | | |
--------------------------------------------------------------------------------
1) Fair valuations include fair valuation of Total Return Swaps (TRS), synthetic
options and CO2 emission rights, and valuations of biological assets mainly
related to associated companies' forest assets
2) Includes capital gains totalling EUR 163.0 million in 2006 from the sale of
shares in Sampo (EUR 130.0 million) and Finnlines (EUR 33.0 million)
Cash Earnings Per Share (CEPS) = Net profit for the period + depreciation and
amortisation)/average number of shares
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, provisions for planned restructuring and
penalties. Non-recurring items are normally specified individually if they
exceed one cent per share.
Reconciliation of Operating Profit, Continuing Operations
--------------------------------------------------------------------------------
| EUR million | Q1/0 | Q4/0 | Q1/0 | Chang | Change |
| | 7 | 7 | 8 | e % | % |
| | | | | Q1/08 | Q1/08- |
| | | | | -Q1/0 | Q4/07 |
| | | | | 7 | |
--------------------------------------------------------------------------------
| Profit from operations, excl. NRI | 270. | 131. | 124. | -54.1 | -5.3 |
| | 8 | 3 | 4 | | |
--------------------------------------------------------------------------------
| Associated companies, operational, | 24.1 | 12.8 | 15.7 | -34.9 | 22.7 |
| excl. fair valuations | | | | | |
--------------------------------------------------------------------------------
| Operating Profit excl. NRI and Fair | 294. | 144. | 140. | -52.5 | -2.8 |
| Valuations | 9 | 1 | 1 | | |
--------------------------------------------------------------------------------
| Fair valuations* | 15.7 | 183. | -15. | -196. | -108.2 |
| | | 8 | 1 | 2 | |
--------------------------------------------------------------------------------
| Operating Profit, excl NRI | 310. | 327. | 125. | -59.8 | -61.9 |
| | 6 | 9 | 0 | | |
--------------------------------------------------------------------------------
| NRI | -12. | -388 | - | n/a | n/a |
| | 0 | .5 | | | |
--------------------------------------------------------------------------------
| Operating Profit (IFRS) | 298. | -60. | 125. | -58.1 | 306.3 |
| | 6 | 6 | 0 | | |
--------------------------------------------------------------------------------
* Fair valuations include fair valuation of Total Return Swaps (TRS), synthetic
options and CO2 emission rights, and valuations of biological assets mainly
related to associated companies' forest assets
Operating profit excluding non-recurring items and fair valuations decreased by
EUR 154.8 million to EUR 140.1 million, which is 4.9% of sales. Operating profit
was lower in all segments except Magazine Paper, where prices increased. Wood
Products operating profit was much lower than a year ago because sales prices
decreased significantly. Wood Products operating profit was also negatively
impacted by the revaluation of inventories totalling EUR -14 million. Newsprint
operating profit decreased mainly because average sales prices declined.
Fine Paper operating profit decreased mainly because wood and other variable
costs rose. Consumer Board operating profit was also lower as higher variable
costs, especially for wood, and unfavourable exchange rate trends partly offset
by higher sales prices. The demand for Industrial Packaging products remained
healthy and sales prices were up on a year ago. However, the operating profit
decreased slightly as higher sales prices were more than offset by higher costs
for fibre, externally purchased containerboards and energy. The operating loss
from Other operations increased mainly due to a writedown in Wood Supply for
weather damage to the Group's plantation in China and a restructuring provision
at Skutskär Mill in Sweden, together totalling EUR 9.0 million, which was partly
offset by increased profits in Group-level energy operations. Increased wood,
fibre and recycled paper costs depressed the Group's overall operating profit by
approximately EUR 94 million compared with the first quarter of 2007.
Unfavourable exchange rate trends decreased operating profit net of currency
hedges by approximately EUR 40 million compared with the first quarter of 2007.
Deliveries of wood to the Group's mills totalled 10.4 million cubic metres,
which was some 14% less than in the first quarter of 2007, mainly due to
production curtailments at sawmills and structural changes to the Group,
including the divestment of Stora Enso's North American operations and mill
closures. Wood deliveries were 4% lower than in the previous quarter. Wood costs
were clearly higher than a year before, but only somewhat higher than in the
previous quarter.
The share of associated company operational results, excluding IAS 41 forest
valuations, amounted to EUR 15.7 (EUR 24.1) million; the main contributions were
from Bergvik Skog, Tornator and Veracel. Associated companies are now reported
separately in operating profit, whereas they were earlier included in the
respective business area's operating profit. Operating profit includes a
negative net effect of EUR 15.1 million (positive EUR 15.7 million) from the
accounting of share-based compensation, Total Return Swaps (TRS), CO2 emission
rights and IAS 41 forest valuations mainly related to associated companies.
There were no non-recurring items in the first quarter of 2008.
Net financial items were EUR -41.9 (EUR -36.1) million. Net interest expenses
decreased to EUR 37.2 (EUR 39.5) million and net foreign exchange losses on
borrowings, currency derivatives and bank accounts were EUR -8.7 (positive EUR
3.1) million. Income from other financial items increased to EUR 4.0 (EUR 0.3)
million.
Profit before tax and minority interests decreased by EUR 179.4 million to EUR
83.1 million. Profit before tax and minority interests excluding non-recurring
items decreased by EUR 191.4 million to EUR 83.1 million.
Net taxes including non-recurring items totalled EUR -16.6 (EUR -65.3) million,
leaving a net profit for the quarter of EUR 66.5 (EUR 197.2) million.
Earnings per share excluding non-recurring items decreased by EUR 0.18 to EUR
0.08. Earnings per share including non-recurring items were EUR 0.08 (EUR 0.25).
Cash earnings per share were EUR 0.30 (EUR 0.53) excluding non-recurring items.
The return on capital employed was 5.0% (12.6%) excluding non-recurring items.
The return on capital employed excluding non-recurring items and fair valuations
was 5.6% (12.0%). Group capital employed, excluding Merchants, was EUR 10 173.2
million on 31 March 2008, a net decrease of EUR 2 200.6 million, due to the
divestment of North American operations, the planned divestment of Merchants,
restructuring of the Group, and fixed asset and goodwill impairments recorded in
September 2007.
Discontinued Operations
The Merchants segment has been classified as a discontinued operation in
accordance with IFRS 5, and hence its net result is reported in a single line
after the net profit from continuing operations. The disposal is not expected to
result in a loss or gain. However, the final outcome of the transaction is
subject to exchange rate and fair value changes and the financial results of the
operations of Merchants before the actual divestment date, which is expected to
be in the second quarter of 2008. Assets and liabilities of discontinued
operations are presented in one line under current assets and in one line under
current liabilities.
The operating profit from discontinued operations (Merchants segment) for the
first quarter of 2008 was EUR 9.9 (EUR 16.6) million.
Q1/2008 Results (compared with Q4/2007)
Sales at EUR 2 831.8 million were 5.0% lower than the previous quarter's EUR
2 980.7 million. Sales were lower in Newsprint and Magazine Paper as deliveries
decreased. Lower Industrial Packaging deliveries were offset by higher average
prices. Deliveries increased in Fine Paper, Consumer Board and Wood Products,
but in Wood Products higher deliveries were more than offset by lower sales
prices. The closure of Summa Mill and restructuring of Anjala Mill in the first
quarter of 2008 decreased comparative deliveries by some 63 000 tonnes and sales
by EUR 32 million.
Operating profit excluding non-recurring items and fair valuations decreased by
EUR 4.0 million to EUR 140.1 million. Wood Products deteriorated from break-even
to an operating loss of EUR -23.4 million due to rapidly falling sales prices
and the revaluation of inventories totalling EUR -14 million. Newsprint
operating profit decreased by EUR 22.0 million as weaker demand depressed sales
prices and volumes. Seasonally higher volumes and higher average sales prices
increased Consumer Board operating profit by EUR 12.9 million. Magazine Paper
operating profit increased by EUR 11.6 million to EUR 27.2 million, mainly due
to higher sales prices. Operating profit increased slightly in Fine Paper and
decreased marginally in Industrial Packaging. The operating loss from Other
operations decreased by EUR 12.7 million, mainly due to higher margins on
European wood supply operations and more profitable Group-level energy
operations.
Operating profit includes a negative net effect of EUR 15.1 (positive EUR 183.8)
million from the accounting of share-based compensation EUR 18.8 (EUR 27.1)
million, Total Return Swaps (TRS) EUR
-46.5 (EUR -62.5) million, CO2 emission rights EUR 4.2 (EUR 0.2) million and IAS
41 forest valuations of associated companies EUR 8.4 (EUR 219.0) million. The
EUR 219.0 million of forest asset valuation gains of associated companies
recorded in the fourth quarter of 2007 was due to an increase in estimated wood
prices and higher further harvesting volumes.
Unfavourable exchange rate trends decreased operating profit net of currency
hedges by some EUR 20 million compared with the previous quarter.
Profit before tax amounted to EUR 83.1 (EUR 284.2) million excluding
non-recurring items and EUR 83.1 (EUR -104.3) million including non-recurring
items.
Earnings per share were EUR 0.08 (EUR 0.28) excluding non-recurring items and
cash earnings per share were EUR 0.30 (EUR 0.50) excluding non-recurring items.
The return on capital employed was 5.0% (13.0%) excluding non-recurring items.
The return on capital employed excluding non-recurring items and fair valuations
was 5.6% (5.7%). Group capital employed, excluding Merchants, was EUR 10 173.2
million on 31 March 2008, a net decrease of EUR 329.4 million mainly due to the
expected divestment of Merchants and lower capital expenditure, partly offset by
increased working capital.
Capital Structure
--------------------------------------------------------------------------------
| EUR million | 31 Mar | 31 Dec 07 | 31 Mar 08 | 31 Mar 08 |
| | 07 | | incl. | excl. |
| | | | Merchants | Merchants |
--------------------------------------------------------------------------------
| Fixed assets | 11 029.2 | 8 493.2 | 8 366.8 | 8 087.0 |
--------------------------------------------------------------------------------
| Associated companies | 868.3 | 1 154.5 | 1 142.5 | 1 141.4 |
--------------------------------------------------------------------------------
| Operative working capital | 2 415.3 | 2 084.3 | 2 361.3 | 2 122.9 |
--------------------------------------------------------------------------------
| Non-current interest-free | -1 050.7 | -610.8 | -641.5 | -613.9 |
| items, net | | | | |
--------------------------------------------------------------------------------
| Operating Capital Total | 13 262.1 | 11 121.2 | 11 229.1 | 10 737.4 |
--------------------------------------------------------------------------------
| Net tax liabilities | -888.3 | -618.6 | -584.5 | -564.2 |
--------------------------------------------------------------------------------
| Capital Employed | 12 373.8 | 10 502.6 | 10 644.6 | 10 173.2 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity attributable to | 7 642.0 | 7 476.1 | 7 016.6 | 6 823.5 |
| Company shareholders | | | | |
--------------------------------------------------------------------------------
| Equity in discontinued | | | | 193.1 |
| operations | | | | |
--------------------------------------------------------------------------------
| Minority interests | 106.2 | 71.9 | 69.2 | 69.2 |
--------------------------------------------------------------------------------
| Net interest-bearing | 4 625.6 | 2 954.6 | 3 558.8 | 3 280.5 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Discontinued operations | | | | -193.1 |
--------------------------------------------------------------------------------
| Financing Total | 12 373.8 | 10 502.6 | 10 644.6 | 10 173.2 |
--------------------------------------------------------------------------------
Financing (compared with Q4/07)
Cash flow from continuing operations was EUR -27.4 (EUR 280.6) million and cash
flow after investing activities EUR -161.4 (EUR -20.3) million. The weak cash
flow was mainly due to a one-time prepayment of Finnish pension contributions of
EUR 83 million, payments of EUR 64 million in relation to restructuring, low
profitability and seasonally increased inventories and receivables.
