Stora Enso Oyj

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Box 309 FI-00101 Helsinki, Finland Tel: + 358 20 46 111 www.storaenso.com Business ID 1039050-8 VAT No FI 10390508 Contents Report of the Board of Directors (unaudited) Stora Enso introduction Markets and deliveries Operational key figures, items affecting comparability and other non-IFRS measures Financial results – Group Financial results – Segments Investments and capital expenditure Innovation, research and development Non-financial information EU taxonomy Environmental liabilities Risks and risk management Climate-related financial disclosures (TCFD) Corporate governance Legal proceedings Changes in Group management Share capital Outlook and short-term risks Annual General Meeting Proposal for the distribution of dividend Non-IFRS measures Calculation of key figures Consolidated financial statements (audited) Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated cash flow statement Supplemental cash flow information Statement of changes in equity Notes to the consolidated financial statements (audited) Note 1 Accounting principles Note 2 Critical accounting estimates and judgements Note 3 Segment information Note 4 Acquisitions, disposals and assets held for sale Note 5 Other operating income and expense Note 6 Personnel expenses Note 7 Board and executive remuneration Note 8 Net financial items Note 9 Income taxes Note 10 Depreciation, amortisation and impairment charges Note 11 Intangible assets and property, plant and equipment Note 12 Forest assets Note 13 Equity accounted investments Note 14 Equity instruments Note 15 Emission rights and other non-current assets Note 16 Inventories Note 17 Operative receivables Note 18 Shareholders' equity Note 19 Non-controlling interests Note 20 Post-employment benefits Note 21 Employee variable compensation and equity incentive schemes Note 22 Provisions Note 23 Operative liabilities Note 24 Financial risk management Note 25 Fair values Note 26 Debt Note 27 Derivatives Note 28 Cumulative translation adjustment and equity hedging Note 29 Commitments and contingencies Note 30 Principal subsidiaries and joint operations Note 31 Related party transactions Note 32 Earnings per share Note 33 Events after the reporting period Parent company Stora Enso Oyj financial statements (audited) Notes to the parent company financial statements (audited) Signatures for the financial statements Auditor's Report The official audited financial statements in Finnish and an unofficial Swedish translation are available at storaenso.com/download-centre The audit firm PricewaterhouseCoopers Oy has provided an independent auditor’s reasonable assurance report only on Stora Enso’s ESEF Financial Statements in Finnish in accordance with ISAE 3000 (Revised). Unaudited 2 Report of the Board of Directors Introduction to Stora Enso Part of the global bioeconomy, Stora Enso is a leading provider of renewable products in packaging, biomaterials, and wooden construction, and one of the largest private forest owners in the world. We believe that everything that is made from fossil-based materials today can be made from a tree tomorrow. Sustainability and responsible business practices are deeply embedded in our strategy. Stora Enso contributes to the transformation towards a biobased circular economy in three areas where we have the biggest impact and opportunities: climate change, biodiversity, and circularity. With our low-carbon and recyclable fiber-based products, we support our customers in meeting the demand for renewable eco-friendly products. Stora Enso had 21,790 employees on average during 2022. Our sales in 2022 were EUR 11.7 billion, with an operational EBIT of EUR 1,891 million. Stora Enso shares are listed at the Helsinki (STEAV, STERV) and Stockholm (STE A, STE R) stock exchanges. In addition, the shares are traded in the USA as ADRs. Markets and deliveries Demand for cartonboard remained elevated in 2022, with some dampening towards the end of the year. Even though the pandemic still presented challenges for certain end-use segments, it boosted others. Demand in the Asian region is stronger than the more mature European and North American markets but was negatively affected by the zero-tolerance policy of China. Containerboard demand started to weaken towards the end of 2022 as the result of normalisation in consumption patterns, inflation pressuring household budgets and large inventory draw downs in the box and finished goods markets, especially in North America and Europe. In China, pandemic-related disruptions continued to cut containerboard demand. The growth of European corrugated packaging demand in Stora Enso's main markets slowed down to 1% in 2022 mainly driven by the current economic difficulties and normalisation of e- commerce sales to pre-pandemic levels. The ongoing war in Ukraine has made consumers to reconsider their purchasing habits which slows down the growth of corrugated packaging demand even more. Largest sales for Stora Enso corrugated markets are in home and garden and in grocery and retail sectors. Global demand for chemical market pulp rebounded to 3% in 2022. Softwood pulp deliveries decreased by 1% reflecting the weakness in Chinese softwood pulp demand. Hardwood and unbleached kraft pulp (UKP) deliveries increased by 5% and by 13%, respectively. Demand for fluff pulp continued strong. The global chemical market pulp capacity increased by 2% in 2022, the softwood capacity declined by 1% while hardwood capacity increased by 4% and UKP capacity by 6%. The overall shipment-to-capacity balance stood at 90%, 1 percent-point up from 2021. Higher than expected demand and several supply side and logistics disruptions kept the pulp market tight in Europe and North America. Chinese paper and board demand continued subdued due to weak macro economy and strict zero-covid policy. Slowing economy, inflation and energy availability weakened pulp demand especially in Europe towards the end of year. Global pulp inventories were generally balanced despite imparity between grades. Softwood pulp inventories remained elevated whereas the hardwood pulp inventories were below the 5- year average level. Pulp prices reached the all-time high records in summer 2022. Hardwood pulp prices have remained resilient throughout 2022 while softwood pulp prices started to soften towards the year end. Global sawn wood consumption decreased by some 3% in 2022 according to EOS (European Organization of the Sawmill Industry) estimate. The market situation continued strong in the first part of 2022. Market supply was limited and was not able to meet the high demand, which kept the price levels high in 2022. From early summer 2022 in the USA the market situation started to cool down and prices reduced significantly. Prices started to go down in other markets as well during the second half of 2022. The war in Ukraine and extremely high inflation reduced the amount of housing starts and customer confidence which led into uncertainty in the market. During the second half and especially in Q4 the market was focusing to run inventory levels down which led into low demand and declining price levels. According to EOS North American demand reduced by 2% from 2021 levels and in Europe 5%. In Australia market remained strong longer than in USA or in Europe, but also Australian market cooled down during Q4. Year 2022 was eventful for the paper markets. European paper demand remained healthy during the first half of year, but started to decline sharply during the second half as result of macroeconomic slow down. Prices increased during the whole year and reached an all-time high level. Price increases were driven by heavily increased costs (especially energy and paper for recycling) and balanced supply and demand. The healthy supply-demand balance was driven by capacity closures and machine conversions. European paper demand was 10% weaker in 2022 compared to the previous year. In North America, demand increased by 2% and in Asia declined by 2% compared to 2021. Global paper consumption was 2% lower in 2022 than in 2021. Estimated consumption of board, pulp, sawn softwood, and paper in 2022 Tonnes, million Europe North America Asia and Oceania Consumer board 11.2 9.6 29.4 Containerboard 35.1 33.1 89.1 Corrugated board (billion m2)1 11.0 n/a n/a Chemical market pulp 17.4 8.0 36.0 Sawn softwood (million m3) 78.9 99.9 n/a Newsprint 3.6 1.4 5.8 Uncoated magazine paper 2.1 0.9 0.1 Coated magazine paper 2.7 1.2 2.2 Coated fine paper 3.2 2.7 9.2 Uncoated fine paper 5.9 6.1 28.3 1 European focus markets (Baltics, FI, PL, SE) Source: Afry Smart, ICCA, RISI, Numera, Euro-Graph, PPPC, EPIS, Hawkins Wright, Stora Enso, EOS Unaudited 3 Production and external deliveries 2022 2021 Change % 2022–2021 Board deliveries, 1,000 tonnes 4,294 4,258 0.9% Board production, 1,000 tonnes 4,682 4,685 -0.1% Corrugated packaging European deliveries, million m2 741 949 -21.9% Corrugated packaging European production, million m2 771 1,049 -26.5% Market pulp deliveries, 1,000 tonnes 2,374 2,495 -4.9% Wood product deliveries, 1,000 m3 4,397 4,803 -8.5% Wood deliveries, 1,000 m3 13,304 12,091 10.0% Paper deliveries, 1,000 tonnes 1,924 2,872 -33.0% Paper production, 1,000 tonnes 1,926 2,776 -30.6% The Group’s board deliveries totalled 4,294,000 tonnes, which was 36,000 tonnes, or 0.9% higher compared to a year ago. Corrugated packaging European deliveries decreased by 208 million m2 or 21.9% to 741 million m2 mainly due to exit from Russian operations. Market pulp deliveries decreased by 121,000 tonnes, or 4.9%, to 2,374,000 tonnes, mainly due to higher share of internal deliveries. Wood product deliveries decreased by 406,000 m3 or 8.5% to 4,397,000 m3, mainly due to exit from Russian operations. Wood deliveries increased by 1,213,000 m3 or 10.0% to 13,304,000 m3 supported by higher deliveries in Sweden. Paper deliveries totalled 1,924,000 tonnes, down 948,000 tonnes, or 33.0%, from 2021, driven by the structural changes. Operational key figures, items affecting comparability and other non- IFRS measures The list of Stora Enso’s non-IFRS measures and the calculation of our key figures are presented at the end of the Report of the Board of Directors. See also the chapter Non-IFRS measures at the end of this report. Financial results – Group Group sales increased by 15% year-on-year to EUR 11,680 (10,164) million. Operational EBIT was EUR 1,891 (1,528) million, and the operational EBIT margin was 16.2%. Earnings per share increased by 22% to EUR 1.97 (1.61) and earnings per share excluding fair valuations increased by 31% to EUR 1.55 (1.19). The IFRS operating profit includes a positive net effect of EUR 195 (positive 328) million from biological asset valuation from subsidiaries and joint operations. The positive impact comes mainly from the increase in fair valuation in Stora Enso owned forests in Sweden, mainly driven by higher market prices. There is also a positive net effect of EUR 168 (positive 84) million from Stora Enso’s share of net financial items, taxes and biological asset valuation of equity accounted investments. The positive impact comes mainly from the change in the valuation method and increase in fair valuation in Finnish forests, through Stora Enso's 41% investment in Tornator. Tangible and intangible asset (including goodwill) impairments amounted to EUR 114 (149) million. Impairment reversals amounted to EUR 7 (0) million, The Group recorded items affecting comparability (IAC) with a negative impact of EUR 245 (negative 354) million on its IFRS operating profit and a positive impact of EUR 9 (positive 58) million on income taxes. The IAC relate mainly to the disposal of Russian operations. The IFRS operating profit was EUR 2,009 (1,568) million. Segment share of operational EBIT, IAC, fair valuations and non-operational items and operating profit/loss Year Ended 31 December Operational EBIT IAC, Fair Valuations and Non-Operational items Operating Profit/Loss EUR million 2022 2021 2022 2021 2022 2021 Packaging Materials 596 556 -1 -4 595 552 Packaging Solutions -2 26 -100 -4 -101 23 Biomaterials 687 495 -19 11 668 506 Wood Products 309 364 -56 -1 253 363 Forest 204 267 319 355 523 622 Paper 185 -124 -14 -298 172 -423 Other -47 -48 -12 -19 -59 -67 Total 1,891 1,528 118 40 2,009 1,568 Net financial items -151 -149 Profit before Tax 1,858 1,419 Income tax expense -322 -151 Net Profit 1,536 1,268 Operational EBIT comprises the operating profit excluding items affecting comparability (IAC) and fair valuations from the segments and Stora Enso’s share of the operating profit of equity accounted investments (EAI), also excluding items affecting comparability and fair valuations. IAC =Items affecting comparability are exceptional transactions that are not related to recurring business operations. The most common IAC are capital gains and losses, impairments or impairment reversals, disposal gains and losses relating to Group companies, provisions for planned restructurings, environmental provisions, changes in depreciation due to restructuring and penalties. Items affecting comparability are normally disclosed individually if they exceed one cent per share. Fair valuations and non-operational items include CO2 emission rights, non-operational fair valuation changes of biological assets, adjustments for differences between fair value and acquisition cost of forest assets upon disposal and the Group’s share of income tax and net financial items of EAI. Non-operational fair value changes of biological assets reflect changes made to valuation assumptions and parameters. Operational fair value changes of biological assets contain all other fair value changes, mainly due to inflation and differences in actual harvesting levels compared to the harvesting plan. The adjustments for differences between fair value and acquisition cost of forest assets upon disposal are a result of the fact that the cumulative non-operational fair valuation changes of disposed forest assets were included in previous periods in IFRS operating profit (biological assets) and other comprehensive income (forest land) and are included in operational EBIT only at the disposal date. Unaudited 4 Items affecting comparability, fair valuations and non-operational items Year Ended 31 December EUR million 2022 2021 Impairments and impairment reversals -124 -141 Restructuring costs excluding impairments -3 -227 Acquisitions and disposals -104 11 Other -15 4 Items affecting comparability -245 -354 Fair valuations and non-operational items 363 394 Total 118 40 Segment share of operative assets, operative liabilities and operating capital Year Ended 31 December Operative Assets Operative Liabilities Operating Capital EUR million 2022 2021 2022 2021 2022 2021 Packaging Materials 4,441 4,120 1,097 914 3,344 3,206 Packaging Solutions 381 422 146 176 235 245 Biomaterials 3,095 2,755 299 236 2,796 2,520 Wood Products 998 955 280 277 718 678 Forest 7,481 7,131 518 435 6,963 6,696 Paper 887 884 554 761 333 123 Other and eliminations 1,432 970 16 131 1,416 839 Total 18,715 17,237 2,909 2,930 15,806 14,307 Key figures 2022 2021 2020 Sales, EUR million 11,680 10,164 8,553 Operational EBIT, EUR million 1,891 1,528 650 Operational EBIT margin 16.2% 15.0% 7.6% Operating profit (IFRS), EUR million 2,009 1,568 922 Operating profit margin (IFRS) 17.2% 15.4% 10.8% Return on equity (ROE) 13.3% 13.0% 7.6% Operational ROCE 13.8% 12.4% 5.8% Operational ROCE excl. Forest division 20.9% 17.8% 7.0% Net debt/equity ratio 0.15 0.22 0.33 EPS (basic), EUR 1.97 1.61 0.79 EPS excluding FV, EUR 1.55 1.19 0.45 Dividend and distribution per share1, EUR 0.60 0.55 0.30 Payout ratio, excluding FV 38.6% 46.3% 66.7% Payout ratio (IFRS) 30.5% 34.3% 38.0% Dividend and distribution yield, (R share) 4.6% 3.4% 1.9% Price/earnings (R share), excluding FV 8.46 13.60 34.78 Equity per share, EUR 15.89 13.55 11.17 Market capitalisation 31 Dec, EUR million 10,503 12,809 12,383 Closing price 31 Dec, A/R share, EUR 13.90/13.15 16.60/16.14 15.90/15.65 Average price, A/R share, EUR 16.58/16.12 16.68/15.70 12.06/11.52 Number of shares 31 Dec (thousands) 788,620 788,620 788,620 Trading volume A shares (thousands) 1,174 1,750 4,662 % of total number of A shares 0.7% 1.0% 2.6% Trading volume R shares (thousands) 455,952 422,493 605,233 % of total number of R shares 74.5% 69.0% 98.8% Average number of shares, basic (thousands) 788,620 788,620 788,620 Average number of shares, diluted (thousands) 789,391 789,126 789,182 1 See the Board of Directors' proposal for dividend distribution. Sales and operational EBIT Operational ROCE excl. Forest Net debt to operational EBITDA Unaudited 5 Net financial expenses at EUR 151 (149) million were EUR 2 million higher than a year ago. Net interest expenses, at EUR 105 million, decreased by EUR 20 million, mainly as a result of higher interest income on interest-bearing receivables and deposits. Other net financial expenses, at EUR 44 million, were EUR 22 million higher, mainly due to write-down of Russia related loan receivables and loss allowance. The net foreign exchange impact in respect of cash equivalents, interest-bearing assets and liabilities and related foreign-currency hedges amounted to a loss of EUR 1 (loss of EUR 2) million, mainly due to a revaluation of foreign currency net debt in subsidiaries and joint operations located in China, Brazil, Poland and Russia. The net tax charge totalled EUR 322 (151) million, equivalent to an effective tax rate of 17.3% (10.7%), as described in more detail in the Note 9 (Income taxes). The loss attributable to non-controlling interests was EUR 13 (gain EUR 3) million, leaving a profit of EUR 1,550 (1,266) million attributable to Company shareholders. Earnings per share excluding fair valuations were EUR 1.55 (1.19). Operational return on capital employed was 13.8% (12.4%). The Group capital employed was EUR 14,356 million on 31 December 2022, an increase of EUR 1,380 million, mainly due to the increase of the fair valuation of forest assets in Sweden and shares in Pohjolan Voima. Breakdown of Capital Employed change EUR million Capital Employed 31 December 2021 12,976 Capital expenditure excluding investments in biological assets less depreciation 168 Investments in biological assets less depletion of capitalised silviculture costs 7 Impairments and reversal of impairments -107 Fair valuation of forest assets 529 Unlisted securities (mainly PVO) 533 Equity accounted investments 254 Net liabilities in defined benefit plans 152 Operative working capital and other interest-free items, net 399 Emission rights 13 Net tax liabilities -236 Translation difference -314 Other changes -18 31 December 2022 14,356 Financing Cash flow from operations was EUR 1,873 (1,752) million and cash flow after investing activities was EUR 1,162 (1,101) million. Working capital increased by EUR 461 (increased 25) million, inventories increased by EUR 454 million and trade receivables by EUR 184 million. Trade payables increased by EUR 267 million and thus had a positive impact on working capital. Payments related to the previously recognised provisions were EUR 126 million. Operative cash flow EUR million 2022 2021 Operational EBITDA 2,529 2,184 IAC on operational EBITDA -133 -213 Other adjustments -62 -194 Change in working capital -461 -25 Cash Flow from Operations 1,873 1,752 Cash spent on fixed and biological assets -705 -645 Acquisitions of equity accounted investments -7 -6 Cash Flow after Investing Activities 1,162 1,101 At the end of the year, Group net interest-bearing liabilities were EUR 1,853 (2,309) million. The decrease in net interest-bearing liabilities was mainly driven by a strong cash flow from operations after investments and dividend payments. Cash and cash equivalents net of bank overdrafts increased to EUR 1,917 (1,480) million. The net debt/equity ratio at 31 December 2022 decreased to 0.15 (0.22). The ratio of net debt to the last 12 months' operational EBITDA decreased to 0.7 (1.1) due to lower net debt and higher operational EBITDA. The average interest rate on borrowings for the full year 2022 increased to 3.3% (3.0%) with a run-rate of 3.3% as per the end of the fourth quarter. During 2022, altogether EUR 550 million of bilateral bank loans were arranged. Maturities of these loans vary from 18 months to 3 years with extension options. Proceeds from these loans are used for general corporate purposes and EUR 200 million of these loans were undrawn at reporting date. In May 2022, Stora Enso signed a new EUR 200 million committed credit facility with a maturity of one year and one six month extension option which was exercised in October 2022. In December 2021, Stora Enso signed a new EUR 700 million Revolving Credit Facility (RCF) with 12 commercial banks. The maturity of the facility is five years with two one-year extensions. The pricing is partly linked to meeting emission targets on Scope 1&2 and Scope 3. In October 2022, the first extension option of this facility was used together with all 12 banks and therefore maturity is now in 2027. Simultaneously, the existing EUR 600 million RCF with original maturity in 2023 was cancelled. Additionally, Stora Enso has access to statutory pension premium loans in Finland up to EUR 1,050 (1,000) million. The forest land fair valuation increased the Group’s other comprehensive income in equity by EUR 264 (195) million. The fair valuation of cash flow hedges and equity investments fair valued through other comprehensive income increased equity by EUR 563 (decreased by EUR 474) million. This is due to a significantly higher fair valuation of the Group’s shareholding in Pohjolan Voima Oy (PVO), owing to higher forward electricity prices partly and also by net fair valuation gains from outstanding cash flow hedge derivatives recorded in other comprehensive income. At the end of the year, the ratings for Stora Enso’s rated bonds were as follows: Rating agency Long/short-term rating Valid from Fitch Ratings BBB- (stable) 8 August 2018 Moody’s Baa3 (stable) / P-3 1 November 2018 Unaudited 6 Financial results – Segments Packaging Materials division The Packaging Materials division is a global leader and expert in circular packaging providing premium packaging materials based on virgin and recycled fiber. Addressing the needs of today’s eco-conscious consumers, Stora Enso helps customers replace fossil-based materials with low-carbon, renewable and recyclable alternatives for their food, beverage and transport packaging. A wide selection of base boards and barrier coatings enables design optimisation for various demanding packaging end-uses. EUR million 2022 2021 Sales 4,690 3,898 Operational EBITDA 900 846 Operational EBITDA margin 19.2% 21.7% Operational EBIT 596 556 Operational EBIT margin 12.7% 14.3% Operational ROOC 18.2% 18.0% Cash flow from operations 756 807 Cash flow after investing activities 440 459 Board deliveries, 1,000 tonnes 4,599 4,616 Board production, 1,000 tonnes 4,682 4,685 Packaging Materials division sales were at an all-time high level of EUR 4,690 (3,898) million, an increase of 20%, driven by higher sales prices in all business segments. Consumer board market remained strong throughout the year, while the containerboard market turned soft during the second half of the year, impacting the volume growth year-on-year. An all-time high operational EBIT at EUR 596 (556) million increased by EUR 40 million despite of heavy cost increases on all variable cost components. Record high result was driven by extraordinarily strong Containerboard performance during first half year, partly offsetting the variable cost escalation. Packaging Solutions division The Packaging Solutions division develops and sells premium fiber-based packaging products and services. Stora Enso’s high-end eco-friendly packaging products are used by leading brands across multiple market sectors, including the retail, e-commerce and industrial sectors. The portfolio includes converting corrugated board and carton board, and other new materials such as formed fiber and wood foams into standard and bespoke packaging solutions. The division also provides design and sustainability services for our customers, as we support a shift towards circular solutions. EUR million 2022 2021 Sales 737 723 Operational EBITDA 27 56 Operational EBITDA margin 3.6% 7.8% Operational EBIT -2 26 Operational EBIT margin -0.2% 3.6% Operational ROOC -0.7% 10.8% Cash flow from operations -5 56 Cash flow after investing activities -40 26 Corrugated packaging European deliveries, million m2 772 1,046 Corrugated packaging European production, million m2 771 1,049 Packaging Solutions division sales were at an all-time high of EUR 737 (723) million, up 2%, driven by higher sales prices following the higher cost levels as well as higher sales for innovation and service led businesses. The revenue from innovation and service led businesses increased by almost 50%. Examples of these businesses are formed fiber, circular solutions, reusable solutions and packaging automation. Operational EBIT was EUR -2 (26) million, impacted mainly by the divestment of the Russian units and investments in innovation and service led businesses. Operational EBIT for traditional businesses, excluding Russia, increased. Sales and operational EBIT Packaging Materials Operational ROOC Packaging Materials Sales and operational EBIT Packaging Solutions Operational ROOC Packaging Solutions Unaudited 7 Biomaterials division The Biomaterials division meets the growing demand for bio-based solutions which replace fossil-based and non-renewable materials. Stora Enso achieves this by using all fractions of biomass, like lignin, to develop new solutions including novel applications such as bio-based anode material for batteries and bio-based binders. Our pulp offering encompasses a wide variety of grades to meet the demands of packaging, paper, tissue, specialities, and hygiene product producers. We also serve the biochemicals market with tall oil and turpentine from biomass for further refining. Pulp continues to be our foundation while long-term growth is driven by new products and innovations. EUR million 2022 2021 Sales 2,180 1,728 Operational EBITDA 822 618 Operational EBITDA margin 37.7% 35.7% Operational EBIT 687 495 Operational EBIT margin 31.5% 28.7% Operational ROOC 25.8% 20.8% Cash flow from operations 682 490 Cash flow after investing activities 536 391 Pulp deliveries, 1,000 tonnes 2,554 2,576 Biomaterials division sales were at an all time high at EUR 2,180 (1,728) million, up 26% due to significantly higher pulp sales prices in all grades and favourable currency exchange rates. The market was strong, supported by a good operational efficiency. Operational EBIT, at EUR 687 (495) million increased by EUR 192 million, mainly due to significantly higher sales prices in all grades, supported by good delivery volumes. Operational EBIT was negatively impacted by higher costs. Foreign exchange rates had a positive impact on operational EBIT. Side streams contributed more than in previous year. Wood Products division The Wood Products division is the largest sawn wood producer in Europe and a leading provider of sustainable wood-based solutions for the global construction industry. The growing Building Solutions business offers building concepts and a full range of products to support low-carbon construction. Stora Enso develops services and digital tools to simplify the design and construction of buildings with wood. Additionally, we offer applications for windows and doors, and pellets for sustainable heating solutions. EUR million 2022 2021 Sales 2,195 1,872 Operational EBITDA 356 410 Operational EBITDA margin 16.2% 21.9% Operational EBIT 309 364 Operational EBIT margin 14.1% 19.5% Operational ROOC 44.2% 59.4% Cash flow from operations 346 313 Cash flow after investing activities 264 252 Wood products deliveries, 1,000 m3 4,235 4,508 Wood Products division sales were at an all-time-high level of EUR 2,195 (1,872) million, up 17% due to favourable market, record high sales prices, and improved productivity. After a period of strong sawn wood market, there was a rapid decline in demand after the summer. The building solutions business continued to benefit from the favourable trend of building with wood. Operational EBIT was the second highest result, after the all-time high in 2021, at EUR 309 (364) million. It decreased by EUR 55 million, or 15%. The positive impact of sales prices was offset by higher costs for logs, logistics, energy, and increased fixed costs. Sales and operational EBIT Biomaterials Operational ROOC Biomaterials Sales and operational EBIT Wood Products Operational ROOC Wood Products Unaudited 8 Forest division The Forest division creates customer value through innovative solutions, competitive wood supply and sustainable forest management. Forests are the foundation for Stora Enso’s renewable offerings. The division manages Stora Enso’s forest assets in Sweden and a 41% share of Tornator, whose forest assets are mainly located in Finland. It is also responsible for wood sourcing for Stora Enso’s Nordic and Baltic operations and B2B customers. Stora Enso is one of the biggest private forest owners in the world. EUR million 2022 2021 Sales 2,519 2,311 Operational EBITDA 256 318 Operational EBITDA margin 10.2% 13.7% Operational EBIT 204 267 Operational EBIT margin 8.1% 11.5% Operational ROCE 3.7% 5.1% Cash flow from operations 146 158 Cash flow after investing activities 91 112 Wood deliveries, 1,000 m3 38,217 39,652 Operational fair value change of biological assets 87 82 Forest division sales were EUR 2,519 (2,311) million, up 9% due to higher sales prices. Operational EBIT at EUR 204 (267) million decreased by 24%. Excluding the large forest area sale in Hylte in Sweden in 2021, operational EBIT improved by 6% from last year. Paper division At the end of 2022, Stora Enso had an established customer base and its product portfolio had offerings for print and office use. Customers benefit from Stora Enso’s selection of paper grades made from recycled and virgin fiber, our technical and operational expertise and sustainability know-how, and our sales and customer service centre network. EUR million 2022 2021 Sales 1,772 1,703 Operational EBITDA 242 -48 Operational EBITDA margin 13.7% -2.8% Operational EBIT 185 -124 Operational EBIT margin 10.5% -7.3% Operational ROOC 81.3% -40.3% Cash flow from operations 77 -25 Cash flow after investing activities 16 -77 Cash flow after investing activities to sales 0.9% -4.5% Paper deliveries, 1,000 tonnes 1,924 2,872 Paper production, 1,000 tonnes 1,926 2,776 Paper division sales increased by 4% to EUR 1,772 (1,703) million, despite lower deliveries due to the closures of the Veitsiluoto and Kvarnsveden sites in Q3/2021. Paper prices increased significantly throughout the year, resulting in successful turnaround of the paper business supported by good supply-demand balance. Sales from retained business, after the closures of Veitsiluoto and Kvarnsveden, increased by 50%. Operational EBIT at EUR 185 (-124) million increased by EUR 310 million, due to the significantly higher sales prices more than offsetting the increase in variable costs, especially energy. Cash flow after investing activities was EUR 16 (-77) million driven by improved profitability, however impacted by the higher restructuring provision payouts during the year. Cash flow from the retained business was EUR 94 (-8) million. Sales and operational EBIT Forest Operational ROCE Forest Sales and operational EBITDA Paper Cash flow after investing activities to sales ratio Paper Unaudited 9 Other The segment Other includes Stora Enso’s shareholding in the energy company Pohjolan Voima (PVO), and the Group’s shared services and administration. EUR million 2022 2021 Sales 1,097 1,092 Operational EBITDA -33 -9 Operational EBITDA margin -3.0% -0.8% Operational EBIT -47 -48 Operational EBIT margin -4.3% -4.4% Cash flow from operations -130 -48 Cash flow after investing activities -146 -62 Sales for Segment Other at EUR 1,097 (1,092) million and operational EBIT at negative EUR 47 (48) million remained flat compared to previous year. Investments and capital expenditure Additions to fixed and biological assets including internal costs capitalised in 2022 totalled EUR 778 (666) million. The total amount includes additions in biological assets of EUR 77 (58) million. In January, an investment of EUR 40 million was announced to enhance operational and carbon footprint performance for fluff pulp production at the Skutskär site in Sweden. In February, Stora Enso announced an investment of EUR 9 million in an automated CLT (cross-laminated timber) coating line at the Ybbs sawmill in Austria. The solution will shorten construction times and improve wood protection. In April, Stora Enso decided to invest EUR 10 million to reduce annual operational CO2 emissions by 70,000 tonnes at its Enocell site, Finland, replacing fossil-based fuel oil with renewable pitch oil made from trees. This complements the main energy source, sawdust powder, utilising 100% bio energy. Following the feasibility study announced in February 2022 Stora Enso announced in October, that it will invest approximately EUR 1 billion to convert the remaining idle paper machine at the Oulu site in Finland into a high-volume consumer board line. The investment supports the Group’s growth strategy in renewable packaging by providing new volume for growing packaging segments. The targeted end-use segments are food and beverage packaging, especially frozen and chilled, and dry and fast food, mainly in Europe and North America. Production on the converted machine is estimated to start in early 2025. Stora Enso’s new production site for cross-laminated timber (CLT) in Ždírec, the Czech Republic, was inaugurated in October. Following the EUR 79 million investment, the new CLT site is one of the most modern in the world, supporting Stora Enso’s strategy of growth within wooden building solutions. The estimated annual production capacity will be approximately 120,000 m³ after ramp-up. The investment in centralising and modernising the wood handling capacity at the Imatra site in Finland was completed in November. The investment of EUR 80 million, started in the first quarter of 2021, reduces water usage at the site by 85% and enhances Stora Enso’s production capabilities for premium packaging board. The project included installation of a new, third debarking line, improvements to chip handling systems, and modifications to the existing wood yard infrastructure. In December, Stora Enso announced a EUR 38 million investment in unbleached kraft pulp (UKP) production at its Enocell site in Finland and a EUR 42 million investment in fluff pulp production improvement at its Skutskär site in Sweden to strengthen its focus on specialised pulp grades. These investments will support the growing consumer demand for non-bleached renewable packaging materials and hygiene products respectively. Stora Enso is conducting a feasibility study regarding the conversion of the one of the two paper line at its Langerbrugge site in Belgium into a high-volume recycled containerboard line. The feasibility study is expected to be finalised in the first half of 2023. Depending on an investment decision, the converted line is expected to be in production during 2025. The annual capacity would be 700,000 tonnes of testliner and recycled fluting grades and would generate annual sales of approximately EUR 350 million when run at full capacity. The total investment for the conversion is estimated to be approximately EUR 400 million. The Group is also evaluating its first industrial production line of lignin at the Sunila site in Finland through a feasibility study. The other main projects ongoing at the end of 2022 were an investment in increasing capacity at the Skoghall board production site in Sweden, and Skutskär bleach plant upgrade in Sweden. Changes in the Group structure During 2022, Stora Enso divested its three corrugated packaging plants in Lukhovitsy, Arzamas and Balabanovo in Russia to local management. Stora Enso also divested its two sawmills in Nebolchi and Impilahti in Russia to local management. The divestment included Stora Enso’s Russian forest operations which supplied wood to the sawmills. Minor formalities remain to complete the transaction for certain Russian legal entities. In March, Stora Enso announced that it would divest four of its five paper mills. In September, Stora Enso signed agreements to divest the Maxau paper production site in Germany to Schwarz Produktion, part of Schwarz Group, one of the top retailers in the world, and the Nymölla site in Sweden to Sylvamo, a US-based global producer of uncoated paper. The divestment of the Nymölla site to Sylvamo was concluded in early January, and the divestment of the Maxau site is expected to be finalised during the first half of 2023. The divestment of the Hylte site in Sweden to Sweden Timber was announced in January 2023. The Group also announced that the Anjala paper will be retained in the Group. In September, Stora Enso announced the acquisition of De Jong Packaging Group, based in the Netherlands, for an enterprise value of EUR 1,020 million. The acquisition advances Stora Enso’s strategic direction, accelerates revenue growth and builds market share in renewable packaging in Europe. De Jong Packaging Group is one of the largest corrugated packaging producers in the Benelux countries. Its product portfolio and geographic presence complement and enhance Stora Enso’s offering, especially in fresh produce, e-commerce and industrial packaging. The transaction was completed in January 2023. Innovation, research and development Stora Enso’s total spend on innovation, research and development in 2022 was EUR 112 (133) million, equivalent to 1.0% (1.3%) of total sales. Research and development work is a basic element for staying relevant and competitive towards customers. The company employed approximately 400 people in research and development. The responsibility of product innovations and development of services is at the business divisions while long-term science and research priorities are driven by Group Innovation and R&D. Stora Enso's innovation and growth focus is on the development of sustainable packaging applications to replace plastic-based materials, bio-based barriers solutions for packaging, innovative biomaterials or high-end applications, and the development of sustainable wooden- Unaudited 10 based materials and components in Building Solutions which store carbon and improve buildings’ energy efficiency. Intellectual property (IP) is an important tool to protect and secure Stora Enso's development of innovative products and processes. During 2022, Stora Enso continued to strengthen its patent portfolio by applying for patents for 83 new innovations. The focus of the new patent filings has been within Biomaterials, Packaging Materials and Packaging Solutions. Stora Enso’s patent portfolio amounts to over 3,800 applications and granted patents. For more information on Stora Enso's Innovation and R&D, please see the section Our strategy. Non-financial information Requirements of non-financial information reporting according to the Finnish Accounting Act are reported below. The scope of the reporting includes those non-financial topics that relate to the Group’s key risks. Risks and policy principles related to these topics are additionally described in the chapter Risks and Risk Management, including Stora Enso’s reporting according to Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Business model Stora Enso is one of the leading providers of renewable products in packaging, biomaterials and wooden construction, and one of the largest private forest owners in the world. Sustainability is deeply embedded in the Group's strategy and responsible business practices. Stora Enso contributes to the transformation towards a biobased circular economy in three areas where it has the biggest impact and opportunities: climate change, biodiversity, and circularity. A description of Stora Enso's business model is at the beginning of the Report of Board of Directors. Stora Enso acknowledges the importance of the United Nations Sustainable Development Goals (SDGs) as part of a commonly agreed global ambition to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere. Stora Enso supports all seventeen SDGs, and goals 12 (Responsible consumption and production), 13 (Climate action), and 15 (Life on land) have been identified as most relevant where the Group has the largest impact through its operations and products. Sustainability governance Sustainability is a key element of Stora Enso’s corporate governance, promoted by the Board of Directors, the CEO, and the Group Leadership Team (GLT). The CEO carries the ultimate responsibility for the successful implementation of the sustainability strategy. Work on sustainability is led by the Executive Vice President, Sustainability, who reports directly to the CEO. The Board of Directors’ Sustainability and Ethics Committee oversees the implementation of Stora Enso’s Sustainability Strategy and Ethics and Compliance Strategy. The Committee met four times in 2022. Stora Enso’s Sustainability Policy describes the Group's overall approach to sustainability and the governance model. At the same time, the Code of Conduct and other policies, guidelines, and statements on specific sustainability topics all further elaborate the approach, while also guiding the Group’s employees in their everyday work. These documents are available at storaenso.com/sustainability. More information on Stora Enso’s approach to sustainability is included in the sections Our Strategy and Sustainability reporting. Environmental matters Climate change Key policy: Energy and Carbon Policy Stora Enso's science-based target is to reduce absolute scope 1 and 2 greenhouse gas (GHG) emissions from operations by 50% by 2030 from the 2019 baseline year, in line with the 1.5- degree scenario. Stora Enso is also committed to a target to reduce scope 3 GHG emissions by 50% by 2030 from the 2019 baseline year. In 2022, Stora Enso’s absolute GHG emissions (scope 1 and 2) were 27% lower than the baseline level (14%1 lower in 2021). During 2022, the emissions decreased mainly due to less use of fossil fuels in multiple production sites as well as the ceasing operations at the Veitsiluoto mill in Finland. Stora Enso’s estimated GHG emissions elsewhere along the value chain (scope 3) were 27% lower than the baseline level (4%1 lower in 2021). The emissions decreased year-on-year due to mill closures and the end of dissolving pulp production. 1 Historical figures recalculated due to divestments or additional data after the previous annual report. Sustainable forestry and biodiversity Key policy: Wood and Fiber Sourcing, and Land Management policies Stora Enso is committed to achieving a net-positive impact on biodiversity in its own forests and plantations by 2050 through active biodiversity management. During 2022, Stora Enso launched a Biodiversity Leadership Programme with selected projects to drive the delivery of this target. The programme covers Stora Enso’s own forests, suppliers’ forests, and global forests, as well as improving biodiversity beyond the forest sector. The company uses its own forest in Sweden as a platform for continuously developing new biodiversity management practices to be adapted to local conditions and implemented in different geographical areas when feasible. Measures to be developed, tested and used in the Company's own forests in Sweden include: application of modern digital tools to improve accuracy of planning and operations; increasing amount of deadwood and broad-leaved trees, especially birch; continuous cover forestry in suitable areas; and increasing use of controlled burning in forest regeneration. Stora Enso monitors and measures the state of biodiversity and the impact of its operations on biodiversity with selected science-based indicators. Currently, Stora Enso follows its progress in sustainable forestry with a key performance indicator that measures the proportion of land in wood production and harvesting owned or leased by Stora Enso covered by forest certification schemes. At the end of 2022, Stora Enso owned or leased lands covered a total area of 2.01 million hectares (2.01 million hectares in 2021). The majority of Stora Enso’s owned or leased lands are located in Sweden. For more details, see the Note 12. The Group’s target is to maintain the high level of 96%, and in 2022, the certification coverage amounted to 99% (99%1 in 2021). Certain purchased areas in Stora Enso’s joint operations in Brazil and Uruguay were in the certification process but not yet certified by the end of 2022. In 2022, the total amount of wood (including roundwood and wood chips) delivered to Stora Enso's mills was 35.1 million m3 (solid under bark) (37.6 million m3 in 2021). The proportion of third-party certified wood in the Group's total wood supply was 80% (77%). 1 Reporting on total land area and its forest certification coverage aligned with financial reporting on forests assets. Historical figures recalculated for comparability. For more information, see Note 12 Unaudited 11 Circularity Key policy: Stora Enso Circular Design Guidelines Stora Enso is committed to transparent and circular material flows that help to minimise waste and combat climate change. The target is to achieve 100% recyclable products by 2030. By the end of 2022, 94% of the Group's products were recyclable.2 2 Based on the technical recyclability of products and their production volumes consolidated as tonnes. Technical recyclability is defined by international standards and tests when available, such as PTS and CTP, and in absence of these by Stora Enso’s own tests that prove recyclability. The reporting scope includes Stora Enso’s packaging, pulp, paper and solid wood products as well as biochemical by- products. Water Key policy: Stora Enso Environmental Guidelines The objective of the Group’s key performance indicators on total water withdrawal and process water discharges is to drive a downward trend from the 2016 baseline of 59 m3 and 27 m3 per saleable tonne of product, respectively. In 2022, total water withdrawal was 61 m3 per saleable tonne (60 m3 in 2021) and process water discharges amounted to 31 m3 per saleable tonne (31 m3 in 2021). Water performance normalised by tonne was partly affected by lower production levels compared to the baseline year. From 2023, the target for process water discharge is to reduce specific process water discharges per saleable tonne (m3/tonne) by 17% by 2030 from its new baseline year, 2019. The amount of water required at Stora Enso’s board, pulp and paper mills is not directly related to production volumes, and wastewater treatment, in particular, requires a regular flow of water to function properly. Social and employee matters Employees Key policies: Minimum Human Resources Requirements for labour conditions On 31 December 2022, there were 20,879 (22,094) employees in the Group. The average number of employees in 2022 was 21,790, which is 1,281 less than the average number in 2021. The figures include 50% of the employees at Veracel in Brazil and Montes del Plata in Uruguay. Read more in the chapter Employees in the Sustainability reporting section. Personnel expenses totalled EUR 1,315 (1,351) million or 11.3% of sales. Wages and salaries were EUR 996 (1,017) million, pension costs EUR 152 (165) million and other employer costs amounted to EUR 160 (162) million. At the end of 2022, the Group's top four countries in respect to the number of employees were Finland, Sweden, China, and Poland. 