Stora Enso Falls on Plans for 5,000 Layoffs, More Output Cuts
By Chad Thomas and Diana ben-Aaron
Jan. 19 (Bloomberg) --Stora Enso Oyj, the world’s second- largest papermaker, fell to the lowest level in 12 years after saying “significant” cuts will continue in the first half and announcing layoffs that may affect more than 5,000 workers.
Stora dropped 6.4 percent to 4.52 euros, the lowest value since May 1996. The company was the fifth-worst performer in the benchmark Dow Jones Stoxx 600 Index. The shares were trading at 4.55 euros as of 11:41 a.m. in Helsinki.
European papermakers have been forced to cut output, idle workers and write down assets as the global recession accelerated a slump in demand. Stora booked writedowns of 670 million euros ($893 million) in the fourth quarter and plans to extend production cuts that amounted to 15 percent of its paper and board output in the period.
“The magnitude of the production cuts is significant,” said Mathias Carlson, an analyst at Deutsche Bank with a “sell” rating on Stora. “If you have an operating rate of 85 percent in the paper business, then you have really high costs.” He had anticipated as much as 1 billion euros of writedowns.
The cuts, which include a 20 percent decline in pulp output, had a “clearly unfavorable” effect on earnings, Stora said today.
Stora closed a boxboard mill and a magazine paper line in Germany in the quarter as part of a cost-cutting plan announced in September. It stopped cutting wood in Finland for several weeks around the turn of the year and joined other Finnish papermakers including UPM-Kymmene Oyj and M-real Oyj in taking down time as the worldwide recession reduced demand for advertising and packaging.
‘Weaker Demand’
“The production cuts are due both to weaker demand and to more active management of working capital by both us and our customers,” Stora Enso Chief Financial Officer Markus Rauramo said in an interview. The company wrote down its wood inventory as log costs fell, he said.
The write downs and curtailments were in line with the company’s estimates at the end of the third quarter, the CFO said. He wouldn’t comment on the progress of a program to eliminate 1,700 permanent jobs, announced in September.
The 5,000 planned layoffs is “a lot,” said Timo Jaakkola, a Helsinki-based analyst with Oehman, noting similar announcements at other companies. “It looks like the European industry will have to take a third major round of closures in 2009,” he said.
Stora has about 9,000 employees in Finland.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net
Jan. 19 (Bloomberg) --Stora Enso Oyj, the world’s second- largest papermaker, fell to the lowest level in 12 years after saying “significant” cuts will continue in the first half and announcing layoffs that may affect more than 5,000 workers.
Stora dropped 6.4 percent to 4.52 euros, the lowest value since May 1996. The company was the fifth-worst performer in the benchmark Dow Jones Stoxx 600 Index. The shares were trading at 4.55 euros as of 11:41 a.m. in Helsinki.
European papermakers have been forced to cut output, idle workers and write down assets as the global recession accelerated a slump in demand. Stora booked writedowns of 670 million euros ($893 million) in the fourth quarter and plans to extend production cuts that amounted to 15 percent of its paper and board output in the period.
“The magnitude of the production cuts is significant,” said Mathias Carlson, an analyst at Deutsche Bank with a “sell” rating on Stora. “If you have an operating rate of 85 percent in the paper business, then you have really high costs.” He had anticipated as much as 1 billion euros of writedowns.
The cuts, which include a 20 percent decline in pulp output, had a “clearly unfavorable” effect on earnings, Stora said today.
Stora closed a boxboard mill and a magazine paper line in Germany in the quarter as part of a cost-cutting plan announced in September. It stopped cutting wood in Finland for several weeks around the turn of the year and joined other Finnish papermakers including UPM-Kymmene Oyj and M-real Oyj in taking down time as the worldwide recession reduced demand for advertising and packaging.
‘Weaker Demand’
“The production cuts are due both to weaker demand and to more active management of working capital by both us and our customers,” Stora Enso Chief Financial Officer Markus Rauramo said in an interview. The company wrote down its wood inventory as log costs fell, he said.
The write downs and curtailments were in line with the company’s estimates at the end of the third quarter, the CFO said. He wouldn’t comment on the progress of a program to eliminate 1,700 permanent jobs, announced in September.
The 5,000 planned layoffs is “a lot,” said Timo Jaakkola, a Helsinki-based analyst with Oehman, noting similar announcements at other companies. “It looks like the European industry will have to take a third major round of closures in 2009,” he said.
Stora has about 9,000 employees in Finland.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net
Labels: layoffs, Stora Enso
<< Home