Stora Enso Interim Review January-June 2007

7/26/2007, 11:59 AM (Source: GlobeNewswire)
Year-on-year improvement maintained under difficult operating
conditions; challenges will continue through 2007


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

Summary of Second Quarter Results (compared with Q2/2006)

* Sales were EUR 3 805.2 (EUR 3 616.3) million.
* Operating profit was EUR 216.7 (EUR 118.2) million excluding
non-recurring items and EUR 229.5 (EUR 124.9) million including
non-recurring items, both including EUR 21.3 (EUR -44.7) million
net impact of non-operational nature.
* Profit before tax was EUR 164.2 (EUR 53.2) million excluding
non-recurring items, and EUR 177.0 (EUR 59.9) million including
non-recurring items.
* Net profit was EUR 125.1 (EUR 38.8) million excluding
non-recurring items and EUR 143.9 (EUR 40.9) million including
non-recurring items.
* Earnings per share were EUR 0.16 (EUR 0.05) excluding
non-recurring items and EUR 0.18 (EUR 0.05) including
non-recurring items. Cash earnings per share were EUR 0.48 (EUR
0.39) excluding non-recurring items.
* ROCE excluding non-recurring items was 7.5% (4.1%).


Message from CEO Jouko Karvinen:
"The Stora Enso Group continued its year-on-year improvement trend in
the second quarter of 2007, under very challenging conditions. As
anticipated, the shortage of birch pulpwood caused by the unusually
short winter harvesting season resulted in higher wood costs and
necessitated pulp production curtailments in stand-alone pulp mills
in Finland. In addition, our profitability faces negative pressure
from both direct and indirect effects of a continually weakening US
dollar. Concerted efforts were made to meet these challenges and I am
pleased with our ability to continue to serve our customers. Wood
flows were continually optimised and high levels of maintenance
stoppages were taken during the period. Despite these actions, the
profitability of the paper and board divisions was lower than in the
previous quarter, partly due to seasonal effects. Year-on-year,
taking into account the Celbi Pulp Mill divestment, Fine Paper
achieved double-digit year-on-year earnings improvement, as did Wood
Products. Packaging Board suffered from a shortage of wood requiring
production curtailments at Enocell Pulp Mill in Finland. Conditions
for our magazine paper business remained difficult, resulting in
clearly unsatisfactory profitability, which is being addressed as a
top priority. Wood Products continued to perform well for another
quarter.

"Looking ahead for the rest of this year we anticipate further fibre
cost increases. Rising wood costs cause us to revise our estimate of
input cost inflation from 2.0-2.5% to about 3.5% for the full year
2007. Timely resolution of the roundwood export duty issue between
Russia and the EU, specifically for birch pulpwood, is critical, not
only to avoid further standstills at our mills; shortage of wood has
increased the wood costs to such a level that the Finnish wood
market's competitiveness is at a serious risk.
"Our ongoing portfolio review is progressing as planned. The
decisions will be announced when appropriate."

Near-term market outlook
In Europe the positive economic outlook is expected to support market
demand for publication paper, which is also anticipated to benefit
from the usual seasonal upswing in the autumn. Newsprint demand and
prices are expected to remain mainly stable. Magazine paper prices,
which have been trending downwards, are expected to stabilise. The
outlook for fine paper demand and prices remains healthy, and steady
growth in demand is anticipated, except for the seasonal slowdown due
to summer holidays. The demand for packaging board is forecast to
remain rather good with prices generally stable, and a slight
improvement in some business segments is predicted. Market conditions
for wood products are expected to moderate somewhat after an
exceptionally strong first half of 2007.

In North America further weakening in demand for newsprint is
anticipated, and prospects for magazine paper and coated fine paper
are uncertain. Announced reductions in domestic supply and trade
policy initiatives are expected to improve the supply and demand
balance in the coated paper market.

In Latin America demand for coated magazine paper should remain
healthy and prices are forecast to rise. In China healthy demand for
coated fine paper is predicted, keeping prices stable.

http://hugin.info/132206/R/1142196/216101.pdf

Markets
Compared with Q2/2006
In Europe market demand was stronger for publication paper, fine
paper and packaging board. Markets for wood products improved
steadily except in the USA, where demand contracted. Prices were
higher than a year ago in newsprint, lower in magazine paper,
unchanged in coated fine paper and higher in uncoated fine paper.
Prices for most packaging boards and wood products were higher.

In North America market demand was clearly weaker than a year ago for
newsprint, but virtually unchanged for coated magazine paper and
clearly stronger for uncoated magazine paper. Prices were lower in
all publication paper segments. Market demand for coated fine paper
weakened during the year, but prices remained largely stable.

In Latin America market demand for coated magazine paper was stronger
but prices lower than a year ago.

In China market demand for coated fine paper was stronger but prices
were unchanged.

Compared with Q1/2007
In Europe market demand strengthened in newsprint, industrial and
speciality papers, and wood products, but weakened in magazine paper
and seasonally in fine paper. Publication paper prices were
unchanged, but there was some downward pressure in the non-contracted
business. Fine paper prices improved and packaging board prices were
stable. Sales prices for wood products rose in most markets except
Central Europe, where there were some downward price adjustments due
to increased wood supply resulting from storms.

In North America market demand for all publication papers improved
slightly. Magazine paper prices were rather stable, but newsprint
prices eroded further. Market demand for coated fine paper weakened,
but prices remained unchanged.

In Latin America market demand for coated magazine paper strengthened
and prices remained firm.

In China market demand for coated fine paper strengthened and prices
increased slightly.

Stora Enso Deliveries and Production


+---------------------------------------------------------------------------+
| | | | | | | Change| Change|
| | Q1-| Q1-| | | |s Q2/07-|s Q2/07-|
| |Q2/06|Q2/07| Q2/06| Q1/07| Q2/07| Q2/06| Q1/07|
|------------------------+-----+-----+------+------+------+--------+--------|
|Paper and Board | | | | | | | |
|deliveries (1 000 | | | | | | | |
|tonnes) |7 197|7 518| 3 578| 3 790| 3 728| 150| -62|
|------------------------+-----+-----+------+------+------+--------+--------|
|Wood Products deliveries| | | | | | | |
|(1 000 m3) |3 309|3 463| 1 746| 1 666| 1 797| 51| 131|
|------------------------+-----+-----+------+------+------+--------+--------|
|Paper and Board | | | | | | | |
|Production (1 000 | | | | | | | |
|tonnes) |7 327|7 578| 3 576| 3 833| 3 745| 169| -88|
+---------------------------------------------------------------------------+


Q2/2007 Results (compared with Q2/2006)
Sales at EUR 3 805.2 million were 5.2% higher than in the second
quarter of 2006, mainly due to higher average prices for wood
products and office papers, and increased deliveries of publication
paper and packaging board.

Operating profit excluding non-recurring items increased by EUR 98.5
million to EUR 216.7 million, which is 5.7% of sales. Operating
profit was clearly higher in Wood Products, approximately the same in
Fine Paper, but lower in Publication Paper, due to the declining
performance in magazine papers, and in Packaging Board. The decrease
in Publication Paper operating profit was due to lower magazine paper
prices and higher wood, recycled paper and maintenance costs. Fine
Paper operating profit remained unchanged because increases in
uncoated fine paper prices offset higher wood and maintenance costs.
Fine Paper operating profit rose more than 20% on a comparable basis,
adjusting for the EUR 13.5 million impact of Celbi Pulp Mill
divestment in the second quarter of 2006. Fine paper deliveries were
lower due to the divestment of Celbi Pulp Mill and the permanent
shutdown of Berghuizer PM 7 in April 2007. Packaging Board operating
profit was lower due to production curtailments for about five weeks
at the stand-alone Enocell Pulp Mill. Excluding this effect, the
year-on-year earnings would have been up almost 20% despite more
scheduled maintenance and higher wood costs.

