Stora Enso expects its operational Ebitda to decrease by more than 50 per cent compared to the 2022 figure this year.
Stora Enso has revised its earnings expectations for the 2023 financial year. The company said its operational Ebit for the full-year 2023 would be “significantly lower” than in 2022, which according to the company’s guidance means a decrease of at least 50 per cent. When publishing the results for 2022, the company was still expecting a downturn ranging between 15 and 50 per cent. For 2022, Stora Enso reported an operational Ebit of nearly €1.9bn.
The change in earnings expectations for the full year 2023 is a result of the worsening market outlook which accelerated towards the latter part of the first quarter, Stora Enso explained. Cost pressures and market uncertainties are expected to be significantly more challenging in 2023 than in 2022, weighing on the company’s results and lowering the short-term visibility this year.
This market situation will continue to weaken consumer confidence resulting in lower private consumption impacting all of the company’s divisions. Compared to 2022, the group’s margins are expected to be adversely impacted by increasing costs, particularly in relation to energy, wood, and chemicals. Furthermore, Stora Enso states that the whole packaging market is currently weakening. Especially containerboard demand is expected to remain weak but consumerboard is also showing signs of weakening, with the exception for liquid packaging board.
The construction sector remains challenging with a lower number of issued building permits. This is expected to have a temporary impact on demand for the Wood Products division this year. In addition to higher pulpwood cost, a weakening global pulp market is expected to weigh on the Biomaterials division. Availability for pulpwood remains tight.
To manage volatility, variable costs are continually reviewed, and preparatory actions are taken to respond to fluctuations in demand with reinforced cost control actions. Other measures such as pricing, flexibility in product mix, capacity and inventory management, and sourcing and logistics have been put in place. In Finland, Stora Enso has completed negotiations on potential furloughs at its divisions' production sites. Capacity adjustment activities are in place to respond to fluctuations in demand.
Operationally, the focus on decentralisation continues together with reduction of overhead costs. Restrictive capital expenditure and working capital management to safeguard cash flow and to secure a solid balance sheet are in place.