Ever increasing cost inflation will require further cost and capacity cuts, as
well as price increases
STORA ENSO OYJ INTERIM REVIEW 24 July 2008 at 06.00 GMT
Summary of Second Quarter Results
--------------------------------------------------------------------------------
| Continuing Operations: | | Q2/07 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Sales | EUR | 2 989.9 | 2 831.8 | 2 871.8 |
| | million | | | |
--------------------------------------------------------------------------------
| Operating Profit excl. NRI and | EUR | 222.9 | 140.1 | 94.4 |
| Fair Valuations | million | | | |
--------------------------------------------------------------------------------
| Operating profit (IFRS) | EUR | 244.2 | 125.0 | 71.3 |
| | million | | | |
--------------------------------------------------------------------------------
| Profit before tax excl. NRI | EUR | 191.2 | 83.1 | 31.7 |
| | million | | | |
--------------------------------------------------------------------------------
| Profit before tax | EUR | 191.2 | 83.1 | 30.4 |
| | million | | | |
--------------------------------------------------------------------------------
| Net profit excl. NRI | EUR | 148.9 | 66.5 | 29.9 |
| | million | | | |
--------------------------------------------------------------------------------
| Net profit | EUR | 148.9 | 66.5 | 28.6 |
| | million | | | |
--------------------------------------------------------------------------------
| EPS excl. NRI | EUR | 0.19 | 0.08 | 0.04 |
--------------------------------------------------------------------------------
| EPS | EUR | 0.19 | 0.08 | 0.04 |
--------------------------------------------------------------------------------
| CEPS excl. NRI | EUR | 0.45 | 0.30 | 0.26 |
--------------------------------------------------------------------------------
| ROCE excl. NRI | % | 9.7 | 5.0 | 2.8 |
--------------------------------------------------------------------------------
| ROCE excl. NRI and fair | % | 8.8 | 5.6 | 3.6 |
| valuations | | | | |
--------------------------------------------------------------------------------
Message from CEO Jouko Karvinen:
“The fastest cost inflation in the recent history of the industry, firstly in
wood costs, but now also in fuel and electricity costs, has decreased our
profits for the third consecutive quarter, now below half of the same period a
year ago. Operating profit was significantly below our expectations especially
in Wood Products, whereas the rapid cost increases and strong Euro have hurt
most of the paper and board businesses as well. The restructuring measures we
launched in late 2007 are being implemented as planned; however, in the present
environment they are clearly not enough.
“Even with our strong overall energy balance, especially with biofuel-based
energy, the 40% increase in oil and particularly gas prices in the past three
months, in addition to the wood cost increases of the past two years, means we
must take further actions. We have announced price increases in several paper
and board grades to our customers. Escalating costs and potentially weakening
demand will also require both temporary and permanent capacity reductions. These
capacity adjustments are independent of the outcome of the Russian wood duty
negotiations; they are needed because of unacceptable costs and the weak
profitability in certain products and production lines. We will announce
specific plans still during this current quarter. In parallel, we are preparing
a second set of capacity reduction plans in case there is no concrete and
cost-improving compromise on Russian duties soon.
“We sincerely appreciate the Finnish government's recent decision to
significantly reduce the income tax on domestic wood raw material. The forest
owners and the industry together need to turn this decision into increased
availability of fibre in Finland at competitive costs, as it is an opportunity
not only to reduce the damage of the Russian duties but also to provide forest
owners with a viable long-term customer base for their wood. The time to act is
now.
“Our forecast for overall annual unit cost inflation for 2008 is still estimated
to be about 4%. If current trends on several cost factors do not change for the
better, it is clear that this can rise further. We remain committed to
compensating for 2.5% to 3% of unit cost inflation through our own actions.
“In the challenging environment we expect our operating profit excluding
non-recurring items and fair valuations for the third quarter of 2008 to be
somewhat weaker than the second quarter of 2008. The weakening earnings will
naturally also have a negative impact on the Group's cash flow. We continue the
policy of balancing financial prudence and cash preservation on the one hand,
and investing selectively in attractive growth opportunities for the future on
the other.
“In this reality it is clear that waiting for things to get better will do the
Company nothing but great harm. This is especially true now that uncertainty
about the market outlook has changed as we see the first clear signs of demand
softness in certain grades. We will continue to take corrective actions as
rapidly and efficiently as we can in the reality we see ahead.”
Near-term Market Outlook
Forecasts of advertising expenditure in Western Europe and North America during
the rest of the year have been downgraded owing to growing macroeconomic
concerns. Print advertising expenditure in those regions is forecast to
stagnate, in contrast to positive growth in Central and Eastern Europe and Asia.
In Europe demand for newsprint is expected to be weaker than a year ago, but the
market should remain firm with prices unchanged on the second quarter of 2008 as
the supply and demand balance has improved.
Slightly stronger demand for magazine paper than a year ago is anticipated, but
demand growth may slow down due to macroeconomic uncertainties. The supply and
demand balance has improved in uncoated and coated magazine paper markets.
Price increases have been announced and higher prices, including biannual
contracts, are foreseen in the third quarter.
Demand for fine paper is expected to be weaker in Europe than a year ago, and
also affected by the normal seasonal downturn during the summer holiday period.
Due to severe cost inflation, price rises for both coated und uncoated fine
paper are foreseen later in the year.
Demand for consumer board is forecast to be much the same as a year ago
globally, but slightly weaker in Europe, and seasonally somewhat weaker than in
the second quarter. Prices are expected to start improving towards the end of
the year for cartonboard. The outlook for industrial packaging is affected by
the deteriorating macroeconomic prognosis, and weaker demand in the third
quarter than a year ago is foreseen. Prices for RCP-based containerboard are
expected to continue to soften and for corrugated packaging prices are expected
to be stable.
The market for wood products will remain weak. Demand in the third quarter is
forecast to be considerably weaker than a year ago, and also slightly weaker
than in the second quarter of 2008, aggravated by further weakening of the
European housing market. Prices will remain under pressure.
In Latin America rising demand for coated magazine paper is expected to level
out after the boom in demand in the first six months of the year. Prices are
predicted to improve.
In China demand for uncoated magazine paper is forecast to improve after a
seasonally weaker summer and prices may be higher than in the second quarter.
However, the outlook for fine paper demand and prices is expected to weaken
slightly.
Markets
Compared with Q2/2007
In Europe market demand was stronger for all magazine paper grades, similar to a
year ago for consumer board and some industrial packaging grades, weaker for
newsprint, fine paper and recycled containerboard, and dramatically weaker for
wood products compared with the exceptional second quarter of last year.
Market prices in local currencies were higher for all magazine paper grades and
some industrial packaging grades, slightly higher for uncoated fine paper and
consumer board, virtually unchanged for recycled containerboard, and lower for
newsprint in Europe, coated fine paper and wood products.
Producer inventories were lower than a year ago in newsprint and uncoated
magazine paper, and similar in coated magazine paper and fine paper.
In Latin America market demand for coated magazine paper was stronger and prices
increased considerably.
In China market demand for coated fine paper continued to grow and prices were
higher than a year ago.
Compared with Q1/2008
In Europe market demand was stronger for newsprint and uncoated magazine paper,
seasonally stronger for wood products, similar for consumer board and weaker for
coated magazine paper, fine paper and industrial packaging.
Market prices in local currencies were slightly higher for uncoated fine paper,
unchanged for newsprint in Europe, magazine paper, coated fine paper, consumer
board and some industrial packaging grades, and lower for recycled
containerboard and wood products.
Producer inventories were lower in newsprint, unchanged in uncoated magazine
paper and fine paper, and higher in coated magazine paper.
In Latin America market demand for coated magazine paper strengthened and prices
improved.
In China demand for uncoated magazine paper and fine paper grew steadily and
prices increased.
Stora Enso Deliveries and Production from Continuing Operations
--------------------------------------------------------------------------------
| | Q1-Q | Q1-Q | Q2/0 | Q1/0 | Q2/0 | Chang | Chang | Chang |
| | 2/07 | 2/08 | 7 | 8 | 8 | e % | e % | e % |
| | | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | -Q2/0 | -Q1/0 | /08 - |
| | | | | | | 7 | 8 | Q1-Q2 |
| | | | | | | | | /07 |
--------------------------------------------------------------------------------
| Paper and board | 6 | 6019 | 3 | 3 | 2 | -2.4 | -1.0 | -3.2 |
| deliveries (1 000 | 218 | | 068 | 024 | 995 | | | |
| tonnes) | | | | | | | | |
--------------------------------------------------------------------------------
| Paper and board | 6 | 6038 | 3107 | 3 | 2 | -4.4 | -3.3 | -3.9 |
| production (1 000 | 284 | | | 069 | 969 | | | |
| tonnes) | | | | | | | | |
--------------------------------------------------------------------------------
| Wood products | 3 | 3030 | 1 | 1 | 1 | -11.3 | 6.5 | -10.4 |
| deliveries (1 000 | 382 | | 763 | 467 | 563 | | | |
| m3) | | | | | | | | |
--------------------------------------------------------------------------------
Mill closures and restructurings reduced comparative deliveries as follows for
the period Q2/08 compared with Q2/07: Summa Mill closure in January 2008 by some
92 000 tonnes, mainly newsprint; Reisholz Mill closure in the fourth quarter of
2007 by some 44 000 tonnes of magazine paper; Anjala Mill restructuring in the
first quarter of 2008 by some 29 000 tonnes of magazine paper; Berghuizer Mill's
two paper machines shut down in April and October 2007 by some 40 000 tonnes of
fine paper; and Kemijärvi Pulp Mill closure at the end of April 2008 by some
7 000 tonnes.
Mill closures and restructurings reduced comparative deliveries as follows for
the period Q1-Q2/08 compared with Q1-Q2/07: Summa Mill closure in January 2008
by some 154 000 tonnes, mainly newsprint; Reisholz Mill closure in the fourth
quarter of 2007 by some 84 000 tonnes of magazine paper; Anjala Mill
restructuring in the first quarter of 2008 by some 44 000 tonnes of magazine
paper; Berghuizer Mill's two paper machines shut down in April and October 2007
by some 95 000 tonnes of fine paper; and Kemijärvi Pulp Mill closure at the end
of April 2008 by some 1 000 tonnes (due to timing of maintenance stoppages in
2007).
Q2/2008 Results from Continuing Operations (compared with Q2/2007)
Sales at EUR 2 871.8 million were 3.9% lower than in the second quarter of 2007.
Unfavourable exchange rate trends for Magazine Paper, Newsprint, Fine Paper and
Consumer Board, and significantly lower prices and deliveries in Wood Products
were only partly compensated by higher volumes in Newsprint, Magazine Paper and
Fine Paper, and higher sales prices in Magazine Paper and Fine Paper. Newsprint
sales prices decreased. Mill closures reduced sales by EUR 136 million.
Industrial Packaging sales increased as higher sales prices more than offset
slightly lower volumes.
Key Figures
--------------------------------------------------------------------------------
| EUR million | 200 | Q1- | Q1- | Q2/0 | Q1/0 | Q2/0 | Chan | Chan | Chan |
| | 7 | Q2/ | Q2/ | 7 | 8 | 8 | ge % | ge % | ge % |
| | | 07 | 08 | | | | Q2/0 | Q2/0 | Q1-Q |
| | | | | | | | 8-Q2 | 8-Q1 | 2/08 |
| | | | | | | | /07 | /08 | -Q1- |
| | | | | | | | | | Q2/0 |
| | | | | | | | | | 7 |
--------------------------------------------------------------------------------
| Continuing | | | | | | | | | |
| Operations | | | | | | | | | |
--------------------------------------------------------------------------------
| Sales | 11 | 5 | 5 | 2 | 2 | 2 | -3.9 | 1.4 | -4.8 |
| | 848 | 991 | 703 | 989. | 831. | 871. | | | |
| | .5 | .1 | .6 | 9 | 8 | 8 | | | |
--------------------------------------------------------------------------------
| EBITDA excluding | 1 | 927 | 512 | 431. | 275. | 236. | -45. | -14. | -44. |
| NRI | 568 | .4 | .4 | 4 | 7 | 7 | 1 | 1 | 7 |
| | .6 | | | | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 1 | 554 | 197 | 244. | 125. | 72.6 | -70. | -41. | -64. |
| excluding NRI | 126 | .8 | .6 | 2 | 0 | | 3 | 9 | 4 |
| | .8 | | | | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 861 | 517 | 234 | 222. | 140. | 94.4 | -57. | -32. | -54. |
| excl. NRI and | .1 | .8 | .5 | 9 | 1 | | 6 | 6 | 7 |
| fair valuations | | | | | | | | | |
--------------------------------------------------------------------------------
| NRI | -94 | -12 | -1. | - | - | -1.3 | n/a | n/a | 89.2 |
| (operational) | 9.9 | .0 | 3 | | | | | | |
--------------------------------------------------------------------------------
| Operating margin | 9.5 | 9.3 | 3.5 | 8.2 | 4.4 | 2.5 | -69. | -43. | -62. |
| excluding NRI, % | | | | | | | 5 | 2 | 4 |
--------------------------------------------------------------------------------
| Operating profit | 176 | 542 | 196 | 244. | 125. | 71.3 | -70. | -43. | -63. |
| (IFRS) | .9 | .8 | .3 | 2 | 0 | | 8 | 0 | 8 |
--------------------------------------------------------------------------------
| Net financial | -15 | -89 | -82 | -53. | -41. | -40. | 22.8 | 2.4 | 7.1 |
| items | 6.7 | .1 | .8 | 0 | 9 | 9 | | | |
--------------------------------------------------------------------------------
| Profit before | 970 | 465 | 114 | 191. | 83.1 | 31.7 | -83. | -61. | -75. |
| tax and minority | .1 | .7 | .8 | 2 | | | 4 | 9 | 3 |
| interests | | | | | | | | | |
| excluding NRI | | | | | | | | | |
--------------------------------------------------------------------------------
| Profit before | 20. | 453 | 113 | 191. | 83.1 | 30.4 | -84. | -63. | -75. |
| tax and minority | 2 | .7 | .5 | 2 | | | 1 | 4 | 0 |
| interests | | | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for | 745 | 358 | 96. | 148. | 66.5 | 29.9 | -79. | -55. | -73. |
| the period | .9 | .1 | 4 | 9 | | | 9 | 0 | 1 |
| excluding NRI | | | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for | 11. | 346 | 95. | 148. | 66.5 | 28.6 | -80. | -57. | -72. |
| the period | 4 | .1 | 1 | 9 | | | 8 | 0 | 5 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EPS from | 0.9 | 0.4 | 0.1 | 0.19 | 0.08 | 0.04 | -78. | -50. | -73. |
| continuing | 4 | 5 | 2 | | | | 9 | 0 | 3 |
| operations | | | | | | | | | |
| excluding NRI, | | | | | | | | | |
| Basic, EUR | | | | | | | | | |
--------------------------------------------------------------------------------
| EPS from | 0.0 | 0.4 | 0.1 | 0.19 | 0.08 | 0.04 | -78. | -50. | -72. |
| continuing | 1 | 4 | 2 | | | | 9 | 0 | 7 |
| operations, | | | | | | | | | |
| Basic, EUR | | | | | | | | | |
--------------------------------------------------------------------------------
| CEPS from | 1.9 | 0.9 | 0.5 | 0.45 | 0.30 | 0.26 | -42. | -13. | -42. |
| continuing | 4 | 8 | 6 | | | | 2 | 3 | 9 |
| operations | | | | | | | | | |
| excluding NRI, | | | | | | | | | |
| EUR | | | | | | | | | |
--------------------------------------------------------------------------------
| ROCE from | 11. | 11. | 3.8 | 9.7 | 5.0 | 2.8 | -71. | -44. | -65. |
| continuing | 4 | 1 | | | | | 1 | 0 | 8 |
| operations | | | | | | | | | |
| excluding NRI, % | | | | | | | | | |
--------------------------------------------------------------------------------
| ROCE from | 8.7 | 10. | 4.5 | 8.8 | 5.6 | 3.6 | -59. | -35. | -56. |
| continuing excl. | | 4 | | | | | 1 | 7 | 7 |
| NRI and fair | | | | | | | | | |
| valuations, % | | | | | | | | | |
--------------------------------------------------------------------------------
| ROCE, % | 1.8 | 10. | 3.8 | 9.7 | 5.0 | 2.7 | -72. | -46. | -65. |
| | | 9 | | | | | 2 | 0 | 1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Operations | | | | | | | | | |
--------------------------------------------------------------------------------
| EPS from total | -0. | 0.4 | 0.1 | 0.18 | 0.09 | 0.03 | -83. | -66. | -73. |
| operations, | 27 | 6 | 2 | | | | 3 | 7 | 9 |
| Basic, EUR | | | | | | | | | |
--------------------------------------------------------------------------------
| EPS from total | 0.8 | 0.3 | 0.1 | 0.13 | 0.09 | 0.03 | -76. | -66. | -69. |
| operations | 8 | 9 | 2 | | | | 9 | 7 | 2 |
| excluding NRI, | | | | | | | | | |
| Basic, EUR | | | | | | | | | |
--------------------------------------------------------------------------------
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.