Deliveries of wood to the Group's mills totalled 11.4 million cubic
metres, an increase of 0.4 million cubic metres or 3.3% on the second
quarter of 2006. Wood costs were considerably higher in the second
quarter of 2007 than a year earlier, except in North America.

Key Figures

Q1- Q1-
EUR million 2005 2006 Q2/06 Q2/07 Q2/06 Q1/07 Q2/07
Sales 13 187.5 14 593.9 7 224.0 7 660.6 3 616.3 3 855.4 3 805.2
EBITDA
excluding
non-recurring
items 1 501.1 1 872.8 903.5 1 041.4 387.3 568.9 472.5
Operating
profit
excluding
non-
recurring
items 371.2 782.1 365.2 524.0 118.2 307.3 216.7
Non-recurring
items
(operational) -417.3 -133.7 -16.5 44.8 6.7 32.0 12.8
Operating
margin
excluding
non-
recurring
items, % 2.8 5.4 5.1 6.8 3.3 8.0 5.7
Operating
profit -46.1 648.4 348.7 568.8 124.9 339.3 229.5
Net financial
items1) -165.3 -104.0 -22.9 -129.0 -85.2 -56.7 -72.3
Profit before
tax and
minority
interests
excluding
non-recurring
items 273.1 602.5 264.1 439.0 53.2 274.8 164.2
Profit before
tax and
minority
interests -144.2 631.8 377.6 483.8 59.9 306.8 177.0
Net profit
for the
period
excluding
non-recurring
items
230.3 439.4 197.0 332.3 38.8 207.2 125.1
Net profit
for the
period -107.4 589.2 267.3 366.4 40.9 222.5 143.9

EPS excluding
non-recurring
items, Basic,
EUR 0.28 0.55 0.25 0.41 0.05 0.26 0.16
EPS, Basic,
EUR -0.14 0.74 0.33 0.46 0.05 0.28 0.18
CEPS
excluding
non-recurring
items, EUR 1.70 1.94 0.93 1.07 0.39 0.59 0.48
ROCE
excluding
non-recurring
items, % 3.4 6.8 6.3 9.1 4.1 10.8 7.5

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.



Change
Change % Q1-
% Change Q2/07-
Q2/07- % Q2/07- Q1-
EUR million Q2/06 Q1/07 Q2/06
Sales 5.2 -1.3 6.0
EBITDA excluding
non-recurring
items 22.0 -16.9 15.3
Operating profit
excluding non-
recurring items 83.3 -29.5 43.5
Non-recurring items
(operational) 91.0 -60.0 n/a
Operating margin
excluding non-
recurring items, % 72.7 -28.8 33.3
Operating profit 83.7 -32.4 63.1
Net financial items1) 15.1 -27.5 n/m
Profit before tax and
minority
interests excluding
non-recurring
items 208.6 -40.2 66.2
Profit before tax and
minority
interests 195.5 -42.3 28.1
Net profit for the
period
excluding non-recurring
items 222.4 -39.6 68.7
Net profit for the
period 251.8 -35.3 37.1

EPS excluding
non-recurring
items, Basic, EUR 220.0 -38.5 64.0
EPS, Basic, EUR 260.0 -35.7 39.4
CEPS excluding
non-recurring
items, EUR 23.1 -18.6 15.1
ROCE excluding
non-recurring
items, % 82.9 -30.6 44.4

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.


Operating profit includes a positive net effect of EUR 21.3 million
(negative EUR 44.7 million) from the accounting of share-based
compensation, Total Return Swaps (TRS) and CO2 emission rights. These
non-operational items have a positive cash impact of EUR 22.2 million
from the exercised TRS and they are all reported in the segment
Other.

There were two non-recurring items with a net positive impact of EUR
12.8 million (positive EUR 6.7 million) on operating profit: a
negative non-cash actuarial valuation adjustment of EUR 11.6 (USD
14.6) million related to the new labour agreements in North America
and a capital gain, net of provisions, of EUR 24.4 million from the
sale of warehouses and office properties in Sweden and Denmark by
Stora Enso's Papyrus paper merchant.

The share of associated company results amounted to EUR 19.8 (EUR
20.2) million; the main contributions were from Bergvik Skog and
Tornator.

Net financial items were EUR -72.3 (EUR -85.2) million. Net interest
expenses decreased to EUR 55.8 (EUR 58.4) million and net foreign
exchange losses on borrowings, currency derivatives and bank accounts
were EUR 0.1 (EUR 11.1) million. Other financial items totalled EUR
-16.4 (EUR -15.7) million, mainly arising from the fair valuation of
financial items.

Profit before taxes and minority interests excluding non-recurring
items increased by EUR 111.0 million to EUR 164.2 million and profit
before tax amounted to EUR 177.0 (EUR 59.9) million including
non-recurring items.

Net taxes totalled EUR -33.1 (EUR -19.0) million, leaving a net
profit for the quarter of EUR 143.9 (EUR 40.9) million.

The profit attributable to minority shareholders was EUR 2.6 (EUR
2.3) million, so the profit attributable to Company shareholders was
EUR 141.3 (EUR 38.6) million.

Earnings per share excluding non-recurring items increased by EUR
0.11 to EUR 0.16. Earnings per share including non-recurring items
were EUR 0.18 (EUR 0.05). Cash earnings per share were EUR 0.48 (EUR
0.39) excluding non-recurring items.

The return on capital employed was 7.5% (4.1%) excluding
non-recurring items. Capital employed was EUR 11 683.5 million on 30
June 2007, a net increase of EUR 341.8 million, mainly due to
decreased pension and tax liabilities.

January-June 2007 Results (compared with the same period in 2006)
Sales at EUR 7 660.6 million were 6.0% higher than in the first half
of 2006, mainly due to higher prices for wood products and increased
deliveries in all segments except Fine Paper, where deliveries were
lower mainly due to the divestment of Celbi Pulp Mill in July 2006.
Publication Paper deliveries were higher, largely due to the
standstill at Port Hawkesbury Mill in 2006 and the acquisition of
Arapoti Mill in September 2006.

Operating profit excluding non-recurring items increased by EUR 158.8
million to EUR 524.0 million and was clearly higher in Wood Products.
Operating profit was lower in Publication Paper despite higher
newsprint prices, because magazine paper sales prices declined while
wood and recycled paper costs rose. Fine Paper operating profit
increased because higher office paper prices more than offset higher
maintenance costs and the divested Celbi Pulp Mill's EUR 26.6 million
operating profit in the first half of 2006. Packaging Board operating
profit was largely unchanged because higher sales volumes were offset
by higher raw material and maintenance costs, and production
curtailments at Enocell Pulp Mill.

The share of associated company results amounted to EUR 44.0 (EUR
51.8) million; the main contributions were from Bergvik Skog and
Tornator.

Net financial items were EUR -129.0 (EUR -22.9) million. The
difference is mainly due to a non-recurring capital gain of EUR 130.0
million from the sale of shares in Sampo Oyj in the first half of
2006 and from the fair valuations of financial instruments.

Profit before taxes and minority interest excluding non-recurring
items increased by EUR 174.9 million to EUR 439.0 million. Net taxes
totalled EUR -117.4 (EUR -110.3) million.

Earnings per share excluding non-recurring items increased by EUR
0.16 to EUR 0.41. Earnings per share including non-recurring items
were EUR 0.46 (EUR 0.33).

Q2/2007 Results (compared with Q1/2007)
Sales at EUR 3 805.2 million were 1.3% lower than the previous
quarter's EUR 3 855.4 million. Deliveries increased in Wood Products
and decreased in Fine Paper, partly due to the permanent shutdown of
Berghuizer PM 7. Deliveries were almost unchanged in Packaging Board
and Publication Paper. Realised prices were in local currencies
higher for wood products and industrial packaging, and somewhat
higher for uncoated and coated fine paper, lower for publication
paper, particularly for magazine grades, and somewhat lower for
consumer board.

