Company InFocus

DIVIDEND AND AGM INFORMATION CONTACTS

Payment of dividend Kari Vainio The Board of Directors proposes to the Annual General Executive Vice President, Corporate Communications Meeting (AGM) that a dividend of EUR 0.45 per share Tel. +44 20 7016 3140 be paid for the fiscal year ending 31 December 2003. Fax +44 20 7016 3208 Dividends payable on VPC registered shares will Postal address: Stora Enso International Office, be forwarded by VPC and paid in Swedish krona. 9 South Street, London W1K 2XA, UK Dividends payable to ADR-holders will be forwarded [email protected] by Deutshe Bank Trust Company Americas and paid in US dollars. For more details, see Information for Keith B Russell Shareholders on page 52. Senior Vice President, Investor Relations Tel. +44 20 7016 3146 Dividend Policy Fax +44 20 7016 3208 Strive to pay stable dividends linked to Postal address: Stora Enso International Office, the long-term performance 9 South Street, London W1K 2XA, UK One half of net profits over a business cycle [email protected]

Annual General Meeting Ulla Paajanen-Sainio The AGM of Stora Enso Oyj will be held at 16.00 Vice President, Investor Relations and Financial Communications (Finnish time) on Thursday, 18 March 2004 at the Tel. +358 2046 21242 Finlandia Hall, Mannerheimintie 13 e, Helsinki, Finland. Fax +358 2046 21307 Postal address: Stora Enso Oyj, P.O. Box 309, FIN-00101 Helsinki, Finland [email protected]

Cover picture Scott A. Deitz Vice President, Investor Relations, North America View of a cylinder in the dryer section Tel. +1 715 422 1521 of the new paper machine at Fax +1 715 422 3882 Langerbrugge. The end of the cylinder at the top left is yellow, the felt at the Postal address: Stora Enso North America, P.O. Box 8050, bottom right is grey, and reflections off Wisconsin Rapids, WI 54495-8050, USA the cylinder surface in between are red. [email protected] CONTENTS

8 STRATEGY 32 BOARD OF DIRECTORS 21 Focused strategy will enhance profitability and growth. ROCE 34 MANAGEMENT GROUP target remains 13% over a business cycle. Dividend policy 38 CORPORATE GOVERNANCE amended to distributing half of Stora Enso has updated its net profits over a cycle. Corporate Governance in response to reorganisation of the Group, 12 STORA ENSO ACCOUNT public interest in governance MANAGEMENT issues, new rules and recommen- An innovation for key customers dations of the Helsinki, Stockholm providing a single integrated and New York Stock Exchanges service for all their purchases. and the Sarbanes Oxley Act.

14 NEW ORGANISATIONAL 42 SHARES AND STRUCTURE SHAREHOLDERS Organisation streamlined around 2 COMPANY PRESENTATION Stora Enso’s three core product 46 FINANCIAL SUMMARY Stora Enso is an integrated paper, areas: Paper, Packaging Boards, For the full financial information, packaging and forest products and Forest Products. see www.storaenso.com/2003 company producing publication or the separate Financials 2003 and fine papers, packaging boards 16 PAPER report. Instructions for ordering and wood products, areas in 20 New paper machine at it are on the back cover of this which the Group is a global Langerbrugge report. market leader. 22 PACKAGING BOARDS 52 INFORMATION FOR FINANCIAL HIGHLIGHTS SHAREHOLDERS 2 24 InnoCentre Key figures for 2003 excluding non-recurring items: operating 26 FOREST PRODUCTS 11 profit EUR 538.1 million (4.4% 29 Further processing: of sales), profit before tax and window frames minority interests EUR 331.4 million and EPS EUR 0.25. 30 HUMAN RESOURCES MANAGEMENT 3 YEAR 2003 IN BRIEF Stora Enso employs some 44 000 employees in more than 40 4 PRODUCT AREAS IN BRIEF countries. Their importance to Stora Enso’s long-term success is 6 LETTER TO SHAREHOLDERS reflected in the Group’s HR vision “What People Can Do”.

STORA ENSO COMPANY 2003 1 COMPANY PRESENTATION

Creating value

tora Enso is an integrated paper, Stora Enso serves its mainly business- Stora Enso is committed to develop- packaging and forest products com- to-business customers through its own ing its business towards ecological, social S pany producing publication and global sales and marketing network. A and economic sustainability. This com- fine papers, packaging boards and wood global presence provides local customer mitment is demonstrated through its products, areas in which the Group is a service. Customers are large and small values and its environmental and social global market leader. publishers, printing houses and mer- responsibility policy, and has been recog- Stora Enso sales totalled EUR 12.2 bil- chants, as well as the packaging, joinery nised by selection for the Dow Jones DJSI lion in 2003. The Group has some 44 000 and construction industries worldwide. World and DJSI STOXX sustainability employees in more than 40 countries in The main markets are Europe, North indexes since they were launched in five continents and an annual production America and Asia. 1999. Stora Enso had the highest score in capacity of 15.7 million tonnes of paper The Group has production facilities in this sustainability ranking among forest and board and 7.4 million cubic metres of Europe, North America and Asia. Its mod- products companies in 2003. Stora Enso is sawn wood products, including 2.8 mil- ern production capacity and the good also included in the FTSE4Good index. lion cubic metres of value-added prod- integration between raw material, energy ucts. Stora Enso’s shares are listed in and efficient processes ensure production Helsinki, Stockholm and New York. continuity.

Financial highlights 2002 2003 2002 2003 Sales, EUR million 12 783 12 172 Debt/Equity ratio **0.37 0.48 Operating profit, EUR million -152 484 Earnings per share, EUR -0.25 0.17 excluding non-recurring items, EUR million 927 538 excluding non-recurring items, EUR 0.57 0.25 % of sales 7.2 4.4 Cash earnings per share, EUR 2.49 1.58 Profit before tax and minority interests, EUR million -343 223 excluding non-recurring items, EUR 1.97 1.64 excluding non-recurring items, EUR million 735 331 Equity per share, EUR 9.36 9.65 Net profit for the period, EUR million -222 147 Dividend per share, EUR 0.45 * 0.45 Capital expenditure, EUR million 878 1 248 Payout ratio, % 79 180 Interest-bearing net liabilities, EUR million 3 267 3 919 Market capitalisation, EUR million, 31 Dec. 9 052 9 288 Capital employed, EUR million 11 242 11 744 Deliveries of paper and board, 1 000 tonnes 13 149 13 551 Return on capital employed (ROCE), % -1.5 4.1 Deliveries of wood products, 1 000 m3 5 112 5 822 excluding non-recurring items, % 7.1 4.6 Average number of employees 43 853 44 264 Return on equity (ROE), % -3.3 1.8 *) Board’s dividend proposal **) Adjusted with the initial valuation of IAS 41 Agriculture

2 STORA ENSO COMPANY 2003 YEAR 2003 IN BRIEF

Year in Brief

lobal uncertainty in forest prod- mill’s output. The mill will be the largest production capacity of the machine ucts industry markets persisted single-line bleached eucalyptus pulp mill will be about 420 000 tonnes of high- G for the third year, mainly because in the world. It is scheduled to begin pro- quality super-calendered (SC) papers. The economic stagnation kept demand low, duction in mid 2005. machine is expected to start up at the end especially in advertising-driven paper In December Stora Enso approved a of 2005. Simultaneously with the start-up grades. The decline in the value of the US EUR 211 million investment in Skoghall 130 000 tonnes of capacity will be shut- dollar negatively impacted the Group’s Mill’s Energy 2005 project. The new down. margins on overseas sales and in Europe, evaporation plant and recovery boiler will Also within the ARP, paper machine 6 where competition increased. start up in autumn 2005 and the biofuel which produces SC-B paper at Maxau Mill In North America the moderate boiler in summer 2006. in Germany will be rebuilt to enhance its growth that started in late 2002 acceler- In December Stora Enso announced productivity and competitiveness. ated in the second half of the year, allow- its intention of restructuring ownership ing the announcement of some price of the Group’s forestlands in Sweden. increases, especially in magazine and Stora Enso’s partner in the transaction is newsprint grades, but at the end of the Korsnäs. The Swedish forests of Stora year these increases were facing resist- Enso and Korsnäs will be transferred to a ance. Imports from Europe and Asia dis- new company named Bergvik Skog AB. turbed the supply and demand balance, Stora Enso will retain a minority share- keeping prices under pressure. holding of 44% in the new company. The rest of the company’s shares were placed Main events 2003 with institutional investors. In February Stora Enso and the owners of AS Sylvester, Estonia’s largest sawmill Asset Restructuring Programme and wood procurement company, closed (ARP) the previously announced acquisition. In December Stora Enso approved the In May Stora Enso Oyj and Aracruz construction of a new paper machine at Celulose S.A. announced their decision to Kvarnsveden Mill in Sweden to improve go ahead with construction of a 900 000 its competitiveness in uncoated magazine tonnes per year eucalyptus pulp mill for paper production as part of the ARP. The Veracel Celulose S.A. in Bahia, Brazil. total investment is estimated at approxi- Stora Enso will be entitled to half of the mately EUR 450 million and the annual

Read more www.storaenso.com/2003

STORA ENSO COMPANY 2003 3 PRODUCT AREAS IN BRIEF

Stora Enso Paper

PUBLICATION PAPER FINE PAPER

PRODUCTS PRODUCTS Uncoated super-calendered (SC), uncoated machine-finished Graphic papers (coated fine paper), office papers (uncoated (MF), light-weight coated (LWC), medium-weight coated fine paper) and speciality papers (technical, label and flexible (MWC), heavy-weight coated (HWC) and machine-finished packaging papers). coated (MFC) papers, wallpaper, standard newsprint and Used for document printing, commercial printing, high- newsprint specialities such as improved newsprint, directory quality books, labelling, print-on-demand applications, and papers and book papers. protecting, transporting and identifying products. Used for magazines, printed advertising material, cata- logues, direct marketing, newspapers, newspaper supplements, MARKET POSITION advertising leaflets, telephone directories, and hardback and world’s third-largest producer of graphic papers paperback books. graphic paper market share 13% in Europe, 14% in North America and 9% globally MARKET POSITION main graphic paper markets Europe (47% of sales) world’s second-largest producer of magazine paper and North America (38% of sales) magazine paper market share 21% in Europe, 18% in world’s sixth-largest producer of office papers North America and 18% globally office paper market share 14% in Europe and main magazine paper markets Europe (57% of sales) 4% globally and North America (40% of sales) main office paper markets Europe (80% of sales) annual magazine paper production capacity 4.5 million and Asia (7% of sales) tonnes world’s largest producer of speciality papers world’s fourth-largest producer of newsprint and main speciality paper markets North America newsprint specialities (54% of sales) and Europe (37% of sales) newsprint market share 20% in Europe, 7% globally annual fine paper production capacity 4.4 million and 1% in North America tonnes main newsprint markets Europe (77% of sales), Far East (7% of sales) and North America (7% of sales) annual newsprint production capacity 3.6 million tonnes

Share of Share of Capacity the Group Capacity the Group sales sales

Germany 24% Publication Paper 34% Finland 47% Fine Paper 24% Finland 23% North America 22% North America 21% Sweden 16% Sweden 20% Germany 6% Belgium 7% Netherlands 5% France 6% China 4%

4 STORA ENSO COMPANY 2003 Stora Enso Packaging Boards Stora Enso Forest Products

WOOD PRODUCTS

PRODUCTS PRODUCTS Liquid packaging boards, cupstock, cartonboards, container- Sawn and further-processed wood products used by the boards (corrugated raw materials), corrugated packaging, core- construction and joinery industries and wood products trade. boards, cores and laminating papers. MARKET POSITION MARKET POSITION world’s second-largest producer of sawn softwood one of the world’s leading producers of consumer main markets Europe (55% of sales), Asia (29% of sales), packaging boards North Africa and Middle East (11% of sales) and main markets Europe (80% of sales), Asia (14% of sales) North America (5% of sales) and North America (3% of sales) sawn wood products annual production capacity annual production capacity 3.3 million tonnes of 7.4 million m3 per year, of which 2.8 million m3 packaging boards and papers, 760 million m2 of is value-added products corrugated packaging and 205 000 tonnes of cores FURTHER PROCESSING FURTHER PROCESSING further-processing mills in Austria, the Czech Republic, cores are produced in Canada, China, Finland, Estonia, Finland, Germany, Lithuania, the Netherlands Germany, the Netherlands, Spain, Sweden, the UK and Sweden and the USA corrugated packaging is produced in Estonia, Finland, Hungary, Latvia, Lithuania, Russia and Sweden

Share of Capacity the Group Share of sales Capacity the Group sales Finland 31% Wood Products 11% Austria 23% Finland 56% Packaging Boards 21% Sweden 15% Sweden 30% Estonia 12% Other Europe 8% The Czech Republic 11% Germany 5% Latvia 3% North America 1% Russia 3% Lithuania 2%

STORA ENSO COMPANY 2003 5 LETTER TO SHAREHOLDERS

Dear Shareholder,

he year 2003 has been a challeng- ing year for the whole forest T products industry, including Stora Enso. Economic forecasts for 2003 had been fairly optimistic, but the adver- tising market remained weak, causing paper demand to be disappointingly static. Two exceptional factors that impaired our financial results were the Iraq war, which undermined business confidence and restrained demand, and the sharp fall in the value of the US dollar towards the end of the year. We have done a lot to improve the competitiveness of our North American operations in response to persistently weak markets. The Profit Enhancement Programme already in progress was expanded and two paper machines per- manently shut down during the year. Although the programme also includes investment in machine rebuilds and modernisations, it has entailed a regret- table but inevitable reduction in the workforce. Stora Enso’s CEO Jukka Härmälä and Chairman Claes Dahlbäck

6 STORA ENSO COMPANY 2003 Our programme of asset upgrading in ties to enhance growth through mergers governance issues, new stock exchange Europe continued, the highlight being and acquisitions that meet the Group’s regulations and the Sarbanes Oxley Act. the start-up of the new paper machine at financial criteria. We also established a Nomination Com- Langerbrugge in Belgium, the world’s The world’s economies are showing mittee to submit proposals concerning biggest newsprint machine. In magazine signs that improvement is in prospect, the composition of the Board and the paper, PM 6 at Maxau in Germany especially in the USA. Traditionally this remuneration of its members. is being rebuilt and a new SC paper boosts the forest products industry. The In 2003 Stora Enso changed its divi- machine, PM 12 at Kvarnsveden in first half of 2004, however, will remain dend policy to raise the proportion of net Sweden, is scheduled to start up at the tough. profits distributed as dividend over the end of 2005. As part of this restructuring, Stora Enso is in good shape to benefit business cycle from one-third to one-half. some older capacity will be shut down from an upturn. We have very good prod- The dividend proposed by the Board of and other machines switched to manu- uct ranges and customer relationships. Directors for the year 2003 is EUR 0.45. facturing different products. Our international personnel and stream- We would like to thank all our per- Finance is being released through the lined organisation can deliver results. Our sonnel for their excellent work during the sale of non-core assets. Following divest- finances are sound, our balance sheet and demanding year. ment of its forestlands in Finland in 2002, cash flow strong, and our credit ratings Our vision is to be the world’s leading Stora Enso is transferring its forestlands in good. forest products company, sustainably cre- Sweden to a new company in which it In 2003 we updated our Corporate ating optimum value for all our stake- will retain only a minority interest. The Governance policy in response to reor- holders. proceeds of this restructuring will be ganisation of the Group, public interest in invested in businesses with a higher yield, mainly in new strategically impor- tant areas such as Russia, South America and China. Helsinki, 4 February 2004 The year was very quiet for mergers and acquisitions in general, and in the global forest products industry too. How- ever, we will always consider opportuni- Claes Dahlbäck, Chairman Jukka Härmälä, CEO

STORA ENSO COMPANY 2003 7 MISSION, VISION AND VALUES

Mission We promote communication and well-being of people by turning renewable fibre into paper, packaging and processed wood products.

Vision We will be the leading forest products company in the world We take the lead in developing the industry

Customers choose us for the value we create for them

We attract investors for the value we create

Our employees are proud to work with us

We are an attractive partner for our suppliers.

Values Customer focus – We are the customers’ first choice Performance – We deliver results

Responsibility – We comply with principles of sustainable development

Emphasis on people – Motivated people create success

Focus on future – We take the first step

Close to the customer: at Varkaus in Finland paper goes direct from Stora Enso’s paper mill into SanomaWSOY’s printing plant on the same site.

