Consumables

Stora Enso CEO Jouko Karvinen comments on second quarter 2013 results announced

Thursday 25. July 2013 - "Serious challenges to be addressed in European paper, further transformation steps launched"

“The second quarter was a demonstration of the mixed reality we have in Stora Enso. Whereas the overall performance was according to our second quarter outlook, including solid cash flow, the picture is very different in the different businesses. On the positive side, Renewable Packaging maintained a solid earnings performance in a healthy market. Biomaterials improved on operational EBITDA level year-on-year whilst entering the final stages of the Montes del Plata pulp mill project. Building and Living swung back to decent profitability after several quarters of poor earnings, supported by a cyclical recovery, but in addition this business began streamlining efforts already in the fourth quarter of 2012, much earlier than the other businesses. The disappointment for yet another quarter was the performance of Printing and Reading, which is now loss-making and experiencing a decline in demand that was in many grades substantially worse than the long-term structural decline.
“It would be wrong to expect the operating environment to get any easier in the foreseeable future. The streamlining plans launched in April, which are progressing on schedule to achieve EUR 200 million net fixed costs reduction, are therefore critical to securing our future. Given the reality of Printing and Reading, it is intended that this business will have the majority of the reductions, although all businesses and Group functions will contribute. Separately, the three newsprint machine closures announced in the past seven months have been completed on time. Although the impact of these on the supply and demand balance should be apparent in the second half, the impact in improving profits will be only limited before 2014.
“On our transformation we have two concrete new steps to report. The long-awaited integrated pulp and board project in China has received final approval from the National Development and Reform Commission of China. In parallel with this good news, we have agreed with our Chinese partner to launch the implementation now in a revised two-phase sequence, starting with the board machine and related industrial investments in the first phase using imported chemical pulp, and building the pulp mill in the second phase. The investment according to revised plan will achieve the same attractive returns as the original, enable delivery of locally produced world-class consumer boards up to a year earlier than anticipated and cut the mid-term three-year capital expenditure requirements by half. Finally, the revised plan gives us and our local partner more time to build up our fibre base and sustainable forest operations in harmony with the local communities and with the support of all stakeholders, as the fibre demand will not immediately be driven by pulp mill volume requirements.
“The news of the biorefinery investment is good news for the great team at Sunila, offering new markets and improved profitability, as well as a significant reduction in the CO2 footprint of the mill. Strategically, for Stora Enso entry into lignin-based specialty chemical raw material markets is even more important. The scalability of the concept offers us an opportunity to replicate the high-value-added and high-margin business in our global chemical pulp business.
“In summary, the operating environment is not easy, but it really never was. Our journey continues, step by step, staying on our selected strategy path.”