Stora Ensos Performance in Q2 Esko Mäkeläinen, CFO 22 August, 2003

22 August 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 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 Groups 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 Groups 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 Groups 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 Groups principal geographic markets or fluctuations in exchange and interest rates.

22 August Highlights Profits negatively impacted by: –Geopolitical factors and subdued economic activity across global markets –Production losses and fixed cost increases related to Midsummer holiday stoppages –Direct and indirect effects of declining US dollar I/2003II/2003 Sales, EUR million Operating Profit, EUR million EPS, EUR Cash EPS, EUR Debt/Equity There were no non-recurring items in the periods under review

22 August Main Events Veracel –Decision was taken by associated company Veracel to construct a tonnes p.a.pulp mill in Bahia, Brazil, based on own eucalyptus –Stora Enso is entitled to 50 % of the output, to be used ascaptive pulp –Production start up: mid 2005 Langerbrugge –Successful start up of worlds largest newsprint machine of tonnes – based entirely on recovered paper –Main measures in Newsprint asset restructuring have now been taken

Financial figures

22 August EUR million2002II/02H1/02 H1/03 I/03 II/03 Sales EBITDA 1) Operating profit 1) Profit before tax Net profit EPS, EUR 1) EPS, basic, EUR CEPS, EUR 1) ROCE, % 1) Debt/Equity Summary Financials 1) excluding non-recurring items

22 August Currency Hedging Operational cash flow hedges had a positive impact of EUR 34.8 million in Q2/2003 Major net cash flows (2002): USD +800 GBP +800 (EUR million equivalent)

22 August Indirect Impact of Euro Strength Imports increasing somewhat to Europe Packaging Boards experiencing increased competition versus US dollar based suppliers in its overseas sales US dollar price increases in magazine grades are supported by stronger Euro, but mitigated by increased imports from Europe

22 August EUR million II/02III/02IV/02 I/03 II/03 Net interest Foreign exchange profit/loss Valuation of financial instruments (non cash) Other financing items Total Net Financial Items

22 August Change in EPS I/2003 vs II/2003 EUR

22 August EPS by Quarter EUR excluding non-recurring items

22 August Change in EPS 1-6/2003 vs 1-6/2002 EUR excluding non-recurring items

22 August ROCE % Target > 13% over the cycle excluding non-recurring items WACC 9.5% before tax ROCE target 13%

22 August Debt/Equity Target < 0.8

22 August Share Buy-Back Programme Current programme approved by 2003 AGM to continue through 19 March Allows repurchase up to: A shares R shares Status through 08 August 2003: Number of Average % of Shares shares purchased: purchase price: authorisation A shares5 000EUR R shares EUR March, 2003 Total shares in issue:

22 August Capital Expenditure and Depreciation Capital expenditure Capital expenditure as % of sales EUR million Depreciation Goodwill amortisation

22 August Deliveries 2002 Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 Publication Papers Fine Papers Packaging Boards Paper and Board Total Timber Production Publication Papers Fine Papers Packaging Boards Paper and Board Total Timber Deliveries and Production tonnes/m3

22 August Curtailments 1000 tonnes2002 Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 Publication Papers Fine Papers Packaging Boards Paper and Board Total Europe USA Paper and Board Total

North America H1 2003

22 August USD million2002H1/02 H2/02 H1/03 Sales EBITDA 1) EBITA 1) Cash flow after Capex 2) Deliveries (1 000 tonnes) Market-related downtime (1 000 tonnes) Financial Results in North America 1) excluding non-recurring items 2) excluding forest asset sale

22 August North American Printing Paper Prices *Note: Newsprint prices in U.S. $ per metric tonne USD per short ton Monthly Average Transaction Prices Source: RISI

22 August Profit Enhancement Programme in North America Profit Enhancement Programme is proceeding according to plan –Kimberly Mill PM 96 and Biron Mill 26 rebuilds were successfully completed during Q Workforce reduced by 20 % since year 2000 Permanent closure of Wisconsin Rapids 12; Biron 24 to close by the end of 2003 The programme will be completed in the mid 2005; from then onwards the EPS effect will be

22 August Further Cost Cutting Measures in North America Fixed costs in North America continue to be too high further cost-cutting steps will be taken These measures will be announced before the end of the third quarter 2003

Stora Enso Follows IAS Standards

22 August What is IAS? International Accounting Standards (IAS) were created in the 1960s by Anglo Saxon Auditors who, on a voluntary and informal basis, tried to improve comparability on financial information In the 1970s the International Accounting Standards Committee (IASC) was created In 1995 an agreement was reached between IASC and the International Organisation of the Securities Commission

22 August What is IAS? In 2001 the International Accounting Standards Board was formed and based its headquarters in London –more resources to develop standards –IASC Foundation led by Mr Paul Volcker –IASB chaired by Sir David Tweedie IAS standards will be compulsory from 2005 for stock listed companies in the EU. This will affect over 7,000 companies in Europe

22 August How Stora Enso Adopted IAS Standards In 1998 Stora Kopparberg and Enso merged. Instead of conforming to Finnish Accounting Standards the company decided to adopt IAS In 2000 Stora Enso was listed on the NYSE. IAS remains the main standard in accounting but reconciliation is also made to US GAAP

22 August Objective of the IASB To develop a single set of understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the various capital markets to make economic decisions.

