Stora Enso Launches Profit Protection Program to Strengthen Competitiveness

 

Stora Enso (Helsinki, Finland) is implementing a profit protection program intended to achieve an annual cost reduction of EUR 120 million as well as reduction of capital expenditure by about EUR 50 million compared to the earlier announced forecast. The program includes plans to reduce costs at the Ala and Imavere sawmills and a plan to close PM 6 at Imatra Mills.

Stora Enso is implementing a profit protection program of EUR 120 million targeting reductions in variable and fixed costs, as market uncertainty increases. The program will include all divisions and corporate functions. The group estimates that some effects will be visible already during 2019 with full impact by the end of 2020.

"We have prepared already for a year for the possibility that the markets would become weaker. Under the current geopolitical circumstances, there is a notable risk that global trade could shrink materially. Due to market risk and increasing costs, we are now taking proactive action and are implementing our profit protection program. We do this to further strengthen our competitiveness," says Stora Enso’s CEO Karl-Henrik Sundström.

As part of the program, Stora Enso is planning to close paper machine 6 at Imatra Mills in Finland and to start co-determination negotiations at the mill related to this plan. With annual production capacity of 90 000 tonnes, PM6 is a small machine that has reached its end-of-life. The planned closure would result in a reduction of maximum 80 FTEs (full-time equivalents) and reorganization of some tasks. The plan is to continue production until the maintenance break during Q3 or until the end of 2019, with an ability to deliver the committed volumes. The planned closure would cost approximately EUR 4 million related to asset write-off and costs of the co-determination process. The amount would be recorded as an item affecting comparability (IAC).

Stora Enso is also planning to take performance improvement measures at the Ala sawmill in Sweden and the Imavere sawmill in Estonia. The plan includes actions to increase productivity and reduce costs. The planned actions would result in a reduction of maximum 35 FTEs and required co-determination negotiations related to this plan have been initiated.

The detailed plans of the profit protection program are subject to appropriate information and/or consultation of the relevant employee representative bodies where applicable, and is also subject to the relevant legal procedures and approvals.

Stora Enso announced in November 2018 that it would maintain its capital expenditure (including investments to biological assets), at EUR 550–600 million in 2019, excluding the impact of IFRS 16 Leases. Stora Enso’s new capital expenditure forecast for 2019 is EUR 540–590 million, but now including the capitalized leasing contracts according to IFRS 16 Leases of approximately EUR 40 million. The new capital expenditure forecast takes into account a reduction of EUR 50 million as part of the profit protection program. The depreciation and operational decrease in biological asset values forecast is EUR 590–630 million. This includes also the IFRS 16 impact.