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UPM Raflatac to Reduce Capacity in Europe, South Africa, Australia

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UPM Raflatac, Finland, is planning to reduce labelstock production capacity in Europe, South Africa, and Australia to secure cost competitiveness and profitability in low-growth markets. The planned actions are estimated to result in annual cost savings of about EUR 12 million starting at the beginning of 2014.

According to the plan, the labelstock factory in Martigny, Switzerland, the coating operations in Melbourne, Australia and Durban, South Africa, as well as the slitting and distribution terminal in Johannesburg, South Africa, would be closed. In addition, working time and shift changes and reductions are planned in France, Spain, and the U.K. The product range, service,and deliveries offered to customers will not be impacted by these plans.

If all plans are implemented, the estimated total impact would be a maximum of 170 positions in the affected countries.

Decisions will be taken after consultation and negotiations with employees in the relevant countries. Most of the restructuring is estimated to be complete by the end of this year.

"The economy in Western Europe has been weak for a long time and we don't expect the situation to improve in the foreseeable future. Simultaneously, the demands of our customers for cost-efficient labeling solutions continue to increase all over the world. To secure our customers' and our own profitability in the long run, we need to ensure that our manufacturing operations continue to be the most cost competitive in the industry. Unfortunately, the planned restructuring would also mean that we will lose a significant number of dedicated employees," said Jussi Vanhanen, president of UPM Engineered Materials.

"We will continue investing in growing markets in line with our strategy," Vanhanen continued. "In the past couple of years, we have strongly enhanced our service and operations network in Asia, Latin America, and Eastern Europe. Capacity adjustments are taking place in areas where the demand situation is not in line with our production capacity."

In the third quarter of this year, UPM will book a EUR 3 million write-off in fixed assets and make a provision for restructuring costs for EUR 11 million. The actions are not expected to impact the sales of the Label Business Area.


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