RUSSIA – Finnish corrugated packaging company Stora Enso is expecting to incur an additional loss of US$55 million following its decision to fulling divest its Russia operations.
The company has corrugated packaging plants in Lukhovitsy, Arzamas and Balabanovo which combined employ approximately 650 people and have a total annual capacity of 395 million m² of corrugated packaging.
They each produce corrugated packaging for the grocery, home improvement, confectionery, and pet food categories in the domestic Russian market.
In March 2022, Stora Enso announced that it would stop all production and sales in Russia “until further notice” following the country’s attack on Ukraine.
Due to reduced business prospects for these businesses, the company reported having incurred an impairment loss of €35 million in the first quarter result.
A statement from Stora Enso said: The additional loss on the transaction under IFRS will be approximately €55 million (US$58 million), consisting mainly of currency translation adjustments to be recorded at the closing date. The expenses are considered as items affecting comparability.”
The company says the sale of its sites to local ownership and operations will provide a “more sustainable long-term solution” for these facilities and their employees.
Stora Enso which has also divested two sawmills and forest operations in the country to local management joins a list of European multinational companies leaving the Eastern European nation
Earlier this month, United Kingdom-based paper and packaging firm Mondi decided to divest its assets in Russia.
The company’s board had previously evaluated all options for the group’s interests in the country, including legal separation due to the conflict.
Last month, Stora Enso’s peer, Finland-based sustainable packaging provider Huhtamaki also announced its decision to divest its operations in Russia.
Paper packaging shortage looms across Europe due to Ukraine War
Meanwhile, financial service provider Rabobank is projecting a spike in production costs for paper packaging manufacturers across Europe due to the ongoing Russia-Ukraine crisis.
Energy, which is mainly reliant on Russian gas, is expected to be the biggest cost driver as the Russian federation curtails supplies and European countries shift to expensive alternatives.
“Packaging paper production is an energy-intensive industry that consumes energy in the form of power as well as fuel,” Rabobank said.
“This is especially the case for the production of recycled grades, the share of which is significant in Europe.”
The bank said that the energy prices– together with the supply and prices of raw materials and disruptions in transport and logistics – are causing margin pressure for paper packaging producers.
This pressure will be felt via additional paper packaging price increases in the already stressed downstream supply chain, the bank said.
The bank is also predicting a potential paper packaging shortage as current energy prices make paper production economically unviable.
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