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UPM plans to reduce 1.3 million tonnes of paper capacity in Europe

Stock Exchange Release 31.8.2011 9:30 EEST

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:
• permanent closure of the UPM Myllykoski mill in Kouvola in Finland
• permanent closure of the UPM Albbruck mill in Germany
• permanent closure of the paper machine 3  at the UPM Ettringen mill in Germany
• transfer of the sheeting lines from UPM Albbruck mill to UPM Plattling mill in Germany
• sale or other exit of the UPM Stracel paper mill from UPM Paper Business Group
• restructuring of overlapping paper sales and supply chain network as well as global functions.

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:
Mr Jussi Pesonen, President and CEO, tel. +358 204 15 0001
Mr Jyrki Ovaska, President, Paper Business Group, tel. +358 2041 50564 (after 10:30 Finnish time)
Mr Tapio Korpeinen, CFO, tel. +358 2041 50004
In Germany: Mr Hartmut Wurster, Executive Vice President, Technology, tel. +49 821 310 9243 (after 09:30 CET time)
In France: Mr Hans Sohlström, Executive Vice President, Corporate relations and development, tel.+358 204 15 0542 (after 09:30 CET time)

Press conferences in Finland today at 14:00 EET /13:00 CET:
UPM will hold the following news conferences concerning the plans today:
- In Helsinki: Press conference in Finnish, hosted by Jussi Pesonen, President and CEO, at UPM’s Group Head Office in Helsinki, Eteläesplanadi 2.
- In Kouvola: Press conference in Finnish, hosted by Jyrki Ovaska, President, UPM, Paper Business Group, at Myllykoski seuratalo, Myllykoskentie 1.

Conference call, in German, for the media today at 14:00 EET /13:00 CET:
Hosted by Hartmut Wurster, Executive Vice President, Technology
Phone numbers:
Germany: +49 (0) 69 5660 36 000 / Austria: +43 (0) 125 3021 408 / Switzerland:  +41 (0) 225 954 730

Conference call for analysts and investors, in English, today at 13:00 EET (11:00 GMT, 06:00 EST)
A conference call and webcast, in English, will be hosted today by Jussi Pesonen.

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.

We recommend that participants start dialling in 5–10 minutes beforehand to ensure the conference starts timely.

Conference call title: UPM Magazine Paper Asset Review
Conference ID: 902590

Phone numbers:                                                                 
Participant - US: +1 334 323 6201
Participant - India Freephone: 000 8001 0035 51
Participant - India Freephone: 000 8001 0035 51
Participant - Australia LC: +61 (0)28 2239 543
Participant - Hong Kong LC: +852 300 278 26
Participant - Japan LC: +81 (3)45 8001 94
Participant - Malaysia LC: +60 (0)37 7124 471
Participant - New Zealand LC: +64 (0)99 1924 18
Participant - Singapore LC: +65 6823 2169
Participant - South Korea LC: +82 (0)23 4831 070
Participant - Taiwan LC: +886 (0)22 1626 701
Participant - Austria: +43 (0)268 2205 6292
Participant - Belgium: +32 (0)2 290 14 07
Participant - Czech Republic: +420 (2)3900 0635
Participant - Denmark: +45 3271 4607
Participant - Finland: +358 (0)9 2313 9201
Participant - France: +33 (0)1 7099 3208
Participant - Germany: +49 (0)695 8999 0507
Participant - Hungary: +36 (0)618 8932 15
Participant - Ireland: +353 (0)1 4364 106
Participant - Italy: +39 023 0350 9003
Participant - Luxembourg: +352 270 0073 408
Participant - Netherlands: +31 (0)20 7965 008
Participant - Norway: +47 2156 312 0
Participant - Spain: +34 9178 8989 6
Participant - Sweden: +46 (0)8 5052 0110
Participant - Switzerland (Geneva): +41 (0)2 2592 7007
Participant - Switzerland (Zurich): +41 (0)434 5692 61
Participant - UK: +44 (0)20 7162 0077

The webcast can be replayed at www.upm.com for 12 months.   

Notes to the editors

UPM Albbruck
UPM Albbruck paper mill manufactures coated magazine papers including sheet-fed. Its three production lines have a combined annual capacity of 320,000 tonnes. Located in south Germany, the mill employs 557 people. The mill was founded in 1882.

UPM Ettringen
UPM Ettringen paper mill manufactures uncoated magazine papers and newsprint. Its three production lines have a combined annual capacity of 600,000 tonnes. Located in Bavaria, south Germany, the mill employs 530 people. The mill was founded in 1897. 

UPM Myllykoski
UPM Myllykoski paper mill manufactures uncoated and coated magazine papers. Its three production lines have a combined annual capacity of 600,000 tonnes. Located in south-east Finland, the mill employs 375 people. The mill was founded in 1892.

UPM Plattling
UPM Plattling mill manufactures coated and uncoated magazine papers. Its three production lines have a combined annual capacity of 780,000 tonnes. Located in Bavaria, South Germany the mill employs 460 people. The older mill was founded in1982 and newer mill in 2007.

UPM Stracel
UPM Stracel paper mill manufactures coated magazine papers and special newsprint. Its annual capacity is 280,000 tonnes. Located in Eastern France the mill employs 260 people. The mill was founded in 1936.

UPM Paper Business Area
UPM has 25 modern and sustainable paper mills in Finland, Germany, the United Kingdom, France, Austria, China and the United States. Many of them are large recycling centres and bioenergy producers, as well as paper manufacturers. UPM Paper employs nearly 14,500 people. In 2010, the business group’s net sales amounted to EUR 7.6 billion. To learn more, visit: www.upmpaper.com

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

UPM-Kymmene Corporation                                                        
Pirkko Harrela                                                                 
Executive Vice President, Corporate Communications                             

NASDAQ OMX Helsinki Ltd.                                                       
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