UPM Communication Papers has planned capacity reductions for its Germany and Austria based paper plants by Q2 2023. The decision is in wake of decade-long characterization of industry for demand decline. The reduction will help the company to save annual fixed costs of approximately EUR 13 million.
March 22, 2023
UPM Communication Papers, a part of UPM Group, is planning capacity reductions in its Germany and Austria based plants. The planned actions are estimated to result in annual fixed cost savings of EUR 13 million.
In Germany, the company plans to permanently close PM 6 at UPM Schongau, reducing the annual capacity of uncoated publication papers by 165,000 tonnes by the end of Q2 2023. The machine will be closed post-finalization of the employee consultation process, which is planned to start immediately in line with local legislation. The cost-competitive PM 7 and PM 9 will remain operational along with four other uncoated publication paper machines in Germany and Finland, totalling the production capacity at 1,800,000 TPA.
In Austria, the company has decided to stop the newsprint production at its Steyrermühl newsprint mill by the end of Q2 2023, and plans to accelerate the plans to ensure competitive production at remaining newsprint paper machines in Europe. The exit of a total annual capacity of 320,000 tonnes of newsprint will take place already by the end of Q2 2023.
Mr. Massimo Reynaudo, Executive Vice President, UPM Communication Papers, commented on the decision, “The continued long-term decline in graphic paper demand forces us to continue our efforts to ensure cost competitive production and that our assets are in efficient use in all circumstances. In a declining market, competitiveness in company operations is key to substantiating our long-term commitment to the publication paper market and to remain as a reliable partner to our customers. UPM aims to handle the restructuring measures in a socially responsible manner and will engage now in a fair dialogue with employee representatives.” The COVID-19 years led to demand disruptions in the graphic paper markets, followed by a period of high inflation and unprecedented volatility last year. As the volatility is subsiding, the graphic paper market is returning to its long-term trend of declining demand, industry characterization for over a decade.
UPM will recognize charges of EUR 10 million for its Austrian site, and EUR 26 million restructuring charges for its German site, as items affecting comparability in its Q1 2023 results.