SOURCE: Stora Enso Oyj

October 25, 2007 02:21 ET

Stora Enso to cut magazine paper, newsprint and pulp capacity and reduce administrative staff

HELSINKI, FINLAND--(Marketwire - October 25, 2007) - Stora Enso Oyj News Release October 25, 2007 at 06.00 GMT

HELSINKI, Finland - Stora Enso (NYSE: SEO) today announced that Stora Enso plans to cut magazine paper, newsprint and pulp capacity and reduce administrative staff

- Annual capacity reduction 505 000 tonnes of paper and 550 000 tonnes of pulp

- 1 700 employees affected

- Significant reduction in Group functional staff

- Non-recurring charges of about EUR 380 million including cash impact of about EUR 160 million

- Net annual cost improvement of EUR 140 to 160 million, with full impact in 2009

In response to dramatic cost increases and to safeguard long-term profitability, Stora Enso today announces its intention to close down permanently Summa Paper Mill and one magazine paper machine at Anjala Mill, and the pulp mills at Kemijärvi and Norrsundet. The closures will reduce annual capacity by 505 000 tonnes of newsprint and magazine paper and 550 000 tonnes of pulp. The number of personnel affected by these planned permanent mill closures will total about 1 400 - about 1 100 in Finland and about 300 in Sweden.

Stora Enso also plans to divest its mills at Kotka in Finland. The laminating paper business and the special coated magazine paper operations at Kotka are to be divested as Stora Enso continues to focus its portfolio. These two businesses do not compete directly with products of other Group mills. The sawmilling operations at Kotka could also be sold if a satisfactory offer is received. The mills at Kotka employ about 650 people.

In addition, to reduce costs and streamline administration following the recent reorganisation, the divestment of North American operations and the above capacity reductions, Stora Enso intends to reduce its administrative staff by about 300 in Group administrative functions and shared services (out of total group staff of about 850) in the UK, Finland, Sweden and Germany.

All the planned personnel reductions are subject to local consultation.

"These closures, production rationalisations and staff reductions, however painful, are crucial for Stora Enso to be competitive long-term. To wait in the hope of better times would lead to more severe actions in the future. To reduce our wood costs as rapidly as possible, in parallel with the permanent closure plans we will start production curtailments in pulp and certain paper grades already in the current fourth quarter," said Stora Enso CEO Jouko Karvinen.

"These intended actions are based on specific analyses of marginal costs in wood supply and asset quality, including future investment needs, optimisation of fibre flows between the Nordic pulp mills, and decreasing the overall use of fibre by reducing newsprint and magazine paper production capacity. I also want to be clear that these plans are based on present conditions and the outlook before implementation of the announced 80% (or at least EUR 50 per cubic metre) duties on Russian wood exports from 1 January 2009. If the issue of the impending higher duties cannot be resolved soon and the dramatically increasing wood cost trends reversed, we will have to take further steps to rationalise pulp, paper, board and sawnwood production in Finland," Karvinen continued.

"I am aware of the impact today's announcement will have on the affected employees and their families. However, we are acting to safeguard the future of Stora Enso and the vast majority of our employees. We will, together with the local authorities, proactively help the affected employees to find alternative employment."

Summa Mill and Anjala magazine paper capacity closures Summa Mill, with annual capacity 415 000 tonnes of newsprint, uncoated magazine paper and book paper, is expected to be permanently closed down during the first quarter of 2008. Its customers will continue to be served by Stora Enso's other mills in Finland, Sweden and Western Europe.

The annual capacity of Anjala Mill's PM 2 is currently 155 000 tonnes of coated magazine paper. Immediately after the first quarter of 2008, Anjala PM 2 is to cease production of magazine paper and be converted to produce book paper, including for customers currently served by Anjala PM 1 and Summa Mill. Anjala PM 1, with annual capacity 120 000 tonnes of book paper, is planned to be permanently shut down in a manner that will ensure continuity of customer service.

Capacity reductions:

+--------------------------------------------------+
| Standard and improved newsprint | 270 000 tonnes |
|---------------------------------+----------------|
| Coated magazine paper           | 155 000 tonnes |
|---------------------------------+----------------|
| Uncoated magazine paper         | 80 000 tonnes  |
+--------------------------------------------------+


Kemijärvi and Norrsundet pulp mill closures

Kemijärvi and Norrsundet pulp mills, with annual capacities of 250 000 tonnes and 300 000 tonnes of long-fibre (softwood) pulp respectively, are planned to be permanently closed down. The closures are scheduled for the second quarter of 2008 for Kemijärvi and at the latest by the end of second quarter of 2009 for Norrsundet. These closures are prompted by the dramatic rise in wood costs, which necessitates finding ways to reduce wood consumption and optimise fibre flows to reduce costs for the remaining mills.

