FULLTEXT DEL 5 AV 6
Kvartalsrapport Q4 2023
Change in deferred taxes in 2023 EUR million Value at 1 Jan 2023 Income statement OCI Acquisitions / disposals Translation difference Value at 31 Dec 2023 Forest assets -1,267 -54 9 0 -4 -1,315 Fixed assets -123 58 0 -60 -3 -128 Financial instruments -10 -2 -1 0 0 -12 Untaxed reserves -85 77 0 0 2 -6 Pensions and provisions 26 -3 9 0 1 34 Tax losses and tax credits carried forward 74 40 0 0 -2 112 Other deferred taxes 15 2 0 -2 1 17 Total -1,370 119 18 -62 -4 -1,299 Equity hedges and net investment loans (CTA) 0 0 Cash flow hedging 0 0 Change in deferred tax 119 18 -62 -4 Assets1 74 134 Liabilities1 -1,443 -1,433 1 Deferred tax assets and liabilities have been offset in accordance with IAS 12. OCI = Other Comprehensive income, CTA = Cumulative Translation Adjustment Change in deferred taxes in 2022 EUR million Value at 1 Jan 2022 Income statement OCI Acquisitions / disposals1 Translation difference Value at 31 Dec 2022 Forest assets -1,268 -43 -53 0 97 -1,267 Fixed assets -103 -44 0 17 7 -123 Financial instruments 1 -3 -8 0 0 -10 Untaxed reserves -80 -16 0 4 7 -85 Pensions and provisions 58 -1 -25 -4 -2 26 Tax losses and tax credits carried forward 107 -34 0 0 1 74 Other deferred taxes -2 19 0 -2 0 15 Total -1,287 -122 -86 15 110 -1,370 Equity hedges and net investment loans (CTA) -3 3 Change in deferred tax -125 -83 15 110 Assets2 143 74 Liabilities2 -1,430 -1,443 1 Includes assets held for sale. 2 Deferred tax assets and liabilities have been offset in accordance with IAS 12. OCI = Other Comprehensive income, CTA = Cumulative Translation Adjustment The recognition of deferred tax assets is based on the Group’s estimations of future taxable profits available against which the Group can utilise the benefits. Non-recognised deferred tax assets on deductible temporary differences amounted to EUR 50 (50) million. There is no expiry date for these differences. Taxable temporary differences in respect of investments in subsidiaries, branches and associates and interests in joint operations, for which deferred tax liabilities have not been recognised amounted to EUR 428 (367) million. Tax losses Tax losses carried forward Recognised tax values Unrecognised tax values EUR million 2023 2022 2023 2022 2023 2022 Expiry within five years 88 359 9 5 13 72 Expiry after five years 326 100 60 9 6 14 No expiry 1,213 1,173 42 58 219 198 Total 1,626 1,633 111 73 237 283 At the end of 2023 tax losses of EUR 259 million related to Finland and a deferred tax asset of EUR 52 million was recognized of these tax losses. At the end of 2022, there were no material tax losses related to Finland. Uncertain tax positions At balance sheet date there were on-going tax audits in several jurisdictions. It is not expected that any significant additional taxes in excess of those already recorded for will arise as a result of these audits. Impact of OECD Pillar Two model rules The Group is within the scope of the OECD Pillar Two model rules as from 1 January 2024. The Group has no related current tax exposure for the financial year 2023. The Group applies the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12. The Group has initially assessed its exposure to the legislation. Part of the Group's operation in Uruguay may become subject to the Pillar Two minimum tax. The impact of the legislation to the Group’s average effective tax rate is expected to vary from year to year, and the Group estimates the tax impact in the short term to be between 0–15 million EUR per year. Estimates are based on the current understanding of the interpretation of the new rules. 2.6 Earnings per share Accounting principles Basic earnings per share, attributable to the owners of the parent company, are calculated by dividing the net result attributable to shareholders by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the group and held as treasury shares. Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares plus the diluted effect of all potential dilutive ordinary shares, such as shares from share-based payments. Earnings per share 2023 2022 Net result for the period attributable to the owners of the parent, EUR million -357 1,550 Weighted average number of A and R shares 788,619,987 788,619,987 Weighted average number of share awards 1,094,121 771,150 Weighted diluted number of shares 789,714,108 789,391,137 Basic earnings per share, EUR -0.45 1.97 Diluted earnings per share, EUR -0.45 1.96 45 151Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 ===== SIDA 152 ===== 3 Employee remuneration 3.1 Personnel expenses Personnel expenses EUR million 2023 2022 Wages and salaries 962 996 Pension expenses 147 152 Share-based remuneration 4 8 Other statutory employer costs 139 140 Other voluntary costs 23 20 Total 1,275 1,315 Pension expenses EUR million 2023 2022 Defined benefit plans 7 5 Defined contribution plans 140 146 Total 147 152 The average number of employees in 2023 amounted to 20,822 (21,790). Pension costs are discussed further in note 3.3 Post-employment benefit obligations. In 2023, the expense of the share-based remuneration was EUR 4 (8) million. Share-based remuneration comprising of share awards is described in more detail in note 3.4 Employee variable compensation and equity incentive schemes. Remuneration of the Group Leadership Team and Board are described in note 3.2 Board and executive remuneration. 3.2 Board and executive remuneration Board and committee remuneration 2023 2022 EUR thousand (before taxes) Cash Value of shares1 Total4 Total Committee memberships Board members at 31 December 2023 Kari Jordan, Chair 135 85 220 86 People and Culture, Nomination2,3 Håkan Buskhe, Vice Chair 77 48 125 122 People and Culture, Nomination2,3 Elisabeth Fleuriot 64 33 97 94 Financial and Audit Helena Hedblom 55 33 88 86 Sustainability and Ethics Astrid Hermann 64 33 97 — Financial and Audit Christiane Kuehne 60 33 93 90 Sustainability and Ethics Antti Mäkinen 55 33 88 214 People and Culture Richard Nilsson 71 33 104 101 Financial and Audit Former Board members Hock Goh (until 16 March, 2023) — — — 94 Financial and Audit Hans Sohlström (until 18 September, 2023) 55 33 88 86 Sustainability and Ethics Total remuneration as Directors1 636 364 1,000 972 140% of the Board remuneration, excluding Committee remuneration, in 2023 was paid in Stora Enso R shares purchased from the market and distributed as follows: to Chair 7,326 R shares, Vice Chair 4,136 R shares, and members 2,839 R shares each. The Company has no formal policy requirements for the Board members to retain shares received as remuneration. 2 Stora Enso’s Shareholders’ Nomination Board has been appointed by the AGM in 2016 to exist until otherwise decided. The Shareholders’ Nomination Board according to its Charter as approved by the AGM comprises of four members: the Chair and Vice Chair of the Board of Directors, as well as two members appointed by the two largest shareholders (one each) as of 31 August each year. No separate remuneration is paid to members of the Nomination Board. 3 Marcus Wallenberg, appointed by FAM AB, is Chair of the Nomination Board. Jouko Karvinen is the member of the Shareholders’ Nomination Board appointed by Solidium Oy. Kari Jordan and Håkan Buskhe were appointed as members of the Shareholders’ Nomination Board in their roles as Chair and Vice Chair of the Board of Directors. 4 The Company additionally pays the transfer tax for share purchases for each member, in line with AGM decision, which amount is considered also taxable income for each member. Shareholders at the Annual General Meeting (AGM) have established a Shareholders’ Nomination Board to exist until otherwise decided and to annually prepare proposals for the AGM's approval concerning the number of members of the Board of Directors, the Chair, Vice Chair and other members of the Board, as well as the remuneration for the Chair, Vice Chair and members of the Board and its committees. 46 152Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 ===== SIDA 153 ===== Board share interests at 31 December 2023 Shares held (direct and indirect ownership) A R Board members at 31 December 2023 Kari Jordan, Chair 9,012 Håkan Buskhe, Vice Chair 12,069 Elisabeth Fleuriot 32,868 Helena Hedblom 6,356 Astrid Hermann 2,839 Christiane Kuehne 17,429 Antti Mäkinen 19,415 Richard Nilsson1 127 30,207 Total shares held 127 130,195 1 Spouse holds 127 of A shares and 236 of R shares The following Board members also served in 2023 Shares held when Board membership ended (direct and indirect) Effective date of Board membership ending Hock Goh 34,782 16 March 2023 Hans Sohlström1 16,535 18 September 2023 1 Spouse holds 179 of the shares Group Leadership Team (GLT) remuneration and share interests The table below includes the remuneration earned by GLT members during the year, including those shares with performance conditions that have ended and are due to vest in the coming year. The Company recommends and expects the CEO and GLT members to hold Stora Enso shares at a value corresponding to at least one annual base salary. Stora Enso shares received as remuneration are therefore recommended not to be sold until this level has been reached. The aggregate cost of earned remuneration for GLT in 2023 amounted to EUR 12 (15) million. The total number of GLT members was 11 (11) at the year end in 2023. In accordance with their respective pension arrangements, GLT members may retire at sixty- five years of age with pensions consistent with local practices in their respective home countries. Contracts of employment provide for six months’ notice prior to termination with severance compensation of twelve months basic salary if the termination is at the Company’s request. The outcome of the financial targets relating to the Short term incentive programmes for the performance year 2023, and Long term incentive programmes for the performance years 2021 to 2023 were reviewed and confirmed by the People and Culture Committee, and approved by the Board of Directors in January 2024. Note 3.4 Employee variable compensation and equity incentive schemes includes details of incentive schemes and share opportunity programmes for the management and staff of Stora Enso. Group Leadership Team remuneration 2023 2022 EUR thousand CEO2 Former CEO2 Others3,6 GLT Total CEO Others GLT Total Remuneration1,5 Annual salary 290 669 3,656 4,615 953 4,802 5,755 Local housing (actual costs) — — 3 3 0 2 2 Other benefits — 26 263 289 32 272 304 Termination benefits — 933 300 1,233 0 0 0 Short Term Incentive programme4 — 157 1,024 1,181 845 2,167 3,012 Long Term Incentive programme4 — 912 1,652 2,564 987 2,848 3,835 290 2,697 6,898 9,885 2,817 10,091 12,908 Pension costs Mandatory plans 48 428 920 1,396 477 1,154 1,631 Stora Enso voluntary plans — — 730 730 0 933 933 48 428 1,650 2,126 477 2,087 2,564 Total compensation 338 3,125 8,548 12,011 3,294 12,178 15,472 1 The Finnish Corporate Governance code requires companies to report remuneration that is paid or due, and due to this the figures presented in the above table do not directly reconcile with the amounts recognised as personnel expenses in the Income statement as presented in the below table Group Leadership Team remuneration in Income statement. 2 CEO remuneration consists of remuneration delivered to Hans Sohlström as of 18 September 2023 and Annica Bresky until 18 September 2023. 3 Includes earnings related to René Hansen until 4 May 2023, Minna Björkman until 30 September 2023 and David Ekberg until 30 November 2023. And Micaela Thorström as of 1 April 2023 and Ad Smit as of 1 December 2023. 4 Related to amounts due at year end, which will be paid in 2024. LTI value is calculated using the 29 December 2023 closing price of EUR 12.53. The final value of the vested shares will depend on the share price on vesting date 1 March 2024. 5 Remuneration for executives is disclosed only for the period during which they were GLT members. 6 Remuneration of GLT members decreased in 2023 compared to 2022 mainly due to the performance outcome of variable pay programmes. The average number of GLT members during 2023 was 10.40. Group Leadership Team remuneration in Income statement 2023 2022 EUR thousand CEO Former CEO Others GLT Total CEO Others GLT Total Salaries and other short-term employee benefits 290 852 4,946 6,088 1,830 7,243 9,073 Long Term Incentive programme1 137 432 1,245 1,814 714 1,581 2,295 Post-employment benefits 48 428 1,650 2,126 477 2,087 2,564 Total recognised in Income statement 475 1,712 7,841 10,028 3,021 10,911 13,932 1 The costs of long-term incentive (LTI) programmes are recognised as costs over the three year vesting period based on the share price at grant date and the estimate of equity instruments that will eventually vest. 47 153Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 ===== SIDA 154 ===== Executives other than CEO Short term incentive (STI) programmes for management In 2023, GLT members have STI programmes with up to a maximum of 70% or 80% of their annual fixed salary, payable the year after the performance period. 80–100% of the STI for 2023 was based on financial measures and 0–20% on individual strategic key targets. Long term incentive (LTI) programmes for management The 2021 programme has three one-year performance periods which are accumulated after three years. The 2022 and 2023 programmes feature performance metrics with one-year performance periods, which are accumulated after three years, as well as three-year performance periods. All three programmes will be settled in only one portion after three years, and the absolute maximum vesting level is 100% of the number of shares granted. The 2021 programme is related to performance period 2021–2023, the 2022 programme is related to performance period 2022–2024 and the 2023 programme is related to performance periods 2023–2025. The opportunity under the programmes is in Performance Shares, where the shares are vested in accordance with performance criteria proposed by the People and Culture Committee and approved by the Board of Directors. During the year the 2023 programme was launched, in which the GLT members (in GLT at year end) can potentially receive a value corresponding to 227,130 shares before taxes, assuming the maximum vesting level during the three-year vesting period (2023–2025) is achieved. The total number of shares actually transferred will be lower because a portion of shares corresponding to the tax obligation will be withheld to cover income tax. The fair value of employee services received in exchange for share-based compensation payments is accounted for in a manner that is consistent with the method of settlement and is either cash or equity settled as described in more detail in note 3.4 Employee variable compensation and equity incentive schemes. For the equity settled part, it is possible that the actual cash cost does not agree with the accounting charges because the share price is not updated at the time of the vesting. The figures in the Group Leadership Team Remuneration table refer to individuals who were executives at year end or during part of the year. At the end of the year, the performance period for the 2021 programme ended, and will be settled in one portion after three years in March 2024, dependent on Economic Value Added (EVA) for the Stora Enso Group and Earnings Per Share (EPS) for the Stora Enso Group. The Performance Share programme resulted in a 89 % performance outcome. The number of shares due for executives (GLT members at year end) from programmes that ended during 2023 amounted to 115,580 shares. The total number of shares actually transferred will be lower because a portion of shares corresponding to the tax obligation will be withheld to cover income tax. CEO President & Chief Executive Officer – Hans Sohlström The CEO has been employed by Stora Enso and assumed the position of CEO on 18 September 2023. He has a notice period of six months with a severance payment of twelve months salary on termination by the Company but with no contractual payments on any change of control. The CEO’s pension plan and retirement age is according to the Finnish statutory TyEL plan. Short term incentive (STI) programme for CEO As of 18 September 2023, for the next 12+12 months, the CEO is entitled to an STI programme with a maximum opportunity of 100% of the annual fixed salary for each 12 month period. Long term incentive (LTI) programme for CEO As of 18 September 2023, there is a two-year CEO Performance Plan initiated with a vesting date in Q4/2025. The CEO has the potential to receive a value corresponding to a maximum of 169,420 shares before taxes. The performance targets are related to balance sheet, capital expenditure, strategy and sustainability. The CEO is not eligible to participate in LTI 2023–25 or other potential LTI programmes starting during 2024. Former President & Chief Executive Officer – Annica Bresky Annica Bresky was employed by Stora Enso since 1 May 2017 and assumed the position of CEO on 1 December 2019 until 18 September 2023. She had a notice period of six months with a severance payment of twelve months salary on termination by the Company. The severance payment is due to be paid in 2024. In 2023, the former CEO was entitled to an STI programme decided by the Board giving a maximum opportunity of 100% of the annual fixed salary. The payout is prorated to employment during Jan–Sep, 2023. The former CEO participated in the 2021, 2022 and 2023 share based LTI programmes. Each programme has cliff vesting after three years. At the payout, the actual value of these plans is prorated according to active employment in the Company. Group Leadership Team share interests Executives in office at the year end R shares held1 Shares due 20242 Performance share opportunity 2025–20265 Restricted share opportunity 2024–20255 Hans Sohlström 6 100,799 — 169,420 — Seppo Parvi 63,162 16,457 61,160 — Tobias Bäärnman 4,196 9,892 25,980 — Johanna Hagelberg 35,645 12,047 43,520 — Hannu Kasurinen 52,736 19,961 57,810 — Katariina Kravi 10,383 11,945 33,600 — Per Lyrvall 3 84,143 15,074 47,840 — Annette Stube 9,054 11,218 31,570 — Ad Smit — — 8,168 22,722 Micaela Thorström — 1,677 12,858 302 Lars Völkel 16,477 17,309 51,280 — Total, serving officers4 376,595 115,580 543,206 23,024 1 Direct and indirect ownership. None of the GLT members holds A shares. 2 Shares due to GLT member are gross of taxes for the LTI programmes with performance periods that ended in 2023 and are due to be paid 2024. The Performance Share programme resulted in a 89% performance outcome due to be paid in 2024 partly in shares and cash. Some GLT members hold restricted shares in the Restricted Shares programme that ended in 2023 and those shares are due to be paid 2024. 3 Spouse holds 1,257 of the shares. 4 The Company recommends and expects GLT members to hold Stora Enso shares at a value corresponding to at least one annual base salary. Stora Enso shares received as remuneration are therefore recommended not to be sold until this level has been reached. 