Stora Enso CEO Jouko Karvinen comments on third quarter 2013 results
“Strong performance in Packaging, European paper markets struggle”
“The third quarter ended with the operational profitability just slightly up year on year. Nevertheless, it was a very different quarter than a year ago, with 5% lower sales for the Group and significantly rebalanced contributions from the segments. However, most importantly lower sales were compensated by lower fixed and variable costs. Segmentally, there was a strong performance in Renewable Packaging and continued cost-driven turnaround in Building and Living. The good news was balanced by Printing and Reading continuing to contend with a weak market environment, and Biomaterials facing exchange-rate-related challenges as well as one-time costs from Veracel. In summary, it was a better than expected quarter that underlined the importance of our cost focus.
“The timetable for completing our joint-venture pulp mill Montes del Plata in Uruguay was revised during the quarter after the main technology contractors informed the company that they could not complete their work on schedule. That unexpected development was balanced by the view of the owners of the mill that the mill continues to be a good high-return investment and the delays can only lead to an even stronger effort to complete it well and ramp it up starting in early 2014.
“After announcing the revised two-phase timetable of our China investment, we have gradually started to initiate the mill site works. The target schedule for starting up the board machine remains in the beginning of 2016.
“The fourth quarter outlook for operational EBIT is clearly lower than a year ago, as already announced on 9 October. This is because, in contrast to the other two segments, the two strongly performing segments Renewable Packaging and Building and Living, which together generate the majority of the Group’s earnings, both have a seasonal and market-driven pattern. In practical terms, the last quarter in these segments is clearly weaker than the first three quarters of the year, thus making the Group’s earnings especially seasonal this year and also weaker during the last quarter.
“With all the challenges around us, from European paper markets to finally completing and ramping up Montes del Plata, we at Stora Enso believe that improving the things we can control – from fixed cost reduction to quality of completing and commissioning the new projects in a focused and responsible manner – is more important than ever.”