At the end of the period, interest-bearing net liabilities of the Group were EUR
3 558.8 million, an increase of EUR 604.2 million mainly due to the EUR 354.9
million dividend for 2007 being deducted from equity and entered into current
interest-bearing liabilities for payment on 10 April 2008 and the weak cash flow
from operations. Interest-bearing net liabilities for continuing operations were
EUR 3 280.5 million. Total unutilised credit facilities and cash and
cash-equivalent net reserves decreased by EUR 0.7 billion to EUR 1.6 billion.
Group shareholders' equity amounted to EUR 7 016.6 million or EUR 8.89 (EUR
9.48) per share, compared with the market capitalisation on the Helsinki Stock
Exchange on 31 March 2008 of EUR 5.8 billion.
The debt/equity ratio at 31 March 2008 was 0.51 (0.40); excluding Merchants it
was 0.44. The currency effect on equity was negative EUR 41.0 million net of the
hedging of equity translation risks. The fair valuation of unlisted securities
included within available of sale assets decreased equity by EUR 129.0 million.
Cash Flow
--------------------------------------------------------------------------------
| EUR million | 2007 | Q1/07 | Q4/07 | Q1/08 | Change % | Change % |
| | | | | | Q1/08 - | Q1/08 - |
| | | | | | Q1/07 | Q4/07 |
--------------------------------------------------------------------------------
| Continuing | | | | | | |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 176.9 | 298.6 | -60.6 | 125.0 | -58.1 % | 306.3 % |
--------------------------------------------------------------------------------
| Depreciation and | 1 | 214.5 | 150.0 | 193.9 | -9.6 % | 29.3 % |
| other non-cash | 219.8 | | | | | |
| items | | | | | | |
--------------------------------------------------------------------------------
| Change in working | -228. | -299.7 | 191.2 | -346.3 | -15.5 % | -281.1 % |
| capital | 4 | | | | | |
--------------------------------------------------------------------------------
| Cash Flow from | 1 | 213.4 | 280.6 | -27.4 | -112.8 % | -109.8 % |
| Operations | 168.3 | | | | | |
--------------------------------------------------------------------------------
| Capital expenditure | -768. | -103.3 | -300.9 | -134.0 | -29.7 % | 55.5 % |
| | 3 | | | | | |
--------------------------------------------------------------------------------
| Cash Flow after | 400.0 | 110.1 | -20.3 | -161.4 | -246.6 % | n/m |
| Investing | | | | | | |
| Activities | | | | | | |
--------------------------------------------------------------------------------
| Discontinued | | | | | | |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Cash flow from | 136.8 | 13.6 | 90.0 | 17.0 | 25.0 % | -81.1 % |
| discontinued | | | | | | |
| operations after | | | | | | |
| investing | | | | | | |
| activities | | | | | | |
--------------------------------------------------------------------------------
| Total Cash Flow | 536.8 | 123.7 | 69.7 | -144.4 | -216.7 % | -307.2 % |
| after Investing | | | | | | |
| Activities | | | | | | |
--------------------------------------------------------------------------------
Capital Expenditure
Capital expenditure for the first quarter of 2008 totalled EUR 135.7 million
including Merchants operations and land acquisitions, which is 74.9% of
scheduled depreciation. The Group's total capital expenditure for 2008 is
expected to be about EUR 700-750 million, including land acquisitions.
The main projects during the first quarter of 2008 were plantation projects in
South America (EUR 14.0 million) and at Guangxi in China (EUR 7.0 million), the
sheeting plant at Veitsiluoto Mill in Finland (EUR 6.5 million), Stora Enso's
third corrugated packaging plant in Russia at Lukhovitsy (EUR 6.4 million) and
the micro-flute corrugated plant at Balabanovo, also in Russia (EUR 6.2
million).
Short-term Risks and Uncertainties in Second Quarter of 2008
The global economic slowdown may reduce demand for the Group's products. The
direct impact of the strong euro and its indirect impact on trade flows may
adversely affect the Group's profitability.
Near-term Market Outlook
In Europe demand for newsprint is likely to weaken slightly. However, following
significant capacity reductions in the industry, the market is expected to
remain firm with prices similar to the first quarter of 2008.
Demand for magazine paper is forecast to grow, but more slowly than in the same
quarter of last year owing to increasing macroeconomic uncertainties and their
effect on advertising. Nevertheless, the market should remain firm as supply has
decreased. The outlook for prices is cautiously favourable for non-contractual
business. Fine paper demand is expected to remain unchanged compared with the
second quarter of 2007, subject to normal slowing towards the summer. Slight
price improvements are anticipated in the second quarter of 2008.
Demand for consumer board is predicted to remain generally similar to a year ago
and the previous quarter. Some price increases to partly offset the unfavourable
currency impacts are foreseen.
Demand for industrial packaging is forecast to remain generally good, with a
slight temporary softening in the market for recycled-fibre-based (RCP)
containerboard. Prices are expected to remain stable, with some softening in
RCP-based containerboard prices.
For wood products additional supply pressure due to recent storms in Central
Europe has aggravated the oversupply situation and prices remain under pressure.
During the second quarter of 2008 there should be improvement in demand due to a
seasonal upswing in construction activity.
In Latin America demand for coated magazine paper is expected to remain firm and
further price increases are anticipated.
In China the outlook for fine paper demand and prices remains positive. The
launch of SC grades into the Chinese market has gone well and customer interest
is rapidly growing. Prices are forecast to rise.
First Quarter Events
January
On 10 January 2008 Stora Enso announced that it will invest EUR 29 million in
converting a coated magazine paper machine (PM 2) at its Anjala Mill in Finland
to produce coated and uncoated book paper. The project started in January 2008
and is scheduled to be completed by October 2008.
On 17 January 2008 Stora Enso announced that it had concluded the
co-determination negotiations at Summa, Kemijärvi and Anjala Mills, and the
Helsinki Headquarters. As the reasons for the capacity and resource cuts
announced on 25 October 2007 (excess capacity in standard and improved newsprint
and uncoated magazine paper, and dramatic cost increases, especially for
imported wood) had not changed in the meantime, Stora Enso had to take this
action to safeguard its cost and competitive position, and thereby the future of
the Group.
On 25 January 2008 Stora Enso announced that it had signed a letter of intent
with Anaika Group to sell part of the Kemijärvi Mill real estate to Anaika Group
to enable it to start a high quality engineering works and gluelam beam
operations at the mill site. When in full production, Anaika Group's operations
will employ about 100 people directly and provide substantial indirect
employment in the region. Anaika Group will itself develop the production
facilities. Stora Enso also signed a letter of intent to outsource the
maintenance operations of its Anjala and Kotka Mills in Kymenlaakso to Empower
Oy, which will offer approximately 100 jobs to Stora Enso employees affected by
restructuring measures.
On 28 January 2008 Stora Enso announced that its 200 000 tonnes per year
super-calendered (SC) paper machine at Dawang Mill in Shandong province, China
had been inaugurated. The machine started production on 25 November 2007.
March
On 12 March Stora Enso published its CO2 reduction target of 20% by 2020. The
target covers Stora Enso's direct CO2 emissions from production as well as
indirect emissions from purchased electricity and heat. The baseline year for
the target is 2006.
Stora Enso's joint venture Veracel, in Brazil, received FSC certification for
its plantations on 13 March 2008. FSC chain-of-custody certification was granted
at the same time. Both certificates are valid for five years and were issued by
FSC-accredited certification company SGS.
Biofuel Development at Varkaus Mill
The joint venture of Stora Enso and Neste Oil to develop biomass gasification
and gas cleaning technology for the production of renewable diesel feedstock has
progressed according to plan. Construction of the demonstration plant at Stora
Enso's Varkaus Mill in Finland started in March, and Foster Wheeler was selected
as the supplier of gasification and testing equipment, and as the development
partner for steam-oxygen gasification technology. The plant is expected to be
operational in early 2009. Laboratory tests are under way at VTT Technical
Research Centre of Finland, the project's main research and testing partner. The
joint venture has also received favourable decisions on financial support from
the Ministry of Employment and the Economy in Finland and from TEKES, the
Finnish Funding Agency for Technology and Innovation.
Inspections by Competition Authorities
In 2007, following US Federal District Court trial, Stora Enso was found not
guilty of charges by the US Department of Justice relating to the sale of coated
magazine paper in the USA in 2002 and 2003. Coincident with this case, Stora
Enso has been named in a number of class action lawsuits filed in the USA which
still are pending.
As a result of an investigation, the Finnish Competition Authority has proposed
to the Finnish Market Court that a fine of EUR 30 million should be imposed on
Stora Enso for violating competition laws in the purchasing of wood in Finland
in the period from 1997 to 2004. Stora Enso considers the proposal groundless.
No provision has been made in Stora Enso's accounts for the above-mentioned
investigation and lawsuits.
Changes in Group Composition
On 6 March 2008 Stora Enso signed an agreement to sell its merchant business
Papyrus to Altor Fund II. The sale is expected to be finalised in the second
quarter of 2008 subject to customary statutory approvals.
Share Capital
During the quarter 28 481 A shares were converted into R shares. The latest
conversion was recorded in the Finnish Trade Register on 15 April 2008.
On 31 March 2008 Stora Enso had 177 461 058 A shares and 612 077 441 R shares in
issue, of which the Company held no A shares and 918 512 R shares with a nominal
value of EUR 1.6 million. The holding represents 0.12% of the Company's share
capital and 0.04% of the voting rights.
Decisions of the Annual General Meeting on 26 March 2008
The proposed dividend of EUR 0.45 per share was approved.
The AGM approved a proposal that the Board of Directors shall have nine members
and that of the present members Gunnar Brock, Claes Dahlbäck, Dominique Hériard
Dubreuil, Birgitta Kantola, Ilkka Niemi, Jan Sjöqvist, Matti Vuoria and Marcus
Wallenberg be re-elected to continue in their office and that Juha Rantanen be
elected as a new member.
The AGM approved a proposal that Authorised Public Accountants Deloitte & Touche
Oy be elected to act as auditor of the Company.
The AGM approved a proposal to appoint a Nomination Committee 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 to amend the Articles of Association by reducing the
number of Auditors to one entity which shall be a Certified Public Accountancy
Firm approved by the Finnish Central Chamber of Commerce, by removing references
to minimum and maximum capital and maximum number of shares, and by revising the
matters to be included on the agenda of the Annual General Meeting. Furthermore,
minor changes of a technical nature were approved to be made to the Articles of
Association.
