2007-10-25

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."

Full press release

Information about the company: Stora Enso Oyj