8 STORA ENSO COMPANY 2003 STRATEGY

Focused strategy will enhance profitability and growth Stora Enso is operated and managed as a single industrial group. Its core products are graphic and office papers, newsprint, packaging boards and wood products.

tora Enso’s strategic goal is to Dividend policy will increase Disciplined acquisition policy increase the value of the Company shareholders’ return supports core business development S through profitable growth generat- The Company has amended its dividend Stora Enso has a disciplined merger and ed by targeted capital expenditure, merg- policy to increase the return to share- acquisition policy. A merger or acquisi- ers and acquisitions, world-class facilities, holders. The proportion of net profit it is tion must support core business develop- continuous performance improvement committed to distributing to shareholders ment, provide customer and production and excellent management resources. as dividend over the cycle has been raised synergies, improve asset quality and com- Stora Enso strives to be a sustainable from one-third to one-half. petitiveness, and be in line with the mar- forest products company renowned for ket outlook. operational excellence and superior per- Fibre strategy amended formance. The key to achieving this is to reduce costs The Group has identified three ways of enhanced competence and know-how Stora Enso’s fibre strategy secures high increasing its assets: supported by commitment to shared quality, cost-competitive raw materials expansion in existing core products values. from socially and environmentally sus- in existing markets such as Europe Stora Enso wants to be the customers’ tainable sources. The aim is to reduce raw and the USA; first choice. The Group provides services material costs, which currently account expansion in existing core products that support customers’ product develop- for 20% of Group costs. into new markets such as Russia, ment and enhance their value creation. It The main raw materials are wood, South America and Asia; also undertakes its own continuous prod- recovered paper and purchased pulp. The expansion into new branches of uct development to improve existing most important elements of the fibre the forest products industry or products and production processes, and strategy are own production of pulp and related business segments in existing to develop new products. wood products, and sourcing of wood markets. Stora Enso’s Return on Capital from mainly external suppliers. Employed target remains 13% over the Stora Enso ensures the availability of dif- Such expansion must meet the financial cycle, the weighted average cost of capital ferent types of fibre from multiple sources targets of being EPS and CEPS accretive at the end of 2003 being 8.7%. The through its fibre sourcing and pulping after one year. In the near term it must debt/equity ratio must be at or below 0.8, operations. yield more than the company’s weighted and capital expenditure should not Stora Enso intends to secure and average cost of capital, and in the long exceed depreciation over the cycle. utilise increasing amounts of long fibre term clearly support the Group’s 13% Stora Enso’s identity is based on a sin- from Western Russia and the Baltic States, ROCE target over the cycle. gle strong corporate brand identity that and short fibre from fast-growing planta- reflects the Group’s mission, vision and tions in the Southern Hemisphere. values. Stora Enso’s target is to excel in sus- Reaching key financial targets Target 1999 2000 2001 2002 2003 tainability and be recognised for it. In ROCE, % * 13 12.1 16.8 10.8 7.1 4.6 2003 the sustainability governance was Debt/Equity ratio ≤0.8 0.90 0.62 0.57 ***0.37 0.48 restructured to ensure that these issues are Dividend/share, EUR 0.40 0.45 0.45 0.45 **0.45 better integrated in all the Group’s oper- Payout ratio, % * 50 45 34 48 79 180 ations (for more information, see the sep- * Excluding non-recurring items ** Board of Directors’ proposal to the AGM arate Sustainability 2003 report). *** Adjusted with the initial valuation of IAS 41 Agriculture

STORA ENSO COMPANY 2003 9 STRATEGY

Strategy in action in 2003

Langerbrugge newsprint investment operations. Sawmills were started up at performance annually against key meas- completed Impilahti in Karelia, close to the Finnish ures of business success. This ensures that Asset restructuring continued during border, in August and at Nebolchi in the improvements with the greatest impact 2003. In spring the new newsprint Novgorod region in the beginning of on profit and strategic success receive the machine at Langerbrugge in Belgium 2004. Sawmills are cost-efficient means of highest priority. started up. The machine will use 500 000 entering the Russian market, familiarising Stora Enso’s systematic quality work tonnes of recycled fibre per year to make with Russian practice and legislation, and was once again recognised by the Finnish 400 000 tonnes of newsprint when it training personnel for possible future Quality Award to Ingerois Board Mill. reaches full capacity in 2005. This invest- industrial expansion in the country. This was already the fourth time a Group ment is the biggest project in Stora Enso’s The Veracel pulp mill joint venture in unit has been a Finnish Quality Award history at EUR 470 million. See more Brazil was approved in May. The mill will winner, the previous winners in the com- about it on pages 20–21. provide Stora Enso with 450 000 tonnes petition, which was held for the thir- (50% of the 900 000 tonnes capacity) of teenth time in 2003, being Veitsiluoto Divestment of non-core assets top quality short-fibre pulp annually Publication Papers (1998), Laminating continued from mid 2005 onwards. Papers (2000) and Oulu Fine Paper Mill In 2003 further strategic actions were (2001). taken to release capital from non-core Cost saving through constant activities to finance growth of core busi- development Further profit enhancement in nesses. The Group’s forest assets in Stora Enso is constantly developing its North America Sweden will be restructured by establish- operations and systems to improve com- Results from Stora Enso’s North American ing a company jointly owned with petitiveness through benchmarking at operations remained unsatisfactory in Korsnäs of Sweden to which both part- individual mills. Many European as well 2003 due to the persistently weak market ners are transferring their Swedish forest as North American mills undertook since 2000 and an increased cost base. assets. Stora Enso will sign long-term restructuring during 2003. The Profit Enhancement Programme of wood supply contracts with the new Restructuring is part of Stora Enso’s August 2002 has therefore been expanded entity. Excellence 2005 continuous improve- to reduce annual costs by a further USD ment programme. All Stora Enso units 65 million. Fibre strategy in action with new have developed their own competitive- The Profit Enhancement Programme organisation ness at all levels by implementing of 2002 as extended in 2003 will improve Wood Supply Europe was created to Excellence 2005 through Total Quality EPS by altogether EUR 0.09 by 2005. The manage the wood flows that supply raw Management. This makes it easier to eval- workforce will be reduced from a total of material to Stora Enso’s mills in Europe in uate their operations and agree which 7 300 in 2000 to 5 000 in 2005, a 32% the most efficient and cost-effective way. areas need improvement. reduction. At the end of 2003 the number Stora Enso’s fibre sourcing possibili- Excellence 2005 includes a wide range of employees in North America was 5 670. ties have been improved by sawmill of means of measuring employee and acquisitions in the Baltic States. customer satisfaction, a productivity Presence in the Russian wood market programme and customer relationship is being strengthened through sawmilling management. Each unit evaluates its

10 STORA ENSO COMPANY 2003 Stora Enso Account Management strengthens customer relationships Stora Enso Account Management (SEAM), which originated from the customer rela- tionship management project launched in 2002, has now been developed and will be fully implemented during 2004. The goal of SEAM is to enhance value through strengthened customer relation- ships. This approach facilitates deployment of the Group’s customer-focused strategy. Stora Enso’s most important accounts will benefit from customised products and services to meet their business needs. SEAM will increase customer loyalty and improve co-operation in product and process development. Read more about it At Veracel 47% of the land is eucalyptus plantations and 49% Atlantic rainforest fragments and on pages 12–13. regeneration areas.

R&D reorganisation development and to utilise the scientific developed for cups, trays and liquid car- In 2003 Stora Enso spent EUR 88.8 and technical expertise of the centres tons utilising new approaches to improve million on research and development, efficiently in customer service and barrier properties and converting charac- equivalent to 0.7% of net sales. An inter- troubleshooting. teristics. esting area for research and development Research and development in the In 2003 Stora Enso Timber launched a continued to be Consumer Boards with Paper product area concentrated on end- new product called WoodHeart® that its InnoCentre. Read more about it on use and customer-driven work on print- exploits the natural durability of Nordic pages 24–25. ability, improving customer service to Scots pine heartwood to meet the needs Stora Enso’s research and develop- printers and preparing for future devel- of the woodworking industry where dura- ment centres were integrated with busi- opments in printing technology. bility and stability are required, as ness units during the year to increase the The growth strategy of Packaging explained on page 29. emphasis on R&D in the product areas, to Boards is based on innovation and integrate R&D into business strategy development. New materials have been

STORA ENSO COMPANY 2003 11 STORA ENSO ACCOUNT MANAGEMENT

New value-added service for customers

Stora Enso Account Management (SEAM) is an innovation that enhances the value of Stora Enso’s customer service by providing a single co-ordinated interface for cross-divisional and cross-market customers. This enables Stora Enso to provide a complete service package to meet all of a customer’s various requirements.

tora Enso launched this innovation international customers a single, inte- in customer relationship manage- grated service irrespective of whether Sment in early 2003 with several they are buying from several divisions in pilot projects. The aim is to strengthen one country, or from one or more divi- relationships with customers and develop sions in several countries. This makes it a deep understanding of their business. is easier for them to do business with Customers are becoming increasingly Stora Enso. global in scale, so Stora Enso is offering

SEAM is a comprehensive approach to customer relationships covering all aspects of business including logistics, the environment and product development.

12 STORA ENSO COMPANY 2003 Stora Enso recently signed a new supply agreement with PPR. From left to right: Patrick Terrier, Thierry Falque-Pierrotin and Pierre Chazey from REDCATS (PPR), and François-Xavier Danel, Bernd Rettig, Isabelle Portal, Gauthier Tyrel de Poix and Jan-Walter Cappelen from Stora Enso.

Single interface for the customer made solutions, such as joint proactive Customer’s view Through SEAM Stora Enso provides a spe- product development. Stora Enso achieves Pinault-Printemps-Redoute (PPR), a cialised team to help key customers devel- this by working closely with its cus- European market leader in specialised op their business. This has two advan- tomers, even involving them in planning distribution and a major player in the tages for customers: they benefit from the and budgeting. Objectives are jointly set. luxury goods sector, is one of Stora Enso’s team’s detailed knowledge of the Group’s Stora Enso and the customer agree vol- major customers. whole product range and they gain access umes and grades to be purchased annual- to comprehensive expertise in technolo- ly by the customer based on analysis of gy, product development and logistics. By the customer’s requirements. providing a single interface for each cus- SEAM benefits the customer and Stora “We are constantly seeking tomer, a SEAM team of experts can devel- Enso. The customer benefits from a reli- improvement through a op a co-ordinated customer relationship able, flexible service and Stora Enso’s comprehensive relationship that meets all the needs of an individual long-term commitment and targeted with our suppliers covering customer. expertise. For Stora Enso, SEAM will all aspects of business. With As a global Group, Stora Enso will increase efficiency and hence profitabili- Stora Enso we co-operate on form a SEAM team from people based in ty, and stimulate sales. logistics, environmental matters different countries, which gives the team and product development. a global view of the customer’s business. Service-minded Thanks to our experience of “The greatest challenge has been to con- working together and mutual Strengthened customer relationships vince our people of the benefits of the trust, we have been able to SEAM strengthens customer relationships new approach and create a more entre- optimise this co-operation through and co-operation in product and process preneurial spirit. SEAM involves staff SEAM in a win-win approach and development. from all parts of the Group, such as mills, achieve significant results,” “Our customer base is our greatest sales offices, logistics and R&D,” says asset. SEAM will increase the value of this Gauthier de Poix, Managing Director, says Pierre Chazey, asset by creating added value for our cus- Stora Enso France, who has been working Paper & Print Director at REDCATS (PPR). tomers,” says Petri Wager, Executive Vice on several pilot projects. President, Market Services. A deep understanding of the cus- tomer’s business is needed to provide tailor-

STORA ENSO COMPANY 2003 13 NEW ORGANISATION

Improved co-operation within core businesses

In May 2003 Stora Enso was he new organisation is streamlined reorganised in line with the around Stora Enso’s three core T product areas: Paper, Packaging Group’s strategic principle of Boards and Forest Products. The reorgan- being operated and managed isation will increase efficiency, especially as one industrial group. The by improving co-ordination and co-oper- ation between the units within each core organisational structure dating product area. from the merger that formed The new organisational structure will Stora Enso has functioned well, make Stora Enso’s global businesses even so it only needed to be modified, more highly focused and co-ordinated by strengthening the core businesses. but not changed fundamentally.

Finance, Accounting CEO Corporate Support and Legal Affairs Yngve Stade Esko Mäkeläinen, CFO Jukka Härmälä Human Resources Corporate Strategy, Investments and TQM and Business Planning Christer Ågren Magnus Diesen Information Market Services Deputy CEO Technology Petri Wager Walter Haberland Corporate Communications Björn Hägglund Kari Vainio Investor Relations Keith B Russell

PAPER PACKAGING FOREST Asia Pacific Kai Korhonen BOARDS PRODUCTS Markku Pentikäinen Pekka Laaksonen Publication Paper Arno Pelkonen Latin America Bernd Rettig Consumer Boards Timber Nils Grafström Niilo Pöyhönen Fine Paper Peter Kickinger Jussi Huttunen Corrugated Wood Supply Europe Packaging North America Elisabet Salander Björklund Lars Bengtsson Industrial Papers Pulp Competence Merchants Cores and Centre Mats Nordlander Coreboards Pulp Marketing and Procurement

14 STORA ENSO COMPANY 2003 easier to evaluate company acquisitions Synergies PAPER and investments from the perspective of Synergies will result from easier exchange The Paper Product Area comprises the entire product area. It will also be of best practice as different parts of the the paper divisions (Publication Paper, easier to adjust to short-term oversupply Group are more closely linked with each which includes the former Magazine in the market, especially when there are other: corporate staff and functions with Paper and Newsprint divisions, and differences between Europe and North the divisions, and the various divisions Fine Paper), plus the Merchants America. with each other, especially within the (Papyrus) and North America Paper and the Forest Products product divisions. Speciality Papers, formerly Improved customer management areas, which is why that is where the part of Packaging Boards, has been Simplification of the organisation into biggest changes have been made. transferred to the Fine Paper division. three core product areas will improve Customer Relationship Management. Staff functions linked to product PACKAGING BOARDS Customer service will be better co-ordi- areas The Packaging Boards comprises nated, with a single interface for most Following the reorganisation of the prod- Consumer Boards, Corrugated customers (read more about Stora Enso’s uct areas, the focus moved to the staff Packaging, Industrial Papers and CRM project on pages 12–13). functions. Cores and Coreboard. The staff organisation has been “Four years after the merger that aligned to the new organisation to FOREST PRODUCTS formed Stora Enso, it was time to increase efficiency. A review of the roles Forest Products comprises evaluate how well the organisational and responsibilities of the staff functions Stora Enso Timber, Stora Enso Wood structure was functioning, and and product areas resulted in a lighter Supply Europe, the Pulp Competence identify its strengths and weaknesses. and less bureaucratic set-up where deci- Centre, and Pulp Marketing and “The merger between Stora and Enso, sions can be taken more rapidly. Procurement. and later the integration of Stora Enso Resources will be utilised more efficiently North America have proved successful. by establishing shorter links between the OTHER CHANGES The working atmosphere in the Group staff and the units they serve. This has A new Latin America division was is very good and the customer base already further improved internal formed to plan and implement has been strengthened. customer satisfaction, according to the Stora Enso’s strategic involvement in “The reorganisation did not therefore annual survey in which all Group staff South America. It manages local entail any dramatic changes. It was participate. projects such as Veracel and co- more an enhancement of the existing ordinates sales company activities. structure,”

says Christer Ågren, Executive Vice Investment and capacity President, Corporate Human Resources management and TQM. The streamlined organisation will make it easier to prioritise mergers, acquisitions and investments, and capacity will be even more efficiently managed. In the Paper product area, for example, it will be

STORA ENSO COMPANY 2003 15 P APER

Value created through scale and global reach

The strengths of the Paper product area are its strong market positions in Europe and North America, attractive product range, and good asset quality providing sound support for growth and asset restructuring. ormation of the new Paper product (see page 28), which handles the fibre area reaffirms and strengthens supply for all the Group’s mills in Europe, The new Paper product area F Stora Enso’s commitment to its will be able to procure fibre more effi- combines all Stora Enso’s paper customers around the world. It also ciently and pass on savings from its manufacturing and merchants reflects recent and forecast changes in the increased purchasing power to other operations under one management. paper markets, with global trade growing product areas. The new structure enables efficient and customers merging to operate on two Specialisation is seen in fibre usage co-ordination of strategies and plans or more continents. As customers become too. Primary fibre is readily available in for marketing, capital investment, bigger, their product ranges broaden. In Northern Europe and North America, so R&D and mergers and acquisitions. addition, paper grades have become Stora Enso’s mills there produce mainly This will promote sharing of best increasingly interchangeable. All this has grades made from primary fibre. The mills practices globally and yield synergies. stimulated customer demand for a one- in Western Europe, which is a major face-to-customer approach, which is now source of recovered paper, concentrate on more easily managed within Paper. producing paper mainly from recycled “The long-term challenge is to be fibre. clearly the world’s leading paper Customers’ needs the starting point maker. By leading we mean having Scale enhances product offerings to A growing business consistently high market shares, customers. The Paper product area has a Paper production is a steadily growing a comprehensive product range, wide product range, and new products are business. Global demand is forecast to excellent customer service, trained constantly being developed in close co- grow in line with GDP. Growth is expect- and motivated people, a performance operation with customers. Stora Enso’s ed to be below 2% annually in the West- culture and profitable growth. global reach, with mills on three conti- ern economies, but higher in the rest of These are not just words. I believe nents and a worldwide sales network, the world. In graphical papers (newsprint, Stora Enso Paper will fulfil this provides customer service that is global magazine paper and coated fine paper) commitment to high performance in breadth and local in depth. the key driver is printed advertising. In and organisational excellence,” office papers the key driver is usage of Continuous improvement office equipment (printers and copiers). says Kai Korhonen, Scale allows mill specialisation. This is Senior Executive Vice President, especially evident in Fine Paper, where Stora Enso Paper. mills that previously produced several grades are now specialising in just one or two. Publication paper machines are also Stora Enso PressSelection Paper and Board Demand specialising in fewer grades, and produc- Million tonnes tion that would not be profitable over the WFC 400 long term is being phased out. MWC 300 alue added V LWC In the short term, the most important 200 improvement plan for Stora Enso MFC 100 Paper relates to the cost structure. The SC North American Profit Enhancement MFS 1980 1985 1990 1995 2000 2005 2010 2015 Programme announced in August 2002 Rest of the World Japan NEWS and extended in 2003 will further Latin America Eastern Europe Rest of Asia Western Europe improve the cost competitiveness of the Brightness China North America

North American operations. Source: Jaakko Pöyry

Better utilisation of resources The whole printing paper range is now under Global paper and board demand is forecast Scale also enables more efficient use of the same management. to rise from 325 million tonnes in 2000 to resources. The new Wood Supply Europe 450 million tonnes in 2015.

