Stora Enso Interim Review January-March 2007

4/26/2007, 12:01 PM (Source: GlobeNewswire)
Strong operating profit improvement driven by Fine Paper and Wood
Products; challenging quarters ahead


Stora Enso Oyj Stock Exchange Release 26 April 2007 at 10.00 GMT

Summary of First Quarter Results (compared with Q1/2006)
Sales were EUR 3 855.4 (EUR 3 607.7) million.
Operating profit was EUR 307.3 (EUR 247.0) million excluding
non-recurring items. Operating profit was EUR 339.3 (EUR 223.8)
million including non-recurring items.
Profit before tax was EUR 274.8 (EUR 210.9) million excluding
non-recurring items. Profit before tax was EUR 306.8 (EUR 317.7)
million including non-recurring items.
Net profit excluding non-recurring items was EUR 207.2 (EUR 158.3)
million. Net profit including non-recurring items was EUR 222.5 (EUR
226.4) million.
Earnings per share were EUR 0.26 (EUR 0.20) excluding non-recurring
items. Cash earnings per share were EUR 0.59 (EUR 0.54) excluding
non-recurring items. Earnings per share including non-recurring items
were EUR 0.28 (EUR 0.29).
ROCE excluding non-recurring items was 10.8% (8.5%).

Message from CEO Jouko Karvinen:
Group earnings strongly improved, but challenging quarters ahead
"We are delighted to report strong earnings improvements in Fine
Paper and Wood Products, and a good performance by Packaging Boards.
There was a slight decline in Publication Paper's profitability in
very challenging market conditions for magazine paper. However, in
the next few months we are planning to curtail production at some of
our Finnish pulp mills owing to wood supply constraints resulting
from an unusually short winter harvesting season in Baltic Sea region
and in Russia, and uncertainties around the Russian wood export tax.
These stoppages, together with increased wood costs and a higher
level of seasonal holiday and maintenance stoppages will negatively
impact earnings in the second quarter, although earnings should
remain higher than a year earlier. We are working rigorously to
increase wood supply around the Baltic Sea basin and to solve the
issues concerning Russian wood export tax in good co-operation with
our stakeholders.

Overall market situation is relatively good, with a few exceptions
"The overall market situation and outlook are relatively healthy.
Conditions do vary, however, between customer segments and regions.
Currently, two of the biggest challenges in our industry are weak
magazine paper prices worldwide and the uncertain trend in demand for
printing and writing papers and newsprint in North America. On a
positive note, prospects for our Fine Paper, Newsprint and Wood
Products divisions in Europe are good, and Packaging Boards continues
to perform well"

"Cost inflation remains a real issue for our industry, particularly
for wood. The additional export duties on roundwood announced by
Russia, the European Union's drive to increase the utilisation of
wood fibre as biofuel and the pressure from Non-Governmental
Organisations with environmental concerns about wood harvesting in
certain areas are all contributing to concerns over wood supply. We
are convinced that all stakeholders, not least in Finland and Russia,
understand the seriousness of the situation and will work with us to
find positive solutions to these challenges acceptable to all parties
concerned in the coming months and years.

Group's ROCE target of 13% over the cycle remains
"As we stated at our Annual General Meeting, we remain committed to
our target of achieving a ROCE of 13% over the cycle. Our business
and geographical portfolio review is progressing well. As stated
before, we do not intend to announce a single multi-year plan or
lists of businesses under scrutiny. Rather we will announce key
decisions and actions when appropriate. The result will be a more
focused Group, with businesses that all contribute to our financial
improvement and strategic goals.

"Another imperative is continual cost improvement to be realised
primarily through structural simplification and choices. We will also
be building upon our successful strategy in new growth markets, such
as further development of our Latin American operations.

"We will also emphasise our customer-driven product innovations, such
as media packaging solutions and the positive results from the
never-ending drive for operational excellence evidenced by the world
speed record in production at our Kvarnsveden SC Paper Machine 12 in
the first quarter.

"Even with some short-term challenges and lots of decisions and
choices to make, we are convinced that we will find our way to
long-term, sustainable value creation. Based on track record of 2006
and the first quarter of 2007, even in a challenging environment, our
goal in the future is to stay on the year-on-year improvement path.

Near-term market outlook
"In Europe the positive economic outlook is expected to support the
consumption of advertising-driven paper grades. Stable prices for
newsprint are anticipated but in magazine paper price pressure
persists in non-contractual business. The outlook for fine paper
remains healthy and prices are forecast to rise. Demand for packaging
boards is expected to remain firm with prices rising in some business
segments. Good, stable demand for wood products should keep the
outlook for prices relatively steady.

"In North America the demand outlook for publication paper grades and
coated fine paper is uncertain. Prices may remain under pressure.

"In Latin America demand for coated magazine paper is predicted to
strengthen, but competition is expected to remain intense. In China a
slight improvement in demand for coated fine paper is anticipated,
keeping prices stable."



Stora Enso Interim Review January-March 2007

Markets
Compared with Q1/06
In Europe market demand was stable for newsprint but improved for
magazine paper, fine paper, packaging boards and wood products.
Prices were higher than a year ago in newsprint and lower in magazine
paper. Prices were unchanged in coated fine paper, but higher in
uncoated fine paper. Prices for most packaging boards and wood
products were higher.

In North America market demand for newsprint was clearly weaker than
a year ago, but virtually unchanged for coated magazine paper and
stronger for uncoated magazine paper. Prices declined in newsprint
and magazine paper markets. Demand for coated fine paper weakened
slightly during the year and prices were lower.

In Latin America demand for coated magazine paper increased, whereas
prices decreased.

In China demand for coated fine paper also increased, but prices
decreased.

Compared with Q4/06
In Europe market demand was somewhat stronger than in the previous
quarter in fine paper, packaging boards and wood products, but
seasonally weaker in publication paper. Prices rose in newsprint,
uncoated fine paper, some packaging grades and wood products. Coated
fine paper prices were stable, but magazine paper prices declined.

In North America demand for all publication papers weakened and
prices declined. In coated fine paper demand increased slightly,
mainly for seasonal reasons, but prices decreased.

In Latin America market demand for coated magazine paper weakened
slightly, but prices remained unchanged.

In China demand for coated fine paper was stable, but prices declined
slightly.

Stora Enso Deliveries and Inventories

Changes
Q4-2006 Q1-2006 Q1-2007 Q1/07-Q1/06 Q1/07-Q4/06
Paper and Board
deliveries (1
000 tonnes) 3 735 3 619 3 790 171 55
Wood Products
deliveries (1
000 m3) 1 670 1 563 1 666 103 -4
Paper and Board
Production (1
000 tonnes) 3 740 3 751 3 833 82 93


January-March 2007 Results (compared with Q1/2006)
Sales at EUR 3 855.4 million were 6.9% higher than in the first
quarter of 2006, mainly due to higher average prices for fine paper
and wood products, and increased deliveries of publication paper,
packaging boards and wood products. The net impact on sales of the
acquisition of Arapoti Mill in Brazil together with the divestment of
Pankakoski, Celbi and Grycksbo mills was EUR -42.7 million.

