State-subsidised laminate factory in Kemijärvi has come to a standstill

The plant manufacturing glued laminated wood beams ran out of liquid funds

print this

The Kemijärvi factory owned by the Arktos Group and manufacturing glued laminated wood beams has drifted into serious financial difficulties. The factory was set up just three and a half years ago in the factory building vacated by Stora Enso following the closure of the forest industry giant's pulp mill in Kemijärvi.
      The entire personnel of Arktos has been laid off, and it is not known yet when work at the factory could continue.
      According to Juhani Kukkonen, CEO of Arktos, the furloughs are to continue for the time being. ”The factory has come to a standstill”, he reports.
     
CEO Kukkonen notes further that the difficulties faced by the factory are largely attributable to financial problems related to the company’s minority owner Stora Enso.
      Stora Enso owned the pulp mill that was shut down in 2008, and the laminated timber factory was set up to compensate for the lost jobs in Finnish Lapland.
      Last week, Stora Enso announced that it would write off its equity capital in the Arktos Group and the capital loan granted to the same company, totalling EUR 11 million.
     
The write-down indicates that in Stora Enso’s view, the Arktos shares and loan receivables are worth nothing.
      CEO Kukkonen says that Stora Enso’s announcement scared the other investors. As Stora Enso has no faith in the wood beam factory, it is difficult to get loans from other financiers.
      Stora Enso reports that the company will not take a stand on other financiers’ doings. In addition to Stora, another important investor in the laminated timber factory was the Finnish state-owned specialised financing company Finnvera.
      Kukkkonen says that the situation at the laminated timber factory is grave. ”The investment and operative funding of the Arktos Kemijärvi project is open”, according to the company’s press release.
      Because of the financial problems, Arktos arranged an extraordinary general meeting on Monday.
     
In addition to Stora Enso and Finnvera, the government itself has also pumped money into the wood beam factory.
      In April 2008, the government granted a subsidy of EUR 5.4 million to the factory for the acquisition of machinery and equipment.
      In addition to the machinery and equipment, the government covered part of the costs caused by the training of employees.
     
The laminated timber factory has roughly 80 employees on the payroll. Half of them were laid off earlier, and the remaining half were given furlough notice on Monday.
      Arktos owns another wood beam factory in Pori and an engineering workshop in Mikkeli. According to Kukkonen, they both operate as normal.
      After Stora Enso closed down its pulp mill in Kemijärvi in the winter of 2008, a new factory manufacturing glued laminated wood beams was built inside the old mill.
      However, starting up production has been exceptionally difficult. The factory hardly ever progressed from the pilot production phase to actual production.
      ”There have been many kinds of difficulties”, Kukkonen says.
      The Arktos Group is a small enterprise. During the latest financial period, the company’s total sales were slightly more than EUR 7 million. The result showed an operating profit of EUR 0.5 million.
     
The closure of the pulp mill in Kemijärvi was attributable to Stora Enso’s fear for a shortage of raw materials in Finland.
      At the same time, Russia increased its timber export duties, which slowed down the imports of timber from Russia.
      Since then, those fears have proved groundless, and Finland has more raw material than the Finnish pulp mills are able to use.
      Moreover, Russia’s accession to the World Trade Organisation has been secured, which will guarantee that the country will no longer be able to impose high tariffs on the export of raw timber to Finland.
     
The shut-down of the Kemijärvi pulp mill caused a heated debate in Lapland, leading to the so-called Kemijärvi Mass Movement that handed a petition to Finnish MPs to save Stora Enso’s pulp mill in Kemijärvi.
      The demonstrators’ demands were not met, but Stora Enso consented to finance the Arktos Group, which at that time operated under the name Anaika.
      In February 2008, Stora Enso CEO Jouko Karvinen said: ”I and my best experts have examined the company’s business plan and we believe that it is a good plan. It is a small enterprise, but Stora Enso can take that risk.”


Previously in HS International Edition:
  Stora Enso pulp mill closed down in Kemijärvi (28.4.2008)
  Laminated beam factory to be set up in Kemijärvi pulp mill building (28.1.2008)

See also:
  Kemijärvi demonstrators boo and jeer at visiting Prime Minister Vanhanen (28.1.2008)

Links:
  Stora Enso press release 17.1.2012
  Arktos Group press release 23.1.2012

Helsingin Sanomat