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Sappi to Permanently Close Michigan Mill

Thursday, August 27, 2009

Press release from the issuing company

BOSTON and JOHANNESBURG -- Sappi Fine Paper North America today announced that it will permanently cease operations at its coated fine paper mill in Muskegon, Michigan. The closing will affect approximately 190 salaried and hourly Muskegon employees, who have been on furlough since the suspension of operations at the mill, which was announced in March 2009. Prior to that suspension, Sappi Fine Paper North America operated a single paper machine at the site with an annual production capacity of 170,000 metric tons.

Sappi will record a charge of approximately US$30 million in the fourth financial quarter in respect of separation and other closure costs. Of this amount, an estimated US$10 million relates to non-cash charges. The fixed assets are fully impaired.

"The global economic downturn has resulted in very weak demand for coated fine paper worldwide. In North America, industry conditions remain very challenging, with current year to date shipments of coated wood free paper down 32 percent from 2007 levels and only modest recovery forecast for 2010," said Ralph Boettger, Chief Executive Officer of Sappi Limited, the parent of Sappi Fine Paper North America. "The permanent closure of the Muskegon Mill, while an extremely difficult decision to make, is necessary to ensure that we remain competitive in today's global marketplace. This decision is in line with our commitment to substantially improve Sappi's profitability and returns in all our businesses."

"We understand the hardship this decision creates for our employees at the Muskegon Mill. We will be providing separation benefits and job placement services for our salaried employees and will be commencing discussions with union representatives regarding the terms of hourly employees' separation benefits," said Mark Gardner, President and CEO of Sappi Fine Paper North America. "Our workforce at Muskegon was very dedicated, achieving record productivity and safety performance in the last year of operation. Unfortunately, the scale of the site made it difficult to successfully compete against larger paper mills throughout the world. We will be retaining an adviser to seek purchasers for the mill not engaged in the manufacture of coated printing and writing paper."

The cessation of operations at the Muskegon Mill will not affect the product lines offered by Sappi Fine Paper North America. Since March, products previously made at Muskegon have been and will continue to be manufactured at the Company's other paper mills in Skowhegan, Maine and Cloquet, Minnesota, including Opus PS, a high bulk to weight web and sheet offering with excellent surface quality and optics.

"We remain committed to meeting the needs of our customers for high quality, strongly branded coated products with outstanding service from our mills located in Maine and Minnesota, as well as Western Europe," Gardner said. "Even with the suspension of operations at the Muskegon Mill, we have continued to increase our market position and gain new customers in this weak environment through new product line extensions and product improvements. With our ongoing focus on customer service, cash generation and good cost management, Sappi Fine Paper North America continues to demonstrate its leadership in our market segment."




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