Stora Enso is implementing a profit protection programme intended to achieve an annual cost reduction of €120 million as well as reduction of capital expenditure by about €50 million compared to the earlier announced forecast. The programme includes plans to reduce costs at the Ala and Imavere sawmills and a plan to close papermachine 6 at Imatra Mills.
Stora Enso is implementing a profit protection programme of €120 million targeting reductions in variable and fixed costs, as market uncertainty increases. The programme will include all divisions and corporate functions. The group estimates that some effects will be visible already during 2019 with full impact by the end of 2020.
‘We have prepared already for a year for the possibility that the markets would become weaker. Under the current geopolitical circumstances, there is a notable risk that global trade could shrink materially. Due to market risk and increasing costs, we are now taking proactive action and are implementing our profit protection programme. We do this to further strengthen our competitiveness,’ said Stora Enso’s CEO Karl-Henrik Sundström.
As part of the programme, Stora Enso is planning to close papermachine 6 at Imatra Mills in Finland and to start co-determination negotiations at the mill related to this plan. With annual production capacity of 90,000 tonnes, PM6 is a small machine that has reached its end of life. The planned closure would result in a reduction of maximum 80 FTEs (full time equivalents) and reorganisation of some tasks. The plan is to continue production until the maintenance break during Q3 or until the end of 2019, with an ability to deliver the committed volumes. The planned closure would cost approximately EUR 4 million related to asset write off and costs of the co-determination process. The amount would be recorded as an item affecting comparability (IAC).
Stora Enso is also planning to take performance improvement measures at the Ala sawmill in Sweden and the Imavere sawmill in Estonia. The plan includes actions to increase productivity and reduce costs. The planned actions would result in a reduction of maximum 35 FTEs and required co-determination negotiations related to this plan have been initiated.
The detailed plans of the profit protection programme are subject to appropriate information and/or consultation of the relevant employee representative bodies where applicable, and is also subject to the relevant legal procedures and approvals.
Stora Enso announced in November 2018 that it would maintain its capital expenditure (including investments to biological assets), at €550 to 600 million in 2019, excluding the impact of IFRS 16 Leases. Stora Enso’s new capital expenditure forecast for 2019 is €540 to 590 million, but now including the capitalised leasing contracts according to IFRS 16 Leases of approximately €40 million. The new capital expenditure forecast takes into account a reduction of €50 million as part of the profit protection programme. The depreciation and operational decrease in biological asset values forecast is €590 to 630 million. This includes also the IFRS 16 impact.