Operating profit excluding non-recurring items increased by EUR 60.3
million to EUR 307.3 million, which is 8.0% of sales. Profitability
was higher in all segments except Publication Paper. Prices rose in
wood products and uncoated fine paper. In Publication Paper,
operating profit decreased as higher newsprint prices only partly
offset lower magazine paper prices. Wood and energy costs were
materially higher in the first quarter of 2007 than a year earlier.

Key Figures

Change % Change %
EUR million 2005 2006 Q4/06 Q1/06 Q1/07 Q1/07-Q1/06 Q1/07-Q4/06
13 14 3 3 3
Sales 187.5 593.9 731.8 607.7 855.4 6.9 3.3
EBITDA
excluding
non-recurring 1 1
items 501.1 872.8 472.4 516.2 568.9 10.2 20.4
Operating
profit
excluding
non-recurring
items 371.2 782.1 187.6 247.0 307.3 24.4 63.8
Non-recurring
items
(operational) -417.3 -133.7 60.0 -23.2 32.0 n/a -46.7
Operating
margin
excluding
non-recurring
items, % 2.8 5.4 5.0 6.8 8.0 17.6 60.0
Operating
profit -46.1 648.4 247.6 223.8 339.3 51.6 37.0
Net financial
items1) -165.3 -104.0 -38.6 62.3 -56.7 n/a -46.9
Profit before
tax and
minority
interests
excluding
non-recurring
items 273.1 602.5 141.4 210.9 274.8 30.3 94.3
Profit before
tax and
minority
interests -144.2 631.8 234.4 317.7 306.8 -3.4 30.9
Net profit
for the
period
excluding
non-recurring
items 230.3 439.4 101.4 158.3 207.2 30.9 104.3
Net profit
for the
period -107.4 589.2 264.8 226.4 222.5 -1.7 -16.0

EPS excluding
non-recurring
items, Basic,
EUR 0.28 0.55 0.13 0.20 0.26 30.0 100.0
EPS, Basic,
EUR -0.14 0.74 0.33 0.29 0.28 -3.4 -15.2
CEPS
excluding
non-recurring
items, EUR 1.70 1.94 0.49 0.54 0.59 9.3 20.4
ROCE
excluding
non-recurring
items, % 3.4 6.8 6.7 8.5 10.8 27.1 61.2

1) Includes capital gains of EUR 130.0 million (sale of Sampo shares)
in Q1/2006, EUR 33.0 million (sale of Finnlines shares) in Q4/2006
totalling to EUR 163.0 million in 2006.
CEPS = (Net profit for the period + depreciation and
amortisation)/average number of shares
Non-recurring items are exceptional transactions that are not related
to normal business operations. The most common non-recurring items
are capital gains, additional write-downs, restructuring provisions
and penalties. Non-recurring items are normally specified
individually if they exceed one cent per share.

Deliveries of wood to the Group's mills in Europe and Brazil totalled
11.1 million cubic metres, which is similar to the first quarter of
2006 and up 8% on the previous quarter.

A storm at the beginning of the quarter improved wood supplies and
wood prices turned down in Continental Europe. In the Nordic
countries market prices rose and market supplies increased. However,
decreasing imports from Russia and a very short and warm winter
weakened the overall delivery balance.

Operating profit includes a positive non-operational effect of EUR
15.7 million (positive EUR 35.3 million), comprising a positive EUR
19.4 million net due to EUR -12.0 million and EUR 31.4 million
respectively from the accounting of share-based compensation and
Total Return Swaps (TRS), and a charge of EUR 3.7 million from the
reduced value of government grants related to CO2 emission rights.
These non-operational items include a non-cash impact of EUR 2.4
million and they are reported in the segment Other.

TRS instruments, which are only partially hedging cash settled
synthetic options, do not qualify for hedge accounting under IFRS
criteria, and therefore all periodic changes to their fair value are
recorded in the Income Statement; they were previously presented in
other financial items. From the first quarter of 2007 onwards, the
TRS-related gains and losses, the fair value changes and cash flows,
are presented in operating profit under personnel expenses and the
comparative years have been reclassified accordingly; the
reclassification improved operating profit by EUR 31.4 million (EUR
52.9 million) and increased financial expenses correspondingly.

There were two non-recurring items with a net positive impact of EUR
32.0 million (negative EUR 23.2 million) on operating profit: the new
labour agreements in North America had a positive impact of EUR 44.0
(USD 57.7 million) million and closure of Sauga Sawmill in Estonia
had a negative impact of EUR 12.0 million.

The share of associated company results amounted to EUR 24.2 (EUR
31.6) million; the main contributions were from Bergvik Skog,
Tornator and Veracel.

Net financial items were EUR -56.7 million (positive EUR 62.3
million). Net interest expenses increased to EUR 60.7 (EUR 52.8)
million and net foreign exchange gains on borrowings, currency
derivatives and bank accounts were EUR 3.6 (losses of EUR 7.0)
million. Other financial items totalled positive EUR 0.4 (positive
EUR 122.1) million, the decrease being mainly due to a non-recurring
capital gain of EUR 130.0 million from the sale of shares in Sampo
Oyj during the first quarter of 2006.

Profit before taxes and minority interests excluding non-recurring
items increased by EUR 63.9 million to EUR 274.8 million and profit
before tax amounted to EUR 306.8 (EUR 317.7) million including
non-recurring items.

Net taxes totalled EUR -84.3 (EUR -91.3) million, leaving a net
profit for the quarter of EUR 222.5 (EUR 226.4) million. The
cumulative tax-rate for the first three months was 27.5%.

The profit attributable to minority shareholders was EUR 3.3 (EUR
1.4) million, so the profit attributable to Company shareholders was
EUR 219.2 (EUR 225.0) million.

Earnings per share excluding non-recurring items increased by EUR
0.06 to EUR 0.26. Earnings per share including non-recurring items
were EUR 0.28 (EUR 0.29). Cash earnings per share were EUR 0.59 (EUR
0.54) excluding non-recurring items.

The return on capital employed was 10.8% (8.5%) excluding
non-recurring items. Capital employed was EUR 11 478.5 million on 31
March 2007, approximately the same as a year earlier.

First Quarter Results (compared with Q4/2006)
Sales at EUR 3 855.4 million were 3.3% higher than the previous
quarter's EUR 3 731.8 million. Deliveries increased in fine paper and
packaging boards and decreased in publication paper. Prices increased
in newsprint, uncoated fine paper, wood products and somewhat in
packaging boards, but decreased in magazine paper.

Operating profit excluding non-recurring items increased by EUR 119.7
million to EUR 307.3 (EUR 187.6) million, which is 8.0% of sales.
Operating profit increased in all product segments except Publication
Paper. Strong demand and higher prices increased operating profit in
Fine Paper and Wood Products. Operating profit in Packaging Boards
increased mainly due to seasonally higher production and delivery
volumes. Publication Paper operating profit decreased, mainly because
decreases in magazine paper prices were only partly offset by
increases in newsprint prices. Wood costs were higher than in the
previous quarter.

Profit before tax amounted to EUR 274.8 (EUR 141.4) million excluding
non-recurring items and EUR 306.8 (EUR 234.4) million including
non-recurring items.

Earnings per share were EUR 0.26 (EUR 0.13) excluding non-recurring
items. Earnings per share including non-recurring items were EUR 0.28
(EUR 0.33). Cash earnings per share were EUR 0.59 (EUR 0.49)
excluding non-recurring items.

