Stora Enso’s Performance in Q2Esko Mäkeläinen, CFO22 August, 2003

22 August 20032

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.

22 August 20033

Highlights

• Profits negatively impacted by:– Geopolitical factors and subdued economic activity across global

markets– Production losses and fixed cost increases related to Midsummer

holiday stoppages– Direct and indirect effects of declining US dollar

I/2003II/2003

Sales, EUR million 3 0993 057

Operating Profit, EUR million 211.1106.7

EPS, EUR 0.100.07

Cash EPS, EUR 0.430.41

Debt/Equity 0.460.47

There were no non-recurring items in the periods under review

22 August 20034

Main Events

• Veracel– Decision was taken by associated company Veracel to

construct a 900 000 tonnes p.a.pulp mill in Bahia, Brazil, based on own eucalyptus

– Stora Enso is entitled to 50 % of the output, to be used as ’captive’ pulp

– Production start up: mid 2005

• Langerbrugge– Successful start up of world’s largest newsprint machine of

400 000 tonnes – based entirely on recovered paper– Main measures in Newsprint asset restructuring have now

been taken

Financial figures

22 August 20036

EUR million 2002 II/02 H1/02 H1/03 I/03 II/03

Sales 12 783 3 233 6 462 6 156 3 099 3057EBITDA 1) 2 172 518 1 121 900 501 400Operating profit 1) 926 190 464 318 211 107Profit before tax -343 206 395 216 129 87Net profit -222 138 299 142 85 56EPS, EUR 1) 0.57 0.15 0.30 0.16 0.10 0.07EPS, basic, EUR -0.25 0.12 0.33 0.16 0.10 0.07CEPS, EUR 1) 1.97 0.48 1.03 0.84 0.43 0.41ROCE, % 1) 7.1 5.6 6.9 5.3 7.1 3.6Debt/Equity 0.37 0.46 0.46 0.47 0.46 0.47

Summary Financials

1) excluding non-recurring items

22 August 20037

Currency Hedging

• Operational cash flow hedges had a positiveimpact of EUR 34.8 million in Q2/2003

• Major net cash flows (2002):USD +800GBP +800(EUR million equivalent)

22 August 20038

Indirect Impact of Euro Strength

• Imports increasing somewhat to Europe

• Packaging Boards experiencing increased competition versus US dollar based suppliers in its overseas sales

• US dollar price increases in magazine grades are supported by stronger Euro, but mitigated by increased imports from Europe

22 August 20039

EUR million II/02 III/02 IV/02 I/03 II/03

Net interest -54.8 -53.0 -49.3 -34.6 -51.5Foreign exchange profit/loss 10.9 13.2 0.4 2.9 7.9Valuation of financial instruments (non cash) -16.1 -20.0 -11.0 -44.1 30.0Other financing items 16.0 3.6 -0.9 -5.5 2.3Total -44.0 -56.2 -60.8 -81.3 -11.3

Net Financial Items

22 August 200310

Change in EPS I/2003 vs II/2003

0,00

0,02

0,04

0,06

0,08

0,10

0,12

GROUP TOTALI/03

Sales prices Sales volumeand mix

Fixed Costs Financing cost Other GROUP TOTALII/03

EUR

0.10

0.01 -0.05

0.01 0.07

0.05

-0.05

22 August 200311

EPS by Quarter

0,00

0,05

0,10

0,15

0,20

0,25

II/01 III/01 IV/01 I/02 II/02 III/02 IV/02 I/03 II/03

EUR

excluding non-recurring items

22 August 200312

Change in EPS 1-6/2003 vs 1-6/2002

0,00

0,05

0,10

0,15

0,20

0,25

0,30

GROUP TOTAL1-6/02

Sales prices Sales volume Energy Fixed Costs Financing cost Other GROUP TOTAL1-6/03

EUR0.30

0.09 -0.01 0.04 0.16-0.01

-0.22

-0.03

excluding non-recurring items

22 August 200313

0

2

4

6

8

10

12

14

16

18

20

1998 1999 2000 2001 2002 II/2003

ROCE

%

Target > 13% over the cycle excluding non-recurring items

WACC 9.5%before tax

ROCE target13%

22 August 200314

Debt/Equity

0,20

0,25

0,30

0,35

0,40

0,45

0,50

0,55

0,60

0,65

II/01 III/01 IV/01 I/02 II/02 III/02 IV/02 I/03 II/03

Target < 0.8

22 August 200315

Share Buy-Back Programme

Current programme approved by 2003 AGM to continue through 19 March 2004. Allows repurchase up to:A shares 9 100 000R shares 34 000 000

