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Stora Enso sees packaging demand staying strong beyond pandemic

HELSINKI (Reuters) - Finnish forestry firm Stora Enso on Wednesday reported stronger than expected second-quarter core earnings and revenue as higher prices helped to drive strong profit growth in pulp, packaging and wood products.

FILE PHOTO: The Stora Enso company logo is seen near a packaging mill in Riga, Latvia September 18, 2012. REUTERS/Ints Kalnins/File Photo

Chief Financial Officer Seppo Parvi told Reuters he sees the strong demand continuing beyond the coronavirus pandemic that boosted house renovations, takeaway eating and online shopping.

“We see the demand continuing strong in packaging, wood products and construction even after the pandemic and the European Union forest strategy and climate package only support that,” Parvi told Reuters, referring to the EU climate plan announced last week.

Stora’s shares rose nearly 3% early on Wednesday but later in the session they were down 0.30%.

“The Q2 numbers were clearly above estimates due to the very strong development in these cyclical segments. It is safe to say this will not go on forever,” analyst Antti Viljakainen from Inderes said, adding that pulp prices in China have already declined somewhat.

“The stock market is now weighing up how much the strong result will indicate what will happen in the coming quarters,” Viljakainen told Reuters.

Stora said its second-quarter operating profit rose to 364 million euros ($428.32 million) from 178 million a year ago, beating the 302.2-million-euro estimate of 9 analysts polled by Refinitiv.

Stora’s sales rose 22.6% to 2.59 billion euros, with its biomaterials (pulp) unit up 57%, wood products 37.7% and both packaging material units up more than 20%.

The analysts had estimated the revenue to be 2.35 billion euros.

Stora’s paper business sales remained stable year-on-year but it made a loss of 49 million euros.

Parvi told Reuters that Stora sees the situation improving after closing paper mills in Finland and Sweden and finalising the sale of a third mill in Germany by the end of the ongoing third quarter.

The company also said its Oulu mill in northern Finland, which was converted to make packaging cardboard instead of paper, had broken even in the third quarter, three quarters ahead of Stora’s initial expectation.

($1 = 0.8498 euros)

Reporting by Essi Lehto, editing by Louise Heavens and Jane Merriman