UPM to implement planned restructuring of its Plywood and Timber operations in Finland and start investments to improve their competitiveness

(UPM, Helsinki, 12 January 2010 at 09:00 EET) – In November 2009, UPM announced plans concerning significant restructuring of its Plywood and Timber operations to ensure their competitiveness in Finland. The measures now decided include centralising operations and investing in the more competitive Finnish units.

In negotiations with the employees, financial prerequisites could not be found to continue the operations at the plywood mills in Heinola and Kaukas in Lappeenranta, the sawmill in Heinola, and the further processing mill in Parkano. UPM will permanently close these mills during the first half of 2010. In addition, UPM is prepared for temporary production curtailments at all of its plywood mills and sawmills in Finland in 2010.

Furthermore, to improve the efficiency of the Plywood business, UPM will discontinue weekend shifts in most of the Finnish mills as well as streamline the organisation of office employees. In the Timber business area, UPM will restructure the production of the Kaukas further processing mill in Lappeenranta.

As part of the measures to improve the competitiveness of the Plywood and Timber operations in Finland, UPM will invest approximately EUR 25 million in the expansion of the Savonlinna plywood mill and the development of the production at the Kaukas sawmill and the Aureskoski further processing mill in Parkano. After the investment, the Savonlinna plywood mill will be the world's most efficient birch plywood unit.

UPM estimates the restructuring costs to be approximately EUR 44 million, including impairment charges of approximately EUR 11 million. The restructuring costs for the fourth quarter of 2009 are estimated to be in the Plywood business approximately EUR 30 million, including a cash impact of approximately EUR 24. In the Timber business, the cost is estimated to be approximately EUR 14 million, including a cash impact of approximately EUR 9 million.

Impacts on the personnel and UPM's From-job-to-job programme

Implementation of these measures will decrease the amount of UPM employees by approximately 830 persons, of which approximately 650 work in the units to be permanently closed:
The Kaukas plywood mill employs 298 persons, the Heinola plywood mill 212, the Heinola sawmill 75, and the Parkano further processing mill 63 persons. UPM estimates that approximately 200 persons could enter different pension schemes.

UPM's Plywood business employs currently 2,450 persons in Finland whereas Timber employs around 900 persons. As a result of the measures, the number of employees in the Plywood business will decrease by around 680 persons and by 150 in the Timber business.

"These decisions are regrettable and they affect many individuals. We intend to implement the restructuring in a professional manner and support employees in different ways to identify opportunities in the future," says Mr Jussi Vanhanen, Member of UPM's Group Executive Board and President of the Engineered materials Business Group.

UPM will start a From-job-to-job programme to alleviate the impacts of the mill closures. The programme includes, in cooperation with authorities and partner companies, active measures to find new jobs and retraining. UPM carried out a similar programme when the Kajaani and Voikkaa paper mills where closed in 2008 and 2006.

UPM will support re-employment training of employees who have been given notice. UPM has reserved EUR 1.5 million to support the participation and material costs for retraining with a sum of up to EUR 5,000 per person.

In addition, UPM will encourage employees to create new enterprises by offering start-up support. The company has reserved EUR 1 million for this purpose. The start-up support can be applied for until the end of 2011, and the maximum support for an enterprise is EUR 20,000.

After the re-employment obligation of 9 months, UPM is committed to continue for a further 9 months informing the employees given notice about UPM's vacancies to their home addresses and the employment authorities of the cities where UPM's plywood mills and sawmills are located.

For employees moving to work in a new location, the company will cover relocation costs and a settling-in allowance equal to one month's remuneration.

Retiring employees and those given notice at the Heinola and Kaukas plywood mill, Heinola sawmill and the Parkano further processing mill have the right to use UPM's occupational health services for one year after the end of their employment.

Immediately after the restructuring plans were announced, UPM started cooperation with the Finnish Ministry for Employment and the Economy, municipal bodies, regional and local Employment and Economic Development Centres as well as the local employment authorities in the cities where the mills to be closed are located. The cooperation continues with the target to create new jobs.

Press conferences today:
UPM will arrange following news conferences concerning the decisions in Finnish language today on 12 January 2010 at 11:00 Finnish time:
- in Heinola at the Hotel Kumpeli, address Muonamiehenkatu 3, hosted by UPM directors Tuomo Visanko, Kari Hyvönen and Tapio Laine.
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 Arto Juvonen, Raimo Särkelä, Petri Parjanen and Matti Lehmuskorpi.
Local contact person: Mariitta Stenbäck, Communications Manager, UPM, Kaukas,
tel. +358 40 595 8904.
- in Parkano at restaurant Parooni, address Parkanontie 68, hosted by UPM directors Arto Halonen and Matti Nordberg. Local contact person: Antti Ratia, Head of Communications, UPM, Timber, tel. +358 40 487 2173.

For further information, please contact:
From 9 to 10 Finnish time: Mr Jussi Vanhanen, President, UPM, Engineered materials Business Group, tel. +358 40 567 2458

Plywood business – after 11.45 Finnish time:
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

From job-to-job programme – after 11.45 Finnish time:
Mr Tapio Laine, HR Manager, UPM, tel. + 358 40 565 8472

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 75 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 63 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.