Warnings and closures continue @ Nordic Pulp & Paper sector

Pulp & paper companies were under pressure after M-Real (OMXH: MRLBV) issued a profit warning, in which the company said that fourth quarter result will be clearly weaker than the previous quarter. The earlier guidance assumed that Q4 results would be on par with Q3 results. The company will start statutory negotiations for working time arrangements and possible layoffs affecting up to 1200 workers. M-Real’s stock retreated 11%. Moodys joined the party shortly after that and revised outlook for global paper and forest products to negative. The rating agency says that declining demand leading to weakened pricing will not be fully offset by cost cutting measures of the companies and declining input prices.

Norske Skog’s (OSE: NSG) stock price held up better today as its corporate assembly agreed with the board of directors that the historic Norske Skog Follum mill shall be closed, removing some of the redundant newsprint capacity. The mill has two remaining machines, PM1 and PM7, after the closure of PM2 in 2008. The capacity of the two machines is 290 000 tonnes. The mill has long been considered as uncompetitive in the future market environment.

The tensions got high after the announcement amongst the workers union and the 356 employees, as forest owners association Viken Skog had an outstanding offer for the purchase of Follum rejected by Norske Skog . The initial offer was in fact completely unreasonable, given that even the resalable energy contracts from Follum are worth more than that. The appreciation of the Norwegian Krone has made the situation even more dire for companies producing in there. Norske Skog’s stock price has been up since the third quarter results raised hopes that the company will be able to weather the storm out.

After market close Swedish company Holmen (OMX: HOLM B) noted that it has finished a forest revaluation process, which will positively impact operating prodit by 3.6 billion SEK and profit after tax by 2.6 billion SEK on Q4. Press conference is scheduled for tomorrow December 9th at 10.00 CET.