April 27, 2017 / 11:48 AM / 8 months ago

Finland's Stora Enso backs off from Polish mill expansion

HELSINKI, April 27 (Reuters) - Finnish pulp, paper and packaging board maker Stora Enso scrapped plans to expand its paperboard mill in Poland because of an over-supplied market as it delivered a weak profit forecast on Thursday.

Stora announced the investment in the mill in Ostroleka, Poland last year, estimating the project’s costs in the region of 350-400 million euros.

Presenting its interim report on Thursday, the company said that there were several new paperboard projects in the pipeline in Europe at the moment that will affect the product’s market balance.

“We can not meet our capital return targets if we go ahead with that (expansion plan),” chief executive Karl Sundstrom told a news conference.

In January, Stora Enso said it would also likely scrap its plan to build a 700-800 million euro pulp mill in China, where it is currently ramping up a paperboard mill.

Analyst Antti Viljakainen from Inderes Equity Research welcomed both cancellations, saying the projects had looked uncertain.

“They are still ramping up the paperboard mill in China, so it is not at all necessary to jump into a large growth project right now... Also, both Poland expansion and China pulp plant looked questionable,” he said, adding that Stora will likely look to boost its paperboard capacity in China in the coming years.

Stora’s first quarter core profit, 215 million euros, came in slightly above market expectations, but it forecast a similar second-quarter profit which disappointed investors.

Shares in the company fell 4.5 percent by 1104 GMT.

In the past decade, Stora Enso has shifted towards packaging board from graphic papers - such as newsprint and magazine paper - which have faced falling demand as publishing moves online. (Reporting by Jussi Rosendahl and Tuomas Forsell; Editing by Elaine Hardcastle)

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