Demand for Newsprint reduces the profit for Holmen

October 26, 2010 by timbercommunity

Demand for newsprint in Europe remained weak in the third quarter. The virgin fibre board market was robust and deliveries to Europe rose by 10 per cent during the first nine months of the year compared to the same period in 2009.
Holmen reported a lower profit than last year due to lower prices for newsprint and higher costs for pulp and waste paper.
Profit after tax for January to September 2010 was SEK 528 million (January to September 2009 was SEK 781 million). Holmen was expected to present a pre-tax profit of 224 million Swedish crowns for the third quarter, according to a compilation of twelve analysts' forecasted by SME Direkt.

Earnings per share reached 6.3 (9.3) SEK. Return on equity was 4.3 (6.7) percent. Operating profit amounted to 971 (1229) million SEK. Earnings at Holmen Paper has worsened significantly due to lower newsprint prices and higher fiber costs. The profitability of the Group's other business areas improved.
Operating profit rose from second to third quarter, up from 115 million SEK to 383 million SEK. The improvement was due to lower seasonal staff and maintenance costs and higher board production.
Demand for newsprint in Europe remained weak during the third quarter. The market situation for virgin fiber board was good and supplies to Europe were up 10 percent in the first nine months compared to same period last year.

This result compares with 214 million second quarter and 386 million SEK in the third quarter of 2009.

Holmen Paper was expected to show a significant loss, while paperboard operations in Iggesund was expected to show continued strong profitability.

Holmen Paper, dominated by the newsprint business, reported in the second quarter operating loss of 170 million sek. Operations pressured by a weak market that has a simple explanation, the overcapacity in the European market.

Refinancing of loan

Holmen also talks with banks to refinance a loan of total 600 million euros wrote Bloomberg News about a week ago.
According to Bloomberg Holmen wants a five-year revolving credit facility that should replace the current funding solution with 600 million that will expire in 2012.
The new facility will according to Bloomberg News, amount 400 million.

Increased prices for newsprint prices
Among financial analysts it is expected that newsprint prices will increase up to 10 percent in 2011, compared to 2010.