Stora Enso looks forward to a resurgent 2004.Stora Enso
The Company of the Year award is chosen by a vote of the Solutions! Editorial Board. Members of the Board took a number of factors into account in their deliberations--financial results, environmental policies, management practices and health, education and training programs, a long-term commitment to the paper industry exhibited by capital investment and a clear pursuit of strategic business goals and global competitiveness. Stora Enso has a strong claim to be among the world leaders For a list of heads of state, see . World leaders is a MMORPG. The game involves creating a state, joining an alliance and going into war. It is mostly played by players from Israel, China, USA, Britain, Brazil and Saudi-Arabia. across these categories. The group has shown a high degree of innovation under the current management team. Stora Enso has been keen to experiment with new ideas "New Ideas" is the debut single by Scottish New Wave/Indie Rock act The Dykeenies. It was first released as a Double A-side with "Will It Happen Tonight?" on July 17, 2006. The band also recorded a video for the track. and the company has shown a refreshing willingness to employ a range of different management tools along the way. In recent years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time group has systematically assessed and managed risk across its business portfolio--not just interest rates or currency risks, but energy, raw materials and other key factors in the supply chain are analyzed. Stora Enso has also been at the forefront of innovation in terms of its environmental policies. Evidence of this can be seen throughout the company. Partly as a result of this dedication, the Group has now been included in the Dow Jones Dow Jones the best known of several U.S. indexes of movements in price on Wall Street. [Am. Hist.: Payton, 202] See : Finance Sustainability Index for five consecutive years. Stora Enso ranked as the leading company in the forest products and paper industry sector for the second year in a row in 2003, receiving the highest possible score (100%) in environmental and corporate social responsibility reporting. As the company notes on its own web site, "Even though Stora Enso does not have the highest score in all dimensions, the overall good performance is reflected in the highest total score." [ILLUSTRATION OMITTED] Underlining un·der·lin·ing n. 1. The act of drawing a line under; underscoring. 2. Emphasis or stress, as in instruction or argument. the importance the group places on the issue, Stora Enso publishes a sustainability report along-side its Annual Report each year. The report includes almost as much information about environmental performance and corporate responsibility as the company releases on its business results. Just as importantly, it projects a willingness to engage its critics and develop policies in a transparent and ethical manner. Today, 100% of the company's pulp, paper and paperboard operations are covered by ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 14001 and/or EMAS EMAS - Edinburgh Multi Access System (Eco-Management and Audit System), and these tools are integrated with the company's own total quality management approach. The group publishes detailed figures on emissions and waste from just about every mill, covering S[O.sub.2], NOx, AOX AOX Alternative Oxidase AOx Alcohol Oxidase AOX Adsorbable Organic Halides AOX Armies of Exigo (computer game) AOX Alstria Office REIT AG AOX Adsorbable Organohalogens AOX Army of Xena AOX Automated Optical Cross-Connect , COD, C[O.sub.2] etc. Traceability systems cover more than 98% of the company's wood supply and Stora Enso is actively promoting forest certification. As anyone in business knows, of course, all the environmental or corporate responsibility credentials in the world mean nothing if the company isn't profitable. It is clear from Stora Enso's results that today's economic circumstances are not exactly helping the company in its target to deliver 13% ROCE ROCE See: Return on capital employed (Return on Capital Employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). ) over the cycle. But few companies will have done as much in trying to position themselves to take advantage of global opportunities when the upturn does arrive. The core of the Group's plans for the future are more than evident in its fiber strategy. Stora Enso is focusing on securing long-term supplies at the lowest cost possible and offloading higher cost, "non-core" assets. In recent years, the company divested large-scale forest holdings in Finland and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . More recently, the group disposed of 146,000 hectares of forestland for·est·land n. A section of land covered with forest or set aside for the cultivation of forests. in Ontario, Canada, and transferred the company's Swedish forest holdings into a new company called Bergvik Skog. [ILLUSTRATION OMITTED] Bergvik was created with a long-term wood supply contract with Stora Enso for approximately 4.5 million cubic meters/yr (solid under bark) of cutting rights at market prices. The majority of the shares in Bergvik Skog were sold off to institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. in March this year, but Stora Enso still controls 43.3% of the group. The move allowed the Group to realize a net reduction in interest-bearing liabilities of some SEK SEK In currencies, this is the abbreviation for the Swedish Krona. