Stora Enso Oyj - Company Profile, Information, Business Description, History, Background Information on Stora Enso Oyj

Kanavaranta One
P.O. Box 309
FIN-00101 Helsinki

Company Perspectives:

Mission: To promote communication and the well-being of people by turning renewable fiber into paper, packaging, and processed wood products.

History of Stora Enso Oyj

Stora Enso Oyj, which was formed in late 1998 from the merger of Sweden's Stora Kopparbergs Bergslag AB and Finland's Enso Oyj, is one of the leading global forest products groups. In 1999 world rankings of producers, it held the number two positions in magazine paper, newsprint, consumer packaging board, and sawn softwood, and the number three position in fine paper. Following the completion of its February 2000-announced acquisition of Consolidated Papers, Inc., a U.S. maker of coated papers for magazines, annual reports, and labels, Stora Enso would bolster these positions and gain a significant presence in the important U.S. paper market. Pre-Consolidated Papers, Stora Enso derived more than three-quarters of its revenues from countries in the European Union (with 17 percent from Germany alone), about six percent from other European countries, another six percent from North America, about seven percent from the Asia-Pacific region, and the remaining four percent elsewhere. In addition to its production operations, Stora Enso through its Papyrus unit distributes fine papers and other products to printers, graphic design studios, and other customers in 13 European countries. The company owns 2.1 million hectares (5.2 million acres) of Nordic forestland. Among Stora Enso's shareholders, the Finnish state and the Swedish investment group Investor AB each own 24.1 percent of the voting rights.

Stora's Copper Mining Origins: 13th-18th Centuries

Of the two firms that joined to form Stora Enso, Stora had by far the longer history. In fact, the company claimed to be the world's oldest existing joint-stock company. It went through several transformations during its 700-plus-year history. Throughout most of its life, Stora was one of Europe's largest copper producers as its official name, Stora Kopparbergs Bergslags (The Great Copper Mountain Mining Company), indicated. It was Sweden's first, and for a considerable period only, major enterprise of international significance. As copper output declined in the 19th century, Stora diversified into iron and steel production as well as forestry products. It remained active in these sectors until the 1970s, when it decided to concentrate on the pulp and paper industry. As a result of a series of acquisitions in the 1980s, Stora became Europe's largest forestry company, a position it held into the mid-1990s when a handful of rivals surpassed it through a series of mergers and acquisitions.

Peasant farmers began mining the copper mountain near Falun in central Sweden around the year 1000. The first documentary evidence of the mine appears in a letter from 1288 giving the Bishop of Västerås a one-eighth share in the mine in exchange for landholdings. The document shows that a cooperative organization by this time was managing the mine, with shares being bought and sold.

The mine was controlled by Swedish nobles and German merchants, who were responsible for selling the copper in the European market. Mine operations were conducted by master miners, who excavated the ore on a rotation basis. They were supervised by a royal bailiff after King Magnus Eriksson granted a charter, bestowing a series of privileges on the mine, in 1347.

The decree of 1347 acknowledged that the mine played a decisive role in the national economy and its importance grew over the next few centuries. The improvement of production techniques boosted the annual output of the mine from 80 tons of copper in the late 15th century to 750 tons 100 years later.

This was occurring as copper output in central Europe was declining. The mine soon became a prime source of national wealth, accounting for 60 percent of the gross national product, as foreign demand grew for Swedish copper. 'Sweden stands or falls with the Copper Mountain,' read one proclamation from the royal government, which viewed the mine as a means to improve its poor financial position and support its series of military campaigns in the Baltic region and central Europe during the 17th century.

Having declared that the crown had regal rights to the copper deposits, the Swedish kings demanded taxes on the mined ore and tried to monopolize the mining and trading of copper.

Their success in this demand was limited, however. By 1650, when annual copper production from the mine hit a peak of 3,000 tons, the metal had become the country's most important export product and Sweden dominated the European copper market, supplying two-thirds of the continent's copper needs.

The highest authority over mine operations was the Royal Mine Board in Stockholm and the king's local representative was the mine master. The mine master was in charge of allocating mining rights to the master miners, who paid one-tenth of their ore production to the crown as rent, plus one-fourth of the crude copper they produced from smelters as tax. The total number of mining shares was fixed at 1,200, an arrangement that lasted until Stora became an aktiebolag--public limited company--in 1888.

The decline of Stora's mine was signaled by two giant cave-ins in 1655 and 1687, after which production never exceeded 1,500 tons a year and output gradually sank to an annual level of 900 tons by the late 18th century. During this period, copper was still Sweden's second largest export item after iron, but its importance declined sharply in the early 19th century.

Diversifying into Iron, Steel, and Forest Products, 19th Century

The mine owners then decided to develop the forest and iron-ore resources in the region to replace the falling copper production. They had considerable experience of both products since they had harvested and transported wood to fuel the copper smelters, while they manufactured mining tools out of iron ore.

In the early 1800s Stora began producing pig iron and bar iron as a new business venture, becoming one of the country's leading manufacturers in this sector by mid-century. It bought or leased tracts of forest to supply the iron furnaces and forges with charcoal fuel.

In conjunction with the change in its activity, Stora also underwent an organizational reform in 1862 that transformed its legal status and administrative rules. The crown's influence over operations was ended with the abolition of the master miner's office. Supervision of the company's mining operations and its manufacturing activity in iron and wood products, which had been managed separately, were merged under a three-member collective leadership--this marked the official establishment of Stora Kopparbergs Bergslag.

