Hot Nordic weather hits Stora Enso’s profit, shares fall

July 20, 2018

By Jussi Rosendahl

HELSINKI (Reuters) – Finnish pulp, paper and packaging board maker Stora Enso <STERV.HE> missed quarterly profit expectations on Friday, partly blaming wood supply problems stemming from the exceptionally hot and dry weather in the Nordics.

Wildfires have swept across Sweden and to smaller extent have flared in Finland. Concerns that harvesting could start more fires has reduced activity in the region where the company has most of its mills.

Stora said it was forced to turn to wood supply from Poland and Ireland, which has lifted costs, while machine breakdowns in Sweden and Finland also had a negative effect in the quarter.

Shares in the company fell 9.9 percent by 0927 GMT after it reported an adjusted operating profit of 327 million euros ($380 million), short of the 338 million euros expected by analysts.

But profit still jumped 49 percent from a year ago with the help of increased prices and a new packaging board mill in China.

“We had a number of headwinds … so we have an additional potential that (we) did not realize in the quarter,” CEO Karl-Henrik Sundstrom told a news conference.

For the third quarter, he forecast a flat profit compared to the second quarter due to seasonal factors, but said the guidance was “probably on the conservative side”.

Stora, known for supplying the boxes for Apple <AAPL.O> iPhones, has shifted its focus in the recent years away from paper production, a declining industry in Europe due to the rise of reading in digital formats.

The majority of Stora’s profit comes from pulp and packaging board. Alongside paper, pulp is needed to make tissues and packaging board, products that are growing on the back of Chinese demand and growth in online shopping.

As an example of the ongoing shift, Stora said last month that it was evaluating a potential 700 million euro ($815 million) investment to convert its Oulu paper mill in Finland into packaging board production.

Some analysts said the share fall was overdone, and added that the stock was still 24 percent higher than a year ago.

“Their underlying performance is very good… but sometimes, if the stock has risen recently, the markets do not tolerate even slight profit misses,” said Antti Viljakainen from Inderes Equity Research who holds an ‘accumulate’ rating on the stock.

($1 = 0.8585 euros)

(Reporting by Jussi Rosendahl; Editing by Jason Neely and Edmund Blair)

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July 20, 2018 at 03:50PM
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