UPDATE 2-Stora Enso to close two paper mills as pandemic speeds up digital shift

(Adds CEO comments, context)

HELSINKI, April 20 (Reuters) - Finnish forestry company Stora Enso will permanently close two paper mills, it said on Tuesday, putting around 1,100 jobs at risk as the COVID-19 pandemic accelerates a shift from printed materials to digital devices.

The company said it had seen a decline of almost 18% in demand for printing paper in the pandemic and that both the Veitsiluoto mill in northern Finland and Kvarnsveden mill in central Sweden had been loss-making for some time.

“This is the only action we can take to ensure the competitiveness of our paper business and Stora Enso as a whole,” Chief Executive Annika Bresky told a news conference.

The pandemic, pushing people to work remotely and boosting the use of digital tools, has accelerated a decline in the previously lucrative print paper business and driven forestry companies to look for new sources of growth.

In a strategy update in November 2020, Stora Enso said it would focus on packaging materials, wooden buildings and biomaterials such as lignin.

The company said it would now start negotiations with the 440 employees at the Veitsiluoto mill and the 670 employees at Kvarnsveden.

The closures will cut the firm’s annual paper sales by about 600 million euros ($723 million), while core profit (EBITDA) should improve by around 35 million euros a year, it said.

It expects to book one-off costs of 127 million euros in the first quarter and 104 million in the second quarter of 2021.

The planned closures, expected to take place during the third quarter, will reduce the company’s paper production capacity by 35% to 2.6 million tonnes per year, it added.

At 1010 GMT, Stora Enso shares were down 1.8% at 16.45 euros.

The company said falling demand had led to “significant” over-capacity in Europe’s paper market and historically low prices.

$1 = 0.8289 euros Reporting by Essi Lehto and Helena Soderpalm. Editing by Simon Johnson and Mark Potter