By the 1870s, Stora Kopparbergs had begun to assume its modern profile. It used its ownership of forest lands to become one of the country's largest wood product companies. Its Domnarvet sawmill was the largest water-power mill in the nation and the sawn timber it produced accounted for more than half of the company's sales. A large iron works was also built at Domnarvet during the decade to replace the company's dozen scattered and inefficient small works.

Mining operations, meanwhile, contributed a decreasing share of corporate revenues. The mine accounted for one-quarter of sales in 1870, but its output of copper and recently discovered gold and silver amounted to only a tenth of sales by 1890. The mine also generated income from the production of sulfur pyrites as well as the distinctive Falun red paint that adorns many houses in the Swedish countryside; the production of Falun red paint dated back to the mid-18th century.

Erik Johan Ljungberg, who became general manager of Stora Kopparbergs in 1875, emphasized the strategy of making a limited number of basic products in a few large plants to achieve economies of scale. A sawmill at Skutskär on the mouth of the Dalälven River was acquired in 1885 and expanded to become one of the world's largest, with two pulp mills added in the 1890s. A giant paper mill for newsprint was also established at Kvarnsveden, near Domnarvet, in 1897.

Additional forests and the ore mines at Grängesberg were purchased as well as other ironworks, including the Söderfors facility that was later developed into the company's specialty steelworks. These facilities were powered by hydroelectric stations built by Stora along the Daläven River in the early 20th century.

When Stora Kopparbergs Bergslag became a limited share company in 1888, with Ljungberg appointed managing director and chairman of the board, it was the largest concern in Sweden in terms of sales and number of employees. It had an initial share capital of SKr 9.6 million, with eight shares being exchanged for each old share dating from the 17th century. During Ljungberg's time, corporate sales grew from SKr 4.5 million to more than SKr 30 million.

Expanding on the Stora Core: 1900-75

By the time of Ljungberg's death in 1915, the foundations of the modern Stora Kopparbergs were clearly laid with the saw and pulp mills at Skutskär, the paper mill at Kvarnsveden, and the iron and steel works at Domnarvet, all of them concentrated along the Dalälven River Basin. The company would spend the next 60 years developing and expanding these core facilities. The sectors in which Stora operated formed the backbone of the country's industrial breakthrough in the late 19th century, enhancing the company's importance to the nation.

In 1916, Stora Kopparbergs became one of the crown jewels of the extensive Swedish industrial empire controlled by the Wallenberg family with the appointment of Marcus Wallenberg, Sr., the head of the dynasty, as chairman.

Emil Lundqvist, one of the top executives in the Wallenberg sphere, was named managing director of Stora Kopparbergs in 1923 and he oversaw the company's steady growth over the next two decades. Under Lundqvist, sales increased threefold to SKr 131 million, while profits grew from SKr 2 million to SKr 11 million.

Lundqvist was succeeded by Ejnar Rodling and Håkan Abenius, who presided over an almost uninterrupted expansion with sales approaching SKr 1 billion by the early 1960s. Annual capital investment rose from SKr 20 million in 1945 to more than SKr 150 million in 1960, with the construction of five new power stations and expansion of existing industrial facilities.

But the 1960s proved to be a period of growing difficulties for Stora Kopparbergs. Increased international competition depressed prices for the bulk commodities that were the company's primary products. It introduced rationalization measures to boost production capacity, while developing special grades of standard products to reduce its heavy dependence on goods particularly vulnerable to economic cycles. These included new types of pulp and high quality iron and steel. In 1961, Stora Kopparbergs also established its first overseas venture with the building of a pulp mill in the Canadian province of Nova Scotia.

The recession that followed the oil shock of the early 1970s posed a new challenge for the company's next president, Erik Sundblad. Mounting losses in both commercial steel and specialty steel operations placed a heavy burden on the company. It was clear that what was needed was the creation of larger units that could operate at lower cost through economies of scale.

Focusing on Forest Products: 1976-89

Instead of expanding the steel business through acquisitions, however, Stora Kopparbergs decided to sell it. The first step occurred in 1976 with the sale of its specialty steel unit to Uddeholm, another Swedish specialty steel company. This was followed a year later with the transfer of its commercial steel operations, mainly consisting of the Domnarvet Steelworks and iron mines, to Svenskt Stål AB, a new company created by the government to concentrate the country's ailing steel industry under one umbrella group.

With these moves, Stora Kopparbergs became primarily a pulp and paper company with substantial resources in forests and hydroelectric power. Its new strategy of concentrating on this sector was inaugurated with the purchase of Bergvik & Ala, a Swedish forestry company, in 1976.

The early 1980s were marked by a power struggle between the Wallenbergs and the Swedish automaker Volvo, which had been permitted to buy a stake in the company, over ownership control of Stora Kopparbergs, with the family eventually emerging victorious.

Following the sudden death of Sundblad in 1984, Bo Berggren, a former deputy managing director, became the new company head. Within months, Stora Kopparbergs, which had been Sweden's second biggest forestry company after Svenska Cellulosa AB, suddenly emerged as Europe's largest, with sales of SKr 13 billion, after the SKr 3.6 billion purchase of Billerud, Sweden's fifth largest forestry company.

The deal was significant for other reasons besides size. It broadened the company's product range from its traditional areas of newsprint and fine paper to Billerud's specialized area of packaging, including sack paper and liquid packaging board. It also obtained its first main production facility within the European Community (EC) with Billerud's eucalyptus pulp mill in Portugal. The company marked this milestone by shortening its name for general usage to Stora, the Swedish word for 'great' or 'large.'

