Stora Enso Interim Review January-June 2009

Clear Sequential Improvement in Operating Profit; Third Consecutive Quarter of Solid Cash Flow From Operations -- Early Cost Cuts Pay Off

• Press Release
• Source: Stora Enso Oyj
• On 3:29 am EDT, Thursday July 23, 2009

 * EUR 49 million operating profit excluding NRI and fair valuations
   through EUR 276 million (13 margin point) year-on-year reduction
   mostly in fixed and fibre costs
 * EUR 189 million cash flow from operations through third consecutive
   quarter of working capital and net debt reductions 
 * EUR 418 million non-cash write-down due to refinancing of NewPage
   jointly with Cerberus; 19.9% shareholding in NewPage maintained
 * Continuing losses in Finland with structural external cost issues,
   further capacity cuts necessary

 Summary of Second Quarter Results
 -------------------------------------------------------------------
 Continuing Operations                     Q2/09    Q1/09     Q2/08
 -------------------------------------------------------------------
 Sales                           EUR       2184.8   2130.5   2 871.8
                                 million
 -------------------------------------------------------------------
 EBITDA excl. NRI and fair       EUR        190.4    134.3     262.6
 valuations                      million
 -------------------------------------------------------------------
 Operating Profit excl. NRI      EUR         48.5      3.0      94.4
 and Fair Valuations             million
 -------------------------------------------------------------------
 Operating loss/profit (IFRS)    EUR       -209.4     -0.9      71.3
                                 million
 -------------------------------------------------------------------
 Profit/loss before tax excl.    EUR         47.2    -82.1      31.7
 NRI                             million
 -------------------------------------------------------------------
 Loss/profit before tax          EUR       -370.6    -48.1      30.4
                                 million
 -------------------------------------------------------------------
 Net profit/loss excl. NRI       EUR         44.9    -60.2      27.5
                                 million
 -------------------------------------------------------------------
 Net loss/profit                 EUR       -368.3    -36.1      28.6
                                 million
 -------------------------------------------------------------------
 EPS excl. NRI                   EUR         0.06    -0.08      0.04
 -------------------------------------------------------------------
 EPS                             EUR        -0.46    -0.05      0.04
 -------------------------------------------------------------------
 CEPS excl. NRI                  EUR         0.24     0.10      0.26
 -------------------------------------------------------------------
 ROCE excl. NRI                  %            2.8     -1.6       2.8
 -------------------------------------------------------------------
 ROCE excl. NRI and fair         %            2.3      0.1       3.6
 valuations
 -------------------------------------------------------------------

 Fair valuations include synthetic options net of realised and open 
 hedges, CO2 emission rights, and valuations of biological assets 
 mainly related to associated companies' forest assets.
 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.

Related Quotes

Symbol	Price	Change
SEOAY.PK	7.84	-0.30

{"s" : "seoay.pk","k" : "c10,l10,p20,t10","o" : "","j" : ""}

HELSINKI, Finland, July 23, 2009 (GLOBE NEWSWIRE) -- Message from CEO Jouko Karvinen:

"Three months ago we expected the second quarter of 2009 to be a repetition of the extraordinarily difficult first quarter. We were unfortunately right about the demand remaining weak. Our continued push for pricing quality, including heavy curtailments, paid off with a slightly positive year-on-year development in paper and board pricing, however combined with materially lower pricing of wood products and market pulp.

"What is important as well is that our cost improvement actions in the past two years are now paying off. The overall costs went down by about EUR 280 million(13 margin points) year on year in the second quarter, mostly through a EUR 109 million year-on-year improvement in quarterly fixed costs and EUR 83 million lower fibre costs. A material part of the latter is due to our actions in curtailing the high cost Finnish asset base and directing the limited volumes to our lowest cost assets.

"With all these actions, and in spite of a 17% year-on-year volume reduction, our second quarter operating profit excluding NRI and fair valuations at EUR 49 million was clearly better than the EUR 3 million in the first quarter, although still unacceptably poor. Also, the cash flow from operations at EUR 189 million and cash flow after investments at EUR 81 million remained solid for a third quarter in a row. This led to another quarter of net debt reduction in an unprecedentedly difficult demand environment.

"The refinancing plan for NewPage, undertaken jointly with Cerberus, turned the second quarter operating profit including NRI into an operating loss, with no cash impact. At the same time, if anything this proves that our early decision two years ago to disengage ourselves from our North American operations was correct as we now can, and will, continue optimising our present asset base further and review strategic growth options.

"We foresee that demand will continue to be weak during the third quarter of 2009. Our lower cost level will help us to defend our earnings against price pressure in certain paper grades. Our Next Step programme announced in April to streamline the organisation and cut overhead costs by a further EUR 250 million is progressing on time and cost targets. However, the completed and announced actions are still not enough to solve the external cost issues that have made some of our assets unprofitable, especially in Finland. For three consecutive quarters, the profit the Group has made outside Finland has been to a large extent or even completely lost in Finland. We are therefore preparing plans for not only continuing curtailments, but also permanent capacity closures in areas where we cannot see a rapid recovery to clearly positive returns. The specific plans, once finalised will be announced separately during the third quarter of 2009.

"We have not waited for better times, but instead acted, and that has proved to have been absolutely the right thing to do. We will never say we are ready, we have done everything -- on the contrary, now we want to move even faster."

Near-term Outlook

The market environment for the Group's products is expected to stay challenging as no immediate improvement in the economic outlook can be seen. Forecasts for advertising expenditure have been further revised downwards as a declining share of GDP is spent on advertising, and printed advertisements are still losing market share in total advertising expenditure.

Though the pace of contraction is slowing, demand is forecast to remain weaker than a year ago for newsprint, magazine paper and fine paper in the third quarter of 2009. However, some seasonal improvement in the newsprint and magazine paper market in the third quarter is predicted compared with the previous quarter. Demand for liquid packaging board is forecast to remain the same as last year, but demand for other packaging products is expected to be weaker. The demand outlook for wood products remains weak due to depressed construction markets throughout Europe, Japan and USA.

In Europe some graphic paper grades are exposed to price pressure. Prices for consumer board and industrial packaging products are forecast to remain largely unchanged. Production curtailments have led to an improved balance between supply and demand in wood products. Some wood product prices are expected to increase.

In China the economy is recovering and demand for uncoated magazine paper is predicted to be stronger than a year ago. Prices for uncoated magazine paper are expected to stabilise. Market demand for coated fine paper is forecast to improve further and prices to maintain their slow improvement. In Latin America a seasonal improvement in coated magazine paper demand is anticipated in the autumn. Prices are expected to stabilise.

Stora Enso continues to forecast that its cost deflation excluding internal actions will be at about 4% for the full year 2009, the main contributor being the lower costs of fibre raw material (wood, recycled paper and purchased pulp).

The full-length version of the Stora Enso interim review is available on the Stora Enso website at www.storaenso.com/investors

Stora Enso's third quarter 2009 results will be published on 22 October 2009.

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 2008 amounted to EUR 11.0 billion.

Stora Enso Oyj
Jouko Karvinen, CEO
+358 2046 21410
Markus Rauramo, CFO
+358 2046 21121
Lauri Peltola, Head of Group Communications
+358 2046 21380
Ulla Paajanen-Sainio, Head of Investor Relations
+358 2046 21242
www.storaenso.com
www.storaenso.com/investors