The return on capital employed was 10.8% (6.7%) excluding
non-recurring items. Capital employed was EUR 11 478.5 million on 31
March 2007, a net increase of EUR 146.7 million due to increased
working capital partly offset by low capital expenditure.


Capital Structure

Change % Change %
31 Mar 07 31 Mar 07
31 Mar 31 Mar - 31 Mar - 31 Dec
EUR million 31 Dec 06 06 07 06 06
Fixed assets 11 234.7 11 454.3 11 029.2 -3.7 -1.8
Operative working
capital 2 174.5 2 509.6 2 388.3 -4.8 9.8
Non-current
interest-free items,
net -1 204.0 -1 312.1 -1 050.7 -19.9 -12.7
Operating Capital
Total 12 205.2 12 651.8 12 366.8 -2.3 1.3
Net tax liabilities -873.4 -1 125.5 -888.3 -21.1 1.7
Capital Employed 11 331.8 11 526.3 11 478.5 -0.4 1.3
Associated companies 805.2 754.7 868.3 15.1 7.8
Total 12 137.0 12 281.0 12 346.8 0.5 1.7

Equity attributable
to Company
shareholders 7 799.6 7 072.4 7 642.0 8.1 -2.0
Minority interests 103.5 93.0 106.2 14.2 2.6
Net interest-bearing
liabilities 4 233.9 5 115.6 4 598.6 -10.1 8.6
Financing Total 12 137.0 12 281.0 12 346.8 0.5 1.7


Financing
Cash flow from operations was EUR 210.2 (EUR 603.9) million and cash
flow after investing activities EUR 101.3 (EUR 424.2) million
compared with the fourth quarter of 2006. Cash flow decreased due to
increased working capital.

At the end of the period, interest-bearing net liabilities were EUR 4
598.6 million, an increase of EUR 364.7 million due to the EUR 354.9
million dividend for 2006 being deducted from equity and entered into
current interest-bearing liabilities for payment on 17 April 2007.
Unutilised credit facilities and cash and cash-equivalent reserves
totalled EUR 2.2 billion.

Shareholders' equity amounted to EUR 7 642.0 million or EUR 9.69 (EUR
9.89) per share, compared with the market capitalisation on the
Helsinki Stock Exchange on 30 March 2007 of EUR 10.2 billion.

The debt/equity ratio at 30 March 2007 was 0.60 (0.54). The currency
effect on equity was EUR -45.2 million net of the hedging of equity
translation risks.

Cash Flow

Change % Change %
Q1/07 - Q1/07 -
EUR million 2006 Q1/06 Q4/06 Q1/07 Q1/06 Q4/06
Operating profit 648.4 223.8 247.6 339.3 51.6 37.0
Adjustments* 1 060.9 265.9 297.0 256.2 -3.6 -13.7
Change in working
capital 199.1 -189.9 59.3 -385.3 -102.9 n/m
Cash Flow from
Operations 1 908.4 299.8 603.9 210.2 -29.9 -65.2
Capital expenditure -583.4 -167.7 -179.7 -108.9 35.1 39.4
Cash Flow after
Investing Activities 1 325.0 132.1 424.2 101.3 -23.3 -76.1

*) Adjustments include depreciations, other non-cash income and
expenses and capital gains and losses which are included in proceeds
from the sale of fixed assets and shares.

Capital Expenditure for the First Quarter of 2007
Capital expenditure for the first quarter totalled EUR 108.9 million,
which is 42% of scheduled depreciation and 3% of sales. The Group's
capital expenditure for 2007 is expected to be about EUR 900 million.

The main projects during the first three months were the plantation
projects at Guangxi, China (EUR 9.2 million) and in South America
(EUR 6.1 million) and paper machine 3 at Varkaus Mill in Finland (EUR
6.7 million).

Asset Performance Review (APR)
The schedule for closing Berghuizer Mill in the Netherlands has been
finalised, with paper machine PM 7 permanently ceasing production on
16 April 2007 and PM 8 on 31 October 2007. These machines had a total
capacity of 245 000 tonnes of uncoated fine paper per year.
Approximately 80 000 tonnes of Berghuizer Mill's annual production is
expected to be transferred to Stora Enso's Nymölla Mill in Sweden.
The annual capacity of Nymölla Mill will remain unchanged at 485 000
tonnes, but the mill has upgraded some of its assets to supply higher
quality products with better margins and to improve its customer
service.

Short-term risks and uncertainties
The availability and cost of pulpwood and increasing recovered fibre
prices are near-term business uncertainties. The company is taking
actions to mitigate these risks.

Near-term market outlook
In Europe the positive economic outlook is expected to support the
consumption of advertising-driven paper grades. Stable prices for
newsprint are anticipated but in magazine paper price pressure
persists in non-contractual business. The outlook for fine paper
remains healthy and prices are forecast to rise. Demand for packaging
boards is expected to remain firm with prices rising in some business
segments. Good, stable demand for wood products should keep the
outlook for prices relatively steady.

In North America the demand outlook for publication paper grades and
coated fine paper is uncertain. Prices may remain under pressure.

In Latin America demand for coated magazine paper is predicted to
strengthen, but competition is expected to remain intense. In China a
slight improvement in demand for coated fine paper is anticipated,
keeping prices stable.

First Quarter Events

January
Stora Enso signed a loan agreement with the European Investment Bank
(EIB) for a EUR 140 million loan facility to finance part of Stora
Enso's investment in research and development in Finland and Sweden
for the next five years. The facility, which is expected to be fully
drawn, is the result of good long-term co-operation between EIB and
Stora Enso.

March
Stora Enso announced that it will expand its corrugated packaging
business in Eastern Europe and Russia by constructing new plants at
Balabanovo in Russia and Komarom in Hungary, and by expanding the
existing plant at Lodz in Poland. The corrugated packaging markets in
Eastern Europe and Russia are developing rapidly. Stora Enso's
expansions are targeted at meeting customers' growing demand for
value-added corrugated packaging. These developments are in line with
Stora Enso's strategy of growing its packaging business and its
operations in new growth markets.

Stora Enso also announced that it plans to close down Sauga Sawmill
in Estonia in June 2007 owing to a continuing shortage of raw
material, resulting in higher costs and unprofitable operations. The
closure will not have a material impact on Stora Enso's annual sales,
but it is expected to have a slightly positive impact on the Group's
full year 2007 operating profit. The Company has recorded a
write-down and restructuring provision totalling about EUR 12 million
as non-recurring items in the first quarter of 2007.

Stora Enso signed an agreement with Neste Oil to join forces to
develop technology for producing new-generation biofuels from wood
residues to replace fossil fuels in transportation and thus cut
greenhouse gases. The first step will be to design and build a full
scale test plant at Stora Enso's Varkaus Mill in Finland. This plant,
which will be owned on a 50/50 basis by the parties, is expected to
start up in 2008.

Inspections by Competition Authorities
Concluding an investigation initiated in 2004, the US Antitrust
authorities announced on 13 December 2006 that Stora Enso North
America Corp. had been indicted for its alleged anticompetitive
conduct in connection with the sale of coated magazine paper in the
USA from autumn 2002 until spring 2003. No Stora Enso employee was
charged individually. Stora Enso denies any wrongdoing and has
entered a plea of not guilty in response to the indictment. The Group
expects the trial to occur in 2007. Coincident with this
investigation, Stora Enso has been named in a number of class action
lawsuits filed in the USA.

