Stora Enso to shut down and sell old paper mills in Europe and North America

About 5,000 jobs to be lost

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Paper, paperboard, and sawn timber manufacturer Stora Enso has announced a massive programme of cost cutting measures, which will eliminate 5,000 jobs by the summer of 2007. The company now employs about 38,000 people.
      Stora Enso plans to shut down or sell many of its older and smaller mills, and to close paper machines at individual plants in Europe and the United States. Only one paper machine will be shut down in Finland - in Varkaus. Also, the Pankakoski paperboard factory, and the Veitsiluoto sawmill will be sold. A decision on unprofitable medium-sized factories is to be made late next year.
     
Investors appeared to feel that the cost-cutting programme announced on Thursday was too lax; Stora Enso’s share price fell on Thursday. Normally, such announcements tend to boost a company’s stock market value.
      Stora Enso published details of the programme which it originally announced earlier this year. The aim of the Profit 2007 programme is to improve the company’s pretax profit by EUR 300 million a year.
      The company says that the units to be shut down had failed to achieve the economic goals set by the company, and the top management concluded that they never will.
      In addition to one paper machine in Varkaus, Stora Enso will shut down two magazine paper machines at the Corbehem factory in France, a packaging paperboard plant in Hammarby, Sweden, and a paper machine in Stevens Point in the United States.
      The list of units facing divestment include the Pankakoski mill and Veitsiluoto sawmill in Finland, the Celbi pulp mill in Portugal, the Grycksbo paper mill and the Linghed sawmill in Sweden, and the Wolfsheck paper mill in Germany.
     
The job cutbacks would be enacted even if no units were to be shut down. Stora Enso did not immediately say how the reductions would be spread out among the countries.
      In addition to the cutbacks, Stora Enso plans to outsource between 600 and 700 jobs at its mills in Finland, including its cleaners and security guards, as allowed by the new labour contract in the paper industry.
      A total of 2,300 people work at the units to be sold or shut down. Most of the employees at the installations that are to be sold will continue under the new management.
     
In addition to the shutdowns and divestments, Stora Enso is putting a number of installations on a watch list, including the Summa paper mill in Finland, the Reisholz and Uetersen mills in Germany, and the Berguizer mill in The Netherlands.
      The mills, which employ about 2,000 people, have until the end of next year to show improvement.
     
Stora Enso’s operating profit in July through September was a dissapointing EUR 106 million.
      The bottom line was affected by the labour dispute in the Finnish paper industry, which is calculated to have eaten away EUR 40 million from the bottom line.
      Return on investment was just 3.7%, which means that Stora Enso is ten percentage points below its target.
      However, the company says that the outlook for the near future is better than before: demand is improving in nearly all product groups. Prices are expected to remain largely unchanged.


Links:
  Press release Oct. 27, 2005: Stora Enso creates platform for stronger financial performance

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