Stora Enso to invest €1bn in Oulu conversion

The first machine conversion at the Oulu site took place in 2021
The first machine conversion at the Oulu site took place in 2021

Stora Enso is investing around €1bn (£876m) to convert the remaining idle paper machine at its Oulu site in Finland into a high-volume consumer board production line.

The investment supports the group’s growth strategy in renewable packaging by providing new volume for growing packaging segments. Production on the converted machine is estimated to start in early 2025.

Following the first machine conversion at the Oulu site in 2021 from paper to kraftliner, the remaining idle paper line will be converted into a highly flexible consumer board line for folding boxboard (FBB) and coated unbleached kraft (CUK).

The total annual capacity will be 750,000 tonnes of consumer board. The target end-use segments are food and beverage packaging, especially frozen and chilled, and dry and fast food, mainly in Europe and North America.

Stora Enso president and CEO Annica Bresky said: “Renewable packaging continues to be our largest strategic growth area. It’s also a market that is now, for the first time, growing faster than plastics-based alternatives.

“Through this conversion we can build on existing assets for quick and cost-effective time-to-market compared to other investment alternatives. This puts us in a strong position to drive revenue growth and build market share.”

The total investment of around €1bn will span 2022 to 2025. At full capacity, the investment is expected to meet the profitability target of the Packaging Materials division: operational return on operating capital (ROOC) of 20%. Annual sales are expected to be around €800m.

“This investment represents a step change in the European market and will develop our Oulu unit into a mega site, improving profitability and competitiveness for both our consumer board and containerboard offerings,” said Hannu Kasurinen, EVP and head of the Packaging Materials division.

“The converted line will be the most cost-competitive FBB machine in Europe, also enabling us to optimise production at other sites to unlock further growth.”

Stora Enso said the investment is fully aligned with its sustainability commitments. It will support circularity by further enhancing the recycling performance of the Packaging Materials division’s product portfolio.

The Oulu site’s total scope 1 and 2 greenhouse gas emissions will remain at a low level as they were already reduced by 80% during the first conversion in 2021.

The investment will create around 300 new jobs at the Oulu site and support functions, and an additional 1,500 indirect employment opportunities overall.

The wood consumption of the new line will be approximately one million cubic metres of pulp wood. After the investment, the group's market pulp position will be reduced by approximately 250,000 tonnes annually.

Stora Enso has also today (21 October) released its results for Q3, and for the year to date. The company’s sales increased by 15% to €2.96bn in Q3, while its operational EBIT was up by 29% to €527m.

For the first nine months of the year, its sales were €8.82bn while its operational EBIT was €1.54bn.

On its outlook, the company said it remains vigilant against the persisting market disruptions and uncertainties such as increased geopolitical risk, the rapidly changing macroeconomic environment, inflationary pressures, logistical constraints, and material shortages.

“To manage volatility, measures such as pricing, flexibility in sourcing and logistics, as well as hedging are in place. Stora Enso also benefits from its high self-sufficiency in wood of 30% and in energy of 69% for the group,” it stated.

The group impact from higher energy costs in its Packaging Materials and Paper divisions will be partly offset by recognised income in its segment Other due to Stora Enso’s ownership in the energy company Pohjolan Voima.

Last month Stora Enso signed an agreement to divest its Nymölla paper production site in Sweden, and all related assets, to US-based uncoated paper producer Sylvamo.

This transaction, like the sale of its Maxau paper site in Germany to Schwarz Produktion a few days earlier, is part of the earlier announced plan to divest four of Stora Enso’s five paper production sites.