Holmen profits plunge on lower paper prices and strong Swedish krona

Magnus Hall, President and CEO; Foto: Ulla-Carin Ekblom
Source: Holmen Group
15 Aug 2013 − 

Holmen has reported a huge fall in profits for the first half of 2013 amid softer paper prices and a strong Swedish krona. Demand for printing paper and sawn timber remained weak.

Net profit for the six months to June plummeted by 60% to SEK274m. The group reported net sales of SEK8.35bn, a decrease of 11% from the same period a year ago. Operating profit was SEK405m, down by SEK643m. Excluding items affecting comparability - impairment losses and restructuring costs amounted to SEK140m in the first quarter of 2013 - operating profit was SEK545m, almost 50% down from the first half 2012.

Holmen attributed the H1 2013 results to low selling prices for printing paper and a strong Swedish krona. In addition, the group said it booked SEK90m in extra costs and production losses due to major maintenance downtime at the Iggesund board mill.

Holmen Paper posted a SEK331m operating loss on net sales of SEK3.66bn. That compared with a profit of SEK111m on net sales of SEK4.18bn for the same period a year ago. According to Holmen, operating results were negatively impacted by lower selling prices, a strong Swedish krona and market related downtime resulting in lower production. On the cost side, lower prices for fibre and efficiency measures have had a positive effect.

Paper machine closures at Holmen's Hallsta and Braviken mills in Sweden are scheduled to take place in September and October, reducing production capacity by 140,000 tpy of SC-paper and 200,000 tpy of newsprint. Manning will be reduced by 400 positions, according to the company. CEO Magnus Hall explained Holmen Paper was further strengthening its focus on MF magazine paper and book paper for paperbacks and was working to increase productivity. Some SEK30-40m in extra costs would be booked during Q3 related to machine stops and extra running cost, including maintenance and rebuilding shut down costs at the Braviken mill, explained Anders Jernhall, CFO of Holmen. The effects from rationalisation would "filter through in full effect from Q2 2014 and should increase the operating margin by 2%."

Iggesund Paperboard could not improve its results on better market conditions- European deliveries rose by 5%in the first half 2013. Operating profit was down 70% y-o-y to SEK104m. Net sales decreased 10% y-o-y to SEK2.29bn. The plunge in operating profit was due to a stronger Swedish krona, production disruptions and extra costs arising from the maintenance shut down at the Iggesund mill.

Holmen Energi performed good in the January-June 2013 period, posting an operating profit of SEK272m compared to SEK201m last year. According to Holmen, H1 2013 operating profit includes SEK102m gains associated with the establishment of Varsvik AB, a JV wind power company in the second quarter. Together with the French fund Eurofideme 2, Holmen will build a 51 MW wind farm near the Hallsta paper mill at a cost of SEK650m. Start up is scheduled for autumn next year.

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