UPM-Kymmene Oyj (UPM1V), Europe’s second- largest paper maker, climbed the most since April 26 after saying it will reduce capacity and cut costs amid declining demand. Shares of competitors such as Stora Enso Oyj (STEAV) also rose.
UPM jumped as much as 7.2 percent in Helsinki, its biggest intraday advance in more than eight months. The company plans to reduce graphic paper capacity in Europe by 580,000 tons and will close and sell some facilities in Finland, Germany and France and cut 860 jobs, it said today in a statement.
“The general climb is related to capacity cuts,” Henri Parkkinen, an analyst at Pohjola Bank, said by phone. “It may be that it also lifted future expectations in the sector, perhaps some see the window for consolidations more open now.”
European paper producers have suffered from falling demand since at least 2005 as consumers shift to online media. Europe’s sovereign debt crisis, unemployment and austerity measures have exacerbated the challenges. UPM booked writedowns and other charges at its paper unit to reflect their earnings potential, cutting fourth-quarter profit by 1.6 billion euros ($2 billion).
Shares in the Helsinki-based company traded up 6.3 percent at 9.33 euros as of 4:48 p.m. Stora Enso climbed as much as 6.1 percent and was up 4.8 percent. The two companies led gains today among stocks on the benchmark OMX Helsinki 25 Index. (HEX25)
Other papermakers also advanced. Holmen AB (HOLMB) gained as much as 3.9 percent, Norske Skogindustrier ASA (NSG) rose as much as 4.3 percent and BillerudKorsnas AB climbed as much as 3.1 percent.
“It’s logical that what is seen as positive for UPM in the market point of view reflects positively on Stora Enso,” Parkkinen said. “There’s still plenty of overcapacity in Europe and this doesn’t solve the pricing issues yet, but it’s undoubtedly a step in the right direction.”
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