Stora Enso finalised its exit from the Russian market in August 2023, a move that reflects a strategic realignment within the broader packaging industry.

The decision to divest packaging operations in Lukhovitsy, Arzamas, and Balabanovo, along with previous divestments in the sawmills and forest operations, underscores the company’s focus on navigating uncertainties in the Russian market.

Amid geopolitical tensions impacting international businesses, Stora Enso’s actions contribute to a larger industry-wide reassessment of operational sustainability and local ownership strategies. It joins Smurfit Kappa and Mondi in divesting from Russia.

Other packaging companies may find resonance in Stora Enso’s approach as they too grapple with geopolitical challenges and seek resilient solutions for their operations.

A chronicle of unwinding Russian ventures

Stora Enso has successfully concluded two smaller outstanding transactions related to its ownership in Russia-based harvesting companies, marking the completion of its exit from the Russian market.

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By GlobalData

The company had initially announced its intention to exit the Russian market on March 2, 2022, in response to Russia’s invasion of Ukraine. However, the finalisation of these transactions faced delays due to changes in the required closing procedures by the Russian government.

Stora Enso’s exit plan encountered complications as a result of regulatory adjustments in the Russian government’s closing procedures.

In the second quarter of 2022, the company had anticipated the finalisation of minor formalities for Russian legal entities involved in wood supply operations by the second half of 2022.

Unfortunately, the revised procedures extended the timeline for the outstanding transactions, primarily related to ownership in two Russia-based harvesting companies.

Despite the prolonged exit process, Stora Enso emphasised that these transactions will not significantly impact its annual sales and Operational EBIT.

The completion of the exit from the Russian market is aligned with the company’s commitment to the safety and well-being of its employees and the safeguarding of assets amid the ongoing geopolitical tensions.

Earlier divestments as part of exit strategy

In a series of strategic decisions, Stora Enso had earlier announced the divestment of its packaging operations in Russia on May 16, 2022.

The Lukhovitsy, Arzamas, and Balabanovo packaging plants were divested to local management, focusing on corrugated packaging production for various segments in the domestic Russian market.

The company’s assessment emphasised that local ownership and operation would provide a more sustainable long-term solution for these businesses amid uncertainties in the Russian market.

Prior to the packaging operations divestment, on April 25, 2022, Stora Enso disclosed the divestment of its sawmills and forest operations in Russia.

The Nebolchi and Impilahti sawmills, along with the Russian forest operation supplying wood to the sawmills, were divested to local management.

Similar to the packaging divestment, the company highlighted the importance of local ownership and operation in ensuring a sustainable long-term solution for these business operations and their employees.

Response to Russia-Ukraine conflict

Stora Enso expressed shock and sadness at Russia’s attack on Ukraine and its impact on international security and stability.

In response, the company promptly announced the suspension of all production and sales in Russia, including exports and imports, until further notice. This decision was part of a mitigation plan to secure input materials from alternative sources.

The company, with five units in Russia – two sawmills and three packaging plants – and approximately 1100 employees, prioritised the safety and well-being of its workforce.

In Ukraine, where Stora Enso has limited operations and less than five employees, similar considerations were extended to those with Ukrainian backgrounds throughout the company.

Stora Enso declared its full alignment with and strict adherence to EU and international guidelines regarding the implementation of sanctions against Russia. A dedicated crisis team was formed to ensure the implementation of necessary actions to safeguard employees and business interests.

The company clarified that sales in Russia constituted less than 3% of its total group sales, with main imports including wood and natural gas.

Despite the challenges, Stora Enso pledged support to relief efforts through donations to UNHCR and encouraged its employees to assist local organisations. The company has expressed hope for an end to the military conflict and the safety and security of all those affected.