Decisions by the Board of Directors
At its meeting held after the AGM, the Stora Enso Board of Directors elected
from among its members Claes Dahlbäck as its Chairman and Ilkka Niemi as Vice
Chairman.
Jan Sjöqvist (chairman), Claes Dahlbäck, Birgitta Kantola and Ilkka Niemi will
continue as members of the Financial and Audit Committee.
Claes Dahlbäck (chairman), Dominique Hériard Dubreuil, Ilkka Niemi and Matti
Vuoria will continue as members of the Compensation Committee.
Events after the Period
Stora Enso's Section 12(g) registration and Section 13(a) and Section 15(d)
reporting obligations under the US Securities Exchange Act ended on 7 April
2008.
On 15 April Stora Enso announced that Per Lyrvall had been appointed as the new
General Counsel of the Company and secretary to the Board of Directors effective
from 1 June 2008.
This report is unaudited.
Helsinki, 24 April 2008
Stora Enso Oyj
Board of Directors
Segments Q1/08 compared with Q1/07
Newsprint and Book Paper
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q4/07 | Q1/08 | Change % | Change % |
| | | | | Q1/08-Q1/0 | Q1/08-Q4/0 |
| | | | | 7 | 7 |
--------------------------------------------------------------------------------
| Sales | 438.7 | 436.3 | 386.5 | -11.9 | -11.4 |
--------------------------------------------------------------------------------
| Operating | 61.1 | 48.4 | 26.4 | -56.8 | -45.5 |
| profit* | | | | | |
--------------------------------------------------------------------------------
| % of sales | 13.9 | 11.1 | 6.8 | -51.1 | -38.7 |
--------------------------------------------------------------------------------
| ROOC, %** | 17.6 | 15.2 | 8.9 | -49.4 | -41.4 |
--------------------------------------------------------------------------------
| Deliveries, 1 | 756 | 803 | 711 | -6.0 | -11.5 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
| Production, 1 | 785 | 735 | 715 | -8.9 | -2.7 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
* Excluding NRI ** ROOC = 100% x Operating profit/Operating capital
Newsprint and book paper sales were EUR 386.5 million, down 12% on the first
quarter of 2007 mainly due to closure of Summa Mill, which accounted for 40% of
the sales reduction, and decreased prices. Operating profit was EUR 26.4
million, down 57% on the previous year due to lower sales prices, strengthening
of the euro and higher fibre costs.
Summa Mill in Finland permanently ceased production at the end of January 2008,
reducing standard and improved newsprint production by 270 000 tonnes per year.
Markets
Compared with Q1/2007
In Europe demand for newsprint was weaker than a year ago. Newsprint imports
from North America increased considerably, while domestic deliveries decreased.
Overseas exports of Western European suppliers rose significantly, offsetting
the decline in domestic shipments and resulting in a modest increase in total
Western European deliveries. Prices and producer inventories were lower than in
the first quarter of 2007.
Compared with Q4/2007
In Europe demand weakened seasonally as the fourth quarter is usually the
strongest of the year. Domestic deliveries and imports from North America
decreased. Prices declined and producer inventories increased.
Magazine Paper
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q4/07 | Q1/08 | Change % | Change % |
| | | | | Q1/08-Q1/0 | Q1/08-Q4/0 |
| | | | | 7 | 7 |
--------------------------------------------------------------------------------
| Sales | 566.6 | 589.5 | 547.3 | -3.4 | -7.2 |
--------------------------------------------------------------------------------
| Operating | 9.4 | 15.6 | 27.2 | 189.4 | 74.4 |
| profit* | | | | | |
--------------------------------------------------------------------------------
| % of sales | 1.7 | 2.6 | 5.0 | 199.6 | 87.8 |
--------------------------------------------------------------------------------
| ROOC, %** | 1.9 | 3.8 | 7.1 | 273.7 | 86.8 |
--------------------------------------------------------------------------------
| Deliveries, 1 | 717 | 785 | 691 | -3.6 | -12.0 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
| Production, 1 | 737 | 730 | 728 | -1.2 | -0.3 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
* Excluding NRI ** ROOC = 100% x Operating profit/Operating capital
Magazine paper sales were EUR 547.3 million, down 3% on the first quarter of
2007 mainly due to the mill closures and restructuring which were partly offset
by higher sales prices. Operating profit was EUR 27.2 million, much higher than
a year earlier, mainly due to sales price and volume increases, which more than
offset the impact of exchange rates.
Summa Mill in Finland permanently ceased production at the end of January 2008,
reducing uncoated magazine paper production by 80 000 tonnes per year. Anjala
Mill PM 2 in Finland ceased coated magazine paper production in February 2008,
reducing coated magazine paper production by 155 000 tonnes per year. Output at
Dawang Mill in China has built up more rapidly than scheduled following the
start-up of the SC paper machine in November 2007.
Kemijärvi Pulp Mill will be permanently shutdown at the end of April 2008, and
restructuring is planned at Kvarnsveden Mill. Negotiations with the union in
Norrsundet Pulp Mill have been concluded and the mill will be closed at the end
of 2008. A maintenance stoppage at Skutskär Pulp Mill in the second quarter of
2008 will burden Magazine Paper operating profit.
Markets
Compared with Q1/2007
In Europe demand for magazine paper was stronger than a year ago and prices were
higher in all grades. Producer inventories were lower in uncoated and coated
grades.
In Latin America demand was stronger and prices rose considerably.
Compared with Q4/2007
In Europe deliveries of magazine paper seasonally weakened, but prices rose in
all grades. Producer inventories increased moderately.
In Latin America deliveries decreased seasonally but prices increased
significantly.
Fine Paper
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q4/07 | Q1/08 | Change % | Change % |
| | | | | Q1/08-Q1/0 | Q1/08-Q4/0 |
| | | | | 7 | 7 |
--------------------------------------------------------------------------------
| Sales | 577.0 | 526.7 | 545.2 | -5.5 | 3.5 |
--------------------------------------------------------------------------------
| Operating | 55.1 | 35.7 | 37.3 | -32.3 | 4.5 |
| profit* | | | | | |
--------------------------------------------------------------------------------
| % of sales | 9.5 | 6.8 | 6.8 | -28.4 | 0 |
--------------------------------------------------------------------------------
| ROOC, %** | 13.1 | 8.5 | 8.5 | -35.1 | 0 |
--------------------------------------------------------------------------------
| Deliveries, 1 | 760 | 681 | 726 | -4.5 | 6.6 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
| Production, 1 | 738 | 693 | 696 | -5.7 | 0.4 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
* Excluding NRI ** ROOC = 100% x Operating profit/Operating capital
Fine paper sales were EUR 545.2 million, down 6% on the first quarter of 2007
mainly due to closure of Berghuizer Mill. Operating profit was EUR 37.3 million,
down 32% on a year ago mainly due to higher wood and other variable costs. Sales
price increases and mix improvements were mainly offset by unfavourable currency
impacts.
Markets
Compared with Q1/2007
In Europe coated fine paper demand was somewhat stronger than a year ago, but
coated fine paper prices were slightly lower. Industry inventories increased
slightly. Uncoated fine paper demand was down on a year ago as European economic
growth slowed, but uncoated fine paper prices were higher. Industry inventories
increased.
In China coated fine paper demand was stronger and prices were higher than a
year ago.
Compared with Q4/2007
In Europe fine paper demand strengthened and prices in local currencies were
largely unchanged. Industry inventories were unchanged for coated fine paper and
lower for uncoated fine paper.
In China coated fine paper demand continued to strengthen and prices increased.
Consumer Board
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q4/07 | Q1/08 | Change % | Change % |
| | | | | Q1/08-Q1/0 | Q1/08-Q4/0 |
| | | | | 7 | 7 |
--------------------------------------------------------------------------------
| Sales | 589.6 | 579.1 | 574.4 | -2.6 | -0.8 |
--------------------------------------------------------------------------------
| Operating | 72.4 | 29.6 | 42.5 | -41.3 | 43.6 |
| profit* | | | | | |
--------------------------------------------------------------------------------
| % of sales | 12.3 | 5.1 | 7.4 | -39.8 | 45.1 |
--------------------------------------------------------------------------------
| ROOC, %** | 14.6 | 6.9 | 10.0 | -31.5 | 44.9 |
--------------------------------------------------------------------------------
| Deliveries, 1 | 638 | 622 | 636 | -0.3 | 2.3 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
| Production, 1 | 646 | 638 | 660 | 2.2 | 3.4 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
* Excluding NRI ** ROOC = 100% x Operating profit/Operating capital
Consumer board sales were EUR 574.4 million, down 3% on the first quarter of
2007 mainly due to lower pulp deliveries. Operating profit was EUR 42.5 million,
down 41% on the previous year mainly because much higher pulpwood costs, which
affected Consumer Board especially strongly, and unfavourable exchange rate
trends only partially offset by higher sales prices.
Because of its high marginal costs, Enocell Pulp Mill will curtail production
for seven days at Midsummer. This will reduce operating profit in the second
quarter, but on an annual basis the operating profit is not expected to be
affected, as the stoppage will replace the maintenance stoppage scheduled for
the autumn and additional personnel costs for working at Midsummer will be
avoided.
Some restructuring is planned at Ingerois Mill and Fors Mill in the second
quarter of 2008.
Markets
Compared with Q1/2007
Delivery volumes and average prices were almost unchanged on a year ago, as
impacts of price increases were offset by negative trends in exchange rates.
Compared with Q4/2007
Delivery volumes were seasonally higher and prices rose on average.
Industrial Packaging
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q4/07 | Q1/08 | Change % | Change % |
| | | | | Q1/08-Q1/0 | Q1/08-Q4/0 |
| | | | | 7 | 7 |
--------------------------------------------------------------------------------
| Sales | 266.1 | 275.4 | 275.5 | 3.5 | 0.0 |
--------------------------------------------------------------------------------
| Operating | 29.2 | 28.4 | 27.6 | -5.5 | -2.8 |
| profit* | | | | | |
--------------------------------------------------------------------------------
| % of sales | 11.0 | 10.3 | 10.0 | -9.1 | -2.9 |
--------------------------------------------------------------------------------
| ROOC, %** | 18.4 | 16.7 | 15.4 | -16.3 | -7.8 |
--------------------------------------------------------------------------------
| Deliveries, 1 | 279 | 256 | 260 | -6.8 | 1.6 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
| Production, 1 | 271 | 260 | 270 | -0.4 | 3.8 |
| 000 t | | | | | |
--------------------------------------------------------------------------------
* Excluding NRI ** ROOC = 100% x Operating profit/Operating capital
Industrial packaging sales were EUR 275.5 million, up 4% on the first quarter of
2007 mainly due to higher sales prices. Operating profit was EUR 27.6 million,
down 6% on a year earlier as higher sales prices were more than offset by higher
recycled fibre and energy costs, and one-time costs of starting up new and
rebuilt production lines in Russia, North America, Finland and Poland.
