Stora Enso Annual General Meeting, 2009-04-01

Annual General Meeting1 April 2009

Annual General Meeting 1/4/2009 2

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.

CEO’s report


2008 summary

• First half– High cost inflation– Stable markets

• Second half– Weakening markets– Inflation still a burden

• Our actions– Cut capacity– Preserve cash flow


Paper deliveries in Western Europe 2000–2/2009

2 500 000

2 700 000

2 900 000

3 100 000

3 300 000

3 500 000

3 700 000

3 900 000

4 100 000

4 300 000

01.00 07.00 01.01 07.01 01.02 07.02 01.03 07.03 01.04 07.04 01.05 07.05 01.06 07.06 01.07 07.07 01.08 07.08 01.09

Tonnes

Sources: PPPC (Magazine paper and Newsprint)Cepifine (Fine Paper)


Income statement Continuing operations

EUR million 2008 2007 Change EUR million

Change %

Sales 11 028.8 11 848.5 -819.7 -6.9

EBITDA excl. NRI and fair valuations 1 027.2 1 569.9 -542.7 -34.6

Operating profit excl. NRI and fair valuations 388.4 861.1 -472.7 -54.9

Operating profit / loss (IFRS) -726.6 176.9 -903.5 n/m

Net profit / loss excl. NRI 142.8 747.3 -604.5 -80.9

Net profit / loss -679.0 12.8 -691.8 n/m

ROCE excl. NRI and fair valuations, % 4.1 8.6 -4.5 -52.3

ROCE excl. NRI, % 3.4 11.3 -7.9 -69.9

EPS excl. NRI, EUR 0.18 0.94 -0.76 -80.9

EPS, EUR -0.86 0.01 -0.87 n/m


Change in EPS (Continuing operations) 2007–2008, including closed units

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2007 2008

* 2007 includes 0.32 EUR impact of fair valuations and related items, which include Total Return Swaps (TRS), synthetic options and CO2 emission rights, and fair valuations of biological assets mainly related to associated companies’ forest assets

Fibre Depr OtherFixed Costs

AssocSales Price

Sales Volume

Sales FX

Energy

EUR million

+0.18

excluding non-recurring items

-0.11 +0.12

+0.09

+0.94*

+0.10 -0.17

-0.27

-0.12 -0.03 -0.05


Total cost comparison, 2008 vs 2006

Cost savings in 2008 compared to 2006 cost level• Personnel

10% +1.5 margin points• Other fixed

18% +2.3 margin points• Production services

14% +1.3 margin points• Depreciation

22% +1.5 margin points• TOTAL

15% +6.5 margin points

Cost increase in 2008 compared to 2006 cost level• Fibre

22% -4.6 margin points• Energy

17% -1.3 margin points• Chemicals

14% -1.2 margin points• TOTAL

19% -7.0 margin pointsSales volume & price 4% -3.3 margin points

Total costs in million Euros. / Continuing operations = Excluding discontinued operations (SENA, Merchants)Excluding non-recurring items

Total costs difference 2006 vs 2008 -3.8 margin points


Capital structure

EUR million 31 Dec 08 31 Dec 07 Change EUR million

Change %

Fixed assets 6 853.7 8 493.2 -1 639.5 -19.3

Associated companies 1 042.5 1 154.5 -112.0 -9.7Operative working capital 1 674.7 2 084.4 -409.7 -19.7Non-current interest-free items, net -513.6 -493.3 -20.3 4.1Operating capital 9 057.3 11 238.8 -2 181.5 -19.4Net tax liabilities -282.8 -618.6 335.8 -54.3Capital employed 8 774.5 10 620.2 -1 845.7 -17.4

Equity 5 594.0 7 593.6 -1 999.6 -26.3Minority Interest 56.5 71.9 -15.4 -21.4Net interest-bearing liabilities 3 124.0 2 954.7 169.3 5.7Financing total 8 774.5 10 620.2 -1 845.7 -17.4Debt/Equity ratio 0.56 0.39 0.17 43.5


Reclassification of equity components

• Incorrect classification related to the cancellation of repurchased shares in 2001, repeated in 2002–2006

• EUR 1 512 million reclassified from retained earnings to share premium account

• No impact on the total equity in the Parent Company or in the Group


Operating cash flow Continuing operations, rolling 4 quarters

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08

EUR million Cash flow from operations excl provision payments


Actions

1. Divestment of SENA and Papyrus

2. Reduction short term debt

3. Removal Russian wood dependency

4. Two restructuring programs– Support for employees made redundant

5. Reduction of Capital Expenditures

6. Pricing push

7. Drive for cash


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2004 2005 2006 2007 2008

Balance Sheet

0,0x

0,5x

1,0x

1,5x

2,0x

2,5x

3,0x

3,5x

4,0x

4,5x

5,0x

2004 2005 2006 2007 2008

Net Debt / EBITDA Debt/Equity


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2004 2005 2006 2007 2008

Balance Sheet without Actions (Pro Forma)

