Stora Enso Stock Rises as Cost Cuts Limit Quarterly Loss

Stora Enso Oyj, Europe’s largest papermaker, gained the most in six months as labor-cost reductions helped limit the first-quarter loss and the company outlined a 200 million-euro ($260 million) savings plan.

Stora Enso gained as much as 7.7 percent, the biggest intraday advance since Oct. 23, and was trading up 6.1 percent at 2:57 p.m. in Helsinki. Volume was about double the three-month daily average.

The company and Finnish competitor UPM-Kymmene Oyj have shuttered production lines and cut jobs in response to falling demand for paper as consumers shift to online media. The savings project, which includes a 30 million-euro cost-reduction target at its construction-wood division announced in February, will involve combining four business areas into three, Stora Enso said in a statement today.

“The issues we and our industry face are clearly not just short term,” Chief Executive Officer Jouko Karvinen said in the statement. “With the economy also structurally weak in the euro zone, this means that we must continue to adjust our capacities to the reality ahead of us.”

Paper exports from Finland will contract for a third year in 2013 and extend their drop next year as low demand prompts capacity cuts, PTT Research Institute said on April 9.

Disposals Planned

Store Enso also said it will generate savings by selling assets that aren’t part of its main businesses and centralizing functions. The company’s biomaterials and renewable packaging divisions will remain separate while the unit that makes paper for publishers will combine with the construction-wood business.

The first-quarter net loss was 17 million euros compared with a 74 million-euro profit a year earlier, Stora Enso said. The loss was narrower than the 26.8 million-euro average of six analyst estimates compiled by Bloomberg. Sales declined 0.2 percent to 2.68 billion euros, compared with the 2.65 billion-euro average estimate. The workforce was reduced 2.8 percent to 28,220 employees.

Second-quarter sales will rise “slightly” from the first three months of the year as earnings before interest and taxes about match the figure or exceed it, the manufacturer said.

The company is betting on renewable packaging as the engine for growth, and has invested in operations such as a Polish container-board site in Ostroleka, Poland. Final approvals for setting up a packaging business in Guangxi, China are still pending, Stora said today.