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Stora Enso Oyj

Earnings Release Feb 1, 2019

3239_er_2019-02-01_bc9dd2ab-fd76-47f0-9802-a9f1004420ba.pdf

Earnings Release

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Stora Enso Full year financial results

January–December 2018

Sales growth continued

- Temporary operational challenges – Dividend proposal EUR 0.50 per share

Q4/2018 (compared with Q4/2017)

  • Sales increased 5.8% to EUR 2 657 (2 511) million, making Q4 the eighth consecutive quarter of sales growth. The growth was primarily due to favourable prices compared to a year ago, and active product mix management. Deliveries were lower, due to slightly weaker markets. Excluding the divested Puumerkki, sales increased 6.4%.
  • Operational EBIT decreased slightly to EUR 271 (280) million. Higher prices were more than offset by higher costs than expected. Main reasons for higher costs were temporary operational issues of approximately EUR 40 million, at six mills. Volumes declined due to market softness across all businesses with a negative impact of EUR 11 million. The operational EBIT margin was 10.2% (11.2%), above 10% for the sixth consecutive quarter.
  • EPS increased by 75.0% to EUR 0.39 (0.22) and EPS excl. IAC was EUR 0.33 (0.26).
  • Cash flow from operations decreased to EUR 323 (519) million, mainly due higher operative working capital mainly driven by increased sales. Cash flow after investing activities amounted to EUR 148 (262) million.
  • Balance sheet continued to strengthen, and net debt was reduced by EUR 161 million. The net debt to operational EBITDA ratio improved to 1.1 (1.4).
  • Operational ROCE was 12.4% (13.5%).

Year 2018 (compared with year 2017)

  • Sales of EUR 10 486 (10 045) million increased 4.4%. Excluding the divested Puumerkki, sales increased 5.6%
  • Operational EBIT of EUR 1 325 (1 004) million increased 32.0%, mainly due to favourable prices and active product mix management.
  • Operational ROCE was 15.5% (11.9%), well above the strategic target of 13%.

Main events Q4/2018

  • The previously announced restructuring of Stora Enso's forest associate Bergvik Skog is proceeding. The shareholders signed a binding agreement aiming at completing the transaction during the first half of 2019. Bergvik Skog sold forestland in Latvia and increased fair values of its biological assets. Stora Enso's share of the increase net of tax was EUR 49 million.
  • The feasibility study evaluating the potential conversion of the Oulu paper mill into packaging board production is ongoing. The environmental impact assessment was completed in December 2018.
  • The investment in a new cross laminated timber (CLT) unit at the Gruvön sawmill is being completed. Commercial production will begin during the first quarter of 2019 as planned.

  • Stora Enso increased its ownership up to 100% in the Sweden-based Cellutech AB.

  • Stora Enso launched a new sustainable RFID tag technology, ECO™ by Stora Enso, for intelligent packaging functionalities in supply chain, retail and ecommerce applications.
  • Stora Enso and startup Sulapac joined forces to develop renewable and biodegradable straws.
  • Stora Enso partners with H&M group and Inter IKEA group to industrialise the joint venture TreeToTextile, with the aim of developing new textile fibres in a sustainable way at attractive cost levels.

Profit protection programme

Stora Enso announced today a profit protection programme to strengthen competitiveness. The intention is to achieve annual cost reduction of EUR 120 million as well as reduction of capital expenditure by about EUR 50 million compared to the earlier forecast.

Outlook for 2019

Stora Enso introduces new way of giving annual outlook and quarterly guidance. The Group starts to guide absolute range for quarterly operational EBIT, instead of comparing quarterly sales and operational EBIT to the previous quarter qualitatively.

Stora Enso's year 2019 is expected to be largely in line with 2018, provided that the current trading conditions do not significantly change. Demand growth is expected to continue for Stora Enso's other businesses except for European Paper, for which demand is forecast to continue to decline in 2019. Group's sales are expected to be higher and costs are forecast to increase in 2019 compared to 2018. Stora Enso will implement measures to mitigate these cost increases and the increased uncertainties with the profit protection programme.

Guidance for Q1/2019

Q1/2019 operational EBIT is expected to be in the range of EUR 260–350 million. The Group's annual maintenance schedule has been changed from last year. During Q1/2019 there will be annual maintenance shutdowns at Veracel pulp mill and Ostro ka containerboard mill. The total negative impact of maintenance is estimated to be EUR 20 million more compared to Q1/2018. In Q1/2018 there were no annual maintenance shutdowns.

Net debt to operational EBITDA Operational return on capital employed (ROCE)

Key figures

Change % Change %
EUR million Q4/18 Q4/17 Q4/18-
Q4/17
Q3/18 Q4/18-
Q3/18
2018 2017 Change %
2018–2017
Sales 2 657 2 511 5.8% 2 585 2.8% 10 486 10 045 4.4%
Operational EBITDA 405 427 -5.1% 502 -19.3% 1 878 1 587 18.3%
Operational EBITDA margin 15.3% 17.0% 19.4% 17.9% 15.8%
Operational EBIT 271 280 -3.3% 358 -24.4% 1 325 1 004 32.0%
Operational EBIT margin 10.2% 11.2% 13.8% 12.6% 10.0%
Operating profit (IFRS) 356 236 50.7% 363 -1.9% 1 390 904 53.7%
Profit before tax excl. IAC 267 238 12.3% 305 -12.3% 1 190 826 44.1%
Profit before tax 315 209 50.7% 305 3.3% 1 210 742 63.1%
Net profit for the period 299 173 72.5% 204 46.5% 988 614 61.0%
Capital expenditure 237 267 -11.1% 129 84.4% 574 640 -10.3%
Capital expenditure excluding investments
in biological assets
215 251 -14.3% 109 98.0% 491 560 -12.3%
Depreciation and impairment charges excl. IAC 114 125 -8.5% 122 -6.4% 479 507 -5.5%
Net interest-bearing liabilities 2 092 2 253 -7.1% 2 172 -3.7% 2 092 2 253 -7.1%
Operational return on capital employed (ROCE) 12.4% 13.5% 16.7% 15.5% 11.9%
Earnings per share (EPS) excl. IAC, EUR 0.33 0.26 25.0% 0.31 3.8% 1.29 0.89 45.4%
EPS (basic), EUR 0.39 0.22 75.0% 0.27 42.6% 1.28 0.79 62.5%
Return on equity (ROE) 18.1% 11.6% 13.0% 15.5% 10.3%
Net debt/equity ratio 0.31 0.38 0.34 0.31 0.38
Net debt to last 12 months' operational EBITDA
ratio
1.1 1.4 1.1 1.1 1.4
Fixed costs to sales, % 25.0% 26.9% 23.3% 23.6% 25.1%
Equity per share, EUR 8.51 7.62 11.7% 8.16 4.3% 8.51 7.62 11.7%
Average number of employees 26 151 26 116 0.1% 26 545 -1.5% 26 067 26 206 -0.5%
TRI rate12 7.9 7.3 8.2% 4.6 71.7% 5.9 7.4 -20.3%

Operational key figures, items affecting comparability and other non-IFRS measures: The list of Stora Enso's non-IFRS measures and the calculation of the key figures are presented at the end of this report. See also the chapter Non-IFRS measures at the beginning of the Financials section.

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

1 As of January 2018 Stora Enso's joint operations Veracel and Montes del Plata are included in the Group's consolidated safety performance. 2017 figures restated accordingly for comparability.

2 Q3/18 recalculated due to additional data after the Q3/2018 Interim Report.

Deliveries and production

Q4/18 Q4/17 Change %
Q4/18-
Q4/17
Q3/18 Change %
Q4/18-
Q3/18
2018 2017 Change %
2018–
2017
Consumer board deliveries,
1 000 tonnes
701 712 -1.5% 727 -3.5% 2 914 2 816 3.5%
Consumer board production,
1 000 tonnes
694 734 -5.5% 730 -5.0% 2 922 2 871 1.8%
Containerboard external deliveries,
1 000 tonnes
213 274 -22.2% 272 -21.5% 985 1 023 -3.8%
Containerboard production,
1 000 tonnes
338 339 -0.2% 345 -2.1% 1 320 1 333 -1.0%
Corrugated packaging deliveries,
million m2
276 279 -1.1% 260 6.2% 1 059 1 103 -4.0%
Market pulp external deliveries,
1 000 tonnes
532 526 1.2% 476 11.8% 2 017 2 135 -5.5%
Wood product deliveries, 1 000 m3 1 285 1 308 -1.7% 1 242 3.5% 5 095 5 097 0.0%
Paper deliveries, 1 000 tonnes 1 121 1 146 -2.2% 1 161 -3.5% 4 591 4 713 -2.6%
Paper production, 1 000 tonnes 1 087 1 159 -6.2% 1 216 -10.5% 4 633 4 672 -0.8%

CEO comment

We continue to deliver sustainable profitable growth for the eighth consecutive quarter, with a sales increase of close to 6%. This was the highest fourth quarter sales since 2012 and the growth was primarily due to favourable prices and our active work on product mix and pricing. Due to slightly weaker markets, we have had lower levels of deliveries. We have experienced temporary operational issues at six of our mills, which has resulted in an EBITimpact of approximately EUR 40 million. Our operational EBIT decreased a bit over 3%, while operational EBIT margin exceeded 10% for the sixth consecutive quarter.

Looking at the whole year of 2018, sales are again well above 10 billion euros and our operational EBIT increased by 32%. Our operational ROCE was close to 16%, well above the strategic target of 13%. I am also very pleased with the quite significant increase in full year EPS of 62.5%. We continue to strengthen our balance sheet and net debt/EBITDA amounted to 1.1. Therefore, the Board of Directors proposes to the Annual General Meeting a dividend of 0.50 euros per share, an increase of 22% from last year, which is the fourth year in a row with an increase. This is a vote of confidence for the future of Stora Enso.

Our transformation projects are progressing well. The investment in a new cross laminated timber (CLT) unit at the Gruvön sawmill is being completed. Commercial production will begin during the first quarter of 2019 as planned. I am additionally encouraged that we have taken an important step in securing our competitive raw material supply for the long term. We, together with the other shareholders, have signed a binding agreement aiming at completing the Bergvik Skog forestry transaction during the first half of 2019.

We continue to launch new products that enable our customers to leverage digital solutions to further advance their business. The most recent one is a new sustainable RFID tag technology called ECO™ by Stora Enso. It is designed for intelligent packaging functionalities in supply chain, retail and e-commerce applications. We have also entered an interesting partnership with H&M group and Inter IKEA group to industrialise new textile fibres in a sustainable way at attractive cost levels.

As sustainability is in the core of our business, I am indeed proud that we have been top-rated in combatting global warming by the international non-profit organisation CDP. CDP has included us on its new 2018 Climate A List, which identifies the global companies that are taking leadership in climate action. Moreover, we have been acknowledged as the leading listed company on sustainability in a ranking of all companies listed on the Stockholm Stock Exchange and we have received the award of the Best sustainable brand of the year in our industry.

With reference to current geopolitical developments, there is a notable risk of escalation in protectionist measures to the extent that global trade could materially shrink. This would have major knock-on effects for inflation, business

sentiment, consumer outlook and ultimately global economic growth. Therefore, we have started to implement a profit protection programme of EUR 120 million to be kicked-off immediately, to better prepare for potential market weakness.

In these times of increased uncertainty and less visibility, 2019 is expected to continue in line with the 2018 for us, provided that the current trading conditions do not significantly change. I expect growth in demand to continue for all our businesses except for European paper, for which demand is forecast to continue to decline in 2019. Our sales are expected to be higher and costs are forecast to increase in 2019 compared to 2018. We will implement measures to mitigate these cost increases and the increased uncertainties with our profit protection programme.

