Finnforest to make 20 million euro investment in Kerto factory expansion

28/01/2005

Finnforest is meeting growing demand for wood-based building systems by
expanding its Kerto production unit at Punkaharju in eastern Finland.
Production capacity at Punkaharju will increase by 60,000 cubic metres a year
to an annual 130,000 cubic metres. The investment involved will be 20 million
euros. Finnforest's total investment in plants at Punkaharju is thus rising to
70 million euros after two investment stages and a power plant investment. 

Finnforest Corporation's goal is to be Europe's market leader in wood products
and wood-based systems and solutions. The company has been concentrating its
activities on developing, manufacturing and marketing wood-based building
systems for five years now. Engineered wood products based on Kerto have played
a key part in this process since they are particularly suitable for use in
demanding applications. Kerto is a laminated veneer lumber (LVL) product
manufactured by gluing 3.2mm-thick softwood veneers together. Kerto is used in
load-bearing structures, such as floors, and in the manufacture of I-joists. 

With the powerful development of wood-based building in Europe, both in
building systems and in modular building, demand for Kerto is also rising
strongly. The total production and building use, of LVL in Europe is under
200,000 cubic metres a year. The total world market for LVL is almost 3 million
cubic metres a year. North America accounts for about 80% of this. At present
Finnforest, the only European manufacturer produces some 170,000 cubic metres
of Kerto annually at its factories at Lohja and Punkaharju. The most important
market areas are the UK, Germany, France, Finland and the USA. 

Finnforest is expanding its Kerto unit at Punkaharju and increasing production
capacity there from 70,000 cubic metres to 130,000 cubic metres a year. The
necessary additional production space will be arranged in cooperation with
Punkaharju municipality and the East Savo Joint Municipal Authority. The
arrangements include the setting up of a real estate company, 51% owned by
Punkaharju municipality and 49% by the East Savo Joint Municipal Authority.
This company will purchase Finnforest's present Kerto production premises and
be responsible for the extension of the premises required for the investment.
Finnforest will rent production space through a long-term agreement. 

The investment involved in the expansion is on the level of 20 million euros.
It will have a favourable effect on employment with the creation of 130 jobs,
50 of them in production and another 80 in wood procurement and subcontrators'
companies. The construction phase of the investment project will involve 150
person-years of work. The increased use of wood in production - an additional
150,000 cubic metres of spruce logs a year - will mean a considerable increase
in wood purchases in the East Savo area. 

Finnforest has invested a total of more than 70 million euros in the production
of wood products and building systems in Punkaharju since the year 2000,
including investment in a power plant. The total permanent effect on employment
amounts to over 300 more jobs. Wood procurement in the Punkaharju units is
rising to over 500,000 cubic metres a year. Finnforest has applied for
investment support from Finland's Ministry of Trade and Industry. Investment in
the expansion project will start immediately. The present aim is to begin
production in February 2006. 

Further information:
Ari Martonen, President and CEO, Finnforest Corporation, phone +358 50 2406
Heikki Castrén, Director, Building Systems Business Area, phone +358 50 598 7270
Ari Tiukkanen, Director, Building Products Business, phone +358 50 598 7293

Timo Kouri, COO, Director, Distribution Business Area, phone +358 50 598 8840
Eero Lampola, Director, Punkaharju Mills, phone +358 50 598 7288

Markko Ihamuotila, Director, Marketing and Communications +358 50 598 7014