Stora Enso Continues the Change

The Group Plans to Further Reduce its High-cost Manufacturing Base

• Press Release
• Source: Stora Enso Oyj
• On 3:19 am EDT, Wednesday August 19, 2009

  *  Permanent closure of Sunila Pulp Mill during the second quarter 
     of 2010 planned
  *  Permanent closure of Tolkkinen Sawmill by end of 2009 planned; 
     curtailments at other sawmills to continue
  *  Divestment of Kotka Mills to be restarted
  *  Uncoated fine paper orders to be prioritised to Veitsiluoto Mill  
     and Nymolla Mill to minimise total costs; more curtailments of 
     uncoated fine paper machines at Varkaus and Imatra mills planned
  *  Permanent shutdown of uncoated fine paper machine PM 8 at Imatra 
     Mills during the first quarter of 2010 planned
  *  Permanent closure of Varkaus Mills by the end of 2010 planned 
     unless uncoated fine paper demand supply balance and pricing
     clearly recover
  *  Approximately 450-1 100 employees in Finland would be affected 
     by the plans, depending on the outcome of the plans for Varkaus
     Mills and excluding Kotka divestment process

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HELSINKI, Finland, Aug. 19, 2009 (GLOBE NEWSWIRE) -- Stora Enso plans further reductions in its manufacturing capacity due to on-going weak demand and the resulting heavy losses.

"In the past two years we have transformed the Group to improve our long-term financial returns, which are the basis for the future of any company. We have tried to move as fast as possible, but it has not been fast enough. Divestments, de-layering of the organisation, and significant reduction of production assets and fixed costs have all been and remain part of our efforts - and they are a key reason why we have been able to defend our cash flow and have a strong balance sheet today. The operating environment has deteriorated faster than ever before: long-term structural cost inflation in fibre and energy costs has recently been followed by dramatic weakening in demand. As we cannot change this operating environment, we will instead continue to change Stora Enso so we can operate in the new environment and ensure a brighter future for the Group," says Stora Enso CEO Jouko Karvinen.

The planned capacity adjustments would affect approximately 450 people by mid2010 through the permanent closure of Sunila Pulp Mill, permanent closure of the now temporarily shut down Tolkkinen Sawmill and a permanent closure of PM 8 at Imatra Mills.

Stora Enso will renew its efforts to sell all Stora Enso's integrated mills at Kotka and laminating paper operations in Malaysia by early 2010. In uncoated fine paper, the Group plans to prioritise profitable orders to the flexible full-range mills at Veitsiluoto in Finland and Nymolla in Sweden. That will lead to severe production curtailments for PM 8 at Imatra Mills and PM 3 at Varkaus Mills. It is planned to shut down PM 8 at Imatra Mills permanently during the first quarter of 2010. Unless there is a robust recovery in demand supply balance for office paper that allows clearly profitable operation, it is also planned to close down the Varkaus Mills permanently by the end of 2010 as the closure of the uncoated fine paper machine 3 would make it impossible to manufacture newsprint, directory paper and wood products there profitably. Limited demand and raw material availability in the coming months are expected to lead to further curtailments at Varkaus Sawmill, with product transfers to other mills.

The biofuel joint venture with Neste Oil, NSE Biofuels Oy, and its demonstration phase will not be affected by these capacity closure plans. Stora Enso will start an analysis together with relevant stakeholders to find a future solution for recycling used beverage cartons in Finland and for the supply of district heating to the city of Varkaus if Varkaus Mills are closed.

"Finland is the country with by far the greatest relative dependence on the forest products industry per capita: half a million people have some kind of dependence on the sector either directly or indirectly. This spring we said that there were only weeks or months to find real, permanent solutions to Finland's cost issues compared with other European manufacturing locations. Whereas the Group's immediate plans are based on the dramatic drop in demand and the resulting losses, the longer term future of the Finnish manufacturing base depends critically on the structural changes needed to wood costs, including harvesting and transportation costs, present and threatened additional energy taxation and the cost disadvantage of the distance to major European customers," Jouko Karvinen concludes.

Stora Enso will support redeployment of those affected by the plans through efficiently offering jobs internally and eligibility for outplacement services. The Group works closely with local employment and economic development centres to find new job opportunities and new business for mills planned to be closed. Stora Enso also continues to pay financial support to those who would like to start their own business.

The plans are subject to co-determination negotiations with the employee representatives. Any decision on closures and other restructuring measures will be taken later when the co-determination negotiations concerning the units have been undertaken and concluded as required.

