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Stora Enso Launches Asset Restructuring Plan for Printing Papers

Monday, October 28, 2002

Press release from the issuing company

HELSINKI, Finland, Oct. 25 -- Stora Enso today announced that Stora Enso's Board of Directors at its meeting on 24 October 2002 approved a comprehensive asset restructuring plan that will improve the Group's asset quality in the Magazine and Fine Paper businesses. This plan is part of an ongoing programme by Stora Enso to increase the overall competitiveness of its assets, which include about a hundred production units, whilst meeting the growing quality and volume demands of its customers. The plan includes targeted investments, machine specialisation measures and elimination of less-competitive production assets. Magazine Paper Uncoated magazine paper, used in periodicals and advertising material, is a core product for Stora Enso. The supply and demand balance, and forecast capacity utilisation of this product in Europe is sound, and the annual growth is healthy. Although currently competitive, Stora Enso's European asset base needs to be modernised to maintain its competitive edge. The main elements of the asset restructuring plan are: New PM12 at Kvarnsveden To improve its competitiveness in uncoated magazine paper production, Stora Enso intends to build a new paper machine at the Kvarnsveden Mill in Sweden, subject to requisite permissions being granted. The annual production capacity of the machine will be about 400 000 tonnes of high-quality super-calendared (SC) papers. To meet quality demands , the paper will be based on virgin fibre. The total investment at Kvarnsveden is estimated at EUR 450 million. The machine is expected to start up in mid 2005. Shutdown of PM9 at Kvarnsveden The plan for the Kvarnsveden Mill includes shutting down its PM9, which has an annual capacity of 130 000 tonnes of improved newsprint. The shutdown will coincide with the start-up of the new SC machine. Rebuild of PM6 at Maxau The asset restructuring plan also includes a EUR 168 million investment to rebuild PM6 at the Maxau Mill in Germany to enhance its productivity and competitiveness. The machine produces SC-B paper based on recovered fibre. The annual production capacity will increase by 120 000 tonnes to 260 000 tonnes. The rebuild will be completed in the second half of 2004. The main markets for the paper machines at Kvarnsveden and Maxau will be in Europe. Intercontinental customers can be served too because of the excellent cost base of both lines. Grade change for PM3 at Langerbrugge After the start-up of the new paper machine at Kvarnsveden, PM3 at the Langerbrugge Mill, which has an annual capacity of 165 000 tonnes, will be transferred from mainly high-quality SC to exclusively SC-B. This will allow Langerbrugge to maximise the usage of recycled fibre. Divestment of Wolfsheck Mill In addition, the Group intends to divest its Wolfsheck Mill in Germany, as it is judged that the machinery cannot be kept competitive in its present standard grades in the longer term. The mill has two paper machines producing some 150 000 tonnes of high-quality SC paper and wallpaper base annually. These steps, scheduled for completion in 2005, will increase the Group's annual capacity in high-quality SC by a net 195 000 tonnes and in SC-B and improved newsprint by a net 150 000 tonnes, taking into account the previously announced shutdown of the PM2 and rebuilding of PM3 at Langerbrugge. Fine Paper Office papers are core products in Stora Enso's portfolio, partly because they balance profit-wise the more advertising-driven paper grades. Capacity utilisation in the European copy paper market is forecast to be over 90 % for the coming years. It is important for Stora Enso to keep pace with technical developments and customers' quality needs. As an essential part of its office paper asset restructuring programme, Stora Enso has approved an investment of EUR 125 million to rebuild the uncoated fine paper machine (PM3) at the Veitsiluoto Mill in Finland. The aim of the rebuild, scheduled for completion in November 2003, is to improve the machine's competitiveness and product quality in the growing office paper market. Its annual production capacity will increase by 115 000 tonnes to 290 000 tonnes. Strategy and financial targets unchanged Stora Enso will maintain its strategy of growing profitably through mergers and acquisitions in addition to selected investments. The above investments fall within Stora Enso's target of keeping capital expenditure at or below the level of depreciation over the cycle. Each project meets the Group's financial return targets and will be financed from cash flow.




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