25% (24%) of all employees were women. As of 2022, Stora Enso's target is to increase the share of female managers among all managers to 25% by the end of 2024. By the end of 2022, 23% of managers were female. Personnel turnover in 2022 was 13.9%(13.2%). Illness-related absenteeism amounted to 4.1% (3.8%) of total theoretical working hours. The Group's wages in relation to local minimum wages and approach to living wages are described in chapter Employees in the Sustainability reporting section. Remuneration to the Board of Directors and key management is described in Note 7 of the consolidated financial statements. Safety Key policy: Health and Safety Policy In 2022, the Total Recordable Incident (TRI) rate decreased to 5.9 (6.2). The milestone of 5.3 for 2022 was not achieved. Even though Stora Enso’s safety performance has remained stable over the past years, it is does not reflect the Group’s dedication of everybody home safe, every day. Sustainable sourcing Key policy: Supplier Code of Conduct (SCoC) Stora Enso’s key performance indicator for responsible sourcing measures the proportion of Group's total supplier spend covered by the Supplier Code of Conduct (SCoC), including all categories and regions. By the end of 2022, 96% of Stora Enso’s total spend on materials, goods, and services was duly covered (96% at the end of 2021), which exceeds the target to maintain at least the level of 95%. Respect for human rights Key policy: Human Rights Policy and Guidelines Stora Enso’s commitment to respect human rights covers all our operations, including employees, contractors, suppliers, and neighbouring communities. In addition to the Group's commitment to the UN Guiding Principles on Business and Human Rights, Stora Enso’s annual Slavery and Human Trafficking Statement is available at storaenso.com/sustainability. While Stora Enso considers all human rights to be important and respects them, the human rights identified as having the highest priority remain the primary focus. This includes the following topics: •Health and safety •Fair labour (fair employment conditions, freedom from forced labour, freedom of association, non-discrimination and non-harassment) •Land and natural resource rights acquisition and management •Grievance mechanisms •Children’s rights (relevant to the forest sector) In preparation for the upcoming EU Corporate Sustainability Due Diligence (CSDD) directive, Stora Enso, together with an external business and human rights consultancy, carried out three pilot projects in 2022 focused on improving our internal controls for two high risk supply chains, as well as the due diligence processes in our own operations. Read more in chapter Human Rights in the Sustainability reporting section. During 2022, Stora Enso continued to address land and natural resource rights in Guangxi, China and Bahia, Brazil. Guangxi, China Stora Enso leases 73,133 hectares of land in Guangxi province China, of which 53,437 hectares is leased from state-owned forest farms. The remaining 19,696 hectares, or 27% of the total area, is social land leased from village collectives, individual households, and local forest farms. Parts of the land leased by Stora Enso have been occupied for up to ten years for the purpose of growing crops and trees on a small scale. In some cases, the occupiers are claiming rights to the land based on historical land ownership documents that have been superseded by state ownership in successive land reform processes. Recovery of occupied land continued in 2022, with 6,124 hectares of land still under occupation at the end of the year. In December 2022, Stora Enso initiated a divestment process for the Beihai site and the forest operations. Unaudited 12 Bahia, Brazil In Bahia, Brazil, work continued on a Sustainable Settlement Initiative launched in 2012 to provide farming land and educational support for local families in the landless people’s social movements. In 2018, Veracel signed a new agreement with the social landless movements to complement the earlier agreed Sustainable Settlement Initiative. At the end of 2022, 182 hectares or 0.2% of productive land owned by Veracel remained occupied by movements not involved in the agreements. At the end of 2022, the total land area owned by Veracel was 210,000 hectares, of which 82,000 hectares are used for growing eucalyptus for pulp production. Approximately half of Veracel's lands are dedicated to protecting local biodiversity by restoring and conserving the natural Atlantic rainforest. Community Key policies: Human Rights Policy and Guidelines, Community Investment Guidelines During 2022, Stora Enso initiated a number of large cash donations towards humanitarian emergency relief. Two donations were directed towards the Ukraine crisis and one towards the emergency relief following the severe flooding in Pakistan. The donations were channelled through UNHCR. The total monetary value of the community contribution towards Ukraine across the Group was EUR 0.25 million. In 2022, Stora Enso’s total voluntary community investment was EUR 2.0 million. Anti-corruption and bribery matters Key policies: Business Practice Policy, the Stora Enso Code (Code of Conduct) A total of 153 (117 in 2021) potential non-compliance cases were reported in 2022. In recent years there has been a steady increase in the number of reported cases, most likely due to more focus on ethical conduct, compliance and whistleblowing, both internally and externally. A total of 140 (98) investigations of potential non-compliance were completed, which also included open cases from previous years. Proven cases leading to disciplinary action, legal action and/or process improvements were identified in 44 (26) of the investigations. Based on the Group’s categorisation, 12 (9) of the proven cases were related to corruption and/or fraud, resulting in employee dismissal or a disciplinary process. While Stora Enso continues to enforce zero tolerance of corruption, none of the proven cases had a material impact on the Company. Furthermore, 13 (11) of the proven cases were related to discrimination, harassment and/or bullying. Remediation plans have been or are being implemented together with relevant management representatives. EU Taxonomy Background To meet the EU’s climate and energy targets for 2030 and reach the objectives of the European Green Deal, a classification system for sustainable economic activities called EU Taxonomy was published and entered into force in 2020. In the Annual Reports for 2021, published in 2022, large companies were obligated to report the share of Taxonomy-eligibility in their operations. Taxonomy-eligibility describes if an economic activity is included in the scope of activities recognised in the Taxonomy Regulation. In the Annual Reports for 2022, published in 2023, companies are obligated to report also the share of Taxonomy-alignment in their operations. Taxonomy-alignment describes if an economic activity is sustainable based on defined science- based technical screening criteria specified for the activity. The criteria for ‘substantial contribution’ determine that the economic activity either has a substantial positive environmental impact or substantially reduces negative impacts on the environment. The criteria for ‘do no significant harm’ determine that the economic activity does not impede on the other environmental objectives from being reached, i.e. has no significant negative impact on them. Taxonomy-aligned activity needs to be also carried out in compliance with the minimum safeguards, thus sustainable activity is to respect basic human rights and follow good business conduct rules. During the first two reporting years of the EU Taxonomy, the focus is on activities contributing to climate objectives, climate change mitigation and adaptation, according to the EU Climate Delegated Act. The Taxonomy Regulation is a developing regulation and not yet covering all sustainable activities in the market. The forest industry is not at the core of the current legislation and therefore has only few relevant economic activities to report on. From Stora Enso’s main products, only wood-based solutions for construction industry are included in the EU Taxonomy through their contribution to buildings' energy efficiency. Other main products, production of pulp, consumer board, containerboard, corrugated packaging and paper, are out of the scope of the EU Taxonomy and therefore the reported Taxonomy-eligible KPIs are low. EU Taxonomy is anticipated to expand to four other environmental objectives during 2023 with the next delegated act, but the amendments are not expected to bring major impact to Stora Enso's Taxonomy- eligibility. Stora Enso supports the goals set by EU Taxonomy and welcomes the further development of the regulation. EU Taxonomy accounting principles The KPI's reported in the EU Taxonomy are presented in separate tables for turnover, CapEx and OpEx as defined in the regulation. The total turnover is Stora Enso Group’s total sales and rental income in 2022, which respectively include the IFRS15 and the IFRS16 income according to the EU Taxonomy turnover definition. The external sales connected to the economic activities are correspondingly reported under Taxonomy-eligible turnover, either under Taxonomy-aligned or not Taxonomy-aligned. The total CapEx is the Group's total capital expenditure in 2022, as presented in the line of additions, excluding goodwill additions, in the Note 11 (Intangible assets, property, plant and equipment and right of use assets), and the Note 12 (Forest assets). The Taxonomy-eligible CapEx, either Taxonomy-aligned or not Taxonomy-aligned, are the investments related to the assets or processes associated with the respective economic activities. The total OpEx covers the maintenance expenses, short-term lease costs, non- capitalised research and development costs and silviculture costs on Stora Enso Group level. The Taxonomy-eligible OpEx include the corresponding direct non-capitalised costs associated to the economic activities, reported either under Taxonomy-aligned or not Taxonomy-aligned. Different to last year’s practice, the reported CapEx and OpEx are reported in full amount for activities 1.3 Forest management and 4.20 Cogeneration of heat/cool and power from bioenergy instead in relation to external turnover as in 2021. Stora Enso avoids double counting by having a clear cost structure in reporting which ensures that the profit centres and cost elements are separate for each activity. Taxonomy eligible and aligned activities Stora Enso has identified six eligible activities to report in the EU Taxonomy. Stora Enso has carried out the assessments for Taxonomy-eligibility and Taxonomy-alignment based on the best interpretation of the Taxonomy Regulation and the Climate Delegated Act and the currently available guidelines from the European Commission. During 2022 Stora Enso formed a working group of experts to assess if the eligible activities recognised in the EU Taxonomy are fulfilling the criteria for Taxonomy alignment. For each economic activity, Stora Enso conducted Unaudited 13 assessment for substantial contribution and ‘do no significant harm’ criteria to determine the alignment. The alignment was determined for the climate change mitigation objective. Minimum safeguards were assessed on the Group level. In the process Stora Enso used support from external experts to provide a second opinion and the assessments and the data is covered by external assurance. 1.3 Forest management Stora Enso is one of the biggest private forest owners in the world and the forest assets share of Group total assets is significant, 39% (excluding leased land). While Stora Enso owns forests also via holdings, Taxonomy-eligible forest management includes only Stora Enso's own forest activities in Sweden where the Company has full control over the activity. Tree plantations in South America and China are not included in the EU Taxonomy reporting, under forest management. 100% of Stora Enso’s Swedish forests are certified under certification systems (PEFC or FSC) which lays the foundation for sustainable forest management. Through assessment of the technical screening criteria for substantial contribution and ‘do no significant harm’ defined in the EU Taxonomy for 1.3 Forest management, the activity was concluded Taxonomy-aligned. The output of the activity, the grown wood, is used mostly internally in Stora Enso’s own operations and hence not included in EU Taxonomy reporting. In the EU Taxonomy, the forest management turnover includes the sale of externally sold roundwood and forest residuals. The CapEx includes investments that support the forest management activities, such as forest land acquisitions and investments in roads and bridges. In OpEx the silviculture costs and related research and development costs are included. 1.4 Conservation forestry In Brazil, Stora Enso’s 50% owned joint operation Veracel has dedicated approximately half of its land for protection and restoration of biological biodiversity in natural Atlantic rainforest. The aim is to restore each year new rainforest areas on degraded grasslands/pasture lands. The conservation operations are included in Taxonomy-eligible conservation forestry. Conservation forests are maintained as local habitat and species protection areas and are excluded from the harvesting activities and plans. Through assessment of the technical screening criteria for substantial contribution and 'do no significant harm' defined in the EU Taxonomy for 1.4 Conservation forestry, the activity was concluded Taxonomy-aligned. There is no turnover nor CapEx connected to the conservation forestry activity. OpEx includes the expenses related to the conservation work. 3.4 Manufacture of batteries Graphitic carbon in lithium-ion batteries can be replaced with renewable hard carbon made from lignin, which is a by-product in the production of cellulose fibers. Lignin is produced at Stora Enso’s pulp production site in Sunila, where the pilot plant for refining of lignin and turning it into hard carbon material (Lignode ®) for batteries was established. The pilot plant investment and research and development related to hard carbon innovation are included in Taxonomy-eligibility. Lignode offers a renewable active anode material for batteries, contributing to energy storage applications for transportation, stationary and off-grid energy storage, and hence to climate change mitigation. The alignment assessment is done based on the predicted future industrial scale operations and production which will be aligned with the technical screening criteria of 3.4 Manufacture of batteries once started. No turnover is yet connected to this activity. CapEx includes the investment in the pilot plant in Sunila. OpEx includes the non-capitalised research and development costs of Lignode and the maintenance material and other direct costs at the pilot plant in Sunila. External turnover for the activity is expected within the next few years. 3.5 Manufacture of energy efficiency equipment for buildings Stora Enso produces wood-based solutions for the construction industry. Door, window and roofing components and external wall systems manufactured from classic sawn, CLT, LVL and construction beams are reported eligible in the EU Taxonomy. Stora Enso manufactures construction materials at sawmills in several countries and locations. As Stora Enso is not a manufacturer of the end products, the compliance with the substantial contribution was assessed based on the knowledge of the end use and the energy efficiency related regulations in the primary market areas. Through an assessment of the technical screening criteria for substantial contribution and 'do-no-significant harm' defined in the EU Taxonomy for 3.5 Manufacture of energy efficiency equipment for buildings, the activity was concluded Taxonomy- aligned. The external sales related to the share of production that is estimated to end up for doors, windows, roofing and external wall systems, is included under the EU Taxonomy turnover. The same share is used in allocation of the related CapEx and OpEx costs for the activity. CapEx includes the investments related to the production of the Taxonomy-eligible products under this activity. The largest single CapEx item is the investment in a new CLT site in Ždírec that was inaugurated in October 2022. OpEx includes the maintenance salaries, maintenance material, research and development and other direct costs related to the day-to-day serving of the asset. 4.15 District heating/cooling distribution Stora Enso has invested in connecting pipeline to provide district heating for Karlsruhe area in Germany. Industrial surplus heat produced at the Maxau site's combined heat and power plant in Germany is fed into the pipeline. The new connection is taken into use early 2023. Through assessment of the technical screening criteria for substantial contribution and do no significant harm defined in EU Taxonomy for 4.15 District heating/cooling distribution, the activity was concluded Taxonomy- aligned. The investment in the district heating pipeline at Maxau is reported in the EU Taxonomy in 2022. The turnover and OpEx are expected to start generating during 2023. Stora Enso has signed an agreement to divest the Maxau paper production site and all related assets to Schwarz Produktion. The ownership is assumed to change in the beginning of 2023. The turnover, CapEx and OpEx from other Stora Enso mills, that produce eligible bioenergy and are connected to local district heating systems, are reported under activity 4.20 Cogeneration of heat/cool and power from bioenergy. 4.20 Cogeneration of heat/cool and power from bioenergy At Stora Enso, wood residuals like bark, saw dust powder, harvesting residuals and by-products from the pulp process like black liquor are used for energy production. Most of the produced bioenergy is consumed internally, but energy is also sold to external markets. The bioenergy that uses solely biobased feedstock in normal operations (excluding the usage of start-up fuel), is considered eligible in the EU Taxonomy reporting. Eligible bioenergy is produced in several Stora Enso sites. Through assessment of the technical screening criteria for substantial contribution and 'do no significant harm' defined in the EU Taxonomy for 4.20 Cogeneration of heat/cool and power from bioenergy, the majority of the activity was concluded Taxonomy- aligned. The few boilers that did not meet all the thresholds defined in 'do no significant harm' criteria for pollution, are reported as Taxonomy-eligible but not Taxonomy-aligned. Unaudited 14 In the EU Taxonomy, the turnover includes the external sales of the excess electricity and heat which is not consumed internally. CapEx includes the investments in the bioenergy production at different sites. OpEx includes the maintenance salaries, maintenance material and other direct costs related to the day-to-day serving of the asset. Minimum safeguards The Taxonomy Regulation specifies that in addition to substantial contribution and 'do no- significant harm' criteria, an economic activity can be considered environmentally sustainable only if it is carried out in compliance with the minimum safeguards. The minimum safeguards prevent activities from being labelled sustainable if they for example violate human or labour rights, engage in corrupt, anti-competitive or non-compliant taxation practices. The compliance can be assessed from two angles according to the published guidance from Platform on Sustainable Finance: there are adequate processes and controls in place in the areas of human rights, corruption, taxation and fair competition and there are no breaches or violations existing. Stora Enso has assessed the compliance with minimum safeguards by reviewing the company processes for human rights, corruption, taxation and fair competition and investigated possible cases of violations by the parent company, its subsidiaries or senior management. While Stora Enso acknowledges the importance of continuous improvement of the processes in these areas, the Company considers its processes to be on a robust level and with no violations to meet the alignment with the minimum safeguards. Read more in the following chapters in the Sustainability reporting section: Human rights, Business ethics, and Stora Enso's tax footprint. Proportion of Turnover from products or services associated with Taxonomy-aligned economic activities 2022 EUR million Substantial contribution criteria DNSH criteria ('Does Not Significantly Harm') Economic Activities Code(s) Absolute turnover Proportion of turnover Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards Taxonomy- aligned proportion of turnover, year N Category (enabling activity) Category (transitional activity) EUR % % % % % % % y/n y/n y/n y/n y/n y/n E T A TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 111 0.9% 100% N/A y y y y y y 100.0% Manufacture of energy efficiency equipment for buildings 3.5 595 5.1% 100% N/A y y y y y y 100.0% E Cogeneration of heat/cool and power from bioenergy 4.20 54 0.5% 100% N/A y y N/A y y y 96.6% Turnover of environmentally sustainable activities (Taxonomy- aligned) A.1 760 6.5% 99.7% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Cogeneration of heat/cool and power from bioenergy 4.20 2 0.0% Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 2 0.0% Total (A.1+A.2) 762 6.5% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy-non-eligible activities (B) 10,932 93.5% Total (A+B)1 11,694 100% 1 In the Taxonomy, turnover includes also rental income, therefore the figure differs slightly from the Group total sales. Unaudited 15 Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities 2022 Capital Expenditure EUR million Substantial contribution criteria DNSH criteria ('Does Not Significantly Harm') Economic Activities Code(s) Absolute CapEx Proportion of CapEx Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards Taxonomy- aligned proportion of capex, year N Category (enabling activity) Category (transitional activity) EUR % % % % % % % y/n y/n y/n y/n y/n y/n % E T A TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 13 1.6% 100% N/A y y y y y y 100% Manufacture of batteries 3.4 3 0.3% 100% N/A y y y y y y 100% E Manufacture of energy efficiency equipment for buildings 3.5 23 3.0% 100% N/A y y y y y y 100% E District heating/cooling distribution 4.15 2 0.3% 100% N/A y y N/A y y y 100% Cogeneration of heat/cool and power from bioenergy 4.20 7 0.8% 100% N/A y y N/A y y y 70.1% CapEx of environmentally sustainable activities (Taxonomy-aligned) A.1 47 6.0% 94.3% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Cogeneration of heat/cool and power from bioenergy 4.20 3 0.4% CapEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 3 0.4% Total (A.1+A.2) 50 6.4% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES CapEx of Taxonomy-non-eligible activities (B) 728 93.6% Total (A+B) 778 100.0% Unaudited 16 Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities 2022 EUR million Substantial contribution criteria DNSH criteria ('Does Not Significantly Harm') Economic Activities Code(s) Absolute OpEx Proportion of OpEx Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards Taxonomy- aligned proportion of OpEx, year N Category (enabling activity) Category (transitional activity) EUR % % % % % % % y/n y/n y/n y/n y/n y/n % E T A TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 27 3.2% 100% N/A y y y y y y 100% Conservation forestry 1.4 1 0.1% 100% N/A y y y y y y 100% Manufacture of batteries 3.4 13 1.6% 100% N/A y y y y y y 100% E Manufacture of energy efficiency equipment for buildings 3.5 25 3.0% 100% N/A y y y y y y 100% E Cogeneration of heat/cool and power from bioenergy 4.20 20 2.4% 100% N/A y y N/A y y y 52.9% OpEx of environmentally sustainable activities (Taxonomy- aligned) A.1 86 10.3% 82.9% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activites) Cogeneration of heat/cool and power from bioenergy 4.20 18 2.1% OpEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activites) (A.2) 18 2.1% Total (A.1+A.2) 104 12.5% B. TAXONOMY-NON-ELIGIBLE ACTIVITES OpEx of Taxonomy-non-eligible activites (B) 733 87.5% Total (A+B) 837 100% Environmental investments and liabilities In 2022 Stora Enso’s environmental investments amounted to EUR 82 (50) million. These investments were mainly to improve the quality of air and water, to enhance resource and energy efficiency, and to minimise the risk of accidental spills. Stora Enso’s environmental costs in 2022 excluding interest and including depreciation totalled EUR 243 (191) million. These costs include taxes, fees, refunds, permit-related costs, and repair and maintenance costs, as well as wastewater treatment chemicals and certain other materials. The reporting scope was changed in 2022 to exclude the payments related to provisions from environmental remediation projects. Due to this, the total costs for 2021 have been restated. Provisions for environmental remediation amounted to EUR 73 (75) million at 31 December 2022, details of which are in Note 22. There are currently no active or pending legal claims concerning environmental issues that could have a material adverse effect on Stora Enso’s financial. Unaudited 17 Risks and risk management Our approach to risk management Risk is an integral element of business and corporate governance, and it is characterised by both threats and opportunities, which may have an impact on future performance and the financial results of Stora Enso, as well as on its ability to meet certain social and environmental objectives. Stora Enso is committed to ensuring that systematic, holistic and proactive management of risks and opportunities is among its organisational core capabilities, and that a culture is fostered where both are carefully considered in all business decisions. Through consistent application of dynamic risk analysis and scenario planning, we enhance opportunities and manage risk in order to reduce threats which may prevent us from reaching our business goals. Risk governance Stora Enso defines risk as the effect of uncertainty on our ability to meet organisational values, objectives and goals. The Group Risk Policy, which is approved by the Board of Directors, sets out the overall approach to governance and the management of risks in accordance with the COSO (Committee of Sponsoring Organizations) framework and in line with the ISO 31000 standard. The Board retains the ultimate responsibility for the overall risk management process and for determining predominantly through Group policies the appropriate and acceptable level of risk. The Board has established a Financial and Audit Committee to provide support to the Board in monitoring the adequacy of the risk management process within Stora Enso, and specifically regarding the management and reporting of financial risks. This oversight scope includes also monitoring of the cybersecurity risk. The Sustainability and Ethics Committee is responsible for overseeing the company’s sustainability and ethical business conduct, its strive to be a responsible corporate citizen, and its contribution to sustainable development. The head of Enterprise Risk Management, reporting to the Chief Strategy and Innovation Officer, is responsible for the design, development and monitoring of the top-down implementation of the Group risk management framework. Each division and Group function head, together with their respective management teams, are responsible for process execution and cascading the framework and guidelines further down in the organisation. The Internal Audit unit evaluates the effectiveness and efficiency of the Stora Enso risk management process. Risk management process Risk management is embedded in all decision-making processes, with holistic risk assessments conducted also as part of all significant investment decisions. In connection with the annual strategy process, business divisions and group service and support functions conduct a holistic baseline risk assessment, linked to their key objectives. Specific guidance regarding the risk management process is outlined in the enterprise risk management instructions. Business entities and functions identify the sources of risk events including changes in circumstances and their causes and potential consequences. Stora Enso’s risk model outlines the overall risk universe which is used to support holistic risk identification and risk consolidation, while also providing taxonomy as well as consistency in risk terminology. Risk analysis involves developing an understanding of the risk to provide an input for risk evaluation. The purpose of risk evaluation is to determine the risk priorities and to support decision making to determine which risks require treatment/actions. Risks are assessed in terms of their impact and likelihood of occurrence, often based on specific risk scenarios. The effectiveness of existing risk reduction is factored in to define the residual risk level. Pre-defined impact scales consider financial, safety and reputational impacts, on both a quantitative and qualitative basis. Risk treatment involves selecting one or more risk management option, such as avoidance, reduction, sharing or retention. Additional risk mitigation actions are determined for risks which exceed the perceived risk tolerance incorporating the assignment of responsibility, schedule and timetable of the risk response actions. Following the annual baseline assessment, prioritised and emerging risks, as well as the corresponding risk mitigation and business continuity plans related to those risks, are reviewed in divisional business review meetings on a semi-annual basis. Despite the measures taken to manage risks and mitigate the impact of risks, and while some of the risks remain beyond the direct control of the management, there can be no absolute assurance that risks, if they occur, will not have a materially adverse effect on Stora Enso’s business, financial condition, operating profit or ability to meet financial obligations. Main risks Macroeconomy, geopolitics, and currency rates Changes in global economic conditions, such as sharp market corrections and foreign exchange volatility, could have a negative and material impact on Stora Enso's profit, cash flows and financial position. Stora Enso is exposed to several financial market risks that the Group is responsible for managing under policies approved by the Board of Directors. The objective is to achieve cost- effective funding in Group companies and manage financial risks by using financial instruments to reduce earnings volatility. The main exposures for the Group, besides currency risk, are interest rate risk, liquidity risk, refinancing risk, commodity price risk and credit risk. Financial risks are discussed in detail in Note 24, Financial risk management. Mitigation measures and opportunities Stora Enso has a diversified portfolio of businesses which mitigates exposure to any one country or product segment. The external environment is continuously monitored and planning assumptions take account of important near- to medium-term and long-term drivers and risks related to key macro-economic factors. The compliance to the Board-approved risk appetite is closely monitored and cash flow and liquidity are actively managed. Stora Enso hedges 15–60% of the highly probable 12-month net foreign exchange flows in main currency pairs. Currency translation risk is reduced by funding assets, whenever economically possible, in the same currency as the asset. The divisions regularly monitor their order flows and other leading indicators, where available, so that they may respond quickly to a deterioration in trading conditions. In the event of a significant deterioration in general economic condition and in main leading economic indicators, the Group has a possibility to implement cost reduction measures to offset the impact on margins from deterioration in sales. Competition and market demand The packaging, pulp, paper and wood products industries are mature, capital intensive and highly competitive. Stora Enso’s principal competitors include several large international forest products companies and numerous regional and more specialised competitors. Customer demand is influenced by the general economic conditions and inventory levels and affects product price levels. Product prices, which tend to be cyclical, are affected by capacity utilisation, which decreases in times of economic slowdowns. Changes in prices differ between products and geographic regions. Unaudited 18 The following table shows the operating profit sensitivity to a +/- 10% change in either price or volume for different segments based on figures for 2022. Operating profit: Impact of changes +/- 10%, EUR million Segments Price Volume Packaging Materials 447 125 Packaging Solutions 72 19 Biomaterials 205 101 Wood Products 215 67 Forest 249 11 Paper 163 43 Mitigation measures and opportunities The ability to respond to changes in product demand and consumer preferences and to develop new products on a competitive and economic basis calls for innovation, continuous capacity management and structural development. The risks related to factors such as demand, price, competition and customers are regularly monitored by each division and unit as a routine part of business management. These risks are also continuously monitored and evaluated on a Group level to gain a perspective of the Group’s total asset portfolio and overall long-term profitability potential. Stora Enso, as one of the biggest private forest owners in the world, also benefits from a strategic renewable resource base. The Group's expertise in wood and wood based renewable materials is focused on responding to changing customer and consumer preferences, driven by climate change. Products based on renewable materials with a low carbon footprint help customers and society at large to reduce CO2 emissions by providing an alternative to solutions based on fossil fuels or other non-renewable materials. Sourcing Increasing input costs or availability of materials, goods and services may adversely affect Stora Enso’s profitability. Securing access to reliable low-cost supplies and proactively managing costs and productivity are of key importance. Reliance on outside suppliers for energy also makes Stora Enso susceptible to changes in energy market prices. There is also an increased risk of disturbances in the supply chain due to cyber incidents, political instability and other drivers related to global trade. The following table shows Stora Enso’s major cost items. Composition of costs in 2022 Operative costs % of costs % of sales Logistics and commissions 12% 10% Manufacturing costs Fiber 33% 27% Chemicals and fillers 10% 9% Energy 9% 8% Material 11% 9% Personnel 13% 11% Other 7% 6% Depreciation 5% 5% Total costs and sales 100% 85% Total operative costs and sales in EUR million 9,847 11,680 Equity accounted investments (EAI), operational 58 Operational EBIT (EUR million) 1,891 In many areas Stora Enso is dependent on suppliers and their ability to deliver a product or a service at the right time and of the right quality. The most important products are fiber, chemicals and energy, and machinery and equipment in capital investment projects. Increased demand for carbon neutral primary and secondary biomass fuels may increase energy costs. The most important services are transport and various outsourced business support services. For some of these inputs, the limited number of suppliers is a risk. Mitigation measures and opportunities Input cost volatility is closely monitored at the business unit, divisional and group level and a consistent long-term energy risk management is applied. The price and supply risks are mitigated through increased own generation, shareholding in competitive power assets such as PVO/TVO, physical long-term contracts and financial derivatives. Stora Enso hedges price risks in raw material and end-product markets and supports the development of financial hedging markets. A wide range of suppliers are used and monitored to avoid situations that might jeopardise continued production, business transactions or development projects. Suppliers and subcontractors must also comply with Stora Enso’s sustainability requirements as they are part of Stora Enso’s value chain. The sustainability requirements for suppliers and audit schemes cover raw materials, and other goods and services procured. Suppliers are assessed for risks related to environmental, social and business practices through our internal risk assessment tool. Supplier code of conduct audits are conducted on high-risk suppliers and findings from such audits are followed-up. Suppliers should have the possibility to mitigate, but where necessary, the supplier contract would be terminated. Stora Enso also has an opportunity to add value and bring innovation to its business globally by building strong and measurable relationships with the best suppliers as well as enforcing harmonised sourcing processes to increase capabilities, increase tender quality to reduce cost, and develop sustainable suppliers. Regulatory changes Stora Enso's businesses may be affected by political or regulatory developments in any of the countries and jurisdictions where it operates, including changes to forest, biodiversity, environmental, fiscal, tax or other regulatory regimes. Potential impacts include higher costs and capital expenditure to meet new requirements, the expropriation of assets, imposition of royalties or other taxes targeted at the industry, and requirements for local ownership or beneficiation. The EU Green Deal and its climate targets for 2030 and 2050 have resulted in a proliferation of future legislation which have been further advanced in 2022 and may impact Stora Enso's future operations. The policy initiatives from the European Commission will include policies and legislation on areas such as EU Forest and Biodiversity strategies, the Renewable Energy Directive, EU Emission Trading System (ETS), Sustainable products initiative, Packaging and Packaging waste revision as well as EU taxonomy. Political decisions on forest resources, could limit the availability of wood, increase costs and reduce investment opportunities. Stora Enso has been granted various investment subsidies and has given certain investment commitments in different countries e.g. Finland, China and Sweden. If committed planning conditions are not met, local officials may pursue administrative measures to reclaim some of the formerly granted investment subsidies or to impose penalties on Stora Enso, and the outcome of such a process could result in a negative financial impact on Stora Enso. Unaudited 19 Mitigation measures and opportunities Active monitoring of regulatory and political developments in the countries where Stora Enso operates as well as participation in policy development mainly through industry associations and other partnership programmes are important risk mitigation regarding regulatory changes. Regulatory changes can also bring significant opportunities by driving market growth for sustainable products and create competitive advantage through resource efficiency and renewability. Climate change – physical impacts Long-term (25–30 years) changes in precipitation patterns, periods of drought, frequent extreme weather events and higher average temperatures that increase the risk of forest fires and insect outbreaks, could cause damage to operations, forests and tree plantations, affecting forests asset values and regional wood prices. Milder winters could also have an impact on the harvesting and transport of wood and related costs in northern regions. More frequent extreme weather events also increase the risk of disruptions in the production, logistics and supply of raw materials and energy. During 2022, a quantitative analysis regarding climate resilience was conducted in the South American plantations based on three scenarios: SSP1-1.9 (~1.5⁰C and net-zero CO₂ emissions), SSP2-4.5 (~2.7⁰C and CO₂ emissions are similar to current) and SSP5-8.5 (~4.4⁰C and CO₂ emissions are double that of the current). Results show a relative resilience of the plantations. Financial consequences are not expected to be material in SSP1-1.9 and SSP2-4.5 scenarios, but could be material in SSP5-8.5. Read more in the following chapter TCFD, and in an index table available at storaenso.com. Mitigation measures and opportunities Physical risks are to a great extent subject to risk transfer and thereby within the cover of Stora Enso's property and business interruption insurance programs. With regards to forest and plantation assets, Stora Enso benefits from strategic resilience through geographical diversification within the asset portfolio. Diligent plantation planning is ensured to avoid frost sensitive areas and R&D programmes are applied to increase tolerance to extreme temperatures. Stora Enso maintains a diversity of forest types and structures and enforces diversification in wood sourcing. Wood harvesting in soft soils involves the implementation of best practices guidelines. Nordic forests in Finland and Sweden could also benefit from increased heat summation and longer growing seasons, leading to acceleration in forest growth with direct positive impact on the value of own forest assets and an indirect impact related to market wood availability and costs. People and capabilities Competition for personnel is intense and Stora Enso may, in the long term, not be successful in attracting or retaining qualified personnel. The loss of key employees, the inability to attract new or adequately trained employees, or a delay in hiring key personnel could seriously harm Stora Enso’s business and impede reaching the Group's strategic objectives. Labour market disruptions and strikes, especially in times of restructuring and redundancies due to divestments and mill closures or during labour market negotiations, could also have adverse material effects on Stora Enso's business, financial position and profitability. Mitigation measures and opportunities Stora Enso manages the risks and loss of key talents through a combination of different actions. Some of the activities aim towards making the Stora Enso employer brand better known both internally and externally, globalising some of the remuneration practices and intensifying the efforts to identify and develop talents. Finally, the Group actively focuses on talent and management assessments, including succession planning for key positions. The majority of employees are represented by labour unions under several collective agreements in different countries where Stora Enso operates, thus relations with unions are of high importance to manage labour disruption risks. Stora Enso recognises the opportunity of skilled and dedicated employees being essential for success. Engaged high performing people enable the implementation of transformation strategy and commercial success. Personal safety – employees and wider workforce Failure to maintain high levels of safety management can result in harm to Stora Enso’s employees and contractors, and also to communities near our operations and the environment. Impacts in addition to physical injury, health effects and environmental damage could include liability to employees or third parties, damage to reputation, or an inability to attract and retain skilled employees. Government authorities could additionally enforce the closure of our operations on a temporary basis. Personnel safety and security can never be compromised and, thus, Stora Enso must be aware of potential safety risks and provide adequate guidelines to people for managing risks related to, for example, travelling, working and living in countries with security or crime concerns. Mitigation measures and opportunities Stora Enso’s goal is to provide an accident-free workplace. Encouraging a company-wide safety culture means that everyone is responsible for making every workday healthy and safe - from top management and throughout the company. The approach to safety extends to contractors, suppliers, and on-site visitors. Everyone is encouraged to give feedback and provide ideas on how to further improve safety. Additionally, safety is promoted among contractors and suppliers through a dedicated e-learning. The Group also emphasise the importance of safety by asking suppliers for information on their safety performance in the tendering process. Stora Enso’s Health and Safety Policy defines the objectives for safety management, as well as a governance model on how to manage health and safety topics in practice and how to integrate them into annual planning and reporting. Leading health and safety performance can potentially strengthen the brand as an employer, as well as improved engagement, efficiency and productivity. Physical assets The installed capacity of Stora Enso's production facilities have an inherent risk of potential for failure or off-specification operations, which could result in poor product quality, unplanned production downtime, lower output or increased production costs. It may also impact the company's ability to meet delivery commitments and the business plan. In some instances, the risks are the result of inherent design deficiencies, failures in the mode of operation or operating practices. The most significant asset risks lie predominantly in integrated pulp and board production and related energy generation. Unaudited 20 Mitigation measures and opportunities Protecting production assets and business results is a high priority for Stora Enso. This is achieved through structured methods of identifying, measuring and controlling different types of process risk and exposure. Divisional risk specialists manage this process together with insurance companies and other loss prevention specialists. Each year a number of technical risk inspections are carried out at production units. Risk improvement programmes and cost-benefit analyses of proposed investments are managed via internal reporting and risk assessment tools. Internal and external property loss prevention guidelines, fire loss control assessments, key machinery risk assessments and specific loss prevention programmes are also utilised. Planned stoppages for maintenance and other work are important to keep machinery in good order. Preventive maintenance programmes and spare part criticality analyses are utilized to secure the high availability and efficiency of key machinery. Product safety and compliance Some of our products are used for package liquids and food consumer products, so any defects could affect health or packaging functions and result in costly product recalls. Wood products are incorporated into buildings, and this may involve product liability resulting from failures in structural design, product selection or installation. Failure to ensure product safety could result in product recalls involving significant costs including compensation for indirect costs of customers, and reputational damage. Mitigation measures and opportunities The mills producing food and drink contact products have established certified hygiene management systems based on risk and hazard analysis. To ensure the safety of its products, Stora Enso actively participates in CEPI (Confederation of European Paper Industry) working groups on chemical and product safety. In addition, Stora Enso mills have certified relevant ISO quality management systems. Furthermore, contractual liability limitation and insurance protection are used to limit the risk exposure to Stora Enso. The Group recognises the opportunity of differentiation and value creation through superior product quality and the highest level of product conformity. Information technology, security, and digitalisation Stora Enso is dependent on IT systems for both internal and external communications and for the day-to-day management of its operations. Information systems, personnel and facilities are subject to cyber security risk, such as ransomware. In addition, accidental disclosure of confidential information due to a failure to follow information handling guidelines or due to an accident or criminal act may result in financial damage, penalties, disrupted or delayed launch of new lines of business or ventures, loss of customer and market confidence, loss of research secrets, breach of data privacy regulation and other business critical information. Mitigation measures and opportunities The management of risks is actively pursued in the Information Risk Management System and best practice change management and project methodologies are applied. We actively work to prevent cybercrime. A number of security controls have been implemented to strengthen the protection of confidential information and to facilitate compliance with international regulations. Opportunities may arise from efficient operations, performance optimisation, innovative product offerings, and new customer services through digitisation and sophisticated IT systems, as well as new technologies offering significant potential for higher level of process optimisation and automatisation, generating new business and enhanced value propositions for customers and consumers. Strategic investments To succeed with the implementation of its strategy, Stora Enso has to understand the needs of its customers and find the best way to serve them with the right offering and with the right production asset portfolio. Failure to complete strategic projects in accordance with the agreed schedule, budget or specifications can, therefore, have serious impacts on the company's financial performance. Significant, unforeseen changes in costs or an inability to sell the envisaged volumes or achieve planned price levels may prevent Stora Enso from achieving its business goals. Mitigation measures and opportunities Risks are mitigated through profound and detailed pre-feasibility and feasibility studies which are prepared for each large investment. Investment guidelines stipulate the process, governance, risk assessment, management and monitoring procedures for strategic projects, including climate related risk factors. The guidelines also require that the calculation of potential cost and income for CO2 emissions as part of the investment proposal, Environmental and Social Impact Assessments (ESIAs) are conducted for all new projects that could cause significant adverse effects in local communities. Post completion audits are carried out for all significant investments. Mergers, acquisitions, and divestments Failure to realise the expected benefits from an acquisition of a company or asset can have serious financial impacts on Stora Enso. The Group can also find itself liable for past acts or omissions of the acquired business, without any adequate right of redress. Failure to achieve expected values from the sales of assets or deliveries beyond the expected receipt of funds may also impact the Group's financial position. Divestments or business restructuring may involve additional costs due to historical and unaccounted liabilities as well as reputational impacts. Mitigation measures and opportunities Rigorous M&A guidelines, including due diligence procedures are applied to the evaluation and execution of all acquisitions. Structured governance and policies such as the policy for responsible right-sizing, are followed when making restructuring decisions. A strong balance sheet and cash flow enable value enhancing M&A, when the timing and opportunity are right. Ethics and compliance Stora Enso operates in a highly regulated business area and is, thereby, exposed to risks related to breach of applicable laws and regulations associated to e.g. capital markets regulation, company and tax laws, customs, environment, human rights, and safety, as well as areas covered by policies such as the Stora Enso Code and Business Practice Policy, e.g. fraud, anti- trust, corruption, conflict of interests and other misconduct. Breaches may lead to high compliance and remediation costs including prosecution costs, fines, penalties, and contractual, financial and reputational damage. Mitigation measures and opportunities Stora Enso’s Ethics and Compliance Programme, which includes policy setting, promoting values, training, knowledge sharing and grievance mechanisms, is continuously updated and developed. Other compliance mechanisms include Stora Enso Group’s internal control system Unaudited 21 and Internal Audit assurance, as well as Supplier Code of Conduct in supplier contracts, risk assessments, trainings and audits. In response to capital markets regulations, Stora Enso’s Disclosure Policy emphasises the importance of transparency, credibility, responsibility, proactivity and interaction. Environmental risks are minimised through environmental management systems and environmental due diligence for acquisitions and divestments, and indemnification agreements where effective and appropriate remediation projects are required. Special remediation projects related to discontinued activities and mill closures are executed based on risk assessments. Focus on ethics in a wider sense, not mere compliance with laws and regulations, promotes a value-driven and more successful business, fosters accountability and enhances corporate reputation. Climate-related financial disclosures (TCFD) The Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD) recommends a framework for disclosing climate-related risks and opportunities. Stora Enso's disclosures with reference to TCFD recommendations are listed in an online index table, available at storaenso.com, with references to those locations where these issues are addressed in the Group's annual reporting. Scenario analysis in 2022 Aligned with the TCFD recommendations, Stora Enso utilises scenarios to assess the impacts of climate change. During 2022, a quantitative resilience analysis was conducted for tree plantations in South America against three global Shared Socioeconomic Pathway (SSP) scenarios: SSP1-1.9 (Sustainability – Taking the Green Road), SSP2-4.5 (Regional Rivalry – a Rocky Road) and SSP5-8.5 (Fossil-fuelled Development – Taking the Highway). Results show a relative resilience of Stora Enso's tree plantations in all the three scenarios. Financial impacts are not expected to be material in SSP1-1.9 and SSP2-4.5 scenarios but in SSP5-8.5 scenario the growth conditions of tree plantations would be affected resulting in potentially material financial impacts. Scenario analysis the during previous years In 2020, Stora Enso developed a scenario analysis with the qualitative assessment of the physical climate impacts on the Nordic forests and the Group's business until 2050. This work was based on the Business-As-Usual scenario by the International Panel for Climate Change (RCP 8.5 scenario) that would deliver a temperature increase of 4–5 degrees by the end of the century. The climate change attributes considered were pests, diseases, droughts, wildfires, floods, periods of frost, water scarcity, changes to precipitation patterns, rise in sea level and changing temperatures. In 2021, the work with physical climate impacts continued by a deeper analysis of measures improving resiliency of the forests against the negative impacts of global warming. Results showed that sustainable forest management practices as well as possibilities to monitor and to react to events such as forest fires and diseases, play an important role in mitigating the negative impacts of climate change. During 2021, Stora Enso assessed a business impact scenario for 2030 according to the global transition required to limit the global average temperature increase in line with the Paris agreement of 1.5 degrees (RCP 1.9). The work concluded that the overall transition to a low carbon, circular bioeconomy is well aligned with Stora Enso’s strategy. The scenario work also showed that potential new regulations and market mechanisms motivated by the ambitions to limit climate change and its effects on the society and environment could impact Stora Enso’s operating costs by limiting wood harvesting volumes or forest management practices as well as increasing greenhouse gas emission costs and energy prices. Sustainable product initiatives and requirements may also have an impact on the Group's future market access, product demand growth and product development requirements. Corporate governance in Stora Enso Stora Enso complies with the Finnish Corporate Governance Code 2020 issued by the Securities Market Association (the “Code”). The Code is available at cgfinland.fi. Stora Enso also complies with the Swedish Corporate Governance Code (“Swedish Code”), with the exception of the deviations listed in Appendix 1 of the Corporate Governance part of this report. The deviations are due to differences between Swedish and Finnish legislation, governance code rules and practices, and in these cases Stora Enso follows the practice in its domicile. The Swedish Code is issued by the Swedish Corporate Governance Board and is available at corporategovernanceboard.se. Legal proceedings Contingent liabilities Stora Enso has undertaken significant restructuring actions in recent years which have included the divestment of companies, sale of assets and mill closures. These transactions include a risk of possible environmental or other obligations the existence of which would be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. A provision has been recognised for obligations for which the related amount can be estimated reliably and for which the related future cost is considered to be at least probable. Stora Enso is party to legal proceedings that arise in the ordinary course of business and which primarily involve claims arising out of commercial law. The management does not consider that liabilities related to such proceedings before insurance recoveries, if any, are likely to be material to the Group’s financial condition or results of operations. European Commission inspection As announced in Stora Enso’s stock exchange release on 12 October 2021, the European Commission has conducted unannounced inspections in locations at several member states at the premises of companies active in the wood pulp sector. Stora Enso was included in the European Commission’s inspection at its headquarters in Helsinki, Finland. Stora Enso is cooperating fully with the authorities. As stated by the Commission, the fact that they carry out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself. Stora Enso is under strict confidentiality rules regarding the details of the ongoing European Commission investigation and cannot pre-empt or speculate regarding the next steps or eventual outcome of the investigation. Veracel On 11 July 2008, Stora Enso announced that a federal judge in Brazil had issued a decision claiming that the permits issued by the State of Bahia for the operations of Stora Enso’s joint operations company Veracel were not valid. The judge also ordered Veracel to take certain actions, including reforestation with native trees on part of Veracel’s plantations and a possible fine of, at the time of the decision, BRL 20 (EUR 4) million. Veracel disputes the decision and has filed an appeal against it. Veracel operates in full compliance with all Brazilian laws and has obtained all the necessary environmental and operating licences for its industrial and forestry Unaudited 22 activities from the relevant authorities. In November 2008, a Federal Court suspended the effects of the decision. No provisions have been recorded in Veracel’s or Stora Enso’s accounts for the reforestation or the possible fine. Changes in the Group management René Hansen joined Stora Enso as EVP, Brand and Communications and a member of the Group Leadership Team in February 2022. Teemu Salmi, CIO, Head of IT & Digitalisation and a member of the Group Leadership Team left his position at Stora Enso in May. Seppo Parvi, CFO, assumed the responsibility for the IT & Digitalisation organisation. Kati ter Horst, EVP Paper division and a member of the Group Leadership Team, left her position at Stora Enso in July. Seppo Parvi, CFO, assumed the responsibility for the Paper division. Jari Suominen, EVP Forest division and a member of the Group Leadership Team, left his position at Stora Enso in December. Per Lyrvall, previously EVP Legal, was appointed as new EVP Forest division. He continues as a member of the Group Leadership Team and as Stora Enso's country head for Sweden. The search for a new General Counsel is ongoing. In the interim period, Christian Swartling, SVP Group Legal, assumes the acting role in the position. Minna Björkman was appointed EVP Sourcing and Logistics and a member of the Group Leadership Team as of January 2023. Minna Björkman joined Stora Enso in 2019 as Senior Vice President, Supply Chain and Operational Excellence for Packaging Solutions. Prior to joining Stora Enso, she held several senior level positions at Finnish companies such as Nokia, Fazer and Kemira. Share capital Stora Enso Oyj’s shares are divided into A and R shares. The A and R shares entitle holders to the same dividend but different voting rights. Each A share and each ten R shares carry one vote at a shareholders’ meeting. However, each shareholder has at least one vote. During 2022, a total of 5,769 A shares converted into R shares were recorded in the Finnish Trade Register. Number of shares as at 31 December 2022 A shares R shares Total Number of shares 176,238,280 612,381,707 788,619,987 Number of votes (at least) 176,238,280 61,238,171 237,476,451 Board of Directors is authorised to decide on the repurchase and on the issuance of Stora Enso R shares. The amount of shares to be issued or repurchased shall not exceed a total of 2 000 000 R shares, corresponding to approximately 0.25% of all shares and 0.33% of all R shares. Major shareholders as of 31 December 2022 By voting power A shares R shares % of shares % of votes 1 Solidium Oy1 62,655,036 21,792,540 10.7% 27.3% 2 FAM AB2 63,123,386 17,000,000 10.2% 27.3% 3 Social Insurance Institution of Finland 23,825,086 — 3.0% 10.0% 4 Ilmarinen Mutual Pension Insurance Company 4,172,492 14,900,000 2.4% 2.4% 5 Varma Mutual Pension Insurance Company 5,163,018 1,140,874 0.8% 2.2% 6 MP-Bolagen i Vetlanda AB 4,885,000 1,000,000 0.7% 2.1% 7 Elo Mutual Pension Insurance Company 2,000,000 7,601,000 1.2% 1.2% 8 Bergslaget's Healthcare Foundation 626,269 1,609,483 0.3% 0.3% 9 SEB Investment Management — 6,976,453 0.9% 0.3% 10 The State Pension Fund — 5,000,000 0.6% 0.2% 11 The Society of Swedish Literature in Finland — 3,000,000 0.4% 0.1% 12 Avanza Pension Insurance 146,285 1,268,398 0.2% 0.1% 13 Unionen (Swedish trade union) — 2,612,750 0.3% 0.1% 14 Afa Insurance — 2,381,676 0.3% 0.1% 15 SEB AB, Luxembourg Branch 2,177 1,785,231 0.2% 0.1% Total 166,598,749 88,068,405 32.3% 73.9% Nominee-registered shares3 75,058,822 496,088,402 72.4% 52.5% 1 Entirely owned by the Finnish State. 