Read more www.storaenso.com/2003

STORA ENSO COMPANY 2003 17 P APER

Publication Paper

he newly formed Publication Paper Newsprint and Book Paper Uncoated Magazine Paper is used division combines the previous Stora Enso manufactures papers for news- mainly for periodicals and advertising T Magazine Paper and Newsprint papers and supplements from recycled material, such as inserts and flyers. It is divisions. Its operations are managed as and primary fibre. The tinted varieties are also suitable for mass circulation TV three Business Areas: Newsprint and Book used for identifying sports, business and magazines and catalogues. Paper, Coated Magazine Paper, and political sections of a newspaper. The Uncoated Magazine Paper. The division book paper range includes paper for Coated Magazine Paper in various offers a complete range of papers for hardback and paperback books, and matt, silk and glossy grades is used for newspapers, magazines, books, directories directory papers for telephone directories special interest and general interest mag- and all forms of advertising material. Cus- and timetables. azines. Other end-uses include supple- tomers include printing houses and pub- ments, upmarket and home-shopping lishers. catalogues, and magazine covers.

Outlook In Europe, uncoated magazine paper % of the prices remained almost unchanged Key figures* 2001 2002 2003 Group Sales, EUR million 5 414.4 4 715.6 4 295.7 34.3 throughout the year, whereas coated Operating profit, EUR million 855.7 320.1 114.1 21.2 magazine paper prices declined slightly. % of sales 15.8 6.8 2.7 Revenues were depressed by the depreci- Operating capital, EUR million 4 512.4 3 969.9 4 024.7 31.4 ation of the US dollar and British pound. Return on operating capital, % 18.8 7.5 2.9 The strengthening US economy and Capital expenditure, EUR million 239.7 482.2 591.6 Average number of employees 13 384 13 241 12 903 29.2 growing confidence in a European recov- Market-related production curtailments, tonnes 690 000 874 000 497 000 ery are expected gradually to increase *) excluding goodwill demand for advertising-driven paper Deliveries Deliveries Deliveries Capacity 1 000 tonnes 2001 2002 2003 2004 grades. In North America GDP growth has Newsprint and book paper 3 031 2 899 2 993 3 550 not yet stimulated paper demand or Uncoated magazine paper (SC) 1 377 1 363 1 440 1 680 orders. Magazine advertisement page Coated magazine paper counts, an indicator of paper demand, are (LWC, MWC, HWC, MFC) 2 452 2 507 2 482 2 740 still low. Wallpaper base 42 38 39 65 Total 6 902 6 807 6 954 8 035

18 STORA ENSO COMPANY 2003 Fine Paper

Asia and South America Stora Enso benefits from the lower manufacturing costs in Asia and South America. Interests in China include a fine paper mill and a core factory. A prefeasibility study of plantations in southern China is in progress. The Group, which has a permit to build a second paper machine in China, is upgrading the existing machine. In Brazil a 900 000 tonnes per year eucalyptus pulp mill is being built as a joint venture. The short-fibre pulp that the mill will manufacture is ideal for fine paper production.

tora Enso Fine Paper comprises Graphic Papers are tailored for the high Speciality Papers are used for various three Business Areas: Office Papers, quality printing needs of printers and purposes. Flexible packaging papers SGraphic Papers and Speciality publishers globally. The product range include paper grades designed for pro- Papers. includes multicoated papers used in art tecting, transporting and identifying pri- books, annual reports and luxury maga- marily food products. Technical papers Office Papers meet the rapidly changing zines, coated papers used in magazines, are manufactured for the Variable Image and highly demanding needs of modern catalogues and brochures, and uncoated Print (VIP) and pressure-sensitive mar- offices around the world. Products graphic papers suitable for stationery and kets. Label papers include wet-strength include document printing paper, enve- manuals. and non-wet-strength grades. lope paper, papers used in school note- books and blocks, business forms for con- Outlook tinuous stationery and digital printing In Western Europe fine paper demand paper. was recovering at the end of 2003. Cur- rent economic trends suggest modest vol- ume recovery is likely to continue, espe- % of the Key figures* 2001 2002 2003 Group cially in the short term. Overseas exports Sales, EUR million 3 670.4 3 427.4 3 197.7 24.0 are expected to stabilise or even decline Operating profit, EUR million 396.5 303.7 156.0 29.0 owing to the strong euro. Import pressure % of sales 10.8 8.9 4.9 will persist, especially in uncoated fine Operating capital, EUR million 4 190.2 3 660.6 3 380.6 26.3 Return on operating capital, % 9.2 7.7 4.4 paper. The outlook for fine paper prices Capital expenditure, EUR million 193.7 134.6 219.1 remains challenging. Average number of employees 10 968 9 872 9 521 21.5 In North America competitive Market-related imports of coated fine paper continue to production curtailments, tonnes 670 000 274 000 176 000 influence the North America market, but *) excluding goodwill Deliveries Deliveries Deliveries Capacity the weakness of the US dollar seems to 1 000 tonnes 2001 2002 2003 2004 have slowed their growth. The outlook is Office (uncoated) paper 1 273 1 330 1 347 1 655 rather stable in volumes and prices. How- Graphic (coated) paper 1 918 1 826 1 900 2 360 Speciality paper 257 276 344 385 ever, prices stay at low levels. Total 3 448 3 432 3 591 4 400

STORA ENSO COMPANY 2003 19 P APER – LANGERBRUGGE

Paper from 100% recovered fibre

Paper machine 4 at Langerbrugge he Langerbrugge paper machine Close to raw material sources and markets in Belgium, which started up on 4 project is Stora Enso’s largest ever T at a total investment of EUR 470 Langerbrugge’s location in the densely 31 May 2003, is the world’s million. It is part of the Group’s Asset populated heart of Western Europe is biggest newsprint machine. Restructuring Programme to enhance ideal for Stora Enso’s strategy of recycling It utilises only recovered paper competitiveness in publication paper and fibre close to the source and to customers. meet increasing demand for high quality Recovered paper is collected from within as raw material, and residuals paper. Four-colour printing is rapidly 300 kilometres of the mill, an area with are burnt as fuel, in line with growing in popularity and the latest nearly 80 million inhabitants. The recov- Stora Enso’s commitment technology is required to produce top ered paper is transported to the mill from quality paper to meet this demand. Belgium, the Netherlands, the UK, to sustainable development. There is also demand from authorities Germany and France by road and rail. and customers for more use of recovered Currently, the mill aims to sell fibre in paper manufacturing. In the UK, about 80% of its output in Europe, but for example, national and regional news- Langerbrugge is well located for serving papers have voluntarily promised the overseas customers because of its deep- government they will progressively water port. Stora Enso’s share of the ten increase the recovered fibre content of million tonnes per year European their newspapers to 70% by 2006. newsprint market is about 25%. The most important markets are the UK and Germany.

20 STORA ENSO COMPANY 2003 Langerbrugge Mill Stora Enso’s Langerbrugge Mill in Belgium is in the deepwater port of Ghent, about 50 kilometres from Brussels. Since paper production at Langerbrugge began in 1932, the annual production capacity has risen to a total of 565 000 tonnes of stan- dard newsprint and uncoated (SC) magazine paper from two paper machines. Langerbrugge Mill has 480 employees. The mill is certified to ISO 9001 and ISO 14001, and EMAS registration is scheduled for 2005.

Stig Andersson, Langerbrugge Mill Director, celebrates the start-up of the machine with his colleagues.

Sharing best practices Customised training for the whole crew Technical facts During the project Stora Enso’s resources included basic tuition, training by equip- When the new machine reaches full were well utilised for international trans- ment suppliers and separate courses for capacity in 2005, it will produce 400 000 fer of expertise. Personnel from other the paper machine, deinking plant, tonnes of newsprint per year. The mill’s Group mills in Finland, Sweden, power plant and maintenance personnel. total consumption of recovered paper will Germany and France went to Belgium to Employees also received on-site training grow to 500 000 tonnes per year. The wire provide know-how and start-up support. at Hylte Mill in Sweden and Sachsen Mill width is 11.1 metres and speed 2 000 in Germany. m/min. The total length of the machine and winder section is 154 metres. The project also included a new deinking Ideal location: nearly 80 million people plant, a 75 MW biofuel power plant, a live within 300 km. Helsinki new warehouse for recovered paper, a Stockholm product warehouse and a new office building.

Rotterdam Amsterdam London Düsseldorf Berlin Cologne Sachsen Langerbrugge Brussels

Maxau-WolfsheckM Paris

Bern

Barcelona

STORA ENSO COMPANY 2003 21 P ACKAGING BOARDS Strong manufacturing base and innovation

The Packaging Boards product area comprises four market and product segments: Consumer Boards, Corrugated Packaging, Industrial Papers, and Cores and Core Boards. The raw materials used are primary fibre from the Group’s pulp mills and recycled fibre collected from near the board mills in line with Stora Enso’s recycling strategy. Stora Enso is the market leader in primary-fibre-based consumer boards in Europe. tora Enso aims to be the most mas corrugated packaging mill in Russia Consumer board demand 2002-2012 rational choice for customers. As an opened in 2003. Estimated demand growth in 2002-2012, % per annum S integrated pulp and board producer 5 in a strong financial position, Stora Enso Innovation the way ahead 4 is a stable, reliable long-term supplier. Innovation will maintain and strengthen Large shares of business in target markets the competitive advantage of fibre-based 3 Average and product segments have been gained packaging materials over alternative 3 % 2 per annum through world-class innovation and envi- materials. Research and development in ronmentally and socially sound opera- Packaging Boards was recently reorgan- 1

tions. This strategy gives a financial ised and more closely integrated with 0 5 10 15 20 25 30 35 return adequate to cover shareholder strategic business development to Consumption in 2002, million tonnes SBS CUK interests and the future development of improve financial performance and prod- FBB Liquid Boards the business. uct quality. The new technologies being WLC Uncoated Recycled developed will further enhance the com- Source: Jaakko Pöyry Strength through the value chain petitiveness of Stora Enso packaging Packaging Boards has advanced produc- materials. Consumer board demand is forecast to grow tion assets, particularly the large efficient by 3% per year to 2012. machines manufacturing consumer Outlook boards. Ownership of the whole value Demand and prices were quite stable at “We’re going for profitable growth. chain from pulp production to recycling the end of 2003 for most board and paper While maximising sales revenues and of composite materials secures price and grades, as well as for corrugated products. keeping costs down, we are also open supply stability for customers, and the Prices for bleached boards (SBS) and lam- to acquisition opportunities to increase scale of the Group supports an excep- inating papers declined marginally. growth. Stora Enso must be the most tionally large product range. Not surpris- Demand and prices are generally expect- rational choice for customers,” ingly, Stora Enso has been the supplier of ed to remain stable in the near future. choice for a number of leading companies Some market-related downtime is antici- says Pekka Laaksonen, for more than forty years. pated because of European producers’ Senior Executive Vice President, Co-operation in innovation projects weaker competitiveness in overseas Stora Enso Packaging Boards. is another key benefit for customers (read markets. more about Stora Enso’s InnoCentre on pages 24–25), along with recycling of

composite materials. % of the Key figures* 2001 2002 2003 Group New areas of growth Sales, EUR million 2 671.1 2 720.2 2 761.6 21.1 Operating profit, EUR million 344.2 354.7 296.9 55.2 Packaging Boards is currently concentrat- % of sales 12.9 13.0 10.8 ed in Northern Europe, so Stora Enso is Operating capital, EUR million 2 641.8 2 605.3 2 561.0 20.0 looking for growth in new geographic Return on operating capital, % 12.5 13.5 11.5 areas. Economic development in Central Capital expenditure, EUR million 294.4 140.5 170.9 and Eastern Europe is increasing demand Average number of employees 9 527 9 949 10 068 22.7 Market-related production for packaging, and corrugated packaging curtailments, tonnes 180 000 109 000 109 000 consumption is growing especially fast in *) excluding goodwill Eastern Europe - annual growth there is Deliveries Deliveries Deliveries Capacity 1 000 tonnes 2001 2002 2003 2004 estimated at 5–10%. In the past eight Packaging boards and papers 2 509 2 909 3 006 3 285 years Stora Enso has built nine new pack- aging plants in Russia, Hungary and the Baltic States, the newest being the Arza- Read more www.storaenso.com/2003

STORA ENSO COMPANY 2003 23 P ACKAGING BOARDS – INNOCENTRE

Profitable growth through innovation

Stora Enso Consumer Boards full-scale converter itself. The aim is to established its new InnoCentre to expand markets through innovations that offer Stora Enso’s customers new stimulate growth through innova- business opportunities. tion in packaging manufacturing. One InnoCentre – three locations nnoCentre, a packaging research and InnoCentre comprises three research development centre established by and development units located at Imatra I Stora Enso Consumer Boards and and Karhula in Finland and Karlstad in Stora Enso Research, became operational Sweden. Each unit specialises in a differ- in July 2003. It was formed to develop ent aspect of packaging manufacture. new packaging material concepts, under- InnoCentre employs experts in fields take research on packaging engineering ranging from packaging development to and test new technology. digital printing technology and heat-seal- ing techniques. InnoCentre collaborates New business from innovation efficiently with Stora Enso Research. InnoCentre is intended to generate prof- itable future growth for Stora Enso Services for customers Consumer Boards through innovation InnoCentre is itself an innovation in cus- and adding value to existing businesses. tomer service in the packaging board “Our target is to increase the propor- industry, the basic idea being to develop tion of Stora Enso Consumer Boards’ sales innovations for customers’ benefit and to generated by new types of business collaborate with them on research and significantly in the next ten years,” says development. Juha Lehtola, Vice President, New InnoCentre serves Stora Enso’s Business Innovations. He emphasises that customers by developing and testing Stora Enso does not intend to become a packaging and high-barrier boards, and

24 STORA ENSO COMPANY 2003 InnoCentre is part of Stora Enso Partner Services, which also includes Service Centres and PartnerWeb. Read more about these services at Stora Enso’s website www.storaenso.com/partnerservices.

making available to them machine tech- Innovating into CD and DVD markets nology used in all stages of packaging This commercial approach is already Machine manufacture. Customers can commis- starting to bear fruit. One example is the suppliers Logistics Brand sion trial runs and product batches for successful market launch of Stora Enso’s experts owners market launches. patented DBS (DiscBox Slider) packaging system. Worldwide sales of CD and DVD End Getting the timing right discs totalled 22 billion in 2002, and DBS Designers Innovation users InnoCentre allocates its resources pru- is a serious cartonboard rival to plastic CD dently. and DVD covers. The competitive advan- StoraEnso Researchers “The starting point is doing the right tages of Stora Enso’s DBS are low cost, things at the right time,” emphasises Juha durability, compactness and unlimited Converters Lehtola. InnoCentre concentrates on graphical printing potential. development projects leading to a market launch within the next three years, so all A wealth of possibilities Vertical innovation process involves projects have a strongly commercial and There is enormous scope for new ideas to all parties in the value chain. practical orientation. Flexibility and rapid add value to packaging. response to trends give InnoCentre a InnoCentre provides the ideal envi- unique advantage in packaging research ronment for developing new solutions in and development. consumer boards. InnoCentre turns inspirations into practical applications and business models.