On 21 December 2006 Stora Enso announced that the Finnish Competition
Authority, as a result of an investigation initiated in 2004, had
proposed to the Finnish Market Court that a fine of EUR 30 million 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 investigations and lawsuits.

Changes in the Group Management
As announced on 17 October 2006, Stora Enso's Board of Directors
appointed Jouko Karvinen, M.Sc. (Eng.), as the new CEO of Stora Enso.
He joined the company on 1 January 2007 and took up the position of
CEO following the Annual General Meeting (AGM) on 29 March 2007.

Jukka Härmälä left the position of CEO at the AGM on 29 March 2007.
He will continue to undertake special assignments specified by the
Board of Directors of Stora Enso until the end of August 2007.

On 29 March Stora Enso's Board of Directors appointed Hannu Ryöppönen
as Deputy CEO in addition to his existing role as CFO. Certain
Group-wide functional responsibilities will also be added to his
responsibilities in the future. Divisions continue to report to the
CEO, Jouko Karvinen.

On 20 March Stora Enso announced that Pekka Laaksonen, Senior
Executive Vice President, Fine Paper and member of the Executive
Management Group (EMG), had accepted the position of CEO with Valio
Ltd. He will relinquish his current duties with Stora Enso by 15
August 2007.

Share Capital
During the quarter 450 A shares were converted into R shares. The
conversion was recorded in the Finnish Trade Register on 15 February
2007.

During the quarter the Company allocated 10 901 repurchased R shares
under the terms of the Stora Enso North America Option Plan.

On 31 March 2007 Stora Enso had 178 102 667 A shares and 611 435 832
R shares in issue, of which the Company held no A shares and 941 726
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.

Decisions of the Annual General Meeting on 29 March 2007
The proposed dividend of EUR 0.45 per share was approved.

The AGM approved a proposal that the Board of Directors shall have
nine members and that of the present members Gunnar Brock, Lee A.
Chaden, Claes Dahlbäck, Dominique Hériard Dubreuil, Birgitta Kantola,
Ilkka Niemi, Jan Sjöqvist, Matti Vuoria and Marcus Wallenberg be
re-elected to continue in office.

The AGM also approved a proposal to appoint a Nomination Committee to
prepare proposals concerning (a) the number of members of the Board
of Directors, (b) the members of the Board of Directors, (c) the
remuneration for the Chairman, Vice Chairman and members of the Board
of Directors and (d) the remuneration for the Chairman and members of
the committees of the Board of Directors.

Decisions by Board of Directors
At its meeting held after the AGM, the Stora Enso Board of Directors
elected from among its members Claes Dahlbäck as its Chairman and
Ilkka Niemi as Vice Chairman.

Jan Sjöqvist (chairman), Lee A. Chaden, Claes Dahlbäck, Birgitta
Kantola and Ilkka Niemi will continue as members of the Financial and
Audit Committee.

Claes Dahlbäck (chairman), Dominique Hériard Dubreuil, Ilkka Niemi
and Matti Vuoria will continue as members of the Compensation
Committee.



This report is unaudited.

Helsinki, 26 April 2007
Stora Enso Oyj
Board of Directors

Segments

Publication Paper

EUR million Change % Change %
Q4/06 Q1/06 Q1/07 Q1/07-Q1/06 Q1/07-Q4/06
Sales 1
1 230.5 1 171.0 240.5 5.9 0.8
Operating
profit* 69.0 70.3 63.5 -9.7 -8.0
% of sales 5.6 6.0 5.1 -15.0 -8.9
ROOC, %** 7.0 6.8 6.5 -4.4 -7.1
Deliveries, 1 1 860 1 666 1 824
000 t 9.5 -1.9
Production, 1
000 t 1 843 1 717 1 882 9.6 2.1

* Excluding non-recurring items ** ROOC = 100% x Operating
profit/Operating capital

Publication Paper sales were EUR 1 240.5 million, 5.9% up on the
first quarter of 2006 due to increased deliveries. Operating profit
was lower than in the first quarter of 2006 at EUR 63.5 million as
magazine paper prices decreased, and energy and wood costs increased.
In Europe the annual newsprint contract negotiations were
successfully concluded with price increases averaging 5% agreed for
2007.

Publication Paper has improved its average asset structure by
divesting Wolfsheck Mill and closing down Corbehem PM 3 and PM 4, and
cost reductions from the major restructuring at Summa, Reisholz,
Norrsundet and Skutskär will enhance future competitiveness.
Resumption of operations at Port Hawkesbury Mill will strengthen our
position in North American markets again. Nevertheless, results are
unsatisfactory, so further profit improvements are needed.

Compared with Q1/2006
In Europe newsprint demand was unchanged, but magazine paper demand
improved significantly. Producer inventories increased in newsprint
and uncoated magazine paper, but decreased in coated magazine paper.
Prices were higher for newsprint and lower for magazine paper.

In North America demand was clearly weaker for newsprint, stronger in
uncoated magazine paper and fairly stable in coated magazine paper.
Inventories increased considerably and prices were lower in all
product segments.

In Latin America demand for coated magazine paper improved, but
prices deteriorated.

Compared with Q4/2006
In Europe demand for all publication paper grades was seasonally
weaker than in the previous quarter and producer inventories
increased. Prices were higher for newsprint and lower for magazine
paper.

In North America demand for all publication paper grades was weaker
and inventories increased. Prices were lower in all product segments.

In Latin America market demand for coated magazine was slightly
weaker, but prices remained unchanged.

Fine Paper


EUR million Change % Change %
Q4/06 Q1/06 Q1/07 Q1/07-Q1/06 Q1/07-Q4/06
Sales 718.3 776.3 738.6 -4.9 2.8
Operating
profit* 34.6 52.7 61.5 16.7 77.7
% of sales 4.8 6.8 8.3 22.1 72.9
ROOC, %** 6.4 8.2 11.4 39.0 78.1
Deliveries, 1 966
000 t 946 994 -2.8 2.1
Production, 1
000 t 947 1 029 951 -7.6 0.4

* Excluding non-recurring items ** ROOC = 100% x Operating
profit/Operating capital

Fine paper sales were EUR 738.6 million, down 4.9% on the first
quarter of 2006 mainly due to the sale of Grycksbo Mill and closure
of Varkaus PM 1 during 2006, and lower coated fine paper prices.
Operating profit was EUR 61.5 million, up 16.7% on the first quarter
of 2006 as increased sales, higher production efficiency and improved
cost efficiency more than offset the effects of lower sales prices,
divestments and closures. In the first quarter of 2006 operating
profit included Celbi pulp mill's operating profit of EUR 13.1
million. The operational improvement in operating profit excluding
the Celbi mill effect in the first quarter of 2006 was 55.3%.

Compared with Q1/2006
In Europe coated fine paper demand was stronger than a year ago
driven by solid economic growth in Europe, but prices were almost
unchanged. Industry and Stora Enso coated fine paper inventories
decreased. Uncoated fine paper demand was slightly stronger than a
year ago due to steady economic growth, and uncoated fine paper
prices rose. Industry and Stora Enso uncoated fine paper inventories
were lower than a year ago.

