Stora Enso Oyj

Hello everyone, and welcome to Stora Enso's Q4 and full year results presentation. I'm Jutta Mikkola, Head of Investor Relations, and I'm delighted to be joined here today with our President and CEO Hans Solström and our CFO Niklas Rosenlev. We're kicking off the webcast with our clear theme, Sharpen Strategic Focus. It reflects the works we've done throughout 2025. and the momentum we're carrying into 2026. Today, we'll start with Hans, who will walk you through the key highlights and our strategic priorities. After that, Niklas will take you through our financial performance and we'll close with the main takeaways and what's ahead of us in 2026. Once we've covered everything, as usual, we'll open the floor for your questions. Thank you for joining us. Great to have you with us. Over to you, Hans.

Thank you, Jutta, and hello everyone. Great to have you with us. 2025 was a pivotal year for Stora Enso, marked by decisive actions to sharpen our strategic focus and unlock long-term value for our shareholders. In Q4, we completed the strategic review of our Swedish forest assets, a major milestone, and began the separation to form two strong companies, a leading renewable materials company with a sharpened focus on packaging and Europe's largest listed pure play forest company. We also launched a strategic review of our central European soil mills and building solutions operations to further focus our portfolio. Despite a challenging environment during 2025, we delivered resilient results with a sales of €9.3 billion and EBIT of €528 million. We continued ramping up the old consumer board line, a key part of our renewable packaging strategy throughout 2025. This weighted on our earnings by 140 million euros in total during the year, but strengthens our long-term position and competitiveness. Excluding Oulu, the underlying profitability improved across all business areas with biomaterials, the exception due to lower pulp prices. Our net debt to adjusted EBITDA improved to 2.8 times, supported by the divestment of approximately 175,000 hectares of Swedish forest land at a value of 900 million euros, and by our ongoing focus on cash flow and cost competitiveness. The Board of Directors will propose a dividend of €0.25 per share at the Annual General Meeting on 24 March 2026. Finally, we hosted a successful Capital Markets Day, where we introduced our new financial targets, strategic priorities and a clear roadmap for the coming years. Topics I'll return to shortly. But before that, let's review how we did with our sustainability progress. During 2025, we had strong progress on our sustainability targets. By the end of 2025, we have reduced scope one and two emissions by 61% from 2019 base year, well surpassing our 2030 targets to reduce emissions by 50%. I am also proud to say that Stora Enso once again has been included on CDP's Climate Change A-list, highlighting our strong transparency and performance in climate actions. His recognition affirms our dedication to sustainable growth through emission reduction, renewable material innovation and advancing the circular bioeconomy. Additionally, in partnership with IUCN, the International Union for Conservation of Nature, we completed a pioneering project that offers the forest sector a science-based framework for achieving net positive biodiversity impact. This collaboration helps forestry operations focus on the most effective actions to reduce species extinction risks while maintaining long-term economic value. But now let's look at the new financial targets and strategic priorities that we have set for the next years. Our strategic priorities, as set forth in our Capital Market Day, are clear. We want to lead in customer value creation, grow our business, expand our margins and generate strong cash flow over the cycle. We will achieve this through our continued actions in sourcing, operational efficiency, commercial excellence, working capital and fixed cost. All underpinned by a disciplined approach to capital allocation. Customer centricity is now at the forefront of our strategy. It drives us to push innovation, quality and sustainability across everything we do. With superior customer offering and the use of advanced technologies, we are raising the bar and setting new industry standards. So how will this show in our performance over the cycle? First, annual revenue growth of above 4% per annum. We have a strong track record of over 5% during the last decade for our renewable packaging business. We are well invested for the next wave and we will continue to lead in innovation, quality, sustainability and operational efficiency. Second, we are implementing our plan with speed and determination to reach about 10% EBIT margin. And importantly, this is fully in our own hands. We are putting profit and loss responsibility in place across six business areas and 23 P&L responsible business units, enabling determined execution of value creation actions and a strengthened focus on the core