UPM-Kymmene - Company Announcement

UPM introduces a new profit improvement target of EUR 150 million – UPM Paper ENA plans to reduce 800,000 tonnes of publication paper capacity in 2015

UPM-Kymmene Corporation   Stock exchange release      13 November 2014 at 09:30
EET 

UPM is introducing a new profit improvement target with an annualised impact of
EUR 150 million by the end of 2015. The target includes savings in variable and
fixed costs in all UPM businesses as well as planned capacity closures in the
European paper business, which continues to suffer from overcapacity. 

“During the past 12 months we have been able to improve our financial
performance through streamlining but also through better focus and significant
decrease in variable costs. Our new business structure has shown that it is
capable of delivering results and we have been able to identify further profit
improvement potential in our businesses. This potential we aim to capture in
2015, ” says Jussi Pesonen, President and CEO of UPM. 

“The European paper business is a case for itself. We have achieved a
turnaround in profitability during 2014. Nevertheless, the current operating
rates are unacceptably low and the current economic environment is not
promising tailwind for 2015. We plan to adapt our production to meet the
profitable customer demand. We also ensure savings without endangering customer
deliveries in the structurally declining market”, says Pesonen. 

Planned permanent closures in UPM Paper ENA

UPM is planning to permanently reduce its publication paper capacity in Europe
by further 800,000 tonnes approximately. The capacity reductions are planned to
take place in France, Finland and in the UK. 

UPM plans a permanent closure of:

  -- newsprint machine 3 at UPM Chapelle in France 
  -- newsprint machine 1 at UPM Shotton in the UK 
  -- SC paper machine Jämsänkoski 5 at UPM Jämsä River Mills in Finland 
  -- coated mechanical paper machine 2 at UPM Kaukas in Finland.

In addition, the company plans to centralise UPM Paper ENA supply chain
planning and order fulfillment activities to Augsburg and Dörpen in Germany. 

If all the plans to close capacity would be implemented, UPM's personnel at the
mills would be reduced by approximately 550 persons by the end of 2015. The
employee information and consultation processes will start during November in
line with the local legislation. 

The UPM Chapelle newsprint production line 3 and UPM Shotton newsprint
production line 1  have an annual newsprint capacity of 345,000 tonnes. The
Jämsänkoski SC production line 5 and UPM Kaukas coated mechanical production
line 2 have an annual capacity of  460,000 tonnes of magazine papers, of which
235,000 tonnes of SC paper and 225,000 tonnes of coated mechanical paper:  All
machines are  planned to be permanently closed by the end of Q1 2015. 

All four mills will continue paper production on the remaining paper machines
on the mill sites. 

“We regret the impact of planned closures on our employees who, even under
considerable pressure, have been loyal and committed. However, we have to adapt
our operations to the changing market environment - this is the only way for a
sustainable future. With the planned actions we will ensure the efficient use
of our remaining capacity in Europe,” says Bernd Eikens, Executive Vice
President, UPM Paper ENA. 

***

The full profit improvement programme includes variable and fixed cost savings
in all UPM businesses and functions.  As part of the programme UPM will start a
review of the production, maintenance and other site operating practices across
all of UPM businesses and operating countries. Furthermore, UPM's programme for
variable cost savings will continue. 

The total annualised cost reduction impact of EUR 150 million is expected by
the end of 2015, compared with the Q3 2014. The fixed cost reduction of the
planned capacity closures is expected to be EUR 55 million. UPM will book
write-offs of approximately EUR 100 million and restructuring charges of
approximately EUR 80 million in Q4/2014. 

UPM will follow and update the progress against the profit improvement target
in its quarterly reporting. 

***

For further information please contact:

Tapio Korpeinen, CFO (best available from 9:30 until 10:30 o'clock CET, tel.
+358 204 15 0004) 
Bernd Eikens, Executive Vice President, UPM Paper ENA  (best available from
11:00-12:30 CET and 14:30-15:30 CET, tel. +49 160 707 3940) 

For local information, please contact:

Antti Hermonen, Operations Director, UPM Kaukas paper mill, UPM Paper ENA,
(best available from 11:00-11:30 CET, tel. +358 4002 80839) 

Markku Taavitsainen, General Manager, UPM Jämsä River Mills, UPM Paper ENA,
(best available from 11:00-11:30 CET, tel. +358 40 5039 924, +358 2041 50058) 

Jean Kubiak, General Manager, UPM Chapelle Darblay, UPM Paper ENA, (best
available from 10:30-11:30 and 14:30-15:30 CET) Tel. +33 2 35184022 

David Ingham, General Manager, UPM Shotton, UPM Paper ENA, (best available from
10:30-11:30 and 14:00-15:00 CET Tel. +44 1244 2844 07 

Link to UPM Paper press kit:
http://www.upm.com/EN/MEDIA/Presskits/Business/Paper/Pages/default.aspx 

**

Note to the editors

Mill information:

UPM Kaukas
UPM Kaukas paper mill manufactures coated magazine papers (LWC and MWC) with
the annual capacity of 560,000 tonnes. Located in South East Finland the mill
employs about 320 people. Paper mill is a part of Kaukas mill integrate which
employs about 1200 people. 

UPM Jämsä River Mills
UPM Jämsä River Mills manufacture uncoated magazine papers (SC), label and
packaging papers in Jämsänkoski unit and coated magazine papers (LWC),
directory paper (MFS) and newsprint in Kaipola unit with the combined annual
capacity of 1,600,000 tonnes. Located in Central Finland the mills employ about
1,000 people. 

UPM Chapelle Darblay
UPM Chapelle manufactures standard and special newsprint (MFS) with the annual
capacity of 380,000 tonnes. Located in Northern France the mill employs about
360 people. 

UPM Shotton
UPM Shotton manufactures standard newsprint with an annual capacity of 490,000
tonnes. Located in North Wales, the United Kingdom the mill employs about 370
people. 

UPM Paper ENA in brief
UPM Paper ENA (Europe & North America) is the world's leading producer of
graphic papers, serving customers in Magazine Publishing & Advertising,
Merchants, Home & Office, and Newspaper Publishing. A leader in sustainable and
high performance papers, UPM Paper ENA's production is located in Finland,
Germany, the United Kingdom, France, Austria, and the United States. With
headquarters in Germany, UPM Paper ENA employs approximately 10 000 people. To
learn more about UPM Paper ENA visit: www.upmpaper.com 

UPM in brief
Through the renewing of the bio and forest industries, UPM is building a
sustainable future across six business areas: UPM Biorefining, UPM Energy, UPM
Raflatac, UPM Paper Asia, UPM Paper Europe and North America and UPM Plywood.
Our products are made of renewable raw materials and are recyclable. We serve
our customers worldwide. The group employs around 21,000 people and its annual
sales are approximately € 10 billion. UPM shares are listed on NASDAQ OMX
Helsinki. UPM - The Biofore Company - www.upm.com 

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Stakeholder Relations

UPM, Media Desk
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