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

Karl-Henrik Sundström, CEO

Dividend proposal per share

EUR 0.50

Operational ROCE (Q4/2018)

12.4%

(Target >13%)

Net debt to operational EBITDA

1.1 (Target <2.0)

Reconciliation of operational profitability

Change %
Q4/18-
Change %
Q4/18-
Change %
EUR million Q4/18 Q4/17 Q4/17 Q3/18 Q3/18 2018 2017 2018–2017
Operational EBITDA 405 427 -5.1% 502 -19.3% 1 878 1 587 18.3%
Depreciation and depletion of equity
accounted investments (EAI)
0 -2 87.1% -4 94.4% -7 -10 23.0%
Operational decrease in the value of
biological assets
-20 -20 1.4% -18 -10.0% -66 -66 -0.3%
Depreciation and impairment excl. IAC -114 -125 8.5% -122 6.4% -479 -507 5.5%
Operational EBIT 271 280 -3.3% 358 -24.4% 1 325 1 004 32.0%
Fair valuations and non-operational
items1
37 -15 n/m 5 n/m 45 -16 n/m
Items affecting comparability (IAC) 47 -29 262.5% 0 100.0% 20 -84 123.5%
Operating profit (IFRS) 356 236 50.7% 363 -1.9% 1 390 904 53.7%

1 Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the Group's share of income tax and net financial items of EAI.

Fourth quarter 2018 results (compared with Q4/2017)

Breakdown of change in sales Q4/2017 to Q4/2018

Sales Q4/2017, EUR million 2 511
Price and mix 7%
Currency -1%
Volume -1%
Other sales1 2%
Total before structural changes 6%
Structural changes2 0%
Total 6%
Sales Q4/2018, EUR million 2 657

1 Wood, energy, paper for recycling, by-products etc.

2 Asset closures, major investments, divestments and acquisitions

Group sales increased 5.8% or EUR 146 million to EUR 2 657 million, despite operational issues. This was the highest fourth quarter sales since 2012 and the eighth consecutive quarter of growth. Topline growth was driven by clearly higher sales prices in local currencies, as well as active mix management. This was only partly offset by lower deliveries, slightly negative currency impact and the divestment of Puumerkki in the Wood Products division in the fourth quarter of 2017.

Operational EBIT decreased 3% or EUR 9 million to EUR 271 (280) million. The operational EBIT margin decreased by 1% point to 10.2% (11.2%). Higher prices were more than offset by higher than expected costs. Main reasons for the higher temporary costs were operational issues of approximately EUR 40 million at Veitsiluoto, Nymölla, Montes del Plata, Skutskär, Imatra and Fors mills.

Clearly higher sales prices and active mix management, especially in Paper, Biomaterials, Wood Products and Packaging Solutions divisions, improved operational EBIT by EUR 168 million. The total volume impact was EUR 11 million negative, as deliveries were slightly lower in all divisions.

Variable costs continued to increase and were EUR 123 million higher, mainly due to increased wood, pulp, chemicals and logistic costs. Fixed costs increased by EUR 34 million and net foreign exchange impact decreased operational EBIT by EUR 2 million. Operational result from equity accounted investments, depreciations and closed units decreased profitability by EUR 7 million.

The planned and unplanned production downtime was 16% (9%) for paper, 9% (4%) for board, and 1% (0%) for wood products.

The average number of employees in the fourth quarter of 2018 was approximately 26 200 (26 100). The average number of employees in Europe was approximately 19 900 (19 500). In China, the average number of employees was approximately 5 300 (5 500).

Fair valuations and non-operational items had a positive net impact on the operating profit of EUR 37 million (negative EUR 15 million). The impact came mainly from an increase in fair valuation of forests of the Nordic equity accounted investment Bergvik Skog.

Earnings per share increased by 75.0% to EUR 0.39 (EUR 0.22) and earnings per share excluding items affecting comparability (IAC) increased to EUR 0.33 (EUR 0.26).

The Group recorded an item affecting comparability (IAC) with a positive impact of EUR 47 (negative EUR 29) million on its operating profit. The IAC relates to the Stora Enso's share of the disposal gain from associated company Bergvik Skog's Latvian subsidiary.

Net financial expenses at EUR 41 million were EUR 14 million higher. Net interest expenses at EUR 34 million increased by EUR 3 million. Other net financial expenses were EUR 3 (EUR 6) million. The net foreign exchange impact in respect of cash, interest-bearing assets and liabilities and related foreign-currency hedges amounted to a loss of EUR 4 (gain of EUR 10) million, mainly due to revaluation of foreign currency net debt in subsidiaries.

Breakdown of change in capital employed 31 December 2017 to 31 December 2018

EUR million Capital employed
31 December 2017 8 308
Capital expenditure less depreciation 59
Impairments and reversal of impairments -1
Fair valuation of biological assets -2
Costs related to growth of biological assets -66
Unlisted securities (mainly PVO) 104
Equity accounted investments 186
Net liabilities in defined benefit plans -27
Operative working capital and other interest-free items, net 384
Net tax liabilities -54
Translation difference -81
Other changes 14
31 December 2018 8 824

The operational return on capital employed (ROCE) in the fourth quarter of 2018 was 12.4% (13.5%).

Fourth quarter 2018 results (compared with Q3/2018)

Sales increased by EUR 72 million, or 2.8%, to EUR 2 657 million. Operational EBIT decreased by EUR 87 million to EUR 271 million. Sales prices in local currencies decreased operational EBIT by EUR 16 million, mainly due to lower pulp prices. Volume impact decreased operational EBIT by EUR 22 million, negatively impacted by too low water level at nearby lake, leading to Nymölla paper mill production restrictions. Variable costs were EUR 21 million higher, as increased wood and chemical costs were only partly offset by lower pulp costs. Fixed costs were seasonally high and decreased operational EBIT by EUR 47 million. The net foreign exchange impact increased the profitability by EUR 4 million. Operational result from equity accounted investments and depreciations increased operational EBIT by EUR 15 million.

Full year 2018 results (compared with full year 2017)

Breakdown of change in sales 2017 to 2018

Sales 2017, EUR million 10 045
Price and mix 8%
Currency -1%
Volume -1%
Other sales1 0%
Total before structural changes 5%
Structural changes2 -1%
Total 4%
Sales 2018, EUR million 10 486

1 Wood, energy, paper for recycling, by-products etc.

2 Asset closures, major investments, divestments and acquisitions

Sales increased 4.4% or EUR 441 million to EUR 10 486 million. Operational EBIT increased by EUR 321 million or 32% to EUR 1 325 million and represents a margin of 12.6% (10.0%), Improved sales prices and active mix management in all divisions increased operational EBIT by EUR 795 million. Lower volumes decreased operational EBIT by EUR 10 million. Variable costs were EUR 387 million higher, especially for wood and also for pulp, chemicals, and transportation. Fixed costs increased EUR 55 million, mainly due to higher personnel and maintenance costs. The net foreign exchange impact decreased operational EBIT by EUR 34 million. The operational result from equity accounted investments was EUR 8 million lower. The positive impact from lower depreciation was EUR 20 million.

Financing in the fourth quarter 2018 (compared with Q3/2018)

Capital structure

EUR million 31 Dec 2018 30 Sep 2018 30 Jun 2018 31 Mar 2018 31 Dec 2017
Operative fixed assets1 6 636 6 544 6 417 6 417 6 554
Equity accounted investments 1 729 1 596 1 543 1 536 1 600
Operative working capital, net 1 078 1 112 1 068 984 729
Non-current interest-free items, net -488 -475 -447 -456 -490
Operating Capital Total 8 955 8 777 8 581 8 481 8 393
Net tax liabilities -132 -145 -58 -67 -85
Capital Employed 8 824 8 631 8 523 8 414 8 308
Equity attributable to owners of the Parent 6 714 6 436 6 043 6 142 6 008
Non-controlling interests 18 23 38 46 47
Net interest-bearing liabilities 2 092 2 172 2 442 2 226 2 253
Financing Total 8 824 8 631 8 523 8 414 8 308

1 Operative fixed assets include goodwill, other intangible assets, property, plant and equipment, biological assets, emission rights, and unlisted securities.

Cash and cash equivalents net of overdrafts increased by EUR 145 million to EUR 1 128 million. Net debt was EUR 2 092 million, a decrease of EUR 80 million from the previous quarter. The ratio of net debt to the last 12 months' operational EBITDA was 1.1, unchanged compared to the ratio of 1.1 at the end of the previous quarter. The net debt/equity ratio on 31 December 2018 was 0.31 (0.34).

In the fourth quarter of 2018, Moody's Investors Service assigned Stora Enso Oyj an investment grade credit rating by upgrading the long-term issuer rating from Ba1 to Baa3 with stable outlook.

Stora Enso has EUR 600 million committed revolving credit facility that was fully undrawn at the year-end. Additionally, Stora Enso has access to various long-term sources of funding up to EUR 1 000 (900) million.

The fair value of Pohjolan Voima (PVO) shares, accounted for as equity investment fair valued through other comprehensive income under IFRS 9, decreased in the quarter by EUR 51 million to EUR 415 million. The change in the fair value was mainly driven by the decrease in electricity forward market prices.

Cash flow in the fourth quarter 2018 (compared with Q3/2018)

Operative cash flow

Change %
Q4/18-
Change %
Q4/18-
Change %
EUR million Q4/18 Q4/17 Q4/17 Q3/18 Q3/18 2018 2017 2018–2017
Operational EBITDA 405 427 -5.1% 502 -19.3% 1 878 1 587 18.3%
IAC on operational EBITDA 47 -24 297.8% 0 100.0% 20 -76 125.9%
Other adjustments -81 -38 -111.9% -24 -238.9% -104 -56 -85.6%
Change in working capital -50 154 -132.2% -22 -127.6% -428 37 n/m
Cash Flow from Operations 323 519 -37.8% 457 -29.3% 1 365 1 492 -8.5%
Cash spent on fixed and biological
assets
-155 -257 39.7% -128 -20.7% -525 -658 20.2%
Acquisitions of equity accounted
investments
-19 0 -100.0% -10 -98.2% -29 -9 -221.4%
Cash Flow after Investing
Activities
148 262 -43.3% 319 -53.4% 811 825 -1.7%

Fourth quarter 2018 cash flow after investing activities was EUR 148 million. Working capital increased by EUR 50 million, mainly due to higher sales and inventories. Cash spent on fixed and biological assets was EUR 155 million. Payments related to the previously announced provisions were EUR 3 million.

Capital expenditure

Additions to fixed and biological assets in the fourth quarter 2018 totalled EUR 237 million, of which EUR 215 million were fixed assets, in line with the normal annual pattern, and EUR 22 million biological assets. Depreciations and impairment charges totalled EUR 114 million. Additions in fixed and biological assets had a cash outflow impact of EUR 155 million. Capital expenditure in 2018 was EUR 574 million, slightly below the forecast maximum of EUR 600 million.

The main projects ongoing in the fourth quarter of 2018 were the malodorous gas handling and chemi-thermomechanical pulp (CTMP) flash drying at Imatra Mills in Finland, the Heinola Fluting Mill upgrade in Finland, the capacity extension and technology upgrade in the China Packaging unit, the fluff pulp investment at Skutskär Mill in Sweden, the dissolving pulp investment at Enocell Mill in Finland, the new cross laminated timber (CLT) production unit at Gruvön sawmill in Sweden, the Launkalne sawmill expansion in Latvia, and the new steam turbine project at Maxau Mill in Germany.

Capital expenditure and depreciation forecast 2019

EUR million Forecast 2019
Capital expenditure 540–590
Depreciation and operational decrease in biological asset values 590–630

Stora Enso's capital expenditure forecast for 2019 includes approximately EUR 100 million for the Group's biological assets and the capitalised leasing contracts according to IFRS 16 Leases of approximately EUR 40 million. The capital expenditure forecast takes into account a reduction of EUR 50 million as part of the new profit protection programme. The depreciation and operational decrease in biological asset values forecast includes also the IFRS 16 impact. The amount of operational decrease in biological asset values in the forecast is EUR 50–70 million.