2 As confirmed to Stora Enso. 3 According to Euroclear Finland. The list has been compiled by the Company on the basis of shareholder information obtained from Euroclear Finland, Euroclear Sweden and a database managed by Citibank, N.A (Citi). This information includes only directly registered holdings, thus certain holdings (which may be substantial) of shares held in nominee or brokerage accounts are not included. The list is therefore incomplete. Share distribution as at 31 December 2022 By size of holding, A share Shareholders % of shareholders Shares % of shares 1–100 6,834 59.28% 264,473 0.15% 101–1,000 4,120 35.74% 1,463,504 0.83% 1,001–10,000 542 4.70% 1,257,741 0.71% 10,001–100,000 22 0.19% 473,102 0.27% 100,001–1,000,000 2 0.02% 284,687 0.16% 1,000,001– 8 0.07% 172,494,773 97.88% Total 11,528 100.00% 176,238,280 100.00% By size of holding, R share Shareholders % of shareholders Shares % of shares 1–100 16,974 36.76% 821,972 0.13% 101–1,000 22,825 49.43% 9,047,232 1.48% 1,001–10,000 5,868 12.71% 15,492,151 2.53% 10,001–100,000 435 0.94% 11,584,478 1.89% 100,001–1,000,000 58 0.13% 20,922,126 3.42% 1,000,001– 17 0.04% 554,513,748 90.55% Total 46,177 100.00% 612,381,707 100.00% According to Euroclear Finland. This list includes only directly registered shares in Euroclear Finland. E.g. Stora Enso's Swedish shareholders are listed under their nominee bank in this list. Unaudited 23 Ownership distribution as at 31 December 2022 % of shares % of votes Solidium Oy1 10.7% 27.3% FAM AB2 10.2% 27.3% Social Insurance Institution of Finland (KELA) 3.0% 10.0% Finnish institutions (excl. Solidium and KELA) 9.8% 7.7% Swedish institutions (excl. FAM) 1.9% 1.1% Finnish private shareholders 3.9% 2.4% Swedish private shareholders 3.1% 2.3% ADR holders 1.7% 0.6% Under nominee names (non-Finnish/non-Swedish shareholders) 55.7% 21.3% 1 Entirely owned by the Finnish State. 2 As confirmed to Stora Enso. Outlook Stora Enso remains vigilant against persisting market disruptions and uncertainties, macroeconomic environment and inflationary pressures. Stora Enso enters the new year with market softness and variable cost pressures which are expected to be more challenging in 2023 than in 2022 weighing on our results this year. The high macroeconomic uncertainty and continued weak consumer confidence resulting in lower private consumption will continue to impact negatively, especially on containerboard demand. Lower demand in the construction sector remains challenging and is expected to especially impact on the demand for traditional sawn wood. Compared to 2022, Group margins are expected to be squeezed by increasing costs, particularly in relation to energy, wood, chemicals and logistics. To manage volatility, variable costs are continually reviewed, and preparatory actions are taken to be prepared to respond to fluctuations in demand with reinforced cost control. Other measures such as pricing, flexibility in product mix, capacity and inventory management, and sourcing and logistics are in place. Stora Enso in Finland has completed negotiations on potential furloughs at its Wood Products division, and this year started negotiations on potential furloughs at its Packaging Materials division’s production sites. Activities on adjusting capacity to respond to fluctuations in demand have also been put in place for the Wood Products division’s sites in other countries. Stora Enso also benefits from its high self-sufficiency in energy of 72% as well as hedging, and from its ~30% self-sufficiency of wood. The Group has made extensive changes to reshape the business over the past three years under its new leadership and disciplined capital allocation is firmly integrated to the Group's day to day operations. Stora Enso is now financially, operationally and strategically in better shape to handle market fluctuations and at the same time, invest for growth in renewable packaging, sustainable building solutions and biomaterials innovations. Guidance Stora Enso's full-year 2023 operational EBIT is expected to be lower than for the full-year 2022 (EUR 1,891 million). Short-term risks and uncertainties Risk is characterised by both threats and opportunities, which may have an impact on future performance and the financial results of Stora Enso, as well as on its ability to meet certain social and environmental objectives. The rapidly changing macroeconomic and geopolitical disruption is increasing complexity. The sanctions on Russia, retaliatory measures as well as conflict-related risks to people, operations, trade credit, cyber security, supply, and demand, could all have an adverse impact on the Group. There is a risk of continued higher cost inflation in general and in components such as chemicals, and increased price volatility for raw materials such as wood, components and energy in Europe, as well as continued logistical disruptions across the markets. The high market demand for wood could cause disruptions such as delays and/or lack of wood supply to the Group's production sites. The increased risk of a global economic downturn and recession, as well as sudden interest rate increases and currency fluctuations, could all affect the Group’s profits, cash flow and financial position negatively. Other risks and uncertainties include, but are not limited to; general industry conditions, unanticipated expenditures related to the cost of compliance with existing and new environmental and other governmental regulations, and related to actual or potential litigation; material process disruption at one of Stora Enso's manufacturing facilities with operational or environmental impacts; risks inherent in conducting business through joint ventures; and other factors that can be found in Stora Enso’s press releases and disclosures. Stora Enso has been granted various investment subsidies and has given certain investment commitments in several countries e.g. Finland, China and Sweden. If commitments to planning conditions are not met, local officials may pursue administrative measures to reclaim some of the formerly granted investment subsidies or to impose penalties on Stora Enso, and the outcome of such a process could result in adverse financial impact on Stora Enso. Sensitivity analysis Energy sensitivity analysis: the direct effect of a 10% change in electricity and fossil fuel market prices would have an impact of approximately EUR40 million on operational EBIT for the next 12 months. Wood sensitivity analysis: the direct effect of a 10% change in wood prices would have an impact of approximately EUR 236 million on operational EBIT for the next 12 months. Pulp sensitivity analysis: the direct effect of a 10% change in pulp market prices would have an impact of approximately EUR 165 million on operational EBIT for the next 12 months. Chemical and filler sensitivity analysis: the direct effect of a 10% change in chemical and filler prices would have an impact of approximately EUR 64 million on operational EBIT for the next 12 months. Foreign exchange rates transaction risk sensitivity analysis for the next twelve months: the direct effect on operational EBIT of a 10% strengthening in the value of the US dollar, Swedish krona and British pound would be approximately positive EUR 114 million, negative EUR 12 million and positive EUR 18 million annual impact, respectively. Weakening of the currencies would have the opposite impact. These numbers are net of hedges and assuming no changes occur other than a single currency exchange rate movement in an exposure currency. The Group's consolidated income statement on operational EBIT level is exposed to a foreign-currency translation risk worth approximately EUR 164 million expense exposure in Brazilian real (BRL) and approximately EUR 77 million income exposure in Chinese Renminbi (CNY). These exposures arise from the foreign subsidiaries and joint-operations located in Brazil and China, respectively. For these exposures a 10% strengthening in the value of a foreign currency would have a negative EUR 16 million and a positive EUR 8 million impact on operational EBIT, respectively. Unaudited 24 Annual General Meeting Stora Enso Oyj's Annual General Meeting (AGM) will be held on Thursday 16 March 2023 at 4 p.m. Finnish time at the Marina Congress Center in Helsinki, Finland. More information is available at storaenso.com/agm Proposal for the distribution of dividend The Board of Directors proposes to the AGM that a dividend of EUR 0.60 per share be distributed on the basis of the balance sheet adopted for the year 2022. The Board of Directors has assessed the Company’s financial situation and liquidity before making the proposal. There have been no material changes in the parent company’s financial position since 31 December 2022, the liquidity of the parent company remains good and the proposed dividend does not risk the solvency of the Company. Stora Enso's policy is to distribute 50% of earnings per share (EPS) excluding fair valuation over the cycle. In 2022, EPS excluding fair valuation was EUR 1.55. The Parent Company distributable shareholders’ equity on 31 December 2022 amounted to EUR 1,970,697,938.32, including the profit for the period of EUR 415,641,225.97. The Board of Directors proposes to the Annual General Meeting of the Company that the distributable funds be used as follows: A dividend of EUR 0.60 per share from the distributable shareholders’ equity to be distributed on 788,619,987 shares, not to exceed EUR 473,171,992.20, which would leave EUR 1,497,525,946.12 in distributable shareholders’ equity. The dividend would be paid to shareholders who on the record date of the dividend payment, 20 March 2023, are recorded in the shareholders’ register maintained by Euroclear Finland Oy or in the separate register of shareholders maintained by Euroclear Sweden AB for Euroclear Sweden registered shares. Dividends payable to Euroclear Sweden registered shares will be forwarded by Euroclear Sweden AB and paid in Swedish crowns. Dividends payable to ADR holders will be forwarded by Citibank N.A. and paid in US dollars. The Board of Directors proposes to the AGM that the dividend be paid on or about 27 March 2023. Events after the reporting period Divestment of paper sites The divestment of the Nymölla paper site in Sweden to Sylvamo was completed in early January. The divestments of the Maxau site in Germany to Schwarz Produktion and the Hylte site in Sweden to Sweden Timber are expected to be completed during H1/2023. The divestment process for the Anjala paper site was discontinued and the site will be retained in Stora Enso. Changes in segment reporting Stora Enso's segment reporting changed as of 1 January 2023. The Paper division was discontinued as of 1 January 2023, and it is not reported as a separate segment going forward. From 1 January 2023 onwards, the Maxau and Hylte paper sites are reported in Segment Other until the completion of the divestments. The Langerbrugge and Anjala sites, which are retained in Stora Enso are reported as part of the Packaging Materials division. From 1 January 2023, the reporting of emerging businesses, including Formed Fiber, Circular Solutions (biocomposites), and Selfly Stores, was transferred from the Packaging Solutions division to Segment Other. The comparative figures will be restated accordingly. Acquisition of De Jong Packaging Group In January, Stora Enso finalised the acquisition of the Dutch De Jong Packaging Group for an enterprise value of approx. EUR 1,020 million. The acquisition will advance Stora Enso’s strategic direction, accelerate revenue growth and build market share in renewable packaging in Europe, and provide an entry into the corrugated packaging market in the Netherlands, Belgium, Germany and the UK. De Jong Packaging Group’s full year 2022 sales is estimated at approximately EUR 1 billion. Its product portfolio complements and enhances Stora Enso’s offering, especially in fresh produce, e-commerce and industrial packaging. Unaudited 25 Calculation of key figures Operational return on capital employed, operational ROCE (%) 100 x Annualised operational EBIT Capital employed1, 2 Operational return on operating capital, operational ROOC (%) 100 x Annualised operational EBIT Operating capital2 Return on equity, ROE (%) 100 x Net profit/loss for the period Total equity2 Net interest-bearing liabilities Interest-bearing liabilities – interest-bearing assets Net debt/equity ratio Net interest-bearing liabilities Equity3 Earnings per share (EPS) Net profit/loss for the period3 Average number of shares Payout ratio, excl. FV, % 100 x Dividend distribution / share EPS excl. FV Dividend and distribution yield, % 100 x Dividend distribution / share Closing price of share Price/earnings ratio (P/E), excl. FV Closing price of share EPS excl. FV Operational EBIT Operating profit/loss excluding items affecting comparability (IAC) and fair valuations (FV) of the segments and Stora Enso’s share of operating profit/loss excluding IAC and fair valuations of its equity accounted investments (EAI) Operational EBITDA Operating profit/loss excluding silviculture costs and damage to forests, fixed asset depreciation and impairment, IACs and fair valuations. The definition includes the respective items of subsidiaries, joint arrangements and equity accounted investments. Net debt/last 12 months’ operational EBITDA ratio Net interest-bearing liabilities LTM operational EBITDA Fixed costs Maintenance, personnel and other administrative type of costs, excluding IAC and fair valuations Last 12 months (LTM) 12 months prior to the end of reporting period 1 Capital employed = Operating capital – Net tax liabilities 2 Average for the financial period 3 Attributable to owners of the Parent Non-IFRS measures The Group’s key non-IFRS performance metric is operational EBIT, which is used to evaluate the performance of its operating segments and to steer allocation of resources to them. Operational EBIT comprises the operating profit excluding items affecting comparability (IAC) and fair valuations from the segments and Stora Enso’s share of the operating profit of equity accounted investments (EAI), also excluding items affecting comparability and fair valuations. Items affecting comparability are exceptional transactions that are not related to recurring business operations. The most common IAC are capital gains and losses, impairments or impairment reversals, disposal gains and losses relating to Group companies, provisions for planned restructurings, environmental provisions, changes in depreciation due to restructuring and penalties. Items affecting comparability are normally disclosed individually if they exceed one cent per share. Fair valuations and non-operational items include CO2 emission rights, non-operational fair valuation changes of biological assets, adjustments for differences between fair value and acquisition cost of forest assets upon disposal and the Group’s share of income tax and net financial items of EAI. Non-operational fair value changes of biological assets reflect changes made to valuation assumptions and parameters. Operational fair value changes of biological assets contain all other fair value changes, mainly due to inflation and differences in actual harvesting levels compared to the harvesting plan. The adjustments for differences between fair value and acquisition cost of forest assets upon disposal are a result of the fact that the cumulative non-operational fair valuation changes of disposed forest assets were included in previous periods in IFRS operating profit (biological assets) and other comprehensive income (forest land) and are included in operational EBIT only at the disposal date. Cash flow after investing activities (non-IFRS) is calculated as follows: cash flow from operations (non-IFRS) excluding cash spent on intangible assets, property, plant and equipment, and biological assets and acquisitions of EAIs. List of non-IFRS measures Operational EBITDA Operational EBITDA margin Operational EBIT Operational EBIT margin Profit before tax excl. IAC and FV Capital expenditure Capital expenditure excl. investments in biological assets Capital employed Depreciation and impairment charges excl. IAC Operational ROCE Earnings per share (EPS), excl. FV Operational ROOC Net debt/last 12 months' operational EBITDA ratio Cash flow after investing activities 26 Consolidated financial statements Consolidated income statement Year ended 31 December EUR million Note 2022 2021 Sales 3 11,680 10,164 Other operating income 5 326 345 Changes in inventories of finished goods and work in progress 258 122 Materials and services -6,979 -5,936 Freight and sales commissions -1,148 -939 Personnel expenses 6 -1,315 -1,351 Other operating expenses 5 -594 -610 Share of results of equity accounted investments 13 221 143 Change in net value of biological assets 12 195 328 Depreciation, amortisation and impairment charges 10 -635 -697 Operating profit 3 2,009 1,568 Financial income 8 40 42 Financial expense 8 -191 -190 Profit before Tax 1,858 1,419 Income tax 9 -322 -151 Net profit for the year 1,536 1,268 Attributable to Owners of the Parent 18 1,550 1,266 Non-controlling Interests 19 -13 3 Net profit for the year 1,536 1,268 Earnings per share Basic earnings per share, EUR 32 1.97 1.61 Diluted earnings per share, EUR 32 1.96 1.60 Consolidated statement of comprehensive income Year ended 31 December EUR million Note 2022 2021 Net profit for the year 1,536 1,268 Other Comprehensive Income (OCI) Items that will not be reclassified to profit and loss Equity instruments at fair value through OCI 14 519 501 Actuarial gains and losses on defined benefit plans 20 147 126 Revaluation of forest land 12 259 225 Share of OCI of equity accounted investments (EAI) 13 58 16 Income tax relating to items that will not be reclassified 9 -77 -68 906 800 Items that may be reclassified subsequently to profit and loss Cumulative translation adjustment (CTA) 28 -197 56 Net investment hedges and loans 28 -27 14 Cash flow hedges and cost of hedging 27 52 -35 Share of OCI of non-controlling interests (NCI) 19 0 -3 Income tax relating to items that may be reclassified 9 -6 9 -177 42 Total comprehensive income 2,265 2,110 Attributable to Owners of the Parent 2,278 2,110 Non-controlling interests 19 -13 0 Total comprehensive income 2,265 2,110 The accompanying Notes are an integral part of these consolidated financial statements. 27 Consolidated statement of financial position As at 31 December EUR million Note 2022 2021 Assets Goodwill O 11 244 282 Other intangible assets O 11 121 124 Property, plant and equipment O 11 4,860 5,060 Right-of-use assets O 11 418 441 5,643 5,907 Forest assets O 12 6,846 6,747 Biological assets O 12 4,531 4,547 Forest land O 12 2,315 2,201 Emission rights O 15 123 137 Equity accounted investments O 13 832 580 Listed securities I 14 8 13 Unlisted securities O 14 1,437 905 Non-current interest-bearing receivables I 26 120 51 Deferred tax assets T 9 74 143 Other non-current assets O 15 38 34 Non-current assets 15,120 14,517 Inventories O 16 1,810 1,478 Tax receivables T 11 17 Operative receivables O 17 1,473 1,449 Interest-bearing receivables I 26 77 84 Cash and cash equivalents I 1,917 1,481 Current assets 5,287 4,509 Assets held for sale 4 514 0 Total assets 20,922 19,026 As at 31 December EUR million Note 2022 2021 Equity and liabilities Share capital 18 1,342 1,342 Share premium 77 77 Invested non-restricted equity fund 633 633 Fair value reserve 3,002 2,175 Cumulative translation adjustment 28 -415 -195 Retained earnings 7,893 6,650 Equity attributable to owners of the Parent 12,532 10,683 Non-controlling Interests 19 -30 -16 Total equity 12,502 10,666 Post-employment benefit obligations O 20 159 347 Provisions O 22 81 91 Deferred tax liabilities T 9 1,443 1,430 Non-current interest-bearing liabilities I 26 2,792 3,313 Non-current operative liabilities O 23 11 13 Non-current liabilities 4,486 5,195 Current portion of non-current debt I 26 667 180 Interest-bearing liabilities I 26 513 444 Bank overdrafts I 26 0 1 Provisions O 22 43 139 Operative liabilities O 23 2,410 2,339 Tax liabilities T 9 64 61 Current liabilities 3,697 3,165 Liabilities related to assets held for sale 4 237 0 Total liabilities 8,419 8,360 Total equity and liabilities 20,922 19,026 Items designated "O" comprise Operating Capital, items designated "I" comprise Interest-bearing Net Liabilities, items designated "T" comprise Net Tax Liabilities. The accompanying Notes are an integral part of these consolidated financial statements. 28 Consolidated cash flow statement Year ended 31 December EUR million Note 2022 2021 Cash flow from operating activities Net profit for the year 1,536 1,268 Adjustments and reversal of non-cash items: Taxes 9 322 151 Depreciation and impairment charges 10 635 697 Change in value of biological assets 12 -195 -328 Change in fair value of share awards 7 3 Share of results of equity accounted investments 13 -221 -143 CTA and profits and losses on sale of fixed assets and investments1 5 52 -54 Net financial items 8 151 149 Other adjustments 22 17 Dividends received from equity accounted investments 13 25 16 Interest received 13 2 Interest paid -119 -123 Other financial items, net -7 -19 Income taxes paid 9 -178 -136 Change in net working capital, net of businesses acquired or sold -461 -25 Net cash provided by operating activities 1,582 1,476 Cash flow from investing activities Acquisition of shares in equity accounted investments 13 -7 -6 Acquisition of unlisted securities 14 -11 -1 Cash flow on disposal of subsidiary shares and business operations, net of disposed cash 4 -77 55 Cash flow on disposal of shares in equity accounted investments 13 10 47 Cash flow on disposal of intangible assets and property, plant and equipment 11 17 105 Capital expenditure 3, 11 -603 -565 Investment in biological assets 12 -101 -79 Proceeds from/payment of non-current receivables, net 31 -4 Net cash used in investing activities -742 -449 Year ended 31 December EUR million Note 2022 2021 Cash flow from financing activities Proceeds from issue of new long-term debt 26 366 19 Repayment of long-term debt and lease liabilities 26 -390 -940 Change in short-term interest-bearing liabilities 26 9 -59 Dividends paid -434 -237 Purchase of own shares -1 -3 Net cash used in financing activities -450 -1,220 Net change in cash and cash equivalents 389 -193 Translation adjustment 48 18 Net cash and cash equivalents at beginning of year 1,480 1,655 Net cash and cash equivalents at year end 1,917 1,480 Cash and cash equivalents at year end2 1,917 1,481 Bank overdrafts at year end 0 -1 Net cash and cash equivalents at year end 1,917 1,480 1 CTA = Cumulative Translation Adjustment 2 Cash and cash equivalents comprise cash-in-hand, deposits held at call with banks and other liquid investments with original maturity of less than three months. Bank overdrafts are included in current liabilities. The accompanying Notes are an integral part of these consolidated financial statements. 29 Consolidated cash flow statement Supplemental cash flow information Year ended 31 December EUR million Note 2022 2021 Change in net working capital consists of: Change in inventories -454 -196 Change in interest-free receivables: Current -165 -305 Non-current -1 -7 Change in interest-free liabilities: Current 163 491 Non-current -3 -7 Change in net working capital, net of businesses acquired or sold -461 -25 Cash and cash equivalents consist of: Cash on hand and at banks 1,272 946 Cash equivalents 646 535 Cash and cash equivalents 1,917 1,481 Non-cash investing activities Total capital expenditure excluding right-of-use assets 656 576 Amounts paid -603 -565 Non-cash part of additions to intangible assets and property, plant and equipment 53 11 Cash flow on disposals of subsidiaries and business operations Cash part of the consideration 4 13 67 Cash and cash equivalents in divested companies 4 -90 -12 Net cash flow from disposal -77 55 The accompanying Notes are an integral part of these consolidated financial statements. 30 Statement of changes in equity Fair value reserve EUR million Share capital Share premium and reserve fund Invested non- restricted equity fund Treasury shares Equity instruments through OCI Cash flow hedges Revaluation reserve OCI of Equity Accounted Investments CTA and net investment hedges and loans Retained earnings Attributable to owners of the parent Non- controlling interests Total Balance at 1 January 2021 1,342 77 633 — 277 23 1,195 12 -267 5,518 8,809 -16 8,793 Net profit for the year — — — — — — — — — 1,266 1,266 3 1,268 OCI before tax — — — — 501 -35 225 16 70 126 903 -3 900 Income tax relating to OCI — — — — 1 8 -46 — 2 -22 -59 — -59 Total Comprehensive Income — — — — 501 -27 179 16 72 1,369 2,110 — 2,110 Dividend — — — — — — — — — -237 -237 — -237 Acquisitions and disposals — — — — — — — — — — — — — Purchase of treasury shares — — — -3 — — — — — — -3 — -3 Share-based payments — — — 3 — — — — — — 3 — 3 Balance at 31 December 2021 1,342 77 633 — 778 -4 1,373 29 -195 6,650 10,683 -16 10,666 Net profit for the year — — — — — — — — — 1,550 1,550 -13 1,536 OCI before tax — — — — 519 52 259 58 -224 147 812 — 812 Income tax relating to OCI — — — — 1 -9 -53 — 3 -25 -83 — -83 Total Comprehensive Income — — — — 520 43 206 58 -220 1,672 2,278 -13 2,265 Dividend — — — — — — — — — -434 -434 — -434 Acquisitions and disposals — — — — — — — — — — — — — Purchase of treasury shares — — — -1 — — — — — — -1 — -1 Share-based payments — — — 1 — — — — — 5 6 — 6 Balance at 31 December 2022 1,342 77 633 — 1,298 39 1,579 87 -415 7,893 12,532 -30 12,502 CTA = Cumulative Translation Adjustment, NCI = Non-controlling Interests, OCI = Other Comprehensive Income, EAI = Equity Accounted Investments 31 Notes to the consolidated financial statements Note 1 Accounting principles Principal activities Stora Enso Oyj (“the Company”) is a Finnish public limited liability company organised under the laws of the Republic of Finland and with its registered address at Salmisaarenaukio 2, 00180 Helsinki. Its shares are currently listed on Nasdaq Helsinki and Stockholm. The operations of Stora Enso Oyj and its subsidiaries (together “Stora Enso” or “the Group”) are organised into the following reportable segments: Packaging Materials, Packaging Solutions, Biomaterials, Wood Products, Forest, Paper and segment Other. The Group’s main market is Europe. The Financial Statements were authorised for issue by the Board of Directors on 30 January 2023. Basis of preparation The consolidated financial statements of Stora Enso Oyj have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, including International Accounting Standards (IAS) and interpretations issued by the IFRS Interpretations Committee (IFRIC). The consolidated financial statements of Stora Enso Oyj have been prepared according to the historical cost convention, except as disclosed in the accounting policies. The detailed accounting principles are explained in the related notes with a few exceptions where the accounting principles are presented in this note. The consolidated financial statements are presented in euros, which is the parent company’s functional currency. All figures in this Annual Report have been rounded to the nearest million, unless otherwise stated. Therefore, figures in this report may not add up precisely to the totals presented and may vary from previously published financial information. New and amended standards and interpretations adopted in 2022 The Group has applied the following new and amended standards and interpretations which are effective from 1 January 2022: •Amendments to IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Annual Improvements 2018-2020. The amendments in IFRS 3 relate to identifying the liabilities assumed in a business combination and that an acquirer does not recognise contingent assets acquired in a business combination. The amendment in IAS 16 prohibits deducting from the cost of a fixed asset any proceeds from selling items produced while bringing that asset in use. Instead, proceeds from selling such items and the cost of producing those items are recognised in profit or loss. The amendments in IAS 37 specify that the cost of fulfilling a contract includes the costs that relate directly to the contract (examples include direct labour, materials, and allocation of the depreciation for an asset used in fulfilling the contract). Annual Improvements to IFRS Standards 2018–2020 include minor amendments in IFRS 9 Financial Instruments, IFRS 16 Leases and IAS 41 Agriculture. The effective date is 1 January 2022. The amendments did not have a significant impact on the Group. •Amendments to IFRS 16 Leases: COVID-19 Related Rent Concessions. The amendments extend the availability of the practical expedient and provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The effective date is annual reporting periods beginning on or after 1 April 2021. The amendments did not have a significant impact on the Group. •Other standards standard amendments and interpretations did not have any significant impact on the Group's consolidated financial statements or disclosures. Changes in accounting principles Valuation of Finnish forest assets Stora Enso changed the valuation method for its forest assets in Finland at the end of 2022 to correspond to the valuation method applied with Swedish forest assets. Forest assets in Finland are owned through Group's 41% shareholding in equity accounted investment Tornator. Forest assets are defined as biological assets (standing growing trees) and the related forest land. As a result of the valuation method change, the forest assets in Finland are valued using a market approach. Forest assets in Finland are valued by using a market approach method based on the forest market transactions in those areas where Stora Enso’s forests are located. In Finland reliable market transaction data is considered to be available and also considered to provide a more transparent and observable valuation basis. The total forest assets net cash flows consist of cash flows related to standing trees (biological assets) and separate cash flows regarding forest land. The standing trees valuation is computed based on a discounted cash flow (DCF) method and using a discount rate implied by the market transactions in accordance with the IAS 41 Agriculture standard. The discount rate is determined as the rate at which the market transaction prices match the total forest assets cash flows. The discount rate is the same for biological assets and forest land. Previously, the discounted cash flow method was used for valuation of biological assets and forest land, where the discount rate applied was determined using the weighted average cost of capital method. There are no changes in applied accounting principles and the change in the valuation method concerns only forest assets in Finland, while there are no changes in the valuation method with Tornator's minor forest holdings in Estonia and Romania. Changes in the valuation method with Finnish forest assets increased Stora Enso's share of the carrying amount of forest assets by approximately EUR 240 million, divided between an increase in biological assets of EUR 170 million and an increase in forest land of EUR 70 million. Net of taxes, the change resulted in about EUR 190 million increase in investments in equity accounted investments. The increase in forest land assets is recognised in the OCI net of deferred taxes and does not have an impact on the income statement. The fair value changes in biological assets is recognised in the income statement. The comparative periods have not been restated. See Note 12 Forest assets for more details. Accounting considerations relating to Russia As announced in March 2022, all import and export activities from and to Russia were halted, and operations in Russia were stopped. In May and July 2022, Stora Enso sold all of its operations in Russia. Related to one forest operations unit, the disposal will be completed in 2023, upon finalisation of certain formalities. More details about disposed Packaging Solutions, Wood Products and Forest operations are presented in Note 4 Acquisitions disposals 32 and assets held for sale. More information about valuation of remaining Russia related receivables see Note 26 Interest-bearing assets and liabilities. Consolidation principles The consolidated financial statements include the parent company, Stora Enso Oyj, and all companies controlled by the Group. Control is defined as when the Group: •has power over the investee, •is exposed, or has rights, to variable returns from its involvement with the investee; and •has the ability to use its power to affect its returns. If facts and circumstances indicate that there are changes to the three elements of control listed above the Group reassess whether or not it controls an investee. Acquired companies are accounted for under the acquisition method whereby they are included in the consolidated financial statements from the date the control over the subsidiary is obtained, whereas, conversely, disposed companies are included up to the date when the control is lost. The subsidiaries and joint operations are listed in Note 30 Group companies. All intercompany transactions, receivables, liabilities and unrealised profits, as well as intragroup profit distributions, are eliminated. Accounting policies for subsidiaries, joint arrangements and equity accounted investments are adjusted where necessary to ensure consistency with the policies adopted by Stora Enso. Associated companies over which Stora Enso exercises significant influence are accounted for by using the equity method. These companies are investments in which the Group has significant influence, but which it does not control. Significant influence means the power to participate in the financial and operating policy decisions of the company without control or joint control over those policies. More detailed information is presented in Note 13 Equity accounted investments. Joint control is the contractually agreed sharing of control of the joint arrangement, which exists only when decisions on relevant activities require the unanimous consent of the parties sharing control. Joint operations are joint arrangements, whereby the partners who have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint ventures are joint arrangements, whereby the partners who have joint control of the arrangement have rights to the net assets of the joint arrangement. The Group has two joint operations, Veracel and Montes del Plata. In both companies, Stora Enso’s ownership is 50%. The arrangements are based on shareholders’ agreements, which give Stora Enso rights to a share of returns and make the Group indirectly liable for the liabilities, as its ability to pay for the pulp is used to finance debts. In relation to its interest in joint operations, the Group recognises its share of assets, liabilities, revenues, expenses and cash flows of the joint operation. The share is determined based on rights to the assets and obligations for the liabilities of each joint operator. •Veracel is a jointly owned company of Stora Enso and Suzano located in Brazil. The pulp mill produces 1.2 million tonnes of bleached eucalyptus hard wood pulp per year and both owners are entitled to half of the mill’s output. The eucalyptus is sourced mostly from the company’s own forestry plantations. The mill commenced production in May 2005. •Montes del Plata is a jointly owned company of Stora Enso and Arauco located in Uruguay. The Montes del Plata Pulp Mill’s annual capacity is 1.4 million tonnes of bleached eucalyptus hard wood pulp and Stora Enso’s part, 0.7 million tonnes, is sold entirely as market pulp. The eucalyptus is sourced mostly from the company’s own forestry plantations. The mill commenced production in June 2014. Revenue recognition Sales comprise products, raw materials and services less indirect sales tax and discounts, and are adjusted for cash flow hedging result on sales in foreign currencies. Sales are recognised after Stora Enso has transferred the control of goods and services to a customer and the Group retains neither a continuing right to dispose of the goods, nor effective control of those goods; usually, this means that sales are recorded upon the delivery of goods to customers in accordance with the agreed terms of delivery. Stora Enso’s terms of delivery are based on Incoterms 2020, which are the official rules for the interpretation of trade terms as issued by the International Chamber of Commerce (ICC). The main categories of the terms covering Group sales are: •“D” terms, under which the group is obliged to deliver the goods to the buyer at the agreed place in the manner specified in the chosen rule, in which case the Point of Sale is the moment of delivery to the buyer. •“C” terms, whereby the Group arranges and pays for the external carriage and certain other costs, though the Group ceases to be responsible for the goods once they have been handed over to the carrier in accordance with the relevant term. The Point of Sale is thus the handing over of the goods to the carrier contracted by the seller for the carriage to the agreed destination. •“F” terms, being where the buyer arranges and pays for the carriage, thus the Point of Sale is the handing over of the goods to the carrier contracted by the buyer at the agreed point. Where local rules may result in invoices being raised in advance of the above, the effect of this revenue advancement is quantified, and an adjustment is made accordingly.Stora Enso’s sales mainly comprise sales of products and the revenue is typically recognised at a point in time when Stora Enso transfers control of these products to a customer. Revenues from services are recognised over time once the service has been performed. More detailed information regarding Stora Enso's principal activities from which the Group generates its revenue and disaggregation of revenue is presented in Note 3 Segment information. Foreign currency transactions Transactions in foreign currencies are recorded at the rate of exchange prevailing at the transaction date, but at the end of the month foreign-currency-denominated receivables and liabilities are translated using the month-end exchange rate. Foreign exchange differences for operating items are presented in the appropriate income statement line in the operating profit, and, for financial assets and liabilities, they are presented in the financial items in the consolidated income statement, except when deferred in equity as qualifying cash flow hedges, net investment hedges or net investment loans. Translation differences on non-monetary financial assets, such as equities classified at fair value through other comprehensive income (FVTOCI), are included in equity. Foreign currency translations The income statements of Group companies with functional and presentational currencies other than the euro are translated into the Group reporting currency using the average exchange rates of the year, whereas the statements of the financial position of these companies are translated using the exchange rates at the reporting date. The Group is exposed to currency risks arising from exchange rate fluctuations on the value of its net investment in non-euro area foreign entities. Exchange differences arising from the retranslation of net investments in foreign entities that are non-euro foreign subsidiaries, joint operations or equity 33 accounted investments, and of financial instruments that are designated to hedge such investments, are recorded directly in equity as cumulative translation adjustment (CTA). See Note 28 Cumulative translation adjustments and equity hedging for more details. Future standard changes endorsed by the EU but not yet effective in 2022 •Amendments to IAS 1 Presentation of Financial Statements: Disclosure of Accounting policies. The amendment requires entities to disclose their material accounting policy information rather than their significant accounting policies. The effective date is 1 January 2023. The Group will consider the amendment in disclosures and expects that the impact will not be significant. •Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates. The amendments introduce the definition of accounting estimates and includes other amendments to IAS 8 to help entities distinguish changes in accounting estimates from changes in accounting policies. The effective date is 1 January 2023. The Group expects that the amendment does not have a significant impact. •Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction. The amendments clarify how entities account for deferred tax on transactions such as leases and decommissioning obligations. The main change is related to the initial recognition exemption and in accordance with the amendment; the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. The effective date is 1 January 2023. The Group expects that the amendment does not have a significant impact. •No other published standards, standard amendments or interpretations which would be expected to have any significant impact on the Group’s consolidated financial statements or disclosures. Future standard changes not yet effective and not yet endorsed by the EU in 2022 •Amendments to IFRS 16 Leases: Lease Liability in Sale and Leaseback. Amendment requires a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognise any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from recognising in profit or loss any gain or loss relating to the partial or full termination of a lease. The effective date is 1 January 2024. The Group is evaluating the impact of the amendments. •Amendments to IAS 1 Presentation of Financial Statements: Information about long-term debt with covenants. IAS 1 requires a company to classify debt as non-current only if the company can avoid settling the debt in the 12 months after the reporting date. However, a company’s ability to do so is often subject to complying with covenants. The amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, the amendments require a company to disclose information about these covenants in the notes to the financial statements. The effective date is 1 January 2024. The Group is evaluating the impact of the amendments and expects that the amendment does not have significant impact. •Amendments to IAS 1 Presentation of Financial Statements: Classification of liabilities as current or non-current. The amendments clarify a criterion for classifying a liability as non-current. The amendments specify that an entity’s right to defer settlement must exist at the end of the reporting period; clarify that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement; clarify how lending conditions affect classification; and clarify requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments. The effective date is 1 January 2024. The Group is evaluating the impact of the amendments and expects that the amendment does not have significant impact. •Other published standards, standard amendments or interpretations are not expected to have any significant on the Group’s consolidated financial statements or disclosures. Note 2 Critical accounting estimates and judgements The preparation of consolidated financial statements in accordance with IFRS requires management to make estimates, judgements and assumptions that affect the reported assets and liabilities, as well as the disclosure of contingent assets and liabilities at the reporting date and the reported revenues and expenses during the period. These estimates, judgments and assumptions might have a significant impact on the amounts recognised in the consolidated financial statements. The estimates are based on historical experience and various other assumptions that are believed to be reasonable and reflect management's best estimates, though actual results and timings could differ from these. The estimates, judgements and assumptions are reviewed regularly and updated if there are changes in circumstances or as a result of new information. The accounting items presented below represent those matters which include the most estimation uncertainty and exercise of judgement. Property, plant and equipment, intangible assets and right-of-use assets The carrying amounts of property, plant and equipment and intangible assets and right-of- use assets are assessed at each reporting date to determine whether there is any indication that an asset may be impaired. If an indicator of impairment exists, the asset's recoverable amount is determined and compared with its carrying amount. The recoverable amount of an asset is estimated as the higher of fair value less the cost of disposal and the value in use, and an impairment charge is recognised whenever the carrying amount exceeds the recoverable amount. The value in use is calculated using a discounted cash flow method which is most sensitive to the discount rate as well as the expected future cash flows. The key assumptions used in the impairment testing, are explained further in Note 10 Depreciation, amortisation and impairment charges. Management believes that the assigned values and useful lives, as well as the underlying assumptions, are reasonable, though different assumptions and assigned useful lives could have a significant impact on the reported amounts. For material intangible assets and property, plant and equipment in an acquisition, an external advisor makes a fair valuation of the acquired intangible assets and property, plant and equipment and assists in determining their remaining useful life. Goodwill Goodwill is tested per Cash Generating Unit (CGU) or by a group of CGUs at least on an annual basis and recoverable amount is calculated using the discounted cash flow method (value in use). Impairment is recognised if the carrying amount exceeds the recoverable amount. The discounted 34 cash flow method uses future projections of cash flows from each of the reporting units in a CGU or a group of CGUs and includes, among other estimates, projections of future product pricing, production levels, product costs, market supply and demand, projected capital expenditures and an assumption of the weighted average cost of capital. The discount rates used reflect the best estimate of the weighted average cost of capital. The Group has evaluated the most sensitive estimates and assumptions, which, when changed, could have a material impact on the valuation of the assets including goodwill and, therefore, could lead to an impairment. These estimates and assumptions are expected sales prices, expected operating costs and the discount rate. The key assumptions used in the impairment testing are presented in Note 10 Depreciation, amortisation and impairment charges. Leases When assessing the lease term and if an extension or renewal options are included or not, the Group considers all relevant facts, circumstances and incentives that might have an impact on the assessment. Options to extend or renew the lease are included in the lease term only if it is reasonably certain that Stora Enso will exercise the option. The Group will do a reassessment, for example upon changes in circumstances, receiving new information or an occurrence of a significant event that is within the control of the lessee and might have an impact on the assessment. See Note 11 Intangible assets, property, plant and equipment and right-of- use assets for more details about right-of- use assets and Note 26 Interest-bearing assets and liabilities for more details about lease liabilities. Biological assets The Group has biological assets in subsidiaries, joint operations and associated company. Biological assets, in the form of standing trees, are accounted in accordance with the IAS 41 Agriculture standard, which requires that the assets are measured at fair value less the costs to sell. Fair value is determined by using discounted cash flows from continuous operations based on sustainable forest management plans taking into account the growth potential of one cycle. These discounted cash flows require estimates of growth, harvesting, sales price, costs and discount rate. In determining the value of biological assets, the management needs to make estimates of future price levels and trends for sales and costs, and to undertake regular surveys of the forest to establish the volumes of wood available for harvesting and their current growth rates. See next chapter for estimates and judgement applied in valuation of Nordic forest assets and Note 12 Forest assets for more detailed information about Nordic and plantation forest assets. Nordic forest assets The fair value of forest assets in the Nordics is determined using a market approach method, which is based on the forest market transactions in the areas where Stora Enso’s forests are located. Market prices between areas vary significantly and judgement is applied to define relevant areas for market transactions used in valuation. The valuation of the forest assets is based on detailed transaction data and price statistics as provided by market data suppliers. Market transaction data is adjusted to consider characteristics and nature of Stora Enso's forest assets and to exclude certain non- forest assets and transactions considered as outliers compared to other transactions. The valuation takes into account where the forest land is located, price levels and volume of standing stock. The value of the forest assets will be affected by changes in transaction prices and by how the volume of standing stock develops. Stora Enso is applying weighted three-year average market transaction prices and this is considered to include a sufficient amount of transactions and estimated to represent market conditions at the reporting date. The value of the forest assets is allocated to biological assets and forest land. Allocation of the combined fair value of forest assets is based on the income approach where separate present values of expected net cash flows are calculated for both biological assets and forest land. The discount rate is determined as the rate at which the valuation based on market transaction prices matches the total forest assets combined cash flows for biological assets and forest land. The total net cash flows for each of the components include estimates in respect of future harvesting volumes, sales price levels, and cost development. See Note 12 Forest assets for more information. Fair value of financial instruments Where the fair value of financial assets and liabilities cannot be derived directly from publicly quoted market prices, other valuation techniques, such as discounted cash flow models, transaction multiples, the Black and Scholes model and the Gordon model, are applied. The key judgements include future cash flows, credit risk, volatility and changes in assumptions about these factors which could affect the reported fair value of the financial instruments. Investments in debt and equity instruments of unlisted entities, such as Pohjolan Voima Oy (PVO), represent a significant portion of the Group’s assets and require management judgement, as explained in more detail in Notes 14 Equity instruments and 24 Financial risk management. Income taxes Tax assets and liabilities are reviewed on a regular basis and balances are adjusted appropriately. The deferred tax assets, whether arising from temporary differences or from tax losses, are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Management considers that adequate provision has been made for future tax consequences based on the current facts, circumstances and tax laws. However, should any tax positions be challenged and not prevail, different outcomes could result and have a significant impact on the amounts reported in the consolidated financial statements. See Note 9 Income taxes for more detailed information. Post-retirement benefits The determination of the Group pension obligation and expense is subject to the selection of certain assumptions used by actuaries in calculating such amounts, including, among others, the discount rate, the annual rate of increase in future compensation levels and estimated lifespans. Amounts charged in the income statement are determined by independent actuaries; however, where actual results differ from the initial estimates, together with the effect of any change in assumptions or other factors, these differences are recognised directly in equity, as disclosed in the statement of comprehensive income. See Note 20 Post-employment benefit obligations for detailed information on the assumptions used in the pension obligation calculations. Provisions The Group has recognised provisions for known environmental, restructuring and other obligations, where legal or constructive obligation exist as a result of past events. The amounts recognised as provisions are based on the management’s best estimate of the costs required to settle the obligation. Due to uncertainty regarding the timing and amount of these costs, the actual costs might differ significantly from the original estimate. The carrying amounts of provisions are reviewed regularly and adjusted when needed to consider changes in cost estimates, regulations, applied technologies and conditions. See Note 22 Provisions for more detailed information. 