Stora Enso Plans to Close Its Reisholz and Berghuizer Mills
Helsinki, Finland, 04 October 2006 - Stora Enso has announced its intention to close down Reisholz Mill in Germany and Berghuizer Mill in the Netherlands. The planned closures are subject to local consultation. Summa Mill in Finland and Uetersen Mill in Germany will remain in operation while further improving their financial performance.
These four mills have been under scrutiny since the announcement of Stora Enso's Asset Performance Review (APR) in October 2005. During the past year all four mills have implemented a number of actions to increase their competitiveness. The performance of each of these mills following these improvements has been evaluated using a range of financial and operational measures, with long-term profitability and strategic fit as key criteria.
Reisholz and Berghuizer mills are planned to be closed due to lack of profitability. The Reisholz mill, which is part of Stora Enso's Publication Paper division, is planned to be closed in phases by the end of 2007. Increasing energy and wood prices in Germany also influenced the decision to close the mill. The Reisholz mill, which produces improved super-calendered (SC) papers, has a total annual production capacity of 215,000 metric tons. The mill has 378 employees.
The Berghuizer mill, which is part of Stora Enso's Fine Paper division, is planned to be closed during 2007. The annual production capacity of the Berghuizer mill, which produces woodfree uncoated (fine) paper (e.g. copy and printing paper), is 235,000 metric tons. The mill has 297 employees.
Stora Enso intends to supply customers of Reisholz and Berghuizer mills from its other mills following the planned closures.
Stora Enso will record total provisions and write-downs related to the planned closures of EUR 270 million in the third quarter of 2006. Approximately EUR 180 million of the provisions will have a cash impact. The cash impact will be realised as the actions occur. A significant portion of the cash cost is expected to be offset by income from realisable assets.
The Reisholz and Berghuizer mills had combined external sales of EUR 142 million in the first six months of 2006. In the same period the combined operating profit was slightly negative. Working capital at the end of June 2006 was EUR 30 million.
The Summa mill has improved its financial performance through locally agreed efficiency measures.The mill, which is part of Stora Enso's Publication Paper division, has improved its financial performance. Local agreements have been concluded on operator maintenance and sharing maintenance resources with other mills in Kymenlaakso, and salary and wage freezes and changes to salary and wage structures have reduced costs. The mill has also been gradually shifting its standard newsprint production towards higher-value-added products, such as improved newsprint, book paper, and magazine paper.
The Uetersen mill continues with a combined product offering with the Oulu mill. Uetersen Mill, which is part of Stora Enso's Fine Paper division, has in combination with Oulu Mill in Finland, an important role in the graphic (coated fine) paper business area's product portfolio. The Uetersen mill is centrally located close to large customer groups and has also improved its financial performance. The measures to improve financial performance include reduction of personnel and adjustments of local labour agreements.
Both the Summa and Uetersen mills are expected to operate without new investments for at least the next several years.
"The work that has been done in Summa and Uetersen mills recently has resulted in improved profitability, but further profit improvement is still needed," comments Stora Enso's CEO Jukka Härmälä. "The analysis of the alignment of the Group's strategy and its product and production asset portfolio continues. We are committed to further enhancing profits to achieve our return on capital target by continuing to monitor closely the performance of not only these two mills but all our assets."
Stora Enso's second half 2006 results and nonrecurring items for third quarter 2006:
The Group's reported operating profit for the third quarter is expected to be negatively impacted by relatively high maintenance stoppage costs, necessary market-related curtailments in the coated magazine paper business area, and costs related to a labor dispute as a consequence of machine closures at its Corbehem mill. In the fourth quarter, the impact of market-related curtailments and costs related to a labor dispute at the Corbehem mill continues, in addition to the negative impact of the gradual start-up of the Port Hawkesbury mill.
Stora Enso will record the following nonrecurring items in its operating result for the third quarter 2006:
- a capital gain of about EUR 186 million, including an additional dividend, on the divestment of Celbi pulp mill in Portugal, which was finalized in August.
- impairment and restructuring provisions of EUR 47 million on the divestment of Wolfsheck mill in Germany, which was finalized in September.
- an additional restructuring provision of EUR 7 million relating to the social plans at Corbehem mill in France and previously announced machine closures.
- impairments of EUR 21 million and restructuring provisions of EUR 3 million relating to Stora Enso Timber's fixed asset impairments in Germany and Estonia, and to restructuring of Stora Enso Timber's sales network.
- a provision of approximately CAD 20 million (EUR 14 million) relating to post-employment benefits at Port Hawkesbury mill in Canada as a result of the new labor agreement and decision to restart the mill.
- provisions and write-down of EUR 270 million relating to the planned closures of Berghuizer and Reisholz mills.