Operating profit excluding non-recurring items decreased by EUR 90.6
million to EUR 216.7 (EUR 307.3) million, which is 5.7% of sales.
Operating profit decreased in all product segments except Wood
Products. Operating profit was decreased by lower sales prices in
Publication Paper and lower sales volumes in Fine Paper, but
increased by higher sales prices in Wood Products. The second quarter
was also affected by a high level of maintenance and holiday
shutdowns, increasing wood costs and approximately five weeks of
production curtailments at Packaging Board's Enocell Pulp Mill due to
a shortage of wood.

Profit before tax amounted to EUR 164.2 (EUR 274.8) million excluding
non-recurring items and EUR 177.0 (EUR 306.8) million including
non-recurring items.

Earnings per share were EUR 0.16 (EUR 0.26) excluding non-recurring
items. Earnings per share including non-recurring items were EUR 0.18
(EUR 0.28). Cash earnings per share were EUR 0.48 (EUR 0.59)
excluding non-recurring items.

The return on capital employed was 7.5% (10.8%) excluding
non-recurring items. Capital employed was EUR 11 683.5 million on 30
June 2007, a net increase of EUR 177.9 million due to increased
working capital and decreased provisions.

Capital Structure


Change Change
% 30 % 30
Jun 07 Jun 07
- -
31 Dec 30 Jun 31 Mar 30 Jun 30 Jun 31 Mar
EUR million 06 06 07 07 06 07
Fixed assets 11 234.7 11 200.6 11 029.2 11 029.5 -1.5 0.0
Operative working
capital 2 183.6 2 517.4 2 415.4 2 497.4 -0.8 3.4
Non-current
interest-free
items, net -1 204.0 -1 292.4 -1 050.7 -954.3 -26.2 -9.2
Operating Capital
Total 12 214.3 12 425.6 12 393.9 12 572.6 1.2 1.4
Net tax
liabilities -873.4 -1 083.9 -888.3 -889.1 18.0 -0.1
Capital Employed 11 340.9 11 341.7 11 505.6 11 683.5 3.0 1.5
Associated
companies 805.2 762.2 868.3 907.3 19.0 4.5
Total 12 146.1 12 103.9 12 373.9 12 590.8 4.0 1.8

Equity
attributable to
Company
shareholders 7 799.6 7 104.4 7 642.0 8 052.9 13.4 5.4
Minority interests 103.5 91.6 106.2 117.0 27.7 10.2
Net
interest-bearing
liabilities 4 243.0 4 907.9 4 625.7 4 420.9 -9.9 -4.4
Financing Total 12 146.1 12 103.9 12 373.9 12 590.8 4.0 1.8


Financing (compared with Q1/07)
Cash flow from operations was EUR 377.7 (EUR 210.2) million and cash
flow after investing activities EUR 190.6 (101.3) million compared
with the first quarter of 2007. Cash flow from operations improved
due to moderating increase in working capital.

At the end of the period, interest-bearing net liabilities were EUR 4
420.9 million, a decrease of EUR 204.8 million due to redemptions of
long-term debt. Unutilised credit facilities and cash and
cash-equivalent reserves totalled EUR 1.6 billion.

Shareholders' equity amounted to EUR 8 052.9 million or EUR 10.21
(EUR 9.69) per share, compared with the market capitalisation on the
Helsinki Stock Exchange on 30 June 2007 of EUR 11.0 billion.

The debt/equity ratio at 30 June 2007 was 0.55 (0.61). The currency
effect on equity was positive EUR 59.6 million net of the hedging of
equity translation risks.

Cash Flow


Change
Change Change % Q1-
% % Q2/07
Q2/07 Q2/07 -
Q1- Q1- - - Q1-
EUR million 2006 Q2/06 Q2/07 Q2/06 Q1/07 Q2/07 Q2/06 Q1/07 Q2/06
Operating
profit 648.4 348.7 568.8 124.9 339.3 229.5 83.7 -32.4 63.1
Adjustments* 1 060.9 576.7 477.1 310.8 256.2 220.9 -28.9 -13.8 -17.3
Change in
working
capital 199.1 -221.5 -458.0 -31.6 -385.3 -72.7 -130.1 81.1 -106.8
Cash Flow
from
Operations 1 908.4 703.9 587.9 404.1 210.2 377.7 -6.5 79.7 -16.5
Capital
expenditure -583.4 -275.0 -296.0 -107.3 -108.9 -187.1 74.4 71.8 7.6
Cash Flow
after
Investing
Activities 1 325.0 428.9 291.9 296.8 101.3 190.6 -35.8 88.2 -31.9


* 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 January-June 2007
Capital expenditure for the first half of 2007 totalled EUR 296.0
million, which is 57% of scheduled depreciation and 3.9% of sales.
The Group's capital expenditure for 2007 is expected to be in range
of EUR 800-850 million.

The main projects during the first six months were PM 6 at Huatai in
China (EUR 20.9 million), land acquisitions in South America (EUR
17.2 million) and PM 3 at Varkaus Mill in Finland (EUR 14.9 million).

Short-term risks and uncertainties
Possible further price rises for major raw materials, especially
wood, the availability of birch pulpwood and continued US dollar
decline are short-term risks.

Near-term market outlook
In Europe the positive economic outlook is expected to support market
demand for publication paper, which is also anticipated to benefit
from the usual seasonal upswing in the autumn. Newsprint demand and
prices are expected to remain mainly stable. Magazine paper prices,
which have been trending downwards, are expected to stabilise. The
outlook for fine paper demand and prices remains healthy, and steady
growth in demand is anticipated, except for the seasonal slowdown due
to summer holidays. The demand for packaging board is forecast to
remain rather good with prices generally stable, and a slight
improvement in some business segments is predicted. Market conditions
for wood products are expected to moderate somewhat after an
exceptionally strong first half of 2007.

In North America further weakening in demand for newsprint is
anticipated, and prospects for magazine paper and coated fine paper
are uncertain. Announced reductions in domestic supply and trade
policy initiatives are expected to improve the supply and demand
balance in the coated paper market.

In Latin America demand for coated magazine paper should remain
healthy and prices are forecast to rise. In China healthy demand for
coated fine paper is predicted, keeping prices stable.

Second Quarter Events

April
Stora Enso signed a mill site land acquisition agreement with Beihai
City Government in Guangxi, China. The agreement provides Stora Enso
a total of 250 hectares of industrial land for possible future use as
a mill site. It is located by the sea in the Tieshangang Industrial
Zone of Beihai City in the north of Beibu Gulf in the South China
Sea, near Vietnam. The purchase price of EUR 27 million is to be paid
in the third quarter of 2007.

May
Stora Enso announced an investment of EUR 25 million in a new copy
paper sheeter, two packaging lines and a new machine hall at its
Veitsiluoto fine paper mill in Finland. The project, which will
increase mill specialisation within the division, was scheduled to
start in June 2007 and be completed within a year.

Stora Enso signed a new EUR 1.4 billion syndicated credit facility
agreement with a group of 15 banks. The facility, which has a
maturity of five years, is for general corporate purposes including
the refinancing of an existing EUR 1.75 billion syndicated facility.
The new loan facility has a margin of 0.225% p.a. over Euribor.

June
Stora Enso announced the start of co-determination negotiations
concerning possible temporary lay-offs of personnel at its Kemijärvi
pulp mill in Finland due to the shortage of wood.

Stora Enso announced that it will upgrade and modernise the two board
machines (BM 2 and BM 3) and chemi-thermomechanical pulping (CTMP)
plant 2 at its Fors Mill in Sweden to improve quality and pulp
production. This project, costing a total of EUR 29 million, is
scheduled to start in 2007.

Stora Enso also announced that it is investing EUR 16.8 million to
reduce energy costs by increasing packaging-derived fuel and biofuel
combustion capacity at its Anjalankoski Mill. Packaging-derived fuel
is the source-separated, processed, dry combustible part of municipal
solid waste.