Consumer Board division

Challenging market conditions continued, first price increases achieved

The ambition of the Consumer Board division is to be the global leader in high-quality virgin fibre cartonboard. We aim to be the preferred partner of customers and brand owners in premium end-use packaging and graphical segments. Our wide board and barrier coating selection is suitable for consumer packaging for liquid, food, pharmaceutical and luxury goods.

Change %
Q4/18-
Change %
Q4/18-
Change %
EUR million Q4/18 Q4/17 Q4/17 Q3/18 Q3/18 2018 2017 2018–2017
Sales 637 636 0.2% 648 -1.6% 2 622 2 516 4.2%
Operational EBITDA 74 119 -37.8% 101 -26.6% 423 477 -11.3%
Operational EBITDA margin 11.6% 18.7% 15.6% 16.1% 19.0%
Operational EBIT 24 69 -64.5% 50 -51.5% 231 285 -18.8%
Operational EBIT margin 3.8% 10.8% 7.8% 8.8% 11.3%
Operational ROOC 5.0% 14.2% 10.3% 11.9% 14.6%
Cash flow from operations 65 140 -53.8% 125 -48.1% 339 458 -26.1%
Cash flow after investing activities 13 73 -82.1% 91 -85.5% 177 218 -18.6%
Board deliveries, 1 000 tonnes 701 712 -1.5% 727 -3.5% 2 914 2 816 3.5%
Board production, 1 000 tonnes 694 734 -5.5% 730 -5.0% 2 922 2 871 1.8%

• Sales increased slightly, 0.2% or EUR 1 million to a record high Q4 of EUR 637 million. The positive effect of higher local sales prices of EUR 10 million was offset by lower volumes.

  • Operational EBIT decreased EUR 45 million to EUR 24 million. Significantly higher variable costs, especially for wood, pulp and chemicals, were only partly offset by improved sales prices. Carton board production was lower. Operational challenges at Imatra and Fors mills had a slight negative impact on profitability.
  • Operational ROOC declined to 5.0%, on the back of lower profitability.
  • Stora Enso and startup Sulapac joined forces to develop renewable and biodegradable straws, based on Sulapac's biocomposite material - made of wood and natural binders.
  • Stora Enso is investing EUR 22 million (SEK 232 million) at Skoghall Mill in Sweden in an expansion of the existing water treatment plant. Increased capacity and new, modern technology will enhance the water treatment process at the mill. The investment is expected to be completed in early 2020.
  • Stora Enso has also invested EUR 7 million (SEK 70 million) in modernisation of its chemical recycling at Skoghall Mill, and EUR 3 million (SEK 30 million) in a new cooling tower at Fors Mill.

Markets

Product Market Demand Q4/18
compared with Q4/17
Demand Q4/18
compared with Q3/18
Price Q4/18 compared
with Q4/17
Price Q4/18 compared
with Q3/18
Consumer board Europe Slightly stronger Slightly stronger Higher Stable
Sales and operational EBIT Operational ROOC

5.0%

(Target: >20%)

Scheduled annual maintenance shutdowns

2019 2018
Q1
Q2 Beihai Mill
Q3 Beihai and Imatra mills Imatra and Ingerois mills
Q4 Fors, Ingerois and
Skoghall mills
Skoghall and Fors mills

Packaging Solutions division

Record sales and profitability

The Packaging Solutions division provides fibre-based board materials and corrugated packaging products and services that are designed for a wide array of applications. Our renewable high-end packaging solutions serve leading converters, brand owners and retailers – including those in e-commerce that are looking to optimise performance, drive innovation and improve their sustainability.

EUR million Q4/18 Q4/17 Change %
Q4/18-Q4/17
Q3/18 Change %
Q4/18-Q3/18
2018 2017 Change %
2018–2017
Sales 352 334 5.3% 330 6.6% 1 344 1 255 7.1%
Operational EBITDA 76 74 3.3% 86 -10.7% 313 240 30.3%
Operational EBITDA margin 21.7% 22.2% 25.9% 23.3% 19.1%
Operational EBIT 59 58 1.7% 68 -13.3% 245 170 43.9%
Operational EBIT margin 16.8% 17.4% 20.6% 18.2% 13.5%
Operational ROOC 25.7% 26.9% 30.4% 27.2% 19.6%
Cash flow from operations 66 82 -19.2% 67 -0.6% 272 249 9.2%
Cash flow after investing
activities
41 39 4.0% 43 -4.8% 172 156 10.2%
Board deliveries (external),
1 000 tonnes
213 274 -22.2% 272 -21.5% 985 1 023 -3.8%
Board production,
1 000 tonnes
338 339 -0.2% 345 -2.1% 1 320 1 333 -1.0%
Corrugated packaging
deliveries, million m2
276 279 -1.1% 260 6.2% 1 059 1 103 -4.0%
Corrugated packaging
production, million m2
273 277 -1.4% 245 11.3% 1 048 1 102 -4.9%

• Sales increased 5.3%, or EUR 18 million, to all time high EUR 352 million, driven by improved prices and active sales mix management in the European-based operations. Total containerboard deliveries were stable.

  • Operational EBIT increased EUR 1 million to a record high Q4 of EUR 59 million. Clearly higher sales prices and good mix management in the European-based units were offset by lower sales volumes in China, higher raw material costs overall, and some spare part write-offs.
  • Operational ROOC at 25.7%, significantly above the long-term target of 20%, driven by profitability.
  • Stora Enso launched a new sustainable RFID tag technology called ECO™ by Stora Enso, designed for intelligent packaging functionalities in supply chain, retail and e-commerce applications. The technology enables paper-based RFID tags, providing a plastic-free and recyclable solution for packaging authentication.
  • Stora Enso divested 100% of the shares of its Swedish subsidiary June Emballage AB to its management team. June Emballage is a manufacturer specialized in small-batch custom-made transport packaging in corrugated board.

Markets

Product Market Demand Q4/18
compared with Q4/17
Demand Q4/18
compared with Q3/18
Price Q4/18 compared
with Q4/17
Price Q4/18 compared
with Q3/18
Virgin fibre-based
containerboard
Global Stable Stable Significantly higher Stable
Recycled fibre based
(RCP) containerboard
Europe Slightly stronger Slightly weaker Slightly higher Slightly lower
Corrugated packaging Europe Slightly stronger Slightly stronger Higher Stable

Sales and operational EBIT Operational ROOC

25.7%

(Target: >20%)

Scheduled annual maintenance shutdowns

2019 2018
Q1
Q2 Heinola and Varkaus
mills
Q3 Heinola and Ostro ka
kraft mills
Q4 Varkaus Mill

Biomaterials division

Good market conditions continued, signs of price pressure

The Biomaterials division offers a wide variety of pulp grades to meet the demands of paper, board, tissue, textile and hygiene product producers. We are maximising the business potential of the by-products extracted in our processes, such as tall oil and turpentine from biomass. Based on our strong innovation approach, all fractions of biomass, like sugars and lignin, hold substantial potential for use in various applications.

Change % Change %
EUR million Q4/18 Q4/17 Q4/18-
Q4/17
Q3/18 Q4/18-
Q3/18
2018 2017 Change %
2018–2017
Sales 415 364 14.1% 413 0.6% 1 635 1 483 10.3%
Operational EBITDA 116 95 22.6% 157 -25.6% 550 409 34.4%
Operational EBITDA margin 28.0% 26.1% 37.9% 33.6% 27.6%
Operational EBIT 91 61 49.6% 125 -27.0% 427 264 61.9%
Operational EBIT margin 22.0% 16.8% 30.3% 26.1% 17.8%
Operational ROOC 15.0% 10.4% 20.9% 17.9% 10.5%
Cash flow from operations 117 106 10.0% 120 -2.6% 438 404 8.4%
Cash flow after investing activities 80 59 34.8% 94 -15.0% 327 271 20.6%
Pulp deliveries, 1 000 tonnes 611 623 -1.9% 595 2.7% 2 432 2 597 -6.3%

• Sales increased 14.1% or EUR 51 million to another all-time high of EUR 415 million, driven by significantly higher sales prices.

• Operational EBIT was at record high Q4 level of EUR 91 million, an increase of EUR 30 million. Higher pulp prices were only partly offset by increased variable costs, especially for wood and energy. There were production problems at Montes del Plata and Skutskär mills during the quarter.

  • Operational ROOC reached the strategic target level of 15.0%.
  • Stora Enso increased its ownership up to 100% in the Sweden-based Cellutech AB, which specialises in development of new materials and applications based on cellulose, micro-fibrillated cellulose (MFC) and other wood-based components.
  • Stora Enso partners with H&M group and Inter IKEA group to industrialise TreeToTextile, a joint venture between H&M group, Inter IKEA group and innovator Lars Stigsson since 2014, with the aim of developing new textile fibres in a sustainable way at attractive cost levels.
  • LineoTM by Stora Enso, a lignin-based product launched in 2018, was awarded 'Innovative Product Award 2018' by the Institution of Chemical Engineers (IChemE). Stora Enso was recognised for creating a new bio-based, sustainable material to replace fossil-fuels used in coatings and adhesives.

Markets

Product Market Demand Q4/18
compared with Q4/17
Demand Q4/18
compared with Q3/18
Price Q4/18 compared
with Q4/17
Price Q4/18 compared
with Q3/18
Softwood pulp Europe Slightly weaker Stable Significantly higher Slightly lower
Hardwood pulp Europe Stable Weaker Higher Slightly lower
Hardwood pulp China Significantly stronger Slightly weaker Slightly lower Lower

Sales and operational EBIT Operational ROOC

15.0%

(Target: >15%)

Scheduled annual maintenance shutdowns

2019 2018
Q1 Veracel Mill
Q2 Enocell Mill
Q3 Enocell Mill Sunila Mill
Q4 Montes del Plata and
Skutskär mills
Montes del Plata and
Skutskär mills

Wood Products division

Another record quarter

The Wood Products division is a leading provider of innovative wood-based solutions. The product range covers all areas of construction, including massive wooden elements and wooden components. It also includes a variety of sawn timber goods and pellets for sustainable heating. The emerging product range of Biocomposites addresses the opportunities to replace plastics in consumer goods and creates potential in various demanding exterior applications in a cost-competitive way.

Change %
Q4/18-
Change %
Q4/18-
Change %
EUR million Q4/18 Q4/17 Q4/17 Q3/18 Q3/18 2018 2017 2018–2017
Sales 399 398 0.3% 400 -0.2% 1 622 1 669 -2.8%
Operational EBITDA 50 36 39.3% 56 -9.9% 199 147 35.2%
Operational EBITDA margin 12.6% 9.0% 13.9% 12.3% 8.8%
Operational EBIT 42 25 66.2% 48 -12.7% 165 111 48.5%
Operational EBIT margin 10.4% 6.3% 11.9% 10.2% 6.7%
Operational ROOC 27.1% 18.5% 31.6% 28.1% 20.5%
Cash flow from operations 38 40 -6.1% 57 -34.1% 147 152 -3.4%
Cash flow after investing activities 23 9 158.6% 37 -36.9% 80 90 -11.2%
Wood products deliveries,
1 000 m3
1 247 1 257 -0.7% 1 207 3.4% 4 932 4 926 0.1%

Sales excluding the divested Puumerkki operations increased 3.5%, or EUR 13 million, mainly due to improved sales prices in classic sawn.

• Operational EBIT increased EUR 17 million, to a record high Q4 of EUR 42 million. Clearly better prices and improved mix was only partly offset by higher fixed costs related to increase in operations.

• Operational ROOC continued at a record high level of 27.1%, clearly above the strategic target of 20%.

