Click here for Pulp & Paper Radio International
The Paperitalo Library
Free Downloads
My Profile
Stora Enso Plans Capacity Reductions
Helsinki, Finland, 10 September 2008 -- /PRNewswire/ -- Stora Enso is planning to close assets with poor profitability (totaling 600,000 metric tons of paper and board and 170,000 cubic meters of sawn goods annual capacity), but also to improve local productivity, irrespective of Russian duty threat.

About 1700 employees will be affected by the permanent capacity reduction and restructuring plans, including 600 employees in Germany, 550 in Finland, 400 in Russian Wood Supply, and 150 in other countries. About 1450 employees planned to be transferred as part of a new specialized maintenance joint venture in Finland.

Plans for significant reductions in Russian wood sourcing organization, controled curtailments at Sunila and Enocell stand-alone pulp mills, and investment at Imatra pulp mill complete Stora Enso's plans to address the anticipated Russian roundwood duty scenario.

Investments of about EUR 135 million are planned, along with volume transfers to safeguard profitable customer accounts and to prepare for higher Russian roundwood duties.

Provisions and write-downs totalling about EUR 280 million, about half of which are cash costs. Estimated annual operating profit improvement EUR 140 million to be realized by the end of 2010. Future growth opportunities in emerging markets, fiber-based packaging and selected paper grades, and cost-competitive plantation-based pulp raw material.

"In July we said that in the third quarter we would announce restructuring plans to address profitability problems that are independent of the Russian wood duties," said Jouko Karvinen, CEO of Stora Enso. "Today we are not only doing that, but also saying that we will be ready for the anticipated increases in duties on roundwood imported from Russia. We will be able to operate without Russian roundwood in 2009, and we are doing this in a way that gives us and Finnish forest owners time to increase domestic volumes still further. Our earlier actions, together with today's plans, have transformed Stora Enso from the largest importer of Russian wood into Finland to being ready to operate effectively without Russian roundwood, if needed," he said.

"Had we not in the past 18 months undertaken the difficult but necessary restructuring actions, and successfully increased domestic wood sourcing in Finland early on, today's news would be not only far harder for our employees, but also much more drastic for the Group," Karvinen continued. "As before, we are announcing today's plans to safeguard the future of the Group and most of its employees. I understand that the plans we are announcing today will be difficult for the employees affected. I want to assure them that we will do our utmost to help them find a new future. I hope our track record from the programme announced in autumn 2007 proves our commitment to achieving this.

"We continue proactively to build the future of the Group. Whilst taking the necessary steps to get through the 'perfect storm', it is increasingly clear where the future growth opportunities for Stora Enso will come. We foresee a more focused Group, with fewer product lines. We also see the need to have a stronger asset base in growth markets. We have a strong starting position in fiber-based packaging materials and are convinced that versatile fiber-based packaging will compete successfully with plastics and other materials made from fossil fuels. These factors provide sound growth and earnings potential.

"Another key to an exciting future is cost-competitive plantation-based pulp as raw material for paper and board products, based on fiber growth rates up to ten times higher than in traditional northern hemisphere forests. As an early entrant into plantation-based eucalyptus pulp, Stora Enso is well positioned to capture this growth potential, particularly in Latin America and China.

"The paper businesses, but possibly not all of them, will also remain part of Stora Enso. We will continue to work actively on consolidation solutions to create strong businesses within and outside Stora Enso that can create sustainable returns. Whilst we are doing this, we will continue to actively improve every business and every mill - as that will only enhance our value as a potential partner.

"We are building a Group that will come out of this storm stronger than ever before - and succeed in the businesses we are in. We are making our own good times to come," Karvinen concluded. 

Consumer Board will maintain and develop its global leadership position by further strengthening the competitiveness of its existing production units and seizing growth opportunities in new markets. The aim is to grow in core markets by building on profitable customer segments and meaningful leadership positions.

Consumer Board will strongly promote packaging concepts based on renewable wood fiber. The plan is to invest in healthy and strong units through productivity improvements, streamlining and specialization of mill operations.

Stora Enso plans to permanently close down the cartonboard machine at Baienfurt in Germany, with annual capacity of 190,000 metric tons of folding boxboard by the end of 2008, subject to local consultation. The machine is planned to be closed due to persistent profitability problems caused by European overcapacity in folding boxboard, the strength of the euro and cost increases, especially for wood and energy. The plan is to continue serving the mill's customers from the Group's other board mills in Finland and Sweden. The sheeting service center at Baienfurt will remain in operation to continue providing an excellent service to customers.

Stora Enso plans, subject to local consultation, to permanently shut down board machine (BM) 1 at Imatra in Finland, with annual capacity of 170,000 metric tons of cupstock and liquid packaging board, by the end of 2009. The machine is unprofitable due to the strong euro and high wood costs. Stora Enso also plans to permanently shut down two polymer coating (PE) machines due to reduced polymer coating needs (PE 2 at Imatra and PE 4 at Karhula). The plan also includes an overall streamlining of operations at Imatra mills.

At the same time, Stora Enso plans to invest about EUR 135 million over the next two years to develop the Group's operations at Imatra, Fors, and Ingerois mills.