STORA ENSO COMPANY 2003 25 FOREST PRODUCTS

Better value for customers from optimised fibre supply

The Forest Products product area has several strategic roles within Stora Enso. It adds value and competitiveness to products throughout the supply chain by optimising the use of wood raw material for paper, packaging and wood products. It reduces Stora Enso’s total costs by integrating fibre supply chains. The competitive wood products are a core business for the Group. Sustainable competitive advantage Adding value for wood products The new Forest Products product area will customers Forest Products comprises Stora Enso gain the full synergy benefits from inte- Wood products is one of the core busi- Timber, Stora Enso Wood Supply grating the wood supply processes for nesses of the Group. Stora Enso Timber is Europe, the Pulp Competence sawmilling and pulping. Logs and wood strategically important as a producer and Centre, and Pulp Marketing and Pro- fibre account for a significant proportion supplier of competitive wood products, curement. Stora Enso Timber converts of Stora Enso’s costs, and co-ordinating and in enhancing wood procurement. the more valuable parts of the wood and optimising the wood supply will Fibre products from the sawmills such as supply into competitive wood maximise overall efficiency and value cre- chips and sawdust have a vital role in the products. Wood Supply Europe is ation. Group strategy as raw materials for other responsible for procuring and supply- For Stora Enso, its wood supplies and mills. ing the wood for Stora Enso’s wood products are fundamental to sus- Each sawmill has a specific role in European mills, for ensuring the tainability. Wood Supply Europe ensures serving customers, depending on its raw optimal raw material for them, and the acceptability of all Stora Enso’s prod- material base, capabilities and market for forest-related environmental ucts in the long term by applying and demand. Several sawmills in the Nordic matters globally. The Pulp Compe- promoting sustainable forest manage- countries have been modernised recently tence Centre has an important role ment practices. Sawn and processed wood to increase production efficiency. in optimising pulp flows, assets and products also help reduce the greenhouse A key element in Stora Enso Timber’s techniques throughout Stora Enso. effect while promoting a functional and strategy is to move from standardised to visually enjoyable living environment for mass-customised and higher-value-added people. products. This means offering complete “We want the most competitive fibre solutions for selected end-use segments. supply in the industry to gain the Expanding into new areas The increasing proportion of further- maximum benefit from our global Wood supply markets are very tight, espe- processed products in the output will purchasing power and to optimise the cially in Northern Europe. Stora Enso increase profits and reduce the volatility wood flows. Our top priority is therefore plans to expand its wood supply and pro- of the business. to implement a co-ordinated strategy cessing operations in Central and Eastern for the whole product area. Modern Europe, including Russia. Expansion into sawmilling has a vital role in realising the Baltic States was one of the first steps the corporate strategy. We will increase in this direction, building the first integration of pulping, sawmilling and sawmills in Russia another. Over the next wood supply to gain synergies and few years Stora Enso plans to invest fur- Increasing fibre supply from share best practices,” ther in sawmills and wood procurement, Eastern Europe mainly in the Baltic States and Russia. 2003 says Arno Pelkonen, Senior Executive Current projects in the region include 2006E Vice President, Stora Enso Forest Products. sawmills recently built, being designed or 15.2 15.0 upgraded, or under construction. Local manufacturing is a good way of Increasing value Percentage of production entering emerging wood products mar- 17.5 Finland 15.6 100 10+ kets. By applying internationally accept- 20% 60% 6.0 able wood trade practices, it also supports 80 development of local wood supply mar- 80% RussiaRussia 60 kets. Sweden 8.8 4.7 40 40% Baltic Baltic 20 StatesStates

0 8.0 7.1 Continental 2000 2006E Europe Further processed Rough sawn

Stora Enso’s procurement from different Stora Enso Timber’s strategic focus is to increase operating areas. the share of further-processed products.

Read more www.storaenso.com/2003

STORA ENSO COMPANY 2003 27 FOREST PRODUCTS

Wood Products

tora Enso Timber is an international Outlook wood products company that pro- Key factors influencing competitiveness whitewood and redwood, is uncertain. Svides customer-focused solutions to and market balance in Europe in the near Demand for wood products is expected to the construction and joinery industries future will be output in the Nordic coun- remain relatively stable, supported by and the wood products trade worldwide. tries, Continental Europe and Russia, steady housing markets in the USA and Its annual net sales are EUR 1.4 billion. and the weak US dollar. As a result, the Japan, and repair and maintenance activ- Stora Enso Timber’s total annual produc- market outlook, especially for Nordic ity in all market areas. tion capacity is 7.4 million m3 of sawn wood products, including 2.8 million m3 of value-added products. It employs 4 600 % of the Key figures* 2001 2002 2003 Group people in 24 softwood sawmills and 20 Sales, EUR million 1 180.5 1 235.2 1 400.0 10.6 further-processing plants in ten European Operating profit, EUR million 12.6 46.8 27.6 5.1 countries and in its sales and distribution % of sales 1.1 3.8 2.0 companies throughout the world. Operating capital, EUR million 421.3 421.6 654.1 5.1 Stora Enso Timber focuses on cus- Return on operating capital, % 3.1 11.1 5.1 Capital expenditure, EUR million 64.4 53.5 141.9 tomised mass-produced value-added Average number of employees 3 644 3 745 4 626 10.5 products for growing industrial end-uses. *) excluding goodwill They include laminated, stress-graded Deliveries Deliveries Deliveries Capacity 1 000 m3 2001 2002 2003 2004 and finger-jointed products for standard- Sawn wood products 4 860 5 112 5 822 7 380 ised building purposes and the joinery of which further-processed industries, as well as basic and commer- wood products 1 018 1 207 1 406 2 845 cialised products for timber merchants and importer-distributors.

Wood Supply Europe

tora Enso’s wood procurement units Outlook in Europe were integrated in May Supplies in wood markets are expected to S2003. The new division, Wood recover in Finland during the first quarter Supply Europe, brings together all the of 2004, and to remain strong and stable European wood supplying businesses in Russia and good in Continental Europe operating in the Baltic States, Continental with no major price changes expected in Europe, Finland, Russia and Sweden. either region in the first half of 2004. Wood Supply Europe applies sustainable forest management principles and opti- mises Stora Enso’s wood and fibre flows. With 3 000 employees, it procures about 50 million m3 of wood annually, of which about 40 million m3 is supplied to Stora Enso’s own mills in Europe.

28 STORA ENSO COMPANY 2003 FOREST PRODUCTS – WINDOW FRAMES

Window components – through further adding value processing

A strategic aim of indow manufacturers are a mated scanners and log x-ray machines at Stora Enso Timber is to increase key market for Stora Enso sawmills are being integrated to select the W Timber. most suitable raw material for compo- the value of its products through “We are convinced that wood is the nents and to increase synergies and effi- the whole supply chain. ideal material for window frames,” says ciency throughout the entire process. Production of window compo- Olle Berg, Senior Vice President, Business This allows window manufacturers to Line Joinery. Wood is a strong, durable concentrate on their core business of nents is a good example of and environmentally friendly choice for assembling, finishing and marketing implementing this strategy. window manufacturing. There are long high-quality wooden windows. Window components and other traditions of constructing buildings from Co-operation with key customers joinery products and services are wood, especially in the Nordic countries. Taking a step further in the value chain being developed to exploit the Comprehensive product range means much closer co-operation with competitive advantages of wood. In the past two years Stora Enso Timber window manufacturers. Products are has invested about EUR 15 million in being developed jointly with key cus- joinery component manufacturing at Ala tomers, the target being to develop stan- in Sweden, Honkalahti in Finland and dardised solutions. Imavere and Viljandi in Estonia. Each “Our strength in the market is our plant now specialises in particular types competence. We have people who really of product, and together they offer a com- understand our customers’ processes,” prehensive product range for window and says Olle Berg. door manufacture including glued, lami- ® nated and finger-jointed components. Stora Enso WoodHeart – durable by nature Online further processing Stora Enso Timber has developed a new The window industry is in transition as product for the joinery industry called the value chain is redefined. WoodHeart that is ideal for window com- Integration within the supply chain is ponents requiring high durability and sta- supported by new technology, making it bility. WoodHeart is an environmentally most cost efficient to manufacture com- friendly product that exploits the natural ponents as near the raw material source as properties of Nordic Scots pine. It is manu- possible. Modern sawmilling and compo- factured at Honkalahti Sawmill from logs nent manufacture go well together. Auto- with the highest heartwood content select- ed using the latest x-ray technology.

STORA ENSO COMPANY 2003 29 HUMAN RESOURCES MANAGEMENT

What people Can Do Success is not just about machines – people make the crucial difference. This is stressed in the Stora Enso Human Resources vision “What People Can Do”. Developing the quality of human resource work and promoting best practices are key issues in meeting future requirements.

tora Enso’s vision is to create and Human Resources indicators maintain a corporate culture and competence level that will secure a Key figures 2001 2002 2003 S Average number of employees 44 275 43 853 44 264 competitive advantage over rivals. This requires highly motivated personnel with Sales/employees, EUR 305 112 291 488 274 993 the right skills who are stimulated to Personnel turnover, %* 3.1 2.8 2.2 achieve their full potential. Training days/employee 3.9 4.9 3.8 *) Based on a number of outgoing permanent employees who have left Stora Enso voluntarily. Turning strategy into action The Human Resources strategy has been Employees by country 2001 2002 2003 % evolving since 1999, starting right after Finland 15 054 14 676 14 479 32 the Stora Enso merger. An evaluation of Sweden 9 433 9 187 9 068 20 what has been accomplished so far con- USA 6 071 5 731 5 182 12 firms that this is the right path. Germany 4 767 4 761 4 785 11 France 1 368 1 333 1 312 3 The three keys to achieving the vision Austria 1 127 1 189 1 226 3 are: Performance-oriented corporate Estonia 71 132 1 140 3 culture – a highly motivated and focused Canada 746 850 849 2 organisation in which all employees Netherlands 801 858 829 2 know their own role and understand how China 852 816 811 2 they contribute to achieving business Russia 227 581 741 2 goals and ultimately performance of the Belgium 694 645 623 1 highest standard; Other countries 3 064 3 094 3 219 7 Competence development – increasing Total, average 44 275 43 853 44 264 100 the competence of employees to meet Total, year-end 42 932 42 461 42 814 today’s and future demands will enable continual improvement and learning, Education and ultimately establish a clear competi- Basic education 25.4% tive advantage; High school/Vocational certificate 48.4% Attracting and retaining talents – College level 13.2% Stora Enso strives to be the most attrac- Bachelor’s degree/ tive employer in the industry by creating Polytechnic degree 8.2% an attractive working environment and Master’s degree 4.5% allowing people to develop their full Licentiate/Doctorate 0.3% potential.

30 STORA ENSO COMPANY 2003 Sven Rignell and Karin Örtenblad in the control room of board machine 3 at Fors Mill in Sweden.

Common thread Human Resources objectives in 2004 Human Resources objectives and bench- marking common to all Stora Enso units Performance-oriented corporate culture and develop it to meet changing have been developed to achieve results Corporate culture, motivation and job requirements through training and and monitor performance improvement satisfaction are regularly evaluated improving their own skills themselves. in the key areas. This has been integrated through attitude surveys. Attracting and retaining employees into Stora Enso’s framework for ensuring Low accident and absenteeism figures Stora Enso aims to be the most attrac- continuous improvement, the Excellence confirm successful corporate culture. tive employer in the forest products 2005 programme, which in 2003 was Competence development industry in each country. developed to focus on the Group’s strate- All units have a resource plan specify- Recruitment objectives are set for gic objectives and priorities. ing the overall competence required units depending on the key groups There is now a strong common thread to gain and maintain high competi- for the unit, local availability of skilled linking Stora Enso’s ambition to be the tiveness and how to achieve it. workers, development plans and staff leading forest products company, the All employees have a personalised pro- turnover. Human Resources vision “What People gramme to monitor their competence Can Do” and the shared Human Resources objectives. With a strong For further details about employee well-being, diversity and Corporate Social Responsibility, see the separate emphasis on setting clear targets and fol- Sustainability 2003 report. lowing up results, the framework is in place to overcome the Red Queen Princi- Stora Enso’s managers must be commit- ple – it takes all the running you can do just ted to developing its corporate culture Regeneration to keep in the same place. The principle, and assets. They are selected for their In a Group like Stora Enso with over from Alice’s adventures Through the Look- superior leadership and capability as 40 000 employees in more than 40 ing-Glass by Lewis Carroll, highlights the regards: countries, key employees of every importance of moving fast to stay in the Professional competence type are constantly reaching retire- lead. To gain and maintain a competitive Leadership ment age. Stora Enso ensures a edge requires an innovative approach and Utilisation of leadership tools smooth transition by recruiting the real commitment. most talented candidates, retaining First-class leadership is about delivering them, training them and developing First-class leadership excellent and sustainable results. their skills throughout their career Good leadership is crucial to a strong cor- Stora Enso managers are responsible for: with the Group. porate culture. Managers at all levels delivering short-term results; within Stora Enso lead by example. A new improving the competitiveness and leadership policy has been introduced to long-term results of their unit. support development of the current man- agers and recruitment of new managers.

STORA ENSO COMPANY 2003 31 BOARD OF DIRECTORS

Board of Directors

Claes Dahlbäck Gutzeit Supervisory Board from May 1993 Björn Hägglund M.Sc. (Econ.), Hon. Ph.D. (Tech. and Arts) until the merger with STORA in 1998. Mem- Ph.D. (For.) Chairman of Stora Enso Board of Directors since ber of Stora Enso Compensation Committee Deputy Chief Executive Officer of December 1998 since 23 December 1998 and Nomination Stora Enso and member of Stora Enso Independent member of the Board. Committee since 14 August 2003. Has 1 500 Board of Directors since December 1998 Born 1947. Chairman of the Board of Investor A shares in Stora Enso. Born 1945. President of Stora Forest and AB, Vin & Sprit AB, Gambro AB and EQT Timber division from January 1991 until Funds, and member of the Board of Goldman, Harald Einsmann March 1998, and CEO of STORA from March & Sachs Co. Member of the STORA Board of Ph.D. (Econ.) 1998 until December 1998. Chairman of the Directors from May 1990 and Chairman of Independent member of Stora Enso Board Research Institute of Industrial Economics the Board from May 1997 until the merger of Directors since December 1998 (IUI) in Sweden. Member of Royal Swedish with Enso in 1998. Chairman of Stora Enso Born 1934. Executive Chairman of the Board Academy of Engineering Sciences and Royal Compensation Committee since 23 December of Findus AB, member of the Board of British Swedish Academy of Agriculture and Forestry. 1998 and Nomination Committee since 14 American Tobacco plc, EMI Group plc, Tesco Member of the Board of Federation of Swedish August 2003. Has 2 541 A and 19 529 R shares Ltd and several other international corpora- Forest Industries and Confederation of Euro- in Stora Enso. tions. Member of the STORA Board of Direc- pean Paper Industries. Has 7 877 A and 14 618 tors from March 1998 until the merger with R shares and 363 750 year 1999–2002 and Krister Ahlström Enso in 1998. President of Procter & Gamble 90 000 year 2003 options/synthetic options M.Sc. (Eng.), Hon. Ph.D. (Tech. and Arts) Europe from 1984 until 1999. Member of Stora in Stora Enso. Vice Chairman of Stora Enso Board of Directors Enso Compensation Committee since 23 since December 1998 December 1998 and Nomination Committee Independent member of the Board. Born since 14 August 2003. Has ADRs representing 1940. Former Chairman of the Board, Presi- 4 800 R shares in Stora Enso. dent and CEO of A. Ahlstrom Corporation. Chairman of the Board of Wermland Paper AB and member of the Board of EQT Finland BV, NKT Holding A/S and several academic insti- tutions and foundations. Member of Enso-

From left to right: Jan Sjöqvist, Paavo Pitkänen, Marcus Wallenberg, Harald Einsmann, Barbara Kux, Björn Hägglund, Jukka Härmälä, Krister Ahlström, Claes Dahlbäck, George W. Mead, Ilkka Niemi

