Stora Enso creates platform for stronger financial performance

STORA ENSO OYJ Stock Exchange Release 27 October at 9.55

Stora Enso creates platform for stronger financial 
performance

The pulp and paper industry is generally suffering from poor 
profitability. Stora Enso is facing several challenges in Europe, 
such as rising input costs, structural overcapacity and increased 
competition from low-cost regions. Despite its significant global 
presence and investment focus on new growth markets, the Group’s main 
market remains Europe, where it is vital to secure better financial 
performance and long-term competitiveness. 

“The two improvement programmes, Profit 2007 and Asset Performance 
Review (APR), will improve the competitiveness of our European 
platform through continued development of core assets. At the same 
time we are increasingly focusing investments on new growth markets,” 
CEO Jukka Härmälä explains.

Two main initiatives are:

-Profit 2007 – improvement in annual pre-tax profit of EUR 300 
million 

-Asset Performance Review (APR) – short-term reduction of about 
400 000 tonnes in annual capacity 

Profit 2007 – target EUR 300 million improvement in 
annual pre-tax profit from mid 2007 onwards

To be achieved by:
-Reducing production costs (EUR 160 million)
-Reducing support and administration costs (EUR 120 million)
-Improving sales and production mix (EUR 20 million)
-Reducing personnel by about 2 000 

The profit improvement target of the Profit 2007 programme is based 
on 2005 price and cost levels and is net of implementation costs.

Production costs
The main production cost saving measures will be reductions in raw 
material and maintenance costs, and a review of mill organisations. 
Costs will be reduced through energy-saving programmes at various 
mills, reduced use of chemical pulp and recipe changes, more 
efficient and globally co-ordinated purchasing, and further 
optimisation of logistics. 

Support and administration costs
The main changes in administration and support functions will be a 
review of headquarter operations, reorganisation of the sales network 
and further development of shared services. IT platforms will be 
consolidated and standardised.

Planned changes include:

-Establishing Human Resources and Accounting shared services 
-Integrating administration of:
o	Skutskär and Norrsundet mills in Sweden
o	Summa, Kotka and Anjala mills in Finland
o	Veitsiluoto and Kemijärvi mills in Finland
o	Kabel and Reisholz mills and Düsseldorf office in Germany
-Reorganising Financial Services (Treasury) by moving a major 
part of the operations from London to Helsinki 

Sales and production mix
The main aim as regards sales and production mix is to improve 
overall efficiency by optimising the customer and product portfolio. 
The product portfolio will be reviewed with the focus on 
profitability.

Personnel reductions
Personnel reductions totalling about 2 000 have been identified, half 
of them white-collar and half blue-collar staff. Slightly more than 
half of them would be in the Nordic countries and the rest elsewhere 
in Europe. No specific unit is especially affected. The final 
personnel reduction number will be determined after the local 
negotiations are completed. Possible outsourcing might reduce the 
workforce by a further 600–700 people. Provisions for the personnel-
related restructuring costs as part of Profit 2007 will be made as 
the programme evolves.

Asset Performance Review (APR) to secure a competitive 
European production base

-Planned closures of four units with approximately 400 000 tonnes 
annual capacity
-Divestment of six production units
-About 2 300 personnel potentially affected

The units that are planned to be closed under the APR have not been 
achieving the Group’s financial performance targets and are unlikely 
to do so in the future. These closures are intended to improve the 
viability of the remaining units. They will be individually scheduled 
and all will be completed during 2006. 

Estimated effects of the restructuring and closures when they have 
all been completed (excluding the possible divestments): 

-Net sales decreased by about EUR 220 million 
-EBIT increased by about EUR 10 million
-Working capital released about EUR 30 million
-The Group anticipates provisions and write-downs in the fourth 
quarter of 2005 of approximately EUR 300 million, of which about 
EUR 50 million would have a cash impact
-Currently identified personnel reductions due to closures about 
730


Summary of closures and divestments, which are subject to local rules 
and regulations:

Stora Enso Publication Paper

-Planned closure of PM3 and PM4 at Corbehem Mill, France (LWC, 
250 000 tonnes/year)
-Divestment of Wolfsheck Mill, Germany, which is changing from SC 
to other paper grades (155 000 tonnes/year)

Stora Enso Fine Paper

-Planned closure of PM1 at Varkaus Mill, Finland (WFC, 95 000 
tonnes/year)
-Divestment of Grycksbo Mill, Sweden (WFC, 280 000 tonnes/year)
-Possible divestment of Celbi Mill, Portugal (short-fibre pulp, 
305 000 tonnes/year)