  • Stora Enso is investing a further EUR 9 million at Launkalne sawmill in Latvia to start production of pellets. The investment is expected to be completed during the first quarter of 2020.
  • The investment in a new cross laminated timber (CLT) unit at the Gruvön sawmill is being completed. Commercial production will begin during the first quarter of 2019 as planned.
  • During the quarter, Stora Enso was selected as the provider of wooden materials for several new building projects around the world. Together with B&K Structures, a leading sustainable frame contractor, we finalised the office building Green House in London, the second phase of Cambridge Health Road. The building is almost 50 000 ft², built to meet the rising demand from social change tenants who need flexible and affordable workspace in the capital.
  • The four-storey office building Mundo A in Antwerp (Belgium) was officially opened in December. It is a new dynamic meeting place with 170 workplaces hosting 35 organisations. The office was built by CLT-S who also finalised Troubleyn Elmer, a school extension in Brussels. The two-storey extension was built on an inner court surrounded by residential houses without any other access than aerial. All elements were lifted on spot over the existing buildings. Most of the CLT walls, LVL beams, decking and roofing will remain visible according to the architect's wish.

Markets

Product Market Demand Q4/18
compared with Q4/17
Demand Q4/18
compared with Q3/18
Price Q4/18 compared
with Q4/17
Price Q4/18 compared
with Q3/18
Wood products Europe Slightly stronger Stable Higher Stable

Sales and operational EBIT Operational ROOC

27.1%

(Target: >20%)

Paper division

Solid quarter impacted by operational challenges

Stora Enso is the second largest paper producer in Europe with an established customer base and a wide product portfolio for print and office use. Customers benefit from Stora Enso's broad selection of papers made from recycled and virgin fibre as well as our valuable industry experience, know-how and customer support.

Change % Change % Change
%
EUR million Q4/18 Q4/17 Q4/18-
Q4/17
Q3/18 Q4/18-
Q3/18
2018 2017 2018–
2017
Sales 761 726 4.8% 779 -2.4% 3 066 2 920 5.0%
Operational EBITDA 73 78 -5.8% 93 -20.9% 345 239 44.3%
Operational EBITDA margin 9.7% 10.7% 11.9% 11.3% 8.2%
Operational EBIT 45 46 -2.0% 65 -30.9% 234 128 82.7%
Operational EBIT margin 5.9% 6.3% 8.4% 7.6% 4.4%
Operational ROOC 22.9% 24.7% 33.5% 30.2% 14.8%
Cash flow from operations 31 102 -69.8% 78 -60.4% 222 259 -14.3%
Cash flow after investing activities 19 46 -59.1% 65 -70.8% 175 160 9.2%
Cash flow after investing activities
to sales, %
2.5% 6.3% 8.3% 5.7% 5.5%
Paper deliveries, 1 000 tonnes 1 121 1 146 -2.2% 1 161 -3.5% 4 591 4 713 -2.6%
Paper production, 1 000 tonnes 1 087 1 159 -6.2% 1 216 -10.5% 4 633 4 672 -0.8%

• Sales increased 4.8%, or EUR 35 million, to EUR 761 million, as clearly higher sales prices in all grades and a better mix were only partly offset by lower sales volumes.

• Operational EBIT decreased EUR 1 million to EUR 45 million. Significantly higher sales prices in all grades were offset by higher variable costs, especially in wood, pulp and chemicals . Production reductions caused by water shortage at Nymölla Mill and technical problems at the Veitsiluoto pulp mill had a EUR 16 million negative impact. Both mills are now back at normal operation. Softness of the coated woodfree paper market led to market curtailments at Oulu Mill.

• Cash flow after investing activities to sales ratio was 2.5% (6.3%), negatively impacted by temporary working capital challenges.

Markets

Product Market Demand Q4/18
compared with Q4/17
Demand Q4/18
compared with Q3/18
Price Q4/18 compared
with Q4/17
Price Q4/18 compared
with Q3/18
Paper Europe Weaker Slightly stronger Significantly higher Stable

Sales and operational EBITDA Cash flow after investing activities to sales1

2.5%

(Target: >7%)

Scheduled annual maintenance shutdowns

2019 2018
Q1
Q2 Nymölla Mill Oulu Mill
Q3 Veitsiluoto Mill Veitsiluoto Mill
Q4 Oulu Mill

1 The Paper division's financial target is cash flow after investing activities to sales (non-IFRS), because the division's goal is to generate cash flow for the Group so that it can transform into a renewable materials growth company.

Segment Other

The segment Other includes the Nordic forest equity-accounted investments, Stora Enso's shareholding in the energy company Pohjolan Voima, operations supplying wood to the Nordic and Baltic mills, plantations not connected to any mill site, and the Group's shared services and administration.

Change %
Q4/18-
Change %
Q4/18-
Change %
EUR million Q4/18 Q4/17 Q4/17 Q3/18 Q3/18 2018 2017 2018–2017
Sales 913 618 47.7% 831 9.9% 3 425 2 490 37.6%
Operational EBITDA 15 25 -40.7% 11 38.6% 48 75 -35.7%
Operational EBITDA margin 1.6% 4.0% 1.3% 1.4% 3.0%
Operational EBIT 9 21 -55.1% 2 n/m 23 46 -50.4%
Operational EBIT margin 1.0% 3.4% 0.2% 0.7% 1.8%
Cash flow from operations 7 49 -86.3% 11 -38.0% -52 -30 -74.1%
Cash flow after investing activities -27 36 -174.6% -10 -177.2% -119 -70 -70.5%

• Sales increased as transport and freight sales and silviculture services in Finland previously presented under other operating income were transferred to sales due to an accounting change. These are mainly internal services. The effect on external sales was EUR 11 million in the fourth quarter.

• Operational EBIT decreased by EUR 12 million to EUR 9 million due to extraordinary high profitability in Nordic forest associates in comparative period of 2017.

  • Stora Enso's forest associate Bergvik Skog divested its ownership in its subsidiaries in Latvia, where the company owned a total of 0.1 million hectares of forest land. Stora Enso's share of the disposal gain is disclosed as an IAC and is not included in the above table.
  • In November Stora Enso announced that the shareholders of Bergvik Skog AB had signed a binding agreement regarding the previously announced intent to restructure its ownership. With this agreement, the parties aim to complete the transaction during the first half of 2019. Stora Enso's forest holdings in Sweden will increase to 1.4 million hectares, of which 1.15 million hectares is productive forest land. Stora Enso's 49.8% share of the productive forest land in Bergvik totalled 0.9 million hectares at end of December 2018. The transaction is estimated to increase Stora Enso's balance sheet by approximately EUR 1.0 billion.

Sustainability in the fourth quarter 2018 (compared with Q4/2017)

Safety performance

TRI rate

Q4/18 Q4/17 Q3/18 2018 2017 Milestone Milestone to be
reached by
TRI rate 1 2 3 7.9 7.3 4.6 5.9 7.4 6.7 end of 2018

TRI (Total recordable incident) rate = number of incidents per one million hours worked. 1

For own employees. ² As of January 2018 Stora Enso's joint operations Veracel and Montes del Plata are included in the Group's consolidated safety performance. 2017 figures restated accordingly for comparability.

³ Q3/18 recalculated due to additional data after the Q3/2018 Interim Report.

The milestone for 2018 was achieved. Compared to 2017, a 20% reduction was achieved on the TRI-rate. The milestone for 2019 will be communicated in the Q1 Interim Report.

Suppliers

Implementation of the Supplier Code of Conduct

31 Dec 2018 30 Sep 2018 31 Dec 2017 Target
% of supplier spend covered by the Supplier Code of Conduct1 95% 95% 95% 95%

1 Excluding joint operations, intellectual property rights, leasing fees, financial trading, and government fees such as customs, and wood purchases from private individual forest owners.

The target to maintain the high coverage level of 95% was achieved.

Human rights

During the quarter, the focus was on finalising a compliance monitoring programme on the Group's eight highest priority human rights. The ambition is to have this work completed by the end of the first quarter of 2019.

Forests, plantations, and land use

Agreements with social landless movements and land occupations in Bahia, Brazil

31 Dec 2018 30 Sep 2018 31 Dec 2017
Productive area occupied by social movements not involved in
the agreement, ha
468 3 019 3 043

During the quarter, Veracel signed a new agreement with the social landless movements to complement the earlier agreed Sustainable Settlement Initiative. In the new agreement Veracel sells 3 300 hectares of previously occupied lands to the movements and related associations, and the movements will leave from Veracel's lands corresponding to 800 hectares. In addition, Veracel donates 225 hectares. After this new agreement, 468 hectares of productive land owned by Veracel remained occupied by social landless movements not involved in the Sustainable Settlement Initiative or in the new agreement. Veracel will continue to seek repossessions of remaining occupied areas through legal processes. Previously Veracel has voluntarily reserved 16 500 hectares to support the Sustainable Settlement Initiative. At the end of 2018, the total land area owned by Veracel was 213 500 hectares, of which 76 000 hectares are planted with eucalyptus for pulp production.

Carbon dioxide

Science-based target (SBT) performance compared to 2010 base-year level

Q4/18 Q4/17 Q3/18 2018 2017 Target Target to be
reached by
Reduction of fossil CO2e emissions per saleable
tonne of pulp, paper and board (kg/t) 1 2
-17% -16% -25% -18% -21% -31% end of 2030

1 Covering direct fossil CO2e emissions from production and indirect fossil CO2e emissions related to purchased electricity and heat (Scope 1 and 2). Excluding joint operations.

² Historical figures recalculated due to additional data after the Q3/2018 Interim Report.

In December 2017, Stora Enso's Science Based Targets to combat global warming were approved by the Science Based Target Initiative. With the new targets, Stora Enso commits to reduce greenhouse gas (GHG) emissions from operations 31% per tonne of pulp, paper and board produced by 2030 from a 2010 base-year. The full-year performance declined three percentage points from 2017, mainly due to the increased use of peat at two Finnish mills and a higher fossil content in the generation of the purchased electricity in Finland and Poland.

Other events

Stora Enso's Sustainability Report 2017 was chosen as best by Finnish financial journalists in a competition organised by seven organisations including the leading corporate responsibility network FIBS. The report was short-listed among the 10 best reports in the overall competition.

For the second time in a row, Stora Enso was top-ranked in both management quality and carbon performance by the Transition Pathway Initiative.

Stora Enso was top-rated in combatting global warming by the international non-profit organisation CDP. CDP has included Stora Enso on its new 2018 Climate A List, which identifies the global companies that are taking leadership in climate action.

In December 2017, Stora Enso's Science Based Targets to combat global warming were approved by the Science Based Target Initiative (SBTi). This initiative was founded by the UN Global Compact and three international non-profit organisations, including CDP, to encourage greater emissions reductions by companies in support of the Paris Agreement. These targets commit Stora Enso to reducing greenhouse gas (GHG) emissions from operations 31% per tonne of pulp, paper and board produced by 2030 compared to a 2010 base-year. Progress is reported in our quarterly interim reports.

Stora Enso was awarded 'Industry Leader 2018' in the Sustainable Brand Index™ B2B, which is the largest brand study on sustainability in the Nordics. The study covers over one hundred business-to-business brands across more than 10 industries in Sweden. Stora Enso was ranked as the most sustainable listed company in Sweden by Dagens Industri, Aktuell Hållbarhet and Lund University School of Economics and Management.

Stora Enso and the Forest Stewardship Council (FSC) signed an international partnership agreement establishing a long-term strategic collaboration to develop and promote sustainable forestry. Stora Enso promotes all main forest certification systems and is committed to responsible sourcing of wood and fibre only from sustainably managed forests and tree plantations.

