FreightWaves wrote last week about a large European pulp and paper company that issued a negative profit warning for the first time in more than four years owing to deteriorating pulp demand in Europe and China and poor paperboard demand. Another week brings another profit warning from a large European pulp and paper company, this time Finland-based Stora Enso.
Stora on Thursday substantially reduced its 2023 profit outlook from down 15-50% versus 2022 to down more than 50%, prompted by intensifying market weakness toward the latter part of Q1. The company noted that the entire European packaging market is deteriorating, particularly containerboard/boxes but also paperboard. In addition, the construction market is being adversely affected by falling permits and new housing starts, and the global pulp market is worsening, as its peer Metsä Board indicated last week.
At the same time as demand and prices are falling, Stora is experiencing increasing cost pressure, particularly in terms of energy wood and chemicals. In other words, the company is getting squeezed from all sides. In response, Stora has completed negotiations on potential furloughs at its divisions’ product sites in Finland and is implementing other cost-reduction measures.
Lest readers think this market weakness is specific to Europe and China, it most certainly isn’t. All manner of economic indicators in the U.S. are deteriorating (employment, retail sales, freight rates/volumes, etc.), including box demand. FreightWaves’ recent survey of more than 30 box makers pointed to another substantial year-over-year demand decline in Q1, as was the case in Q4, with little to no sequential improvement expected in April or thereafter.
Global paper and packaging companies — and many other companies besides — benefited enormously from the pandemic and related unprecedented government stimulus spending (which drove a historic boom in goods demand). The reverse is happening now, with no end in sight to the weakness.