Packaging firm Stora Enso is progressing on its journey of transformation into a renewable materials growth company.
The packaging group plans to grow in packaging, building solutions, and biomaterials innovations, shifting the strategic focus of its portfolio further towards these growth areas.
Paper Business Restructuring
In line with this strategy, Stora Enso is restructuring its paper business due to decline in demand across the global market, which has resulted in paper mill closures and divestments.
The decline in paper demand in North America and Europe has been ongoing for some two decades now, the company noted.
The trend further accelerated due to the pandemic, which led to changes in consumer behaviour, resulting in overcapacity and historically low price levels.
In 2020, European paper consumption fell by 18%.
Although paper demand is currently recovering from last year’s low levels due to increased economic activity, the decline in demand is forecast to continue at historical or a somewhat slower pace.
Due to the many restructuring actions in the industry, demand-supply balance has lately clearly improved.
The recently announced measures, closures of Veitsiluoto and Kvarnsveden and divestment of Sachsen, are important steps in a longer journey Stora Enso has been on for over a decade, transforming from being a traditional paper company to becoming a renewable materials growth company.
"We have continuously adapted to limit the impact of the declining paper market, while remaining able to benefit from the cash flow that the paper business provides," says Seppo Parvi, CFO of Stora Enso.
After the ongoing restructuring, the paper division’s share of overall group sales will be reduced to slightly above 10%.
These actions will have significant effects on the business, as paper production capacity will decrease by 42% (1.6 million tonnes) to 2.2 million tonnes per year.
The closures of Kvarnsveden and Veitsiluoto will also improve the group's environmental performance by reducing CO2 emissions annually by 8% (from Scopes 1 and 2, i.e. fossil fuels used and electricity purchased for production).
In addition to accelerating Stora Enso’s transformation journey, the goal for adapting production in the declining markets is to improve the competitiveness of the total paper business.
"The role of the paper division in Stora Enso’s strategy is to provide strong cash generation through cost reductions and active capacity management. This is why ensuring competitiveness and profitability are a top priority going forward," says Kati ter Horst, executive vice-president of the paper division.
Investment In Modernising Paper Sites
Stora Enso recently announced investments in modernising two paper sites in Anjala-Ingerois and Nymölla.
"These investments will improve the competitiveness of both production units and at the same time contribute to our sustainability performance," ter Horst added.
In addition, the group also plans to achieve a higher degree of operational independence to adapt to challenging market conditions.
That way, the group believes it can be more agile in adapting costs and operational processes to the division’s requirement.