In North America coated fine paper demand weakened slightly as the
economy slowed and prices were lower than a year ago. Industry and
Stora Enso coated fine paper inventories were lower than a year ago.

In China coated fine paper demand was stronger, but prices lower than
a year ago.

Compared with Q4/2006
In Europe coated fine paper demand was slightly stronger than in the
previous quarter, stimulated by economic growth, and prices were
stable. Industry and Stora Enso coated fine paper inventories
decreased to normal levels. Uncoated fine paper demand was clearly
stronger than in the previous quarter due to seasonal factors and
economic growth, and prices continued to rise. Industry and Stora
Enso uncoated fine paper inventories continued to fall to extremely
low levels.

In North America coated fine paper demand was slightly stronger,
mainly for seasonal reasons, but prices for reels decreased. Industry
and Stora Enso coated fine paper inventories increased slightly, but
were still normal.

In China coated fine paper demand continued to grow, but prices
declined slightly.

Merchants
Sales were EUR 532.9 million, up 7.3% on the first quarter of 2006
mainly due to increased sales volumes. Operating profit was EUR 16.6
million, up 72.9% on the first quarter of 2006 due to successful
integration of acquired operations.

Integration of recent acquisitions is proceeding well according to
plan. Structural cost savings have been achieved and internal
efficiency improved. Customers have been retained and sales have
continued to increase during these internal changes.

Packaging Boards


EUR million Change % Change %
Q4/06 Q1/06 Q1/07 Q1/07-Q1/06 Q1/07-Q4/06
Sales 871.7 869.0 919.8 5.8 5.5
Operating
profit* 59.4 99.5 106.5 7.0 79.3
% of sales 6.8 11.4 11.6 1.8 70.6
ROOC, %** 8.6 13.9 15.4 10.8 79.1
Deliveries, 1 1 000
000 t 929 959 4.3 7.6
Production, 1
000 t 950 1 005 1 000 -0.5 5.3

*)Excluding non-recurring items ** ROOC = 100% x Operating
profit/Operating capital

Packaging board sales were EUR 919.8 million, up 5.8% on the first
quarter of 2006 mainly due to increased deliveries. The impacts of
divestment of Pankakoski Mill and closure of PM 31 at Stevens Point
were offset by several improvement actions. Operating profit was EUR
106.5 million, up 7.0% on the first quarter of 2006, mainly due to
increased sales volumes and improved sales mix. In addition to the
successful implementation of Profit 2007 improvement initiatives,
major energy efficiency improvement projects at Skoghall and Fors
started to contribute to results.

Demand for consumer boards was generally good with volumes higher
than in the previous quarter and similar to a year ago. Prices
improved slightly.

Demand for industrial packaging was good with volumes and prices
higher than in the previous quarter and a year ago.

Wood Products


EUR million Change % Change %
Q4/06 Q1/06 Q1/07 Q1/07-Q1/06 Q1/07-Q4/06
Sales 443.0 377.1 479.8 27.2 8.3
Operating
profit* 19.0 3.8 53.7 n/m 182.6
% of sales 4.3 1.0 11.2 n/m 160.5
ROOC, %** 11.6 2.3 32.9 n/m 183.6
Deliveries, 1
000 m3 1 670 1 563 1 666 6.6 -0.2

* Excluding non-recurring items **ROOC = 100% x Operating
profit/Operating capital

Wood product sales were EUR 479.8 million, up 27.2% on the first
quarter of 2006 mainly due to higher sales prices. Operating profit
was EUR 53.7 million, up EUR 49.9 million on the first quarter of
2006 due to higher sales prices, internal restructuring measures and
successful actions to improve product and sales mix.

Compared with Q1/2006
Market demand improved except in the USA, where the housing market
was booming a year ago. The slowdown in the US housing market has
reduced sawnwood demand and prices have fallen in the USA. In all
other markets good demand, low stock levels and rapid raw material
cost escalation supported sharp rises in market prices.

Compared with Q4/2006
Demand remained strong in most product categories in Europe, Asia,
North Africa and the Middle East, and prices continued to rise. North
American markets remained depressed with weak demand and low prices,
but they accounted for only a small proportion of sales.


Financials

Key Ratios

Change % Change %
2005 2006 Q4/06 Q1/06 Q1/07 Q1/07-Q1/06 Q1/07-Q4/06
Earnings per
share (basic),
EUR -0.14 0.74 0.33 0.29 0.28 -3.4 -15.2
Earnings per
share excl.
non-recurring
items, EUR 0.28 0.55 0.13 0.20 0.26 30.0 100.0
Cash earnings
per share
(CEPS), EUR 1.65 2.34 0.73 0.63 0.62 -1.6 -15.1
CEPS excl.
non-recurring
items, EUR 1.70 1.94 0.49 0.54 0.59 9.3 20.4
Return on
capital employed
(ROCE), % -0.4 5.6 8.9 7.7 11.9 54.5 33.7
ROCE excl.
non-recurring
items, % 3.4 6.8 6.7 8.5 10.8 27.1 61.2
Return on equity
(ROE), % -1.4 7.7 14.0 12.5 11.4 -8.8 -18.6
Debt/equity
ratio 0.70 0.54 0.54 0.72 0.60 -16.7 11.1
Equity per
share, EUR 9.16 9.89 9.89 8.97 9.69 8.0 -2.0
Equity ratio, % 41.0 45.3 45.3 40.2 44.1 9.7 -2.6
Operating
profit, % of
sales -0.3 4.4 6.6 6.2 8.8 41.9 33.3
Operating profit
excl.
non-recurring
items, % of
sales 2.8 5.4 5.0 6.8 8.0 17.6 60.0
Capital
expenditure, EUR 1
million 145.3 583.4 179.7 167.7 108.9 -35.1 -39.4
Capital
expenditure, %
of sales 8.7 4.0 4.8 4.6 2.8 -39.1 -41.7
Capital
employed, EUR 11 11 11 11 11
million 678 332 332 526 478 -0.4 1.3
Interest-bearing
net liabilities,
EUR million 5 084 4 234 4 234 5 116 4 599 -10.1 8.6
Average number 46 45 45 46 43
of employees 166 631 631 056 504 -5.5 -4.7
Average number
of shares
(million)
periodic 798.7 788.6 788.6 788.6 788.6
cumulative 798.7 788.6 788.6 788.6 788.6
cumulative,
diluted 799.2 788.9 788.9 789.1 788.9


Key Exchange Rates for the Euro

One Euro is Closing Rate Average Rate
31 Dec 06 31 Mar 07 31 Dec 06 31 Mar 07
SEK 9.0404 9.3462 9.2517 9.1892
USD 1.3170 1.3318 1.2563 1.3112
GBP 0.6715 0.6798 0.6819 0.6707
CAD 1.5281 1.5366 1.4247 1.5363


Transaction Risk and Hedges in Main Currencies as at 31 March 2007

EUR million USD GBP SEK JPY
Estimated annual net operating cash flow
exposure 1 450 600 -1 000 300
Transaction hedges as at 31 Mar. 360 255 -556 48
Hedging percentage as at 31 Mar. for the next
12 months 25 % 43 % 56 % 16 %