35 Note 3 Segment information Accounting principles Stora Enso’s reportable segments are Packaging Materials, Packaging Solutions, Biomaterials, Wood Products, Forest, and Paper and the segment Other. Operating segments reflect the Group’s management structure and the way financial information is regularly reviewed by Stora Enso’s President and CEO who is responsible for allocating resources and assessing the performance of the operating segments. Costs, revenues, assets and liabilities are allocated to business segments on a consistent basis. Transactions between operating segments are based on arm’s length terms, and they are eliminated on consolidation. The activities of the reportable segments are: Packaging Materials The Packaging Materials division is a global leader and expert in circular packaging providing premium packaging materials based on virgin and recycled fiber. Addressing the needs of today’s eco-conscious consumers, Stora Enso helps customers replace fossil-based materials with low-carbon, renewable and recyclable alternatives for their food, beverage and transport packaging. A wide selection of base boards and barrier coatings enables design optimisation for various demanding packaging end-uses. Packaging Solutions The Packaging Solutions division develops and sells premium fiber-based packaging products and services. Stora Enso’s high-end eco-friendly packaging products are used by leading brands across multiple market sectors, including the retail, e-commerce and industrial sectors. The portfolio includes converting corrugated board and carton board, and other new materials such as formed fiber and wood foams into standard and bespoke packaging solutions. The division also provides design and sustainability services for our customers, as we support a shift towards circular solutions. Biomaterials The Biomaterials division meets the growing demand for bio-based solutions which replace fossil-based and non-renewable materials. Stora Enso achieves this by using all fractions of biomass, like lignin, to develop new solutions including novel applications such as bio-based anode material for batteries and bio-based binders. Our pulp offering encompasses a wide variety of grades to meet the demands of packaging, paper, tissue, specialities, and hygiene product producers. We also serve the biochemicals market with tall oil and turpentine from biomass for further refining. Pulp continues to be our foundation while long-term growth is driven by new products and innovations. Wood Products The Wood Products division is the largest sawn wood producer in Europe and a leading provider of sustainable wood-based solutions for the global construction industry. The growing Building Solutions business offers building concepts and a full range of products to support low-carbon construction. Stora Enso develops services and digital tools to simplify the design and construction of buildings with wood. Additionally, we offer applications for windows and doors, and pellets for sustainable heating solutions. Forest The Forest division creates customer value through innovative solutions, competitive wood supply and sustainable forest management. Forests are the foundation for Stora Enso’s renewable offerings. The division manages Stora Enso’s forest assets in Sweden and a 41% share of Tornator, whose forest assets are mainly located in Finland. It is also responsible for wood sourcing for Stora Enso’s Nordic and Baltic operations and B2B customers. Stora Enso is one of the biggest private forest owners in the world. Paper At the end of 2022, Stora Enso had an established customer base and its product portfolio had offerings for print and office use. Customers benefit from Stora Enso’s selection of paper grades made from recycled and virgin fiber, our technical and operational expertise and sustainability know-how, and our sales and customer service centre network. Segment Other The segment Other includes Stora Enso’s shareholding in the energy company Pohjolan Voima (PVO), and the Group’s shared services and administration. Read more about the changes in segment reporting in 2023 in the Note 33 (Events after the reporting period). Sales by segment External Internal Total External Internal Total EUR million 2022 2021 Packaging Materials 4,473 218 4,690 3,715 183 3,898 Packaging Solutions 714 23 737 704 19 723 Biomaterials 1,798 382 2,180 1,499 229 1,728 Wood Products 2,058 137 2,195 1,766 106 1,872 Forest 848 1,671 2,519 781 1,530 2,311 Paper 1,691 81 1,772 1,644 59 1,703 Other 97 1,000 1,097 55 1,037 1,092 Elimination of internal sales -3,512 -3,512 -3,163 -3,163 Total 11,680 0 11,680 10,164 0 10,164 Disaggregation of revenue EUR million 2022 2021 Product sales 11,521 10,047 Service sales 159 117 Total 11,680 10,164 36 Segment share of operating profit/loss Year Ended 31 December Operating Profit/Loss EUR million 2022 2021 Packaging Materials 595 552 Packaging Solutions -101 23 Biomaterials 668 506 Wood Products 253 363 Forest 523 622 Paper 172 -423 Other -59 -67 Eliminations -41 -8 Total 2,009 1,568 Net financial items -151 -149 Profit before Tax 1,858 1,419 Income tax expense -322 -151 Net Profit 1,536 1,268 Operating capital, depreciation, impairments and impairment reversals, disposal gains and losses, and capital expenditure by segment Year Ended 31 December Operating capital Depreciation/ impairments/ impairment reversals/ disposal gains and losses Capital expenditure1 EUR million 2022 2021 2022 2021 2022 2021 Packaging Materials 3,344 3,206 253 255 342 330 Packaging Solutions 235 245 66 32 46 34 Biomaterials 2,796 2,520 110 99 121 88 Wood Products 718 678 59 46 87 66 Forest 6,963 6,696 50 20 35 25 Paper 333 123 88 207 60 55 Other 1,477 860 9 37 10 11 Eliminations -61 -21 0 0 0 0 Total 15,806 14,307 635 697 701 609 1 Excluding biological asset capex Operating capital (“O” items) is designated thus in the balance sheet and represents the sum of intangible asset and property, plant and equipment, right-of-use assets, forest assets, emission rights, unlisted shares, other non-current assets, inventories, current operative receivables and liabilities, provisions and other non-current operative liabilities. Operating capital includes assets held for sale and liabilities related to assets held for sale. Goodwill by segment Year Ended 31 December Goodwill1 EUR million 2022 2021 Packaging Materials 24 25 Packaging Solutions 6 6 Biomaterials 45 45 Wood Products 117 116 Forest 0 0 Paper 51 90 Other 0 0 Total 244 282 1 Goodwill excluding assets held for sale See Note 10 Depreciation, amortisation and impairment charges for more details related to recognised impairments and impairment testing. Average personnel Year Ended 31 December Segment 2022 2021 Packaging Materials 6,274 5,801 Packaging Solutions 3,966 4,361 Biomaterials 2,135 1,865 Wood Products 4,445 4,177 Forest 1,412 1,476 Paper 2,298 3,292 Other 1,261 2,098 Total 21,790 23,071 Year Ended 31 December Location 2022 2021 Austria 1,067 1,028 Baltic States 1,512 1,459 Belgium 506 506 Czech Republic 1,118 1,039 Finland 5,666 6,003 Germany 598 734 Poland 1,994 1,976 Russia 585 1,132 Sweden 4,659 5,023 Other Europe 230 236 Total Europe 17,934 19,137 Brazil 527 477 China (incl. Hong Kong) 2,894 3,006 USA 33 43 Uruguay 313 310 Other countries 89 98 Total 21,790 23,071 As at 31 December 2022 2021 Year-End Personnel 20,879 22,094 37 External sales by destination Sales by Destination EUR million 2022 2021 Austria 450 403 Baltic States 377 315 Belgium 117 102 Czech Republic 231 188 Denmark 128 108 Finland 759 610 France 449 357 Germany 1,208 1,049 Italy 650 450 Netherlands 317 207 Poland 733 548 Russia 112 307 Spain 311 246 Sweden 1,071 975 UK 444 395 Other Europe 577 837 Total Europe 7,934 7,096 Australia / New Zealand 202 146 Brazil 50 41 China (incl. Hong Kong) 1,125 1,183 Japan 417 316 Middle East 275 252 Uruguay 31 28 USA 397 320 Other countries 1,250 782 Total 11,680 10,164 Reconciliation of operating capital to total assets As at 31 December EUR million 2022 2021 Operating capital 15,806 14,307 Operative liabilities 2,909 2,930 Interest-bearing receivables 2,122 1,629 Tax receivables 85 160 Total assets 20,922 19,026 Operating capital, non-current assets and capital expenditure by location Year Ended 31 December Operating capital Non-current assets1 Capital expenditure2 EUR million 2022 2021 2022 2021 2022 2021 Austria 125 107 128 120 16 8 Baltic States 163 151 74 72 12 9 Belgium 99 123 135 153 13 21 Czech Republic 196 162 198 158 41 39 Finland 4,543 3,358 2,729 2,382 311 296 Germany 44 -68 53 216 10 5 Poland 413 406 379 378 35 36 Russia -2 112 0 73 3 12 Sweden 7,021 6,777 6,837 6,951 173 129 Other Europe 66 92 11 6 8 1 Total Europe 12,668 11,219 10,543 10,508 623 556 Brazil 303 261 278 231 21 16 China (incl. Hong Kong) 1,093 1,173 1,044 1,116 25 18 Uruguay 1,722 1,636 1,580 1,514 31 18 USA 41 47 32 30 0 0 Other countries -22 -29 4 6 1 1 Total 15,806 14,307 13,481 13,405 701 609 1 Non-current assets excluding assets held for sale, financial instruments and deferred tax assets. 2 Excluding biological asset capex 38 Note 4 Acquisitions, disposals and assets held for sale Accounting principles Acquired companies are accounted in accordance with the acquisition method whereby these companies are included in the consolidated financial statements from the date the control is obtained. Accordingly, the consideration transferred (including contingent consideration) and the acquired company's identifiable net assets are measured at fair value at the date of the acquisition. Transaction costs related to acquisition are expensed as incurred. The measurement type of non-controlling interest is decided separately for each acquisition, and measured either at fair value or non-controlling interest's proportionate share of the net assets. The excess of the consideration transferred, non-controlling interest and possible previously held equity interest over the fair value of net assets of the acquired company is recognised as goodwill, which is tested for impairment at least annually. The disposed companies are included in the consolidated financial statements up to the date when the control is lost. The gain or loss on disposal together with cumulative translation adjustments (CTA) related to disposed companies are recognised in the consolidated income statement at the date control is lost. Gains and losses on the disposal of a Group entity include any goodwill relating to the entity sold. Assets are classified as held for sale, if their carrying amounts will be recovered mainly through a sale transaction rather than through continuing use. The assets must be available for immediate sale in their present condition subject only to terms that are usual and customary for sale of such assets. Also, the sale must be highly probable and expected to be completed within one year from the date of classification. These assets and related liabilities are presented separately in the consolidated statement of financial position and measured at the lower of the carrying amount and fair value less costs to sell. Comparative information is not restated when classification is made. Assets classified as held for sale are not depreciated. Acquisition of Group companies Stora Enso did not complete any company or business acquisitions in 2022 or 2021. In September 2022, Stora Enso signed an agreement to acquire De Jong Packaging Group and the transaction was completed on 6th January 2023, presented as non-adjusting event after the reporting period. Following the completion of the transaction, purchase accounting for the acquisition has been initiated, including the preparation of a purchase price allocation. As of the date of authorisation for issuance of these financial statements, given the size, complexity and timing of the acquisition, the provisional purchase price allocation is incomplete. Accordingly, assets acquired, liabilities assumed, and the resulting non-controlling interest and goodwill to be recognised have not yet been estimated on a preliminary basis and therefore not presented. The goodwill will represent the expected synergies, mainly through sourcing, containerboard integration optimisation and commercial opportunities. The goodwill will be allocated to Divisions benefiting from the acquisition, Packaging Solutions and Packaging Materials. None of the goodwill recognised is expected to be deductible for tax purposes. The shares of the acquired companies are mainly 100% owned, with certain units having minor non-controlling interests. The non-controlling interest will be measured based on the proportionate share of the identifiable net assets. The preliminary cash purchase consideration was EUR 612 million, excluding contingent earn-out component. The earn-out component will be settled in cash in 2024 and is subject to De Jong Packaging Group achieving certain earnings thresholds. The contingent consideration is measured at its fair value at the date of acquisition and the maximum amount of earn-out is EUR 45 million. The final purchase price is subject to customary purchase price adjustments. De Jong Packaging Group is based in the Netherlands and is one of the largest corrugated packaging producers in the Benelux countries. De Jong Packaging Group is also active in containerboard production through the acquisition of the De Hoop mill in the Netherlands in 2021. De Jong Packaging Group has 17 sites in the Netherlands, Belgium, Germany and the UK and it employs approximately 1,300 people. With the acquisition, Stora Enso’s Packaging Solutions division will increase its corrugated packaging capacity by approximately 1,200 million m2 to more than 2,000 million m2, including De Jong Packaging Group’s ongoing expansion projects. The acquisition will advance Stora Enso’s strategic direction, accelerate revenue growth and build the market share in renewable packaging in Europe. De Jong Packaging Group's product portfolio and geographic presence will complement and enhance Stora Enso’s offering. The acquisition is also expected to generate synergies over the cycle, mainly through sourcing, containerboard integration optimisation and commercial opportunities. The acquired units will be reported in Packaging Solutions and Packaging Materials divisions. 39 Disposal of Group companies Year Ended 31 December EUR million 2022 2021 Net assets sold Cash and cash equivalents 90 12 Property, plant and equipment 8 32 Intangible assets 0 1 Working capital -1 10 Tax assets and liabilities 6 9 Interest-bearing assets and liabilities -19 -1 Net assets in disposed companies 85 62 Total disposal consideration 70 67 CTA release -47 1 Asset writedowns1 -155 -20 Loan impairments -23 0 Transaction costs -4 -2 Total net gain/loss -244 -16 1 2022 mainly related to writedowns in connection to Russia operations and including also writedowns related to assets held for sale. 2022 Kvarnsveden site In December 2022, Stora Enso divested its 100% owned Kvarnsveden site in Sweden to Northvolt, a European supplier of sustainable battery cells. Due to structural decline in demand for graphical paper, in April 2021 Stora Enso announced a plan to close its Kvarnsveden paper site and the production was ended in September 2021. The site will be developed into a battery manufacturing plant, reusing and refurbishing the existing facilities and site infrastructure. The sold unit was part of segment Other at the time of disposal. The transaction did not have a significant impact on the Group. Russia operations - Wood Products and Forest In July 2022, Stora Enso divested its two Nebolchi and Impilahti sawmills in Russia to local management. In addition, the divestment included Russian forest operations which supplies wood to the sawmills. The disposed sawmill sites are located in Novgorod and Karelia and have a total annual capacity of 350,000 m3 of sawn timber, including 55,000 m3 of processed timber and 65,000 tonnes of pellets. Russian forest operations managed long-term harvesting rights for around 370,000 hectares. The divested seven legal entities were mainly 100% owned, with exception of one unit that was 99.48% owned. Related to one forest operations unit, the disposal will be completed in 2023, upon finalisation of certain formalities. This does not have any significant impact on the Group. During 2022, the Group recognised asset write-downs of EUR 74 million (mainly fixed assets, inventories and trade receivables) related to the transaction. About two thirds of the sale consideration is to be received in instalments at future dates. The loss on disposal was EUR 24 million, including cumulative translation adjustments (CTA) being released from equity to income statement. In addition, there were impairments of loan receivables of EUR 23 million related to the transaction. The sold units were part of the Wood Products and Forest divisions. Russia operations - Packaging Solutions In May 2022, Stora Enso divested its three 100% owned corrugated packaging plants in Russia to local management. The divested three packaging plants are located in Lukhovitsy, Arzamas and Balabanovo and have a total annual capacity of 395 million m² of corrugated packaging. The sites primarily produce corrugated packaging in the domestic Russian market. During 2022, the Group recognised asset write-downs of EUR 42 million (mainly fixed assets, inventories and trade receivables) related to the transaction. The sale consideration is to be received in instalments at future dates. The loss on disposal was approximately EUR 49 million, consisting mainly of cumulative translation adjustments (CTA) being released from equity to income statement. The sold units were part of the Packaging Solutions division. Vlar Papier In February 2022, Stora Enso divested its 100% shareholdings in Vlar Papier NV in Belgium. The sold company was part of the Paper division. The transaction did not have a significant impact on the Group. 2021 Laos In September 2021, Stora Enso divested its 100% shareholdings in Stora Enso Laos Plantation AB and Stora Enso Lao Co Ltd to SilviCarbon. Stora Enso operated plantations in Laos since 2007, with approximately 3 800 hectares of land use rights. After the transaction, Stora Enso does not own any forest assets in Laos. The sold companies were part of the Forest division. The transaction did not have a significant impact on the Group. ECO RFID In September 2021, Stora Enso divested its ECO RFID technology business to Group CCRR. The sold business was part of the segment Other. The transaction did not have a significant impact on the Group. Sachsen In May 2021, Stora Enso signed an agreement to divest its 100% shareholding in the Sachsen Mill to Model Group. The mill is located in Eilenburg, Germany and has an annual production capacity of 310 000 tonnes of newsprint specialty paper based on recycled paper. The disposal was completed in August 2021 and Stora Enso will continue to sell and distribute Sachsen’s products under a contract manufacturing agreement for a period of 18 months after the closing. During the second quarter of 2021, the Group recognised asset impairments of EUR 20 million related to the transaction. The consideration received by Stora Enso for the divestment of the shares was EUR 53 million. The final disposal loss was not significant. Sachsen Mill was part of the Paper division. Forest division units In March and June 2021, Stora Enso divested its 100% shareholdings in several wind turbine project and real estate related companies. These companies were mainly acquired in May 2019 in connection to Bergvik Skog AB restructuring. The sold companies were part of Forest division. The transactions did not have a significant impact on the Group. 40 Assets held for sale Year Ended 31 December EUR million 2022 2021 Property, plant and equipment 264 0 Intangible assets 55 0 Inventories 91 0 Current operative receivables 104 0 Tax assets 0 0 Assets held for sale 514 0 Non-current operative liabilities 42 0 Current operative liabilities 163 0 Tax liabilities 28 0 Interest-bearing liabilities 4 0 Liabilities related to assets held for sale 237 0 Assets held for sale at the end of 2022 include the Maxau, Nymölla and Hylte sites. In September 2022, Stora Enso signed an agreement to divest its 100% owned Maxau paper production site in Germany and all related assets to Schwarz Produktion (part of Schwarz Group) with an enterprise value of approximately EUR 210 million. The transaction is expected to be completed during the first half of 2023. The mill has an annual supercalendered paper (SC paper) capacity of 530,000 tonnes. Maxau mill is part of the Paper division. In September 2022, Stora Enso signed an agreement to divest its 100% owned Nymölla paper production site in Sweden and all related assets to Sylvamo, a US-based global producer of uncoated paper, with an enterprise value of approximately EUR 150 million. Transaction was completed in the beginning of 2023. The Nymölla site’s annual capacity is 485,000 metric tonnes of wood free uncoated office papers. In 2022 and in connection to the transaction, the Group recognised approximately EUR 14 million of asset writedowns. Nymölla mill is part of the Paper division. In January 2023, Stora Enso signed an agreement to divest its 100% owned Hylte paper production site in Sweden to Sweden Timber with an enterprise value of approximately EUR 18 million. The transaction is expected to be completed during the first half of 2023. The Hylte site's annual capacity is 245,000 tonnes of newsprint paper. In 2022 and in connection to the transaction, the Group recognised approximately EUR 19 million of asset writedowns in the unit. Hylte mill is part of the Paper division. 41 Note 5 Other operating income and expense Accounting principles Research and development Research costs are expensed as incurred in other operating expenses in the consolidated income statement. Development costs are also expensed as incurred unless they meet the criteria to be recognised as intangible assets in accordance with IAS 38, in which case they are capitalised as intangible assets and depreciated over their expected useful lives. Government grants Government grants relating to the purchase of property, plant and equipment are deducted from the carrying value of the asset, while the net cost is capitalised. Other government grants are recognised as income on a systematic basis over the periods necessary to match them with the related costs which they were intended to compensate. Green certificates Stora Enso is part of the local green energy production system which entitles selected mills in Europe to receive green certificates based on megawatt hours of green energy produced. Green certificates received are recognised at grant date market value only in the balance sheet. As such, subsequent changes in market prices do not have an impact on the income statement and the income is recognised only when certificates are sold. Other operating income and expense Year Ended 31 December EUR million 2022 2021 Other operating income Emission rights allocated and disposal gains 177 154 Sale of green certificates 10 20 Gains on disposal of fixed assets 4 31 Gains on disposal of Group companies and business operations 18 34 Dividend and gain on sale of unlisted shares 1 0 Insurance compensation 10 7 Other1 85 83 Government grants 16 14 CTA release 5 2 Total 326 345 1 Including rent income, fair value changes for non-hedge accounted derivatives and other items. Derivatives are discussed in more detail in Note 27 Derivatives. Year Ended 31 December EUR million 2022 2021 Other operating expenses Lease expenses 40 38 Research and development 89 82 Credit losses, net of reversals 13 3 Losses on disposal of Group companies and business operations 26 3 CTA release 52 16 Provision changes in income statement 31 184 Other1 342 284 Total 594 610 1 Including expenses related to, among others, consultancy and other services, IT and telecommunications, properties and administration, audit, training, travelling, insurance, penalties, currency translation differences on operative payables. Year Ended 31 December Materials and services include 2022 2021 Emissions rights to be delivered 112 99 The Group has recorded an other operating income of EUR 177 (EUR 154) million related to Emissions. Under Materials and Services an expense of EUR 112 (EUR 99) million has been booked related to the cost of CO2 emissions from production. Actual realised profits amounted to EUR 59 (EUR 22) million on the disposal of surplus rights. See Note 15 Emission rights and other non-current assets for more details related to emission rights. The income from the sale of green certificates amounted to EUR 10 (EUR 20) million. Lease expenses include expenses relating to short-term leases of EUR 12 (EUR 10) million, low-value assets of EUR 21 (EUR 20) million and variable lease payments not included in the measurement of lease liabilities of EUR 2 (EUR 3) million. Lease expenses also include service payments included in lease contracts, which are not included in the measurement of lease liabilities. Auditor's fees and services Year Ended 31 December EUR million 2022 2021 Audit fees 4 4 Audit-related 0 0 Tax fees 0 0 Other fees 0 0 Total 4 4 Aggregate fees for professional services rendered to the Group principal auditor PwC amounted to EUR 4 (EUR 4) million. Audit fees relate to the auditing of the annual financial statements or ancillary services normally provided in connection with statutory and regulatory filings. Audit- related fees are incurred for assurance and associated services that are reasonably related to the performance of the audit or for the review of financial statements. 42 Note 6 Personnel expenses Personnel expenses Year Ended 31 December EUR million 2022 2021 Wages and salaries 996 1,017 Pension expenses 152 165 Share-based remuneration 8 7 Other statutory employer costs 140 143 Other voluntary costs 20 19 Total 1,315 1,351 Pension expenses Year Ended 31 December EUR million 2022 2021 Defined benefit plans 5 12 Defined contribution plans 146 153 Total 152 165 The average number of employees in 2022 amounted to 21,790 compared with 23,071 in 2021. Pension costs are discussed further in Note 20 Post-employment benefit obligations. In 2022, the expense of the share-based remuneration was EUR 8 (EUR 7) million. Share- based remuneration comprising of share awards is described in more detail in Note 21 Employee variable compensation and equity incentive schemes. Remuneration of the Group Leadership Team and Board are described in Note 7 Board and executive remuneration. Note 7 Board and executive remuneration Board and committee remuneration Year Ended 31 December 2022 2021 EUR thousand (before taxes) Cash Value of shares1 Total4 Total Committee memberships Board members at 31 December 2022 Antti Mäkinen, Chair 133 81 214 208 People and Culture, Nomination2,3 Håkan Buskhe, Vice Chair 76 46 122 118 People and Culture, Nomination2,3 Elisabeth Fleuriot 63 32 94 91 Financial and Audit Hock Goh 63 32 94 91 Financial and Audit Helena Hedblom 54 32 86 82 Sustainability and Ethics Kari Jordan 54 32 86 People and Culture Christiane Kuehne 58 32 90 87 Sustainability and Ethics Richard Nilsson 69 32 101 97 Financial and Audit Hans Sohlström 54 32 86 82 Sustainability and Ethics Former Board members Mikko Helander (until 15 March 2022) 0 0 0 82 Total remuneration as Directors1 624 348 972 939 140% of the Board remuneration, excluding Committee remuneration, in 2022 was paid in Stora Enso R shares purchased from the market and distributed as follows: to Chair 4 332 R shares, Vice Chair 2 454 R shares, and members 1 686 R shares each. The Company has no formal policy requirements for the Board members to retain shares received as remuneration. 2 Stora Enso’s Shareholders’ Nomination Board has been appointed by the AGM in 2016 to exist until otherwise decided. The Shareholders’ Nomination Board according to its Charter as approved by the AGM comprises of four members: the Chair and Vice Chair of the Board of Directors, as well as two members appointed by the two largest shareholders (one each) as of 31 August each year. No separate remuneration is paid to members of the Nomination Board. 3 Marcus Wallenberg, appointed by FAM AB, is Chair of the Nomination Board. Reima Rytsölä is the member of the Shareholders’ Nomination Board appointed by Solidium Oy. Antti Mäkinen and Håkan Buskhe were appointed as members of the Shareholders’ Nomination Board in their roles as Chair and Vice Chair of the Board of Directors. 4 The Company additionally pays the transfer tax for share purchases for each member, in line with AGM decision, which amount is considered also taxable income for each member. Shareholders at the Annual General Meeting (AGM) have established a Shareholders’ Nomination Board to exist until otherwise decided and to annually prepare proposals for the AGM's approval concerning the number of members of the Board of Directors, the Chair, Vice Chair and other members of the Board, as well as the remuneration for the Chair, Vice Chair and members of the Board and its committees. 43 Board share interests at 31 December 2022 Shares held A R Board members at 31 December 2022 Antti Mäkinen, Chair 16,576 Håkan Buskhe, Vice Chair 7,933 Elisabeth Fleuriot 30,029 Hock Goh 34,782 Helena Hedblom 3,517 Kari Jordan 1,686 Christiane Kuehne 14,590 Richard Nilsson1 127 27,132 Hans Sohlström2 13,517 Total shares held 127 149,762 1 Spouse holds 127 of A shares and 236 of R shares 2 Spouse holds 179 of the shares The following Board members also served in 2022 Shares held when Board membership ended Effective date of Board membership ending Mikko Helander 8,910 15 March 2022 Group Leadership Team (GLT) remuneration and share interests The table below includes the remuneration earned by GLT members during the year, including those shares with performance conditions that have ended and are due to vest in the coming year. The company recommends and expects the CEO and GLT members to hold Stora Enso shares at a value corresponding to at least one annual base salary. Stora Enso shares received as remuneration are therefore recommended not to be sold until this level has been reached. The aggregate cost of earned remuneration for GLT in 2022 amounted to EUR 15 (EUR 11) million. The total number of GLT members was eleven (thirteen) at the year end in 2022. In accordance with their respective pension arrangements, GLT members may retire at sixty- five years of age with pensions consistent with local practices in their respective home countries. Contracts of employment provide for six months’ notice prior to termination with severance compensation of twelve months basic salary if the termination is at the Company’s request. The outcome of the financial targets relating to the Short term incentive programmes for the performance year 2022, and Long term incentive programmes for the performance years 2020 to 2022 were reviewed and confirmed by the People and Culture Committee, and approved by the Board of Directors in January 2023. Note 21 Employee variable compensation and equity incentive schemes includes details of incentive schemes and share opportunity programmes for the management and staff of Stora Enso. Group Leadership Team remuneration Year Ended 31 December 2022 2021 EUR thousand CEO Others2,5 GLT Total CEO Others GLT Total Remuneration1,4 Annual salary 953 4,802 5,755 981 4,695 5,676 Local housing (actual costs) 0 2 2 0 1 1 Other benefits 32 272 304 33 342 375 Termination benefits 0 0 0 0 0 0 Short Term Incentive programme3 845 2,167 3,012 672 2,053 2,725 Long Term Incentive programme3 987 2,848 3,835 0 137 137 2,817 10,091 12,908 1,686 7,228 8,914 Pension Costs Mandatory plans 477 1,154 1,631 341 1,226 1,567 Stora Enso voluntary plans 0 933 933 0 735 735 477 2,087 2,564 341 1,961 2,302 Total Compensation 3,294 12,178 15,472 2,027 9,189 11,216 1 The Finnish Corporate Governance code requires companies to report remuneration that is paid or due, and due to this the figures presented in the above table do not directly reconcile with the amounts recognised as personnel expenses in the Income statement as presented in the below table Group Leadership Team remuneration in Income statement. 2 Include earnings related to Teemu Salmi until 20 May 2022 and Kati ter Horst until 30 June 2022 and Jari Suominen until 30 November 2022. 3 Relate to amounts due at year end, which will be paid in 2023. LTI value is calculated using the 30 December 2022 closing price of EUR 13.15. The final value of the vested shares will depend on the share price on vesting date 1 March 2023. 4 Remuneration for executives is disclosed only for the period during which they were GLT members. 5 Remuneration of GLT members increased in 2022 compared to 2021 mainly due to the performance outcome of variable pay programmes. The average number of GLT members during 2022 was 11.71. Group Leadership Team remuneration in Income statement Year ended 31 December 2022 2021 EUR thousand CEO Others GLT Total CEO Others GLT Total Salaries and other short-term employee benefits 1,830 7,243 9,073 1,686 7,091 8,777 Long Term Incentive programme1, 2 714 1,581 2,295 468 1,638 2,106 Post-employment benefits 477 2,087 2,564 341 1,961 2,302 Total recognised in Income statement 3,021 10,911 13,932 2,495 10,690 13,185 1 The costs of long-term incentive (LTI) programmes are recognised as costs over the three year vesting period based on the share price at grant date and the estimate of equity instruments that will eventually vest. 2 Year 2021 figures have been restated. Executives other than CEO Short term incentive (STI) programmes for management In 2022, GLT members have STI programmes with up to a maximum of 70% or 80% of their annual fixed salary, payable the year after the performance period. 70% of the STI for 2022 was based on financial measures and 30% on individual key targets. Long term incentive (LTI) programmes for management The 2020 LTI programme has a three-year performance period. The 2021 programme has three one-year performance periods which are accumulated after three years. The 2022 programme features performance metrics with one-year performance periods, which are accumulated after 44 three years, as well as three-years performance periods. All three programmes will be settled in only one portion after three years, and the absolute maximum vesting level is 100% of the number of shares granted. The 2020 programme is related to performance period 2020–2022, the 2021 programme is related to performance period 2021–2023 and the 2022 programme is related to performance periods 2022–2024. The opportunity under the programmes is in Performance Shares, where the shares are vested in accordance with performance criteria proposed by the People and Culture Committee and approved by the Board of Directors. During the year the 2022 programme was launched, in which the GLT members (in GLT at year end) can potentially receive a value corresponding to 242,650 shares before taxes, assuming the maximum vesting level during the three-year vesting period (2022–2024) is achieved. The total number of shares actually transferred will be lower because a portion of shares corresponding to the tax obligation will be withheld to cover income tax. The fair value of employee services received in exchange for share-based compensation payments is accounted for in a manner that is consistent with the method of settlement and is either cash or equity settled as described in more detail in Note 21. For the equity settled part, it is possible that the actual cash cost does not agree with the accounting charges because the share price is not updated at the time of the vesting. The figures in the Group Leadership Team Remuneration table refer to individuals who were executives at year end or during part of the year. At the end of the year, the performance period for the 2020 programme ended, and will be settled in one portion after three years in March 2023, dependent on Economic Value Added (EVA) for the Stora Enso Group and Earnings Per Share (EPS) for the Stora Enso Group. The Performance Share programme resulted in a 100% performance outcome. The number of shares due for executives (GLT members at year end) from programmes that ended during 2022 amounted to 265,340 shares. The total number of shares actually transferred will be lower because a portion of shares corresponding to the tax obligation will be withheld to cover income tax. President & Chief Executive Officer – Annica Bresky The CEO has been employed by Stora Enso since 1 May 2017 and assumed the position as CEO on 1 December 2019. She has a notice period of six months with a severance payment of twelve months salary on termination by the company but with no contractual payments on any change of control. The CEO’s benefits include pension provisions. The CEO’s pension plan has contributions equal to the collectively agreed pension plan in Sweden (ITP1), with a pensionable salary consisting of annual base salary, vacation pay, and actual paid STI. The retirement age is sixty-five years. Short term incentive (STI) programme for CEO In 2022, the CEO is entitled to an STI programme decided by the Board each year giving a maximum of 100% of the annual fixed salary. The STI for 2022 was 70% based on financial measures, and 30% based on ESG-, operational- and individual key measures. Long term incentive (LTI) programmes for CEO The CEO participates in 2020, 2021 and 2022 share based LTI programmes. The 2020 programme has a three-year performance period. The 2021 programme has three one-year performance periods which are accumulated after three years. The 2022 programme features performance metrics with one-year performance periods which are accumulated after three years as well as performance metrics with three-years performance periods. All three programmes will be settled in only one portion after three years. The 2020 programme is related to performance period 2020–2022, the 2021 programme is related to performance period 2021– 2023 and the 2022 programme is related to performance periods 2022–2024. The opportunity in the programmes is in performance shares, where shares vest in accordance with performance criteria proposed by the People and Culture Committee and approved by the Board of Directors. During the year the 2022 LTI programme was launched in which the CEO has the potential to receive a value corresponding to a maximum of 65,430 shares before taxes. The grant value of EUR 1,154,251 is based on the share price at the grant date, assuming a maximum vesting level during the three-year vesting period (2022–2024) is achieved. The total number of shares actually transferred will be lower because a portion of shares corresponding to the tax obligation will be withheld to cover income tax. At the end of the year, the performance period for the 2020 programme ended and will be settled in one portion after three years in March 2023, dependent on Economic Value Added (EVA) and Earnings Per Share (EPS) for the Stora Enso Group. 75,080 shares are due for the CEO from Performance Share programmes that ended during 2022 due to a 100% performance outcome. Group Leadership Team share interests Executives in office at the year end R shares held1 Shares due 20232 Performance share opportunity 2024–20255 Annica Bresky 19,763 75,080 122,817 Seppo Parvi 50,924 25,340 43,484 Tobias Bäärnman 1,960 5,200 22,629 David Ekberg 1,245 17,640 32,481 Johanna Hagelberg 28,146 17,440 32,803 Rene Hansen — 3,400 12,000 Hannu Kasurinen 38,421 29,640 47,406 Katariina Kravi — 21,500 27,938 Per Lyrvall3 73,383 22,100 34,459 Annette Stube — 20,000 26,271 Lars Völkel — 28,000 41,623 Total, serving officers4 213,842 265,340 443,911 1 None of the GLT members holds A shares. 2 Shares due to GLT member are gross of taxes for the LTI programmes with performance periods that ended in 2022 and are due to be paid 2023. The Performance Share programme resulted in a 100% performance outcome due to be paid in 2023. Some GLT members hold restricted shares in the Restricted Shares programme that ended in 2022 and those shares are due to be paid 2023. 3 Spouse holds 1 257 of the shares. 4 The Company recommends and expects GLT members to hold Stora Enso shares at a value corresponding to at least one annual base salary. Stora Enso shares received as remuneration are therefore recommended not to be sold until this level has been reached. 5 Potential shares to GLT members are gross of taxes for LTI programmes with performance periods that end in 2023-2024 and are due to be paid 2024-2025. The following Executive Officers also served in 2022 R shares held when GLT membership ended Performance Share Awards when GLT Membership Ended Restricted Share Awards When GLT Membership Ended Effective date of GLT membership ending Teemu Salmi1 10,150 32,380 2,335 20 May 2022 Kati ter Horst1 61,996 86,556 — 30 June 2022 Jari Suominen1 53,168 65,331 — 30 November 2022 1 Unvested shares are forfeited at end of employment 45 Note 8 Net financial items Accounting principles Net financial items comprise net interest expenses, foreign exchange gains and losses and other financial income and expenses mainly arising from interest-bearing assets and liabilities. Financial income and expense Year Ended 31 December EUR million 2022 2021 Net financial expense in the income statement Financial income 40 42 Financial expense -191 -190 Total -151 -149 Represented by Interest expense Interest expense from borrowings measured at amortised cost -96 -95 Interest component of the effective hedges under cash flow hedge -12 -15 Interest expense on leases -17 -17 Interest capitalised 0 1 Interest income on loans and receivables measured at amortised cost 20 2 Net interest expense -105 -124 Foreign exchange gains and losses Currency derivatives 8 -39 Borrowings, cash equivalents. lease liabilities and other -10 37 Net foreign exchange gains and losses -1 -2 Other financial income 2 1 Other financial expense Financial fees -8 -17 Fair valuation losses -4 -3 Impairments of interest-bearing assets -30 0 Net interest on net defined benefit liabilities -3 -3 Net other financial expense -45 -22 Total -151 -149 Gains and losses on derivative financial instruments are shown in Note 27 Derivatives. In 2022, the net interest expense decreased mainly as a result of higher interest income rate on loans and receivables. Costs on long-term debt issues capitalised as part of non-current debt amounted to EUR 6 (EUR 7) million in the statement of financial position. During the year, EUR 2 (EUR 4) million was amortised through interest expense by using the effective interest rate method. Exchange gains and losses for currency derivatives mainly relate to non-hedge accounted instruments fair valued in the income statement. The amount reported as other financial income mainly consists of fair valuation gains, while other financial expense in the table above relates to net financial fees for unused committed credit facilities, guarantees and negative interest on deposits. Impairments of interest-bearing assets relate to divestment of Russia operations and are discussed in more detail in Note 4 Acquisitions and disposals. Note 9 Income taxes Accounting principles The Group income tax expense/benefit includes taxes of Group companies based on taxable profit/loss for the period, together with tax adjustments for previous periods and the change in deferred taxes. Tax assets and liabilities reflect uncertainty related to income taxes, if any. Deferred taxes are provided using the liability method, as measured with enacted, or substantially enacted, tax rates, to reflect the net tax effects of all temporary differences between the tax bases and the accounting bases of assets and liabilities. No deferred tax is recognised for the initial recognition of goodwill and the initial recognition of an asset or liability in a transaction which is not a business combination, and at the time of the transaction this affects neither accounting profit nor taxable profit. Deferred tax assets reduce income taxes payable on taxable income in future years. The deferred tax assets, whether arising from temporary differences or from tax losses, are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Tax expense Year Ended 31 December EUR million 2022 2021 Current tax -196 -118 Deferred tax -126 -34 Total income tax -322 -151 Income tax rate reconciliation Year Ended 31 December EUR million 2022 2021 Profit before tax 1,858 1,419 Tax at statutory rates applicable to profits in the country concerned1 -337 -263 Non-deductible expenses and tax exempt income2 -15 49 Valuation of deferred tax assets 15 -7 Taxes from prior years 2 39 Changes in tax rates and tax laws 0 1 Profits from equity accounted investments 44 29 Other3 -31 1 Total income taxes -322 -151 Effective tax rate 17.3% 10.7% Statutory tax rate (blended) 18.2% 18.5% 1 Includes a EUR 55 million impact from countries with tax holidays and tax benefits in 2022 and a EUR 37 million impact from tax holidays and other tax benefits in 2021. 2 The tax value of non-deductible expenses of EUR 16 million has been netted against tax exempt income of 1 EUR million in 2022, and tax value of non-deductible expenses of EUR 30 million has been netted against tax exempt income of EUR 79 million in 2021. 3 Includes a EUR 34 million negative impact from disposal of Russian operations in 2022. The statutory tax rate is a weighted average of the statutory tax rates prevailing in jurisdictions where Stora Enso operates. 