Short-term risks and uncertainties

Increasing competition, and supply and demand imbalances in the paper, pulp, packaging, wood products and roundwood markets may affect Stora Enso's market share and profitability. Changes in the global economic and political environment, sharp market corrections, increasing volatility in foreign exchange rates and deteriorating economic conditions in the main markets could all affect Stora Enso's profits, cash flows and financial position.

With reference to current geopolitical circumstances, there is an increasing risk of an escalation in protectionist measures to the extent that global trade could materially shrink. This would have major knock-on effects for inflation, business sentiment, consumer sentiment and ultimately global economic growth.

Furthermore, as the global economy is moving into a new phase where the main central banks will begin to reduce or reverse their lenient monetary policy positions, such developments may give rise to significant uncertainty and negatively affect Stora Enso's business conditions.

Other risks and uncertainties include, but are not limited to, general industry conditions, such as changes in the cost or availability of raw materials, energy and transportation costs, unanticipated expenditures related to the cost of compliance with existing and new environmental and other governmental regulations and to actual or potential litigation, material disruption at one of our manufacturing facilities, risks inherent in conducting business through joint ventures, and other factors that can be found in Stora Enso's press releases and disclosures.

A more detailed description of risks is available in Stora Enso's Financial Report at storaenso.com/investors/annual-report.

Energy sensitivity analysis: the direct effect of a 10% increase in electricity, heat, oil and other fossil fuel market prices would have a negative impact of approximately EUR 12 million on operational EBIT for the next 12 months, after the effect of hedges.

Wood sensitivity analysis: the direct effect of a 10% increase in wood prices would have a negative impact of approximately EUR 203 million on operational EBIT for the next 12 months.

Pulp sensitivity analysis: the direct effect of a 10% increase in pulp market prices would have a positive impact of approximately EUR 130 million on operational EBIT for the next 12 months.

Chemical and filler sensitivity analysis: the direct effect of a 10% increase in chemical and filler prices would have a negative impact of approximately EUR 62 million on operational EBIT for the next 12 months.

A decrease of energy, wood, pulp or chemical and filler prices would have the opposite impact.

Foreign exchange rates 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 against the euro would be approximately positive EUR 184 million, negative EUR 99 million and positive EUR 38 million annual impact, respectively. Weakening of the currencies would have the opposite impact. These numbers are before the effect of hedges and assuming no changes occur other than a single currency exchange rate movement.

The Group incurs annual unhedged net costs worth approximately EUR 120 million in Brazilian real (BRL) in its operations in Brazil and approximately EUR 110 million in Chinese Renminbi (CNY) in its operations in China. For these flows, a 10% strengthening in the value of a foreign currency would have a EUR 12 million and EUR 11 million negative impact on operational EBIT, respectively.

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.

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.

Legal proceedings in Latin America

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 BRL 20 (EUR 5) 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.

Legal proceedings in Finland

Roundwood claim

In December 2009, the Finnish Market Court fined Stora Enso for competition law infringements in the market for roundwood in Finland from 1997 to 2004. Stora Enso did not appeal against the ruling. In March 2011, Metsähallitus of Finland initiated legal proceedings against Stora Enso, UPM and Metsäliitto claiming compensation for damage allegedly suffered due to the competition infringement. In its judgement rendered in June 2016, the Helsinki District Court dismissed Metsähallitus' claim for damages against Stora Enso, UPM and Metsäliitto. Metsähallitus appealed against the District Court's judgment to the Helsinki Court of Appeal, which rendered its judgement in the matter in May 2018. In its judgement, the Court of Appeal dismissed Metsähallitus' appeal and upheld the District Court's judgement. The total amount of Metsähallitus' claim jointly and severally against Stora Enso, UPM and Metsäliitto in the Court of Appeal was approximately EUR 125 million and the secondary claim against Stora Enso was approximately EUR 68 million. Metsähallitus applied for a leave of appeal from the Supreme Court. The Supreme Court decided on 29 January 2019 that the application to appeal is denied. This concludes the case without Stora Enso having any payment obligation towards Metsähallitus. Further the entire round woodclaim case can be now considered closed without any material financial effects on Stora Enso. The quarterly reporting will discontinue.

Legal proceedings in Sweden

Insurance claim

In July and August 2016, six Swedish insurance companies filed lawsuits in the Environmental Court and the District Court of Falun against Stora Enso, due to damage caused by the forest fire in Västmanland, Sweden, in 2014. The claimed amount is approximately SEK 300 (EUR 30) million. Stora Enso denies liability. So far the Environmental Court and thereafter the Environmental Court of Appeal has found that the Environmental code is not applicable on damage caused by fire.

Company fine

In January 2018, a Swedish prosecutor filed a lawsuit against Stora Enso and its supplier, due to the forest fire in Västmanland, Sweden in 2014, claiming a company fine of SEK 5 million each. Both Stora Enso and the supplier have disputed the claim.

Major events in 2018

Decisions of Annual General Meeting 2018

Stora Enso Oyj's Annual General Meeting (AGM) was held on 28 March 2018 in Helsinki. The AGM approved the proposal by the Board of Directors that the Company distributes a dividend of EUR 0.41 per share for the year 2017.

The AGM approved the proposal that of the current members of the Board of Directors – Anne Brunila, Jorma Eloranta, Elisabeth Fleuriot, Hock Goh, Christiane Kuehne, Richard Nilsson, Göran Sandberg, and Hans Stråberg – be re-elected members of the Board of Directors until the end of the following AGM and that Antti Mäkinen be elected new member of the Board of Directors for the same term of office. The AGM elected Jorma Eloranta as Chairman of the Board of Directors and Hans Stråberg as Vice Chairman.

The AGM approved the proposed annual remuneration for the Board of Directors as follows:

Chairman EUR 175 000 (2017: EUR 170 000)
Vice Chairman EUR 103 000 (2017: EUR 100 000)
Members EUR 72 000 (2017: EUR 70 000)

The AGM also approved the proposal that the annual remuneration for the members of the Board of Directors, be paid in Company shares and cash so that 40% will be paid in Stora Enso R shares to be purchased on the Board members' behalf from the market at a price determined in public trading, and the rest in cash.

The AGM also approved the proposed annual remuneration for the Board committees.

The AGM approved the proposal that PricewaterhouseCoopers Oy be elected as auditor until the end of the following AGM. PricewaterhouseCoopers Oy has notified the company that Samuli Perälä, APA, will act as the responsible auditor. It was resolved that the remuneration for the auditor shall be paid according to invoice approved by the Financial and Audit Committee.

Decisions by the Board of Directors

At its meeting held after the AGM, Stora Enso's Board of Directors elected Richard Nilsson (chairman), Jorma Eloranta, Antti Mäkinen and Christiane Kuehne as members of the Financial and Audit Committee.

Jorma Eloranta (chairman), Elisabeth Fleuriot and Hans Stråberg were elected members of the Remuneration Committee.

Anne Brunila (chairman), Hock Goh and Göran Sandberg were elected members of the Sustainability and Ethics Committee.

Shareholders' Nomination Board

The Shareholders' Nomination Board was appointed in September and it consists of the same members as for the previous period: Jorma Eloranta (Chairman of Stora Enso's Board of Directors), Hans Stråberg (Vice Chairman of Stora Enso's Board of Directors), Harri Sailas (Chairman of the Board of Directors of Solidium Oy), and Marcus Wallenberg (Chairman of the Board of Directors of FAM AB). The Shareholders' Nomination Board elected Marcus Wallenberg as its Chairman.

The Shareholders' Nomination Board proposes to the AGM to be held on 14 March 2019 that the Company's Board of Directors shall have nine (9) members.

The Shareholders' Nomination Board proposes that of the current members of the Board of Directors - Jorma Eloranta, Elisabeth Fleuriot, Hock Goh, Christiane Kuehne, Antti Mäkinen, Richard Nilsson, Göran Sandberg, and Hans Stråberg be reelected members of the Board of Directors until the end of the following AGM and that Mikko Helander be elected new member of the Board of Directors for the same term of office. The Shareholders' Nomination Board proposes that Jorma Eloranta be elected Chairman and Hans Stråberg be elected Vice Chairman of the Board of Directors. Anne Brunila has announced that she is not available for re-election to the Board of Directors.

Annual General Meeting 2019

Stora Enso Oyj's Annual General Meeting (AGM) will be held on Thursday 14 March 2019 at 4.00 p.m. Finnish time at Finlandia Hall, Mannerheimintie 13 e, Helsinki, Finland.

The proposals for decisions relating to the agenda of the AGM and the AGM notice are available on Stora Enso Oyj's website at storaenso.com/agm. Stora Enso Oyj's annual accounts, the report of the Board of Directors and the auditor's report for 2018 will be published on Stora Enso Oyj's website storaenso.com/investors/annual-report during the week commencing 11 February 2019. The proposals for decisions and the other meeting documents will also be available at the AGM. The minutes of the AGM will be available on Stora Enso Oyj's website from 28 March 2019 at the latest.

The Board of Directors' proposal for the payment of dividend

The Board of Directors proposes to the AGM that a dividend of EUR 0.50 per share be distributed for the year 2018.

The dividend would be paid to shareholders who on the record date of the dividend payment, 18 March 2019, 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 25 March 2019.

Share capital and shareholdings

During the fourth quarter of 2018, the conversions of 14 375 A shares into R shares were recorded in the Finnish trade register. During 2018, a total of 79 648 A-shares converted into R-shares were recorded in the Finnish Trade Register.

On 31 December 2018, Stora Enso had 176 312 672 A shares and 612 307 315 R shares in issue. The company did not hold its own shares. The total number of Stora Enso shares in issue was 788 619 987 and the total number votes at least 237 543 403.

Events after the period

On 29 January the Supreme Court denied the Finnish Metsähallitus' application to appeal in the roundwood claim case.

On 1 February Stora Enso announced a profit protection programme to strengthen competitiveness. The intention is to achieve annual cost reduction of EUR 120 million as well as reduction of capital expenditure by about EUR 50 million compared to the earlier forecast.

All figures in this Interim Report have been rounded to the nearest million, unless otherwise stated. Therefore, percentages and figures in this report may not add up precisely to the totals presented and may vary from previously published financial information.

This report has been prepared in Finnish, English and Swedish. If there are any variations in the content between the versions, the English version shall govern. This report is unaudited.

Helsinki, 1 February 2019 Stora Enso Oyj Board of Directors

Financials

Basis of Preparation

This unaudited interim financial report has been prepared in accordance with the accounting policies set out in International Accounting Standard 34 on Interim Financial Reporting and in the Group's Financial Report for 2017 with the exception of new and amended standards applied to the annual periods beginning on 1 January 2018.

All figures in this Interim Report have been rounded to the nearest million, unless otherwise stated. Therefore, percentages and figures in this report may not add up precisely to the totals presented and may vary from previously published financial information.

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 items affecting comparability are capital gains, additional write-downs or reversals of write-downs, provisions for planned restructuring and penalties. Items affecting comparability are normally disclosed individually if they exceed one cent per share.

Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets and the Group's share of income tax and net financial items of EAI.

Cash flow from operations (non-IFRS) is a Group specific way to present operative cash flow without hedging result from OCI and starting from operational EBITDA instead of operating profit.

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.

The full list of the non-IFRS measures is presented at the end of this report.

The following new and amended standards are applied to the annual periods beginning on 1 January 2018

Stora Enso has applied the following new and amended standards from 1 January 2018:

• The Group has adopted IFRS 9 Financial Instruments standard effective from 1 January 2018. The standard replaced IAS 39 Financial instruments: Recognition and Measurement. The standard includes revised requirements for recognition and measurement of financial assets and liabilities, impairment and general hedge accounting.