Pulp- and papermaking is one of the world's most capital-intensive industries. Stora realized that only the largest companies would be able to survive and compete in international markets against huge U.S. rivals. The company's size was further enlarged with the decision by the Wallenbergs to concentrate their forestry holdings under Stora. This phase began in 1986 when Stora acquired Papyrus, then the country's fifth largest pulp and paper company. The SKr 5.8 billion deal boosted Stora's annual sales to SKr 18 billion.

In 1988, Stora paid SKr 5.9 billion for Swedish Match, another Wallenberg-controlled company. The deal underscored Stora's strategy of becoming a forest products group that spanned the entire manufacturing process from raw materials to finished consumer products. Although Swedish Match was best known for matches and lighters, it also produced a range of timber-based building products, including flooring, doors, and kitchen furnishings. The acquisition boosted Stora's sales to almost SKr 40 billion.

Expanding Outside Sweden: 1990-98

Having consolidated its position at home, Stora then decided to expand its international operations, especially in the EC, which accounted for almost half of its sales. One worry was that its production of paper and pulp remained largely concentrated in Sweden, which could be a handicap as competition intensified in the EC single market after 1992.

In 1990, it first bought the French paper concern Les Paperteies de la Chapelle-Darblay in partnership with the Finnish forestry company Kymmene. But it then pulled out of the deal when it saw a more attractive target. This was the DM4 billion takeover of Feldm√ľhle Nobel, the German forest products and engineering group. Stora had cooperated with Feldm√ľhle Nobel for more than 20 years, with the two companies jointly operating pulp and newsprint mills in Sweden. Ownership of Feldm√ľhle Nobel made Stora the largest producer of lightweight coated magazine paper and newsprint in Europe, while increasing its sales to SKr 62 billion in 1990.

Stora had to rein in some of its other ambitions in order to finance the purchase of the German firm, one of the largest ever transactions in Europe. It decided to sell some of the Swedish Match units as well as the engineering operations of Feldm√ľhle Nobel; the latter were sold to Germany's Metallgesellschaft AG in June 1991 for US$706 million. This still left Stora as the dominant power in the European pulp and paper industry and one of the world's largest forest products companies.

Stora suffered from the effects of the global recession in pulp and paper products in the early 1990s, leading the firm to initiate restructuring efforts. Stora announced in 1990 that it would cut 3,500 jobs from its workforce, then in late 1991 said that a further 2,500 would be eliminated. The company took restructuring charges totaling SKr 400 million in 1991 and SKr 847 million in 1992, leading to a net loss for the latter year of SKr 1.36 billion. Also in 1992 came the historic ending of mining operations in Falun.

Stora's financial performance trailed the overall industry in the mid-1990s, a period marked by industrywide overcapacity and an increasing pressure for global consolidation. A spate of mergers left Stora as the fourth largest forestry company in Europe by early 1998, trailing UPM-Kymmene Corporation and Enso Oyj, both based in Finland, and Svenska Cellulosa AB of Sweden. In one of its last initiatives before joining the merger wave itself through the late 1998 linkup with Enso, Stora acquired majority control of Suzhou Papyrus Paper, the largest producer of coated fine paper in China, earlier in 1998.

Enso's Roots, Late 19th Century

Enso Oyj, which was known as Enso-Gutzeit Osakeyhtiö from 1924 to 1996, was a typical Finnish forest-based company in that it developed through acquisitions. Its origin lies in the founding of a sawmill in 1872 on the island of Kotka, off the southern coastline of Finland at the estuary of the Kymi River. Previously sawmills were small and water-powered, as steam-powered sawmills were forbidden by the government. A new policy was adopted in 1861, however, enabling steam-driven sawmills to be erected throughout Finland. This change in policy led industrialists to build sawmills at suitable points on the coast at places where timber could be floated and sawn goods shipped abroad. One such location was the island of Kotka. Here the Norwegian industrialist Hans Gutzeit erected a sawmill, which was opened on November 16, 1872. Hans Gutzeit came from Norway, where the company W. Gutzeit & Co. had built Norway's first steam-powered sawmill in 1858.

The new mill at Kotka had six frame saws and two circular saws as well as auxiliary machinery of the most modern design at that time. The machinery was powered by a steam engine of about 100 horsepower. To operate the new mill, Gutzeit imported skilled operators from Norway. It was popularly known as the Norway Mill. In 1880 Hans Gutzeit returned to Norway, where the board had its seat. In Kotka, management was given to a residential manager, the Norwegian Christian Holt.

Kotka Island was a favorite place for new sawmills. Soon there were many mills, all of whose logs were floated from the large Päij&auml--e lake system. The competition for the most favorable forest resources was fierce, however, and resulted in ever increasing prices. The Gutzeit mill began to look for new sources for its raw material. Eventually it found that it could build a mechanical transport facility from Finland's largest lake system, the Saimaa Lakes, over an isthmus to a small lake, connected to the Kymi River. Large volume, however, was needed to justify this investment, and so Gutzeit started buying forestland in the Saimaa basin. To eliminate a potentially dangerous competitor--Egerton Hubbard & Co., an English-owned St. Petersburg-based company that owned AB Utra Wood Co., a sawmill in the Saimaa basin--Gutzeit purchased the latter company, together with the sawmill, receiving a forest area of 100,000 hectares (247,000 acres).

