Finnish forestry firm Stora Enso posted a bigger-than-expected jump in first quarter operating profit on Friday but said its paper division fell to a loss as sales dropped 28% from last year.
Chief financial officer Seppo Parvi told Reuters the closure of two paper mills, which was announced this week, would return the paper business to 'satisfactory profitability'.
Citing falling paper demand in Europe, Stora Enso had said it would close the mills in Finland and Sweden that employ a total of 1,110 people. But analysts said this might not be enough to improve stem losses from the paper business.
"It is by no means clear these measures will be sufficient if the market does not improve and the prices do not start rising," Inderes analyst Antti Viljakainen told Reuters.
The pulp, paper and cardboard maker said first quarter operating profit rose to €328 million ($394 million) from €180 million a year earlier, beating the €251.4 million mean estimate of nine analysts polled by Refinitiv.
Shares in Stora Enso were 2.1% up in afternoon trading.
Stora Enso said on Friday it would convert its Enocell mill in eastern Finland to produce other pulp grades instead of dissolving pulp.
Stora Enso’s president and CEO, Annica Bresky, commented, "Global trade has rebounded faster than expected this year and the economic recovery in China and USA are naturally important factors. The quick response from governments with fiscal stimuli has also helped to improve global economic performance and evade deep recessions.
"Furthermore, the fact that vaccines have been developed much faster than we've ever seen has given a boost of hope. Global supply chains have largely proven resilient. With all this, it is encouraging that we are starting to see signs of light at the end of the tunnel."