0.0X

0.5X

1.0X

1.5X

2.0X

2.5X

3.0X

3.5X

4.0X

4.5X

5.0X

2004 2005 2006 2007 2008

Net Debt / EBITDA Debt/Equity

Year 2009


Safeguard cash flow & customer volumes

Newsprint and Book PaperMagazine PaperFine PaperWood Products

Order flow to lowest cost machine• independent of country• also within a country


Changes in selected cost components 2007 to 2008

Energy Costs % Personnel Costs %

-25

-15

-5

5

15

25

35

FI DE SE(SEK)

SE(EUR)*

Wood Costs %

Underlying costs for paper and board (incl pulp) Euro per tonne, excluding non-recurring items Excluding discontinued (SENA, Merchants), closed and divested operationsFX-rates in 2007 / 2008 / March 2009: EUR/SEK 9,2517 / EUR/SEK 9,6280 / EUR/SEK 10,9565* 2008 cost level in SEK converted to EUR with current FX-rate (EUR/SEK 10,9565)

-25

-15

-5

5

15

25

35

FI DE SE(SEK)

SE(EUR)*

-25

-15

-5

5

15

25

35

FI DE SE(SEK)

SE(EUR)*


Northern pulp lines are at great risk Cost Competitiveness in Rotterdam (BHKP) - Hard Wood

0

100

200

300

400

500

600

700

800

900

0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000

2008/IVEUR/t

Net Sales PriceMarch 2009 341 EUR/t

Net Sales PriceJuly 2008 464 EUR/t

Cumulative capacity, 1000 t/a

Net Sales Price = FOEX Reference Market Price – 13 % DiscountOperating rate 100%

1 USD=0.744 EUR1 EUR=1.344 USD

Source: Pöyry


Finland

• Industry situation in Europe traumatic

• Finland in a dangerous situation– total cost increase in Finland 11% from 2006 to 2008, almost

double compared to the total cost increase of the Group

• The problem is too big for anybody to solve alone

• Now it is time to work together

• We all win or we all lose


Top 15 producers of chemical pulp

0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000

UPMWeyerhaeuser

SuzanoAraucoSappi

OjiBotnia

RGM/APRILNippon Paper Group

Georgia-PacificVCP

APP/Sinar MasDomtar

Stora EnsoInternational Paper

Source: JPsmartterminalIncludes SW and HW, bleached and semi-bleached, kraft, sulfite, semichemical

Capacity 1 000 t/a


2009

• Pricing quality and cash preservation

• CAPEX reduced to EUR 400 million (EUR 700 million in 2008)

• Order flow to lowest cost production units

• Temporary lay-offs & other cost measures must continue


Our Promise – Vision and Mission

Vision:• Today we as a company, people and planet face new

challenges never before seen. The world needs a new approach to materials.

Mission:• We will win with solutions based on renewable materials.


Carbon footprint of beverage cartons and plastic bottles in Spain

0

25

50

75

100

125

150

175

200

1 L PET bottle 1 L HDPE 1 L aseptic brick carton

kg CO2 equivalents per 1000 L beverage carton

Source: IFEU Carbon Footprint of milk and juice containers in Spain, 2008 The carbon footprint calculation uses a “cradle-to-grave” approach. It covers all relevant process steps from raw material sourcing to the final waste treatment or recycling of the used packaging. Certain allocation assumptions have been made in the study.

Paperboard food tray


Long-term Demand Growth by Region through 2025 Paper and Paperboard

-1

0

1

2

3

4

5

6

7

0 20 40 60 80 100

Demand growth, %/a

Source: PöyryShare of consumption in 2006, %

JapanNorth America

Western Europe

India

Latin AmericaRest of Asia

Oceania

China

Middle EastRussia

Average 1.9%/a

Eastern EuropeAfrica

Towards the future with Biofuel development

Our planet

We do not convert native forests into plantations.

We protect rainforest.

Sustainably managed forests remove CO2

from the atmosphere and our products are carbon

storages.

All our products are 100% recyclable.


