UPM to close down Kajaani and Tervasaari pulp mills in Finland by year's end

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UPM will close down Kajaani paper mill and Tervasaari pulp mill by the end of the year. The company announced its plans on the closures in September. Financial prerequisites to continue the operations of the mills could not be found in the negotiations with employees. The slowing economy has further weakened the situation of these mills during the autumn.

At both Kajaani paper mill and Tervasaari pulp mill, negotiations also included alternatives for retirement, re-employment within the company, retraining and measures to alleviate the impacts of redundancy. UPM will start a "From job to job" programme in Kajaani and Valkeakoski, where the Tervasaari mill is located.

Possibilities for profitable operations at the Kajaani paper mill have constantly weakened due to the price development of wood and energy as well as the weak long term demand outlook for its main products. The mill is not competitive in the long term despite many well completed efficiency improvements. UPM's sawmill and wood procurement will continue operations in Kajaani.

Profitability of pulp production has significantly decreased in Finland. The main driver for this is the high price of wood fibre. Tervasaari pulp mill is the smallest and oldest of UPM's Finnish pulp mills and it has no prerequisites to operate profitably in this wood supply situation. UPM steers fibre to its bigger, newer and more competitive pulp mills in Finland. Tervasaari mill's three paper machines continue operations. In future, chemical pulp will be supplied to Tervasaari from more competitive pulp mills in Finland.

The implementation of the decisions made will reduce the number of UPM's employees in Finland by around 700 persons. In Kajaani, the number of employees will reduce by 535 persons, around 100 through retirement. At the Tervasaari mill, the number of permanent jobs will reduce by 166. The number of people who will be eligible for a pension will be available by the end of the year.

Based on these decisions, UPM will book at the end of the year an approximately EUR 170 million write-off in fixed assets and make a provision for the reduction in the number of employees, and other closure costs of approximately EUR 30 million with cash impact mainly in 2009.
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