Condensed Consolidated Income Statement

2006 Q1/2006 Q1/2007 Change %
EUR million Q1/07-Q1/06
Sales 14 593.9 3 607.7 3 855.4 6.9
Other operating income 364.9 50.2 16.7 -66.7
Materials and services -8 111.5 -1 987.7 -2 160.0 -8.7
Freight and sales -1 751.4 -392.7 -430.7 -9.7
commissions
Personnel expenses -2 200.9 -544.4 -483.7 11.1
Other operating expenses -988.9 -240.1 -185.0 22.9
Depreciation and impairment -1 257.7 -269.2 -273.4 -1.6
Operating Profit / (Loss) 648.4 223.8 339.3 51.6
Share of results of 87.4 31.6 24.2 -23.4
associated companies
Net financial items -104.0 62.3 -56.7 n/a
Profit / (Loss) before Tax 631.8 317.7 306.8 -3.4
Income tax -42.6 -91.3 -84.3 7.7
Net Profit / (Loss) for the 589.2 226.4 222.5 -1.7
Period

Attributable to:
Equity holders of the Parent 585.0 225.0 219.2 -2.6
Company
Minority interests 4.2 1.4 3.3 135.7
589.2 226.4 222.5 -1.7

Earnings per share
Basic earnings per share, 0.74 0.29 0.28 -3.4
EUR
Diluted earnings per share, 0.74 0.29 0.28 -3.4
EUR


Consolidated Statement of Recognised Income & Expense

EUR million 2006 Q1/2006 Q1/2007

Defined benefit plan actuarial gains / (losses) 135.1 - -
Tax on actuarial movements -46.6 - -
Aggregate fair value movements in 251.6 -103.7 51.1
Available-for-Sale assets
Currency and commodity hedges -45.3 88.7 -37.5
Associate hedges 11.1 3.5 -0.1
Tax on Other Comprehensive Income Movements 50.2 2.1 10.2
(OCI)
Currency translation movements on equity net -86.4 -39.9 -69.0
investments (CTA)
Equity net investment hedges 118.0 38.6 32.1
Tax on equity hedges -30.7 -10.1 -8.3
Net Income & Expense Recognised directly in 357.0 -20.8 -21.5
Equity
Net profit / (loss) for the period 589.2 226.4 222.5
Total Recognised Income & Expense for the 946.2 205.6 201.0
Period

Attributable to:
Equity holders of the Parent Company 942.0 204.2 197.7
Minority interests 4.2 1.4 3.3
Total Recognised Income & Expense for the 946.2 205.6 201.0
Period



Condensed Consolidated Cash Flow Statement

EUR million 2006 Q1/2006 Q1/2007
Cash Flow from Operating Activities
Operating profit 648.4 223.8 339.3
Adjustments 1 060.9 265.9 256.2
Change in net working capital 199.1 -189.9 -385.3
Change in short-term interest-bearing
receivables 89.9 32.2 49.0
Cash Flow Generated by Operations 1 998.3 332.0 259.2
Net financial items -335.4 -45.1 -41.3
Income taxes paid -215.4 -10.3 -45.0
Net Cash Provided by Operating Activities 1 447.5 276.6 172.9

Cash Flow from Investing Activities
Acquisitions of subsidiaries -329.8 -7.4 -0.4
Acquisitions of associated companies -19.4 0.0 -65.9
Proceeds from sale of fixed assets and
shares 700.8 206.3 7.1
Capital expenditure -583.4 -167.7 -108.9
Proceeds from (payment of) the non-current
receivables, net -21.4 -14.6 18.9
Net Cash Used in Investing Activities -253.2 16.6 -149.2

Cash Flow from Financing Activities
Change in long-term liabilities -11.6 97.8 113.1
Change in short-term borrowings -623.5 -586.1 20.3
Dividends paid -354.9 0.0 0.0
Minority equity injections less dividends 6.6 -0.5 0.4
Options exercised -2.0 -1.3 -0.5
Repurchase / Sale of own shares 0.2 0.0 0.1
Net Cash Used in Financing Activities -985.2 -490.1 133.4

Net Increase (Decrease) in Cash and Cash
Equivalents 209.1 -196.9 157.1
Cash and bank in acquired companies 1.6 0.7 0.0
Cash and bank in sold companies -20.2 -0.6 0.0
Translation adjustment -30.4 -3.8 -0.3
Net cash and cash equivalents at the
beginning of period 149.5 351.4 309.6
Net Cash and Cash Equivalents at Period End 309.6 150.8 466.4

Cash and Cash Equivalents at Period End 609.0 352.7 525.5
Bank Overdraft at Period End -299.4 -201.9 -59.1
Net Cash and Cash Equivalents at Period End 309.6 150.8 466.4


Acquisitions of Subsidiary Companies
Cash and cash equivalents 1.6 0.7 -
Working capital 47.2 -1.2 -
Operating fixed assets 281.1 1.8 0.3
Interest-bearing assets 0.0 - -
Tax liabilities 1.2 0.3 -
Interest-bearing liabilities -4.4 -0.6 -
Non-cash share exchange - - -
Minority interests 1.1 -0.2 0.1
Fair Value of Net Assets 327.8 0.8 0.4
Goodwill 2.0 6.6
Total Purchase Consideration 329.8 7.4 0.4

Disposal of Subsidiary Companies
Cash and cash equivalents 20.2 0.6 -
Working capital 59.5 6.5 -
Operating fixed assets 217.9 44.1 -
Interest-bearing assets 1.2 0.9 -
Tax liabilities -18.0 -13.5 -
Interest-bearing liabilities -12.0 -1.5 -
Minority interests -0.2 - -
Net Assets in Divested Companies 268.6 37.1 0.0
Income Statement capital gain (goodwill
realised) 197.9 - -
Total Disposal Consideration 466.5 37.1 0.0


Property, Plant and Equipment, Intangible Assets and Goodwill

EUR million 2006 Q1/2006 Q1/2007
Carrying value at 1 January 11 213.2 11 213.2 10 440.4
Acquisition of subsidiary companies 283.1 8.4 0.3
Additions 559.1 165.1 96.7
Additions in biological assets 24.3 2.6 12.2
Change in emission rights 54.4 80.2 4.2
Disposals -237.3 -61.0 -6.4
Depreciation, amortisation and
impairment -1 257.7 -269.2 -273.4
Translation difference and other -198.7 -87.9 -90.0
Balance Sheet Total 10 440.4 11 051.4 10 184.0


Borrowings

EUR million 2006 Q1/2006 Q1/2007
Non-current borrowings 4 081.0 4 392.1 4 141.0
Current borrowings 1 166.5 1 667.5 1 350.2
5 247.5 6 059.6 5 491.2

Carrying value at 1 January 6 083.9 6 083.9 5 247.5
Debt acquired with new subsidiaries 4.4 0.6 -
Debt disposed with sold subsidiaries -12.0 -4.3 -
Proceeds from / payments of borrowings
(net) -692.4 -327.9 -95.9
Translation difference and other*) -136.4 307.3 339.6
Total Borrowings 5 247.5 6 059.6 5 491.2

*) includes dividend liability of EUR 354.9 million in Q1/2007 and in
Q1/2006.


