Metsä Tissue's strategic projects advancing well

Metsä Tissue, producer of tissue and cooking papers, posted net sales of 478 (456) million euros for January-June. Operating profit excluding non-recurring items dropped to 10 million euros (31). Net sales showed a year-on-year increase of roughly 5 per cent on the corresponding period last year. Growth in net sales was largely attributable to a favourable sales mix as well as advantageous exchange rates. Sales of Metsä Tissue’s own brands showed a year-on-year increase of 10 per cent, with healthy growth reported especially for Lambi, Katrin and Serla. Lambi sales for the first half of the year showed an increase as great as 13 per cent on the previous year.

Operating profit was dampened by the rising cost of pulp, recovered paper, other materials and energy as well as relatively high incremental costs related to the start-up of production in Düren, Germany.

The company’s Baking and Cooking investment programme in Düren, Germany, is proceeding on schedule, with the rebuild of both paper machine 5 and related facilities completed and the new converting lines now operational. The complete facility will be dedicated to the production of baking and cooking papers marketed under the SAGA brand.

Metsä Tissue’s three-year investment programme at the Krapkowice mill in Poland is now into the building stage. The programme announced in April includes two new paper machines, a converting line, the rebuild of one paper machine and general infrastructural development. In June the company signed a near EUR 37.0 million credit agreement with Sumitomo Mitsui Banking Corporation for financing the programme. The investment will further strengthen Metsä Tissue’s foothold in Central Europe.

During the second quarter, the company’s project for adopting a new ERP system and harmonised processes proceeded to the preparation phase, with units in four different countries preparing themselves for go-lives to take place on a phased basis. The new system and processes were already successfully adopted in Germany during the first quarter. The project will be finalised at the end of the second quarter next year.

In June, Metsä Tissue announced an exclusive agreement with Georgia-Pacific under which Metsä Tissue will obtain the licence to manufacture, sell and market the Lotus consumer tissue brand in Russia. The deal is expected to close at the end of the third quarter. Last year, Lotus consumer sales in Russia totalled around 20 million euros. The agreement will strengthen Metsä Tissue’s position in the Russian consumer tissue market, making it the second-biggest supplier in the branded category.

As the deteriorating availability and quality of locally sourced recovered paper is threatening the production of recycled fibre-based products, the company has been carefully evaluating options for mitigating the associated risks. Drivers behind the threat are the declining consumption of primary fibre based paper and increasing exports of recovered paper both in and outside Europe. The quality of recovered paper moreover threatens to deteriorate as a result of unsorted waste collection systems in certain European countries and a growing interest in the incineration of recovered paper as an energy source.

Metsä Tissue’s consumer brands, Mola and Tento, renewed their brand identity and launched new products. The new look and feel of the brands utilises key elements from the company’s Serla brand, bringing the three brands closer together and offering consumers enhanced product quality.

Lambi launched a renewed toilet paper grade in Finland last May, featuring new embossing and a new, softer and thicker base paper. In addition, Lambi also introduced new summer prints for its toilet paper, household towels and napkin ranges. Katrin introduced a new plastic-free sauna seat cover called Green Spa. Completely biodegradable and fully compostable, it is the first product of its kind to be awarded the Nordic Swan Ecolabel.

To mark the UN International Year of Forests, the Metsäliitto Group and WWF Finland concluded a cooperation agreement covering 2011 and 2012. Within the framework of this cooperation, Metsä Tissue is organising training for its personnel on themes related to sustainable development. The first training session was organised in cooperation with the WWF in June.

The demand for tissue and cooking papers is expected to remain stable and brand growth looks set to continue. Higher variable production costs and additional expenses will continue to be transferred to prices.

The successful implementation of ongoing strategic development projects, committed efforts to improve the company’s financial result and increase brand growth as well as excellence in customer and supply service will remain Metsä Tissue’s key focus areas throughout the year.