Forestry company Stora Enso said yesterday that he had fired the CEO since 2019 Annica Breskyn and that he appointed the new CEO Hans Sohlström.
Having followed Stora Enso for a long time S-Bank Fenno fund portfolio manager Juha Varinsen according to the news finally came as a surprise.
“Yes, this came as a surprise to me. I haven’t heard such speculations, and I haven’t had this type of solution in mind either,” says Varis.
Even last year, Stora Enso made an excellent result, boosted by the strong cycle of the forest sector.
The company’s operating profit was around 1.9 billion euros and the turnover was around 11.7 billion euros.
On the other hand, the current year has been dark for the company. In April-June, the company’s operating profit fell by as much as 93 percent from the comparison period to 26 million euros.
According to Varis, one open question is whether the company’s board needed more prompt measures to deal with the deterioration of the result.
Stora Enso previously decided to close the Sunila pulp mill in Kotka.
“The question that comes to mind is whether the government should have reacted more forcefully in other units as well,” Varis reflects.
Declining from the peak period
In any case, Stora Enso’s result for the whole year will be significantly lower than a year ago. The main reasons are related to the weak business cycle of the forest sector.
Inflation, the weak purchasing power of consumers, the contraction of construction and the need for customers to unload stocks are now creating challenges for forest companies.
“Also, the balance sheet situation is suddenly more challenging. The dividend will certainly be cut next spring as well. The boom has come to a grinding halt.”
Stora Enso’s management has commented that not all of the company’s own measures have been successful.
Indebtedness is also behind the weakening of the balance sheet. Stora Enso bought last year Dutch De Jong Packaging Groupin with a purchase price of over one billion euros.
According to Stora Enso, the acquisition was financed with current liquidity and bilateral loan arrangements.
“There has been no profit benefit from the store this year. When the demand outlook weakens rapidly, this type of large acquisition has weakened the balance sheet quite a lot. The timing and price of the deal might be one of the reasons why the company’s situation is what it is now,” Varis estimates.
There will be concrete projects right away
Hans Sohlström, who has been elected CEO of Stora Enso, has gathered a lot of experience in the forest sector during his career.
He has worked, among other things In Kymi-Kymmene, in Finnpap, In the United Paper Mills and at UPM, where he was responsible for the development of bio-based materials in the last phase.
Most recently, Sohlström has worked Ahlstrom-Munksjön as CEO from 2018 until the beginning of the current year.
Varis states that Sohlström has been involved in many, and he is familiar with the industry.
“In Ahlstrom-Munksjø, Sohlström made big efficiency measures and strategic moves. He is, so to speak, a man of action and will certainly set things in motion at Stora as well. He has good and extensive experience,” says Varis.
The key question is how to get Stora Enso’s profit development back on track.
The company has started extensive restructuring, which it estimates will reduce the annual turnover by around 380 million euros and improve the operating profit by around 110 million euros.
The number of personnel is supposed to decrease by 1,150 people. The already completed parts of the change negotiations lead to a reduction of 710 people. The closing of the Sunila factory is one of these parts.
One big task for Sohlström is to complete the sale of Stora’s China unit. The company is in the process of mapping out opportunities for the sale of its consumer packaging board factory in Beihai, China, and related operations.
“In this balance sheet situation, it also matters if the operations can be sold at a reasonable price. Concrete projects like this are on the horizon”, Varis assesses.
Source: Arvopaperi by www.arvopaperi.fi.
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