M-real to Begin Restructuring Program, Reduce Capacity
Oct. 18, 2006 - Europe's largest fine papermaker M-real said it will begin an extensive restructuring program that includes capacity closures, a cost reduction plan, and the potential sale of some assets.
The new program will take effect immediately, with completion expected by the end of 2007, M-real said.
“M-real's Board of Directors initiated a strategic review of M-real's current business portfolio in March 2006, with a view to exploring potential benefits of participation in the consolidation and restructuring of the European paper industry,” said Kari Jordan, Chairman of the Board of Directors at M-real.
“We firmly believe that further consolidation within the European paper industry is needed and that the structure of European paper merchanting is going to change. The planned restructuring program announced today is the first step in the execution of the strategic review,” Jordan said in a press statement.
Jordan said the company has identified two paper mills and an additional two paper machines that are “uncompetitive” and being considered for closure. The closures would result in a capacity reduction of 485,000 tons per year of coated and uncoated woodfree paper. The operations are:
- Sittingbourne, UK - 210,000 tons of coated woodfree paper
- Wifsta, Sweden - 175,000 tons of uncoated woodfree paper
- PM 6 and 7 in Gohrsmühle, Germany - 100,000 tons of coated woodfree paper
M-real said that the closures would reduce its fine paper capacity by 15%, both in Commercial Printing and Office Paper Business Areas.
The company's restructuring deal also includes a new cost reduction plan and working capital improvement program.
In a strategic review of its assets, M-real has earmarked a short list of potential divestitures which the company says are expected to raise EUR 500 million in proceeds, including the possible sale of minimum of 8% stake of Metsä-Botnia to Metsäliitto. In addition, a potential sale of the Folding Cartons converting business—all units or each unit separately:
- Meulemans carton plant in Belgium
- Petöfi carton plant in Hungary
- Tako carton plant in Finland
M-real said that the sale of additional assets will be determined in the future.