5 Potential shares to GLT members are gross of taxes for LTI programmes with performance periods that end in 2024–2025 and are due to be paid 2025–2026. 6 Spouse holds 179 of the shares. 48 154Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 ===== SIDA 155 ===== The following Executive Officers also served in 2023 R shares held when GLT membership ended Performance Share Awards when GLT membership ended Restricted Share Awards when GLT membership ended Effective date of GLT membership ending Annica Bresky 52,594 79,197 17 September 2023 Minna Björkman 2,344 16,508 1,122 30 September 2023 David Ekberg 1 8,830 37,820 30 November 2023 René Hansen 1 1,462 27,100 3,400 4 May 2023 1 Unvested shares are forfeited at end of employment 3.3 Post-employment benefit obligations Accounting principles Employee benefits The Group operates a number of defined benefit and contribution plans throughout the world, the assets of which are generally held in separate trustee administered funds. Such pension and post-retirement plans are generally funded by payments from employees and by the relevant Group companies, taking into account the recommendations of independent qualified actuaries. Employer contributions to the defined contribution pension plans are charged to the consolidated income statement in the year they relate to. For defined benefit plans, accounting values are assessed using the projected unit credit method. Under this method, the cost of providing pensions is charged to the consolidated income statement to spread the regular cost over the service lives of employees in accordance with the advice of qualified actuaries who carry out a full valuation of the plan every year in all major pension countries. The pension obligation is measured as the present value of the estimated future cash outflows using interest rates of highly rated corporate bonds or government securities, as appropriate, that match the currency and expected duration of the related liability. The Group recognises all actuarial gains and losses arising from defined benefit plans directly in equity, as disclosed in its consolidated statement of comprehensive income. Past service costs are identified at the time of any amendments to the plans and are recognised immediately in the consolidated income statement regardless of vesting requirements. In the Group’s consolidated statement of financial position, the full liability for all plan deficits is recorded. The Group's pension expenses amounted to EUR 147 (152) million in 2023, as shown in note 3.1 Personnel expenses. Pensions are classified as defined contribution plans and defined benefit plans. The majority of the Group's pensions plans are defined contribution plans for which the charge amounted to EUR 140 (146) million. The priority of the Group is to provide defined contribution plans as its post-employment benefits. Net defined benefit obligation reconciliation Defined benefit obligation Fair value of plan assets Net defined benefit obligation / (asset) EUR million 2023 2022 2023 2022 2023 2022 At 1 January 736 1,108 -577 -762 159 347 Current service cost 7 12 0 0 7 12 Past service cost 0 -6 0 0 0 -6 Settlements 0 -7 0 7 0 0 Interest expense (+) income (-) 27 13 -22 -10 5 3 Total included in income statement 34 11 -22 -3 12 9 Actuarial changes in demographic assumptions 1 -13 0 0 1 -13 Actuarial changes in financial assumptions 31 -306 0 0 31 -306 Actuarial changes from experience adjustments 19 63 0 0 19 63 Return on plan assets1 0 0 -1 105 -1 105 Asset ceiling impact1 0 0 2 5 2 5 Total remeasurement gains (-) / losses (+) included in OCI 52 -256 0 109 52 -147 Benefit payments -56 -54 45 41 -12 -13 Employer contributions and refunds 0 0 -20 4 -20 4 Translation difference 3 -38 -3 33 0 -5 Disposals and classification as held for sale 6 -35 -1 0 5 -35 At 31 December 775 736 -578 -577 197 159 1 Excluding amounts included in interest expense (+) income (-) In 2024, contributions of EUR 22 (19) million are expected to be paid to Group's defined benefit plans. Significant actuarial assumptions used in the valuation of defined benefit obligations Finland Germany Sweden 2023 2022 2023 2022 2023 2022 Discount rate % 3.1 3.6 3.3 3.6 3.1 4.0 Future salary increase % 3.0 3.0 2.5 2.5 2.9 2.9 Future pension increase % 2.2 2.2 2.0 2.0 2.0 2.0 Duration of pension plans 8.0 8.0 8.8 10.2 12.7 13.1 Sensitivity of the defined benefit obligation Impact on defined benefit obligation Change in assumption Increase in assumption Decrease in assumption Discount rate 0.50 % Decrease by 4.9% Increase by 5.5% Salary growth rate 0.50 % Increase by 1.1% Decrease by 1.0% Pension growth rate 0.50 % Increase by 4.1% Decrease by 3.7% Life expectancy 1 year Increase by 3.6% Decrease by 3.5% The Group defines following actuarial risks associated with defined benefit plans: 49 155Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 ===== SIDA 156 ===== Interest risk The obligations are assessed using market rates of high-quality corporate or government bonds to discount the obligations and are therefore subject to any volatility in the movement of the market rate. The net interest income or expense recognised in profit and loss are also calculated using the market rate of interest. Life expectancy In the event that members live longer than assumed, the obligations may be understated originally and a deficit may emerge if funding has not adequately provided for the increased life expectancy. Defined benefit plan summary by country as at 31 December 2023 EUR million Finland Germany Sweden Other Total Present value of funded obligations 167 5 277 151 600 Present value of unfunded obligations 0 131 20 23 174 Defined benefit obligations (DBO) 167 136 297 174 775 Fair value of plan assets -160 -5 -271 -142 -578 Net obligation in the balance sheet 7 131 26 32 197 Represented by Defined benefit pension plans 7 131 26 9 174 Other post-employment benefits 0 0 0 23 23 Net obligation in the balance sheet 7 131 26 32 197 Defined benefit plan summary by country as at 31 December 2022 EUR million Finland Germany Sweden Other Total Present value of funded obligations 172 3 226 163 563 Present value of unfunded obligations 0 134 15 24 173 Defined benefit obligations (DBO) 172 137 241 187 736 Fair value of plan assets -157 -4 -266 -150 -577 Net obligation in the balance sheet 15 134 -26 36 159 Represented by Defined benefit pension plans 15 134 -26 13 136 Other post-employment benefits 0 0 0 23 23 Net obligation in the balance sheet 15 134 -26 36 159 Finland In Finland the employees are entitled to a statutory pensions benefit determined by Employee's pension Act (TyEL). These benefits are defined as contribution benefits. They are insured with an insurance company and provide coverage for old age, disability and death. Charge in the income statement from contribution benefits is EUR 62 (64) million. In addition, the Group has additional defined benefit plans which resulted in a charge of EUR 0 (0) million excluding finance costs. Defined benefit plans and plan assets are managed by insurance companies. Details of the exact structure and investment strategy surrounding plan assets are not available to participating employers, as the assets actually belong to the insurance companies themselves. The assets are managed in accordance with EU regulations, and also national requirements, under which there is an obligation to pay guaranteed benefits irrespective of market conditions. Germany German pension costs amounted to EUR 3 (6) million, of which EUR 3 (6) million related to defined contribution plans and EUR 0 (1) million to defined benefits excluding finance costs. The net defined benefit obligation amounted to EUR 131 (134) million. Defined benefit pension plans are mainly accounted for in the statement of financial position through book reserves with some minor plans using insurance companies or independent trustees. Retirement benefits are based on years worked and salaries received during the pensionable service and the commencement of pension payments are linked to the national pension scheme’s retirement age. Pensions are paid directly by the companies themselves to their former employees. The security for the pensioners is provided by the legal requirement that the book reserves held in the statement of financial position are insured up to certain limits. Sweden In Sweden, all blue-collar staff and part of white-collar staff are covered by defined contribution plans, the charge in the Income statement being EUR 53 (54) million. Defined benefit plans are covering the remaining white-collar staff and resulted in a charge of EUR 3 (1) million excluding finance costs. The net defined benefit obligation amounted to EUR 26 (net asset EUR -26) million. The increase in net obligation arose mainly from changes in actuarial assumptions, especially from an decrease in discount rate. Stora Enso has undertaken to pay all local legal pension obligation for the main ITP scheme to the foundation, thus the remaining obligation relates to other small plans. The long-term investment return target for the foundation is a 3% real return after tax. Other countries The net defined benefit obligation in the remaining countries amounted to EUR 32 (EUR 36) million. The change in net obligation arose mainly from changes in actuarial assumptions. Plan assets 2023 2022 EUR million Quoted Unquoted Total % of total Quoted Unquoted Total % of total Equity 89 7 96 17% 88 12 101 17% Debt 41 51 92 16% 46 44 90 16% Property 0 62 62 11% 0 55 55 9% Cash 5 0 5 1% 10 0 10 2% Assets held by insurance companies 0 228 228 39% 0 226 226 39% Others 7 89 96 17% 0 96 96 17% Total pension fund assets 142 436 578 100% 144 433 577 100% Plan assets do not include any real estate or other assets occupied by the group or the Company's own financial instruments. The two main financial factors affecting Group's pension obligation are changes in interest rates and inflation expectations. The aim of asset investment allocations is to neutralise these effects, secure solvency for benefit payments and maximise returns. 50 156Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 ===== SIDA 157 ===== 3.4 Employee variable compensation and equity incentive schemes Accounting principles Share awards The costs of all employee-related share-based payments are charged to the consolidated income statement as personnel expenses over the vesting period. All share-based payment transactions are classified as equity-settled share awards. The equity-settled share awards (net of tax), are measured at the fair value of the equity instruments on the grant date, and are adjusted for the present value of expected dividends. The fair value of the equity-settled share-based payments determined on the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of equity instruments that will eventually vest, with a corresponding increase in equity. Short term incentive (STI) programmes Salaries for senior management are negotiated individually. Stora Enso has incentive plans that take into account the performance, development and results of both business units and individual employees. This performance-based variable compensation system is based on profitability as well as on attaining key business targets. Group Executives, as well as division and business unit management have STI programmes in which the payment is calculated as a percentage of the annual base salary with a maximum level ranging from 7% to 100%. Non-management employees participate in an STI programme with a maximum incentive level of 7%. All incentives are discretionary. These performance- based programmes cover most employees globally, where allowed by local practice and regulations. For the performance year 2023, the annual incentive programmes were based on financial measures as well as targets related to operational efficiency, emission reduction, safety and individual targets. The financial success metrics in the STI programme 2023 are Sales growth and EBITDA. Long term incentive (LTI) programmes Since 2005, new share based programmes for executives have been launched every year. The 2021 programme, ending in 2023 and settled in 2024 has a three one-year performance periods which are accumulated after three years. The 2022 and 2023 programmes, features performance metrics with one-year performance periods which are accumulated after three years as well as three-years performance periods. All outstanding programmes will be settled in one portion after three years. For the vast majority of awarded employees, three quarters (75%) of the opportunity under the programmes are in performance shares, where shares will vest in accordance with performance criteria proposed by the People and Culture Committee and approved by the Board of Directors. The financial performance metrics are 3-year Economic Value Added (EVA) and Earnings Per Share (EPS) for the Stora Enso Group for the 2021 programme and EPS and Relative Total Shareholder Return for the 2022 and 2023 programme, which in addition feature ESG metrics (emissions reduction and diversity). One quarter (25%) of the opportunity under the programmes are in Restricted Shares, for which vesting is only subject to continued employment. Members of the GLT have been awarded performance shares only. Outstanding restricted and performance share opportunities before taxes are shown in the table below. The total number of shares actually transferred will be less than that shown below because a portion of shares corresponding to employees' tax obligation will be withheld to cover income tax. Share awards at 31 December 2023 Outstanding restricted and performance share awards at year end Number of shares 2024 2025 2026 Total 2021 programme 649,329 649,329 2022 programme 719,101 719,101 2023 programme 1,060,720 1,060,720 Total 649,329 719,101 1,060,720 2,429,150 The costs of the Stora Enso share-based programmes are recognised as costs over the vesting period, which is the period between the grant and vesting. The total impact of share-based programmes in the income statement amounted to an expense of EUR 4 (EUR 8) million, all of which were related to restricted and performance share awards. 51 157Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 ===== SIDA 158 ===== 4 Operating capital 4.1 Intangible assets, property, plant and equipment and right-of-use assets Accounting principles Goodwill Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognised by the Group on an acquisition. Goodwill is computed as the excess of the cost of an acquisition over the fair value of the Group’s share of the fair value of net assets of the acquired subsidiary at the acquisition date and is allocated to those groups of cash generating units expected to benefit from the acquisition. Goodwill arising on the acquisition of non-euro foreign entities is treated as an asset of the foreign entity denominated in the local currency and translated at the closing rate. Goodwill is not amortised but tested for impairment on an annual basis, or more frequently if there is an indication of impairment. Other intangible assets Intangible assets are stated at their historical cost and amortised on a straight-line basis over their expected useful lives, which usually varies from 3 to 10 years and up to 20 years for patents. An adjustment is made for any impairment. Intangible items acquired must be recognised as assets separately from goodwill if they meet the definition of an asset, are either separable or arise from contractual or other legal rights, and their fair value can be measured reliably. The cost of development or acquisition of new software clearly associated with an identifiable asset that will be controlled by the Group and has a probable benefit exceeding its cost beyond one year is recognised as an intangible asset and will be amortised over the expected useful life of the software between 3 to 10 years. Intangible assets recognised separately from goodwill in acquisitions consist of marketing and customer- related or contract and technology-based intangible assets. Typical marketing and customer-related assets include trademarks, trade names, service marks, collective marks, certification marks, customer lists, order or production backlogs, customer contracts and the related customer relationships. Contract and technology- based intangible assets are normally licensing and royalty agreements or patented technology and trade secrets, such as confidential formulas, processes or recipes. The initial fair value of customer contracts and related relationships is derived from expected retention rates and cash flow over the customers’ remaining estimated lifetime using excess earnings method. The initial fair value of trademarks is derived from a discounted cash flow analysis using the relief from royalty method. Property, plant and equipment Property, plant and equipment acquired by Group companies are stated at their historical cost, which are augmented where appropriate by asset retirement costs. Assets arising on the acquisition of a new subsidiary are stated at fair value at the date of acquisition. Depreciation is computed on a straight-line basis and adjusted for any impairment and disposal charges. The carrying amount represents the cost deducted by received grants and subsidies and less the accumulated depreciation and any impairment charges. Interest costs on borrowings to finance the construction of assets are capitalised as part of the cost during the construction period when the requirements are fulfilled. Land and water areas are not depreciated, as these are deemed to have an indefinite life, but otherwise depreciation is based on the following expected useful lives: Asset class Depreciation years Buildings, industrial 10-50 Buildings, office & residential 20-50 Groundwood mills 15-20 Hydroelectric power 40 Paper, board and pulp mills, main machines 20-30 Heavy machinery 10-20 Converting factories 10-15 Sawmills 10-15 Computers 3-5 Vehicles 5 Office equipment 3-5 Railway, harbours 20-25 Forest roads 10-15 Roads, fields, bridges 15-20 Ordinary maintenance and repair charges are written as expensed when incurred, but the costs of significant renewals and improvements are capitalised and depreciated over the remaining useful lives of the related assets. Retirements, sales and disposals of property, plant and equipment are recorded by deducting the cost and accumulated depreciation from the accounting records with any resulting terminal depreciation adjustments reflected in impairment charges in the consolidated income statement. Capital gains are shown in other operating income. Spare parts are accounted for as property, plant and equipment if they are major and used over more than one period, or if they are used only in connection with an item of property, plant and equipment. In all other cases, spare parts are carried as part of the inventory and recognised in profit or loss as consumed items. Right-of-use (ROU) assets At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. ROU assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted mainly for lease payments made at or before the commencement date. The Group allocates the consideration in the contract to each lease component and will separate non-lease components if these are identifiable. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The ROU assets are subsequently depreciated using the straight line method from the commencement date to the earlier of the end of the lease term or the end of the useful life of the ROU asset. In addition, the ROU asset is adjusted for certain remeasurements of the lease liability. The Group has elected not to recognise ROU assets for short-term leases that have a lease term of 12 months or less and leases of low value assets. Leases of low value assets mainly include IT and office equipment, certain vehicles and machinery and other low value items. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term, see note 2.2 Other operating income and expense, for more information. 52 158Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 159 ===== Intangible assets EUR million Computer software Customer relationships and trademarks Other intangible assets Assets in progress Goodwill Total Acquisition cost At 1 January 2022 226 0 103 7 532 867 Translation difference 0 0 -1 0 -2 -4 Reclassifications 5 0 2 -4 0 3 Additions 3 0 2 16 0 21 Disposals1 -11 0 -6 0 -28 -46 At 31 December 2022 222 0 100 18 502 842 Translation difference -1 0 -3 0 -3 -7 Reclassifications 5 0 0 0 0 5 Additions 15 206 6 18 349 594 Disposals and classification as held for sale1 -13 0 77 0 0 64 At 31 December 2023 229 206 179 36 848 1,498 Accumulated amortisation and impairment At 1 January 2022 178 0 34 0 250 462 Translation difference 0 0 0 0 -3 -3 Disposals1 -11 0 -6 0 0 -17 Amortisation 17 0 8 0 0 24 Impairment 1 0 0 0 11 12 At 31 December 2022 185 0 35 0 258 478 Translation difference -1 0 -2 0 -1 -3 Disposals and classification as held for sale1 -9 0 93 0 0 85 Amortisation 17 16 8 0 0 41 Impairment 6 0 14 3 85 109 At 31 December 2023 198 16 149 3 343 709 Net Book Value at 31 December 2023 31 190 30 32 505 789 Net Book Value at 31 December 2022 38 0 65 18 244 364 1 Company disposals are included in Disposals line. Company disposals and classification of assets as held for sale are discussed in more detail in note 6.1 Acquisitions, disposals and assets held for sale. Included in Customer relationships and trademarks, as part of the acquisition of De Jong Packaging Group, are customer related intangibles purchased with a carrying amount of EUR 156 million and a remaining amortisation period of 14 years and marketing related intangibles of EUR 34 million with remaining amortisation periods of between 4–19 years. Property, plant and equipment EUR million Land and water Buildings and structures Plant and equipment Other tangible assets Assets in progress Total Acquisition cost At 1 January 2022 117 3,355 13,421 448 394 17,735 Translation difference -1 -12 -266 -11 -10 -300 Reclassifications 0 57 207 10 -277 -3 Reclassifications to biological assets 0 -2 -1 0 0 -3 Additions 6 33 217 4 373 634 Disposals1 -19 -390 -2,668 -58 -27 -3,162 At 31 December 2022 103 3,041 10,909 393 454 14,900 Translation difference 1 -22 -17 -2 7 -32 Reclassifications 0 25 260 8 -298 -5 Reclassifications to biological assets 0 -2 -1 0 0 -3 Additions 5 77 434 14 583 1,113 Disposals and classification as held for sale1 -1 -286 -956 -10 -6 -1,259 At 31 December 2023 109 2,833 10,629 404 739 14,714 Accumulated depreciation and impairment At 1 January 2022 3 2,113 10,164 380 14 12,674 Translation difference 0 -30 -262 -9 0 -302 Disposals1 -1 -378 -2,458 -49 0 -2,886 Depreciation 0 78 371 10 1 460 Impairments and reversals 0 21 68 4 2 95 At 31 December 2022 2 1,804 7,882 336 16 10,040 Translation difference 0 -4 7 -1 0 1 Disposals and classification as held for sale1 0 -180 -742 -9 0 -931 Depreciation 0 74 349 10 0 433 Impairments and reversals 0 133 488 5 1 628 At 31 December 2023 2 1,827 7,984 340 17 10,170 Net Book Value at 31 December 2023 107 1,006 2,644 64 722 4,544 Net Book Value at 31 December 2022 101 1,237 3,027 57 437 4,860 1 Company disposals are included in the Disposals line. Company disposals and classification of assets as held for sale are discussed in more detail in note 6.1 Acquisitions, disposals and assets held for sale. 53 159Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 160 ===== Right-of-use assets EUR million Land and water Forest land Buildings and structures Plant and equipment and other Total Acquisition cost At 1 January 2022 107 253 104 127 591 Translation difference -2 -2 -3 -1 -7 Reclassifications to biological assets 0 -17 0 0 -17 Additions 1 6 20 18 45 Disposals1 -2 0 -23 -36 -62 Other changes 1 2 0 4 6 At 31 December 2022 105 243 96 113 556 Translation difference -5 -14 -1 0 -19 Reclassifications to biological assets 0 -16 0 0 -16 Additions 0 5 188 14 207 Disposals and classification as held for sale1 -75 -181 -26 -21 -303 Other changes 1 15 7 3 26 At 31 December 2023 25 52 264 109 451 Accumulated depreciation and impairment At 1 January 2022 8 18 55 69 150 Translation difference 0 -1 -2 -2 -4 Disposals1 -1 0 -23 -34 -58 Depreciation 3 5 19 23 50 Impairment 0 0 1 0 0 At 31 December 2022 10 22 49 56 138 Translation difference -1 -1 0 0 -3 Disposals and classification as held for sale1 -36 -24 -20 -20 -100 Depreciation 3 3 32 21 59 Impairment 28 0 3 2 33 At 31 December 2023 4 0 64 60 128 Net Book Value at 31 December 2023 21 52 201 49 323 Net Book Value at 31 December 2022 95 221 47 57 418 1 Company disposals are included in the Disposals line. Company disposals and classification of assets as held for sale are discussed in more detail in note 6.1 Acquisitions, disposals and assets held for sale. Stora Enso’s most material right-of-use assets capitalised consist of land areas used in forestry and industrial operations, various machinery and equipment leases including operative machinery and logistic equipment, as well as properties including offices, warehouses and other operative properties. Some of the leases contain renewal options and extension options that are considered in the lease term if the Group is reasonably certain to exercise the option. See notes 5.3 Interest-bearing assets and liabilities for more details about lease liabilities and 2.2 Other operating income and expense for details about lease expenses included in the income statement. Intangible assets and property, plant and equipment, and right-of-use asset additions The total capital expenditure excluding investments in biological assets for the year amounted to EUR 1,054 (701) million. Details of ongoing projects and future plans are discussed in more detail in the Report of the Board of Directors. 4.2 Forest assets Accounting principles The forest assets of Stora Enso are defined as standing growing trees, classified as biological assets, and related forest land. The biological assets of Stora Enso consist of standing trees to be used as raw material in pulp and mechanical wood production and as biofuels. Forest asset valuation is based on continuous operations and sustainable forest management, also taking into consideration environmental restrictions and other reservations. Biological assets are recognised and valued in accordance with the IAS 41 Agriculture standard at fair value and forest land assets are recognised in accordance with the IAS 16 Property, plant and equipment standard. Leased forest land assets are presented as part of right-of-use assets in note 4.1 Intangible assets, property, plant and equipment and right- of-use assets. Nordic and plantation forest assets are classified as different classes of assets due to different nature, usage and characteristics of the assets. The main difference is the short-term growing cycle of 6–12 years in plantations versus the long-term growing cycle of 60-100 years in Nordic forests. There are also differences in regeneration methods, forest management, and the use of the assets for other purposes. Nordic forest assets include holdings in Sweden and Finland and plantation forest assets include holdings in China, Brazil and Uruguay. Accounting policies for the different class of forest assets are presented separately below. In addition the Group has minor forest asset holdings in Estonia and Romania through associate company Tornator. The Group has forest assets in its own subsidiaries in Sweden and China as well as in joint operations in Brazil and Uruguay, and in associate company in Finland. Stora Enso also ensures that the Group’s share of the valuation of forest holdings in associated companies and joint operations are consistent with Group accounting policies. At harvesting, biological assets are transferred to the inventory. Nordic forest assets Forest assets in Sweden and Finland are recognised at fair value and valued by using a market approach method on the basis of the forest market transactions in the areas where Stora Enso’s forests are located. Stora Enso’s forest assets create value by securing wood supply, increasing long-term yield, optimising land use and securing financial flexibility. They play an important role in mitigating climate change impacts, as growing trees absorb CO2. The forests also offer opportunities for future value streams, such as wind power. The total forest assets value is calculated with verified inventory data and regional standing stock prices, considering among others: • regional market transaction data based on the forest assets' geographical locations, • standing stock prices by forest cubic meter (m3 fo) combined from traded forest estates and • regional standing stock inventory. Information relating to forest asset transactions are available from market data suppliers. Stora Enso is applying three-year weighted average market transaction prices and this is considered to include a sufficient amount of transactions and is estimated to represent market conditions at the reporting date. The market transaction information can be viewed as market-corroborated inputs. Certain adjustments are made to refine the market-corroborated inputs using unobservable inputs, therefore inputs are categorised to fair value hierarchy measurement level 3. The judgements are further explained in note 1.2 Critical accounting estimates and judgements. The total value of the forest assets in Nordics is allocated across biological assets and forest land. Allocation of the combined fair value of forest assets is based on the income approach where separate present values of expected net cash flows are calculated for both biological assets and forest land. 54 160Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 161 ===== The discount rate is determined as the rate at which the valuation based on market transaction prices matches the total forest assets combined cash flows for biological assets and forest land. The discount rate is estimated to be the same for biological assets and forest land as the nature and timing of the cash flows are similar. Biological assets are measured at fair value in accordance IAS 41. The fair value is based on the income approach and the discounted cash flow method whereby the fair value of the biological assets is calculated using cash flows from continuous operations, taking into account the growth potential of one cycle. Forest land is measured at fair value using the revaluation method as defined in the IAS 16 standard. Fair value of forest land is measured based on income approach, including net cash flows related to trees to-be-planted in the future as well as other land related income, such as hunting rights, wind power leases and soil material sales. Changes in the fair value of biological assets are recognised in the income statement. Changes in the fair value of forest land, net of deferred taxes, are recognised in other comprehensive income (OCI) and accumulated in a revaluation reserve in equity. Revaluation reserve is not recycled to the income statement upon disposal. If the fair value of forest land were to be less than cost, the difference would be recognised in the income statement as an impairment loss. Plantation forest assets In plantation forest areas, biological assets are recognised at fair value in accordance with the IAS 41 standard and based on the income approach in those areas where the Group has forest land. Fair value measurement is based on fair value hierarchy measurement level 3. Forest land is measured initially and subsequently at cost, using the cost model as defined in IAS 16 standard. The valuation of biological assets is based on the discounted cash flow method calculated using cash flows from continuous operations and based on sustainable forest management, taking into account growth potential of one cycle. The fair value of the biological assets is based on the productive forest land. The yearly harvest from the forecasted tree growth is multiplied by wood prices and the cost of silviculture and harvesting is deducted. The fair value of the biological assets is measured as the present value of the harvest from one growth cycle, taking into consideration environmental restrictions and other reservations. The discount rate applied is determined using the weighted average cost of capital method. Young standing timber less than two years old (less than three years in Montes del Plata) is considered to be an immature asset and accounted at cost. Fair value is deemed to approximate the cost when little biological transformation has taken place or the impact of the transformation on the price is not expected to be significant, which varies according to the location and species of the assets. Changes in the fair value of biological assets are recognised in the income statement. The forest land is measured at cost and not depreciated. The value of forest assets disclosed in the consolidated statement of financial position from subsidiary companies and joint operations amounts to EUR 6,921 (6,846) million as shown below. The Group’s indirect share of forest assets held by associated company amounts to EUR 1,417 (1,271) million. The total forest asset value, excluding leased forest land and including forest assets classified as held for sale, amounts to EUR 8,522 (8,117) million. Forest assets Biological assets Forest land2 Forest assets total EUR million 2023 2022 2023 2022 2023 2022 Subsidiaries and joint operations Value at 1 January 4,531 4,547 2,315 2,201 6,846 6,747 Translation differences 2 -305 0 -145 2 -449 Unrealized change in fair value1 385 336 -49 259 335 596 Additions 71 77 1 2 72 78 Disposals and classification as held for sale3 -181 -2 2 -2 -178 -4 Change due to harvesting1 -168 -141 0 0 -168 -141 Other operative changes1 -7 -1 0 0 -7 -1 Reclassification from PPE 20 20 0 0 20 20 Value at 31 December 4,652 4,531 2,269 2,315 6,921 6,846 Classified as held for sale 184 0 0 0 184 0 Associated company Tornator Oyj (41%) 1,287 1,122 130 149 1,417 1,271 Value at 31 December 1,287 1,122 130 149 1,417 1,271 Total 6,123 5,653 2,399 2,464 8,522 8,117 1 For biological assets, changes are presented in the profit and loss. For forest land, changes in fair value are recognised directly in equity. 2 Not including leased forest land. 3 Assets held for sale are discussed in more detail in note 6.1 Acquisitions, disposals and assets held for sale. 55 161Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 162 ===== Valuation and standing stock of forest assets As at 31 December 2023 Swedish forests Guangxi 3 Veracel (50%) MdP (50%) Tornato r (41%) Total Total area Thousand ha 1,383 70 116 138 310 2,016 - of which owned Thousand ha 1,383 — 104 95 310 1,892 - of which leased Thousand ha — 70 12 43 — 125 Productive area Thousand ha 1,139 61 49 92 285 1,627 Total area Standing stock million m3 fo.1 151.9 4.3 6.1 15.0 33.7 210.8 Productive area Standing stock million m3 fo.1 149.7 4.3 6.1 15.0 33.4 208.4 Estimated growth million m3 fo.1 5.8 1.3 2.2 2.0 1.5 12.8 Harvesting million m3 fo.1 -4.2 -1.2 -1.3 -2.3 -1.4 -10.5 Other changes million m3 fo.1 -2.5 0.0 0.0 -0.3 0.6 -2.1 Harvesting million m3 u.b.2 -3.5 -1.0 -1.1 -1.9 -1.1 -8.6 Biological assets EUR million 4,239 184 124 288 1,287 6,123 Biological assets Productive area EUR/ha 3,723 3,010 2,531 3,121 4,509 3,764 Forest land EUR million 2,072 — 30 167 130 2,399 Total forest assets EUR million 6,312 184 154 455 1,417 8,522 Leased forest land EUR million — 157 4 48 — 209 1Forest cubic meters 2Solid under bark (sub) cubic meters 3 Classified as held for sale As at 31 December 2022 Swedish forests Guangxi Veracel (50%) MdP (50%) Tornator (41%) Total Total area Thousand ha 1,389 73 113 138 301 2,014 - of which owned Thousand ha 1,389 — 105 95 300 1,890 - of which leased Thousand ha — 73 8 43 — 124 Productive area Thousand ha 1,142 64 47 92 277 1,622 Total area Standing stock million m3 fo.1 152.7 4.2 5.2 15.5 33.2 210.8 Productive area Standing stock million m3 fo.1 150.5 4.1 5.2 15.5 32.8 208.1 Estimated growth million m3 fo.1 5.8 1.3 1.8 3.2 1.5 13.6 Harvesting million m3 fo.1 -4.6 -1.2 -1.7 -1.8 -1.3 -10.7 Other changes million m3 fo.1 -1.1 -0.8 0.0 0.2 -0.1 -1.8 Harvesting million m3 u.b.2 -3.8 -1.0 -1.4 -1.5 -1.2 -8.9 Biological assets EUR million 3,963 196 103 269 1,122 5,653 Biological assets Productive area EUR/ha 3,471 3,062 2,162 2,922 4,054 3,485 Forest land EUR million 2,113 — 29 173 149 2,464 Total forest assets EUR million 6,076 196 131 441 1,271 8,117 Leased forest land EUR million — 166 3 52 — 221 1Forest cubic meters 2Solid under bark (sub) cubic meters Subsidiaries and joint operations At the end of 2023, forest assets, including assets held for sale in China (excluding leases), were located by value, in Sweden 89% (89%), China 3% (3%), Brazil 2% (2%) and Uruguay 6% (6%). The total area amounts to 1,706 (1,713) thousand hectares of which 7% (7%) is leased and under 0% (1%) is restricted. From Stora Enso's total forest holdings 1,341 (1,345) thousand hectares is productive forest area. The Montes del Plata and Veracel amounts take into account the ownership share. Swedish forests At the end of 2023, the value of the biological assets in Swedish forests amounted to EUR 4,239 (3,963) million, related forest land amounted to EUR 2,072 (2,113) million and the total forest assets amounted to EUR 6,312 (6,076) million. The increase in the forest assets value is mainly driven by higher market prices. Foreign exchange impact increased the value slightly. Deferred tax liabilities related to forest assets amounted to EUR 1,297 (1,250) million. The discount rate of 3.8% (3.6%) was applied in the valuation. The productive area in Swedish forests amounted to 1,139 (1,142) thousand hectares with a standing stock of 149.7 (150.5) million forest m3. The weighted three-year average market transaction price applied in the valuation for Swedish forests assets in 2023 is EUR 42 (40) per forest m3. The forest asset value corresponds to an average of EUR 5,540 (5,320) per ha of productive forest area. The valuation of the forest assets is based on detailed transaction data and price statistics as provided by different market data suppliers. Market transaction data is adjusted to consider the characteristics and nature of Stora Enso's forest assets and to exclude certain non-forest assets and outliers. The valuation takes into account where the forest land is located, price levels and volume of standing stock. Market prices between areas varies significantly. Future changes in value of Swedish forest assets are impacted by changes in market transaction prices and changes in volume of standing stock, considering growth and other changes. See also note 1.2 Critical accounting estimates and judgements for information related estimates and judgment applied in the valuation. Forest asset location and volume 2023 North Middle South Total Productive area Thousand ha 186 953 0 1,139 Percentage of total % 1 6 % 8 4 % 0 % 100 % Standing stock million m3 fo. 16.9 132.8 0.0 149.7 Percentage of total % 1 1 % 8 9 % 0 % 100 % 2022 North Middle South Total Productive area Thousand ha 190 951 0 1,142 Percentage of total % 1 7 % 8 3 % 0 % 100 % Standing stock million m3 fo. 17.5 133.0 0.0 150.5 Percentage of total % 1 2 % 8 8 % 0 % 100 % Guangxi At the end of 2023, the value of the biological assets in Guangxi, China, amounted to EUR 184 (196) million. All the forest land in China is leased. The value decrease is mainly driven by harvesting depletion and foreign exchange impact, whereas capital expenditure and higher volume increased the value. The biological assets included young standing timber with a value of EUR 24 (27) million. The discount rate of 9.7% (10.2%) used in the discounted cash flows (DCF) decreased in 2023. These forestry operations were classified as held for sale at the end of 2023. See note 6.1 Acquisitions, disposals and assets held for sale for more details. 