46 Change in deferred taxes in 2022 EUR million Value at 1 Jan 2022 Income statement OCI Acquisitions / disposals1 Translation difference Value at 31 Dec 2022 Forest assets -1,268 -43 -53 0 97 -1,267 Fixed assets -103 -44 0 17 7 -123 Financial instruments 1 -3 -8 0 0 -10 Untaxed reserves -80 -16 0 4 7 -85 Pensions and provisions 58 -1 -25 -4 -2 26 Tax losses and tax credits carried forward 107 -34 0 0 1 74 Other deferred taxes -2 19 0 -2 0 15 Total -1,287 -122 -86 15 110 -1,370 Equity hedges and net investment loans (CTA) -3 3 Cash flow hedging 0 0 Change in deferred tax -125 -83 15 110 Assets2 143 74 Liabilities2 -1,430 -1,443 1 Includes assets held for sale. 2 Deferred tax assets and liabilities have been offset in accordance with IAS 12. OCI = Other Comprehensive income, CTA = Cumulative Translation Adjustment Change in deferred taxes in 2021 EUR million Value at 1 Jan 2021 Income statement OCI Acquisitions / disposals Translation difference Value at 31 Dec 2021 Forest assets -1,175 -70 -40 0 16 -1,268 Fixed assets -173 75 0 -8 3 -103 Financial instruments -11 3 8 0 1 1 Untaxed reserves -39 -43 0 0 2 -80 Pensions and provisions 56 27 -23 0 -2 58 Tax losses and tax credits carried forward 104 1 0 0 2 107 Other deferred taxes 23 -26 0 -1 2 -2 Total -1,215 -33 -55 -9 24 -1,287 Equity hedges and net investment loans (CTA) -2 2 Change in deferred tax -35 -53 -9 24 Assets1 117 143 Liabilities1 -1,332 -1,430 1 Deferred tax assets and liabilities have been offset in accordance with IAS 12. OCI = Other Comprehensive income, CTA = Cumulative Translation Adjustment The recognition of deferred tax assets is based on the Group’s estimations of future taxable profits available against which the group can utilise the benefits. Non-recognised deferred tax assets on deductible temporary differences amounted to EUR 50 (EUR 58) million. There is no expiry date for these differences. Taxable temporary differences in respect of investments in subsidiaries, branches and associates and interests in joint operations, for which deferred tax liabilities have not been recognised amounted to EUR 367 (EUR 339) million. Tax losses As at 31 December Tax losses carried forward Recognised tax values Unrecognised tax values EUR million 2022 2021 2022 2021 2022 2021 Expiry within five years 359 417 5 7 72 79 Expiry after five years 100 343 9 60 14 11 No expiry 1,173 1,137 58 38 198 210 Total 1,633 1,897 73 106 283 300 At the end of 2022, there were no material tax losses related to Finland. At the end of 2021 tax losses of EUR 274 million related to Finland and a deferred tax asset of EUR 55 million was recognized relating to these tax losses. Uncertain tax positions At balance sheet date there were on-going tax audits in several jurisdictions. It is not expected that any significant additional taxes in excess of those already recorded for will arise as a result of these audits. Note 10 Depreciation, amortisation and impairment charges Accounting principles Depreciation, amortisation and impairment charges Depreciation or amortisation of an asset begins when it is available for use in the location and condition necessary for it to be operated in the manner intended by management. Depreciation or amortisation ceases when the asset is derecognised or classified as held for sale. Depreciation or amortisation does not cease when the asset becomes idle. Tangible and intangible assets are depreciated and amortised on a straight-line basis during their useful lives. Useful lives are reviewed annually. If an asset is disposed of, proceeds exceeding the carrying value of the asset up to its historical cost are netted against depreciation, amortisation and impairment charges. Only disposal proceeds exceeding the historical cost of an asset are presented as other operating income (Note 5). If the asset’s book value is higher than the disposal proceeds, the difference is recognised as an impairment in the period when reliable estimate of disposal loss is available, at the latest when a binding sales contract is signed. Right- of-use (ROU) assets are depreciated using the straight line method from the commencement date of the contract to the earlier of the end of the lease term or the end of the useful life of the ROU assets. The carrying amounts of intangible assets, property, plant and equipment and ROU assets are reviewed at each reporting date to determine whether there is any indication of impairment, whereas goodwill is tested annually. If any such indication exists, the recoverable amount is estimated as the higher of the fair value less costs of disposal and the value in use, with an impairment loss being recognised whenever the carrying amount exceeds the recoverable amount. A previously recognised impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, however, not to an extent higher than the carrying amount that would have existed had no impairment loss been recognised in prior years. For goodwill, however, a recognised impairment loss is not reversed. 47 Whilst intangible assets, property, plant and equipment and ROU assets are subject to impairment testing at the cash generating unit (CGU) level, goodwill is subject to impairment testing at the CGU level for groups of CGUs, which represents the lowest level within the Group at which goodwill is monitored for internal management purposes. Depreciation, amortisation and impairment charges Year ended 31 December EUR million 2022 2021 Depreciation and amortisation Intangible assets 24 26 Buildings and structures 81 79 Plant and equipment 371 373 Right-of-use assets 50 62 Other tangible assets 8 9 Total 533 549 Impairment Goodwill 11 4 Intangible assets 1 7 Buildings and structures 25 10 Plant and equipment 75 126 Right-of-use assets 0 1 Other tangible assets 2 2 Total 114 149 Reversal of impairment Plant and equipment -7 0 Total -7 0 Disposal gains/losses Gain on sale of assets -10 -4 Loss on sale of assets 4 3 Total -5 0 Depreciation, amortisation and impairment charges 635 697 Impairment testing The recoverable amount for the cash generating units (CGUs) has been determined based on a value in use calculation using cash flow projections from financial estimates approved by the Board of Directors and management. The pre-tax discount rates are calculated for each CGU taking into account the business environment of the CGU and the tax and risk profile of the country in which the cash flow is generated. The table in the goodwill impairment testing section below sets out the pre-tax discount rates used for goodwill impairment testing, which are similar to those used in the impairment testing of other intangible assets, property, plant and equipment, and ROU assets. Impairments were tested using a value in use method for each CGU based on the following main assumptions: •Sales price estimates in accordance with internal and external specialist analysis •Cash flows and discount rates were prepared in nominal terms •Current cost structure to remain unchanged •For goodwill testing, a five-year future period was used, after which the perpetuity value was determined using inflation based growth rates, except for Paper division for which the testing period used was the remaining expected economic life •For intangible assets, property, plant and equipment, and ROU assets testing period was the remaining expected economic life of the assets. Property, plant and equipment, other intangible assets and ROU assets impairments The total impairment charges on property, plant and equipment, other intangible assets and ROU assets in 2022 amounted to EUR 103 (EUR 145) million and resulted from business restructuring and Group company disposals. In 2022, impairments were mainly related to Group company disposals in Russia and upcoming disposals in the Paper division. Russia related impairments of EUR 75 million concerned Wood Products Baltic and Russia CGU, Packaging Solutions Europe CGU and Forest operations CGU. Paper related impairments of EUR 22 million concerned News and Office CGUs. In 2021, mainly due to restructuring, Group company disposal, impairment testing and further deterioration of certain paper-grade market due to Covid-19 pandemic, total impairment charge of EUR 127 million was recognised in News, Uncoated Mechanical and Office CGUs in the Paper division. Goodwill impairments In 2022 or 2021, the goodwill impairment testing did not result in any impairment. In 2022 and due to upcoming disposals in the Paper division, goodwill impairment of EUR 11 million was recognised in News and Office CGUs. In 2021 and due to Sachsen Mill disposal, goodwill impairment of EUR 4 million was recognised in Paper - News CGU. The most material groups of CGUs containing goodwill Year ended 31 December 2022 2021 EUR million Goodwill at year end2 Pre-tax discount rate Goodwill at year end Pre-tax discount rate Wood Products - Central Europe 111 9.9% 109 8.7% Paper - Book Paper 28 8.4% 28 7.2% Paper - Uncoated Mechanical 12 8.4% 40 7.2% Biomaterials - Nordic and Innovation 45 8.2% 45 7.2% Other CGUs1 47 60 Total 244 282 1 Other CGUs is including Packaging Solutions - Europe, Packaging Materials operations in Sweden, Packaging Materials - Containerboards, Wood Products - Northern Europe, Paper - News and Paper - Office cash generating units. 2 Goodwill excluding assets held for sale The calculation of value in use is highly sensitive to discount rates, sales prices and costs. Sensitivity analysis are conducted to calculate the amounts by which the value assigned to the key assumption must change in order for the unit’s recoverable amount to be equal to its carrying amount for the CGUs for which a reasonably possible change in an assumption could result in an impairment. In 2022 any reasonably possible change in key assumptions would not cause carrying amount to exceed its recoverable amount. 48 Summary of impairments and impairment reversals per division Year ended 31 December EUR million 2022 2021 Packaging Materials 0 10 Packaging Solutions 36 2 Biomaterials 0 0 Wood Products 10 0 Forest 31 1 Paper 33 131 Other -4 4 Total (impairment +) / (Impairment reversal -) 107 149 Note 11 Intangible assets, property, plant and equipment and right- of-use assets Accounting principles Goodwill Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognised by the Group on an acquisition. Goodwill is computed as the excess of the cost of an acquisition over the fair value of the Group’s share of the fair value of net assets of the acquired subsidiary at the acquisition date, and is allocated to those groups of cash generating units expected to benefit from the acquisition. Goodwill arising on the acquisition of non-euro foreign entities is treated as an asset of the foreign entity denominated in the local currency and translated at the closing rate. Goodwill is not amortised but tested for impairment on an annual basis, or more frequently if there is an indication of impairment. Other intangible assets Intangible assets are stated at their historical cost and amortised on a straight-line basis over their expected useful lives, which usually varies from 3 to 10 years and up to 20 years for patents. An adjustment is made for any impairment. Intangible items acquired must be recognised as assets separately from goodwill if they meet the definition of an asset, are either separable or arise from contractual or other legal rights, and their fair value can be measured reliably. The cost of development or acquisition of new software clearly associated with an identifiable and unique product that will be controlled by the Group and has a probable benefit exceeding its cost beyond one year is recognised as an intangible asset and will be amortised over the expected useful life of the software between 3 to 10 years. Intangible assets recognised separately from goodwill in acquisitions consist of marketing and customer-related or contract and technology-based intangible assets. Typical marketing and customer-related assets include trademarks, trade names, service marks, collective marks, certification marks, customer lists, order or production backlogs, customer contracts and the related customer relationships. Contract and technology-based intangible assets are normally licensing and royalty agreements or patented technology and trade secrets, such as confidential formulas, processes or recipes. The fair value determination of customer contracts and related relationships is derived from expected retention rates and cash flow over the customers’ remaining estimated lifetime. The value of trademarks is derived from a discounted cash flow analysis using the relief from royalty method. Property, plant and equipment Property, plant and equipment acquired by Group companies are stated at their historical cost, which are augmented where appropriate by asset retirement costs. Assets arising on the acquisition of a new subsidiary are stated at fair value at the date of acquisition. Depreciation is computed on a straight-line basis, and adjusted for any impairment and disposal charges. The carrying amount represents the cost deducted by received grants and subsidies and less the accumulated depreciation and any impairment charges. Interest costs on borrowings to finance the construction of assets are capitalised as part of the cost during the construction period when the requirements are fulfilled. Land and water areas are not depreciated, as these are deemed to have an indefinite life, but otherwise depreciation is based on the following expected useful lives: Asset class Depreciation years Buildings, industrial 10-50 Buildings, office & residential 20-50 Groundwood mills 15-20 Hydroelectric power 40 Paper, board and pulp mills, main machines 20-30 Heavy machinery 10-20 Converting factories 10-15 Sawmills 10-15 Computers 3-5 Vehicles 5 Office equipment 3-5 Railway, harbours 20-25 Forest roads 10-15 Roads, fields, bridges 15-20 Ordinary maintenance and repair charges are written as expensed when incurred, but the costs of significant renewals and improvements are capitalised and depreciated over the remaining useful lives of the related assets. Retirements, sales and disposals of property, plant and equipment are recorded by deducting the cost and accumulated depreciation from the accounting records with any resulting terminal depreciation adjustments reflected in impairment charges in the consolidated income statement. Capital gains are shown in other operating income. Spare parts are accounted for as property, plant and equipment if they are major and used over more than one period, or if they are used only in connection with an item of property, plant and equipment. In all other cases, spare parts are carried as part of the inventory and recognised in profit or loss as consumed items. Right-of-use (ROU) assets At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. ROU assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted mainly for lease payments made at or before the commencement date. The Group allocates the consideration in the 49 contract to each lease component and will separate non-lease components if these are identifiable. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The ROU assets are subsequently depreciated using the straight line method from the commencement date to the earlier of the end of the lease term or the end of the useful life of the ROU asset. In addition, the ROU asset is adjusted for certain remeasurements of the lease liability. ROU assets are tested for impairment in accordance with IAS 36. The Group has elected not to recognise ROU assets for short-term leases that have a lease term of 12 months or less and leases of low value assets. Leases of low value assets mainly include IT and office equipment, certain vehicles and machinery and other low value items. The Group recognises the lease payments associated with these leases as an expense on a straight- line basis over the lease term (Note 5). Intangible assets Year ended 31 December EUR million Computer software Other intangible assets Assets in progress Goodwill Total Acquisition cost At 1 January 2021 233 98 17 695 1,044 Translation difference 2 6 0 8 16 Reclassifications 8 12 -16 0 4 Additions 6 5 6 0 17 Disposals -23 -19 0 -171 -213 At 31 December 2021 226 103 7 532 867 Translation difference 0 -1 0 -2 -4 Reclassifications 5 2 -4 0 3 Additions 3 2 16 0 21 Disposals and classification as held for sale1 -11 -6 0 -28 -46 At 31 December 2022 222 100 18 502 842 Accumulated amortisation and impairment At 1 January 2021 176 38 0 414 629 Translation difference 1 4 0 3 8 Disposals -22 -19 0 -171 -212 Amortisation 18 9 0 0 26 Impairment 5 2 0 4 11 At 31 December 2021 178 34 0 250 462 Translation difference 0 0 0 -3 -3 Disposals and classification as held for sale1 -11 -6 0 0 -17 Amortisation 17 8 0 0 24 Impairment 1 0 0 11 12 At 31 December 2022 185 35 0 258 478 Net Book Value at 31 December 2022 38 65 18 244 364 Net Book Value at 31 December 2021 48 69 7 282 405 1 Company disposals are included in Disposals line. Company disposals and classification of assets as held for sale are discussed in more detail in Note 4 Acquisitions, disposals and assets held for sale. Property, plant and equipment Year ended 31 December EUR million Land and water Buildings and structures Plant and equipment Other tangible assets Assets in progress Total Acquisition cost At 1 January 2021 128 3,301 13,256 455 549 17,690 Translation difference 0 64 48 0 1 114 Reclassifications 2 58 405 11 -480 -4 Reclassifications to biological assets 0 -1 -1 0 0 -2 Additions 0 15 214 1 328 558 Disposals -13 -82 -503 -19 -4 -620 At 31 December 2021 117 3,355 13,421 448 394 17,735 Translation difference -1 -12 -266 -11 -10 -300 Reclassifications 0 57 207 10 -277 -3 Reclassifications to biological assets 0 -2 -1 0 0 -3 Additions 6 33 217 4 373 634 Disposals and classification as held for sale1 -19 -390 -2,668 -58 -27 -3,162 At 31 December 2022 103 3,041 10,909 393 454 14,900 Accumulated depreciation and impairment At 1 January 2021 3 2,096 10,186 386 11 12,683 Translation difference 0 9 -30 0 1 -20 Disposals -1 -79 -487 -19 0 -586 Depreciation 0 77 373 11 0 461 Impairments and reversals 0 10 125 2 0 137 At 31 December 2021 3 2,113 10,164 380 14 12,674 Translation difference 0 -30 -262 -9 0 -302 Disposals and classification as held for sale1 -1 -378 -2,458 -49 0 -2,886 Depreciation 0 78 371 10 1 460 Impairments and reversals 0 21 68 4 2 95 At 31 December 2022 2 1,804 7,882 336 16 10,040 Net Book Value at 31 December 2022 101 1,237 3,027 57 437 4,860 Net Book Value at 31 December 2021 114 1,242 3,256 68 380 5,060 1 Company disposals are included in the Disposals line. Company disposals and classification of assets as held for sale are discussed in more detail in Note 4 Acquisitions, disposals and assets held for sale. 50 Right-of-use assets Year ended 31 December EUR million Land and water Forest land Buildings and structures Plant and equipment and other Total Acquisition cost At 1 January 2021 99 233 97 148 577 Translation difference 9 26 1 1 37 Reclassifications to biological assets 0 -15 0 0 -15 Additions 0 9 9 15 33 Disposals -1 0 -4 -37 -42 Other changes 0 0 1 0 1 At 31 December 2021 107 253 104 127 591 Translation difference -2 -2 -3 -1 -7 Reclassifications to biological assets 0 -17 0 0 -17 Additions 1 6 20 18 45 Disposals and classification as held for sale1 -2 0 -23 -36 -62 Other changes 1 2 0 4 6 At 31 December 2022 105 243 96 113 556 Accumulated depreciation and impairment At 1 January 2021 6 12 38 70 125 Translation difference 1 2 1 0 3 Disposals -1 0 -4 -36 -41 Depreciation 3 5 20 34 62 Impairment 0 0 0 1 1 At 31 December 2021 8 18 55 69 150 Translation difference 0 -1 -2 -1 -4 Disposals and classification as held for sale1 -1 0 -23 -34 -58 Depreciation 3 5 19 23 50 Impairment 0 0 1 0 0 At 31 December 2022 10 22 49 56 138 Net Book Value at 31 December 2022 95 221 47 57 418 Net Book Value at 31 December 2021 99 235 49 59 441 1 Company disposals are included in the Disposals line. Company disposals and classification of assets as held for sale are discussed in more detail in Note 4 Acquisitions, disposals and assets held for sale. Stora Enso’s most material right-of-use assets capitalised consist of land areas used in forestry and industrial operations, various machinery and equipment leases including operative machinery and logistic equipment, as well as properties including offices, warehouses and other operative properties. Some of the leases contain renewal options and extension options that are considered in the lease term if the Group is reasonably certain to exercise the option. See Note 26 Interest-bearing assets and liabilities for more details about lease liabilities and Note 5 Other operating income and expense for details about lease expenses included in the income statement. Intangible assets and property, plant and equipment, and right-of-use asset additions The total capital expenditure excluding investments in biological assets for the year amounted to EUR 701 (EUR 609) million. Details of ongoing projects and future plans are discussed in more detail in the Report of the Board of Directors. Note 12 Forest assets Accounting principles The forest assets of Stora Enso are defined as standing growing trees, classified as biological assets, and related forest land. The biological assets of Stora Enso consist of standing trees to be used as raw material in pulp and mechanical wood production and as biofuels. Forest asset valuation is based on continuous operations and sustainable forest management, also taking into consideration environmental restrictions and other reservations. Biological assets are recognised and valued in accordance with the IAS 41 Agriculture standard at fair value and forest land assets are recognised in accordance with the IAS 16 Property, plant and equipment standard. Leased forest land assets are presented as part of right-of-use assets in Note 11 Intangible assets, property, plant and equipment, and right-of-use assets. The Group changed its valuation method related to Finnish forest asset valuation at the end of 2022 to correspond to the valuation method applied with Swedish forest assets, as explained in Note 1 Accounting principles. Nordic and plantation forest assets are classified as different classes of assets due to different nature, usage and characteristics of the assets. The main difference is the short-term growing cycle of 6–12 years in plantations versus the long-term growing cycle of 60-100 years in Nordic forests. There are also differences in regeneration methods, forest management, and the use of the assets for other purposes. Nordic forest assets include holdings in Sweden and Finland and plantation forest assets include holdings in China, Brazil and Uruguay. Accounting policies for the different class of forest assets are presented separately below. In addition the Group has minor forest asset holdings in Estonia and Romania through associate company Tornator. The Group has forest assets in its own subsidiaries in Sweden and China as well as in joint operations in Brazil and Uruguay, and in equity accounted investment in Finland. Stora Enso also ensures that the Group’s share of the valuation of forest holdings in equity accounted investments and joint operations are consistent with Group accounting policies. At harvesting, biological assets are transferred to the inventory. Nordic forest assets Forest assets in Sweden and Finland are recognised at fair value and valued by using a market approach method on the basis of the forest market transactions in the areas where Stora Enso’s forests are located. Stora Enso’s forest assets create value by securing wood supply, increasing long-term yield, optimising land use and securing financial flexibility. They play an important role in mitigating climate change impacts, as growing trees absorb CO2. The forests also offer opportunities for future value streams, such as wind power. The total forest assets value is calculated with verified inventory data and regional standing stock prices, considering among others: •regional market transaction data based on the forest assets' geographical locations, •standing stock prices by forest cubic meter (m3 fo) combined from traded forest estates and •regional standing stock inventory. 51 Information relating to forest asset transactions are available from market data suppliers. The market transaction information can be viewed as market-corroborated inputs. Certain adjustments are made to refine the market-corroborated inputs using unobservable inputs, therefore inputs are categorised to fair value hierarchy measurement level 3. The judgements are further explained in Note 2 Critical accounting estimates and judgements. The total value of the forest assets in Nordics is allocated across biological assets and forest land. Allocation of the combined fair value of forest assets is based on the income approach where separate present values of expected net cash flows are calculated for both biological assets and forest land. The discount rate is determined as the rate at which the valuation based on market transaction prices matches the total forest assets combined cash flows for biological assets and forest land. The discount rate is estimated to be the same for biological assets and forest land as the nature and timing of the cash flows are similar. Biological assets are measured at fair value in accordance IAS 41. The fair value is based on the income approach and the discounted cash flow method whereby the fair value of the biological assets is calculated using cash flows from continuous operations, taking into account the growth potential of one cycle. Forest land is measured at fair value using the revaluation method as defined in the IAS 16 standard. Fair value of forest land is measured based on income approach, including net cash flows related to trees to-be-planted in the future as well as other land related income, such as hunting rights, wind power leases and soil material sales. Changes in the fair value of biological assets are recognised in the income statement. Changes in the fair value of forest land, net of deferred taxes, are recognised in other comprehensive income (OCI) and accumulated in a revaluation reserve in equity. Revaluation reserve is not recycled to the income statement upon disposal. If the fair value of forest land were to be less than cost, the difference would be recognised in the income statement as an impairment loss. Plantation forest assets In plantation forest areas, biological assets are recognised at fair value in accordance with the IAS 41 standard and based on the income approach in those areas where the Group has forest land. Fair value measurement is based on fair value hierarchy measurement level 3. Forest land is measured initially and subsequently at cost, using the cost model as defined in IAS 16 standard. The valuation of biological assets is based on the discounted cash flow method calculated using cash flows from continuous operations and based on sustainable forest management, taking into account growth potential of one cycle. The fair value of the biological assets is based on the productive forest land. The yearly harvest from the forecasted tree growth is multiplied by wood prices and the cost of silviculture and harvesting is deducted. The fair value of the biological assets is measured as the present value of the harvest from one growth cycle, taking into consideration environmental restrictions and other reservations. The discount rate applied is determined using the weighted average cost of capital method. Young standing timber less than two years old (less than three years in Montes del Plata) is considered to be an immature asset and accounted at cost. Fair value is deemed to approximate the cost when little biological transformation has taken place or the impact of the transformation on the price is not expected to be significant, which varies according to the location and species of the assets. Changes in the fair value of biological assets are recognised in the income statement. The forest land is measured at cost and not depreciated. The value of forest assets disclosed in the consolidated statement of financial position from subsidiary companies and joint operations amounts to EUR 6,846 (EUR 6,747) million as shown below. The Group’s indirect share of forest assets held by associated company amounts to EUR 1,271 (EUR 985) million. The total forest asset value, excluding leased forest land, amounts to EUR 8,117 (EUR 7,732) million. Forest assets Biological assets Forest land2 Forest assets total Year Ended 31 December Year Ended 31 December Year Ended 31 December EUR million 2022 2021 2022 2021 2022 2021 Subsidiaries and joint operations Value at 1 January 4,547 4,250 2,201 2,005 6,747 6,256 Translation differences -305 -43 -145 -26 -449 -68 Unrealized change in fair value1 336 471 259 225 596 696 Additions 77 58 2 1 78 59 Disposals -2 -64 -2 -5 -4 -69 Change due to harvesting1 -141 -127 0 0 -141 -127 Other operative changes1 -1 -17 0 0 -1 -17 Reclassification from PPE 20 17 0 0 20 17 Value at 31 December 4,531 4,547 2,315 2,201 6,846 6,747 Associated company Tornator Oyj (41%) 1,122 906 149 78 1,271 985 Value at 31 December 1,122 906 149 78 1,271 985 Total 5,653 5,453 2,464 2,279 8,117 7,732 1 For biological assets, changes are presented in the profit and loss. For forest land, changes in fair value are recognised directly in equity. 2 Not including leased forest land. 52 Valuation and standing stock of forest assets As at 31 December 2022 Swedish forests Guangxi Veracel (50%) MdP (50%) Tornator (41%) Total Total area Thousand ha 1,389 73 113 138 301 2,014 - of which owned Thousand ha 1,389 — 105 95 300 1,890 - of which leased Thousand ha — 73 8 43 — 124 Productive area Thousand ha 1,142 64 47 92 277 1,622 Total area Standing stock million m3 fo.1 152.7 4.2 5.2 15.5 33.2 210.8 Productive area Standing stock million m3 fo.1 150.5 4.1 5.2 15.5 32.8 208.1 Estimated growth million m3 fo.1 5.8 1.3 1.8 3.2 1.5 13.6 Harvesting million m3 fo.1 4.6 1.2 1.7 1.8 1.3 10.7 Other changes million m3 fo.1 -1.1 -0.8 0.0 0.2 -0.1 -1.8 Harvesting million m3 u.b.2 3.8 1.0 1.4 1.5 1.2 8.9 Biological assets EUR million 3,963 196 103 269 1,122 5,653 Biological assets Productive area EUR/ha 3,471 3,062 2,162 2,922 4,054 3,485 Forest land EUR million 2,113 — 29 173 149 2,464 Total forest assets EUR million 6,076 196 131 441 1,271 8,117 Leased forest land EUR million — 166 3 52 — 221 1Forest cubic meters 2Solid under bark (sub) cubic meters As at 31 December 2021 Swedish forests Guangxi Veracel (50%) MdP (50%) Tornator (41%) Total Total area Thousand ha 1,389 77 113 136 295 2,009 - of which owned Thousand ha 1,389 — 106 95 295 1,884 - of which leased Thousand ha — 77 7 41 — 125 Productive area Thousand ha 1,141 68 47 90 271 1,617 Total area Standing stock million m3 fo.1 152.6 5.0 5.0 13.9 33.0 209.5 Productive area Standing stock million m3 fo.1 150.5 4.9 5.0 13.9 32.7 207.1 Estimated growth million m3 fo.1 5.8 1.6 1.8 2.6 1.4 13.2 Harvesting million m3 fo.1 4.4 1.3 1.2 1.6 1.3 9.9 Other changes million m3 fo.1 6.2 0.4 0.0 -0.1 1.2 7.7 Harvesting million m3 u.b.2 3.7 1.0 1.0 1.3 1.2 8.2 Biological assets EUR million 4,005 200 81 260 906 5,453 Biological assets Productive area EUR/ha 3,511 2,950 1,713 2,900 3,342 3,372 Forest land EUR million 2,012 — 26 163 78 2,279 Total forest assets EUR million 6,017 200 107 423 985 7,732 Leased forest land EUR million — 187 2 45 — 235 1Forest cubic meters 2Solid under bark (sub) cubic meters Subsidiaries and joint operations At the end of 2022, forest assets (excluding leases) were located by value, in Sweden 89% (89%), China 3% (3%), Brazil 2% (2%) and Uruguay 6% (6%). The total area amounts to 1,713 (1,715) thousand hectares of which 7% (7%) is leased and under 1% (1%) is restricted. From Stora Enso's total forest holdings 1,345 (1,346) thousand hectares is productive forest area. The Montes del Plata and Veracel amounts take into account the ownership share. Swedish forests At the end of 2022, the value of the biological assets in Swedish forests amounted to EUR 3,963 (EUR 4,005) million, related forest land amounted to EUR 2,113 (EUR 2,012) million and the total forest assets amounted to EUR 6,076 (EUR 6,017) million. The value increase in the forest assets value is mainly driven by higher market prices, whereas foreign exchange impact netted the impact of price increases and decreased the value with approximately EUR 485 million. Deferred tax liabilities related to forest assets amounted to EUR 1,250 (EUR 1,237) million. The discount rate of 3.6% (3.5%) was applied in the valuation. The productive area in Swedish forests amounted to 1,142 (1,141) thousand hectares with a standing stock of 150.5 (150.5) million forest m3. The weighted three-year average market transaction price applied in the valuation for Swedish forests assets in 2022 is EUR 40 (EUR 40) per forest m3. The forest asset value corresponds to an average of EUR 5,320 (EUR 5,270) per ha of productive forest area. The valuation of the forest assets is based on detailed transaction data and price statistics as provided by different market data suppliers. Market transaction data is adjusted to consider the characteristics and nature of Stora Enso's forest assets and to exclude certain non-forest assets and outliers. The valuation takes into account where the forest land is located, price levels and volume of standing stock. Market prices between areas varies significantly. Future changes in value of Swedish forest assets are impacted by changes in market transaction prices and changes in volume of standing stock, considering growth and other changes. See also Note 2 for information related estimates and judgment applied in the valuation. Forest asset location and volume 2022 North Middle South Total Productive area Thousand ha 190 951 0 1,142 Percentage of total % 17% 83% 0% 100% Standing stock million m3 fo. 17.5 133.0 0.0 150.5 Percentage of total % 12% 88% 0% 100% 2021 North Middle South Total Productive area Thousand ha 191 950 0 1,141 Percentage of total % 17% 83% 0% 100% Standing stock million m3 fo. 17.1 133.3 0.0 150.5 Percentage of total % 11% 89% —% 100% Guangxi At the end of 2022, the value of the biological assets in Guangxi, China, amounted to EUR 196 (EUR 200) million. All the forest land in China is leased. The value decrease is mainly driven by foreign exchange impact and increased discount rate, whereas higher prices increased the value. The biological assets included young standing timber with a value of EUR 27 (EUR 33) million. The discount rate of 10.2% (8.6%) used in the discounted cash flows (DCF) increased in 2022. The productive forest area in Guangxi totals to 64 (68) thousand hectares with a standing stock of 4.1 (4.9) million forest m3. Veracel Veracel is a 50% joint operation in Brazil. Stora Enso’s share of the biological assets was EUR 103 (EUR 81) million. The increase is mainly driven by increased prices and foreign exchange impact, whereas increased discount rate and higher costs decreased the value. The biological 53 assets included young standing timber with a value of EUR 31 (EUR 21) million. The discount rate of 7.9% (6.9%) used in the DCF increased in 2022. The related forest land is measured at cost. Stora Enso’s share of the productive forest area totals to 47 (47) thousand hectares with a standing stock of 5.2 (5.0) million forest m3. Montes del Plata Montes del Plata (MdP) is a 50% joint operation in Uruguay. Stora Enso’s share of the biological assets was EUR 269 (EUR 260) million. The movement is mainly driven by foreign exchange impact and discount rate change. The biological assets included young standing timber with a value of EUR 50 (EUR 46) million. The discount rate of 9.0% (6.5%) used in the DCF increased in 2022. The related forest land is measured at cost. Stora Enso’s share of the productive forest area totals to 92 (90) thousand hectares with a standing stock of 15.5 (13.9) million forest m3. Associated company Tornator Tornator Oyj is a 41% owned Finnish associate company. Stora Enso’s share of the biological assets was EUR 1,122 (EUR 906) million, related forest land amounted to EUR 149 (EUR 78) million, and total forest assets equalled to EUR 1,271 (EUR 985) million. The increase in the value of forest assets is mainly driven by moving to market transaction based valuation method from discounted cash flow based method concerning forest assets in Finland. Acquisitions also increased the forest asset value. See Note 1 for more details related to changes in the valuation method. Stora Enso’s share of the productive forest area totals to 277 (271) thousand hectares with a standing stock of 32.8 (32.7) million forest m3. The weighted three-year average market transaction price applied in the valuation for forest assets located in Finland in 2022 is EUR 42 per forest m3. The forest asset value in Finland corresponds to an average of EUR 4,750 per ha of productive forest area. Valuation sensitivities of significant assumptions of a +/- 10% movement EUR million Wood market prices Growth rate Discount rate Guangxi +/-28 +/-1 +/-4 Veracel +/-10 +/-10 +/-2 Montes del Plata +/-30 +/-30 +11/-10 Swedish forest asset valuation is sensitive for changes in market transaction prices and volume of standing stock. A change in the average market price of forest assets of EUR 1 per forest m3 would impact the value of forest assets by EUR 151 (EUR 150) million. A change in the volume of standing stock of 1 million forest m3 would impact the value of forest assets by EUR 40 (EUR 40) million. Note 13 Equity accounted investments Accounting principles Associated companies over which Stora Enso exercises significant influence are accounted for using the equity method. Stora Enso does not control associate companies alone or jointly with other parties, but has significant influence. The Group’s share of the equity accounted investment profit or loss is recognised in the consolidated income statement. The Group’s interest in an associated company is carried in the consolidated statement of financial position at an amount that reflects its share of the net assets of the associate together with goodwill. Goodwill arising from the acquisition of an equity accounted investment is included in the carrying amount of the investment and is assessed for impairment as part of that investment. There is no material goodwill in the carrying amount of equity accounted investments. When the Group share of losses exceeds the carrying amount of an investment, the carrying amount is reduced to zero and any recognition of further losses ceases unless the Group is obliged to satisfy obligations of the investee that it has guaranteed or which it is otherwise committed to. The Group’s share of results in equity accounted investments is reported in the operating profit to reflect the operational nature of these investments. Similarly, dividends received from equity accounted investments are presented in the net cash provided by operating activities in the consolidated cash flow statement. Principal equity accounted investments As at 31 December Ownership interest % EUR million Company Reportable segment Domicile and principal place of operations 2022 2021 2022 2021 Tornator Oyj Forest Finland 41.00 41.00 800 545 Others 32 35 Carrying amount 832 580 In 2022, Stora Enso divested its 30.41% participation in Encore Ympäristöpalvelut Oy. The transaction did not have a material impact on the Group. In 2021 Stora Enso's 20% ownership in Arauco Florestal Arapoti S.A. was divested. The transaction did not have a material impact on the Group. Also in 2021, Bergvik Skog AB was liquidated, there were no operations remaining in the company after Bergvik Skog AB restructuring in 2019. 54 Group share of equity accounted investments income statements Year Ended 31 December EUR million 2022 2021 Sales 147 142 Net operating expenses -103 -97 Biological asset valuation 189 120 Operating profit 233 166 Net financial items 40 10 Net profit before tax 273 176 Income tax -52 -34 Net profit for the year 221 143 The average number of personnel in the equity accounted investments was 1,043 in 2022, compared with 1,193 in 2021. A summary of the financial information, prepared in accordance IFRS, in respect of the Group’s material associate, Tornator Oyj is set out below. The Group’s share of Tornator Oyj is reported in the Forest division and covers the majority of the Group’s total carrying amount of equity accounted investments. Tornator Oyj EUR million 2022 2021 Forest Assets 3,101 2,401 Other non-current assets 70 39 Current assets 73 53 Non-current liabilities 752 821 Current liabilities 120 43 Tax liabilities 420 300 Sales 176 155 Net profit for the year 542 349 Other comprehensive income 141 39 Total comprehensive income 683 388 Dividends received during the financial year 25 16 Net assets of the associate 1,952 1,329 Ownership interest 41.00% 41.00% Carrying amount of the Group's interest in Tornator Oyj 800 545 The Group’s current 41% ownership is valued at EUR 800 (EUR 545) million at the year-end of 2022. The Group’s share of Tornator’s net profit was EUR 222 (EUR 143) million, including a biological asset valuation gain net of taxes of EUR 152 (EUR 96) million. Aggregate information of equity accounted investments that are not individually material As at 31 December EUR million 2022 2021 Non-current assets 35 30 Current assets 12 22 Non-current liabilities 3 2 Current liabilities 12 15 Sales 74 78 Net profit for the year -2 0 Dividends received during the financial year 1 0 Net assets of the associates 32 35 Equity accounting value 32 35 Equity accounting value for Tornator Oyj 800 545 Total equity accounting value 832 580 Equity accounted investment balances As at 31 December EUR million 2022 2021 Receivables from equity accounted investments Non-current loan receivables 2 2 Trade receivables 1 1 Other receivables 0 10 Liabilities due to equity accounted investments Trade payables 101 55 Equity accounted investment transactions Year Ended 31 December EUR million 2022 2021 Sales to equity accounted investments 19 19 Interest on loan receivables from equity accounted investments 0 1 Purchases from equity accounted investments 163 109 The Group engages in transactions with equity accounted investments such as sales and purchases of wood. All agreements are negotiated at arm’s length and are conducted on terms that the Group considers customary in the industry and generally no less favourable than would be available from independent third parties. 55 Note 14 Equity instruments Accounting principles The Group has elected to classify its equity investments in Pohjolan Voima shares and certain listed shares held by the Group at fair value through other comprehensive income (FVTOCI) under IFRS 9 by applying the irrevocable election for equity instruments under the standard due to the long-term nature of the ownership. The gains and losses resulting from changes in the fair value of equity investments under FVTOCI are not recycled to the Income Statement upon impairment or disposal, only the dividend income is recognised in the income statement. In addition, the Group also has certain equity investments in unlisted securities that are classified as fair value through income statement. Summary of values Year Ended 31 December EUR million 2022 2021 Acquisition cost at 1 January Listed securities 3 3 Unlisted securities 135 135 Investments classified as equity instruments 139 138 OCI in opening balance 779 279 Equity Instruments at 1 January 918 417 Translation difference and other -2 0 Additions 10 1 Change in fair values accounted for as OCI 519 501 Carrying amount at 31 December 1,445 918 Unrealised gains and losses on listed and unlisted securities Year Ended 31 December EUR million 2022 2021 Net unrealised holding gains (OCI) 1,299 780 Cost 147 139 Fair value 1,445 918 Net unrealised holding gains (OCI) 1,299 780 Deferred tax -1 -2 Net unrealised holding gains shown in equity as OCI 1,297 778 Change in net unrealised holding gains shown in equity as OCI 519 501 PVO shares The Group holds a 15.6% (15.6%) interest in Pohjolan Voima Oyj (PVO), a public limited company in the energy sector that produces electricity and heat for its shareholders in Finland at cost-based and non-profit making principle (Mankala-principle). Each subsidiary of the PVO group has its own class of shares that, instead of dividends, entitle the shareholder to the energy produced in proportion to its ownership of that class of share. Also, the shareholders then have an obligation to cover the costs of production, which are generally lower than market prices. Stora Enso did not receive actual dividend payments from PVO during 2022. The holding is fair valued quarterly using the discounted cash flow method. During the last quarter of 2022 the Group refined the valuation method to be based on discounted cash flow analysis only, while previously, also market multiples were used. Trading multiples are considered to be less reliable under current market conditions. The valuation is categorised at level 3 in the fair value hierarchy according to IFRS 13; levels are explained in Note 25 Fair values. The electricity prices used in the valuation are based on market future derivative prices for the first three years and on long-term electricity price estimates for the years thereafter. The historical financial statements provide the basis for the cost structure for each power asset and for future periods, estimates from PVO shareholder information is used when available and these are adjusted by inflation factor in future years. The discount rate of 7.99% used in the valuation model is determined using the weighted average cost of capital method. A +/- 5% change in the electricity price used in the DCF would change the valuation by EUR +127 million and -127 million, respectively. A +/- percentage point change in the discount rate would change the valuation by EUR -158 million and +200 million, respectively.. Stora Enso holds an indirect share of approximately 8.9% of the capacity of Olkiluoto 3 nuclear plant unit through its PVO B2 shares. The Olkiluoto 3 plant unit has been running test production during 2022. During the test production, in October 2022, damages were identified in the plant unit's feedwater pumps. After an investigation into the damages, Teollisuuden Voima Oyj announced in December 2022 that the regular electricity production is expected to start in March 2023. PVO shareholding on 31 December 2022 EUR million Share Series % Holding Asset Category Fair Value 2022 Fair Value 2021 PVO-Vesivoima Oy A 20.6 Hydro 307 302 Teollisuuden Voima Oyj B 15.7 Nuclear 735 540 Teollisuuden Voima Oyj B2 14.8 Nuclear 377 54 Other C,C2,V,M Various Various 4 4 Total 1,423 900 The valuation in 2022 amounted to EUR 1,423 (EUR 900) million against a cost value of EUR 130 (EUR 130) million, with the revaluation of EUR 1,293 (EUR 770) million presented in equity as part of the fair value reserve. The change in PVO’s value is mainly caused by the increase in electricity market prices during the year. No deferred tax is recognized, as under Finnish tax regulations holdings above 10% are exempt from tax on disposal proceeds. Principal equity instruments 31 December 2022 EUR million Holding % Number of Shares Acquisition Cost Fair Value Packages Ltd, Pakistan - listed shares 6.0 5,396,650 3 8 Total listed securities 3 8 Pohjolan Voima Oy - unlisted shares 15.6 5,073,972 130 1,423 Others - unlisted securities 14 14 Total unlisted securities 144 1,437 Total Equity instruments at 31 December 2022 147 1,445 Total Equity instruments at 31 December 2021 139 918 56 Note 15 Emission rights and other non-current assets Accounting principles The Group participates in the European Emissions Trading Scheme, with the aim of reducing greenhouse gas emissions. The Group has been allocated allowances to emit a fixed tonnage of carbon dioxide (CO2) over a fixed period of time, which are recognised as intangible assets, government grants and as liabilities for the obligation to deliver allowances equal to those emissions that have been made during the compliance period. Intangible assets related to emission allowances are measured at level 1 fair value at the date of initial recognition. The liabilities to deliver allowances are recognised based on actual emissions and are settled using allowances on hand and measured at the carrying amount of those allowances. At the reporting date, if the market value for the emission allowances is less than the carrying amount, any surplus allowances that are not required to cover emissions made are impaired to the market value. The Group expenses emissions made at the grant date fair value, under materials and services, together with purchased emission rights at their purchase price. Such costs will be offset under other operating income by the income from the original rights used at their grant date fair value. The consolidated income statement will, thus, be neutral in respect to all the rights consumed that were within the original grant of rights. Sales of excess emission allowances are recognised as income on the delivery date. Any net effect represents the costs of purchasing additional rights to cover excess emissions, or the sale of unused rights in case that the realised emissions are below the allowances received free of charge or the impairment of allowances that are not required for own use. Emission rights Year Ended 31 December EUR million 2022 2021 Value on 1 January 137 36 Emission allowances allocated 160 167 Sales -62 -35 Settlement with the government -85 -31 Classification as held for sale -27 0 Value on 31 December 123 137 The liability to deliver allowances is presented in the consolidated statement of financial position in line other operative liabilities. As of 31 December 2022, the liability to deliver allowances amounted to EUR 91 (EUR 99) million as presented in Note 23 Other liabilities. The excess emission rights held at the year end were valued at EUR 32 (EUR 38) million. Other non-current assets As at 31 December EUR million 2022 2021 Prepaid expenses and accrued income 22 15 Tax credit 4 3 Other non-current operative assets 12 15 Total 38 34 Note 16 Inventories Accounting principles Inventories are reported at lower of cost and net realisable value with the cost determined by the first-in first-out (FIFO) method or, alternatively, by the weighted average cost where it approximates FIFO. The same cost formula is used for all inventories having a similar nature and use to the Group. The cost of finished goods and work in progress comprises raw material, direct labour, depreciation, other direct costs and related production overheads, but excludes interest expenses. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and sale. Where market conditions result in the manufacturing costs of a product exceeding its net realisable value, a valuation allowance is made. Valuation allowances are also made for old, slow moving and obsolete finished goods and spare parts when needed. Such valuation allowances are deducted from the carrying value of the inventories in the consolidated statement of financial position. As at 31 December EUR million 2022 2021 Materials and supplies 501 422 Work in progress 84 97 Finished goods 962 689 Spare parts and consumables 337 331 Other inventories 25 23 Advance payments and cutting rights 63 55 Obsolescence allowance - spare parts and consumables -103 -125 Obsolescence allowance - finished goods -19 -9 Net realisable value allowance -40 -5 Total 1,810 1,478 EUR 6,576 (EUR 5,740) million of inventories in total have been expensed during the year. EUR 78 (EUR 29) million of inventory write-downs have been recognised as an expense. EUR 9 (EUR 16) million have been recognised as a reversal of previous write-downs. 