Stora Enso's subsidiary paper merchant Papyrus sold warehouses and
office properties in Sweden and Denmark to the Swedish listed
property company Kungsleden. The total value of the cash deal, which
had a positive impact on Stora Enso's cash flow in the second quarter
of 2007, was EUR 50.4 million. A capital gain of approximately EUR
24.4 million has been recorded as a non-recurring item in Stora
Enso's second quarter results under Merchants. The company also
announced that Papyrus is to build a new 27 000 m2 Scandinavian
Central Warehouse in the Port of Göteborg in Sweden to increase
efficiency and give Scandinavian customers access to a wider product
range with improved product availability. Papyrus is purchasing
49 000 m2 of land from Scandinavian Distripoint AB, a company owned
by the City of Gothenburg, for the building site at a cost of EUR 3.2
million. The total capital expenditure in the project will be EUR 35
million.

Sauga Sawmill in Estonia was permanently shut down in June as
announced in March 2007. The closure is expected to have a slightly
positive impact on the full year operating profit.

Inspections by Competition Authorities
In 2004 the US antitrust authorities started investigations
concerning the sale of coated magazine paper in the USA from autumn
2002 until spring 2003. On Thursday 19 July 2007, following a jury
trial in the US Federal District Court in Hartford, Connecticut, the
jury found Stora Enso not guilty of the charges. Coincident with this
investigation, Stora Enso has been named in a number of class action
lawsuits filed in the USA. These lawsuits are still 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 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.

Share Capital
During the quarter 284 857 A shares were converted into R shares. The
conversion was recorded in the Finnish Trade Register on 16 July
2007.

During the quarter the Company allocated 3 204 repurchased R shares
under the terms of the Stora Enso North America Option Plan.

On 30 June 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 938 522 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
Stora Enso has announced a quality-driven investment of EUR 15
million to upgrade board manufacturing at its Imatra mills in
Finland.

Kai Korhonen, Senior Executive Vice President, Packaging Board and
member of the Executive Management Group (EMG), has chosen to retire
and leave his duties at Stora Enso. He will relinquish his current
duties by 31 August 2007, but will continue to undertake special
assignments for CEO Jouko Karvinen until the end of 2007. Kai
Korhonen's successor will be announced before the end of August.

Stora Enso has decided to start a pre-feasibility study for a pulp
and paper mill complex in Nizhny Novgorod, Russia which will be
undertaken in close co-operation with the Russian government. The
objective is to manufacture paper for Russian consumers from Russian
wood in Russia.

Jussi Huttunen, Senior Executive Vice President, Market Services left
Stora Enso to pursue new opportunities.

This report is unaudited.

Helsinki, 26 July 2007
Stora Enso Oyj
Board of Directors

Segments


Publication Paper


Change
Change Change % Q1-
% % Q2/07-
Q1- Q1- Q2/07- Q2/07- Q1-
EUR million 2006 Q2/06 Q1/07 Q2/07 Q2/06 Q2/07 Q2/06 Q1/07 Q2/06
Sales 4 773.4 1 145.2 1 240.5 1 217.4 2 316.2 2 457.9 6.3 -1.9 6.1
Operating
profit* 251.6 55.3 63.5 35.9 125.6 99.4 -35.1 -43.5 -20.9
% of
sales 5.3 4.8 5.1 2.9 5.4 4.0 -39.6 -43.1 -25.9
ROOC, %** 6.2 5.4 6.5 3.7 6.1 5.1 -31.5 -43.1 -16.4
Deliveries,
1 000 t 6 929 1 662 1 824 1 834 3 328 3 658 10.3 0.5 9.9
Production, 6 955 1 674 1 882 1 842 3 391 3 724 10.0 -2.1 9.8
1 000 t


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

Publication Paper's performance deteriorated during the second
quarter of 2007, depressed by the coated and uncoated magazine
business areas. Sales were EUR 1 217.4 million, up 6.3% on the second
quarter of 2006 because coated magazine paper sales increased and a
year ago there was a standstill at Port Hawkesbury Mill and Arapoti
Mill was not yet part of the Group. Operating profit at EUR 35.9
million was 35.1% lower than a year earlier mainly because magazine
paper prices decreased in all regions, while prices increased for raw
materials, especially wood and recycled paper. The operating profit
benefited from EUR 15 million refund of the German energy tax and
release of EUR 9 million restructuring provision at Reisholz Mill,
both entered in the second quarter as a cumulative adjustment for the
first half of 2007.

The deteriorating trend in magazine papers caused by a combination of
weak pricing conditions and increased fibre costs will require
significant changes in cost structures. These changes may include
capacity reductions should underlying conditions not improve rapidly.

Markets
Compared with Q2/2006
In Europe demand for all publication paper grades was stronger than a
year ago. Producer inventories were up in newsprint and uncoated
magazine paper, but down in coated magazine paper. Prices were higher
for newsprint and lower for magazine paper.

In North America demand was clearly weaker for newsprint, clearly
stronger for uncoated magazine paper and almost unchanged for coated
magazine paper. Inventories were higher but prices lower in all
product segments.

In Latin America demand was stronger but prices were lower.

Compared with Q1/2007
In Europe demand for newsprint strengthened but demand for magazine
paper weakened. Producer inventories rose. Prices were virtually
unchanged for all grades, but the non-contractual business has
recently been facing increasing price pressure.

In North America demand for all publication paper grades improved
slightly. Newsprint prices declined further, but magazine paper
prices remained fairly stable.

In Latin America demand strengthened and prices remained firm.

Fine Paper


Change
Change Change % Q1-
% % Q2/07-
Q1- Q1- Q2/07- Q2/07- Q1-
EUR million 2006 Q2/06 Q1/07 Q2/07 Q2/06 Q2/07 Q2/06 Q1/07 Q2/06
Sales 2 956.3 738.9 738.6 684.9 1 515.2 1 423.5 -7.3 -7.3 -6.1
Operating
profit* 166.0 46.3 61.5 41.1 99.0 102.6 -11.2 -33.2 3.6
% of
sales 5.6 6.3 8.3 6.0 6.5 7.2 -4.8 -27.7 10.8
ROOC, %** 7.1 7.2 11.4 7.6 7.7 9.5 5.6 -33.3 23.4
Deliveries,
1 000 t 3 839 945 966 894 1 939 1 860 -5.4 -7.5 -4.1
Production,
1 000 t 3 861 944 951 924 1 973 1 875 -2.1 -2.8 -5.0


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

Sales were EUR 684.9 million, a decrease of EUR 54.0 million on the
second quarter of 2006 mainly due to the sale of Celbi Pulp Mill and
the permanent shutdown of Berghuizer PM 7 in April 2007. Fine Paper
operating profit improved year-on-year when adjusted for the EUR 13.5
million contribution from the divested Celbi Pulp Mill. Operating
profit was EUR 41.1 million, EUR 5.2 million less than in the second
quarter of 2006 as higher prices and improved cost efficiency were
more than offset by higher wood and pulp costs and seasonally
increased maintenance.

Markets
Compared with Q2/2006
In Europe coated fine paper demand was stronger than a year ago,
driven by economic growth, but prices were unchanged. Industry
inventories were similar to a year ago. In uncoated fine paper,
demand was somewhat better due to economic growth, prices were higher
and industry inventories were lower than a year ago.

In North America coated fine paper demand was clearly weaker than a
year ago due to the economic slowdown, but prices were unchanged. In
coated fine paper producer inventories were slightly higher than a
year ago.

Chinese coated fine paper demand was stronger than a year ago, but
prices were unchanged.

Compared with Q1/2007
In Europe coated fine paper demand was weaker than in the previous
quarter following the normal seasonal trend. Coated fine paper prices
rose slightly, and industry inventories increased. In uncoated fine
paper, demand was seasonally weaker than in the previous quarter, but
prices continued to rise. Producer inventories increased to normal
levels.

