Economic|Interim reports
The decline in construction and the weakening demand for corrugated board weighed on the result and expectations for the rest of the year. The Anjala paper mill will soon be the only one left of the company’s paper production.
Stora Enson the entire last year’s result was the company’s best since 2020, i.e. before the major restructuring of the paper industry began. However, the record year ended in gloomy moods.
The turnover in the last quarter of the year increased by five percent from October to December last year to 2,864 million euros. However, the operating result shrank to 355 million euros from last year’s 426 million euros.
Operating profit was still 12.4 percent in relation to turnover. Towards the end of the year, the market for some products clearly weakened.
The company’s board proposes to the general meeting that a dividend of EUR 0.60 per share will be paid, i.e. a total of EUR 473 million. The board’s per-share dividend proposal is the company’s highest ever.
The deteriorating outlook pushed the stock down by almost three percent when the stock market opened.
Construction the decline particularly affected the demand and prices of timber. Lumber prices were still record high at the beginning of the year following the renovation boom of the corona crisis.
The general economic uncertainty has also weakened the demand and prices of packaging materials, i.e. cardboard. According to the company, the demand for consumer packaging products is still strong, but the demand and profitability of corrugated cardboard have clearly weakened.
“The market for sawn timber and corrugated cardboard was weak”, CEO Annica Bresky says in the announcement.
At the end of the year, the result of the unit that makes sawn timber and, for example, clt elements, fell to a loss.
Also the general increase in costs is eating into the company’s margins. According to him, the biomaterials unit was responsible for the result, i.e. in practice pulp production, forest revenue and the remaining paper mills. The profitability of the pulp-making unit was still amazing, the operating profit was more than 38 percent in relation to the turnover.
“After an exceptional year in many ways, I am proud that we have reached the result in accordance with our financial guidelines, despite the disruptions of 2022, high inflation and an otherwise challenging environment,” says Bresky.
According to Bresky, last year’s result was the best since 2000.
“Just like in 2021, we again reached a historically large full-year operating result, which was 1,891 million euros in 2022, the highest since 2000. The increase compared to the previous year was 24 percent.”
The turnover for the whole year increased to 11.7 billion euros from 10.2 billion euros the previous year.
This one for the year’s result, Bresky is already predicting that it will be weaker than last year. The company has had or is now having change negotiations in Finland regarding layoffs in both wood product and packaging material production.
“Significant macroeconomic uncertainty and continued weak consumer confidence, which leads to a decrease in private consumption, continue to have a negative effect, especially on the demand for corrugated board. The lower demand in the construction sector is still challenging, and it is expected to especially affect the demand for traditional lumber,” he says.
In the last quarter of the year, production and deliveries of corrugated cardboard in Europe decreased by more than 30 percent from the corresponding period of the previous year.
Bresky has accelerated Stora Enso’s complete exit from paper in recent years. The corona epidemic collapsed the chronically declining demand and prices of paper.
It caused many forest companies to close paper mills. In Finland, UPM’s Kaipola and Stora Enso’s Veitsiluoto were caught. The rapid reduction in capacity temporarily improved the profitability of paper production, but no one expects the change to be permanent, as consumption continues to decline steadily.
Last March, the company said it had put the last paper mills up for sale. Last week, the company said that the process had almost been completed. However, the Anjalan paper mill in Finland was not sold. It will continue, at least for now.
At the same time, however, Stora Enso has invested large sums in cardboard production and, for example, in the production of wooden elements for buildings.
In October the company said it would invest about one billion euros in converting the decommissioned paper machine of the Oulun factory into a large-scale consumer packaging cardboard line.
Production with the new so-called folding board machine will start in early 2025, if the plans hold.
The second former paper machine of the Oulun factory was converted into a machine for producing corrugated surface board already in 2020–2021 in a project that cost about 350 million euros. The investment now stated is therefore almost three times compared to that.
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