Stora Enso Q3 profit falls 28% as Oulu ramp-up costs weigh; outlook stays weak

Investing.com -- Finnish pulp and packaging producer Stora Enso Oyj (HE:STERV) on Thursday posted a lower third-quarter profit as costs tied to its €1.7 billion Oulu board investment offset modest sales growth and continued weak demand. The company warned that market conditions would stay subdued through the year-end. 

Sales rose 1% from a year earlier to €2.28 billion, supported by the Junnikkala acquisition and higher output from the new Oulu consumer board line. Adjusted operating profit fell 28% to €126 million from €175 million, including a €45 million negative impact from the Oulu ramp-up. 

The adjusted EBIT margin declined to 5.5% from 7.8%. Operating profit under IFRS increased to €231 million from €139 million due to €117 million in items affecting comparability. Earnings per share rose to €0.25 from €0.11, while cash flow from operations decreased to €223 million from €271 million.

Chief executive Hans Sohlström in a statement said the group focused on areas within its control amid continued market challenges. “We will continue our systematic efforts to improve profitability and cash flow, whilst we expect market conditions to continue to be subdued and challenging,” he said. 

He added that excluding the Oulu impact, profitability would have been comparable to last year.

The company completed the sale of about 175,000 hectares of forest land in Sweden, representing 12.4% of its Swedish forest holdings, for SEK 9.8 billion (€900 million). 

The transaction reduced net debt by 9% to €3.22 billion and cut the net debt-to-adjusted EBITDA ratio to 2.7 from 3.1. 

The fair value of total forest assets was €8.3 billion, or €10.50 per share, following the divestment.

In its outlook, Stora Enso said low consumer confidence and weak order inflows were pressuring the packaging and pulp markets, with prices expected to stay flat or under downward pressure through the fourth quarter. 

The company forecast capital expenditure of €730-790 million for 2025 and said maintenance stops would remain at similar levels as in the third quarter. 

It expects the completed Swedish forest sale to have an annual adverse impact of €25 million, or about €6 million per quarter, on the Forest segment’s results beginning in the fourth quarter.

Segment results were mixed. Packaging Materials sales fell 3.5% to €1.13 billion, with adjusted EBIT down 51% to €36 million due to start-up costs and weaker prices. 

Packaging Solutions improved to a €2 million adjusted EBIT from a €6 million loss a year earlier on better product mix. 

Biomaterials sales dropped 10.8% to €339 million, while Wood Products sales rose 22.7% to €440 million on stronger sawn-wood demand. 

The Forest segment posted a 7.9% increase in sales to €750 million and a 6% decline in adjusted EBIT to €76 million, maintaining stable performance.

Sohlström said the Oulu site remains central to Stora Enso’s long-term strategy.  “While the rampup has, and will continue to, weigh on profitability in the short term, we remain confident that the Oulu board line will deliver industry-leading quality and cost competitiveness once fully operational,” he said. The line is expected to reach full capacity in 2027.

Stora Enso said it will continue its review of the remaining 1.2 million hectares of Swedish forest assets, which includes assessing a potential separation and public listing.