The new impairment model for financial assets requires recognition of loss allowances based on the expected credit loss model. At the adoption of IFRS 9, the Group has updated its impairment methodology to be in line with IFRS 9. For trade receivables, simplified approach has been implemented and loss allowances are recognised based on expected lifetime credit losses. For receivables measured at amortised cost or fair value through other comprehensive income, general approach has been implemented with the loss allowance being recognised based on 12-month expected credit losses if there has not been a significant increase in credit risk since the initial recognition. As a result of the new impairment methodology, the Group recognised EUR 3 million negative pre-tax transition adjustment to the opening balance of retained earnings for 2018.

The Group has evaluated its financial assets and liabilities based on the new classification and measurement criteria under IFRS 9. Stora Enso has categorised its financial assets to be measured at amortised cost, at fair value through other comprehensive income and at fair value through Income statement. For financial liabilities, the classification is based on amortised cost and fair value through Income Statement categories. On the date of initial application, 1 January 2018, the financial assets and liabilities of the Group were as follows:

Classification changes of financial instruments

Measurement category Carrying amount
Classification under IAS 39 Classification under IFRS 9 Original New Difference
Non-current financial assets
Listed securities Available-for-sale financial
assets
Fair value through Other
comprehensive income (FVTOCI)
21 21 0
Unlisted securities Available-for-sale financial
assets
Fair value through Other
comprehensive income (FVTOCI)
and Fair value through Income
Statement (FVTPL)
318 318 0
Non-current loan receivables Loans and receivables
(amortised cost)
Amortised cost 55 55 0
Current financial assets
Trade and other operative receivables Loans and receivables
(amortised cost)
Amortised cost and Fair value
through Other comprehensive
income (FVTOCI)
965 962 -3
Interest-bearing receivables Loans and receivables
(amortised cost)
Amortised cost 15 15 0
Derivatives (under hedge accounting) Fair value through other
comprehensive income
(FVTOCI)
Fair value through Other
comprehensive income (FVTOCI)
49 49 0
Derivatives (not under hedge
accounting)
Fair value through Income
Statement (FVTPL)
Fair value through Income
Statement (FVTPL)
16 16 0
Cash and cash equivalents Loans and receivables
(amortised cost)
Amortised cost 607 607 0
Total financial assets 2 046 2 043 -3
Non-current financial liabilities
Non-current debt Amortised cost Amortised cost 2 046 2 046 0
Current financial liabilities
Current portion of non-current debt Amortised cost Amortised cost 370 370 0
Interest-bearing liabilities Amortised cost Amortised cost 560 560 0
Derivatives (under hedge accounting) Fair value through other
comprehensive income
(FVTOCI)
Fair value through Other
comprehensive income (FVTOCI)
32 32 0
Derivatives (not under hedge
accounting)
Fair value through Income
Statement (FVTPL)
Fair value through Income
Statement (FVTPL)
4 4 0
Bank overdrafts Amortised cost Amortised cost 4 4 0
Contingent consideration Fair value through Income
Statement (FVTPL)
Fair value through Income
Statement (FVTPL)
20 20 0

The Group has elected to classify its equity investments in Pohjolan Voima shares and certain listed shares held by the Group, earlier classified as available-for-sale investments (AFS) under IAS 39, at fair value through other comprehensive income (FVTOCI) under IFRS 9. 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, with only dividend income being recognised in the Income Statement.

Trade and other operative payables Amortised cost Amortised cost 1 576 1 576 0 Total financial liabilities 4 612 4 612 0

Under IFRS 9 the changes in the time value of currency options used as hedges of foreign currency sales will be recognised in Other Comprehensive income to the extent that they relate to the hedged items, and will be reclassified from equity to profit or loss in the same period or periods during which the expected future cash flows will affect the profit or loss. The change will reduce Income Statement volatility compared to IAS 39. The outstanding option time value as at the date of adoption amounted to EUR 1 million negative and was recognised as a transition adjustment to the opening balance of retained earnings for 2018.

Figures in the comparison periods have not been restated.

• The Group has adopted IFRS 15 Revenue from Contracts with Customers standard and related clarifications effective from 1 January 2018. The standard replaced IAS 18 Revenue and IAS 11 Construction Contracts standards and related interpretations. The new standard specifies how and when revenue is recognised. The standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The Group has reviewed its performance obligations, main customer contracts for each division and evaluated the impact of IFRS 15 based on the amount and timing of revenue recognition.

In conclusion, the adoption of IFRS 15 has no significant impact on the substance of the principles applied by the Group to the amount and timing of revenue recognition. The revenue recognition principles and delivery terms applied by the Group remain generally unaltered and are presented in Stora Enso's Financial Report 2017.

The Group has adopted the modified retrospective application of IFRS 15 from 1 January 2018, without adjusting prior reporting periods. The new guidance is applied only to contracts that are not completed at the adoption date. No adjustment to the opening balance of retained earnings has been made as there are no changes in the timing of the revenue recognition. As from 1 January 2018 non-significant amounts of transport and freight sales and silviculture services previously presented under Other operating income have been reclassified to the Sales line in the Consolidated Income Statement. In 2018 the amount of these items was EUR 56 million. The previous year's figures have not been restated due to immateriality.

  • Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions effective from 1 January 2018 were adopted prospectively without restatement of comparative periods. Tax laws or regulations may require the Group to withhold an amount for an employee's tax obligation associated with a share-based payment and transfer that amount, normally in cash, to the tax authority on the employee's behalf. To fulfil this obligation, the Group withholds the number of equity instruments equal to the monetary value of the employee's tax obligation from the total number of equity instruments that otherwise would have been issued to the employee upon vesting of the share-based payment. According to the IFRS 2 amendments, such transactions are to be classified in their entirety as equity-settled share-based payment transactions, even though the tax obligation is paid in cash on behalf of the employee. Resulting from the application of the amendments, the Group recognised EUR 9 million positive transition adjustment to the opening balance of retained earnings for 2018.
  • Other amended IFRS standards and interpretations are not relevant to the Group.

Future standard changes endorsed by the EU but not yet effective in 2018

• IFRS 16 Leases. This standard replaces the current guidance in IAS 17 and related interpretations and is a significant change in accounting by lessees in particular. IFRS 16 requires lessees to recognize a lease liability reflecting future lease payments and a right-of-use (ROU) asset for virtually all lease contracts. In accordance IFRS 16, 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. Amendment in lease definition have no material effect to the Group.

Stora Enso adopted IFRS 16 on 1 January 2019, using the modified retrospective approach and therefore the comparative information will not be restated and continues to be reported under IAS 17 and IFRIC 4. Effect of initial application of IFRS 16 is recognized in balance sheet at 1 January 2019. At transition, lease liabilities are measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rates. ROU assets are measured an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The Group allocates the consideration in the contract to each lease component and will separate non-lease components if these are identifiable.

The Group has elected not to recognise ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low value assets. The Group has also applied the exemption not to capitalise contracts which are ending in 2019. The Group has defined low value asset exemption to include leases in which the underlying asset is not material to Stora Enso. The assessment of whether the underlying asset is material and is within the scope or excluded from the recognition requirements of IFRS 16 is based on the concept of materiality in the Conceptual Framework and IAS 1. Leases of low value assets are mainly including 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.

Undiscounted operating lease commitments at the end of Q4 are EUR 731 million. In accordance with the current assessment of the impact of implementing IFRS 16 indicates that a lease liability in the range of EUR 500–550 million will be recognised. It is expected that operating profit (IFRS) / operational EBIT will somewhat increase since the interest component of leasing payments will be presented in financial expenses. It is also assumed that operational EBITDA will increase, since both depreciation and interest component will be presented below EBITDA. Impact on EPS is not expected to be material. Operating cash flow will increase and financing cash flow will decrease since most of the lease payments are shown in financing cash flow, no impact to total cash flow.

In addition certain land use contracts, amounting to EUR 76 million, before IFRS 16 transition accounted as intangible assets will be classified on transition to IFRS 16 as leases. All the liabilities related to the arrangements have already been settled in previous periods and therefore there is no effect on the lease liability or income statement.

Condensed consolidated income statement

EUR million Q4/18 Q4/17 Q3/18 2018 2017
Sales 2 657 2 511 2 585 10 486 10 045
Other operating income 27 53 19 92 147
Change in inventories of finished goods and WIP -2 22 58 125 28
Materials and services -1 602 -1 507 -1 527 -6 157 -5 945
Freight and sales commissions -232 -239 -232 -932 -968
Personnel expenses -339 -342 -308 -1 330 -1 331
Other operating expenses -133 -143 -115 -526 -551
Share of results of equity accounted investments 112 31 25 181 66
Change in net value of biological assets -17 -20 -20 -68 -72
Depreciation, amortisation and impairment charges -114 -130 -122 -479 -515
Operating Profit 356 236 363 1 390 904
Net financial items -41 -27 -58 -180 -162
Profit before Tax 315 209 305 1 210 742
Income tax -16 -36 -101 -221 -128
Net Profit for the Period 299 173 204 988 614
Attributable to:
Owners of the Parent 304 174 214 1 013 625
Non-controlling interests -5 -1 -10 -24 -11
Net Profit for the Period 299 173 204 988 614
Earnings per Share
Basic earnings per share, EUR 0.39 0.22 0.27 1.28 0.79
Diluted earnings per share, EUR 0.39 0.22 0.27 1.28 0.79

Consolidated statement of comprehensive income

EUR million Q4/18 Q4/17 Q3/18 2018 2017
Net profit/loss for the period 299 173 204 988 614
Other Comprehensive Income (OCI)
Items that will Not be Reclassified to Profit and Loss
Equity instruments at fair value through other comprehensive
income
-58 0 151 97 0
Actuarial gains and losses on defined benefit plans -20 57 -4 -24 61
Income tax relating to items that will not be reclassified 6 -9 1 5 -10
-73 48 148 78 51
Items that may be Reclassified Subsequently to Profit and
Loss
Share of OCI of EAIs that may be reclassified 0 2 1 4 5
Currency translation movements on equity net investments (CTA) 33 -60 17 -36 -288
Currency translation movements on non-controlling interests 0 1 -1 0 -3
Net investment hedges -3 4 -3 -14 40
Cash flow hedges 21 5 18 -24 32
Cost of hedging - time value of options -1 0 1 -2 0
Non-controlling interests' share of cash flow hedges -1 0 -1 -2 0
Available-for-sale investments 0 38 0 0 39
Income tax relating to items that may be reclassified -4 -3 -5 7 -10
46 -13 27 -68 -185
Total Comprehensive Income 272 208 379 999 480
Attributable to:
Owners of the Parent 277 208 391 1 025 494
Non-controlling interests -6 0 -12 -27 -14
Total Comprehensive Income 272 208 379 999 480

CTA = Cumulative Translation Adjustment

OCI = Other Comprehensive Income

EAI = Equity Accounted Investments

Condensed consolidated statement of financial position

EUR million 31 Dec 2018 31 Dec 2017
Assets
Goodwill
O
243 237
Other intangible assets
O
254 229
Property, plant and equipment
O
5 234 5 310
5 731 5 776
Biological assets
O
457 448
Emission rights
O
26 12
Equity accounted investments
O
1 729 1 600
Listed securities
I
13 21
Unlisted securities
O
422 318
Non-current loan receivables
I
54 55
Deferred tax assets
T
120 154
Other non-current assets
O
48 50
Non-current Assets 8 601 8 434
Inventories
O
1 567 1 321
Tax receivables
T
9 9
Operative receivables
O
1 487 1 319
Interest-bearing receivables
I
55 80
Cash and cash equivalents
I
1 130 607
Current Assets 4 248 3 336
Total Assets 12 849 11 770
Equity and Liabilities
Owners of the Parent 6 714 6 008
Non-controlling Interests 18 47
Total Equity 6 732 6 055
Post-employment benefit provisions
O
401 377
Other provisions
O
101 111
Deferred tax liabilities
T
168 166
Non-current debt
I
2 265 2 046
Other non-current operative liabilities
O
34 52
Non-current Liabilities 2 970 2 752
Current portion of non-current debt
I
403 370
Interest-bearing liabilities
I
675 596
Bank overdrafts
I
1 4
Other provisions
O
16 23
Other operative liabilities
O
1 960 1 888
Tax liabilities
T
92 82
Current Liabilities 3 147 2 963
Total Liabilities 6 117 5 715
Total Equity and Liabilities 12 849 11 770

