Stora Enso Oyj (SEOAY.PK, SEOBF.PK), an integrated paper, packaging, and forest products company, Monday warned that its fourth-quarter earnings were unfavorably impacted by "aggressive" production curtailments to counter the weak demand as well as wood inventory writedowns. The company expects production cuts to continue into 2009 and also plans to temporarily lay off over 5 thousand staff at its Finnish operations.
As forecasted in its third-quarter Interim review, the group scaled down its paper and board production in the fourth quarter by around 490 thousand tons, roughly about 15% of its total paper and board production capacity. The company also reduced its pulp production by about 240 thousand tons, about 20% of total capacity, and sawnwood production by 300 thousand m3, around 30% of capacity.
This was done in order "to ensure the Group started 2009 with inventory levels appropriate for the challenging year to come," the company added.
In general, the paper industry has been for the past several years on a decline, as it struggled to keep afloat after being weighed down by overcapacity and lower prices. The slump in demand got further aggravated as the global recession progressed, forcing the industry to go in for production curtailments, layoffs, and asset writedowns.
Moving forward to 2009, Stora Enso sees further curtailment at its paper and board production, and pulp and sawmill operations in the first half of the year. In addition, the company also expects to take a charge of about EUR 670 million related to goodwill and fixed asset impairment testing undertaken in the fourth quarter.
In a separate release, the company said it also plans to temporarily lay-off more than 5,000 employees in its operations in Finland. The temporary lay-off needs and their length will be determined in detail locally as the co-determination negotiations proceed, the company added.
SEOAY.PK closed Friday's regular trading at $6.42, up $0.17, or 2.72%, with a volume of 345,722 shares.
SEOBF.PK last traded on January 14, to close at $7.55.
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