S&P 500 gains to extend record run, set for positive week
Investing.com -- Shares of Holmen AB (STO:HOLMB) fell 1.5% as the market responded to a mix of higher forest valuations and raw material costs, alongside consumer caution impacting demand for paperboard and graphic paper.
The Swedish forest company is grappling with the effects of high wood raw material prices, which are over 50% higher compared to 2021 levels, due to a shortage of supply in the Nordics.
Holmen’s control over forest ownership is seen as an advantage for securing long-term supply, especially as Nordic sawlogs and pulpwood prices are expected to remain elevated. The forest valuation on the balance sheet has been increased by 3% to SEK 57.8 billion, suggesting SEK 366 per share.
However, this positive outlook is tempered by the potential for these forest owners to underperform relative to their peers in the event of peace between Russia and Ukraine, which could lead to lower wood costs for competitors.
The company’s paper and board division has managed to maintain earnings and margins better than its peers, partly due to a favorable product mix and efficient management of paper production. Despite this, the demand for consumerboard is being affected by consumer caution, and paper consumption continues to trend downward.
Additionally, the wood products segment is facing challenges from weak construction demand, even though lumber prices remained stable in the fourth quarter. Sawlog costs, however, have increased.
The energy sector has not been immune to market pressures either, with Holmen experiencing the negative impact of lower electricity prices and high hydro levels.
In their analysis, Jefferies commented on Holmen’s position in the market, saying, "HOLMB may relatively underperform P&P peers in a 2025 recovery scenario (not a pulp play), and we see better risk/reward elsewhere in P&P."
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