Finnish and Swedish Forest Industry Financial Benchmark

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Finnish and Swedish Forest Industry Financial Benchmark Tieto Forest Industry Consulting www.tieto.com

Executive summary Dramatic slowdown in global trade growth. One of the main element of the slowdown is weaker import growth in China. However, the global trade and GPD are expected to recover in 2016-2017. In 2015 the Finnish forestry industry s production and exports have not increased compared to previous year. Despite the demand is expected to recover on the world market next year says, Forestry Sector Economic Outlook 2015-2016. Which will be in same line with the Finnish economic activity which was broadly flat in 2015, but is projected to strengthen in 2016. While the consumption trend for publishing paper has been declining for a long time, other product segments such as tissue, packaging and cardboard and specialty paper have increased. For special papers like label and release paper, demand have increased globally, but average prices were slightly lower than in the previous year. Demand for global chemical pulp continued strong. The Total consumption of market pulp is expected to gradually increase in line with global growth. Hardwood pulp inventories, which are generally higher than softwood pulp inventories, declined slightly. Inventories of purchased pulp were historically low. Finland's pulp and paper industry production stable in 2015 (0.2%) while the production of softwood sawn timber decreased 2.7%. (Pulp and paper news 2016-02-09). The pine market, in particular, was characterised by oversupply and intense Russian competition in the weakened but key Egyptian market, and in China. In 2015 Finnish roundwood prices fell slightly. In Q4, the consumer confidence index declined slightly, but remained stable in the US and increased some in the the euro zone compared to Q4 in 2014. 2 Tieto Corporation

We are growing in Sweden Imano 50+ Consultants dedicated to the Forest Industry Office in Falun, Leksand, Växjö, Stockholm, Jönköping och Göteborg 3 Tieto Corporation

Content Sales and EBIT margin development on Group Level EBIT Margin and Sales development on Product level Forest Operations Pulp Packaging Paper Sawn Wood Tissue Special Papers EBIT Margin development Group Level including non recurring items Contacts 4

Tieto Insights 63% 63% of executives say it will be impossible to stay competitive without being a quick adopter of new technology. The Future of Business Transformation Research, Kairos Future together with Tieto 5

Financial Benchmark Tieto Forest Industry Consulting 6

Strong numbers in 2010, but generally weak growth for most companies past that year. 200 150 100 Finnish economy growth have been stable since 2011. High wages and rigid employment benefits are continuing to restrict growth in Finland. In Finland, Consumer confidence rose to a five month high in January, as consumers were more optimistic that the economy would improve in 2016, and expressed more interest in making purchases than in saving money. 50 0 2009 2010 2011 2012 2013 2014 2015 World GDP average growth Sweden GDP average growth Finland GDP average growth Average sales growth all companies Sweden s GDP is expected to grow at a relatively rapid rate in 2015 and 2016. This is due to several factors, including the expectation that the demand for Swedish exports will accelerate when international growth improves. Many of the Swedish and Finnish forest industry companies show flat sales development since 2009, despite growing economies. In 2015 companies sales and profitably have shown light of growth. Source: Annual Reports, OECD Excluding Billerudkorsnäs and Munksjö. 7

EBIT Margin Development Group Level excl. IAC (Items Affecting Comparability) 30% 20% Yearly trend Quarterly Margin trend In 2015, Suominen s net sales grew by 10.5% from the comparison period. The strengthening of the USD compared to EUR, Suominen s reporting currency, increased the net sales of 2015 by approximately EUR 42 million. EBIT Margin 10% 0% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Most of the companies within the forest industry are expecting profitably to improve in 2016. In 2015 Stora Enso s sales decreased 1.7% even the operational EBIT increased 13.0%, which were mainly due to strong performance in Biomaterials, favourable FX, and lower variable costs. -10% -20% Years Södra reported an historically strong result and therefore proposes an increased divi dend payment for 2015. The strong result is due to favourable exchange rates, a healthy forest economy and greater operational efficiency. Source: Annual Reports All companies excl. Munksjö and Billerudkorsnäs Total SCA Group Ebit margin average 8

