3 - Stora Enso

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STRATEGY Strategy in action in 2005 Focusing on profi tability Two profi t improvement programmes were introduced in 2005 covering Stora Enso’s European operations to secure the competitiveness of the Group’s assets in this key market. The Profi t 2007 programme has targeted improving Stora Enso’s pre-tax profi t by EUR 300 million annually from mid-2007 onwards. The measures needed to achieve this will include streamlining production costs and support, cutting administrative costs, as well as optimising the sales and production mix to improve overall effi ciency. This is expected to result in a reduction in per- The competitive environment in 2005 Demand growth for printing and writing paper remained modest in the mature markets of Western Europe and North America, but continued buoyant in new growth markets. Total world demand is estimated to have grown by 1% in 2005. Demand for packaging grades also moved ahead faster in Eastern Europe and Asia, and China in particular, than in mature markets. Demand for wood products grew well in North America, but remained marginal in Western Europe in 2005. Western Europe Production of printing and writing paper in Western Europe in 2005 is estimated to have totalled 36.2 million tonnes, and demand to have totalled 30.4 million tonnes, slightly up on 2004. Exports of these types of papers to other regions totalled some 7.3 million tonnes, and imports 1.3 million tonnes. Production of standard newsprint production was down 1% on 2004, at 9.4 million tonnes, while demand was up 1%, at 9.2 million tonnes. As exports 10• STORA ENSO COMPANY 2005 sonnel of 2 000, and by a further 600 to 700 if additional outsourcing potential is taken up. The Asset Performance Review has resulted in a decision to close four production units with 400 000 tonnes of capacity, and divest six other units. These actions will be fi nalised by the end of 2006. A total of 730 jobs will be lost as a result of the planned closures. In addition, operations at four units will be subject to close and ongoing scrutiny. The units concerned are: Summa Mill in Finland, Berghuizer Mill in the Netherlands, and Reisholz Mill and Uetersen Mill in Germany. A decision to other regions declined and imports increased, total deliveries were somewhat lower than in 2004. The market for improved newsprint continued to grow. Western European production of cartonboard is estimated to have totalled 6 million tonnes, down 2% on 2004. Demand, at 4.5 million tonnes, was also 2% lower. The proportions of white lined chipboard, folding boxboard, and solid bleached sulphate board remained unchanged, at 2.7 million tonnes, 1.5 million tonnes, and 0.3 million tonnes respectively. Deliveries to Eastern Europe continued to rise, while those to other regions decreased slightly. Production of wood products in Western Europe is expected to total 81.4 million m³ in 2005, a 1% increase on 2004. Consumption rose only marginally, to 79.1 million m³. Eastern Europe Production of printing and writing paper in Eastern Europe reached 3 million tonnes, an increase of 6% on 2004, while demand rose 7% to 4.6 million tonnes. will be taken on the future of these mills before the end of 2006. The Profi t Enhancement Programme in North America was largely completed by the end of 2005. Five of the planned six machine rebuilds and modernisations have been completed and four machines and pulp assets closed down. The number of personnel in North America as of the end of 2005 totalled 5 000, compared to 7 300 in 2000. Closer to the customer Stora Enso continued its strategy of moving closer to the end-use customer in the value chain in 2005, through the acqui- Imports increased by 11% to 2.2 million tonnes. Demand for newsprint expanded by 6% to reach 1.8 million tonnes in 2005. Imports totalled 0.6 million tonnes. North America Production of printing and writing paper in North America totalled 28.2 million tonnes in 2005, unchanged from 2004. Total demand reached 30.2 million tonnes, 2% down on 2004. Demand for uncoated mechanical paper increased the fastest, and was up by 3%. Imports and exports were virtually unchanged from 2004, accounting for 3.1 million and 1.1 million tonnes respectively. Total production of newsprint continued to decline, and stood at 12.7 million tonnes, down by 5% on 2004, as capacity decreased by approximately 4%. Demand in North America fell back by over 5% to 10.4 million tonnes due to the use of lighter grades, a continuing fall in circulation fi gures, and a weaker advertising market. Exports totalled 2.6 million tonnes, a slight increase on 2004.
