A muddy report from Stora Enso (OMX: STE1RV) was weighing on the entire Nordic pulp & paper sector yesterday and the Finnish company lost almost 10% for the day although wider market sentiment likely contributed some into that. CEO Jouko Karvinen put pressure on the individual units to deliver on operational improvements at an increased speed and prepare for more measures.
Cash flow (246 million from operations) and liquidity (1240 million) improvements improved vs. Q2 2012 but operational EBIT continued its downward path to 141.2 million Euros. This was slightly below Q1 and down over 40% vs. last year. Sales haven’t been affected as much and were still above 2.7 billion. Positive non-recurring items made the fall in margins not to show in reported profit just yet, with 80% from the net profit of nearly 70 million consisting of one-off gains.
The growth projects such as Completion of the Ostrołęka, Poland light-weight board machine with start-up in Q1 2013, Skoghall Mill upgrade end at Q4 2012, and 1.3 million tonne Montes del Plata Pulp Mill in Mexico with expected start mid-year in 2013 as well as the pulp and board mill in Guangxi, China a little more down the line are considered transformative strategic investments aimed to allow for higher returns.
Product curtailments were added in Printing and Reading and Building and Living where continued problems within the eurozone started to show in the business towards the end of the quarter and cause what the company calls a clearly weakening market conditions. Guidance for Q3 is for sales roughly level with Q2 and operational EBIT at a similar level or slightly higher support by variable and fixed cost improvements.
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