UPM-Kymmene - UPM continues measures to improve profitability; Company removes significant capacity in magazine and newsprint
Following the review of its asset portfolio against the current cost and
business environment, UPM has decided on several courses of action, including
removal of production capacity.
The Company today announced the following:
- removal of 450,000 tonnes of magazine paper capacity by permanently closing
the Miramichi paper mill in Canada
- reduction of 250,000 tonnes of newsprint capacity through the temporary
shutdown of one paper machine in Kajaani, Finland, for ten months, and one
machine in Steyrermühl, Austria, for two months
- reduction of label paper capacity with the temporary shutdowns in Finland of
one paper machine in Jämsänkoski and one in Tervasaari, both up to three months
- rationalisation of the Company's self-adhesive label materials operations by
closing three old coating lines in Tampere, Finland, and one coating line in
Melbourne, Australia, and
- commencing negotiations with employees on the possible closing of the timber
components and planing mill in Luumäki, Finland.
With the exception of Miramichi and Tampere, all the above measures still
require negotiations with employees according to the national practises in
The decisions are based on UPM's view of the markets and cost competitiveness of
the assets. We estimate that next year demand growth will be slower than in 2007
and in the beginning of the year meaningful price increases can be achieved
mainly in magazine papers. At the same time the industry will face higher costs
of wood, recycled paper and energy. The full year 2007 operating profit,
excluding special items, is forecast to exceed that of 2006. The cost
development is, however, visible already during the current quarter which will
be our weakest quarter of the year.
The annualized cost saving is estimated to be in the range of EUR 50 to 70
million, mainly consisting of reduced wood, recycled paper, energy and personnel
Due to the closure of the Miramichi mill, UPM will book in operating profit
costs of approx. EUR 105 million in Q4 of 2007, majority of which will impact
Magazine Papers Division. The cash flow impact is estimated to be EUR 80 million
during 2008-2009. In addition, income tax charges of approx. EUR 15 million will
be recorded from the reduction of deferred tax assets in Canada.
Actions related to magazine papers
UPM will permanently close its paper mill in Miramichi, Canada. The Miramichi
mill has been temporarily shut down since August 2007.
“During the temporary shutdown, we have investigated several business solutions
to make the Miramichi operation viable. Unfortunately, the current business
environment leaves us no options," says Jyrki Ovaska, President of UPM's
Magazine Papers Division.
The record strong Canadian dollar has made the export of Miramichi paper to the
United States market unprofitable. The Canadian currency has gained 25% this
year. The increasing cost of essential raw materials such as wood and chemicals
has offset the benefit of price increase for magazine paper. Demand for magazine
paper grades in North America has been stable, but globally, there continues to
be overcapacity in magazine papers.
UPM has permanently ceased production of 980,000 tonnes of coated magazine paper
in 2006-2007 to reduce the structural overcapacity and improve profitability of
Near Miramichi, UPM operates two sawmills in the communities of Blackville and
Bathurst, and manages woodlands under Crown forest licenses. The future of these
operations is under consideration.
UPM's North American customers will continue to be served by the Company's
coated groundwood paper mill in Blandin, Minnesota, USA, and UPM's paper mills
Actions related to newsprint
UPM will reduce its standard newsprint production capacity in 2008 by 250,000
tonnes by temporarily shutting down one paper machine (PM 4) in Kajaani,
Finland, for ten months and one paper machine (PM 4) in Steyrermühl, Austria,
for two months, starting during the first quarter of 2008.
Furthermore, the cost competitiveness of the Kajaani mill will be improved by
streamlining and reorganisation which will result in permanent headcount
"Shutdown for almost a year is an unconventional measure. However, we foresee a
changing newsprint market situation in Europe in 2008. The demand growth for
standard newsprint is currently flat in Europe, and with continued imports from
North America and a decrease in exports to Asia, the European newsprint market
is not in balance. Therefore, we need to take action," says Hartmut Wurster,
President of UPM's Newsprint Division.
Actions related to label papers
UPM will temporarily shut down two label paper machines for up to three months,
one in Jämsänkoski (PM 4) and one in Tervasaari (PM 5), both in Finland. In
label papers, there is
overcapacity in Europe and the strong euro makes the current exports
Actions related to wood products
UPM will start negotiations with employees on the possible closure of the timber
components and planing mill in Luumäki, Finland. The financial performance of
the mill has been negative and the market outlook for 2008 will remain weak. The
closure of the Luumäki planing mill relates to UPM Timber's plans to centralise
its planing operations.
