Business News

Stora Enso will close down newsprint and directory paper production at Varkaus

Wednesday 07. July 2010 - Stora Enso will permanently close down newsprint and directory paper production at Varkaus in Finland by the end of the third quarter of 2010. The reasons for the planned capacity closure announced on 22 April 2010 have not changed: the European newsprint and directory paper market is strongly structurally oversupplied and sales prices have fallen significantly. As a result, newsprint production at Varkaus Mill is expected to remain unprofitable in the long term.

“The overcapacity position in the European newsprint and directory paper market
has persisted in 2010. Consequently, sales prices have fallen significantly. In
the longer term demand in Europe is expected to decline further, as has been
happening in North America. In addition, the competitiveness of Varkaus is
weakened because newsprint production at Varkaus relies on less-competitive
virgin fibre, the availability of wood raw material in Finland is not stable and
Varkaus is far away from most of its customers and main markets,” says Juha
Vanhainen, EVP, Publication Paper Business Area and Country Manager Finland.

The closure of the two newsprint machines PM 2 and PM 4 at Varkaus Mill will
reduce newsprint and directory paper annual production by 290 000 tonnes. The
co-determination negotiations at Varkaus were concluded at the end of June. As a
result of the ending of newsprint production, 175 employees will be made
redundant. There are currently 506 employees at Stora Enso’s Varkaus Mill.

The Varkaus mill site will continue to produce pulp and fine paper after
newsprint and directory paper production ends. The operations of the sawmill and
the NSE Biofuels Oy biofuel joint venture with Neste Oil and its demonstration
plant will also continue. The ending of newsprint production will not
substantially affect the amount of renewable energy produced at Varkaus.

Stora Enso will support redeployment of those affected by the plans through
efficiently offering jobs internally and eligibility for outplacement services.
The Group works closely with local employment and economic development centres
to find new job opportunities for people affected. Stora Enso will also support
financially those who would like to start their own business.

Estimated financial impact
As announced on 22 April 2010, Stora Enso anticipates that the planned
permanent shutdown of newsprint production at Varkaus will have the following
financial impacts on the Newsprint segment:

——————————————————————————–
| | EUR million |
——————————————————————————–
| One-time non-cash fixed asset and working capital | 0 |
| write-downs in Q2/2010 | |
——————————————————————————–
| One-time cash provisions in Q2/2010 as non-recurring | 23 |
| items | |
——————————————————————————–
| Annual sales reduction | 148 |
——————————————————————————–
| Annual working capital reduction | 9 |
——————————————————————————–
| Annual operating profit improvement | 9 |