56 162Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 163 ===== Veracel Veracel is a 50% joint operation in Brazil. Stora Enso’s share of the biological assets was EUR 124 (103) million. The increase is mainly driven by increased prices, volume and planting, whereas increased discount rate decreased the value. The biological assets included young standing timber with a value of EUR 40 (31) million. The discount rate of 10.2% (7.9%) used in the DCF increased in 2023. The related forest land is measured at cost. Montes del Plata Montes del Plata (MdP) is a 50% joint operation in Uruguay. Stora Enso’s share of the biological assets was EUR 288 (269) million. The slight increase is mainly driven by higher wood price, harvesting volume estimates and additions, whereas foreign exchange impact decreased the value. During 2023 there were severe drought periods in Uruguay causing decreased annual forest growth estimate compared to the previous years. The biological assets included young standing timber with a value of EUR 48 (50) million. The discount rate of 9.0% (9.0%) is used in the DCF in 2023. The related forest land is measured at cost. Associated company Tornator Tornator Oyj is a 41% owned Finnish associate company. Stora Enso’s share of the biological assets was EUR 1,287 (EUR 1,122) million, related forest land amounted to EUR 130 (149) million, and total forest assets equalled to EUR 1,417 (1,271) million. The increase in the value of forest assets is mainly driven by higher market prices and acquisitions. Stora Enso’s share of the productive forest area totals to 285 (277) thousand hectares with a standing stock of 33.4 (32.8) million forest m3. The weighted three-year average market transaction price applied in the valuation for forest assets located in Finland in 2023 is EUR 42 (42) per forest m3. The forest asset value in Finland corresponds to an average of EUR 4,960 (4,750) per ha of productive forest area. Valuation sensitivities of significant assumptions of a +/- 10% movement EUR million Wood market prices Growth rate Discount rate Guangxi +/-26 +/-1 +/-3 Veracel +/-11 +/-11 +/-2 Montes del Plata +/-32 +/-32 +12/-11 Swedish forest asset valuation is sensitive for changes in market transaction prices and volume of standing stock. A change in the average market price of forest assets of EUR 1 per forest m3 would impact the value of forest assets by EUR 150 (151) million. A change in the volume of standing stock of 1 million forest m3 would impact the value of forest assets by EUR 42 (40) million. 4.3 Associates Accounting principles Associated companies over which Stora Enso exercises significant influence are accounted for using the equity method. Stora Enso does not control associated companies alone or jointly with other parties, but has significant influence. The Group’s share of the associated companies profit or loss is recognised in the consolidated income statement. The Group’s interest in an associated company is carried in the consolidated statement of financial position at an amount that reflects its share of the net assets of the associate together with goodwill. Goodwill arising from the acquisition of an associated companies is included in the carrying amount of the investment and is assessed for impairment as part of that investment. There is no material goodwill in the carrying amount of associated companies. When the Group share of losses exceeds the carrying amount of an investment, the carrying amount is reduced to zero and any recognition of further losses ceases unless the Group is obliged to satisfy obligations of the investee that it has guaranteed or which it is otherwise committed to. The Group’s share of results in associated companies is reported in the operating result to reflect the operational nature of these investments. Similarly, dividends received from associated companies are presented in the net cash provided by operating activities in the consolidated cash flow statement. Principal associated company investments Ownership interest % EUR million Company Reportable segment Domicile and principal place of operations 2023 2022 2023 2022 Tornator Oyj Forest Finland 41.00 41.00 892 800 Others 35 32 Carrying amount 926 832 In 2022, Stora Enso divested its 30.41% participation in Encore Ympäristöpalvelut Oy. The transaction did not have a material impact on the Group. Group share of associated companies income statements EUR million 2023 2022 Sales 126 147 Net operating expenses -69 -103 Biological asset valuation 121 189 Operating result 178 233 Net financial items -12 40 Net result before tax 166 273 Income tax -30 -52 Net result for the year 136 221 The average number of personnel in the associated companies was 1,046 in 2023, compared with 1,043 in 2022. A summary of the financial information, prepared in accordance IFRS, in respect of the Group’s material associate, Tornator Oyj is set out below. The Group’s share of Tornator Oyj is reported in the Forest division and covers the majority of the Group’s total carrying amount of associated companies. 57 163Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 164 ===== Tornator Oyj EUR million 2023 2022 Forest Assets 3,456 3,101 Other non-current assets 73 70 Current assets 102 73 Non-current liabilities 851 752 Current liabilities 146 120 Tax liabilities 459 420 Sales 194 176 Net result for the year 341 542 Other comprehensive income -57 141 Total comprehensive income 284 683 Dividends received during the financial year 60 25 Net assets of the associate 2,175 1,952 Ownership interest 41.00 % 41.00 % Carrying amount of the Group's interest in Tornator Oyj 892 800 The Group’s current 41% ownership is valued at EUR 892 (800) million at the year-end of 2023. The Group’s share of Tornator’s net profit was EUR 140 (222) million, including a biological asset valuation gain net of taxes of EUR 97 (152) million. Aggregate information of associated companies that are not individually material EUR million 2023 2022 Non-current assets 33 35 Current assets 13 12 Non-current liabilities 0 3 Current liabilities 11 12 Sales 47 74 Net result for the year -4 -2 Dividends received during the financial year 0 1 Net assets of the associates 35 32 Associate company value 35 32 Associate company value for Tornator Oyj 892 800 Total associate company value 926 832 Associated company balances EUR million 2023 2022 Receivables from associated companies Non-current loan receivables 2 2 Trade receivables 2 1 Liabilities to associated companies Trade payables 128 101 Associated company transactions EUR million 2023 2022 Sales to associated companies 16 19 Purchases from associated companies 181 163 The Group engages in transactions with associated companies such as sales and purchases of wood. All agreements are negotiated at arm’s length and are conducted on terms that the Group considers customary in the industry and generally no less favourable than would be available from independent third parties. 4.4 Equity instruments Accounting principles The Group has elected to classify its equity investments in Pohjolan Voima shares and certain listed shares held by the Group at fair value through other comprehensive income (FVTOCI) under IFRS 9 by applying the irrevocable election for equity instruments under the standard due to the long-term nature of the ownership. The gains and losses resulting from changes in the fair value of equity investments under FVTOCI are not recycled to the income statement upon impairment or disposal, only the dividend income is recognised in the income statement. In addition, the Group also has certain equity investments in unlisted securities that are classified as fair value through income statement. The majority of the Group's equity instruments consist of investments in Pohjolan Voima Oyj (PVO). Equity instruments EUR million 2023 2022 Carrying amount at 1 January 1,445 918 Change in fair value - OCI -645 519 Change in fair value - Income statement 0 0 Additions 18 10 Disposals 0 0 Translation difference and other changes 0 -2 Carrying amount at 31 December 819 1,445 58 164Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 165 ===== PVO shares The Group holds a 15.7% (15.7%) interest in Pohjolan Voima Oyj (PVO), a public limited company in the energy sector that produces electricity and heat for its shareholders in Finland at cost-based and non-profit making principle (Mankala-principle). Each subsidiary of the PVO group has its own class of shares that, instead of dividends, entitle the shareholder to the energy produced in proportion to its ownership of that class of share. Also, the shareholders then have an obligation to cover the costs of production, which are generally lower than market prices. Stora Enso did not receive actual dividend payments from PVO during 2023. The holding is fair valued quarterly using the discounted cash flow method. The valuation is categorised at level 3 in the fair value hierarchy according to IFRS 13; levels are explained in 5.2 Fair values. The electricity prices used in the valuation are based on market future derivative prices for the first two years and on long-term electricity price estimates for the years thereafter. The historical financial statements provide the basis for the cost structure for each power asset and for future periods, estimates from PVO shareholder information is used when available and these are adjusted by inflation factor in future years. The discount rate of 6.93% used in the valuation model is determined using the weighted average cost of capital method. A +/- 5% change in the electricity price used in the DCF would change the valuation by EUR +92 million and -92 million, respectively. A +/- percentage point change in the discount rate would change the valuation by EUR -140 million and +183 million, respectively. PVO's shares are divided in different share series. The B and B2 series relate to PVO's shareholdings in Teollisuuden Voima Oyj (TVO), which operates three nuclear plants in Finland (Olkiluoto 1–3).Stora Enso holds an indirect share of approximately 8.9% of the capacity of the Olkiluoto 3 nuclear plant unit through its PVO B2 shares. The Olkiluoto 3 plant related test production was completed in April 2023 and regular electricity production was started. Olkiluoto 3 electricity production capacity is approximately 1,600 megawatt, which corresponds to about 15% of electricity demand in Finland. As the largest nuclear power plant in Europe, Olkiluoto in total will produce about 30% of Finland's electricity. The production of Olkiluoto 3 plays a key role in Finland's green transition, and accelerates the move towards a carbon-neutral society and electricity self-sufficiency. PVO shareholding on 31 December 2023 EUR million Share Series % Holding Asset Category Fair value 2023 Fair value 2022 Pohjolan Voima Oyj A 20.6 Hydro 226 307 Pohjolan Voima Oyj B, B2 15.7, 14.8 Nuclear 546 1,113 Pohjolan Voima Oyj C,C2,V,M Various Various 7 4 Total 778 1,423 The valuation in 2023 amounted to EUR 778 (1,423) million. The decrease in PVO’s valuation is mainly caused by a decrease in the electricity price estimates. No deferred tax is recognised, as under Finnish tax regulations holdings above 10% are exempt from tax on disposal proceeds. Principal equity instruments EUR million Holding % Number of shares Acquisition cost Fair value Packages Ltd, Pakistan - listed shares 6.4 5,396,650 3 9 Total listed securities 3 9 Pohjolan Voima Oyj 15.7 5,073,972 131 778 Other unlisted securities 32 32 Total unlisted securities 163 810 Total Equity instruments at 31 December 2023 166 819 Total Equity instruments at 31 December 2022 147 1,445 4.5 Emission rights and other non-current assets Accounting principles The Group participates in the European Emissions Trading Scheme, with the aim of reducing greenhouse gas emissions. The Group has been allocated allowances to emit a fixed tonnage of carbon dioxide (CO2) over a fixed period of time, which are recognised as intangible assets, government grants and as liabilities for the obligation to deliver allowances equal to those emissions that have been made during the compliance period. Intangible assets related to emission allowances are measured at level 1 fair value at the date of initial recognition. The liabilities to deliver allowances are recognised based on actual emissions and are settled using allowances on hand and measured at the carrying amount of those allowances. At the reporting date, if the market value for the emission allowances is less than the carrying amount, any surplus allowances that are not required to cover emissions made are impaired to the market value. The Group expenses emissions made at the grant date fair value, under materials and services, together with purchased emission rights at their purchase price. Such costs will be offset under other operating income by the income from the original rights used at their grant date fair value. The consolidated income statement will, thus, be neutral in respect to all the rights consumed that were within the original grant of rights. Sales of excess emission allowances are recognised as income on the delivery date. Any net effect represents the costs of purchasing additional rights to cover excess emissions, or the sale of unused rights in case that the realised emissions are below the allowances received free of charge or the impairment of allowances that are not required for own use. Emission rights EUR million 2023 2022 Value at 1 January 123 137 Emission allowances allocated 146 160 Sales -64 -62 Settlement with the government -98 -85 Disposals and classification as held for sale — -27 Value at 31 December 108 123 The liability to deliver allowances is presented in the consolidated statement of financial position in line other operative liabilities. As of 31 December 2023, the liability to deliver allowances amounted to EUR 79 (91) million as presented in note 4.8 Operative liabilities. The excess emission rights held at the year end were valued at EUR 28 (32) million. 59 165Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 166 ===== Other non-current assets EUR million 2023 2022 Prepaid expenses and accrued income 25 22 Tax credit 4 4 Other non-current operative assets 29 12 Total 58 38 4.6 Inventories Accounting principles Inventories are reported at lower of cost and net realisable value with the cost determined by the first-in first- out (FIFO) method or, alternatively, by the weighted average cost where it approximates FIFO. The same cost formula is used for all inventories having a similar nature and use to the Group. The cost of finished goods and work in progress comprises raw material, direct labour, depreciation, other direct costs and related production overheads, but excludes interest expenses. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and sale. Where market conditions result in the manufacturing costs of a product exceeding its net realisable value, a valuation allowance is made. Valuation allowances are also made for old, slow moving and obsolete finished goods and spare parts when needed. Such valuation allowances are deducted from the carrying value of the inventories in the consolidated statement of financial position. EUR million 2023 2022 Materials and supplies 384 501 Work in progress 62 84 Finished goods 774 962 Spare parts and consumables 307 337 Other inventories 29 25 Advance payments and cutting rights 52 63 Obsolescence allowance - spare parts and consumables -100 -103 Obsolescence allowance - finished goods -18 -19 Net realisable value allowance -25 -40 Total 1,466 1,810 EUR 6,271 (6,576) million of inventories in total have been expensed during the year. EUR 35 (78) million of inventory write-downs have been recognised as an expense. EUR 55 (9) million have been recognised as a reversal of previous write-downs. 