UPM to Retire Four Paper Machines, Shed 800,000 Metric tpy of Capacity

 

UPM, Finland, is introducing a new profit improvement target with an annualized impact of EUR 150 million by the end of 2015. The target includes savings in variable and fixed costs in all UPM businesses as well as planned capacity closures in the European paper business, which continues to suffer from overcapacity.

 

"During the past 12 months we have been able to improve our financial performance through streamlining, but also through better focus and significant decrease in variable costs. Our new business structure has shown that it is capable of delivering results and we have been able to identify further profit improvement potential in our businesses. This potential we aim to capture in 2015," said Jussi Pesonen, president and CEO.

 

"The European paper business is a case for itself. We have achieved a turnaround in profitability during 2014. Nevertheless, the current operating rates are unacceptably low and the current economic environment is not a promising tailwind for 2015. We plan to adapt our production to meet the profitable customer demand. We also want to ensure savings without endangering customer deliveries in the structurally declining market," Pesonen added.

 

UPM is planning to permanently reduce its publication paper capacity in Europe by an additional 800,000 metric tpy. The capacity reductions are planned to take place in France, Finland, and the U.K. The company plans a permanent closure of: 

• Newsprint machine No. 3 at UPM Chapelle in France  
• Newsprint machine No. 1 at UPM Shotton in the U.K.  
• SC paper machine Jämsänkoski No. 5 at UPM Jämsä River Mills in Finland 
• Coated mechanical paper machine No. 2 at UPM Kaukas in Finland.

In addition, the company plans to centralize UPM Paper ENA supply chain planning and order fulfillment activities to Augsburg and Dörpen in Germany.

 

If all of the plans to close capacity are implemented, UPM’s personnel at the mills would be reduced by approximately 550 people by the end of 2015. The employee information and consultation processes will start during November in line with local legislation.

 

The UPM Chapelle newsprint production line No. 3 and UPM Shotton newsprint production line No. 1 have an annual newsprint capacity of 345,000 metric tons. The Jämsänkoski SC production line No. 5 and UPM Kaukas coated mechanical production line No. 2 have an annual capacity of  460,000 metric tons of magazine papers, of which 235,000 metric tons are SC paper and 225,000 metric tons are coated mechanical paper. All machines are planned to be permanently closed by the end of Q1 2015. 

 

All four mills will continue paper production on the remaining paper machines at their sites.

 

"We regret the impact of planned closures on our employees who, even under considerable pressure, have been loyal and committed. However, we have to adapt our operations to the changing market environment—this is the only way for a sustainable future. With the planned actions, we will ensure the efficient use of our remaining capacity in Europe," said Bernd Eikens, EVP, UPM Paper ENA.