A new research report from Moody shows that, amid continued pressure on the paper industry, European paper and forest products companies that have diversified away from the mature European publication paper market and invested in new growth areas saw improved profitability in the first half of 2015.
"Companies such as Mondi Plc and Metsa Board Corporation have made sizeable investments in related segments, such as specialty paper and paper packaging, with higher margins and growth prospects, allowing them to generally outperform their peers that still have a relatively high exposure to the mature European publication paper market," says Matthias Volkmer, a Moody's Vice President - Senior Analyst.
The report discusses companies such as Mondi Plc, Smurfit Kappa Group plc, UPM-Kymmene, Metsa Board Corporation, Stora Enso Oyj, Norske Skog, Ence Energia y Celulosa, Lecta and Portucel.
The report notes that more players are seeking to diversify for growth. Norske Skogindustrier ASA, for example, plans to invest in growth areas such as tissue and biogas, though these initiatives may not be enough to help the company achieve a turnaround and refinance its debt maturities next year.
Furthermore, while some European pulp producers have benefited from the weaker euro -- as pulp is a US-dollar traded commodity while their costs are mainly in euros -- a ramp-up in pulp production could exert pressure on pulp prices in the second half of 2015.