Divestment of mills at Kotka

The laminating paper business in Finland and Malaysia and special coated magazine paper operations at Kotka are to be divested as soon as practicable. The sawmilling operations at Kotka could be sold if a satisfactory offer is received.

The mills at Kotka produce 160 000 tonnes of laminating papers, 18 000 tonnes of ImprexÒ products, 170 000 tonnes of special coated magazine paper and 250 000 cubic metres of sawn goods per year. Their external sales totalled about EUR 220 million in 2006.

Maintenance and service companies

The roles of the regional maintenance and service companies Kymenso and Fortek in Finland will diminish following the closures of Summa Mill, Kemijärvi Mill and Anjala PM 1, and the divestment of operations at Kotka. Stora Enso's maintenance company serving Norrsundet Mill and Skutskär Mill will also be affected; since these two mills have a common management, the personnel at Skutskär Mill will be affected as well.

Reorganisation of administrative functions

Administrative functions are planned to be reduced in size at principal offices in Finland, Sweden, the UK and Germany to levels more appropriate for the Group. Intended job losses will include headquarters staff in Finance, Human Resources, Research and Development, Communications and Support. The total of some 300 job cuts includes about 90 corporate and country level staff in these four countries. It is also intended to replace the current financial shared service centres in Finland, Sweden and Germany with a single shared service centre at one new cost-efficient location. Planning for this change affecting the 150 shared service centre jobs will start in early 2008 with intended completion within a year. In addition, it is planned to reduce the number of employees by about 60 by consolidating two research centres in Sweden into one. This consolidation will further improve and focus R&D operations through the R&D centres specialising in particular competences and avoiding overlaps. Stora Enso intends to maintain its investment in R&D at or above the present level.

Estimated on-going financial impact of the closures and personnel reductions on the Stora Enso Group

The Group anticipates approximately EUR 380 million of provisions and fixed asset write-downs as non-recurring items in its financial results for the fourth quarter of 2007, of which about EUR 160 million will have a cash impact over the restructuring period from 2007 to the second quarter of 2009.


+-------------------------------------------------------------------+
| Segment        | Financial impact of fixed asset write-downs and  |
|                | provisions                                       |
|----------------+--------------------------------------------------|
| Newsprint      | EUR 170 million                                  |
|----------------+--------------------------------------------------|
| Magazine Paper | EUR 210 million                                  |
+-------------------------------------------------------------------+



The main benefits of the above actions will come from reduced marginal wood and energy costs, reduced personnel costs and lower depreciation. The net annualised cost improvement is estimated to be in the range of EUR 140 to 160 million and will have full annual impact in 2009.


+-------------------------------------------------------------------+
| External sales reduction                        | EUR 370 million |
|-------------------------------------------------+-----------------|
| Capital employed reduction                      | EUR 300 million |
|-------------------------------------------------+-----------------|
| Total personnel reduction due to closures and   | 1 700 people    |
| staff function reorganisation (excluding        |                 |
| increase due to new single financial service    |                 |
| centre)                                         |                 |
+-------------------------------------------------------------------+



For further information, please contact:
Tim Laatsch, Senior Vice President, Communications, Stora Enso North
America,
tel. 715 422 4023

On Thursday 25 October 2007 Stora Enso will announce its third
quarter results at 09.00 Finnish time (08.00 CET).

PRESS CONFERENCE IN HELSINKI
Time:    11.30 local time
Location:        Wanha Satama, conference room H+,
Address:           Pikku Satamakatu 3-5
Hosts:   Jouko Karvinen, CEO
Hannu Ryöppönen, Deputy CEO & CFO
Kari Vainio, Executive Vice President, Corporate Communications

The conference will be held in English. Questions can be asked from Jouko Karvinen and Hannu Ryöppönen after the presentation.

Webcast of press conference

A live webcast (audio with synchronised slide presentation) of the press conference may be accessed on www.storaenso.com. The presentation material will be available on www.storaenso.com/investors at 10.00 Finnish time (9.00 CET).

In case you are participating remotely in press conference and you would like to pose a question, please dial:

+44 (0)20 7162 0125    Continental Europe and the UK
+46 (0)8 5052 0114     Sweden
358 (0)9 2313 9202     Finland
+1 334 323 6203        USA 

ANALYST CONFERENCE CALL

CEO Jouko Karvinen and Deputy CEO & CFO Hannu Ryöppönen will be hosting a combined conference call and webcast today at 16.00 Finnish time (15.00 CET, 14.00 UK time, 9.00 US Eastern time).

If you wish to participate, please dial (quoting 'Stora Enso'):

+44 (0)20 7806 1950     Continental Europe and the UK
+46 (0)8 5352 6408      Sweden
+358 (0)9 7251 9035     Finland
+1 718 354 1387         USA

The live webcast may be accessed at www.storaenso.com/investors

Further details of replay numbers can be found at www.storaenso.com/investors

www.storaenso.com www.storaenso.com/investors


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