UPM to Shut Two Mills in Finland by Year-end

UPM in September announced the "possible" closure of the mills as part of the company's restructuring program.

UPM in a statement said, "Financial prerequisites to continue the operations of the mills could not be found in the negotiations with employees. The slowing economy has further weakened the situation of these mills during the autumn."

At both the Kajaani paper mill and Tervasaari pulp mill, UPM said negotiations also included alternatives for retirement, re-employment within the company, retraining and measures to alleviate the impacts of redundancy.

The company will start a "From job to job" program in Kajaani and Valkeakoski, where the Tervasaari mill is located.

UPM said possibilities for profitable operations at the Kajaani paper mill have constantly weakened due to the price development of wood and energy as well as the weak long term demand outlook for its main products. The mill is not competitive in the long term despite many well completed efficiency improvements.

UPM's sawmill and wood procurement will continue operations in Kajaani.

According to UPM, profitability of pulp production has significantly decreased in Finland. The main driver for this is the high price of wood fiber. Tervasaari pulp mill is the smallest and oldest of the company's Finnish pulp mills and it has no prerequisites to operate profitably in this wood supply situation. The company steers fiber to its bigger, newer and more competitive pulp mills in Finland. Tervasaari mill's three paper machines continue operations.

In future, chemical pulp will be supplied to Tervasaari from more competitive pulp mills in Finland, UPM added.

The mill closures will reduce UPM's employees in Finland by around 700 people—535 in Kajaani with about100 through retirement, and 166 jobs at the Tervasaari mill.

UPM will book at the end of the year an approximately EUR 170 million write-off in fixed assets and make a provision for the reduction in the number of employees, and other closure costs of approximately EUR 30 million with cash impact mainly in 2009.

SOURCE: UPM