Stora Enso’s Strategic ResponsesEsko Mäkeläinen, CFO12 May 2005

12 May 2005 UPS 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.

Financial Figures

12 May 2005 UPS 4

Highlights Q1 2005

IV/2004I/2005Sales, EUR million 3 241.9 3 144.9Operating profit*, EUR million 41.4 112.7EPS, EUR 0.18 0.07EPS*, EUR 0.030.07Cash EPS*, EUR 0.38 0.41Debt/Equity 0.38 0.51

*) excluding non-recurring items

• Continued strength in demand • Moderate price increases • In Publication Papers 134 000 tonnes production lost due to rebuilds

– EBIT effect EUR -32 million• Higher deliveries in Fine Paper and Packaging Boards• Non-cash items regarding emission rights and share-based payments

amounted to EUR -6.6 million

Financial Figures

12 May 2005 UPS 6

EUR million 2004 I/04 IV/04 I/05

Sales 12 396 3 018 3 242 3 145EBITDA* 1 511 393 331 389Operating profit* 339 102 41 113Operating profit 709 218 221 113Profit before tax* 272 80 23 84Net profit 741 405 149 59EPS*, EUR 0.26 0.06 0.03 0.07EPS, basic, EUR 0.89 0.49 0.18 0.07CEPS*, EUR 1.67 0.41 0.38 0.41ROCE*, % 3.0 3.7 1.5 4.1Debt/Equity 0.38 0.39 0.38 0.51

Summary Financials

*excluding non-recurring items

12 May 2005 UPS 7

Net Financial Items

EUR million I/04 II/04 III/04 IV/04 I/05

Net interest -42.0 -34.9 -31.8 -32.6 -27.6Foreign exchange profit/loss 4.8 -1.6 -1.5 -2.8 5.7Valuation of financial instruments 13.6 5.9 5.7 7.1 -19.2Other financial items 3.3 4.4 0.6 -4.2 -2.0Total -20.3 -26.2 -27.0 -32.5 -43.1

excluding non-recurring items

12 May 2005 UPS 8

Tonnes 2004 I/04 II/04 III/04 IV/04 I/05

Publication Paper

Europe 240 000 93 000 74 000 21 000 52 000 9 000North America

Fine Paper

Europe 36 000 12 000 8 000 3 000 13 000 1 000North America 7 000 7 000

Packaging 81 000 20 000 16 000 37 000 8 000 2 000Total 364 000 125 000 98 000 61 000 80 000 12 000

Market-Related Production Curtailments

12 May 2005 UPS 9

Change in EPS IV/2004 vs I/2005

0,00

0,02

0,04

0,06

0,08

0,10

0,12

0,14

GROUP TOTALIV/04

Sales prices Volume Energy Fixed Costs Financing Other Goodwillamortisation

GROUP TOTALI/05

EUR

0.3

0.04

-0.02

0.07

0.07

excluding non-recurring items

-0.04-0.03

-0.01

0.03

12 May 2005 UPS 10

Operating Profit by Quarter

EUR million

excluding non-recurring items*no goodwill amortisation in 2005

** structural effect from Swedish forestland

0

50

100

150

200

250

I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 I/05*

**

**

**

**

**

12 May 2005 UPS 11

Debt/Equity

Target < 0.8

0,20

0,30

0,40

0,50

0,60

0,70

0,80

I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 I/05

12 May 2005 UPS 12

Current programme approved by AGM 2005 to end 21 March 2006. Allows repurchase up to :A shares 17 900 000R shares 62 150 000

Status through 3 May 2005:

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

A shares 19 200 10.86 0.1R shares 7 677 600 10.69 12.35

2002 2003 2004 15 Apr 2005

Total shares in issue: 899 778 299 864 262 499 837 243 399 812 977 099

Share Buy-Back Programme

12 May 2005 UPS 13

0

200

400

600

800

1 000

1 200

1 400

1 600

2001 2002 2003 2004 1-3/20050

1

2

3

4

5

6

7

8

9

10

11

12

Capital Expenditure and DepreciationCapital expenditure

Capital expenditure as % of salesEUR million

Depreciation

Improving Profitability

12 May 2005 UPS 15

Continuing Profit Enhancement

• Asset Restructuring in Europe– Kvarnsveden PM 12 still to be completed

• North American Profit Enhancement Programme– Almost completed

• European Profit Improvement Programme to be initiated

12 May 2005 UPS 16

Programme for Profit Improvement

• Having completed a major asset restructuring programme of Stora Enso’s European units, it is time to gain the benefits

• Capex to be kept at or below depreciation; opportunities in emerging markets will be emphasized

• In an environment of low industry profitability, tighter competition and a weaker US dollar, Stora Enso is intensifying its efforts for improving profitability mainly at its European operations

12 May 2005 UPS 17

Main Targets for the Programme

• Target to improve profit before tax by EUR 300 million based on 2005 price and cost levels

• The programme consists of:

– Efficiency improvements in production, sales and logistics

– Improvement in working capital management

– Cost cuttings in sourcing and administration

• There may be closures or disposals of units with specifically high costs or low long-term earnings potential; redundancies may occur

• The programme will start immediately and have the full targeted impact on profit by mid 2007 onwards

Market Outlook

12 May 2005 UPS 19

Near-term Market OutlookWestern Europe

Price Demand Comments

Magazine Papers

SC

CMR

Newsprint

Fine Papers

WFC

WFU

Packaging Boards

Wood Products

Demand good; prices have increased 3-5 % in local currencies

Demand improving; price increases for some segments announcedDemand improving; sheet prices under pressuredue to overcapacity

Firm demand outlook; price increases in consumer boards, corrugated boards prices under pressureDemand improving seasonally; prices stable

Demand good; prices have increased 3-5 % in local currenciesDemand good; prices have increased 5-8 % in local currencies

12 May 2005 UPS 20

Price Demand Comments

Near-term Market OutlookNorth America

Magazine Papers

SC

CMR

Newsprint

Fine Papers

WFC

Demand strong; price increasesexpected in Q2Demand good; price increasesexpected in Q2

Demand rather weak

Demand good; price increasesexpected in Q2 for reels

Stora Enso’s Strategic Principles

12 May 2005 UPS 22

Strategic Goals and Financial Targets

Key principles:

• ROCE target: ≥ 13% over the cycle

• Debt/Equity ratio: ≤ 0.8

• Capex: ≤ annual depreciation over the cycle

• Dividend policy: distribute on average one half of net profit over the cycle

• Strive to achieve top quartile asset quality

• Profit growth

• Increase the size of the packaging boards business within the Group’s portfolio

• To become closer to the customer and end-user in the value chain

12 May 2005 UPS 23

M&A Strategy Guided by Discipline

• Must support core business development

• Provide customer, production or other synergies

• EPS and CEPS accretive, post synergies, after year one

• In the near term, returns must surpass our weighted average cost of capital (=@8.7% pre-tax)

• In the longer term, must clearly support our continuing ROCE target of 13% over the cycle

Recent Acquisitions

12 May 2005 UPS 25

Stora Enso Strengthens its Distribution Channels

• Acquisitions:– Dutch paper merchant Scaldia Papier (2004)– French paper merchant Papeteries de France (PdF) (2005)

• Announcement of the acquisition of Schneidersöhne Group

– Stora Enso has signed a memorandum of understanding to acquire 100% of the shares in the German paper merchant Schneidersöhne Group

– The strategic aim of the acquisitions is to bring Stora Enso closer to the customer and end-user in the value chain and to improve the profitability of its merchant business

– All-cash acquisition is expected to be completed during the third quarter of 2005, subject to due diligence and approval by regulatory and competition authorities

