UPM plans to restructure its Label Division’s European operations in order to secure profitability in a weak economic environment. The company plans to close down a number of self-adhesive labelstock production lines and reduce slitting capacity in the UK, France, Germany, Hungary and Finland. The number of employees affected is estimated to be 340, which corresponds to about 20 percent of UPM Raflatac‘s total personnel in Europe. The restructuring is estimated to be complete by the end of 2009.
 
The Label Division will book restructuring costs of approximately €25 million and an approximately €9 million non-cash impairment charge for redundant assets in the fourth quarter 2008. The cash costs will occur in 2009.
 
The planned actions will improve UPM’s Label Division’s cost competitiveness and profitability, according to Jussi Vanhanen, president of UPM’s Engineered Materials Business Group. The aim is to reduce operating costs annually by about EUR 25 million. The planned actions will have no material impact on the division’s sales.
 
UPM’s plans include: permanent closure of two coating lines, one in Scarborough, Engand, and the other in Nancy, France; further reduction of coating capacity through shift reductions in Scarborough, Nancy and Tampere, Finland; closure of two slitting and distribution terminals, one in Düsseldorf/Ratingen, Germany, and one in Tatabanya, Hungary; slitting capacity reduction in Tampere, Scarborough and Nancy through shift reductions.
 
“Due to the weak economic conditions, market demand for self-adhesive labelstock is currently declining in Western Europe, and we foresee no short-term change in this trend,” says Vanhanen. “We recognize the remarkable job our employees have done in improving our operational efficiency in recent years, but unfortunately the headwinds from the overall economy are exceptionally strong. We have to take these difficult but vital steps to adjust our capacity to the demand outlook of our customers, and to secure our profitability.”
 
UPM Raflatac’s North American operations also have been feeling the economic strain, but the company has not had to take steps as sweeping as those in Europe.
 
“In North America, during the last eight years, we have built an operations platform that we believe is strategically perfect to serve this market place, and this – hopefully short term – economic downturn gives us no reason to change it,” says Jouko Lähepelto, senior vice president, Americas. “Of course, we have to do all we can in order to be competitive during these difficult times, and we have reduced shifts in both coating and finishing to meet lower demand. We carefully monitor the situation, and will take further actions if required due to the weak market situation.”