Status through 08 August 2003:

Number of Average % of Shares shares purchased: purchase price: authorisation

A shares 5 000 EUR 9.69 0.05R shares 17 004 400 EUR 9.27 50.0

2001 2002 31 March, 2003

Total shares in issue: 906 753 299 899 778 299 864 187 499

22 August 200316

Capital Expenditure and Depreciation

Capital expenditure

Capital expenditure as % of salesEUR million Depreciation

Goodwill amortisation

0

200

400

600

800

1 000

1 200

1 400

1 600

1998 1999 2000 2001 2002 H1/20030 %

1 %

2 %

3 %

4 %

5 %

6 %

7 %

8 %

9 %

10 %

22 August 200317

Deliveries 2002 Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 Publication Papers 6 807 1 638 1 636 1 703 1 830 1 654 1 678 Fine Papers 3 432 874 866 859 833 885 895 Packaging Boards 2 909 711 749 734 715 756 781 Paper and Board Total 13 148 3 223 3 251 3 296 3 378 3 295 3 354 Timber 5 112 1 203 1 344 1 252 1 313 1 283 1 644

ProductionPublication Papers 6 796 1 686 1 651 1 745 1 714 1 739 1 663 Fine Papers 3 477 888 866 876 847 894 889 Packaging Boards 2 973 751 742 740 741 788 763 Paper and Board Total 13 246 3 325 3 259 3 361 3 302 3 421 3 315 Timber 5 157 1 235 1 288 1 277 1 357 1 406 1 648

Deliveries and Production

1 000 tonnes/m3

22 August 200318

Curtailments

1000 tonnes 2002 Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 Publication Papers 874 249 250 188 187 123 143 Fine Papers 274 49 58 73 94 64 32 Packaging Boards 109 37 18 10 44 15 25 Paper and Board Total 1 257 335 326 271 325 202 200

Europe 1 037 249 218 248 322 195 158 USA 220 86 108 23 3 7 42 Paper and Board Total 1 257 335 326 271 325 202 200

North America H1 2003

22 August 200320

USD million 2002 H1/02 H2/02 H1/03

Sales 1 871 884 987 933EBITDA 1) 153 50 103 39EBITA 1) -155 -105 -50 -98Cash flow after Capex 2) 138 25 113 -71Deliveries (1 000 tonnes) 2 655 1 229 1 426 1 345Market-related downtime (1 000 tonnes) 233 194 26 49

Financial Results in North America

1) excluding non-recurring items2) excluding forest asset sale

22 August 200321

North American Printing Paper Prices

400

450

500

550

600

650

700

750

800

850

900

950

1000 Newsprint 30-lb East* SC-A 35-lb CWF No. 3 60-lb, rolls CMR No. 5 40-lbs

*Note: Newsprint prices in U.S. $ per metric tonne

USD per short ton

Monthly Average Transaction Prices

Source: RISI

950

750705

875

665695

625

440495

855

710690

22 August 200322

Profit Enhancement Programme in North America

• Profit Enhancement Programme is proceeding according to plan

– Kimberly Mill PM 96 and Biron Mill 26 rebuilds were successfully completed during Q2 2003

• Workforce reduced by 20 % since year 2000• Permanent closure of Wisconsin Rapids 12; Biron 24 to

close by the end of 2003• The programme will be completed in the mid 2005; from

then onwards the EPS effect will be + 0.05

22 August 200323

Further Cost Cutting Measures in North America

• Fixed costs in North America continue to betoo high

further cost-cutting steps will be taken• These measures will be announced before

the end of the third quarter 2003

Stora Enso Follows IAS Standards

22 August 200325

What is IAS?

• International Accounting Standards (IAS) were created in the 1960s by Anglo Saxon Auditors who, on a voluntary and informal basis, tried to improve comparability on financial information

• In the 1970s the International Accounting Standards Committee (IASC) was created

• In 1995 an agreement was reached between IASC and the International Organisation of the Securities Commission

22 August 200326

What is IAS?

• In 2001 the International Accounting Standards Board was formed and based its headquarters in London

– more resources to develop standards– IASC Foundation led by Mr Paul Volcker– IASB chaired by Sir David Tweedie

• IAS standards will be compulsory from 2005 for stock listed companies in the EU. This will affect over 7,000 companies in Europe

22 August 200327

How Stora Enso Adopted IAS Standards

• In 1998 Stora Kopparberg and Enso merged. Instead of conforming to Finnish Accounting Standards the company decided to adopt IAS

• In 2000 Stora Enso was listed on the NYSE. IAS remains the main standard in accounting but reconciliation is also made to US GAAP

22 August 200328

Objective of the IASB

• To develop a single set of understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the various capital markets to make economic decisions.

