Stora Enso Oyj

Hello, everyone. My name is Jutta Mikkola. And as head of investor relations at Stora Enso, I'm pleased to welcome in the middle of the summer to our second quarter results presentation. I'm happy to have Hans Solström, our president and CEO, and Niklas Rosenlev, our CFO, with me here today. This quarter, our main theme was optimizing our portfolio and driving results through our own actions. That captures well the progress we have made, both in executing our strategy and optimizing our portfolio. Today, we will follow our usual agenda, starting with strategy updates, followed by a financial review and concluding with the key takeaways. After the presentation, we will be happy to take your questions. Thank you for joining us. Hans, the floor is yours.

Thank you, Jutta. And hello, everyone. Great to have you with us. The second quarter marked another period of disciplined execution in a volatile market environment. We improved operational performance, strengthened customer relationships and advanced several important strategic initiatives. Our profitability improved compared to last year. Sales were stable and adjusted EBIT increased by 27% to €160 million. This reflects continued operational improvement, progress in Oulu and disciplined cost management. I'm particularly pleased with the progress in consumer packaging where operational performance strengthened further and customer feedback continued to be very encouraging. We continue to receive positive feedback on both product quality and service, reflecting the dedication of our teams, strength of our customer offering and our significant investments in leading technologies. Creating customer value remains at the heart of our strategy, and it is encouraging to see this translating into stronger customer relationships and faster than the market growth. During the quarter, we also continued to optimize our portfolio. We announced an investment to strengthen our position in Fluff Pulp at Skutsjär, while at the same time deciding to close a less competitive production line at the site. Preparations for the separation of Bergslaget Skogar also progressed as planned. The strategy is defined, the organization is in place and execution is firmly on track. In Oulu, the ramp up of the new consumer board line continued to progress. Production stability, technical runability and operational efficiency improved further during the quarter. While the ramp up continues to affect short-term profitability, the overall development is positive. Overall, this quarter again demonstrated that we are not relying on market conditions to improve our performance. We continue to drive profitability through our own actions, operational and commercial excellence and systematic value creation. Our strategic priorities remain unchanged. We lead in customer value creation through innovation, quality and sustainability. We grow faster than the market with a superior customer offering, leading technology and operational efficiency. We expand margins through business focus, a positive performance culture and systematic value creation. And we generate cash with a high conversion ratio and disciplined capital allocation. These priorities guide our actions across the business. They are also closely linked to how we are developing the portfolio, improving performance and building a stronger, more focused Stora Enso. Portfolio optimization is an important part of our value creation agenda. It is not a one off action. It is a discipline, a continuous lever to sharpen business focus, strengthen competitiveness and allocate capital where we see the best long term opportunities. Over the past years, we have taken several concrete steps. We have closed or exited non-core or low-return assets, divested part of our Swedish forest holdings, acquired Junnikala sawmills to support Oulu's cost competitiveness, and continued the ramp-up of Oulu. In 2026, we announced further actions. At Skudshär we decided to invest in fluff pulp capacity and close the softwood pulp line. This strengthens our position in specialized pulp and improves the long-term competitiveness of the site. We are also divesting the corrugated board production site in Germany as part of our corrugated asset base optimization. At the same time, the strategic review of our central European sawmills continue. And looking ahead, the planned separation of Bärslaget Skoga remains a key step in unlocking value and enhancing strategic focus for both companies. The common theme across these actions is clear. We are building a more focused portfolio, improving capital allocation and strengthening the foundation for long term value creation. One of our key strategic priorities is to expand margins through business focus, a positive performance culture and systematic value creation. This has been a core priority through the last two years and continues to be so going forward. We have identified 500 to 700 million euros of value creation initiatives. These initiatives have clear ownership and are already underway. In the first half of 2026, our own actions continued to contribute positively. At the same time, market impacts remained mixed. Lower pulpwood costs supported the development. However, solo costs have remained high or even increased. We also continued to face unfavorable foreign exchange rate impacts. pressure on price and demand, as well as war-related impacts on energy, logistics and chemicals. Enso Oyj The Oulu ramp-up continued to affect profitability. The impact was at the same level as in Q1, while operational progress continued. The key message is that the fundamentals of our margin expansion story remain