August 28, 2008
By Chadwick, Philip
BUYERS' GUIDE Difficult times have led to reduced profitability for major newsprint firms, who are looking to green solutions to keep costs down, finds Philip Chadwick
As recently as June, both Stora Enso and UPM announced that the higher pulpwood costs and escalating oil prices would considerably affect their profitability. Stora Enso is bracing itself for a second-quarter slump with profits likely to be half the Pounds 175m it achieved in the same period in 2007.
UPM is also expecting its full-year operative profitability to be below last year's citing higher-than-estimated costs of wood fibre sourcing. The manufacturer has responded by reducing its sawmilling over next spring and summer.
It's all a far cry from this time last year. Back in August 2007, the market was looking to the future with optimism and insiders were declaring that newsprint manufacturers had never had it so good.
For buyers though, the current market situation could prove to be a blessing. In May, there was evidence that newsprint prices were falling across Europe.
Swedish papermaker Holmen claimed that the price of newsprint had fallen in the past year by 4%, although deliveries were down 2% year- on-year. Like Stora Enso and UPM, Holmen didn't escape the dip in profits, although it did manage to increase its overall turnover. But the company had been hit hard by the weak dollar and high input costs.
In general the industry is making an effort to tighten supply and therefore push up prices. There have also been mill closures, which has had the wider knock-on effect of job losses in the sector.
With the sector looking grim, people are anxious about what's in store. In the current political climate the environment is on everyone's minds and News International's switch to reusable newsprint cores could be a good indication of the steps that the market is going to have to take to remain buoyant. Going down the environmental route could be the key to keeping costs under control.
WHAT'S NEW IN... NEWSPRINT
* Norske-Skog, the newsprint manufacturer, was the subject of speculation in March with reports suggesting it was on the verge of a sale to one of its Scandinavian rivals
* Sluggish market conditions will have an impact on the fine paper sector, accordingto PPL Research. The findings from the firm's UK Preview 2008 warned that newsprint prices will be influenced by currency changes, making European prices higher than the US
* News International opened what it claimed to be the biggest printing plant in the world at Broxbourne, Hertfordshire in March. The group spent Pounds 650m on the move from Wapping, a site in Knowsley near Liverpool, and a Eurocentre facility near Glasgow. The printing of the DailyTelegraphand the Sunday Telegraphwas moved to News International's print plants
* In July, staff at West Ferry Printers were warned that their jobs might be at risk after the news that the Telegraph titles switch to the News International sites was brought forward to September
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Letterhead paper 6.09.08
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