During this time, Alexander Gullichsen, another Norwegian, had entered the company as a clerk. He was a very able man and rose steadily through the ranks of the company. He was the first to recognize the possibility of obtaining raw material from the Saimaa basin and it was he who negotiated the Utra Wood deal. Eventually he was nominated managing director of Aktiebolaget W. Gutzeit & Co., the name given to the owner of the Kotka mill when it was incorporated as a Finnish company in 1896 (hereafter called Gutzeit). Although the ownership of the company was still mainly Norwegian, Holt and Gullichsen were considered to be Finns, having become naturalized citizens of Finland.

As a new step in the development of the company, Gullichsen in 1908 built a sulfate pulp mill at the Kotka sawmill to make use of the waste wood, which up until that time was burned. More important for the diversification of the company was the range of acquisitions generated by Gullichsen's initiative.

In northern Karelia, not far from the Russian border, was an old iron ore refinery. In 1902 this had been converted into a mechanical wood pulp mill when the old iron works had to be closed. This groundwood mill was incorporated as a company in 1904 under the name of Aktiebolaget Pankakoski. This company was purchased in 1909 by Gutzeit and a board mill was added.

Of greater significance, however, was the acquisition of Enso. This took Gutzeit further into the field of chemical pulp making and eventually into paper. It also led to a change in the company's name. Enso was built in 1888 as the first groundwood mill on the huge Vuoksi River, which drains the Saimaa basin into Lake Ladoga through a series of mighty falls, and was considered too large to be harnessed for industrial purposes. Nevertheless, Baron Adi Standertskjöld, a Finnish industrialist who had sold his groundwood mills at Inkeroinen on the Kymi River, came to the Räikkölä Falls in 1887 to buy a site on which to build a new groundwood mill. The founder gave the name Enso to the falls and the mill; eventually the name was extended to the township that grew up around them. 'Enso' is derived from the Finnish word ensi, meaning 'first,' as the mill was the first on the Vuoksi River. The new company was named Enso Träsliperi Aktiebolaget (hereafter called Enso). The mill was designed by the Swedish engineer Hedbäck. In order to use the falls as a source of power, a small channel with sluices was excavated beside the main rapids, which were left to flow freely. Nine turbines generated 2,000 horsepower. When the first shipment of groundwood pulp left the mill in February 1889, it had to be transported by horse and sledge to Viipuri where it could be loaded on to a train for transportation to St. Petersburg.

The area was a wilderness. To accommodate the workers, the company had to build houses, for which purpose they constructed a small brick manufacturing unit. The office staff was minimal, consisting of the residential manager, a cashier-bookkeeper, a correspondent-dispatcher, and a messenger boy.

Emergence of Enso-Gutzeit, Early 20th Century

In 1907 a 'yankee-type' paper machine--that is, a machine equipped with a large drying cylinder of several meters' diameter called a yankee cylinder--was added. At the same time the company decided to build a dam across the river to obtain more power. The Swedish engineering company commissioned for the work failed, however, and the project had to be discontinued after more than a year's futile labor. The Finnish engineer A. Sandsund, who took on the work soon afterward, was successful and in 1910 the new dam, the largest of its kind at the time, was completed. The work was extremely expensive and was such a strain on finances that the owners decided to sell the company to Gutzeit in 1912. The latter was well aware of the value of its purchase. Gutzeit now owned a mill that could make use of all the small wood that came from the company's forests when logs were cut for the sawmills. It also had an ample supply of hydraulic power at its disposal. As its first project, the new owner planned a new board machine. New forestry holdings were added by the purchase in 1913 of over 70,000 hectares (173,000 acres) from the Finland Wood Co.

In 1917 Gutzeit's driving force, Alexander Gullichsen, died. Another Norwegian, Herman Heiberg, was nominated managing director. Major changes in ownership soon occurred, however. In October 1918 the Finnish government purchased 4,400 Gutzeit shares from the Norwegian owners, becoming the majority shareholder with more than half of the company's 7,200 shares. Enso's residential manager, Sölve Thunström, was nominated managing director of the group.

Since the Saimaa Lake basin was the most important area for wood purchasing and transport, the company developed a lake transport fleet, assisted by a shipyard and machine shop, Laitaatsillan Konepaja, founded by the company near the town of Savonlinna. It was considered, however, that other shipping companies or shipowners would suffer from Gutzeit's monopoly on service shops in the district, and a rival machine shop was started in 1917 in Savonlinna, only six kilometers (3.7 miles) from Laitaatsalmi. The rival company was later named Oy Lypsyniemen Konepaja. It had problems from the start, and was heading for bankruptcy in 1919 when it was saved by Gutzeit, which had become a majority shareholder. Lypsyniemen Konepaja entered a phase of rapid growth and later specialized in machinery for the pulp industry.

The rapid development of the Gutzeit group in the early 1920s, as well as the decrease in the value of the Finnish markka, compelled the company to increase its capital. In 1923 the Finnish government subscribed for Gutzeit's new shares, raising government ownership of the company to 87 percent.

Thunström left the company in 1924 and V.A. Kotilainen was nominated managing director and chief executive officer of the group. The new manager found that the finances of the company were excessively dependent on short-term loans and he concentrated his efforts upon the strengthening of the company's balance sheet. In a few years he managed to get rid of the short-term debt, and to reduce total borrowings to only 46 percent of annual sales. The head office was transferred to Enso and in 1927 the company was renamed Enso-Gutzeit Osakeyhtiö (Enso-Gutzeit Ltd.).

