Stora Kopparbergs Bergslags AB

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Stora Kopparbergs Bergslags AB

S-791 80 Falun
Sweden
(023) 800 00
Fax: (023) 138 58

Public Company
Incorporated: 1888
Employees: 69,700
Sales: SKr62.36 billion (US$11.07 billion)
Stock Exchanges: Stockholm London Frankfurt

Stora, which claims to be the world’s oldest existing joint-stock company, has gone through several transformations during its 700-year history. Throughout most of its life, Stora was one of Europe’s largest copper producers as its official name Stora Kopparbergs Bergslags (The Great Copper Mountain Mining Company) indicates. It was Sweden’s first, and for a considerable period only, major enterprise of international significance. As copper output declined in the 19th century, Stora diversified into iron and steel production as well as forestry products. It remained active in these sectors until the 1970s, when it decided to concentrate on the pulp and paper industry. As a result of a series of acquisitions in the 1980s, Stora has become Europe’s largest forestry company.

Peasant farmers began mining the copper mountain near Falun in central Sweden around the year 1000. The first documentary evidence of the mine appears in a letter from 1288 giving the Bishop of Vásteras a one-eighth share in the mine in exchange for landholdings. The document shows that a cooperative organization by this time was managing the mine, with shares being bought and sold.

The mine was controlled by Swedish nobles and German merchants, who were responsible for selling the copper in the European market. Mine operations were conducted by master miners, who excavated the ore on a rotation basis. They were supervised by a royal bailiff after King Magnus Eriksson granted a charter, bestowing a series of privileges on the mine, in 1347.

The decree of 1347 acknowledged that the mine played a decisive role in the national economy and its importance grew over the next few centuries. The improvement of production techniques boosted the annual output of the mine from 80 tons of copper in the late 15th century to 750 tons 100 years later.

This was occurring as copper output in central Europe was declining. The mine soon became a prime source of national wealth, accounting for 60% of gross national product, as foreign demand grew for Swedish copper. “Sweden stands or falls with the Copper Mountain,” read one proclamation from the royal government, which viewed the mine as a means to improve its poor financial position and support its series of military campaigns in the Baltic region and central Europe during the 17th century.

Having declared that the crown had regal rights to the copper deposits, the Swedish kings demanded taxes on the mined ore and tried to monopolize the mining and trading of copper.

Their success in this demand was limited, however. By 1650, when annual copper production from the mine hit a peak of 3,000 tons, the metal had become the country’s most important export product and Sweden dominated the European copper market, supplying two-thirds of the continent’s copper needs.

The highest authority over mine operations was the Royal Mine Board in Stockholm and the king’s local representative was the mine master. The mine master was in charge of allocating mining rights to the master miners, who paid one-tenth of their ore production to the crown as rent, plus one-fourth of the crude copper they produced from smelters as tax. The total number of mining shares was fixed at 1,200 an arrangement that lasted until Stora became an aktiebolag— public limited company—in 1888.

The decline of Stora’s mine was signaled by two giant caveins in 1655 and 1687, after which production never exceeded 1,500 tons a year and output gradually sank to an annual level of 900 tons by the late 18th century. During this period, copper was still Sweden’s second-largest export item after iron, but its importance declined sharply in the early 19th century.

The mine owners then decided to develop the forest and iron-ore resources in the region to replace the falling copper production. They had considerable experience of both products since they had harvested and transported wood to fuel the copper smelters, while they manufactured mining tools out of iron ore.

In the early 1800s Stora Kopparberg began producing pig iron and bar iron as a new business venture, becoming one of the country’s leading manufacturers in this sector by the mid-century. It bought or leased tracts of forest to supply the iron furnaces and forges with charcoal fuel.

In parallel with the change in its activity, Stora Kopparberg also underwent an organizational reform in the 1860s that transformed its legal status and administrative rules. The crown’s influence over operations was ended with the abolition of the master miner’s office. Supervision of the company’s mining operations and its manufacturing activity in iron and wood products, which had been managed separately, were merged under a three-member collective leadership.

