Nordic paper makers, including global heavyweights Stora Enso and UPM-Kymmene, are focusing on cutting costs and oversupply on the market after reporting falls in their profits for January-March.
Ther world's largest paper and board maker Stora Enso reported on Thursday a slightly worse-than-expected fall in first-quarter results, while top magazine paper maker UPM-Kymmene was slightly ahead of forecasts. UPM said that despite an ongoing restructuring programme, its costs would rise a net 2 percent in 2008, while Stora Enso forecast a 2.5-3 percent gross cost rise in 2008, and would be aiming to offset that.
Norway's Norske Skog gave a profit warning on Thursday and said its first-quarter results would be significantly weaker than in the previous quarter, citing lower newsprint prices in Europe, and Finnish M-real first-quarter results, published on Wednesday, fell more than expected.
Stora Enso's first-quarter operating profit, excluding one-off items, than halved from a year ago to 140.1 million euros ($223 million), missing the average forecast of 153 million in a Reuters poll. "The short summary of the first quarter is - unsatisfactory results," said Stora Enso Chief Executive Jouko Karvinen.
Top magazine paper maker UPM's operating profit excluding one-offs fell 15 percent to 188 million euros, beating the average estimate of 165 million in a Reuters poll of 15 analysts, but within the range of forecasts. "It was a good result and, compared with the rivals, a very good one," said eQ Bank analyst Katja Keitaanniemi. "Especially positive was the good performance of the magazine paper unit, their core business."
Operating profit at UPM's key magazine paper unit rose 63 percent to 44 million euros, at the top end of analysts' forecasts of 12 to 44 million. Paper makers have suffered for years from overcapacity, which has kept a lid on prices, keeping profits low in recent years, while the strong euro, Russian wood duties and cost inflation have added to the sector's woes recently.
Both UPM and Stora said the strong euro made operations more difficult, with UPM saying the weaker US dollar and British pound hurt earnings. "The dollar is a significant uncertainty factor and keeps profits low," Pohjola Bank analyst Henri Parkkinen said. As the euro has strengthened, paper flows have shifted increasingly to Europe, adding to price competition.
UPM also said it saw wood costs this year being higher than it previously expected, and it would cut production in central European fine paper mills. Russia increased its wood export duties to 15 euros per cubic metre this month and has said it would raise them to 50 euros next year, aiming to promote the development of the Russian wood-processing industry, but adding to the costs of Nordic firms. About 12 million cubic metres of wood were imported from Russia to Finland last year, about 16 percent of the total wood use in the Nordic country.
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