Cash Earnings per Share (CEPS) = (Net profit for the period + depreciation and
amortisation)/average number of shares
Fair valuations include fair valuation of Total Return Swaps (TRS), synthetic
options and CO2 emission rights, and valuations of biological assets mainly
related to associated companies' forest assets
Reconciliation of Operating Profit, Continuing Operations
--------------------------------------------------------------------------------
| EUR million | Q1- | Q1- | Q2/0 | Q1/0 | Q2/0 | Chang | Chang | Chang |
| | Q2/ | Q2/ | 7 | 8 | 8 | e % | e % | e % |
| | 07 | 08 | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Profit from | 473 | 210 | 202. | 124. | 86.1 | -57.6 | -30.8 | -55.6 |
| operations, excl. | .7 | .5 | 9 | 4 | | | | |
| NRI | | | | | | | | |
--------------------------------------------------------------------------------
| Associated | 44. | 24. | 20.0 | 15.7 | 8.3 | -58.5 | -47.1 | -45.6 |
| companies, | 1 | 0 | | | | | | |
| operational, excl. | | | | | | | | |
| fair valuations | | | | | | | | |
--------------------------------------------------------------------------------
| Operating Profit | 517 | 234 | 222. | 140. | 94.4 | -57.6 | -32.6 | -54.7 |
| excl. NRI and Fair | .8 | .5 | 9 | 1 | | | | |
| Valuations | | | | | | | | |
--------------------------------------------------------------------------------
| Fair valuations* | 37. | -36 | 21.3 | - | - | -202. | -44.4 | -199. |
| | 0 | .9 | | 15.1 | 21.8 | 3 | | 7 |
--------------------------------------------------------------------------------
| Operating Profit, | 554 | 197 | 244. | 125. | 72.6 | -70.3 | -41.9 | -64.4 |
| excl NRI | .8 | .6 | 2 | 0 | | | | |
--------------------------------------------------------------------------------
| NRI | - | - | - | - | - | n/a | n/a | -89.2 |
| | 12. | 1.3 | | | 1.3 | | | |
| | 0 | | | | | | | |
--------------------------------------------------------------------------------
| Operating Profit | 542 | 196 | 244. | 125. | 71.3 | -70.8 | -43.0 | -63.8 |
| (IFRS) | .8 | .3 | 2 | 0 | | | | |
--------------------------------------------------------------------------------
* Fair valuations include fair valuation of Total Return Swaps (TRS), synthetic
options and CO2 emission rights, and valuations of biological assets mainly
related to associated companies' forest assets
Q2/2008 Results from Continuing Operations (compared with Q2/2007) (continued)
Operating profit excluding non-recurring items and fair valuations decreased by
EUR 128.5 million to EUR 94.4 million, which is 3.3% of sales. Wood Products
accounted for EUR 70.2 million of the decrease, and operating profit was also
lower in all other segments except Magazine Paper and Other operations.
In paper and board mills, excluding closed mills, increased deliveries improved
operating profit by EUR 28 million and higher sales prices in local currencies
increased operating profit by EUR 51 million. Unfavourable exchange rate trends
decreased operating profit net of currency hedges by approximately EUR 35
million. Lower deliveries and sales prices decreased Wood Products operating
profit by EUR 72 million.
Energy costs increased by EUR 38 million, two-thirds of which was due to fuel
and one-third due to electricity. Half of the electricity cost increase was due
to temporary electricity generation and transmission problems in Finland and
Sweden. Wood costs were expected to have levelled out by mid year, but total
wood costs were still clearly higher than a year before, although sawlog costs
were lower. Higher wood costs reduced the Group's overall operating profit by
approximately EUR 34 million as the decrease in sawlog costs (EUR 13 million)
was more than offset by the increase in pulpwood costs (EUR 47 million). The
impairments in the second half of 2007 reduced depreciation by EUR 34 million.
Fixed costs decreased by EUR 14 million. This was the result a reduction of EUR
30 million due to cost improvement actions partially offset by an increase of
EUR 16 million mainly due to maintenance costs and related extended start-up
periods.
Deliveries of wood to the Group's mills totalled 9.6 million cubic metres, which
was some 9.5% less than in the second quarter of 2007, mainly due to production
curtailments at sawmills and mill closures.
The share of associated company operational results, excluding IAS 41 forest
valuations, amounted to EUR 8.3 (EUR 20.0) million; the main contributions were
from Bergvik Skog, Tornator and Veracel. Since the beginning of 2008, associated
companies have been reported separately in operating profit; in the previous
year they were included in the respective business area's operating profit. The
comparative operating profits of business areas for 2007 have been reclassified
accordingly. Operating profit includes a negative net effect of EUR 21.8 million
(positive EUR 21.3 million) from the accounting of share-based compensation,
Total Return Swaps (TRS), CO2 emission rights and IAS 41 forest valuations
mainly related to associated companies.
There were several non-recurring items in the second quarter of 2008, but their
net effect on Group profit was not material.
Net financial items were EUR -40.9 (EUR -53.0) million. Net interest expenses
increased to EUR 36.4 (EUR 35.5) million and net foreign exchange gains on
borrowings, currency derivatives and bank accounts were EUR 4.2 (loss EUR 0.5)
million. The net expense of other financial items decreased to EUR 8.7 (EUR
17.0) million mainly due to reduced fair valuation losses.
Profit before tax and minority interests decreased by EUR 160.8 million to EUR
30.4 million. Profit before tax and minority interests excluding non-recurring
items decreased by EUR 159.5 million to EUR 31.7 million.
Net taxes including non-recurring items totalled EUR -1.8 (EUR -42.3) million,
leaving a net profit for the quarter of EUR 28.6 (EUR 148.9) million.
Earnings per share excluding non-recurring items decreased by EUR 0.15 to EUR
0.04. Earnings per share including non-recurring items were EUR 0.04 (EUR 0.19).
Cash earnings per share were EUR 0.26 (EUR 0.45) excluding non-recurring items.
The return on capital employed was 2.8% (9.7%) excluding non-recurring items.
The return on capital employed excluding non-recurring items and fair valuations
was 3.6% (8.8%). Group capital employed was EUR 10 638.6 million on 30 June
2008, a net decrease of EUR 1 952.2 million, due to the divestment of North
American and Merchant operations, restructuring of the Group, and fixed asset
and goodwill impairments recorded in September 2007, partly offset by the fair
valuation of unlisted securities included in available-for-sale investments.
January-June 2008 Results (compared with the same period in 2007)
Sales at EUR 5 703.6 million were 4.8% lower than in the first half of 2007,
partly due to unfavourable exchange rate trends and significantly lower prices
and deliveries in Wood Products. Mill closures reduced sales by EUR 247 million.
Operating profit excluding non-recurring items and fair valuations decreased by
EUR 283.3 million to EUR 234.5 million, which is 4.1% of sales. Wood Products
accounted for EUR 148.4 million of the decrease, and operating profit was also
lower in all segments except Magazine Paper and Other operations.
Changes in deliveries had no material effect on Group operating profit, as
decreased Wood Products deliveries were offset at Group level. Sales prices in
local currencies increased in Magazine Paper, Fine Paper, Consumer Board and
Industrial Packaging, but this was fully offset by decreased Newsprint prices
and much lower Wood Products prices. Unfavourable exchange rate trends decreased
operating profit net of currency hedges by approximately EUR 70 million.
Higher wood costs reduced the Group's overall operating profit by approximately
EUR 103 million as the slight decrease in sawlog costs (EUR 7 million) was more
than offset by the increase in pulpwood costs (EUR 110 million). Other fibre
costs increased by some EUR 26 million.
Energy costs increased by approximately EUR 42 million. Fixed costs decreased by
some EUR 44 million, as a reduction of EUR 68 million due to cost improvement
actions was partially offset by an increase of EUR 24 million mainly due to
maintenance costs. Impairments in the second half of 2007 decreased depreciation
by EUR 80 million.
Deliveries of wood to the Group's mills totalled 19.8 million cubic metres,
which was some 8.9% less than in the first half of 2007, mainly due to
production curtailments at sawmills and mill closures.
There were several non-recurring items in the first half of 2008, but their net
effect on Group profitability was not material.
Net financial items were EUR -82.8 (EUR -89.1) million. Net interest expenses
decreased to EUR 73.6 (EUR 75.0) million and net foreign exchange borrowings,
currency derivatives and bank accounts were EUR 4.5 (gain EUR 2.6) million. The
net expense of other financial items decreased to EUR 4.7 (EUR 16.7) million.
Earnings per share excluding non-recurring items decreased by EUR 0.33 to EUR
0.12. Earnings per share including non-recurring items were EUR 0.12 (EUR 0.44).
Cash earnings per share were EUR 0.56 (EUR 0.98) excluding non-recurring items.
The return on capital employed was 3.8% (11.1%) excluding non-recurring items.
The return on capital employed excluding non-recurring items and fair valuations
was 4.5% (10.4%).
Discontinued Operations
On 30 April 2008 Stora Enso finalised the divestment of its merchant business
Papyrus to Altor Fund II as announced on 6 March 2008. The merchants business is
classified as a discontinued operation according to IFRS, so its net profit for
the four months ended 30 April is reported in a single line after net profit
from continuing operations. The profit on discontinued operations includes a
loss on disposal including cumulative exchange rate differences.
The operating profit from discontinued operations, excluding the loss on
disposal, was EUR 15.6 million. The loss on disposal before tax was EUR 4.6
million, net of cumulative exchange rate differences.
Q2/2008 Results (compared with Q1/2008)
Sales at EUR 2 871.8 million were 1.4% higher than the previous quarter's EUR
2 831.8 million mainly due to slightly increased deliveries and prices in local
currencies. Mill closures decreased sales by EUR 41 million.
Operating profit excluding non-recurring items and fair valuations decreased by
EUR 45.7 million to EUR 94.4 million.
Earnings per share were EUR 0.04 (EUR 0.08) excluding non-recurring items and
cash earnings per share were EUR 0.26 (EUR 0.30) excluding non-recurring items.
The return on capital employed was 2.8% (5.0%) excluding non-recurring items.
The return on capital employed excluding non-recurring items and fair valuations
was 3.6% (5.6%). Group capital employed was EUR 10 638.6 million on 30 June
2008, a net decrease of EUR 6.0 million mainly due the divestment of Merchant
operations, offset by the fair valuation of unlisted securities included in
available-for-sales investments.
