UPM to Reduce Graphic Paper Capacity in Europe an Additional 580,000 Metric TPY

UPM, Finland, reports that continuing challenges in the European economy have significantly impacted the consumption of paper, exacerbating the effect of structural changes in paper end-uses, and resulting in a further decline in the demand of graphic papers in Europe. The company thus is planning to permanently reduce paper capacity in Europe by an additional 580,000 metric tons. The capacity reductions are planned to take place in Finland, Germany, and France. The company also said it will streamline its Paper Business Group and global functions to remain cost competitive in the new business scale.

In early January, UPM announced a reduction of 270,000 metric tpy of coated magazine paper capacity at its Stracel, France, mill. Combined with the 580,000 metric tpy reduction announced this week, UPM will reduce a total of approximately 850,000 metric tpy of graphic paper capacity in 2013. These reductions include:

Permanent closure of PM 3 at UPM Rauma mill in Finland
Permanent closure of PM 4 at UPM Ettringen in Germany
A sale or other exit of UPM Docelles mill in France
Subject to further analysis, streamlining in the Paper Business and UPM's global functions.

If all plans are implemented, UPM's personnel will be reduced by approximately 860 people. The plans would affect several countries.

According to the plan, the Rauma and Ettringen machine lines would be permanently closed by the end of the first half of 2013. Both machines are producing uncoated magazine paper, totaling 420,000 metric tpy.

The process for selling the UPM Docelles mill will start immediately, and will be given a maximum of six months. Docelles is producing 160,000 metric tpy of uncoated woodfree papers. Streamlining of the Paper Business Group and global functions will begin after further analysis beginning in early February. Including UPM Stracel, the plans are estimated to result in annual fixed cost savings of EUR 90 million, and one-time cash costs of EUR 100 million.

"The target of the planned actions is to ensure the efficient use of UPM's remaining capacity. The paper machines targeted for closure are either at the end of their technical age, have limited product flexibility, or have poor profitability. The situation is very regrettable for the personnel; however, in the overcapacity situation, we need to adjust our capacity to the level of profitable customer demand," said Jyrki Ovaska, president of the UPM Paper Business Group.

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