Commercial deliveries from the corrugated packaging plant at Lukhovitsy in
Russia started slightly ahead of schedule, and the new heavy-duty corrugated box
production line started up at Lodz in Poland. The former fine paper machine (PM
12) at Wisconsin Rapids in the USA started up on schedule after rebuilding to
manufacture coreboard. Wisconsin Rapids PM 13 was permanently shut down in March
2008.
The offset printed micro-flute corrugated packaging plant at Balabanovo in
Russia will start up during the second quarter of 2008. A maintenance stoppage
at Kotka Mill and a production stoppage for investment at Heinola Mill will
burden the operating profit in the second quarter of 2008.
Markets
Compared with Q1/2007
Sales prices were generally higher than a year ago and demand similar to a year
ago.
Compared with Q4/2007
Prices for corrugated case materials made from recycled paper decreased, but
prices for other industrial packaging products remained steady. Demand for
containerboards made from recycled paper was temporarily depressed by reduced
demand for corrugated boxes, especially in the food sector, combined with high
stock levels at the year end. Demand for other industrial packaging products
remains healthy.
Wood Products
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q4/07 | Q1/08 | Change % | Change % |
| | | | | Q1/08-Q1/0 | Q1/08-Q4/0 |
| | | | | 7 | 7 |
--------------------------------------------------------------------------------
| Sales | 472.3 | 393.7 | 378.6 | -19.8 | -3.8 |
--------------------------------------------------------------------------------
| Operating | 54.8 | -0.5 | -23.4 | -142.7 | n/m |
| profit* | | | | | |
--------------------------------------------------------------------------------
| % of sales | 11.6 | -0.1 | -6.2 | -153.3 | n/m |
--------------------------------------------------------------------------------
| ROOC, %** | 27.3 | -0.3 | -12.3 | -145.1 | n/m |
--------------------------------------------------------------------------------
| Deliveries, 1 | 1 619 | 1 421 | 1 467 | -9.4 | 3.2 |
| 000 m3 | | | | | |
--------------------------------------------------------------------------------
* Excluding NRI **ROOC = 100% x Operating profit/Operating capital
Wood product sales were EUR 378.6 million, down 20% on the first quarter of 2007
due to lower sales prices and volumes. Operating profit was EUR -23.4 million,
down EUR 78.2 million from last year's record levels due to significantly lower
sales prices and volumes for sawn goods and by-products such as chips and
sawdust, and the inventory write-down.
For wood products additional supply pressure due to the recent storms in Central
Europe has aggravated the oversupply situation and prices remain under pressure.
During the second quarter of 2008 there should be improvement in demand due to a
seasonal upswing in construction activity. Given the challenging market
conditions the Wood Products segment will struggle to achieve an operating
profit for the full year 2008.
Following the extensive production curtailments in the last quarter of 2007 and
first quarter of 2008, further curtailments are planned in Finland because of
continuing oversupply, pressure on prices and log costs that are still too high.
Stora Enso Wood Products is today starting negotiations concerning possible
temporary lay-offs of personnel at its Finnish sawmills. The production
curtailment in the second half of 2008 and the first quarter of 2009 is expected
to be at maximum 500 000 cubic metres.
Markets
Compared with Q1/2007
Demand and prices were clearly weaker than during the booming market of early
2007 in all regions. The market situation in North America remains extremely
difficult and continues to affect global market balances.
Compared with Q4/2007
Prices continued to fall, driven by oversupply in all markets. Excessive
supplies of sawlogs due to the recent storms in Central Europe have temporarily
added to supply pressure.
Financials
Key Ratios
--------------------------------------------------------------------------------
| | 2006 | 2007 | Q1/07 | Q4/07 | Q1/08 | Change | Change |
| | | | | | | % | % |
| | | | | | | Q1/08-Q | Q1/08-Q |
| | | | | | | 1/07 | 4/07 |
--------------------------------------------------------------------------------
| Continuing | | | | | | | |
| Operations | | | | | | | |
--------------------------------------------------------------------------------
| Earnings per | 0.87 | 0.01 | 0.25 | -0.07 | 0.08 | -68.0 | 214.3 |
| share (basic), | | | | | | | |
| EUR | | | | | | | |
--------------------------------------------------------------------------------
| Earnings per | 0.68 | 0.94 | 0.26 | 0.28 | 0.08 | -69.2 | -71.4 |
| share excluding | | | | | | | |
| NRI, EUR | | | | | | | |
--------------------------------------------------------------------------------
| Cash earnings per | 2.19 | 1.95 | 0.53 | 0.38 | 0.30 | -43.4 | -21.1 |
| share (CEPS), EUR | | | | | | | |
--------------------------------------------------------------------------------
| CEPS excluding | 1.79 | 1.94 | 0.53 | 0.50 | 0.30 | -43.4 | -40.0 |
| NRI, EUR | | | | | | | |
--------------------------------------------------------------------------------
| Return on capital | 7.4 | 1.8 | 12.2 | -2.4 | 5.0 | -59.0 | 308.3 |
| employed (ROCE), | | | | | | | |
| % | | | | | | | |
--------------------------------------------------------------------------------
| ROCE excluding | 8.9 | 11.4 | 12.6 | 13.0 | 5.0 | -60.3 | -61.5 |
| NRI, % | | | | | | | |
--------------------------------------------------------------------------------
| Return on equity | 7.7 | -2.7 | 11.4 | -7.3 | 3.9 | -65.8 | 153.4 |
| (ROE), %* | | | | | | | |
--------------------------------------------------------------------------------
| Debt/equity | 0.54 | 0.40 | 0.61 | 0.40 | 0.51 | -16.4 | 27.5 |
| ratio* | | | | | | | |
--------------------------------------------------------------------------------
| Equity per share, | 9.89 | 9.48 | 9.69 | 9.48 | 8.89 | -8.3 | -6.2 |
| EUR* | | | | | | | |
--------------------------------------------------------------------------------
| Equity ratio, %* | 45.3 | 49.3 | 44.1 | 49.3 | 48.3 | 9.5 | -2.0 |
--------------------------------------------------------------------------------
| Operating profit, | 6.2 | 1.5 | 10.0 | -2.0 | 4.4 | -56.0 | 320.0 |
| % of sales | | | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 7.4 | 9.5 | 10.3 | 11.0 | 4.4 | -57.3 | -60.0 |
| excluding NRI, % | | | | | | | |
| of sales | | | | | | | |
--------------------------------------------------------------------------------
| Capital | 583. | 820. | 108.9 | 313.1 | 135.7 | 24.6 | -56.7 |
| expenditure, EUR | 4 | 4 | | | | | |
| million* | | | | | | | |
--------------------------------------------------------------------------------
| Capital employed, | 9 | 10 | 9 938 | 10 022 | 10 | 2.4 | 1.5 |
| EUR million | 718 | 022 | | | 173 | | |
--------------------------------------------------------------------------------
| Interest-bearing | 4 | 2 | 4 626 | 2 955 | 3 559 | -23.1 | 20.4 |
| net liabilities, | 243 | 955 | | | | | |
| EUR million* | | | | | | | |
--------------------------------------------------------------------------------
| Average number of | 37 | 35 | 35 | 35 838 | 34 | -4.6 | -4.2 |
| employees | 859 | 838 | 980 | | 315 | | |
--------------------------------------------------------------------------------
| Average number of | | | | | | | |
| shares (million) | | | | | | | |
--------------------------------------------------------------------------------
| periodic | 788. | 788. | 788.6 | 788.6 | 788.6 | - | - |
| | 6 | 6 | | | | | |
--------------------------------------------------------------------------------
| cumulative | 788. | 788. | 788.6 | 788.6 | 788.6 | - | - |
| | 6 | 6 | | | | | |
--------------------------------------------------------------------------------
| cumulative, | 788. | 788. | 788.9 | 788.9 | 788.9 | - | - |
| diluted | 9 | 8 | | | | | |
--------------------------------------------------------------------------------
NRI = Non-recurring items
* Total operations
Key Exchange Rates for the Euro
--------------------------------------------------------------------------------
| One Euro is | Closing Rate | Average Rate |
--------------------------------------------------------------------------------
| | 31 Dec 07 | 31 Mar 08 | 31 Dec 07 | 31 Mar 08 |
--------------------------------------------------------------------------------
| SEK | 9.4415 | 9.3970 | 9.2517 | 9.3980 |
--------------------------------------------------------------------------------
| USD | 1.4721 | 1.5812 | 1.3710 | 1.5001 |
--------------------------------------------------------------------------------
| GBP | 0.7333 | 0.7958 | 0.6847 | 0.7582 |
--------------------------------------------------------------------------------
Transaction Risk and Hedges in Main Currencies as at 31 March 2008
--------------------------------------------------------------------------------
| EUR million | USD | GBP | SEK | JPY |
--------------------------------------------------------------------------------
| Estimated annual net operating | 800 | 600 | -1 000 | 200 |
| cash flow exposure | | | | |
--------------------------------------------------------------------------------
| Transaction hedges as at 31 March | 370 | 316 | -750 | 82 |
--------------------------------------------------------------------------------
| Hedging percentage as at 31 March | 48% | 49% | 57%/75%* | 41% |
| for the next 12 months | | | | |
--------------------------------------------------------------------------------
* 57% represents the hedging ratio including the profit margin of the Swedish
production units and 75% excludes the profit margin.
