Paper maker Stora Enso Oyj experienced a third-quarter net loss of 264 million EUR(US$375 million) with slightly growing revenue, and warned of layoffs, closures and production cuts caused by higher costs and a weakening dollar.
Markets welcomed the company's cost-cutting measures, with its stock closing up slightly at 11.77 EUR(US$16.84) in Helsinki, but workers protested with plans to close 12 plants in Finland for a day on Friday.
The Finnish-Swedish forest products group said net loss in the three-months through Sept. 30 was caused by nonrecurring items, down from a net profit of 180 million EUR a year earlier. Net sales in the period were 3.23 billion EUR(US$4.6 billion), up from 3.21 billion EUR.
Chief Executive Jouko Karvinen said the company was hit by "the same factors that affected our second-quarter performance - higher wood costs and the weakening U.S. dollar," and warned that problems would continue in 2007.
To improve profitability, Stora Enso said it would lay off 1,700 workers, close mills in Finland and Sweden, and cut production.
"These closures, production rationalizations (cuts) and staff reductions, however painful, are crucial for Stora Enso to be competitive long-term. To wait in the hope of better times would lead to more severe actions in the future," Karvinen said. "We will therefore curtail production in the fourth quarter."
The company will lay off about 10 percent of its work force in Finland, or 1,100 people, and close three plants, while in neighboring Sweden it will close one mill, cutting 300 jobs. Also, it plans to slash more than a third of its administrative staff worldwide, eliminating 300 jobs, mostly in Britain, Finland, Sweden and Germany.
The government, which owns a 12-percent stake in Stora Enso, said Thursday it would allocate 15 million EUR(US$21 million) to help Finnish regions hit by the closures and job cuts.
The closures will reduce annual production of newsprint and magazine paper by 505,000 tons and pulp by 550,000 tons, the company said, adding that it expected the measures to result in annual savings of up to 160 million EUR(US$230 million) by 2009.
Union leaders and regional government officials criticized the company's loss-making investment decisions in early 2000, especially in North America.
"What we are partly paying for now are Stora Enso's incredible American losses," said Antero Raanoja, shop steward at Stora's Anjala mill in Finland. "Of course, increased costs are also playing a role."
When Karvinen was appointed president and CEO in March, he announced a shake-up in the company, and last month said it would sell the North American unit for about US$2.1 billion (1.5 billion EUR), in a deal that also assumed it a debt of US$450 million (320 million EUR).
"I'm new in the job, so I don't fully comprehend those decisions made seven years ago," Karvinen said Thursday. "But deciding to give up the North American (operations) means it will free up capital ... and we will be able to invest in other units."
Helsinki-based Stora Enso is one of the world's largest forest product companies, with 44,000 employees in more than 40 countries. The group was formed in a 1998 merger between Finland's Enso and Stora of Sweden.
The choice of the city of Helsinki is not incidental as the capital of Finland had hosted US-Soviet negotiations on the limitation of nuclear stockpiles in 1969