32 STORA ENSO COMPANY 2003 Jukka Härmälä Ilkka Niemi Marcus Wallenberg B.Sc. (Econ.), Hon. Ph.D. (Tech. and Econ.) M.Sc. (Econ.) B.Sc. (Foreign Service) Chief Executive Officer of Stora Enso and Independent member of Stora Enso Board Independent member of Stora Enso Board member of Stora Enso Board of Directors since of Directors since March 2001 of Directors since December 1998 December 1998 Born 1946. Senior Advisor and independent Born 1956. CEO and President of Investor AB, Born 1946. Vice Chairman of the Supervisory consultant on international finance. Chair- and member of the Board of Saab AB, Scania Board of Varma Mutual Pension Insurance man of the Board of Motiva Oy and member AB, Skandinaviska Enskilda Banken AB, Tele- Company, Vice Chairman of the Board of of the Board of Kvaerner Masa-Yards Oy. CEO fonaktiebolaget LM Ericsson, and the Knut Finnlines Plc and member of the Board of and member of the Board of Finnish State and Alice Wallenberg Foundation. Vice Presi- Finnish Forest Industries Federation and Euro- Guarantee Board from September 1989 until dent of Stora Feldmühle AG, a STORA pean Round Table of Industrialists. Employed July 1997. Member of the Board and represen- subsidiary, from August 1990 until June 1993. by Enso-Gutzeit from April 1970 to February tative of the Nordic Countries and Baltic Member of the STORA Board of Directors from 1984, he was Senior Vice President and a States at the World Bank in Washington DC March 1998 until the merger with Enso in member of the Board of Management of from August 1997 until August 2000. Chair- 1998. Member of Stora Enso Financial and Kansallis-Osake-Pankki (a predecessor of man of Finnish Accounting Standards Board Audit Committee since 29 December 2000. Nordea Bank) until rejoining Enso-Gutzeit in from 1993 to 1996. Member of Stora Enso Has 3 049 A and 6 019 R shares in Stora Enso. September 1988 as President and COO until Financial and Audit Committee since 19 December 1991. From January 1992 Chairman March 2002. Has no shares in Stora Enso. Josef Ackermann, a member of the Stora Enso Board of the Board of Enso-Gutzeit and President of Directors since 1998, resigned from office on 20 and CEO until the merger with STORA in Paavo Pitkänen March 2003. He was Chairman of the Stora Enso 1998. Has 6 500 R shares, warrants entitling M.Sc. (Math.) Financial and Audit Committee from 29 December to 102 000 R shares, and 442 500 year Independent member of Stora Enso Board 2000 until 20 March 2003. 1999–2002 and 110 000 year 2003 of Directors since December 1998 options/synthetic options in Stora Enso. Born 1942. President and CEO of Varma Years of issue of options/synthetic options: Mutual Pension Insurance Company, and 1999, 2000, 2001, 2002 and 2003. Barbara Kux member of the Board of Wärtsilä Corporation, MBA (Hons), INSEAD Sampo plc and various Finnish insurance To be considered “independent”, the Board must Independent member of Stora Enso Board of institutions. Member of the Enso-Gutzeit resolve that a director has no material relationship Directors since March 2003 Board of Directors from October 1994 until with the Company other than as a director. Born 1954. Chief Procurement Officer and the merger with STORA in 1998. Member of member of Group Management Committee Stora Enso Financial and Audit Committee Enso-Gutzeit became Enso in May 1996. of Royal Philips Electronics. Member of the since 29 December 2000. Has 3 800 A shares Board of INSEAD, Fontainebleau. Manage- in Stora Enso. ment Consultant of McKinsey & Co, Germany 1984–1989, Vice President of ABB Jan Sjöqvist AG and Nestlé S.A. 1989–1999 and Executive M.Sc. (Econ.) Director of Ford Motor Company 1999–2003. Independent member of Stora Enso Board Has no shares in Stora Enso. of Directors since December 1998 Born 1948. CEO and member of the Board of George W. Mead Swedia Networks AB, and member of the M.Sc. (Paper Chem.), B.Sc. (Chem.) Board of SSAB Svenskt Stål AB, Green Cargo Independent member of Stora Enso Board of AB and Lannebo fonder AB. Member of the Directors since August 2000 STORA Board of Directors from March 1997 Born 1927. Chairman and acting Treasurer until the merger with Enso in 1998. Chairman of Mead Witter Foundation. Chairman of the of Stora Enso Financial and Audit Committee Board of Consolidated Papers , Inc. prior to since 20 March 2003. Has 508 A and 1 943 R acquisition by Stora Enso. Member of Stora shares in Stora Enso. Enso Financial and Audit Committee since 20 March 2003. Has ADRs representing 2 685 492 R shares in Stora Enso.

STORA ENSO COMPANY 2003 33 EXECUTIVE MANAGEMENT GROUP

Executive Management Group

Jukka Härmälä of Stora Enso R&D Committee until of several subsidiaries and associated compa- B.Sc. (Econ.), Hon. Ph.D. (Tech. and Econ.) 31 July 2003. Has no shares in Stora Enso. nies. He joined Varkaus Mill of Enso (previ- Chief Executive Officer since December 1998 Has 166 900 year 1999–2002 and 45 000 year ously A. Ahlström Osakeyhtiö) in May 1977, Born 1946. He was employed by Enso-Gutzeit 2003 options/synthetic options in Stora Enso. and was Senior Vice President, Corporate from April 1970 to February 1984, and Planning, from March 1991 until December rejoined in September 1988 as President and Jussi Huttunen 1992, Managing Director of Sachsen Papier COO until December 1991, then President M.Sc. (Econ.) Eilenburg GmbH from January 1993 until and CEO from January 1992 until the merger Senior Executive Vice President, February 1996, Vice President, Marketing, with STORA in 1998. For further information, Stora Enso Fine Paper, since January 2002 Enso Publication Papers from January 1996 see page 33. Born 1954. Member of the Board of Directors until December 1998, Senior Executive Vice of several subsidiaries and associated compa- President, Newsprint, from December 1998 Björn Hägglund nies. He joined Enso-Gutzeit in 1979 and was until August 2000, and Senior Executive Vice Ph.D. (For.) Sales Manager at Enso Marketing Co Ltd from President, North America, from September Deputy Chief Executive Officer since March 1983 until December 1985, Managing 2000 until April 2003. Member of Stora Enso December 1998 Director of Enso Rose Ltd from March 1986 R&D and Sustainability Committees. Has no Born 1945. He joined STORA in 1991 and until January 1992, Managing Director of shares in Stora Enso. Has 181 900 year was President of Stora Forest and Timber divi- Enso Marketing Co Ltd from January 1990 1999–2002 and 45 000 year 2003 options/ sion from January 1991 until March 1998, and until January 1992, Vice President of Enso synthetic options in Stora Enso. CEO of STORA from March 1998 until Decem- Fine Paper Division from January 1992 until ber 1998. Chairman of Stora Enso July 1994, Managing Director of Enso Pekka Laaksonen R&D and Sustainability Committees. UK from August 1994 until December 1998, M.Sc. (Econ.) For further information, see page 32. and Managing Director of Stora Enso UK Senior Executive Vice President, from January 1999 until December 2001. Stora Enso Packaging Boards, since December 1998 Lars Bengtsson Member of Stora Enso R&D Committee Born 1956. Stora Enso Country Manager M.Sc. (Tech.) until 31 July 2003. Member of Stora Enso Finland and member of the Board of Directors Senior Executive Vice President, Sustainability Committee. Has no shares in of several subsidiaries and associated compa- Stora Enso North America, since May 2003 Stora Enso. Has 91 800 year 1999–2002 and nies, and member of the Board of Suominen Born 1945. Stora Enso Regional Manager for 45 000 year 2003 options/synthetic options Corporation. He joined the Enso Plywood North America and member of the Board of in Stora Enso. Division in 1979 and was Sales Manager at Directors of several subsidiaries and associated Enso (Deutschland) from August 1981 until companies. He joined STORA in 1986 and was Kai Korhonen August 1984, Head of the Enso Plywood Divi- Executive Vice President, Fine Paper, from M.Sc. (Eng.), eMBA sion from September 1984 until June 1985, December 1998 until August 2000, and Senior Senior Executive Vice President, Sales Manager at Enso (Deutschland) from Executive Vice President, Newsprint, from Stora Enso Paper, since May 2003 July 1985 until December 1988, Managing September 2000 until April 2003. Member Born 1951. Member of the Board of Directors Director of Enso (Deutschland) from January 1989 until August 1993, Executive Vice Presi- dent of Enso Packaging Boards Division from January 1993 until December 1998, and Senior Executive Vice President, Packaging Boards, from December 1998. He was also a deputy member from August 1993 until April 1996 and full member of the Enso Board of Directors from May 1996 until December 1998. Member of Stora Enso Sustainability Committee. Has 10 000 A shares, and 181 900 year 1999–2002 and 45 000 year 2003 options/synthetic options in Stora Enso.

From left to right: Esko Mäkeläinen, Björn Hägglund and Jussi Huttunen

34 STORA ENSO COMPANY 2003 Esko Mäkeläinen ber 1998, and Senior Executive Vice President, 1995, Managing Director of Enso Timber Oy M.Sc. (Econ.) Accounting and Legal Affairs of Stora Enso Ltd from September 1995 until December Chief Financial Officer and Senior Executive Vice from December 1998 until August 2001. Has 1998, Executive Vice President and Managing President, Finance, Accounting and Legal Affairs, 1 900 A and 4 669 R shares, warrants entitling Director of Stora Enso Timber Oy Ltd from since September 2001 to 180 000 R shares, and 181 900 year December 1998 until August 2001, and Senior Born 1946. Member of the Board of Directors 1999–2002 and 45 000 year 2003 options/syn- Executive Vice President, Timber, from of several subsidiaries and associated compa- thetic options in Stora Enso. August 2001 until April 2003. Member of nies, and the supervisory board of Mutual Stora Enso Sustainability and R&D Commit- Pension Insurance Company Ilmarinen. He Arno Pelkonen tees. Has no shares in Stora Enso. Has joined Enso-Gutzeit in 1970 and was head of M.Sc. (Econ.) 151 900 year 1999–2002 and 45 000 year 2003 accounting at Kotka Mill from November Senior Executive Vice President, options/synthetic options in Stora Enso. 1970 until December 1976 and at wood prod- Stora Enso Forest Products, since May 2003 ucts division from December 1976 until April Born 1954. Member of the Board of Directors Bernd Rettig 1977, head of budgeting from May 1977 until of several subsidiaries and associated compa- M.Sc. (Eng.) October 1983, Vice President and head of cor- nies. He joined Enso-Gutzeit in 1984 and was Senior Executive Vice President, porate accounting from November 1983 until Enso sawmill division Sales Manager from Stora Enso Publication Paper, since May 2003 December 1991, Executive Vice President, May 1984 until May 1986, Sales Director from Born 1956. Member of the Board of Directors CFO and member of the Enso-Gutzeit Board May 1986 until January 1990 and Marketing of several subsidiaries and associated compa- of Directors from January 1992 until Decem- Director from January 1990 until September nies. He joined STORA in 1982 and was Managing Director of Stora Reisholz GmbH from January 1992 until May 1996, Managing Director of Stora Enso Kabel GmbH from June 1996 until March 1999, and Senior Executive Vice President, Magazine Paper, from April 1999 until May 2003. Member of Stora Enso R&D Committee. Has no shares in Stora Enso. Has 181 900 year 1999–2002 and 45 000 year 2003 options/synthetic options in Stora Enso.

Yngve Stade M.Sc. (Eng.) Senior Executive Vice President, Corporate Support and Energy, since December 1998 Born 1947. Stora Enso Country Manager Sweden and member of the Board of Directors From left to right: Arno Pelkonen, Kai Korhonen, Jukka Härmälä and Lars Bengtsson of several subsidiaries and associated compa- nies, and member of the Board of Swedish P&P Research AB, TAPPI (International slot) and Marcus Wallenberg Foundation. He joined STORA in 1994 and was Senior Vice President of STORA and President of Stora Corporate Research from March 1994 until December 1998. Member of Stora Enso Investment, R&D and Sustainability Committees. Has 725 R shares, and 181 900 year 1999–2002 and 45 000 year 2003 options/synthetic options in Stora Enso.

Enso-Gutzeit became Enso in May 1996.

From left to right: Bernd Rettig, Pekka Laaksonen and Yngve Stade

STORA ENSO COMPANY 2003 35 MANAGEMENT GROUP

Management Group

John F Bergin Born 1944, joined the Company in 1988. 2 000 A shares, and 45 000 year 2001–2002 B.Sc. (Eng.), MBA Chairman of Stora Enso Investment and 30 000 year 2003 options/synthetic Senior Vice President, Stora Enso North America Committee. Member of R&D Committee until options in Stora Enso. Born 1943, joined the Company in 1968. 31 July 2003. Has 1 000 A shares, warrants Has ADRs representing 72 247 R shares, entitling to 15 000 R shares, and 107 900 year Walter Haberland North America warrants entitling to ADRs 1999–2002 and 30 000 year 2003 M.Sc. (Phys.) representing 66 124 R shares, and 27 500 year options/synthetic options in Stora Enso. Senior Vice President, Information Technology 1999–2002 and 22 500 year 2003 Born 1946, joined the Company in 1995. options/synthetic options in Stora Enso. Nils Grafström Has no shares in Stora Enso. Has LL.M. 60 400 year 1999–2002 and 22 500 year 2003 Magnus Diesen Executive Vice President, options/synthetic options in Stora Enso. M.Sc. (Paper Tech.) Stora Enso Latin America Executive Vice President, Corporate Strategy, Born 1947, employed by STORA 1980–1997, Peter Kickinger Investments and Business Planning rejoined the Company in 2001. Has M.Sc. (Econ.) Executive Vice President, Stora Enso Timber Born 1964, joined the Company in 1993. Member of Stora Enso Investment Committee. Has no shares in Stora Enso. Has 54 100 year 1999–2002 and 15 000 year 2003 options/synthetic options in Stora Enso.

Jyrki Kurkinen LL.M. General Counsel, Senior Vice President, Legal Affairs Born 1948, joined the Company in 1979. Member of Stora Enso Disclosure Committee. Has 32 568 R shares, warrants entitling to 60 000 R shares, and 100 400 year 1999–2002 and 22 500 year 2003 options/synthetic options in Stora Enso. From left to right: Markku Pentikäinen, Niilo Pöyhönen, Nils Grafström and Kari Vainio Mats Nordlander M.Sc. (Eng.) Executive Vice President, Stora Enso Merchants Born 1961, joined the Company in 1994. Has no shares in Stora Enso. Has 48 400 year 1999–2002 and 12 500 year 2003 options/synthetic options in Stora Enso.

Markku Pentikäinen M.Sc. (Eng.), eMBA Executive Vice President, Stora Enso Asia Pacific Born 1953, joined the Company in 1979. Has no shares in Stora Enso. Has 53 800 year 1999–2002 and 16 500 year 2003 options/synthetic options in Stora Enso.

From left to right: Eberhard Potempa, Jyrki Kurkinen, Elisabet Salander Björklund and John F Bergin

36 STORA ENSO COMPANY 2003 Eberhard Potempa 1999–2002 and 22 500 year 2003 Born 1958, joined the Company in 1995. M.Sc. (Econ.) options/synthetic options in Stora Enso. Member of Stora Enso Sustainability Senior Vice President, Country Manager Germany Committee. Has no shares in Stora Enso. Born 1953, joined the Company in 1976. Keith B Russell Has 44 800 year 1999–2002 and 12 500 year Has no shares in Stora Enso. Has B.A. 2003 options/synthetic options in Stora Enso. 73 500 year 1999–2002 and 22 500 year 2003 Senior Vice President, Investor Relations options/synthetic options in Stora Enso. Born 1958, joined the Company in 2002. Kari Vainio Has 7 000 R shares, and 45 000 year 2002 and B.Sc. (Econ.) Niilo Pöyhönen 45 000 year 2003 options/synthetic options in Executive Vice President, M.Sc. (Econ.) Stora Enso. Corporate Communications Executive Vice President, Born 1946, employed by Enso-Gutzeit Stora Enso Consumer Boards Elisabet Salander Björklund 1980–1983, rejoined the Company in 1985. Born 1953, joined the Company in 1978. M.Sc. (For.) Member of Stora Enso Sustainability Member of Stora Enso R&D Committee. Has Executive Vice President, Committee. Has 3 800 R shares, warrants no shares in Stora Enso. Has 58 400 year Stora Enso Wood Supply Europe entitling to 45 000 R shares, and 122 900 year 1999–2002 and 30 000 year 2003 options/synthetic options in Stora Enso.

Petri Wager M.Sc. (For.) Executive Vice President, Market Services Born 1948, joined the Company in 1973. Member of Stora Enso Sustainability Committee. Has no shares in Stora Enso. Has 66 100 year 1999–2002 and 22 500 year 2003 options/synthetic options in Stora Enso.

