Nov 3 2009
UPM plans significant restructuring to ensure the competitiveness of its Plywood and Timber operations in Finland. The target is to remarkably improve the businesses' long-term cost competitiveness and increase value added of the production in Finland. Co-operation negotiations with employees concerning the plans will start immediately
UPM plans to permanently close the plywood mill and sawmill in Heinola, the Kaukas plywood mill in Lappeenranta, and the further processing mill in Parkano during the first half of 2010. Furthermore in the Plywood business area, the company plans to discontinue weekend shifts in most of the Finnish mills as well as to streamline the organisation of office employees. In addition, the production of the Kaukas further processing mill in Lappeenranta will be restructured. If the restructuring is realised according to these plans, the amount of UPM employees will decrease by approximately 870 persons, of which approx. 650 work in units planned to be permanently closed.
The restructuring costs are estimated to be approximately EUR 44 million including impairment charges of approximately EUR 11 million.
In addition, UPM plans to invest approximately EUR 25 million in the expansion of the Savonlinna plywood mill and the development of the production in the Kaukas sawmill and the Aureskoski further processing mill. If the plans materialise, the Savonlinna plywood mill will become the world's most efficient birch plywood unit with an annual production capacity of 120, 000 cubic metres of high quality birch plywood. With the investment UPM strives to ensure its position as the leading plywood supplier in Europe. The planned investments in the Kaukas sawmill and Aureskoski further processing mill would strengthen the cost competitiveness of the Timber business and position in the European markets.
"Centralisation and efficiency improvement create opportunities for profitable operations in Finland in the long term. The employee impacts of these plans are regrettable but the current situation is unsustainable. Cost competitiveness and an efficient production structure are necessary for both our Plywood and Timber businesses," says Mr Jussi Vanhanen, Member of UPM's Group Executive Board and President of the Engineered materials Business Group.
"With the proposed actions UPM will adjust its Finnish production to a level which facilitates profitable production and competitive wood sourcing," says Mr Tuomo Visanko, Senior Vice President of UPM's Forest and Timber Business Area.
The challenging market situation of plywood and timber products has continued since last autumn and UPM has been forced to implement large production curtailments and temporary lay-offs in all of its mills.
The Heinola plywood mill has been at a standstill since January and the Kaukas plywood mill since May this year. The employees of both of the mills have been temporarily laid off during the standstills. The Kaukas plywood mill employs 298 persons and the Heinola plywood mill 212 persons.
The Heinola sawmill and the Parkano and Kaukas further processing mills have had production curtailments during the whole year. The Heinola sawmill employs 77, the Parkano further processing mill 64 and the Kaukas further processing mill 25 persons.
"In the future, UPM would operate four modern plywood mills and two veneer mills, five sawmills and three further processing mills in Finland. We have here very good know-how and a stabile operating environment. The planned actions improve our ability to respond to our customers' needs as the market picks up again. UPM will be the leading European plywood supplier also in the future", says Vanhanen.
UPM's Plywood business employs currently 2,450 persons in Finland whereas Timber employs around 900 persons. If the measures materialise as planned, the number of employees in the Plywood business will decrease by around 710 persons and by 160 in the Timber business. The Timber business will also start co-operation negotiations with employees in all the other Finnish units on continuing temporary production curtailments in 2010.
UPM estimates the restructuring costs for the fourth quarter of 2009 to be in the Plywood business approximately EUR 30 million, including approximately EUR 24 million cash impact. In Timber business the cost is estimated to be approximately EUR 14 million, including approximately EUR 9 million cash impact.
The first results of the co-operation negotiations can be expected at the beginning of 2010.
Also opportunities for retirement, relocation within UPM and retraining will be discussed in the negotiations.
If the planned closures will be completed, UPM will start a From-job-to-job programme based on its earlier experiences. The programme would include, in cooperation with various parties, active measures to support finding a new job and retraining.