Stora Enso Oyj: Stora Enso Interim Report January–September 2016

Regulatory News:

Another quarter of solid performance

Stora Enso OYJ (HEX:STEAV) (HEX:STERV) (STO:STEA) (STO:STER), Helsinki, Finland

INTERIM REPORT 25 October 2016 at 13.00 EEST

Q3/2016 (compared with Q3/2015)

· Sales EUR 2 393 (EUR 2 500) million decreased 4.3%. Sales excluding the structurally declining paper business and divested Barcelona Mill increased 1.8%, primarily due to the ramp-ups at Varkaus kraftliner and Beihai consumer board mills.

· Operational EBIT was EUR 219 (EUR 246) million, including a negative impact of EUR 35 million due to the ramp-up of Beihai. The EBIT margin was 9.2% (9.8%).

· EPS EUR 0.16 (EUR 0.16). EPS excl. IAC increased to EUR 0.17 (EUR 0.13).

· Cash flow from operations was EUR 390 (EUR 484) million, cash flow after investing activities EUR 177 (EUR 234) million.

· Continued strengthening of the balance sheet; net debt to operational EBITDA 2.1 (2.5); liquidity EUR 775 (EUR 797) million.

· Operational ROCE 10.1% (11.6%), operational ROCE excluding the Beihai investment 13.5% (13.1%).

Q3/2016 (compared with Q2/2016)

· Sales at EUR 2 393 (EUR 2 526) million decreased 5.3%. Sales excluding the structurally declining paper business declined 5.1%, mainly due to usual seasonality in Wood Products.

· Operational EBIT at EUR 219 (EUR 226) million decreased 3.1%, mainly due to the ramp-up of Beihai.

Q1–Q3/2016 (compared with Q1–Q3/2015)

· Sales at EUR 7 364 (EUR 7 553) million declined 2.5%. Sales excluding the structurally declining paper business and divested Barcelona Mill increased 2.6%.

· Operational EBIT at EUR 693 (EUR 673) million increased 3.0%, mainly due to lower variable costs.

Transformation

· Beihai Mill ramp-up is proceeding ahead of plan. Customer tests of liquid boards are proceeding well and the first CKB board test runs are completed. The consumer board machine is expected to reach full production within 18?24 months from the start-up in May 2016. The bleached chemi-thermomechanical pulp (BCTMP) plant is expected to be operational before the end of Q4.

· Varkaus kraftliner mill reached EBITDA break-even during Q3. Full production is expected during the second half of 2017.

· The new production line for wooden building components (LVL) at Varkaus Mill is ramping up, and product certification is going on. Full production is expected in mid-2018.

· Divestment of the Kabel coated magazine paper mill in Germany was completed in September.

· Advance payments of EUR 118 million received from the divestment of the Suzhou Mill site.

Outlook for Q4/2016

Q4/2016 sales are estimated to be slightly higher or slightly lower than the amount of EUR 2 393 million, and operational EBIT is expected to be in line with or somewhat lower than the EUR 219 million recorded in Q3/2016. The impact of the annual maintenance shutdowns is expected to be approximately EUR 35 million lower than in Q3/2016.

Stora Enso's CEO Karl-Henrik Sundström comments on the third quarter 2016 results:

"In the third quarter, sales increased 1.8%, excluding the structurally declining paper business and divested Barcelona Mill. This was primarily due to the ramp-ups of Varkaus kraftliner and Beihai consumer board mills. Operational EBIT was EUR 219 million compared to EUR 246 million a year ago, negatively affected with the ramp-up of Beihai by EUR 35 million. Cash flow from operations was EUR 390 million thanks to reduced working capital and proceeds from divestments. The balance sheet continued to strengthen as net debt to operational EBITDA was 2.1.

Our transformation into a customer-focused renewable materials company is progressing well. I am pleased that the ramp-up of the Beihai Mill is ahead of plan and we are now conducting customer tests of liquid boards and other grades. We have also completed our first test runs of CKB, our cartonboard which is very competitive in terms of strength, stiffness, purity and runnability. It provides superior food safety which is high on consumers’ minds in China. We have launched a new product in our CKB product family during the quarter, CKB Nude by Stora Enso. It is an uncoated carton board designed to meet the consumer preferences for renewable packaging materials with natural look and feel.

