Stora Sees Little Sign of Recovery

Stora Enso posted weaker first-quarter profits and said there had been no sustained recovery in its markets.

The Finnish-Swedish company, the second largest forest products company in the world, said there had been signs of improvement in demand for uncoated fine paper and consumer packaging, which tend to lead the paper-industry cycle, but advertising-related paper markets remained weak.

``Although markets are showing the first signs of more favorable conditions, a clearer upturn will be needed before the financial results of the group improve,'' Stora Enso said in a statement, declining to forecast full-year earnings.

The company said January-March pre-tax profits fell 44 percent year-on-year to $213.4 million, but eased only 3.5 percent from a weak fourth-quarter.

Chief Executive Jukka Harmala said the North American paper markets, where Stora Enso has significant operations following its acquisition in 2000 of Wisconsin-based Consolidated Papers, remained weak compared to Europe.

``Advertising-driven papers have remained weak, while consumer-related products -- office papers and packaging -- have improved somewhat,'' Harmala told Reuters by telephone from the group's London offices.

``We have seen the bottom of pulp prices, and the trend is slightly up now,'' Harmala said. Pulp prices, down 7.4 percent this year after sliding 34 percent last year (FOEX), are monitored as a paper price indicator, although the link has weakened.

Harmala said manufacturers had raised prices of uncoated fine papers, mainly in the second quarter, but said prices of coated fine, coated magazine and SC (supercalendered) magazine paper had fallen this year by an average of about seven percent.

To take up slack in demand and avoid piling up inventories, Stora Enso slashed paper production heavily last year, but market-related production cuts in the first quarter amounted to 335,000 tons, down from 486,000 in the previous quarter.

Harmala said the unused capacity also held significant potential for earnings improvement once volumes recovered.