• Total impact on UPM: Around 840 roles could be reduced, mostly in Finland with a restructuring cost of EUR 115m (48% cash and 52% non-cash) mainly impacting their Communication Papers segment.
  • Potential newsprint sale and conversion provides negative read-through for European containerboard: UPM has flagged the potential sale and subsequent conversion of their Shotton mill in Wales (250ktpa of newsprint). This is a theme that continues to be playing out due to the pandemic. Newsprint has been the hardest hit graphic paper grade and poses a threat to containerboard supply/demand dynamics due to the “ease” of converting newsprint machines. UPM flagged the paper machine as “technically flexible to support conversion especially into containerboard production”.
  • Positive read-though for Sappi’s only mill in Finland: UPM’s announcement is welcome news for coated paper producers in Europe and for SAP’ Kirkniemi mill in Finland, which has a capacity of 750ktpa and produces coated mechanical. Our understanding is that this mill remains highly competitive due to its scale and layout, allowing it to generate reasonable margins even with low capacity utilisation (<70%).
  • Communication Papers to be rationalised further: Despite early signs of a normalisation in paper demand after lockdowns, the deteriorating economic outlook has meant UPM is further rationalising capacity to ensure operations remain competitive. Additionally, the business will streamline its business function teams across Europe and North America reducing headcount by c.170 positions. Total plans should drive savings of EUR 75m pa.
  • Paper assets impacted: UPM will permanently close its Kaipola mill in Finland latest by the end of 2020. The closure will impact 450 employees and reduce capacity by 720ktpa. This is comprised of 450ktpa of newsprint and 270ktpa of coated mechanical paper. According to UPM, this mill was the least competitive among its paper mills due to high logistic costs, regulatory and tax burden, high labour costs and increasing fibre costs.
  • Biorefining and Specialty Papers also earmarked for optimisation: Headcount could be reduced by as much as 110 impacting their Kymi, Kaukas and Pietarsaari pulp mills. About 50 roles could be shaved off from their Specialty Papers business impacting their Tervasaari mill in Finland.

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