Stora Enso believes Russia will compromise on wood tariff issue

Company prepares to reduce production already this year

print this

Pulp and paper manufacturer Stora Enso says that it is not certain that the export tariffs imposed by Russia on unrefined timber will fully take effect. Stora Enso CEO Jouko Karvinen believes that a compromise can be reached on the matter to secure wood supplies for Finnish pulp and paper mills.
      "The European Union is continuing its negotiations. I have said for about a year now that we should seek a compromise that would suit all parties. I have not given up hope, but I am not planning the future on the basis of hope", Karvinen said on Wednesday.
     
Although negotiations continue, Stora Enso is preparing for an end to imports of wood from Russia. This would mean that the company would have to cut production in Finland already this year.
      Two other paper manufacturers, UPM and Metsäliitto, have previously warned of reductions in output capacity. Stora Enso's situation is more difficult, because it is most dependent on Russian birch.
      If the worst-case scenario is realised, it will affect all of Stora Enso's customers as well. When output declines, the company will not be able to satisfy all of its buyers.
      "My basic concern is not to lose our most important customers. That is the risk that we are trying to minimise", Karvinen said.
     
Stora Enso has already changed its mix of raw materials by replacing some of the birch it uses with coniferous wood, and by buying more wood from domestic sources. Last year the increase in domestic acquisitions was three million cubic metres.
      Last year Stora Enso imported four million cubic metres of raw timber from Russia. The record for Russian imports in a single year is seven million cubic metres.
      Raw material shortages have already caused Stora Enso to close down the Summa paper mill, and the Kemijärvi pulp mill is scheduled to close in April.
     
There are ample forest resources in Finnish Lapland, but the company is directing supplies to its larger mills in Kemi and Oulu.
      The building now housing the Kemijärvi pulp mill will be taken over by the Anaika Group, which manufactures laminated wood beams. Stora Enso has granted Anaika a capital loan of EUR 7 million for the purpose.
      Karvinen says that Stora Enso will eventually recoup on the investment. "My best experts and myself have checked their business plans, and we believe that this is a good plan. It is a small company, but Stora Enso can take the risk."
      Stora Enso manufactures laminated beams itself, but it does not want to produce them in Kemijärvi.
      "We don't want to do everything ourselves. Because of the raw material, the Anaika concept differs from the way that we produce things. Give them a chance. We will support them. Let's try to make this a success story", Karvinen said.
      Deputy CEO Hannu Ryöppönen says that Stora Enso and Anaika have a long-term goal. "We know this business well."
     
Reporting on last year's result was a tightrope walk straddling the border between good news and bad news for the management of Stora Enso. Prospects are fairly good in paper, cardboard, and the pulp industry, because demand is steady and prices are gradually firming up.
     
Karvinen emphasised the last quarter of the accounting period, which was worse than the previous quarters, in light of the dwindling of the sawn board market.
      Stora Enso reported annual net sales of EUR 13.4 billion, with operating profit excluding non-recurring items of EUR 1,172 million.
      Helsingin Sanomat has calculated that Stora Enso's net result excluding NRIs improved by EUR 229 million to some EUR 780 million.
      Figures for 4Q/2007 were less impressive, with EPS negative at EUR -0.06 (4Q/2006: EUR 0.38), compared with an annual EPS of EUR 0.09 (2006: EUR 0.88). The company employed an average of 39,239 persons during the year.


Previously in HS International Edition:
  UPM: Russian wood tariffs could reduce paper production already this year (6.2.2008)
  Laminated beam factory to be set up in Kemijärvi pulp mill building (28.1.2008)
  Väyrynen makes proposals to Russia on wood export tariff issue (23.11.2007)

Links:
  Full Report (.pdf file)
  Stora Enso Fourth Quarter and Full Year Results

Helsingin Sanomat