In North America coated fine paper demand was weaker than in the
previous quarter but prices were unchanged. Producer inventories
continued increasing slightly, but only to normal levels.

Chinese coated fine paper demand continued to grow and prices
increased slightly.

Merchants
Sales were EUR 479.4 million, up 5.9% on the second quarter of 2006
mainly due to increased sales volumes and higher prices. Operating
profit was EUR 8.2 million excluding non-recurring items, up by EUR
5.3 million on the second quarter of 2006, boosted by volume
increases and margin improvements. Suppliers' price increases were
successfully passed on and costs were kept generally stable.


Packaging Board


Change
Change Change % Q1-
% % Q2/07-
Q2/07- Q2/07- Q1-
EUR million 2006 Q2/06 Q1/07 Q2/07 Q1-Q2/06 Q1-Q2/07 Q2/06 Q1/07 Q2/06
Sales 3 531.5 881.8 919.8 909.0 1 750.8 1 828.8 3.1 -1.2 4.5
Operating
profit* 323.4 70.8 106.5 62.5 170.3 169.0 -11.7 -41.3 -0.8
% of
sales 9.2 8.0 11.6 6.9 9.7 9.2 -13.8 -40.5 -5.2
ROOC, %** 11.5 10.0 15.4 9.1 12.1 12.4 -9.0 -40.9 2.5
Deliveries,
1 000 t 3 850 971 1 000 1 000 1 930 2 000 3.0 0.0 3.6
Production,
1 000 t 3 883 958 1 000 979 1 963 1 979 2.2 -2.1 0.8


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

Packaging Board operated under difficult conditions as it suffered
from a shortage of wood and significant year-on-year wood cost
increases during the second quarter of 2007. Sales were EUR 909.0
million, up 3.1% on the second quarter of 2006 mainly due to higher
volumes. Operating profit was EUR 62.5 million, down 11.7% on the
second quarter of 2006 due to about five weeks of curtailments in
pulp production caused by a shortage of wood.

Markets
Compared with Q2/2006
Cartonboard demand was stronger in Europe. Producer inventories were
lower and market prices higher, mainly in recovered fibre grades, but
also in primary fibre cartonboard.

Prices for consumer board were lower due to exchange rate trends.

Volumes and prices for industrial packaging and speciality papers
were higher than a year ago.

Compared with Q1/2007
Cartonboard demand in Europe was unchanged on the previous quarter.
Exports to overseas continued decreasing. Producer inventories
increased and cartonboard market prices improved slightly.

Prices for consumer board were unchanged.

Volumes and prices for industrial packaging and speciality papers
were similar to the previous quarter.

Wood Products


Change
Change Change % Q1-
% % Q2/07-
Q1- Q1- Q2/07- Q2/07- Q1-
EUR million 2006 Q2/06 Q1/07 Q2/07 Q2/06 Q2/07 Q2/06 Q1/07 Q2/06
Sales 1 676.4 437.8 479.8 530.7 814.9 1 010.5 21.2 10.6 24.0
Operating
profit* 59.1 14.9 53.7 57.8 18.7 111.5 n/m 7.6 n/m
% of
sales 3.5 3.4 11.2 10.9 2.3 11.0 n/m -2.7 n/m
ROOC, %** 9.2 8.9 32.9 33.9 5.6 34.0 n/m 3.0 n/m
Deliveries,
1 000 m3 6 572 1 746 1 666 1 797 3 309 3 463 2.9 7.9 4.7


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

Wood Products sales and profitability benefited from excellent market
conditions in the first half of 2007. Sales were EUR 530.7 million,
up 21.2% on the second quarter of 2006 mainly due to higher sales
prices. Operating profit was EUR 57.8 million, an increase of EUR
42.9 million on the second quarter of 2006 aided by higher sales
prices and improved cost efficiency.

Markets
Compared with Q2/2006
Markets improved steadily over the year except in the USA, where the
booming housing market of recent years turned down during the second
half of 2006. In all other markets good demand and rapid raw material
cost escalation supported a steady improvement in market prices
following several years of weakness.

Compared with Q1/2007
Demand remained good in Europe, Asia, North Africa and the Middle
East. Sales volumes were generally higher than in the previous
quarter due to seasonally stronger construction activity. Sales
prices rose in most markets except Central Europe, where increased
supply following winter storm Kyrill led to some downward price
adjustments. The North American market, which accounts for only a
small percentage of sales, remained depressed with weak demand and
low prices.
Financials

Key Ratios


Q1- Q1-
2005 2006 Q2/06 Q2/07 Q2/06 Q1/07 Q2/07
Earnings per share
(basic), EUR -0.14 0.74 0.33 0.46 0.05 0.28 0.18
Earnings per share
excl.
non-recurring
items,
EUR 0.28 0.55 0.25 0.41 0.05 0.26 0.16
Cash earnings per
share
(CEPS), EUR 1.65 2.34 1.02 1.13 0.39 0.62 0.50
CEPS excl.
non-recurring
items, EUR 1.70 1.94 0.93 1.07 0.39 0.59 0.48
Return on capital
employed (ROCE), % -0.4 5.6 6.1 9.9 4.4 11.9 7.9
ROCE excl. non-
recurring items, % 3.4 6.8 6.3 9.1 4.1 10.8 7.5
Return on equity
(ROE),
% -1.4 7.7 7.4 9.1 2.3 11.4 7.2
Debt/equity ratio 0.70 0.54 0.69 0.55 0.69 0.61 0.55
Equity per share,
EUR 9.16 9.89 9.01 10.21 9.01 9.69 10.21
Equity ratio, % 41.0 45.3 41.4 46.7 41.4 44.1 46.7
Operating profit, %
of sales -0.3 4.4 4.8 7.4 3.5 8.8 6.0
Operating profit
excl.
non-recurring
items, % of
sales 2.8 5.4 5.1 6.8 3.3 8.0 5.7
Capital
expenditure, EUR
million 1 145.3 583.4 275.0 296.0 107.3 108.9 187.1
Capital
expenditure, % of
sales 8.7 4.0 3.8 3.9 3.0 2.8 4.9
Capital employed,
EUR
million 11 678 11 341 11 341 11 683 11 341 11 505 11 683
Interest-bearing
net
liabilities, EUR
million 5 084 4 243 4 908 4 421 4 908 4 626 4 421
Average number of
employees 46 166 45 631 46 051 44 026 46 051 43 504 44 026
Average number of
shares (million)
periodic 798.7 788.6 788.6 788.6 788.6 788.6 788.6
cumulative 798.7 788.6 788.6 788.6 788.6 788.6 788.6
cumulative,
diluted 799.2 788.9 789.1 788.9 789.1 788.9 788.9



Change
Change % Change % % Q1-
Q2/07- Q2/07- Q2/07-
Q2/06 Q1/07 Q1-Q2/06
Earnings per share
(basic), EUR 260.0 -35.7 39.4
Earnings per share excl.
non-recurring items,
EUR 220.0 -38.5 64.0
Cash earnings per share
(CEPS), EUR 28.2 -19.4 10.8
CEPS excl. non-recurring
items, EUR 23.1 -18.6 15.1
Return on capital
employed (ROCE), % 79.5 -33.6 62.3
ROCE excl. non-
recurring items, % 82.9 -30.6 44.4
Return on equity (ROE),
% 213.0 -36.8 23.0
Debt/equity ratio -20.3 -9.8 -20.3
Equity per share, EUR 13.3 5.4 13.3
Equity ratio, % 12.8 5.9 12.8
Operating profit, % of sales 71.4 -31.8 54.2
Operating profit excl.
non-recurring items, % of
sales 72.7 -28.8 33.3
Capital expenditure, EUR
million 74.4 71.8 7.6
Capital expenditure, % of
sales 63.3 75.0 2.6
Capital employed, EUR
million 3.0 1.5 3.0
Interest-bearing net
liabilities, EUR million -9.9 -4.4 -9.9
Average number of
employees -4.4 1.2 -4.4
Average number of
shares (million)
periodic
cumulative
cumulative, diluted


