The world's top paper and board producer Stora Enso posted disappointing second-quarter earnings recently and said conditions remained tough in its main markets, sending its stock sliding.
Weak paper demand tied to the depressed global advertising markets was once again the Achilles heel, and the group's North American operations lost money in the first half while its European business stayed clearly profitable.
Second-quarter pre-tax profit excluding non-recurring items sank 38 per cent year-on-year to €154.6 million, below all forecasts. Earnings per share before one-offs slumped 33 per cent to €0.12.
The Finnish-Swedish company said it had not seen any signs of improvement in print media advertising, especially in the United States, and it declined to predict full-year earnings.
"The situation that existed during the first quarter has continued, and the price declines that occurred during the first quarter now had an effect for the whole of the second quarter," Stora Enso Chief Executive Jukka Harmala said.
"After the first quarter, we said we had reached the bottom but did not know when we would rise out of it, and the situation in fact remains quite the same," Harmala told Reuters in a telephone interview.
Harmala said that with the return on capital employed down to around seven per cent in the first half, it was clear that the company would not achieve in 2002 its long-term target for ROCE of at least 13 per cent over the business cycle.
Stora Enso shares, already at 10-month lows on worries about the paper market recovery and the grim mood sweeping stock markets, plunged 7.8 per cent to €10.60.
"This was a clear disappointment," said Evli Bank forestry analyst Antti Seppanen. "The recovery is painfully slow."Stora Enso's results marked a gloomy start to the quarterly earnings reporting season for the Nordic forest industry. They follow generally weak results from North American rivals as the global economic slump keeps paper markets under pressure.
April-June net sales shrank 4.6 per cent on the same period a year ago to €3.23 billion, but Stora Enso said some consumer related products, such as office papers, consumer boards and timber products, were faring better than others.
"The one thing that really stands out is the complete lack of progress on the volume front," said forest industry analyst Lars Kjellberg at CSFB in London.
The company's significant North American operations suffered an operating loss before goodwill amortisation of €117 million, up from losses of four million a year ago.