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Stora Enso North America Cuts Costs; To Lay Off 700

Press release from the issuing company

HELSINKI, Finland, Aug. 26 -- Stora Enso today announced that Stora Enso North America will implement a USD 65 million (EUR 60 million) reduction in annual fixed costs through an extension of the profit enhancement programme announced in August 2002. This programme will have its full financial impact by mid 2005, and it will increase the profit per share by EUR 0.04 on top of the EUR 0.05 increase from the earlier programme. The new programme includes a reduction in Stora Enso North America's total workforce of about 12% or 700 employees by mid 2005. In addition, 350 of the reductions in the previously announced profit enhancement programme remain to be implemented. Stora Enso North America currently employs about 6,050 people. After the programme has been fully implemented, the number of employees will be about 5,000. As part of this initiative, Stevens Point Mill paper machine 32, which produces 25 000 tonnes of speciality papers annually, and, as previously announced, Biron Mill paper machine 24, which produces 69 000 tonnes of light-weight coated paper annually, will be permanently shut down as of 1 September 2003. This will result in the removal of 94 000 tonnes of annual capacity and affect approximately 60 full-time positions. Stora Enso will include a non-recurring pre-tax restructuring charge associated with these changes of about USD 24 million (EUR 22 million) during the third quarter, of this charge USD 2 million is non-cash. Factors contributing to the need for these measures include: a lagging economy that has been slow to recover from the downturn of the past three years; increased competition from lower-priced imports; higher energy costs; and higher production and labour costs. Sales prices for paper products in North America continue to be at historic lows. Stora Enso North America President Lars Bengtsson notes that many changes have already been made: "During the past three years, Stora Enso North America has implemented major cost-cutting initiatives, including a 20% reduction in the workforce. We have put a freeze on hiring, placed restrictions on travel and reduced the use of outside consultants. We will implement a freeze on salaried employee wages and will consider cost-effective modifications in the employee benefit programme as well as departmental reorganizations." Every facility and support group within the Division is included in the current cost-reduction effort. Reductions in both the salaried and hourly workforce will be implemented consistent with the needs of each facility to ensure a safe workplace and quality production. Workforce reductions will be made in a number of ways, including severance, retirement and attrition, and will be carried out in accordance with applicable collective bargaining agreements. These reductions have already begun and will continue on a facility-by-facility and department-by- department basis through mid 2005. Employees affected by this initiative will be offered outplacement services to assist with finding other employment.