UPM Plans to Reduce 580,000 Tonnes of Graphic Paper Capacity in Europe

he continuing challenges in European economy have significantly impacted the consumption of paper, exacerbating the effect of structural changes in paper end-uses and resulting in further decline in the demand of graphic papers in Europe. High costs and significant overcapacity continue to challenge the industry operators in Europe.

UPM is planning to permanently reduce paper capacity in Europe by a further 580,000 tonnes. The capacity reductions are planned to take place in Finland, Germany and France. The business environment also makes evident the need for streamlining of the Paper Business Group and UPM’s global functions to remain cost competitive in the new business scale.

In early January, UPM finalized the employee consultation process in UPM Stracel, France, implying reduction of 270,000 tonnes of coated magazine paper capacity. With UPM Stracel and today’s plans, UPM would reduce a total of approximately 850,000 tonnes of graphic paper capacity in 2013.

UPM plans:
 

• a permanent closure of paper machine 3 at UPM Rauma mill in Finland,
• a permanent closure of paper machine 4 at UPM Ettringen in Germany,
• a sale or other exit of UPM Docelles mill in France, and
• subject to further analysis, streamlining in the Paper Business and UPM’s global functions.

If all plans will be implemented, UPM’s personnel would be reduced by approximately 860 persons. The plans would affect several countries.

According to the plan the Rauma and Ettringen machine lines would be permanently closed by the end of first half of 2013. Both machines are producing uncoated magazine paper, in total 420,000 tonnes annually.

The employee information and consultation processes will start in line with the local legislation. In case of Ettringen and Rauma the process will start immediately.

The process for selling the UPM Docelles mill will start immediately. The process will be given maximum six months. Docelles is producing uncoated woodfree papers, 160,000 tonnes annually.

As for Paper Business Group and global functions streamlining, the process will start after further analysis as of the beginning of February 2013.

Including UPM Stracel, the plans are estimated to result in annual fixed cost savings of EUR 90 million, and one-time cash costs of EUR 100 million.

“The target of the planned actions is to ensure the efficient use of UPM’s remaining capacity. The paper machines targeted for closure are either at the end of their technical age, have limited product flexibility or poor profitability. The situation is very regrettable for the personnel, however, in the overcapacity situation, we need to adjust our capacity to the level of profitable customer demand,” says Jyrki Ovaska, President of the UPM Paper Business Group.

“Healthy cash flow is critical for UPM and its employees. Therefore UPM must take action to secure it. Under these circumstances only the most efficient and the most flexible production lines and organizations are competitive,” says Ovaska.