Christer Ågren B.A. (Business Adm.) Executive Vice President, Corporate Human Resources and TQM From left to right: Keith B Russell, Peter Kickinger and Mats Nordlander Born 1954, joined the Company in 1993. Member of Stora Enso Sustainability Committee. Has 3 000 R shares, and 122 900 year 1999–2002 and 30 000 year 2003 options/synthetic options in Stora Enso.

Seppo Hietanen, Executive Vice President, Asia Pacific, retired on 31 December 2003. Sven Rosman, Executive Vice President, Merchants, retired on 31 August 2003.

Years of issue of options/synthetic options: 1999, 2000, 2001, 2002 and 2003.

From left to right: Christer Ågren, Walter Haberland, Petri Wager and Magnus Diesen

STORA ENSO COMPANY 2003 37 CORPORATE GOVERNANCE

Corporate Governance

General Governance Issues Stora Enso has one or two official the Board shall have of a majority of inde- The duties of the various bodies within auditors, as decided by the shareholders pendent directors. To be considered Stora Enso Oyj (Stora Enso or the at the Annual General Meeting (AGM). “independent”, the Board must resolve Company) are determined by the laws of To the maximum extent possible, cor- that a director has no material relation- Finland and by the Company’s corporate porate actions and corporate records are ship with the Company other than as a governance policy, which complies with taken and recorded in English. director. Currently, the Board has eleven the Finnish Companies Act and Finnish ordinary members: nine non-executive Securities Market Act. The rules and Objectives and Composition of members who are independent and not recommendations of the Helsinki, Governance Bodies affiliated with Stora Enso and two execu- Stockholm and New York Stock The decision-making bodies with respon- tive members (CEO and Deputy CEO). Exchanges are also followed, where appli- sibility for managing the Company are All directors are required to deal at cable. This corporate governance policy is the Board, CEO and Deputy CEO. The arm’s length with the Company and its decided by the Board of Directors (Board). operations of the Company are co-ordi- subsidiaries and to disclose circumstances The Board, the Chief Executive nated through the Executive Manage- that might be perceived as a conflict of Officer (CEO) and the Deputy Chief ment Group (EMG), Management Group interest. Executive Officer (Deputy CEO) are (MG) and various committees. The shareholders at the AGM decide responsible for the management of the Day-to-day operational responsibility the remuneration of the Board members Company. Other governance bodies have rests with the product area and division- (including the remuneration of the mem- an assisting and supporting role. al managements and their operation bers of the Board Committees). As a poli- Stora Enso prepares annual and inter- teams supported by various staff and serv- cy, remuneration is paid to non-executive im financial accounts conforming to ice functions. members only. international financial reporting stan- The Board supervises the operation dards (IFRS). These reports are published Board of Directors and management of Stora Enso and in Finnish, Swedish, English and German. Stora Enso is managed by the Board decides on significant matters relating to In addition, Stora Enso makes an annual under international corporate governance strategy, investments, organisation and reconciliation with US GAAP (Form 20-F). principles. finance. The Company’s head office is in According to the Company’s articles The Board is responsible for oversee- Helsinki, Finland. It also has an interna- of association, the Board consists of 6–11 ing management and for the proper tional office in London, United Kingdom ordinary members appointed by the organisation of Company operations. It is and head office functions in Stockholm, shareholders at the AGM for a one-year likewise responsible for overseeing the Sweden. term. It is the policy of the Company that proper supervision of accounting and control of financial matters. The Board has defined a working order, the principles of which are pub- Governance bodies lished in the annual report and on the Company’s website. Shareholders’ Meeting The Board elects a Chairman and a Vice Chairman from among the Board Board of Directors Board Committees members and appoints the CEO, Deputy Financial and Nomination Compensation Audit Committee Committee Committee CEO and heads of product areas, divisions CEO and staff functions. The Board approves the organisational structure of the Com- Executive Operative Committees Management pany. Deputy CEO Management Group (MG) Investment Sustainability R&D Disclosure The Board reviews and determines Group (EMG) Committee Committee Committee Committee the compensation of the CEO. Auditing The Board evaluates its performance

Internal Auditing External Auditors annually. The Board also reviews the cor- porate governance policy annually and amends it when required.

38 STORA ENSO COMPANY 2003 The Board’s work is supported through Paper and North America) and the heads Financial and Audit Committee meeting its committees – the Financial and Audit of Finance (CFO) and Corporate Support. to the Board. The tasks and responsibilities Committee, the Nomination Committee The EMG’s tasks and responsibilities of the Financial and Audit Committee are and the Compensation Committee. Each are investment planning and follow-up, defined in its charter, which is approved by committee’s chairman and members are control of mergers and acquisitions and the Board. Financial and Audit Committee appointed by the Board annually. divestments, preparation of strategic members may receive compensation sole- The Board meets at least five times a guidelines, allocation of resources, review ly based on their role as directors. The year. The non-executive Board members of key day-to-day operations and opera- compensation is decided upon by the meet regularly without executive members tional decisions, preparatory work with shareholders at an AGM. in connection with the Board meetings. regard to Board meetings and review of the main features of the sales network. Nomination Committee Chief Executive Officer (CEO) The EMG meets regularly, approxi- The Board has a Nomination Committee The CEO is in charge of the day-to-day mately once a month, and as required. that is responsible for giving guidance to management of the Company in accor- the shareholders through the Board dance with instructions and orders issued Management Group (MG) regarding the composition of the Board by the Board. It is the duty of the CEO to The tasks and responsibilities of the and remuneration of Board members. ensure that the Company’s accounting Management Group are to review the Further, it prepares a proposal to the methods comply with the law and that budget, Company strategy and business Board on the composition and Chairmen financial matters are handled in a reliable development. of the Board Committees. The Committee manner. The MG is chaired by the CEO. The is comprised of 3–4 non-executive board The CEO is directly in charge of the MG consists of members of the EMG and members who are independent and not following: monitoring and coaching the additional members appointed by the affiliated with the Company. The Nomi- Paper and Packaging Boards product CEO. nation Committee meets regularly at areas, business strategy (long-range plan- The MG meets approximately four least once a year. The Chairman of the ning and investments), finance (financ- times a year. Committee presents the proposals of the ing, accounting and legal affairs), market Nomination Committee to the Board. services, corporate communications and Board committees The tasks and responsibilities of the investor relations, and preparatory work Financial and Audit Committee Nomination Committee are defined in its with regard to Board meetings. In addi- The Board has a Financial and Audit charter, which is approved by the Board. tion, he or she supervises decisions Committee to support the Board in main- regarding key personnel and other impor- taining the integrity of the Company’s Compensation Committee tant operational matters. financial reporting and the Board’s con- The Board has a Compensation Committee trol functions. It regularly reviews the sys- that is responsible for recommending, Deputy Chief Executive Officer tem of internal control, management and evaluating and approving executive (Deputy CEO) reporting of financial risks and the audit (other than the CEO) nominations and The Deputy CEO acts as deputy to the process. It makes recommendations compensations, evaluating the perform- CEO. The Deputy CEO is in charge of the regarding the appointment of external ance and compensation of the CEO, and following operational matters: monitor- auditors for the parent company and the making recommendations to the Board ing and coaching the Forest Products main subsidiaries. relating to management compensation product area, Asia Pacific and Latin The Committee is comprised of 3–5 issues generally, including equity incen- America divisions, corporate support non-executive board members who are tive compensation plans. The Board functions (purchasing, R&D, environ- independent and not affiliated with the approves the compensation of the CEO. mental matters), human resources, ener- Company. At least one committee member The Committee is comprised of 3–4 non- gy and information technology. must be a financial expert who has signif- executive board members who are in icant knowledge and experience in dependent and not affiliated with the Executive Management Group (EMG) accounting and accounting principles Company. The Compensation Commit- The Executive Management Group is applicable to the Company. The Financial tee meets regularly at least once a year. chaired by the CEO. The EMG members and Audit Committee meets regularly at The Chairman of the Committee presents are appointed by the Board. Currently, it least twice a year. The Committee mem- a report on each Compensation Commit- consists of the Deputy CEO and three bers meet the external auditor without the tee meeting to the Board. The tasks and product area heads (Paper, Packaging management being present in connection responsibilities of the Compensation Boards and Forest Products), three divi- with its meetings. The Chairman of the Committee are defined in its charter, sional heads (Publication Paper, Fine Committee presents a report on each which is approved by the Board.

STORA ENSO COMPANY 2003 39 CORPORATE GOVERNANCE

Operative committees mental and non-governmental organisa- bers are the head of Internal Auditing and Investment Committee tions, to take initiatives for the develop- the General Counsel. Other members are The Investment Committee is chaired ment of relevant management procedures nominated by the CEO as required. The by the head of Corporate Strategy, and to produce the annual Sustainability Disclosure Committee reports to the CEO Investments and Business Planning. The Report. and Chief Financial Officer (CFO). Committee’s members are appointed by The Sustainability Committee meets The Disclosure Committee meets reg- the CEO. regularly as required. ularly as required. The tasks and responsibilities of the Investment Committee are co-ordination Research and Development (R&D) Other supervisory bodies and norms of the investment planning and approval Committee Auditors process, co-ordination of the investment The R&D Committee is chaired by the The shareholders at the AGM annually completion audit and follow-up process, Deputy CEO. The Committee’s members, elect one or two auditors for Stora Enso. participation in the planning and execu- representing the R&D organisation and The Financial and Audit Committee tion of large investment projects in the the product areas, are appointed by the monitors the auditor selection process Company’s various geographical areas, CEO. and gives its recommendation as to who and the drawing-up of recommendations The tasks of the R&D Committee are: should serve as auditor to the Board and on funds available for investments. to secure a group perspective on R&D in to the shareholders at the AGM. The audi- The Investment Committee meets at the Company with regard to the rele- tor(s) shall be an authorised public least six times a year and as required. vance of R&D and its quality and effi- accounting firm or firms, which then ciency, to initiate R&D policy and strate- appoint(s) the auditor responsible. Sustainability Committee gy at Group level, to monitor group R&D The Sustainability Committee is chaired and to supervise Company-financed R&D Internal Auditing by the Deputy CEO. The Committee’s undertaken externally. In order to facili- Stora Enso has a separate internal auditing members, representing the relevant staff tate these tasks, the R&D committee must organisation. It independently appraises groups and the product areas, are monitor technology and future-oriented the adequacy and effectiveness of systems, appointed by the CEO. product development. internal controls and accounting. The tasks of the Sustainability Com- The R&D Committee meets regularly Internal Auditing reports its findings mittee are: to formulate corporate policy as required. to the management, the external audi- and strategy in environmental and cor- tors and the Financial and Audit Com- porate social responsibility matters, to Disclosure Committee mittee. The head of Internal Auditing ensure that these policies and strategies The Disclosure Committee supervises the reports to the CFO on a functional basis are well established and respected reliability of the Company financial and to the CEO, and has direct access to throughout the Company, to co-ordinate reporting and disclosure processes. The the Chairman of the Financial and Audit and follow-up relations and communica- Committee is chaired by the Group Con- Committee. tion with stakeholders such as govern- troller, and the other permanent mem- Internal Auditing conducts regular audits at major mills, subsidiaries and other Company units.

Insider guidelines The Company complies fully with the insider guidelines of the Helsinki Exchanges. The Company’s internal insider guidelines are published and regularly distributed throughout the organisation. The Company expects all of its employees to act as required of an insider.

40 STORA ENSO COMPANY 2003 All information that relates to the the auditors. The CEO has decided that considered project-specific insiders. Company’s present and future business other permanent insiders shall be the A separate project-specific insider register operations is expected to be kept strictly members of the Management Group and is maintained when considered appropri- confidential. The Company’s insider reg- nominated persons in legal, financial, ate by the General Counsel or his or her ister is publicly available and is main- accounting, R&D, communications and Deputy. tained by the Finnish Central Securities investor relations functions. Depository. Persons, who participate in the devel- Permanent insiders are members of opment and preparation of a project, the Board, the CEO and Deputy CEO, and including mergers or acquisitions, are

Corporate Governance in 2003

In 2003 Stora Enso updated its 2003), Ilkka Niemi, Paavo Pitkänen replaced by a new Sustainability Corporate Governance in response and Marcus Wallenberg, and Committee in May 2003. Impor- to reorganisation of the Group, convened six times during 2003. tant items on the agenda in 2003 public interest in governance During 2003 the Board approved a were climate change, forest certifi- issues, new rules and recommen- new charter for the Financial and cation and wood traceability, CSR, dations of the Helsinki, Stockholm Audit Committee that defines its the Group environmental action and New York Stock Exchanges authority, tasks and processes. plan and the Group Sustainability and the Sarbanes Oxley Act. The Nomination Committee was Report 2003. The Environment The Board of Directors convened established in August 2003. It had Committee convened twice and eight times and had eleven three members, Claes Dahlbäck had fourteen members. The Sus- members. (Chairman), Krister Ahlström and tainability Committee convened The Executive Management Group Harald Einsmann, and convened once and had thirteen members. reviewed Stora Enso’s organisa- once. The R&D Committee’s main task tional structure, in addition to its The Compensation Committee during the year was to change customary governance tasks. This had three members, Claes Dahlbäck the R&D organisational structure resulted in a new structure stream- (Chairman), Krister Ahlström and to strengthen the research focus lined around the core product Harald Einsmann, and convened of the Product Areas and the areas (see pages 14–15). Other three times. relationship between business important items on the agenda in The Investment Committee units and R&D. New funding 2003 were the restructuring of examined several major investment arrangements were planned to forest ownership in Sweden, the proposals and made recommenda- facilitate commercialisation of Veracel pulp mill joint venture in tions on the allocation of divisional new business ideas. The R&D Brazil, the new paper machine at funds for consideration by the Committee had nine members Kvarnsveden and the Energy 2005 Board. Important items on the until 31 July and seven from project at Skoghall. The EMG agenda in 2003 were the new paper 1 August onwards. It convened convened twenty times and had machine at Kvarnsveden, the new twice in 2003. ten members. pulp mill in Brazil and modernisa- The Disclosure Committee had The Management Group tions at Maxau and Skoghall. The three members and convened convened four times and had Investment Committee had six five times. twenty-five members. members and convened thirteen The closed period was amended to The Financial and Audit times in 2003. start two weeks prior to the date Committee comprised five The Sustainability Committee when the results of a reporting members, Jan Sjöqvist (Chairman further developed and strengthened period are announced. The dates from 18 March 2003), Josef governance related to sustainability are published in the financial Ackermann (member and issues to reflect Stora Enso’s overall calender on: Chairman until 18 March 2003), approach to sustainability. The for- www.storaenso.com/investors George W. Mead (from 18 March mer Environment Committee was

STORA ENSO COMPANY 2003 41 SHARES AND SHAREHOLDERS

Shares and Shareholders

Shares of Stora Enso Oyj (hereafter “Company” or “Stora Enso”) are divided into series A and series R shares. All shares carry equal rights to dividend but different voting rights. At a shareholders’ meeting, each A share and each ten R shares carry one vote. However, each shareholder has at least one vote. The nominal value of each share is EUR 1.70. On 31 December 2003 the Company’s fully paid-up share capital entered in the Finnish Trade Register was EUR 1 469.3 million. The total number of shares was 864 262 499 and the number of votes 249 516 222.

