Nordic paper maker Stora Enso reports €102 million Q1 profit as markets improve

By Matti Huuhtanen, AP
Thursday, April 22, 2010

Paper maker Stora Enso has €102 million Q1 profit

HELSINKI — Paper maker Stora Enso Oyj on Thursday reported a first-quarter net profit of €102 million ($136 million) on lower costs and improving markets.

Sales also grew in the period, to €2.3 billion from €2.1 billion a year earlier, the company said. In the same period in 2009, Stora posted a net loss of €36 million as the global downturn hit paper demand.

The improved performance was “driven by volume recovery, active cost management and pulp price increases,” the Finnish-Swedish group said.

Stora’s stock closed up 3 percent at €6.03 ($8.04) in Helsinki.

Demand grew in European markets for newsprint, magazine paper, fine paper and packaging products compared to 2009, Stora said, but cautioned that “overall demand for all products remained materially less than pre-crisis levels two years ago.”

Chief Executive Jouko Karvinen said Stora will close down newsprint production at its Varkaus mill in Finland because of falling prices in Europe. He said overcapacity in the market was expected to reach 18 percent this year.

The closure will mean about 200 layoffs among the work force of more than 500 at Varkaus that also makes fine papers.

“Our path forward may not be easy, but we are well on our way, focusing on long-term sustainable returns,” Karvinen said.

Karvinen confirmed the Finnish-Swedish company had signed an agreement to sell its Finnish mills at Kotka and its laminating paper operations in Malaysia to the Los Angeles-based private equity firm OpenGate Capital.

All 570 workers, mostly in Finland, will be transferred to the new owners, Stora Enso said.

The deal is expected to cut Stora’s annual sales by €203 million and improve its annual operating profit by €11 million, Karvinen said.

Like other paper makers in the global downturn, Stora has been plagued by tough competition, overcapacity and weakening demand. It has cut thousands of jobs, closed mills and cut production.

It also took a €12 million hit because of a two-week stevedores’ strike that closed Finnish ports for two weeks in March, Karvinen said.

Stora Enso is one of the world’s largest forest product companies, making magazine paper, newsprint, fine paper, pulp and packaging boards. It employs 27,400 people — down 17 percent from a year ago.

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