Ever Increasing Cost Inflation Will Require Further Cost and Capacity Cuts,

                         as Well as Price Increases




    HELSINKI, Finland, July 24 /EMWNews/ --

    STORA ENSO OYJ INTERIM REVIEW 24 July 2008 at 06.00 GMT

    Summary of Second Quarter Results



    Continuing Operations:                     Q2/07   Q1/08   Q2/08



    Sales                         EUR        2 989.9 2 831.8 2 871.8

                                  million



    Operating Profit excl. NRI    EUR          222.9   140.1    94.4

    and Fair Valuations           million



    Operating profit (IFRS)       EUR          244.2   125.0    71.3

                                  million



    Profit before tax excl. NRI   EUR          191.2    83.1    31.7

                                  million



    Profit before tax             EUR          191.2    83.1    30.4

                                  million



    Net profit excl. NRI          EUR          148.9    66.5    29.9

                                  million



    Net profit                    EUR          148.9    66.5    28.6

                                  million



    EPS excl. NRI                 EUR           0.19    0.08    0.04



    EPS                           EUR           0.19    0.08    0.04



    CEPS excl. NRI                EUR           0.45    0.30    0.26



    ROCE excl. NRI                %              9.7     5.0     2.8



    ROCE excl. NRI and fair       %              8.8     5.6     3.6

    valuations



    Message from CEO Jouko Karvinen:



    "The fastest cost inflation in the recent history of the industry,

firstly in wood costs, but now also in fuel and electricity costs, has

decreased our profits for the third consecutive quarter, now below half of

the same period a year ago. Operating profit was significantly below our

expectations especially in Wood Products, whereas the rapid cost increases

and strong Euro have hurt most of the paper and board businesses as well.

The restructuring measures we launched in late 2007 are being implemented

as planned; however, in the present environment they are clearly not

enough.



    "Even with our strong overall energy balance, especially with

biofuel-based energy, the 40% increase in oil and particularly gas prices

in the past three months, in addition to the wood cost increases of the

past two years, means we must take further actions. We have announced price

increases in several paper and board grades to our customers. Escalating

costs and potentially weakening demand will also require both temporary and

permanent capacity reductions. These capacity adjustments are independent

of the outcome of the Russian wood duty negotiations; they are needed

because of unacceptable costs and the weak profitability in certain

products and production lines. We will announce specific plans still during

this current quarter. In parallel, we are preparing a second set of

capacity reduction plans in case there is no concrete and cost-improving

compromise on Russian duties soon.



    "We sincerely appreciate the Finnish government's recent decision to

significantly reduce the income tax on domestic wood raw material. The

forest owners and the industry together need to turn this decision into

increased availability of fibre in Finland at competitive costs, as it is

an opportunity not only to reduce the damage of the Russian duties but also

to provide forest owners with a viable long-term customer base for their

wood. The time to act is now.



    "Our forecast for overall annual unit cost inflation for 2008 is still

estimated to be about 4%. If current trends on several cost factors do not

change for the better, it is clear that this can rise further. We remain

committed to compensating for 2.5% to 3% of unit cost inflation through our

own actions.



    "In the challenging environment we expect our operating profit

excluding non-recurring items and fair valuations for the third quarter of

2008 to be somewhat weaker than the second quarter of 2008. The weakening

earnings will naturally also have a negative impact on the Group's cash

flow. We continue the policy of balancing financial prudence and cash

preservation on the one hand, and investing selectively in attractive

growth opportunities for the future on the other.



    "In this reality it is clear that waiting for things to get better will

do the Company nothing but great harm. This is especially true now that

uncertainty about the market outlook has changed as we see the first clear

signs of demand softness in certain grades. We will continue to take

corrective actions as rapidly and efficiently as we can in the reality we

see ahead."



    Near-term Market Outlook



    Forecasts of advertising expenditure in Western Europe and North

America during the rest of the year have been downgraded owing to growing

macroeconomic concerns. Print advertising expenditure in those regions is

forecast to stagnate, in contrast to positive growth in Central and Eastern

Europe and Asia.



    In Europe demand for newsprint is expected to be weaker than a year

ago, but the market should remain firm with prices unchanged on the second

quarter of 2008 as the supply and demand balance has improved.



    Slightly stronger demand for magazine paper than a year ago is

anticipated, but demand growth may slow down due to macroeconomic

uncertainties. The supply and demand balance has improved in uncoated and

coated magazine paper markets. Price increases have been announced and

higher prices, including biannual contracts, are foreseen in the third

quarter.



    Demand for fine paper is expected to be weaker in Europe than a year

ago, and also affected by the normal seasonal downturn during the summer

holiday period. Due to severe cost inflation, price rises for both coated

und uncoated fine paper are foreseen later in the year.



    Demand for consumer board is forecast to be much the same as a year ago

globally, but slightly weaker in Europe, and seasonally somewhat weaker

than in the second quarter. Prices are expected to start improving towards

the end of the year for cartonboard. The outlook for industrial packaging

is affected by the deteriorating macroeconomic prognosis, and weaker demand

in the third quarter than a year ago is foreseen. Prices for RCP-based

containerboard are expected to continue to soften and for corrugated

packaging prices are expected to be stable.



    The market for wood products will remain weak. Demand in the third

quarter is forecast to be considerably weaker than a year ago, and also

slightly weaker than in the second quarter of 2008, aggravated by further

weakening of the European housing market. Prices will remain under

pressure.



    In Latin America rising demand for coated magazine paper is expected to

level out after the boom in demand in the first six months of the year.

Prices are predicted to improve.



    In China demand for uncoated magazine paper is forecast to improve

after a seasonally weaker summer and prices may be higher than in the

second quarter. However, the outlook for fine paper demand and prices is

expected to weaken slightly.



    The full-length version of the Stora Enso interim review is available

on the Stora Enso website at http://www.storaenso.com/investors .



    Stora Enso's third quarter results 2008 will be published on 23 October

2008.