Ceepackaging

Analysis

Demand for cartonboard nearly recovered according to M-Real

Chief Executive Mikko Helander told the Reuters Paper and Packaging Summit he was confident operating losses before restructuring charges would narrow amid a continued recovery in cartonboard demand, a seasonal rise in pulp demand and lower costs following restructuring.

The first half loss totaled 135 million euros ($193.1 million).

“I am not saying the second half will be wonderful. We are still in recession and demand for paper, cartonboard and pulp is not yet back to normal. Times are still challenging,” he said.

The paper market remains weak, but cartonboard demand — which is less cyclical and less impacted than paper by the global economic downturn — may well be back at the same levels as a year ago in a few months, Helander said.

“I’m definitely more optimistic today than I was at the beginning of the year,” he said.

Sluggish demand for office paper — known in the industry as uncoated fine paper — had probably hit bottom, he said.

CARTONBOARD PRICE HIKES

M-real has announced price hikes on cartonboard — the main product of its profitable packaging unit which accounts for nearly half of group sales — in Britain.

“We also continue to plan hikes (elsewhere) in Europe” and outside, the major impact from which would be felt next year,” Helander told the summit at Reuters News bureau in Helsinki.

M-real, which has not made a full-year pretax profit since 2002, hopes to swing back to profitability once activity in the wider economy returns to normal and the firm completes a strategic review of its remaining paper units, he said.

“Thanks to restructuring, we are moving in the right direction. The impact of paper has been reduced, the impact of packaging has increased,” Helander said.

CONSOLIDATION & RESTRUCTURING

Helander said M-real, which last year agreed to sell its struggling coated fine paper unit to South Africa’s Sappi (SAPJ.J), was still in the midst of a strategic review, and the uncoated fine paper industry was still in need of consolidation.

“I do not see reasons why we cannot expect in future some news from specialty paper, uncoated fine paper,” he said. “The key issue is to support consolidation of the European paper industry.”

He said that could mean divestments, mergers, joint ventures or acquisitions, but given the company’s strategy and financing the third option was unlikely. M-real was ready to do a deal but other European companies would need to be ready too.

FINANCING

Helander said he was comfortable with M-real’s financing, a worry that has dogged the firm’s shares, especially its ability to pay a 400-million-euro bond due in December 2010.

Helander said M-real’s net debt would probably have shrunk to around 700 million euros by year-end from a current 1.2 billion. “Refinancing at the moment is not such a big issue.”

He said M-real was working to improve its cash situation. “Our liquidity is strong, the cash situation is OK.”

Helander said that while its strategy was to focus on cartonboard, it would also in future have some paper business.