22 August 200329

What were the main changes from FAS to IAS?

• Preparations took about 6 months because of the recalculations for previous years

• The main changes were in the booking of:– business combinations (mergers and acquisitions)– pensions (IAS 26)– provisions (IAS 37)– leases (IAS 17)– investments in associated companies (IAS 28)– Impairment of assets (IAS 36)

22 August 200330

Inventory movement effectsMeasurement principles (IAS 2)

• Inventories should be measured at the lower of cost and net realisable value

• Cost includes all costs to bring the inventories to their present condition and location

→ Finished goods and work in progress include costs incurred so far in the process and the cost of raw materials

→ Producing more than delivering increases inventory value thus increasing profit

→ Result emphasises production over deliveries

22 August 200331

Inventory movement effectsEffects on Stora Enso

• Fixed production costs (such as direct labour and depreciation) are calculated based on normal operating rate

• Stora Enso has larger scale production stand stills during Midsummer and Christmas

• Generally inventories decline during these periods (demand does not fluctuate as much as production)

• Second and fourth quarter results therefore include fixed cost from previous periods (released to the period when products from inventory are sold)

22 August 200332

Newly Adopted IAS Standards

• IAS 39 - Valuation of Financial Instruments– a derivative is a financial instrument– fair value is the amount for which an instrument could be

exchanged– hedging instruments and effectiveness

• IAS 41 - Accounting of Biological Assets– current value of the assets at the end of the period– “biological transformation comprises the processes of

growth”– “harvest is the detachment of produce from a biological

asset”

22 August 200333

Unrealised Financial InstrumentsIAS 39 entries

There are two different ways of entering the valuation ofunrealised financial instruments under IAS 39:

Only in balance sheet until they have been realised (hedging instruments);

Directly in profit and loss statement (non-hedging instruments)

22 August 200334

Unrealised Financial InstrumentsIAS 39 entries

The entries of the valuation of unrealised hedging instrument:

Valuation losses are entered debiting other comprehensive income (“OCI”) directly in equity and crediting short term liabilities.

Valuation gains are entered debiting short-term receivables and crediting OCI.

Realised gains and losses of hedging instruments are entered against the item they have hedged in profit and loss statement.

22 August 200335

Unrealised Financial InstrumentsIAS 39 entries

The entries of the valuation of unrealised non-hedginginstrument:

Valuation losses are entered debiting financial items in profit and loss statement and crediting short term liabilities.

Valuation gains are entered debiting short-term receivables and crediting financial items in profit and loss statement.

Outlook

22 August 200337

Outlook

• Global economic activity remains muted • In Europe advertising spending is still not increasing• North American advertising spending is beginning to

recover from the Iraq War-impacted levels• Increasing imports affecting the supply/demand balance in

the USA• Consumer confidence in Asia is recovering from the

temporary effects of SARS

22 August 200338

Outlook (cont.)

• Overcapacity in Europe continues to negatively impact pricing in coated printing papers

• Uncoated fine paper and recovered fibre-based board prices under pressure in Europe

• Additional cost cutting measures within the company will be effected

• The Group’s capital expenditure plans for 2003 and 2004 are being adjusted not to exceed the level of depreciation

22 August 200339

Near-term Market OutlookWestern Europe

Price Demand Comments

Magazine Paper

SC

CMR

Newsprint

Fine Papers

WFC

WFU

Packaging Boards

Timber

SC is expected to be stable

No strong sign of improvement in demand

Price pressure; producer stock remain high

Demand will seasonally be slow;order books good; imports affectingpricesStable order book. Market related downtime mainly in recovered-fibre-based gradesOversupply in whitewood; redwood normal

Demand slowly improving; D/S ratio imbalance puts pressure on prices

22 August 200340

Near-term Market OutlookNorth America

Price Demand Comments

Magazine Paper

SC

CMR

Newsprint

Fine Papers

WFC

Timber

A modest recovery forecasted;some further price increases expected in H2

Some signs of improvement in Demand; $50 price increase partially implemented; new price increases announced

Demand levelling off; high stock levels

A modest recovery forecasted; somefurther price increases expected in H2

Housing activity continues; prices slightly improved

22 August 200341

Summary

• The strongest balance sheet in the industry

• Disciplined and consistent financial targets

• Targeted capital expenditures to achieve high asset quality

• Debt-to-equity discipline

• Strong cash earnings per share

• Profitability at the bottom of the cycle

Visit www.storaenso.com for more information.