Capital Structure
--------------------------------------------------------------------------------
| EUR million | 31 Dec 07 | 30 Jun 07 | 31 Mar 08 | 30 Jun 08 |
--------------------------------------------------------------------------------
| Fixed assets | 8 493.2 | 11 029.5 | 8 366.8 | 8 572.8 |
--------------------------------------------------------------------------------
| Associated companies | 1 154.5 | 907.3 | 1 142.5 | 1 213.7 |
--------------------------------------------------------------------------------
| Operative working capital | 2 084.3 | 2 497.4 | 2 361.3 | 1 921.3 |
--------------------------------------------------------------------------------
| Non-current interest-free | -610.8 | -954.3 | -641.5 | -531.5 |
| items, net | | | | |
--------------------------------------------------------------------------------
| Operating Capital Total | 11 121.2 | 13 479.9 | 11 229.1 | 11 176.3 |
--------------------------------------------------------------------------------
| Net tax liabilities | -618.6 | -889.1 | -584.5 | -537.7 |
--------------------------------------------------------------------------------
| Capital Employed | 10 502.6 | 12 590.8 | 10 644.6 | 10 638.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity attributable to | 7 476.1 | 8 052.9 | 7 016.6 | 7 665.0 |
| Company shareholders | | | | |
--------------------------------------------------------------------------------
| Minority interests | 71.9 | 117.0 | 69.2 | 74.8 |
--------------------------------------------------------------------------------
| Net interest-bearing | 2 954.6 | 4 420.9 | 3 558.8 | 2 898.8 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Financing Total | 10 502.6 | 12 590.8 | 10 644.6 | 10 638.6 |
--------------------------------------------------------------------------------
Financing Q2/08 (compared with Q1/08)
Cash flow from continuing operations was EUR 345.9 (EUR -27.4) million and cash
flow after investing activities EUR 151.6 (EUR -161.4) million.
At the end of the period, interest-bearing net liabilities of the Group were EUR
2 898.8 million, a decrease of EUR 660 million mainly due to the sale of the
Merchants segment in April. Total unutilised committed credit facilities and
cash and cash-equivalent net reserves increased by EUR 0.3 billion to EUR 1.9
billion. In addition, Stora Enso has access to various long-term sources of
funding up to EUR 1.1 billion.
The debt/equity ratio at 30 June 2008 was 0.38 (0.51). The currency effect on
equity was positive EUR 76 million net of the hedging of equity translation
risks. The fair valuation of unlisted securities, mainly related to the unlisted
Finnish power supply company Pohjolan Voima, included within available-for-sale
assets increased equity by EUR 504.0 million. The revaluation was due to the
large increase in electricity prices since the first quarter of 2008.
Cash Flow
--------------------------------------------------------------------------------
| EUR million | 200 | Q1- | Q1-Q | Q2/0 | Q1/0 | Q2/0 | Chang | Chang | Chang |
| | 7 | Q2/ | 2/08 | 7 | 8 | 8 | e % | e % | e % |
| | | 07 | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Continuing | | | | | | | | | |
| Operations | | | | | | | | | |
--------------------------------------------------------------------------------
| Operating | 176 | 542 | 196. | 244. | 125. | 71.3 | -70.8 | -43.0 | -63.8 |
| profit | .9 | .8 | 3 | 2 | 0 | | | | |
--------------------------------------------------------------------------------
| Depreciation | 1 | 402 | 386. | 188. | 193. | 192. | 2.3 | -0.6 | -4.0 |
| and other | 219 | .8 | 6 | 4 | 9 | 7 | | | |
| non-cash | .8 | | | | | | | | |
| items | | | | | | | | | |
--------------------------------------------------------------------------------
| Change in | -22 | -38 | -264 | -83. | -346 | 81.9 | 198.0 | 123.7 | 31.0 |
| working | 8.4 | 3.4 | .4 | 6 | .3 | | | | |
| capital | | | | | | | | | |
--------------------------------------------------------------------------------
| Cash Flow | 1 | 562 | 318. | 349. | -27. | 345. | -0.9 | 1 | -43.3 |
| from | 168 | .2 | 5 | 0 | 4 | 9 | | 362.4 | |
| Operations | .3 | | | | | | | | |
--------------------------------------------------------------------------------
| Capital | -76 | -27 | -328 | -170 | -134 | -194 | -14.2 | -45.0 | -20.0 |
| expenditure | 8.3 | 3.5 | .3 | .2 | .0 | .3 | | | |
--------------------------------------------------------------------------------
| Cash Flow | 400 | 288 | -9.8 | 178. | -161 | 151. | -15.2 | 193.9 | -103. |
| after | .0 | .7 | | 8 | .4 | 6 | | | 4 |
| Investing | | | | | | | | | |
| Activities | | | | | | | | | |
--------------------------------------------------------------------------------
| Discontinued | | | | | | | | | |
| Operations | | | | | | | | | |
--------------------------------------------------------------------------------
| Cash flow | 136 | 32. | 51.4 | 19.1 | 17.0 | 34.4 | 80.1 | 102.4 | 60.1 |
| from | .8 | 1 | | | | | | | |
| discontinued | | | | | | | | | |
| operations | | | | | | | | | |
| after | | | | | | | | | |
| investing | | | | | | | | | |
| activities | | | | | | | | | |
--------------------------------------------------------------------------------
| Total Cash | 536 | 320 | 41.6 | 197. | -144 | 186. | -6.0 | 228.8 | -87.0 |
| Flow after | .8 | .8 | | 9 | .4 | 0 | | | |
| Investing | | | | | | | | | |
| Activities | | | | | | | | | |
--------------------------------------------------------------------------------
Capital Expenditure for January - June 2008
Capital expenditure for the first half of 2008 totalled EUR 328.3 million
including land acquisitions, which is in line with decreased depreciation. The
Group's total capital expenditure for 2008 is expected to be about EUR 700-750
million, including land acquisitions.
The main projects during the first half of 2008 were plantation projects in
South America (EUR 31.6 million) and at Guangxi in China (EUR 22.0 million), the
energy-related investment at Langerbrugge Mill in Belgium (EUR 15.0 million),
the sheeting plant at Veitsiluoto Mill in Finland (EUR 11.7 million) and Stora
Enso's third corrugated packaging plant in Russia at Lukhovitsy (EUR 9.8
million).
Goodwill impairment testing
Goodwill impairment testing, which has been undertaken in the third quarter each
year, will from now on be undertaken in the fourth quarter in order to align the
testing procedures with the strategy and planning process. Fixed assets are
currently being reviewed for potential impairment including the uncertainties
relating mainly to Russian duties, and the Group expects to complete the fixed
asset and goodwill impairment testing by the year end.
Short-term Risks and Uncertainties
The global economic slowdown may reduce demand for the Group's products. The
direct impact of the strong euro and its indirect impact on trade flows may
adversely affect the Group's profitability. Stora Enso expects the Group's
profitability in the second half of 2008 to be negatively impacted by the effect
of rising fossil fuel prices on energy, transport and chemical costs. The
forthcoming increases in Russian export duties on roundwood are causing
continuing uncertainty in the Baltic Sea region.
Energy sensitivity analysis: direct impact of 10% change in electricity market
price and 10% change in oil market price impact operating profit by about EUR 8
million and about EUR 35 million respectively.
Near-term Market Outlook
Forecasts of advertising expenditure in Western Europe and North America during
the rest of the year have been downgraded owing to growing macroeconomic
concerns. Print advertising expenditure in those regions is forecast to
stagnate, in contrast to positive growth in Central and Eastern Europe and Asia.
In Europe demand for newsprint is expected to be weaker than a year ago, but the
market should remain firm with prices unchanged on the second quarter of 2008 as
the supply and demand balance has improved.
Slightly stronger demand for magazine paper than a year ago is anticipated, but
demand growth may slow down due to macroeconomic uncertainties. The supply and
demand balance has improved in uncoated and coated magazine paper markets.
Price increases have been announced and higher prices, including biannual
contracts, are foreseen in the third quarter.
Demand for fine paper is expected to be weaker in Europe than a year ago, and
also affected by the normal seasonal downturn during the summer holiday period.
Due to severe cost inflation, price rises for both coated und uncoated fine
paper are foreseen later in the year.
Demand for consumer board is forecast to be much the same as a year ago
globally, but slightly weaker in Europe, and seasonally somewhat weaker than in
the second quarter. Prices are expected to start improving towards the end of
the year for cartonboard. The outlook for industrial packaging is affected by
the deteriorating macroeconomic prognosis, and weaker demand in the third
quarter than a year ago is foreseen. Prices for RCP-based containerboard are
expected to continue to soften and for corrugated packaging prices are expected
to be stable.
The market for wood products will remain weak. Demand in the third quarter is
forecast to be considerably weaker than a year ago, and also slightly weaker
than in the second quarter of 2008, aggravated by further weakening of the
European housing market. Prices will remain under pressure.
In Latin America rising demand for coated magazine paper is expected to level
out after the boom in demand in the first six months of the year. Prices are
predicted to improve.
In China demand for uncoated magazine paper is forecast to improve after a
seasonally weaker summer and prices may be higher than in the second quarter.
However, the outlook for fine paper demand and prices is expected to weaken
slightly.
Second Quarter Events
April
Stora Enso's Section 12(g) registration and Section 13(a) and Section 15(d)
reporting obligations under the US Securities Exchange Act ended on 7 April
2008.
May
On 21 May 2008 Stora Enso announced that it had signed two separate agreements
to sell the Berghuizer Mill power plant, land and buildings. The power plant
transaction was finalised at the end of June and the land and buildings
transaction is expected to be finalised during 2008. Cash proceeds from the
transactions will total EUR 21.5 million.
On 23 May 2008 Stora Enso announced that it had decided to commence a
feasibility study for an integrated pulp and paper mill in the Nizhny Novgorod
region in Russia, as the findings of the recently completed pre-feasibility
study begun in July 2007 supported continuation of the process at this point.
The feasibility study, which is expected to be completed by April 2009, will
evaluate the profitability of the project to manufacture paper for Russian
consumers from Russian wood in Russia.
June
On 9 June 2008 Stora Enso announced that it had signed an agreement to sell its
head office building in Helsinki to Deka Immobilien GmbH of Germany for
approximately EUR 30 million.
On 25 June 2008 Stora Enso's Russian subsidiary Stora Enso Packaging BB
inaugurated its new corrugated board plant at Lukhovitsy, some 130 kilometres
southeast of Moscow. The annual production capacity of the plant will be 150
million m2 of corrugated packaging board.
Inspections by Competition Authorities
In 2007, following US Federal District Court trial, Stora Enso was found not
guilty of charges by the US Department of Justice relating to the sale of coated
magazine paper in the USA in 2002 and 2003. Coincident with this case, Stora
Enso has been named in a number of class action lawsuits filed in the USA which
still are pending.
As a result of an investigation, the Finnish Competition Authority has proposed
to the Finnish Market Court that a fine of EUR 30 million should be imposed on
Stora Enso for violating competition laws in the purchasing of wood in Finland
in the period from 1997 to 2004. Stora Enso considers the proposal groundless.
No provision has been made in Stora Enso's accounts for the above-mentioned
investigation and lawsuits.
Changes in Group Composition
On 6 March 2008 Stora Enso signed an agreement to sell its merchant business
Papyrus to Altor Fund II. The transaction was finalised on 30 April. Stora Enso
divested Papyrus as part of its strategy of focusing the business portfolio of
the Group. The divestment includes a long-term supply agreement with Papyrus,
which will maintain Stora Enso's strong business relationship with Papyrus,
while at the same time giving the Group independence in dealings with all of its
important distribution channels.
Share Capital
During the quarter 295 663 A shares were converted into R shares. The latest
conversion was recorded in the Finnish Trade Register on 13 June 2008.
On 30 June 2008 Stora Enso had 177 154 889 A shares and 612 383 610 R shares in
issue of which the Company held no A shares and 918 512 R shares with a nominal
value of EUR 1.6 million. The holding represents 0.12% of the Company's share
capital and 0.04% of the voting rights.
Events after the Period
On 11 July 2008 Stora Enso announced that its associated company Veracel in
Brazil had received a decision issued by a federal judge in Bahia originating
from a claim of 1993 in which Veracel (at that time Veracruz Florestal Ltda.)
was accused of having deforested a minor area (64 hectares) of native forest in
1993. Veracel operates in full compliance with all Brazilian laws. An extensive
environmental impact assessment study was undertaken in 1994-1995 as part of the
legal permit requirements. Veracel has obtained all the necessary environmental
and operating licences for its industrial and forestry activities from the
Brazilian environmental authorities. Veracel has asked the court for
clarification of the judgement and will also appeal against the same.
This report is unaudited.
Helsinki, 24 July 2008
Stora Enso Oyj
Board of Directors
Segments Q2/08 compared with Q2/07
Newsprint and Book Paper
--------------------------------------------------------------------------------
| EUR | 2007 | Q2/0 | Q1/0 | Q2/0 | Q1-Q2 | Q1-Q2 | Chang | Chang | Chang |
| million | | 7 | 8 | 8 | /07 | /08 | e % | e % | e % |
| | | | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Sales | 1 | 429. | 386. | 389. | 868.6 | 775.5 | -9.5 | 0.6 | -10.7 |
| | 734. | 9 | 5 | 0 | | | | | |
| | 9 | | | | | | | | |
--------------------------------------------------------------------------------
| Operatin | 211. | 50.2 | 26.4 | 27.9 | 111.3 | 54.3 | -44.4 | 5.7 | -51.2 |
| g | 9 | | | | | | | | |
| profit* | | | | | | | | | |
--------------------------------------------------------------------------------
| % of | 12.2 | 11.7 | 6.8 | 7.2 | 12.8 | 7.0 | -38.5 | 5.9 | -45.3 |
| sales | | | | | | | | | |
--------------------------------------------------------------------------------
| ROOC, | 15.7 | 14.7 | 8.9 | 9.5 | 16.2 | 9.2 | -35.4 | 6.7 | -43.2 |
| %** | | | | | | | | | |
--------------------------------------------------------------------------------
| Deliveri | 3 | 749 | 711 | 702 | 1 505 | 1 413 | -6.3 | -1.3 | -6.1 |
| es, 1 | 061 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
| Producti | 3 | 746 | 715 | 687 | 1 531 | 1 402 | -7.9 | -3.9 | -8.4 |
| on, 1 | 061 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Newsprint and book paper sales were EUR 389.0 million, down 10% on the second
quarter of 2007 due to closure of Summa Mill, which accounted for more than the
total sales reduction, and lower prices which were almost fully compensated by
improved sales mix. Operating profit was EUR 27.9 million, down 44% on the
previous year due to strengthening of the euro and higher fibre and energy
costs.
Markets
Compared with Q2/2007
In Europe demand for newsprint was weaker and prices were lower than a year ago.
