UPM Release: UPM to secure Label Division's cost competitiveness - Company plans to reduce coating capacity and close two slitting terminals in Europe

UPM to secure Label Division's cost competitiveness

Company plans to reduce coating capacity and close two slitting terminals in Europe

(UPM, Helsinki, 12.11.2008 at 12:00 EET) – UPM plans to restructure its Label Division's European operations in order to secure profitability in a weak economic environment. The company plans to close down a number of self-adhesive labelstock production lines and reduce slitting capacity in the UK, France, Germany, Hungary and Finland. The number of employees affected by this programme is estimated to be approximately 340 which corresponds to about 20 % of UPM Raflatac's total personnel in Europe. The restructuring is estimated to be complete by the end of 2009.

Label Division will book restructuring costs of approximately EUR 25 million and an approximately EUR 9 million non-cash impairment charge for redundant assets in the fourth quarter 2008. The cash costs will occur in 2009.

The planned actions will improve UPM's Label Division's cost competitiveness and profitability. The aim is to reduce operating costs annually by about EUR 25 million. The planned actions will have no material impact on the division's sales.

Decisions will be taken after consultation and negotiation with the employees in the relevant countries.

UPM's plans include:

• Permanent closure of two coating lines: one in Scarborough, UK, and
  one in Nancy, France
• Further reduction of coating capacity through shift reductions in Scarborough, Nancy and Tampere, Finland
• Closure of two slitting and distribution terminals: one in Düsseldorf/Ratingen, Germany and one in Tatabanya, Hungary
• Slitting capacity reduction in Tampere, Scarborough and Nancy through shift reductions.

"Due to the weak economic conditions, market demand for self-adhesive labelstock is currently declining in Western Europe, and we foresee no short-term change in this trend. We recognize the remarkable job our employees have done in improving our operational efficiency in recent years, but unfortunately the headwinds from the overall economy are exceptionally strong. We have to take these difficult but vital steps to adjust our capacity to the demand outlook of our customers, and to secure our profitability," says Jussi Vanhanen, President of UPM's Engineered Materials Business Group.

"Through the proposed measures each site in UPM Raflatac Europe will get a clear and focused role for developing the business for the future. This together with the resulting industry-leading cost competitiveness is vitally important for the future of UPM Raflatac, its employees and customers."

Negotiations with employees on the proposed closures and reductions will start immediately and they will proceed according to the local legislation in each country. Possibilities for retirement, relocation within UPM and retraining will be handled in the negotiations, too.

For more information, please contact:

 Mr Jussi Vanhanen, President, UPM, Engineered Materials, tel. +358 40 567 2458
(Between 12.00-13.00 CET and after 14.00 CET)

Mr Tapio Kolunsarka, Senior Vice President, Europe, UPM Raflatac, tel. +1 828 301 7997 (Between 12:00-14:00 CET and after 15:00 CET)

Concerning Tampere site:
Mr Arto Tuomi, General Manager, UPM Raflatac Oy, Tampere, Finland, tel. +358 40 501 6774 (Between 11.30-12 CET and after 14.00 CET)

Concerning Scarborough site:
Mr Alan Wright, General Manager, UPM Raflatac Ltd., Scarborough, UK, tel. +44 1723 502544 (13.00-15.30 CET and 17.00-18.30 CET)

Concerning Nancy site:
Mr Marc de Saint Pol, Director, UPM Raflatac SAS, Nancy, France, tel. +33 6 66 69 06 23 (After 11:00 CET)

Concerning Tatabanya site:
Mr Ernö Tökes, Operations Manager, UPM Raflatac Kft, Tatabanya, Hungary, tel. +36 34 517 800  (After 15:00 CET)

Concerning Düsseldorf/Ratingen site:
Mr Hans Stude, Managing Director, UPM Raflatac GmbH, Düsseldorf/Ratingen, Germany, tel. +49 171 412 0800 (After 14:00 CET)

Notes to editors

UPM Raflatac
The Label Division of UPM is a world-leading supplier of self-adhesive label materials and RFID tags and inlays for a wide variety of needs in product and information labelling. UPM Raflatac has around 2,700 employees and made sales of approximately EUR 1 billion (USD 1.4 billion) in 2007. UPM Raflatac's factories are located in Australia, China, Finland, France, Malaysia, Poland, South Africa, Spain, United Kingdom and the USA. www.upmraflatac.com.

UPM Raflatac Ltd.
UPM Raflatac Ltd. Scarborough factory manufactures paper-based self-adhesive label materials. Located on the North East coast of England, UK, the factory employs 258 people. The factory was acquired by UPM-Kymmene in 1984.

UPM Raflatac SAS
UPM Raflatac SAS Nancy factory manufactures paper-based self-adhesive label materials and high value-added special products. Located in the north-eastern France, the factory employs 288 people. The factory was founded in 1990.

UPM Raflatac Oy
UPM Raflatac Oy Tampere factory manufactures filmic self-adhesive label materials and high value-added special products. UPM Raflatac's research and product development is also concentrated in Tampere. Located in western Finland, the factory employs 239 people. The factory was founded in 1972.

UPM
UPM is one of the world’s leading forest products groups. The Group employs around 26,000 people and in 2007 made sales of EUR 10 billion. UPM’s main products include printing papers, label materials and wood products. The company has production units in 15 countries and its main market areas are Europe and North America. UPM’s shares are listed on the stock exchange in Helsinki. www.upm-kymmene.com

UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
communications@upm-kymmene.com