Subscribe to read!Paperless trends
slow makers sales
Capacity cuts counterbalance demand
29 Oct’11
Global leading papermakers International Paper, Stora Enso and UPM announced last week weaker financial results for Q3’11.
International Paper
Financial Review – Q3’11 v Q3’10
Sales were $6.6Bn down 2%. Operating profits were up $571m or 7.3%/sales compared to $752m or 5.7%/sales.
"IP delivered a strong quarter in a tough environment," said John Faraci, CEO. "We are consistently generating higher profits and cash flow from our transformed portfolio with an international footprint that has strengthened our earnings power. Even as some expected challenges persisted in the third quarter, including weak economic growth in developed markets and input cost inflation, we look ahead with confidence as we continue to capitalize on our balanced portfolio and realize gains from recent investments.”
The performance of the company's business segments are measured quarter to quarter without variations caused by special items, as management focuses on business segment operating profits excluding those items.
North American sales volumes and prices were relatively stable in the third quarter, but were somewhat weaker in export markets reflecting seasonal declines in our integrated EMEA box plants, as well as a slower than expected overall economic recovery. Higher recycled fiber costs had a $14 million negative impact versus the second quarter of 2011.
Printing Papers’ operating profits were $238 million ($239 million including special items) versus $222 million ($243 million including special items) in the second quarter of 2011. In
Consumer Packaging operating profit was $103 million ($30 million including special items) compared with $98 million (a loss of $33 million including special items) in the second quarter of 2011. Third quarter improvement was primarily driven by the lack of maintenance outages and
further sales price realizations in North America, but was partially offset by higher input costs.
xpedx, the company’s North American distribution business, reported operating profits of $27m ($9m including special items), up significantly from $14m($4m including special items) in the second quarter of 2011. Earnings improved from the prior quarter due to seasonally higher sales volumes and lower operating costs, partially offset by lower sales margins.
UPM Kymmene
Financial Review – Q3’11 v Q3’10
Sales were €2.6Bn up 13% with operating profits €136m or 5.2% compared with €204m or 8.8%/sales.
Jussi Pesonen, CEO, comments on the result:
“During the third quarter UPM’s delivery volumes fell while variable costs reached a peak level. These coinciding events impacted on our operating profit. Particularly the lower pulp and fine paper deliveries in Europe had an adverse impact on the operating profit”.
“On a positive note, our strong performance in terms of operating cash flow continued. Myllykoski integration proceeded well and the magazine paper business showed solid performance. The demand for publication papers was stable and, during the quarter, we were able to increase paper prices by 1-2%. Also, the Label and Plywood businesses were able to implement price increases. However, this was not sufficient to offset the rise in variable costs during the third quarter. While the cost level still remains high, we estimate that we have now reached the peak and variable costs are expected to start gradually decreasing”.
“We are prepared for a heavy winter. There is already a clear decline in demand in Europe for our timber and plywood businesses. However, UPM is in a much better position to respond to the rough economic climate compared to 2008”.
“The strategic acquisitions of the Fray Bentos mill and the Myllykoski have further improved our cost competitiveness and cash flow generation. Our net debt increased only EUR 205 million year-on-year. Our balance sheet is strong, which gives us opportunities to consider further strategic moves”.
“As announced after the Myllykoski acquisition, we have plans in place to reduce 1.3 million tonnes of paper capacity in Europe and gain annual cost synergies worth EUR 200 million. We are prepared to adopt flexible production operations in various businesses, if needed, and will continue our stringent cost control and strict investment policy. All in all, UPM is well prepared to face any economic scenario”, Pesonen concludes.
Outlook for 2011
Economic outlook has turned weaker during the second half of the year. As a result, demand for UPM’s products for the rest of the year is lower than earlier anticipated.
Price outlook for UPM’s products is mostly stable for the rest of the year and variable costs are anticipated to start gradually to decrease during the fourth quarter of 2011 from the peak level reached in the third quarter of 2011.
UPM’s full-year 2011 operating profit excluding special items is expected to be somewhat lower than last year. Previously, the full year 2011 operating profit excluding special items was expected to improve from last year.
Stora Enso
Financial Review – Q3’11 v Q3’10
Sales were €2.74Bn up 4.6% with operating profits of €204m or 7.4%/sales down from €255m or 97%/sales.
CEO Jouko Karvinen comments on results as follows:
“Solid quarter, measures to fight the economic reality continue and increase”
“We finished the third quarter as planned. The business areas performed as expected, but associated companies underperformed, essentially due to currency impact.
“In July we forecast rapidly increasing economic uncertainty and the need to plan for alternative demand scenarios going forward. We described the early signs of weakening demand and sales channel inventory reductions in Fine Paper and Wood Products.
Whereas we see for example in coated fine paper stabilisation after inventory corrections, it is clear that going into the fourth quarter our customers, as well as ourselves, will reduce inventories and therefore we will further step up the manufacturing curtailments which we already increased significantly in the third quarter. If temporary lay-offs are planned, they will be subject to co-determination negotiations.
“As before, in a rapidly changing business environment our priorities are clear: cash preservation, defending our margins through active capacity management, minimising the number of underutilised assets by product swaps and continued cost-efficiency actions. The good news is that we are now in a stronger position than a few years ago due to lower fixed costs.
We have enhanced flexibility through outsourcing and other means of decreasing the negative earnings impact of reduced demand. This path of improvements in costs and productivity, but also flexibility is one we will continue to follow.
“Looking further ahead, our current strategic projects – the Montes del Plata pulp mill in Uruguay, the Ostroleka containerboard machine in Poland and the cross-laminated timber investment in Austria – are proceeding according to plan. Inpac acquisition was completed in the third quarter. Our strong balance sheet and cash position gives us a solid platform to pursue our future in our selected growth areas.”
Paperless trends
slow makers' sales
Capacity cuts counterbalance demand
28 Oct’11
Global leading papermakers International Paper, Stora Ensoand UPM announced last week weaker financial results for Q3’11.
