Finnish-Swedish paper, packaging and forest products manufacturer Stora Enso Oyj (SEOAY.PK) said Friday that based on conclusion of co-determination negotiations, it has decided to shut down Finland-based Tolkkinen Sawmill by the end of 2009. The company attributed lower demand, heavy losses, long-term overcapacity in sawnwood market and limited availability of cost-effective raw material for the closure.
The closure is expected to reduce its annual production capacity by 260 thousand cubic meter of sawn wood and its number of employees by 41. The mill has been temporarily shutdown and since January 2009 most of its employees were on temporary lay off.
Wood Products Business Area's executive vice president Hannu Kasurinen said, "In close co-operation with local authorities and the city of Porvoo, Stora Enso will help employees affected to find new employment."
Stora Enso will also facilitate redeployment by offering jobs internally and eligibility for outplacement services, added Kasurinen.
Earlier on August 19, Stora Enso has revealed its intentions to permanently close down its Tolkkinen Sawmill, and to shut down Imatra Mills PM 8 and Sunila Pulp Mill permanently during the first and second quarters of 2010 respectively.
Further, the company said it plans to divest Kotka Mills by early 2010, and to permanently close down Varkaus Mills by the end of 2010 unless uncoated fine paper demand supply balance and pricing recovers.
Stora Enso expects the total costs related to the restructuring to be EUR 270 million, and foresees the expense to affect its third quarter results. Nearly 450 to 1,100 employees in Finland would be affected by the plans, depending on the outcome of the plans for Varkaus Mills and excluding Kotka divestment process, said the company.
Stora Enso noted that due to the restructuring, the debt equity ratio would increase to 0.59 from 0.53, and that the closure of Imatra Mills PM 8 and Sunila Pulp Mill and Tolkkinen Sawmill would result in an external sales reduction of EUR 150 million.
On July 23, Chief Executive Officer Jouko Karvinen had stated that the profit made outside of Finland is lost in Finland, and hinted that the company is preparing for plans on permanent capacity closures.
For the second quarter of fiscal 2009, the company had reported a net loss of EUR 368.3 million or EUR 0.46 per share on revenues of EUR 2184.8 million.
SEOAY.PK is currently trading at $7.06 per share, up 1.00%, on the Pink Sheets.
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