Another industrial unit was soon added to the company. In 1877 Wolter Ramsay founded a small company in Lahti, south of Lake Päijäe, for the manufacturing of bobbins for English textile mills. The company derived the name Tornator Osakeyhtiö from the Latin word tornare, meaning 'to turn.' When Ramsay died suddenly in 1890, the ownership of Tornator was transferred to the Wolff family. Gradually Eugen Wolff took the leading role in the company. His ambition was to establish a large mill on the Vuoksi River and when he heard that the owner of Tainionkoski Manor at the eponymous falls on the Vuoksi River, G. Törnudd, had died in 1894, he convinced his brother, Reguel Wolff, that Tornator should buy Tainionkoski Manor. This led to the purchase of the manor in 1895. During the years 1896-97 Eugen Wolff erected a bobbin production unit at Tainionkoski, as well as a paper mill and a groundwood mill. He later began to build a sulfate pulp mill at Tainionkoski, and started to manufacture grease-proof paper. This new product proved successful, securing a good market for the company in western Europe, especially in England. By 1918, however, Eugen Wolff had tired of his pioneering work and sold his shares to the Finnish government.

Enso-Gutzeit (E-G) had long been interested in Tornator, its neighbor on the Vuoksi River. In 1931 Enso-Gutzeit purchased the privately owned shares of the company. Thus E-G became the owner of all forest-based interests in the Vuoksi Valley and also of the valuable lakeshore at the beginning of the river. The chief executive, V.A. Kotilainen, now had the resources to turn the company into the leading timber, pulp, board, and paper enterprise in Finland. He also had a team of talented specialists at his disposal. A sulfate pulp mill was built at Enso in 1930, but Kotilainen wanted to increase further the share of sulfate pulp in the company's product line. In the 1930s Enso-Gutzeit built the large Kaukopää sulfate mill, a gigantic unit for its time, on the southern shore of Lake Saimaa. The company had acquired the valuable area through the Tornator merger. Previously sulfate pulp had been of minor interest, but with the development of paper and paperboard packing the process had become more promising. The mill was designed to produce 80,000 tons a year but by 1937 production had increased to 120,000 tons a year.

E-G was always eager to purchase forestland. In 1913 the total area of Gutzeit forests was 400,000 hectares (990,000 acres). The acquisition of Tornator brought another 79,000 hectares (195,000 acres) and the purchase of a timber company in easternmost Karelia in 1937 brought still more. When World War II began in 1939, E-G owned 523,000 hectares (1.3 million acres) of forestland.

With the addition of new mills and machinery, the company wanted to increase its power facilities. By 1936 Enso had already become the largest paperboard mill in Finland. In 1938 the company decided to make full use of the Enso falls for power production. It planned to increase the height of the Enso falls by adding a dam, raising the water level above the falls so that the Vallinkoski rapids, four kilometers (2.5 miles) upstream from Enso, were combined with Enso, making the Enso falls 16 meters (52 feet) high. At this time, most industrial power plants were built in rapids or falls of six to ten meters (20-33 feet). When war broke out in 1939 this gigantic construction project was still unfinished.

World War II Damage, Concessions, and Rebuilding

In 1941 E-G acquired all the shares of the Insulite Company of Finland from its founder, an American company wishing to withdraw from Finland. This factory, near Kotka, added another new line of business to E-G. Its product, insulite, was a board made of aspen fibers and well suited to the needs of the new owners. In Helsinki in 1940 E-G erected a factory to make packaging boxes for special requirements in Finland.

Finland was attacked by the Soviet Union on November 30, 1939. Damage was inevitable as most of E-G's facilities were in Karelia, near the border with the Soviet Union. Soviet bombs caused some damage to the mills and the raw material woodpiles at Enso and Kaukopää were burned. The total amount of wood lost was 650,000 cubic meters (23 million cubic feet). The Norway Sawmill in Kotka was completely destroyed by Soviet bombs, but the worst was still to come. In the 1940 armistice Finland had to cede a large part of Karelia to the Soviet Union. Among the cessions was the Enso mill town with its large power plant still under construction. E-G also lost the easternmost sawmills and hydraulic power stations as well as almost 100,000 hectares (247,000 acres) of forestland.

Politics also affected E-G at the top management level. CEO Kotilainen had taken part in organizing services to civilians, such as food supply, education, and medical care, in the Russian area occupied by Finland in 1941-44, and he had to step down from all public offices at the demand of the Soviets. A new managing director and chief executive officer, William Lehtinen, was nominated on October 1, 1945. He had previously been a member of the board, responsible for sales and marketing.

E-G now had to compensate for the loss of Enso. All of the Enso employees were guaranteed employment at the other mills in the vicinity, mainly at Tornator and Kaukopää. This led to temporary overstaffing. At the Tainionkoski falls a new hydraulic power station was built in 1945 to compensate for the loss of the Enso station that had been nearing completion. At the end of 1946 E-G purchased the Joh. Parviaisen Tehtaat Oy, an industrial company in central Finland specializing in plywood and mechanical wood processing. In addition to providing an entry into the plywood business, the new acquisition brought a factory for prefabricated houses, a product in strong demand after the war. To domestic demand were added the Soviet war-reparation claims, which included large quantities of prefabricated housing. The Soviet demand for many kinds of machinery as war reparation led to a heavy workload for E-G's subsidiary, the Lypsyniemen Konepaja machine shop. In 1945, E-G purchased the former metallurgical works in the Vuoksi River Valley of Outokumpu Oy, the well-known copper company, which transferred its activities to western Finland. E-G concentrated its chemical plants in these facilities, specializing in processing the byproducts of the pulp mills. The central laboratories of the company were also transferred there. In 1947, to facilitate international shipment of its products, E-G established a ship-owning company, Merivienti Oy, and a shipping company, Oy Finnlines Ltd., which was Merivienti's subsidiary.

