Stora Enso expects weak demand to persist into next year, although signs the worst might be over for the forestry industry drove the Finnish firm’s shares up 5% on Tuesday. Source: Reuters
High inflation and falling demand have squeezed forestry sector profits since late last year, with companies like Stora Enso and UPM-Kymmene also suffering from clients destocking.
“We anticipate no significant improvement in market demand or inventory levels for the year-end,” CEO Hans Sohlstrom said in a statement.
Stora said some costs had eased from their earlier peaks and destocking by customers was coming to an end, which could offer some support in 2024, but warned recovery in the pulp market would be slow.
“The outlook for Q4 remains weak but importantly it appears as if we have now seen the bottom with some slight improvement expected q/q (quarter on quarter),” JPMorgan analysts said in a research note, pointing to rising pulp prices and volumes.
UPM-Kymmene said on Tuesday demand for some of its products had already started to improve as it posted better than expected third quarter results.
Mr Sohlstrom said all Stora’s businesses were affected by tough market conditions and price pressure in the third quarter, as global pulp demand remained weak amid high supply, and high interest rates weighed on demand from the construction market.
Stora, which has been trying to counter weak demand and high costs with a number of mill shutdowns and personnel reductions, said it did not plan further closures for now.
It reported third quarter operating earnings before interest and taxes of 21 million euros (US$22.4 million), a 96% slump from a year earlier.
JPMorgan said the earnings were in line with consensus estimates and some investors might have expected an operating loss.
