The decline in paper demand in North America and Europe has been ongoing for some two decades now. This trend further accelerated due to the pandemic, which led to changes in consumer behaviour, resulting in overcapacity and historically low price levels. In 2020, European paper consumption fell by 18%.
Although paper demand is currently recovering from last year’s low levels due to increased economic activity, the decline in demand is forecast to continue at historical or a somewhat slower pace. Due to the many restructuring actions in the industry, demand-supply balance has lately clearly improved.
Taking steps forward on the transformation journey
The recently announced measures, closures of Veitsiluoto and Kvarnsveden and divestment of Sachsen, are important steps in a longer journey Stora Enso has been on for over a decade, transforming from being a traditional paper company to becoming a renewable materials growth company.
“We have continuously adapted to limit the impact of the declining paper market, while remaining able to benefit from the cash flow that the paper business provides,” says Seppo Parvi, CFO at Stora Enso.
After the ongoing restructuring, the Paper division’s share of the Group sales will be reduced to slightly above 10%. These actions will have significant effects on our business: our paper production capacity will decrease by 42% (1.6 million tonnes) to 2.2 million tonnes per year.
The closures of Kvarnsveden and Veitsiluoto will also improve our environmental performance by reducing our CO2e emissions annually by 8% (from Scopes 1 and 2, i.e. fossil fuels used and electricity purchased for production).
Aiming to ensure competitiveness
In addition to accelerating Stora Enso’s transformation journey, the goal for adapting production in the declining markets is to improve the competitiveness of our total paper business.
“The role of the Paper division in Stora Enso’s strategy is to provide strong cash generation through cost reductions and active capacity management. This is why ensuring competitiveness and profitability are a top priority going forward,” says Kati ter Horst, Executive Vice President, Paper division.
Stora Enso recently announced investments in modernising two paper sites, Anjala-Ingerois and Nymölla.
“These investments will improve the competitiveness of both production units and at the same time contribute to our sustainability performance,” says Kati ter Horst.
In addition, we also want to provide our paper business with a higher degree of operational independence to adapt to challenging market conditions. That way, we can be more agile in adapting costs and operational processes to the division’s requirement.
Focus on growth areas
The planned restructuring in paper business strongly supports Stora Enso’s strategy of shaping our business for accelerated growth and value.
We focus on packaging, building solutions and biomaterials innovations. These are the areas where we see strong growth potential and where renewable materials can best meet demands for eco-friendly and circular products. In these areas we already have leading positions and can build on existing strengths in order to grow more rapidly.