4.7 Operative receivables Accounting principles Trade receivables Trade receivables are recognised initially at fair value and subsequently at their anticipated realisable value with an estimate made for loss allowance on expected credit losses based on a forward-looking and objective review of all outstanding amounts at period end. A simplified approach under IFRS 9 has been implemented for trade receivables and loss allowances are recognised based on expected lifetime credit losses in the consolidated income statement within other operating expenses. For non-defaulted receivables, expected credit losses are estimated based on externally generated customer level probability of default data that is used in the forward-looking loss allowance calculation model. The loss allowance model for non-defaulted receivables also takes into account a macroeconomic indicator that considers the macroeconomic developments and further incorporates forward-looking data to the calculation model. The rebuttable presumption that default does not occur later than when a financial asset is 90 days past due has been applied in the calculation model and a default is normally estimated to occur when trade receivables are at least 90 days overdue or there is otherwise objective evidence supporting the conclusion that a default has occurred. Trade receivables will be written off and booked as a credit loss only with the court's decision of bankruptcy or in some other cases when there is objective evidence supporting the write-off. Trade receivables are presented in current assets under operative receivables in the consolidated statement of financial position. Trade receivables under factoring arrangements Stora Enso uses factoring arrangements as one of the working capital management tools. Sold trade receivables are derecognised once significant related risks and rewards of ownership have been transferred to the buyer. Outstanding balances for trade receivables that were not yet sold at period end but qualify to be sold under factoring programmes in the next period, are classified as trade receivables fair valued through other comprehensive income in accordance with the business model and contractual cash flow characteristics tests under IFRS 9. Please refer to note 5.2 Fair values for further details. Current operative receivables EUR million 2023 2022 Trade receivables - gross carrying amount including amount held for sale 939 1,329 Trade receivables - gross carrying amount held for sale -46 -92 Trade receivables - gross carrying amount 893 1,236 Loss allowance -27 -32 Prepaid expenses and accrued income 80 68 Other receivables 245 200 Total 1,191 1,473 Age analysis of trade receivables EUR million 2023 2022 Not overdue 841 1,213 Less than 30 days overdue 57 55 31 to 60 days overdue 1 10 61 to 90 days overdue 3 2 91 to 180 days overdue 1 3 Over 180 days overdue 36 47 Total 939 1,329 60 166Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 167 ===== As at 31 December 2023, a gross amount of EUR 98 (116) million of trade receivables were overdue. These relate to a number of countries and unrelated customers that have no recent history of default. At 31 December 2023, lifetime expected credit losses for trade receivables amounted to EUR 27 (32) million. Loss allowances for trade receivables are estimated on an individual basis based on a forward-looking model where estimated probabilities of customer default are used in the calculation model. If the Group has concerns regarding the financial status of a customer, an advance payment or an irrevocable letter of credit drawn from a bank is required. At the year end, the letters of credit awaiting maturity totalled EUR 54 (74) million. Please refer to note 5.1 Financial risk management for details of customer credit risk management. Age analysis of loss allowance EUR million 2023 2022 Not overdue and less than 90 days overdue 2 5 91 to 365 days overdue 2 7 Over 365 days overdue 23 21 Total 27 32 Reconciliation of loss allowance EUR million 2023 2022 Opening balance at 1 January 32 26 Change in loss allowance booked through income statement 9 13 Write-offs -15 -6 Other 1 0 Closing balance at 31 December 27 32 The actual credit losses during 2023 amounted to EUR 15 (6) million of trade receivables being written-off from the Group's balance sheet. Stora Enso has entered into factoring agreements to sell trade receivables in order to accelerate cash conversion. These agreements resulted in full derecognition of trade receivables amounting to a nominal value of EUR 178 (174) million at the end of the year. The continuing involvement of Stora Enso in the sold receivables was estimated as being insignificant due to the non-recourse nature of the factoring arrangements involved. 4.8 Operative liabilities Non-current operative liabilities EUR million 2023 2022 Share-based payments 2 2 Other payables 9 9 Total 11 11 Current operative liabilities EUR million 2023 2022 Trade payables 1,582 1,831 Payroll and staff-related accruals 224 245 Accrued liabilities and deferred income 112 130 Emission liabilities 79 91 Advances received 18 18 Other payables1 96 94 Total 2,112 2,410 1 Other payables consist especially of taxes payable to government, such as VAT and payroll taxes. 4.9 Provisions Accounting principles Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the management’s best estimate and there is some uncertainty regarding the timing and amount of the costs. Provisions for obligations to dismantle, remove or restore assets after their use are added to the carrying amount of the assets at acquisition date and depreciated over the useful life of the asset. Provisions are discounted to their current net present value if the effect of the time value of money is material. Environmental provisions Environmental expenditures resulting from the remediation of an existing condition caused by past operations, and which do not contribute to current or future revenues, are recognised as provisions. Environmental provisions are recorded when it is probable, based on current interpretations of environmental laws and regulations, that a present obligation has arisen and the amount of such liability can be reliably estimated. Restructuring provisions A restructuring provision is recognised in the period in which the Group becomes legally or constructively committed to the plan. The relevant costs are those that are incremental to, or incurred as a direct result of, the exit plan, or are the result of a continuing contractual obligation with no ongoing economic benefit, or represent a penalty incurred to cancel the obligation. Other provisions Other provisions are recognised regarding different legal or constructive obligations, such as reforestation, onerous contracts, ongoing lawsuits, claims, or similar. 61 167Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 168 ===== Provisions EUR million Environmental provisions Restructuring provisions Other provisions Total provisions Carrying Value at 1 January 2022 75 88 67 231 Translation difference -4 -3 -2 -9 Disposals and classification as held for sale -3 -1 0 -4 Charge in Income Statement New provisions 14 8 19 40 Increase in existing provisions 1 12 2 15 Reversal of existing provisions -1 -16 -8 -25 Payments -9 -66 -50 -124 Carrying Value at 31 December 2022 73 21 30 124 Translation difference 0 0 1 1 Disposals and classification as held for sale 3 0 0 3 Charge in Income Statement New provisions 7 89 12 107 Increase in existing provisions 4 4 1 8 Reversal of existing provisions -16 -7 0 -22 Payments -9 -31 -14 -54 At 31 December 2023 63 77 28 168 Allocation between current and non- current provisions Current provisions: Payable within 12 months 1 72 12 85 Non-current provisions: Payable after 12 months 61 5 16 83 Total at 31 December 2023 63 77 28 168 The Group has undergone major restructuring in recent years, from divestments to mill closures and administrative cost-saving programmes. The most material restructuring provision included in the ending balance of 2023 is EUR 35 million related to closing down the De Hoop containerboard site in the Netherlands. Other restructuring provisions relate mainly to permanently closing down Sunila pulp production in Finland and restructuring programmes to reduce the number of office employees in Group functions and the Packaging Materials division. Material payments in 2022 in restructuring and other provisions are mainly related to closing down pulp and paper production at the Kvarnsveden site in Sweden and the Veitsiluoto site in Finland. The most material environmental provision is based on an agreement between Stora Enso and the City of Falun that obligates the Group to purify runoff from the Kopparberg mine before releasing the water into the environment. The provision at year end amounted to EUR 27 (EUR 31) million. The most material case in other provisions is related to an obligation in some Nordic countries to take care of reforestation within a specified time after final harvesting. 62 168Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 169 ===== 5 Capital structure and financing 5.1 Financial risk management Risk management principles and process Stora Enso is exposed to several financial market risks that the Group is managing under the policies approved by the Board of Directors. The objective is to ensure cost-effective funding of Group companies and manage financial risks effectively. The Stora Enso Group Financial Risk Policy governs all financial transactions in Stora Enso. This policy and any future amendments take effect once they are approved by the Board of Directors and all policies covering the use of financial instruments must comply with it. The Group’s joint operations companies operate under their own financial risk policies, which may not be fully similar to the Group’s policies. The major financial market risks are detailed below with the main exposures for the Group being interest rate risk, currency risk, liquidity risk, refinancing risk, and commodity price risk, especially for fiber, pulp, and energy. Interest rate risk The Group is exposed to an interest rate risk that is the risk of fluctuating interest rates affecting the interest expense of the Group and value of its assets and liabilities. Stora Enso is exposed to the interest rate risk through interest-bearing assets and liabilities, such as loans, financial instruments and lease liabilities, but also through commercial agreements and operative assets and liabilities such as biological assets. The Group’s aim is to keep interest costs stable. The Group’s aggregate duration should not exceed the average loan maturity, but should aim towards a long duration. A duration above the average loan maturity is approved by the Board of Directors. The Group may use interest-rate swaps and cross-currency swaps to manage the interest- rate risk by synthetically converting floating-rate loans into fixed-rate loans through the use of derivatives. The Group's floating and fixed rate interest-rate position as per the year-end is presented in the following table. The table includes the respective assets and liabilities classified as held for sale. Floating and fixed interest-rate position As at 31 December 2023 As at 31 December 2022 EUR million Floating rate Fixed rate Floating rate Fixed rate Non-current interest-bearing receivables1 11 51 11 80 Current interest-bearing receivables1 1 14 1 — Cash and cash equivalents 2,464 1,917 Interest-bearing liabilities2 -1,422 -4,293 -1,074 -2,818 Interest-bearing assets and liabilities excluding interest rate derivatives 1,053 -4,229 855 -2,738 Interest-rate and cross-currency swaps 488 -488 650 -650 Interest-bearing assets and liabilities, net of interest rate derivatives 1,541 -4,717 1,506 -3,388 1 Excluding interest receivable, listed securities, and derivative assets 2 Non-current interest-bearing liabilities, current portion of non-current debt, short-term interest bearing liabilities and bank overdrafts excluding derivative liabilities and interest payable The average interest duration for the Group's net interest-bearing liabilities, including all interest rate derivatives but excluding cash and cash equivalents, is 2.7 (3.3) years. As of 31 December 2023, one percentage point increase in interest rates would increase annual net interest expenses by approximately EUR 10 (EUR 4) million and a similar decrease in interest rates would decrease net interest expenses by EUR 10 (EUR 4) million. This assumes that the duration and the funding structure of the Group remain constant throughout the year. This simulation calculates the interest effect of a 100 basis point parallel shift in interest rates on all floating rate instruments excluding cash equivalents from their next reset date to the end of the year. In addition, all short-term loans maturing during the year are assumed to be rolled over on maturity to year end using the new higher or lower interest rate. A one percentage point parallel change up or down in interest rates would also result in fair valuation gains or losses of EUR 6 (EUR 10) million before taxes in the cash flow hedge reserve in OCI regarding interest rate swaps under cash flow hedge accounting. Note 5.4 Derivatives summarises the nominal and fair values of the outstanding interest rate derivative contracts. Foreign exchange risk – transaction risk The Group operates globally and is exposed to a foreign-currency transaction risk arising from exchange rate fluctuations. Foreign exchange transaction risk exposure comprises both the geographical location of Stora Enso production facilities around the world, sourcing of raw materials and sales of end products in foreign currencies, mainly denominated in US dollars, British pounds and Swedish crowns. Stora Enso Group companies with functional currency other than euro are also exposed to a foreign-currency transaction risk arising from EUR denominated net cash flows. These EUR exposures mainly arise from Stora Enso subsidiaries located in Sweden, Czech Republic and Poland. The currency transaction risk is the impact of exchange rate fluctuations on the Group's Income statement, which is the effect of currency rates on expected future cash flows and subsequent trade receivables or payables. The Group's standard policy to mitigate the risk is to hedge 15–60% of the highly probable forecast cash flows in major currencies for the next 12 months by using derivative financial instruments, such as foreign exchange forwards and foreign exchange options. The Group may also hedge periods between 12 months and 36 months, or change the above mentioned hedging ratio for the next 12 months upon the discretion of the Group's management. For operative receivables and payables in foreign currencies, the objective is to hedge 50– 100% of the outstanding net receivable balance in major currency pairs. The table below presents the estimated net operative foreign currency transaction risk exposures for the main currencies for the next 12 months and the related foreign-currency hedges in place as at 31 December, retranslated using year-end exchange rates. The net operative receivables and payable exposures, representing the balances as at 31 December, include foreign currency exposures generated by external and intercompany transactions in line with the requirements of IFRS 7. A positive amount of exposure in the table below represents an estimated future inflow or receivable of a foreign currency amount. 63 169Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 170 ===== Operative foreign currency transaction risk exposure As at 31 December 2023 As at 31 December 2022 EUR million EUR SEK USD GBP AUD UYU EUR SEK USD GBP AUD UYU Estimated annual net cash flow exposure in hedged foreign-currency flows1 674 -278 1,446 126 63 -48 960 -238 1,983 240 83 -48 Cash flow hedges for the next 12 months -394 188 -632 -34 -15 27 -525 119 -843 -59 -26 26 Estimated annual net cash flow exposure, net of hedges 280 -90 814 93 47 -21 435 -119 1,139 181 57 -22 Hedging percentage as at 31 December for next 12 months 58 % 68 % 44 % 27 % 25 % 57 % 55 % 50 % 43 % 24 % 31 % 54 % Weighted-average hedged rate against EUR2 11.57 1.10 0.87 1.66 45.07 10.63 1.09 0.87 1.52 45.20 Operative receivables and payables net exposure -38 -23 181 18 18 -5 -22 8 284 30 49 -5 Net receivable currency hedges -7 7 -119 -15 -20 — -18 -3 -186 -16 -51 — Net operative receivables exposure, net of hedges -45 -15 62 3 -2 -5 -39 5 98 14 -2 -5 Estimated annual net transaction risk exposure after hedges 235 -105 876 96 46 -26 396 -113 1,238 195 55 -27 1 Cash flows are forecasted highly probable net operating foreign-currency cash flows in hedged currencies. The exposure presented in the EUR column relates to operative transaction risk exposure from EUR denominated cash flows in Group companies located in Sweden, Czech Republic and Poland with functional currency other than EUR. 2 The weighted-average exchange rate against EUR is calculated based on bought leg of option collar structure and forward contracts' forward rate and therefore represents the weighted-average hedged rate based on the least favourable hedged rate from the Group's point-of-view. The following table includes the estimated effect on the annual operating result of a weakening of an exposure currency against the functional currencies of exposed subsidiaries. The sensitivities have been calculated based on a 5% movement in EUR, SEK, USD, GBP and AUD while 10% movement in UYU. These changes are estimated as reasonably possible changes in exchange rates, measured against year-end closing rates. A corresponding strengthening of the exposure currency would have an approximately equal opposite impact. A negative amount in the table reflects a potential net loss in the income statement or equity and, conversely, a positive amount reflects a potential net gain. In practice, the actual foreign currency results may differ from the sensitivity analysis presented below, since the income statements of subsidiaries with functional currencies other than the euro are translated into the Group reporting currency using the average exchange rates for the year, whereas the statements of the financial position of such subsidiaries, including currency hedges, trade receivables and payable, are translated using the exchange rates at the reporting date. The translation risk exposures are discussed more in detail under the Translation risk chapter below. The calculation includes currency hedges and assumes that there are no changes in other underlying currencies. The currency effects are based on estimated operative foreign currency flows for the next twelve months, hedging levels at the year end, and the assumption that the currency cash flow hedging levels and all other variables will remain constant during the next twelve months. Hedging instruments include foreign exchange forward contracts and foreign exchange options. Indirect currency effects with an impact on prices and product flows, such as a product becoming cheaper to produce in a different geographical location, have not been considered in this calculation. Sensitivity analysis of operative foreign currency transaction risk exposure As at 31 December 2023 As at 31 December 2022 EUR million EUR SEK USD GBP AUD UYU EUR SEK USD GBP AUD UYU Exposure currency change by1 - 5 % - 5 % - 5 % - 5 % - 5 % -10 % - 5 % - 5 % - 5 % - 5 % - 5 % -10 % Effect on estimated annual net cash flows in hedged flows -34 14 -72 -6 -3 5 -48 12 -99 -12 -4 5 Effect on cash flow hedging OCI reserve before taxes as at year end2 20 -9 32 2 1 -3 26 -6 42 3 1 -3 Effect on net operative receivables and payables after hedges3 2 1 -3 — — 1 2 — -5 -1 — — Estimated annual EBIT impact4 -12 5 -44 -5 -2 3 -20 6 -62 -10 -3 3 1 The sensitivity analysis for EUR denominated annual net cash flows, operative net receivables and related hedges refer to the EUR denominated transaction risk arising from EUR denominated foreign-currency cash flows in Sweden, Czech Republic and Poland with functional currency other than EUR. 2 The effect on OCI cash flow hedging reserve before taxes at year end is related to the fair value change in derivative contracts qualifying as cash flow hedges of highly probable forecast transactions under IFRS 9. Amount effecting OCI will be recycled to operative result when the transaction realises. 3 Currency effect related to net operative receivables or payables and related hedges. 