Stora Enso’s CEO Jouko Karvinen and CFO Markus Rauramo discuss the results for 2008, the company’s future direction, the launch of the values, vision and mission, restructuring, and the prospects for 2009.
Year 2008 results and challenges
Jouko: Markus, after a tremendously diffi cult year and fourth quarter, what do you think of our results for 2008?
Markus: They are disappointing, no doubt. At the same time, we were – and are – financially sound with a strong balance sheet. If anything, we were prepared for a tough year because we had already faced some big challenges in 2007. In addition, perhaps most importantly of all, we have done everything possible to prepare for another challenging year in ‘09.
Jouko: 2007 and the fi rst part of ‘08 were not easy for a number of reasons, such as the weak dollar, the Russian wood duty threat and booming energy costs from oil prices. And just when our early actions started to have an impact on these issues, we faced the fourth quarter, something nobody has really seen before. Well, after the earlier issues, at least our team was experienced and ready to face the challenge of the fourth quarter.
Markus: Yes, I do feel good about the company and its people because they have shown such readiness and fl exibility in dealing with this. Of course this is the benefit, if you can call it that, of having had difficulties with big increases in wood prices, energy costs and currencies in 2007. These were extreme circumstances but we found the means to deal with it.
Jouko: Even with all the public uproar, I am still of the view that we took the right actions in 2008, such as divesting Papyrus, achieving independence from Russian wood and even the difficult restructuring actions. In fact it’s not what we did that I worry about, it is whether we moved early and fast enough. Do we as an organisation understand that we have probably made 20% of the necessary change – change required to reach a completely different earnings level?
Markus: Good question. I do think that we have at least found the right tools in the short term to do what we need to do – and that is obviously critical. In 2008 we reduced capital expenditure, which we’re doing further, drove down working capital very aggressively and focused on price quality. In the latter part of 2008 and first half of 2009 it’s about taking downtime and curtailment in production to be able to match changes in market demand, and adjusting every cost item as fast as possible.
Jouko: Yes, we have done a lot to position ourselves for the short term. Adjusting our manufacturing volumes to real demand was the right decision, which we did within days of the crisis in early October. This not only improved our cash fl ow, but also positioned us and prepared our people for a fi ght this year, although it cost us dearly in our fourth quarter earnings.
Markus: As we now continue along the path we embarked upon in late 2007, it is important for our people to understand that this is not only a battle to maximise short-term performance; it is also about being ready for possible opportunities in investment and even consolidation.
Jouko: So true, especially as our people have been in a perfect storm for so very long. They need to see that there is more to this than cuts and hardship, that there is light at the end of the long tunnel we are in. I hope that when our people read the press they see that, in spite of everything, we are one of the few in our industry who were able to produce a positive, albeit small, operating profit, and that the large negative numbers were not due to 2008 at all; rather they are a revaluation, or impairment, of historical investments over many years against the future world and market situation. Nevertheless, we in management need to keep in mind that these impairments, even if they have no cash impact now, are based on actual past investments with real cash.
Read the entire dialogue in the Annual Report 2008 at www.storaenso.com/annualreport.