Items designated with "O" comprise Operating Capital

Items designated with "I" comprise Net Interest-bearing Liabilities

Items designated with "T" comprise Net Tax Liabilities

Condensed consolidated statement of cash flows

EUR million 2018 2017
Cash Flow from Operating Activities
Operating profit 1 390 904
Hedging result from OCI 0 0
Adjustments for non-cash items 404 551
Change in net working capital -428 37
Cash Flow Generated by Operations 1 365 1 492
Net financial items paid -121 -193
Income taxes paid, net -152 -97
Net Cash Provided by Operating Activities 1 092 1 202
Cash Flow from Investing Activities
Acquisition of subsidiary shares and business operations, net of disposed cash -4 0
Acquisitions of equity accounted investments -29 -9
Acquisitions of unlisted securities -3 -8
Proceeds from disposal of subsidiary shares and business operations, net of disposed cash 42 -4
Proceeds from disposal of shares in equity accounted investments 3 5
Proceeds from disposal of unlisted securities 1 0
Proceeds and advances from disposal of intangible assets and property, plant and equipment 9 45
Income taxes paid on disposal of property 0 -15
Capital expenditure -525 -658
Proceeds from non-current receivables, net 8 -52
Net Cash Used in Investing Activities -497 -696
Cash Flow from Financing Activities
Proceeds from issue of new long-term debt 578 425
Repayment of long-term debt -358 -1 034
Change in short-term borrowings 39 76
Dividends paid -323 -292
Buy-out of interest in subsidiaries from non-controlling interests -2 0
Equity injections from, less dividends to, non-controlling interests -2 -1
Purchase of own shares1 -5 -3
Net Cash Provided by Financing Activities -73 -829
Net Change in Cash and Cash Equivalents 521 -323
Translation adjustment 4 -23
Net cash and cash equivalents at the beginning of period 603 949
Net Cash and Cash Equivalents at Period End 1 128 603
Cash and Cash Equivalents at Period End 1 130 607
Bank Overdrafts at Period End -1 -4
Net Cash and Cash Equivalents at Period End 1 128 603
Disposals
Cash and cash equivalents 2 7
Other intangible assets, property, plant and equipment and biological assets 38 3
Working capital -2 1
Interest-bearing assets and liabilities 0 -1
Non-controlling interests -1 0
Net Assets in Divested Companies 38 10
Gain on sale, excluding CTA release and transaction costs 6 -9
Total Disposal Consideration 44 1
Cash part of consideration 44 0
Non-cash/ not received part of consideration 0 1
Total Disposal Consideration 44 1
Cash Received Regarding Previous Year Disposals 0 3

1 Own shares purchased for the Group's share award programme. The Group did not hold any of its own shares at 31 December 2018.

Statement of changes in equity

Fair Valuation Reserve
EUR million Share
Capital
Share
Premium
and Reserve
fund
Invested
Non
Restricted
Equity Fund
Treasury
Shares
Step
Acquisition
Revaluation
Surplus
Equity
invest
ments
through
OCI
Available
for-Sale
Invest
ments
Cash Flow
Hedges
OCI of
Equity
Accounted
Invest
ments
CTA and Net
Investment
Hedges
Retained
Earnings
Attributable to
Owners of the
Parent
Non
controlling
Interests
Total
Balance at 31 December 2016 1 342 77 633 0 4 0 162 -11 -19 -32 3 650 5 806 62 5 868
Profit/loss for the period 0 0 0 0 0 0 0 0 0 0 625 625 -11 614
OCI before tax 0 0 0 0 0 0 39 32 5 -248 61 -111 -3 -114
Income tax relating to components
of OCI
0 0 0 0 0 0 4 -6 -8 -10 -20 -20
Total Comprehensive Income 0 0 0 0 0 0 43 26 5 -256 676 494 -14 480
Dividend 0 0 0 0 0 0 0 0 0 0 -292 -292 -1 -293
Purchase of treasury shares 0 0 0 -3 0 0 0 0 0 0 0 -3 -3
Share-based payments 0 0 0 3 0 0 0 0 0 0 0 3 3
Balance at 31 December 2017 1 342 77 633 0 4 0 205 15 -14 -288 4 034 6 008 47 6 055
Adoption of IFRS 2 and IFRS 91 205 -205 8 8 8
Balance at 1 January 2018 1 342 77 633 0 4 205 0 15 -14 -288 4 042 6 016 47 6 063
Profit/loss for the period 0 0 0 0 0 0 0 0 0 0 1 013 1 013 -24 988
OCI before tax 0 0 0 0 0 97 0 -26 4 -50 -24 0 -2 -2
Income tax relating to components
of OCI
0 0 0 0 0 1 0 5 0 3 4 13 0 13
Total Comprehensive Income 0 0 0 0 0 98 0 -22 4 -47 993 1 026 -27 999
Dividend 0 0 0 0 0 0 0 0 0 0 -323 -323 -2 -326
Acquisitions and disposals 0 0 0 0 0 0 0 0 0 0 0 0 -2 -2
NCI buy-out 0 0 0 0 0 0 0 0 0 0 -2 -2 2 0
Purchase of treasury shares 0 0 0 -5 0 0 0 0 0 0 0 -5 0 -5
Share-based payments 0 0 0 5 0 0 0 0 0 0 -3 2 0 2
Balance at 31 December 2018 1 342 77 633 0 4 304 0 -7 -11 -335 4 706 6 714 18 6 732

1 See Basis of Preparation relating to new and amended standards applied to annual periods beginning in January 2018.

CTA = Cumulative Translation Adjustment

OCI = Other Comprehensive Income

NCI = Non-controlling Interests

Goodwill, other intangible assets, property, plant and equipment, and biological assets

EUR million 2018 2017
Carrying value at 1 January 6 224 6 518
Additions in tangible and intangible assets 491 560
Additions in biological assets 83 80
Costs related to growth of biological assets -66 -66
Acquisition of subsidiary companies 5 0
Disposals -5 -12
Disposals of subsidiary companies -37 -3
Depreciation and impairment -479 -515
Fair valuation of biological assets -2 -6
Translation difference and other -26 -332
Statement of Financial Position Total 6 187 6 224

Borrowings

EUR million 31 Dec 2018 31 Dec 2017
Bond loans 1 523 1 352
Loans from credit institutions 1 140 1 029
Finance lease liabilities 1 29
Other non-current liabilities 4 6
Non-current Debt including Current Portion 2 668 2 416
Short-term borrowings 566 525
Interest payable 40 35
Derivative financial liabilities 68 36
Bank overdrafts 1 4
Total Interest-bearing Liabilities 3 344 3 016
EUR million 2018 2017
Carrying value at 1 January 3 016 3 774
Proceeds of new long-term debt 578 425
Repayment of long-term debt -358 -1 034
Change in short-term borrowings and interest payable 46 54
Change in derivative financial liabilities 32 -21
Translation differences and other 30 -182

Total Interest-bearing Liabilities 3 344 3 016

Commitments and contingencies

EUR million 31 Dec 2018 31 Dec 2017
On Own Behalf
Mortgages 2 2
Operating leases, in next 12 months 100 81
Operating leases, after next 12 months 631 644
Other commitments 6 6
On Behalf of Equity Accounted Investments
Guarantees 4 4
On Behalf of Others
Guarantees 23 26
Other commitments 13 0
Total 779 763
Mortgages 2 2
Guarantees 27 30
Operating leases 731 725
Other commitments 19 6
Total 779 763

Capital Commitments

EUR million 31 Dec 2018 31 Dec 2017
Total 111 152

The Group's direct capital expenditure contracts include the Group's share of direct capital expenditure contracts in joint operations.

Sales by segment

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Consumer Board 2 622 637 648 691 646 2 516 636 639 630 611
Packaging Solutions 1 344 352 330 329 333 1 255 334 318 313 290
Biomaterials 1 635 415 413 413 394 1 483 364 379 371 369
Wood Products 1 622 399 400 430 393 1 669 398 415 440 416
Paper 3 066 761 779 754 772 2 920 726 727 719 748
Other 3 425 913 831 844 838 2 490 618 593 628 651
Inter-segment sales -3 229 -820 -815 -797 -797 -2 288 -565 -562 -573 -588
Total 10 486 2 657 2 585 2 664 2 579 10 045 2 511 2 509 2 528 2 497

Disaggregation of revenue

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Product sales 10 346 2 623 2 550 2 626 2 547 9 957 2 489 2 486 2 507 2 475
Service sales1 140 34 35 38 32 88 22 23 21 22
Total 10 486 2 657 2 585 2 664 2 579 10 045 2 511 2 509 2 528 2 497

Sales comprise mainly sales of products and are typically recognised at a point in time when Stora Enso transfers control of products to a customer.

1 As from 1 January 2018, transport and freight sales and silviculture services in Finland previously presented under other operating income are presented in sales. In 2018, the amount of the external sales items was EUR 56 million at Group level, in addition to the internal service sales eliminations. The previous periods have not been restated due to immateriality.

Product and Service sales by segment

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Consumer Board Product sales 2 611 634 645 688 643 2 505 633 636 628 608
Service sales 11 3 3 3 3 11 3 3 2 3
Packaging Solutions Product sales 1 340 351 329 328 332 1 251 333 317 312 289
Service sales 4 1 1 1 1 4 1 1 1 1
Biomaterials Product sales 1 610 410 407 407 387 1 453 357 371 364 361
Service sales 25 5 6 6 7 30 7 8 7 8
Wood Products Product sales 1 619 398 399 429 392 1 667 398 415 439 415
Service sales 3 1 0 1 1 2 0 0 1 1
Paper Product sales 3 043 755 773 748 767 2 910 724 726 716 744
Service sales 23 6 5 7 5 10 2 1 3 4
Other Product sales 2 430 665 579 587 599 2 240 551 528 566 595
Service sales 995 248 252 257 239 250 67 65 62 56
Inter-segment sales Product sales -2 307 -590 -582 -562 -573 -2 069 -507 -507 -518 -537
Service sales -922 -229 -232 -236 -224 -219 -58 -55 -55 -51
Total 10 486 2 657 2 585 2 664 2 579 10 045 2 511 2 509 2 528 2 497

Operational EBIT by segment

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Consumer Board 231 24 50 65 91 285 69 86 69 61
Packaging Solutions 245 59 68 57 61 170 58 48 40 24
Biomaterials 427 91 125 109 102 264 61 88 62 53
Wood Products 165 42 48 47 29 111 25 29 35 22
Paper 234 45 65 54 69 128 46 29 11 42
Other 23 9 2 -5 17 46 21 10 2 13
Operational EBIT 1 325 271 358 327 369 1 004 280 290 219 215
Fair valuations and non
operational items1
45 37 5 17 -14 -16 -15 0 -6 5
Items affecting comparability 20 47 0 -28 0 -84 -29 -20 -8 -27
Operating Profit (IFRS) 1 390 356 363 317 355 904 236 270 205 193
Net financial items -180 -41 -58 -60 -22 -162 -27 -46 -60 -29
Profit before Tax 1 210 315 305 257 333 742 209 224 145 164
Income tax expense -221 -16 -101 -44 -60 -128 -36 -33 -2 -57
Net Profit 988 299 204 213 273 614 173 191 143 107

1 Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the Group's share of income tax and net financial items of EAI.

