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UPM Reduces Capacity to Secure Label Division's Cost Competitiveness
Helsinki, Finland, 12 November 2008 – UPM plans to restructure its Label Division's European operations to secure profitability in a weak economic environment. The company plans to close down a number of self-adhesive labelstock production lines and reduce slitting capacity in the United Kingdom, France, Germany, Hungary, and Finland. The number of employees affected by this program is estimated to be approximately 340, which corresponds to about 20% of UPM Raflatac's total personnel in Europe. The restructuring is expected to be complete by the end of 2009.

The Label Division will book restructuring costs of approximately EUR 25 million and an approximately EUR 9 million non-cash impairment charge for redundant assets in the fourth quarter 2008. The cash costs will occur in 2009.

The planned actions will improve UPM's Label Division's cost competitiveness and profitability. The aim is to reduce operating costs annually by about EUR 25 million. The planned actions will have no material effect on the division's sales.

Decisions will be taken after consultation and negotiation with the employees in the relevant countries.

UPM's plans include:
- Permanent closure of two coating lines: one in Scarborough, UK, and one in Nancy, France.
- Further reduction of coating capacity through shift reductions in Scarborough, in Nancy, and in Tampere, Finland.
- Closure of two slitting and distribution terminals: one in Düsseldorf/Ratingen, Germany and one in Tatabanya, Hungary.
- Slitting capacity reduction in Tampere, Scarborough, and Nancy through shift reductions.

"Due to the weak economic conditions, market demand for self-adhesive labelstock is currently declining in Western Europe, and we foresee no short-term change in this trend. We recognize the remarkable job our employees have done in improving our operational efficiency in recent years, but unfortunately the headwinds from the overall economy are exceptionally strong. We have to take these difficult but vital steps to adjust our capacity to the demand outlook of our customers, and to secure our profitability," says Jussi Vanhanen, president of UPM's Engineered Materials Business Group.

"Through the proposed measures each site in UPM Raflatac Europe will get a clear and focused role for developing the business for the future. This together with the resulting industry-leading cost competitiveness is vitally important for the future of UPM Raflatac, its employees and customers," Vanhanen said.

Negotiations with employees on the proposed closures and reductions will start immediately and will proceed according to the local legislation in each country. Possibilities for retirement, relocation within UPM, and retraining will be handled in the negotiations, too.

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