Stora Enso has defined three focus areas for growth in its updated strategy: Packaging Materials and Packaging Solutions, Building Solutions within the Wood Products division, and Biomaterials innovations.
In this interview, Annica Bresky, our President and CEO, comments on the Group’s rationale behind its strategic focus and innovation agenda.
Stora Enso recently presented an updated strategy. Why are you making these changes?
We have renewed our strategy and a few long-term financial targets, shaping our business for accelerated growth and value. In line with this, we continue to create value in the bioeconomy with our renewable products, solving global sustainability challenges. We have defined key business areas where we already have leading positions and can build on existing strengths in order to grow more rapidly. The updated strategy will focus on the areas of our product portfolio where renewable materials can best meet demands for eco-friendly and circular products.
In the renewed strategy, you define three key focus areas. Why did you choose these?
What the three selected focus areas have in common is that we see significant growth opportunities in markets where we can build on our strengths and competitive advantage. We have leading market positions in high-margin products, strong and competitive assets, industry-leading competence and control of our renewable resource wood. It’s also where we see the greatest potential for scalable innovation and commercialisation of new products, such as bio-based barriers and carbon for energy storage, where we have ongoing investments. Within wooden building solutions we see significant untapped potential in a market dominated by cement and concrete, materials that produce a lot of CO2 emissions. In essence, we target business areas that will allow us to drive profitable growth faster.
You have also highlighted that forest, traditional wood products and market pulp make up the foundation for value creation. Tell us more.
The forest is the source of everything, ensuring our long-term fibre supply, and securing future businesses. It’s a valuable, growing asset. Pulp is the base for our production in board and packaging materials, as well as the innovation within biomaterials. Cost competitive pulp is key and especially our Latin American production facilities, are strong cash contributors. Our traditional wood products business is the foundation for a value adding offering within Building Solutions. It also supports our production facilities with fibre supply.
You are planning a major investment for expanding pulp and board production at Skoghall Mill. What are the key drivers behind this plan?
Skoghall Mill is one of our flagship mills and one of the world’s biggest producers of liquid board. One in six liquid packages globally uses board from Skoghall Mill. So, needless to say, it’s already a very competitive mill in terms of both cost and product quality. We believe that demand for sustainable food and liquid packaging will continue to grow and there’s room for more capacity. An investment would target full integration on the chemical pulp side and debottlenecking of the current machines. It’s an attractive opportunity as Skoghall Mill also has excellent access to a local supply of wood, given our significant forest holding in the region. This is a key factor when considering an investment of this size. Now the focus will be on the feasibility study, which, when completed by the end of 2021, will determine whether we move forward and define the final capital investment sum.
Moving forward, what will the role of paper be in your strategy?
The decline in paper has been ongoing for over two decades now. To navigate this, we have continuously adapted to limit impact while remaining able to benefit from the cash flow that the paper business provides. We have been successful in doing so and since 2006 we have reduced our paper capacity by close to 70%. After the conversion of Oulu Mill, paper will represent less than 20% of our total net sales. The decline in paper will, however, continue and restructuring is necessary to mitigate its effects. We will continue to take action when needed. We also want to provide our paper business with a higher degree of operational independence. That way, we can be more agile in adapting costs and operational processes to the division’s requirement.
What are the primary focus areas for innovation in the new strategy?
In line with the updated strategy focus, we will concentrate our innovation efforts and resources in the areas where we have identified key business opportunities. We will zoom in on new sustainable packaging materials, sustainable barriers and our biochemical platform in lignin, and do so in close collaboration with our customers and partners. Strategic partnerships will be essential in all of these areas as innovation does not happen in isolation.
Source: Stora Enso