HELSINKI (Reuters) - Finnish forestry firm Stora Enso STERV.HE reported a 46% drop in first-quarter profit as business closures to tackle the coronavirus pandemic hit demand for office paper and struggling publishers stopped producing free daily newspapers.
Joining the rush of European companies making cut-backs, the pulp, paper and packaging-board maker increased its savings target for the end of 2021 by 75 million euros ($81 million) and said it would pay most of its dividend only when it could better estimate the impact of the virus outbreak on its business.
“The first quarter of the year has been marked by challenging harvesting conditions, strikes in Finland and the start of the COVID-19 pandemic,” Chief Executive Annica Bresky said on Tuesday.
Stora Enso, Europe’s second-largest paper producer, said its adjusted operating profit in the three months to March 31 fell to 180 million euros from 335 million a year earlier, though still beating the average forecast of 137.6 million in a Refinitiv poll of analysts.
The company had guided to a first-quarter adjusted operating profit of 90 million to 200 million euros.
Bresky said lower prices and volumes had hit sales and operating profit, compared with record levels in the first quarter of last year.
Sales at its paper unit - which accounted for 27% of group revenues in the quarter - dropped 22% from a year ago, as a decline in demand in Europe accelerated.
To battle the macroeconomic challenges, the company increased its savings target to 350 million euros by the end of 2021 from 275 million previously. It said it had reached 40 million euros of savings in the first quarter.
“With regards to managing a potential demand decrease, we have started preparations for potential temporary layoffs or shorter working time if and when needed,” Bresky said.
Stora Enso said it would pay a dividend of 0.15 euros per share and the remaining 0.35 euros per share of a payout announced in January would be distributed with board approval when the impact of the pandemic became clearer.
The company also said it would drop its practice of issuing financial guidance due to the uncertain global economy.
“The big picture, which seems very blurry, is not a signal of confidence, although the company’s defense game in Q1 was reasonable in the current circumstances,” Inderes analyst Antti Viljakainen said in a research note.
Stora Enso shares were 1.5% lower in morning trading, roughly in line with wider markets.
Reporting by Tarmo Virki and Anne Kauranen; Editing by Louise Heavens and Mark Potter
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