Postwar Expansion and International Ventures

The company needed new paper mills to realize its strategic growth plans, however. A new newsprint paper mill was completed by 1955 at Summa on the southern coastline, east of Kotka. Production of kraft paper was started at the Kotka mills. At the factories in Lahti, the production of textile bobbins was discontinued and replaced by a paper-converting and box-making plant. The joinery at the Lahti factories was developed. At Kaukopää a bleaching plant was built and a linerboard machine was erected. The production of white linerboard, used as packaging for consumer goods, began. In 1959 the company began building another large sulfate pulp mill near the old Tornator Tainionkoski mills. This new pulp mill with a capacity of 150,000 tons, initially named Kaukopää II, was renamed Tainionkoski mills after the old Tornator mills ceased operation in 1963. A new mill with production capacity for 100,000 tons of bleached sulfate pulp was built in northern Karelia at Uimaharju between 1962 and 1967.

In 1962 Pentti Halle was nominated chief executive officer after the retirement of William Lehtinen. In the same year, the company moved headquarters into a new building in central Helsinki, designed by architect Alvar Aalto.

The internationalization of E-G began in 1963 when the company became a shareholder in the Dutch Roermond paper mill company. Two years later E-G acquired all the shares of this company, but in 1972 Roermond was sold back to the Dutch. Even though this first experiment in internationalization proved futile, E-G continued in other directions. In order to procure linerboard for international markets, E-G formed a joint venture, together with the Finnish company Oy Tampella Ab and with American interests to establish a U.S. pulp and linerboard mill, Pineville Kraft Corporation, in Louisiana. This mill went into operation in 1968. Later, however, the two Finnish minority partners sold their shares to their U.S. partners. A more lasting investment abroad was the formation of a Canadian venture, Eurocan Pulp & Paper Co. Ltd. (Eurocan) in British Columbia. At first E-G had 50 percent of the shares, the other 50 percent being divided between the Finnish companies Tampella and Kymmene. Eurocan went into operation in 1970. It had a sawmill and a sulfate pulp mill plus a kraftliner machine and a kraft paper machine in Kitimat. For years the Canadian company had financial problems and Tampella sold its shares to Kymmene. In 1979 Kymmene sold its shares to E-G. The latter replaced the partnership by an agreement with the Canadian company West Fraser Timber Co. Ltd. in 1980. It took years of negotiations and new agreements, however, before Eurocan became a viable business and a profitable investment.

Later E-G continued its expansion abroad. In addition to sales offices in many locations in different parts of the world, the company owned production facilities--in addition to Eurocan--in Barbados, France, the United Kingdom, the Netherlands, and Indonesia.

Pentti Halle was to retire as chief executive officer in 1972. The board of administration, the highest authority below the general meeting of shareholders, had already employed Aarne Hildén as executive vice-president. He had gained international business experience in the service of Esso, the large oil company. It seemed obvious that Hilden should be nominated chief executive officer, which in Enso's case also included becoming chairman of the board. Intrigues took place within the company, however, influenced by politicians at high levels, and eventually the post of chief executive officer was awarded instead to Olavi J. Mattila, chief executive officer of Valmet Oy. Pentti Salmi, from within the company, was nominated managing director. This period resulted in a troubled decade for the company, before Mattila retired in 1983. Pentti Salmi was then nominated chief executive officer. Under his command E-G's business developed steadily.

Growth Through Acquisition: 1986-98

In the late 1980s major changes took place in the Finnish business world. Mergers, takeovers, and the selling off of divisions were common. E-G and the largest Finnish family-owned industry, A. Ahlström Oy, were involved in one such deal. Gutzeit's managing director in the days before the Enso acquisition, Alex Gullichsen, had already been interested in acquiring the Varkaus mills and factories in the northern Saimaa area when the owner, the Viipuri merchant Paul Wahl & Co., was willing to sell at the beginning of the 1900s. Although details of the deal had already been discussed, A. Ahlström Oy managed to buy the Varkaus mills and factories before Gullichsen had reached a decision. Thus Varkaus became one of Ahlström's most attractive assets. At Varkaus, Ahlström built a large pulp mill, a paper mill, a sawmill, a plywood factory, and machine shops. During the reshuffle of the 1980s, however, Ahlström found a need to shed some of its financial burdens so that it could afford to remain a family-controlled business. In 1986 the Varkaus pulp and paper mills and sawmills were sold to E-G. Part of the price paid by E-G was the transfer of its machine shops in Savonlinna, Lypsyniemen Konepaja, to A. Ahlström Oy. E-G had finally achieved its aim of taking over the Varkaus mills, 80 years after the intention was first announced.

Other changes took place in the structure of E-G; the company sold its interests in fiberboards and plywood in 1990 to Schauman Wood Oy, a subsidiary of the Kymmene group. Political changes in the Soviet Union resulted in new ventures involving E-G. Because part of the company's forest resources had to be ceded to the Soviet Union after the war, E-G regularly purchased timber from behind the frontier. The Soviet era of perestroika and glasnost led to new ideas for joint ventures. In October 1989 E-G agreed with the authorities of the Soviet Union to form a jointly owned Finnish company, Enocell Oy, with 80 percent of the shares held by E-G. Enocell was to take over the activities of the Uimaharju sulfate pulp mill, where a replacement pulp mill was being constructed, from the beginning of 1992. Most of the raw materials were to be supplied by the Soviet partner. Another joint venture, Ladenso, was formed in Soviet Karelia to concentrate on forest development and related activities, while E-G expanded further in eastern Europe with the 1994 opening of a new plant in eastern Germany at Eilenburg through a new unit called Sachsen Papier. The Eilenburg plant produced newsprint using wastepaper as a raw material; this contrasted with the company's other papermaking, all of which was based completely on wood.

