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UPM to Close Mills and Reduce Publication Paper Capacity

Helsinki, Finland, 31 August 2011 -- (GLOBE NEWSWIRE) -- As part of the Myllykoski integration, UPM has completed a comprehensive review of the long-term competitiveness of its publication paper mills. The review has covered asset efficiency, production input availability, costs, and end-use markets.

As a result of the review, UPM plans to adjust its magazine paper capacity to match the needs of its global customer base. Therefore, UPM will start negotiations with employees on the plan to permanently remove 1.2 million metric tons of magazine paper capacity in Finland, Germany, and France, and 110,000 metric tons of newsprint capacity in Germany. The plan also includes restructuring of the overlapping paper sales and supply chain networks and global functions.

The planned measures include the following:

• permanent closure of the UPM Myllykoski mill in Kouvola in Finland,
• permanent closure of the UPM Albbruck mill in Germany,
• permanent closure of the paper machine 3 at the UPM Ettringen mill in Germany,
• transfer of the sheeting lines from UPM Albbruck mill to UPM Plattling mill in Germany,
• sale or other exit of the UPM Stracel paper mill from UPM Paper Business Group, and
• restructuring of overlapping paper sales and supply chain network as well as global functions.

In addition, UPM plans to temporarily close the paper machine 2 producing uncoated fine paper at UPM Nordland Papier in Germany and streamline operations in Pietarsaari pulp and paper mills in Finland.

The planned closure of the Myllykoski and Albbruck mills and paper machine 3 of UPM Ettringen would be scheduled by the end of 2011. The Stracel mill sales process would start this autumn and is expected to be completed within 12 months.

Implementation of the plan would reduce the number of employees by approximately 1,170. Based on the plan, UPM will book in the third quarter of 2011 an approximately EUR 70 million write-off in fixed assets and make a provision for costs of approximately EUR 200 million. Net cash impact from the restructuring plan amounts to approximately EUR 170 million. Annual synergy benefits of the Myllykoski acquisition, including the planned actions, are estimated to total approximately EUR 200 million.

“The paper industry faces severe challenges due to high raw material, energy and logistics costs, and considerable overcapacity. The profitability of our paper business is clearly below the level required to run long-term sustainable operations. The planned restructuring would further strengthen the cost competitiveness of UPM’s paper operations and reduce the future need for major maintenance investments,” said Jussi Pesonen, UPM’s president and CEO.

“With the planned actions we would respond to the magazine paper overcapacity challenge for our own benefit. In addition, we would ensure the efficient use of our remaining capacity. However, this plan would not solve the cost challenges of the industry,” Pesonen noted.

“Our aim is to improve the profitability and cost competitiveness of our magazine papers. The planned measures would immediately reduce the unit costs of UPM’s magazine papers and newsprint from the level before the acquisition of Myllykoski. In spite of the restructuring, we would be able to serve our paper customers better through our improved product portfolio and geographic scope,” said Jyrki Ovaska, president of UPM Paper Business Group.

“The planned closures are very unfortunate for the affected employees, but restructuring is the only way to make a fundamental improvement in the cost competitiveness of our paper business. UPM will carry out the restructuring negotiations in a responsible and professional manner in line with the national legislation of the respective countries,” Ovaska said.

UPM will consider options to establish a “from job-to-job” program appropriate to the local legislation provided the plan proceeds to implementation. The planned actions will be discussed in the upcoming negotiations with employees and authorities.

The affected mills include the following:

UPM Albbruck

UPM Albbruck paper mill manufactures coated magazine papers including sheet-fed. Its three production lines have a combined annual capacity of 320,000 metric tons. Located in southern Germany, the mill employs 557 people. The mill was founded in 1882.

UPM Ettringen

UPM Ettringen paper mill manufactures uncoated magazine papers and newsprint. Its three production lines have a combined annual capacity of 600,000 metric tons. Located in Bavaria, in southern Germany, the mill employs 530 people. The mill was founded in 1897.

UPM Myllykoski

UPM Myllykoski paper mill manufactures uncoated and coated magazine papers. Its three production lines have a combined annual capacity of 600,000 metric tons. Located in southeast Finland, the mill employs 375 people. The mill was founded in 1892.

UPM Plattling

UPM Plattling mill manufactures coated and uncoated magazine papers. Its three production lines have a combined annual capacity of 780,000 metric tons. Located in Bavaria, in southern Germany, the mill employs 460 people. The older mill was founded in 1982 and newer mill in 2007.

UPM Stracel

UPM Stracel paper mill manufactures coated magazine papers and special newsprint. Its annual capacity is 280,000 metric tons. Located in eastern France, the mill employs 260 people. The mill was founded in 1936.

UPM has 25 modern and sustainable paper mills in Finland, Germany, the United Kingdom, France, Austria, China, and the United States. Many of them are large recycling centers and bioenergy producers, as well as paper manufacturers. UPM Paper employs nearly 14,500 people. In 2010, the business group’s net sales amounted to EUR 7.6 billion. To learn more, visit www.upmpaper.com

UPM is a leader in the integration of bio and forest industries into a new, sustainable, and innovation-driven future. Its products are made of renewable raw materials and are recyclable. UPM consists of three Business Groups: Energy and pulp, Paper, and Engineered materials. The Group employs around 24,500 people and it has production plants in 16 countries. UPM's annual sales exceed EUR 10 billion. UPM's shares are listed on the Helsinki stock exchange.

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