To start with, how has the Paper division done well even in light of market challenges?
We have focused on developing our core assets and serving our key customers. While it is difficult to sell more when demand declines, you can always optimise your business in terms of sales and costs. We continuously look for ways to enhance our competitiveness through improved efficiency and processes throughout our operations.
It has been hard work, year after year, and has resulted in paper machine closures and divestments. But it has also resulted in new ways of working or totally new business ideas, like producing biocomposite granules at Hylte Mill in Sweden. The Varkaus paper machine conversion in Finland is also a fantastic example of creating a new future for the mill, as well as improving our office paper business at Nymölla and Veitsiluoto by optimising product and customer portfolio.
What are some specific accomplishments in 2016?
In every business, it is the results that count in the end, and I am very proud of what we were able to achieve in the Paper division during 2016. We reduced our exposure to coated mechanical grades by selling Arapoti and Kabel mills, and successfully divested the Suzhou mill site in China. Although global paper demand continued to decline by 3%, we were able to keep our sales volumes stable. Our operational EBIT improved by EUR 134 million, supported by a EUR 40 million fixed cost reduction excluding restructuring impacts. Our cash generation was also at a record high level in the last quarter of 2016. Cash flow after investing activities to sales reached 11.8%, also well above our long-term target of 7%.
How does the Paper division fit in the Stora Enso strategy?
All companies have to grow. Stora Enso’s strategy is to grow in the wood products, packaging and biomaterials businesses. At the same time, we have our roots in paper, and that has provided a deep competence in forestry and processes that can be shared to advantage with all the businesses. The Paper division has been an important part of Stora Enso’s transformation for the past 10 years, in terms of revenue, people and competence. Additionally, the cash generation of our paper business has contributed greatly to investments in other areas where the company can grow.
What are the Paper divisions’ underlying strengths?
Of course we have access to fibre, competitive assets, and an efficient supply chain, but our biggest strength is our people – their competence and fighting spirit. Despite the challenges, we want to beat competition and are always ready to take the extra mile when we can see what it will bring. And all this plays an essential role in our long-term relationships we have with customers.
What will drive the future of paper?
On the demand side, the main drivers are the consumers’ media behavior, advertising expenditure, the ability of print to attract consumers to stores and websites, and ongoing innovation that combines print and digital in a creative way for maximal impact as well as the development of 3D printing.
Further digitalisation will support the way we operate our mills and serve our customers, and most likely, the creation of new service concepts and business models.
But paper will never disappear. We read our news on tablets and phones, work all day on screens, but at the end the day we might just want something on paper – a book, magazine or newspaper – to read with thought and relax.
What is the Paper division doing in terms of innovation?
An open innovation initiative, launched in 2014, has resulted in a number of projects – we can concretely talk about the recent EUR 12 million investment at Hylte as a case in point. On the product side, we have launched several new products in past years especially in Super Calendered (SC) grades. In general, the trend is towards bulkier and lighter paper grades. At our Sachsen unit, we are investing in a brighter FlyoBrite especially for retail end-use. Innovation can also be seen in the form of supply chain processes and efficiency, e-commerce and new services to improve ways of working. Additionally, new opportunities to lower raw material consumption, especially in energy, are continuously being explored.
Beyond our own operations, our cooperation with Volvo Cars in Ghent, Belgium serves as a great example for innovation and sustainability. Last November, Stora Enso and Volvo Cars opened a new hot water pipeline between our manufacturing sites. The four-kilometre pipeline takes hot water that is heated using renewable energy from our Langerbrugge paper mill to the Volvo plant, where it is used to heat buildings and paint booths. This brings a reduction of 40% in annual CO2 emissions at the Volvo plant.
What part does paper play in the bioeconomy?
In my view, a circular, climate-friendly bioeconomy is one in which renewable raw materials and low fossil or fossil-free energy are efficiently used to manufacture recyclable products. The forest industry, and paper as one of its core products, obviously has a fundamental role in this, underlined by sustainable forest and land management and responsible resource use, as well as in creating value from the recycling of products.
An appropriate response to the environmental challenges our planet is facing must take the full life-cycle of a product into account. 90% of our own paper brands are covered by one or more recognised ecolabels, including the EU Ecolabel, the Nordic Swan and the Blue Angel. For this, our products have to comply with strict ecological criteria, covering every stage of their life-cycle: from the extraction of raw materials to production right through to product use and disposal. At every point of the product life-cycle, the best decisions for the environment should be made, while providing customers high-performance products.