Stora Enso will close down newsprint and directory paper production at Varkaus
STORA ENSO OYJ STOCK EXCHANGE RELEASE 7 July 2010 at 06.00 GMT
Stora Enso will permanently close down newsprint and directory paper production at Varkaus in Finland by the end of the third quarter of 2010. The reasons for the planned capacity closure announced on 22 April 2010 have not changed: the European newsprint and directory paper market is strongly structurally oversupplied and sales prices have fallen significantly. As a result, newsprint production at Varkaus Mill is expected to remain unprofitable in the long term. “The overcapacity position in the European newsprint and directory paper market has persisted in 2010. Consequently, sales prices have fallen significantly. In the longer term demand in Europe is expected to decline further, as has been happening in North America. In addition, the competitiveness of Varkaus is weakened because newsprint production at Varkaus relies on less-competitive virgin fibre, the availability of wood raw material in Finland is not stable and Varkaus is far away from most of its customers and main markets,” says Juha Vanhainen, EVP, Publication Paper Business Area and Country Manager Finland. The closure of the two newsprint machines PM 2 and PM 4 at Varkaus Mill will reduce newsprint and directory paper annual production by 290 000 tonnes. The co-determination negotiations at Varkaus were concluded at the end of June. As a result of the ending of newsprint production, 175 employees will be made redundant. There are currently 506 employees at Stora Enso's Varkaus Mill. The Varkaus mill site will continue to produce pulp and fine paper after newsprint and directory paper production ends. The operations of the sawmill and the NSE Biofuels Oy biofuel joint venture with Neste Oil and its demonstration plant will also continue. The ending of newsprint production will not substantially affect the amount of renewable energy produced at Varkaus. Stora Enso will support redeployment of those affected by the plans through efficiently offering jobs internally and eligibility for outplacement services. The Group works closely with local employment and economic development centres to find new job opportunities for people affected. Stora Enso will also support financially those who would like to start their own business. Estimated financial impact As announced on 22 April 2010, Stora Enso anticipates that the planned permanent shutdown of newsprint production at Varkaus will have the following financial impacts on the Newsprint segment: -------------------------------------------------------------------------------- | | EUR million | -------------------------------------------------------------------------------- | One-time non-cash fixed asset and working capital | 0 | | write-downs in Q2/2010 | | -------------------------------------------------------------------------------- | One-time cash provisions in Q2/2010 as non-recurring | 23 | | items | | -------------------------------------------------------------------------------- | Annual sales reduction | 148 | -------------------------------------------------------------------------------- | Annual working capital reduction | 9 | -------------------------------------------------------------------------------- | Annual operating profit improvement | 9 | -------------------------------------------------------------------------------- For further information, please contact: Juha Vanhainen, EVP, Publication Paper Business Area and Country Manager Finland, tel. +358 2046 21343 Lauri Peltola, Head of Communications, tel. +358 2046 21380 www.storaenso.com www.storaenso.com/investors Stora Enso is a global paper, packaging and wood products company producing newsprint and book paper, magazine paper, fine paper, consumer board, industrial packaging and wood products. The Group is the world leader in forest industry sustainability. We offer our customers solutions based on renewable raw materials. Our products provide a climate-friendly alternative to many non-renewable materials, and have a smaller carbon footprint. Stora Enso is listed in the Dow Jones Sustainability Index and the FTSE4Good Index. Stora Enso employs some 27 000 people worldwide, and our sales in 2009 amounted to EUR 8.9 billion. Stora Enso shares are listed on NASDAQ OMX Helsinki (STEAV, STERV) and Stockholm (STE A, STE R). In addition, the shares are traded in the USA as ADRs (SEOAY) in the International OTCQX over-the-counter market. STORA ENSO OYJ Jari Suvanto Ulla Paajanen-Sainio