At Imatra, investments in the pulp mill will reduce costs and the dependence on Russian roundwood. The annual capacity of BM 4 will be increased to improve product quality and to serve current customers of BM 1. Stora Enso also will invest to improve the efficiency and quality of the remaining PE coating lines and build one new sheeting line at Imatra.

At Fors and Ingerois, the quality, capacity, and productivity of the board machines will be improved and the sheeting capacity increased.

Stora Enso plans to permanently shut down paper machine (PM) 3 at Kabel in Germany, with annual capacity of 140 000 metric tons of coated magazine paper, by the end of 2008 due to profitability problems caused by overcapacity in Europe and increased wood and energy costs.

Stora Enso plans to permanently shut down by the end of 2008 Corenso's coreboard machine at Varkaus in Finland, with an annual capacity of 100,000 metric tons, which is part of the Industrial Packaging business area, due to persistent profitability problems. Measures are also planned to be taken at Varkaus to improve profitability by enhancing efficiency in fine paper and newsprint.

Stora Enso plans to permanently shut down the sawmill at Paikuse in Estonia, with an annual capacity of 170,000 cubic meters, by the end of 2008 due to profitability problems caused by overcapacity and escalating sawlog prices.

Further productivity improvement measures in operations, maintenance, and administration are planned at Veitsiluoto mill in Finland, Maxau mill in Germany, and Hylte mill in Sweden, which also will reduce the numbers of personnel employed at those locations.

Stora Enso is now prepared for full Russian roundwood duty increases. In good cooperation with co-owner Myllykoski, Stora Enso will curtail pulp production at Sunila, and at Stora Enso's Enocell mill, if needed, when the full Russian wood duties apply, and based on the availability of low cost wood. In addition, Stora Enso plans to curtail sawmill production to adjust to the full Russian wood duties.

The plans for curtailments, and the permanent closure of Kemijarvi, Summa, and Norrsundet mills, strengthening of the Finnish wood sourcing organization in early 2007, and investments at Imatra mills to reduce dependence on short-fiber pulp, will enable Stora Enso to be independent of Russian roundwood export in 2009. This plan also gives Stora Enso and Finnish forest owners time to continue increasing domestic wood supplies, and will enable efficient adjustment to any compromise on duties, or even a later reversal of the duties.

Stora Enso plans to downsize substantially its Wood Supply Russia unit to adjust o the current and future level of wood procurement in Russia. 

To improve productivity and decrease costs, Stora Enso and ABB have signed a letter of intent to establish a joint venture company to provide maintenance services at Stora Enso's Veitsiluoto, Oulu, Varkaus, Imatra, Enocell, and Heinola mills in Finland. Stora Enso will own 51% and ABB 49% of the shares in the joint company. Plans are to transfer an estimated 1450 Stora Enso employees to the new joint venture company, which will be under ABB management and is planned to be in operation at the beginning of 2009

In October 2007 Stora Enso announced its intention to sell the mills at Kotka in Finland. Negotiations to divest the mills have now ceased, mainly due to the turbulence in financial markets. There were interested buyers, but no satisfactory agreement was reached.

As earlier announced, Stora Enso plans to outsource maintenance at Kotka to Empower and transfer 90 Stora Enso employees to Empower. Other productivity improvement measures to enhance the competitiveness of the mills and maintain service to customers will continue.

Stora Enso has been focusing its business portfolio for nearly a year and continues to do so. The Group also plans to reduce its administration to suit its more focussed business needs. The Group is already assessing its administrative functions at all levels of the organization to determine which activities are needed to support the business. The results of the assessment will be ready by the end of 2008.

Stora Enso is making every effort to help the affected personnel find new employment opportunities as fast as possible. Possible job openings in other Stora Enso units will be available to those affected. Stora Enso will also actively work with labor authorities to find new jobs and training opportunities for displaced employees outside the Group. There will be support for those who have to move to another location.

Solutions have been found for some 800 employees affected by the restructuring program announced in October 2007. Estimated financial effects of the planned closures and personnel reductions on the Stora Enso Group (excluding reductions in administrative staff)

The Group anticipates approximately EUR 280 million of provisions and fixed asset write-downs as nonrecurring items in the financial results for the third quarter of 2008, about half of which are cash costs impacting over the restructuring period.

| Segment | Financial impact of fixed asset write-downs and provisions in Q3/2008 |
| Newsprint and Book Paper | EUR 7 million |
| Magazine Paper | EUR 40 million |
| Fine Paper | EUR 3 million |
| Consumer Board | EUR 180 million |
| Industrial Packaging | EUR 15 million |
| Wood Products | EUR 8 million |
| Other (Wood Supply) | EUR 27 million |
| External sales reduction | EUR 440 million|
| Capital employed reduction | EUR 200 million|
| Annual operating profit improvement | EUR 140 million|

Once the full impact of the above actions is realized, by the end of 2010, the estimated annual operating profit improvement will be about EUR 140 million.


Related Articles:

Powered by Bondware
News Publishing Software

The browser you are using is outdated!

You may not be getting all you can out of your browsing experience
and may be open to security risks!

Consider upgrading to the latest version of your browser or choose on below: