Stora Enso to cut magazine paper, newsprint and pulp capacity and reduce administrative staff
-Annual capacity reduction 505 000 tonnes of paper and 550 000 tonnes of pulp
-1 700 employees affected
-Significant reduction in Group functional staff
-Non-recurring charges of about EUR 380 million including cash impact of about
EUR 160 million
-Net annual cost improvement of EUR 140 to 160 million, with full impact in
2009
In response to dramatic cost increases and to safeguard long-term profitability,
Stora Enso today announces its intention to close down permanently Summa Paper
Mill and one magazine paper machine at Anjala Mill, and the pulp mills at
Kemijärvi and Norrsundet. The closures will reduce annual capacity by 505 000
tonnes of newsprint and magazine paper and 550 000 tonnes of pulp. The number of
personnel affected by these planned permanent mill closures will total about 1
400 - about 1 100 in Finland and about 300 in Sweden.
Stora Enso also plans to divest its mills at Kotka in Finland. The laminating
paper business and the special coated magazine paper operations at Kotka are to
be divested as Stora Enso continues to focus its portfolio. These two businesses
do not compete directly with products of other Group mills. The sawmilling
operations at Kotka could also be sold if a satisfactory offer is received. The
mills at Kotka employ about 650 people.
In addition, to reduce costs and streamline administration following the recent
reorganisation, the divestment of North American operations and the above
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.
All the planned personnel reductions are subject to local consultation.
“These closures, production rationalisations and staff reductions, however
painful, are crucial for Stora Enso to be competitive long-term. 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,” said Stora Enso CEO Jouko Karvinen.
“These intended actions are based on specific analyses of marginal costs in wood
supply and asset quality, including future investment needs, optimisation of
fibre flows between the Nordic pulp mills, and decreasing the overall use of
fibre by reducing newsprint and magazine paper production capacity. 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 metre)
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 rationalise
pulp, paper, board and sawnwood production in Finland,” Karvinen continued.
“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.”
Summa Mill and Anjala magazine paper capacity closures
Summa Mill, with annual capacity 415 000 tonnes 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 tonnes 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 tonnes of book paper, is planned to be
permanently shut down in a manner that will ensure continuity of customer
service.
Capacity reductions:
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| Standard and improved newsprint | 270 000 tonnes |
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| Coated magazine paper | 155 000 tonnes |
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| Uncoated magazine paper | 80 000 tonnes |
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Kemijärvi and Norrsundet pulp mill closures
Kemijärvi and Norrsundet pulp mills, with annual capacities of 250 000 tonnes
and 300 000 tonnes of long-fibre (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 optimise fibre
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 tonnes of laminating papers, 18 000 tonnes of
Imprex products, 170 000 tonnes of special coated magazine paper and 250 000
cubic metres 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 centre 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 centres in Sweden into one. This
consolidation will further improve and focus R&D operations through the R&D
centres specialising in particular competences and avoiding overlaps. Stora Enso
intends to maintain its investment in R&D at or above the present level.
Estimated on-going financial impact of the closures and personnel reductions on
the Stora Enso Group
The Group anticipates approximately EUR 380 million of provisions and fixed
asset write-downs as non-recurring items in its financial results for the fourth
quarter of 2007, of which about EUR 160 million will have a cash impact over the
restructuring period from 2007 to the second quarter of 2009.
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| Segment | Financial impact of fixed asset write-downs and |
| | provisions |
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| Newsprint | EUR 170 million |
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| Magazine Paper | EUR 210 million |
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The main benefits of the above actions will come from reduced marginal wood and
energy costs, reduced personnel costs and lower depreciation. The net annualised
cost improvement is estimated to be in the range of EUR 140 to 160 million and
will have full annual impact in 2009.
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| External sales reduction | EUR 370 million |
--------------------------------------------------------------------------------
| Capital employed reduction | EUR 300 million |
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| Total personnel reduction due to closures | 1 700 people |
| and staff function reorganisation | |
| (excluding increase due to new single | |
| financial service centre) | |
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For further information, please contact:
Jouko Karvinen, CEO, tel. +358 2046 21410
Hannu Ryöppönen, Deputy CEO and CFO, tel. +358 2046 21450
Kari Vainio, EVP, Corporate Communications, tel. +44 7799 348 197
Keith B Russell, SVP, Investor Relations, tel. +44 7775 788 659
Ulla Paajanen-Sainio, VP, Investor Relations and Financial Communications,
tel.
+358 40 763 8767
On Thursday 25 October 2007 Stora Enso will announce its third quarter results
at 09.00 Finnish time (08.00 CET).
PRESS CONFERENCE IN HELSINKI
Time: 11.30 local time
Location: Wanha Satama, conference room H+,
Address: Pikku Satamakatu 3-5
Hosts: Jouko Karvinen, CEO
Hannu Ryöppönen, Deputy CEO & CFO
Kari Vainio, Executive Vice President, Corporate Communications
The conference will be held in English. Questions can be asked from Jouko
Karvinen and Hannu Ryöppönen after the presentation.
Webcast of press conference
A live webcast (audio with synchronised slide presentation) of the press
conference may be accessed on www.storaenso.com. The presentation material will
be available on www.storaenso.com/investors at 11.30 Finnish time (10.30 CET).
In case you are participating remotely in press conference and you would like to
pose a question, please dial:
+44 (0)20 7162 0125 Continental Europe and the UK
+46 (0)8 5052 0114 Sweden
358 (0)9 2313 9202 Finland
+1 334 323 6203 USA
ANALYST CONFERENCE CALL
CEO Jouko Karvinen and Deputy CEO & CFO Hannu Ryöppönen will be hosting a
combined conference call and webcast today at 16.00 Finnish time (15.00 CET,
14.00 UK time, 9.00 US Eastern time).
If you wish to participate, please dial (quoting ‘Stora Enso'):
+44 (0)20 7806 1950 Continental Europe and the UK
+46 (0)8
5352 6408 Sweden
+358 (0)9 7251 9035 Finland
+1 718 354 1387 USA
The live webcast may be accessed at www.storaenso.com/investors
Further details of replay numbers can be found at www.storaenso.com/investors
www.storaenso.com
www.storaenso.com/investors
Stora Enso Oyj
Jyrki Kurkinen Ulla Paajanen-Sainio