Condensed Consolidated Balance Sheet

EUR million Change % Change %
31 Mar 31 Mar
31 Dec 31 Mar 31 Mar 07 - 31 07 - 31
06 06 07 Mar 06 Dec 06

Assets

Fixed Assets and Other
Non-current Investments
Fixed assets O 10 230.8 10 850.0 9 957.5 -8.2 % -2.7 %
Biological assets O 111.5 77.5 124.2 60.3 % 11.4 %
Emission rights O 98.1 123.9 102.3 -17.4 % 4.3 %
Investment in
associated companies A 805.2 754.7 868.3 15.1 % 7.8 %
Available-for-sale:
Listed securities I 41.2 83.5 42.6 -49.0 % 3.4 %
Available-for-sale:
Unlisted shares O 794.3 402.9 845.2 109.8 % 6.4 %
Non-current loan
receivables I 149.2 141.8 127.0 -10.4 % -14.9 %
Deferred tax assets T 53.5 65.2 60.0 -8.0 % 12.1 %
Other non-current
assets O 61.1 16.1 58.2 261.5 % -4.7 %
12
12 344.9 12 515.6 185.3 -2.6 % -1.3 %

Current Assets
Inventories O 2 019.5 2 210.6 2 126.9 -3.8 % 5.3 %
Tax receivables T 124.8 112.6 118.4 5.2 % -5.1 %
Operative receivables O 2 127.9 2 260.8 2 403.5 6.3 % 13.0 %
Interest-bearing 214.2 365.8 197.5
receivables I -46.0 % -7.8 %
Cash and cash 609.0 352.9 525.5
equivalents I 48.9 % -13.7 %
5 095.4 5 302.7 5 371.8 1.3 % 5.4 %

Total Assets 17
17 440.3 17 818.3 557.1 -1.5 % 0.7 %

Equity and Liabilities

Equity attributable 7 799.6 7 072.4 7 642.0
to Company shareholders 8.1 % -2.0 %
Minority interests 103.5 93.0 106.2 14.2 % 2.6 %
Total Equity 7 903.1 7 165.4 7 748.2 8.1 % -2.0 %

Non-current Liabilities
Post-employment 763.1 886.6 697.8
benefit provisions O -21.3 % -8.6 %
Other provisions O 308.3 138.0 209.9 52.1 % -31.9 %
Deferred tax 793.0 919.4 795.7
liabilities T -13.5 % 0.3 %
Non-current debt I 4 081.0 4 392.1 4 141.0 -5.7 % 1.5 %
Other non-current 193.7 303.6 201.2
operative liabilities O -33.7 % 3.9 %
6 139.1 6 639.7 6 045.6 -8.9 % -1.5 %
Current Liabilities
Current portion of 630.2 159.5 650.6
long-term debt I 307.9 % 3.2 %
Interest-bearing 536.3 1 508.0 699.6
liabilities I -53.6 % 30.4 %
Operative liabilities O 1 972.9 1 961.8 2 142.1 9.2 % 8.6 %
Tax liabilities T 258.7 383.9 271.0 -29.4 % 4.8 %
3 398.1 4 013.2 3 763.3 -6.2 % 10.7 %

Total Liabilities 9 537.2 10 652.9 9 808.9 -7.9 % 2.8 %

Total Equity and 17 818.3 17
Liabilities 17 440.3 557.1 -1.5 % 0.7 %

Items designated with "O" comprise Operating Capital
Items designated with "I" comprise Interest-bearing Net Liabilities
Items designated with "T" comprise Net Tax Liabilities
Items designated with "A" comprise Associate Companies


Changes in Group Shareholders' Equity

Share Capital Treasury Retained
EUR million Capital Reserves Shares OCI CTA Earnings Total
Balance at 31 7
December 2004 1 423.3 1 009.2 -180.8 67.6 -218.9 5 525.0 625.4
Repurchase of
Stora Enso Oyj
shares - - -344.7 - - - -344.7
Cancellation
of Stora Enso
Oyj shares -41.2 -224.4 265.6 - - - 0.0
Dividend (EUR
0.45 per
share) - - - - - -365.3 -365.3
Buy-out of
minority
interests - - - - - -43.2 -43.2
Net profit for
the period - - - - 0.2 -111.1 -110.9
Net expense
recognised
directly to
equity - - - 400.4 91.6 -33.2 458.8
Balance at 31 7
December 2005 1 382.1 784.8 -259.9 468.0 -127.1 4 972.2 220.1
Cancellation
of Stora Enso
Oyj shares -39.9 -15.9 249.1 - - -193.3 0.0
Dividend (EUR
0.45 per
share) - - - - - -354.9 -354.9
Options
exercised - - - - - - 0.0
Buy-out of
minority
interests - - - - - - 0.0
Net profit for
the period - - - - 4.2 225.0 229.2
Net expense
recognised
directly to
equity - - - -9.4 -11.4 - -20.8
Balance at 31 7
March 2006 1 342.2 768.9 -10.8 458.6 -134.3 4 649.0 073.6
Cancellation
of Stora Enso
Oyj shares - - - - - - 0.0
Dividend (EUR
0.45 per
share) - - - - - - 0.0
Options
exercised - -2.0 0.3 - - - -1.7
Buy-out of
minority
interests - - - - - -0.1 -0.1
Net profit for
the period - - - - -10.0 360.0 350.0
Net expense
recognised
directly to
equity - - - 277.0 12.3 88.5 377.8
Balance at 31 7
December 2006 1 342.2 766.9 -10.5 735.6 -132.0 5 097.4 799.6
Cancellation
of Stora Enso
Oyj shares - - - - - - 0.0
Dividend (EUR
0.45 per
share) - - - - - -354.9 -354.9
Options
exercised - -0.5 0.1 - - - -0.4
Buy-out of
minority
interests - - - - - - 0.0
Net profit for
the period - - - - - 219.2 219.2
Net expense
recognised
directly to
equity - - - 23.7 -45.2 - -21.5
Balance at 31 7
March 2007 1 342.2 766.4 -10.4 759.3 -177.2 4 961.7 642.0

CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income


Commitments and Contingencies

EUR million 31 Dec 06 31 Mar 06 31 Mar 07
On Own Behalf
Pledges given 1.0 1.1 0.8
Mortgages 146.8 211.9 137.0
On Behalf of Associated Companies
Mortgages 0.8 0.8 0.0
Guarantees 343.0 369.0 281.2
On Behalf of Others
Guarantees 9.5 11.7 10.3
Other Commitments, Own
Leasing commitments, in next 12 33.0
months 38.4 30.5
Leasing commitments, after next 12 143.0
months 130.3 123.4
Pension liabilities 0.2 0.5 0.2
Other commitments 17.1 90.7 18.6
Total 687.1 861.7 602.0

Pledges given 1.0 1.1 0.8
Mortgages 147.6 212.7 137.0
Guarantees 352.5 380.7 291.5
Leasing commitments 168.7 176.0 153.9
Pension liabilities 0.2 0.5 0.2
Other commitments 17.1 90.7 18.6
Total 687.1 861.7 602.0


Purchase Agreement Commitments

EUR million Scheduled Contract Payments
Type of
Supply Contract Total 2007 2008-9 2010-11 2012+
2
Fibre 361 200 447 424 1 290

Energy 810 258 341 211 -

Logistics 727 128 169 109 321
Other
Production
costs 139 126 6 3 4
4
037 712 963 747 1 615
Capital
Expenditure 173 145 27 1 -
Total
Contractual 4
Commitments 210 857 990 748 1 615


