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Stora Enso initiates plans to cut paper output with pulp and paper mill closures

Global forest industry major Stora Enso Oyj announced that it will start co-determination negotiations with employees at its Kvarnsveden Mill in Sweden and Veitsiluoto Mill in Finland regarding a plan to permanently close down pulp and paper production at both mills citing declining overall paper demand trend and significant overcapacity in Europe. No decisions regarding the planned closures nor employee impact will be taken until the local co-determination negotiations have been concluded.

The Stora Enso Kvarnsveden Mill in Borlänge, central Sweden (photo courtesy Stora Enso).

According to Stora Enso, paper demand in Europe has declined for over a decade. This trend has further accelerated due to the ongoing coronavirus (COVID-19) pandemic, which has led to changes in consumer behaviour viz a viz paper consumption.

As a consequence, there is significant overcapacity in the European paper market, which has resulted in historically low price levels and challenged the cost-competitiveness of many paper mills.

This is heavy news for our company and our colleagues at Veitsiluoto and Kvarnsveden mills. Our people at the sites are very competent and have done their utmost during very difficult circumstances. Unfortunately, in the rapidly declining paper market, we need to adjust our production capacity to improve the competitiveness of our total paper business. This sadly means the closure of unprofitable assets. As communicated last year, we have reviewed our strategy and are shaping our business for accelerated growth and value. We are focusing on packaging, building solutions and biomaterials innovations, where we see strong growth potential, said Stora Enso’s President and CEO Annica Bresky.

Both Kvarnsveden and Veitsiluoto mills are loss-making, and their profitability is expected to remain unsatisfactory also going forward.

We have examined several options to improve the financial situation for Veitsiluoto and Kvarnsveden mills. However, none of these options have proved feasible in ensuring a cost-competitive future for the mills. If there was a decision to close down the mills, we would work closely together with other Stora Enso locations, the cities of Kemi and Borlänge, and other stakeholders to support in re-employment and training of the affected employees. We would also actively engage in discussions to find alternative future uses for the mill sites. Throughout this process, we will serve our customers in the best possible way, said Kati ter Horst, EVP, Stora Enso’s Paper division.

Production at Kvarnsveden and Veitsiluoto

Stora Enso Kvarnsveden Mill in Borlänge, Sweden has two paper machines with a combined annual capacity of 565 000 tonnes of supercalendered (SC) magazine papers and improved newsprint, used in magazines, newspapers, catalogues, supplements and retail advertising.

The mill has also an integrated softwood thermomechanical pulp (TMP) mill with an annual capacity of 900 000 tonnes, and the planned closure would impact a maximum of 440 persons.

Stora Enso Veitsiluoto Mill in Kemi, Finland has a total annual capacity of 790 000 tonnes on three paper machines. Two machines produce woodfree uncoated paper (WFU) for office use and one machine produces coated paper grades, mainly for magazines but also for packaging applications.

In addition, the mill has an integrated chemical pulp mill (360 000 t/a), groundwood mill and a sheeting plant. The planned closure of the mill would impact a maximum of 670 people, of whom 530 in the Paper division and 140 at the maintenance company Efora.

The Stora Enso Veitsiluoto Mill in Kemi, northern Finland (photo courtesy Stora Enso).

The sawmill at Veitsiluoto would continue operating at the site under the Wood Products division and employ some 50 persons. Stora Enso would aim to sell its shares (50 percent) in the port operator Kemi Shipping Oy.

Stora Enso would continue to source wood in northern Finland and central Sweden, as the regions continue to be important sources of wood for the company’s operations.

Anticipated impacts

The planned closures would take place already during the third quarter of 2021, and reduce Stora Enso’s paper production capacity by 35 percent to 2.6 million tonnes per year.

Stora Enso continues to produce woodfree uncoated (WFU) office papers at its Nymölla Mill in Sweden, supercalendered (SC) papers at Langerbrugge Mill in Belgium and at the Maxau Mill in Germany, machine finished coated (MFC) papers and coated and uncoated book papers at Anjala Mill in Finland, standard newsprint at Langerbrugge Mill in Belgium and Hylte Mill in Sweden, and improved newsprint and other newsprint specialities at Anjala Mill in Finland and Sachsen Mill in Germany.

Stora Enso’s annual paper sales would decrease by approximately EUR 600 million, and the operational EBITDA is expected to improve by approximately EUR 35 million annually. The share of Paper division of the Group sales would be reduced to slightly above 10 percent after these planned closures.

Stora Enso has recorded a EUR 127 million non-cash impairment cost related to Kvarnsveden and Veitsiluoto mills in its Q1/2021 results as an item affecting comparability (IAC).

In Q2/2021, the Group will record a cost of EUR 104 million, of which the cash impact is EUR 96 million, as an IAC relating to the potential lay-offs and restructuring expenses at the two mills.

No decisions regarding the planned closures nor employee impact will be taken until the local co-determination negotiations have been concluded.

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