Stora Enso Oyj

Hello, everyone. My name is Jutta Mikkola, and as the head of investor relations, I'm delighted to welcome you to our first quarter results presentation. With me today is our president and CEO, Hans Sundström, and our CFO, Niklas Rosenlev. This quarter, our main theme was focus on our own actions drives results. This highlights the decisions and actions we took last year, and the momentum we are bringing into this year. Hans will start with key highlights and strategic focus areas, and after that, Niklas will take you through our performance and results. We'll wrap it up with the key main takeaways. Once we're finished, like usual, we will open the floor for your questions. So thank you once again, and hope you had a good time with us. With these words, Hans, the stage is yours.

Thank you Jutta and hello everyone. Great to have you with us. The first quarter of 2026 developed largely as expected. While market conditions remained challenging, we continued to drive performance through our own actions across operations, costs, commercial excellence and procurement. Demand in our main market stayed at a relatively low level and pricing pressure persisted in some business segments while prices firmed up and increased in others. We delivered resilient results with sales of 2.4 billion euro and EBIT of 159 million euros. Operationally, the ramp up of the new consumer board line at Oulu continued. We focus on improving the technical runability of production. This in addition to the weak market impacted profitability during the quarter and is expected to continue into the second quarter. While the ramp-up continues to impact short-term profitability, we remain confident in bringing the line to full operational performance during 2027. Stora Enso's segment reporting changed as of 1 January 2026, and the Group has restarted the comparative figures for its segment reporting for 2025. This quarter marks the first time we report under our new reporting structure. which reflects how we manage the business and how value is created across the group. A key to value creation is the P&L responsibility across six business areas and 23 business units. I am pleased to see that this decentralized P&L responsibility is already having a positive effect through our leaders focusing on continuous profit improvement. This provides a strong foundation for performance culture going forward. We continue the preparation for the separation of our Swedish forest assets business into a new publicly listed company, which is expected to be completed during the first half of 2027. Preparations for the separation of our Swedish forest assets business, now named Verkslaget Skogar, formerly Forest Company, continued to progress as planned. We'll discuss this more in detail a bit further in the presentation. Our strategic priorities remain unchanged. Lead in customer value creation through innovation, quality and sustainability. Grow faster than market with superior customer offering, leading technology and operational efficiency. Expand margin through business focus, a positive performance culture and systematic value creation. Generate cash with high conversion ratio and disciplined capital allocation. We continue to strengthen our competitiveness and ability to deliver consistent performance regardless of external market volatility. As said, one of our key strategic priorities is to expand margins through business-focused, stronger performance culture and a systematic value creation. This has been a core priority throughout last year and continues to be so going forward. We have identified 500 to 700 million euros of value creation initiatives, all with clear ownership and already underway, expected to support margin expansion over the next two to four years. Development in the first quarter have been encouraging. First quarter underlying profitability improved as a result of our own actions of setting market headwinds from unfavorable exchange rates, as well as a continued pressure on prices and demand. With the wood cost easing, the market headwind can even turn into a tailwind at some point. The whole ramp up continues to wait on profitability in the short term, but once fully ramped up, it will be a clear contributor. Overall, the fundamentals of our margin expansion story remains firmly intact, with increasing contribution from own actions as we move forward. Next, a couple of words about the progress of the demerger of the Swedish forest business. We are moving ahead with our plans to de-merger the Swedish forest assets into a separate listed company with completion anticipated in the first half of 2027. Today, I'm happy to announce the name of the company, Värdslaget Skogar. The new name reflects both the geographic and historic footprint in Sweden's Värdslagen region and a long-term approach to value creation where planning horizons extend across generations. This company will represent a high-quality forest asset entity with over 1.2 million hectares of sustainably managed forest land in Sweden and positioned to become Europe's largest listed pure play forest company. A few words about the logo. In earlier centuries, timber transported from the forest was marked to indicate ownership and origin. In Värdislagen, that mark was the letter V, which today inspires the new logo. The design reference the wood structures historically used in the fallen mine where timber formed the foundation for safety, stability and continuity. Values that continue to guide forest management today. The name and the logo are not the only thing we are announcing today. We will be hosting Bergslaget Skogar's Capital Market Day on 3rd November, 2026 in Stockholm. So please do mark today into your calendar. That is where the company will provide investors with an overview of Bärslager Skogar's standalone strategy, value creation drivers, capital allocation framework, and financial profile. Then, let's move on to the innovation highlights. This time, I have three examples related to another strategic priority, lead in customer value creation through innovation, quality, and sustainability. The first example is our partnership with Majoral and Thrift Foam. We co-developed a jewelry package made from Papira. Papira is our trademark wood-based and fully renewable and recyclable packaging foam. It was awarded in the Paris Packaging Week Innovation Awards for its performance, design, and environmental responsibility. This shows that our sustainable fiber solutions are making an impact in premium packaging. The second example highlights the importance of the strong link between material development and converting expertise, in this case with Aristo. Aristo is a manufacturer of paperboard boxes and paperbacks. Our CKB Nude Aqua dispersion coated board solution offers grease resistance and delivers the physical properties converters expect from high performing board. In addition, it serves as an alternative to plastic materials. The third case highlights our progress in emission reduction, particularly at our Imatra mills, where we have significantly reduced greenhouse gas emissions. More broadly, reducing CO2 is a priority across all our mills, with Imatra as a strong example. In the first quarter, total group Scope 1 and 2 emissions were down by 62% compared to the 2019 base year. reflecting continued improvements in energy efficiency and lower operational emissions. At Imatra, this has translated into a reduction of more than 100,000 tons of CO2. Taken together, these cases demonstrate how innovation, quality and sustainability come together in our offering, supporting customer value creation and strengthening our position