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Starting the groundwork for consumer board mill at Guangxi, China and other transformation projects

​I hope you have enjoyed your summer and are ready for a productive investment season during the autumn. Before we start our roadshows for September, I just want to remind you of the latest events in our transformation story.
 

We received the Chinese National Development and Reform Commission's (NDRC) approval for our integrated pulp and consumer board project in Guangxi, southern China in July. Due to the delay to the NDRC approval, we decided to undertake the investment in reverse order to be able to meet customer demand as quickly as possible. If we had followed the original plan of building the pulp mill and board mill simultaneously, we would have lost a year of deliveries to customers. Also, the revised investment schedule will cut the three-year capital expenditure requirement by half, as capital will be committed for the pulp mill only when the board machine is already generating cash flow. The ground breaking at the mill site has already started and the 450 000 tonnes per year board machine is scheduled to be operational in early 2016.


 

Why did we decide to build this mill in China? We have been at full capacity in our existing consumer board mills in Finland and Sweden for some time already. In order to grow and meet customer demand, we had to increase capacity. China of course was a natural choice, because we wanted to benefit from the growing consumer demand for hygienic and high quality consumer boards in the country.

Delaying construction of the pulp mill will also give us an additional three years to build up our fibre base and sustainable plantation operations in harmony with the local communities and with the support of all stakeholders. We will not be acquiring new land for eucalyptus plantations before we have solved the existing challenges concerning land leasing. We will continue our efforts together with the local communities to seek fair distribution of income from our operations.


 

In connection with the second quarter 2013 results we announced a EUR 32 million investment in a biorefinery at our Sunila pulp mill in Finland. This will be our first step towards a new business selling lignin to external customers. It will enable global specialty chemical and high-tech material customers to replace fossil raw materials with renewable alternatives. The first applications will be in the building, construction and automotive sectors. In these segments lignin offers sustainable alternatives to phenols in plywood glues and other wood-based panels, and polyols used in foams.


 

In addition to offering a new innovative, commercial product, this investment will reduce the CO2 emissions of Sunila mill. This is achievable as up to 90% of natural gas will be replaced by lignin extracted from the black liquor. The technology can be extended to our other pulp mills in the future. The lignin production capacity is projected to be 50 000 tonnes per year and this investment exceeds clearly our ROCE return target of 13%.


 

I hope it was helpful to you to get a small reminder of our investment story. We are on the right track in transforming Stora Enso from a European pulp and paper company to a value-creating renewable materials company focusing on growth markets.