Sales Development Group Level Recovery Boom Depression 20% Moelven 10% SCA Ahlstrom Stora Enso BillerudKorsnäs UPM 0% -70% -50% -30% -10% 10% 30% 50% 70% Metsä Setra Sveaskog Holmen -10% -20% Slowdown Sales Development 2015 vs. 2009 Suominen s Q4 operating profit excluding nonrecurring items fell 32% during the quarter to EUR 4.3 million. General Suominen s financial development during the full 2015 financial year corresponded to their positive outlook. In 2015 Moelven Group improved its underlying operations by NOK 50 million and achieved an operating profit of 215 million Norwegian kroner. For Holmen, Operating profit for 2015 was SEK 1 700 million, excluding items affecting comparability (2014: SEK 1 734 million). Earnings were negatively affected by price decreases for printing paper and sawn timber, as well as a number of significant rebuilding and maintenance shutdowns. Source: Annual Reports Sales Development Q4 2015 vs. Q4 2014 9

Average EBIT Margin Development Q4 vs. Q3 2015 30% Supply of wood remained good throughout the year 2015 and the stumpage prices were stable. Demand for logs and pulpwood in Sweden was lower than usual in the fourth quarter. Log prices decreased slightly. 25% Q3 Q4 General view of global demand for pulp has remained stable. There are no signs of material changes in the market situation. EBIT Margin Average 20% 15% 10% 5% 0% Q3 Q4 Forest Operations Q3 Q4 Q4 Q3 Q3 Q4 Q3 Q4 Pulp Packaging Paper Sawn Wood Tissue Q3 Q4 Special Papers Demand for SBB and FBB decreased seasonally in the fourth quarter. Deliveries to Europe from European producers increased by 3 per cent in 2015 compared with 2014. Demand for printing paper in Europe decreased by 6 per cent during January November compared with the same period in 2014. Selling prices were generally stable in the fourth quarter. Ongoing negotiations are expected to lead to price increases. Market conditions for sawn timber in Europe remained weak in the fourth quarter as a result of high supply. Selling prices have decreased gradually over the year. Source: Annual Reports 10

Tieto Insights - Changes in both human behaviour and technology are driving industry disruption The world is changing at an accelerating pace with digitalization driving the change. Disruption in business is a challenge, however, it also provides great opportunities for those who see what s coming next and have the agility to respond when the time is right. Tieto is set out to create a more intelligent forest industry. Our services and solutions expand the capabilities of companies to manage transformation, meet the changing business requirements and take up future opportunities. 11

Product Group Forest Operations 12

EBIT Margin Development Forest operations excl. IAC (Items Affecting Comparability) 30% Yearly trend Quarterly Margin trend Supply of wood remained good throughout the year 2015 and the stumpage prices were stable. Demand for logs and pulpwood in Sweden was lower than usual in the fourth quarter. Log prices decreased slightly. EBIT Margin 15% 0% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Metsä Forest s sales of forest management services continued to grow during the year 2015 even the mild weather in the last quarter made harvesting stands and delivering wood more difficult. Metsä Forest enhanced their digitalization. Metsä forest states that electronic services related to wood trade and forest management were well-received. -15% Years Holmen Skog Sveaskog Södra Skog Compared with the third quarter for Holmen Skog, earnings from operations rose by SEK 32 million to SEK 158 million as a result of seasonally lower costs. Operating profit amounted to SEK 228 million (217). Metsä Forest EBIT Margin Average Source: Annual Reports 13

Sales Development Forest Operations* Recovery 10% Boom Holmen Skog s earnings from operations for 2015 increased by SEK 103 million to SEK 638 million, mainly owing to lower costs for handling storm felling's and the effects of implemented rationalizations. 5% Metsä forest operating result in was lowest in Q4 (6.3 MEUR) compared to Q1- Q3/2015. 0% -40% -30% -20% -10% 0% 10% 20% 30% 40% Sales Development 2015 vs. 2009 Sveaskog s operating profit from continuing operations for the full year 2015 amounted to SEK 1,280 million (1,254). Depression -5% -10% Sveaskog Holmen Skog Slowdown Metsä Forest Delivery volumes from Sveaskog s own forests were in principle on the same level as last year but with a higher proportion of deliveries from stocks which had already been recognised in earnings. Source: Annual Reports Sales Development Q4 2015 vs. Q4 2014 14 *) Concerns only companies that clearly distinguish forest operations

