(AP) — Paper maker Stora Enso Oyj's first-quarter net profit surged 50 percent to euro156 million ($223 million), driven by higher paper prices and increased demand.
Revenue in January through March increased to euro2.7 billion from euro2.3 billion in 2010, the Finnish-Swedish company said Wednesday. Net profit a year ago period was euro102 million ($146 million).
Stora Enso described the period as a "strong quarter," with improvements in all sectors, but warned that growing inflation would hit the company's second-quarter performance.
"Increasing inflation is now our short-term focus and concern," CEO Jouko Karvinen said, adding that the company has upped its prediction of annual inflation from 3 percent to 4 percent. "The operating environment during the past three months, with increasing inflation pressure, clearly shows the race is never over."
Stora Enso closed almost unchanged at euro8.36 ($12.13) on the Helsinki Stock Exchange.
Like many forest product companies, Stora has been hit by persistent overcapacity in European paper markets, forcing it to cut production, close mills and lay off thousands of workers. Last year, it cut paper volumes by 700,000 tons, closing four paper-making machines in Europe.
Karvinen said the first-quarter result showed "significant profitability improvement," partly caused by a recovering market and "a conscious effort to improve pricing quality even when that has meant limiting volumes and capacity."
"Productivity and cost improvements will continue in Stora Enso through hundreds of local improvement efforts as we rethink the ways we do things," he added.
Stora said it will invest euro90 million in a mill in Sweden to meet "growing demand and expectations" in the packaging market sector by the end of 2012.
In January, Stora announced it will build a $1.9 billion pulp mill in Uruguay with its Chilean joint venture partner Arauco.
The plant will have an annual capacity of 1.3 million tons and is expected to be operational in 2013.
Helsinki-based Stora Enso is one of the world's largest forest product companies making magazine paper, newsprint, fine paper, pulp and packaging boards. It employs 26,300 people worldwide — down from 27,200 a year earlier.