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Stora Enso Q1 profit halves to $97 million

Matti Huuhtanen, Associated Press

HELSINKI (AP) -- Paper maker Stora Enso Oyj's first-quarter net profit halved to €74 million ($97 million), mainly because of lower paper prices and smaller demand for renewable packaging materials.

The Finnish-Swedish company said Tuesday that revenue fell slightly in the period, to €2.67 billion from €2.62 billion a year earlier. Net profit in the quarter last year was €156 million.

Stora said it expects slightly higher sales in the second quarter but warned of temporary interruptions at some plants.

"There will be maintenance stoppages in several European mills and the benefits of improving variable costs are expected to become only slowly apparent in the results," Stora said. "The main maintenance impact is anticipated to be in the biomaterials business area."

Like other forest products companies, Stora has been struggling with persistent overcapacity in European markets and low demand, forcing it to cut production, close mills and lay off thousands of workers.

In February, Stora announced 240 layoffs as part of a planned annual savings target of some €70 million.

CEO Jouko Karvinen said the first-quarter performance had been in line with expectations.

"However, the return on capital employed was below cost of capital, which shows the never-ending need to improve our cost position and operational performance," Karvinen said. "In addition to the expected price pressures and variable cost reductions only slowly improving our profit, we also had operational issues in several of our mills."

Stora's shares closed up almost 3 percent at €5.29 ($6.95) on the Helsinki Stock Exchange.

Karvinen stressed the importance of keeping the company's "cash engines going strong" to finance plant construction in Uruguay and China.

"I am very excited about our most recent investment decision to build a world-class integrated consumer board and pulp mill in China based on locally grown renewable materials," he said. "Both these announced investments are significant steps in transforming our company into a value-creating renewable materials company in markets with significant growth."

Construction of the €1.6 billion board and pulp mill at Beihai city in Guangxi, southern China, is expected to start this year with production planned to begin in late 2014.

Last year, Stora announced plans to build a $1.9 billion pulp mill in Uruguay with its Chilean joint venture partner Arauco.

Helsinki-based Stora Enso is one of the world's largest forest product companies, making magazine paper, newsprint, fine paper, pulp and packaging boards. It employs 29,000 people worldwide — up from 26,000 a year earlier.