Wood shortages limit Stora Enso's Q2 growth

Stora Enso's share price fell by 10% this morning on the publication of Q2 results that failed to live up to expectations.

The share price dropped sharply, despite a 49% year-on-year increase in operational EBIT (earnings before interest & tax) to €327m (£293m), significantly below the €338m expected, and a sales increase of 5.4% to €2.7bn (£2.4bn) for the quarter.

The slowdown in performance at the Finnish paper and pulp company was attributed to a shortage in wood, but growth was maintained by favourable prices and an active management of Stora’s product mix. The company’s share price on the Copenhagen stock exchange had dropped 10% to €14.68 at the time of writing.

“Six consecutive quarters of sales growth prove that we have reached a level of sustainable profitable growth,” said chief executive Karl-Henrik Sundström. “I am proud of the strong increase in operational EBIT of 50% to €327m, despite the temporary headwinds that we have had during the quarter.

“Production-related issues, higher maintenance and tight wood supply had negative impacts. If we look specifically at consumer board, even with headwinds in production effecting volumes substantially, the division reached all-time high in sales. All in all, we still have untapped potential to grab.

“I am very pleased with our new, more ambitious, financial targets regarding net debt to EBITDA and debt to equity ratio. These are signalling our aim to reach an investment grade credit rating.”

With an EBIT increase of 60.4% across the first half of 2018, Stora’s outlook for Q3 foresees EBIT remaining in line with Q2 and sales continuing to hover around the region of €2.7bn.

In Q2, maintenance costs were €15m higher than initially forecast, and risks of forest fires affecting harvesting conditions will continue to keep the Nordic wood situation “tight”. It is expected to be detrimental to Stora to the tune of €10m across Q3.

However, Sundström did pledge to keep his company “ambitious”, with continued consideration on converting its Oulu paper mill into a centre for packaging board production to further its “transformation journey”.

Investment across the operation included a new cross-laminated timber unit at its Gruvön sawmill and a new fluff pulp line at its Skutskär mill.


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