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Stora Enso's Q2 Profit Expected to be Half of 2007

Press release from the issuing company

(June 18, 2008) Stora Enso's operating profit excluding non-recurring items for the second quarter of 2008 is expected to be about half the EUR 223 million achieved in the same period of 2007. The main reasons for the year-on-year decrease are the continued poor performance of the Wood Products business area, higher pulpwood costs, impacts from escalating oil prices, negative foreign exchange movements, and the effects of maintenance and technical stoppages during the second quarter of 2008.
Earnings in the second quarter of 2008 have been negatively impacted by maintenance and technical stoppages, especially at Skutskär Pulp Mill in Sweden and Veracel Pulp Mill in Brazil, together totalling about EUR 22 million.

Stora Enso expects the Group's profitability in the second half of 2008 to be negatively affected by the impact of rising fossil fuel prices on energy, transportation and chemical costs, which has already become apparent in the first half of 2008 compared with the first half of 2007. The forthcoming increases in Russian export duties on roundwood are causing continuing uncertainty in the Baltic Sea region.

After three quarters of deteriorating performance, combined with the uncertain macroeconomic outlook, Stora Enso is reviewing its plans for production curtailments in the second half of 2008 as well as permanent capacity reductions. Reducing the dependence on purchased natural gas, as evidenced by the already announced Langerbrugge and Maxau energy investments, has become even more critical for the Group.

Owing to these factors, the estimate of overall annual unit cost inflation in 2008 has been raised to 4%. The original commitment to compensate for 2.5-3% of the unit cost inflation for the full year through internal actions is reconfirmed. The Group is further intensifying its efforts to mitigate the increases in unit cost inflation.