Finnish Giants Stora Enso & UPM to Pivot Amid Poor Global Demand

Two of Finland's largest forest companies are looking to consolidate operations to return to profitability and competitiveness.

Wed 25 Oct 23


Two of Finland’s largest forest companies have reported a significant drop in profit and activity.

Blaming “Geopolitical uncertainty, sluggish economic activity and persistent inflation”, Stora Enso and UPM have appointed new CEOs as the global forest market addresses changes to market fundamentals. 

Yesterday, Stora Enso and UPM reported that profitability has crashed by 96% and 72%, with the poor results continuing a global trend where forest companies are shifting from high-volume to high-value production.

According to newly appointed Stora Enso CEO Hans Sohlström, profits fell from 527 million in 2022 to 21 million euros between July and September. 

In addition, revenues declined by 28% to 2.13 billion euros, “resulting in weak demand and low prices affecting nearly all of its areas of operation.”

Stora Enso was among the forest companies hardest hit by sanctions placed on Russia by Western Countries and relied heavily on the Russian market for feedstock.

Earlier this year, Stora Enso fully exited the Russian market, with the lack of fibre supply leading to the closure of its Sunila pulp mill in Kotka.

The Suinila pulp mill was last upgraded just 3 years ago. According to Stora Enso, the Finnish mill has been impacted by the Russian-Ukrainan war and the increased competition for pulp wood in European markets. The site has an annual capacity of 375,000 tonnes of long-fibre pulp and employs approximately 270 people.

Despite challenges, Mr Sohlström stressed that “variable costs have peaked and wood prices remain high.”

Like Stora Enso, UPM’s profits have plummeted from 779 million euros in 2022 to 220 million euros in 2023, with the firm’s total revenue falling from 3.42 billion to 2.58 billion euros – a 24% decrease.

From next year, Massimo Reynaudo will replace retiring UPM CEO Jussi Pesonen with the world’s leading graphic paper producers adjusting to a new market where global demand for print and writing paper is in structural decline.

Since COVID-19, UPM has been consolidating operations to remain competitive.

In March, UPM announced plans to consolidate production across its 13 sites to reduce capacity by 485,000 tonnes to 6 million tonnes of paper produced per year.

At the time, Mr Pesonen said the reconsolidation “ensured competitive production on our remaining newsprint machines across Europe.”

Last month, Wood Central reported that the push to flexible production comes amid a crash in the global pulp and paper markets, leading the world’s largest forest companies to write off significant financial losses.

In July, Canfo reported a USD 67 million loss for the second quarter, with a USD 37.9 million loss from its pulp division.

Like West Fraser Timber, which posted a USD 173 million second-quarter loss, Canfor attributes a significant portion of its falling profitability to a weak pulp and paper market.

“Declining pulp prices led to a significant inventory write-down,” West Fraser Timber said.

“As a result, our pulp and paper segment experienced higher losses than expected.”


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