Product Group Pulp 15

EBIT Margin Development - Pulp excl. IAC (Items Affecting Comparability) 40% 30% Yearly trend Quarterly Margin trend General view of global demand for pulp has remained stable. There are no signs of material changes in the market situation. EBIT Margin 20% 10% 0% -10% -20% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Years Södra Cell Stora Enso Biomaterials Metsä Fibre UPM Biorefining EBIT Margin Average The global economic uncertainty and changes in the currency market will have an impact on companies pulp markets. Metsä s Pulp Industry and Paperboard Industry accounted for the most significant result improvement in 2015. UPM s profitability improved also in 2015 Södra Cells operating profit for the period totalled SEK 638 million (599), and SEK 2,351 million (1,593) for the full-year. The earnings trend was primarily due to a favourable currency situation, strong demand and stable prices. Source: Annual Reports 16

Sales Development Pulp Recovery Depression Source: Annual Reports 40% 30% 20% -10% -20% -30% -40% Sales Development Q4 2015 vs. Q4 2014 Stora Enso Biomaterials (Sales development 2014 vs 2011 Boom UPM Biorefining Södra Cell (-8% 10% 2015 vs Metsä Fibre 2009) 0% -80% -50% -20% 10% 40% 70% Slowdown // 260% Sales Development 2015 vs. 2009 In Q4 Growth projects began contributing to UPM's earnings, with a strong start in the expanded UPM Kymi pulp mill. Metsä s Pulp delivery volumes were strong in Q4. Q4 the euro-denominated prices of softwood pulp decreased slightly from the previous quarter while Hardwood pulp prices were stable. Stora Enso s Pulp sales were EUR 60 million (+19.1%) higher driven by the Montes del Plata ramp-up and the positive foreign exchange impact in Q4. During the year, production volumes for Södra Cell amounted to 1,512,000 tonnes, comprising 1,218,000 tonnes softwood sulphate pulp, 183,000 tonnes hardwood sulphate and 111,000 tonnes dis- solving pulp. 17

Product Group Packaging 18

EBIT Margin Development - Packaging excl. IAC (Items Affecting Comparability) 25% Yearly trend Quarterly Margin trend In 2015 Metsä Board s profitability improved clearly compared previous years. 15% 5% -5% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Stora Enso s Packing Solutions sales and operational EBIT decreased while Consumer Board results were more stable even higher variable costs, mainly from pulp and chemicals. For Holmen, rebuilding work will take place in March 2016 at the mill in Workington in order to increase capacity by 20 000 tonnes and improve product quality. -15% Source: Annual Reports Billerudkorsnäs financial data from 2012. Billerudkorsnäs Consumer Board BillerudKorsnäs Packging paper BillerudKorsnäs Container board Metsä Board Stora Enso packaging solutions & consumer board Holmen Iggesund Paperboard EBIT Margin Average Demand for SBB and FBB decreased seasonally in the fourth quarter. Deliveries to Europe from European producers increased by 3 per cent in 2015 compared with 2014. 19

Sales Development Packaging Recovery Metsä Board Sales Anlysis -5% -10% Holmen Paperboard Boom 10% Billerudkorsnäs Consumer board Billerudkorsnäs (9% in short term Container Board sales) 8% in short term 5% sales) Billerudkorsnäs Packaging Paper (3% in short term sales) 0% -25% -15% -5% 5% 15% 25% Depression Stora Enso Packaging Solutions & Consumer Board Slowdown Sales Development 2015 vs. 2009 In Q4, Metsä s paperboard deliveries decreased slightly on a seasonal basis even the paperboard price levels were stable. In Q4 the Finnish paperboard production grew to 810,000 tonnes, which is approx. 6% more compared to the corresponding period of 2014. Holmen Iggesund Paperboard s deliveries in 2015 amounted to 499 000 tonnes, which was 1 per cent higher than in 2014. For Stora Enso the EUR 27 million investment to increase the capacity of consumer board machine at the Imatra mill in Finland was completed in October 2015. In addition to a capacity increase of 20 000 tonnes, the investment also enables quality enhancements and cost- competitiveness. Sales Development Q4 2015 vs. Q4 2014 Source: Annual Reports Stora Enso result is calculated for packaging solutions and consumer board. 20

