For the Three Months Ended April 3, 2021: Net sales increased 42% to $247.6 million, compared to $174.4 million during the same period last year. Gross profit increased 57% to $145.2 million, or 58.6% of net sales, compared to $92.5 million, or 53.0% of net sales, in the first quarter of 2020. Operating income increased 148% to $40.0 million, or 16.2% of net sales, compared to $16.2 million, or 9.3% of net sales, during the prior year quarter. Net income increased to $30.5 million, or 12.3% of net sales, compared to $8.5 million, or 4.9% of net sales, in the prior year quarter.
Earlier this month PrintWeek reported on the ‘perfect storm’ of global events that have tightened the supply of graphical papers and resulted in paper mills resorting to allocation for the first time since 2001.
Factors in the mix are wide-ranging with the surging global demand for pulp being at the forefront, fuelled by its ever-expanding uses in new and existing markets, such as hygiene and tissue products, as well as the backlash against plastic with manufacturers seeking paper-based alternatives.
“Pulp is no longer a one-trick pony,” says Mario di Lieto, managing director of Stora Enso division LumiPaper. “There’s a much broader use for cellulose today than just paper. It’s being used for plastic substitute, for clothing, for biomass for energy, all sorts of applications.”
As a result of this soaring demand, pulp prices have been pushed up further and further from $700-$750 (£520-£557) a tonne a year ago, to nearly $1,200 causing a knock-on effect across the print and packaging industry, among others.
“Nobody projected the backlash against plastic, and that subsequently pulp demand would shoot through the roof,” di Lieto says, adding that despite the ongoing development of new pulp mills around the world he could see no let-up in supply issues until these were completed.
Added to the widening demand for pulp, paper manufacturers such as Holmen, Stora Enso, UPM and Mondi all report in their latest financials continued increases in raw materials costs such as chemicals and fillers as well as logistics and energy, with some stating the cost increases had offset or partially offset their higher selling prices.
Meanwhile in recent years, as a result of reduced demand, numerous paper manufacturers have mothballed or converted paper machines to make carton board, for example, while new demand from China has greatly exacerbated the problem.
As part of an environmental clean-up strategy, the Chinese government closed more than 2,000 factories in 2010 including some 279 pulp and paper mills on top of targeting an annual capacity reduction of around 4.3 million tonnes. Added to that, a ban, since 1 January, on waste paper for recycling among other things, and the resulting surge in paper demand has redirected much of the tonnage produced in Asia away from Europe and the west coast of the US. It has even attracted at least one European papermaker, rumoured to be Holmen, to move some of its sales from Europe to China.
The situation is further hindered by the uncertain futures of German paper makers Scheufelen and Feldmuehle Uetersen. The former is in the midst of insolvency proceedings as was the latter, but has now been bought, although the deal has yet to be completed.
Furthermore, many publishers have switched paper grades as they look for cost reductions, applying more pressure on supplies with web offset, gravure and newsprint papers in particularly short supply.
more at: https://www.printweek.com/print-week/briefing/1164589/forecast-worsening-for-paper-supply