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 10.0 billion (EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.1 billion) and slashed the group's debt/equity ratio Debt/Equity Ratio A measure of a company's financial leverage calculated by dividing long-term debt by shareholders equity. It indicates what proportion of equity and debt the company is using to finance its assets. by about 0.15, leaving Stora Enso with one of the strongest balance sheets in the industry, at just over 0.3. On the flip side Flip side In the context of general equities, opposite side to a proposition or position (buy, if sell is the proposition and vice versa). , Stora Enso has used its financial muscle to build a larger presence in Russia and the Baltic countries, where a host of new sawmills and acquisitions are set to enhance future fiber supplies at lower cost. More immediately, 2005 will see the first pulp produced from the massive Veracel mill in Brazil, where Stora Enso has a 50% share in a joint venture with Aracruz. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Stora Enso's Senior Executive Vice President Kai kai Noun NZ informal food [Maori] kai noun N.Z. (informal) food, grub (slang) provisions, fare, board, commons, eats (slang Korhonen, the 900,000 metric tons/yr Veracel mill secures a key source of short fiber for years to come. "If you want access to short fiber, then geographically you go south," he said. "Brazil is one of the best--possibly even the best--location for that, especially for eucalyptus eucalyptus (y  'kəlĭp`təs): see myrtle. eucalyptus pulp. For long fiber and the types that get used in reinforcement pulp across many of business areas, the best fiber sources are found in the Northern Hemisphere. Russia is a key forest area and, from our point of view, it's one of the best under-utilized locations for long fiber. We are looking to secure our long-term wood flows from that region. "But that's not to underestimate the importance and strength of the advantages we gain from the quality of our existing spruce plantations," he continued. "What we've done in Europe by reducing our Swedish holdings and building up in Russia is to try and secure a base for future supplies of cheap raw materials that will be needed as we grow in the future." For Stora Enso, the investments in Brazil, Russia and the Baltic states Baltic states, the countries of Estonia, Latvia, and Lithuania, bordering on the eastern coast of the Baltic Sea. Formed in 1918, they remained independent republics until their involuntary incorporation in 1940 into the USSR. They regained their independence in Sept. represent the basis of future growth for the company and a similar strategy is being pursued in arguably ar·gu·a·ble adj. 1. Open to argument: an arguable question, still unresolved. 2. That can be argued plausibly; defensible in argument: three arguable points of law. the world's biggest growth market--China. As Korhonen points out, an effective fiber strategy is likely to be a key success factor in this rapidly growing market. "For China, the main challenge for the moment is securing fiber. You need to have a good idea of where you're going to get your fiber from. In this respect, I think we have a good chance of making things work out there." Stora Enso already operates a fine paper mill at Suzhou in the Jiangsu Province, but feasibility studies have been undertaken on new plantations and the possibility of adding a new paper machine as the company looks to greatly expand its presence in China. In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , the Suzhou mill is getting a EUR 38 million upgrade to extend the production capabilities and increase the annual sheeting capacity by 75,000 metric tons/yr to 240,000 metric tons/yr. The work should be completed in September 2005, but to most observers it seems highly unlikely Stora Enso will stop there given China's potential. On the other hand, the company is well aware of the very real danger that overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. could wreck any major investment in China. As a company spokesman noted, "The risk of overcapacity is definitely there. At the same time, we can definitely see that the demand growth is there as well." Stora Enso forecasts that coated fine paper demand in China will grow at 7% per year through to 2010, so the prize is certainly interesting. However, even if the company is successful in attacking the quality end of the market, margins could be squeezed if overcapacity becomes the problem that some analysts predict. Stora Enso does not believe that all the startups announced to date will be implemented, but even so, overcapacity will remain a concern. STEP CHANGES Worries about overcapacity are not restricted to China by any means. Three years of poor market demand have pushed operating rates well down across the company, impacting profitability along the way. So, for example, when Stora Enso announced that it would invest EUR 450 