Number of Number of Total number Share capital Changes in share capital 2001–2003 A shares issued R shares issued of shares (EUR million) Stora Enso Oyj, 1 Jan 2001 194 496 456 732 726 810 927 223 266 1 576.3 Cancellation of repurchased shares -910 600 -22 260 100 -23 170 700 -39.4 Conversion of A shares into R shares -9 312 271 9 312 271 - Subscription of new R shares 2 700 733 2 700 733 Stora Enso Oyj, 31 Dec 2001 184 273 585 722 479 714 906 753 299 1 541.5 Subscription of new R shares 1 158 000 1 158 000 Cancellation of repurchased shares -813 200 -7 319 800 -8 133 000 -13.8 Conversion of A shares into R shares -1 143 700 1 143 700 - Stora Enso Oyj, 31 Dec 2002 182 316 685 717 461 614 899 778 299 1 529.6 Subscription of new R shares - 3 000 3 000 Cancellation of repurchased shares -93 800 -35 500 000 -35 593 800 -60.5 Conversion of A shares into R shares -1 011 805 1 011 805 - Subscription of new R shares 75 000 75 000 Stora Enso Oyj, 31 Dec 2003 181 211 080 683 051 419 864 262 499 1 469.3 Subscription of new R shares 222 000 222 000 Conversion of A shares into R shares -27 906 27 906 - Stora Enso Oyj, 15 Jan 2004 181 183 174 683 301 325 864 484 499 1 469.6

Stora Enso continued to repurchase Stora Enso is listed on three stock Share price performance and volumes shares in 2003 exchanges Helsinki The Annual General Meeting (AGM) on 20 Stora Enso shares are listed on the Helsin- The Stora Enso R (STERV) share price rose March 2003 authorised the Board of Direc- ki and Stockholm stock exchanges. The R during 2003 by 6% (30% decrease in tors to repurchase and dispose of not more shares are also listed in ADR form on the 2002). During the same period the HEX than 9 100 000 A shares and not more New York Stock Exchange (NYSE). The All-Share index fell by 0.3%, the Helsinki than 34 000 000 R shares in the Company. shares are quoted in Helsinki in euros Portfolio index rose by 12% and the HEX However, the number of shares repur- (EUR), in Stockholm in Swedish krona Forest Industry index fell by 4%. The year chased could not exceed 5% of the votes or (SEK) and euros (EUR) and in New York in high was EUR 12.42 and the year low EUR the share capital. The authorisation is valid US dollars (USD). 8.30. up to and including 19 March 2004. Deutsche Bank Trust Company Amer- Stockholm Repurchases began on 27 March 2003. icas acts as depositary bank for the Stora The Stora Enso R (STE R) share price rose By 31 December 2003, 8 100 A shares and Enso ADR programme. The administration during 2003 by 7% (32% decrease in 23 504 400 R shares had been repurchased, of the ADR programme was transferred to 2002). During the same period the Stock- representing 0.09% and 69.1% of the tar- Deutsche Bank Trust Company Americas holmsbörsen All-Share index rose by 30% get amounts respectively. The average from Citibank, N.A. in January 2004. The and the SX 15 Materials index by 15%. The price paid for the A shares was EUR 10.11 exchange rate between Stora Enso ADRs year high was SEK 113.50 and the year low and for the R shares EUR 9.70. and R shares is 1:1, i.e. one ADR represents SEK 77.50. The Board of Directors currently has one Stora Enso R share and the ADR ticker no authorisations to issue shares, convert- is SEO. ible bonds or bonds with warrants.

42 STORA ENSO COMPANY 2003 Monthly share price performance and volumes on Helsinki Exchanges (1995–2003)

Series A Series R

14 Number of shares, million Share price (EUR) 14 100 Number of shares, million Share price (EUR) 100 90 90 12 12 80 80 10 10 70 70 60 60 8 8 50 50 6 6 40 40 4 4 30 30 20 20 2 2 10 10 0 0 0 0 Volume Monthly average share price Volume Monthly average share price

New York Facts about option programmes Stora Enso North America option On the NYSE the Stora Enso ADR (SEO) Option/synthetic option programmes programme share price rose during 2003 by 30% (15% Stora Enso has five option/synthetic Following the acquisition of Consolidated decrease in 2002). During the same period option programmes for key personnel. Papers, Inc. the Board of Directors decid- the Standard & Poor’s Paper index rose by Options/synthetic options were issued in ed to convert the Consolidated Papers’ 30.9%. The year high was USD 14.05 and 1999, 2000, 2001, 2002 and 2003. share option plans into share option the year low USD 9.16. Depending on local circumstances, hold- plans of Stora Enso. The options entitle Volumes ers may receive either cash compensation the holder to either cash compensation or The volume weighted average price of the or an option to purchase shares already an option to subscribe for shares already R share over the year was EUR 10.23 in issued (not new shares). issued (not new shares). Helsinki (EUR 12.86 in 2002), SEK 93.18 Warrants in Stockholm (SEK 119.50 in 2002) and The option programme for management USD 11.77 in New York (USD 12.29 in comprises warrants issued in 1997 to Detailed descriptions of the option 2002). members of the senior management. One programmes may be found on page 95 The cumulative trading volume of the warrant entitles the holder to subscribe in the Financials 2003 report. R share in Helsinki was 780 890 417 shares for 3 000 new R shares. (70% of total), in Stockholm 318 984 991 shares (28% of total) and in New York 19 097 500 shares (2% of total). Total mar- ket capitalisation in Helsinki at the year- end was EUR 9.3 billion.

Facts about option programmes Year of Number Number of Exercise Options Option programme Type issuance of staff Strike price options issued period outstanding 2003 Synthetic 2003 1 000 EUR 10.00 6 064 150 8 Feb 2006–7 Feb 2010 6 064 150 2002 Synthetic 2002 1 000 EUR 16.50 5 902 000 8 Feb 2005–7 Feb 2009 5 812 000 2001 Synthetic 2001 500 EUR 11.70 4 215 000 1 Apr 2004–31 Mar 2008 4 100 000 2000 Synthetic 2000 200 EUR 12.25 2 800 000 1 Apr 2003–31 Mar 2007 2 602 500 1999 Synthetic 1999 200 EUR 11.75 2 750 000 15 Jul 2002–15 Jul 2006 2 532 750 1997 Warrants 1997 15 FIM 45.57 3 000 000 1 Dec 1998–31 Mar 2004 567 000 (EUR 7.66) North America Stock options 2000 839 USD 6.9687 5 680 000 11 Sep 2000–4 Feb 2010 1 899 692 (EUR 5.51)

STORA ENSO COMPANY 2003 43 SHARES AND SHAREHOLDERS

Stora Enso has some 82 000 issued. The largest single shareholder in holders, of which some 52 000 are registered shareholders the Company is the Finnish State. How- Swedish shareholders and some 3 000 When shareholders with holdings of ever, since June 1998 the Finnish State ADR-holders. Each nominee register is more than 5% of the shares or votes are has not been required to own Stora Enso entered in the share register as one share- excluded, the free float of shares is shares. holder. Approximately 611 million (71%) approximately 681 million, correspon- At the end of 2003 the Company had of the Company’s shares were registered ding to 79% of the total number of shares approximately 82 000 registered share- in the name of a nominee.

Major shareholders in Stora Enso on 31 December 2003

By voting power % of shares % of votes 1 Finnish State 11.2 23.9 2 Knut and Alice Wallenberg Foundation 6.8 23.4 Ownership distribution, 3 Social Insurance Institution of Finland 3.2 9.7 31 December 2003 4 Varma-Sampo Mutual Pension Insurance Company 1.0 3.6 (by number of 5 Sampo Life Insurance Company Limited 0.8 2.6 shares held) 6 Marianne and Marcus Wallenberg Foundation 0.5 1.9 7 Ilmarinen Mutual Pension Insurance Company 0.8 1.5 8 Suomi Group Finnish institutions 15.9% Finnish state 11.2% Suomi Mutual Life Assurance Company 0.4 1.3 Finnish private shareholders 2.0% Suomi Insurance Company 0.4 1.3 Swedish institutions 15.0% 9 Erik Johan's Ljungberg's Education Fund 0.8 0.9 Swedish private shareholders 4.0% 10 MP-Bolagen i Vetlanda AB ADR-holders 9.2% Werner von Seydlitz 0.4 0.9 Under nominee names (non-Finnish/ Total 26.3 71.0 non-Swedish shareholders) 42.7% Nominee registered shares 70.7 51.3

The list has been compiled by the Company on the basis of shareholder information obtained from the Finnish Central Securities Depository (APK), Swedish Securities Register Center (VPC) and a database managed by Citibank.

At the year end Stora Enso had 181 211 080 A shares and 683 051 419 R shares in issue, of which the Company held 8 100 A shares and 26 181 379 R shares with a nominal value of EUR 44.5 million. The holding represents 3.0% of the Company’s share capital and 1.1% of the voting rights.

Trading codes, lots and currencies German stock market quotations (Freiverkehr) Helsinki Stockholm New York Symbol CUSIP number Place of listing Series A STEAV STE A and STE AE - Series A ENUA 870 734 Berlin, Munich Series R STERV STE R and STE RE - Series R ENUR 871 004 Berlin, Frankfurt, ADRs - - SEO Stuttgart, Munich Lot 100 200 - Currency EUR EUR and SEK USD

Reuters STERV.HE Detailed information may be found on pages 32–39 Bloomberg STERV FH of the Financials 2003 report and updated information EQUITY on the Group’s website www.storaenso.com/investors

44 STORA ENSO COMPANY 2003 Key share ratios 1997–2003 (for calculations see Financials 2003 page 115)

According to Helsinki Stock Exchange 1997 1998 1999 2000 2001 2002 2003 Earnings/share, EUR* 0.53 0.24 0.98 1.77 1.03 -0.25 0.17 excl. non-recurring items, EUR* 0.58 0.59 0.89 1.32 0.94 0.57 0.25 Cash earnings/share, EUR* 1.63 1.79 2.18 3.16 2.43 2.49 1.58 excl. non-recurring items, EUR* 1.65 1.80 2.09 2.61 2.34 1.97 1.64 Equity/share, EUR* 7.28 6.94 7.84 9.41 10.03 9.36 9.65 Dividend/share, EUR* 0.33 0.35 0.40 0.45 0.45 0.45 **0.45 Payout ratio, excl. non-recurring items, %* 57 59 45 34 48 79 180 Dividend yield, %* A share 4.6 4.6 2.3 3.5 3.2 4.5 4.1 R share 4.6 4.6 2.3 3.6 3.1 4.5 4.2 Price/earnings ratio (P/E), excl. non-recurring items* A share 12.3 12.8 19.8 9.7 15.1 17.7 44.0 R share 12.2 31.0 19.4 9.5 15.3 17.6 42.7 Total market capitalisation at year-end, EUR million*** 2 214 5 801 13 209 11 733 13 006 9 052 9 288 Average number of shares (thousands) basic* 759 574 759 574 759 580 812 040 901 506 889 606 851 128 diluted* 759 691 759 822 760 628 813 488 902 296 889 956 852 423

*Proforma STORA and Enso figures for years 1997-1998. **Board of Directors’ proposal to the AGM. ***Figures based on market information are calculated from Enso Oyj’s figures before 29 December 1998.

Capital structure, Earnings and dividend per share, Equity per share, EUR million EUR EUR

16 000 1.4

14 000 1.2 12 000 10 1 10 000 8 0.8 8 000 6 0.6 6 000 4 0.4 4 000 2 2 000 0.2

0 0 0 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003

Equity Earnings per share* Net interest-bearing liabilities Dividend per share Minority interests *excl. non-recurring items Read more www.storaenso.com/2003

Distributed dividend, EUR million

450 400 350 300 250 200 150 100 50 0 1999 2000 2001 2002 2003

STORA ENSO COMPANY 2003 45 FINANCIAL SUMMARY

Consolidated Income Statement

Year Ended 31 December EUR million 2001 2002 2003

Sales 13 508.8 12 782.6 12 172.3

Other operating income 63.2 176.1 29.6 Changes in inventories of fi nished goods and work in progress 38.4 30.3 63.5 Change in net value of biological assets - - 11.6 Materials and services -6 547.8 -6 373.2 -6 192.8 Freight and sales commissions -1 234.0 -1 240.9 -1 286.8 Personnel expenses -2 234.4 -2 282.0 -2 285.3 Other operating expenses -839.7 -802.6 -828.0 Depreciation, amortisation and impairment charges -1 267.6 -2 441.9 -1 200.4

Operating Profi t / (Loss) 1 486.9 -151.6 483.7

Share of results in associated companies 79.6 14.6 -23.0 Net fi nancial items -343.5 -206.2 -237.7

Profi t / (Loss) before Tax and Minority Interests 1 223.0 -343.2 223.0

Income tax expense -299.6 120.9 -70.6

Profi t / (Loss) after Tax 923.4 -222.3 152.4

Minority interests 2.9 0.1 -5.8

Net Profi t / (Loss) for the Period 926.3 -222.2 146.6

Earnings per Share Basic earnings / (loss) per share, EUR 1.03 -0.25 0.17 Diluted earnings / (loss) per share, EUR 1.03 -0.25 0.17

For the full fi nancial information, see www.storaenso.com/2003 or the separate Financials 2003 report. Instructions for ordering it are on the back cover of this report.

46 STORA ENSO COMPANY 2003 Consolidated Balance Sheet

As at 31 December EUR million 2001 2002 2003

Assets

Fixed Assets and Other Long-term Investments Goodwill O 2 276.0 1 055.5 902.6 Intangible fi xed assets O 89.6 73.3 80.4 Property, plant and equipment O 12 335.6 10 812.1 9 964.5 Biological assets O - - 1 587.8 Investment in associated companies 306.7 211.7 319.0 Listed securities I 197.4 169.2 227.7 Unlisted shares O 181.0 148.5 140.8 Non-current loan receivables I 505.4 480.6 44.3 Deferred tax assets T 28.1 52.7 12.1 Other non-current assets O 257.9 241.1 170.3 16 177.7 13 244.7 13 449.5 Current Assets Inventories O 1 600.0 1 565.0 1 623.5 Tax receivables T 224.3 243.1 182.5 Short-term operative receivables O 1 976.3 1 902.4 1 703.3 Interest-bearing receivables I 333.1 1 090.5 781.8 Cash and cash equivalents I 247.0 168.5 201.5 4 380.7 4 969.5 4 492.6

Total Assets 20 558.4 18 214.2 17 942.1

Shareholders’ Equity and Liabilities

Shareholders’ Equity Share capital 1 541.5 1 529.6 1 469.3 Share premium fund 1 641.9 1 554.0 1 247.4 Treasury shares -125.5 -314.9 -258.0 Other comprehensive income 58.6 233.4 114.6 Cumulative translation adjustment -52.5 -144.4 -197.1 Retained earnings 4 998.7 5 521.4 5 570.9 Net profi t for the period 926.3 -222.2 146.6 8 989.0 8 156.9 8 083.7

Minority Interests 50.2 30.4 60.3

Long-term Liabilities Pension and post-employment benefi t provisions O 774.0 747.0 727.6 Other provisions O 153.6 194.5 97.1 Deferred tax liabilities T 2 011.0 1 787.3 1 830.8 Long-term debt I 5 182.0 4 525.2 3 404.6 Other long-term operative liabilities O 51.4 36.9 77.7 8 172.0 7 290.9 6 137.8 Current Liabilities Current portion of long-term debt I 230.0 306.5 359.5 Interest-bearing liabilities I 997.5 343.9 1 410.1 Short-term operative liabilities O 1 631.0 1 547.9 1 538.3 Tax liabilities T 488.7 537.7 352.4 3 347.2 2 736.0 3 660.3

Total Shareholders’ Equity and Liabilities 20 558.4 18 214.2 17 942.1

Items designated ”O” comprise Operative Capital Items designated ”I” comprise Interest-bearing Net Liabilities Items designated ”T” comprise Net Tax Liabilities

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STORA ENSO COMPANY 2003 47 FINANCIAL SUMMARY

Consolidated Cash Flow Statement

Year Ended 31 December EUR million 2001 2002 2003

Cash Flow from Operating Activities Net profi t / (loss) for the period 926.3 -222.2 146.6 Reversal of non-cash items: Minority interests -2.9 -0.1 5.8 Taxes 299.6 -120.9 70.6 Depreciation, amortisation and impairment charges 1 267.6 2 441.9 1 200.4 Change in value of biological assets - - -11.6 Share of results of associated companies -79.6 -14.6 23.0 Profi ts and losses on sale of fi xed assets and investments -48.4 -159.1 -10.5 Net fi nancial income 343.5 206.2 237.7 Interest received 56.1 46.5 24.6 Interest paid, net of amounts capitalised -352.5 -321.4 -228.1 Dividends received 17.0 9.2 5.8 Other fi nancial items, net -27.4 170.0 -0.4 Income taxes paid -699.6 -62.1 -233.8 Change in net working capital, net of businesses acquired or sold -171.2 -547.2 458.7 Net Cash Provided by Operating Activities 1 528.5 1 426.2 1 688.8

Cash Flow from Investing Activities Acquisition of subsidiary shares, net of cash -233.6 -56.3 -125.2 Acquisition of shares in associated companies -135.6 -1.5 -103.5 Acquisition of available-for-sale investments -7.0 -12.8 -12.6 Capital expenditure -857.1 -877.6 -1 226.7 Investment in biological assets - - -6.2 Proceeds from disposal of subsidiary shares, net of cash - 360.6 - Proceeds from disposal of shares in associated companies 62.4 185.5 0.4 Proceeds from disposal of available-for-sale investments - 16.8 18.5 Proceeds from sale of fi xed assets 92.6 202.4 47.5 Proceeds from (payment of) long-term receivables, net 196.0 -74.4 336.2 Net Cash Used in Investing Activities -882.3 -257.3 -1 071.6

Cash Flow from Financing Activities Proceeds from (payment of) long-term liabilities, net -351.3 -487.6 -962.5 Proceeds from (payment of) short-term borrowings, net -216.1 -56.3 1 097.0 Dividends paid -407.4 -403.6 -387.7 Proceeds from issue of share capital 29.5 - 2.3 Repurchase of own shares -199.8 -286.9 -319.1 Net Cash Used in Financing Activities -1 145.1 -1 234.4 -570.0

