Helsinki, 2011-08-31 08:30 CEST (GLOBE NEWSWIRE) -- As part of the Myllykoski integration, UPM has completed a comprehensive review of the long term competitiveness of its publication paper mills. The review has covered asset efficiency, production input availability and costs as well as end-use markets.
As a result of the review, UPM plans to adjust its magazine paper capacity to match the needs of its global customer base. Therefore, UPM will start negotiations with employees on the plan to permanently remove 1.2 million tonnes of magazine paper capacity in Finland, Germany and France, and 110,000 of newsprint capacity in Germany. The plan also includes restructuring of the overlapping paper sales and supply chain networks and global functions.
The planned measures include:
In addition, UPM plans to temporarily close the paper machine 2 producing uncoated fine paper at UPM Nordland Papier in Germany and streamline operations in Pietarsaari pulp and paper mills in Finland.
The planned closure of the Myllykoski and Albbruck mills and the paper machine 3 of UPM Ettringen would be scheduled by the end of 2011. The Stracel mill sales process would start this autumn and is expected to be completed within twelve months.
The implementation of the plan would reduce the number of employees by approximately 1,170. Based on the plan, UPM will book in the third quarter of 2011 an approximately EUR 70 million write-off in fixed assets and make a provision for costs of approximately EUR 200 million. Net cash impact from the restructuring plan amounts to approximately EUR 170 million. Annual synergy benefits of the Myllykoski acquisition including the planned actions are estimated to total approximately EUR 200 million.
“The paper industry faces severe challenges due to high raw material, energy and logistics costs, and considerable overcapacity. The profitability of our paper business is clearly below the level required to run long-term sustainable operations. The planned restructuring would further strengthen the cost competitiveness of UPM’s paper operations and reduce the future need for major maintenance investments”, says UPM’s President and CEO Jussi Pesonen.
“With the planned actions we would respond to the magazine paper overcapacity challenge for our own benefit. In addition, we would ensure the efficient use of our remaining capacity. However, this plan would not solve the cost challenges of the industry,” says Pesonen.
“Our aim is to improve the profitability and cost competitiveness of our magazine papers. The planned measures would immediately reduce the unit costs of UPM’s magazine papers and newsprint from the level before the acquisition of Myllykoski. In spite of the restructuring, we would be able to serve our paper customers better through our improved product portfolio and geographic scope”, says Jyrki Ovaska, President of UPM Paper Business Group.
“The planned closures are very unfortunate for the affected employees but restructuring is the only way to make a fundamental improvement in the cost competitiveness of our paper business. UPM will carry out the restructuring negotiations in a responsible and professional manner in line with the national legislation of the respective countries,” says Ovaska.
UPM will consider options to establish a “From-job-to-job” programme appropriate to the local legislation provided the plan proceeds to implementation. The planned actions will be discussed in the upcoming negotiations with employees and authorities.
For more information, please contact:
Press conferences in Finland today at 14:00 EET /13:00 CET:
Conference call, in German, for the media today at 14:00 EET /13:00 CET:
Conference call for analysts and investors, in English, today at 13:00 EET (11:00 GMT, 06:00 EST)
Conference call and webcast details:
You can participate in the conference call either by dialling one of the numbers from the list below or following the webcast online at www.upm.com. Only participants who wish to ask questions in the conference call need to dial in. All participants can view the webcast presentation online.
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Conference call title: UPM Magazine Paper Asset Review
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Notes to the editors
UPM Paper Business Area
UPM leads the integration of bio and forest industries into a new, sustainable and innovation-driven future. Our products are made of renewable raw materials and are recyclable. UPM consists of three Business Groups: Energy and pulp, Paper, and Engineered materials. The Group employs around 24,500 people and it has production plants in 16 countries. UPM's annual sales exceed EUR 10 billion. UPM's shares are listed on the Helsinki stock exchange. UPM – The Biofore Company – www.upm.com