Producer inventories were much lower. Imports from North America decreased
considerably. Deliveries by Western European suppliers to European and overseas
customers were somewhat lower. Strong demand growth continued in Asia and Latin
America; demand in North America declined.
Compared with Q1/2008
In Europe demand was seasonally firmer, leading to strong growth in deliveries
by European suppliers. Prices were unchanged and producer inventories decreased.
In North America demand weakened. Prices in overseas markets increased.
Magazine Paper
--------------------------------------------------------------------------------
| EUR | 2007 | Q2/0 | Q1/0 | Q2/0 | Q1-Q2 | Q1-Q2 | Chang | Chang | Chang |
| million | | 7 | 8 | 8 | /07 | /08 | e % | e % | e % |
| | | | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Sales | 2 | 552. | 547. | 540. | 1 | 1 | -2.2 | -1.2 | -2.8 |
| | 296. | 9 | 3 | 5 | 119.5 | 087.8 | | | |
| | 3 | | | | | | | | |
--------------------------------------------------------------------------------
| Operatin | 50.9 | 8.4 | 27.2 | 14.5 | 17.8 | 41.7 | 72.6 | -46.7 | 134.3 |
| g | | | | | | | | | |
| profit* | | | | | | | | | |
--------------------------------------------------------------------------------
| % of | 2.2 | 1.5 | 5.0 | 2.7 | 1.6 | 3.8 | 80.0 | -46.0 | 137.5 |
| sales | | | | | | | | | |
--------------------------------------------------------------------------------
| ROOC, | 2.9 | 1.7 | 7.1 | 3.7 | 1.8 | 5.4 | 117.6 | -47.9 | 200.0 |
| %** | | | | | | | | | |
--------------------------------------------------------------------------------
| Deliveri | 2 | 717 | 691 | 698 | 1 434 | 1 389 | -2.6 | 1.0 | -3.1 |
| es, 1 | 993 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
| Producti | 2 | 739 | 728 | 696 | 1 476 | 1 424 | -5.8 | -4.4 | -3.5 |
| on, 1 | 951 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Magazine paper sales were EUR 540.5 million, down 2% on the second quarter of
2007 mainly due to the capacity reduction at Anjala Mill in Finland and the
closure of Reisholz Mill in Germany. Operating profit was EUR 14.5 million,
which was higher than a year earlier as adverse currency movements and steep
input cost increases were more than offset by higher paper prices, restructuring
and productivity improvements. Operating profit was also affected by the EUR 16
million cost of the 18-month maintenance stoppage at Skutskär Pulp Mill and
problems in restarting production following the stoppage.
Kemijärvi Pulp Mill was permanently shutdown at the end of April 2008. A large
decrease in production at Norrsundet Pulp Mill is planned in the third quarter
of 2008 in preparation for closure of the mill at the end of the year.
Markets
Compared with Q2/2007
In Europe demand for magazine paper was stronger than a year ago and prices were
higher in all grades. Producer inventories were lower in uncoated and virtually
unchanged in coated grades.
In Latin America demand and prices were considerably higher.
Compared with Q1/2008
In Europe demand for uncoated grades strengthened but demand for coated grades
weakened somewhat. Prices remained stable. Producer inventories were almost
unchanged in uncoated but higher in coated grades.
In Latin America deliveries increased and prices improved.
In China demand grew steadily and prices rose.
Fine Paper
--------------------------------------------------------------------------------
| EUR | 2007 | Q2/0 | Q1/0 | Q2/0 | Q1-Q2 | Q1-Q2 | Chang | Chang | Chang |
| million | | 7 | 8 | 8 | /07 | /08 | e % | e % | e % |
| | | | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Sales | 2 | 522. | 545. | 537. | 1 | 1 | 2.9 | -1.4 | -1.5 |
| | 156. | 8 | 2 | 8 | 099.8 | 083.0 | | | |
| | 2 | | | | | | | | |
--------------------------------------------------------------------------------
| Operatin | 163. | 38.5 | 37.3 | 19.7 | 93.6 | 57.0 | -48.8 | -47.2 | -39.1 |
| g | 7 | | | | | | | | |
| profit* | | | | | | | | | |
--------------------------------------------------------------------------------
| % of | 7.6 | 7.4 | 6.8 | 3.7 | 8.5 | 5.3 | -50.0 | -45.6 | -37.6 |
| sales | | | | | | | | | |
--------------------------------------------------------------------------------
| ROOC, | 9.7 | 9.1 | 8.5 | 4.3 | 11.1 | 6.5 | -52.7 | -49.4 | -41.4 |
| %** | | | | | | | | | |
--------------------------------------------------------------------------------
| Deliveri | 2 | 689 | 726 | 688 | 1 449 | 1 414 | -0.1 | -5.2 | -2.4 |
| es, 1 | 826 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
| Producti | 2 | 720 | 696 | 694 | 1 458 | 1 390 | -3.6 | -0.3 | -4.7 |
| on, 1 | 856 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Fine paper sales were EUR 537.8 million, up 3% on the second quarter of 2007
mainly due to increased prices. Operating profit was EUR 19.7 million, down 49%
on the previous year due to higher wood and energy costs, partly compensated by
higher sales prices. Sales price increases were offset by unfavourable exchange
rate trends.
Markets
Compared with Q2/2007
In Europe demand was somewhat weaker for coated and uncoated fine paper as
economic growth slowed. Coated fine paper prices were lower and uncoated fine
paper prices slightly higher than a year ago. Industry inventories were
unchanged.
In China coated fine paper demand was again stronger and prices were higher than
a year ago.
Compared with Q1/2008
In Europe coated fine paper demand weakened substantially, partly for seasonal
reasons, but prices were practically unchanged. Uncoated fine paper demand
weakened slightly but prices increased somewhat. Industry inventories for coated
and uncoated fine paper were unchanged.
In China coated fine paper demand continued to grow and prices rose.
Consumer Board
--------------------------------------------------------------------------------
| EUR | 2007 | Q2/0 | Q1/0 | Q2/0 | Q1-Q2 | Q1-Q2 | Chang | Chang | Chang |
| million | | 7 | 8 | 8 | /07 | /08 | e % | e % | e % |
| | | | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Sales | 2 | 570. | 574. | 587. | 1 | 1 | 3.0 | 2.2 | 0.2 |
| | 300. | 1 | 4 | 3 | 159.7 | 161.7 | | | |
| | 9 | | | | | | | | |
--------------------------------------------------------------------------------
| Operatin | 158. | 29.0 | 42.5 | 23.0 | 101.4 | 65.5 | -20.7 | -45.9 | -35.4 |
| g | 0 | | | | | | | | |
| profit* | | | | | | | | | |
--------------------------------------------------------------------------------
| % of | 6.9 | 5.1 | 7.4 | 3.9 | 8.7 | 5.6 | -23.5 | -47.3 | -35.6 |
| sales | | | | | | | | | |
--------------------------------------------------------------------------------
| ROOC, | 8.4 | 5.9 | 10.0 | 5.5 | 10.3 | 7.8 | -6.8 | -45.0 | -24.3 |
| %** | | | | | | | | | |
--------------------------------------------------------------------------------
| Deliveri | 2 | 640 | 636 | 643 | 1 278 | 1 279 | 0.5 | 1.1 | 0.1 |
| es, 1 | 532 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
| Producti | 2 | 628 | 660 | 626 | 1 274 | 1 286 | -0.3 | -5.2 | 0.9 |
| on, 1 | 533 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Consumer board sales were EUR 587.3 million, up 3% on the second quarter of 2007
mainly due to increased pulp deliveries. Operating profit was EUR 23.0 million,
down 21% on the second quarter of 2007 due to sharp escalation in wood costs,
which is affecting Consumer Board especially strongly, and rising energy-related
costs towards the end of the quarter. These cost increases outweighed the
benefits of improvement actions.
Markets
Compared with Q2/2007
Deliveries were similar to a year ago and prices were generally somewhat higher
despite unfavourable exchange rate trends.
Compared with Q1/2008
Deliveries increased slightly and prices were stable.
Industrial Packaging
--------------------------------------------------------------------------------
| EUR | 2007 | Q2/0 | Q1/0 | Q2/0 | Q1-Q2 | Q1-Q2 | Chang | Chang | Chang |
| million | | 7 | 8 | 8 | /07 | /08 | e % | e % | e % |
| | | | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Sales | 1 | 274. | 275. | 285. | 540.3 | 560.9 | 4.1 | 3.6 | 3.8 |
| | 083. | 2 | 5 | 4 | | | | | |
| | 5 | | | | | | | | |
--------------------------------------------------------------------------------
| Operatin | 111. | 29.6 | 27.6 | 20.1 | 58.8 | 47.7 | -32.1 | -27.2 | -18.9 |
| g | 9 | | | | | | | | |
| profit* | | | | | | | | | |
--------------------------------------------------------------------------------
| % of | 10.3 | 10.8 | 10.0 | 7.0 | 10.9 | 8.5 | -35.2 | -30.0 | -22.0 |
| sales | | | | | | | | | |
--------------------------------------------------------------------------------
| ROOC, | 16.9 | 18.2 | 15.4 | 10.9 | 18.3 | 13.2 | -40.1 | -29.2 | -27.9 |
| %** | | | | | | | | | |
--------------------------------------------------------------------------------
| Deliveri | 1 | 273 | 260 | 264 | 552 | 524 | -3.3 | 1.5 | -5.1 |
| es, 1 | 065 | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
| Paper | 1 | 274 | 270 | 266 | 545 | 536 | -2.9 | -1.5 | -1.7 |
| and | 058 | | | | | | | | |
| Board | | | | | | | | | |
| producti | | | | | | | | | |
| on, 1 | | | | | | | | | |
| 000 t | | | | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items ** ROOC = 100% x Operating profit/Operating
capital
Industrial packaging sales were EUR 285.4 million, up 4% on the second quarter
of 2007 due to higher sales prices, especially for corrugated packaging, and
production from the new plant at Lukhovitsy in Russia. Operating profit was EUR
20.1 million, down 32% on the previous year due to energy, fibre and transport
cost increases, and maintenance and investment standstills at Heinola and Kotka
in Finland. Operating profit was also affected by the start-up costs of the
Lukhovitsy plant in Russia and the rebuilt coreboard machine at Wisconsin Rapids
in the USA, where the new board grades are currently being evaluated by
customers.
The offset printed micro-flute corrugated packaging plant at Balabanovo in
Russia started up on schedule at the end of the second quarter, and the offset
printed micro-flute packaging plant at Komarom in Hungary is scheduled for
completion in the third quarter of 2008. Corenso's new paint can is currently
undergoing industrial trials with customers.
Markets
Compared with Q2/2007
Demand for recycled containerboard was weaker and prices reverted to the same
level as a year ago after rising strongly in the second half of 2007. Demand for
other industrial packaging products was unchanged but prices were higher.
Compared with Q1/2008
General economic uncertainty started to affect industrial packaging markets.
Demand for recycled containerboard continued to weaken, demand for corrugated
packaging started to slow in some markets and demand for other products seemed
to be weakening. Recycled containerboard prices continued to decrease but other
industrial packaging prices remained stable.
Wood Products
--------------------------------------------------------------------------------
| EUR | 2007 | Q2/0 | Q1/0 | Q2/0 | Q1-Q2 | Q1-Q2 | Chang | Chang | Chang |
| million | | 7 | 8 | 8 | /07 | /08 | e % | e % | e % |
| | | | | | | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Sales | 1 | 525. | 378. | 409. | 998.0 | 788.4 | -22.0 | 8.2 | -21.0 |
| | 853. | 7 | 6 | 8 | | | | | |
| | 1 | | | | | | | | |
--------------------------------------------------------------------------------
| Operatin | 150. | 59.3 | -23. | -10. | 114.1 | -34.3 | -118. | 53.4 | -130. |
| g | 7 | | 4 | 9 | | | 4 | | 1 |
| profit* | | | | | | | | | |
--------------------------------------------------------------------------------
| % of | 8.1 | 11.3 | -6.2 | -2.7 | 11.4 | -4.4 | -123. | 56.5 | -138. |
| sales | | | | | | | 9 | | 6 |
--------------------------------------------------------------------------------
| ROOC, | 19.5 | 28.6 | -12. | -5.6 | 28.3 | -8.9 | -119. | 54.5 | -131. |
| %** | | | 3 | | | | 6 | | 4 |
--------------------------------------------------------------------------------
| Deliveri | 6 | 1 | 1 | 1 | 3 382 | 3 030 | -11.3 | 6.5 | -10.4 |
| es, 1 | 348 | 763 | 467 | 563 | | | | | |
| 000 m3 | | | | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items **ROOC = 100% x Operating profit/Operating
capital
Wood product sales were EUR 409.8 million, down 22% on the second quarter of
2007 as sales prices and volumes declined in significantly weakening markets.
There was an operating loss of EUR 10.9 million, a deterioration of EUR 70.2
million compared with the second quarter of 2007 due to lower sales prices and
volumes, and unfavourable exchange rate trends. Production curtailments and
other cost-saving measures could not prevent losses. The situation is especially
difficult in Finnish sawmills.
Markets
Compared with Q2/2007
Demand and prices in all markets were significantly weaker than in the very
strong markets prevailing in early 2007.
Compared with Q1/2008
Prices further declined due to oversupply. The seasonal increase in demand in
the second quarter was weakened by the general downscaling of construction
activity. Manufacturers continued to curtail production of wood products to
adjust supply to the lower demand levels.
