PREVIEW-Nordic forestries' second quarter seen weak
HELSINKI, July 21 (Reuters) - The price outlook for paper, as well as signs of softening demand and wood sourcing difficulties will be the key features of Nordic forestry companies' second-quarter results, analysts said on Monday.
Nordic paper makers have struggled in the second quarter, as stagnating paper prices and higher costs eat into their already low margins, but analysts say the reported figures are not the main focus this time.
"With numerous profit warnings, figures are less interesting," said Pohjola Bank analyst Henri Parkkinen.
"Paper volumes are interesting as there are signs of softening economy -- estimates of how this might affect volumes later, and whether they plan curbing production due to demand, will be interesting to see."
Nordea analyst Harri Taittonen said he will also be looking closely at engineering companies' order books to gauge the economic outlook and to get hints of future paper demand.
Analysts said they would be closely looking at how well the paper firms have been able to push through planned price hikes.
Pohjola's Parkkinen said magazine paper prices could rise, while for newsprint and fine paper, used for art books and glossy advertising, prices could stay steady or decline.
"Magazine paper markets in Europe are in good condition, and I have some hope that prices of magazine paper might go up twice this year. Other paper grades are more difficult, especially newsprint is struggling," he said.
WOOD DUTIES
Russian wood duties and slow timber trade in Finland spell more trouble for the forestries.
"Main interest will be in how the forestries notify the problems, what they have done and what they are planning," Taittonen said. "Wood duties are of course in other people's hands, but I expect some indication that they are not waiting until January."
About 15 percent of wood used by Finnish paper and pulp mills is imported from Russia and Sweden also imports considerable amounts of Russian timber. Russia has announced plans to hike wood duties from 15 to 50 euros per cubic metre from January 2009, which would more than double the cost of lumber.
The top paper and board maker Stora Enso (STERV.HE) is the most likely company to cut capacity due to Russian duties as its pulp mills are the most dependent on Russian wood.
"I think especially Stora Enso might announce something concrete on a larger scale ... the company has said it wants to act pre-emptively," Parkkinen said. Continued...
