Weak krona and cheap wood prompt Stora Enso to move production to Sweden

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Paper manufacturer Stora Enso is shifting its paper and sawmill production increasingly from Finland to Sweden. The move is prompted by the low value of the Swedish currency, the Krona, and the availability of inexpensive wood.
      Stora Enso CEO Jouko Karvinen says in the Swedish business newspaper Dagens Industri that the company is moving production to Sweden in order to gain full advantage of the weakening of the Swedish currency.
      The company also warned on Wednesday that its result for January-March will be significantly weaker than for October-December last year. Demand is expected to remain weak in the second quarter of this year as well.
     
In addition to the advantageous exchange rate, wood prices in Sweden are significantly lower than in Finland.
      Stora Enso plans to raise output at its paper mills and saw mills in Sweden. In many communities in Finland, plants are to be operated at less than full capacity, and there will be shutdowns of factories for weeks or months.
      “We are very happy that we have factories in Sweden. The weak Krona is a good cushion in times like these. We will move as much production to Sweden as we can”, Karvinen says in the interview.
      “We are able to maximise cash flow. The biggest cuts now have to be made in Finland.”
     
Each one per cent decline in the value of the krona means about EUR 10 million in the company’s annual result. From last summer, the dollar has appreciated by 46 per cent, and the euro by 18 per cent against the krona.
      Karvinen says that the company has used derivatives to protect itself against a possible rise in the Swedish currency.
     
The difference in wood costs is about 30 per cent to Sweden’s advantage, says Karvinen. This means much for a company for whom wood acquisition accounts for a third of all costs.
      “In the short term, my biggest headache is the price of wood in Finland”, Karvinen says. Stora Enso has 13 paper mills and three sawmills in Sweden, which employ 7,700 people.
     
In Finland, the company has 11,000 employees, of whom at least 5,000 will be laid off temporarily during the spring.
      Karvinen insists that the company will produce new goods only if there are orders. Therefore, cutbacks in output could stay for the long term.
      On Wednesday, Stora Enso also said that it has decided, along with its partner Aracruz, to postpone the second phase of the Veracel pulp project in Brazil by at least a year. Planned investments into the joint venture originally planned for this year will also be cut.


Previously in HS International Edition:
  Stora Enso pulp mill closed down in Kemijärvi (28.4.2008)
  Stora Enso to shut down two factories in Finland and one in Sweden - 1,400 jobs to go (25.10.2007)
  Stora Enso pulls out of North America after massive losses (24.9.2007)

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