The Varkaus kraftliner mill ramp-up is also proceeding and the mill reached EBITDA break-even during the quarter, as planned. We are expecting full production of virgin-fibre-based containerboard during the second half of 2017. In addition, we have finalised the divestment of the Kabel coated magazine paper mill in Germany. We have also received the first pre-payments for the divested Suzhou Mill site in China. This deal was announced in the second quarter 2016.

We are planning to create a centre of excellence for corrugated packaging in Lahti. The aim is to boost competitiveness by consolidating manufacturing of corrugated packaging in Finland to one location. As part of the possible consolidation, we would invest approximately EUR 19 million in new machinery and supporting infrastructure. The proposed project is expected to be finalised by the end of the first quarter 2018.

Wooden buildings are on the rise. Australia's first wooden office building is being built with our Cross Laminated Timber (CLT) in Sydney. The major structural components of the six storey office are made from more than 2 000 m³ of our CLT. The building is due for completion in 2017, proving that CLT is not only a renewable and sustainable choice, but also contributes to rapid construction time.

Another initiative to meet growing urban construction needs is the modernisation of the sawmill in Murów. As previously announced, the modernisation will increase yearly capacity from 70 000 m³ to 400 000 m³. In September, we inaugurated the modernised sawmill together with 200 customers.

I am happy that our Annual Report was awarded the best in Finland for the second consecutive year in a ranking by ReportWatch. The ranking included 1 600 companies from 65 countries. Also, the international not-for-profit organisation CDP (formerly Carbon Disclosure Project) recognises Stora Enso as a world leader for combating global warming, with a position on its 2016 Climate A List.

When it comes to outlook, sales for the fourth quarter 2016 are estimated to be slightly higher or slightly lower than the amount of EUR 2 393 million, and operational EBIT is expected to be in line with or somewhat lower than the EUR 219 million recorded in the third quarter of 2016. The impact of the annual maintenance shutdowns is expected to be approximately EUR 35 million lower than in the third quarter of 2016.

As always, I would like to thank our customers for their business, our employees for their dedication and our investors for their trust.”

Karl-Henrik Sundström, CEO

KEY FIGURES

TRI (Total recordable incidents) rate = number of incidents per one million hours worked.

LTA (Lost-time accident) rate = number of lost-time accidents per one million hours worked.

Webcast and conference call for analysts, investors and media at 15.00 EEST

(14.00 CEST, 13.00 BST, 08.00 EST)

The webcast and conference call for analysts, investors and media will be hosted by CEO Karl-Henrik Sundström, CFO Seppo Parvi, and SVP Head of Investor Relations Ulla Paajanen-Sainio, and may be accessed at http://edge.media-server.com/m/p/8grvmu8j. Those participants who wish to ask questions should join the conference call (details below). All participants can follow the presentation over the webcast.

Conference call dial-in details

UK +44(0)20 3427 1901

Finland +358 (0)9 2310 1620

Sweden +46 (0)8 5065 3937

USA +1 646 254 3367

Confirmation Code: 9672195

The links to the webcasts are also available on the Stora Enso website: storaenso.com/investors (http://www.storaenso.com/investors)

Stora Enso’s Capital Markets Day will take place in London on 17 November 2016. Stora Enso’s fourth quarter and full year 2016 results will be published on 3 February 2017.

Stora Enso is a leading provider of renewable solutions in packaging, biomaterials, wooden constructions and paper on global markets. Our aim is to replace fossil based materials by innovating and developing new products and services based on wood and other renewable materials. We employ some 26 000 people in more than 35 countries, and our sales in 2015 were EUR 10.0 billion. Stora Enso shares are listed on Nasdaq Helsinki (STEAV, STERV) and Nasdaq Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY) on the International OTCQX over-the-counter market. storaenso.com (http://www.storaenso.com)/investors

It should be noted that Stora Enso and its business are exposed to various risks and uncertainties and 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. 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. All statements are based on management’s best assumptions and beliefs in light of the information currently available to it and Stora Enso assumes no obligation to publicly update or revise any forward-looking statement except to the extent legally required.

STORA ENSO OYJ

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