Stora Enso keeps full-year guidance despite Q1 beat

FILE PHOTO: Stora Enso company logo is seen near a packaging mill in Riga

By Boleslaw Lasocki

HELSINKI (Reuters) -Finnish forestry firm Stora Enso beat first-quarter operating profit forecasts on Thursday, but kept its full-year guidance in a move some analysts described as cautious.

The group, which has shifted its focus away from paper production to renewable packaging, construction materials and biomaterials, reported its highest quarterly operating earnings before interest and tax (EBIT) in around 20 years, and an all-time high EBIT margin of 18%.

"We are fully booked, see no weakening in our markets and we continuously work to mitigate higher input costs," Chief Executive Annika Bresky said in a statement.

The company's shares were down around 2% in afternoon trade.

Inderes analyst Antti Viljakainen said good numbers were probably to be expected after peer UPM-Kymmene posted strong quarterly earnings earlier in the week.

Stora Enso said it still expected full-year operating EBIT in line with the 1.53 billion euros booked for 2021.

"Given the strong start to the year, that guidance is arguably conservative", Citi analysts said in a note to clients.

The company's Chief Financial Officer Seppo Parvi defended the decision to stick with current guidance.

"War escalation and rising cost inflation may impact general demand and market sentiment which is not in our control," he told Reuters, adding those factors could affect demand for Stora Enso's products, such as packaging and construction materials.

Stora Enso's quarterly operating EBIT jumped 53% year-on-year to 503 million euros ($528 million), compared with analysts' average forecast of 444 million euros in a Refinitiv poll.

Though the forestry industry has been struggling with a decline in demand for paper, it has seen growing demand for wood-based packaging material. This has led Stora Enso to consider investments in packaging board production worth 900 million-1 billion euros.

In March, Stora Enso started the sale process for four of its five paper mills as it no longer sees paper production as part of its future strategy.

Earlier this week, the company decided to sell its sawmills in Russia to local management, in a move that would result in a 130 million euro loss.

Bresky said the impact of the Russian operations was not material as they represented only 3% of group sales in 2021.

($1 = 0.9524 euros)

(Reporting by Boleslaw Lasocki Editing by Uttaresh.V and Mark Potter)