Stora Enso CEO Jouko Karvinen comments on first quarter 2013 results
“First quarter performance as expected - time to rethink structures”
“The first quarter of 2013 was, as expected, clearly characterised by weak markets and profitability for our Printing and Reading and Building and Living Business Areas. The combination of continuing structural decline in media-driven paper grades and economic weakness in Europe led to year-on-year declines of 9% in the Group’s operational EBITDA and 21% in operational EBIT despite the solid performance of the other two Business Areas. Seasonality also reduced the cash flow to an unsatisfactory level.
“The issues we and our industry face are clearly not just short term. Demand for printed media has continued to decline structurally for the seventh year in a row in Europe, and we foresee this continuing for several years. With the economy also structurally weak in the eurozone, this means that we must continue to adjust our capacities to the reality ahead of us, as demonstrated by the plans announced in February in Printing and Reading and in Building and Living.
“However, that is not enough. As a Group we must also once again rethink our structures and cost levels beyond the capacity and volume reductions. We need to find a way to repeat the productivity and fixed cost ratio improvements achieved since 2008 to continue to finance our strategic path to a global renewable materials company. Simplification, clarity and a stepwise fixed cost reduction of EUR 200 million with full impact starting from the second quarter of 2014 is our plan, including the EUR 30 million reduction in Building and Living announced in February. The plan will also support our strategic transformation as it will decrease the interdependence and increase accountability of the Divisions and enable a shift in management focus to growth initiatives in the chosen businesses.
“In the new structure we would combine the Printing and Reading and the Building and Living Business Areas into a new division under the leadership of Karl-Henrik Sundström, and then significantly simplify the functional structures between Group level, country level and the Divisions, as described in separate release today. The segment reporting will remain as before to give the markets continued transparency.
“We understand this new plan may cause concerns among our employees. At the same time we believe the plan is crucial to enable us as a Group to stay true to our strategy and continue our transformation.”