intact. We are not standing still and we are not waiting for market conditions to improve. We continue to drive performance through our own actions. Let me now highlight three concrete examples of how innovation supports one of our strategic priorities, leading in customer value through innovation, quality and sustainability. The first example is circularity. In May, Stora Enso published its circularity plan aligned with the first version of the global circularity protocol for business. We also set a new target to reach 90% material circularity in our direct operations by 2030. For customers, this brings clarity and credibility. Circularity is becoming increasingly important, but common frameworks are still developing. By moving early, we are helping to create a more consistent and transparent basis for measuring progress. while also supporting our customers' own sustainability ambitions. This is also about competitiveness. Circularity brings together design, operational efficiency and value chain collaboration. It means using resources more efficiently, minimizing waste and helping customers move towards renewable packaging solutions designed for circular systems. The second example is Oulu. Our Oulu business unit now hosts Finland's first pulp mill to achieve FSSC 22000 food safety certification. Since May 2026 the certification covers the full production chain of Oulu from pulp production to board machines, sheeting and the portal terminal. For customers this means added assurance, process are audited, risk management is systematic and the materials are sustainable for direct food contact. This matters especially in food packaging where quality, safety and reliability are critical. The third example here is Performa Natura Aqua. In food service and bakery packaging, customers need grease resistance, stiffness, converting performance, and a high quality printing surface. Performa Natura Aqua combines these requirements in one dispersion coated folding box board. The customer value is practical and immediate. The integrated barrier supports grease resistance without additional processing steps, while the board structure supports stiffness, stable runability and reliable production protection. Together, these examples show that we are not innovating for innovation's sake. We are creating measurable customer value, helping customers meet sustainability expectations, enter growing packaging segments and rely on safe, high performing, renewable materials. With that, I will hand over to Niklas to take you through the financials.

Thank you, Hans, and hello, everyone. Let's now take a look at the financial performance for the second quarter. During the second quarter, sales were stable at 2.4 billion euros. Higher sales from the old ramp-up and the unical acquisition were largely offset by lower prices and adverse currency movements. Adjusted EBIT increased by 27% to 160 million euros. Profitability improved as a result of disciplined owned actions and progress in the old ramp up. Volumes were higher, particularly in consumer packaging, which helped to partially offset weaker external sales prices for wood in Sweden and negative foreign exchange impacts. Overall, the quarter shows that our own actions continued to support performance in a challenging market environment. This can be seen more clearly when looking at the EBIT bridge. So looking at the EBIT bridge, the main message is that progress with our own actions and in all more than compensated for the negative market impacts. Price and mix was negative during the quarter. This was largely driven by lower external wood sales prices in Sweden and pricing across our industrial businesses was otherwise broadly stable. While wood prices had a negative impact on price and mix, it had a positive impact on variable costs. The reason is simple. In Sweden, we both sell wood externally and procure wood for our own operations. Wood prices in Sweden declined following the late December storm Johannes. The storm resulted in a significant volume of storm damaged timber entering the market. As this timber needs to be harvested and transported relatively quickly, supply increased and prices came under temporary pressure. We have seen similar dynamics following previous storms and historically prices have normalized once the excess volume have been absorbed by the market. Volumes were higher, particularly in consumer packaging, where, as Hans mentioned, operational performance continued to improve and customer feedback continued to be encouraging. We also continue to benefit from operational improvements and own actions across the business. These helped offset increased pressure from higher logistics, energy and chemical costs related to the conflict in the Middle East. Foreign exchange was again a headwind, with the weaker dollar reducing sales and currency movements increasing cost pressure in some areas. The positive development during the quarter was also supported by progress in Oulu, which is visible in the other category of the bridge, together with contribution from our own actions across the business. The bridge clearly shows that we continue to improve performance through actions we can control, even though the external environment remains challenging. Let's then look more closely at wood cost development. And let me spend a minute on this, as there are a few important points to keep in mind. First, pulpwood costs have come down from the exceptionally high levels we saw over the last few years. Clearly, that is positive for our wood intensive business and supports profitability. However, the impact on our total wood costs is not one on one. While