Through the storm

Past two years• Unforeseen challenges• Secure vital strengths • Capable, loyal, resilient personnel

2009• Traumatic weakening of markets• Strong cash flow, pricing quality• Cost savings efforts

Future• Fibre-based, recyclable packaging • Cost-competitive pulp from plantations• Stora Enso more efficient, more focused, ready for change

Distribution of funds


Distribution of funds

• The Board of Directors proposes to the AGM that EUR 0.20 per share, a maximum aggregate of EUR 157 907 699.80, be distributed to the shareholders from the share premium fund of the parent company.

• The distribution shall be paid after the Finnish National Board of Patents and Registration has given its consent to the decrease of the share premium fund which is expected to take place in July 2009 at the earliest.

• The Board of Directors proposes that it will be authorised to decide on record date and payment date after the consent.

• Estimated record date 31 July 2009• Estimated payment date 10 August 2009

Proposal by the Nomination Committee


Remuneration for the Members of the Board of Directors

Proposal for remuneration 2009Chairman EUR 67 500Deputy Chairman EUR 42 500Members EUR 30 000

• The Nomination Committee also proposes that 40% of the remuneration be paid in Stora Enso Series R shares purchased from the market.

At the initiative of the BOD, the remuneration is proposed to be reduced by 50% for the year 2009.


Remuneration for the Members of the Board Committees

Proposal for remuneration 2009Financial and Audit CommitteeChairman EUR 10 000Members EUR 7 000Remuneration CommitteeChairman EUR 5 000Members EUR 3 000

At the initiative of the BOD, the remuneration is proposed to bereduced by 50% for the year 2009.


Proposed Members of the Board of Directors

• Gunnar Brock

• Claes Dahlbäck

• Dominique Hériard Dubreuil

• Birgitta Kantola

• Ilkka Niemi

• Juha Rantanen

• Matti Vuoria

• Marcus Wallenberg

• Hans Stråberg


Hans Stråberg

• President and CEO of AB Electrolux– Holds a Master’s degree in Science and Engineering from the

Chalmers University of Technology in Gothenburg

• Board Member of Roxtec, Swedish Engineering Industries, Confederation of Swedish Enterprise and AB Electrolux


Appointment of Nomination Committee

Duties• The Nomination Committee proposes that the AGM 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.

Members:• The Chairman of the Board of Directors• The Vice Chairman of the Board of Directors • Two members appointed by the two largest shareholders (one each) as

of 1 October 2009Remuneration for 2009• EUR 3 000/year (payable only to non-board members)

Remuneration


Remuneration for the Members of the Board of Directors

Proposal for remuneration 2009Chairman EUR 67 500Deputy Chairman EUR 42 500Members EUR 30 000

• The Nomination Committee also proposes that 40% of the remuneration be paid in Stora Enso Series R shares purchased from the market.

At the initiative of the BOD, the remuneration is proposed to be reduced by 50% for the year 2009.


Remuneration for the Members of the Board Committees

Proposal for remuneration 2009Financial and Audit CommitteeChairman EUR 10 000Members EUR 7 000Remuneration CommitteeChairman EUR 5 000Members EUR 3 000

At the initiative of the BOD, the remuneration is proposed to bereduced by 50% for the year 2009.

Proposed Board Members


Esitys hallituksen jäseniksi

• Gunnar Brock

• Claes Dahlbäck

• Dominique Hériard Dubreuil

• Birgitta Kantola

• Ilkka Niemi

• Juha Rantanen

• Matti Vuoria

• Marcus Wallenberg

• Hans Stråberg

Auditor


Election of Auditors

• The Board of Directors proposes to the AGM that Authorised Public Accountants Deloitte & Touche Oy continue as the statutory auditor of the Company until the end of the following AGM.




Duties• The Nomination Committee proposes that the AGM 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.

Members:• The Chairman of the Board of Directors• The Vice Chairman of the Board of Directors • Two members appointed by the two largest shareholders (one each) as

of 1 October 2009Remuneration for 2009• EUR 3 000/year (payable only to non-board members)

Share premium fund and reserve fund


Decrease of the share premium fund and the reserve fund of the parent company

• The Board of Directors proposes that:– the share premium fund as shown in the balance sheet of the

parent company as per 31 December 2008 will be decreased by an amount of EUR 1 688 145 310.08

– the reserve fund as shown in the balance sheet of the parent company as per 31 December 2008 by an amount of EUR 353 946 990.12

• The decreased amounts shall be transferred to the invested non- restricted equity fund.

• The decrease of the share premium fund and the reserve fund become effective after the Finnish National Board of Patents and Registration has given its consent to the decrease.