million in a new SC paper machine for the Kvarnsveden mill in Sweden the news was accompanied by the corresponding closure of 130,000 metric tons/yr of capacity elsewhere. "Obviously, we're not happy about the present operating ratios and there is overcapacity in the market," Korhonen says. "Running at just over 80% of our operational capacity in Europe isn't great, but the market is growing." This addition of new capacity and phasing out of older machines is similar to the approach the company took when it moved ahead with a new newsprint mill at Langerbrugge in Belgium. The company says that it is pleased with the competitiveness of the new 400,000 metric tons/yr machine, which takes its raw materials from the "urban forests" of Brussels, Paris, and London. Competitiveness is, after all, one of the company's main aims. In fact, the new Kvarnsveden machine is part of Stora Enso's asset restructuring program in Europe, which also includes a rebuild of PM 6 at the Maxau Mill in Germany, restructuring of the Corbehem mill in France, a EUR 211 million energy improvement project at the Skoghall board mill in Sweden and the launch of the "North European Transport Supply System," which the group hopes will slash logistics costs. Given the state of the markets, restructuring efforts are not restricted to Europe. North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. has proved to be an extremely challenging market for Stora Enso in recent years, with overcapacity and weak demand. The group has been forced to extend and accelerate a restructuring plan across the group's asset base in the region to combat an "unsatisfactory" performance. The profit enhancement program in North America will cut employee numbers to 5000 in 2005, compared to the 7300 that were employed in 2000. By the time the current round of cuts is finished, Stora Enso will have shut six paper machines. It is not all depressing news, though. The cutbacks are being accompanied by a US$ 250 million investment and modernization program that should secure the viability of the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. business for years to come. As Korhonen explains, "We've identified all the non-viable units. We're developing and modernizing in other areas and from a volume point of view our production capacity will actually go up slightly." The group is confident that the changes being made now will pay dividends in the future, as the units will be far more competitive when the market eventually recovers. Not only that, there are a number of signs that a tentative recovery is gathering momentum in the United States. According to the company, consumption is climbing back to the levels of demand last seen in 2000 before the technology bubble burst, although there is still some slack in the system. "Utilization rates are challenging our competitiveness, but we now have a good platform in the United States and some growth will help us," Korhonen adds. According to Stora Enso's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Jukka Harmala, the rising GDP GDP (guanosine diphosphate): see guanine. figures witnessed in the United States are now, finally, beginning to drag the paper industry out of its three-year malaise as ad spending rises and demand for packaging improves. "In North America demand for paper is improving gradually. Despite the low value of the dollar, imports from Europe and Asia are continuing, though at a slower rate than previously." In the short term, the company's results this year are likely to be hit by rebuilds of fine paper machine 97 at the Kimberly mill and PM 16 at Wisconsin Rapids-more strands of the North America's profit enhancement program. [FIGURE 1 OMITTED] Nevertheless, Harmala forecasts that the coated fine paper market will continue to improve and Stora Enso has announced price increases in a bid to claw back some badly needed profitability from the market. Price increases are also the order of the day in the magazine paper market, which also saw better demand in the first part of this year. In Europe, economic recovery has been slower to establish itself. However, as Harmala pointed out, "Demand for paper has increased and this seems to be stabilizing prices for most paper grades and making some price increases possible. Provided that market conditions continue to improve, the group's results are expected to benefit in the latter part of the year." Whatever happens this year, it is clear that Stora Enso will continue to seek growth in each of its target markets and aim to enhance its profitability over the business cycle. After a long period of sluggishness, economic conditions around the world do show some early signs of improvement and as Korhonen points out, "If we want to be the leading paper company in the world then growth has to be one of our chief concerns." [ILLUSTRATION OMITTED] That growth will have to be tempered by financial discipline. But with the backing of a coherent fiber strategy, a strong balance sheet and serious growth potential in its Asia markets particularly, Stora Enso looks set to continue to build and develop its asset base around the globe. In the meantime, management faces some serious challenges in terms of getting profit ratios back on track.