Condensed Consolidated Income Statement
--------------------------------------------------------------------------------
| EUR million | 2007 | Q1/07 | Q4/07 | Q1/08 | Change | Change |
| | | | | | % | % |
| | | | | | Q1/08-Q | Q1/08-Q |
| | | | | | 1/07 | 4/07 |
--------------------------------------------------------------------------------
| Continuing | | | | | | |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Sales | 11 | 3 | 2 | 2 831.8 | -5.6 | -5.0 |
| | 848.5 | 001.2 | 980.7 | | | |
--------------------------------------------------------------------------------
| Other operating | 88.4 | 16.3 | 33.0 | 46.5 | 185.3 | 40.9 |
| income | | | | | | |
--------------------------------------------------------------------------------
| Materials and | -6 | -1 | -1 | -1 | -4.4 | 4.8 |
| services | 962.9 | 669.4 | 830.1 | 742.1 | | |
--------------------------------------------------------------------------------
| Freight and sales | -1 | -287.6 | -326.0 | -282.6 | 1.7 | 13.3 |
| commissions | 134.0 | | | | | |
--------------------------------------------------------------------------------
| Personnel expenses | -1 | -416.1 | -448.7 | -447.7 | -7.6 | 0.2 |
| | 712.9 | | | | | |
--------------------------------------------------------------------------------
| Other operating | -761.9 | -148.6 | -340.5 | -130.1 | 12.4 | 61.8 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Share of results of | 341.3 | 24.1 | 231.9 | 23.9 | -0.8 | -89.7 |
| associated | | | | | | |
| companies | | | | | | |
--------------------------------------------------------------------------------
| Depreciation and | -1 | -221.3 | -360.9 | -174.7 | 21.1 | 51.6 |
| impairment | 529.6 | | | | | |
--------------------------------------------------------------------------------
| Operating Profit / | 176.9 | 298.6 | -60.6 | 125.0 | -58.1 | 306.3 |
| (Loss) | | | | | | |
--------------------------------------------------------------------------------
| Net financial items | -156.7 | -36.1 | -43.7 | -41.9 | -16.1 | 4.1 |
--------------------------------------------------------------------------------
| Profit / (Loss) | 20.2 | 262.5 | -104.3 | 83.1 | -68.3 | 179.7 |
| before Tax | | | | | | |
--------------------------------------------------------------------------------
| Income tax | -8.8 | -65.3 | 44.1 | -16.6 | 74.6 | -137.6 |
--------------------------------------------------------------------------------
| Net Profit / (Loss) | 11.4 | 197.2 | -60.2 | 66.5 | -66.3 | 210.5 |
| for the Period from | | | | | | |
| Continuing | | | | | | |
| Operations | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Discontinued | | | | | | |
| Operation | | | | | | |
--------------------------------------------------------------------------------
| Loss after tax for | -223.8 | 25.3 | -77.5 | 4.7 | -81.4 | 106.1 |
| the period from | | | | | | |
| discontinued | | | | | | |
| operations | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net Profit / (Loss) | -212.4 | 222.5 | -137.7 | 71.2 | -68.0 | 151.7 |
| for the Period | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to: | | | | | | |
--------------------------------------------------------------------------------
| Equity holders of | -214.7 | 219.2 | -135.3 | 71.9 | -67.2 | 153.1 |
| the Parent Company | | | | | | |
--------------------------------------------------------------------------------
| Minority interests | 2.3 | 3.3 | -2.4 | -0.7 | -121.2 | 70.8 |
--------------------------------------------------------------------------------
| | -212.4 | 222.5 | -137.7 | 71.2 | -68.0 | 151.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings Per Share | | | | | | |
--------------------------------------------------------------------------------
| Basic earnings per | -0.27 | 0.28 | -0.17 | 0.09 | -67.9 | 152.9 |
| share, EUR | | | | | | |
--------------------------------------------------------------------------------
| Diluted earnings | -0.27 | 0.28 | -0.17 | 0.09 | -67.9 | 152.9 |
| per share, EUR | | | | | | |
--------------------------------------------------------------------------------
| Earnings Per Share | | | | | | |
| from Continuing | | | | | | |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Basic earnings per | 0.01 | 0.25 | -0.07 | 0.08 | -68.0 | 214.3 |
| share, EUR | | | | | | |
--------------------------------------------------------------------------------
| Diluted earnings | 0.01 | 0.25 | -0.07 | 0.08 | -68.0 | 214.3 |
| per share, EUR | | | | | | |
--------------------------------------------------------------------------------
Consolidated Statement of Recognised Income & Expense
--------------------------------------------------------------------------------
| EUR million | 2007 | Q1/07 | Q4/07 | Q1/08 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Operations | | | | |
--------------------------------------------------------------------------------
| Defined benefit plan | 17.3 | - | 16.8 | - |
| actuarial gains / (losses) | | | | |
--------------------------------------------------------------------------------
| Tax on actuarial movements | -6.3 | - | -6.2 | - |
--------------------------------------------------------------------------------
| Aggregate fair value | 217.3 | 51.1 | 3.8 | -129.0 |
| movements in | | | | |
| Available-for-Sale assets | | | | |
--------------------------------------------------------------------------------
| Currency and commodity | 5.6 | -37.5 | -28.3 | -0.5 |
| hedges | | | | |
--------------------------------------------------------------------------------
| Associate hedges | 5.1 | -0.1 | 0.1 | -0.3 |
--------------------------------------------------------------------------------
| Tax on Other Comprehensive | -3.2 | 10.2 | 7.8 | 22.2 |
| Income Movements (OCI) | | | | |
--------------------------------------------------------------------------------
| Currency translation | -85.3 | -69.0 | -61.5 | -82.8 |
| movements on equity net | | | | |
| investments (CTA) | | | | |
--------------------------------------------------------------------------------
| Equity net investment | 53.7 | 32.1 | 18.8 | 20.5 |
| hedges | | | | |
--------------------------------------------------------------------------------
| Tax on equity hedges | -13.2 | -8.3 | -4.1 | -5.3 |
--------------------------------------------------------------------------------
| Income & Expense Recognised | 191.0 | -21.5 | -52.8 | -175.2 |
| in Equity | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Items from Equity | 52.7 | 0.0 | 69.1 | 0.0 |
| Recognised in Income | | | | |
| Statement | | | | |
--------------------------------------------------------------------------------
| Net Income & Expense | 243.7 | -21.5 | 16.3 | -175.2 |
| Recognised in Equity | | | | |
--------------------------------------------------------------------------------
| Net Profit/(Loss) for the | -212.4 | 222.5 | -137.7 | 71.2 |
| period | | | | |
--------------------------------------------------------------------------------
| Total Recognised Income & | 31.3 | 201.0 | -121.4 | -104.0 |
| Expense for the Period | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to: | | | | |
--------------------------------------------------------------------------------
| Equity holders of the | 29.0 | 197.7 | -119.0 | -103.3 |
| Parent Company | | | | |
--------------------------------------------------------------------------------
| Minority interests | 2.3 | 3.3 | -2.4 | -0.7 |
--------------------------------------------------------------------------------
| Total Recognised Income & | 31.3 | 201.0 | -121.4 | -104.0 |
| Expense for the Period | | | | |
--------------------------------------------------------------------------------
Condensed Consolidated Cash Flow Statement - Group Total
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q1/08 |
--------------------------------------------------------------------------------
| Cash Flow from Operating Activities | | |
--------------------------------------------------------------------------------
| Operating profit | 363.5 | 134.8 |
--------------------------------------------------------------------------------
| Adjustments | 266.5 | 211.1 |
--------------------------------------------------------------------------------
| Change in net working capital | -348.4 | -310.3 |
--------------------------------------------------------------------------------
| Cash Flow Generated by Operations | 281.6 | 35.6 |
--------------------------------------------------------------------------------
| Net financial items | -64.0 | -65.6 |
--------------------------------------------------------------------------------
| Income taxes paid | -45.0 | -45.6 |
--------------------------------------------------------------------------------
| Net Cash Provided by/ (Used in) Operating | 172.6 | -75.6 |
| Activities | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash Flow from Investing Activities | | |
--------------------------------------------------------------------------------
| Acquisitions of subsidiaries | -0.4 | -2.8 |
--------------------------------------------------------------------------------
| Acquisitions of associated companies | -65.9 | -8.7 |
--------------------------------------------------------------------------------
| Proceeds from sale of fixed assets and | 7.1 | 19.2 |
| shares | | |
--------------------------------------------------------------------------------
| Capital expenditure | -108.9 | -135.7 |
--------------------------------------------------------------------------------
| Proceeds from/ (payment of) the non-current | 18.9 | -0.6 |
| receivables, net | | |
--------------------------------------------------------------------------------
| Net Cash (Used in) Investing Activities | -149.2 | -128.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash Flow from Financing Activities | | |
--------------------------------------------------------------------------------
| Proceeds from issue of new long-term debt | 136.8 | 28.6 |
--------------------------------------------------------------------------------
| Repayment of long-term liabilities | -11.9 | -244.1 |
--------------------------------------------------------------------------------
| Change in short-term borrowings | -9.6 | -212.6 |
--------------------------------------------------------------------------------
| Dividends paid | - | - |
--------------------------------------------------------------------------------
| Minority equity injections less dividends | 0.4 | -1.5 |
--------------------------------------------------------------------------------
| Options exercised | -0.4 | - |
--------------------------------------------------------------------------------
| Net Cash Provided by/ (Used in) Financing | 115.3 | -429.6 |
| Activities | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net Increase/ (Decrease) in Cash and Cash | 138.7 | -633.8 |
| Equivalents | | |
--------------------------------------------------------------------------------
| Cash and bank in acquired companies | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| Cash and bank in sold companies | 0.0 | -0.1 |
--------------------------------------------------------------------------------
| Translation adjustment | 18.1 | -6.9 |
--------------------------------------------------------------------------------
| Net cash and cash equivalents at the | 309.6 | 879.3 |
| beginning of period | | |
--------------------------------------------------------------------------------
| Net Cash and Cash Equivalents at Period End | 466.4 | 238.5 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and Cash Equivalents at Period End | 525.5 | 308.2 |
--------------------------------------------------------------------------------
| Bank Overdrafts at Period End | -59.1 | -69.7 |
--------------------------------------------------------------------------------
| Net Cash and Cash Equivalents at Period End | 466.4 | 238.5 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisitions of Subsidiary Companies | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | - | 0.0 |
--------------------------------------------------------------------------------
| Working capital | - | -0.0 |
--------------------------------------------------------------------------------
| Fixed assets | 0.3 | 4.2 |
--------------------------------------------------------------------------------
| Interest-bearing assets | - | 0.2 |
--------------------------------------------------------------------------------
| Tax liabilities | - | -0.5 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | - | -1.1 |
--------------------------------------------------------------------------------
| Minority interests | 0.1 | - |
--------------------------------------------------------------------------------
| Fair Value of Net Assets | 0.4 | 2.8 |
--------------------------------------------------------------------------------
| Goodwill | - | - |
--------------------------------------------------------------------------------
| Total Purchase Consideration | 0.4 | 2.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Disposal of Subsidiary Companies | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | - | 0.1 |
--------------------------------------------------------------------------------
| Working capital | - | 0.3 |
--------------------------------------------------------------------------------
| Fixed assets | - | 0.0 |
--------------------------------------------------------------------------------
| Interest-bearing assets | - | - |
