Stora Enso OYJ Investor News 28 May
2019 at 9.30 EEST
HELSINKI, May 28, 2019 /PRNewswire/ -- Stora Enso has
decided to invest approximately EUR 350
million to convert the Oulu paper mill in Finland into packaging production. The
investment includes converting paper machine 7 into high-quality
virgin-fibre-based kraftliner production, and the closure of paper
machine 6 and sheeting plant. Production on the converted machine
is estimated to start by the end of 2020.
"The conversion of Oulu Mill will enable Stora Enso to further
improve its position in the growing packaging business and take a
major step forward in its transformation. We have proven competence
in running large conversion projects successfully, as we have
already converted one paper machine at Varkaus Mill to produce
kraftliner," says Stora Enso's CEO Karl-Henrik
Sundström.
The typical end uses for kraftliner are in packaging segments
that require high strength, quality and purity, such as food, fruit
and vegetables as well as heavy duty packaging. Production will
target global export markets.
"Economic growth, sustainability and food safety are key market
drivers in the packaging business. This conversion will allow
us to provide customers with an innovative kraftliner
product with high-performance qualities in terms of strength,
printability and food safety," says Gilles van Nieuwenhuyzen, EVP, Stora Enso's
Packaging Solutions division.
To transform Stora Enso further from declining and low EBITDA
business to growing higher profitability business, the Group will
invest approximately EUR 350 million
in the conversion during 2019–2022. This will increase the Group's
earlier estimated capital expenditure for 2019 from EUR 540–590
million to EUR 610–660 million. The market dynamics of woodfree
coated paper have deteriorated further, and therefore Stora Enso
must accelerate its transformation by increasing capital
expenditure from the earlier estimate. Following the conversion,
Oulu Mill's EBITDA margin is expected to improve by 15–20
percentage points, once the kraftliner machine is running at full
capacity approximately four years after start-up. At full capacity,
the investment is expected to meet the Packaging Solutions
division's profitability target, operational return on operating
capital (ROOC) of 20%.
The investment will include a new world-class line for
virgin-fibre based kraftliner (both brown and white-top) with an
annual capacity of 450 000 tonnes, the modification of the pulp
mill and drying machine for unbleached brown pulp, as well as
investments to enhance the mill's environmental performance. The
project will start with ground work in the summer of 2019, and
about 200 contractors will work at the Oulu Mill site during the
project.
The converted Oulu Mill will directly employ approximately 180
people. Wood consumption at the mill will increase by 0.5 million
m3 to 2.4 million m3 annually. Wood will be purchased mainly from
private forest owners in Northern
Finland.
As an outcome of the co-determination process started on
25 March 2019, 365 people will be
permanently laid off. The initial estimate on the maximum number of
employee reductions was 400 people. The redundancies will mainly
take place by the end of year 2020, when Oulu Mill will cease to
produce woodfree coated papers. Stora Enso will provide support to
the people who will not continue working at the Oulu Mill after the
conversion. At maximum 20% of the redundancies can be managed
through pension arrangements.
"We will be working closely together with other Stora Enso
locations, the city of Oulu and other stakeholders to support in
re-employment for those employees who will not have a position in
the new organisation. Our support will include outplacement
services as well as individual and group trainings for
re-employment. We will also offer financial support for employees
starting up their own companies," says Kati ter Horst, EVP,
Stora Enso's Paper division.
Stora Enso will book a cost of EUR 31
million as an item affecting comparability (IAC) relating to
layoffs, restructuring expenses, asset write-downs and impairment
reversals, of which EUR 7 million
will be recognised in the second quarter of 2019 and EUR 24 million in the following five quarters.
The restructuring related costs will have a cash impact of
approximately EUR 19 million when
paper production at the mill ends.
Oulu Mill's current capacity is 1 080 000 tonnes of woodfree
coated papers annually. Typical end-uses for woodfree coated papers
are e.g. high-quality advertising and magazines. Paper production
is expected to continue until the end of September 2020.
Links to previous releases about Oulu Mill:
- 18 March 2019: Stora Enso
starts co-determination process regarding the possible conversion
of the Oulu paper mill into packaging board mill and closure of one
paper machine
- 28 June 2018: Stora Enso
evaluates development opportunities at its Oulu Mill in
Finland
Part of the bioeconomy, Stora Enso is a leading global provider
of renewable solutions in packaging, biomaterials, wooden
constructions and paper. We believe that everything that is made
from fossil-based materials today can be made from a tree tomorrow.
Stora Enso has some 26 000 employees in over 30 countries. Our
sales in 2018 were EUR 10.5 billion.
Stora Enso shares are listed on Nasdaq Helsinki (STEAV, STERV) and
Nasdaq Stockholm (STE A, STE R). In addition, the shares are traded
in the USA as ADRs (SEOAY).
storaenso.com
For further information, please contact:
Ulrika Lilja
EVP
Communications
Tel. +46-72-221-9228
Investor enquiries:
Ulla Paajanen
SVP
Investor Relations
Tel. +358-40-763-8767
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