Table 1: Stora Enso's sales by product area, 2003-2002.
2003 2002
EUR million % %
Publication Paper 4,296 35.3% 4,716 36.9%
Fine Paper 3,198 26.3% 3,427 26.8%
Merchants 628 5.2% 721 5.6%
Other (281) -2.3% (290) -2.3%
Paper 7,840 64.4% 8,574 67.1%
Packaging Boards 2,762 22.7% 2,720 21.3%
Wood Products 1,400 11.5% 1,235 9.7%
Wood Supply Europe 2,074 17.0% 1,959 15.3%
Other (591) -4.9% (531) -4.2%
Forest Products 2,883 23.7% 2,663 20.8%
Other (1,312) -10.8% (1,174) -9.2%
Total 12,172 100.0% 12,783 100.0%
RELATED ARTICLE IN THIS ARTICLE YOU WILL LEARN: * How Stora Enso is securing its position as one of the world's top pulp and paper companies. * How the company is re-shaping its global fiber strategy to underpin future expansion. * How the company intends to seek growth opportunities in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and Asia. ADDITIONAL RESOURCES: * "Stora Enso moving into Latin America," L.C. Araujo, Solutions!, January 2004: Product Code: 04JANS JANS Joint Army Navy Space 065 (Enter product code in search engine at www.tappi.org." * Stora Enso web site: www.storaenso.com. * For more information on the Company of the Year Award, contact Alan Rooks at arooks@solutionsmagazine.org. RELATED ARTICLE: STORA ENSO'S YNGVE STADE NAMED TAPPI FELLOW Yngve Stade, senior executive vice president of Stora Enso, Stockholm, Sweden, was named a TAPPI Fellow at the 2004 TAPPI Annual Meeting on May 4, 2004. Mr. Stade has been a member of TAPPI since 1994 and a member of the Research Management Committee. In addition to being a member of the TAPPI Board of Directors from 2002-2004, he was also a member of the Executive Committee of the Board. He served in leadership positions in the TAPPI Research Management Committee, and also served as the President of SPCI SPCI Single-Premium Credit Insurance SPCI Standard & Poor's Commodity Index SPCI Software Product Configuration Item SPCI Small Pci , the Swedish technical association for the paper industry. [ILLUSTRATION OMITTED] RELATED ARTICLE: STORA ENSO IN BRIEF 15.7 million metric tons of paper and board capacity 7.4 million cubic meters of sawn and processed wood products Annual Sales: EUR 12.2 billion Market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. : EUR 8.9 billion Listed on the Helsinki, Stockholm and New York stock exchanges New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. 44,000 employees in 40 countries [ILLUSTRATION OMITTED] JIM Jim Miss Watson’s runaway slave; Huck’s traveling companion. [Am. Lit.: Huckleberry Finn] See : Escape KENNY, CONTRIBUTING EDITOR/EUROPE ABOUT THE AUTHOR Jim Kenny is contributing editor/Europe, for Solutions! magazine, and is based in Brussels, Belgium. He is the former vice president of editorial for Paperloop and today heads his own company, DSI (Dynamic Systems Initiative) An umbrella term for a suite of Microsoft products that help manage the Windows environment in large enterprises. DSI was introduced in 2003. . Contact him by phone at +32 2 534 4960, or by email at jim.kenny@dsinow.com. |
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion