Stora Enso, a leading provider of renewable products in packaging, biomaterials and wooden construction, has lowered its guidance for the full year 2023.
Due to materially lower earnings forecasts for the full year results 2023, Stora Enso’s new guidance is that the full-year 2023 operational EBIT is expected to be ‘significantly lower’ than for the full-year 2022 (1,891 million Euros).
Earlier, Stora Enso in its financial statement release 2022, published on 31 January 2023, had said that its full-year 2023 operational EBIT was expected to be ‘lower’ than for the full-year 2022.
The change in earnings expectations for the full year 2023 is a result of the worsening market outlook which accelerated towards the latter part of the first quarter.
According to Stora Enso’s guidance range, ‘significantly higher’ means +50% and above; higher is more than +15%, but less than +50%; Lower is more than -15%, but less than -50%; and significantly lower is -50% and below.
Cost pressures and market uncertainties are expected to be significantly more challenging in 2023 than in 2022, weighing on its results and lowering the short-term visibility this year, the company said. This market situation will continue to weaken consumer confidence resulting in lower private consumption impacting all our divisions. Compared to 2022, group margins are expected to be adversely impacted by increasing costs, particularly in relation to energy, wood, and chemicals.
The whole packaging market is currently weakening. Containerboard demand is expected to remain weak but consumer boards are also showing signs of weakening, with the exception for liquid packaging boards, it said.
The construction sector remains challenging with a lower number of issued building permits and new housing starts. This is expected to have a temporary impact on demand for the wood products division this year. In addition to higher pulpwood cost, a weakening global pulp market is expected to weigh on the Biomaterials division. Availability for pulpwood remains tight.
To manage volatility, variable costs are continually reviewed, and preparatory actions are taken to respond to fluctuations in demand with reinforced cost control actions. Other measures such as pricing, flexibility in product mix, capacity and inventory management, and sourcing and logistics have been put in place. In Finland, Stora Enso has completed negotiations on potential furloughs at its divisions’ production sites. Capacity adjustment activities are in place to respond to fluctuations in demand.
Operationally, the focus on decentralization continues together with reduction of overhead costs. Restrictive capital expenditure and working capital management to safeguard cash flow and to secure a solid balance sheet are in place.
Anjala production unit in Finland to shut down
Earlier this month, Stora Enso had announced plans to consolidate its book paper production and permanently close one of the two paper machines at Anjala in Finland. The Group will start change negotiations concerning all employees at the integrated Anjalankoski site.
The Anjalankoski site in Finland includes the Ingenious packaging board production unit and the Anjala paper production unit. Today, the Anjala production unit produces coated and uncoated book papers, coated magazine paper and improved newsprint on two machines.
Due to prevailing weak paper demand and high input costs, Stora Enso has initiated a plan to concentrate all book paper production to one line. With the remaining paper machine, the Group would be able to continue producing its selection of book paper grades. The planned closure of the line producing uncoated mechanical grades would reduce the site’s annual capacity by 250,000 tons and sales with approximately EUR 100 million.
“The decline in newsprint and publication paper demand has further accelerated, and has also reached the previously more stable book paper market. Hence, to ensure the vitality of our book paper offering, we plan to focus all our efforts on the remaining Anjala production line and continue to serve our book paper customers with high quality products,” said Hannu Kasurinen, EVP Packaging Materials division, on the plant’s closure.