Product Group Paper 21

EBIT Margin Development - Paper excl. IAC (Items Affecting Comparability) EBIT Margin 15% 10% 5% 0% -5% -10% Yearly trend 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Years Quarterly Margin trend Stora Enso s sales declined by 9.6% mainly due to the disposal of Uetersen Mill in early 2015, the conversion of the Varkaus fine paper mill into a kraftliner producer in autumn 2015, and lower sales prices in local currencies, which were partly offset by the positive foreign exchange impact. 2015, In Europe and North America the demand for newsprint and magazine decreased steeply. Prices for newsprint and magazine in Europe were in lowered by 5% while fine paper prices were on average 4% higher than in 2014. US private equity firm Blackstone Group L.P. is considering the takeover of Norway's newsprint and magazine paper manufacturer. Holmen Paper Stora Enso Paper UPM Paper Asia UPM Paper ENA EBIT Margin Average Source: Annual Reports UPM ENA & Asia financial data after 2012 and UPM Paper financial data before 2012. 22

Sales Development Paper Recovery 10% 8% 6% 4% Boom Stora Enso s Cash flow after investing activities was weak in the Q4/2015, mainly due to a cash payment related to renegotiation of a long-term supply agreement, seasonally high capital expenditure, and provision payments related to earlier announced restructuring cases. 2% 0% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% UPM Paper Asia -2% (-1% in short term sales) Holmen Paper -4% UPM ENA (-4% in short term sales) -6% Depression -8% Stora Enso Paper -10% Source: Annual Reports UPM ENA & Asia results are calculated. Sales Development Q4 2015 vs. Q4 2014 Slowdown Sales Development 2015 vs. 2009 Stora Enso s demand of paper division Q4/15 compared with Q3/15 was slightly stronger. Demand for printing paper in Europe decreased by 6 per cent during January November compared with the same period in 2014. Selling prices were generally stable in the fourth quarter. Ongoing negotiations are expected to lead to price increases. 23

Product Group Sawn Wood 24

EBIT Margin Development - Sawn wood excl. IAC (Items Affecting Comparability) 20% 10% EBIT Margin 0% -10% -20% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Holmen Timber Södra Timber Moelven Metsä Wood EBIT Margin Average Yearly trend Years Stora Enso Wood Products Setra Bergs Timber UPM Plywood Quarterly Margin trend Market conditions for sawn timber in Europe remained weak in the fourth quarter as a result of high supply. Selling prices have decreased gradually over the year. Plywood demand in Europe increased slightly thanks to growth in both industrial applications and constructionrelated end-use segments. Metsä Wood adjusted the sawing volume during the autumn 2015. Operating profit for Holmen Timber in 2015 was SEK 9 million (37), excluding items affecting comparability. The decrease was due to lower selling prices and higher costs for logs. Source: Annual Reports 25

Sales Development Sawn Wood Recovery 20% 15% 10% Boom Moelven Q4, Metsä Wood's comparable delivery volumes grew slightly from the previous year due to the increased deliveries of sawn timber Stora Enso s operational EBIT improved mainly due to lower wood costs and positive foreign exchange impact. 5% 0% // -60% -40% -20% 0% 20% 40% 60% -5% Setra Stora Enso 140% UPM Plywood Holmen Timber Sales Development 2015 vs. 2009 In Q4 especially in Finland the softwood sawn timber production decreased 0.5%. Holmen Timber s deliveries in 2015 amounted to 730 000 cubic metres, which was slightly higher than in 2014. Depression Source: Annual Reports -10% -15% -20% Sales Development Q4 2015 vs. Q4 2014 Metsä Wood Slowdown As a result of the current market situation in North Africa, Setra have chosen to implement production limits during the fourth quarter. This have had a negative impact on their results, but has allowed them to maintain good control of their inventory and their cash flow. 26