Items affecting comparability (IAC), fair valuations and non-operational items

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Impairments and reversals of intangible
assets, PPE and biological assets
0 0 0 0 0 -8 -5 0 0 -3
Restructuring costs excluding fixed asset
impairments
0 0 0 0 0 -14 0 0 0 -14
Disposals 20 47 0 -28 0 -28 -8 -20 0 0
Other 0 0 0 0 0 -34 -16 0 -8 -10
Total IAC on Operating Profit 20 47 0 -28 0 -84 -29 -20 -8 -27
Fair valuations and non-operational items 45 37 5 17 -14 -16 -15 0 -6 5
Total 65 85 5 -11 -14 -100 -44 -20 -14 -22

Items affecting comparability (IAC) by segment

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Consumer Board 0 0 0 0 0 -30 1 -20 -8 -3
Packaging Solutions 0 0 0 0 0 -3 0 0 0 -3
Biomaterials 0 0 0 0 0 -3 0 0 0 -3
Wood Products 0 0 0 0 0 -9 -9 0 0 0
Paper 0 0 0 0 0 -22 -4 0 0 -18
Other 20 47 0 -28 0 -17 -17 0 0 0
IAC on Operating Profit 20 47 0 -28 0 -84 -29 -20 -8 -27
IAC on tax -27 0 -27 0 0 11 4 0 1 6
IAC on Net Profit -8 47 -27 -28 0 -73 -25 -20 -7 -21
Attributable to:
Owners of the Parent -8 47 -27 -28 0 -73 -25 -20 -7 -21
Non-controlling interests 0 0 0 0 0 0 0 0 0 0
IAC on Net Profit -8 47 -27 -28 0 -73 -25 -20 -7 -21

Fair valuations and non-operational items1 by segment

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Consumer Board -1 0 0 0 -1 -2 0 0 -1 -1
Packaging Solutions -1 0 0 0 -1 -1 0 0 0 -1
Biomaterials -3 3 -2 -3 -1 -7 0 -4 -2 -1
Wood Products -1 0 0 0 -1 0 1 0 0 -1
Paper 0 -4 -1 4 1 0 0 0 0 0
Other 51 38 7 17 -11 -6 -16 4 -3 9
FV and Non-operational Items
on Operating Profit
45 37 5 17 -14 -16 -15 0 -6 5

1 Fair valuations and non-operational items include equity incentive schemes and related hedges, CO2 emission rights, valuations of biological assets, and the Group's share of income tax and net financial items of EAI.

Operating profit/loss by segment

EUR million 2018 Q4/18 Q3/18 Q2/18 Q1/18 2017 Q4/17 Q3/17 Q2/17 Q1/17
Consumer Board 230 25 50 65 90 253 70 66 60 57
Packaging Solutions 244 59 68 56 60 166 58 48 40 20
Biomaterials 425 94 123 106 101 254 61 84 60 49
Wood Products 164 42 48 47 28 102 17 29 35 21
Paper 234 41 65 58 70 106 42 29 11 24
Other 93 95 9 -16 6 23 -12 14 -1 22
Operating Profit (IFRS) 1 390 356 363 317 355 904 236 270 205 193
Net financial items -180 -41 -58 -60 -22 -162 -27 -46 -60 -29
Profit before Tax 1 210 315 305 257 333 742 209 224 145 164
Income tax expense -221 -16 -101 -44 -60 -128 -36 -33 -2 -57
Net Profit 988 299 204 213 273 614 173 191 143 107

Key exchange rates for the euro

One Euro is Closing Rate Average Rate
31 Dec 2018 31 Dec 2017 31 Dec 2018 31 Dec 2017
SEK 10.2548 9.8438 10.2567 9.6369
USD 1.1450 1.1993 1.1815 1.1293
GBP 0.8945 0.8872 0.8847 0.8761

Transaction risk and hedges in main currencies as at 31 December 2018

EUR million EUR USD SEK GBP Other Total
Sales during 2018 5 935 1 961 1 083 418 1 089 10 486
Costs during 2018 -4 931 -369 -1 986 -56 -1 386 -8 728
Net amount 1 004 1 592 -903 362 -297 1 758
Estimated annual operating cash flow exposure 1 840 -990 380
Transaction hedges as at 31 December 2018 -930 630 -190
Hedging percentage as at 31 December 2018 for the next 12 months 51% 64% 50%

For the next 13–18 months, 19% of the estimated exposure in SEK is hedged.

Changes in exchange rates on Operational EBIT

Operational EBIT: Currency strengthening of +10% EUR million
USD 184
SEK -99
GBP 38

The sensitivity is based on the estimated net operating cash flow for the next 12 months. The calculation does not take into account currency hedges, and it assumes that no changes occur other than exchange rate movement in a currency. A currency weakening would have the opposite impact.

Fair Values of Financial Instruments

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 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 valuation techniques are described in more detail in the Group's Financial Report.

Carrying amounts of financial assets and liabilities by measurement and fair value categories: 31 December 2018

EUR million Amortised cost Fair value
through OCI
Fair value
through
Income
Statement
Hedge
accounted
derivatives
Total
carrying
amount
Fair value
Financial Assets
Listed securities - 13 - - 13 13
Unlisted securities - 415 8 - 422 422
Non-current loan receivables 54 - - - 54 54
Trade and other operative receivables 1 092 44 - - 1 136 1 136
Interest-bearing receivables 1 - 5 49 55 55
Cash and cash equivalents 1 130 - - - 1 130 1 130
Total 2 277 472 13 49 2 811 2 811
EUR million Amortised cost Fair value
through
Income
Statement
Hedge
accounted
derivatives
Total
carrying
amount
Fair value
Financial Liabilities
Non-current debt 2 265 - - 2 265 2 541
Current portion of non-current debt 403 - - 403 403
Interest-bearing liabilities 604 7 63 675 675
Trade and other operative payables 1 627 21 - 1 648 1 648
Bank overdrafts 1 - - 1 1
Total 4 901 28 63 4 992 5 268

The following items are measured at fair value on a recurring basis.

EUR million Level 1 Level 2 Level 3 Total
Listed securities 13 - - 13
Unlisted securities - - 422 422
Trade and other operative receivables - 44 - 44
Derivative financial assets - 54 - 54
Total financial assets 13 98 422 533
Trade and other operative liabilities - - 21 21
Derivative financial liabilities - 70 - 70
Total financial liabilities - 70 21 91

Carrying amounts of financial assets and liabilities by measurement and fair value categories: 31 December 2017

EUR million Loans and
Receivables
Financial Items
at Fair Value
through Income
Statement
Hedging
Derivatives
Available
for-Sale
Investments
Carrying
Amounts
Fair Value
Financial Assets
Available-for-sale - - - 339 339 339
Non-current loan receivables 55 - - - 55 55
Trade and other operative receivables 965 - - - 965 965
Interest-bearing receivables 15 16 49 - 80 80
Cash and cash equivalents 607 - - - 607 607
Carrying Amount by Category 1 642 16 49 339 2 046 2 046
EUR million Financial Items
at Fair Value
through Income
Statement
Hedging
Derivatives
Measured at
Amortised
Cost
Carrying
Amounts
Fair Value
Financial Liabilities
Non-current debt - - 2 046 2 046 2 357
Current portion of non-current debt - - 370 370 370
Interest-bearing liabilities 4 32 560 596 596
Trade and other operative payables 20 - 1 576 1 596 1 596
Bank overdrafts - - 4 4 4
Carrying Amount by Category 24 32 4 556 4 612 4 923
EUR million Level 1 Level 2 Level 3 Total
Derivative financial assets - 65 - 65
Trade and other operative receivables - - - -
Available-for-sale investments 21 - 318 339
Derivative financial liabilities - 36 - 36
Trade and other operative liabilities - - 20 20

Reconciliation of level 3 fair value measurement of financial assets and liabilities: 31 December 2018

EUR million 2018 2017
Financial assets
Opening balance at 1 January 318 253
Gains/losses recognised in income statement -2 -2
Gains/losses recognised in other comprehensive income 104 60
Additions 3 7
Disposals -1 0
Closing Balance 422 318
EUR million 2018 2017
Financial liabilities
Opening balance at 1 January 20 23
Gains/losses recognised in income statement 1 -3
Closing Balance 21 20

Level 3 Financial Assets

The level 3 financial assets consist mainly of PVO shares for which the valuation method is described in more detail in the Annual Report. The valuation is most sensitive to changes in electricity prices and discount rates. The discount rate of 4.06% 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 +54 million and -41 million, respectively. A +/- 1%-point change in the discount rate would change the valuation by EUR -34 million and +100 million, respectively.

Stora Enso shares

Trading volume

Helsinki Stockholm
A share R share A share R share
October 111 950 58 161 667 195 654 7 890 144
November 83 820 55 842 805 109 324 13 080 621
December 228 185 47 916 924 220 614 12 447 653
Total 423 955 161 921 396 525 592 33 418 418

Closing price

Helsinki, EUR Stockholm, SEK
A share R share A share R share
October 14.00 13.31 144.00 137.70
November 12.90 11.26 132.00 116.60
December 11.05 10.09 116.00 103.40

Average number of shares

Million Q4/18 Q4/17 Q3/18 2018 2017
Periodic 788.6 788.6 788.6 788.6 788.6
Cumulative 788.6 788.6 788.6 788.6 788.6
Cumulative, diluted 789.7 790.0 789.7 789.9 790.0

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 capital 2
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
Operational EBIT Operating profit/loss excluding items affecting comparability (IAC) and fair valuations
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 operational decrease in the value of biological assets,
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 administration type of costs, excluding IAC and
fair valuations
Last 12 months (LTM) 12 months prior to the end of reporting period
TRI Total recordable incident rate = number of incidents per one million hours worked
1
Capital employed = Operating capital – Net tax liabilities
2 Average for the financial period 3 Attributable to the owners of the Parent

List of non-IFRS measures

Operational EBITDA Depreciation and impairment charges excl. IAC
Operational EBITDA margin Operational ROCE
Operational EBIT Earnings per share (EPS), excl. IAC
Operational EBIT margin Net debt/last 12 months' operational EBITDA ratio
Profit before tax excl. IAC Fixed costs to sales
Capital expenditure Operational ROOC
Capital expenditure excl. investments in biological assets Cash flow from operations
Capital employed Cash flow after investing activities

Contact information

Tel. +358 2046 131 Klarabergsviadukten 70

Stora Enso Oyj Stora Enso AB storaenso.com P.O.Box 309 P.O.Box 70395 storaenso.com/investors FI-00101 Helsinki, Finland SE-107 24 Stockholm, Sweden Visiting address: Kanavaranta 1 Visiting address: World Trade Center Tel. +46 1046 46 000

For further information, please contact:

Seppo Parvi, CFO, tel. +358 2046 21205 Ulla Paajanen, SVP, Investor Relations, tel. +358 40 763 8767 Ulrika Lilja, EVP, Communications, tel. +46 72 221 9228

Stora Enso's Q1 results 2019 will be published on

25 April 2019

Part of the bioeconomy, Stora Enso is a leading global provider of renewable solutions in packaging, biomaterials, wooden constructions and paper. We believe that everything that is made from fossil-based materials today can be made from a tree tomorrow. Stora Enso has some 26 000 employees in over 30 countries. Our sales in 2018 were EUR 10.5 billion. Stora Enso shares are listed on Nasdaq Helsinki Oy (STEAV, STERV) and Nasdaq Stockholm AB (STE A, STE R). storaenso.com/investors

It should be noted that Stora Enso and its business are exposed to various risks and uncertainties and certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by "believes", "expects", "anticipates", "foresees", or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties, which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the Group's targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group's patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group's products and the pricing pressures thereto, price fluctuations in raw materials, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group's principal geographic markets or fluctuations in exchange and interest rates. All statements are based on management's best assumptions and beliefs in light of the information currently available to it and Stora Enso assumes no obligation to publicly update or revise any forward-looking statement except to the extent legally required.

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