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Welcome to join us as we talk to Stora Enso's CEO Jukka Härmälä on the Group's recent development and hear how he views the prospects for both the industry as a whole and for Stora Enso in particular.
You may watch the entire interview or any of the listed discussion subjects separately.
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Please find the interview in form of queastions and answers below.
2001 is considered to have been a difficult year for the forest products industry. Where did the main problems lie?
We are certainly very closely linked to the overall development of the economy and since the year was slowing down everywhere, not least in North America, this affected our performance also. It is also clear that this development was speeded up by the tragic events of 11 September.
Looking at things from a business point of view one typical thing highlighting our performance was the massive de-stocking throughout, from paper-maker to final consumer.
How do you rate Stora Enso's performance?
I'm pleased to say that in these conditions we actually performed rather well. I'm not happy with the overall results but we must remember that we were creating value. Our return on capital employed was well above our cost of capital, which is a milestone we are very happy with.
What made it possible for Stora Enso to deliver in the face of difficult market conditions?
Today, after the various mergers in our history, we are a fairly streamlined company. All the synergy effects of these mergers have materialised well, supporting the improved level of our operations and, of course, our results. Even now in difficult conditions, we have come through this cycle in far better shape if you compare what we are today with what we were five or ten years ago.
How do you see the outlook for the present year?
Again you would need a good crystal ball to be able to tell what will happen. Economists seem to be divided into two categories - those who are predicting a rather rapid recovery, say during the second half of the year, and those who do not expect an improvement before the year 2003. In this uncertain outlook we certainly need to be very cautious about how we operate.
It's roughly two years now since Stora Enso acquired Consolidated Papers. Has the North American acquisition come up to expectations?
We can judge the acquisition from two standpoints. The financial results are certainly far from what they should be, mainly due to the North American economic problems, the slowdown in the economy and so on, so there is plenty of room for improvement in the coming years. On the other hand, if we look at how the merger has been implemented, from a management point of view, the performance has been excellent. We really have been able to reorganise and streamline operations and are now more than ready for the future improvement of the business.
What have you learned from the acquisition?
Nothing really new. It has perhaps reconfirmed us in the knowledge that we are good at acquisitions, good at putting them through. Our history is paved with considerable success in this respect and I think we have a rather good M&A reputation. But this time we were entering a new continent in a major way so we definitely had to be very sharp and see whether we could pass on our knowledge of how to take over a company. This has been done very successfully.
Where do you go from here on the M&A front?
First of all, bearing in mind what I said earlier about the overall outlook, whatever we do, we must be very certain that any deal we may make fulfils the financial criteria. In other words they have to be cash earnings per share accretive right from the very beginning. Having said this, we have certainly not changed our strategy and will continue to study possibilities in the areas targeted earlier, in other words Europe, North America - in particular building on the platform we have there today - and with a somewhat longer-term view we will look at what can be done in South-East Asia.
Turning to a rather different area. Last year Stora Enso announced its Principles for Corporate Social Responsibility. Why should the Company care about these and why at this particular point in time?
The starting point of the whole process to establish these policies certainly came from the world surrounding our various stakeholders, be they customers, shareholders, or the like. Particularly in view of the globalisation of the Company, it has become increasingly important to apply policies regardless of the part of the world in which we operate.
How do you feel Stora Enso has performed in this area so far?
Traditionally we have been strongly European and are still pretty much a European-based company with extensions in other places. There certainly haven't been any major problems in this respect. But the further we move from the traditional cultures, the more important it is to apply sound principles of corporate social responsibility to our operations. This is where we have to put our emphasis in the future.
Where do you see the greatest room for improvement?
Informing the surrounding world about these policies is certainly a beginning. What we have to do now is make sure that every single Stora Enso employee in his or her daily operations is aware of these policies. I would say that this is particularly demanding as we expand our operations outside Europe.
The industry has seen major changes over the past few years? Do you expect this trend to continue?
Well, the world is not yet complete and neither is this industry. I have always been a great believer in consolidation. It has taken huge leaps forward and this trend will certainly continue.
Looking at the current year and the longer term what are your main concerns and targets?
We have now become one of the leading companies in this industry and the various stakeholders watch us more and more closely to see how we perform and what we accomplish. And since we intend to go on expanding I think this will be an increasing challenge for all our personnel.
Mr. Härmälä, we wish you luck in reaching your targets and thank you for talking to us!
Read Letter to Shareholders
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The whole interview, 10'08''