--------------------------------------------------------------------------------
| Tax liabilities | - | -0.4 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | - | - |
--------------------------------------------------------------------------------
| Minority interests | - | - |
--------------------------------------------------------------------------------
| Net Assets in Divested Companies | - | 0.0 |
--------------------------------------------------------------------------------
| Income Statement capital gain | - | 0.6 |
--------------------------------------------------------------------------------
| Total Disposal Consideration Received in | - | 0.6 |
| Cash | | |
--------------------------------------------------------------------------------
Property, Plant and Equipment, Intangible Assets and Goodwill
--------------------------------------------------------------------------------
| EUR million | 2007 | 1-3/07 | 1-3/08 |
--------------------------------------------------------------------------------
| Carrying value at 1 January | 10 440.4 | 10 440.4 | 7 232.4 |
--------------------------------------------------------------------------------
| Acquisition of subsidiary companies | 10.7 | 0.3 | 4.2 |
--------------------------------------------------------------------------------
| Additions | 770.2 | 96.7 | 126.0 |
--------------------------------------------------------------------------------
| Additions in biological assets | 50.2 | 12.2 | 9.7 |
--------------------------------------------------------------------------------
| Change in emission rights | -92.9 | 4.2 | 80.5 |
--------------------------------------------------------------------------------
| Disposals | -52.9 | -6.4 | -13.0 |
--------------------------------------------------------------------------------
| Disposals of subsidiary companies | -1 780.0 | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| Discontinued operations | | | -291.7 |
--------------------------------------------------------------------------------
| Depreciation, amortisation and | -1 529.6 | -221.3 | -174.7 |
| impairment, Continuing Operations | | | |
--------------------------------------------------------------------------------
| Depreciation, amortisation and | -351.7 | -52.1 | -17.2 |
| impairment, Discontinued Operations | | | |
--------------------------------------------------------------------------------
| Translation difference and other | -232.0 | -90.0 | 0.7 |
--------------------------------------------------------------------------------
| Balance Sheet Total | 7 232.4 | 10 184.0 | 6 956.9 |
--------------------------------------------------------------------------------
Borrowings
--------------------------------------------------------------------------------
| EUR million | 31 Dec | 31 Mar 2007 | 31 Mar 2008 |
| | 2007 | | |
--------------------------------------------------------------------------------
| Non-current borrowings | 3 354.8 | 4 141.0 | 3 177.7 |
--------------------------------------------------------------------------------
| Current borrowings | 1 086.6 | 1 337.9 | 710.9 |
--------------------------------------------------------------------------------
| | 4 441.4 | 5 478.9 | 3 888.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | 2007 | 1-3/07 | 1-3/08 |
--------------------------------------------------------------------------------
| Carrying value at 1 January | 5 227.9 | 5 247.5 | 4 441.4 |
--------------------------------------------------------------------------------
| Debt acquired with new subsidiaries | 1.2 | - | 1.1 |
--------------------------------------------------------------------------------
| Debt disposed with sold | -1 019.3 | - | - |
| subsidiaries | | | |
--------------------------------------------------------------------------------
| Proceeds from / payments of | 358.3 | -95.9 | -102.6 |
| borrowings (net) | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | - | - | -438.9 |
--------------------------------------------------------------------------------
| Translation difference and other | -126.7 | 327.3 | -12.4 |
--------------------------------------------------------------------------------
| Total Borrowings | 4 441.4 | 5 478.9 | 3 888.6 |
--------------------------------------------------------------------------------
Discontinued Operations
--------------------------------------------------------------------------------
| EUR million | Q1/08 |
--------------------------------------------------------------------------------
| Sales | 529.6 |
--------------------------------------------------------------------------------
| Operating costs | -519.7 |
--------------------------------------------------------------------------------
| Operating profit before remeasurement to fair value | 9.9 |
--------------------------------------------------------------------------------
| Remeasurement to fair value | - |
--------------------------------------------------------------------------------
| Operating profit | 9.9 |
--------------------------------------------------------------------------------
| Net financial items | -3.7 |
--------------------------------------------------------------------------------
| Profit before tax | 6.2 |
--------------------------------------------------------------------------------
| Tax related to operations | -1.5 |
--------------------------------------------------------------------------------
| Profit after tax from a discontinued operation | 4.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash provided by operating activities | 13.5 |
--------------------------------------------------------------------------------
| Net cash used in investing activities | -1.5 |
--------------------------------------------------------------------------------
| Net cash provided by financing activities | 0.4 |
--------------------------------------------------------------------------------
| Net increase (decrease) in cash and cash equivalents | 12.4 |
--------------------------------------------------------------------------------
Condensed Consolidated Balance Sheet
--------------------------------------------------------------------------------
| EUR million | | 31 Dec 07 | 31 Mar 07 | 31 Mar 08 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Assets | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Fixed Assets and Other | | | | |
| Non-current Investments | | | | |
--------------------------------------------------------------------------------
| Fixed assets | O | 7 138.5 | 9 957.5 | 6 782.8 |
--------------------------------------------------------------------------------
| Biological assets | O | 88.7 | 124.2 | 88.3 |
--------------------------------------------------------------------------------
| Emission rights | O | 5.2 | 102.3 | 85.8 |
--------------------------------------------------------------------------------
| Investment in associated | O | 1 154.5 | 868.3 | 1 141.4 |
| companies | | | | |
--------------------------------------------------------------------------------
| Available-for-sale: Listed | I | 161.8 | 42.6 | 134.2 |
| securities | | | | |
--------------------------------------------------------------------------------
| Available-for-sale: Unlisted | O | 1 260.8 | 845.2 | 1 130.1 |
| shares | | | | |
--------------------------------------------------------------------------------
| Non-current loan receivables | I | 126.5 | 127.0 | 127.5 |
--------------------------------------------------------------------------------
| Deferred tax assets | T | 63.7 | 60.0 | 53.9 |
--------------------------------------------------------------------------------
| Other non-current assets | O | 22.6 | 58.2 | 26.5 |
--------------------------------------------------------------------------------
| | | 10 022.3 | 12 185.3 | 9 570.5 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current Assets | | | | |
--------------------------------------------------------------------------------
| Inventories | O | 1 992.6 | 2 126.9 | 1 927.3 |
--------------------------------------------------------------------------------
| Tax receivables | T | 34.3 | 118.4 | 33.4 |
--------------------------------------------------------------------------------
| Operative receivables | O | 2 063.1 | 2 442.8 | 1 860.7 |
--------------------------------------------------------------------------------
| Interest-bearing receivables | I | 227.8 | 158.2 | 140.7 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | I | 970.7 | 525.5 | 205.7 |
--------------------------------------------------------------------------------
| | | 5 288.5 | 5 371.8 | 4 167.8 |
--------------------------------------------------------------------------------
| Assets of disposal group | | - | - | 1 052.3 |
| classified as held for sale | | | | |
--------------------------------------------------------------------------------
| | | 5 288.5 | 5 371.8 | 5 220.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Assets | | 15 310.8 | 17 557.1 | 14 790.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity and Liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity attributable to Company | | 7 476.1 | 7 642.0 | 7 016.6 |
| shareholders | | | | |
--------------------------------------------------------------------------------
| Minority interests | | 71.9 | 106.2 | 69.2 |
--------------------------------------------------------------------------------
| Total Equity | | 7 548.0 | 7 748.2 | 7 085.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current Liabilities | | | | |
--------------------------------------------------------------------------------
| Post-employment benefit | O | 327.3 | 697.8 | 304.2 |
| provisions | | | | |
--------------------------------------------------------------------------------
| Other provisions | O | 135.9 | 209.9 | 115.7 |
--------------------------------------------------------------------------------
| Deferred tax liabilities | T | 582.0 | 795.7 | 545.1 |
--------------------------------------------------------------------------------
| Non-current debt | I | 3 354.8 | 4 141.0 | 3 177.7 |
--------------------------------------------------------------------------------
| Other non-current operative | O | 170.2 | 201.2 | 220.5 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| | | 4 570.2 | 6 045.6 | 4 363.2 |
--------------------------------------------------------------------------------
| Current Liabilities | | | | |
--------------------------------------------------------------------------------
| Current portion of long-term | I | 513.1 | 650.6 | 366.1 |
| debt | | | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | I | 573.5 | 687.3 | 344.8 |
--------------------------------------------------------------------------------
| Operative liabilities | O | 1 971.4 | 2 154.4 | 1 665.1 |
--------------------------------------------------------------------------------
| Tax liabilities | T | 134.6 | 271.0 | 106.4 |
--------------------------------------------------------------------------------
| | | 3 192.6 | 3 763.3 | 2 482.4 |
--------------------------------------------------------------------------------
| Liabilities directly associated | | - | - | 859.2 |
| with the assets classified as | | | | |
| held for sale | | | | |
--------------------------------------------------------------------------------
| | | 3 192.6 | 3 763.3 | 3 341.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Liabilities | | 7 762.8 | 9 808.9 | 7 704.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Equity and Liabilities | | 15 310.8 | 17 557.1 | 14 790.6 |
--------------------------------------------------------------------------------
Items designated with “O” comprise Operating Capital
Items designated with “I” comprise Interest-bearing Net Liabilities
Items designated with “T” comprise Net Tax Liabilities
Changes in Group Shareholders' Equity
--------------------------------------------------------------------------------
| EUR million | Share | Capit | Treas | OCI | CTA | Retain | Total |
| | Capit | al | ury | | | ed | |
| | al | Reser | Share | | | Earnin | |
| | | ves | s | | | gs | |
--------------------------------------------------------------------------------
| Balance at 31 | 1 | 784.8 | -259. | 468.0 | -127. | 4 | 7 |
| December 2005 | 382.1 | | 9 | | 1 | 972.2 | 220.1 |
--------------------------------------------------------------------------------
| Cancellation of | -39.9 | -15.9 | 249.1 | - | - | -193.3 | 0.0 |
| Stora Enso Oyj | | | | | | | |
| shares | | | | | | | |
--------------------------------------------------------------------------------
| Dividend (EUR 0.45 | - | - | - | - | - | -354.9 | -354. |
| per share) | | | | | | | 9 |
--------------------------------------------------------------------------------
| Options exercised | - | -2.0 | 0.3 | - | - | - | -1.7 |
--------------------------------------------------------------------------------
| Buy-out of minority | - | - | - | - | - | -0.1 | -0.1 |
| interests | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for the | - | - | - | - | -5.8 | 585.0 | 579.2 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Net expense | - | - | - | 267.6 | 0.9 | 88.5 | 357.0 |
| recognised directly | | | | | | | |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance at 31 | 1 | 766.9 | -10.5 | 735.6 | -132. | 5 | 7 |
| December 2006 | 342.2 | | | | 0 | 097.4 | 799.6 |
--------------------------------------------------------------------------------
| Dividend (EUR 0.45 | - | - | - | - | - | -354.9 | -354. |
| per share) | | | | | | | 9 |
