Stora Enso Oyj

Good morning and welcome to Stora Enso's third quarter 2026 resource presentation. I am Jutta Mikkola, Head of Investor Relations, and joining me today are our President and CEO Hans Ulström and our CFO Niklas Rosenlev. There is quite a lot happening at Stora Enso at the moment. Alongside delivering and improving the performance of our businesses, We are preparing for one of the most significant steps in reshaping our portfolio, the planned separation of Parish Market Skuga. So today we will look both at how Stora Enso performed in the third quarter and at the work underway to build two stronger and more focused companies. Hans will start with the highlights of the quarter. Thank you and hello everyone.

And as Jutta said, there is a lot going on and we made further progress on several fronts during the quarter. In the third quarter, we continued to make steady progress with an organic growth of 2% supported by our own actions. AI is increasingly helping us accelerate our value creation programs and identify further opportunities to improve performance. Despite high planned annual maintenance activity as well as higher costs related to the conflict in Iran, we delivered an adjusted EBIT margin above 7%. This is further evidence that our strategic priorities and portfolio optimization are gradually strengthening the quality and resilience of our earnings and cash flow. And this brings me to another important step in our transformation. We have now formally decided to proceed with the planned separation. In just a few days, we will host the very first Capital Market Day of Värslaget Skogar. Over the past year, significant effort has gone into preparing Värslaget Skogar for life as an independent company. At the CMD, we are presenting Värslaget Skogar's financials and showcase a business with a unique asset base, a strong foundation, and long-term value creation potential. The separation will unlock value and sharpen the strategic focus of both companies. And when talking about focus, we also continued to actively reshape our portfolio in line with our strategic priorities. We divested our packaging solution units in Germany, consolidated sawmilling in the Oulu region, and closed the CLT unit at Gruvern. enabling us to concentrate production in our remaining CLT units in the Czech Republic and Austria. We also announced plans to centralize our packaging solution operations in Finland and reduce our ownership in a Swedish goods supply company. All of these actions follow the same logic, creating a more focused company and directing our resources towards areas where we see the strongest potential for long-term value creation. We are also continuing to develop further growth opportunities. This week, we announced a partnership with Shanshan Technology, one of the world's largest suppliers of battery anode materials. The partnership accelerates the development of Lignod, our wood-based sustainable battery material, and its industrial scale validation through a demonstration line for lignid-based anode materials. It also supports our long-term ambition to establish large-scale lignite production in Europe. This is a good example of how our renewable materials expertise can create new high-value growth opportunities over time. 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 throughout 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. Year to date, our own actions continue to improve performance at a steady pace and will continue to do so. At the same time, market impacts remain mixed. Lower wood costs were supportive, but this was partly offset by ongoing war-related pressure on energy, logistics and chemicals, subdued consumer confidence, lower EU ETS allowances and unfavorable foreign exchange movements. Oulu continued to improve year on year. The key message is that the fundamentals of our margin expansion story remains 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. And AI plays an important role in that. AI is increasingly becoming part of how we execute our value creation program and identify further opportunities. All our employees currently have access to at least three AI capabilities, including our internal agentic AI library. AI is integrated into our performance culture and systematic value creation work. We focus on AI value that is measurable business impact as the main KPI for AI. Today, targeted AI capabilities support around a quarter of our initiatives, particularly across commercial processes, operations, and ways of working, and we expect its role to increase over time. In practice, this range from enterprise AI tools supporting everyday work to our own AI applications and solutions embedded in specific workflows and core business processes. For example, in sales, AI-powered negotiation support brings together customer, market and internal data, helping our teams prepare faster, make better informed decisions and improve commercial outcomes. In operations, predictive AI helps us identify potential equipment issues earlier and reduce unplanned downtime. With that, I will hand over to Niklas to take you through the financial performance. Niklas, please. Thank you, Hans, and hello, everyone. Before going further into the third quarter financial performance, I wanted to start with a few comments about the Bereslaget-Skoga separation and the impacts on Stora Enso. As you know, we have today made several releases on top of the Q3 interim report release. As part of the demerger release, we have for the first time shared the Barislaget Skoga Financials. This is another big step towards the planned demerger and you can now see how Europe's biggest pure play forest business looks like. More to be shared in the CND next week. So let me now take you through a few points on what the demerger means for Stora Enso after the separation. This slide illustrates the impact on our sales earnings profile and balance sheet following the demerger of Barry Slagets Kuga. First, the impact on reported sales is expected to be limited. Barry Slagets Kuga's sales have historically been largely internal within the store Enso Group. Second, on an illustrative basis, excluding Barry Slagets Kuga, our last 12 months adjusted EBIT would have been around 400 million euros compared with 580 million euros for the group. This corresponds to an impact under 200 million on our current EBIT margin. However, good to note that adjusted EBIT includes the operational fair value changes in biological assets which affect the adjusted EBIT but are non-cash. In other words, the cash impact will be less. And third, the balance sheet. Around 800 million net debt is expected to be transferred to Bereslaget Skoga at the completion date. This will reduce Tor Enso's absolute net debt and align the capital structure with the size and needs of the remaining business. So while the demerger reduces absolute earnings, it also creates a more focused Tor Enso with a clear financial profile and a balance sheet aligned with the business. This is a good basis for continuing to strengthen Store Enso. Now, let's look into the Q3 results in more detail. I'm pleased with the continued progress of all our businesses and the improved earnings resilience. During the quarter, we continued to focus on our own improvement actions across the company. Organic sales increased 2% driven by higher deliveries in both consumer and integrated packaging and higher prices in integrated packaging and biomaterials. Reported sales decreased by 2% due to the portfolio optimization, the divestments that Hans mentioned earlier. The divestments included the corrugated board units in Germany and a partial disposal of our share in a wood supply company. We therefore now account for the wood supply company as an associated company instead of a subsidiary. The divestments reduced sales but had a limited impact on EBIT. Our adjusted EBIT was 161 million euros which was a year-on-year increase of 28% or 35 million euros. So let's now turn to the next slide for some additional details. So on the EBIT bridge, you can see the improved resilience that I mentioned earlier. Adjusted EBIT improved by 35 million year-on-year despite continued external pressure. Higher volumes were the biggest positive driver, contributing 31 million, mainly from consumer packaging and integrated packaging. And this was despite the planned maintenance shutdowns that we had in integrated packaging. Price and mix had a 12 million negative impact as higher prices in integrated packaging and biomaterials were offset by lower external wood sales prices in Sweden. Variable costs improved by 40 million. Lower wood costs and our own cost actions more than offset the cost escalation related to the Iran conflict, especially for energy, logistics, and chemicals. And importantly, our own actions also more than compensated for fixed cost inflation. So quarter after quarter, we are making steady progress. We remain focused on what we can influence ourselves, and that work is increasingly visible in our results. Let's now move on to cash flow. Cash generation remains a strategic priority. Cash flow from operations increased to 245 million euros and cash flow after investing activities improved to 132 million euros compared with 57 million euros last year. This improvement reflects stronger cash flow from operations and lower cash spending on capital expenditure. Due to disciplined capital allocation throughout this year, we have also lowered our full year Capital expenditure estimate from 550 to 500 million euros. Overall, the underlying development remains aligned with our priorities. We are reducing capex. We are improving the quality of the portfolio and maintaining capital discipline.

This is also visible in our balance sheet.