Stora Enso Begins Internal Review of Paper Business

 

According to a report late this past month by Reuters News Service (London, U.K.), Stora Enso (Helsinki, Finland), a maker of paper, pulp, and packaging, has begun an internal review of its paper business, reviving speculation on further restructuring in an industry hit hard by the growth of online publishing.

Stora Enso and rivals have closed dozens of paper mills and cut thousands of jobs in the past years as the European demand for paper products declined as readers opt for digital devices. The company said it had started a review on how to manage the paper division when it faces increasing cost pressure and declining demand.

"We have five divisions, four are growing and one (paper) is declining," CEO Karl-Henrik Sundstrom told a conference call. "This is an internal project, we need to create a structure for paper that is future proof."

Analysts took the move as a sign that Stora is stepping up its efforts to reduce exposure to the business.

"I do believe that the option (of divesting the business) is on their table. Perhaps selling the whole unit would be difficult but they could do it in parts," said Antti Viljakainen, analyst at Inderes Equity Research.

This past month the company announced a divestment of a German magazine paper mill and a closure of a Chinese paper plant. There has long been talk of consolidation in the sector and UPM (Helsinki, Finland) in particular has been looking for ways to cut costs by merging paper assets with other players.

"No one wants to put more capital in this business, which makes large moves very difficult," Viljakainen said.

European demand for graphic papers -- such as magazine paper, newsprint and office paper -- has fallen by around a quarter in the past decade. UPM is the region's market leader in the segment. Stora Enso has protected sales and profits by investing in the production of pulp and packaging board -- products with a brighter outlook.