business. Third, we will distribute 50% of our net profit as dividends. Fourth, we will take our net debt per EBITDA to below one times through disciplined capital allocation and a continued focus on cash flow. Finally, we introduced a new reporting structure. Our packaging businesses will be regrouped into consumer packaging and integrated packaging alongside biomaterials and other reporting segments. These new segments will be applied starting in Q1, 2026. As just mentioned, one of our key strategic priorities is to expand margins through business focus, a strong performance culture and systematic value creation. The last two years show this is working. Despite headwinds from low consumer confidence and significantly higher wood costs, about 900 million euros annual headwind compared to the year 2021, our sales have grown and our underlying profitability has improved. This progress comes from our own actions that have more than offset the market headwinds during these years. And the work continues. In addition to the completed value creation programs achieving about 900 million euros profit impact during the years 2024 and 2025, we have identified additional 500 to 700 million euros of profit improvement initiatives, all with clear owners and being worked on as we speak. At the same time, the Oulu ramp up continues and waits profitability short term. Once at full capacity, it will add around 800 million euros in sales and support higher margins. With these levers, we are on a clear path towards reaching about 10% EBIT margin, excluding Swedish forests within two to four years, regardless of market conditions. The message is clear. Margin expansion will come from our own focus, our performance culture and disciplined execution. We are taking determined actions to build a better company and our own future. Let's talk about our recent innovation highlights. We grew our portfolio of premium packaging materials with the launch of Enso Velvet, a new uncoated solid bleached sulphide board with velvet-like smoothness on both sides. It is developed for luxury applications such as cosmetics, perfumes and other premium consumer goods where touch and appearance are important. It also ensures excellent printability. Enso Velvet is of course recyclable, supporting the shift towards circular packaging solutions. The absence of coating also means fewer materials are needed in production, resulting in a reduced carbon footprint while maintaining the premium performance expected from premium packaging materials. Stora Enso's CLT solutions enabled the construction of the world's first large-scale timber data center in Falun, Sweden, and the site is now expanding with two new data centers. Using mass timber drastically cuts embodied carbon and accelerates construction time. The developer, EcoData Center, is aiming to be one of the world's most sustainable data centers. By using mass timber supplied by Stora Enso, the company has created a scalable blueprint for a new type of sustainable infrastructure. World Packaging Organization awarded Stora Enso in three categories, e-commerce, food and other for sustainable and innovative design. Niklas, let's take a look at the financials. Thank you, Hans. So let's begin with group sales, development and EBIT for 2025, as well as then for the fourth quarter. Group sales increased to 9.3 billion in 2025. This was partially supported by structural changes, most notably the unical acquisition and the Oulu ramp-up. In Q4, sales declined, and this was due to slightly lower board prices and significantly lower pulp prices. Adjusted EBIT for the full year decreased. However, if we exclude the old ramp up, actually the profitability improved across nearly all business areas. The exception was biomaterials where significantly lower pulp prices weighted on performance. And in Q4, the reasons for the EBIT decline are pretty much the same. Underlying businesses were developing quite nicely, considering the tough market, and the all ramp up was the main reason for the lower EBIT. In general, market headwinds such as lower pulp prices were offset by value creation actions. Looking at the EBIT development for the full year, the impact of our value creation actions is clearly visible. Even with the significant decline in pulp prices, our price and mix improved by more than 100 million while volumes remain stable. As Hans mentioned earlier, we continue to face a sizable headwind from fiber costs, close to 300 million this year. Despite these headwinds, our ongoing cost and value creation actions had a good positive effect. Other variable costs and fixed costs declined by more than 200 million, supported by a leaner and more business-focused organizational structure. These actions have strengthened our ability to navigate market volatility and deliver a more resilient performance. The main drag on earnings for the year came from Oulu or the ramp up of Oulu, which had a negative impact on EBIT of roughly 140 million again for the full year. While