Net sales up, rising costs squeeze Metsä Tissue's profits

Operating profit was dampened by the rising cost of pulp, recovered fibre, other raw materials and energy. Pulp prices are 15 per cent higher and recovered fibre 30 per cent more than in the corresponding period last year. Rising transport costs likewise ate away profits. The company incurred unforeseen additional expenses due to the exceptionally cold winter and resultant floods in Germany, which posed delivery challenges.

The strategic Baking & Cooking development programme proceeded according to plan. The Düren mill in Germany completed the rebuild of Paper Machine 5, with the first batches of paper produced in March. The installation of converting lines began during Q1, with the ultimate goal of harnessing the Düren mill’s full converting capacity by the end of June. Headcount reductions were started at the Mänttä mill early in the year. Cost overlaps at the Düren and Mänttä mills – though expected as a consequence of the strategic programme – were among the factors adversely affecting the result. Overlaps in production costs will be eliminated after the end of June.

After the period under review, Metsä Tissue announced a EUR 55 million investment programme to be initiated at the Krapkowice mill in Poland. This three-year-programme will include the installation of two new paper machines and a converting line, the rebuild of one paper machine and general infrastructural development.

In March all of Metsä Tissue’s German units successfully adopted the new ERP system and harmonised processes, which are subsequently to be rolled out on a stepwise basis throughout the company.

Metsä Tissue’s Žilina facility in Slovakia switched to using green electricity produced with hydropower. A new connection to the VVB Žilina dam and associated high-voltage transformers enable the mill to utilise renewable non-fossil electricity, while also lowering transformation losses. In the future hydropower will account for some 70 per cent of the mill’s total electricity consumption, which supports the company’s commitment to the goals of sustainable development.

The Žilina hydropower initiative was launched as part of the Tissue 20 project, which aims to achieve an energy efficiency enhancement comparable to 20 per cent of the company’s current consumption level by 2012. Tissue 20 saw Metsä Tissue nominated as one of the three top contenders in the category of Total Energy Management Concept in the European Energy Masters competition in Germany.

Serla’s 50th anniversary marked the launch of a special series of campaigns in sales, marketing and communications. As a testimonial to Serla’s established reputation as a responsible brand, Finnish consumers voted Serla as their second-favourite Swan-labelled brand.

Lambi launched a new spring collection of napkins. A Swedish consumer survey charting Sweden’s best-loved brands ranked Lambi as 15^th out of nearly 1000 brands. A Danish consumer panel selected Lambi as their favourite brand based on its superior product features.

Demand for tissue and cooking papers is expected to remain stable. Continually rising production and transport costs and additional expenses related to indirect taxes will be transferred to prices across all Metsä Tissue product categories.

During 2011 Metsä Tissue will focus its efforts on the successful implementation of its strategic development projects, the goal being to roll out efficient, harmonised company-wide processes and achieve growth aligned with the goals of sustainable development. Through these projects the company will also strive to improve its customer interface performance further.