Finnish pulp and paper manufacturer Stora Enso has reported its net profit for the first quarter (Q1) of fiscal year 2023 (FY23) to drop 35.4% to €185m ($203.82m) from €287m in the same period of FY23.

During Q1 FY23, the company’s sales reached €2.72bn, down by 3% when compared to €2.79bn in the corresponding period a year ago.

Stora Enso’s operational earnings before interest and taxes (EBIT) dropped by 53% to €234m in Q1 FY23 and the operational EBIT margin decreased to 8.6%.

The company registered an operating profit of €258m, down 34.6% from €394m in the same period a year ago.

Stora Enso president and CEO Annica Bresky said: “During the last two years, we have delivered record-high results and advanced our growth agenda in renewable packaging, sustainable building solutions and biomaterials innovations.

“Simultaneously, we have taken investment decisions to improve the competitiveness of strategic assets and steps to reduce cyclicality by exiting the paper business”.

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The company’s profit before tax for Q1 FY23 was €228m, down 39.1% from €374m in Q1 FY22.

Bresky added: “The business environment this year is expected to be significantly more challenging for all our divisions. Demand for most of our products is weak or weakening and market uncertainties are persisting.

“During the quarter, the high inflationary pressures persisted, and we have curtailed production to reduce inventories and adapt to the prevailing market conditions. For us, this means reinforced cost control and diligent capital allocation management.”

Recently, the company issued revised guidance for FY23 in response to the worsening market outlook.

Stora Enso expects its operational EBIT for FY23 to be significantly lower than FY22’s figure of €1.89bn.

Earlier this month, the company finalised the divestment of its paper production site in Hylte, Sweden and all its related assets to sawmill and planning mill company Sweden Timber.