UPM Paper Plans to Eliminate 305,000 Tons of SC Paper Capacity With Machine Closures in Europe

HELSINKI, Finland —November 3, 2016 — UPM is planning to permanently reduce its graphic paper capacity in Europe by 305,000 tons. The capacity reductions are planned to take place in Austria and Germany.

UPM plans to permanently close two paper machines:

• SC paper machine 3 at UPM Steyrermühl, Austria
• SC paper machine 2 at UPM Augsburg, Germany

The number of employees affected by the plan is estimated at 150 for UPM Augsburg and 125 for UPM Steyrermühl. The employee consultation processes will start in the course of November in line with the local legislation. The machines are planned to be closed after the consultation processes have been finalized.

The plan would result in annual cost savings of about EUR 30 Million. UPM would book charges of approximately EUR 75 Million as an item affecting comparability in Q4 2016. Of the total, approximately EUR 45 Million would be cash costs.

According to the plan both mills would continue paper production on the remaining cost-competitive paper machines at the mill sites.

"The demand for SC papers, in line with other graphic papers, has been declining during the last years and the decline is expected to continue. Even under challenging market conditions our employees have always given their best and we regret the impact of the planned closures on the personnel. However, we have to adjust our operations to match with long-term customer demand," says Winfried Schaur, executive VP, UPM Paper ENA.

Anu Ahola, senior VP, News and Retail, UPM Paper ENA, also adds, "Due to the adverse market conditions we have conducted a thorough analysis on the cost competitiveness of our graphic paper machines. Because of their scale, technical age and limited further savings potential PM3 in Steyrermühl and PM2 in Augsburg are the least competitive SC PMs in UPM's machine park. The planned closures would ensure an efficient use of our remaining five SC paper machines."

Earlier this year, UPM sold its Schwedt mill. The annual production of 282,000 tons of newsprint will be ceased in the end of Q3 2017. The new owner will convert the mill into liner production.

About UPM Steyrermühl
UPM Steyrermühl manufactures newsprint and uncoated magazine papers (SC) with the annual capacity of 485,000 tons. Located in Upper Austria, the mill employs about 400 people.

About UPM Augsburg
UPM Augsburg manufactures coated (LWC) and uncoated magazine papers (SC) with the annual capacity of 498,000 tons. Located in Southern Germany, the mill employs about 440 people.

About UPM Paper ENA
UPM Paper ENA (Europe and North America) is the world's leading producer of graphic papers, offering an extensive product range for advertising and publishing, as well as home and office uses. The high performing papers and service concepts of UPM add value to its customers' businesses, while activity fulfilling demanding environmental and social responsibility criteria. With headquarters in Germany, UPM Paper ENA employs approximately 9,000 people.

About UPM
Through the renewing of the bio and forest industries, UPM is building a sustainable future across six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Paper ENA and UPM Plywood. Our products are made of renewable raw materials and are recyclable. UPM serves its customers worldwide. The group employs around 19,600 people and its annual sales are approximately € 10 billion. UPM shares are listed on NASDAQ OMX Helsinki. UPM - The Biofore Company.

Source: UPM.