UPM considers closure of Kajaani sawmill, Heinola and Aureskoski further processing plants in Finland by year-end, plans Q2 impairment charges of €35M, provision for restructuring costs of €10M

Wendy Lisney

HELSINKI, Finland , April 11, 2012 (press release) – UPM clarifies the strategy of its Timber and Living business areas and plans to restructure the production operations in Finland. The plan includes a possible closing of the production of Kajaani sawmill and Heinola and Aureskoski further processing plants by the end of 2012. UPM will begin co-determination negotiations with the employees in Kajaani, Aureskoski and Heinola, and later during April-May with the employees in the Finnish staff functions. Altogether 275 employees are included in the negotiations. Sale is an alternative option for closure of the production units.

”The profitability of the sawmills and further processing units located furthest from our integrated mills has been weak for a long time and has not turned permanently profitable despite the earlier restructuring measures. High log price and over capacity in the end-product markets have weakened the situation,” says the President of UPM’s Energy and Pulp Business Group Heikki Vappula.

”Our plan is to continue sawmilling and further processing in Finland in four locations, Pietarsaari (Alholma), Pori (Seikku), Juupajoki (Korkeakoski) and Lappeenranta (Kaukas), which are close to our pulp and paper mills using big volumes of wood. Saw mills and further processing plants operating close to pulp and paper mills have a central role in UPM’s wood sourcing supply chain as their by-products are used in the production of pulp, paper and energy.”

”The Kajaani, Heinola and Aureskoski production units have good foundations to succeed as independent units what makes the sale of the units a considerable alternative,” says Vappula.

As part of the clarification of the Timber business strategy, UPM will assess the operational preconditions and role of the Pestovo saw mill and planing mill in Russia by the end of 2012.

The Aigrefeuille further processing plant in France and the Steyrermühl sawmill in Austria will continue their operations as before and are excluded from the above mentioned plan.

The plans have no effect on UPM’s current customer commitments or other valid contracts.

In the second quarter of 2012, UPM will book impairment charges of approximately EUR 35 million and make a provision for restructuring costs of approximately EUR 10 million.

The strategy development of UPM Timber and Living business areas will proceed in UPM’s internal work groups. Mr Anssi Klinga has been appointed the new head of the businesses, Senior Vice President, UPM Timber and Living Business Area. He has a long experience of international management positions and he most recently held the position of the CEO of Vaahto Group.

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UPM Living manufactures sustainable, beautiful and recyclable wood-based products for consumers and industry. Manufactured from certified wood raw materials, the products can be used to create top-quality interior decoration solutions or build a high-quality garden or house. The seven UPM Living production facilities are located in Finland (Aureskoski, Heinola, Lappeenranta, Uusikaarlepyy, Pori), France (Aigrefeuille) and Russia (Pestovo). www.upmliving.com

UPM Timber manufactures top-class sawn pine and spruce timber for the construction and joinery industries. UPM Timber annually produces around 2.3 million cubic metres of timber from wood acquired from certified forests. UPM's seven sawmills are located in Finland, Austria and Russia. In Finland, UPM operates five sawmills in Lappeenranta (Kaukas), Kajaani, Pietarsaari (Alholma), Korkeakoski and Pori (Seikku). www.upmtimber.com

Kajaani sawmill employs 83 people and manufactures sawn pine and spruce timber with an annual production capacity of 210,000 cubic metres.

Aureskoski further processing plant has 53 employees. The plant produces interior panels and floorings with an annual production capacity of 130,000 cubic metres.

Heinola further processing plant employs 46 people and produces laminated wood panels with an annual production capacity of 20,000 cubic metres.

The UPM Timber and Living business area staff functions in Finland employ 90 people.

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