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Stora Enso to Make Sweeping Capacity, Personnel Cuts

Oct. 25, 2007 - Swedish papermaker Stora Enso today said that it will cut over a half a million tons of paper capacity, some 550,000 tons of pulp production, and eliminate about 1,700 jobs across Europe in an effort to establish long-term competitiveness.

Helsinki-based Stora Enso plans to permanently close its Summa Paper Mill, along with one magazine paper machine at Anjala Mill, and the pulp mills at Kemijärvi and Norrsundet. The closures will reduce annual capacity by 505,000 tons of newsprint and magazine paper and 550,000 tons of pulp.

According to Stora Enso, these closures will reduce its workforce by 1,400—about 1,100 in Finland and about 300 in Sweden.

The company also plans to divest its mills at Kotka in Finland and said that the laminating paper business and the special coated magazine paper operations at Kotka no longer fit its core product group. In addition, the sawmilling operations at Kotka could also be sold if a satisfactory offer is received. The mills at Kotka employ about 650 people.

As a result of its recent reorganisation, the divestment of North American operations and the above-mentioned capacity reductions, Stora Enso intends to reduce its administrative staff by about 300 in Group administrative functions and shared services (out of total group staff of about 850) in the UK, Finland, Sweden and Germany.

"These closures, production rationalizations and staff reductions, however painful, are crucial for Stora Enso to be competitive long-term," said Stora Enso CEO Jouko Karvinen. "To wait in the hope of better times would lead to more severe actions in the future.

"To reduce our wood costs as rapidly as possible, in parallel with the permanent closure plans we will start production curtailments in pulp and certain paper grades already in the current fourth quarter," added Karvinen.

"These intended actions are based on specific analyses of marginal costs in wood supply and asset quality, including future investment needs, optimization of fiber flows between the Nordic pulp mills, and decreasing the overall use of fiber by reducing newsprint and magazine paper production capacity," Karvinen said. "I also want to be clear that these plans are based on present conditions and the outlook before implementation of the announced 80% (or at least EUR 50 per cubic meter) duties on Russian wood exports from 1 January 2009. If the issue of the impending higher duties cannot be resolved soon and the dramatically increasing wood cost trends reversed, we will have to take further steps to rationalize pulp, paper, board and sawnwood production in Finland.

"I am aware of the impact today's announcement will have on the affected employees and their families. However, we are acting to safeguard the future of Stora Enso and the vast majority of our employees. We will, together with the local authorities, proactively help the affected employees to find alternative employment," Karvinen concluded.

Summa Mill and Anjala Magazine Paper Capacity Closures
Summa Mill, with annual capacity 415,000 tons of newsprint, uncoated magazine paper and book paper, is expected to be permanently closed down during the first quarter of 2008. Its customers will continue to be served by Stora Enso's other mills in Finland, Sweden and Western Europe.

The annual capacity of Anjala Mill's PM 2 is currently 155,000 tons of coated magazine paper. Immediately after the first quarter of 2008, Anjala PM 2 is to cease production of magazine paper and be converted to produce book paper, including for customers currently served by Anjala PM 1 and Summa Mill. Anjala PM 1, with annual capacity 120,000 tons of book paper, is planned to be permanently shut down in a manner that will ensure continuity of customer service.

Capacity Reductions:

  • Standard and improved newsprint - 270,000 tons
  • Coated magazine paper - 155,000 tons
  • Uncoated magazine paper - 80,000 tons

Kemijärvi and Norrsundet Pulp Mill Closures
Kemijärvi and Norrsundet pulp mills, with annual capacities of 250,000 tons and 300,000 tons of long-fiber (softwood) pulp respectively, are planned to be permanently closed down. The closures are scheduled for the second quarter of 2008 for Kemijärvi and at the latest by the end of second quarter of 2009 for Norrsundet. These closures are prompted by the dramatic rise in wood costs, which necessitates finding ways to reduce wood consumption and optimize fiber flows to reduce costs for the remaining mills.

Divestment of Mills at Kotka
The laminating paper business in Finland and Malaysia and special coated magazine paper operations at Kotka are to be divested as soon as practicable. The sawmilling operations at Kotka could be sold if a satisfactory offer is received.

The mills at Kotka produce 160,000 tons of laminating papers, 18,000 tons of Imprex products, 170,000 tons of special coated magazine paper and 250,000 cubic meters of sawn goods per year. Their external sales totalled about EUR 220 million in 2006.

Maintenance and service companies
The roles of the regional maintenance and service companies Kymenso and Fortek in Finland will diminish following the closures of Summa Mill, Kemijärvi Mill and Anjala PM 1, and the divestment of operations at Kotka. Stora Enso's maintenance company serving Norrsundet Mill and Skutskär Mill will also be affected; since these two mills have a common management, the personnel at Skutskär Mill will be affected as well.

Reorganisation of administrative functions
Administrative functions are planned to be reduced in size at principal offices in Finland, Sweden, the UK and Germany to levels more appropriate for the Group. Intended job losses will include headquarters staff in Finance, Human Resources, Research and Development, Communications and Support. The total of some 300 job cuts includes about 90 corporate and country level staff in these four countries. It is also intended to replace the current financial shared service centres in Finland, Sweden and Germany with a single shared service centre at one new cost-efficient location. Planning for this change affecting the 150 shared service center jobs will start in early 2008 with intended completion within a year.

In addition, it is planned to reduce the number of employees by about 60 by consolidating two research centers in Sweden into one. This consolidation will further improve and focus R&D operations through the R&D centers specializing in particular competences and avoiding overlaps. Stora Enso intends to maintain its investment in R&D at or above the present level.

The main benefits of the above actions will come from reduced marginal wood and energy costs, reduced personnel costs and lower depreciation. The net annualized cost improvement is estimated to be in the range of EUR 140 to 160 million and will have full annual impact in 2009.

  • External sales reduction - EUR 370 million
  • Capital employed reduction - EUR 300 million
  • Total personnel reduction - 1,700 people

SOURCE: Stora Enso




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