June 30, 2014 / 9:56 AM / in 3 years

UPDATE 2-New Stora Enso CEO's task to improve paper profits

* Karl-Henrik Sundstrom appointed CEO from Aug. 1

* Says Stora has no pressing need for consolidation

* Analysts see no major changes to strategy

* Shares down 0.4 pct vs 0.3 pct drop in Helsinki bourse (Rewrites first paragraph, adds comments on strategy, consolidation)

By Sakari Suoninen

HELSINKI, June 30 (Reuters) - Finnish pulp and paper maker Stora Enso has promoted Karl-Henrik Sundstrom to the chief executive post, charged with boosting profitability in newsprint and magazine papers which have long been in decline as readers move online.

The company, with annual sales of about 10 billion euros ($14 billion), has been struggling for years as paper consumption has fallen and has already taken a series of rationalisation measures.

Yet operating profit from paper making delivered only 20 percent of the group total in the first quarter, despite accounting for 40 percent of revenue.

Chairman Gunnar Brock said on Monday making paper production more profitable was a priority for the company, even though Stora Enso’s problems in the area were smaller than those of most of its rivals.

“One of the tougher jobs for Karl-Henrik ... is to find a structure and an operating performance product-wise in fine paper, magazine and newsprint that is sustainable and profitable, where we can earn above the cost of capital,” Brock told a news conference.

Sundstrom, 54, is currently head of Stora’s largest division, paper and wood products. He succeeds Jouko Karvinen, who said in April he would step down after a successor had been found.

Karvinen has already taken a number of restructuring measures at Stora Enso to help it adjust to a decline in demand for paper in Europe, as consumers shift from magazines and newspapers to the Internet.

The new CEO, who will take office on Aug. 1, said that much of the needed transformation in paper making had been done, as the group has closed paper mills and announced in April it would convert its Varkaus mill to produce lightweight containerboard rather than paper.

NOT IN TALKS

One further possibility would be to fold Stora’s paper activities together with those of rival UPM-Kymmene, in a move which would help them to close more capacity, a prospect that has helped lift Stora shares more than 40 percent (and UPM’s some 60 percent) in the past 12 months.

But Sundstrom said nothing was planned in this respect.

“We are not in a situation where we must do something,” he said, when asked about consolidation in the industry. “We are in a situation where we can do if it’s beneficial for us.”

Brock added that the company is not in talks with UPM about putting their paper assets together.

Sundstrom, who is Swedish, joined Stora in 2012 from NXP Semiconductors. He was first chief financial officer before moving last year to lead the paper and wood products division, which contributes well over half of Stora’s sales.

“Sundstrom is a safe choice, he has got good results at the company,” analyst Antti Viljakainen at market analysis firm Inderes said.

Karvinen and the company have said no strategic differences were involved in his departure.

Shares in the company, which hit a near three-year peak of 8.38 euros earlier this year, were down 0.4 percent at 7.20 euros by 0850 GMT. The Helsinki bourse general index was down 0.3 percent at the same time. ($1=0.7331 euros) (Editing by Greg Mahlich and David Holmes)

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