sition of two paper merchants: Papeteries de France, with annual sales of approximately EUR 260 million, and the Schneidersöhne Group, Europe’s second largest paper merchant based in Germany, with annual net sales of EUR 1 130 million. These acquisitions have improved Stora Enso’s competitive position in Continental Europe and vertical integration providing signifi cant synergy potential in the paper and board value chain. Captive pulp for Europe and China Veracel joint venture pulp mill started producing short-fi bre pulp with highquality and low-cost in May 2005, two months ahead of schedule. Deliveries to Stora Enso’s mills in Europe and China started during the summer. The mill reached its full monthly capacity in November 2005. Veracel is one of the lowest-cost pulp producers in the world. Encour- North American consumption of wood products reached an estimated 177.3 million m³, up 2% on 2004 and an all-time high, driven by the strong housing market in the USA. Production levels were also up 1.7% on 2004, reaching 177 million m³. Asia Printing and writing paper production capacity in Asia rose by over 5% in 2005, due to major expansion in China. Total demand in the region for these types of paper rose by 4% to approximately 38 million tonnes, a third of which was coated paper. Growth was fastest in China, where demand surged by approximately 6%. Demand for newsprint in Asia in 2005 is estimated to have been 12 million tonnes, 3% higher than in 2004. Production totalled some 10 million tonnes, and net imports 1.8 million tonnes. Chinese demand is estimated to have been 2.7 million tonnes, up 12% on 2004. This was outpaced by a 14% growth in capacity. Asian demand for cartonboard is estimated to have been 15.3 million tonnes, up 6 %. This growth was driven by China, where demand grew by 8% to reach 7.8 million tonnes. Capacity continues to rapidly expand in China, with 1.4 million tonnes of new capacity in 2005. aged by experiences so far, the Company has already announced preliminary plans to build a second fi bre line at the site. Stora Enso purchased additional land for fast-growing plantations in southern Brazil and Uruguay to strengthen its long-term fi bre supply. The plan is to establish 200 000 hectares of plantations to facilitate local pulp production. The Company plans to construct pulping capacity and integrated paper or board production. Strengthening presence in China Stora Enso increased its plantation holdings in Guangxi in southern China by purchasing 34 000 hectares of land, bringing the Company’s total plantation land area to 60 000 hectares, and strengthening Stora Enso’s sustainable fi bre resources for possible future expansion in China. South America Production of printing and writing paper in South America totalled 4.2 million tonnes, 4% higher than in 2004. Uncoated fi ne paper is the dominant grade in the region, accounting for three-quarters of total output. Demand in South America rose 5% to 5 million tonnes, of which the largest market, Brazil, accounted for 1.8 million tonnes. Main global trade fl ows of paper and board The world trade of paper and board amounts to 112 million tonnes, accounting for 31% of global consumption. The main exporting regions are Central Europe, Nordic countries and North America. �� Source: Jaakko Pöyry �� R&D highlights R&D in Fine Paper division focused on tailoring pulp from Veracel Pulp Mill to meet the special needs of graphic paper grades and the machines producing these grades. This pulp has improved the end-use performance of Stora Enso Graphic Papers’ products signifi cantly. Pharmaceutical Solutions business in Packaging Boards division has completed the fi rst Stora Enso Pharma SHR childresistant, senior-friendly carton manufacturing line, which will be located in the USA, which is the world’s largest pharmaceutical market. The fi rst commercial Pharma SHR application is expected to be launched in 2006. • Demand for newsprint totalled 1.8 million tonnes, 2% up on 2004. Domestic production totalled 0.8 million tonnes, and net imports 1 million tonnes. • �� STORA ENSO COMPANY 2005• 11
Page 2 and 3: Stora Enso’s Annual Report 2005 c
Page 4 and 5: STORA ENSO IN BRIEF Stora Enso in b
Page 6 and 7: DIVISIONS IN BRIEF Publication Pape
Page 8 and 9: STRATEGY LETTER TO SHAREHOLDERS Dea
Page 10 and 11: STRATEGY Improving profi tability -
Page 14 and 15: PUBLICATION PAPER Improved asset ma
Page 16 and 17: PUBLICATION PAPER BUSINESS AREAS |
Page 18 and 19: FINE PAPER Cost-effi cient producti
Page 20 and 21: FINE PAPER BUSINESS AREAS More than
Page 22 and 23: PACKAGING BOARDS Getting closer to
Page 24 and 25: PACKAGING BOARDS BUSINESS AREAS Cor
Page 26 and 27: FOREST PRODUCTS Enhancing efficienc
Page 28 and 29: FOREST PRODUCTS BUSINESS AREAS Wood
Page 30 and 31: HUMAN RESOURCES People performance
Page 32 and 33: CORPORATE GOVERNANCE Corporate Gove
Page 34 and 35: CORPORATE GOVERNANCE Chief Executiv
Page 36 and 37: CORPORATE GOVERNANCE Remuneration C
Page 38 and 39: BOARD OF DIRECTORS Board of Directo
Page 40 and 41: EXECUTIVE MANAGEMENT GROUP Executiv
Page 42 and 43: MANAGEMENT GROUP Management Group M
Page 44 and 45: SHARES AND SHAREHOLDERS Shares and
Page 46 and 47: SHARES AND SHAREHOLDERS Incentive p
Page 48 and 49: FINANCIAL SUMMARY Consolidated Inco
Page 50 and 51: FINANCIAL SUMMARY Consolidated Cash
Page 52 and 53: FINANCIAL SUMMARY Key Figures 1997
Page 54 and 55: ORGANISATION CHART Stora Enso’s o
Page 56 and 57: North America North America is the
Page 58: Colorado Stora Enso Oyj P.O. Box 30

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