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Finland's Stora Enso Expects Weak Demand In Fourth Quarter

Published on Oct 29 2019 10:20 AM in Packaging And Design tagged: finland / Brexit / Stora Enso / Trade War / Third Quarter Report

Finland's Stora Enso Expects Weak Demand In Fourth Quarter

Finnish paper firm Stora Enso on Tuesday said geopolitical uncertainties would dampen demand in the fourth quarter following a sharp drop in profit in the three months to September, sending its shares down 8%.

The pulp, paper and packaging-board maker said adjusted operating profit in the third quarter fell 35% from a year earlier to €231 million ($256 million), missing the average forecast of €236 million in a Refinitiv analyst poll.

Sales in July-September fell 7% from a year earlier to €2.4 billion, missing a forecast of €2.51 billion.

The company forecast an adjusted operating profit of €100 - €180 million in the fourth quarter, missing all analyst expectations which ranged from €182 million to €315 million, according to Refinitiv.

"Deteriorating trading conditions caused by geopolitical uncertainties related to trade wars and a possible hard Brexit are expected to impact Stora Enso negatively," the company said in its report.

"Demand growth is forecast to slow for Stora Enso's businesses in general, and the decline in demand for European paper will continue."

Significant Downward Pressure

Analyst Antti Viljakainen of equity research firm Inderes said in a note there was significant downward pressure on the forecasts for the end of the year.

"According to our preliminary analysis there will be bearish pressure left for the next year as well," he added.

Stora Enso said it would increase its cost cutting savings target to €275 million from €200 million to battle slowing demand.

Last week its peer UPM reported better than expected profits for the September quarter saying it had seen modest demand growth in most areas.

But Stora Enso's negative outlook weighed on the sector on Tuesday morning, with European paper and packaging firms UPM, Svenska Cellulosa, Metsa, Mondi and Holmen down between 1% and 3%.

Inderes' Viljakainen said the low expectations were due to continued pressure on prices and volumes.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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