Product Group Tissue 27

EBIT Margin Development - Tissue excl. IAC (Items Affecting Comparability) 15% Yearly trend Quarterly Margin trend Metsä Tissue's profitability weakened compared to the previous year despite the streamlining of operations, improvement of energy efficiency and development of logistics. 10% 5% 0% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 SCA (Tissue) Metsä (Tissue)*Including Cooking paper Source: Annual Reports Metsä has strengthened the position of company's own brands in the Nordic countries and eastern Central Europe through new product launches and product development The European market for consumer tissue and AfH tissue showed low growth. The North American market for AfH tissue showed growth, but competition rose as a result of greater investment in production capacity. The Chinese tissue market showed higher demand. As part of the cost-savings program related to the acquisition of Georgia-Pacific s European tissue operations, during the year SCA closed a tissue production plant in France. 28

Sales Development Tissue Recovery 20% Boom In Q4 Metsä groups operating result was weakened by fibre costs, which were higher than in the year 2014. 15% 10% 5% Metsä Tissue SCA Tissue 0% -60% -30% 0% 30% 60% -5% Sales Development 2015 vs. 2009 For SCA, Cost savings associated with the acquisition of Georgia-Pacific s European tissue operations amounted to approximately SEK 930m in 2015. For SCA, during the fourth quarter 2015, cost savings totaled approximately SEK 260m, corresponding to an annual rate of approximately EUR 110m. -10% -15% Depression -20% Slowdown Source: Annual Reports Sales Development Q4 2015 vs. Q4 2014 29

Product group Special Paper and products 30

EBIT Margin Development Special Paper and products excl. IAC (Items Affecting Comparability) 20% Yearly trend Quarterly Margin trend Ahlstrom s slowdown was most visible in the Filtration business area, and particularly in engine filtration. 15% 10% 5% 0% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015 In 2015 the global demand for special paper especially self-adhesive label material increased by approximately 4 5%. One main key driver were strengthened consumer demand in Europe. Suominen s operating profit excluding non-recurring items fell by 32% to EUR 4.3 (6.2) million. In 2015 Suominen s central focus areas were making progress with their growth investment program (60MEUR) and focusing to enhance their product development process -5% Munksjö UPM Raflatac Ahlstrom Suominen EBIT Margin Average Source: Annual Reports 31

Sales Development Special Papers and products Recovery 20% 15% Suominen Boom In the Q4 markets in served by the Food and Medical business area, the overall demand was lower than in the comparison period across all the geographies, saw Ahlstrom. 10% UPM Raflatac 5% Munksjö Ahlstrom 0% -80% -60% -40% -20% 0% 20% 40% 60% 80% -5% Sales Development 2015 vs. 2009 In Q4 Suominen s Care business area launched in total three new nonwovens products to the market. The speciality paper machine at the UPM Changshu mill in China started production in December. -10% -15% Munksjö Industrial Applications division has showed that they have a strong product with great opportunities. Depression -20% Slowdown Source: Annual Reports Sales Development Q4 2015 vs. Q4 2014 32 *) Earlier Suominens growth investments were 30-40 MEUR on their strategic period of 2015 2017, but in September 2015 the value were updated to 60 MEUR.

