Investing.com -- Shares of Stora Enso (OTC:SEOAY) (HEX:STERV) declined by 5% as the company reported its fourth-quarter earnings, aligning with consensus estimates but revealing a shortfall in the packaging materials segment and a stronger performance in pulp.
The company’s decision to cease providing annual EBIT guidance, along with a subdued short-term demand outlook, has heightened investor concerns.
Stora Enso’s fourth-quarter EBIT came in at €121 million, closely matching the Vara consensus of €122 million. However, the packaging materials division underperformed with a €6 million EBIT, which was significantly lower than the €33 million consensus. On the other hand, the pulp division exceeded expectations with a €67 million EBIT, more than double the €32 million consensus.
Investors were particularly troubled by the company’s announcement that it would no longer offer annual EBIT guidance, opting instead for near-term commentary. This change has been interpreted as a lack of transparency in the company’s financial trajectory, especially as Stora Enso highlighted that the current demand outlook remains weak.
The 750kT Oulu mill ramp-up is expected to create a €100 million EBIT headwind in the first half of 2025, which is more severe than the €50-75 million estimated by Jefferies.
Additionally, the company’s capital expenditure guidance for the year is set at an elevated €730-790 million, compared to the consensus of €736 million. This has raised concerns about the company’s spending in a time of uncertain demand.
Jefferies analysts commented on the situation, stating: "Market likely interprets this negatively, and assumes 2025 EBIT more ’in-line with’ 2024 (old guidance in-line implied +/-15%). We expect 15-20% cuts to stale 2025 cons EBIT of €766m EBIT (JEFe -10% at €685m). Whilst buy-side 2025 expectations were lower (around €625-675m), the lack of guidance likely reduces ’low bar’ expectations even further. With forest sale ongoing, no closure or specific cost actions quantified, we expect shares lower today."
The company’s first-quarter outlook for 2025 indicates challenges in the packaging materials market due to soft demand and high wood costs, which are expected to continue pressuring margins. The biomaterials (pulp) market is seen at cyclical lows, with some price increases anticipated to take effect from the second quarter of 2025 onward.
The wood products segment is expected to mirror the fourth quarter of 2024, with low demand and prices driven by costs.
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