57 Note 17 Operative receivables Accounting principles Trade receivables Trade receivables are recognised initially at fair value and subsequently at their anticipated realisable value with an estimate made for loss allowance on expected credit losses based on a forward-looking and objective review of all outstanding amounts at period end. A simplified approach under IFRS 9 has been implemented for trade receivables and loss allowances are recognised based on expected lifetime credit losses in the consolidated income statement within other operating expenses. For non-defaulted receivables, expected credit losses are estimated based on externally generated customer level probability of default data that is used in the forward-looking loss allowance calculation model. The loss allowance model for non-defaulted receivables also takes into account a macroeconomic indicator that considers the macroeconomic developments and further incorporates forward-looking data to the calculation model. The rebuttable presumption that default does not occur later than when a financial asset is 90 days past due has been applied in the calculation model and a default is normally estimated to occur when trade receivables are at least 90 days overdue or there is otherwise objective evidence supporting the conclusion that a default has occurred. Trade receivables will be written off and booked as a credit loss only with the court's decision of bankruptcy or in some other cases when there is objective evidence supporting the write-off. Trade receivables are presented in current assets under operative receivables in the consolidated statement of financial position. Trade receivables under factoring arrangements Stora Enso uses factoring arrangements as one of the working capital management tools. Sold trade receivables are derecognised once significant related risks and rewards of ownership have been transferred to the buyer. Outstanding balances for trade receivables that were not yet sold at period end but qualify to be sold under factoring programmes in the next period, are classified as trade receivables fair valued through other comprehensive income in accordance with the business model and contractual cash flow characteristics tests under IFRS 9. Please refer to Note 25 Fair values for further details. Current operative receivables As at 31 December EUR million 2022 2021 Trade receivables - gross carrying amount before amount held for sale 1,329 1,175 Trade receivables - gross carrying amount held for sale -92 0 Trade receivables - gross carrying amount 1,236 1,175 Loss allowance -32 -26 Prepaid expenses and accrued income 68 82 Other receivables 200 218 Total 1,473 1,449 Age analysis of trade receivables As at 31 December EUR million 2022 2021 Not overdue 1,213 1,093 Less than 30 days overdue 55 38 31 to 60 days overdue 10 7 61 to 90 days overdue 2 0 91 to 180 days overdue 3 0 Over 180 days overdue 47 37 Total 1,329 1,175 As at 31 December 2022, a gross amount of EUR 116 (EUR 82) million of trade receivables were overdue. These relate to a number of countries and unrelated customers that have no recent history of default. At 31 December 2022, lifetime expected credit losses for trade receivables amounted to EUR 32 (EUR 26) million. Loss allowances for trade receivables are estimated on an individual basis based on a forward-looking model where estimated probabilities of customer default are used in the calculation model. If the Group has concerns regarding the financial status of a customer, an advance payment or an irrevocable letter of credit drawn from a bank is required. At the year end, the letters of credit awaiting maturity totalled EUR 74 (EUR 90) million. Please refer to Note 24 Financial risk management for details of customer credit risk management. Age analysis of loss allowance As at 31 December EUR million 2022 2021 Not overdue and less than 90 days overdue 5 1 91 to 365 days overdue 7 0 Over 365 days overdue 21 25 Total 32 26 Reconciliation of loss allowance As at 31 December EUR million 2022 2021 Opening balance at 1 January 26 35 Change in loss allowance booked through income statement 13 3 Write-offs -6 -12 Closing Balance at 31 December 32 26 The actual credit losses during 2022 amounted to EUR 6 (EUR 12) million of trade receivables being written-off from the Group's balance sheet. Stora Enso has entered into factoring agreements to sell trade receivables in order to accelerate cash conversion. These agreements resulted in full derecognition of trade receivables amounting to a nominal value of EUR 174 (EUR 184) million at the end of the year. The continuing involvement of Stora Enso in the sold receivables was estimated as being insignificant due to the non-recourse nature of the factoring arrangements involved. 58 Note 18 Shareholders' equity Accounting principles Dividend and capital repayments Any dividend or capital repayment proposed by the Board is not deducted from distributable shareholders’ equity until approved by the shareholders at the Annual General Meeting. At 31 December 2022, shareholders’ equity amounted to EUR 12,532 (EUR 10,683) million, compared to the market capitalisation on Nasdaq Helsinki of EUR 10,503 (EUR 12,809) million. The market values of the shares were EUR 13.90 (EUR 16.60) for A shares and EUR 13.15 (EUR 16.14) for R shares. In 2022, EUR 434 (237) million of dividend was paid, corresponding to EUR 0.55 (0.30) per share. The A shares entitle the holder to one vote per share, whereas R shares entitle the holder to one vote per ten shares with a minimum of one vote, though the accountable par of both shares is the same. A shares may be converted into R shares at any time at the request of a shareholder. At 31 December 2022, the company’s fully paid-up share capital, as entered in the Finnish Trade Register, was EUR 1,342 million (EUR 1,342 million). The current accountable par of each issued share is EUR 1.70 (EUR 1.70). At 31 December 2022, Directors and Group Leadership Team members owned 127 (0) A shares and 363,604 (475,519) R shares representing 0.02% of the total voting rights of the company. Full details of Director and Executive interests are shown in Note 7 Board and executive remuneration. A full description of company share award programmes is shown in Note 21 Employee variable compensation and equity incentive schemes. However, none of these have any impact on the issued share capital. Change in share capital and number of shares A shares R shares Total At 1 January 2021 176,254,415 612,365,572 788,619,987 Conversion of A shares to R shares -10,366 10,366 — At 31 December 2021 176,244,049 612,375,938 788,619,987 Conversion of A shares to R shares -5,769 5,769 — At 31 December 2022 176,238,280 612,381,707 788,619,987 Number of votes as at 31 December 20221 176,238,280 61,238,171 237,476,451 Share capital at 31 December 2022, EUR million 300 1,042 1,342 Share capital at 31 December 2021, EUR million 300 1,042 1,342 1 R share votes are calculated by dividing the number of R shares by 10. The issued shares by 6 March 2023 will represent the total shares eligible to vote at the forthcoming Annual General Meeting. Note 19 Non-controlling interests Accounting principles Non-controlling interests are presented as a separate component within the equity of the Group in the consolidated statement of financial position. The proportionate shares of profit or loss attributable to non-controlling interests and to owners of the parent company are presented in the consolidated income statement after the profit for the period. Transactions between non- controlling interests and Group shareholders are transactions within equity and are thus shown in the statement of changes in equity. The measurement type of non-controlling interest is decided separately for each acquisition. Non-controlling interests Year Ended 31 December EUR million 2022 2021 At 1 January -16 -16 Disposals 0 0 Share of profit for the period -13 3 Share of other comprehensive income 0 -3 Dividends 0 0 At 31 December -30 -16 Principal non-controlling interests As at 31 December 2022 2022 2021 Company Principal place of business Proportion of ownership interests held by non- controlling Interests, % EUR million Stora Enso Pulp and Paper Asia AB Group Sweden and China See separate table below -31 -18 Others - 1 1 Total -30 -16 Non-controlling interests in Stora Enso Pulp and Paper Asia AB Group 31 December 2022 31 December 2021 Company Principal place of business Direct-% of NCI Indirect- % of NCI Total-% of NCI Direct-% of NCI Indirect- % of NCI Total-% of NCI Stora Enso Pulp and Paper Asia AB Sweden and China 5.79 — 5.79 5.79 — 5.79 Guangxi Stora Enso Forestry Co Ltd China 5.00 5.50 10.50 5.00 5.50 10.50 Stora Enso (Guangxi) Packaging Company Ltd China 15.00 4.92 19.92 15.00 4.92 19.92 Stora Enso (Guangxi) Forestry Company Ltd China 15.00 4.92 19.92 15.00 4.92 19.92 Summarised financial information in respect of the subsidiaries that have material non- controlling interests is set out below. 59 Stora Enso Pulp and Paper Asia AB Group EUR million 2022 2021 Assets 1,235 1,282 Equity attributable to the owners of the parent -165 -115 Non-controlling interests1 -31 -18 Total equity -196 -133 Liabilities 1,430 1,414 Net profit or loss for the period -74 7 Attributable to Owners of the parent -61 4 Non-controlling interests -13 3 Net profit or loss for the period -74 7 Net cash flow from operating activities 64 90 Net cash flow from investing activities -41 -37 Net cash flow from financing activities 4 -26 Net cash flow 27 27 1 No dividends were paid to non-controlling interests in 2022 or 2021. Note 20 Post-employment benefit obligations Accounting principles Employee benefits The Group operates a number of defined benefit and contribution plans throughout the world, the assets of which are generally held in separate trustee administered funds. Such pension and post-retirement plans are generally funded by payments from employees and by the relevant Group companies, taking into account the recommendations of independent qualified actuaries. Employer contributions to the defined contribution pension plans are charged to the consolidated income statement in the year they relate to. For defined benefit plans, accounting values are assessed using the projected unit credit method. Under this method, the cost of providing pensions is charged to the consolidated income statement to spread the regular cost over the service lives of employees in accordance with the advice of qualified actuaries who carry out a full valuation of the plan every year in all major pension countries. The pension obligation is measured as the present value of the estimated future cash outflows using interest rates of highly rated corporate bonds or government securities, as appropriate, that match the currency and expected duration of the related liability. The Group recognises all actuarial gains and losses arising from defined benefit plans directly in equity, as disclosed in its consolidated statement of comprehensive income. Past service costs are identified at the time of any amendments to the plans and are recognised immediately in the consolidated income statement regardless of vesting requirements. In the Group’s consolidated statement of financial position, the full liability for all plan deficits is recorded. The Group's pension expenses amounted to EUR 152 (EUR 165) million in 2022, as shown in Note 6 Personnel expenses. Pensions are classified as defined contribution plans and defined benefit plans. The majority of the Group's pensions plans are defined contribution plans for which the charge amounted to EUR 146 (EUR 153) million. The priority of the Group is to provide defined contribution plans as its post-employment benefits. Net defined benefit obligation reconciliation Defined benefit obligation Fair value of plan assets Net defined benefit liability / (asset) EUR million 2022 2021 2022 2021 2022 2021 At 1 January 1,108 1,210 -762 -737 347 473 Current service cost 12 14 12 14 Past service cost -6 -2 0 0 -6 -2 Settlements -7 -5 7 5 0 0 Interest expense (+) income (-) 13 9 -10 -6 3 3 Total included in income statement 11 17 -3 -1 9 15 Actuarial changes in demographic assumptions -13 3 -13 3 Actuarial changes in financial assumptions -306 -21 -306 -21 Actuarial changes from experience adjustments 63 -42 63 -42 Return on plan assets1 105 -65 105 -65 Asset ceiling impact1 5 0 5 0 Total remeasurement gains (-) / losses (+) included in OCI -256 -61 109 -65 -147 -126 Benefit payments -54 -58 41 44 -13 -14 Employer contributions and refunds 4 1 4 1 Translation difference -38 1 33 -3 -5 -3 Disposals and classification as held for sale -35 0 0 0 -35 0 At 31 December 736 1,108 -577 -762 159 347 1 Excluding amounts included in interest expense (+) income (-) In 2023, contributions of EUR 19 (EUR 17) million are expected to be paid to Group's defined benefit plans. Significant actuarial assumptions used in the valuation of defined benefit obligations Year ended 31 December Finland Germany Sweden 2022 2021 2022 2021 2022 2021 Discount rate % 3.6 0.7 3.6 0.8 4.0 1.7 Future salary increase % 3.0 3.2 2.5 2.5 2.9 2.9 Future pension increase % 2.2 2.3 2.0 1.8 2.0 2.0 Duration of pension plans 8.0 10.0 10.2 13.0 13.1 16.5 60 Sensitivity of the defined benefit obligation Impact on defined benefit obligation Change in assumption Increase in assumption Decrease in assumption Discount rate 0.50% Decrease by 5.8% Increase by 6.4% Salary growth rate 0.50% Increase by 1.2% Decrease by 1.1% Pension growth rate 0.50% Increase by 4.8% Decrease by 4.4% Life expectancy 1 year Increase by 4.2% Decrease by 4.1% The Group defines following actuarial risks associated with defined benefit plans: Interest risk The obligations are assessed using market rates of high-quality corporate or government bonds to discount the obligations and are therefore subject to any volatility in the movement of the market rate. The net interest income or expense recognised in profit and loss are also calculated using the market rate of interest. Life expectancy In the event that members live longer than assumed, the obligations may be understated originally and a deficit may emerge if funding has not adequately provided for the increased life expectancy. Defined benefit plan summary by country as at 31 December 2022 31 December 2022 EUR million Finland Germany Sweden Other Total Present value of funded obligations 172 3 226 163 563 Present value of unfunded obligations 0 134 15 24 173 Defined benefit obligations (DBO) 172 137 241 187 736 Fair value of plan assets -157 -4 -266 -150 -577 Net liability in the balance sheet 15 134 -26 36 159 Represented by Defined benefit pension plans 15 134 -26 13 136 Other post-employment benefits 0 0 0 23 23 Net liability in the balance sheet 15 134 -26 36 159 Defined benefit plan summary by country as at 31 December 2021 31 December 2021 EUR million Finland Germany Sweden Other Total Present value of funded obligations 238 5 359 236 838 Present value of unfunded obligations 0 224 20 27 270 Defined benefit obligations (DBO) 238 229 379 263 1,108 Fair value of plan assets -208 -4 -324 -226 -762 Net liability in the balance sheet 29 225 55 37 347 Represented by Defined benefit pension plans 29 225 55 12 321 Other post-employment benefits 0 0 0 25 25 Net liability in the balance sheet 29 225 55 37 347 Finland In Finland the employees are entitled to a statutory pensions benefit determined by Employee's pension Act (TyEL). These benefits are defined as contribution benefits. They are insured with an insurance company and provide coverage for old age, disability and death. Charge in the income statement from contribution benefits is EUR 64 (EUR 71) million. In addition, the Group has additional defined benefit plans which resulted in a charge of EUR 0 (EUR 1) million excluding finance costs. Defined benefit plans and plan assets are managed by insurance companies. Details of the exact structure and investment strategy surrounding plan assets are not available to participating employers, as the assets actually belong to the insurance companies themselves. The assets are managed in accordance with EU regulations, and also national requirements, under which there is an obligation to pay guaranteed benefits irrespective of market conditions. Germany German pension costs amounted to EUR 6 (EUR 7) million, of which EUR 6 (EUR 6) million related to defined contribution plans and EUR 1 (EUR 1) million to defined benefits excluding finance costs. The net defined benefit liability amounted to EUR 134 (EUR 225) million. The decrease in net liability arose mainly from changes in actuarial assumptions, especially from an increase in discount rate. Defined benefit pension plans are mainly accounted for in the statement of financial position through book reserves with some minor plans using insurance companies or independent trustees. Retirement benefits are based on years worked and salaries received during the pensionable service and the commencement of pension payments are linked to the national pension scheme’s retirement age. Pensions are paid directly by the companies themselves to their former employees. The security for the pensioners is provided by the legal requirement that the book reserves held in the statement of financial position are insured up to certain limits. Sweden In Sweden, all blue-collar staff and part of white-collar staff are covered by defined contribution plans, the charge in the Income statement being EUR 54 (EUR 56) million. Defined benefit plans are covering the remaining white-collar staff and resulted in a charge of EUR 1 (EUR 8) million excluding finance costs. The net defined benefit asset amounted to EUR 26 (liability EUR 55) million. The decrease in net liability arose mainly from changes in actuarial assumptions, especially from an increase in discount rate. Stora Enso has undertaken to pay all local legal pension liabilities for the main ITP scheme to the foundation, thus the remaining liability relates 61 to other small plans. The long-term investment return target for the foundation is a 3% real return after tax. Other countries The net defined benefit liability in the remaining countries amounted to EUR 36 (EUR 37) million. The most material change in liability was recognised for United Kingdom. The decrease in net liability arose mainly from changes in actuarial assumptions. Plan assets As at 31 December 2022 2021 EUR million Quoted Unquoted Total % of total Quoted Unquoted Total % of total Equity 88 12 101 17% 122 37 159 21% Debt 46 44 90 16% 58 55 112 15% Property 0 55 55 9% 0 50 50 7% Cash 10 0 10 2% 25 0 25 3% Assets held by insurance companies 0 226 226 39% 0 308 308 40% Others 0 96 96 17% 7 101 108 14% Total pension fund assets 144 433 577 100% 211 551 762 100% Plan assets do not include any real estate or other assets occupied by the Group or the Company's own financial instruments. The two main financial factors affecting Group's pension liabilities are changes in interest rates and inflation expectations. The aim of asset investment allocations is to neutralise these effects, secure solvency for benefit payments and maximise returns. Note 21 Employee variable compensation and equity incentive schemes Accounting principles Share awards The costs of all employee-related share-based payments are charged to the consolidated income statement as personnel expenses over the vesting period. All share-based payment transactions are classified as equity-settled share awards. The equity-settled share awards (net of tax), are measured at the fair value of the equity instruments on the grant date, and are adjusted for the present value of expected dividends. The fair value of the equity-settled share-based payments determined on the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of equity instruments that will eventually vest, with a corresponding increase in equity. Short term incentive (STI) programmes Salaries for senior management are negotiated individually. Stora Enso has incentive plans that take into account the performance, development and results of both business units and individual employees. This performance-based variable compensation system is based on profitability as well as on attaining key business targets. Group Executives, as well as division and business unit management have STI programmes in which the payment is calculated as a percentage of the annual base salary with a maximum level ranging from 8% to 100%. Non-management employees participate in an STI programme with a maximum incentive level of 7%. All incentives are discretionary. These performance- based programmes cover most employees globally, where allowed by local practice and regulations. For the performance year 2022, the annual incentive programmes were based on financial measures as well as targets related to operational efficiency, emission reduction, safety and individual targets. The financial success metrics in the STI programme 2022 are Sales growth and EBITDA. Long term incentive (LTI) programmes Since 2005, new share based programmes for executives have been launched every year. The 2020 programme, ending in 2022 and settled in 2023 has a three-year performance period. The 2021 programme, ending in 2023 and settled in 2024, has three one-year performance periods which are accumulated after three years. The 2022 programme features performance metrics with one-year performance periods which are accumulated after three years as well as three- years performance periods. All outstanding programmes will be settled in one portion after three years. For the vast majority of awarded employees, three quarters (75%) of the opportunity under the programmes are in performance shares, where shares will vest in accordance with performance criteria proposed by the People and Culture Committee and approved by the Board of Directors. The financial performance metrics are 3-year Economic Value Added (EVA) and Earnings Per Share (EPS) for the Stora Enso Group for the 2020 and 2021 programme and EPS and Relative Total Shareholder Return for the 2022 programme, which in addition features ESG metrics (emissions reduction and diversity). One quarter (25%) of the opportunity under the programmes are in Restricted Shares, for which vesting is only subject to continued employment. Members of the GLT have been awarded performance shares only. Outstanding restricted and performance share opportunities before taxes are shown in the table below. The total number of shares actually transferred will be less than that shown below because a portion of shares corresponding to employees' tax obligation will be withheld to cover income tax. Share awards at 31 December 2022 Outstanding restricted and performance share awards at year end Number of shares 2023 2024 2025 Total 2020 programme 903,289 903,289 2021 programme 716,460 716,460 2022 programme 822,240 822,240 Total 903,289 716,460 822,240 2,441,989 The costs of the Stora Enso share-based programmes are recognised as costs over the vesting period, which is the period between the grant and vesting. The total impact of share-based programmes in the income statement amounted to an expense of EUR 8 (EUR 7) million, all of which were related to restricted and performance share awards. 62 Note 22 Provisions Accounting principles Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the management’s best estimate and there is some uncertainty regarding the timing and amount of the costs. Provisions for obligations to dismantle, remove or restore assets after their use are added to the carrying amount of the assets at acquisition date and depreciated over the useful life of the asset. Provisions are discounted to their current net present value if the effect of the time value of money is material. Environmental provisions Environmental expenditures resulting from the remediation of an existing condition caused by past operations, and which do not contribute to current or future revenues, are recognised as provisions. Environmental liabilities are recorded when it is probable, based on current interpretations of environmental laws and regulations, that a present obligation has arisen and the amount of such liability can be reliably estimated. Restructuring provisions A restructuring provision is recognised in the period in which the Group becomes legally or constructively committed to the plan. The relevant costs are those that are incremental to, or incurred as a direct result of, the exit plan, or are the result of a continuing contractual obligation with no ongoing economic benefit, or represent a penalty incurred to cancel the obligation. Other provisions Other provisions are recognised regarding different legal or constructive obligations, such as onerous contracts, guarantees to customers, ongoing lawsuits, claims, or similar. Provisions EUR million Environmental provisions Restructuring provisions Other provisions Total provisions Carrying Value at 1 January 2021 91 28 30 149 Translation difference 0 -1 0 -1 Charge in Income Statement New provisions 6 107 72 185 Increase in existing provisions 13 1 0 14 Reversal of existing provisions -6 -4 -5 -15 Payments -29 -44 -29 -101 Carrying Value at 31 December 2021 75 88 67 231 Translation difference -4 -3 -2 -9 Disposals and classification as held for sale -3 -1 0 -4 Charge in Income Statement New provisions 14 8 19 40 Increase in existing provisions 1 12 2 15 Reversal of existing provisions -1 -16 -8 -25 Payments -9 -66 -50 -124 At 31 December 2022 73 21 30 124 Allocation between current and non- current provisions Current provisions: Payable within 12 months 10 20 14 43 Non-current provisions: Payable after 12 months 64 2 16 81 Total at 31 December 2022 73 21 30 124 Provisions for environmental remediation amounted to EUR 73 (75) million at 31 December 2022. The most material environmental provision is based on an agreement between Stora Enso and the City of Falun that obligates the Group to purify runoff from the Kopparberg mine before releasing the water into the environment. The provision at year end amounted to EUR 31 (EUR 37) million. The Group has undergone major restructuring in recent years, from divestments to mill closures and administrative cost-saving programmes. The obligation at the end of 2022 amounted to EUR 21 (EUR 88) million for restructuring provisions and EUR 30 (EUR 67) million with respect to other provisions. Material payments in 2022 in restructuring and other provisions are mainly related to closing down pulp and paper production at Kvarnsveden Mill in Sweden and Veitsiluoto Mill in Finland as announced in 2021. Note 23 Operative liabilities Non-current operative liabilities As at 31 December EUR million 2022 2021 Share-based payments 2 1 Other payables 9 12 Total 11 13 63 Current operative liabilities As at 31 December EUR million 2022 2021 Trade payables 1,831 1,704 Payroll and staff-related accruals 245 256 Accrued liabilities and deferred income 130 155 Emission liabilities 91 99 Advances received 18 18 Other payables1 94 107 Total 2,410 2,339 1 Other payables consist especially of taxes payable to government, such as VAT and payroll taxes. Note 24 Financial risk management Risk management principles and process Stora Enso is exposed to several financial market risks that the Group is managing under the policies approved by the Board of Directors. The objective is to ensure cost-effective funding of Group companies and manage financial risks effectively. The Stora Enso Group Financial Risk Policy governs all financial transactions in Stora Enso. This policy and any future amendments take effect once they are approved by the Board of Directors and all policies covering the use of financial instruments must comply with it. The Group’s joint operations companies operate under their own financial risk policies, which may not be fully similar to the Group’s policies. The major financial market risks are detailed below with the main exposures for the Group being interest rate risk, currency risk, liquidity risk, refinancing risk, and commodity price risk, especially for fiber, pulp, and energy. Interest rate risk The Group is exposed to an interest rate risk that is the risk of fluctuating interest rates affecting the interest expense of the Group and value of its assets and liabilities. Stora Enso is exposed to the interest rate risk through interest-bearing assets and liabilities, such as loans, financial instruments and lease liabilities, but also through commercial agreements and operative assets and liabilities such as biological assets. The Group’s aim is to keep interest costs stable. The Group’s aggregate duration should not exceed the average loan maturity, but should aim towards a long duration. A duration above the average loan maturity is approved by the Board of Directors. The Group may use interest-rate swaps and cross-currency swaps to manage the interest- rate risk by synthetically converting floating-rate loans into fixed-rate loans through the use of derivatives. The Group's floating and fixed rate interest-rate position as per the year-end is presented in the following table: Floating and fixed interest-rate position As at 31 December 2022 As at 31 December 2021 EUR million Floating rate Fixed rate Floating rate Fixed rate Non-current interest-bearing receivables1 11 80 5 40 Current interest-bearing receivables 1 — — 49 Cash and cash equivalents 1,917 1,481 Interest-bearing liabilities2 -1,074 -2,818 -974 -2,863 Interest-bearing assets and liabilities excluding derivatives 855 -2,738 512 -2,774 Interest-rate and cross-currency swaps 650 -650 682 -682 Interest-bearing assets and liabilities, net of derivatives 1,506 -3,388 1,194 -3,456 1 Excluding interest receivable and listed securities 2 Non-current interest-bearing liabilities, current portion of non-current debt, short-term interest bearing liabilities and bank overdrafts excluding derivative liabilities and interest payable The average interest duration for the Group's net interest-bearing liabilities, including all interest rate derivatives but excluding cash and cash equivalents, is 3.3 (4.6) years. As of 31 December 2022, one percentage point increase in interest rates would increase annual net interest expenses by approximately EUR 4 (EUR 2) million and a similar decrease in interest rates would decrease net interest expenses by EUR 4 (EUR 1) million. This assumes that the duration and the funding structure of the Group remain constant throughout the year. This simulation calculates the interest effect of a 100 basis point parallel shift in interest rates on all floating rate instruments excluding cash equivalents from their next reset date to the end of the year. In addition, all short-term loans maturing during the year are assumed to be rolled over on maturity to year end using the new higher or lower interest rate. A one percentage point parallel change up or down in interest rates would also result in fair valuation gains or losses of EUR 10 (EUR 16) million before taxes in the cash flow hedge reserve in OCI regarding interest rate swaps under cash flow hedge accounting. A one percentage point parallel change up or down in interest rate would result in fair valuation gains or losses of EUR 1 (EUR 3) million in net financial items related to cross currency swaps fair valued through profit and loss. Note 27 Derivatives summarises the nominal and fair values of the outstanding interest rate derivative contracts. Foreign exchange risk - transaction risk The Group operates globally and is exposed to a foreign-currency transaction risk arising from exchange rate fluctuations. Foreign exchange transaction risk exposure comprises both the geographical location of Stora Enso production facilities around the world, sourcing of raw materials and sales of end products in foreign currencies, mainly denominated in US dollars, British pounds and Swedish crowns. Stora Enso Group companies with functional currency other than euro are also exposed to a foreign-currency transaction risk arising from EUR denominated net cash flows. These EUR exposures mainly arise from Stora Enso subsidiaries located in Sweden, Czech Republic and Poland. The currency transaction risk is the impact of exchange rate fluctuations on the Group's Income statement, which is the effect of currency rates on expected future cash flows and subsequent trade receivables or payables. The Group's standard policy to mitigate the risk is to hedge 15–60% of the highly probable forecast cash flows in major currencies for the next 12 months by using derivative financial instruments, such as foreign exchange forwards and foreign exchange options. The Group may also hedge periods between 12 months and 36 months, or 64 change the above mentioned hedging ratio for the next 12 months upon the discretion of the Group's management. For operative receivables and payables in foreign currencies, the objective is to hedge 50– 100% of the outstanding net receivable balance in major currency pairs. The table below presents the estimated net operative foreign currency transaction risk exposures for the main currencies for the next 12 months and the related foreign-currency hedges in place as at 31 December, retranslated using year end exchange rates. The net operative receivables and payable exposures, representing the balances as at 31 December, include foreign currency exposures generated by external and intercompany transactions in line with the requirements of IFRS 7. A positive amount of exposure in the table below represents an estimated future inflow or receivable of a foreign currency amount. Operative foreign currency transaction risk exposure As at 31 December 2022 As at 31 December 2021 EUR million EUR SEK USD GBP AUD UYU EUR SEK USD GBP AUD UYU Estimated annual net cash flow exposure in hedged foreign-currency flows1 960 -238 1,983 240 83 -48 995 -191 1,712 346 138 -41 Cash flow hedges for the next 12 months -525 119 -843 -59 -26 26 -553 89 -740 -78 -38 23 Estimated annual net cash flow exposure, net of hedges 435 -119 1,139 181 57 -22 442 -101 971 268 100 -18 Hedging percentage as at 31 December for next 12 months 55% 50% 43% 24% 31% 54% 56% 47% 43% 22% 27% 57% Weighted-average hedged rate against EUR2 10.63 1.09 0.87 1.52 45.20 — 10.21 1.20 0.85 1.60 52.63 Operative receivables and payables net exposure -22 8 284 30 49 -5 -42 5 233 32 58 -2 Net receivable currency hedges -18 -3 -186 -16 -51 — 16 — -200 -26 -26 — Net operative receivables exposure, net of hedges -39 5 98 14 -2 -5 -26 5 34 5 31 -2 Estimated annual net transaction risk exposure after hedges 396 -113 1,238 195 55 -27 416 -97 1,005 274 131 -20 1 Cash flows are forecasted highly probable net operating foreign-currency cash flows in hedged currencies. The exposure presented in the EUR column relates to operative transaction risk exposure from EUR denominated cash flows in Group companies located in Sweden, Czech Republic and Poland with functional currency other than EUR. 2 The weighted-average exchange rate against EUR is calculated based on bought leg of option collar structure and forward contracts' forward rate and therefore represents the weighted-average hedged rate based on the least favourable hedged rate from the Group's point-of-view. The following table includes the estimated effect on the annual operating profit of a weakening of an exposure currency against the functional currencies of exposed subsidiaries. The sensitivities have been calculated based on a 5% movement in EUR, SEK, USD, GBP and AUD while 10% movement in UYU. These changes are estimated as reasonably possible changes in exchange rates, measured against year-end closing rates. A corresponding strengthening of the exposure currency would have an approximately equal opposite impact. A negative amount in the table reflects a potential net loss in the income statement or equity and, conversely, a positive amount reflects a potential net gain. In practice, the actual foreign currency results may differ from the sensitivity analysis presented below, since the income statements of subsidiaries with functional currencies other than the euro are translated into the Group reporting currency using the average exchange rates for the year, whereas the statements of the financial position of such subsidiaries, including currency hedges, trade receivables and payable, are translated using the exchange rates at the reporting date. The translation risk exposures are discussed more in detail under the Translation risk chapter below. The calculation includes currency hedges and assumes that there are no changes in other underlying currencies. The currency effects are based on estimated operative foreign currency flows for the next twelve months, hedging levels at the year end, and the assumption that the currency cash flow hedging levels and all other variables will remain constant during the next twelve months. Hedging instruments include foreign exchange forward contracts and foreign exchange options. Indirect currency effects with an impact on prices and product flows, such as a product becoming cheaper to produce in a different geographical location, have not been considered in this calculation. Sensitivity analysis of operative foreign currency transaction risk exposure As at 31 December 2022 As at 31 December 2021 EUR million EUR SEK USD GBP AUD UYU EUR SEK USD GBP AUD UYU Exposure currency change by1 -5% -5% -5% -5% -5% -10% -5% -5% -5% -5% -5% -10% Effect on estimated annual net cash flows in hedged flows -48 12 -99 -12 -4 5 -50 10 -86 -17 -7 4 Effect on cash flow hedging OCI reserve before taxes as at year end2 26 -6 42 3 1 -3 28 -4 37 4 2 -2 Effect on net operative receivables and payables after hedges3 2 — -5 -1 — — 1 — -2 — -2 — Estimated annual EBIT impact4 -20 6 -62 -10 -3 3 -21 5 -50 -14 -7 2 1 The sensitivity analysis for EUR denominated annual net cash flows, operative net receivables and related hedges refer to the EUR denominated transaction risk arising from EUR denominated foreign-currency cash flows in Sweden, Czech Republic and Poland with functional currency other than EUR. 2 The effect on OCI cash flow hedging reserve before taxes at year end is related to the fair value change in derivative contracts qualifying as cash flow hedges of highly probable forecast transactions under IFRS 9. Amount effecting OCI will be recycled to operative result when the transaction realises. 3 Currency effect related to net operative receivables or payables and related hedges. 4 The estimated annual EBIT impact includes currency effects in respect of operative exposures in the Statement of Financial Position, forecast cash flows and the related hedges. The following table presents the financial foreign currency exposure and the related hedges in place as at 31 December for the main currencies. Net debt includes foreign-currency external loan payables and receivables, foreign-currency internal loan payables and loan receivables and cash equivalents. Loans designated as net investment loans under IAS 21 are excluded from the table as they reduce the foreign-currency exposures on a Group level. Internal transaction exposure includes foreign-currency payables and receivables outstanding within the Group at reporting date. The currency derivatives mainly hedge financial exposures in the statement of financial position. A negative amount of exposure in the table represents a net payable of a foreign currency amount. Additionally, the table includes the estimated effect on the income statement of a currency weakening of an exposure currency against EUR. The sensitivities have been calculated based on a 5% movement in SEK, USD, CNY, and PLN. These changes are estimated as reasonably possible changes in exchange rates, measured against year-end closing rates. A corresponding strengthening of the exposure currency would have an approximately equal opposite impact. A 65 negative amount in the table reflects a potential net loss in the Income statement and, conversely, a positive amount reflects a net potential gain. In practice, the actual foreign currency results may differ from the sensitivity analysis below as the exposure amounts may change during the year. Financial foreign currency exposure and estimated currency effects in income statement As at 31 December 2022 As at 31 December 2021 EUR million SEK USD CNY PLN CZK SEK USD CNY PLN Foreign-currency net debt1 -418 -101 355 -6 -62 -30 -95 462 -1 Currency hedges -3 -46 -211 -7 62 7 -31 -272 -16 Net exposure after hedges -422 -146 144 -12 — -23 -125 190 -18 Internal transaction exposure 138 45 Currency hedges -124 -41 Net non-operative exposure — — — 14 3 Exposure currency change by -5% -5% -5% -5% -5% -5% -5% -5% -5% Effect in the Income Statement2 21 7 -7 — 6 1 6 -10 1 1 The Group has designated certain internal loans to Chinese subsidiaries as net investment loans under IAS 21. The loans are denominated in EUR, USD, and CNY. The underlying foreign currency gain or loss will be posted as part of CTA in Equity. The nominal amount of net investment loans amounted to EUR 398 (EUR 348) million as per the year end and reduces the currency exposure for relevant currencies in the above table. 2 Gains and losses are recognised as part of Net financial items in the Income Statement Foreign exchange risk – translation risk Translation risk results from fluctuations in exchange rates affecting the value of Stora Enso’s consolidated net foreign currency denominated assets, liabilities, and income. Translation risk is reduced by funding assets, whenever economically possible, in the same currency as the asset itself. The Group may also enter into foreign exchange forwards, foreign exchange options or foreign currency denominated loans to hedge its net investments in foreign entities with different functional currencies than the Group. The balance sheets of foreign subsidiaries, equity accounted investments and foreign currency denominated equity instruments in the scope of IFRS 9 are translated into euros using exchange rates prevailing on the reporting date, thus exposing consolidated Group equity to fluctuations in currency rates. The resulting translation differences, along with other movements such as the translation rate difference in the income statement, are recorded directly in shareholders’ equity. These cumulative differences materialise through the Income statement on the disposal, in whole or in part, of the foreign entity. The following table presents the translation risk exposure in the Group's Income statement arising from the translation of subsidiaries' and joint operations' foreign-currency income statements into the presentation currency of the Group in the consolidated financial statements. Translation exposure in Income statement As at 31 December 2022 As at 31 December 2021 EUR million SEK USD BRL CZK CNY SEK USD BRL CZK CNY Translation exposure in Income Statement -147 -192 -164 -38 77 -196 -129 -111 11 83 Exposure currency change by -5% -5% -10% -5% -5% -5% -5% -10% -5% -5% Effect on EBIT from translation risk exposure 7 10 16 2 -4 10 6 11 -1 -4 The next table presents the translation exposure for geographical areas for which the Group has applied net investment hedging techniques to reduce the foreign-currency translation exposure in the consolidated equity. In practise, the Group also incurs material unhedged translation risk exposures in other geographical areas such as Sweden and China. The exposures used in the calculations are based on the foreign currency denominated equity and the hedging levels as at 31 December. Full details of actual CTA movements and hedging results are given in Note 28 Cumulative translation adjustment and equity hedging. The sensitivity analysis includes the effects of currency hedges of net investments in foreign entities and assumes that no changes take place other than a single currency exchange rate movement on 31 December each year. Hedged translation exposure in Equity As at 31 December EUR million 2022 2021 Translation exposure on equity in USD area1 1,686 1,502 EUR/USD equity hedges2 -281 -265 Translation exposure after hedges 1,405 1,237 Sensitivity before hedges - EUR strengthening 5% -84 -75 Sensitivity after hedges - EUR strengthening 5% -70 -62 1 Includes the joint operation Montes del Plata in Uruguay, which has USD as its functional currency. 2 USD denominated bonds classified as hedges of net investments in foreign assets. Liquidity and refinancing risk Liquidity risk arises from the difficulty of obtaining finance for operations at a given point in time. Stora Enso’s funding policy states that the average maturity of outstanding loans and committed credit facilities covering short-term borrowings should be at least four years. The policy further states that the Group must have cash equivalents and undrawn committed credit facilities to cover all debt maturing within the next 12 months, including supply chain financing and factoring. At 31 December 2022, undrawn committed credit facilities and undrawn loans were at EUR 1,100 (EUR 700) million. During 2022, altogether EUR 550 million of bilateral bank loans were arranged. EUR 200 million of these loans were undrawn at reporting date. The EUR 700 million committed credit facility agreement with a syndicate of 12 banks had originally a maturity of five years with two one-year extensions. In October 2022, the first extension option of this facility was used together with all 12 banks and the new maturity is in 2027. In May 2022, the Group signed a new EUR 200 million committed credit facility with a maturity of one year and one six month extension option. The extension option was exercised in October 2022 and therefore the new maturity is during the last quarter of 2023. The credit facilities are used as a backup for general corporate purposes and are both fully undrawn. Additionally, Stora Enso has access to various additional long-term sources of funding up to EUR 1,050 (EUR 1,000) million. These mainly relate to available funding sources from Finnish pension funds. 66 Refinancing risk, or the risk that maturing debt is not refinanced in the markets, is mitigated by Stora Enso’s target of maintaining an even maturity profile of outstanding debt. The table below shows maturity analysis for the Group's contractual financial liabilities classified under principal headings based on the remaining period to contractual maturity at the reporting date. Forward interest rates as at the year-end were used for estimating contractual finance charges for the upcoming years. Contractual maturity repayments of financial liabilities, settlement net: 2022 EUR million 2023 2024 2025 2026 2027 2028+ Total Bond loans 300 270 404 90 325 1,081 2,470 Loans from credit institutions 306 40 273 5 0 0 624 Lease liabilities 63 49 44 33 30 159 377 Other non-current financial liabilities 0 2 0 0 0 0 2 Non-current borrowings including current portion 668 361 721 128 355 1,240 3,472 Estimated contractual finance charges 108 90 74 43 40 190 545 Estimated contractual lease charges 16 14 13 11 10 58 123 Contractual repayments on non- current borrowings 792 465 807 182 405 1,489 4,140 Current borrowings, carrying amounts 429 0 0 0 0 0 429 Gross-settled derivative liabilities - receipts -2,405 0 0 0 0 0 -2,405 Gross-settled derivative liabilities - payments 2,401 0 0 0 0 0 2,401 Net-settled derivative liabilities -4 0 0 0 0 0 -5 Trade payables 1,831 0 0 0 0 0 1,831 Bank overdrafts 0 0 0 0 0 0 0 Estimated contractual finance charges 6 0 0 0 0 0 6 Total Contractual Repayments at 31 December 2022 3,050 464 807 182 405 1,489 6,398 Contractual maturity repayments of financial liabilities, settlement net: 2021 EUR million 2022 2023 2024 2025 2026 2027+ Total Bond loans 0 300 293 427 98 1,390 2,508 Loans from credit institutions 117 253 41 165 4 0 578 Lease liabilities 64 50 43 35 31 165 387 Other non-current financial liabilities 0 4 0 0 0 0 4 Non-current borrowings including current portion 180 606 376 627 132 1,555 3,476 Estimated contractual finance charges 73 72 63 55 39 218 521 Estimated contractual lease charges 16 14 13 12 11 61 126 Contractual repayments on non- current borrowings 269 693 452 693 182 1,834 4,123 Short-term borrowings, carrying amounts 372 0 0 0 0 0 372 Gross-settled derivative liabilities - receipts -1,797 0 0 0 0 0 -1,797 Gross-settled derivative liabilities - payments 1,769 0 0 0 0 0 1,769 Net-settled derivative liabilities 16 10 1 0 0 0 27 Trade payables 1,705 0 0 0 0 0 1,705 Bank overdrafts 1 0 0 0 0 0 1 Estimated contractual finance charges 5 0 0 0 0 0 5 Total Contractual Repayments at 31 December 2021 2,339 703 453 693 182 1,834 6,205 Financial transactions counterparty credit risk Financial counterparty risk is the risk of fluctuations in the value of the Group’s assets as a result of counterparties being unable to meet their obligations arising from financial contracts. The exposure to a financial counterparty risk is measured as the maximum loss that Stora Enso can suffer directly in the event of a single counterparty’s credit default. This risk is minimised by: •entering into transactions only with leading financial institutions and with industrial companies that have a good credit rating; •only investing in liquid funds and deposits with financial institutions or companies that have a minimum credit rating of BBB-. •at least the higher of 50% of cash equivalents, or EUR 150 million, of cash equivalents to be held at counterparties with a minimum rating of A- or equivalent using credit ratings from main rating agencies; •investing at least EUR 75 million of the Group's cash and cash equivalents at counterparties other than the counterparty at which most of Stora Enso's cash and cash equivalents are held; •requiring parent company guarantees when dealing with any subsidiary of a rated company. The Group Financial Risk Policy defines the limits for accepted counterparty risk, based on the tenor of financial contract and counterparty’s credit rating. At the year end 2022, there were no significant concentrations of risk with respect to counterparties of derivative contracts, with the highest counterparty mark-to-market exposure being at EUR 41 (EUR 22) million and credit rating of A+ (A+) using Standard and Poor’s credit rating symbols. 67 Customer credit risk Customer credit risk is Stora Enso’s exposure to contracts arising from deterioration in the financial health of its customers. The Group uses various measures to reduce customer credit risks, including, but not limited to, letters of credit, prepayments and bank guarantees. The Group has also obtained export guarantees, covering both political and commercial risks, which are used in connection with individual customers outside the OECD area. Management considers that no significant concentration of credit risk with any individual customer, counterparty or geographical region exists for Stora Enso. The ageing information of trade receivables and related loss allowances are given in Note 17 Operative receivables. Commodity price risk Outstanding commodity hedges As at 31 December 2022 As at 31 December 2021 Underlying amount of commodity hedged Average hedged commodity price Nominal amount hedged in EUR million Fair value EUR million Underlying amount of commodity hedged Average hedged commodity price Nominal amount hedged in EUR million Fair value EUR million Electricity purchases - Nordic region 175,200 MWh EUR 29.1 5 18 438,000 MWh EUR 29.02 13 15 - Central Europe 87,600 MWh EUR 43.06 4 12 Oil purchases 200,474 barrels USD 73.5 14 — 189,808 barrels USD 58.06 10 2 The Group is exposed to commodity and energy price volatility that will have an impact on the Group's profitability. Electricity, natural gas and oil hedge derivatives are part of energy price risk management in the Group, whilst other commodity risks are measured and hedged if economically possible. In addition to electricity hedge derivatives, the Group also manages energy price risk by entering into long-term physical fixed price purchase agreements, and by holding a 15.6% stake in Pohjolan Voima Oy (PVO), which is a privately owned Group of companies in the energy sector in Finland. The fair value of the shares amounted to EUR 1,423 (EUR 900) million as per the year-end. The fair value of these shares is dependent on electricity market prices and discussed in more detail in Note 14 Equity instruments. A 10% movement in energy and raw material prices would result in a EUR 6 (EUR 6) million change in the fair value of commodity financial hedges described in the above table. The majority of these fair value changes, after taxes, are recorded directly in Equity under Hedging Reserves, until the contracts mature and the result is entered in the Income statement. These estimates only represent the sensitivity of commodity financial instruments to market risk and not the Group's full exposure to raw material and energy price risks as a whole, since the actual underlying purchases are not financial instruments within the scope of the IFRS 7 standard. At the end of 2022, the maturities of the energy and commodity contracts, including both financial hedges and fixed-price physical purchase agreements, ranged between 2023 and 2024. In 2021, the maturities ranged between 2022 and 2024. In an effort to mitigate other commodity price risk exposures in relation to wood fiber price risk, the Group is a significant owner of forest assets in the Nordic region. In Sweden the Group owns 1.4 million hectares of forest land. In addition, Stora Enso holds 41% share in Tornator Oyj, which is a significant forest owner in Finland. The Group's share in Tornator is reported as an equity accounted investment and discussed in more detail in Note 13 Equity accounted investments. The Group's forest assets are discussed in more detail in Note 12 Forest assets. Equity price risk The Group has certain investments in publicly traded securities. Currently these relate to Packages Ltd shares in Pakistan. The market value of these equity investments was EUR 8 (EUR 13) million at the year end. Market value changes in these investments are recorded, after taxes, directly under Shareholders’ Equity in the Equity instruments through OCI reserve. Detailed discussion regarding the publicly traded securities can be found from Note 14 Equity instruments. Capital risk management Stora Enso’s debt structure is focused on capital markets and commercial banks. Group objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, as well as to maintain an optimal capital structure to maintain reasonable cost of capital. In order to maintain or adjust the capital structure, the Group may, subject to shareholder approval as appropriate, vary the dividends paid to shareholders, buy its own shares on financial markets, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group strives to pay stable dividends linked to the long-term performance with the aim of distributing 50% of Earnings per share (EPS) excluding fair valuations over the cycle. The Group monitors its capital on the basis of a target net debt-to-equity ratio of 0.60 or less, and aiming that the Net-debt-to-Operational EBITDA ratio remains below 2.0, indicating a solid financial position, and financial flexibility. Capital structure As at 31 December EUR million 2022 2021 Interest-bearing liabilities 3,972 3,938 Interest-bearing assets 2,122 1,629 Net debt 1,850 2,309 Equity attributable to owners of the parent 12,532 10,683 Operational EBITDA1 2,529 2,184 Net debt to equity ratio 0.15 0.22 Net debt to operational EBITDA 0.73 1.06 1 Operational EBITDA definition is included in the "Non-IFRS measures" chapter in the Report of the Board of Directors. Montes del Plata, a joint operation of Stora Enso, and the Group's subsidiary Stora Enso (Guangxi) Packaging and Forestry Company Ltd have complied with financial covenants related to debt-to-assets ratio during the reported periods. There are no other covenants in the Group's financing contracts. 