Financials
Key Ratios
--------------------------------------------------------------------------------
| | 20 | 20 | Q1- | Q1- | Q2/0 | Q1/0 | Q2/ | Chang | Chang | Chan |
| | 06 | 07 | Q2/ | Q2/ | 7 | 8 | 08 | e % | e % | ge % |
| | | | 07 | 08 | | | | Q2/08 | Q2/08 | Q1-Q |
| | | | | | | | | -Q2/0 | -Q1/0 | 2/08 |
| | | | | | | | | 7 | 8 | -Q1- |
| | | | | | | | | | | Q2/0 |
| | | | | | | | | | | 7 |
--------------------------------------------------------------------------------
| Continuing | | | | | | | | | | |
| Operations | | | | | | | | | | |
--------------------------------------------------------------------------------
| Earnings | 0. | 0. | 0.4 | 0.1 | 0.19 | 0.08 | 0.0 | -78.9 | -50.0 | -72. |
| per share | 87 | 01 | 4 | 2 | | | 4 | | | 7 |
| (basic), | | | | | | | | | | |
| EUR | | | | | | | | | | |
--------------------------------------------------------------------------------
| Earnings | 0. | 0. | 0.4 | 0.1 | 0.19 | 0.08 | 0.0 | -78.9 | -50.0 | -73. |
| per share | 68 | 94 | 5 | 2 | | | 4 | | | 3 |
| excluding | | | | | | | | | | |
| NRI, EUR | | | | | | | | | | |
--------------------------------------------------------------------------------
| Cash | 2. | 1. | 0.9 | 0.5 | 0.45 | 0.30 | 0.2 | -42.2 | -13.3 | -42. |
| earnings | 19 | 95 | 8 | 6 | | | 6 | | | 9 |
| per share | | | | | | | | | | |
| (CEPS), EUR | | | | | | | | | | |
--------------------------------------------------------------------------------
| CEPS | 1. | 1. | 0.9 | 0.5 | 0.45 | 0.30 | 0.2 | -42.2 | -13.3 | -42. |
| excluding | 79 | 94 | 8 | 6 | | | 6 | | | 9 |
| NRI, EUR | | | | | | | | | | |
--------------------------------------------------------------------------------
| Return on | 7. | 1. | 10. | 3.8 | 9.7 | 5.0 | 2.7 | -72.2 | -46.0 | -65. |
| capital | 4 | 8 | 9 | | | | | | | 1 |
| employed | | | | | | | | | | |
| (ROCE), % | | | | | | | | | | |
--------------------------------------------------------------------------------
| ROCE | 8. | 11 | 11. | 3.8 | 9.7 | 5.0 | 2.8 | -71.1 | -44.0 | -65. |
| excluding | 9 | .4 | 1 | | | | | | | 8 |
| NRI, % | | | | | | | | | | |
--------------------------------------------------------------------------------
| Return on | 7. | -2 | 9.1 | 2.5 | 7.2 | 3.9 | 2.5 | -65.3 | -35.9 | -72. |
| equity | 7 | .7 | | | | | | | | 5 |
| (ROE), %* | | | | | | | | | | |
--------------------------------------------------------------------------------
| Debt/equity | 0. | 0. | 0.5 | 0.3 | 0.55 | 0.51 | 0.3 | -30.9 | -25.5 | -30. |
| ratio* | 54 | 40 | 5 | 8 | | | 8 | | | 9 |
--------------------------------------------------------------------------------
| Equity per | 9. | 9. | 10. | 9.7 | 10.2 | 8.89 | 9.7 | -4.8 | 9.3 | -4.8 |
| share, EUR* | 89 | 48 | 21 | 2 | 1 | | 2 | | | |
--------------------------------------------------------------------------------
| Equity | 45 | 49 | 46. | 52. | 46.7 | 47.9 | 52. | 11.3 | 8.6 | 11.3 |
| ratio, %* | .3 | .3 | 7 | 0 | | | 0 | | | |
--------------------------------------------------------------------------------
| Operating | 6. | 1. | 9.1 | 3.4 | 8.2 | 4.4 | 2.5 | -69.5 | -43.2 | -62. |
| profit, % | 2 | 5 | | | | | | | | 6 |
| of sales | | | | | | | | | | |
--------------------------------------------------------------------------------
| Operating | 7. | 9. | 9.3 | 3.5 | 8.2 | 4.4 | 2.5 | -69.5 | -43.2 | -62. |
| profit | 4 | 5 | | | | | | | | 4 |
| excluding | | | | | | | | | | |
| NRI, % of | | | | | | | | | | |
| sales | | | | | | | | | | |
--------------------------------------------------------------------------------
| Capital | 58 | 82 | 296 | 330 | 187. | 135. | 195 | 4.2 | 43.7 | 11.7 |
| expenditure | 3. | 0. | .0 | .7 | 1 | 7 | .0 | | | |
| , EUR | 4 | 4 | | | | | | | | |
| million* | | | | | | | | | | |
--------------------------------------------------------------------------------
| Capital | 9 | 10 | 10 | 10 | 10 | 10 | 10 | 4.1 | 4.6 | 4.1 |
| employed, | 71 | 02 | 217 | 639 | 217 | 173 | 639 | | | |
| EUR million | 8 | 2 | | | | | | | | |
--------------------------------------------------------------------------------
| Interest-be | 4 | 2 | 4 | 2 | 4 | 3 | 2 | -34.4 | -18.5 | -34. |
| aring net | 24 | 95 | 421 | 899 | 421 | 559 | 899 | | | 4 |
| liabilities | 3 | 5 | | | | | | | | |
| , EUR | | | | | | | | | | |
| million* | | | | | | | | | | |
--------------------------------------------------------------------------------
| Average | 37 | 35 | 35 | 35 | 35 | 34 | 35 | -1.7 | 2.7 | -1.7 |
| number of | 85 | 83 | 832 | 227 | 832 | 315 | 227 | | | |
| employees | 9 | 8 | | | | | | | | |
--------------------------------------------------------------------------------
| Average | | | | | | | | | | |
| number of | | | | | | | | | | |
| shares | | | | | | | | | | |
| (million) | | | | | | | | | | |
--------------------------------------------------------------------------------
| periodic | 78 | 78 | 788 | 788 | 788. | 788. | 788 | 0.0 | 0.0 | 0.0 |
| | 8. | 8. | .6 | .6 | 6 | 6 | .6 | | | |
| | 6 | 6 | | | | | | | | |
--------------------------------------------------------------------------------
| cumulative | 78 | 78 | 788 | 788 | 788. | 788. | 788 | 0.0 | 0.0 | 0.0 |
| | 8. | 8. | .6 | .6 | 6 | 6 | .6 | | | |
| | 6 | 6 | | | | | | | | |
--------------------------------------------------------------------------------
| cumulative, | 78 | 78 | 788 | 788 | 788. | 788. | 788 | 0.0 | 0.0 | 0.0 |
| diluted | 8. | 8. | .9 | .6 | 9 | 6 | .6 | | | |
| | 9 | 8 | | | | | | | | |
--------------------------------------------------------------------------------
NRI = Non-recurring items
* Total operations
Key Exchange Rates for the Euro
--------------------------------------------------------------------------------
| One Euro is | Closing Rate | Average Rate |
--------------------------------------------------------------------------------
| | 31 Dec 07 | 30 Jun 08 | 31 Dec 07 | 30 Jun 08 |
--------------------------------------------------------------------------------
| SEK | 9.4415 | 9.4703 | 9.2517 | 9.3772 |
--------------------------------------------------------------------------------
| USD | 1.4721 | 1.5764 | 1.3710 | 1.5316 |
--------------------------------------------------------------------------------
| GBP | 0.7333 | 0.7923 | 0.6847 | 0.7755 |
--------------------------------------------------------------------------------
Transaction Risk and Hedges in Main Currencies as at 30 June 2008
--------------------------------------------------------------------------------
| EUR million | USD | GBP | SEK | JPY |
--------------------------------------------------------------------------------
| Estimated annual net operating | 650 | 650 | 1 100 | 200 |
| cash flow exposure | | | | |
--------------------------------------------------------------------------------
| Transaction hedges as at 30 June | 314 | 316 | 544 | 85 |
--------------------------------------------------------------------------------
| Hedging percentage as at 30 June | 48 % | 49% | 49%/66% | 43% |
| for the next 12 months | | | | |
--------------------------------------------------------------------------------
*49% represents the hedging ratio including the profit margin of the Swedish
production units and 66% excludes the profit margin.
Condensed Consolidated Income Statement
--------------------------------------------------------------------------------
| EUR million | 200 | Q2/ | Q1/ | Q2/ | Q1- | Q1-Q | Chang | Chang | Chang |
| | 7 | 07 | 08 | 08 | Q2/ | 2/08 | e % | e % | e % |
| | | | | | 07 | | Q2/08 | Q2/08 | Q1-Q2 |
| | | | | | | | -Q2/0 | -Q1/0 | /08-Q |
| | | | | | | | 7 | 8 | 1-Q2/ |
| | | | | | | | | | 07 |
--------------------------------------------------------------------------------
| Continuing | | | | | | | | | |
| Operations | | | | | | | | | |
--------------------------------------------------------------------------------
| Sales | 11 | 2 | 2 | 2 | 5 | 5 | -3.9 | 1.4 | -4.8 |
| | 848 | 989 | 831 | 871 | 991 | 703. | | | |
| | .5 | .9 | .8 | .8 | .1 | 6 | | | |
--------------------------------------------------------------------------------
| Other operating | 88. | 13. | 46. | -1. | 30. | 44.9 | -111. | -103. | 49.7 |
| income | 4 | 8 | 5 | 6 | 0 | | 6 | 4 | |
--------------------------------------------------------------------------------
| Materials and | -6 | -1 | -1 | -1 | -3 | -3 | -0.3 | 1.2 | -2.3 |
| services | 962 | 715 | 742 | 720 | 384 | 462. | | | |
| | .9 | .4 | .1 | .4 | .8 | 5 | | | |
--------------------------------------------------------------------------------
| Freight and | -1 | -28 | -28 | -28 | -57 | -568 | -1.3 | -1.2 | 0.2 |
| sales | 134 | 2.5 | 2.6 | 6.1 | 0.0 | .7 | | | |
| commissions | .0 | | | | | | | | |
--------------------------------------------------------------------------------
| Personnel | -1 | -43 | -44 | -45 | -85 | -902 | -3.9 | -1.6 | -5.7 |
| expenses | 712 | 7.7 | 7.7 | 4.7 | 3.7 | .4 | | | |
| | .9 | | | | | | | | |
--------------------------------------------------------------------------------
| Other operating | -76 | -13 | -13 | -17 | -28 | -307 | -29.6 | -36.1 | -7.6 |
| expenses | 1.9 | 6.6 | 0.1 | 7.1 | 5.4 | .2 | | | |
--------------------------------------------------------------------------------
| Share of | 341 | 20. | 23. | 12. | 44. | 36.3 | -38.0 | -48.1 | -17.7 |
| results of | .3 | 0 | 9 | 4 | 1 | | | | |
| associated | | | | | | | | | |
| companies | | | | | | | | | |
--------------------------------------------------------------------------------
| Depreciation | -1 | -20 | -17 | -17 | -42 | -347 | 16.5 | 1.0 | 18.9 |
| and impairment | 529 | 7.3 | 4.7 | 3.0 | 8.5 | .7 | | | |
| | .6 | | | | | | | | |
--------------------------------------------------------------------------------
| Operating | 176 | 244 | 125 | 71. | 542 | 196. | -70.8 | -43.0 | -63.8 |
| Profit | .9 | .2 | .0 | 3 | .8 | 3 | | | |
--------------------------------------------------------------------------------
| Net financial | -15 | -53 | -41 | -40 | -89 | -82. | 22.8 | 2.4 | 7.1 |
| items | 6.7 | .0 | .9 | .9 | .1 | 8 | | | |
--------------------------------------------------------------------------------
| Profit before | 20. | 191 | 83. | 30. | 453 | 113. | -84.1 | -63.4 | -75.0 |
| Tax | 2 | .2 | 1 | 4 | .7 | 5 | | | |
--------------------------------------------------------------------------------
| Income tax | -8. | -42 | -16 | -1. | -10 | -18. | 95.7 | 89.2 | 82.9 |
| | 8 | .3 | .6 | 8 | 7.6 | 4 | | | |
--------------------------------------------------------------------------------
| Net Profit for | 11. | 148 | 66. | 28. | 346 | 95.1 | -80.8 | -57.0 | -72.5 |
| the Period from | 4 | .9 | 5 | 6 | .1 | | | | |
| Continuing | | | | | | | | | |
| Operations | | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Discontinued | | | | | | | | | |
| Operations | | | | | | | | | |
--------------------------------------------------------------------------------
| Profit / (Loss) | -22 | -5. | 4.7 | -1. | 20. | 2.9 | 64.0 | -138. | -85.7 |
| after tax for | 3.8 | 0 | | 8 | 3 | | | 3 | |
| the period from | | | | | | | | | |
| discontinued | | | | | | | | | |
| operations | | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net Profit / | -21 | 143 | 71. | 26. | 366 | 98.0 | -81.4 | -62.4 | -73.3 |
| (Loss) for the | 2.4 | .9 | 2 | 8 | .4 | | | | |
| Period | | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable | | | | | | | | | |
| to: | | | | | | | | | |
--------------------------------------------------------------------------------
| Equity holders | -21 | 141 | 70. | 23. | 360 | 93.8 | -83.5 | -67.0 | -74.0 |
| of the Parent | 4.7 | .3 | 5 | 3 | .5 | | | | |
| Company | | | | | | | | | |
--------------------------------------------------------------------------------
| Minority | 2.3 | 2.6 | 0.7 | 3.5 | 5.9 | 4.2 | 34.6 | 400.0 | -28.8 |
| interests | | | | | | | | | |
--------------------------------------------------------------------------------
| | -21 | 143 | 71. | 26. | 366 | 98.0 | -81.4 | -62.4 | -73.3 |
| | 2.4 | .9 | 2 | 8 | .4 | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per | | | | | | | | | |
| Share | | | | | | | | | |
--------------------------------------------------------------------------------
| Basic earnings | -0. | 0.1 | 0.0 | 0.0 | 0.4 | 0.12 | -83.3 | -66.7 | -73.9 |
| per share, EUR | 27 | 8 | 9 | 3 | 6 | | 3 | | |
--------------------------------------------------------------------------------
| Diluted | -0. | 0.1 | 0.0 | 0.0 | 0.4 | 0.12 | -83.3 | -66.7 | -73.9 |
| earnings per | 27 | 8 | 9 | 3 | 6 | | 3 | | |
| share, EUR | | | | | | | | | |
--------------------------------------------------------------------------------
| Earnings per | | | | | | | | | |
| Share from | | | | | | | | | |
| Continuing | | | | | | | | | |
| Operations | | | | | | | | | |
--------------------------------------------------------------------------------
| Basic earnings | 0.0 | 0.1 | 0.0 | 0.0 | 0.4 | 0.12 | -78.9 | -50.0 | -72.7 |
| per share, EUR | 1 | 9 | 8 | 4 | 4 | | 5 | | |
--------------------------------------------------------------------------------
| Diluted | 0.0 | 0.1 | 0.0 | 0.0 | 0.4 | 0.12 | -78.9 | -50.0 | -72.7 |
| earnings per | 1 | 9 | 8 | 4 | 4 | | 5 | | |
| share, EUR | | | | | | | | | |
--------------------------------------------------------------------------------
Consolidated Statement of Recognised Income & Expense
--------------------------------------------------------------------------------
| EUR million | 2007 | Q2/07 | Q1/08 | Q2/08 | Q1-Q2/ | Q1-Q2/ |
| | | | | | 07 | 08 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Operations | | | | | | |
--------------------------------------------------------------------------------
| Defined benefit plan | 17.3 | 2.6 | - | - | 2.6 | - |
| actuarial gains | | | | | | |
--------------------------------------------------------------------------------
| Tax on actuarial | -6.3 | -0.7 | - | - | -0.7 | - |
| movements | | | | | | |
--------------------------------------------------------------------------------
| Aggregate fair value | 217.3 | 169.7 | -130.0 | 515.6 | 220.8 | 385.6 |
| movements in | | | | | | |
| Available-for-Sale | | | | | | |
| assets | | | | | | |
--------------------------------------------------------------------------------
| Currency and commodity | 5.6 | 53.8 | -12.9 | 55.0 | 16.3 | 42.1 |
| hedges | | | | | | |
--------------------------------------------------------------------------------
| Associate hedges | 5.1 | 3.4 | -0.3 | 7.3 | 3.3 | 7.0 |
--------------------------------------------------------------------------------
| Tax on Other | -3.2 | -17.2 | 9.1 | -18.6 | -7.0 | -9.5 |
| Comprehensive Income | | | | | | |
| Movements (OCI) | | | | | | |
--------------------------------------------------------------------------------
| Currency translation | -85.3 | 66.4 | -56.3 | 86.9 | -2.7 | 30.6 |
| movements on equity net | | | | | | |
| investments (CTA) | | | | | | |
--------------------------------------------------------------------------------
| Equity net investment | 53.7 | -9.1 | 17.7 | -14.5 | 23.0 | 3.2 |
| hedges | | | | | | |
--------------------------------------------------------------------------------
| Tax on equity hedges | -13.2 | 2.3 | -2.5 | 3.7 | -6.0 | 1.2 |
--------------------------------------------------------------------------------