Enso-Gutzeit played a prominent role in the global consolidation of the forest products sector in the mid-to-late 1990s that was triggered by industrywide overcapacity. In 1996 E-G acquired fellow state-controlled Finnish papermaker Veitsiluoto, temporarily becoming the largest forest industry firm in Finland (the merger-created UPM-Kymmene Corporation soon leaped ahead). Out of the merger also came a new name for the company, Enso Oyj. The Finnish state maintained control of more than 60 percent of the voting rights in Enso. In 1997 Enso took a majority 50.4 percent stake in E. Holtzmann & Cie AG, a German maker of newsprint and magazine paper. Enso was now the second largest maker of forest products in Europe, trailing only UPM-Kymmene. Within two years, Enso had increased its interest in Holtzmann to 100 percent.

Formation and Early Development of Stora Enso: 1998 and Beyond

In June 1998 the boards of directors of Stora Kopparbergs Bergslag AB and Enso Oyj approved a merger valued at about US$8.5 billion. In November the competition authorities of the European Union approved the deal, and the following month it was consummated. Although it was billed as a merger of equals--Stora had 1997 sales of US$5.69 billion, and Enso, US$5.51 billion--technically, Enso Oyj changed its name to Stora Enso Oyj, and took over Stora Kopparbergs Bergslag, which became a subsidiary of Stora Enso. Investor AB and the Finnish state each emerged with 24.1 percent of the voting rights in Stora Enso, which was headquartered in Helsinki but had exchange listings in both Helsinki and Stockholm. Named to the CEO position of Stora Enso was Jukka H&auml¬ģ√§l√§, who had headed Enso, while the leader of Stora, Bj√∂rn H√§gglund, became deputy CEO. The new company immediately took over the top spot among European forest products firms, while worldwide it ranked among the top five in revenues and the top two in production capacity, trailing only the U.S. giant International Paper Company. The main areas of focus for Stora Enso were identified as publication papers (newsprint and magazine paper), fine paper, and packaging boards--in each of these sectors, the company was one of the top three players in the world.

As with most mergers of this magnitude, integration issues were in the forefront in the months following the creation of Stora Enso. Through synergies and cost-cutting, savings of EUR 700 million (US$662 million) were anticipated through 2002. Among the integration measures taken in 1999 and early 2000 were the divestment of fine paper mills in Denmark and Finland; the sale of stakes in noncore assets, such as a Finnish shipping company; and the sale of the former Stora head office in Stockholm. It was also announced that the integration would include the elimination of 2,000 jobs&mdashout five percent of the workforce--in the years 1999 through 2002. In May 2000 Stora Enso sold the bulk of its electricity power generation assets to Fortum Corporation, a Finnish energy group, for SKr 15.85 billion (EUR 1.9 billion).

The year 2000 was filled with global paper industry acquisitions, and in February Stora Enso announced one of the largest, a proposed EUR 4.9 billion (US$4.7 billion) takeover of Consolidated Papers, Inc. This purchase would be a key step toward the achievement of a main company goal: gaining a significant presence in the North American market, the largest paper market in the world. Based in Wisconsin Rapids, Wisconsin, Consolidated Papers was among the North American leaders in the production of coated paper and super calendered printing paper (a type of uncoated paper used in periodicals and advertising materials), making for a neat fit with core areas of Stora Enso. Consolidated Papers also held a leading North American position in specialty papers, and owned and managed almost 700,000 acres of forestland in Wisconsin, Michigan, Minnesota, and Ontario, Canada. Stora Enso began planning for a listing of its stock on the New York Stock Exchange, for the integration of Consolidated Papers with the goal of producing annual cost savings of US$110 million by 2002, and for additional acquisitions, particularly in the other region it had targeted for growth: southeast Asia.

Principal Subsidiaries: Stora Kopparbergs Bergslag AB (Sweden; 98.7%); STORA ENSO NEWSPRINT & MAGAZINE PAPER: Stora Enso Publication Papers Oy Ltd; Kymenso Oy; Varenso Oy; Stora Enso Sachsen GmbH (Germany); Stora Enso Maxau GmbH & Co KG (Germany); Stora Enso Langerbrugge NV (Belgium); Stora Enso Corbehem SA (France); Stora Enso Kabel GmbH (Germany); Stora Enso Reisholz GmbH (Germany); Stora Enso Hylte AB (Sweden); Stora Enso Kvarnsveden AB (Sweden); Stora Enso Port Hawkesbury Ltd (Canada). STORA ENSO FINE PAPER: Stora Enso Fine Paper Oy; Berghuizer Papierfabriek NV (Netherlands); Stora Enso Fine Paper AB (Sweden); Stora Enso Nymölla AB (Sweden); Stora Enso Grycksbo AB (Sweden); Stora Enso Mölndal AB (Sweden); Stora Enso Uetersen GmbH (Germany); Stora Enso Suzhou Paper Co Ltd (China; 60.7%). STORA ENSO PACKAGING BOARDS: Corenso United Oy Ltd (71%); Stora Enso Ingerois Oy; Stora Enso Pankakoski Oy Ltd; Laminating Papers Oy; Stora Enso Barcelona S.A. (Spain); Stora Enso Packaging Oy; ZAO Pakenso (Russia); Stora Enso Packaging AB (Sweden); Pakenso Baltica SIA (Latvia); Stora Enso Paperboard AB (Sweden); Stora Enso Fors AB (Sweden); Stora Enso Newton Kyme Ltd (U.K.). STORA ENSO TIMBER: Stora Enso Timber Oy Ltd (73.5%); Holzindustrie Schweighofer AG (Australia); Puumerkki Oy; Stora Enso Timber AB (Sweden). STORA ENSO PULP: Kemijärven Sellu Oy; Enocell Oy (98.4%); Stora Enso Pulp AB (Sweden); Celulose Beira Industrial SA (Portugal). STORA ENSO MERCHANTS: Papyrus Merchants AB (Sweden); Papyrus AB (Sweden). STORA ENSO ENERGY: Pamilo Oy (51%); Stora Enso Energy AB (Sweden); Kopparkraft AB (Sweden; 99.9%). STORA ENSO FOREST: AS Stora Enso Metsä; Stora Enso Skog AB (Sweden).