--------------------------------------------------------------------------------
| Options exercised | - | -0.5 | 0.1 | - | - | - | -0.4 |
--------------------------------------------------------------------------------
| Buy-out of minority | - | - | - | - | - | - | - |
| interests | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for the | - | - | - | - | - | 219.2 | 219.2 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Net income | - | - | - | 23.7 | -45.2 | - | -21.5 |
| recognised directly | | | | | | | |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance At 31 March | 1 | 766.4 | -10.4 | 759.3 | -177. | 4 | 7 |
| 2007 | 342.2 | | | | 2 | 961.7 | 642.0 |
--------------------------------------------------------------------------------
| Dividend (EUR 0.45 | - | - | - | - | - | - | - |
| per share) | | | | | | | |
--------------------------------------------------------------------------------
| Options exercised | - | -1.9 | 0.2 | - | 8.5 | -8.5 | -1.7 |
--------------------------------------------------------------------------------
| Buy-out of minority | - | - | - | - | - | 4.5 | 4.5 |
| interests | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for the | - | - | - | - | 52.7 | -433.9 | -381. |
| period | | | | | | | 2 |
--------------------------------------------------------------------------------
| Net income | - | - | - | 201.1 | 0.4 | 11.0 | 212.5 |
| recognised directly | | | | | | | |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance at 31 | 1 | 764.5 | -10.2 | 960.4 | -115. | 4 | 7 |
| December 2007 | 342.2 | | | | 6 | 534.8 | 476.1 |
--------------------------------------------------------------------------------
| Dividend (EUR 0.45 | - | - | - | - | - | -354.9 | -354. |
| per share) | | | | | | | 9 |
--------------------------------------------------------------------------------
| Options exercised | - | - | - | - | - | - | 0.0 |
--------------------------------------------------------------------------------
| Buy-out of minority | - | - | - | - | - | - | 0.0 |
| interests | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for the | - | - | - | - | - | 70.5 | 70.5 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Net income | - | - | - | -134. | -41.0 | - | -175. |
| recognised directly | | | | 1 | | | 1 |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance at 31 March | 1 | 764.5 | -10.2 | 826.3 | -156. | 4 | 7 |
| 2008 | 342.2 | | | | 6 | 250.4 | 016.6 |
--------------------------------------------------------------------------------
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
Commitments and Contingencies
--------------------------------------------------------------------------------
| EUR million | 31 Dec 07 | 31 Mar 07 | 31 Mar 08 |
--------------------------------------------------------------------------------
| On Own Behalf | | | |
--------------------------------------------------------------------------------
| Pledges given | 0.8 | 0.8 | 0.8 |
--------------------------------------------------------------------------------
| Mortgages | 135.9 | 137.0 | 136.1 |
--------------------------------------------------------------------------------
| On Behalf of Associated | | | |
| Companies | | | |
--------------------------------------------------------------------------------
| Mortgages | | | |
--------------------------------------------------------------------------------
| Guarantees | 249.7 | 281.2 | 225.7 |
--------------------------------------------------------------------------------
| On Behalf of Others | | | |
--------------------------------------------------------------------------------
| Guarantees | 118.5 | 10.3 | 140.3 |
--------------------------------------------------------------------------------
| Other Commitments, Own | | | |
--------------------------------------------------------------------------------
| Leasing commitments, in next 12 | 30.6 | 30.5 | 30.3 |
| months | | | |
--------------------------------------------------------------------------------
| Leasing commitments, after next | 112.2 | 123.4 | 110.0 |
| 12 months | | | |
--------------------------------------------------------------------------------
| Pension liabilities | 0.2 | 0.2 | 0.2 |
--------------------------------------------------------------------------------
| Other commitments | 22.5 | 18.6 | 20.8 |
--------------------------------------------------------------------------------
| Total | 670.4 | 602.0 | 664.2 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Pledges given | 0.8 | 0.8 | 0.8 |
--------------------------------------------------------------------------------
| Mortgages | 135.9 | 137.0 | 136.1 |
--------------------------------------------------------------------------------
| Guarantees | 368.2 | 291.5 | 366.0 |
--------------------------------------------------------------------------------
| Leasing commitments | 142.8 | 153.9 | 140.3 |
--------------------------------------------------------------------------------
| Pension liabilities | 0.2 | 0.2 | 0.2 |
--------------------------------------------------------------------------------
| Other commitments | 22.5 | 18.6 | 20.8 |
--------------------------------------------------------------------------------
| Total | 670.4 | 602.0 | 664.2 |
--------------------------------------------------------------------------------
Purchase Agreement Commitments
--------------------------------------------------------------------------------
| EUR million | Scheduled Contract Payments |
--------------------------------------------------------------------------------
| Type of Supply | Contract | 2008 | 2009-10 | 2011-12 | 2013+ |
| | Total | | | | |
--------------------------------------------------------------------------------
| | Fibre | 2 248 | 268 | 436 | 403 | 1 141 |
--------------------------------------------------------------------------------
| | Energy | 2 084 | 273 | 603 | 330 | 878 |
--------------------------------------------------------------------------------
| | Logistics | 590 | 65 | 141 | 115 | 269 |
--------------------------------------------------------------------------------
| | Other Production | 782 | 76 | 85 | 57 | 564 |
| | costs | | | | | |
--------------------------------------------------------------------------------
| | | 5 704 | 682 | 1 265 | 905 | 2 852 |
--------------------------------------------------------------------------------
| Capital Expenditure | 209 | 132 | 77 | - | - |
--------------------------------------------------------------------------------
| Total Contractual | 5 913 | 814 | 1 342 | 905 | 2 852 |
| Commitments | | | | | |
| at 31 March | | | | | |
| 2008 | | | | | |
--------------------------------------------------------------------------------
Net Fair Values of Derivative Financial Instruments
--------------------------------------------------------------------------------
| EUR million | 31 Dec 07 | 31 Mar 07 | 31 Mar 08 |
--------------------------------------------------------------------------------
| | Net | Net | Positive | Negative | Net |
| | Fair | Fair | F | Fair | Fair |
| | Va | Va | air | Valu | Values |
| | lues | lues | Values | es | |
--------------------------------------------------------------------------------
| Interest | 59.4 | 58.0 | 159.5 | -33.9 | 125.6 |
| rate swaps | | | | | |
--------------------------------------------------------------------------------
| Interest | -6.1 | -1.0 | 0.7 | -16.0 | -15.3 |
| rate options | | | | | |
--------------------------------------------------------------------------------
| Cross-curren | | -1.0 | | | |
| cy swaps | | | | | |
--------------------------------------------------------------------------------
| Forward | -19.7 | 1.1 | 10.9 | -47.4 | -36.5 |
| contracts | | | | | |
--------------------------------------------------------------------------------
| FX options | 17.2 | 5.3 | 42.2 | -7.8 | 34.4 |
--------------------------------------------------------------------------------
| Commodity | 92.0 | 37.0 | 58.8 | -5.2 | 53.6 |
| contracts | | | | | |
--------------------------------------------------------------------------------
| Equity swaps | -34.3 | 25.5 | 0.0 | -82.6 | -82.6 |
--------------------------------------------------------------------------------
| Equity | -0.6 | - | 0.0 | -2.6 | -2.6 |
| options | | | | | |
--------------------------------------------------------------------------------
| Total | 107.9 | 124.9 | 272.1 | -195.5 | 76.6 |
--------------------------------------------------------------------------------
Nominal Values of Derivative Financial Instruments
--------------------------------------------------------------------------------
| EUR million | 31 Dec 07 | 31 Mar 07 | 31 Mar 08 |
--------------------------------------------------------------------------------
| Interest Rate | | | |
| Derivatives | | | |
--------------------------------------------------------------------------------
| Interest rate | | | |
| swaps | | | |
--------------------------------------------------------------------------------
| Maturity under 1 | 69.9 | 83.0 | 76.5 |
| year | | | |
--------------------------------------------------------------------------------
| Maturity 2-5 | 2 164.4 | 1 758.3 | 2 081.1 |
| years | | | |
--------------------------------------------------------------------------------
| Maturity 6-10 | 2 470.9 | 948.5 | 2 326.2 |
| years | | | |
--------------------------------------------------------------------------------
| Maturity over 10 | | 300.3 | |
| years | | | |
--------------------------------------------------------------------------------
| | 4 705.2 | 3 090.1 | 4 483.8 |
--------------------------------------------------------------------------------
| Interest rate | 491.6 | 659.9 | 339.6 |
| options | | | |
--------------------------------------------------------------------------------
| Total | 5 196.8 | 3 750.0 | 4 823.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Foreign Exchange | | | |
| Derivatives | | | |
--------------------------------------------------------------------------------
| Cross-currency | | 6.8 | |
| swap agreements | | | |
--------------------------------------------------------------------------------
| Forward contracts | 3 114.1 | 1 680.7 | 2 135.3 |
--------------------------------------------------------------------------------
| FX Options | 2 607.7 | 1 351.8 | 2 147.1 |
--------------------------------------------------------------------------------
| Total | 5 721.8 | 3 039.3 | 4 282.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commodity | | | |
| Derivatives | | | |
--------------------------------------------------------------------------------
| Commodity | 417.2 | 568.8 | 381.1 |
| contracts | | | |
--------------------------------------------------------------------------------
| Total | 417.2 | 568.8 | 381.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity swaps | | | |
--------------------------------------------------------------------------------
| Equity swaps | 213.9 | 270.9 | 217.2 |
--------------------------------------------------------------------------------
| Equity options | 22.0 | 0.0 | 21.9 |
--------------------------------------------------------------------------------
| Total | 235.9 | 270.9 | 239.1 |
--------------------------------------------------------------------------------
Sales by Segment
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 |
--------------------------------------------------------------------------------
| Newsprint and Book | 438.7 | 429.9 | 430.0 | 436.3 | 1 734.9 | 386.5 |
| Paper | | | | | | |
--------------------------------------------------------------------------------
| Magazine Paper | 566.6 | 552.9 | 587.3 | 589.5 | 2 296.3 | 547.3 |
--------------------------------------------------------------------------------
| Fine Paper | 577.0 | 522.8 | 529.7 | 526.7 | 2 156.2 | 545.2 |
--------------------------------------------------------------------------------
| Consumer Board | 589.6 | 570.1 | 562.1 | 579.1 | 2 300.9 | 574.4 |
--------------------------------------------------------------------------------
| Industrial | 266.1 | 274.2 | 267.8 | 275.4 | 1 083.5 | 275.5 |
| Packaging | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | 472.3 | 525.7 | 461.4 | 393.7 | 1 853.1 | 378.6 |
--------------------------------------------------------------------------------
| Other and | 90.9 | 114.3 | 38.4 | 180.0 | 423.6 | 124.3 |
| elimination | | | | | | |
--------------------------------------------------------------------------------
| Continuing | 3 | 2 | 2 | 2 | 11 848.5 | 2 831.8 |
| Operations | 001.2 | 989.9 | 876.7 | 980.7 | | |
--------------------------------------------------------------------------------
| Discontinued | 1 | 963.7 | 959.7 | 969.1 | 3 913.3 | 529.6 |
| Operation | 020.8 | | | | | |
--------------------------------------------------------------------------------
| Elimination | -166.6 | -148.4 | -151.5 | -151.8 | -618.3 | -133.3 |
--------------------------------------------------------------------------------
| Total | 3 | 3 | 3 | 3 | 15 143.5 | 3 228.1 |
| | 855.4 | 805.2 | 684.9 | 798.0 | | |
--------------------------------------------------------------------------------
Operating Profit by Segment excluding NRI and Fair Valuations
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 |
--------------------------------------------------------------------------------
| Newsprint and Book | 61.1 | 50.2 | 52.2 | 48.4 | 211.9 | 26.4 |
| Paper | | | | | | |
--------------------------------------------------------------------------------
