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Slide 1: Jukka Härmälä B UIL DING A GL OB A L COM PA NY Go ld m an Sac h s Pape r Se m inar M 1 1 , 2000 ay J Go ld m an Sac h s /M H H/m ik 1
Slide 2: Co nte nts 1. R sult J e anuary - M h 2 0 0 0 arc 2. Strate g y 3. Ac q uisitio n o f Co nso lidate d Pape rs J Go ldm an Sac h s /M H H/m ik 2
Slide 3: Sale s and o pe rating m arg in 3500 M EUR Sale s Ope rating m arg in % 18 16 14 3000 2500 12 2000 10 8 6 1 000 4 500 2 0 1 500 0 Q1 /9 7 Q2 /9 7 Q3 /9 7 Q4 /9 7 Q1 /9 8 Q2 /9 8 Q3 /9 8 Q4 /9 8 *Q1 /9 9* Q2 /9 9 Q3 /9 9 Q4 /9 9* Q1 /0 0* *) Be fo re no n-re c urring ite m s J Go ldm an Sac h s /M H H/m ik 3
Slide 4: Pro fit b e fo re tax and m ino rity ite m s 500 450 400 350 300 250 200 1 50 1 00 50 0 Q1 /9 7 Q2 /9 7 Q3 /9 7 Q4 /9 7 Q1 /9 8 Q2 /9 8 Q3 /9 8 Q4 /9 8 Q1 /9 9 Q2 /9 9 Q3 /9 9 Q4 /9 9 Q1 /0 0 M EUR 24 78 25 372 Be fo re no n-re c urring ite m s J Go ldm an Sac h s /M H H/m ik 4
Slide 5: R turn o n c apital e m plo ye d e 20 18 16 14 12 10 8 6 4 2 0 1 996 1 997 1 9 9 8 a d ju ste d 1 999 Q1 /0 0 8 .0 6 .2 1 0 .2 * 1 2 .3 1 1 .4 * % 1 7 .1 * 1 7 .9 7 .8 Target > 13% over the cycle *) Be fo re no n-re c urring ite m s J Go ldm an Sac h s /M H H/m ik 5
Slide 6: R OOC b y pro d uc t are a 40 35 30 25 20 15 10 5 0 1 998 1 999 Q1 /2 0 0 0 ROCE 1 3 % (targ e t) WACC 9 % (pre tax) % M azine Pape r ag Ne w sprint Fine Pape r Pac k ag ing Bo ard s Pulp Tim b e r J Go ldm an Sac h s /M H H/m ik 6
Slide 7: De b t/e q uity 1 .2 0 1 .0 3 1 .0 0 1 .0 1 1 .0 5 1 .0 5 0 .9 0 0 .8 4 0 .8 0 0 .6 0 0 .4 0 0 .2 0 0 .0 0 1 995 1 996 1 997 1 998 1 999 Q1 /0 0 Target ~ 0.80 in 2000 J Go ldm an Sac h s /M H H/m ik 7
Slide 8: Capital e xpe nditure and d e pre c iatio n 1 600 1 400 1 200 1 000 800 600 400 200 0 1 995 1 996 1 997 1 998 1 999 Q1 /0 0 M EUR Capital e xpe nd iture De pre c iatio n * Target: S hould not exceed the level of depreciation *) No n-re c urring w rite do w ns J Go ldm an Sac h s /M H H/m ik 8
Slide 9: S TRA TE GY J Go ld m an Sac h s /M H H/m ik 9
Slide 10: Strate g y in b rie f V ision: Focus: To b e th e le ading fo re st pro duc ts c o m pany in th e w o rld On th re e c o re pro duc t are as: Pub lic atio n pape rs, fine pape r and pac k ag ing b o ards Gro w th prim arily th ro ug h M A’s & Targ e t is to se c ure th e g e ne ratio n o f sh are h o lde r v alue J Go ldm an Sac h s /M H H/m ik 10
Slide 11: Wh y Glo b al ? • To se rv e g lo b al c usto m e rs • To stre ng th e n m ark e t po sitio n – g lo b al purc h asing po w e r – m ark e t le ad e rsh ip – g lo b al b e nc h m ark ing – – – – – b e g lo b al, ac t lo c al – pre se nc e in m ain and g ro w ing pape r m ark e ts • To e nh anc e e c o no m ie s o f sc ale • To e nh anc e g lo b al o pe rating fle xib ility c urre nc y re so urc e s: fib re and e ne rg y c apac ity utilizatio n inv e nto ry m anag e m e nt J Go ldm an Sac h s /M H H/m ik 11
Slide 12: Gro w th strate g y o f c o re pro duc t are as Future growth opportunities Euro pe , No rth -Am e ric a Euro pe , No rth -Am e ric a Euro pe , Asia Euro pe , Asia Baltic R , R im ussia M arket position • Publication papers – M azine pape r ag – Ne w sprint • • Fine papers Packaging B oards – Co nsum e r pac k ag ing – Co rrug ate d b o ards W.Europe* 2 1 1 1 World* 2 2 3 2 J Go ldm an Sac h s /M H H/m ik * ) So urc e J k o Pö yry Co nsulting , po sitio ns b e fo re ac q uisitio ns in 2 0 0 0 aak 12
Slide 13: Sto ra Enso pro d uc tio n, sale s ne tw o rk and trad e flo w s • Glo b al sale s ne tw o rk Pro duc tio n sh o uld b e c lo se to w h e re th e sale s is Lo c al raw m ate rial supply * * Pro duc tio n plant Sale s o ffic e Co nso lidate d Pape rs Inc . 13 J Go ldm an Sac h s /M H H/m ik
Slide 14: Fo c us o n c o re b usine sse s • Fo c us o n o ne c o re are a c re ate s risk s • We pre fe r b ro ade r asse t allo c atio n and po rtfo lio m anag e m e nt – re d uc e s c yc lic ality – c o m ple te pro d uc t pale tte g iv e s c o m pe titiv e e d g e – c usto m e rs g ro w ing b ig g e r Packaging industry • Co nsum e r pac k ag ing b o ard s • Co rrug ate d b o ard m ate rial • Co rrug ate d b o ard s • Co re b o ard s Graphical industry • M azine pape rs ag • Ne w sprint • Fine pape rs J Go ldm an Sac h s /M H H/m ik 14
Slide 15: Info rm atio n te c h no lo g y • Gro w th industry • e -Co m m e rc e is to c o m e – – – – w ill lo w e r m ark e ting c o sts sale s o ffic e inc re ase d fo c us o n c usto m e r re latio ns spe e d up de liv e ry tim e s w o rk ing c apital m anag e m e nt • But, – im po rtanc e o f q uality, pro d uc t ide ntity and e ffic ie nt lo g istic s – partne rsh ips w ith k e y ac c o unt c usto m e rs w ill c o ntinue e -Dialo g ue J Go ldm an Sac h s /M H H/m ik 15
Slide 16: Papyrus e -Busine ss • To day – lo ng and suc c e ssful e xpe rie nc e in Sw e de n – fully inte g rate d in supply c h ain • On-g o ing c h ang e pro g ram – e xte nsiv e inv e stm e nt – fo c us o n e xte nd e d b usine ss m o de l – Pan-Euro pe an launc h • Visio n – industry m ark e t le ade r in e -b usine ss J Go ldm an Sac h s /M H H/m ik 16
Slide 17: A CQUIS ITION OF CONS OL IDA TED PA PERS J Go ld m an Sac h s /M H H/m ik 17
Slide 18: Wh y Co nso lid ate d Pape rs? • • • • Exc e lle nt pro duc t m atc h in faste st g ro w ing pape r g rade s Le ading m ark e t po sitio ns in c o re g rade s Lo ng -standing and h ig h -q uality c usto m e r b ase Exc e lle nt sale s and m ark e ting ne tw o rk and m ark e t re putatio n in U and Canada .S. • Stro ng m anag e m e nt te am w ith e xte nsiv e c o ate d pape r e xpe rie nc e J Go ldm an Sac h s /M H H/m ik 18
Slide 19: Sto ra Enso ’ s Le ading Po sitio n in Euro pe Co ate d Wo o dfre e 1 8% Co ate d M c h anic al e 21 % U o ate d nc M c h anic al Inc l. SC e 1 4% 9 .0 8 .4 6 .8 Total E uropean Capacity million mt/ a J Go ldm an Sac h s /M H H/m ik 19
Slide 20: No w a Le ade r in No rth Am e ric a Co ate d Wo o dfre e 1 3% Co ate d M c h anic al e 1 8% U o ate d nc M c h anic al Inc l. SC e 11% 5 .4 5 .2 5 .0 Total North A merican Capacity million mt/ a J Go ldm an Sac h s /M H H/m ik 20
Slide 21: Inte g ratio n Plans • Ob je c tiv e is to b uild o n Co nso lidate d Pape rs’ trac k re c o rd and suc c e ss • Sto ra Enso utilize s its e xc e lle nt e xpe rie nc e fro m e arlie r m e rg e rs • An inte g ratio n te am is in plac e to e nsure a suc c e ssful c o m b inatio n o f th e tw o b usine sse s a flying start o nc e th e d e al is c lo se d J Go ldm an Sac h s /M H H/m ik 21
Slide 22: Pre lim inary tim e tab le * J une J uly Aug ust Distrib ute pro xy m ate rial (F-4 ) Extrao rdinary sh are h o lde r m e e ting s o f Sto ra Enso and Co nso lidate d Pape rs Clo sing o f th e de al and listing o f th e ADR o n th e Ne w Yo rk Sto c k Exc h ang e s If ADR are no t re g iste re d and liste d b y Oc to b e r 3 1 , 2 0 0 0 , Sto ra Enso w ill s c o m ple te th e transac tio n w ith 1 0 0 % c ash at $4 4 pe r sh are * Sub je c t to re g ulato ry and SEC appro v als. Pro c e ss is lo ng e r th an typic al sto c k transac tio ns due to th e use o f a ne w ADR pro g ram as ac q uisitio n c o nside ratio n. J Go ldm an Sac h s /M H H/m ik 22
Slide 23: Financ ial Targ e ts and Po lic ie s R m ain U h ang e d e nc • Pro fitab ility • Financ ial struc ture • Sh are b uy b ac k – targ e t R OCE 1 3 % o v e r th e c yc le (c urre nt WACC 9 % ) –QR 1 OCE 1 7 .9 % – de b t/e q uity ~0 .8 , e xpe c te d to b e re ac h e d in 2 0 0 0 – Q de b t/e q uity 0 .8 4 1 – 5 % , appro v al fro m AGM sub je c t to b o ard d e c isio n , – 1 /3 o f ne t pro fit o v e r th e c yc le • Div ide nd po lic y • Em ph asis o n g ro w th : M A’ s & Lo ng te rm c re atio n o f sh are h o ld e r v alue J Go ldm an Sac h s /M H H/m ik 23