Stora Enso Packaging Boards

-Planned closure of Hammarby Mill, Sweden (plastic coating, 
35 000 tonnes/year)
-Planned closure of PM31 at Stevens Point Mill, USA (coated 
specialities, 25 000 tonnes/year)
-Divestment of Pankakoski Mill, Finland (FBB, WPB, SBS, 95 000 
tonnes/year)

Stora Enso Forest Products

-Divestment of Veitsiluoto Sawmill, Finland (300 000 m³/year)
-Divestment of Linghed Sawmill, Sweden (40 000 m³/year)

The divestment of these units would decrease net sales by EUR 490 
million. The financial effects will be determined when the 
divestments are finally agreed. The decision to divest these units is 
based on an assessment of their profit potential, strategic fit or 
realisable value.

Further actions

In addition to the actions listed above, the following mills are 
under scrutiny and final decisions about possible actions will be 
taken within one year. The performance of the mills will be evaluated 
using a range of financial and operational measures, with long-term 
profitability the key criterion. All options for the future of these 
mills are currently open. 

-Summa Mill, Finland (MF, newsprint, improved newsprint, 405 000 
tonnes/year)
-Reisholz Mill, Germany (SC, 215 000 tonnes/year)
-Berghuizer Mill, Netherlands (WFU, 235 000 tonnes/year)
-Uetersen Mill, Germany (WFC, coated specialities 270 000 
tonnes/year)

In addition, further analysis of the alignment of the Group’s 
strategy with its product and production asset portfolio is underway.


For further information, please contact:
Jukka Härmälä, Chief Executive Officer, tel. +358 2046 21404
Hannu Ryöppönen, CFO, tel. +44 20 7016 3114
Kari Vainio, EVP, Corporate Communications, tel. +44 7799 348 197
Keith B Russell, SVP, Investor Relations, tel. +44 7775 788 659


On Thursday 27 October 2005 Stora Enso will announce its third 
quarter results at 10.00 a.m. Finnish time (9.00 CET). 

Helsinki
You are most welcome to participate in the PRESS CONFERENCE in 
HELSINKI hosted by Jukka Härmälä, CEO, Hannu Ryöppönen, CFO, and Kari 
Vainio, Executive Vice President, Corporate Communications, at the 
Diana Auditorium, Erottajankatu 5, at 11.00 a.m. Finnish time (10.00 
a.m. CET). The conference will be held in English.

Those unable to attend the press conference in Helsinki are invited 
to attend the press conference in STOCKHOLM or DÜSSELDORF, where the 
audio feed from the Helsinki conference can be heard and the 
presentation slides followed. Questions can be put live to Jukka 
Härmälä and Hannu Ryöppönen from any of these press conferences after 
the presentation. 

Stockholm
The PRESS CONFERENCE in STOCKHOLM at 10.00 a.m. local time will be 
hosted by Yngve Stade, Senior Executive Vice President, Corporate 
Support and Country Manager of Sweden, and Keith B Russell, Senior 
Vice President, Investor Relations, and will take place at the City 
Conference, Drottninggatan 71 B, Norra Latin, conference room 357 (3rd 
floor).

Düsseldorf
The PRESS CONFERENCE in DÜSSELDORF at 10.00 a.m. local time will be 
hosted by Bernd Rettig, Senior Executive Vice President, Publication 
Paper, and Eberhard Potempa, Country Manager of Germany, and will 
take place at the Stora Enso office, Moskauer Straße 27.

Webcast of press conference
A LIVE WEBCAST (audio with synchronised slide presentation) of the 
press conference may be accessed on www.storaenso.com. The 
presentation material will be available on 
www.storaenso.com/investors at 10.00 CET (11.00 a.m. Finnish time).

www.storaenso.com
www.storaenso.com/investors


Previous press releases concerning Stora Enso's profit improvement 
programme available at www.storaenso.com/press:

-23 August 2005: Stora Enso is exploring the possibility of selling 
its Grycksbo Mill
-20 June 2005: Stora Enso Timber completes negotiations with its 
personnel at Veitsiluoto Sawmill
-3 May 2005: Stora Enso Timber to start negotiations with its 
personnel at Veitsiluoto Sawmill


Abbreviations used in the press release:

PM	paper machine
LWC 	light-weight coated paper
SC 	super-calendered paper
WFC 	woodfree coated 
FBB	folding boxboard 
WPB 	wood pulp board
SBS 	solid bleached sulphate board
MF 	machine-finished paper
WFU 	woodfree uncoatedBoards


STORA ENSO OYJ


p.p.	Jussi Siitonen		Jukka Marttila


	

	
	

	
		

Subscribe