Units the Group plans to permanently close down

  *  Sunila Pulp Mill: annual production capacity 375 000 tonnes of 
     softwood pulp; approximately 250 employees; planned closure 
     during the second quarter of 2010
  *  Imatra Mills PM 8: annual production capacity 210 000 tonnes of
     uncoated fine paper; approximately 140 employees including 
     integrate services; planned closure during the first quarter of 
     2010 
  *  Tolkkinen Sawmill: annual production capacity 260 000 m3 of sawn
     wood; approximately 55 employees; planned closure by the end of 
     2009

Unit the Group is provisionally planning to permanently close down by the end of 2010

  *  Varkaus mills: annual production capacity 290 000 tonnes of 
     newsprint and directory papers, 310 000 tonnes of uncoated fine
     paper, 270 000 m3 of sawn wood; approximately 630 employees

Units the Group divests in early 2010

  *  Kotka mills: annual production capacity 185 000 tonnes of 
     machine-finished coated paper (MFC) paper, 175 000 tonnes of 
     laminating paper and Imprex core stock, 250 000 m3 of sawn wood; 
     approximately 530 employees

BM1 to continue and PE2 to restart production at Imatra Mills

Stora Enso plans to continue production on board machine 1 at Imatra Mills in Finland, contrary to the plans announced on 10 September 2008. The reason for the change is the increased demand for its products and improved profitability. Stora Enso also plans to restart polymer coating line PE 2 at Imatra. The overall streamlining of operations at Imatra Mills will continue as earlier announced. Due to this decision, the Group will reverse EUR 8 million of previous impairments and release EUR 3 million of previous provisions in its Q3/2009 results.

Estimated financial impact

Stora Enso anticipates approximately EUR 245 million of non-cash fixed asset and working capital write-downs as non-recurring items in its financial results for the third quarter of 2009. Stora Enso will record a non-recurring restructuring provision of EUR 25 million for closure of Sunila Pulp Mill, PM 8 at Imatra Mills and Tolkkinen Sawmill in its third quarter 2009 financial results.

 ---------------------------------------------------------------------
 Segment     Non-cash fixed asset   Cash provisions    Total costs
              and working capital      Q3/2009           Q3/2009
               write-downs for
                  Q3/2009
 ---------------------------------------------------------------------
 Newsprint       EUR 48 million          --           EUR 48 million
 ---------------------------------------------------------------------
 Magazine 
  Paper          EUR 10 million    EUR 14 million     EUR 24 million
 ---------------------------------------------------------------------
 Fine Paper      EUR 153 million   EUR 9 million      EUR 162 million
 ---------------------------------------------------------------------
 Industrial                       
 Packaging       EUR 3 million            --          EUR 3 million
 ---------------------------------------------------------------------
 Wood 
  Products             --          EUR 2 million      EUR 2 million
 ---------------------------------------------------------------------
 Other           EUR 31 million           --          EUR 31 million
 ---------------------------------------------------------------------
 Group total     EUR 245 million   EUR 25 million     EUR 270 million
 ---------------------------------------------------------------------

The targeted annual operating profit improvement of planned closure is estimated to be in range of EUR 140 million to EUR 160 million depending of the outcome of the provisional planned closure of Varkaus Mills and the divestment of Kotka Mills from the beginning of 2011 onwards.

Impacts of the planned closures of Sunila Pulp Mill, PM 8 at Imatra Mills and Tolkkinen Sawmill

---------------------------------------------------------------------
  External sales reduction                    EUR 150 million
 ---------------------------------------------------------------------
  Capital employed reduction                  EUR 50 million
 ---------------------------------------------------------------------
  Personnel                                   Approximately 450
 ---------------------------------------------------------------------

Effects on wood consumption

The planned closures of Sunila Pulp Mill and Tolkkinen Sawmill would reduce Stora Enso's annual wood consumption by 2.5 million m3.

 Press conference in Helsinki
 Time:      11.00 local time today
 Location:  Stora Enso Head Office
 Address:   Kanavaranta 1
 Hosts:     Jouko Karvinen, CEO, Markus Rauramo, CFO
            Juha Vanhainen, Country Manager Finland

The press conference will be held in Finnish.

ANALYST CONFERENCE CALL

CEO Jouko Karvinen and CFO Markus Rauramo will be hosting a conference call and webcast today at 16.00 Finnish time (15.00 CET, 14.00 UK time, 9.00 US Eastern time). The conference call will be held in English.

 If you wish to participate, please dial:
 International/UK:  +44 (0)20 7906 8509
 Finland:           0800 919 607
 Sweden:            0200 896 806
 USA:               1 866 978 9967
 Access code:       245211#

The live webcast may be accessed at www.storaenso.com/investors

www.storaenso.com

www.storaenso.com/investors

Stora Enso is the world leader in forest industry sustainability. We offer our customers solutions based on renewable raw materials. Our products provide a climate-friendly alternative to many non-renewable materials, and have a smaller carbon footprint. Stora Enso is included in the Global 100 list of the world's most sustainable companies. Stora Enso is also listed in the Dow Jones Sustainability Index, the FTSE4Good Index, and the Climate Disclosure Leadership Index. Stora Enso employs 29 000 people worldwide, and our sales in 2008amounted to EUR 11.0 billion.

STORA ENSO OYJ

Jari Suvanto

Ulla Paajanen-Sainio

Stora Enso
Jouko Karvinen, CEO
+358 2046 21410
Markus Rauramo, CFO
+358 2046 21121
Lauri Peltola, Head of Group Communications
+358 50 5705606
Ulla Paajanen-Sainio, Head of Investor Relations
+358 40 763 8767
Juha Vanhainen, Country Manager Finland
+358 2046 21343