UPM to Reduce Production of Publication Paper in Europe by 800,000 Tonnes

UPM plans to permanently close four paper machines with a combined 800,000 tonnes capacity that includes newsprint, SC and coated paper.

Nov. 14, 2014 - UPM yesterday announced plans to permanently reduce its publication paper capacity in Europe further by about 800,000 tonnes with capacity reductions to take place in France, Finland and in the UK.

“If all the plans to close capacity would be implemented, UPM's personnel at the mills would be reduced by approximately 550 persons by the end of 2015,” the company said in a press statement.

UPM said that employee information and consultation processes will start during November in line with the local legislation.

UPM's decision to reduce capacity is a result of the company's 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 of UPM.

“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 promising tailwind for 2015. We plan to adapt our production to meet the profitable customer demand. We also ensure savings without endangering customer deliveries in the structurally declining market,” Pesonen added.

Planned permanent closures in UPM Paper ENA

UPM plans a permanent closure of:

  • Newsprint machine 3 at UPM Chapelle in France
  • Newsprint machine 1 at UPM Shotton in the UK
  • SC paper machine Jämsänkoski 5 at UPM Jämsä River Mills in Finland
  • Coated mechanical paper machine 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.

The UPM Chapelle newsprint production line 3 and UPM Shotton newsprint production line 1 have an annual newsprint capacity of 345,000 tonnes.

The Jämsänkoski SC production line 5 and UPM Kaukas coated mechanical production line 2 have an annual capacity of 460,000 tonnes of magazine papers, of which 235,000 tonnes of SC paper and 225,000 tonnes of coated mechanical paper.

All of the above-mentioned machines are planned to be permanently closed by the end of the first quarter of 2015, UPM said.

All four mills will continue paper production on the remaining paper machines on the mill sites, UPM added.

“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, Executive Vice President, UPM Paper ENA.

Profit Improvement Program
The full profit improvement program includes variable and fixed cost savings in all UPM businesses and functions. As part of the program UPM will start a review of the production, maintenance and other site operating practices across all of UPM businesses and operating countries. Furthermore, UPM's program for variable cost savings will continue.

The total annualized cost reduction impact of EUR 150 million is expected by the end of 2015, compared with the Q3 2014. The fixed cost reduction of the planned capacity closures is expected to be EUR 55 million. UPM will book write-offs of approximately EUR 100 million and restructuring charges of approximately EUR 80 million in Q4/2014.

UPM Paper ENA (Europe & North America) provides magazine paper, newsprint and fine papers for a wide range of end-uses. To learn more, please visit: www.upm.com.


Also see: UPM to Reduce Graphic Paper Capacity in Europe by 580,000 Tonnes (1/7/2013)