Actions related to self-adhesive label materials
UPM will rationalise its self-adhesive label materials production at its Tampere
factory in Finland by closing three outdated coating lines, no later than in
In addition, UPM will shut down a self-adhesive label materials production line
at its factory in Melbourne, Australia. The specialty products produced on this
coater have been transferred to other production lines. The Melbourne factory
continues to serve the Australian market with a combination of locally produced
products and imports from other Asian factories.
Impacts on personnel
UPM estimates that these measures will reduce the number of the Group's
personnel by approximately 680, mainly caused by the permanent closure of the
Miramichi mill (540 persons), streamlining and reorganisation of the Kajaani
mill (60 persons) and the possible closure of the Luumäki mill (50 persons).
Rationalisation of the self-adhesive label materials operations in Tampere,
Finland, and Melbourne, Australia, will reduce the headcount by about 30
In Kajaani, Jämsänkoski and Tervasaari, negotiations on possible temporary
layoffs will be started with employees. Temporary layoffs are estimated to
affect approximately 110 persons at the Kajaani mill. At the Tervasaari mill in
Valkeakoski, the temporary layoffs are estimated to affect approximately 90
persons and at the Jämsänkoski mill approximately 70 persons.
Press conferences and conference call:
UPM will conduct news conferences in
- Fredericton, Canada: Hotel Crowne Plaza at 9.00 a.m. local time hosted by Mr
Jyrki Ovaska, President, Magazine Papers Division
- Kajaani, Finland: Mill Club House at 15.30 EET hosted by Mr Hartmut Wurster,
President, Newsprint Division, Mr Kari Pasanen, General Manager, UPM, Kajaani,
and Mr Sakari Toivonen, Director, Human Resources, Northern Europe
A conference call for investors and analysts will take place in English language
at 16:00 EET, hosted by President and CEO Jussi Pesonen. Dial-in numbers for the
conference call are:
Call title: UPM briefing on December 17, 2007
International dial-in: +44 (0)1452 555 566
UK Free call: 0800 694 0257
USA Free Call: 1866 966 9439
Dial-in numbers for replay, available until December 23, 2007:
Access code: 28668221#
International Dial In: +44 (0) 1452 55 00 00
UK Free Call: 0800 953 1533
UK Local Call: 0845 245 5205
USA Free Call: 1866 247 4222
For further information, please contact:
Mr Jyrki Salo, Executive Vice President and CFO, tel. +358 204 15 0011
Mr Jyrki Ovaska, President, UPM, Magazine Paper Division, tel. +358 204 15 0564
Mr Hartmut Wurster, President, Newsprint Division, tel. +49 821 310 9243
Mr Matti Lievonen, President, Fine and Speciality Papers Division, tel. +358 204
Mr Heikki Pikkarainen, President, Label Division (UPM Raflatac), tel. +358 204
Mr Matti Lindahl, President, Wood Products Division, tel. +49 821 3109374
Notes to the editor
UPM's Miramichi mill has two paper machines, producing lightweight coated paper,
with an annual capacity of 450,000 tonnes. The Miramichi paper and groundwood
pulp mills employ about 650 people.
UPM's Kajaani paper mill manufactures standard and speciality newsprint as well
as uncoated magazine papers. The mill's three machine lines have a combined
annual capacity of 640,000 tonnes. The mill is located in the middle of Finland
and employs around 600 people.
UPM Steyrermühl paper mill manufactures newsprint and on-line calendered
uncoated mechanical paper. The mill's two paper machines have a combined annual
capacity of 490,000 tonnes. The mill is located in Upper Austria and employs
around 500 people.
UPM's Tervasaari paper mill manufactures label papers, envelope papers and bag
papers. The mill's three machine lines have a combined annual capacity of
350,000 tonnes. The mill is located in central Finland and employs together with
a pulp mill around 700 people.
UPM's Jämsänkoski paper mill manufactures uncoated magazine papers and
speciality papers for labels and packacking. The mill's four machine lines have
a combined annual capacity of 870,000 tonnes. The mill is located in central
Finland and employs around 750 people.
UPM's Luumäki timber components and planing mill manufactures components mainly
for window and door manufacturers. The mill is located in south eastern Finland
and employs some 50 people.
Executive Vice President, Corporate Communications
OMX Nordic Exchange Helsinki
UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284