Proposal by shareholders Matti Ikonen,

Matti Liimatainen and Annina Käppi

Proposal to amend Stora Enso’s policy on old-growth forests

Sini HarkkiApril 1st 2009

Marina Congress Center


Value of intact forests

• Less than 5% of Finnish forests are in natural state

• Loss of intact forests is a global concern– Biodiversity– Adapting to climate change and mitigating it– Ecosystem services


Stora Enso’s policy on old-growth forests

“We do not purchase wood and fibre from protected areas or areas in the official process of designation for protection, old growth forests and high conservation value forests defined in national stakeholder processes unless the purchases are clearly in line with the national conservation regulations. “


Old-growth forests in Finland

• According to scientific estimates approximately half are protected

• Forests whose structure has not been significantly changed by forestry or are in a natural state

• Significant to threatened species and also to other uses of forests

• In Finnish North-Boreal zone the amount of protected forest in natural state is less than 7%


Old-growth forests in Forest Lapland



• Finnish Association for Nature Conservation, Greenpeace, Luonto-Liitto 2006

• Thousands of findings of threatened species• Most of the forest in the areas is old-growth• Even medieval trees can be found, natural

structure• Significant to recreation and forest based

livelihoods because of their wilderness-like nature



• In 2007 more than 250 researchers appealed for these forests to be protected, including more than 70 professors

“The natural development of Lapland's forest ecosystems is so slow that logging in its remaining old natural forests cannot be considered a sustainable use of natural resources… It can be reasonably stated that logging of natural forests causes irreversible change of habitat, and destroys an important part of our national


Stora Enso’s policy on old-growth forests

• AGM 2007:

Stora Enso asked Metsähallitus to inventory the natural values of the contested areas before logging would be re-started


Logging continued

• No reports on the inventories or ecological values have been published

• Metsähallitus classified the areas in three classes but presented no evidence or criteria: 1) natural state, 2) ”areas with earlier forestry operations”, 3) natural state, with ”no special nature values”


Logging in 2009• In Ahmatunturi and Talluskotavaara in old-

growth forests that were classified ”in natural state” by Metsähallitus itself (classes 1 and 3).

->How can the logging of natural state old- growth be in line with SE’s principles?

->Why can SE/MH not publish the reports on the inventories?


Logging in 2009

• Over 300 years old trees logged• Completely natural state forest• Forests important to other livelihoods and

local people• In a situation where contractors have been

laid off and wood storage piles are filled




Stora Enso’s policy• Trying to get around it: ”individual old trees”,

”trees are 80 year old, some 140-200 years”


Stora Enso’s policy

• Misusing FSC Controlled Wood as proof of the sustainability of certain operations – not allowed by the FSC

• Does not take into account ecological data or researchers’ appeals

• Does not consider even forests classified as ”natural state” by Metsähallitus valuable enough


The proposal

“We propose that Stora Enso Oyj no longer procure from the Finnish state enterprise Metsähallitus any wood from forest areas in forest Lapland that nature conservation organisations have designated as rare contiguous wilderness areas formed by old-growth forests, bogs and fells.”


The proposal

• Ecological data supports the decision• Finally a real environmental policy

decision• In the current wood procurement situation,

there should be no financial impediments to taking such a responsible decision


We can afford it• Proposal concerns 30,000 ha of forest land

outside protected areas• This is less than 0,8 % of Lapland’s forest land

outside protected areas• 10,2 million m3 of Lapland’s tree growth is in

forestry use and only 1,6 million m3 in protected areas

• Logging opportunities in young forests are growing and capacity is decreased at the same time


Conclusions

• 2010 is the year of biodiversity and natural forests (CBD, EU Countdown)

• No financial impediments to sustainable policy on old-growth forests

• Stora Enso has a sustainable policy in the Saami Homeland, why not in other old- growth areas as well?

Stora Enso’s response to the proposal regarding

protection of biodiversity in Forest Lapland


Stora Enso is committed to protecting biodiversity

• Stora Enso is committed to protecting old-growth forests

• We do not buy wood from forests which have been protected as old- growth in a national stakeholder process

• We have supported many multi-stakeholder processes in northern Finland since 1996 to protect old-growth forests

• Already 43% of the forests (0.5 million hectares) in Forest Lapland are protected

• According to the Finnish Ministry of Environment there is no need for further protection areas in Forest Lapland


Stora Enso’s position

• Stora Enso can receive wood from the areas addressed by the environmental organizations

– Not protected as valuable old-growth forests in the national stakeholder processes

• We encourage all relevant stakeholders to participate in the dialogue – The next opportunity to make a difference is to take part in the

Metsähallitus’ Natural Resource Planning process starting in fall 2009

Thank You

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Stora Enso Annual General Meeting, 2009-04-01

Business