Group Level Including Items Affecting Comparability 33

EBIT Margin Development Group Level Including. IAC (Items Affecting Comparability) 20% Yearly trend Quarterly Margin trend 15% 10% EBIT Margin 5% 0% -5% 2009 2010 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2015-10% -15% -20% Years SCA Holmen Setra Suominen UPM Ahlstrom Metsä Ebit margin average Source: Annual Reports 34

How we can help Maximise business intelligence Optimise operations Accelerate revenue Consolidate data more efficiently for better oversight Measure performance in real-time Make real-time decisions Focus resources, scale/outsource in cost-efficient way Shift human resources to more advisory and sales roles Break down silos and establish a more customer-centric mind-set Increase customer loyalty, shareof- wallet and market share Develop personalised services and products Increase brand equity 35 Tieto Corporation

Contacts Adam Aljaraidah Heidi Metsola Tieto Team Associate Management Consultant Adam.Aljaradidah@tieto.com +46722424416 Associate Management Consultant heidi.metsola@tieto.com +358505116031 Industry and Cross-Industry Experts 36 Tieto Corporation

Notes

Notes 1. Alhström 1. On group level 2. 2014 annual report is used for the 2012-14 financial figures and 2013 annual report is used for the 2009-11 financial figures 3. Including non recurring items on group level Page 33 2. Bergs Timber 1. Bergs timber has fiscal financial year and reports from 1/9-31/8 3. Billerudskorsnäs 1. On Group level Billerudkorsnäs was excluded 2. On Product level from 2009-2011 Korsnäs and Billerud sales figures is added to Billerudkorsnäs 3. Billerudkorsnäs adjusted result 2012 4. Holmen 1. Excluding changes in forest value for Holmen 2. Including non recurring items on group level Page 33 5. Mellanskog 1. On group level revenues from affiliated companies are included 2. On group level other revenues are excluded 6. Metsä Group 1. On group level adjusted result in 2010 2. On group level other revenues excluded 3. On product level Metsä Tissue includes cooking paper 4. Including non recurring items on group level Page 33 7. Moelven 8. Munksjö 1. On group level Munksjö was excluded 1

Notes 9. SCA 1. Forest swap is excluded. 2. Adjusted result for SCA in 2012 and 2013. 3. SCA is excluded in product level evaluation 4. Including non recurring items on group level Page 33 5. SCA Group incl. total financial numbers 10. Setra 1. Other revenues excluded 2. Including non recurring items in on group level Page 33 11. Stora Enso 1. Adjusted result in 2012 (Operational EBIT) 2. On group level revenues from affiliated companies are included 3. Stora enso (Packaging) is packaging solutions & consumer board 4. Between 2009-20010 on paper product level Stora Enso result includes news print paper + book paper + fine paper + magazine paper 5. Stora enso packaging 2011-2009 result includes industrial packaging and consumer board 6. On product level Stora Enso Packaging is consumer board + packaging solutions 7. Stora Enso reorganised its divisional and reporting structure as of 1 January 2015. The IFRS reporting segments are formed by the divisions and the segment Other. Henceforth, Stora Enso will report financial figures for the divisions Consumer Board, Packaging Solutions, Biomaterials, Wood Products and Paper and the segment Other. 12. Sveaskog 1. On group level revenues from affiliated companies are included 2. Excluding changes in forest value for Sveaskog 13. Södra 1. Other revenues included for Södra 2. Södra has a Tertial report Q2 (2015) May-Aug 2

Notes 14. Suominen 1. On group level 2. November 2011 Suominen acquired Ahlstrom s Home and Personal business operations. Net sales were more than doubled. 3. Including non recurring items on group level Page 33 15. UPM 1. On group level revenues from affiliated companies are included 2. 2015 Sales figure (EURm) Includes a fair value increase of biological assets in Finland totalling EUR 265 million, due to adjusted long-term wood price estimates and a change in the discount rate. 3. Annual reports UPM Biorefining data includes: UPM Biorefining 2013-Q3/2015 financial data and Pulp division financial data before year 2009-2012. 4. UPM Paper division data includes: UPM Paper division 2009-2011 financial data and after the divsion in 2012 financial data from UPM ENA and Asia divisions 5. Including non recurring items on group level Page 33 3

Financial Reporting Frequency SCA Mellan Skog Södra Setra Metsä BK Holmen Munksjö Stora Enso Moelven Bergs Rörvik UPM Suominen Ahlström Yearly x x x x x x x x x x x x x x x Quarterly x x x x x x x x x x x Other Fourmonthly report 4