| Income & Expense | 191.0 | 271.2 | -175.2 | 635.4 | 249.6 | 460.2 |
| Recognised in Equity | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Items From Equity | 52.7 | - | - | -10.2 | -1.4 | -10.2 |
| Recognised in Income | | | | | | |
| Statement | | | | | | |
--------------------------------------------------------------------------------
| Net Income & Expense | 243.7 | 271.2 | -175.2 | 625.2 | 248.2 | 450.0 |
| Recognised in Equity | | | | | | |
--------------------------------------------------------------------------------
| Net Profit/(Loss) for | -212. | 143.9 | 71.2 | 26.8 | 366.4 | 98.0 |
| the period | 4 | | | | | |
--------------------------------------------------------------------------------
| Total Recognised Income | 31.3 | 415.1 | -104.0 | 652.0 | 614.6 | 548.0 |
| & Expense for the Period | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to: | | | | | | |
--------------------------------------------------------------------------------
| Equity holders of the | 29.0 | 412.5 | -104.7 | 648.5 | 608.7 | 543.8 |
| Parent Company | | | | | | |
--------------------------------------------------------------------------------
| Minority interests | 2.3 | 2.6 | 0.7 | 3.5 | 5.9 | 4.2 |
--------------------------------------------------------------------------------
| Total Recognised Income | 31.3 | 415.1 | -104.0 | 652.0 | 614.6 | 548.0 |
| & Expense for the Period | | | | | | |
--------------------------------------------------------------------------------
Condensed Consolidated Cash Flow Statement - Group Total
--------------------------------------------------------------------------------
| EUR million | Q1-Q2/07 | Q1-Q2/08 |
--------------------------------------------------------------------------------
| Cash Flow from Operating Activities | | |
--------------------------------------------------------------------------------
| Operating profit | 568.8 | 207.3 |
--------------------------------------------------------------------------------
| Cash flow from SORIE | 32.2 | 18.7 |
--------------------------------------------------------------------------------
| Adjustments | 477.1 | 398.0 |
--------------------------------------------------------------------------------
| Change in net working capital | -442.3 | -352.6 |
--------------------------------------------------------------------------------
| Cash Flow Generated by Operations | 635.8 | 271.4 |
--------------------------------------------------------------------------------
| Net financials items paid | -104.2 | -145.1 |
--------------------------------------------------------------------------------
| Income taxes paid | -91.8 | -74.2 |
--------------------------------------------------------------------------------
| Net Cash Provided by Operating Activities | 439.8 | 52.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash Flow from Investing Activities | | |
--------------------------------------------------------------------------------
| Acquisitions of subsidiaries | -0.8 | -3.4 |
--------------------------------------------------------------------------------
| Acquisitions of associated companies | -72.6 | -25.4 |
--------------------------------------------------------------------------------
| Proceeds from sale of Papyrus shares | - | 144.2 |
--------------------------------------------------------------------------------
| Proceeds from sale of fixed assets and other | 70.3 | 62.6 |
| shares | | |
--------------------------------------------------------------------------------
| Capital expenditure | -296.0 | -330.7 |
--------------------------------------------------------------------------------
| Proceeds from (payment of) the non-current | 18.4 | -13.1 |
| receivables, net | | |
--------------------------------------------------------------------------------
| Net Cash Used in Investing Activities | -280.7 | -165.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash Flow from Financing Activities | | |
--------------------------------------------------------------------------------
| Proceeds from issue of new long-term debt | 139.0 | 61.7 |
--------------------------------------------------------------------------------
| Long-term debt, payments | -569.0 | -339.7 |
--------------------------------------------------------------------------------
| Papyrus loans repaid by Altor | - | 345.1 |
--------------------------------------------------------------------------------
| Change in short-term borrowings | 531.6 | 73.2 |
--------------------------------------------------------------------------------
| Dividends paid | -354.9 | -354.9 |
--------------------------------------------------------------------------------
| Minority equity injections less dividends | 7.4 | -2.7 |
--------------------------------------------------------------------------------
| Repurchase of own shares | -0.6 | - |
--------------------------------------------------------------------------------
| Net Cash Used in Financing Activities | -246.5 | -217.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net Decrease in Cash and Cash Equivalents | -87.4 | -331.0 |
--------------------------------------------------------------------------------
| Cash and bank in disposed companies | - | -77.3 |
--------------------------------------------------------------------------------
| Translation adjustment | -2.7 | 3.5 |
--------------------------------------------------------------------------------
| Net cash and cash equivalents at the | 309.6 | 879.3 |
| beginning of period | | |
--------------------------------------------------------------------------------
| Net Cash and Cash Equivalents at Period End | 219.5 | 474.5 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and Cash Equivalents at Period End | 318.4 | 489.3 |
--------------------------------------------------------------------------------
| Bank Overdrafts at Period End | -98.9 | -14.8 |
--------------------------------------------------------------------------------
| Net Cash and Cash Equivalents at Period End | 219.5 | 474.5 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisitions of Subsidiary Companies | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | - | - |
--------------------------------------------------------------------------------
| Working capital | - | 0.1 |
--------------------------------------------------------------------------------
| Fixed assets | 0.4 | 4.2 |
--------------------------------------------------------------------------------
| Interest-bearing assets | - | - |
--------------------------------------------------------------------------------
| Tax liabilities | - | -0.5 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | - | -1.1 |
--------------------------------------------------------------------------------
| Minority interests | 0.4 | 0.7 |
--------------------------------------------------------------------------------
| Fair Value of Net Assets | 0.8 | 3.4 |
--------------------------------------------------------------------------------
| Goodwill | - | - |
--------------------------------------------------------------------------------
| Total Purchase Consideration | 0.8 | 3.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Disposal of Subsidiary Companies | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | - | 77.3 |
--------------------------------------------------------------------------------
| Working capital | - | 185.4 |
--------------------------------------------------------------------------------
| Fixed assets | 0.9 | 299.7 |
--------------------------------------------------------------------------------
| Interest-bearing assets | - | 95.4 |
--------------------------------------------------------------------------------
| Tax liabilities | - | -25.8 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | - | -414.6 |
--------------------------------------------------------------------------------
| Minority interests | 0.5 | - |
--------------------------------------------------------------------------------
| Net Assets in Divested Companies | 1.4 | 217.4 |
--------------------------------------------------------------------------------
| Income Statement capital gain | 0.6 | 4.2 |
--------------------------------------------------------------------------------
| Total Disposal Consideration Received in | 2.0 | 221.6 |
| Cash and Kind | | |
--------------------------------------------------------------------------------
Property, Plant and Equipment, Intangible Assets and Goodwill
--------------------------------------------------------------------------------
| EUR million | 2007 | Q1-Q2/07 | Q1-Q2/08 |
--------------------------------------------------------------------------------
| Carrying value at 1 January | 10 440.4 | 10 440.4 | 7 232.4 |
--------------------------------------------------------------------------------
| Acquisition of subsidiary companies | 10.7 | 0.4 | 4.2 |
--------------------------------------------------------------------------------
| Capital Expenditure | 770.2 | 278.3 | 304.5 |
--------------------------------------------------------------------------------
| Additions in biological assets | 50.2 | 17.7 | 26.2 |
--------------------------------------------------------------------------------
| Change in emission rights | -92.9 | -90.2 | 80.6 |
--------------------------------------------------------------------------------
| Disposals | -52.9 | -37.6 | -48.5 |
--------------------------------------------------------------------------------
| Disposals of subsidiary companies | -1 780.0 | -1.1 | -299.7 |
--------------------------------------------------------------------------------
| Depreciation and impairment, | -1 529.6 | -428.5 | -347.7 |
| continuing operations | | | |
--------------------------------------------------------------------------------
| Depreciation and impairment, | -351.7 | -100.7 | -22.1 |
| discontinued operations | | | |
--------------------------------------------------------------------------------
| Translation difference and other | -232.0 | -58.3 | 6.9 |
--------------------------------------------------------------------------------
| Balance Sheet Total | 7 232.4 | 10 020.4 | 6 936.8 |
--------------------------------------------------------------------------------
Borrowings
--------------------------------------------------------------------------------
| EUR million | 31 Dec | 30 Jun 2007 | 30 Jun 2008 |
| | 2007 | | |
--------------------------------------------------------------------------------
| Non-current borrowings | 3 354.8 | 3 889.9 | 3 161.8 |
--------------------------------------------------------------------------------
| Current borrowings | 1 086.6 | 1 177.6 | 819.9 |
--------------------------------------------------------------------------------
| | 4 441.4 | 5 067.5 | 3 981.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| | 2007 | Q1-Q2/2007 | Q1-Q2/2008 |
--------------------------------------------------------------------------------
| Carrying value at 1 January | 5 227.9 | 5 227.9 | 4 441.4 |
--------------------------------------------------------------------------------
| Debt acquired with new subsidiaries | 1.2 | 0.0 | 1.1 |
--------------------------------------------------------------------------------
| Debt disposed with sold | -1 019.3 | 0.0 | -414.6 |
| subsidiaries | | | |
--------------------------------------------------------------------------------
| Proceeds from / (payments) of | 358.3 | -131.7 | -33.0 |
| borrowings (net) | | | |
--------------------------------------------------------------------------------
| Translation difference and other | -126.7 | -28.7 | -13.2 |
--------------------------------------------------------------------------------
| Total Borrowings | 4 441.4 | 5 067.5 | 3 981.7 |
--------------------------------------------------------------------------------
Discontinued Operations
--------------------------------------------------------------------------------
| EUR million | Q1-Q2/08 |
--------------------------------------------------------------------------------
| Sales | 710.2 |
--------------------------------------------------------------------------------
| Operating costs | -694.6 |
--------------------------------------------------------------------------------
| Operating profit before remeasurement to fair value | 15.6 |
--------------------------------------------------------------------------------
| Remeasurement to fair value less CTA | -4.6 |
--------------------------------------------------------------------------------
| Operating profit | 11.0 |
--------------------------------------------------------------------------------
| Net financial items | -5.6 |
--------------------------------------------------------------------------------
| Profit before Tax | 5.4 |
--------------------------------------------------------------------------------
| Income tax | -2.5 |
--------------------------------------------------------------------------------
| Profit after Tax from Discontinued Operations | 2.9 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash provided by operating activities | 17.0 |
--------------------------------------------------------------------------------
| Net cash used in investing activities | -2.6 |
--------------------------------------------------------------------------------
| Net cash provided by financing activities | 2.0 |
--------------------------------------------------------------------------------
| Net increase in cash and cash equivalents | 16.4 |
--------------------------------------------------------------------------------
Condensed Consolidated Balance Sheet
--------------------------------------------------------------------------------
| EUR million | | 31 Dec 07 | 30 Jun 07 | 30 Jun 08 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Assets | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Fixed Assets and Other | | | | |
| Non-current Investments | | | | |
--------------------------------------------------------------------------------
| Fixed assets | O | 7 138.5 | 9 881.1 | 6 748.7 |
--------------------------------------------------------------------------------
| Biological assets | O | 88.7 | 131.4 | 102.3 |
--------------------------------------------------------------------------------
| Emission rights | O | 5.2 | 7.9 | 85.8 |
--------------------------------------------------------------------------------
| Investment in associated | O | 1 154.5 | 907.3 | 1 213.7 |
| companies | | | | |
--------------------------------------------------------------------------------
| Available-for-sale: Listed | I | 161.8 | 49.2 | 194.1 |
| securities | | | | |
--------------------------------------------------------------------------------
| Available-for-sale: Unlisted | O | 1 260.8 | 1 009.1 | 1 636.0 |
| shares | | | | |
--------------------------------------------------------------------------------
| Non-current loan receivables | I | 126.5 | 128.6 | 139.3 |
--------------------------------------------------------------------------------
| Deferred tax assets | T | 63.7 | 65.0 | 65.4 |