Key Exchange Rates for the Euro


One Euro is Closing Rate Average Rate
31 Dec 06 30 Jun 07 31 Dec 06 30 Jun 07
SEK 9.0404 9.2525 9.2517 9.2232
USD 1.3170 1.3505 1.2563 1.3297
GBP 0.6715 0.6740 0.6819 0.6748
CAD 1.5281 1.4245 1.4247 1.5087

Transaction Risk and Hedges in Main Currencies as at 30 June 2007

EUR million USD GBP SEK JPY
Estimated annual net operating cash flow 1 350 700 -1 000 250
exposure
Transaction hedges as at 30 Jun. 422 236 -680 44
Hedging percentage as at 30 Jun. for the next 12 31% 34% 68% 18%
months

Condensed Consolidated Income Statement


Q1- Q1-
EUR million 2006 Q2/06 Q1/07 Q2/07 Q2/06 Q2/07
Sales 14 593.9 3 616.3 3 855.4 3 805.2 7 224.0 7 660.6
Other operating
income 364.9 43.6 16.7 38.6 93.8 55.3
Materials and -3 -4
services -8 111.5 -1 958.5 -2 160.0 -2 212.5 946.2 372.5
Freight and
sales commissions -1 751.4 -478.0 -430.7 -432.0 -870.7 -862.7
Personnel -1 -1
expenses -2 200.9 -623.3 -483.7 -557.8 167.7 041.5
Other operating
expenses -988.9 -206.1 -185.0 -156.2 -446.2 -341.2
Depreciation and
impairment -1 257.7 -269.1 -273.4 -255.8 -538.3 -529.2
Operating Profit
/ (Loss) 648.4 124.9 339.3 229.5 348.7 568.8
Share of results
of associated
companies 87.4 20.2 24.2 19.8 51.8 44.0
Net financial
items -104.0 -85.2 -56.7 -72.3 -22.9 -129.0
Profit / (Loss)
before Tax 631.8 59.9 306.8 177.0 377.6 483.8
Income tax -42.6 -19.0 -84.3 -33.1 -110.3 -117.4
Net Profit /
(Loss) for the
Period 589.2 40.9 222.5 143.9 267.3 366.4

Attributable to:
Equity holders of
the Parent
Company 585.0 38.6 219.2 141.3 263.6 360.5
Minority
interests 4.2 2.3 3.3 2.6 3.7 5.9
589.2 40.9 222.5 143.9 267.3 366.4

Earnings per
share
Basic earnings
per share, EUR 0.74 0.05 0.28 0.18 0.33 0.46
Diluted earnings
per share, EUR 0.74 0.05 0.28 0.18 0.33 0.46



Chang
Chang Chang e %
e % e % Q1-
Q2/07 Q2/07 Q2/07-
- - Q1-
EUR million Q2/06 Q1/07 Q2/06
Sales 5.2 -1.3 6.0
Other operating income -11.5 131.1 -41.0
Materials and services -13.0 -2.4 -10.8
Freight and sales commissions 9.6 -0.3 0.9
Personnel expenses 10.5 -15.3 10.8
Other operating expenses 24.2 15.6 23.5
Depreciation and impairment 4.9 6.4 1.7
Operating Profit / (Loss) 83.7 -32.4 63.1
Share of results of associated
companies -2.0 -18.2 -15.1
Net financial items 15.1 -27.5 -463.3
Profit / (Loss) before Tax 195.5 -42.3 28.1
Income tax -74.2 60.7 -6.4
Net Profit / (Loss) for the
Period 251.8 -35.3 37.1

Attributable to:
Equity holders of the Parent
Company 266.1 -35.5 36.8
Minority interests 13.0 -21.2 59.5
251.8 -35.3 37.1

Earnings per share
Basic earnings per share, EUR 260.0 -35.7 39.4
Diluted earnings per share, EUR 260.0 -35.7 39.4



Consolidated Statement of Recognised Income & Expense


Q1- Q1-
EUR million 2006 Q2/06 Q1/07 Q2/07 Q2/06 Q2/07

Defined benefit plan actuarial 135.1 - - 2.6 - 2.6
gains /
(losses)
Tax on actuarial movements -46.6 - - -0.7 - -0.7
Aggregate fair value movements 251.6 -5.6 51.1 169.7 -109.3 220.8
in
Available-for-Sale assets
Currency and commodity hedges -45.3 -2.4 -37.5 53.8 86.3 16.3
Associate hedges 11.1 3.6 -0.1 3.4 7.1 3.3
Tax on Other Comprehensive 50.2 2.2 10.2 -17.2 4.3 -7.0
Income
Movements (OCI)
Currency translation movements -86.4 -30.7 -69.0 66.4 -70.6 -2.6
on equity
net investments (CTA)
Equity net investment hedges 118.0 37.2 32.1 -9.1 75.8 23.0
Tax on equity hedges -30.7 -9.6 -8.3 2.3 -19.7 -6.0
Net Income & Expense Recognised 357.0 -5.3 -21.5 271.2 -26.1 249.7
directly in Equity
Net profit / (loss) for the year 589.2 40.9 222.5 143.9 267.3 366.4
Total Recognised Income & 946.2 35.6 201.0 415.1 241.2 616.1
Expense for
the Year

Attributable to:
Equity holders of the Parent 942.0 33.3 197.7 412.5 237.5 610.2
Company
Minority interests 4.2 2.3 3.3 2.6 3.7 5.9
Total Recognised Income & 946.2 35.6 201.0 415.1 241.2 616.1
Expense for
the Year





Condensed Consolidated Cash Flow Statement

EUR million Q1-Q2/06 Q1-Q2/07
Cash Flow from Operating Activities
Operating profit 348.7 568.8
Adjustments 576.7 477.1
Change in net working capital -221.5 -458.0
Change in short-term interest-bearing receivables 54.8 15.7
Cash Flow Generated by Operations 758.7 603.6
Net financial items -116.1 -72.4
Income taxes paid -72.6 -91.8
Net Cash Provided by Operating Activities 570.0 439.4

Cash Flow from Investing Activities
Acquisitions of subsidiaries -8.5 -0.8
Acquisitions of associated companies 0.0 -72.6
Proceeds from sale of fixed assets and shares 214.2 70.3
Capital expenditure -275.0 -296.0
Proceeds from (payment of) the non-current -17.0 18.4
receivables, net
Net Cash Used in Investing Activities -86.3 -280.7

Cash Flow from Financing Activities
Change in long-term liabilities 124.4 -134.0
Change in short-term borrowings -430.9 236.0
Dividends paid -354.9 -354.9
Minority equity injections less dividends -1.1 7.4
Options exercised -1.6 -0.8
Repurchase / Sale of own shares 0.0 0.2
Net Cash Used in Financing Activities -664.1 -246.1

Net Increase (Decrease) in Cash and Cash -180.4 -87.4
Equivalents
Cash and bank in acquired companies 0.7 0.0
Cash and bank in sold companies -0.7 0.0
Translation adjustment -7.1 -2.7
Net cash and cash equivalents at the beginning of 351.4 309.6
period
Net Cash and Cash Equivalents at Period End 163.9 219.5

Cash and Cash Equivalents at Period End 299.4 318.4
Bank Overdraft at Period End -135.5 -98.9
Net Cash and Cash Equivalents at Period End 163.9 219.5


Acquisitions of Subsidiary Companies
Cash and cash equivalents 0.7 -
Working capital -1.2 -
Operating fixed assets 2.9 0.4
Interest-bearing assets 0.0 -
Tax liabilities 0.3 -
Interest-bearing liabilities -0.6 -
Non-cash share exchange 0.0 -
Minority interests -0.2 0.4
Fair Value of Net Assets 1.9 0.8
Goodwill 6.6 0.0
Total Purchase Consideration 8.5 0.8

