UPM plans restructuring and permanent closures to ensure competitiveness of its Plywood and Timber operations in Finland

- Savonlinna plywood mill to turn into a world-class birch plywood unit

(UPM, Helsinki, 3 November 2009 at 09:30 EET) – UPM plans significant restructuring to ensure the competitiveness of its Plywood and Timber operations in Finland. The target is to remarkably improve the businesses' long-term cost competitiveness and increase value added of the production in Finland. Co-operation negotiations with employees concerning the plans will start immediately

UPM plans to permanently close the plywood mill and sawmill in Heinola, the Kaukas plywood mill in Lappeenranta, and the further processing mill in Parkano during the first half of 2010. Furthermore in the Plywood business area, the company plans to discontinue weekend shifts in most of the Finnish mills as well as to streamline the organisation of office employees. In addition, the production of the Kaukas further processing mill in Lappeenranta will be restructured. If the restructuring is realised according to these plans, the amount of UPM employees will decrease by approximately 870 persons, of which approx. 650 work in units planned to be permanently closed.

The restructuring costs are estimated to be approximately EUR 44 million including impairment charges of approximately EUR 11 million.

In addition, UPM plans to invest approximately EUR 25 million in the expansion of the Savonlinna plywood mill and the development of the production in the Kaukas sawmill and the Aureskoski further processing mill. If the plans materialise, the Savonlinna plywood mill will become the world's most efficient birch plywood unit with an annual production capacity of
120, 000 cubic metres of high quality birch plywood. With the investment UPM strives to ensure its position as the leading plywood supplier in Europe. The planned investments in the Kaukas sawmill and Aureskoski further processing mill would strengthen the cost competitiveness of the Timber business and position in the European markets.

"Centralisation and efficiency improvement create opportunities for profitable operations in Finland in the long term. The employee impacts of these plans are regrettable but the current situation is unsustainable. Cost competitiveness and an efficient production structure are necessary for both our Plywood and Timber businesses," says Mr Jussi Vanhanen, Member of UPM's Group Executive Board and President of the Engineered materials Business Group.

"With the proposed actions UPM will adjust its Finnish production to a level which facilitates profitable production and competitive wood sourcing," says Mr Tuomo Visanko, Senior Vice President of UPM's Forest and Timber Business Area.

The challenging market situation of plywood and timber products has continued since last autumn and UPM has been forced to implement large production curtailments and temporary lay-offs in all of its mills.

The Heinola plywood mill has been at a standstill since January and the Kaukas plywood mill since May this year. The employees of both of the mills have been temporarily laid off during the standstills. The Kaukas plywood mill employs 298 persons and the Heinola plywood mill 212 persons.

The Heinola sawmill and the Parkano and Kaukas further processing mills have had production curtailments during the whole year. The Heinola sawmill employs 77, the Parkano further processing mill 64 and the Kaukas further processing mill 25 persons.

"In the future, UPM would operate four modern plywood mills and two veneer mills, five sawmills and three further processing mills in Finland. We have here very good know-how and a stabile operating environment. The planned actions improve our ability to respond to our customers' needs as the market picks up again. UPM will be the leading European plywood supplier also in the future", says Vanhanen.

UPM's Plywood business employs currently 2,450 persons in Finland whereas Timber employs around 900 persons. If the measures materialise as planned, the number of employees in the Plywood business will decrease by around 710 persons and by 160 in the Timber business. The Timber business will also start co-operation negotiations with employees in all the other Finnish units on continuing temporary production curtailments in 2010.

UPM estimates the restructuring costs for the fourth quarter of 2009 to be in the Plywood business approximately EUR 30 million, including approximately EUR 24 million cash impact. In Timber business the cost is estimated to be approximately EUR 14 million, including approximately EUR 9 million cash impact.

The first results of the co-operation negotiations can be expected at the beginning of 2010.
Also opportunities for retirement, relocation within UPM and retraining will be discussed in the negotiations.

If the planned closures will be completed, UPM will start a From-job-to-job programme based on its earlier experiences. The programme would include, in cooperation with various parties, active measures to support finding a new job and retraining.