Net Fair Values of Derivative Financial Instruments

EUR million 31 Dec 06 31 Mar 06 31 Mar 07
Net Net Positive Negative Net
Fair Fair Fair Fair Fair
Values Values Values Values Values
Interest rate swaps 48.1 43.9 86.4 -28.4 58.0
Interest rate options -1.8 -7.6 0.6 -1.6 -1.0
Cross-currency swaps -1.2 -5.9 0.0 -1.0 -1.0
Forward contracts 28.2 2.5 5.5 -4.4 1.1
FX options 5.9 1.6 6.8 -1.5 5.3
Commodity contracts 63.2 210.8 48.7 -11.7 37.0
Equity swaps 7.0 39.7 38.5 -13.0 25.5
Total 149.4 285.0 186.5 -61.6 124.9



Nominal Values of Derivative Financial Instruments

EUR million 31 Dec 06 31 Mar 06 31 Mar 07
Interest Rate Derivatives
Interest rate swaps
Maturity under 1 year 177.4 0.0 83.0
Maturity 2-5 years 2 152.1 1 038.6 1 758.3
Maturity 6-10 years 2 490.5 1 788.4 948.5
Maturity over 10 years - - 300.3
4 820.0 2 827.0 3 090.1
Interest rate options 318.0 1 753.6 659.9
Total 5 138.0 4 580.6 3 750.0

Foreign Exchange Derivatives
Cross-currency swap agreements 6.9 70.7 6.8
Forward contracts 1 778.4 2 129.0 - 4.4
FX Options 662.8 833.2 1 351.8
Total 2 448.1 3 032.9 1 354.2

Commodity Derivatives
Commodity contracts 635.8 414.9 568.8
Total 635.8 414.9 568.8

Equity swaps
Equity swaps 328.6 400.9 270.9
Total 328.6 400.9 270.9


Sales by Segment

EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper 1 171.0 1 145.2 1 226.7 1 230.5 4 773.4 1 240.5
Fine Paper 776.3 738.9 722.8 718.3 2 956.3 738.6
Merchants 496.3 452.6 450.1 508.2 1 907.2 532.9
Packaging Boards 869.0 881.8 909.0 871.7 3 531.5 919.8
Wood Products 377.1 437.8 418.5 443.0 1 676.4 479.8
Wood Supply 674.8 651.3 633.9 687.2 2 647.2 778.6
Other -756.8 -691.3 -722.9 -727.1 -2 898.1 -834.8
Total Sales 3 607.7 3 616.3 3 638.1 3 731.8 14 593.9 3 855.4


Operating Profit by Segment excluding Non-recurring items

EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper 70.3 55.3 57.0 69.0 251.6 63.5
Fine Paper 52.7 46.3 32.4 34.6 166.0 61.5
Merchants 9.6 2.9 7.7 12.5 32.7 16.6
Packaging Boards 99.5 70.8 93.7 59.4 323.4 106.5
Wood Products 3.8 14.9 21.4 19.0 59.1 53.7
Wood Supply 8.9 1.3 5.0 -12.4 2.8 12.2
Other 2.2 -73.3 12.1 5.5 -53.5 -6.7
Operating Profit excl.
Non-recurring Items 247.0 118.2 229.3 187.6 782.1 307.3
Non-recurring items -23.2 6.7 -177.2 60.0 -133.7 32.0
Operating Profit (IFRS) 223.8 124.9 52.1 247.6 648.4 339.3
Net financial items 62.3 -85.2 -42.5 -38.6 -104.0 -56.7
Associated companies 31.6 20.2 10.2 25.4 87.4 24.2
Profit before Tax and Minority
Interests 317.7 59.9 19.8 234.4 631.8 306.8
Income tax expense -91.3 -19.0 37.3 30.4 -42.6 -84.3
Net Profit 226.4 40.9 57.1 264.8 589.2 222.5


Non-recurring Items by Segment

EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper -2.9 4.4 -225.2 11.4 -212.3 13.3
Fine Paper -22.0 3.8 72.0 8.5 62.3 19.2
Merchants - - - 0.4 0.4
Packaging Boards - -5.5 - 4.3 -1.2 4.3
Wood Products 1.7 1.2 -24.0 0.4 -20.7 -12.0
Wood Supply - 1.5 - 0.7 2.2
Other - 1.3 - 34.3 35.6 7.2
Total Non-recurring Items -23.2 6.7 -177.2 60.0 -133.7 32.0


- Operating Profit by Segment

EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07
Publication Paper 67.4 59.7 -168.2 80.4 39.3 76.8
Fine Paper 30.7 50.1 104.4 43.1 228.3 80.7
Merchants 9.6 2.9 7.7 12.9 33.1 16.6
Packaging Boards 99.5 65.3 93.7 63.7 322.2 110.8
Wood Products 5.5 16.1 -2.6 19.4 38.4 41.7
Wood Supply 8.9 2.8 5.0 -11.7 5.0 12.2
Other 2.2 -72.0 12.1 39.8 -17.9 0.5
Operating Profit 223.8 124.9 52.1 247.6 648.4 339.3
Net financial items 62.3 -85.2 -42.5 -38.6 -104.0 -56.7
Associated companies 31.6 20.2 10.2 25.4 87.4 24.2
Profit before Tax and Minority
Interests 317.7 59.9 19.8 234.4 631.8 306.8
Income tax expense -91.3 -19.0 37.3 30.4 -42.6 -84.3
Net Profit 226.4 40.9 57.1 264.8 589.2 222.5


Stora Enso Shares

Closing Price Helsinki, EUR Stockholm, SEK New York, USD
A share R share A share R share ADRs
January 12.71 12.77 115.50 115.50 16.74
February 12.40 12.47 115.25 115.25 16.42
March 12.91 13.00 122.00 120.75 17.27



Trading Volume Helsinki Stockholm New York
A share R share A share R share ADRs
January 93 402 107 866 499 118 480 19 169 929 2 044 400
February 71 650 111 174 276 110 544 17 875 014 1 772 500
March 104 004 102 984 571 137 834 14 498 405 1 895 700
Total 269 056 322 025 346 366 858 51 543 348 5 712 600


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 2006.

The Group has adopted IFRS 7, Financial Instruments: Disclosures, and
the complementary Amendment to IAS 1, Presentation of Financial
Statements - Capital Disclosures which is mandatory for the Group's
accounting periods beginning on or after 1 January 2007. The adoption
of this standard and amendment will result in additional disclosures
relating to financial instruments and how an entity manages its
capital in the Group's Annual Report.

Reclassification in 2006
Operating profit for 2006 has been reclassified. Total Return Swaps
(TRS) which are partially hedging cash settled synthetic option
programmes for Management, previously reported in other financial
items, are now reported in operating profit under personnel expenses,
with an effect of income of EUR 52.9 million and EUR 24.6 million in
Q1/2006 and Q1-Q4/2006, respectively. TRS instruments do not qualify
for hedge accounting and therefore all periodic changes to their fair
value are recorded in the Income Statement.

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 (%)

Equity + minority interests 2)


Equity ratio (%) 100
x Equity + minority interests

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 21404
Hannu Ryöppönen, 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 first quarter results 2007 will be published on 26 April
2007.

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.


www.storaenso.com
www.storaenso.com/investors


pp. Jussi Siitonen Jukka Marttila


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