UPDATE: Stora Enso Sees 1Q Operating Result Clearly Down From 4Q 08

Finnish paper company Stora Enso Oyj (STERV.HE) said Wednesday it expects its operating result to be "clearly down" in the first quarter of 2009 from the fourth quarter of 2008, due to customer destocking and weak demand.

In the fourth quarter of last year, Stora Enso said its operating profit totaled EUR28.4 million, excluding one-offs and fair valuations.

"In Europe, market demand is expected to remain weak and clearly less than a year earlier for all of the Group's products throughout at least the first half of 2009 due to the current economic downturn," the company said.

Demand for wood products and fine paper will be particularly weak, it added.

"Stora Enso remains committed to preserving cash flow through large production curtailments, stringent working capital management and other means," the company said.

It said it will cut its capital expenditure target for 2009 to EUR400 million from EUR500 million. It also said that with Brazilian partner Aracruz (ARCZ6.BR) it will delay the Veracel II pulp mill project by at least a year and reduce the joint venture's 2009 capital expenditure.

Nordic paper companies have long struggled with slow demand due to sector overcapacity and a weakening global economy. In January, Stora Enso announced plans to temporarily lay off around 5,000 employees from its workforce of 32,000 due to adverse business conditions.

In its fourth-quarter report in February, the company said near-term demand will be weak due to low advertising expenditure and the slowing economy, but didn't give any profit estimates for the first quarter.

However, one Helsinki-based analyst said Wednesday's guidance was well below consensus estimates for a first-quarter operating profit of around EUR50 million.

He said 2009 will be a difficult year for the entire paper sector, as demand is unlikely to increase until advertising activity and general production rebound.

At 0812 GMT, shares in Stora Enso were down 2.6% at EUR2.98, underperforming a 1.3% rise in the wider market in Helsinki.

Company Web site: http://www.storaenso.com

-By Gustav Sandstrom, Dow Jones Newswires; [phone]; [e-mail]