22 August What were the main changes from FAS to IAS? Preparations took about 6 months because of the recalculations for previous years The main changes were in the booking of: –business combinations (mergers and acquisitions) –pensions (IAS 26) –provisions (IAS 37) –leases (IAS 17) –investments in associated companies (IAS 28) –Impairment of assets (IAS 36)

22 August Inventory movement effects Measurement principles (IAS 2) Inventories should be measured at the lower of cost and net realisable value Cost includes all costs to bring the inventories to their present condition and location Finished goods and work in progress include costs incurred so far in the process and the cost of raw materials Producing more than delivering increases inventory value thus increasing profit Result emphasises production over deliveries

22 August Inventory movement effects Effects on Stora Enso Fixed production costs (such as direct labour and depreciation) are calculated based on normal operating rate Stora Enso has larger scale production stand stills during Midsummer and Christmas Generally inventories decline during these periods (demand does not fluctuate as much as production) Second and fourth quarter results therefore include fixed cost from previous periods (released to the period when products from inventory are sold)

22 August Newly Adopted IAS Standards IAS 39 - Valuation of Financial Instruments –a derivative is a financial instrument –fair value is the amount for which an instrument could be exchanged –hedging instruments and effectiveness IAS 41 - Accounting of Biological Assets –current value of the assets at the end of the period –biological transformation comprises the processes of growth –harvest is the detachment of produce from a biological asset

22 August Unrealised Financial Instruments IAS 39 entries There are two different ways of entering the valuation of unrealised financial instruments under IAS 39: Only in balance sheet until they have been realised (hedging instruments); Directly in profit and loss statement (non-hedging instruments)

22 August Unrealised Financial Instruments IAS 39 entries The entries of the valuation of unrealised hedging instrument: Valuation losses are entered debiting other comprehensive income (OCI) directly in equity and crediting short term liabilities. Valuation gains are entered debiting short-term receivables and crediting OCI. Realised gains and losses of hedging instruments are entered against the item they have hedged in profit and loss statement.

22 August Unrealised Financial Instruments IAS 39 entries The entries of the valuation of unrealised non-hedging instrument: Valuation losses are entered debiting financial items in profit and loss statement and crediting short term liabilities. Valuation gains are entered debiting short-term receivables and crediting financial items in profit and loss statement.

Outlook

22 August Outlook Global economic activity remains muted In Europe advertising spending is still not increasing North American advertising spending is beginning to recover from the Iraq War-impacted levels Increasing imports affecting the supply/demand balance in the USA Consumer confidence in Asia is recovering from the temporary effects of SARS

22 August Outlook (cont.) Overcapacity in Europe continues to negatively impact pricing in coated printing papers Uncoated fine paper and recovered fibre-based board prices under pressure in Europe Additional cost cutting measures within the company will be effected The Groups capital expenditure plans for 2003 and 2004 are being adjusted not to exceed the level of depreciation

22 August Near-term Market Outlook Western Europe Price DemandComments Magazine Paper SC CMR Newsprint Fine Papers WFC WFU Packaging Boards Timber SC is expected to be stable No strong sign of improvement in demand Price pressure; producer stock remain high Demand will seasonally be slow; order books good; imports affecting prices Stable order book. Market related downtime mainly in recovered-fibre- based grades Oversupply in whitewood; redwood normal Demand slowly improving; D/S ratio imbalance puts pressure on prices

22 August Near-term Market Outlook North America Price DemandComments Magazine Paper SC CMR Newsprint Fine Papers WFC Timber A modest recovery forecasted; some further price increases expected in H2 Some signs of improvement in Demand; $50 price increase partially implemented; new price increases announced Demand levelling off; high stock levels A modest recovery forecasted; some further price increases expected in H2 Housing activity continues; prices slightly improved

22 August Summary The strongest balance sheet in the industry Disciplined and consistent financial targets Targeted capital expenditures to achieve high asset quality Debt-to-equity discipline Strong cash earnings per share Profitability at the bottom of the cycle

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