Oulu weighs on short-term profitability, we do remain confident in the long-term value and industry leading quality this investment will bring once the line reaches its full potential in 2027. If we then move on to cash flow, despite the challenging market environment, we managed to safeguard profitability and improve cash generation. Cash flow after investing activities continued to be positive, as expected, following the gradual completion of the investment phase in Oulu. As we now become more disciplined with our capital allocation, combined with ending the heavy investment phase, we expect cashflow after investments continue to improve. So on that note, let's take a look at the net debt. Net debt decreased by almost 800 million in the third quarter, driven by the Swedish forest asset divestment, and remained stable in the fourth quarter. Our net debt to adjusted EBITDA ratio is now 2.8 times. Operating working capital also remained stable at 7% of sales, and we intend to maintain it at these lower levels and reduce it further whenever possible. So let's take a look at our segment performance, starting with packaging materials. During the quarter, we conducted maintenance in some of our main sites. In addition, we continued to ramp up the new Oulu board machine. Despite this, profitability was preserved thanks to good value creation activities and strong customer offers. Sales decreased, driven by slightly lower consumer board prices and adverse currency effect from a weaker US dollar. Adjusted EBIT improved slightly year on year, despite a 31 million negative from the ramp up in Oulu. In packaging solutions, we delivered a positive result despite ongoing market challenges. Sales increased slightly, driven by higher sales prices from improved product mix and an increase in sales volumes. Adjusted EBIT increased year on year, supported by higher sales and a good momentum with value creation actions. So in summary, despite persistent overcapacity, actions to enhance product and customer mix combined with continued cost efficiency improvements helped protect margins. Moving from packaging to biomaterials. In biomaterials, the challenging market conditions continued. Demand for softwood and hardwood pulp was weaker in both Europe and China. Sales and adjusted EBIT decreased due to lower sales prices and volumes and adverse currency movements. However, intensified value creation actions, such as cost reductions measures, partly mitigated the negative effect. In wood products, markets continued to be subdued with high raw material costs and low construction market activity. Sales increased, mainly due to unicolor volumes and higher sales prices, both in classic sawn and building solutions products. Adjusted EBIT improved as the increase in raw material costs was more than offset by higher sales prices and value creation actions. Product curtailments were implemented to align with challenging market conditions. Finally, in forest sales were stable with no material differences in wood prices or volumes. EBIT decreased primarily due to the divestment of the 12% of Swedish forest holdings at the end of the third quarter. The fair value of the group's forest assets increased slightly to 8.5 billion euro or 10.75 per share. The results demonstrate strong operational performance within our forest assets and wood supply operations. So with that, I hand back to you Hans for concluding remarks. Thank you, Niklas. As we enter 2026, we expect market conditions to remain subdued and volatile, shaken by ongoing macroeconomic and geopolitical uncertainty. Our priorities are clear. We will continue to execute our strategy, drive proactive, systematic and determined work across the whole group. We continue to improve profitability, cash flow, and cost competitiveness through activities related to sourcing, operational efficiency, commercial excellence, working capital, and fixed costs, and maintain a disciplined approach to capital allocation. The demerger and listing of our Swedish forest assets will be a key focus, as will the ongoing strategic review of our Central European sawmills and ramping up of our Oulu site. I want to thank all our employees, customers and partners for their dedication and resilience during this transformative year. Together we are building a stronger, more focused and more sustainable Stora Enso. Thank you for listening and we are now ready to take your questions.

If you would like to ask a question, please use the raise hand function at the bottom of your Zoom screen. When it is your turn, you will receive a prompt to be promoted as a panelist. Please accept, wait a moment, and once you have been introduced, you may unmute yourself, turn your video on, and ask your question. Please only ask maximum two questions at a time. If you wish to ask more than two questions, please rejoin the queue. Our first question will come from Charlie Muir-Sands with BNP Paribus. You may now unmute your audio, turn your video on and ask your question.