Principal Divisions: Stora Enso Magazine Paper; Stora Enso Newsprint; Stora Enso Fine Paper; Stora Enso Packaging Boards; Stora Enso Timber; Stora Enso Pulp; Stora Enso Merchants; Stora Enso Asia Pacific.

Principal Competitors: Abitibi-Consolidated Inc.; Asia Pulp & Paper Company Ltd.; Bowater Inc.; Cartiere Burgo S.p.A.; Georgia-Pacific Corporation; International Paper Company; Riverwood International Corporation; Sappi Limited; Smurfit-Stone Container Corporation; UPM-Kymmene Corporation; Weyerhaeuser Company.


Additional Details

Further Reference

Baxter, Andrew, 'Enso Hopes London Listing Will Draw Foreign Investors,' Financial Times, June 20, 1989, p. 33.Carnegy, Hugh, 'Paper Profits Clear Space for Restructuring: Enso-Veitsiluoto Merger Highlights Concentration of Finnish Industry,' Financial Times, June 7, 1995, p. 32.'Four Major Mergers: Two Trans-Atlantic Blockbusters,' Pulp and Paper, April 2000, pp. 13-15.Hallvarsson, Mats, 'The Jewel of the Kingdom,' in Sweden Works: Industry in Transition, Stockholm, New Sweden 1988 Committee, 1987.Hoving, Victor, Enso-Gutzeit Osakeyhtiö, 1872-1958, Helsinki: Frenckhellin Kijapaino Osakeyhtiö, 1961.Jewitt, Caroline, 'Stora Enso Sets Off on a Global Crusade,' Pulp and Paper International, June 2000, pp. 29-31.Karonen, Petri, Enso-Gutzeit Oy laivanvarustajana: Oy Finnlines Ltd ja Merivienti Oy vuosina, 1947-1982, Imatra: Enso-Gutzeit, 1992, 240 p.Kenny, Jim, 'Stora Enso Aims for a Smooth Transition,' Pulp and Paper International, June 1999, pp. 20-21, 25.Korpijaakko, O., 'Gutzeit-yhtmän vaiheet 1872-1947,' Enso-Cutzeit Personnel Magazine, 75th Anniversary Issue, 1947.Kylmala, Timo, Kutsetin Mies, Helsinki: Kirjayhtyma, 1986.Latour, Almar, 'Paper Firms Join in Europe, Creating Giant,' Wall Street Journal, June 3, 1998, p. A11.McIvor, Greg, 'Big Is Beautiful, but Not Automatically,' Financial Times, June 18, 1998.McIvor, Greg, and Tim Burt, 'Paper Giants Open a New Chapter: The Stora-Enso Merger Could Be the First of Many,' Financial Times, June 3, 1998, p. 26.Moore, Stephen D., 'Scandinavian Paper Firms Wrestle with Price Declines,' Wall Street Journal, September 5, 1996, p. B8.Rydberg, Sven, En man föör sig: Emil Lundqvist och Stora Kopparberg under mellankrigstiden, Stockholm: Atlantis, 1985, 154 p.------, The Great Copper Mountain: The Stora Story, Falun, Sweden: Stora Kopparbergs Bergslags AB, 1988, 244 p.------, Stora Kopparberg: 1,000 Years of an Industrial Activity, Stockholm: Gullers International, 1979, 93 p.Salonen, O., 'Piirteita Parviaisen Tehtaiden synnysta ja kehityksesta,' Enso-Gutzeit Personnel Magazine, 75th Anniversary Issue, 1947.Starkman, Dean, 'Stora Enso to Buy Consolidated Papers,' Wall Street Journal, February 23, 2000, p. A3.'Stora's Homespun Remedies Go Against the Industry Grain,' Financial Times, March 17, 1998, p. 36.Sullivan, Aline, 'Stora's Story: A Company As Old As the Millennium Puts on a New Face,' International Herald Tribune, November 27, 1999, p. 17.Taylor, Robert, 'Stora Builds Its Muscle in the Community,' Financial Times, April 30, 1990, p. 27.Urry, Maggie, 'Stora Stays with Go-Ahead Strategy After 700 Years,' Financial Times, June 16, 1988, p. 32.Verespej, Michael A., 'Who Owns Whose Trees?,' Industry Week, March 20, 2000, pp. 58+.Wyman, Vic, 'Enso Powers into Newsprint in Eastern Germany,' Pulp and Paper International, December 1994, p. 28.

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