68 Note 25 Fair values Accounting principles Financial assets The Group classifies its financial assets into three categories, which are amortised cost, fair value through other comprehensive income and fair value through profit and loss. The classification is made according to the IFRS 9 standard and management determines the classification of investments at the time of initial recognition. With investments in debt instruments, the classification is made based on the business model and contractual cash flow characteristics of debt instruments. Investments in debt instruments, for which the business model objective is to hold the financial instruments to collect contractual cash flows and those cash flows are solely payments of principal and interest, are classified as amortised cost and presented under current or non-current assets in the consolidated statement of financial position. Investments in debt instruments, for which the business model objective is to hold the financial instruments for both to collect contractual cash flows and sell financial instruments and the cash flows are solely payments of principal and interest, are classified as fair value through other comprehensive income and presented under current or non-current assets in the consolidated statement of financial position. The Group's investments into equity instruments, such as listed and unlisted securities, are classified as fair value through profit and loss unless the Group has at inception decided to apply the irrevocable election under IFRS 9 to classify the investments as fair value through other comprehensive income with only dividend income from the investments being recognised in the income statement. Investments that are not measured at amortised cost or at fair value through other comprehensive income are classified as fair value through profit and loss and are therefore fair valued through the consolidated income statement and presented under current or non-current assets in the consolidated statement of financial position. Financial liabilities The Group's financial liabilities are classified into amortised cost or fair value through profit and loss categories. Financial liabilities are measured at amortised cost unless the Group has decided to apply a fair value option to designate a financial liability to be measured at fair value through profit and loss. Derivatives Derivative financial assets and liabilities are measured at fair value and classified as fair value through profit and loss or, if the Group has applied hedge accounting, at fair value through other comprehensive income according to the IFRS 9 standard. Derivative financial instruments and hedge accounting are discussed in more detail in Note 27 Derivatives. Fair value of financial instruments The fair values of publicly traded derivatives and listed securities, are based on quoted market prices at the reporting date; the fair values of interest rate swaps are calculated as the present value of the estimated future cash flows, and the fair values of foreign exchange forward contracts are determined using forward exchange rates at the reporting date. The valuation principles for derivative financial instruments have been described in more detail in Note 27 Derivatives. In assessing the fair values of non-traded derivatives and other financial instruments, the Group uses a variety of methods and makes assumptions based on the market conditions at each reporting date. Quoted market prices or dealer quotes for identical or similar instruments are used for non-current debt. Other techniques, such as option pricing models and estimated discounted value of future cash flows, are used to determine fair values for the remaining financial instruments. The face values, less any estimated credit adjustments, for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair values of financial liabilities for disclosure purposes are estimated by discounting the future contractual cash flows at the current market interest rates available to the Group for similar financial instruments. Purchases and sales of financial instruments are recognised based on trade date accounting, which is the date on which the Group commits to purchasing or selling the financial instrument. Financial instruments are derecognised when the rights to receive or the cash flows from the financial instruments have expired or have been transferred and the Group has substantially transferred all risks, rewards and obligations of the ownership of the financial asset or liability. Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: •Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; •Level 2: other techniques, for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; •Level 3: techniques which use inputs which have a significant effect on the recorded fair values that are not based on observable market data. The Group evaluates the categorisation of its fair value measurements within the fair value hierarchy on a regular basis at the end of the reporting period. There were no transfers recognised in the fair value hierarchy between Levels 1 and 2 and no transfers into or out of Level 3 fair value measurements during 2022 and 2021. See Note 14 Equity instruments for more information on Level 3 fair value measurement of listed and unlisted securities. 69 Carrying amounts of financial assets and liabilities by measurement and fair value categories: 2022 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial assets Listed securities — 8 — 8 8 8 — — 14 Unlisted securities — 1,423 14 1,437 1,437 — — 1,437 14 Non-current interest-bearing receivables 92 28 — 120 120 — 28 — 26 Derivative assets — 28 — 28 28 — 28 — Loan receivables 92 — — 92 92 — — — Trade and other operative receivables 1,138 66 — 1,204 1,204 — 66 — 17 Current interest-bearing receivables 10 50 16 77 77 — 67 — 26 Derivative assets — 50 16 67 67 — 67 — Other short-term receivables 10 — — 10 10 — — — Cash and cash equivalents 1,917 — — 1,917 1,917 — — — Total 3,157 1,576 30 4,763 4,763 8 161 1,437 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial liabilities Non-current interest-bearing liabilities 2,792 — — 2,792 2,749 — — — 26 Derivative liabilities — — — 0 0 — — — Non-current debt 2,792 — — 2,792 2,748 — — — Current portion of non-current debt 667 — — 667 667 — — — 26 Current interest-bearing liabilities 462 30 20 513 513 — 50 — 26 Derivative liabilities — 30 20 50 50 — 50 — Current debt 462 — — 462 462 — — — Trade and other operative payables 2,076 — — 2,076 2,076 — — — 23 Bank overdrafts — — — 0 0 — — — Total 5,998 30 20 6,048 6,005 — 51 — In accordance with IFRS, derivatives are classified as fair value through income statement. In the above tables for financial assets and liabilities the cash flow hedge accounted derivatives are however presented as fair value through OCI, in line with how they are booked for the effective portion. 70 Carrying amounts of financial assets and liabilities by measurement and fair value categories: 2021 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial assets Listed securities — 13 — 13 13 13 — — 14 Unlisted securities — 900 5 905 905 — — 905 14 Non-current interest-bearing receivables 45 6 — 51 51 — 6 — 26 Derivative assets — 6 — 6 6 — 6 — Loan receivables 45 — — 45 45 — — — Trade and other operative receivables 1,110 39 — 1,149 1,149 — 39 — 17 Current interest-bearing receivables 52 31 1 84 84 — 32 — 26 Derivative assets — 31 1 32 32 — 32 — Other short-term receivables 52 — — 52 52 — — — Cash and cash equivalents 1,481 — — 1,481 1,481 — — — Total 2,687 990 6 3,683 3,683 13 77 905 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial liabilities Non-current interest-bearing liabilities 3,284 7 23 3,313 3,618 — 30 — 26 Derivative liabilities — 7 23 30 30 — 30 — Non-current debt 3,284 — — 3,284 3,589 — — — Current portion of non-current debt 180 — — 180 180 — — — 26 Current interest-bearing liabilities 403 35 7 444 444 — 42 — 26 Derivative liabilities — 35 7 42 42 — 42 — Current debt 403 — — 403 403 — — — Trade and other operative payables 1,960 — — 1,960 1,960 — — — 23 Bank overdrafts 1 — — 1 1 — — — Total 5,827 42 29 5,899 6,204 — 71 — In accordance with IFRS, derivatives are classified as fair value through income statement. In the above tables for financial assets and liabilities the cash flow hedge accounted derivatives are however presented as fair value through OCI, in line with how they are booked for the effective portion. In the previous tables, the fair value is estimated to be equal to the carrying amount for current financial assets and financial liabilities, such as trade receivables and payables due to their short time to maturity and limited credit risk. The fair value of non-current loan receivables, considered as a level 2 fair value measurement, is based on the discounted cash flow analysis. The fair value of non-derivative interest-bearing liabilities, considered as a level 2 fair value measurement, is estimated based on a discounted cash flow analysis in which the yield curves observable at commonly quoted intervals are used as a discount factor in the model. 71 Reconciliation of level 3 fair value measurement of financial assets and liabilities EUR million 2022 2021 Financial assets Opening balance at 1 January 905 401 Reclassifications -1 0 Gains/losses recognised in other comprehensive income 523 504 Additions 10 1 Closing balance at 31 December 1,437 905 The Group did not have level 3 financial liabilities as at 31 December 2022. Note 26 Interest-bearing assets and liabilities Accounting principles Interest-bearing assets - loan receivables Loan receivables are debt instruments with fixed or determinable payments that are not quoted on an active market. They are recorded initially at fair value and subsequently measured at an amortised cost. Loss allowance for expected credit losses is calculated based on the general approach under IFRS 9, where loss allowance is recognised based on 12-month expected credit losses if there has not been a significant increase in credit risk since the initial recognition. A significant increase in the credit risk will be evaluated based on a comparison of the risk of a default occurring on the financial instrument as at the reporting date with the risk of default occurring on the financial instrument as at the date of initial recognition. The Group may use, for example, rates of credit default swaps (CDS) observable on financial markets to produce the risk assessment. Interest income on loan receivables is included in financial income and expense. Loan receivables with a maturity less than 12 months are included in current assets under interest- bearing receivables, and those with maturities greater than 12 months, in non-current interest- bearing receivables. Interest-bearing liabilities Interest-bearing liabilities are recognised initially at fair value, net of transaction costs incurred. In subsequent periods, interest-bearing liabilities are measured at amortised cost using the effective interest method. Any difference between the proceeds net of transaction costs and redemption value is recognised in the consolidated income statement over the maturity period of the borrowings. Interest expenses are accrued for and recorded in the consolidated Income statement for each period. Interest-bearing liabilities with an original maturity greater than 12 months are classified as non-current interest-bearing liabilities in the consolidated statement of financial position, though repayments falling due within 12 months are presented in current liabilities under the current portion of non-current debt. Short-term commercial paper, bank and other interest-bearing liabilities, for which the original maturity is less than 12 months, are presented in current liabilities under interest-bearing liabilities. Lease liabilities At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease liabilities are initially capitalised at the commencement of the lease and measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group’s incremental borrowing rate. The lease term applied corresponds to the non-cancellable period except in cases where the Group is reasonably certain to exercise renewal option or prolong the contract. The Group allocates the consideration in the contract to each lease component and separates non-lease components if these are identifiable. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease liabilities are subsequently measured at amortised cost using the effective interest method. Lease payment is allocated between the capital liability and finance charges to achieve a constant interest rate on the outstanding liability balance. Lease liabilities are remeasured mainly when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the Group’s assessment whether it will exercise an extension option. When lease liability is remeasured, a corresponding adjustment is generally made to the carrying amount of the right-of-use asset. The Group has elected not to recognise lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low value assets. Leases of low value assets mainly include IT and office equipment, certain vehicles and machinery and other low value items. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Managing Interest Rate Benchmark Reform and associated risks A global reform on interest reference rates is underway as existing IBOR reference rates are being replaced by alternative risk-free rates. The impact of the transition is expected to be limited for the Group's external contracts. The Group has exposure to IBORs on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. The Group's main IBOR exposure at 31 December 2022 was indexed to US dollar LIBOR and related amount of interest bearing liabilities outstanding at 31 December 2022 was EUR 211 (EUR 189) million. The publication of USD LIBORs will cease after June 2023. The Group monitors the process of transition from IBORs to new benchmark rates by reviewing the total amounts of contracts that have yet to transition to an alternative benchmark rate. The expected impact is limited and relates mainly to external long-term debt. The Group's financial instruments are mainly indexed to Euribor and Stibor reference rates and these are expected to continue to exist for now. 72 Interest-bearing assets As at 31 December EUR million 2022 2021 Listed securities 8 13 Long-term derivative assets 28 6 Long-term deposits 48 42 Long-term loans to equity accounted investments 2 2 Other long-term loan receivables 41 1 Total non-current interest-bearing assets 128 64 Short-term derivative assets 66 32 Short-term deposits 0 49 Other short-term loan receivables 11 3 Cash and cash equivalents 1,917 1,481 Total current interest-bearing assets 1,994 1,565 Total interest-bearing assets 2,122 1,629 The annual average interest income rate for deposits and loan receivables during 2022 was approximately 1.0% (0.1%). Current interest-bearing receivables included EUR 10 (EUR 3) million accrued interest at 31 December 2022. The Group has evaluated that there has not been a significant increase in credit risk related to interest-bearing deposits and investments after the initial recognition. Accordingly, the loss allowance is recognised based on 12-month expected credit losses. As part of Other long-term loan receivables balances, EUR 41 million represent receivables, net of impairment allowance, originating from sale of Russia operations, to be received in instalments in future periods. These receivables were recognised at inception at their fair value (EUR 58 million) using a discount rate of 27.1% and are carried in the financial statement of position at amortised cost. At reporting date, loss allowance of EUR 7 million, based on 12- month expected credit losses was recognised in profit and loss. The fair valuation of these receivables and evaluation of their credit risk and collectability involves a significant degree of judgement. Interest-bearing liabilities As at 31 December EUR million 2022 2021 Bond loans 2,460 2,497 Loans from credit institutions 623 577 Lease liabilities 375 387 Long-term derivative financial liabilities (see Note 25) 0 30 Other non-current liabilities 2 4 Non-current interest-bearing liabilities including current portion 3,459 3,493 Short-term borrowings 429 372 Interest payable 35 34 Short-term derivative financial liabilities (see Note 25) 49 38 Bank overdrafts 0 1 Total Interest-bearing Liabilities 3,972 3,938 EUR million 2022 2021 Carrying Value at 1 January 1 3,938 4,756 Translation differences on opening balance -4 120 Proceeds of new long-term debt 366 19 Repayment of long-term debt -351 -862 Additions in lease liabilities 45 33 Repayment of lease liabilities and interest -73 -88 Proceeds/repayments of short-term borrowings 75 -73 Change in interest payable 19 16 Change in derivative financial liabilities -19 38 Disposals and classification as held for sale -5 -1 Other 8 2 Translation differences during the year -28 -22 Total Interest-bearing Liabilities 3,972 3,938 1 The table format has been updated to better present changes in liabilities arising from cash flow activities and non-cash activities. The comparison figures have been restated accordingly. Events during 2022 and 2021 During 2022, altogether EUR 550 million of bilateral bank loans were arranged. Maturities of these loans vary from 18 months to 3 years with extension options. Proceeds from these loans are used for general corporate purposes and EUR 200 million of these loans were undrawn at reporting date. Stora Enso repaid credit institution loans, according to maturity schedule, amounted to a nominal of EUR 289 million during 2022. In May 2022, Stora Enso signed a new EUR 200 million committed credit facility with a maturity of one year and one six month extension option which was exercised in October 2022. In December 2021, Stora Enso signed a new EUR 700 million Revolving Credit Facility (RCF) with 12 commercial banks. The maturity of the facility is five years with two one-year extensions. The pricing is partly linked to meeting emission targets on Scope 1&2 and Scope 3. In October 2022, the first extension option of this facility was used together with all 12 banks and therefore maturity is now in 2027. Simultaneously, the existing EUR 600 million RCF with original maturity in 2023 was cancelled. Stora Enso has a Green Bond Framework as part of its Sustainable Finance approach. The ambition is to offer a loan-format to support sustainability-focused fixed income investors and to report the direct environmental impacts of some investments and business activities. 73 During 2021, Stora Enso repaid multiple credit institution loans ahead of final maturity, the total repayments of loans and bond notes amounted to a nominal of EUR 911 million. This resulted in a EUR 7 million initial modification net loss being recognised in the Income Statement. Interest-bearing liabilities - maturities, interest rates and currency breakdown Stora Enso's borrowings maturities range from 2023 to the longest borrowing maturing in 2036. Borrowings have either fixed or floating interest rates ranging from 0.5% (0.5%) to 7.3% (7.3%). The average interest rate on borrowings for the full year amounted to 3.2% (3.0%) with a run- rate of 3.3% as per the year end. Part of Stora Enso's borrowings have been fixed through floating-to-fixed interest rate swaps and cross-currency swaps. The majority of Group loans are denominated in euros, US dollars, Swedish crowns or Chinese renminbis. Detailed maturity analysis of the Group's borrowings are set out in Note 24 Financial risk management. Net debt In 2022 net interest-bearing liabilities, including held for sale related assets, decreased by EUR 456 (decreased by EUR 611) million to EUR 1,854 (EUR 2,309) million. Net interest-bearing liabilities are equal to total interest-bearing liabilities less total interest-bearing assets such as cash equivalents and deposits. Cash and cash equivalents net of overdrafts increased by EUR 437 (decreased by EUR 175) million to EUR 1,917 (EUR 1,480) million as at 31 December 2022. In 2022, the total cash outflow for leases was EUR 73 (EUR 88) million including interest component of EUR 17 (EUR 17) million. The ratio of net debt to the last 12 months' operational EBITDA was 0.7 (1.1). The net debt/ equity ratio was 0.15 (0.22) as per the year-end. Bond loans Issue/ Maturity Dates Description of Bond Interest Rate % Currency of Bond Nominal Value Issued Outstanding As at 31 December Carrying Value As at 31 December 2022 2021 2022 2021 All Liabilities are Held by the Parent Company Currency million EUR million Fixed Rate 2006-2036 Global 7.250% Notes 2036 7.25 USD 300 300 300 278 262 2016-2023 Euro Medium Term Note 2.125 EUR 300 300 300 300 300 2017-2027 Euro Medium Term Note 2.5 EUR 300 300 300 299 299 2018-2028 Euro Medium Term Note 2.5 EUR 300 300 300 299 298 2019-2024 Euro Medium Term Note (Green Bond) 1.875 SEK 1,750 1,750 1,750 157 171 2020-2025 Euro Medium Term Note (Green Bond) 2.375 SEK 1,550 1,550 1,550 140 152 2020-2030 Euro Medium Term Note (Green Bond) 0.625 EUR 500 500 500 495 495 Total Fixed Rate Bond Loans 1,968 1,976 Floating Rate 2015-2025 Euro Medium Term Note Euribor+2.25 EUR 125 125 125 125 125 2015-2027 Euro Medium Term Note Euribor+2.35 EUR 25 25 25 25 25 2019-2024 Euro Medium Term Note (Green Bond) Stibor+1.45 SEK 1,250 1,250 1,250 112 122 2019-2026 Euro Medium Term Note (Green Bond) Stibor+1.60 SEK 1,000 1,000 1,000 90 97 2020-2025 Euro Medium Term Note (Green Bond) Stibor+2.20 SEK 1,550 1,550 1,550 140 152 Total Floating Rate Bond Loans 492 521 Total Bond Loans 2,460 2,497 74 Note 27 Derivatives Accounting principles Derivative financial instruments and hedge accounting Derivative financial instruments are initially recognised in the consolidated statement of financial position at fair value and subsequently measured at their fair value at each reporting date according to valuation methods described in this note. Derivative contracts with maturity greater than 12 months are classified as non-current interest-bearing receivables and liabilities, and contracts maturing within 12 months are presented under current interest-bearing receivables and liabilities. When derivative contracts are entered into, the Group designates them as either hedges of highly probable forecast transactions or firm commitments (cash flow hedges), hedges of the exposure to changes in the fair value of recognised assets or liabilities (fair value hedges), hedges of net investments in foreign entities, or derivative financial instruments not meeting the hedge accounting criteria in accordance with IFRS 9. The method of recognising the resulting gains or losses on derivative instruments is dependent on the nature of the item being hedged. At the inception of a hedge, the Group documents the relationship between the hedging instrument and the hedged item, as well as its risk management objective and strategy for undertaking various hedging transactions. This process includes linking all financial instruments designated under hedge accounting to specific assets and liabilities or to specific firm commitments or highly probable forecast transactions in order to verify and document the hedge relationship between the hedged item and the hedging instrument as required by IFRS 9. The Group also documents its qualitative prospective assessment at the hedge inception of whether the derivatives used in a hedge relationship are highly effective in offsetting changes in fair value or cash flows of hedged items. Hedge effectiveness will be assessed in accordance with IFRS 9 requirements. The hedge ratio used for hedging relationships is usually 1:1. For currency and commodity hedging purposes, the Group uses a hedge designation where the critical terms of the hedging instrument and the hedged item will coincide in terms of the notional amount and timing. In respect of interest rate hedging, the interest rate basis between swap contracts and underlying debt will coincide. Since the critical terms of the hedges and underlying risks match, the hedging instruments are considered to offset any changes related to the anticipated transactions. Potential sources of ineffectiveness that may be expected to occur in relation to currency and commodity hedges are mainly related to the forecasted transaction not occurring in the amount or at the time expected. For interest rate hedges, cross-currency basis spread or initial fair value of the hedging instrument at the date of hedge designation may result in ineffectiveness being recognised in the income statement. Potential sources of ineffectiveness for all the aforementioned hedges also include possible effects of credit risk dominating fair value changes arising from the hedging instrument and the hedged item designated under the hedging relationship. Cash flow hedges Derivatives used in currency cash flow hedges are mainly forward contracts and options, with swaps mainly used for commodity and interest rate hedging purposes. During 2022 and 2021, the Group did not enter into new interest rate swap contracts. Changes in the fair value of derivatives designated and qualifying as cash flow hedges, and which are effective, are recognised in a separate equity category of OCI cash flow hedges reserve, the movements of which are disclosed in the consolidated statement of comprehensive income. For foreign exchange forwards, both the spot element and forward points have been included to the hedge designation. In case of foreign exchange options, the time value of an option is excluded from the hedge designation and only the intrinsic value component of an option is designated as the hedging instrument. The changes in option time value are recognised in a cost of hedging reserve within OCI. The cumulative gain or loss of a derivative deferred in equity is transferred to the consolidated income statement and classified as an income or expense in the same period in which the hedged item affects the consolidated income statement. The unrealised gains and losses related to cash flow hedges are expected to be recycled through the income statement within one to five years with the longest hedging contract maturing in 2027 (2027). However, the majority of the contracts are expected to mature in 2023. Realised results of hedge accounted derivative instruments hedging foreign currency sales transactions or purchases are booked as adjustments to sales or materials and services, depending on the nature of the underlying hedged item. In respect of hedges of exposures to foreign currency risk of future transactions resulting in the recognition of non-financial assets, the gains and losses deferred to the cash flow hedges reserve within OCI are transferred from equity to be included in the initial acquisition cost of the non-financial asset at the time of recognition. The Group may hedge foreign-currency risk of external or internal foreign-currency purchases where the underlying amount purchased in a foreign-currency impacts the value of inventory in a local currency. In such cases the gains and losses are initially booked as an adjustment to raw material inventory and recycled further to finished goods inventory with being ultimately recognised in the consolidated income statement at the time when the hedged items are sold to an external customer. In case of non-current assets, the deferred amounts are ultimately recognised in the income statement through depreciation over the lifetime of the non- financial assets. When a hedging instrument expires or is sold, terminated or exercised or no longer meets the hedge accounting criteria under IFRS 9, any cumulative gain or loss deferred in equity at that time remains in equity and is accounted for as an adjustment to income or expense when the committed or forecast transaction is ultimately recognised in the consolidated income statement. However, if the underlying forecasted transaction is no longer expected to occur, the cumulative gain or loss reported in equity from the period when the hedge was effective is immediately recognised in the consolidated income statement. Fair value hedges In case of fair value hedges, the Group uses either derivatives or borrowings as a hedging instrument to manage the risk associated with the fair value of a hedged item. The gains and losses on hedging instruments designated and qualifying as fair value hedges, and which are highly effective, are recorded in the consolidated income statement, along with any changes in the fair value of the hedged assets or liabilities attributable to the hedged risk. As at the end of 2022, the Group did not have fair value hedges. Net investment hedges For hedges of net investments in foreign entities, the Group uses either derivatives or foreign- currency borrowings for this purpose. If the hedging instrument is a derivative, any gain or loss thereon relating to the effective portion of the hedge is recognised in equity in CTA as disclosed in the consolidated statement of comprehensive income; the gain or loss relating to the ineffective portion is immediately recognised in the consolidated income statement. In addition, exchange gains and losses arising on the translation of a foreign-currency borrowing that hedges net investment in a foreign operation are also recognised in CTA, with any ineffective 75 portion being immediately recognised in the consolidated income statement. The gains and losses recognised in CTA are recycled from equity to the consolidated income statement at the time when the underlying hedged net investment is disposed. Non-hedge accounted derivatives Certain derivative transactions, while providing effective economic hedges under Group risk management policies, do not qualify for hedge accounting under the specific rules in IFRS 9 and therefore changes in the fair value of such non-qualifying hedges are accounted for at fair value in the consolidated income statement. For non-hedge accounted derivatives economically hedging foreign-currency risk of net of operative receivables and payables, the fair value changes are recognised in operating profit under other operating income and expense. For other non-hedge accounted derivatives, the fair value changes are recognised in the consolidated income statement under financial income and expense. Valuation of derivatives Derivative financial instruments are recorded in the statement of financial position at their fair values defined as the amount at which the instrument could be exchanged in an orderly transaction between market participants at the measurement date. The fair values of such financial items have been estimated on the following basis: •Foreign exchange forward contract fair values are calculated using forward exchange rates at the reporting date. •Foreign exchange option contract fair values are calculated using reporting date market rates together with common option pricing models. •Commodity contract fair values are computed with reference to quoted market prices on futures exchanges or other reliable market sources. •Interest rate swaps fair values are calculated using a discounted cash flow method. •Cross-currency swaps fair values are calculated by using a discounted cash flow method with the exchange of notional also included in the valuation model. Total foreign exchange gains and losses in the income statement excluding hedges Year ended 31 December EUR million 2022 2021 Other operating income 42 31 Other operating expense -21 -14 Borrowings, cash equivalents. lease liabilities and other -10 37 Total 11 54 Hedge gains and losses in operating profit Year ended 31 December EUR million 2022 2021 Cash flow hedge accounted derivatives Currency hedges -105 9 Commodity hedges 43 34 Total -62 43 As adjustments to sales -103 6 As adjustments to materials and services 41 37 Realised from OCI through income statement -62 43 Currency hedges ineffectiveness -2 -1 Net losses from cash flow hedges -65 42 Non-hedge accounted derivatives Net receivable hedges -12 -17 Commodity contract hedges 9 0 Net gains/losses on non-hedge accounted derivatives -3 -17 Net hedge losses in operating profit -67 26 In 2022, certain forecasted future transactions were no longer expected to occur, and due to this hedge accounting was ceased for those transactions. This resulted in a loss of EUR 2 (EUR 1) million being booked in the Group's operating profit and the loss being presented in the table above as ineffectiveness from cash flow hedges. Hedge gains and losses in financial items Year ended 31 December EUR million 2022 2021 Cash flow hedge accounted derivatives Interest rate hedges ineffectiveness 0 -2 Net gains/losses from cash flow hedges 0 -2 Non-hedge accounted derivatives Currency derivatives 8 -40 Interest rate derivatives -4 0 Net gains on non-hedge accounted derivatives 4 -40 Net gains/losses in financial items 4 -42 76 Nominal and fair values of derivative instruments As at 31 December EUR million Nominal values Positive fair values Negative fair values Net fair values Nominal values Positive fair values Negative fair values Net fair values 2022 2021 Currency derivatives Forwards: Operational cash flow hedging 902 19 -13 6 1,104 4 -19 -16 Options: Operational cash flow hedging 1,700 12 -16 -4 980 2 -13 -10 Total cash flow hedge accounted 2,603 32 -30 2 2,084 6 -32 -26 Forwards: Trade and loan receivables hedging 1,151 7 -5 2 469 1 -6 -5 Total non-hedge accounted 1,151 7 -5 2 469 1 -6 -5 Total currency derivatives 3,754 39 -35 4 2,553 7 -38 -32 Commodity derivatives Electricity swaps: Costs hedging 5 18 0 18 16 27 0 27 Oil swaps: Costs hedging 14 1 -1 0 10 3 0 2 Total cash flow hedge accounted 19 18 -1 18 27 29 0 29 Electricity swaps: Closed contracts 11 9 0 9 0 0 0 0 Total non-hedge accounted 11 9 0 9 0 0 0 0 Total commodity derivatives 30 27 -1 27 27 29 0 29 Interest rate derivatives Interest rate swaps: Financial expenses hedging 450 28 0 28 482 1 -8 -7 Total cash flow hedge accounted 450 28 0 28 482 1 -8 -7 Cross-currency swaps: Financial expenses hedging 200 0 -15 -15 200 0 -25 -25 Total non-hedge accounted 200 0 -15 -15 200 0 -25 -25 Total interest rate derivatives 650 28 -15 13 682 1 -32 -31 Total cash flow hedge accounted 3,072 78 -30 48 2,593 36 -40 -4 Total non-hedge accounted 1,363 16 -20 -4 669 1 -31 -30 Total derivatives 4,435 95 -51 44 3,261 37 -71 -34 Positive and negative fair values of financial derivative instruments are shown under interest- bearing receivables and liabilities, and non-current interest-bearing receivables and liabilities. The presented fair values in the table include accrued interest and option premiums. 77 Changes in fair values of hedged items and hedging instruments 2022 EUR million Change in value of hedged item to determine hedge effectiveness Change in value of outstanding hedging instruments Ineffectiveness Foreign exchange risk - Forward and option contracts (excluding option time value)1 77 -79 -2 Foreign exchange risk - Net investment hedges -16 16 0 Commodity price risk - Commodity swaps -31 31 0 Interest rate risk - Interest rate swaps -34 34 0 1 Ineffectiveness booked in Operating profit. Changes in fair values of hedged items and hedging instruments 2021 EUR million Change in value of hedged item to determine hedge effectiveness Change in value of outstanding hedging instruments Ineffectiveness Foreign exchange risk - Forward and option contracts (excluding option time value) 65 -66 -1 Foreign exchange risk - Net investment hedges 21 -21 0 Commodity price risk - Commodity swaps1 -60 60 0 Interest rate risk - Interest rate swaps -11 11 0 Interest rate and foreign exchange risk - Cross- currency swaps2 15 -18 -3 1 Ineffectiveness booked in Operating profit. 2 Ineffectiveness booked in Net financial items. Breakdown of cash flow hedging reserve and net investment hedges in equity 2022 EUR million At 1 Jan 2022 Change in fair value recognised in OCI/CTA Reclassified from OCI to profit and loss Reclassified to non- financial assets Tax impact At 31 Dec 2022 Foreign exchange risk - Operational cash flow hedging -21 -82 107 3 -5 2 Commodity price risk - Commodity swaps 23 41 -52 0 3 15 Interest rate risk - Interest rate swaps -4 33 0 0 -7 23 Interest rate and foreign exchange risk - Cross-currency swaps -1 0 2 0 0 1 Cost of hedging reserve -1 0 0 0 0 -1 Total cash flow hedge reserve in OCI -4 -8 57 3 -9 39 Foreign exchange risk - Net investment hedges 14 -16 0 0 3 1 Total net investment hedges in CTA 14 -16 0 0 3 1 Total hedging reserves 10 -24 57 3 -6 40 Breakdown of cash flow hedging reserve and net investment hedges in equity 2021 EUR million At 1 Jan 2021 Change in fair value recognised in OCI/CTA Reclassified from OCI to profit and loss Tax impact At 31 Dec 2021 Foreign exchange risk - Operational cash flow hedging 39 -66 -10 15 -21 Commodity price risk - Commodity swaps 3 60 -34 -6 23 Interest rate risk - Interest rate swaps -13 11 0 -2 -4 Interest rate and foreign exchange risk - Cross-currency swaps -9 33 -25 0 -1 Cost of hedging reserve 0 -2 0 0 -1 Total cash flow hedge reserve in OCI 20 37 -69 8 -4 Foreign exchange risk - Net investment hedges 30 -20 0 4 14 Total net investment hedges in CTA 30 -20 0 4 14 Total hedging reserves 51 17 -69 12 10 Financial impact of netting for instruments subject to an enforceable master netting agreement 2022 Not offset in the statement of financial position EUR million Gross amount of recognised financial instruments Related liabilities (-) or assets (+) subject to master netting agreements Collateral received (-) or given (+) Net exposure Derivative assets 95 -30 0 65 Derivative liabilities -51 30 0 -21 Financial impact of netting for instruments subject to an enforceable master netting agreement 2021 Not offset in the statement of financial position EUR million Gross amount of recognised financial instruments Related liabilities (-) or assets (+) subject to master netting agreements Collateral received (-) or given (+) Net exposure Derivative assets 38 -16 0 22 Derivative liabilities -71 16 0 -56 The Group enters into derivative transactions under master netting agreements agreed with each counterparty. In case of an unlikely credit event, such as default, all outstanding transactions under the agreements are terminated, and only a single net amount per counterparty is payable for settlement of all transactions. The agreements do not meet the criteria for offsetting in the statement of financial position, because offsetting is enforceable only in the occurrence of certain future events. 78 Note 28 Cumulative translation adjustment and equity hedging Accounting principles The Group operates internationally and is thus exposed to currency risks arising from exchange rate fluctuations on the value of its net investment in non-euro entities. Exchange rate differences arising from the retranslation of net investments in foreign non-euro entities, and financial instruments that are designated as hedges of such investments, are recognised directly in equity in the cumulative translation adjustment (CTA). Movements in CTA (including related hedges) are shown in the consolidated statement of comprehensive income. The cumulative translation adjustments related to disposed and liquidated entities are combined with their gain or loss on disposal. The CTA is recycled in the consolidated income statement upon disposal and liquidation. The Group policy for translation risk exposure is to minimise this by funding assets in the same currency whenever economically viable, but if matching the assets and liabilities in the same currency is not possible, hedging of the remaining translation risk may take place. The Group has also applied net investment loan accounting for certain intragroup loans for which settlement is neither planned nor likely to occur in the foreseeable future. These are in substance, a part of the entity’s net investment in the foreign operation. Cumulative translation adjustment - movement Year ended 31 December EUR million 2022 2021 At 1 January CTA on net investments -235 -292 Net investment hedges and loans 48 34 Income tax related to hedges and loans -8 -10 Net CTA in equity -195 -267 CTA movement OCI CTA movement -244 42 CTA release through income statement 47 14 Net investment hedges and loans -27 14 Income tax related to hedges and loans 3 2 CTA movement OCI total -220 72 At 31 December CTA on net investments -432 -235 Net investment hedges and loans 21 48 Income tax related to hedges and loans -5 -8 Net CTA in equity -415 -195 In 2022 the release of cumulative translation adjustments to the income statement amounted to a loss of EUR 47 million and was related to disposal of Russian Packaging Solutions, Wood Products and Forest operations. After the release, there is no CTA remaining related to Russian ruble. In 2021 the release to the income statement amounted to a loss of EUR 14 million and was mainly related to the divestment of 20% ownership in Arauco Florestal Arapoti S.A. Cumulative translation adjustment - financial position As at 31 December Cumulative Translation Adjustments (CTA) Net investment hedges and loans Net CTA in the statement of financial position EUR million 2022 2021 2022 2021 2022 2021 Brazil -255 -281 0 0 -255 -281 China 131 83 10 28 141 111 Czech Republic 43 38 -9 -9 34 29 Poland -59 -52 17 17 -42 -35 Russia 0 -81 0 0 0 -81 Sweden -543 -97 47 47 -497 -50 Uruguay (USD) 248 154 -44 -34 204 119 USA 8 4 0 0 8 4 Others -4 -3 0 0 -4 -3 CTA before Tax -432 -235 21 48 -411 -187 Taxes 0 0 -5 -8 -5 -8 Net CTA in Equity -432 -235 17 40 -415 -195 The main movements in CTA in 2022 were a gain of EUR 98 (gain of EUR 116) million related to the US dollar, a loss of EUR 446 (loss of EUR 103) million related to the Swedish crown and a gain of EUR 48 (gain of EUR 9) million related to Chinese renminbi. The net amount of hedging loss included in the CTA during the period amounted to EUR 24 (gain EUR 16) million. Hedging instruments and unrealised hedge losses As at 31 December Nominal amount (Currency) Nominal amount (EUR) Unrealised losses (EUR) EUR million 2022 2021 2022 2021 2022 2021 Borrowings USD area 300 300 281 265 -41 -28 Total hedging 281 265 -41 -28 The Group is currently only hedging its equity exposure to the US dollar arising from its joint operation located in Uruguay with USD functional currency. 79 Note 29 Commitments and contingencies Accounting principles Guarantees The guarantees entered into with financial institutions and other credit guarantors generally oblige the group to make payment in the event of default by the borrower. The guarantees have an off-balance sheet credit risk representing the accounting loss that would be recognised at the reporting date if the counterparties fail to perform completely as contracted. The credit risk amounts are equal to the contract sums, assuming the amounts are not paid in full and are irrecoverable from other parties. Commitments As at 31 December EUR million 2022 2021 On own behalf Guarantees 14 15 On behalf of equity accounted investments Guarantees 5 0 On behalf of others Guarantees 5 6 Other commitments 36 36 Total 60 57 Guarantees1 24 21 Other commitments1 36 36 Total 60 57 1The comparative figures have been restated due to a reclassification from other commitments to guarantees. In 2022, the Group’s commitments amounted to EUR 60 (EUR 57) million. In addition, the parent company Stora Enso Oyj has guaranteed the liabilities of many of its subsidiaries and joint operations up to 826 EUR (EUR 1,126) million as of 31 December 2022. Capital commitments As at 31 December EUR million 2022 2021 Total 593 220 Capital expenditure commitments are not recognised in the balance sheet and these include the Group’s share of direct capital expenditure contracts in joint operations. The largest commitments in relation to capital expenditure relate to the mill conversion at Oulu site in Finland, the board production expansion at Skoghall site in Sweden and the wood handling upgrade at Imatra site in Finland. Contingent liabilities Stora Enso has undertaken significant restructuring actions in recent years which have included the divestment of companies, sale of assets and mill closures. These transactions include a risk of possible environmental or other obligations the existence of which would be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. A provision has been recognised for obligations for which the related amount can be estimated reliably and for which the related future cost is considered to be at least probable. Stora Enso has been granted various investment subsidies and has given certain investment commitments in several countries e.g. Finland, China and Sweden. If commitments to planning conditions are not met, local officials may pursue administrative measures to reclaim some of the formerly granted investment subsidies or to impose penalties on Stora Enso, and the outcome of such a process could result in adverse financial impact on Stora Enso. The Group announced its intention in December 2022 to divest its consumer board production and forest operations sites in Beihai, China. As previously disclosed, Stora Enso has been granted investment subsidies and has given certain investment commitments in China. There is a risk that the majority owned local Chinese company may be subject to a claim based on alleged costs resulting from certain uncompleted investment commitments. Given the specific mitigating circumstances surrounding the investment case as a whole, Stora Enso does not consider it to be probable that this situation would result in an outflow of economic benefits that would be material to the Group. The Company continues to monitor the situation as the divestment process proceeds. Stora Enso is party to legal proceedings that arise in the ordinary course of business and which primarily involve claims arising out of commercial law. The management does not consider that liabilities related to such proceedings before insurance recoveries, if any, are likely to be material to the Group’s financial condition or results of operations. Veracel On 11 July 2008, Stora Enso announced that a federal judge in Brazil had issued a decision claiming that the permits issued by the State of Bahia for the operations of Stora Enso’s joint operations company Veracel were not valid. The judge also ordered Veracel to take certain actions, including reforestation with native trees on part of Veracel’s plantations and a possible fine of, at the time of the decision, BRL 20 (EUR 4) million. Veracel disputes the decision and has filed an appeal against it. Veracel operates in full compliance with all Brazilian laws and has obtained all the necessary environmental and operating licences for its industrial and forestry activities from the relevant authorities. In November 2008, a Federal Court suspended the effects of the decision. No provisions have been recorded in Veracel’s or Stora Enso’s accounts for the reforestation or the possible fine. 80 Note 30 Group companies Group ownership, % Group ownership, % Subsidiaries Country 2022 2021 A/O Ladenso Russia 100.00 100.00 Anjala Fiber & Energy Oy Finland 100.00 100.00 AO Stora Enso Russia 0.00 100.00 AS Stora Enso Latvija Latvia 100.00 100.00 Bergnät 1 AB Sweden 100.00 100.00 Beta Skog 1 AB Sweden 100.00 0.00 Cellutech AB Sweden 100.00 100.00 Centrum Dystrybucji i Obróbki Drewna Sp. z.o.o. Poland 100.00 100.00 Changzhou Stora Enso Packaging Technology Co. Ltd. China 100.00 100.00 DanFiber A/S Denmark 51.00 51.00 Dongguan Stora Enso Inpac Packaging Co. Ltd. China 100.00 100.00 DuraSense AB (formerly Box Inc.) Sweden 100.00 100.00 Efora Oy Finland 100.00 100.00 Enso Alueverkko Oy Finland 100.00 100.00 Euro - Timber, spol. s.r.o. Slovak Republic 100.00 100.00 FPB Holding GmbH & Co. KG Germany 0.00 99.98 Guangxi Stora Enso Forestry Co. Ltd. China 89.50 89.50 Herman Andersson Oy Finland 100.00 100.00 HESPOL Sp. z.o.o. Poland 100.00 100.00 Jiashan Stora Enso Inpac Packaging Co. Ltd. China 100.00 100.00 Lignode AB Sweden 100.00 0.00 Lignode Holding Oy Finland 100.00 0.00 Lignode Oy Finland 100.00 0.00 Lumipaper Ltd UK 100.00 100.00 Lumipaper NV Belgium 100.00 100.00 Mena Wood Oy Ltd Finland 100.00 100.00 OAO Olonetsles Russia 0.00 99.48 OOO Setles Russia 0.00 100.00 OOO Setnovo Russia 0.00 100.00 OOO Stora Enso Forest West Russia 0.00 100.00 OOO Stora Enso Packaging BB Russia 0.00 100.00 OOO Stora Transport Russia 0.00 100.00 OOO Terminal Russia 0.00 100.00 Primaskog 9 AB Sweden 0.00 100.00 Selfly Store Oy Finland 100.00 100.00 Skogsutveckling Syd AB Sweden 66.67 66.67 Stora Enso China Packaging (HK) Co., Limited Hong Kong 100.00 100.00 Stora Enso (Guangxi) Forestry Company Ltd. China 80.08 80.08 Stora Enso (Guangxi) Packaging Company Ltd. China 80.08 80.08 Stora Enso (HK) Ltd Hong Kong 100.00 100.00 Stora Enso (Southern Africa) (Pty) Ltd South Africa 100.00 100.00 Stora Enso AB Sweden 100.00 100.00 Stora Enso Amsterdam B.V. Netherlands 100.00 100.00 Stora Enso Arapoti Holding Florestal S.A. Brazil 100.00 100.00 Stora Enso Australia Pty Ltd Australia 100.00 100.00 Stora Enso Austria GmbH Austria 0.00 100.00 Stora Enso Belgium NV Belgium 100.00 100.00 Group ownership, % Group ownership, % Subsidiaries Country 2022 2021 Stora Enso Bergskog 2 AB Sweden 100.00 100.00 Stora Enso Bergskog 3 AB Sweden 100.00 0.00 Stora Enso Bioenergi AB Sweden 0.00 100.00 Stora Enso Bois SAS France 100.00 100.00 Stora Enso Brasil Ltda Brazil 100.00 100.00 Stora Enso China Co., Ltd China 100.00 100.00 Stora Enso China Holdings AB Sweden 100.00 100.00 Stora Enso Corbehem SAS France 100.00 100.00 Stora Enso Danmark A/S Denmark 100.00 100.00 Stora Enso Eesti AS Estonia 100.00 100.00 Stora Enso Espana S.A.U Spain 100.00 100.00 Stora Enso Fors AB Sweden 100.00 100.00 Stora Enso France SAS France 100.00 100.00 Stora Enso Germany GmbH Germany 100.00 100.00 Stora Enso Holding France SAS France 100.00 100.00 Stora Enso Holdings UK Ltd UK 100.00 100.00 Stora Enso Hylte Bruk AB Sweden 100.00 0.00 Stora Enso Ingerois Oy Finland 100.00 100.00 Stora Enso Inpac Corrugated Packaging (Hebei) Company Limited China 100.00 100.00 Stora Enso Inpac Hebei Protective Packaging Co., Ltd. China 100.00 100.00 Stora Enso Inpac Packaging Co. Ltd China 100.00 100.00 Stora Enso International Oy Finland 100.00 100.00 Stora Enso Italia Srl Italy 100.00 100.00 Stora Enso Japan K.K. Japan 100.00 100.00 Stora Enso Kabel GmbH Germany 0.00 99.98 Stora Enso Kvarnsveden Industriutveckling AB Sweden 100.00 100.00 Stora Enso Langerbrugge NV Belgium 100.00 100.00 Stora Enso LLC Ukraine 100.00 100.00 Stora Enso Maxau GmbH Germany 100.00 100.00 Stora Enso Mexico S.A. Mexico 100.00 100.00 Stora Enso Middle East DMCC United Arab Emirates 100.00 100.00 Stora Enso Narew Sp.z.o.o. Poland 100.00 100.00 Stora Enso North American Sales, LLC USA 100.00 100.00 Stora Enso Nymölla Paper AB Sweden 100.00 0.00 Stora Enso Oulu Oy Finland 100.00 100.00 Stora Enso Packaging AB Sweden 100.00 100.00 Stora Enso Packaging AS Estonia 100.00 100.00 Stora Enso Packaging Oy Finland 100.00 100.00 Stora Enso Packaging SIA Latvia 100.00 100.00 Stora Enso Packaging UAB Lithuania 100.00 100.00 Stora Enso Paper AB Sweden 100.00 100.00 Stora Enso Paper France SAS France 100.00 100.00 Stora Enso Paper GmbH Germany 100.00 100.00 Stora Enso Paper Oy Finland 100.00 100.00 Stora Enso Paper UK Ltd UK 100.00 100.00 Stora Enso Pension Trust Ltd. UK 100.00 100.00 81 Group ownership, % Group ownership, % Subsidiaries Country 2022 2021 Stora Enso Plantor AB Sweden 0.00 100.00 Stora Enso Poland S.A. Poland 100.00 100.00 Stora Enso Polska Sp.z.o.o. Poland 100.00 100.00 Stora Enso Portugal Lda Portugal 100.00 100.00 Stora Enso Praha s.r.o. Czech Republic 100.00 100.00 Stora Enso Publication Papers Oy Ltd Finland 100.00 100.00 Stora Enso Pulp AB Sweden 100.00 100.00 Stora Enso Pulp and Paper Asia AB Sweden 94.21 94.21 Stora Enso Skog AB Sweden 100.00 100.00 Stora Enso Skog AS Norway 100.00 100.00 Stora Enso Skog och Mark AB Sweden 100.00 100.00 Stora Enso South East Asia Pte Ltd Singapore 100.00 100.00 Stora Enso Timber AB Sweden 100.00 100.00 Stora Enso Timber DIY Products B.V. Netherlands 100.00 100.00 Stora Enso Treasury Stockholm AB Sweden 100.00 100.00 Stora Enso Turkey Karton Ve Kağıt Ticaret Anonim Sirketi Turkey 100.00 0.00 Stora Enso UK Limited UK 100.00 100.00 Stora Enso US Inc. USA 100.00 100.00 Stora Enso Veitsiluoto Oy Finland 100.00 100.00 Stora Enso Verwaltungs GmbH Germany 0.00 100.00 Stora Enso Wood Products d.o.o. Koper Slovenia 100.00 100.00 Stora Enso Wood Products GmbH Austria 100.00 100.00 Stora Enso Wood Products Japan K.K. Japan 100.00 100.00 Stora Enso Wood Products Planá s.r.o. Czech Republic 100.00 100.00 Stora Enso Wood Products Sp.z.o.o. Poland 100.00 100.00 Stora Enso Wood Products Zdirec s.r.o. Czech Republic 100.00 100.00 Stora Enso WP Bad St. Leonhard GmbH Austria 100.00 100.00 Stora Enso WP HV s.r.o. Czech Republic 100.00 100.00 Stora Kopparbergs Bergslags AB Sweden 100.00 100.00 Sydved AB Sweden 66.67 66.67 Södra Norrlands Hamnbolag nr 1 AB Sweden 100.00 0.00 UAB Stora Enso Lietuva Lithuania 100.00 100.00 Virdia B2X, LLC USA 100.00 100.00 Virdia LLC USA 100.00 100.00 Virdia Ltd Israel 100.00 100.00 VLAR Papier NV Belgium 0.00 100.00 Group ownership, % Group ownership, % Subsidiaries Country 2022 2021 A.C.D.F. Industrie France 35.00 0.00 Encore Ympäristöpalvelut Oy Finland 0.00 30.41 Honkalahden Teollisuuslaituri Oy Finland 50.00 50.00 Kemira Cell Sp.z.o.o. Poland 45.00 45.00 Metsäteho Oy Finland 23.95 23.95 Oy Keskuslaboratorio - Centrallaboratorium Ab Finland 32.24 32.24 Perkaus Oy Finland 33.33 33.33 Pressretur AB Sweden 0.00 50.00 SELF Logistika SIA Latvia 50.00 50.00 Steveco Oy Finland 34.39 34.39 Suomen Keräyspaperi Tuottajayhteisö Oy Finland 40.09 40.09 SweTree Technologies AB Sweden 23.83 23.83 Tornator Oyj Finland 41.00 41.00 Trätåg AB Sweden 50.00 50.00 TreeToTextile AB Sweden 28.94 27.96 ZMP GMBH Austria 30.00 30.00 Österbergs Förpackningsmaskiner AB Sweden 50.00 50.00 Group ownership, % Group ownership, % Other companies Country 2022 2021 AMEXCI AB Sweden 9.10 9.10 Arevo AB Sweden 7.89 7.89 Clic Innovation Oy Finland 9.87 9.87 Combient AB Sweden 5.40 5.40 East Office of Finnish Industries Oy Finland 4.00 4.00 Packages Limited Pakistan 6.40 6.40 Pohjolan Voima Oy Finland 15.61 15.61 PulPac AB Sweden 10.30 0.00 Radioskog AB Sweden 10.00 10.00 RK Returkartong AB Sweden 8.40 8.40 SSG Standard Solutions Group AB Sweden 14.29 14.29 Suomen Puukauppa Oy Finland 10.74 0.00 Sölvesborgs Stuveri & Hamn AB Sweden 7.36 7.36 Union Developement Récup. Pap. France 10.70 10.70 Group ownership, % Group ownership, % Joint operations Country 2022 2021 Celulosa y Energia Punta Pereira S.A. Uruguay 50.00 50.00 El Esparragal Asociación Agraria de Responsabilidad Limitada Uruguay 50.00 50.00 Eufores S.A. Uruguay 50.00 50.00 Forestal Cono Sur S.A. Uruguay 50.00 50.00 Ongar S.A. Uruguay 50.00 50.00 Stora Enso Uruguay S/A Uruguay 50.00 50.00 Terminal Logística e Industrial M`Bopocuá S.A. Uruguay 50.00 50.00 Veracel Celulose SA Brazil 50.00 50.00 Zona Franca Punta Pereira S.A. Uruguay 50.00 50.00 82 Note 31 Related party transactions Balances and transactions between Stora Enso and its subsidiaries and joint operations have been eliminated on consolidation and are not disclosed in this note. For the other entities which are classified as the Group's related parties and disclosed in this note, their subsidiary companies are also considered as related parties. The Group has classified Solidium Oy as a related party. Solidium Oy is entirely owned by the State of Finland, and it owned 10.7% of Stora Enso shares and 27.3% of all votes on 31 December 2022. The group has applied an exemption, as stated in IAS 24 paragraph 25, not to disclose transactions and outstanding balances with government-related entities. The Group has classified FAM AB and Wallenberg Investments AB as related parties. FAM AB owned 10.2% of Stora Enso shares and 27.3% of all votes on 31 December 2022. FAM AB is completely owned by Wallenberg Investments AB. The key management personnel of the Group are the members of the Group Leadership Team and the Board of Directors. The compensation of key management personnel is presented in Note 7 Board and executive remuneration. In the ordinary course of business, the Group engages in transactions on commercial terms with equity accounted investments and other related parties that are not any more favourable than those that would be available to other third parties – with the exception of Veracel. Stora Enso intends to continue with transactions on a similar basis with its equity accounted investments, further details of which are shown in Note 13 Equity accounted investments. Group companies, including subsidiary companies and joint operations, are listed in Note 30 Group companies. Paper for recycling The Group owns non-controlling interests in several paper recyclers, from which paper for recycling is purchased at market prices. Forest assets and wood procurement The Group has a 41.0% interest in Tornator with the remaining 59.0% being held mainly by Finnish institutional investors. Stora Enso has long-term purchase contracts of wood at market prices with the Tornator Group, and in 2022 purchases of 3 (2) million cubic metres came to EUR 126 (82) million. The Group procures wood at market prices from Kopparfors Fastigheter AB, a fully owned subsidiary of Kopparfors Skogar AB, which is completely owned by FAM AB. In 2022 the purchases from the related party amounted to EUR 23 (29) million. At the end of 2022 the Group had EUR 6 (3) million of open payables to the related party. Stevedoring The Group owns 34.4% of shares in Steveco Oy, a Finnish company engaged in loading and unloading vessels. The other shareholders in Steveco are UPM-Kymmene, Finnlines and Ahlström Capital. The stevedoring services are provided by Steveco at market prices and in 2022 amounted to EUR 27 (26) million. Note 32 Earnings per share Accounting principles Basic earnings per share, attributable to the owners of the parent company, are calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the group and held as treasury shares. Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares plus the diluted effect of all potential dilutive ordinary shares, such as shares from share-based payments. Earnings per share Year Ended 31 December 2022 2021 Net profit for the period attributable to the owners of the parent, EUR million 1,550 1,266 Total comprehensive income attributable to the owners of the parent, EUR million 2,278 2,110 Weighted average number of A and R shares 788,619,987 788,619,987 Weighted average number of share awards 771,150 505,705 Weighted diluted number of shares 789,391,137 789,125,692 Basic Earnings per Share, EUR 1.97 1.61 Diluted Earnings per Share, EUR 1.96 1.60 Total Comprehensive Income Attributable to the Owners of the Parent per Share, EUR 2.89 2.67 Note 33 Events after the reporting period The Group has had the following non-adjusting events after the reporting period At 6 January 2023 Stora Enso completed the transaction to acquire De Jong Packaging Group. In the beginning of January 2023, Stora Enso completed the divestment of its Nymölla paper production site in Sweden, and all related assets to Sylvamo, a US-based global producer of uncoated paper. In January 2023, Stora Enso signed an agreement to divest its Hylte paper production site in Sweden to Sweden Timber. More details about the above transactions are presented in Note 4 Acquisitions, disposals and assets held for sale. As of 1 January 2023 and due to the divestments and reorganisation of retained Paper division operations, Stora Enso's segment reporting will be changed. According to the changes, the Paper division will be discontinued and will not reported as a separate segment going forward. The Maxau, Nymölla and Hylte sites together with all previously sold and closed sites will be reported as part of the segment Other going forward. The remaining sites Langerbrugge and Anjala will be reported as part of the Packaging Materials division. Comparative figures will be restated accordingly during the first quarter of 2023. As of 1 January 2023 emerging business related units in Packaging Solutions division will be moved to segment Other. These units are including Formed Fiber, Circular Solutions (biocomposites) and Selfly Stores. Comparative figures will be restated accordingly. 83 Parent company Stora Enso Oyj financial statements Parent company income statement Year ended 31 December EUR million Note 2022 2021 Sales 2 3,325 2,822 Changes in inventories of finished goods and work in progress + / - 86 16 Production for own use 2 1 Other operating income 3 703 308 Materials and services 4 -2,288 -1,864 Personnel expenses 5 -320 -259 Depreciation and impairment 6 -133 -129 Other operating expenses 7 -889 -490 2,839 2,417 Operating profit 485 405 Financial income and expenses 9 290 351 Profit before Appropriations and Taxes 775 756 Appropriations 10 -331 -119 Income tax expense 11 -28 0 Profit for the period 416 637 Parent company statement of financial position As at 31 December EUR million Note 2022 2021 Assets Non-current assets Intangible assets 13 49 49 Tangible assets 13 1,032 987 Investments 14 8,187 8,234 Non-current assets total 9,269 9,270 Current assets Inventories 15 574 387 Short-term receivables 16 1,278 1,314 Financial securities 17 1,130 607 Cash in hand and at bank 1,117 744 Total current assets 4,099 3,051 Total assets 13,368 12,322 Equity and liabilities Equity 18 Share capital 1,342 1,342 Share premium 3,639 3,639 Fair value reserve 25 -6 Invested non-restricted equity fund 633 633 Retained earnings 922 719 Profit for the period 416 637 Total equity 6,977 6,964 Accumulated appropriations 19 290 234 Obligatory provisions 20 25 12 Liabilities Non-current liabilities 22 2,265 2,513 Current liabilities 23 3,811 2,599 Total liabilities 6,076 5,113 Total equity and liabilities 13,368 12,322 84 Parent company cash flow statement Year ended 31 December EUR million 2022 2021 Cash provided by operating activities Profit for the period 416 637 Adjustments and reversal of non-cash items: Direct taxes 28 0 Appropriations 331 119 Depreciation according to plan and impairment 133 129 Unrealised foreign exchange gains and losses 18 10 Other non-cash items 13 -84 Financial income and expenses -290 -351 Change in working capital: Increase(-)/decrease(+) in current non-interest-bearing receivables -198 -108 Increase(-)/decrease(+) in inventories -187 -42 Increase(+)/decrease(-) in current non-interest-bearing liabilities 199 159 Cash flow from operating activities before financial items and taxes 463 471 Interest received from operating activities 58 41 Interest paid from operating activities -79 -74 Dividends received from operating activities 626 502 Other financial items, net -57 -46 Direct taxes paid -2 -2 Cash provided by operating activities 1,009 892 Net cash provided by investing activities Investments in tangible and intangible assets -186 -140 Capital gains from sale of tangible and intangible assets 0 3 Investments in other financial assets 0 -13 Investments in subsidiary shares and other capital contributions -374 -138 Proceeds from disposal of subsidiary shares and other repayment of capital 0 -98 Proceeds from disposal of shares in equity accounted investments and repayment of capital 10 0 Payments of non-current loan receivables -626 -706 Proceeds from non-current loan receivables 944 120 Net cash provided by investing activities -233 -972 Year ended 31 December EUR million 2022 2021 Cash flow from financing activities Proceeds from (issue of) long-term liabilities 350 1,040 Proceeds from (payment of) long-term liabilities -560 -1,431 Proceeds from (issue of) short-term liabilities 1,587 722 Proceeds from (payment of) short-term liabilities -546 -570 Dividends paid -434 -250 Group contributions received -275 -14 Cash flow from financing activities 121 -503 Net change in cash and cash equivalents 897 -584 Translation differences -1 -18 Cash and cash equivalents at start of year 1,350 1,953 Cash and cash equivalents at year end 2,247 1,350 Cash and cash equivalents at year end includes: Financial securities 1,130 607 Cash in hand and at bank 1,117 744 Cash and cash equivalents total 2,247 1,350 85 Notes to the parent company financial statements Note 1 Accounting principles The financial statements of Stora Enso Oyj have been prepared in accordance with the Finnish Accounting Act and other current rules and regulations concerning financial statements in Finland. The financial statements are presented in millions of euros and rounded and therefore the sum of individual figures might deviate from the presented total figure. Derivative contracts Stora Enso is exposed to several financial market risks that the Group is responsible for managing under policies approved by the Board of Directors. The objective is to have cost- effective funding in Group companies and to manage financial risks using financial instruments in order to decrease earnings volatility. The main exposures for the Group are interest rate risk, currency risk, funding risk and commodity price risk, especially for fiber and energy. The parent company manages these risks centrally in the Group. The Group’s risk management principles are presented in more detail in Note 24 Financial Risk Management to the consolidated financial statements. Derivative contracts are measured at fair value on the balance sheet. Derivatives with external counterparties that are subject to hedge accounting are recognised as financial assets and liabilities at fair value through the income statement in the same manner as the parent company’s derivatives with other Group companies as counterparties. The parent company’s derivative contracts that are used to hedge the parent company’s own cash flow are measured at fair value, and the change in fair value (effective part) is recognised, in line with hedge accounting principles, in the fair value reserve in equity on the balance sheet, while the ineffective part is recognised in the parent company’s income statement. The change in fair value of derivatives not included in hedge accounting is entered immediately in the income statement. Interest income and expenses related to derivatives that are used to manage the interest rate risk are allocated over the contract period and are used to adjust interest expenses related to hedged loans. Option premiums are recognised as advance payments until the options mature. With regard to derivatives, more information about the measurement principles, fair values and changes in fair value is provided in Note 25. Foreign currency transactions Transactions in foreign currencies are recorded at the rate of exchange prevailing at the transaction date, but at the end of the month foreign-currency-denominated receivables and liabilities are translated using the month-end exchange rate. Equity incentive schemes The employees covered by the scope of Stora Enso Oyj’s share-based incentive schemes are awarded with shares in the company. The awarded shares and the costs of the schemes are recognised in the income statement once the shares have been earned. The principles of the Group’s share opportunity programmes are presented in more detail in Note 21 (Employee variable compensation and equity incentive schemes) to the consolidated financial statements. Pensions Statutory pension security is arranged through employment pension insurance companies outside the Group. Some employees have additional pension security through life insurance companies outside the Group. Pension contributions are allocated in accordance with performance-based salaries and wages for the financial period. Non-current assets The balance sheet value of intangible and tangible assets is their direct acquisition cost less depreciation according to plan and any impairment. Depreciation according to plan is recognised for intangible and tangible assets, based on their expected useful lives. Depreciation is based on the following useful lives: Buildings and structures 10–50 years Production machinery and equipment 10–20 years Light machinery and equipment 3–5 years Intellectual property rights 3–20 years No depreciation is recognised for land and water areas. Loan receivables are debt instruments with fixed or determinable payments that are not quoted on an active market. They are recorded initially at fair value and subsequently measured at an amortised cost. Investments in subsidiaries and other companies are measured at cost, or fair value in case the fair value is less than cost. Inventories Inventories are measured at acquisition cost or at net realisable value if lower. Acquisition cost is determined using the FIFO method or the weighted average cost method. The cost of finished goods and work in progress comprises raw materials, direct labour, depreciation and other direct costs, as well as the related production overhead. Net realisable value is the estimated selling price less the costs of completion and sale. Leasing Leasing payments are recognised in other operating expenses. The remaining leasing payments under leasing agreements are presented in Note 24 Commitments and Contingencies Expenditure on research and development Expenditure on research and development is recognised as an expense for the financial period. Income taxes The tax expense on the income statement includes income taxes based on the taxable profit for the financial period and tax adjustments for previous periods. The parent company does not recognise deferred tax assets and liabilities, excluding derivatives, in its financial statements. 86 Deferred tax assets and liabilities that can be recognised on the balance sheet are presented in Note 21. Obligatory provisions Future costs and losses that no longer generate corresponding income, to which the company is committed or by which the company is obligated, are recognised in the income statement according to their nature and in obligatory provisions on the balance sheet. Emission rights During 2022, 0.6 million tonnes of free emission allowances in accordance with the EU Emissions Trading Directive were allocated to the company. Emission allowances are recognised through a net cash cost basis, meaning that the difference between the actual emissions and the emission allowances received is recognised through profit or loss if the actual emissions are larger than the emission allowances received. During the financial period, the emissions emitted were estimated at 0.5 million tonnes. The emission rights purchased during the financial period are recognised in other operating expenses, and the emission rights sold during the financial period are recognised in other operating income. At the end of the financial period, the market value of the emission rights was EUR 80.78 per tonne. Comparability of the information for the financial period The operational functions of Efora Oy, Stora Enso's maintenance business subsidiary, were transferred to the organisations of Stora Enso, Stora Enso Packaging Oy and Stora Enso Oulu Oy. The maintenance development and support functions were decentralised to the divisions. Due to these changes, in the transfer of business on 1 January 2022, Efora Oy's personnel, fixed and current assets and contracts were transferred from Efora Oy to the companies concerned. In the business transfer, EUR 1.5 million of fixed assets, EUR 1.1 million of inventories and 543 employees were transferred to Stora Enso Oyj. During 2022, Stora Enso divested all its subsidiaries in Russia to local management. For more information, please refer to the Group's financial statements in Note 4. Other operating income and expenses include an item relating to change of operative model in the Group. Note 2 Net sales by division and market area Year ended 31 December EUR million 2022 2021 By division Packaging Materials 1,882 1,567 Packaging Solutions 0 1 Biomaterials 296 329 Forest 700 759 Wood Products 228 38 Other 219 128 Total 3,325 2,822 Distribution by region Finland 1,361 1,330 Other Europe 1,076 995 North and South America 298 158 Asia and Oceania 381 227 Africa 118 32 Others 91 80 Total 3,325 2,822 Note 3 Other operating income Year ended 31 December EUR million 2022 2021 Rent and equivalents 3 3 Gains on sale of fixed assets 0 1 Production and maintenance services 1 4 Subsidies, grants and equivalents 2 1 Administration services 60 177 Proceeds from sales of emission rights 52 21 Other operating income 586 32 Merger profit 0 69 Total 703 308 Other operating income includes an item relating to change of operative model in the Group. Note 4 Materials and services Year ended 31 December EUR million 2022 2021 Materials and supplies Purchases during the period 1,822 1,366 Change in inventories +/- -105 -30 External services 571 527 Total Materials and Services 2,288 1,864 87 Note 5 Personnel expenses and average number of employees Year ended 31 December EUR million 2022 2021 Salaries and fees 263 211 Statutory employer costs Pensions 47 38 Other personnel costs 9 9 Total 320 259 Remuneration for the CEO and the members of the Board of Directors Remuneration for the CEO and the members of the Board of Directors is presented in Note 7 to the consolidated financial statements. Pension liabilities for the CEO Pension liabilities for the CEO are presented in Note 7 to the consolidated financial statements. Receivables from management There were no loan receivables from the company’s management. Average number of employees 2022 2021 Number of employees during the financial period 4,066 3,057 Note 6 Depreciation and impairment Year ended 31 December EUR million 2022 2021 Depreciation according to plan 133 124 Impairment of fixed assets 1 5 Total 133 129 Depreciation and amortisation on each item in the statement of financial position is included under intangible and tangible assets. Note 7 Other operating expenses Year ended 31 December EUR million 2022 2021 Product freight 267 168 Sales commissions 55 39 Rental costs 20 15 Administration and office services 319 213 Insurance premiums 12 9 Other personnel expenses 17 10 Public and other relations 4 3 Emission rights expenses 40 20 Other operating expenses 154 13 Total 889 490 Other operating expenses includes an item relating to change of operative model in the Group. Note 8 Auditors’ fees Year ended 31 December EUR million 2022 2021 Audit fees 1 1 Other audit-related fees 0 0 Tax fees 0 0 Other fees 0 0 Total 2 1 Note 9 Financial income and expenses Year ended 31 December EUR million 2022 2021 Dividend income From Group companies 601 486 From equity accounted investments 25 16 Total 626 503 Interest income from non-current investments From Group companies 52 41 From equity accounted investments 0 1 From others 2 0 Total 55 42 Other interest and financial income From Group companies 20 -1 From equity accounted investments 9 0 From others 14 10 Total 44 9 Total financial income 725 553 Interest and other financial expenses To Group companies -38 -1 Other financial expenses -93 -103 Total -131 -103 Impairment on investments Impairment on investments in non-current assets -305 -98 Total financial expenses -435 -202 Total financial income and expenses 290 351 The item “Financial Income and Expenses” includes exchange rate gains/losses (net) The item “Financial Income and Expenses” includes exchange rate gains/losses (net) -17 -27 88 Note 10 Appropriations Year ended 31 December EUR million 2022 2021 Difference between depreciation according to plan and depreciation recognised in taxation -56 -46 Group contributions paid -275 -73 Total appropriations -331 -119 Note 11 Income tax expense Year ended 31 December EUR million 2022 2021 Income taxes from primary operations for the period -28 0 Total income tax -28 0 Note 12 Environmental expenses Year ended 31 December EUR million 2022 2021 Materials and services 43 36 Personnel expenses 3 3 Depreciation and impairment 12 12 Total 58 50 Air quality protection 9 9 Wastewater treatment 25 19 Waste management 15 12 Soil and groundwater protection 1 1 Other environmental protection measures 7 9 Total 58 50 Note 13 Intangible and tangible assets Intangible assets EUR million Intellectual property rights Other non- current expenditure Advance payments and acquisitions in progress Total Acquisition cost 1 Jan 172 22 5 198 Increases 3 0 13 16 Decreases -8 0 0 -8 Reclassification 4 1 -3 1 Acquisition cost 31 Dec 171 23 14 208 Accumulated depreciation and impairment 1 Jan -130 -20 0 -150 Accumulated depreciation on decreases and reclassifications 7 0 0 7 Depreciation for the period -15 -1 0 -15 Accumulated depreciation 31 Dec -138 -21 0 -158 Book value on 31 December 2022 33 2 14 49 Book value on 31 December 2021 42 2 5 49 89 Tangible assets EUR million Land and water areas Buildings and structures Plant and equipment Other tangible assets Advance payments and acquisitions in progress Total Acquisition cost 1 Jan 18 586 2,726 174 149 3,654 Increases 0 6 72 1 86 166 Decreases 0 -9 -43 -1 0 -54 Reclassification 0 22 98 7 -129 -1 Acquisition cost 31 Dec 18 605 2,853 181 107 3,764 Accumulated depreciation and impairment 1 Jan 0 -428 -2,082 -159 0 -2,668 Accumulated depreciation on decreases and reclassifications 0 9 42 1 0 52 Depreciation for the period 0 -14 -101 -2 0 -117 Accumulated depreciation 31 Dec 0 -433 -2,141 -160 0 -2,734 Increase in value 31 Dec 2 0 0 0 0 2 Book value on 31 December 2022 20 173 712 21 107 1,032 Book value on 31 December 2021 20 158 644 15 149 987 Production plant and equipment Book value on 31 December 2022 693 Book value on 31 December 2021 624 Advance payments and acquisitions in progress EUR million Intangible assets Buildings and structures Plant and equipment Other tangible assets Total Acquisition cost 1 Jan 5 1 148 0 154 Increases 13 5 81 0 98 Reclassification -3 -1 -128 0 -132 Acquisition cost 31 Dec 14 5 101 0 121 Tangible assets Capitalised environmental expenditure 2022 EUR million Land and water areas Buildings and structures Plant and equipment Other tangible assets Advance payments and acquisitions in progress Total Acquisition cost 1 Jan 4 24 51 4 11 95 Increases 1 0 9 1 8 18 Depreciations for the period 0 -2 -8 -1 0 -12 Book value on 31 December 2022 4 22 52 5 19 101 Air quality protection 1 7 35 0 12 55 Wastewater treatment 0 2 13 0 4 20 Waste management 2 0 1 3 0 7 Soil and groundwater protection 1 12 2 0 2 18 Noise and vibration prevention 0 0 1 1 0 1 4 22 52 5 19 101 2021 EUR million Land and water areas Buildings and structures Plant and equipment Other tangible assets Advance payments and acquisitions in progress Total Acquisition cost 1 Jan 4 26 51 5 3 89 Increases 0 0 7 0 8 16 Increases due to mergers 0 0 0 0 0 1 Depreciations for the period 0 -3 -7 -1 0 -11 Book value on 31 December 2021 4 24 51 4 11 95 Air quality protection 1 9 28 0 5 43 Wastewater treatment 0 2 21 1 4 27 Waste management 3 0 1 2 1 7 Soil and groundwater protection 0 13 2 0 2 17 Noise and vibration prevention 0 0 0 1 0 1 4 24 51 4 11 95 In 2022 and 2021, no environmentally based fines, charges or compensation were paid, and no subsidies or grants were received for environmental protection. 90 Note 14 Non-current investments in shares and loan receivables EUR million Shares in Group companies Loan receivables from Group companies Shares in associated companies Loan receivables from associated companies Other shares Other receivables Total investments Acquisition cost 1 Jan 6,514 1,578 37 2 193 48 8,372 Increases 374 328 0 0 112 815 Decreases -44 -479 0 0 -58 -581 Acquisition cost 31 Dec 6,845 1,428 37 2 193 102 8,606 Impairments 1 Jan -136 0 0 0 -1 0 -138 Increases -276 0 0 0 0 -5 -281 Impairments 31 Dec -412 0 0 0 -1 -5 -419 Book value on 31 December 2022 6,432 1,428 37 2 191 97 8,187 Book value on 31 December 2021 6,378 1,578 37 2 191 48 8,234 Note 15 Inventories As at 31 December EUR million 2022 2021 Materials and supplies 288 183 Work in progress 11 14 Finished goods 247 158 Other inventories 0 0 Prepayments 27 31 Total 574 387 Note 16 Short-term receivables As at 31 December EUR million 2022 2021 Short-term loan receivables Receivables from Group companies Loan receivables 536 764 Interest receivables 50 42 Total 585 806 Receivables from others Loan receivables 0 49 Commodity derivative receivables 18 23 Other receivables 29 5 Interest receivables 23 4 Total 69 82 Total current interest-bearing receivables 654 887 Current non-interest-bearing receivables Receivables from Group companies Trade receivables 150 112 Other receivables 183 60 Total 333 172 Receivables from others Trade receivables 219 200 Deferred tax assets 0 2 Other receivables 41 23 Accrued income 30 29 Total 290 254 Stora Enso may enter into factoring agreements to sell trade receivables in order to accelerate cash conversion. Nominally, such agreements led to the nominal derecognition of EUR 30,0 million (EUR 34,3 million in 2021) by the end of the financial period. The continuing involvement of Stora Enso in the sold receivables was estimated as being insignificant due to the non-recourse nature of the factoring arrangements involved. As at 31 December EUR million 2022 2021 Total current non-interest-bearing receivables 624 427 Total current receivables 1,278 1,314 Significant accruals Other accruals from Group -1 0 Tax-equivalent receivables 3 3 Advances paid 9 7 Other accruals 19 19 Total 30 29 91 Note 17 Financial securities As at 31 December EUR million 2022 2021 From Group companies 620 72 From others 510 535 Total 1,130 607 Note 18 Shareholders' equity As at 31 December EUR million 2022 2021 Restricted shareholders' equity Share capital 1 Jan 1,342 1,342 Share capital 31 Dec 1,342 1,342 Share premium fund 1 Jan 3,639 3,639 Share premium fund 31 Dec 3,639 3,639 Fair value reserve 1 Jan -6 -6 Increase (-) / Decrease (+) 32 0 Fair value reserve 31 Dec 25 -6 Total restricted equity 5,006 4,975 Change in share capital and number of shares are presented in Note 18 to the consolidated financial statements. Non-restricted shareholders' equity Invested unrestricted equity reserve 1 Jan 633 633 Invested unrestricted equity reserve 31 Dec 633 633 Retained earnings 1 Jan 1,356 955 Dividend distribution -434 -237 Retained earnings 31 Dec 922 719 Profit for the period 416 637 Total non-restricted equity 1,971 1,989 Total shareholders' equity 6,977 6,964 Calculation of distributable equity 31 Dec Fair value reserve 31 Dec 0 -6 Invested unrestricted equity reserve 31 Dec 633 633 Retained earnings 31 Dec 922 719 Profit for the period 416 637 Total 1,971 1,983 Note 19 Accumulated appropriations As at 31 December EUR million 2022 2021 Depreciation difference Intellectual property rights -1 -3 Goodwill 0 -1 Other non-current expenditure 1 0 Buildings and structures 34 33 Plant and equipment 257 205 Other tangible assets -1 0 Total 290 234 Note 20 Obligatory provisions As at 31 December EUR million 2022 2021 Restructuring provisions 3 3 Environmental provisions 20 7 Pension provisions 1 1 Total 24 11 Note 21 Deferred tax liabilities and receivables As at 31 December EUR million 2022 2021 Deferred tax liability due to depreciation difference -41 -30 Deferred tax receivables and liabilities due to derivatives -6 2 Deferred tax receivable due to provisions 5 3 Deferred tax receivables and liabilities due to other temporary differences -1 -1 Total deferred tax receivable -43 -27 Deferred tax liabilities and receivables excluding derivatives have not been recognised on the balance sheet. Note 22 Non-current liabilities As at 31 December EUR million 2022 2021 Non-current liabilities Bonds 2,165 2,502 Loans from credit institutions 100 7 Other non-current liabilities to group companies 0 4 Total 2,265 2,513 Liabilities with maturities later than five years Bonds 1,075 1,383 Other non-current liabilities 5 4 Total 1,080 1,387 Specifications of Bond loans are presented in Note 26 Interest-bearing liabilities in consolidated financial statements. 92 Note 23 Current liabilities As at 31 December EUR million 2022 2021 Current interest-bearing liabilities Liabilities to Group companies Other loans 1,966 1,677 Commodity derivative liabilities 18 23 Total 1,984 1,700 Liabilities to others Other loans 141 161 Interest due 32 27 Bonds 300 0 Loans from credit institutions 250 0 Total 722 187 Total current interest-bearing liabilities 2,706 1,888 Current non-interest-bearing liabilities Liabilities to Group companies Trade payables 90 83 Other loans 275 73 Commodity derivative liabilities 6 10 Accrued liabilities and deferred income 0 1 Total 371 166 Liabilities to equity accounted investments Trade payables 98 54 Total 98 54 Liabilities to others Advances received 5 5 Trade payables 468 375 Other loans 27 17 Accrued liabilities and deferred income 134 95 Total 635 491 Total current non-interest-bearing liabilities 1,105 712 Total current liabilities 3,811 2,599 Substantial accrued liabilities and deferred income Payroll payments accrued 66 58 Income tax accrued 28 0 Annual discounts 22 21 Other accrued liabilities and deferred income 18 17 Total 134 96 Note 24 Commitments and contingencies As at 31 December EUR million 2022 2021 For Group debt Guarantees 794 1,044 For joint venture debt Guarantees 32 82 On behalf of Associated companies Guarantees 5 0 On behalf of others Other commitments 36 36 Other commitments, own Leasing commitments, in next 12 months 8 6 Leasing commitments, after next 12 months 14 10 Lease commitments 5 5 Other commitments 12 13 Total 906 1,197 Guarantees 831 1,126 Leasing commitments 22 16 Lease commitments 5 5 Other commitments 47 48 Total 906 1,197 Contingent liabilities Stora Enso Oyj has implemented significant restructuring measures in recent years. These measures have included divestments of business operations and production units, as well as mill closures. These transactions include a risk of possible environmental or other obligations, the existence of which would be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. A provision has been recognised for obligations for which the related amount can be estimated reliably and the occurrence of which is considered likely. Stora Enso Oyj has been granted various investment subsidies and has given certain investment commitments in Finland. If committed planning conditions are not met, local officials may pursue administrative measures to reclaim some of the formerly granted investment subsidies or to impose penalties on Stora Enso Oyj and the outcome of such a process could result in a negative financial impact on Stora Enso Oyj. Stora Enso Oyj is party to legal proceedings that arise in the ordinary course of business and primarily involve claims arising out of commercial law. The company management does not believe that such processes as a whole, before any insurance compensation, would have significant impacts on the company’s financial position or profit from operations. Some of the most significant legal proceedings are described in Note 29 to the consolidated financial statements. 93 Note 25 Financial instruments Valuation of derivatives The fair value is defined as the amount at which a derivative instrument could be exchanged in an orderly transaction between market participants at the measurement date. The fair values of such instruments are determined on the following basis: •Foreign exchange forward contract fair values are calculated using forward exchange rates on the reporting date. •Foreign exchange option contract fair values are calculated using reporting date market rates together with common option pricing models. •Commodity contract fair values are computed with reference to quoted market prices on futures exchanges or other reliable market sources. •Interest rate swaps fair values are calculated using a discounted cash flow method. Fair value hierarchy Stora Enso uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: •Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; •Level 2: other techniques, for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly; •Level 3: techniques which use inputs that have a significant effect on the recorded fair values that are not based on observable market data. The parent company's derivatives are classified as Level 2 in the fair value hierarchy. Nominal and fair values of derivative instruments As at 31 December 2022 EUR million Nominal values Positive fair values Negative fair values Fair values, Net Cash flow hedges entered on behalf of the parent company and its subsidiaries, for which hedge accounting is applied in target companies Foreign exchange forwards 1,523 29 -26 3 Foreign exchange options 3,222 28 -28 0 Commodity contracts 10 18 -18 0 Interest rate swaps 442 28 0 28 Non-hedge accounted derivatives Foreign exchange forwards 1,493 8 -8 0 Commodity contracts 11 9 0 9 Total 6,702 120 -79 41 of which against subsidiaries 2,571 29 -45 -15 of which against external parties 4,131 91 -34 57 As at 31 December 2021 EUR million Nominal values Positive fair values Negative fair values Fair values, Net Cash flow hedges entered on behalf of the parent company and its subsidiaries, for which hedge accounting is applied in target companies Currency forwards 2,007 20 -22 -2 Currency options 1,811 13 -15 -1 Commodity contracts 33 27 -27 0 Interest rate swaps 467 1 -7 -6 Non-hedge accounted derivatives Currency forwards 702 2 -2 0 Total 5,020 63 -72 -9 of which against subsidiaries 2,091 29 -33 -4 of which against external parties 2,930 34 -40 -5 Fair value reserve The net amount of the parent company's unrealised cash flow hedge gains in the fair value reserve was EUR 25.3 (6.4) million, which was related to currency and interest rate derivatives. Currency and interest rate derivatives also include a gain of EUR 0.1 (a loss 0.1) million related to the time value of options. These unrealised gains are recognised in the income statement upon the maturity of the hedging contracts. The longest hedging contract will mature in 2027. However, the majority of the contracts are expected to mature during 2023. The ineffective portions of hedges are recognised as adjustments to financial items, revenue or materials and services according to the hedged item. During 2022 and 2021, there were no material ineffectiveness related to hedges recognised in the income statement. Derivatives used in currency cash flow hedges are mainly forward contracts and options. Swaps are mainly used in commodity hedges and interest rate cash flow hedges. Hedge gains and losses in operating profit Year ended 31 December EUR million 2022 2021 Cash flow hedge accounted derivatives Currency hedges -20 -2 Commodity hedges 0 3 Total -20 1 As adjustments to sales -20 -2 As adjustments to materials and services 0 3 Items realised from the fair value reserve that are recognised in the income statement -20 1 Net losses from cash flow hedges -20 1 Non-hedge accounted derivatives Currency derivatives -5 -4 Net gains on non-hedge accounted derivatives -5 -4 Net hedge gains/losses in operating profit -25 -3 94 Hedge gains and losses in financial items Year ended 31 December EUR million 2022 2021 Non-hedge accounted derivatives Currency derivatives -1 -11 Net gains/losses in financial items -1 -11 Sensitivity of currency derivatives to strengthening of EUR 31 December 2022 EUR million SEK USD GBP Currency change against EUR -5.0% -5.0% -5.0% Nominals of currency derivatives hedging next 12 months cash flow in EUR 0 -184 -16 Estimated effect on fair value reserve in EUR (net of taxes) 0 9 1 Sensitivity of commodity derivatives to price risk There were no outstanding commodity derivatives related to parent company's cash flows at the end of reporting period. Commodity derivative contracts are related to a closed position of Stora Enso Oyj's subsidiary. The market value is settled during year 2023. More detailed information about financial instruments are presented in Note 24 Financial risk management, Note 25 Fair values and Note 27 Derivatives to the consolidated financial statements. Note 26 Related party transactions 31 December EUR million 2022 2021 Related party transactions with associated companies and joint ventures: Purchase of materials and supplies during the year 63 88 Interest income on non-current loan receivables 0 1 Non-current loan receivables at year end 2 2 Trade payables at year end 92 54 The Group's principles for related party transactions are presented in Note 31 to the consolidated financial statements. 95 Signatures for the financial statements There have been no material changes in the Parent Company’s financial position since 31 December 2022. The liquidity of the Parent Company remains good and the proposed dividend does not risk the solvency of the Company. 30 January 2023 Antti Mäkinen Håkan Buskhe Chair Vice Chair Elisabeth Fleuriot Hock Goh Helena Hedblom Kari Jordan Christiane Kuehne Richard Nilsson Hans Sohlström Annica Bresky President and CEO 96 Auditor’s Report (Translation of the Finnish Original) To the Annual General Meeting of Stora Enso Oyj Report on the Audit of the Financial Statements Opinion In our opinion •the consolidated financial statements give a true and fair view of the group’s financial position and financial performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU •the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements in Finland and comply with statutory requirements. Our opinion is consistent with the additional report to the Audit Committee. What we have audited We have audited the financial statements of Stora Enso Oyj (business identity code 1039050-8) for the year ended 31 December 2022. The financial statements comprise: •the consolidated statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, cash flow statement and notes, including a summary of accounting principles •the parent company’s statement of financial position, income statement, cash flow statement and notes. Basis for Opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, the non-audit services that we have provided to the parent company and to the group companies are in accordance with the applicable law and regulations in Finland and we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in note 5 to the Financial Statements. Our Audit Approach Overview •We have applied an overall group materiality of EUR 60 million. •We performed audit procedures at 26 reporting components in 10 countries that are considered significant based on our overall risk assessment and materiality. •Valuation of forest assets •Provisions and contingent liabilities As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial statements as a whole. Overall group materiality EUR 60 million How we determined it Based on operating profit and total assets Rationale for the materiality benchmark applied We chose operating profit and total assets as the benchmarks because, in our view, they are relevant benchmarks against which the performance of the group is commonly measured by users of the financial statements. How we tailored our group audit scope We tailored the scope of our audit, taking into account the structure of the group, the accounting processes and controls, and the industry in which the group operates. The Group operates in a significant number of legal entities or “reporting components” globally. We determined the nature, timing and extent of audit work that needed to be performed at reporting components by us, as the group engagement team, or component auditors operating under our instruction. Where the work was performed by component auditors, we issued specific instructions to those auditors which included our risk analysis, materiality and global audit approach. We performed audit procedures at 26 reporting components in 10 countries that are considered significant based on our overall risk assessment and materiality. We have considered that the remaining reporting components do not present a reasonable risk of material misstatement for consolidated financial statements and thus our procedures related to these reporting components have been limited to targeted audit procedures over significant balances and to analytical procedures performed at group level. By performing the procedures above at reporting components, combined with additional procedures at the group level, we have obtained sufficient and appropriate evidence regarding the financial information of the group as a whole to provide a basis for our opinion on the consolidated financial statements. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Key audit matter in the audit of the group How our audit addressed the key audit matter Valuation of forest assets Refer to Note 1, Note 2 and Note 12 in the consolidated financial statements for the related disclosures. Forest assets comprise of forest land and biological assets excluding leased forest land assets. As of December 31, 2022 the fair value of the Group’s forest assets owned through subsidiaries, joint operations and associated companies was EUR 8 117 million. The fair value of EUR 5 653 million was related to biological assets and EUR 2 464 million was related to forest land. Forest assets in Sweden and Finland are recognised at fair value and valued by using a market approach method on the basis of the forest market transactions in the areas where the Stora Enso's forests are located. Market prices between areas vary significantly and judgement is applied to define relevant areas for market transactions used in the valuation. In addition, market transaction data is adjusted to consider characteristics and nature of the Group’s forest assets and to exclude certain non- forest assets and transactions considered as outliers compared to other transactions. Biological asset valuation is computed based on a discounted cash flow (DCF) method in accordance with IAS 41 Agriculture. For forest land the revaluation method is applied as defined in IAS 16 Property, plant and equipment. Forest land is revalued using a DCF method based on estimated future net cash flow streams related to trees to-be-planted in the future as well as other income, such as hunting rights, wind power leases and soil material sales. Total value of biological assets and forest land agrees to the market transaction based value of forest assets as a discount rate implied by the market transactions is used in the DCF method to value these assets. The value of biological assets outside Sweden and Finland is determined using discounted cash flows based on sustainable forest management plans taking into account the growth potential of one cycle. The one cycle varies depending on the geographic location and species. Determining the discounted cash flows require estimates of growth, harvest, sales price and costs. The other European forest lands are revalued by using a DCF method based on its estimated future net cash flow streams related to trees to-be-planted in the future as well as other non- forest related income. The forest land for the plantations is accounted at cost. Due to the level of judgment involved in the valuation of forest assets as well as the significance of forest assets to the Group's financial position, this is considered to be a key audit matter. We obtained an understanding of management’s forest assets valuation process, evaluated the design and tested the operating effectiveness of internal controls related to directly and indirectly owned forest assets. Our audit procedures over valuation of directly owned forest asset included: •Evaluation of the methodology adopted by management for the valuation; •Testing the mathematical accuracy of the model used for valuation; •Assessment of the discount rates applied in the valuation; •Assessment of the other key valuation assumptions; and •Validation of key inputs and data used in the valuation model including sales price assumptions, growth assumptions and cost assumptions. In addition, specific to the market transaction based valuation our audit procedures included: •Assessment of the definition of relevant areas for market transactions used in the valuation; •Assessment of the adjustments made to the market transaction data; and •Validation of key inputs and data used in the valuation model including market transaction data and volume of standing trees. We involved valuation specialists in the audit work over valuation of directly owned forest assets. Related to indirectly owned forest assets we have communicated with the auditors of the three largest associates and joint operations. As part of the communication, among other things, we have evaluated the key audit procedures performed related to valuation of forest assets. Lastly, we assessed the appropriateness of disclosures related to forest assets. Provisions and contingent liabilities Refer to Note 2, Note 22 and Note 29 in the consolidated financial statements for the related disclosures. As of 31 December 2022, the Group had environmental, restructuring and other provisions totaling EUR 124 million. In addition, the Group has disclosed significant open legal cases and other contingent liabilities in Note 29. The assessment of the existence of the present legal or constructive obligation, the analysis of the probability of the outflow of future economic benefits, and making a reliable estimate, require management’s judgement to ensure appropriate accounting and disclosures. Due to the level of judgement relating to recognition, valuation and presentation of provisions and contingent liabilities, this is considered to be a key audit matter. We obtained an understanding of management’s process to identify new obligations and changes in existing obligations. We analysed significant changes in material provisions from prior periods and obtained a detailed understanding of these changes and assumptions applied. Our audit procedures related to material provisions recognized included: •Assessment of the recognition criteria for the liability; •Evaluation of the methodology adopted by management for the measurement of the liability; •Testing of the mathematical accuracy of the measurement calculation; •Assessment of the discount rates applied in the measurement; and •Assessment of the other key measurement assumptions and inputs. We obtained legal letters on the main outstanding legal cases. We reviewed minutes of the board meetings including sub committees. We assessed the appropriateness of the presentation of the most significant contingent liabilities in the consolidated financial statements. We have no key audit matters to report with respect to our audit of the parent company financial statements. There are no significant risks of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014 with respect to the consolidated financial statements or the parent company financial statements. Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or to cease operations, or there is no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: •Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. •Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control. •Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. •Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern. •Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. •Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other Reporting Requirements Appointment We were first appointed as auditors by the annual general meeting on 28 March 2018. Other Information The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. In our opinion •the information in the report of the Board of Directors is consistent with the information in the financial statements •the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. If, based on the work we have performed, we conclude that there is a material misstatement of the report of the Board of Directors, we are required to report that fact. We have nothing to report in this regard. Other Statements We support the proposal that the financial statements are adopted. The proposal by the Board of Directors regarding the distribution of profits is in compliance with the Limited Liability Companies Act. We support that the Board of Directors and the Managing Director of the parent company should be discharged from liability for the financial period audited by us. Helsinki 13 February 2023 PricewaterhouseCoopers Oy Authorised Public Accountants Samuli Perälä Authorised Public Accountant (KHT)

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