Stora Enso awaits recovery
company has reported a sharp drop in third-quarter operating
profit, and believes that recovery is some way away. "The
long-awaited recovery in demand for forest products in Europe is
still not clearly apparent," says the CEO.
Things aren't looking so good at the moment for Finnish packaging giant Stora Enso. The company has reported a sharp drop in third-quarter operating profit, and believes that recovery is some way away. "The long-awaited recovery in demand for forest products in Europe is still not clearly apparent," said Stora Enso chief executive Jukka Härmälä.
However, the company believes that some sectors have proved more robust than others. "Demand for the group's packaging board products, which depends on general economic activity, remains stable," said Härmälä. "The outlook for product prices in Europe is largely stable, except in fine paper, where downward price pressure persists."
In the three months to 30 September 2003 Stora Enso's operating profit - excluding non-recurring items - fell 45 per cent to €140m on sales down 4 per cent at €2.99bn. Pre-tax profit was €68m, against a loss of €1.03bn last year when the company took a large charge against its US operations.
Cash flow from ongoing operations was €373.8 million and cash flow after investing activities was €87.4 million. Non-recurring items for the period totalling € 39.9 million comprised €24.6 million of restructuring charges related to the cost reduction programme in North America and a further €15.3 million at Corbehem Mill in France.
The company believes that a recovery in economic activity in North America is now discernable, although the pace of improvement is slow and somewhat irregular in forest products. Stora Enso expects the North American market to lead the way towards better conditions in paper markets globally. This can be seen in the price increases being implemented in certain grades.
Difficult market conditions have prompted the group to strengthen its focus on implementing a number of cost-reduction initiatives. In addition to the North America programmes, these initiatives include mill-by-mill productivity improvement programmes, fixed and variable cost reduction measures including redundancies. As announced in the previous Interim Review, steps have also been taken to ensure capital expenditure in the 2003-04 period remains in line with the group's depreciation charges.
Stora Enso is an integrated paper and packaging firm. Sales totalled €12.8 billion in 2002, and the group has some 42 500 employees in more than 40 countries in five continents. Stora Enso's shares are listed in Helsinki, Stockholm and New York.