12 May 2005 UPS 26

Combined Operations of Papyrus and Schneidersöhne

Source: Eugropa

PapyrusSchneidersöhnePapyrus + Schneidersöhne

12 May 2005 UPS 27

Schneidersöhne Group In brief

• By sales volume the second-largest paper merchant in Germany and the fifth-largest in Europe

• Net sales EUR 1 130 million in 2004• Sales volume 1 100 000 tonnes of coated and uncoated

fine paper in 2004• Operations in 11 countries

– Biggest markets: Germany and Switzerland– 38 branch offices, including 20 in Germany

• 2 100 employees

12 May 2005 UPS 28

Schneidersöhne GroupFinancial Effects

• Enterprise value of the company is estimated to be EUR 450 million

• Stora Enso’s EPS will initially be improved by EUR 0.02 and CEPS EUR 0.03

• Stora Enso debt will increase by the enterprise value of Schneidersöhne, approximately EUR 450 million

• The debt/equity ratio will increase by 0.06

12 May 2005 UPS 29

Acquisition of Intercell

• Stora Enso acquired 66% of the shares in the Polish packaging producer Intercell S.A. from private shareholders and the International Finance Corporation based in Washington D.C.

• Rationale for the acquisition:– Supports the expansion of Stora Enso’s

corrugated packaging business– Strengthens the company presence in the fast-

growing Polish market

12 May 2005 UPS 30

Intercell – Key FactsSales by Division

• Sales EUR 150 million, EBITDA EUR 27 million (2003)

• About 1700 employees• Operations mainly in Poland • Fully owned subsidiary

Intercell Recycling is the largest player in recovered paper business in Poland (mainly OCC)

Pulp & Paper

40%Corrugated Board& Boxes

44%Sacks

16%

12 May 2005 UPS 31

Production LocationsPoland and Serbia

Ostrołęka• Head office• Pulp and Paper mill (250 000 tonnes)• Corrugated board and boxes• SackŁódź• Corrugated board and boxesTychy• Corrugated boxesŠabac• SackMosina (in the near future)• Corrugated boxes (sheet plant)

+Marketing office in Warsaw and 20 recycling locations around Poland

Ostrolęka

Tychy

WarsawŁódźMosina

Šabac

Emerging Markets

12 May 2005 UPS 33

Stora Enso’s Focus in Emerging Markets

• Low-cost local resources (raw materials, labour)

• Fast economic growth, low GDP per capita

Focus areas for SE

BrazilChileArgentina

Large,fast growingmarket

Fibreresources

Low fibre costs

China

Russia

Growing market

12 May 2005 UPS 34

Paper andboard

consumption,kg/capita

Demand Growth in Emerging Markets

China

Population,mill.

2000 2015E 2000 2015E

1 2821 418

29,8

51,4

Brazil

Paper andboard

consumption,kg/capita

Population,mill.

167 198

42,8

59,4

Paper andboard

consumption,kg/capita

Russia

Population,mill.

145 133

22,9

52,7

Almost doublein 15 years

More thandouble

Increase30%

Source: Jaakko Pöyry Consulting

12 May 2005 UPS 35

Present Operations in Russia and Eastern Europe

Corrugated packaging board• mills in Riga, Balabanova and Arzamas• 9 new packaging plants in Russia,

Hungary and the Baltic States since1995• Intercell in Poland and Serbia

Sawmilling• mill in Karelia operating since Autumn 2003• Novgorod mill started up in April 2004• 5 sawmills in Estonia, Latvia, extensive procurement• One sawmill in Alythus, Lithuania• Sawmills in Czech Republic

Procurement / wood supply from Russia• procurement volume in 2004 7.2 Mm3/a• 2 port terminals, 4 railway terminals• 4 logging companies, total harvest 0.4 Mm3/a

SawmillsCorrugated packagingboard and packaging materialsWood procurementfocus

12 May 2005 UPS 36

Present Operations in China

• Fine paper mill in Suzhou– Capacity 240 000 tonnes coated

woodfree (including sheeting, in 2005)

– Paper sold to Chinese market– Reliant on imported pulp

• Core factory in Hangzhou– Capacity 10 000 tonnes– Cores sold to different industries:

plastics, paper, etc.

