M-real considers paying off maturing debt by selling profitable assets, including its paper mill in Husum, Sweden, its 32% stake in pulp maker Metsae Fibre, its 2.5% stake in energy producer Pohjolan Voima, says CEO

LOS ANGELES , March 14, 2012 () –

M-real Oyj might sell off profitable assets in order to pay off its maturing debt while following its strategy to focus on its more profitable paperboard division, said the company’s chief, reported Bloomberg Businessweek on March 14.

“Our strategy makes it possible to make moves if necessary,” said CEO Mikko Helander in an interview on March 13. The Espoo, Finland-based company has lost money in six of the past seven years.

Among the assets that M-real might sell would be its pulp and paper mill in Husum, Sweden, although the company is not currently talking with any potential buyer, said Helander. The mill posted a profit of 600 million kroner (US$89 million) in 2010, Businessweek reported.

Other assets that could be put on the block are M-real’s 32% stake in pulp maker Metsae Fibre Oy and its 2.5% stake in energy producer Pohjolan Voima Oy, said Antti Viljakainen, an analyst with Inderes Oy, a Helsinki-based research company.

Reducing its stake in Metsae Fibre would not be a problem for M-real as the company already makes all the pulp it needs for its own use, but it is less likely to divest its stake in Pohjolan Voima because M-real only makes about 65% of its energy demand, said Helander, reported Businessweek.

Since 2006, M-real has sold off assets totaling €2.2 billion (US$2.86 billion) to reduce its pulp and paper output and increase its holdings in paperboard, a market that is growing by about 3% a year, based on Pira estimates, which Helander said he agrees with.

M-real has focused on making the “very highest quality” of cartonboards because it is not easy to enter the market unless you use “superior North European raw materials” rather than eucalyptus pulp, said Helander, Businessweek reported.

The company specializes in high-end consumer paperboard packaging and its annual supply contracts with brandowners such as Nestle SA and Unilever NV, which account for “about 60%” of M-real’s paperboard division revenue, Helander said.

Cartonboard orders have “normalized” from their slump in 2011, a year that ended with low levels probably caused by a drawdown in inventories, said Helander, noting that “underlying demand has not waned.”

The company, which has a €500-million bond maturing in one year, has a 113% net-debt-to-equity ratio as of year-end 2011. Its stock lost 48% of its value last year, reported Businessweek.

The primary source of this article is Bloomberg Businessweek, New York, New York, on March 14, 2012.


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