July 19 (Bloomberg) -- Stora Enso Oyj, Europe’s biggest paper maker, said it will develop a cartonboard production line first after winning regulatory approval in China for a 1.6 billion-euro ($2.1 billion) project in Guangxi province.
Construction of a planned pulp mill will begin after the cartonboard plant is operational in 2016, Helsinki-based Stora Enso said today in a statement. Spending on the first phase of the project will total 760 million euros, of which 90 million euros are allocated for 2013.
“The revised investment schedule will cut the mid-term three-year capital expenditure requirements by half,” Mats Nordlander, head of the renewable packaging unit, said in the statement. “Capital will be committed for the pulp mill only when the board machine is already generating cash flow.”
Stora announced plans for the Guangxi mill in March 2012 as part of a strategy to provide packaging materials for consumer goods to tap into growing middle-class demand in China. The company is entering new product lines and industries to become less dependent on the waning newsprint business. The manufacturer announced today that it’s investing 32 million euros in a biorefinery at its mill in Sunila, Finland.
“It would be wrong to expect the operating environment to get any easier in the foreseeable future,” Chief Executive Officer Jouko Karvinen said today on a conference call. “We’ll never be a boring company. We’ll continue to do difficult things.”
Second-quarter revenue totaled 2.72 billion euros, Stora Enso said separately. That compared with the 2.7 billion-euro average of 10 analyst estimates compiled by Bloomberg. Earnings before interest and taxes, excluding some one-time items and asset revaluations, fell 14 percent to 124 million euros, dragged down by losses at the newsprint and book-paper unit.
A 200 million-euro cost-savings plan, including about 2,500 job cuts, is “critical” to the company’s future and is proceeding on schedule, Karvinen said in another statement.
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