| Magazine Paper | 9.4 | 8.4 | 17.5 | 15.6 | 50.9 | 27.2 |
--------------------------------------------------------------------------------
| Fine Paper | 55.1 | 38.5 | 34.4 | 35.7 | 163.7 | 37.3 |
--------------------------------------------------------------------------------
| Consumer Board | 72.4 | 29.0 | 27.0 | 29.6 | 158.0 | 42.5 |
--------------------------------------------------------------------------------
| Industrial | 29.2 | 29.6 | 24.7 | 28.4 | 111.9 | 27.6 |
| Packaging | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | 54.8 | 59.3 | 37.1 | -0.5 | 150.7 | -23.4 |
--------------------------------------------------------------------------------
| Other | -11.2 | -12.1 | -11.1 | -25.9 | -60.3 | -13.2 |
--------------------------------------------------------------------------------
| Operating Profit | 270.8 | 202.9 | 181.8 | 131.3 | 786.8 | 124.4 |
| excl. NRI by | | | | | | |
| Segment | | | | | | |
--------------------------------------------------------------------------------
| Share of results of | 24.1 | 20.0 | 17.4 | 12.8 | 74.3 | 15.7 |
| associated | | | | | | |
| companies excl. | | | | | | |
| fair valuations | | | | | | |
--------------------------------------------------------------------------------
| Operating Profit | 294.9 | 222.9 | 199.2 | 144.1 | 861.1 | 140.1 |
| excl. NRI and Fair | | | | | | |
| Valuations | | | | | | |
--------------------------------------------------------------------------------
| Fair valuations | 15.7 | 21.3 | 44.9 | 183.8 | 265.7 | -15.1 |
--------------------------------------------------------------------------------
| Operating profit | 310.6 | 244.2 | 244.1 | 327.9 | 1 126.8 | 125.0 |
| excl. NRI | | | | | | |
--------------------------------------------------------------------------------
| NRI | -12.0 | - | -549.4 | -388.5 | -949.9 | - |
--------------------------------------------------------------------------------
| Operating Profit | 298.6 | 244.2 | -305.3 | -60.6 | 176.9 | 125.0 |
| (IFRS) | | | | | | |
--------------------------------------------------------------------------------
| Net financial items | -36.1 | -53.0 | -23.9 | -43.7 | -156.7 | -41.9 |
--------------------------------------------------------------------------------
| Profit before Tax | 262.5 | 191.2 | -329.2 | -104.3 | 20.2 | 83.1 |
| and Minority | | | | | | |
| Interests | | | | | | |
--------------------------------------------------------------------------------
| Income tax expense | -65.3 | -42.3 | 54.7 | 44.1 | -8.8 | -16.6 |
--------------------------------------------------------------------------------
| Net Profit from | 197.2 | 148.9 | -274.5 | -60.2 | 11.4 | 66.5 |
| Continuing | | | | | | |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Discontinued | | | | | | |
| Operation | | | | | | |
--------------------------------------------------------------------------------
| Net profit after | 25.3 | -5.0 | -166.6 | -77.5 | -223.8 | 4.7 |
| tax for the period | | | | | | |
| from discontinued | | | | | | |
| operations | | | | | | |
--------------------------------------------------------------------------------
| Net Profit | 222.5 | 143.9 | -441.1 | -137.7 | -212.4 | 71.2 |
--------------------------------------------------------------------------------
NRI by Segment
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 |
--------------------------------------------------------------------------------
| Newsprint and Book | - | - | - | -110.0 | -110.0 | - |
| Paper | | | | | | |
--------------------------------------------------------------------------------
| Magazine Paper | - | - | -218.0 | -231.0 | -449.0 | - |
--------------------------------------------------------------------------------
| Fine Paper | - | - | -32.6 | 21.0 | -11.6 | - |
--------------------------------------------------------------------------------
| Consumer Board | - | - | -186.8 | -12.5 | -199.3 | - |
--------------------------------------------------------------------------------
| Industrial | - | - | -5.9 | -1.0 | -6.9 | - |
| Packaging | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | -12.0 | - | -106.1 | - | -118.1 | - |
--------------------------------------------------------------------------------
| Other | - | - | - | -55.0 | -55.0 | - |
--------------------------------------------------------------------------------
| Continuing | -12.0 | - | -549.4 | -388.5 | -949.9 | - |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Discontinued | 44.0 | 12.8 | - | -28.3 | 28.5 | - |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Total | 32.0 | 12.8 | -549.4 | -416.8 | -921.4 | - |
--------------------------------------------------------------------------------
Operating Profit by Segment
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 |
--------------------------------------------------------------------------------
| Newsprint and Book | 61.1 | 50.2 | 52.2 | -61.6 | 101.9 | 26.4 |
| Paper | | | | | | |
--------------------------------------------------------------------------------
| Magazine Paper | 9.4 | 8.4 | -200.5 | -215.4 | -398.1 | 27.2 |
--------------------------------------------------------------------------------
| Fine Paper | 55.1 | 38.5 | 1.8 | 56.7 | 152.1 | 37.3 |
--------------------------------------------------------------------------------
| Consumer Board | 72.4 | 29.0 | -159.8 | 17.1 | -41.3 | 42.5 |
--------------------------------------------------------------------------------
| Industrial | 29.2 | 29.6 | 18.8 | 27.4 | 105.0 | 27.6 |
| Packaging | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | 42.8 | 59.3 | -69.0 | -0.5 | 32.6 | -23.4 |
--------------------------------------------------------------------------------
| Other* | 4.5 | 9.2 | -14.2 | -116.1 | -116.6 | -36.5 |
--------------------------------------------------------------------------------
| Share of results of | 24.1 | 20.0 | 65.4 | 231.8 | 341.3 | 23.9 |
| associated | | | | | | |
| companies* | | | | | | |
--------------------------------------------------------------------------------
| Operating Profit | 298.6 | 244.2 | -305.3 | -60.6 | 176.9 | 125.0 |
| (IFRS) | | | | | | |
--------------------------------------------------------------------------------
| Net financial items | -36.1 | -53.0 | -23.9 | -43.7 | -156.7 | -41.9 |
--------------------------------------------------------------------------------
| Profit before Tax | 262.5 | 191.2 | -329.2 | -104.3 | 20.2 | 83.1 |
| and Minority | | | | | | |
| Interests | | | | | | |
--------------------------------------------------------------------------------
| Income tax expense | -65.3 | -42.3 | 54.7 | 44.1 | -8.8 | -16.6 |
--------------------------------------------------------------------------------
| Net Profit from | 197.2 | 148.9 | -274.5 | -60.2 | 11.4 | 66.5 |
| Continuing | | | | | | |
| Operations | | | | | | |
--------------------------------------------------------------------------------
| Discontinued | | | | | | |
| Operation | | | | | | |
--------------------------------------------------------------------------------
| Net profit after | 25.3 | -5.0 | -166.6 | -77.5 | -223.8 | 4.7 |
| tax for the period | | | | | | |
| from discontinued | | | | | | |
| operations | | | | | | |
--------------------------------------------------------------------------------
| Net Profit | 222.5 | 143.9 | -441.1 | -137.7 | -212.4 | 71.2 |
--------------------------------------------------------------------------------
* Includes fair valuations
Stora Enso Shares
--------------------------------------------------------------------------------
| Closing Price | Helsinki, EUR | Stockholm, SEK |
--------------------------------------------------------------------------------
| | A share | R share | A share | R share |
--------------------------------------------------------------------------------
| January | 9.25 | 9.24 | 87.75 | 87.50 |
--------------------------------------------------------------------------------
| February | 8.60 | 8.30 | 81.00 | 78.00 |
--------------------------------------------------------------------------------
| March | 7.40 | 7.31 | 69.25 | 68.75 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Trading Volume | Helsinki | Stockholm |
--------------------------------------------------------------------------------
| | A share | R share | A share | R share |
--------------------------------------------------------------------------------
| January | 150 942 | 101 147 695 | 146 019 | 9 124 791 |
--------------------------------------------------------------------------------
| February | 125 644 | 89 051 314 | 175 672 | 9 990 076 |
--------------------------------------------------------------------------------
| March | 211 090 | 107 141 366 | 159 510 | 15 216 403 |
--------------------------------------------------------------------------------
| Total | 487 676 | 297 340 375 | 481 201 | 34 331 270 |
--------------------------------------------------------------------------------
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 2007.
The planned sale of the Merchants segment has been accounted for as a
discontinued operation that is classified as ‘Held for Sale'. A discontinued
operation represents a separate major line of business or geographical area for
which the assets less liabilities and net financial results may be distinguished
physically, operationally and for financial reporting purposes. Assets are
classified as ‘Held for Sale' when it is highly probable that the carrying
amount of the assets will be recovered through a sale transaction rather than
continuing use. These assets have been measured at the lower of carrying value
and fair value less costs to sell. The closing sales consideration is subject to
fair value changes and therefore the final outcome of the transaction is subject
to change.
Changes in Segment Reporting and Reclassification in 2007
Stora Enso has modified its segment reporting format for operating profit from
the first quarter of 2008 onwards: the share of results of associated companies
and certain fair valuations will no longer be included in business segments'
operating profits; they will be reported as separate items to increase the
transparency of segmental reporting and facilitate comparisons between different
periods. The fair valuation items include share-based compensation, Total Return
Swaps (TRS), CO2 emission rights and IAS 41 forest asset valuations mainly
related to associated companies. Comparative operating profits of segments for
2007 have been reclassified. The share of results of associated companies, and
non-recurring accounting items and fair valuations were EUR 39.8 million and EUR
340.0 million in Q1/2007 and Q1-Q4/2007, respectively. The reclassification has
no effect on Group operating profit or Group profit before tax.
Calculation of Key Figures
Return on capital employed,
ROCE (%) 100 x Operating profit____
Capital employed 1) 2)
Return on operating capital, 100 x Operating profit____
ROOC (%) Operating capital 1) 2)
Return on equity, 100 x Profit before tax and minority items - taxes
ROE (%) Total Equity 2)
Equity ratio (%) 100 x Total Equity
Total assets
Interest-bearing net liabilities Interest-bearing liabilities -
interest-bearing assets
Debt/Equity ratio Interest-bearing net liabilities
Equity
1) Capital employed = Operating capital - Net tax liabilities
2) Average for the financial period
For further information, please contact:
Jouko Karvinen, CEO, tel. +358 2046 21410
Hannu Ryöppönen, CFO, tel. +358 2046 21450
Kari Vainio, EVP, Corporate Communications, tel. +44 7799 348 197
Keith B Russell, SVP, Investor Relations, tel. +44 7775 788 659
Ulla Paajanen-Sainio, VP, Investor Relations and Financial Communications,
tel.
+358 40 763 8767
Stora Enso's second quarter results 2008 will be published on 24 July 2008.
It should be noted that certain statements herein which are not historical
facts, including, without limitation those regarding expectations for market
growth and developments; expectations for growth and profitability; and
statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or
similar expressions, are forward-looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995. Since these
statements are based on current plans, estimates and projections, they involve
risks and uncertainties, which may cause actual results to materially differ
from those expressed in such forward-looking statements. Such factors include,
but are not limited to: (1) operating factors such as continued success of
manufacturing activities and the achievement of efficiencies therein, continued
success of product development, acceptance of new products or services by the
Group's targeted customers, success of the existing and future collaboration
arrangements, changes in business strategy or development plans or targets,
changes in the degree of protection created by the Group's patents and other
intellectual property rights, the availability of capital on acceptable terms;
(2) industry conditions, such as strength of product demand, intensity of
competition, prevailing and future global market prices for the Group's products
and the pricing pressures thereto, price fluctuations in raw materials,
financial condition of the customers and the competitors of the Group, the
potential introduction of competing products and technologies by competitors;
and (3) general economic conditions, such as rates of economic growth in the
Group's principal geographic markets or fluctuations in exchange and interest
rates.
www.storaenso.com
www.storaenso.com/investors
STORA ENSO OYJ
p.p. Jussi Siitonen Jukka Marttila
