Stora Enso warns soaring energy costs will bruise Q4 profits

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

Oct 21 (Reuters) - Finnish forestry firm Stora Enso (STERV.HE) warned on Friday that fourth-quarter profit for its packaging business, its biggest division, would be hurt by soaring energy costs, sending its shares sliding.

Its stock fell 6% in early trade despite the company having posted a better-than-expected 29% jump in third-quarter operating profit.

European manufacturers are grappling with sharp rise in energy prices caused by Russian curbs on natural gas. Consumer demand is also slowing as households tighten budgets amid a cost-of-living crisis driven by spikes in inflation.

"Looking ahead, we see the first signs of potential macroeconomic slowdown that could eventually also impact our business," Chief Executive Annika Bresky said in a statement.

Stora Enso said its paper division, while seeing solid demand, would also be hit by higher energy costs as well as maintenance work.

For the third quarter, operational earnings before interest and tax (EBIT) came in at 527 million euros ($515 million), it said, beating the 465.3 million euros expected in a company-provided estimate.

The company kept its guidance for 2022 operational EBIT to rise year on year.

In a separate statement, the company said it would invest about 1 billion euros to convert another paper machine at its site in Oulu, Finland, to make consumer board in a further move to expand its packaging business.

This is its third paper-to-packaging conversion since 2016.

In recent years, Stora Enso has increased its focus on its packaging materials division after deciding to sell four out of its five paper mills, which it said were no longer profitable.

In September, it bought a Dutch packaging company to increase its corrugated packaging capacity.

($1=1.0242 euros)

Reporting by Boleslaw Lasockip; Editing by Josephine Mason, Mark Potter and Edwina Gibbs

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