4 The estimated annual EBIT impact includes currency effects in respect of operative exposures in the Statement of Financial Position, forecast cash flows and the related hedges. The following table presents the financial foreign currency exposure and the related hedges in place as at 31 December for the main currencies. Net debt includes foreign-currency external loan payables and receivables, foreign-currency internal loan payables and loan receivables and cash equivalents. Loans designated as net investment loans under IAS 21 are excluded from the table as they reduce the foreign-currency exposures on a Group level. Internal transaction exposure includes foreign-currency payables and receivables outstanding within the Group at reporting date. The currency derivatives mainly hedge financial exposures in the statement of financial position. A negative amount of exposure in the table represents a net payable of a foreign currency amount. Additionally, the table includes the estimated effect on the income statement of a currency weakening of an exposure currency against EUR. The sensitivities have been calculated based on a 5% movement in SEK, USD, CNY, PLN, and CZK. These changes are estimated as reasonably possible changes in exchange rates, measured against year-end closing rates. A corresponding strengthening of the exposure currency would have an approximately equal opposite impact. A negative amount in the table reflects a potential net loss in the Income statement and, conversely, a positive amount reflects a net potential gain. In practice, the actual foreign currency results may differ from the sensitivity analysis below as the exposure amounts may change during the year. 64 170Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 171 ===== Financial foreign currency exposure and estimated currency effects in income statement As at 31 December 2023 As at 31 December 2022 EUR million SEK USD CNY PLN CZK SEK USD CNY PLN CZK Foreign-currency net debt1 140 -121 185 -3 24 -418 -101 355 -6 -62 Currency hedges -158 -5 — -5 -21 -3 -46 -211 -7 62 Net exposure after hedges -18 -126 185 -8 3 -422 -146 144 -12 — Internal transaction exposure 137 13 138 45 Currency hedges — — -124 -41 Net non-operative exposure 137 — — 13 — — — — 14 3 Exposure currency change by - 5 % - 5 % - 5 % - 5 % - 5 % - 5 % - 5 % - 5 % - 5 % - 5 % Effect in the Income Statement2 -6 6 -9 -1 — 21 7 -7 — 6 1 The Group has designated certain internal loans to Chinese subsidiaries as net investment loans under IAS 21. The loans are denominated in EUR, USD, and CNY. The underlying foreign currency gain or loss will be posted as part of CTA in Equity. The nominal amount of net investment loans amounted to EUR 591 (EUR 398) million as per the year end and reduces the currency exposure for relevant currencies in the above table. 2 Gains and losses are recognised as part of Net financial items in the Income Statement Foreign exchange risk – translation risk Translation risk results from fluctuations in exchange rates affecting the value of Stora Enso’s consolidated net foreign currency denominated assets, liabilities, and income. Translation risk is reduced by funding assets, whenever economically possible, in the same currency as the asset itself. The Group may also enter into foreign exchange forwards, foreign exchange options or foreign currency denominated loans to hedge its net investments in foreign entities with different functional currencies than the Group. The balance sheets of foreign subsidiaries, associated companies and foreign currency denominated equity instruments in the scope of IFRS 9 are translated into euros using exchange rates prevailing on the reporting date, thus exposing consolidated Group equity to fluctuations in currency rates. The resulting translation differences, along with other movements such as the translation rate difference in the income statement, are recorded directly in shareholders’ equity. These cumulative differences materialise through the Income statement on the disposal, in whole or in part, of the foreign entity. The following table presents the translation risk exposure in the Group's Income statement arising from the translation of subsidiaries' and joint operations' foreign-currency income statements into the presentation currency of the Group in the consolidated financial statements. Translation exposure in Income statement As at 31 December 2023 As at 31 December 2022 EUR million SEK USD BRL CZK CNY SEK USD BRL CZK CNY Translation exposure in Income Statement -357 -196 -179 -65 67 -147 -192 -164 -38 77 Exposure currency change by - 5 % - 5 % -10 % - 5 % - 5 % - 5 % - 5 % -10 % - 5 % - 5 % Effect on EBIT from translation risk exposure 18 10 18 3 -3 7 10 16 2 -4 The next table presents the translation exposure for geographical areas for which the Group has applied net investment hedging techniques to reduce the foreign-currency translation exposure in the consolidated equity. In practise, the Group also incurs material unhedged translation risk exposures in other geographical areas such as Sweden and China. The exposures used in the calculations are based on the foreign currency denominated equity and the hedging levels as at 31 December. Full details of actual CTA movements and hedging results are given in note 5.6 Cumulative translation adjustment and equity hedging. The sensitivity analysis includes the effects of currency hedges of net investments in foreign entities and assumes that no changes take place other than a single currency exchange rate movement on 31 December each year. Hedged translation exposure in Equity As at 31 December EUR million 2023 2022 Translation exposure on equity in USD area1 1,625 1,686 EUR/USD equity hedges2 -271 -281 Translation exposure after hedges 1,354 1,405 Sensitivity before hedges - EUR strengthening 5% -81 -84 Sensitivity after hedges - EUR strengthening 5% -68 -70 1 Includes the joint operation Montes del Plata in Uruguay, which has USD as its functional currency. 2 USD denominated bonds classified as hedges of net investments in foreign assets. Liquidity and refinancing risk Liquidity risk arises from the difficulty of obtaining finance for operations at a given point in time. Stora Enso’s financial risk policy states that the average maturity of outstanding loans and committed credit facilities covering short-term borrowings should be at least four years. The policy further states that the Group must have cash equivalents and undrawn committed credit facilities to cover all debt maturing within the next 12 months, including supply chain financing and factoring. At 31 December 2023, undrawn committed credit facilities and undrawn loans were at EUR 800 (EUR 1,100) million. The credit facilities are used as a backup for general corporate purposes and are fully undrawn. Additionally, Stora Enso has access to various additional long-term sources of funding up to EUR 1,100 (EUR 1,050) million. These mainly relate to available funding sources from Finnish pension funds. During 2023, Stora Enso issued or refinanced altogether EUR 2,006 million of long-term debt, including both bonds and bilateral bank loans. Funding events from during 2023 are described in more detail in note 5.3 Interest-bearing assets and liabilities Refinancing risk, or the risk that maturing debt is not refinanced in the markets, is mitigated by Stora Enso’s target of maintaining an even maturity profile of outstanding debt. The table below shows maturity analysis for the Group's contractual financial liabilities classified under principal headings based on the remaining period to contractual maturity at the reporting date. Forward interest rates as at the year-end were used for estimating contractual finance charges for the upcoming years. The table includes the respective assets and liabilities classified as held for sale. 65 171Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 172 ===== Contractual maturity repayments of financial liabilities, settlement net: 2023 EUR million 2024 2025 2026 2027 2028 2029+ Total Bond loans 136 440 590 591 548 1,310 3,615 Loans from credit institutions 140 717 105 5 5 27 998 Lease liabilities 71 57 48 43 39 263 520 Other non-current financial liabilities 0 2 0 0 0 0 2 Non-current borrowings including current portion 347 1,217 742 639 592 1,600 5,137 Estimated contractual finance charges 193 152 113 82 69 194 802 Estimated contractual lease charges 29 26 25 23 22 225 350 Contractual repayments on non- current borrowings 569 1,395 880 744 683 2,018 6,289 Current borrowings, carrying amounts 595 0 0 0 0 0 595 Gross-settled derivative liabilities - receipts -2,154 0 0 0 0 0 -2,154 Gross-settled derivative liabilities - payments 2,132 0 0 0 0 0 2,132 Trade payables 1,666 0 0 0 0 0 1,666 Estimated contractual finance charges 9 0 0 0 0 0 9 Total contractual repayments at 31 December 2023 2,817 1,395 880 744 683 2,018 8,537 Contractual maturity repayments of financial liabilities, settlement net: 2022 EUR million 2023 2024 2025 2026 2027 2028+ Total Bond loans 300 270 404 90 325 1,081 2,470 Loans from credit institutions 306 40 273 5 0 0 624 Lease liabilities 63 49 44 33 30 159 377 Other non-current financial liabilities 0 2 0 0 0 0 2 Non-current borrowings including current portion 668 361 721 128 355 1,240 3,472 Estimated contractual finance charges 108 90 74 43 40 190 545 Estimated contractual lease charges 16 14 13 11 10 58 123 Contractual repayments on non- current borrowings 792 465 807 182 405 1,489 4,140 Short-term borrowings, carrying amounts 429 0 0 0 0 0 429 Gross-settled derivative liabilities - receipts -2,405 0 0 0 0 0 -2,405 Gross-settled derivative liabilities - payments 2,401 0 0 0 0 0 2,401 Net-settled derivative liabilities -4 0 0 0 0 0 -5 Trade payables 1,831 0 0 0 0 0 1,831 Bank overdrafts 0 0 0 0 0 0 0 Estimated contractual finance charges 6 0 0 0 0 0 6 Total contractual repayments at 31 December 2022 3,050 464 807 182 405 1,489 6,398 Financial transactions counterparty credit risk Financial counterparty risk is the risk of fluctuations in the value of the Group’s assets as a result of counterparties being unable to meet their obligations arising from financial contracts. The exposure to a financial counterparty risk is measured as the maximum loss that Stora Enso can suffer directly in the event of a single counterparty’s credit default. This risk is minimised by: • entering into transactions only with leading financial institutions and with industrial companies that have a good credit rating; • only investing in liquid funds and deposits with financial institutions or companies that have a minimum credit rating of A-3 or BBB-. • at least the higher of 50% of cash equivalents, or EUR 150 million, of cash equivalents to be held at counterparties with a minimum rating of A- or equivalent using credit ratings from main rating agencies; • investing at least EUR 75 million of the Group's cash and cash equivalents at counterparties other than the counterparty at which most of Stora Enso's cash and cash equivalents are held; • requiring parent company guarantees when dealing with any subsidiary of a rated company. The Group Financial Risk Policy defines the limits for accepted counterparty risk, based on the tenor of financial contract and counterparty’s credit rating. At the year end 2023, there were no significant concentrations of risk with respect to counterparties of derivative contracts, with the highest counterparty mark-to-market exposure being at EUR 13 (41) million and credit rating of A+ (A+) using Standard and Poor’s credit rating symbols. Customer credit risk Customer credit risk is Stora Enso’s exposure to contracts arising from deterioration in the financial health of its customers. The Group uses various measures to reduce customer credit risks, including, but not limited to, letters of credit, prepayments and bank guarantees. The Group has also obtained export guarantees, covering both political and commercial risks, which are used in connection with individual customers outside the OECD area. Management considers that no significant concentration of credit risk with any individual customer, counterparty or geographical region exists for Stora Enso. The ageing information of trade receivables and related loss allowances are given in note 4.7 Operative receivables. Commodity price risk Outstanding commodity hedges As at 31 December 2023 As at 31 December 2022 Underlying amount of commodity hedged Average hedged commodity price Nominal amount hedged in EUR million Fair value EUR million Underlying amount of commodity hedged Average hedged commodity price Nominal amount hedged in EUR million Fair value EUR million Electricity purchases - Nordic region 245,712 MWh EUR 55.6 14 -1 175,200 MWh EUR 29.1 5 18 Oil purchases 205,058 barrels USD 75.9 14 -1 200,474 barrels USD 73.5 14 0 The Group is exposed to commodity and energy price volatility that will have an impact on the Group's profitability. Electricity, natural gas and oil hedge derivatives are part of energy price risk management in the Group, whilst other commodity risks are measured and hedged if economically possible. In addition to electricity hedge derivatives, the Group also manages 66 172Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 173 ===== energy price risk by entering into long-term physical fixed price purchase agreements, and by holding a 15.7% stake in Pohjolan Voima Oy (PVO), which is a privately owned Group of companies in the energy sector in Finland. The fair value of the shares amounted to EUR 778 (EUR 1,423) million as per the year-end. The fair value of these shares is dependent on electricity market prices and discussed in more detail in note 4.4 Equity instruments. A 10% movement in energy and raw material prices would result in a EUR 5 (EUR 6) million change in the fair value of commodity financial hedges described in the above table. The majority of these fair value changes, after taxes, are recorded directly in Equity under Hedging Reserves, until the contracts mature and the result is entered in the Income statement. These estimates only represent the sensitivity of commodity financial instruments to market risk and not the Group's full exposure to raw material and energy price risks as a whole, since the actual underlying purchases are not financial instruments within the scope of the IFRS 7 standard. At the end of 2023, the maturities of the energy and commodity contracts, including both financial hedges and fixed-price physical purchase agreements, ranged between 2024 and 2025. In 2022, the maturities ranged between 2023 and 2024. In an effort to mitigate other commodity price risk exposures in relation to wood fiber price risk, the Group is a significant owner of forest assets in the Nordic region. In Sweden the Group owns 1.4 million hectares of forest land. In addition, Stora Enso holds 41% share in Tornator Oyj, which is a significant forest owner in Finland. The Group's share in Tornator is reported as an associate company and discussed in more detail in note 4.3 Associates. The Group's forest assets are discussed in more detail in note 4.2 Forest assets. Equity price risk The Group has certain investments in publicly traded securities. Currently these relate to Packages Ltd shares in Pakistan. The market value of these equity investments was EUR 9 (EUR 8) million at the year end. Market value changes in these investments are recorded, after taxes, directly under Shareholders’ Equity in the Equity instruments through OCI reserve. More details on the publicly traded securities can be found from note 4.4 Equity instruments. Capital risk management Stora Enso’s debt structure is focused on capital markets and commercial banks. Group objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, as well as to maintain an optimal capital structure to maintain reasonable cost of capital. In order to maintain or adjust the capital structure, the Group may, subject to shareholder approval as appropriate, vary the dividends paid to shareholders, buy its own shares on financial markets, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group strives to pay stable dividends linked to the long-term performance with the aim of distributing 50% of Earnings per share (EPS) excluding fair valuations over the cycle. The Group monitors its capital on the basis of a target net debt-to-equity ratio of 0.60 or less, and aiming that the Net-debt-to-Operational EBITDA ratio remains below 2.0, indicating a solid financial position and financial flexibility. Capital structure As at 31 December EUR million 2023 2022 Interest-bearing liabilities1 5,780 3,976 Interest-bearing assets1 2,613 2,122 Net debt 3,167 1,853 Equity attributable to owners of the parent 10,985 12,532 Operational EBITDA2 989 2,529 Net debt to equity ratio 0.29 0.15 Net debt to operational EBITDA 3.2 0.7 1 Interest-bearing liabilities and assets in the table include the respective amounts classified as held for sale. More detailed reconciliation of net debt is included in the "Alternative performance measures" chapter in the Report of the Board of Directors. 2 Operational EBITDA definition is included in the "Alternative performance measures" chapter in the Report of the Board of Directors. Montes del Plata, a joint operation of Stora Enso, and the Group's subsidiary Stora Enso (Guangxi) Packaging and Forestry Company Ltd have complied with financial covenants related to debt-to-assets ratio during the reported periods. There are no other covenants in the Group's financing contracts. 