Weakening consumer packaging demand in Hungary will see Stora Enso reduce its converting operations in the country and concentrate efforts elsewhere with the aim of boosting profitability.
The profitability improving measures will see the Finland-based company permanently shut down operations at the Páty Mill by the end of Q3 2012 and implement efficiency measures at its consumer board mill in Barcelona, Spain.
Under the plans, the company expects to record a €25m negative impact on operating profit for the first quarter of 2012 – with the Páty Mill closure accounting for €9m alone.
Stora Enso senior vice president of investor relations Ulla Paajanen-Sainio told FoodProductionDaily.com that despite the €9m negative impact on operating profits, the company would see the benefits within the year.
“It’s a restructuring provision that’s going to cost us €9m in the first quarter of this year. It’s a one-time cost, but through the closing down of operations we get an annual cost saving of €7m from Q4 2012 onwards,” said Paajanen-Sainio.
Stora Enso is expecting a restructuring cost and a fixed asset write-down as non-recurring items of around €9m in relation to the Páty Mill closure in the first quarter of 2012 operating profit.
The Hungary restructuring measure plans, along with on-going efficiency plans in Sweden and Finland, will reduce annual costs by around €7m from Q4 2012 onwards.
“The close down is due to weaknesses in demand for consumer packaging.”
“Demand for corrugated board has weakened in Hungary, so we have decided to end operations at the Paty Mill and concentrate our Hungarian operations at the Komarom Mill – enhancing productivity in the area,” said Paajanen-Sainio.
Paajanen-Sainio added that the reduced demand for corrugated board was specific to Hungary, and not the rest of Eastern Europe.
“There is less demand in Hungary at the moment, so we have decided to concentrate our efforts elsewhere. This is something we do all the time; we have to be focussed on profitability. This is a daily business for us.”
“This is something we have to look at – how we can be profitable. We want to improve our profitability,” she said.
Stora Enso renewable packaging executive vice president Mats Nordlander added that the plans, combined with earlier announcements, would improve the company’s renewable packaging cost competitiveness.
“Demand for corrugated board consumer packaging has significantly weakened in Hungary, so we plan to centralise our operations in Hungary to Komaron Mill and close Páty Mill. As part of the plans, Komarom Mill would be enhanced with asset transfers and recruitment so it can better meet customer and market needs,” said Nordlander.
“The efficiency measures planned in Barcelona are intended to improve the mill’s profitability,” he added.