UPM Announces Miramachi Paper Mill Shutdown and Write Off of Goodwill
Helsinki, Finland, 05 June 2007 -- /PRNewswire/ -- UPM (NYSE: UPM) will record an impairment charge of the Magazine Papers' goodwill and write off the remaining carrying value of the Miramichi paper mill's production facilities in the second quarter. The company's view of the magazine paper demand development remains unchanged and it expects good demand for magazine papers to continue.
UPM has carried out the testing of goodwill of the Magazine Papers according to IAS 36. Based on the outcome, UPM will record an impairment charge of approximately EUR 350 million from the goodwill. The primary drivers for the impairment relate to lower-than-forecast realized magazine paper price and the adverse development of exchange rates, especially the U.S. dollar. Due to the impairment, deferred tax liabilities will be decreased by approximately EUR 25 million.
The total amount of the Magazine Papers' goodwill at the end of December 2006 was EUR 915 million, out of which EUR 492 million related to the company's North American acquisitions.
As the profitability of the Miramichi mill has continued to be unsatisfactory, UPM has today announced of the decision to shut down the mill for 9 to 12 months and to write off the remaining carrying value, approximately EUR 20 million, of the paper mill's production facilities.
Due to the weakening of the Miramichi mill's prospected financial development, all of the deferred tax assets cannot be carried in the balance sheet according to the IAS 12. Consequently, UPM will write down approximately EUR 40 million of deferred tax assets.
Summary of the estimated bookings in the second quarter with no
Write-off of the production facilities of the Miramichi
paper mill EUR -20 million
Write-down of the deferred tax asset in Canada EUR -40 million
Impairment of Magazine Papers' goodwill EUR -350 million
Decrease of deferred tax liabilities EUR 25 million
Total EUR -385 million
Included in operating profit EUR -370 million
Included in income taxes EUR -15 million
Source: UPM-Kymmene Corporation