By the 1870s, Stora Kopparberg had begun to assume its modern profile. It used its ownership of forest lands to become one of the country’s largest wood product companies. Its Domnarvet sawmill was the largest water-power mill in the nation and the sawn timber it produced accounted for more than half of the company’s sales. A large iron works was also built at Domnarvet during the decade to replace the company’s dozen scattered and inefficient small works.

Mining operations, meanwhile, contributed a decreasing share of corporate revenues. The mine accounted for one-quarter of sales in 1870, but its output of copper and recently discovered gold and silver amounted to only a tenth of sales by 1890. The mine also generated income from the production of sulfur pyrites as well as the distinctive Falun red paint that adorns many houses in the Swedish countryside.

Erik Johan Ljungberg, who became general manager of Stora Kopparberg in 1875, emphasized the strategy of making a limited number of basic products in a few large plants to achieve economies of scale. A sawmill at Skutskár on the mouth of the Dalálven River was acquired in 1885 and expanded to become one of the world’s largest, with two pulp mills added in the 1890s. A giant paper mill for newsprint was also established at Kvarnsveden, near Domnarvet, in 1897.

Additional forests and the ore mines at Grángesberg were purchased as well as other ironworks, including the Soderfors facility that was later developed into the company’s specialty steelworks. These facilities were powered by hydroelectric stations built by Stora along the Daláven River in the early 20th century.

When Stora Kopparberg became a limited share company in 1888, with Ljungberg appointed managing director and chairman of the board, it was the largest concern in Sweden in terms of sales and number of employees. It had an initial share capital of SKr9.6 million, with eight shares being exchanged for each old share dating from the 17th century. During Ljungberg’s time, corporate sales grew from SKr4.5 million to more than SKr30 million.

By the time of Ljungberg’s death in 1915, the foundations of the modern Stora Kopparberg were clearly laid with the saw and pulp mills at Skutskár, the paper mill at Kvarnsveden, and the iron and steel works at Domnarvet, all of them concentrated along the Dalálven River Basin. The company would spend the next 60 years developing and expanding these core facilities. The sectors in which Stora operated formed the backbone of the country’s industrial breakthrough in the late 19th century, enhancing the company’s importance to the nation.

In 1916, Stora Kopparberg became one of the crown jewels of the extensive Swedish industrial empire controlled by the Wallenberg financial family with the appointment of Marcus Wallenberg Sr., the head of the dynasty, as chairman.

Emil Lundqvist, one of the top executives in the Wallenberg sphere, was named managing director of Stora Kopparberg in 1923 and he oversaw the company’s steady growth over the next two decades. Under Lundqvist, sales increased threefold to SKrl31 million, while profits grew from SKr2 million to SKrll million.

Lundqvist was succeeded by Ejnar Rodling and Håkan Abenius, who presided over an almost uninterrupted expansion with sales approaching SKr1 billion by the early 1960s. Annual capital investment rose from SKr20 million in 1945 to more than SKr150 million in 1960, with the construction of five new power stations and expansion of existing industrial facilities.

But the 1960s proved to be a period of growing difficulties for Stora Kopparberg. Increased international competition depressed prices for the bulk commodities that were the company’s primary products. It introduced rationalization measures to boost production capacity, while developing special grades of standard products to reduce its heavy dependence on goods particularly vulnerable to economic cycles. These included new types of pulp and high quality iron and steel. In 1961, Stora Kopparberg also established its first overseas venture with the building of a pulp mill in the Canadian province of Nova Scotia.

The recession that followed the oil shock of the early 1970s posed a new challenge for the company’s next president, Erik Sundblad. Mounting losses in both commercial steel and specialty steel operations placed a heavy burden on the company. It was clear that what was needed was the creation of larger units that could operate at lower cost through economies of scale.

But instead of expanding the steel business through acquisitions, Stora Kopparberg decided to sell it. The first step occurred in 1976 with the sale of its specialty steel unit to Uddeholm, another Swedish specialty steel company. This was followed a year later with the transfer of its commercial steel operations, mainly consisting of the Domnarvet Steelworks and iron mines, to Svenskt Stál AB (SSAB), a new company created by the government to concentrate the country’s ailing steel industry under one umbrella group.

With these moves, Stora Kopparberg became primarily a pulp and paper company with substantial resources in forests and hydroelectric power. Its new strategy of concentrating on this sector was inaugurated with the purchase of Bergvik & Ala, a Swedish forestry company, in 1976.

The early 1980s were marked by a power struggle between the Wallenbergs and the Swedish automaker Volvo, which had been permitted to buy a stake in the company, over ownership control of Stora Kopparberg, with the family eventually emerging victorious.

Following the sudden death of Sundblad in 1984, Bo Berggren, a former deputy managing director, became the new company head. Within months, Stora Kopparberg, which had been Sweden’s second biggest forestry company after Svenska Cellulosa AB, suddenly emerged as Europe’s largest, with sales of SKr13 billion, after the SKr3.6 billion purchase of Billerud, Sweden’s fifth-largest forestry company.

The deal was significant for other reasons besides size. It broadened the company’s product range from its traditional areas of newsprint and fine paper to Billerud’s specialized area of packaging, including sack paper and liquid packaging board. It also obtained its first main production facility within the European Community (EC) with Billerud’s eucalyptus pulp mill in Portugal. The company marked this milestone by shortening its name for general usage to Stora, the Swedish word for “great” or “large.”

Pulp- and papermaking is one of the world’s most capital-intensive industries. Stora realized that only the largest companies would be able to survive and compete in international markets against the huge U.S. rivals.

The company’s size was further enlarged with the decision by the Wallenbergs to concentrate their forestry holdings under Stora. This phase began in 1986 when Stora acquired Papyrus, then the country’s fifth-largest pulp and paper company. The SKr5.8 billion deal boosted Stora’s annual sales to SKr18 billion.

In 1988, Stora paid SKr5.9 billion for Swedish Match, another Wallenberg-controlled company. The deal fitted Stora’s strategy of becoming a forest products group that spanned the entire manufacturing process from raw materials to finished consumer products. Although Swedish Match was best known for matches and lighters, it also produced a range of timber-based building products, including flooring, doors, and kitchen furnishings. The acquisition boosted Stora’s sales to almost SKr40 billion.

Having consolidated its position at home, Stora then decided to expand its international operations, especially in the EC, which accounted for almost half of its sales. One worry was that its production of paper and pulp remained largely concentrated in Sweden, which could be a handicap as competition intensified in the EC single market after 1992.

In 1990, it first bought the French paper concern Les Paperteies de la Chapelle-Darblay in partnership with the Finnish forestry company Kymmene. But it then pulled out of the deal when it saw a more attractive target. This was the DM4 billion takeover of Feldmühle Nobel, the German forest products and engineering group. Stora had cooperated with Feldmühle Nobel for more than 20 years, with the two companies jointly operating pulp and newsprint mills in Sweden. Ownership of Feldmühle Nobel made Stora the largest producer of lightweight coated magazine paper and newsprint in Europe, while increasing its sales to SKr62 billion in 1990.

Stora had to rein back some of its other ambitions in order to finance the purchase of the German firm, one of the largest ever transactions in Europe. It decided to sell some of the Swedish Match units as well as the engineering operations of Feldmühle Nobel. This still left Stora as the dominant power in the European pulp and paper industry and one of the world’s largest forest products companies.

Principal Subsidiaries

Stora Forest; Stora Power; Stora Cell; Stora Feldmühle; Stora Billerud; Stora Papyrus; Stora Timber; Stora Kitchen; Akerlund & Rausing; Swedoor; Tarkett.