Disposal of Subsidiary Companies
Cash and cash equivalents 0.7 0.0
Working capital 7.5 0.0
Operating fixed assets 44.1 0.9
Interest-bearing assets 0.9 0.0
Tax liabilities -13.5 0.0
Interest-bearing liabilities -1.5 0.0
Minority interests - 0.5
Net Assets in Divested Companies 38.2 1.4
Income Statement capital gain (goodwill realised) - 0.6
Total Disposal Consideration 38.2 2.0


Property, Plant and Equipment, Intangible Assets and Goodwill


EUR million 2006 Q1-Q2/06 Q1-Q2/07
Carrying value at 1 January 11 213.2 11 213.2 10 440.4
Acquisition of subsidiary companies 283.1 9.5 0.4
Additions 559.1 270.3 278.3
Additions in biological assets 24.3 4.7 17.7
Change in emission rights 54.4 74.7 -90.2
Disposals -237.3 -63.7 -38.7
Depreciation, amortisation and -1 257.7 -538.3 -529.2
impairment
Translation difference and other -198.7 -172.7 -58.3
Balance Sheet Total 10 440.4 10 797.7 10 020.4


Borrowings


EUR million 2006 Q1-Q2/06 Q1-Q2/07
Non-current borrowings 4 081.0 4 324.2 3 889.9
Current borrowings 1 146.9 1 401.0 1 177.6
5 227.9 5 725.2 5 067.5

Carrying value at 1 January 6 055.6 6 055.6 5 227.9
Debt acquired with new subsidiaries 4.4 0.6 0.0
Debt disposed with sold subsidiaries -12.0 -4.4 0.0
Proceeds from / payments of borrowings -683.7 -158.1 -131.7
(net)
Translation difference and other -136.4 -168.5 -28.7
Total Borrowings 5 227.9 5 725.2 5 067.5



Condensed Consolidated Balance Sheet

Change Change
% %
30 Jun 30 Jun
07 - 07 -
30 Jun 31 Dec
EUR million 31 Dec 06 30 Jun 06 30 Jun 07 06 06

Assets

Fixed Assets and Other
Non-current
Investments
Fixed assets O 10 230.8 10 601.5 9 881.1 -6.8 -3.4
Biological assets O 111.5 77.8 131.4 68.9 17.8
Emission rights O 98.1 118.4 7.9 -93.3 -91.9
Investment in
associated companies A 805.2 762.2 907.3 19.0 12.7
Available-for-sale:
Listed securities I 41.2 78.3 49.2 -37.2 19.4
Available-for-sale:
Unlisted shares O 794.3 402.9 1 009.1 150.5 27.0
Non-current loan
receivables I 149.2 145.9 128.6 -11.9 -13.8
Deferred tax assets T 53.5 67.0 65.0 -3.0 21.5
Other non-current
assets O 61.1 23.2 44.9 93.5 -26.5
12 344.9 12 277.2 12 224.5 -0.4 -1.0

Current Assets
Inventories O 2 019.5 2 145.8 2 219.9 3.5 9.9
Tax receivables T 124.8 109.7 154.3 40.7 23.6
Operative 2 156.6 2 272.6 2 443.6
receivables O 7.5 13.3
Interest-bearing 185.5 293.7 150.4
receivables I -48.8 -18.9
Cash and cash 299.4 318.4
equivalents I 609.0 6.3 -47.7
5 095.4 5 121.2 5 286.6 3.2 3.8

Total Assets 17 440.3 17 398.4 17 511.1 0.6 0.4

Equity and Liabilities

Equity attributable to 7 799.6 7 104.4 8 052.9
Company shareholders 13.4 3.2
Minority interests 103.5 91.6 117.0 27.7 13.0
Total Equity 7 903.1 7 196.0 8 169.9 13.5 3.4

Non-current
Liabilities
Post-employment 763.1 896.7 680.8
benefit provisions O -24.1 -10.8
Other provisions O 308.3 161.9 100.0 -38.2 -67.6
Deferred tax 793.0 900.9 794.0
liabilities T -11.9 0.1
Non-current debt I 4 081.0 4 324.2 3 889.9 -10.0 -4.7
Other non-current 193.7 257.0 218.4
operative liabilities O -15.0 12.8
6 139.1 6 540.7 5 683.1 -13.1 -7.4
Current Liabilities
Current portion of 630.2 584.8 337.9
long-term debt I -42.2 -46.4
Interest-bearing 516.7 816.2 839.7
liabilities I 2.9 62.5
Operative liabilities O 1 992.5 1 901.0 2 166.1 13.9 8.7
Tax liabilities T 258.7 359.7 314.4 -12.6 21.5
3 398.1 3 661.7 3 658.1 -0.1 7.7

Total Liabilities 9 537.2 10 202.4 9 341.2 -8.4 -2.1

Total Equity and 17 398.4 17 511.1
Liabilities 17 440.3 0.6 0.4


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


Retaine
Capital Treasur d
Share Reserve y Earnin
EUR million Capital s Shares OCI CTA gs Total
Balance at 31 1 423.3 1 009.2 -180.8 67.6 -218.9 5 525.0 7 625.4
December 2004
Repurchase of - - -344.7 - - - -344.7
Stora Enso Oyj
shares
Cancellation of -41.2 -224.4 265.6 - - - 0.0
Stora Enso Oyj
shares
Dividend (EUR - - - - - -365.3 -365.3
0.45 per share)
Buy-out of - - - - - -43.2 -43.2
minority
interests
Net profit for - - - - 0.2 -111.1 -110.9
the period
Net expense - - - 400.4 91.6 -33.2 458.8
recognised
directly to
equity
Balance at 31 1 382.1 784.8 -259.9 468.0 -127.1 4 972.2 7 220.1
December 2005
Cancellation of -39.9 -15.9 249.1 - - -193.3 0.0
Stora Enso Oyj
shares
Dividend (EUR - - - - - -354.9 -354.9
0.45 per share)
Options - -1.7 0.2 - - - -1.5
exercised
Buy-out of - - - - - - 0.0
minority
interests
Net profit for - - - - 3.2 263.6 266.8
the period
Net expense - - - -11.6 -14.5 - -26.1
recognised
directly to
equity
Balance at 30 1 342.2 767.2 -10.6 456.4 -138.4 4 687.6 7 104.4
June 2006
Options - -0.3 0.1 - - - -0.2
exercised
Buy-out of - - - - - -0.1 -0.1
minority
interests
Net profit for - - - - -9.0 321.4 312.4
the period
Net expense - - - 279.2 15.4 88.5 383.1
recognised
directly to
equity
Balance at 31 1 342.2 766.9 -10.5 735.6 -132.0 5 097.4 7 799.6
December 2006
Dividend (EUR - - - - - -354.9 -354.9
0.45 per share)
Options - -0.8 0.1 - - - -0.7
exercised
Buy-out of - - - - - 0.2 0.2
minority
interests
Net profit for - - - - -1.4 360.4 359.0
the period
Net expense - - - 233.4 14.4 1.9 249.7
recognised
directly to
equity
Balance at 30 1 342.2 766.1 -10.4 969.0 -119.0 5 105.0 8 052.9
June 2007


CTA = Cumulative Translation Adjustment
OCI = Other Comprehensive Income


Commitments and Contingencies


EUR million 31 Dec 06 30 Jun 06 30 Jun 07
On Own Behalf
Pledges given 1.0 1.1 0.8
Mortgages 146.8 207.8 131.4
On Behalf of Associated Companies
Mortgages 0.8 0.8 0.0
Guarantees 343.0 355.7 276.6
On Behalf of Others
Guarantees 9.5 10.8 10.2
Other Commitments, Own
Leasing commitments, in next 12 38.4 35.3 31.6
months
Leasing commitments, after next 12 130.3 141.2 122.2
months
Pension liabilities 0.2 0.5 0.2
Other commitments 17.1 85.8 20.2
Total 687.1 839.0 593.2