5.2 Fair values Accounting principles Financial assets The Group classifies its financial assets into three categories, which are amortised cost, fair value through other comprehensive income and fair value through profit and loss. The classification is made according to the IFRS 9 standard and management determines the classification of investments at the time of initial recognition. With investments in debt instruments, the classification is made based on the business model and contractual cash flow characteristics of debt instruments. Investments in debt instruments, for which the business model objective is to hold the financial instruments to collect contractual cash flows and those cash flows are solely payments of principal and interest, are classified as amortised cost and presented under current or non-current assets in the consolidated statement of financial position. Investments in debt instruments, for which the business model objective is to hold the financial instruments for both to collect contractual cash flows and sell financial instruments and the cash flows are solely payments of principal and interest, are classified as fair value through other comprehensive income and presented under current or non-current assets in the consolidated statement of financial position. The Group's investments into equity instruments, such as listed and unlisted securities, are classified as fair value through profit and loss unless the Group has at inception decided to apply the irrevocable election under IFRS 9 to classify the investments as fair value through other comprehensive income with only dividend income from the investments being recognised in the income statement. Investments that are not measured at amortised cost or at fair value through other comprehensive income are classified as fair value through profit and loss and are therefore fair valued through the consolidated income statement and presented under current or non-current assets in the consolidated statement of financial position. Financial liabilities The Group's financial liabilities are classified into amortised cost or fair value through profit and loss categories. Financial liabilities are measured at amortised cost unless the Group has decided to apply a fair value option to designate a financial liability to be measured at fair value through profit and loss. 67 173Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 174 ===== Derivatives Derivative financial assets and liabilities are measured at fair value and classified as fair value through profit and loss or, if the Group has applied hedge accounting, at fair value through other comprehensive income according to the IFRS 9 standard. Derivative financial instruments and hedge accounting are discussed in more detail in note 5.4 Derivatives. Fair value of financial instruments The fair values of publicly traded derivatives and listed securities, are based on quoted market prices at the reporting date; the fair values of interest rate swaps are calculated as the present value of the estimated future cash flows, and the fair values of foreign exchange forward contracts are determined using forward exchange rates at the reporting date. The valuation principles for derivative financial instruments have been described in more detail in note 5.4 Derivatives. In assessing the fair values of non-traded derivatives and other financial instruments, the Group uses a variety of methods and makes assumptions based on the market conditions at each reporting date. Quoted market prices or dealer quotes for identical or similar instruments are used for non-current debt. Other techniques, such as option pricing models and estimated discounted value of future cash flows, are used to determine fair values for the remaining financial instruments. The face values, less any estimated credit adjustments, for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair values of financial liabilities for disclosure purposes are estimated by discounting the future contractual cash flows at the current market interest rates available to the Group for similar financial instruments. Purchases and sales of financial instruments are recognised based on trade date accounting, which is the date on which the Group commits to purchasing or selling the financial instrument. Financial instruments are derecognised when the rights to receive or the cash flows from the financial instruments have expired or have been transferred and the Group has substantially transferred all risks, rewards and obligations of the ownership of the financial asset or liability. Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: • Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; • Level 2: other techniques, for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; • Level 3: techniques which use inputs which have a significant effect on the recorded fair values that are not based on observable market data. The Group evaluates the categorisation of its fair value measurements within the fair value hierarchy on a regular basis at the end of the reporting period. There were no transfers recognised in the fair value hierarchy between Levels 1 and 2 and no transfers into or out of Level 3 fair value measurements during 2023 and 2022. See note 4.4 Equity instruments for more information on Level 3 fair value measurement of listed and unlisted securities. 68 174Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 175 ===== Carrying amounts of financial assets and liabilities by measurement and fair value categories: 2023 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial assets Listed securities — 9 — 9 9 9 — — 4.4 Unlisted securities — 794 15 810 810 — — 810 4.4 Non-current interest-bearing receivables 62 14 — 76 76 — 15 — 5.3 Derivative assets — 14 — 15 15 — 15 — Loan receivables 62 — — 62 62 — — — Trade and other operative receivables 835 30 — 865 865 — 30 — 4.7 Current interest-bearing receivables 21 39 4 64 64 — 43 — 5.3 Derivative assets — 39 4 43 43 — 43 — Other short-term receivables 21 — — 21 21 — — — Cash and cash equivalents 2,464 — — 2,464 2,464 — — — Total 3,382 887 19 4,288 4,288 9 87 810 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial liabilities Non-current interest-bearing liabilities 4,445 1 — 4,446 5,071 — 1 — 5.3 Derivative liabilities — 1 — 1 1 — 1 — Non-current debt 4,445 — — 4,445 5,069 — — — Current portion of non-current debt 286 — — 286 286 — — — 5.3 Current interest-bearing liabilities 469 4 2 476 476 — 6 — 5.3 Derivative liabilities — 4 2 6 6 — 6 — Current debt 469 — — 469 469 — — — Trade and other operative payables 1,806 — — 1,806 1,806 — — — 4.8 Bank overdrafts — — — — — — — — Total 7,006 6 2 7,014 7,639 — 8 — In accordance with IFRS, derivatives are classified as fair value through income statement. In the above tables for financial assets and liabilities the cash flow hedge accounted derivatives are however presented as fair value through OCI, in line with how they are booked for the effective portion. 69 175Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 176 ===== Carrying amounts of financial assets and liabilities by measurement and fair value categories: 2022 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial assets Listed securities — 8 — 8 8 8 — — 4.4 Unlisted securities — 1,423 14 1,437 1,437 — — 1,437 4.4 Non-current interest-bearing receivables 92 28 — 120 120 — 28 — 5.3 Derivative assets — 28 — 28 28 — 28 — Loan receivables 92 — — 92 92 — — — Trade and other operative receivables 1,138 66 — 1,204 1,204 — 66 — 4.7 Current interest-bearing receivables 10 50 16 77 77 — 67 — 5.3 Derivative assets — 50 16 67 67 — 67 — Other short-term receivables 10 — — 10 10 — — — Cash and cash equivalents 1,917 — — 1,917 1,917 — — — Total 3,157 1,576 30 4,763 4,763 8 161 1,437 Fair value hierarchy EUR million Amortised cost Fair value through OCI Fair value through income statement Total carrying amount Fair value Level 1 Level 2 Level 3 Note Financial liabilities Non-current interest-bearing liabilities 2,792 — — 2,792 2,749 — — — 5.3 Derivative liabilities — — — 0 0 — — — Non-current debt 2,792 — — 2,792 2,748 — — — Current portion of non-current debt 667 — — 667 667 — — — 5.3 Current interest-bearing liabilities 462 30 20 513 513 — 50 — 5.3 Derivative liabilities — 30 20 50 50 — 50 — Current debt 462 — — 462 462 — — — Trade and other operative payables 2,076 — — 2,076 2,076 — — — 4.8 Bank overdrafts — — — 0 0 — — — Total 5,998 30 20 6,048 6,005 — 51 — In accordance with IFRS, derivatives are classified as fair value through income statement. In the above tables for financial assets and liabilities the cash flow hedge accounted derivatives are however presented as fair value through OCI, in line with how they are booked for the effective portion. In the previous tables, the fair value is estimated to be equal to the carrying amount for current financial assets and financial liabilities, such as trade receivables and payables due to their short time to maturity and limited credit risk. The fair value of non-current loan receivables, considered as a level 2 fair value measurement, is based on the discounted cash flow analysis. The fair value of non-derivative interest-bearing liabilities, considered as a level 2 fair value measurement, is estimated based on a discounted cash flow analysis in which the yield curves observable at commonly quoted intervals are used as a discount factor in the model. 70 176Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 177 ===== Reconciliation of level 3 fair value measurement of financial assets and liabilities EUR million 2023 2022 Financial assets Opening balance at 1 January 1,437 905 Reclassifications 0 -1 Gains/losses recognised in other comprehensive income -646 523 Additions 18 10 Closing balance at 31 December 810 1,437 The Group did not have level 3 financial liabilities as at 31 December 2023. 5.3 Interest-bearing assets and liabilities Accounting principles Interest-bearing assets - loan receivables Loan receivables are debt instruments with fixed or determinable payments that are not quoted on an active market. They are recorded initially at fair value and subsequently measured at an amortised cost. Loss allowance for expected credit losses is calculated based on the general approach under IFRS 9, where loss allowance is recognised based on 12-month expected credit losses if there has not been a significant increase in credit risk since the initial recognition. A significant increase in the credit risk will be evaluated based on a comparison of the risk of a default occurring on the financial instrument as at the reporting date with the risk of default occurring on the financial instrument as at the date of initial recognition. The Group may use, for example, rates of credit default swaps (CDS) observable on financial markets to produce the risk assessment. Interest income on loan receivables is included in financial income and expense. Loan receivables with a maturity less than 12 months are included in current assets under interest-bearing receivables, and those with maturities greater than 12 months, in non-current interest-bearing receivables. Interest-bearing liabilities Interest-bearing liabilities are recognised initially at fair value, net of transaction costs incurred. In subsequent periods, interest-bearing liabilities are measured at amortised cost using the effective interest method. Any difference between the proceeds net of transaction costs and redemption value is recognised in the consolidated income statement over the maturity period of the borrowings. Interest expenses are accrued for and recorded in the consolidated Income statement for each period. Interest-bearing liabilities with an original maturity greater than 12 months are classified as non-current interest-bearing liabilities in the consolidated statement of financial position, though repayments falling due within 12 months are presented in current liabilities under the current portion of non-current debt. Short-term commercial paper, bank and other interest-bearing liabilities, for which the original maturity is less than 12 months, are presented in current liabilities under interest-bearing liabilities. Lease liabilities At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease liabilities are initially capitalised at the commencement of the lease and measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Group’s incremental borrowing rate. The lease term applied corresponds to the non- cancellable period except in cases where the Group is reasonably certain to exercise renewal option or prolong the contract. The Group allocates the consideration in the contract to each lease component and separates non-lease components if these are identifiable. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease liabilities are subsequently measured at amortised cost using the effective interest method. Lease payment is allocated between the capital liability and finance charges to achieve a constant interest rate on the outstanding liability balance. Lease liabilities are remeasured mainly when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the Group’s assessment whether it will exercise an extension option. When lease liability is remeasured, a corresponding adjustment is generally made to the carrying amount of the right-of-use asset. The Group has elected not to recognise lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low value assets. Leases of low value assets mainly include IT and office equipment, certain vehicles and machinery and other low value items. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Managing Interest Rate Benchmark Reform and associated risks The Group monitors the process of the transition from IBORs to new benchmark rates by reviewing the total amounts of contracts that have yet to transition to an alternative benchmark rate. The impact of any ongoing changes is expected to be limited. The Group's financial instruments are mainly indexed to Euribor and Stibor reference rates which are expected to continue to exist for now. At the end of 2022 the Group had EUR 211 million of outstanding interest-bearing liabilities that were indexed to US dollar LIBOR of which publication ceased after June 2023. During the year, these interest-bearing liabilities have been transitioned to follow new benchmark rates. There has been no significant impact on the Group from the change. Interest-bearing assets EUR million 2023 2022 Listed securities 9 8 Long-term derivative assets 15 28 Long-term deposits 48 48 Long-term loans to associated companies 2 2 Other long-term loan receivables 12 41 Total non-current interest-bearing assets 85 128 Short-term derivative assets 42 66 Other short-term loan receivables 22 11 Cash and cash equivalents 2,464 1,917 Total current interest-bearing assets 2,528 1,994 Total interest-bearing assets 2,613 2,122 The annual average interest income rate for deposits and loan receivables during the year was approximately 3.0% (1.0%). Current interest-bearing receivables included EUR 8 (EUR 10) million accrued interest at 31 December 2023. The Group has evaluated that there has not been a significant increase in credit risk related to interest-bearing deposits and investments after the initial recognition. Accordingly, the loss allowance is recognised based on 12-month expected credit losses. Of the other long-term loan receivables EUR 10 (41) million and of the other short-term loan receivables EUR 14 (0) million represent receivables originating from the sale of the Russia operations in 2022. These receivables were recognised at inception at their fair value (EUR 58 million) using a discount rate of 27.1% and are carried in the statement of financial position at amortised cost. In 2023, an impairment of EUR 11 million was recognised on the receivables. The fair valuation of these receivables and evaluation of their credit risk and collectability involves a significant degree of judgement. 71 177Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 178 ===== Interest-bearing liabilities EUR million 2023 2022 Bond loans 3,601 2,460 Loans from credit institutions 794 623 Lease liabilities 334 375 Long-term derivative financial liabilities 1 0 Other non-current liabilities 2 2 Non-current interest-bearing liabilities including current portion 4,733 3,459 Short-term borrowings 418 429 Interest payable 52 35 Short-term derivative financial liabilities 6 49 Total Interest-bearing Liabilities 5,209 3,972 EUR million 2023 2022 Carrying value at 1 January 3,972 3,938 Additions in long-term debt, companies acquired 131 0 Proceeds of new long-term debt 2,006 366 Repayment of long-term debt -619 -351 Additions in lease liabilities, companies acquired 99 0 Additions in lease liabilities 109 45 Repayment of lease liabilities and interest -87 -73 Change in short-term borrowings 177 75 Change in interest payable 40 19 Change in derivative financial liabilities -41 -19 Disposals and classification as held for sale -575 -5 Other 26 8 Translation differences -29 -32 Total Interest-bearing Liabilities 5,209 3,972 Events during 2023 and 2022 Stora Enso published a new framework for green and sustainability-linked financing in May 2023. The combined Green and Sustainability-Linked Financing Framework allows Stora Enso to issue both green and sustainability-linked financing instruments, as well as a combination of the two. In May 2023, Stora Enso issued two EUR 500 million green bonds with 3- and 6.25-year maturities. In November 2023, Stora Enso issued new SEK green bonds with nominal value of SEK 6,100 million, equal to EUR proceeds of 524 million at the transaction date FX rate. The SEK green bonds feature several tranches, with the maturities ranging from 2025 to 2028. Later in December 2023 the Company also completed a private placement of SEK 425 million with maturity in 2033. This was equal to EUR proceeds of 38 million at the transaction date FX rate. In addition, during the year, the Company re-financed altogether EUR 550 million of its bilateral loans and committed credit facility, and also drew bilateral loans of EUR 200 million in total that were arranged but undrawn at the end of 2022. The existing loans were extended by one to two years and new terms also include extension options. The Company also arranged a new EUR 100 million bilateral loan with a 1.5-year maturity and a 1-year extension option during the second quarter. In the fourth quarter a one-year extension was signed to the revolving credit facility of EUR 700 million to extend its maturity to 2028. During 2023, Stora Enso’s total repayments of SEK and EUR bond notes amounted to a nominal of EUR 427 million. This amount includes partial repayment of SEK bond notes with original maturity in February 2024, which resulted in a EUR 1 million modification net gain being recognised in the Income Statement under net financial items. During 2022, altogether EUR 550 million of bilateral bank loans were arranged. Maturities of these loans varied from 18 months to 3 years with extension options. Repayments of credit institution loans based on the original maturity schedule amounted to a nominal of EUR 289 million in 2022. There were no repayments of bond notes in 2022. Interest-bearing liabilities - maturities, interest rates and currency breakdown Stora Enso's borrowings maturities range from 2024 to the longest borrowing maturing in 2039. The Company's borrowings have either fixed or floating interest rates ranging from 0.6% (0.5%) to 7.3% (7.3%). Stora Enso's average interest rate on borrowings for the full year amounted to 3.7% (3.2%) with a run-rate of 4.0% as per the year end. Part of Stora Enso's borrowings have been fixed through floating-to-fixed interest rate swaps. The majority of Group loans are denominated in euros, US dollars, Swedish crowns or Chinese renminbis. Detailed maturity analysis of the Group's borrowings are set out in note 5.1 Financial risk management. Net debt In 2023 net interest-bearing liabilities, including amounts classified as held for sale, increased by EUR 1,314 (decreased by EUR 456) million to EUR 3,167 (EUR 1,854) million. Net interest- bearing liabilities are equal to total interest-bearing liabilities less total interest-bearing assets such as cash equivalents and deposits. Cash and cash equivalents net of overdrafts increased by EUR 547 (increased by EUR 437) million to EUR 2,464 (EUR 1,917) million as at 31 December 2023. In 2023, the total cash outflow for leases was EUR 87 (EUR 73) million including interest component of EUR 23 (EUR 17) million. The ratio of net debt to the last 12 months' operational EBITDA was 3.2 (0.7). The net debt/ equity ratio was 0.29 (0.15) as per the year-end. 72 178Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 179 ===== Bond loans Issue/ Maturity Dates Description of Bond Interest Rate % Currency of Bond Nominal Value Issued Outstanding As at 31 December Carrying Value As at 31 December 2023 2022 2023 2022 All Liabilities