in sustainable packaging. It is about combining material innovation with application expertise, while at the same time reducing our environment footprint. With that, I will conclude this section and hand over to you, Niklas, to take you through the financials. Thank you, Hans, and hello, everyone. Let's now take a look at the financial overview for the first quarter. During the first quarter, as Hans already mentioned, our own actions have been driving the performance. Sales was stable at 2.4 billion and would have increased excluding the negative FX effect. Deliveries were higher in all segments other than biomaterials where the Verosil site had planned maintenance during the first quarter. Adjusted EBIT for the first quarter was 159 million. Comparing year on year and excluding the impact from the old ramp up, the underlying profitability improved, reflecting a stable underlying performance despite market headwinds. This we can clearly see when looking more closely at the EBIT bridge for Q1. So looking at the big picture, adjusted EBIT declined by 16 million euro compared to last year. with the primary reason being the ramp up of the new line in Oulu. The Oulu ramp up had a negative impact of 29 million euro on our EBIT for the first quarter. Last year, the ramp up only started at the end of the first quarter. Nevertheless, our underlying performance has strengthened thanks to our discipline strategy execution and the focus on own actions. This progress is particularly evident in the improvements we made to both variable and fixed costs. On the fixed cost side, we saw gains, even with planned maintenance at the Veracel site, which we didn't have last year at this time. Looking at the market movements, lower wood costs improved profitability, but negative FX effects and some price and mixed changes more than offset those positive contributions. The net FX had a dual hit on us this time. Weaker dollar reduced our sales, while then the stronger Swedish krona pushed our costs up. Let's then turn the focus on to cash flow, which is another important strategic priority for us. In the quarter, we spent 100 million Euro less on CapEx compared to last year. This is fully aligned with our plan to reduce CapEx as we are well invested and have competitive assets. While the underlying cash flow continues to improve, in the first quarter it was impacted by restructuring related one-off items and slightly higher working capital. Specifically, we closed a packaging solution site in China and had other restructuring related payments as well as related to our cost reduction actions. Also, changes in working capital had a somewhat more negative impact compared to Q125. This was mainly due to higher receivables related to the relatively strong consumer packaging sales. Q1 is typically the quarter where we tie up a bit more working capital. So in sum, capex came down, but restructuring actions and working capital movements impacted cash flow in Q1 negatively. However, from an underlying cash flow perspective, the positive trend has continued. If we then move on to the balance sheet and net debt, Net debt was about 3.5 billion euros, a clear decrease from last year's 4 billion euro levels. However, it did increase from last quarter, and this was mainly driven by the full-year dividend booking, which is around 200 million, as well as lower cash flow. Net debt to EBITDA was 3.1 times. On this note, I want to say a few words about the 1 billion hybrid that we successfully issued in April this year. It is a good instrument for us optimizing our balance sheet. It is treated as equity under IFRS and partly by the rating agencies. So it supports credit metrics, protects our investment grade profile and ensures resilience in a volatile world. We are pleased with the interest the hybrid attracted. The hybrid further strengthens our capital structure, enhances our financial flexibility, and supports the long-term strategy and the steps ahead related to our Swedish forest demerger. As Hans said, this is the first time we report based on the new segment structure. Compared to the previous reporting structure, this better reflects our portfolio and focus, how we manage the business, as well as how value is created across the group. Let's start with consumer packaging. We started the year reasonably well with improving sales. This was mainly due to higher deliveries of food and liquid products and structural changes, meaning the ramp up of Oulu and the Unical acquisition. While order inflow improved, especially in food and liquid, demand for European Consumer Board grades remained mixed. Adjusted EBIT increased by 10 million euros. The underlying profitability improved as we made good progress with own actions, lowering the variable and the fixed costs. Also, lower wood costs supported profitability improvements. This was partly offset by the adverse impact of the ramp up of the new line in Oulu, pushing the first quarter results down by 29 million euros. In integrated packaging, sales decreased slightly, but profitability improved. The sales decline was mainly due to negative impact from FX. Volumes, on the other hand, improved. Adjusted EBIT increased by 6 million euros as lower variable costs were partly offset by lower prices and negative FX. Demand for container board and corrugated board remained stable. Also in biomaterials, the main reason for lower sales was the negative FX, mainly the weaker dollar. But also the deliveries were somewhat lower. This was because we carried out planned maintenance at the Veracell site during the first quarter, and we did not have the Veracell maintenance in the comparable quarter last year. Adjusted EBIT decreased by 20 million as lower sales were only partly offset by lower variable costs. The softwood market remained weak, but for Asian hardwood, prices recovered slightly sequentially. Then commenting on the other segment, this is where we have the Swedish forest assets, where we prepare for the demerger, as well as the Central European wood products operations, where we have the strategic review ongoing. In addition, the other segment includes the growth business unit, the wood and energy business area, and group functions. Segment other sales, mainly sales of wood and wood products remain stable. The intercompany sales of wood and logistics services from segment other to industrial segments have been eliminated and do not show anymore in these segment numbers. Adjusted EBIT decreased by 10 million euros, and this was mainly due to higher wood costs in Central European wood products operations. With that said, I will hand back to you, Hans, for concluding remarks. So, thank you, Niklas. As said, the first quarter of 2026 developed largely as expected with stable performance. While market conditions remain challenging, we continue to drive performance through our own actions across operations, cost, commercial excellence and procurement. Our strategic priorities remain unchanged. We will lead in customer value creation through innovation, quality and sustainability. We will grow faster than market with superior customer offering, leading technology and operational efficiency. We will expand margins through business focus, a positive performance culture and systematic value creation. And we will generate cash with high conversion ratio and disciplined capital allocation. I would like to thank our employees for their strong contribution at the start of the year. Also, I would like to thank our customers, partners and shareholders for your continued trust. 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.

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