M-real paper losses hurt H1 results
The Finland-based paperboard and paper company also predicted a tough third quarter on general economic uncertainty in Europe coupled with the ongoing measures to remove itself from revenue-draining paper business.
Falling profit and weaker demand
The firm’s figures were hard-hit by a raft of one-off costs totaling €61m related mainly to its strategy of changing from a “paper company to a clearer packaging producer”.
This meant it operating H1 profit was €14m – although the firm also pointed out the figures excluding these “non-recurring items” was €75m.
Revenues had also been hit because costs for wood, chemicals and energy were also higher, said the company.
The total paper business delivery volume in January–June was 578,000 tonnes – compared to 589,000t in the same period in 2009. Board and paper deliveries by Consumer Packaging totalled 649,000t (693,000).
Structural change
Over the last six months the company has made a string of announcements that will see it significantly reduce its paper operations by either selling or closing a number of mills.
M-real said that several unsuccessful attempts to find a buyer for its Alizay plant meant that it would close the site in September 2011 if it remained unsold.
Estimates made by the company revealed the unprofitability of its paper operations.
The firm said the planned measures at the three paper mills in Alizay, Gohrsmühle and Reflex, would cut its annual sales by €390m but boost its operating profit by €60m.
Its annual paper production capacity would be reduced by about 500,000 tonnes, of which about 430,000 tonnes would be uncoated fine paper and 70,000 tonnes coated specialty papers.
Outlook
Economic slowdown in the US and Europe had already hit pulp and paper demand, said M-real.
Cartonboard orders had fallen from record levels in 2010 but remained strong, with demand for board and the profitability of board continuing to be “good”.
But the firm warned that paper demand was weak.
Efficiency programmes are forecast to net the company M-real’s €90m in savings in 2011.
Looking ahead to Q3, the company said: “M-real’s 3Q 2011 operating result, excluding non-recurring items, is expected to weaken clearly from 2Q 2011 due to the worsened paper and pulp market situation, planned measures at Alizay and Speciality Papers as well as investment and maintenance shutdowns at Botnia’s pulp mills. Profitability of board production is expected to be good also in 3Q 2011.”
