July 28, 2005 07:27 ET

Sappi Reconfigures Muskegon Mill To Meet Customer Needs and Ensure Growth; Retiring a paper machine and mothballing pulp mill will affect 420 jobs

BOSTON--(CCNMatthews - Jul 28, 2005) -

Sappi Fine Paper North America today announced that it will shut down the #4 paper machine at the Muskegon, Michigan mill, its highest cost and oldest printing and writing paper machine in North America. The move is designed to improve the company's overall cost structure and allow the company to grow more cost effectively in today's global marketplace.

The company also plans to suspend operation of the Muskegon pulp mill indefinitely and will cease operations by early September, 2005. The #5 paper machine at Muskegon will continue to operate and produce a variety of coated free sheet papers to meet changing customer needs.

The heavy-weight coated products, currently made on the #4 paper machine in Muskegon, will be transferred to the #5 paper machine in Muskegon and the Sappi machines in Cloquet, Minnesota. The machine closure will take effect within the next few weeks to ensure an orderly transition of customer orders. Approximately 60% of Muskegon's workforce, 365 employees from a total of 585, will be affected by the paper machine shut down and pulp mill mothballing.

In addition, Sappi will eliminate approximately 55 other positions throughout North America, as part of its strategy to streamline the business and align its cost structure to global market conditions. Most of these positions will be eliminated within the next six months.

"In today's extremely competitive marketplace, it is critical that Sappi's operations remain highly efficient and focused on customer needs," said Ronee Hagen, Sappi Fine Paper North America President and CEO. "By reconfiguring our Muskegon operations and reducing corporate overhead, Sappi is better equipped to reduce costs and meet changing customer demand to ensure future growth."

Gavin Travers, Managing Director of Sappi's Muskegon Mill said, "The #4 paper machine, originally built in 1924, is simply not able to compete with more modern, cost efficient machines in the U.S. and other countries. Without the #4 paper machine, we have no present need to run the pulp mill, although we are mothballing the asset to preserve our options in the future. These decisions were difficult, and we know they will affect not only our employees, but the surrounding community."

According to the company, Sappi will do what it can to minimize the impact of the reconfiguration, working with both union and non-union employees whose positions will be eliminated.

"We are very committed to provide separation benefits that recognize the service and considerable contributions achieved by our impacted employees," said Hagen. "We will also support all efforts to help our affected employees find new employment."

As a result of these actions, our third quarter results reflect an asset impairment charge of US$180 million relating to all of the Muskegon assets and our 4th quarter results are expected to reflect a restructuring charge of US$31 million, mainly for the headcount reduction.

The Muskegon paper machine closure, pulp mill mothballing, product reconfiguration and workforce reduction were announced today with the Sappi Limited quarterly earnings announcement and during the conference call with analysts and investors.

Sappi Fine Paper North America is the leading North American producer of coated fine paper used in premium magazines, catalogues, books and high-end print advertising. Headquartered in Boston, Massachusetts, Sappi Fine Paper North America is known for innovation and quality. Its brand names McCoy, Lustro, Strobe, Opus and Somerset are some of the industry's most widely recognized and specified coated paper. SFPNA is a division of Sappi Limited (NYSE: SPP), a global company headquartered in Johannesburg, South Africa, with manufacturing operations in eight countries, sales offices in 50 countries, and customers in over 100 countries around the world. Learn more about Sappi at:

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