Headline: Stora Enso Reports Growth Amid Market Challenges

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Headline: Stora Enso Reports Growth Amid Market Challenges

Stora Enso (STERV.HE), a leading provider in renewable packaging, biomaterials, wooden construction, and paper solutions, announced continued profit improvement with the fourth consecutive quarter of growth in adjusted EBIT during its 2024 Third Quarter Results Presentation. The company's adjusted EBIT reached EUR 175 million, marking a significant increase of EUR 21 million compared to the same period last year. Group sales rose by 6% to approximately EUR 2.3 billion, supported by strong performance across several segments. Despite anticipating a challenging fourth quarter due to market volatility and high wood costs, Stora Enso is on a solid financial performance path, forecasting a substantial increase in full-year adjusted EBIT.

Highlights:

  • 2024 third-quarter adjusted EBIT increased to EUR 175 million from EUR 21 million year-over-year.
  • Group sales rose by 6% to approximately EUR 2.3 billion.
  • Strong performance in Packaging Materials, Biomaterials, and Forest segments.
  • Plans to sell 12% of Swedish forest assets valued at EUR 6.3 billion to strengthen the balance sheet.
  • Expected fourth-quarter challenges due to market volatility and high wood costs.
  • Targeting EUR 120 million in fixed cost savings by 2025.

Company Outlook:

  • A 50% increase in full-year adjusted EBIT from EUR 342 million in 2023 is expected.
  • No current plans for capacity closures.
  • Focus on enhancing profitability through operational efficiency and cost savings measures.

Negative Highlights:

  • Challenges in the Packaging Solutions segment due to market weakness.
  • High wood costs and volatile market demand, particularly in Western Europe.
  • Seasonal low demand and maintenance shutdowns in the fourth quarter may reduce volumes in Packaging Materials.

Positive Highlights:

  • Strong performance in Packaging Materials, Biomaterials, and Forest segments.
  • Retention of the Beihai packaging board facility for its long-term value.
  • The new De Lier facility in the Netherlands is expected to positively impact margins in the future.

Downsides:

  • The overall average price is anticipated to decline due to the high mix of lower-priced containerboard.
  • Seasonal factors could boost demand for polymer region products and heating pellets, potentially hindering demand peaks in the soft retail market.

Q&A Highlights:

  • The Beihai plant in China aims to increase production despite overcapacity in the folding boxboard market.
  • Part of the consumer board contracts will be repriced in the first quarter of 2024, with significant segments renewing annually.
  • The Oulu 750 production line will progress without delays, adding an annual wood consumption of 1 million cubic meters.
  • The strategic sale of 12% of Swedish forest assets aims to reduce debt and demonstrate asset value.

Stora Enso's CEO Hans Sohlström reported that, despite current market challenges, the company has maintained its growth trajectory. With the strategic sale of a portion of forest assets and the retention of the valuable Beihai facility, Stora Enso positions itself for long-term profitability and sustainability. The departure of CFO Seppo Parvi at the end of the month marks the end of a significant era for the company, but the focus remains on enhancing profitability and cash flow.

The earnings call also highlighted challenges in profitability and capacity at the China and Oulu plants, emphasizing operational efficiencies and maintaining profitability in the face of those challenges. The company's reaffirmed commitment to reducing net debt concerning EBITDA for the second consecutive quarter underscores the importance of cost efficiency and value capture initiatives to enhance shareholder value.