pulpwood prices have declined, saw log costs have remained high and in some cases continue to increase, particularly for sawmills. On this slide, we show the development for both pulpwood and saw logs across Finland, Sweden and Central Europe. As you can see, pulpwood cost levels for us have come down, especially in Sweden, but the benefit is to a large extent offset by higher solo costs. As a result, the impact on our total wood cost base is more modest than the pulpwood price development alone would suggest. Second, there is always a timing effect. Changes in market wood prices are reflected in our mill wood costs with a delay, as the wood we consume today has often been purchased some time ago. This means the benefit from lower market prices flows through gradually rather than immediately. Third, it is important to understand the difference between public wood price or public wood price statistics and our actual delivered wood costs. Market statistics typically reflect stumpage or roadside prices, depending on the region. And our delivered mill gate costs also include harvesting, logistics and mix effects. Logistics costs in particular have been under pressure during the year following the conflict in the Middle East. So while lower pulpwood prices are clearly supportive, some of that benefit is offset by higher transportation and sourcing related costs. So in summary, the direction in pulpwood is positive, but the full benefit takes time to come through and is partially offset by higher solo costs and other wood cost components. So with that, let's move on to cash flow. Cash flow remained or cash flow remains and remained an important strategic priority for us. In the second quarter, lower capital expenditure supported cash flows after investing activities. This is in line with our plan to reduce capex after a period of significant investments. Cash flow from operations was lower than last year. This was due to an increase in working capital. We had a higher trade receivable or higher trade receivables as a result of stronger consumer packaging sales. And we also had lower payables. And these were partially offset by a reduction in inventories. Overall, the development remains aligned with our priorities. We are reducing capex, improving the quality of the portfolio and maintaining a capital discipline. This is also visible in our balance sheet development. Net debt decreased clearly during the second quarter following the 1 billion euro hybrid issues. The hybrid strengthens our capital structure and increases financial flexibility. It is treated as equity under IFRS and partly by the rating agencies. So it supports our credit metrics and helps protect our investment rate profile. This was an important step in supporting our long-term strategy and the preparations for the planned separation of Bergslag and Skogar. Net debt to adjusted EBITDA also improved to around 2.2 times. Going forward, our deleveraging path will be supported by structural execution, profitability improvement and disciplined capital allocation. Let's then have a look at how our segments performed. This is the second quarter when we report based on the new segment structure. As I said earlier, the structure reflects the P&L responsibilities and how value is created across the group. Let's start with consumer packaging. Sales increased during the quarter, mainly driven by the ramp up of the new consumer board line in Oulu and unical acquisition. Adjusted EBIT increased by 42 million euros, And this was a result of good operational performance, higher volumes and lower variable costs. As Hans mentioned earlier, we continue to see encouraging customer feedback and a positive response to both our product quality and customer offering. Another contributor to the increase was the continued progress in Oulu. While Oulu still had a significant impact on profitability in absolute terms, in line with the first quarter, the year-on-year improvement was clear and reflects the progress we have made. Order inflow remained healthy during the quarter. At the same time, demand for European consumer board grades continued to be somewhat mixed, reflecting the broader market environment. Then moving on to integrated packaging. Sales decreased mainly due to lower corrugated packaging volumes in Western Europe. The underlying business performance remained relatively stable. However, profitability was negatively affected by lower emission and energy related subsidies compared to last year. Excluding this effect, the performance of the business was broadly stable. Lower fiber costs and good cost discipline helped offset the negative impacts. Demand for virgin container board continued to improve, supported by announced price increases. Then moving on to biomaterials. Sales increased slightly as higher deliveries were only partly offset by negative foreign exchange effects. Adjusted EBIT increased by 23 million euros, mainly due to lower wood and fixed costs. Fixed costs were also supported by lower maintenance activity. Softwood market remains weak, while hardwood and fluff pulp markets are more stable with prices recovering sequentially, albeit still at low levels. In the other segment, sales and profitability decreased, mainly due to lower external wood sales prices in Sweden, reflecting the same market impact from Storm Johannes that I discussed earlier. The external wood sales are part of BU Wood and Energy, so in other category. In additional, profitability in the central European wood product was affected by continued increases in saw log costs, which put pressure on margins. So with that, I'll hand back to Juhans for the key takeaways.