Sunday, September 14, 2008

Paper Companies to Cut Thousands of Jobs

Paper Companies to Cut Thousands of Jobs
A combined 3,300 positions eliminated at UPM, Stora Enso.
By Jason Fell

It appears that UPM Kymmene, the world's largest producer of magazine paper, is following through on its plans for consolidation. The company said it plans to cut 1,600 jobs between 2009 and 2010 as part of a reorganization.

Also as part of the reorganization, UPM is considering the closure of a number of its mills in Finland, the company said in a statement. The changes come as a result of rising costs and a crowded industry.

"UPM's employees have succeeded in increasing the internal efficiency to a new level but unfortunately cost pressures have multiplied," president and CEO Jussi Pesonen said. "The situation is striking particularly in Finland, where wood prices have increased to such a high level that profitable operation of all our units is no longer possible. With today's market outlook and the recent cost development, UPM's paper and pulp production in Finland can not continue in its current form and extent."

If UPM does in fact close the mills, the company says it will book a write-off of about $240 million in fixed assets for the fourth quarter, make a provision for the reduction in the number of employees and for other closure costs of about $42 million.

The reorganization would save UPM nearly $98 million annually and would have a positive impact on EBITDA, the company said.

UPM reported first half revenue was about $7.03 billion, down about 5 percent from $7.43 billion during the first half of 2007. Net profit for the half was $132.27 million, up from a net loss of $291 million during the same period last year.

Job Cuts at Stora Enso

Stora Enso Oyj, another Finland-based paper producer, also announced plans for a reorganization which it said would eliminate 1,700 positions.

As part of the reorganization, Stora Enso said it will close a paper machine in Germany that produces 140,000 tons of coated magazine paper per year.

The company said it plans to invest $190 million to improve efficiency and that estimated annual operating profit would improve by about $200 by the end of 2010 as a result of the reorganization.

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