Press conferences

UPM will arrange following news conferences concerning the plans in Finnish language today on 3 November 2009 at 11:00 Finnish time:
- in Heinola at the Opetusalan koulutuskeskus (Opeko), address Lampikatu 5, hosted by UPM directors Jussi Vanhanen, Tuomo Visanko, Pauli Hänninen and Kari Hyvönen.
Local contact person: Markku Herrala, Communications Manager, UPM, Plywood,
tel. +358 40 586 2597.
- in Lappeenranta at the Kaukas Club, address Kaukaankatu 26, hosted by UPM directors Hans Sohlström, Arto Juvonen, Raimo Särkelä and Matti Lehmuskorpi.
Local contact person: Mariitta Stenbäck, Communications Manager, UPM, Kaukas,
tel. +358 40 595 8904.
- in Parkano at the further processing mill, Teollisuustie 11, hosted by UPM directors Arto Halonen and Matti Nordberg. Local contact person: Antti Ratia, Head of Communications, UPM, Timber, tel. +358 40 487 2173.

Press material in Finnish and English will we available on UPM website as of 11:00 o'clock Finnish time at www.upm-kymmene.com > Media > Competitiveness of Plywood and Timber businesses

For further information, please contact:
Mr Tapio Korpeinen, President, Energy and Pulp Business Group and Member of UPM's Group Executive Board, tel. +358 204 15 0567

Plywood business – after 11.45 Finnish time:
Mr Jussi Vanhanen, President, UPM, Engineered materials Business Group, tel. +358 40 567 2458
Mr Arto Juvonen, Senior Vice President, UPM, Plywood Business Area, tel. +358 20 415 0469

Timber business – after 11.45 Finnish time:
Mr Tuomo Visanko, Senior Vice President, UPM, Forest and Timber Business Area,
tel. +358 20 415 6300
Mr Arto Halonen, Senior Vice President, UPM, Timber, tel. +358 40 823 2877


UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
communications@upm-kymmene.com

Notes to the editor

The Heinola plywood mill employs 212 persons and the annual capacity is approximately
50,000 m³ of birch plywood.

The Heinola sawmill employs 77 persons and the annual capacity is 120,000 m³ of sawn timber.

The Kaukas plywood mill employs 298 persons and the annual capacity is approximately
80,000 m³ of birch plywood.

The Kaukas sawmill employs around 160 persons and the annual capacity is 500,000 m³ of redwood sawn timber.

The Kaukas further processing mill employs 25 persons and the annual capacity is approximately 40,000 m³ of further processed products.

Parkano further processing mill employs 64 persons and the annual capacity is 20,000 m³ of further processed products.

Aureskoski further processing mill employs around 60 persons and the annual capacity is 120,000 m³ of further processed products.

Savonlinna plywood mill employs around 330 persons. The mills annual capacity is 80,000 m³ of birch plywood. After the planned investment the capacity would be 120,000 m³.

UPM leads the integration of bio and forest industries into a new, sustainable and innovation-driven future. Our competitiveness is based on cost leadership and change readiness. 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 24,000 people and it has production facilities in 14 countries. In 2008, UPM's sales amounted to EUR 9.5 billion. UPM's shares are listed on the Helsinki stock exchange. www.upm-kymmene.com

UPM offers high-quality WISA plywoods and veneers mainly for construction, transport and furniture industries. The sales of UPM Plywood in 2008 were EUR 530 million and it has about 3,400 employees, of which 2,450 in Finland. UPM has 6 plywood mills and 2 veneer mills in Finland, a plywood and a veneer mill in Russia and a plywood mill in Estonia. www.wisa.com

UPM Timber produces sawn timber and further processed timber products to building and construction industry and joinery. The annual production capacity is 2,4 million cubic metres of WISA timber products. UPM Timber has 15 production units in Austria, Finland, France and Russia. In Finland, UPM operates 6 sawmills which are located in Lappeenranta, Kajaani, Pietarsaari, Korkeakoski, Heinola and Pori. UPM Timber employs 1,300 people, of which 900 in Finland.