--------------------------------------------------------------------------------
| Other non-current assets | O | 22.6 | 44.9 | 25.7 |
--------------------------------------------------------------------------------
| | | 10 022.3 | 12 224.5 | 10 211.0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current Assets | | | | |
--------------------------------------------------------------------------------
| Inventories | O | 1 992.6 | 2 219.9 | 1 888.2 |
--------------------------------------------------------------------------------
| Tax receivables | T | 34.3 | 154.3 | 42.4 |
--------------------------------------------------------------------------------
| Operative receivables | O | 2 063.1 | 2 443.6 | 1 988.6 |
--------------------------------------------------------------------------------
| Interest-bearing receivables | I | 227.8 | 150.4 | 260.2 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | I | 970.7 | 318.4 | 489.3 |
--------------------------------------------------------------------------------
| | | 5 288.5 | 5 286.6 | 4 668.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Assets | | 15 310.8 | 17 511.1 | 14 879.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity and Liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity attributable to Company | | 7 476.1 | 8 052.9 | 7 665.0 |
| shareholders | | | | |
--------------------------------------------------------------------------------
| Minority interests | | 71.9 | 117.0 | 74.8 |
--------------------------------------------------------------------------------
| Total Equity | | 7 548.0 | 8 169.9 | 7 739.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current Liabilities | | | | |
--------------------------------------------------------------------------------
| Post-employment benefit | O | 327.3 | 680.8 | 300.9 |
| provisions | | | | |
--------------------------------------------------------------------------------
| Other provisions | O | 135.9 | 100.0 | 117.0 |
--------------------------------------------------------------------------------
| Deferred tax liabilities | T | 582.0 | 794.0 | 571.2 |
--------------------------------------------------------------------------------
| Non-current debt | I | 3 354.8 | 3 889.9 | 3 161.8 |
--------------------------------------------------------------------------------
| Other non-current operative | O | 170.2 | 218.4 | 139.3 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| | | 4 570.2 | 5 683.1 | 4 290.2 |
--------------------------------------------------------------------------------
| Current Liabilities | | | | |
--------------------------------------------------------------------------------
| Current portion of long-term | I | 513.1 | 337.9 | 265.2 |
| debt | | | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | I | 573.5 | 839.7 | 554.7 |
--------------------------------------------------------------------------------
| Operative liabilities | O | 1 971.4 | 2 166.1 | 1 955.5 |
--------------------------------------------------------------------------------
| Tax liabilities | T | 134.6 | 314.4 | 74.3 |
--------------------------------------------------------------------------------
| | | 3 192.6 | 3 658.1 | 2 849.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Liabilities | | 7 762.8 | 9 341.2 | 7 139.9 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total Equity and Liabilities | | 15 310.8 | 17 511.1 | 14 879.7 |
--------------------------------------------------------------------------------
Items designated with “O” comprise Operating Capital
Items designated with “I” comprise Interest-bearing Net Liabilities
Items designated with “T” comprise Net Tax Liabilities
Changes in Group Shareholders' Equity
--------------------------------------------------------------------------------
| EUR million | Share | Capit | Treas | OCI | CTA | Retai | Total |
| | Capit | al | ury | | | ned | |
| | al | Reser | Share | | | Earni | |
| | | ves | s | | | ngs | |
--------------------------------------------------------------------------------
| Balance at 31 | 1 | 784.8 | -259. | 468.0 | -127. | 4 | 7 |
| December 2005 | 382.1 | | 9 | | 1 | 972.2 | 220.1 |
--------------------------------------------------------------------------------
| Cancellation of | -39.9 | -15.9 | 249.1 | - | - | -193. | 0.0 |
| Stora Enso Oyj | | | | | | 3 | |
| shares | | | | | | | |
--------------------------------------------------------------------------------
| Dividend (EUR 0.45 | - | - | - | - | - | -354. | -354. |
| per share) | | | | | | 9 | 9 |
--------------------------------------------------------------------------------
| Options exercised | - | -2.0 | 0.3 | - | - | - | -1.7 |
--------------------------------------------------------------------------------
| Buy-out of minority | - | - | - | - | - | -0.1 | -0.1 |
| interests | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for the | - | - | - | - | -5.8 | 585.0 | 579.2 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Net expense | - | - | - | 267.6 | 0.9 | 88.5 | 357.0 |
| recognised directly | | | | | | | |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance at 31 | 1 | 766.9 | -10.5 | 735.6 | -132. | 5 | 7 |
| December 2006 | 342.2 | | | | 0 | 097.4 | 799.6 |
--------------------------------------------------------------------------------
| Dividend (EUR 0.45 | - | - | - | - | - | -354. | -354. |
| per share) | | | | | | 9 | 9 |
--------------------------------------------------------------------------------
| Options exercised | - | -0.8 | 0.1 | - | - | - | -0.7 |
--------------------------------------------------------------------------------
| Buy-out of minority | - | - | - | - | - | 0.2 | 0.2 |
| interests | | | | | | | |
--------------------------------------------------------------------------------
| Net profit for the | - | - | - | - | -1.4 | 360.5 | 359.1 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Net income | - | - | - | 233.4 | 14.3 | 1.9 | 249.6 |
| recognised directly | | | | | | | |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance at 30 June | 1 | 766.1 | -10.4 | 969.0 | -119. | 5 | 8 |
| 2007 | 342.2 | | | | 1 | 105.1 | 052.9 |
--------------------------------------------------------------------------------
| Options exercised | - | -1.6 | 0.2 | - | 8.5 | -8.5 | -1.4 |
--------------------------------------------------------------------------------
| Buy-out of minority | - | - | - | - | - | 4.3 | 4.3 |
| interests | | | | | | | |
--------------------------------------------------------------------------------
| Net loss for the | - | - | - | - | 54.1 | -575. | -521. |
| period | | | | | | 2 | 1 |
--------------------------------------------------------------------------------
| Net expense | - | - | - | -8.6 | -59.1 | 9.1 | -58.6 |
| recognised directly | | | | | | | |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance at 31 | 1 | 764.5 | -10.2 | 960.4 | -115. | 4 | 7 |
| December 2007 | 342.2 | | | | 6 | 534.8 | 476.1 |
--------------------------------------------------------------------------------
| Dividend (EUR 0.45 | - | - | - | - | - | -354. | -354. |
| per share) | | | | | | 9 | 9 |
--------------------------------------------------------------------------------
| Net profit for the | - | - | - | - | -10.2 | 93.8 | 83.6 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Net income | - | - | - | 425.1 | 35.1 | - | 460.2 |
| recognised directly | | | | | | | |
| to equity | | | | | | | |
--------------------------------------------------------------------------------
| Balance at 30 June | 1 | 764.5 | -10.2 | 1 | -90.7 | 4 | 7 |
| 2008 | 342.2 | | | 385.5 | | 273.7 | 665.0 |
--------------------------------------------------------------------------------
CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income
Commitments and Contingencies
--------------------------------------------------------------------------------
| EUR million | 31 Dec 07 | 30 Jun 07 | 30 Jun 08 |
--------------------------------------------------------------------------------
| On Own Behalf | | | |
--------------------------------------------------------------------------------
| Pledges given | 0.8 | 0.8 | 0.8 |
--------------------------------------------------------------------------------
| Mortgages | 135.9 | 131.4 | 81.9 |
--------------------------------------------------------------------------------
| On Behalf of Associated | | | |
| Companies | | | |
--------------------------------------------------------------------------------
| Guarantees | 249.7 | 276.6 | 221.7 |
--------------------------------------------------------------------------------
| On Behalf of Others | | | |
--------------------------------------------------------------------------------
| Guarantees | 118.5 | 10.2 | 149.5 |
--------------------------------------------------------------------------------
| Other Commitments, Own | | | |
--------------------------------------------------------------------------------
| Leasing commitments, in next 12 | 30.6 | 31.6 | 28.4 |
| months | | | |
--------------------------------------------------------------------------------
| Leasing commitments, after next | 112.2 | 122.2 | 104.7 |
| 12 months | | | |
--------------------------------------------------------------------------------
| Pension liabilities | 0.2 | 0.2 | 0.2 |
--------------------------------------------------------------------------------
| Other commitments | 22.5 | 20.2 | 26.4 |
--------------------------------------------------------------------------------
| Total | 670.4 | 593.2 | 613.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Pledges given | 0.8 | 0.8 | 0.8 |
--------------------------------------------------------------------------------
| Mortgages | 135.9 | 131.4 | 81.9 |
--------------------------------------------------------------------------------
| Guarantees | 368.2 | 286.8 | 371.2 |
--------------------------------------------------------------------------------
| Leasing commitments | 142.8 | 153.8 | 133.1 |
--------------------------------------------------------------------------------
| Pension liabilities | 0.2 | 0.2 | 0.2 |
--------------------------------------------------------------------------------
| Other commitments | 22.5 | 20.2 | 26.4 |
--------------------------------------------------------------------------------
| Total | 670.4 | 593.2 | 613.6 |
--------------------------------------------------------------------------------
Purchase Agreement Commitments
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR million | Scheduled | | | |
| | Contract Payments | | | |
--------------------------------------------------------------------------------
| Type of Supply | Contract | 2008 | 2009-10 | 2011-12 | 2013+ |
| | Total | | | | |
--------------------------------------------------------------------------------
| | Fibre | 2 093 | 175 | 425 | 389 | 1 104 |
--------------------------------------------------------------------------------
| | Energy | 2 021 | 188 | 715 | 415 | 703 |
--------------------------------------------------------------------------------
| | Logistics | 571 | 43 | 142 | 116 | 270 |
--------------------------------------------------------------------------------
| | Other Production costs | 825 | 63 | 104 | 60 | 598 |
--------------------------------------------------------------------------------
| | | 5 510 | 469 | 1 386 | 980 | 2 675 |
--------------------------------------------------------------------------------
| Capital Expenditure | 196 | 114 | 82 | - | - |
--------------------------------------------------------------------------------
| Total Contractual | 5 706 | 583 | 1 468 | 980 | 2 675 |
| Commitments at 30 June | | | | | |
| 2008 | | | | | |
--------------------------------------------------------------------------------
Net Fair Values of Derivative Financial Instruments
--------------------------------------------------------------------------------
| EUR million | 31 Dec 07 | 30 Jun 07 | 30 Jun 08 |
--------------------------------------------------------------------------------
| | Net | Net | Positive | Negative | Net |
| | Fair | Fair | F | Fair | Fair |
| | Va | Va | air | Valu | Values |
| | lues | lues | Values | es | |
--------------------------------------------------------------------------------
| Interest | 59.4 | -15.7 | 106.9 | -87.1 | 19.8 |
| rate swaps | | | | | |
--------------------------------------------------------------------------------
| Interest | -6.1 | -4.3 | 0.1 | -9.6 | -9.5 |
| rate options | | | | | |
--------------------------------------------------------------------------------
| Forward | -19.7 | -8.3 | 12.7 | -43.7 | -31.0 |
| contracts | | | | | |
--------------------------------------------------------------------------------
| FX options | 17.2 | 5.2 | 25.2 | -7.9 | 17.3 |
--------------------------------------------------------------------------------
| Commodity | 92.0 | 84.8 | 176.0 | -39.8 | 136.2 |
| contracts | | | | | |
--------------------------------------------------------------------------------
| Equity swaps | -34.3 | 30.6 | - | -110.5 | -110.5 |
--------------------------------------------------------------------------------
| Equity | -0.6 | - | - | -3.7 | -3.7 |
| options | | | | | |
--------------------------------------------------------------------------------
| Total | 107.9 | 92.3 | 320.9 | -302.3 | 18.6 |
--------------------------------------------------------------------------------
Nominal Values of Derivative Financial Instruments
--------------------------------------------------------------------------------
| EUR million | 31 Dec 07 | 30 Jun 07 | 30 Jun 08 |
--------------------------------------------------------------------------------
| Interest Rate | | | |
| Derivatives | | | |
--------------------------------------------------------------------------------
| Interest rate | | | |
| swaps | | | |
--------------------------------------------------------------------------------
| Maturity under 1 | 69.9 | - | 76.0 |
| year | | | |
--------------------------------------------------------------------------------
| Maturity 2-5 | 2 164.4 | 2 337.2 | 2 084.9 |
| years | | | |
--------------------------------------------------------------------------------
| Maturity 6-10 | 2 470.9 | 2 582.8 | 2 257.7 |
| years | | | |
--------------------------------------------------------------------------------
| | 4 705.2 | 4 920.0 | 4 418.6 |
--------------------------------------------------------------------------------
| Interest rate | 491.6 | 786.3 | 349.8 |
| options | | | |
--------------------------------------------------------------------------------
| Total | 5 196.8 | 5 706.3 | 4 768.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Foreign Exchange | | | |
| Derivatives | | | |
--------------------------------------------------------------------------------
| Forward contracts | 3 114.1 | 1 688.5 | 3 102.4 |
--------------------------------------------------------------------------------
| FX Options | 2 607.7 | 1 235.4 | 1 994.8 |
--------------------------------------------------------------------------------
| Total | 5 721.8 | 2 923.9 | 5 097.2 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Commodity | | | |