are Held by the Parent Company Currency million EUR million Fixed Rate 2006-2036 Global 7.250% Notes 2036 7.25 USD 300 300 300 269 278 2016-2023 Euro Medium Term Note 2.125 EUR 300 0 300 0 300 2017-2027 Euro Medium Term Note 2.50 EUR 300 300 300 299 299 2018-2028 Euro Medium Term Note 2.50 EUR 300 300 300 299 299 2019-2024 Euro Medium Term Note (Green Bond) 1.875 SEK 1,750 484 1,750 44 157 2020-2025 Euro Medium Term Note (Green Bond) 2.375 SEK 1,550 1,550 1,550 140 140 2020-2030 Euro Medium Term Note (Green Bond) 0.625 EUR 500 500 500 496 495 2023-2027 Euro Medium Term Note (Green Bond) 4.75 SEK 400 400 0 36 0 2023-2026 Euro Medium Term Note (Green Bond) 4.00 EUR 500 500 0 499 0 2023-2029 Euro Medium Term Note (Green Bond) 4.25 EUR 500 500 0 497 0 2023-2027 Euro Medium Term Note (Green Bond) 4.75 SEK 600 600 0 54 0 2023-2028 Euro Medium Term Note (Green Bond) 5.00 SEK 2,250 2,250 0 202 0 Total Fixed Rate Bond Loans 2,834 1,968 Floating Rate 2015-2025 Euro Medium Term Note Euribor+2.25 EUR 125 125 125 125 125 2015-2027 Euro Medium Term Note Euribor+2.35 EUR 25 25 25 25 25 2019-2024 Euro Medium Term Note (Green Bond) Stibor+1.45 SEK 1,250 1,030 1,250 93 112 2019-2026 Euro Medium Term Note (Green Bond) Stibor+1.60 SEK 1,000 1,000 1,000 90 90 2020-2025 Euro Medium Term Note (Green Bond) Stibor+2.20 SEK 1,550 1,550 1,550 140 140 2023-2027 Euro Medium Term Note (Green Bond) Stibor+1.25 SEK 2,350 2,350 0 211 0 2023-2028 Euro Medium Term Note (Green Bond) Stibor+1.60 SEK 500 500 0 45 0 2023-2033 Euro Medium Term Note (Green Bond) Stibor+2.20 SEK 425 425 0 38 0 Total Floating Rate Bond Loans 766 492 Total Bond Loans 3,601 2,460 73 179Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 180 ===== 5.4 Derivatives Accounting principles Derivative financial instruments and hedge accounting Derivative financial instruments are initially recognised in the consolidated statement of financial position at fair value and subsequently measured at their fair value at each reporting date according to valuation methods described in this note. Derivative contracts with maturity greater than 12 months are classified as non-current interest-bearing receivables and liabilities, and contracts maturing within 12 months are presented under current interest-bearing receivables and liabilities. When derivative contracts are entered into, the Group designates them as either hedges of highly probable forecast transactions or firm commitments (cash flow hedges), hedges of the exposure to changes in the fair value of recognised assets or liabilities (fair value hedges), hedges of net investments in foreign entities, or derivative financial instruments not meeting the hedge accounting criteria in accordance with IFRS 9. The method of recognising the resulting gains or losses on derivative instruments is dependent on the nature of the item being hedged. At the inception of a hedge, the Group documents the relationship between the hedging instrument and the hedged item, as well as its risk management objective and strategy for undertaking various hedging transactions. This process includes linking all financial instruments designated under hedge accounting to specific assets and liabilities or to specific firm commitments or highly probable forecast transactions in order to verify and document the hedge relationship between the hedged item and the hedging instrument as required by IFRS 9. The Group also documents its qualitative prospective assessment at the hedge inception of whether the derivatives used in a hedge relationship are highly effective in offsetting changes in fair value or cash flows of hedged items. Hedge effectiveness will be assessed in accordance with IFRS 9 requirements. The hedge ratio used for hedging relationships is usually 1:1. For currency and commodity hedging purposes, the Group uses a hedge designation where the critical terms of the hedging instrument and the hedged item will coincide in terms of the notional amount and timing. In respect of interest rate hedging, the interest rate basis between swap contracts and underlying debt will coincide. Since the critical terms of the hedges and underlying risks match, the hedging instruments are considered to offset any changes related to the anticipated transactions. Potential sources of ineffectiveness that may be expected to occur in relation to currency and commodity hedges are mainly related to the forecasted transaction not occurring in the amount or at the time expected. For interest rate hedges, cross-currency basis spread or initial fair value of the hedging instrument at the date of hedge designation may result in ineffectiveness being recognised in the income statement. Potential sources of ineffectiveness for all the aforementioned hedges also include possible effects of credit risk dominating fair value changes arising from the hedging instrument and the hedged item designated under the hedging relationship. Cash flow hedges Derivatives used in currency cash flow hedges are mainly forward contracts and options, with swaps mainly used for commodity and interest rate hedging purposes. During 2023 and 2022, the Group did not enter into new interest rate swap contracts. Changes in the fair value of derivatives designated and qualifying as cash flow hedges, and which are effective, are recognised in a separate equity category of OCI cash flow hedges reserve, the movements of which are disclosed in the consolidated statement of comprehensive income. For foreign exchange forwards, both the spot element and forward points have been included to the hedge designation. In case of foreign exchange options, the time value of an option is excluded from the hedge designation and only the intrinsic value component of an option is designated as the hedging instrument. The changes in option time value are recognised in a cost of hedging reserve within OCI. The cumulative gain or loss of a derivative deferred in equity is transferred to the consolidated income statement and classified as an income or expense in the same period in which the hedged item affects the consolidated income statement. The unrealised gains and losses related to cash flow hedges are expected to be recycled through the income statement within one to four years with the longest hedging contract maturing in 2027 (2027). However, the majority of the contracts are expected to mature in 2024. Realised results of hedge accounted derivative instruments hedging foreign currency sales transactions or purchases are booked as adjustments to sales or materials and services, depending on the nature of the underlying hedged item. In respect of hedges of exposures to foreign currency risk of future transactions resulting in the recognition of non-financial assets, the gains and losses deferred to the cash flow hedges reserve within OCI are transferred from equity to be included in the initial acquisition cost of the non-financial asset at the time of recognition. The Group may hedge foreign-currency risk of external or internal foreign- currency purchases where the underlying amount purchased in a foreign-currency impacts the value of inventory in a local currency. In such cases the gains and losses are initially booked as an adjustment to raw material inventory and recycled further to finished goods inventory with being ultimately recognised in the consolidated income statement at the time when the hedged items are sold to an external customer. In case of non-current assets, the deferred amounts are ultimately recognised in the income statement through depreciation over the lifetime of the non-financial assets. When a hedging instrument expires or is sold, terminated or exercised or no longer meets the hedge accounting criteria under IFRS 9, any cumulative gain or loss deferred in equity at that time remains in equity and is accounted for as an adjustment to income or expense when the committed or forecast transaction is ultimately recognised in the consolidated income statement. However, if the underlying forecasted transaction is no longer expected to occur, the cumulative gain or loss reported in equity from the period when the hedge was effective is immediately recognised in the consolidated income statement. Fair value hedges In case of fair value hedges, the Group uses either derivatives or borrowings as a hedging instrument to manage the risk associated with the fair value of a hedged item. The gains and losses on hedging instruments designated and qualifying as fair value hedges, and which are highly effective, are recorded in the consolidated income statement, along with any changes in the fair value of the hedged assets or liabilities attributable to the hedged risk. As at the end of 2023, the Group did not have fair value hedges. Net investment hedges For hedges of net investments in foreign entities, the Group uses either derivatives or foreign-currency borrowings for this purpose. If the hedging instrument is a derivative, any gain or loss thereon relating to the effective portion of the hedge is recognised in equity in CTA as disclosed in the consolidated statement of comprehensive income; the gain or loss relating to the ineffective portion is immediately recognised in the consolidated income statement. In addition, exchange gains and losses arising on the translation of a foreign- currency borrowing that hedges net investment in a foreign operation are also recognised in CTA, with any ineffective portion being immediately recognised in the consolidated income statement. The gains and losses recognised in CTA are recycled from equity to the consolidated income statement at the time when the underlying hedged net investment is disposed. Non-hedge accounted derivatives Certain derivative transactions, while providing effective economic hedges under Group risk management policies, do not qualify for hedge accounting under the specific rules in IFRS 9 and therefore changes in the fair value of such non-qualifying hedges are accounted for at fair value in the consolidated income statement. For non-hedge accounted derivatives economically hedging foreign-currency risk of net of operative receivables and payables, the fair value changes are recognised in operating result under other operating income and expense. For other non-hedge accounted derivatives, the fair value changes are recognised in the consolidated income statement under financial income and expense. Valuation of derivatives Derivative financial instruments are recorded in the statement of financial position at their fair values defined as the amount at which the instrument could be exchanged in an orderly transaction between market participants at the measurement date. The fair values of such financial items have been estimated on the following basis: 74 180Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 181 ===== • Foreign exchange forward contract fair values are calculated using forward exchange rates at the reporting date. • Foreign exchange option contract fair values are calculated using reporting date market rates together with common option pricing models. • Commodity contract fair values are computed with reference to quoted market prices on futures exchanges or other reliable market sources. • Interest rate swaps fair values are calculated using a discounted cash flow method. • Cross-currency swaps fair values are calculated by using a discounted cash flow method with the exchange of notional also included in the valuation model. Total foreign exchange gains and losses in the income statement excluding hedges EUR million 2023 2022 Other operating income -11 42 Other operating expense -4 -21 Borrowings, cash equivalents. lease liabilities and other -10 -10 Total -25 11 Hedge gains and losses in operating result EUR million 2023 2022 Cash flow hedge accounted derivatives Currency hedges -7 -105 Commodity hedges -2 43 Total -8 -62 As adjustments to sales -7 -103 As adjustments to materials and services -2 41 Realised from OCI through income statement -8 -62 Currency hedges ineffectiveness 1 -2 Net gains/losses from cash flow hedges -7 -65 Non-hedge accounted derivatives Net receivable hedges 5 -12 Commodity contract hedges 0 9 Net gains/losses on non-hedge accounted derivatives 5 -3 Net hedge gains/losses in operating result -2 -67 In 2023, certain forecasted future transactions were no longer expected to occur, and due to this hedge accounting was ceased for those transactions. This resulted in a gain of EUR 1 (loss of 2) million being booked in the Group's operating result and is being presented in the table above as ineffectiveness from cash flow hedges. Hedge gains and losses in financial items EUR million 2023 2022 Non-hedge accounted derivatives Currency derivatives -12 8 Interest rate derivatives 4 -4 Net gains/losses on non-hedge accounted derivatives -8 4 Net gains/losses in financial items -8 4 75 181Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 182 ===== Nominal and fair values of derivative instruments EUR million Nominal values Positive fair values Negative fair values Net fair values Nominal values Positive fair values Negative fair values Net fair values 2023 2022 Currency derivatives Forwards: Operational cash flow hedging 1,210 31 -4 27 902 19 -13 6 Options: Operational cash flow hedging 405 6 -1 5 1,700 12 -16 -4 Total cash flow hedge accounted 1,615 37 -5 33 2,603 32 -30 2 Forwards: Trade and loan receivables hedging 379 4 -1 3 1,151 7 -5 2 Total non-hedge accounted 379 4 -1 3 1,151 7 -5 2 Total currency derivatives 1,994 41 -6 35 3,754 39 -35 4 Commodity derivatives Electricity swaps: Costs hedging 14 0 -1 -1 5 18 0 18 Oil swaps: Costs hedging 14 0 -1 -1 14 1 -1 0 Total cash flow hedge accounted 28 0 -2 -2 19 18 -1 18 Electricity swaps: Closed contracts 0 0 0 0 11 9 0 9 Total non-hedge accounted 0 0 0 0 11 9 0 9 Total commodity derivatives 28 0 -2 -2 30 27 -1 27 Interest rate derivatives Interest rate swaps: Financial expenses hedging 443 16 0 16 450 28 0 28 Total cash flow hedge accounted 443 16 0 16 450 28 0 28 Cross-currency swaps: Financial expenses hedging 0 0 0 0 200 0 -15 -15 Total non-hedge accounted 0 0 0 0 200 0 -15 -15 Total interest rate derivatives 443 16 0 16 650 28 -15 13 Total cash flow hedge accounted 2,086 54 -7 47 3,072 78 -30 48 Total non-hedge accounted 379 4 -1 3 1,363 16 -20 -4 Total derivatives 2,464 57 -8 49 4,435 95 -51 44 Positive and negative fair values of financial derivative instruments are shown under interest- bearing receivables and liabilities, and non-current interest-bearing receivables and liabilities. The presented fair values in the table include accrued interest and option premiums. 76 182Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 183 ===== Changes in fair values of hedged items and hedging instruments 2023 EUR million Change in value of hedged item to determine hedge effectiveness Change in value of outstanding hedging instruments Ineffectiveness Foreign exchange risk - Forward and option contracts (excluding option time value)1 -23 24 1 Foreign exchange risk - Net investment hedges -10 10 0 Commodity price risk - Commodity swaps 21 -21 0 Interest rate risk - Interest rate swaps 13 -13 0 1 Ineffectiveness booked in operating result. Changes in fair values of hedged items and hedging instruments 2022 EUR million Change in value of hedged item to determine hedge effectiveness Change in value of outstanding hedging instruments Ineffectiveness Foreign exchange risk - Forward and option contracts (excluding option time value)1 77 -79 -2 Foreign exchange risk - Net investment hedges2 16 -16 0 Commodity price risk - Commodity swaps -31 31 0 Interest rate risk - Interest rate swaps -34 34 0 1 Ineffectiveness booked in operating result. 2 Comparison figures restated. Breakdown of cash flow hedging reserve and net investment hedges in equity 2023 EUR million At 1 Jan 2023 Change in fair value recognised in OCI/CTA Reclassified from OCI to profit and loss Reclassified to non- financial assets Tax impact At 31 Dec 2023 Foreign exchange risk - Operational cash flow hedging 2 20 8 2 -6 25 Commodity price risk - Commodity swaps 15 -21 2 0 4 -1 Interest rate risk - Interest rate swaps 23 -13 0 0 3 13 Interest rate and foreign exchange risk - Cross-currency swaps 1 0 -1 0 0 0 Cost of hedging reserve -1 2 0 0 0 1 Total cash flow hedge reserve in OCI 39 -12 9 2 0 38 Foreign exchange risk - Net investment hedges 1 10 -2 0 -2 7 Total net investment hedges in CTA 1 10 -2 0 -2 7 Total hedging reserves 40 -3 7 2 -2 45 Breakdown of cash flow hedging reserve and net investment hedges in equity 2022 EUR million At 1 Jan 2022 Change in fair value recognised in OCI/CTA Reclassified from OCI to profit and loss Reclassified to non- financial assets Tax impact At 31 Dec 2022 Foreign exchange risk - Operational cash flow hedging -21 -82 107 3 -5 2 Commodity price risk - Commodity swaps 23 41 -52 0 3 15 Interest rate risk - Interest rate swaps -4 33 0 0 -7 23 Interest rate and foreign exchange risk - Cross-currency swaps -1 0 2 0 0 1 Cost of hedging reserve -1 0 0 0 0 -1 Total cash flow hedge reserve in OCI -4 -8 57 3 -9 39 Foreign exchange risk - Net investment hedges 14 -16 0 0 3 1 Total net investment hedges in CTA 14 -16 0 0 3 1 Total hedging reserves 10 -24 57 3 -6 40 Financial impact of netting for instruments subject to an enforceable master netting agreement 2023 Not offset in the statement of financial position EUR million Gross amount of recognised financial instruments Related liabilities (-) or assets (+) subject to master netting agreements Collateral received (-) or given (+) Net exposure Derivative assets 57 -2 0 56 Derivative liabilities -8 2 0 -6 Financial impact of netting for instruments subject to an enforceable master netting agreement 2022 Not offset in the statement of financial position EUR million Gross amount of recognised financial instruments Related liabilities (-) or assets (+) subject to master netting agreements Collateral received (-) or given (+) Net exposure Derivative assets 95 -30 0 65 Derivative liabilities -51 30 0 -21 The Group enters into derivative transactions under master netting agreements agreed with each counterparty. In case of an unlikely credit event, such as default, all outstanding transactions under the agreements are terminated, and only a single net amount per counterparty is payable for settlement of all transactions. The agreements do not meet the criteria for offsetting in the statement of financial position, because offsetting is enforceable only in the occurrence of certain future events. 77 183Stora Enso 2023: Financials Our year 2023 This is Stora Enso Our strategy Our people Shareholders AppendixRemunerationGovernanceSustainability reporting Financials Report of the Board of Directors 109 Consolidated financial statements 135 Notes to the Consolidated financial statements 140 1 Basis for reporting 140 2 Financial performance 144 3 Employee remuneration 152 4 Operating capital 158 5 Capital structure and financing 169 6 Group structure 186 7 Other 192 Parent Coompany financial statement and notes 193 Signatures 205 Auditor’s report 206 Financials ===== SIDA 184 =====