Pledges given 1.0 1.1 0.8
Mortgages 147.6 208.6 131.4
Guarantees 352.5 366.5 286.8
Leasing commitments 168.7 176.5 153.8
Pension liabilities 0.2 0.5 0.2
Other commitments 17.1 85.8 20.2
Total 687.1 839.0 593.2


Purchase Agreement Commitments


EUR million Scheduled Contract Payments
Contract
Type of Supply Total 2007 2008-9 2010-11 2012+
Fibre 2 420 235 462 430 1 293
Energy 792 187 405 186 14
Logistics 670 119 152 105 294
Other Production
costs 121 74 21 25 1
4 003 615 1 040 746 1 602
Capital Expenditure 335 224 79 29 3
Total Contractual
Commitments 4 338 839 1 119 775 1 605


Net Fair Values of Derivative Financial Instruments


EUR million 31 Dec 06 30 Jun 06 30 Jun 07
Net Net Positive Negative Net
Fair Fair Fair Fair Fair
Values Values Values Values Values
Interest rate swaps 48.1 -12.2 59.0 -74.7 -15.7
Interest rate options -1.8 -0.2 0.0 -4.3 -4.3
Cross-currency swaps -1.2 -2.4 0.0 0.0 0.0
Forward contracts 28.2 14.9 10.4 -18.7 -8.3
FX options 5.9 8.1 7.3 -2.1 5.2
Commodity contracts 63.2 194.7 88.3 -3.5 84.8
Equity swaps 7.0 -21.6 38.1 -7.5 30.6
Total 149.4 181.3 203.1 -110.8 92.3



Nominal Values of Derivative Financial Instruments


EUR million 31 Dec 06 30 Jun 06 30 Jun 07
Interest Rate Derivatives
Interest rate swaps
Maturity under 1 year 177.4 100.0 0.0
Maturity 2-5 years 2 152.1 2 517.8 2 337.2
Maturity 6-10 years 2 490.5 2 318.8 2 582.8
4 820.0 4 936.6 4 920.0
Interest rate options 318.0 148.1 786.3
Total 5 138.0 5 084.7 5 706.3

Foreign Exchange Derivatives
Cross-currency swap agreements 6.9 62.6 0.0
Forward contracts 1 778.4 1 407.2 1 688.5
FX Options 662.8 1 036.1 1 235.4
Total 2 448.1 2 505.9 2 923.9

Commodity Derivatives
Commodity contracts 635.8 558.7 523.8
Total 635.8 558.7 523.8

Equity swaps
Equity swaps 328.6 399.4 220.4
Total 328.6 399.4 220.4


Sales by Segment


EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07 Q2/07
Publication 1 171.0 1 145.2 1 226.7 1 230.5 4 773.4 1 240.5 1 217.4
Paper
Fine Paper 776.3 738.9 722.8 718.3 2 956.3 738.6 684.9
Merchants 496.3 452.6 450.1 508.2 1 907.2 532.9 479.4
Packaging 869.0 881.8 909.0 871.7 3 531.5 919.8 909.0
Board
Wood 377.1 437.8 418.5 443.0 1 676.4 479.8 530.7
Products
Wood Supply 674.8 651.3 633.9 687.2 2 647.2 778.6 796.3
Other -756.8 -691.3 -722.9 -727.1 -2 898.1 -834.8 -812.5
Total Sales 3 607.7 3 616.3 3 638.1 3 731.8 14 593.9 3 855.4 3 805.2



Operating Profit by Segment excluding Non-recurring items


EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07 Q2/07
Publication Paper 70.3 55.3 57.0 69.0 251.6 63.5 35.9
Fine Paper 52.7 46.3 32.4 34.6 166.0 61.5 41.1
Merchants 9.6 2.9 7.7 12.5 32.7 16.6 8.2
Packaging Board 99.5 70.8 93.7 59.4 323.4 106.5 62.5
Wood Products 3.8 14.9 21.4 19.0 59.1 53.7 57.8
Wood Supply 8.9 1.3 5.0 -12.4 2.8 12.2 3.5
Other 2.2 -73.3 12.1 5.5 -53.5 -6.7 7.7
Operating Profit excl. 247.0 118.2 229.3 187.6 782.1 307.3 216.7
Non-
recurring Items
Non-recurring items -23.2 6.7 -177.2 60.0 -133.7 32.0 12.8
Operating Profit (IFRS) 223.8 124.9 52.1 247.6 648.4 339.3 229.5
Net financial items 62.3 -85.2 -42.5 -38.6 -104.0 -56.7 -72.3
Associated companies 31.6 20.2 10.2 25.4 87.4 24.2 19.8
Profit before Tax and 317.7 59.9 19.8 234.4 631.8 306.8 177.0
Minority Interests
Income tax expense -91.3 -19.0 37.3 30.4 -42.6 -84.3 -33.1
Net Profit 226.4 40.9 57.1 264.8 589.2 222.5 143.9

-
- Non-recurring Items by Segment
-

EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07 Q2/07
Publication Paper -2.9 4.4 -225.2 11.4 -212.3 13.3 -3.0
Fine Paper -22.0 3.8 72.0 8.5 62.3 19.2 -5.2
Merchants - - - 0.4 0.4 - 24.4
Packaging Board - -5.5 - 4.3 -1.2 4.3 -1.0
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 -2.4
Total Non-recurring Items -23.2 6.7 -177.2 60.0 -133.7 32.0 12.8


- Operating Profit by Segment
-

EUR million Q1/06 Q2/06 Q3/06 Q4/06 2006 Q1/07 Q2/07
Publication Paper 67.4 59.7 -168.2 80.4 39.3 76.8 32.9
Fine Paper 30.7 50.1 104.4 43.1 228.3 80.7 35.9
Merchants 9.6 2.9 7.7 12.9 33.1 16.6 32.6
Packaging Board 99.5 65.3 93.7 63.7 322.2 110.8 61.5
Wood Products 5.5 16.1 -2.6 19.4 38.4 41.7 57.8
Wood Supply 8.9 2.8 5.0 -11.7 5.0 12.2 3.5
Other 2.2 -72.0 12.1 39.8 -17.9 0.5 5.3
Operating Profit 223.8 124.9 52.1 247.6 648.4 339.3 229.5
Net financial items 62.3 -85.2 -42.5 -38.6 -104.0 -56.7 -72.3
Associated companies 31.6 20.2 10.2 25.4 87.4 24.2 19.8
Profit before Tax and 317.7 59.9 19.8 234.4 631.8 306.8 177.0
Minority Interests
Income tax expense -91.3 -19.0 37.3 30.4 -42.6 -84.3 -33.1
Net Profit 226.4 40.9 57.1 264.8 589.2 222.5 143.9



Stora Enso Shares
-

Closing Price Helsinki, EUR Stockholm, SEK New York, USD
A share R share A share R share ADRs
April 13.54 13.48 123.50 123.25 18.28
May 14.21 14.19 132.25 132.00 19.06
June 13.89 13.98 125.00 127.25 18.73




Trading Volume Helsinki Stockholm New York
A share R share A share R share ADRs
April 132 705 121 364 854 218 792 10 191 550 3 463 600
May 3 756 362 107 802 972 120 800 13 101 399 3 235 300
June 234 182 78 002 457 780 106 12 068 620 2 757 200
Total 4 123 249 307 170 283 1 119 698 35 361 569 9 456 100


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 on income of EUR -64.0 million, EUR -11.1 million and
EUR 24.6 million in Q2/2006, Q1-Q2/2006 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 (%)

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, 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 2046 21242


Stora Enso's third quarter results 2007 will be published on 25
October 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. Jukka Marttila Jussi Siitonen


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