| Derivatives | | | |
--------------------------------------------------------------------------------
| Commodity | 417.2 | 523.8 | 352.6 |
| contracts | | | |
--------------------------------------------------------------------------------
| Total | 417.2 | 523.8 | 352.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity swaps | | | |
--------------------------------------------------------------------------------
| Equity swaps | 213.9 | 220.4 | 217.2 |
--------------------------------------------------------------------------------
| Equity options | 22.0 | - | 21.9 |
--------------------------------------------------------------------------------
| Total | 235.9 | 220.4 | 239.1 |
--------------------------------------------------------------------------------
Sales by Segment
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Newsprint and | 438.7 | 429.9 | 430.0 | 436.3 | 1 734.9 | 386.5 | 389.0 |
| Book Paper | | | | | | | |
--------------------------------------------------------------------------------
| Magazine Paper | 566.6 | 552.9 | 587.3 | 589.5 | 2 296.3 | 547.3 | 540.5 |
--------------------------------------------------------------------------------
| Fine Paper | 577.0 | 522.8 | 529.7 | 526.7 | 2 156.2 | 545.2 | 537.8 |
--------------------------------------------------------------------------------
| Consumer Board | 589.6 | 570.1 | 562.1 | 579.1 | 2 300.9 | 574.4 | 587.3 |
--------------------------------------------------------------------------------
| Industrial | 266.1 | 274.2 | 267.8 | 275.4 | 1 083.5 | 275.5 | 285.4 |
| Packaging | | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | 472.3 | 525.7 | 461.4 | 393.7 | 1 853.1 | 378.6 | 409.8 |
--------------------------------------------------------------------------------
| Other and | 90.9 | 114.3 | 38.4 | 180.0 | 423.6 | 124.3 | 122.0 |
| elimination | | | | | | | |
--------------------------------------------------------------------------------
| Continuing | 3 | 2 | 2 | 2 | 11 | 2 | 2 |
| Operations | 001.2 | 989.9 | 876.7 | 980.7 | 848.5 | 831.8 | 871.8 |
--------------------------------------------------------------------------------
| Discontinued | 1 | 963.7 | 959.7 | 969.1 | 3 913.3 | 529.6 | 180.5 |
| operations | 020.8 | | | | | | |
--------------------------------------------------------------------------------
| Elimination | - | - | - | - | - 618.3 | - | - 45.8 |
| | 166.6 | 148.4 | 151.5 | 151.8 | | 134.4 | |
--------------------------------------------------------------------------------
| Total | 3 | 3 | 3 | 3 | 15 | 3 | 3 |
| | 855.4 | 805.2 | 684.9 | 798.0 | 143.5 | 227.0 | 006.5 |
--------------------------------------------------------------------------------
Operating Profit by Segment excluding NRI and Fair Valuations
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Newsprint and | 61.1 | 50.2 | 52.2 | 48.4 | 211.9 | 26.4 | 27.9 |
| Book Paper | | | | | | | |
--------------------------------------------------------------------------------
| Magazine Paper | 9.4 | 8.4 | 17.5 | 15.6 | 50.9 | 27.2 | 14.5 |
--------------------------------------------------------------------------------
| Fine Paper | 55.1 | 38.5 | 34.4 | 35.7 | 163.7 | 37.3 | 19.7 |
--------------------------------------------------------------------------------
| Consumer Board | 72.4 | 29.0 | 27.0 | 29.6 | 158.0 | 42.5 | 23.0 |
--------------------------------------------------------------------------------
| Industrial | 29.2 | 29.6 | 24.7 | 28.4 | 111.9 | 27.6 | 20.1 |
| Packaging | | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | 54.8 | 59.3 | 37.1 | -0.5 | 150.7 | -23.4 | -10.9 |
--------------------------------------------------------------------------------
| Other | -11.2 | -12.1 | -11.1 | -25.9 | -60.3 | -13.2 | -8.2 |
--------------------------------------------------------------------------------
| Operating profit | 270.8 | 202.9 | 181.8 | 131.3 | 786.8 | 124.4 | 86.1 |
| excl. NRI by | | | | | | | |
| Segment | | | | | | | |
--------------------------------------------------------------------------------
| Share of results | 24.1 | 20.0 | 17.4 | 12.8 | 74.3 | 15.7 | 8.3 |
| of associated | | | | | | | |
| companies excl. | | | | | | | |
| fair valuations | | | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 294.9 | 222.9 | 199.2 | 144.1 | 861.1 | 140.1 | 94.4 |
| excl. NRI and | | | | | | | |
| Fair Valuations | | | | | | | |
--------------------------------------------------------------------------------
| Fair valuations | 15.7 | 21.3 | 44.9 | 183.8 | 265.7 | -15.1 | -21.8 |
--------------------------------------------------------------------------------
| Operating profit | 310.6 | 244.2 | 244.1 | 327.9 | 1 126.8 | 125.0 | 72.6 |
| excl. NRI | | | | | | | |
--------------------------------------------------------------------------------
| NRI | -12.0 | - | -549. | -388. | -949.9 | - | -1.3 |
| | | | 4 | 5 | | | |
--------------------------------------------------------------------------------
| Operating Profit | 298.6 | 244.2 | -305. | -60.6 | 176.9 | 125.0 | 71.3 |
| (IFRS) | | | 3 | | | | |
--------------------------------------------------------------------------------
| Net financial | -36.1 | -53.0 | -23.9 | -43.7 | -156.7 | -41.9 | -40.9 |
| items | | | | | | | |
--------------------------------------------------------------------------------
| Profit before | 262.5 | 191.2 | -329. | -104. | 20.2 | 83.1 | 30.4 |
| Tax and Minority | | | 2 | 3 | | | |
| Interests | | | | | | | |
--------------------------------------------------------------------------------
| Income tax | -65.3 | -42.3 | 54.7 | 44.1 | -8.8 | -16.6 | -1.8 |
| expense | | | | | | | |
--------------------------------------------------------------------------------
| Net Profit from | 197.2 | 148.9 | -274. | -60.2 | 11.4 | 66.5 | 28.6 |
| Continuing | | | 5 | | | | |
| Operations | | | | | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | | | | | |
--------------------------------------------------------------------------------
| Net profit after | 25.3 | -5.0 | -166. | -77.5 | -223.8 | 4.7 | -1.8 |
| tax for the | | | 6 | | | | |
| period from | | | | | | | |
| discontinued | | | | | | | |
| operations | | | | | | | |
--------------------------------------------------------------------------------
| Net Profit | 222.5 | 143.9 | -441. | -137. | -212.4 | 71.2 | 26.8 |
| | | | 1 | 7 | | | |
--------------------------------------------------------------------------------
NRI by Segment
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Newsprint and | - | - | - | -110. | -110.0 | - | -2.4 |
| Book Paper | | | | 0 | | | |
--------------------------------------------------------------------------------
| Magazine Paper | - | - | -218. | -231. | -449.0 | - | -2.6 |
| | | | 0 | 0 | | | |
--------------------------------------------------------------------------------
| Fine Paper | - | - | -32.6 | 21.0 | -11.6 | - | 7.0 |
--------------------------------------------------------------------------------
| Consumer Board | - | - | -186. | -12.5 | -199.3 | - | -4.3 |
| | | | 8 | | | | |
--------------------------------------------------------------------------------
| Industrial | - | - | -5.9 | -1.0 | -6.9 | - | -1.0 |
| Packaging | | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | -12.0 | - | -106. | - | -118.1 | - | - |
| | | | 1 | | | | |
--------------------------------------------------------------------------------
| Other | - | - | - | -55.0 | -55.0 | - | 2.0 |
--------------------------------------------------------------------------------
| Continuing | -12.0 | - | -549. | -388. | -949.9 | - | -1.3 |
| Operations | | | 4 | 5 | | | |
--------------------------------------------------------------------------------
| Discontinued | 44.0 | 12.8 | - | -28.3 | 28.5 | - | -4.5 |
| operations | | | | | | | |
--------------------------------------------------------------------------------
| Total | 32.0 | 12.8 | -549. | -416. | -921.4 | - | -5.8 |
| | | | 4 | 8 | | | |
--------------------------------------------------------------------------------
Operating Profit by Segment
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Newsprint and | 61.1 | 50.2 | 52.2 | -61.6 | 101.9 | 26.4 | 25.5 |
| Book Paper | | | | | | | |
--------------------------------------------------------------------------------
| Magazine Paper | 9.4 | 8.4 | -200. | -215. | -398.1 | 27.2 | 11.9 |
| | | | 5 | 4 | | | |
--------------------------------------------------------------------------------
| Fine Paper | 55.1 | 38.5 | 1.8 | 56.7 | 152.1 | 37.3 | 26.7 |
--------------------------------------------------------------------------------
| Consumer Board | 72.4 | 29.0 | -159. | 17.1 | -41.3 | 42.5 | 18.7 |
| | | | 8 | | | | |
--------------------------------------------------------------------------------
| Industrial | 29.2 | 29.6 | 18.8 | 27.4 | 105.0 | 27.6 | 19.1 |
| Packaging | | | | | | | |
--------------------------------------------------------------------------------
| Wood Products | 42.8 | 59.3 | -69.0 | -0.5 | 32.6 | -23.4 | -10.9 |
--------------------------------------------------------------------------------
| Other* | 4.5 | 9.2 | -14.2 | -116. | -116.6 | -36.5 | -32.1 |
| | | | | 1 | | | |
--------------------------------------------------------------------------------
| Share of result | 24.1 | 20.0 | 65.4 | 231.8 | 341.3 | 23.9 | 12.4 |
| of associated | | | | | | | |
| companies* | | | | | | | |
--------------------------------------------------------------------------------
| Operating Profit | 298.6 | 244.2 | -305. | -60.6 | 176.9 | 125.0 | 71.3 |
| (IFRS) | | | 3 | | | | |
--------------------------------------------------------------------------------
| Net financial | -36.1 | -53.0 | -23.9 | -43.7 | -156.7 | -41.9 | -40.9 |
| items | | | | | | | |
--------------------------------------------------------------------------------
| Profit before | 262.5 | 191.2 | -329. | -104. | 20.2 | 83.1 | 30.4 |
| Tax and Minority | | | 2 | 3 | | | |
| Interests | | | | | | | |
--------------------------------------------------------------------------------
| Income tax | -65.3 | -42.3 | 54.7 | 44.1 | -8.8 | -16.6 | -1.8 |
| expense | | | | | | | |
--------------------------------------------------------------------------------
| Net Profit from | 197.2 | 148.9 | -274. | -60.2 | 11.4 | 66.5 | 28.6 |
| Continuing | | | 5 | | | | |
| Operations | | | | | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | | | | | |
--------------------------------------------------------------------------------
| Net profit after | 25.3 | -5.0 | -166. | -77.5 | -223.8 | 4.7 | -1.8 |
| tax for the | | | 6 | | | | |
| period from | | | | | | | |
| discontinued | | | | | | | |
| operations | | | | | | | |
--------------------------------------------------------------------------------
| Net Profit | 222.5 | 143.9 | -441. | -137. | -212.4 | 71.2 | 26.8 |
| | | | 1 | 7 | | | |
--------------------------------------------------------------------------------
* Includes fair valuations
Stora Enso Shares
--------------------------------------------------------------------------------
| Closing Price | Helsinki, EUR | Stockholm, SEK |
--------------------------------------------------------------------------------
| | A share | R share | A share | R share |
--------------------------------------------------------------------------------
| April | 8.10 | 7.96 | 74.25 | 74.25 |
--------------------------------------------------------------------------------
| May | 7.85 | 7.81 | 73.00 | 73.25 |
--------------------------------------------------------------------------------
| June | 5.98 | 5.96 | 56.25 | 56.50 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Trading Volume | Helsinki | Stockholm |
--------------------------------------------------------------------------------
| | A share | R share | A share | R share |
--------------------------------------------------------------------------------
| April | 76 463 | 89 800 120 | 108 155 | 12 911 191 |
--------------------------------------------------------------------------------
| May | 52 024 | 73 046 995 | 86 367 | 9 680 530 |
--------------------------------------------------------------------------------
| June | 77 361 | 109 387 276 | 119 481 | 11 040 610 |
--------------------------------------------------------------------------------
| Total | 205 848 | 272 234 391 | 314 003 | 33 632 331 |
--------------------------------------------------------------------------------
Basis of Preparation
This unaudited interim financial report has been prepared in accordance with the
accounting policies set out in International Accounting Standard 34 on Interim
Financial Reporting and in the Group's Annual Report for 2007.
The divestment of the Merchants segment has been accounted for as a discontinued
operation. A discontinued operation represents a separate major line of business
or geographical area for which the assets, liabilities and net financial results
may be distinguished physically, operationally and for financial reporting
purposes. The net profit from discontinued operations includes the loss on
disposal and is reported in a single line after net profit from continuing
operations.
Changes in Segment Reporting and Reclassification in 2007
Stora Enso has modified its segment reporting format for operating profit from
the first quarter of 2008 onwards: the share of results of associated companies
and certain fair valuations will no longer be included in business segments'
operating profits; they are reported as separate items to increase the
transparency of segmental reporting and facilitate comparisons between different
periods. The fair valuation items include share-based compensation, Total Return
Swaps (TRS), CO2 emission rights and IAS 41 forest asset valuations mainly
related to associated companies. Comparative operating profits of segments for
2007 have been reclassified. The reclassification has no effect on Group
operating profit or Group profit before tax.
Calculation of Key Figures
Return on capital employed,
ROCE (%) 100 x Operating profit____
Capital employed 1) 2)
Return on operating capital, 100 x Operating profit____
ROOC (%) Operating capital 1) 2)
Return on equity, 100 x Profit before tax and minority items - taxes
ROE (%) Total Equity 2)
Equity ratio (%) 100 x Total Equity
Total assets
Interest-bearing net liabilities Interest-bearing liabilities -
interest-bearing assets
Debt/Equity ratio Interest-bearing net liabilities
Equity
1) Capital employed = Operating capital - Net tax liabilities
2) Average for the financial period
For further information, please contact:
Jouko Karvinen, CEO, tel. +358 2046 21410
Hannu Ryöppönen, Deputy CEO and CFO, tel. +358 2046 21450
Kari Vainio, EVP, Corporate Communications, tel. +44 7799 348 197
Keith B Russell, SVP, Investor Relations, tel. +44 7775 788 659
Ulla Paajanen-Sainio, VP, Investor Relations and Financial Communications,
tel.
+358 40 763 8767
Stora Enso's third quarter results 2008 will be published on 23 October 2008.
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.
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STORA ENSO OYJ
p.p. Jussi Siitonen Jukka Marttila