Net Increase (Decrease) in Cash and Cash Equivalents -498.9 -65.5 47.2 Cash and bank in acquired companies - - 3.0 Translation adjustment 1.5 -13.0 -17.2 Cash and cash equivalents at beginning of year 744.4 247.0 168.5 Cash and Cash Equivalents at Year End 247.0 168.5 201.5

48 STORA ENSO COMPANY 2003 Consolidated Cash Flow Statement

Supplemental Cash Flow Information

Year Ended 31 December EUR million 2001 2002 2003

Change in Net Working Capital consists of: Change in inventories -52.6 -17.0 -63.5 Change in interest-free receivables 315.5 31.1 214.9 Change in interest-free liabilities -211.5 -66.2 -5.8 Proceeds from (payment of) short-term receivables -222.6 -495.1 313.1 -171.2 -547.2 458.7 Non-cash Investing and Financing Activities: Total capital expenditure 857.1 877.6 1 248.2 Amounts paid 857.1 877.6 1 226.7 Finance lease obligations incurred --21.5

Acquisition of Group Companies Cash Flow on Acquisitions Purchase consideration on acquisitions 233.6 56.3 128.2 Cash and cash equivalents in acquired companies --3.0 233.6 56.3 125.2 Non-cash Transaction Unlisted share exchange - 27.6 - Total Purchase Consideration 233.6 83.9 125.5

Acquired Net Assets Operating working capital - -8.9 31.2 Operating fi xed assets 141.5 150.4 206.4 Interest-bearing assets less cash and cash equivalents - 5.6 5.7 Tax liabilities - -0.8 -0.2 Interest-bearing liabilities - -79.8 -94.1 Minority interests 92.1 17.4 -23.8 233.6 83.9 125.2

Disposal of Group Companies Cash Flow on Disposals Cash fl ow on disposal - 360.6 - Non-cash Transaction Associate company shares received 129.2 36.8 - 129.2 397.4 - Net Assets Sold Operating working capital 7.9 42.3 - Operating fi xed assets 244.3 441.0 - Interest-bearing assets less cash and cash equivalents 129.2 5.3 - Tax liabilities -31.0 -0.2 - Interest-bearing liabilities -221.2 -116.9 - Gain on sale - 25.9 - 129.2 397.4 -

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STORA ENSO COMPANY 2003 49 FINANCIAL SUMMARY

Key Figures 1997–2003

EUR million 1997 1998 1999 2000 2001 2002 2003

Sales 9 998 10 490 10 636 13 017 13 509 12 783 12 172 % change on previous year 5.1 4.9 1.4 22.4 3.8 -5.4 -4.8 Wages and salaries 1 737 1 805 1 754 1 996 2 234 2 282 2 285 % of sales 17.4 17.2 16.5 15.3 16.5 17.9 18.8 EBITDA 1 747 1 877 2 311 3 500 2 755 2 290 1 684 Depreciation 806 1 111 849 1 041 1 116 1 090 1 084 Goodwill amortisation and impairments 48 65 62 88 152 1 352 116 Operating profi t 893 701 1 400 2 371 1 487 -152 484 % of sales 8.9 6.7 13.2 18.2 11.0 -1.1 4.0 Non-recurring items -52 -471 103 445 -8 -1 078 -108 Operating profi t excl. non-recurring items 945 1 172 1 297 1 926 1 495 926 538 % of sales 9.5 11.2 12.2 14.8 11.1 7.2 4.4 Share of profi ts in associated companies 17 10 10 21 80 15 -23 Net fi nancial expense 280 380 267 293 344 206 238 % of sales 2.8 3.6 2.5 2.3 2.5 1.6 2.0 Profi t after net fi nancial items 630 331 1 143 2 099 1 223 -343 223 % of sales 6.3 3.2 10.7 16.1 9.1 -2.7 1.8 Profi t after net fi nancial items excl. non-recurring items 682 802 1 040 1 654 1 231 735 331 % of sales 6.8 7.6 9.8 12.7 9.1 5.7 2.7 Taxes -204 -146 -392 -650 -300 +121 -71 Profi t for the period 405 185 746 1 435 926 -222 147 Dividend 254 268 304 407 404 392 *389 Capital expenditure 1 134 896 740 769 857 878 1 248 % of sales 11.3 8.5 7.0 5.9 6.3 6.9 10.3 R&D expenditure 79 80 84 95 92 92 89 % of sales 0.8 0.8 0.8 0.7 0.7 0.7 0.7 Operating capital 13 078 12 541 12 615 16 557 16 106 13 272 13 733 Capital employed 11 572 11 038 10 941 13 903 13 859 11 242 11 744 Interest-bearing net liabilities 6 090 5 783 5 524 5 396 5 127 3 267 3 919 ROCE, % 8.0 6.2 13.1 20.7 10.7 -1.5 4.1 ROCE excluding non-recurring items, % 8.5 10.4 12.1 16.8 10.8 7.1 4.6 Return on equity (ROE), % 7.5 3.3 12.8 19.5 10.4 -3.3 1.8 Equity ratio, % 37.2 36.0 38.4 40.9 44.0 45.0 45.4 Debt/Equity ratio 1.05 1.04 0.90 0.62 0.57 **0.37 0.48 Average number of employees 40 301 40 987 40 226 41 785 44 275 43 853 44 264

* Board’s dividend proposal ** Adjusted with the initial valuation of IAS 41 Agriculture

50 STORA ENSO COMPANY 2003 AUDITORS’ REPORT

Auditors’ Report

To the shareholders of Stora Enso Oyj In our opinion, the consolidated fi nancial statements pre- We have audited the accounting records, the fi nancial state- pared in accordance with International Financial Reporting ments and the administration of Stora Enso Oyj for the year Standards (IFRS) give a true and fair view of the consolidated ended 31 December 2003. The fi nancial statements prepared result of operations, as well as of the fi nancial position of the by the Board of Directors and the Chief Executive Offi cer Stora Enso Group. The consolidated fi nancial statements have include the report of the Board of Directors, consolidated been prepared in accordance with prevailing rules and regula- fi nancial statements of the Stora Enso Group prepared in tions in Finland and can be adopted. accordance with International Financial Reporting Standards The parent company’s fi nancial statements have been (IFRS), and parent company fi nancial statements prepared in prepared in accordance with the Finnish Accounting Act and accordance with prevailing rules and regulations in Finland other rules and regulations (FAS). Based on our audit, we express an opinion on these governing the preparation of the fi nancial statements. The fi nancial statements and on the parent company’s administra- parent company fi nancial statements give a true and a fair tion. view, as defi ned in the Accounting Act, of the Company’s We conducted our audit in accordance with Finnish result of operations and fi nancial position. The parent com- Standards on Auditing. Those standards require that we plan pany’s fi nancial statements can be adopted and the members and perform the audit to obtain reasonable assurance as to of the Board of Directors and the Chief Executive Offi cer of whether the fi nancial statements are free of material misstate- the parent company discharged from liability for the period ment. An audit includes examining, on a test basis, evidence audited by us. The proposal of the Board of Directors regard- support-ing the amounts and disclosures in the fi nancial ing the distributable funds is in compliance with the Finnish statements, assessing the accounting principles used and the Companies’ Act. signifi cant estimates made by the management, as well as evaluating the overall fi nancial statement presentation. The purpose of our audit of the administration has been to ensure that the members of the Board of Directors and the Chief Executive Offi cer have legally complied with the rules of the Finnish Companies’ Act.

Helsinki, 13 February, 2004

PricewaterhouseCoopers Oy

Authorised Public Accountants

Pekka Nikula

Authorised Public Accountant

Read more www.storaenso.com/2003

STORA ENSO COMPANY 2003 51 INFORMATION FOR SHAREHOLDERS

Annual General Meeting (AGM) Distribution of financial information Other stakeholders: see details for The AGM of Stora Enso Oyj will be held at The Stora Enso annual report comprising Finnish shareholders. 16.00 (Finnish time) on Thursday 18 three separate reports (Company, Sus- Unsubscribe or subscribe to e-mail March 2004 at Finlandia Hall, Manner- tainability and Financials) is published in alerts via www.storaenso.com/email. On heimintie 13 e, Helsinki, Finland. English, Finnish, German and Swedish. unsubscribing, you will be deleted from Pursuant to Finnish law nominee- The Company and Sustainability all of the e-mail alert lists to which you registered shareholders wishing to reports are distributed to those share- subscribed. If your e-mail address has attend and vote at the AGM must be holders in Finland and Sweden who have changed, please unsubscribe your old temporarily registered in the share regis- so requested, and to all ADR holders. e-mail address, then subscribe again using ter of Stora Enso Oyj on the record The Financials report can be ordered your new e-mail address. date, 8 March 2004. Instructions for by using the online order form submitting notice of attendance will be (www.storaenso.com/order) or by con- Information for holders of American given in the convocation to the AGM, tacting any of the corporate offices. The Depositary Receipts (ADRs) which will be sent to shareholders, annual report is also available at The Stora Enso dividend reinvestment and on the Company’s website at www.storaenso.com/2003. and direct purchase plan was established www.storaenso.com/investors. The annual report on Form 20-F in January 2002 and is administered by is distributed on request and download- Deutsche Bank Trust Company Americas Main proposals of the Board of able as a PDF file from the Company’s (DBTCA). The plan makes it easier for Directors to the AGM website and from the website of the US existing ADR holders and first-time pur- The share capital of the Company be Securities and Exchange Commission chasers of Stora Enso ADRs to increase reduced through the cancellation of (www.sec.gov). ADR holders in North their investment by reinvesting cash div- repurchased shares. America may request a printed copy idends or by making additional cash The Board of Directors be authorised from DBTCA. investments. The plan is intended only to repurchase and dispose of shares Printed interim reviews, which are for US residents. Further information on in the Company. The authorisation available in English, Finnish and Swedish, the Stora Enso ADR programme is avail- would entitle the repurchase of are distributed to those shareholders in able at www.adr.db.com. approximately 9 000 000 A shares Finland and Sweden who have so and approximately 34 100 000 requested. ADR holders in North America Contact information for R shares, the exact numbers to be may request printed copies of interim Stora Enso ADR holders determined by the AGM. reviews from DBTCA. Deutsche Bank Trust Company Americas The interim reviews are published on 85 Challenger Road, Ridgefield Park Payment of dividend the Company’s website, from which they NJ 07660, USA The Board of Directors will propose to the can be downloaded as PDF files. Toll-Free (within the USA only): AGM that a dividend of EUR 0.45 per E-mail alerts for stock exchange +1 800 249 1707 share be paid for the fiscal year ending 31 releases, calendar reminders and December 2003. new financial information notifications Filings to SEC through EDGAR Dividends payable on VPC-registered can be ordered by subscribing at EDGAR (Electronic Data Gathering and shares will be forwarded by VPC and paid www.storaenso.com/email. Retrieval system) filings became manda- in Swedish krona. Dividends payable to tory for non-US companies listed on the ADR holders will be forwarded by Mailing lists for financial information New York Stock Exchange on 4 November Deutsche Bank Trust Company Americas Please notify any change of address or 2002. Stora Enso’s filed stock exchange (DBTCA) and paid in US dollars. request for addition to or removal from releases and interim reviews may be the mailing lists as follows: viewed at SEC’s website www.sec.gov. AGM and dividend calendar for 2004 Finnish shareholders: by e-mail cor- 8 March Record date for AGM [email protected], 18 March AGM by mail Stora Enso Oyj, Financial Com- 19 March Ex-dividend date munications, P.O. Box 309, FIN-00101 23 March Record date for dividend 2 April Dividend payment issued Helsinki or by tel. +358 2046 131. Swedish shareholders: by e-mail Publication dates for 2004 [email protected], by fax +46 8 449 88 10 4 February Financial results for 2003 or by mail Stora Enso, SE-12088 Stockholm. 4 March Annual and Sustainability reports Registered ADR holders should 28 April Interim review for January – March contact DBTCA. Beneficial owners of Stora May Annual report on Form 20-F 28 July Interim review for January – June Enso ADRs should contact their broker. 27 October Interim review for January – September

52 STORA ENSO COMPANY 2003 Group worldwide presence

InFocus

CONTACTS

Kari Vainio Executive Vice President, Corporate Communications Publication Paper Tel. +44 20 7016 3140 Fine Paper Fax +44 20 7016 3208 Packaging Boards Postal address: Stora Enso International Office, Wood Products 9 South Street, London W1K 2XA, UK Pulp in bales www.storaenso.com/contacts [email protected]

Keith B Russell Sales Companies Finland, Helsinki Norway, Oslo UK, Orpington USA, San Francisco, CA Senior Vice President, Investor Relations Argentina, Buenos Aires France, Croissy-sur-Seine Poland, Warsaw UK, Wilmslow USA, Stamford, CT Tel. +44 20 7016 3146 Australia, Melbourne France, La Rochelle Portugal, Estoril USA, Atlanta, GA Fax +44 20 7016 3208 Australia, Sydney France, Paris Portugal, Matosinhos USA, Cleveland, OH Merchants Postal address: Stora Enso International Office, Austria, Vienna Germany, Düsseldorf Russia, Moscow USA, Columbia, MD Belgium, Brussels 9 South Street, London W1K 2XA, UK Belgium, Diegem Germany, Hamburg Russia, St. Petersburg USA, Dallas, TX Denmark, Taastrup [email protected] Brazil, São Paulo Greece, Athens Singapore, Singapore USA, Des Plaines, IL Estonia, Tallinn Canada, Montreal Hungary, Budapest Slovenia, Kopper USA, Detroit, MI Finland, Vantaa Ulla Paajanen-Sainio Canada, Toronto India, New Delhi South Africa, Cape Town USA, Jacksonville, FL France, Wissous Cedex Vice President, Investor Relations and Financial Communications Chile, Santiago de Chile Indonesia, Jakarta Spain, Barcelona USA, Kansas City, KS Hungary, Budapest Tel. +358 2046 21242 China, Beijing Ireland, Dublin Spain, Madrid USA, Los Angeles, CA Latvia, Riga Fax +358 2046 21307 China, Hong Kong Italy, Milan Sweden, Falun USA, Miami, FL Lithuania, Vilnius Postal address: Stora Enso Oyj, P.O. Box 309, China, Shanghai Japan, Osaka Sweden, Stockholm USA, Minneapolis, MN Netherlands, Ad Culemborg FIN-00101 Helsinki, Finland Czech Republic, Prague Korea, Seoul Switzerland, Zürich USA, New York, NY Norway, Oslo [email protected] Denmark, Copenhagen Malaysia, Kuala Lumpur United Arab Emirates, Dubai USA, Philadelphia, PA Poland, Warsaw Denmark, Kolding Netherlands, Amsterdam UK, Nottingham USA, Portland, OR Sweden, Mölndal Cover picture Scott A. Deitz Vice President, Investor Relations, North America View of a cylinder in the dryer section Tel. +1 715 422 1521 of the new paper machine at Fax +1 715 422 3882 Langerbrugge. The end of the cylinder at the top left is yellow, the felt at the Postal address: Stora Enso North America, P.O. Box 8050, bottom right is grey, and reflections off Wisconsin Rapids, WI 54495-8050, USA It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, or similar expressions, are forward-looking statements within the meaning of the United States the cylinder surface in between are red. [email protected] Private Securities Litigation Reform Act of 1995. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties, which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the Group’s targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Group’s patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group’s products and the pricing pressures thereto, price fluctuations in raw materials, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group’s principal geographic markets or fluctuations in exchange and interest rates. Stora Enso AB Stora Enso Oyj P.O. Box 70395 P.O. Box 309 SE-107 24 Stockholm, Sweden Stora Enso International Office FIN-00101 Helsinki, Finland Visiting address: World Trade Center, 9 South Street Visiting address: Kanavaranta 1 Klarabergsviadukten 70 London W1K 2XA, UK Tel. +358 2046 131 Tel. +46 8 613 66 00 Tel. +44 20 7016 3100 Fax +358 2046 21471 Fax +46 8 10 60 20 Fax +44 20 7016 3200

Stora Enso’s Annual Report 2003 comprises three separate booklets

Printed copies of the report may be ordered through our website at www.storaenso.com/order or by contacting any of the corporate offices above.

Graphic design: Incognito Photos: Lasse Arvidson/Hill and Knowlton, Lehtikuva, Hanna Koikkalainen and Stora Enso image archives Printing: Libris Oy Cover stock: LumiSilk 200 g/m2, Stora Enso, Oulu Mill (ISO 14001-certified and EMAS-registered FIN-000021) Text stock: Stora Enso Matt 130 g/m2, Stora Enso, Grycksbo Mill (ISO 14001-certified and EMAS-registered S-000061)