• Joint venture with Shandong Huatai Paper

• Plantations in southern China Core board

Fine paper mill Sales office

Plantations

JV

12 May 2005 UPS 37

Present Operations in South America

• Veracel – a joint venture together with Brazilian pulp maker Aracruz, based in Rio de Janeiro

– A new pulp mill now under construction with 900 000 tonnes of annual capacity

– Production from May-June 2005

– 70 000 hectares of eucalyptus plantations

– Stora Enso’s share of production intended for captive use

• South American division office in Sao Paulo

• Sales offices in Sao Paulo, Santiago and Buenos Aires

Veracel

AracruzSao Paulo

Sales officeDivision office

12 May 2005 UPS 38

Veracel Before

12 May 2005 UPS 39

Veracel Now

12 May 2005 UPS 40

Harvesting in Veracel

General view

12 May 2005 UPS 42

Consolidating Veracel

• Veracel will be consolidated as Associated Company according to equity accounting method

– Profit shown in Stora Enso’s financial items• Stora Enso buys the pulp from Veracel at a price; cost plus

premium• Stora Enso Amsterdam invoices Stora Enso mills

– Stora Enso Amsterdam will be consolidated line by line (shown in EBITDA) in Fine Paper segment

– Cash flow will be inside Stora Enso• The cost for Stora Enso mills is the market price of pulp

Appendix

12 May 2005 UPS 44

Operating Profit of Main Business Areas

EUR million I/04 II/04 III/04 IV/04 I/05

Publication Paper 8.7 -3.8 48.2 38.2 20.0% sales 0.9 -0.4 4.4 3.3 1.9

Fine Paper 18.1 4.6 27.9 13.7 47.8% sales 2.3 0.6 3.5 1.7 5.7

Packaging Boards 82.1 67.7 84.8 43.0 73.7% sales 11.9 9.6 12.6 6.1 10.2

Wood Products 11.4 21.3 10.9 -8.9 -4.0

% sales 3.1 5.1 2.8 -2.3 -1.1

excluding non-recurring items

12 May 2005 UPS 45

EPS by Quarter

EUR

excluding non-recurring items

0.00

0.02

0.04

0.06

0.08

0.10

0.12

I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 I/05

0.00

12 May 2005 UPS 46

ROCE by Quarter

%

excluding non-recurring items

0

2

4

6

8

10

12

I/03 II/03 III/03 IV/03 I/04 II/04 III/04 IV/04 I/05

Target > 13% over the cycle (current WACC 8.7%)

12 May 2005 UPS 47

Change in Group Operating Profit from IV/2004 to I/2005

0

20

40

60

80

100

120

GROUP TOTALIV/04

Sales prices Volumes Energy Fixed costs Other Goodwillamortisation

GROUP TOTALI/05

EUR million

41.4

44.6 -41,6

-20.2

-18.8

112.7

excluding non-recurring items

24.0

83.3

12 May 2005 UPS 48

Change in EPS I/2004 vs I/2005

0,00

0,02

0,04

0,06

0,08

0,10

0,12

0,14

GROUPTOTAL I/04

Sales prices Salesvolume

Bergvikeffect

Energy Fixed Costs Associates &Financing

cost

Goodwillamortisation

GROUPTOTAL I/05

EUR

0.06

-0.02-0.01

0.07

-0.06

0.02

0.07

0.03-0.02

12 May 2005 UPS 49

Change in Group Operating Profit from I/2004 to I/2005

0

50

100

150

200

GROUPTOTAL I/04

Sales prices Volumes Bergvikeffect

Energy Fixed costs Other Goodwillamortisation

GROUPTOTAL I/05

EUR million

102.1

81.4 -72,9

-19.226.4

-2.8

112.7

excluding non-recurring items

-25,022.7

Visit www.storaenso.com for more information