Two of the world's biggest paper makers announced thousands of layoffs, mill closures and production cuts Wednesday to counter high costs and overcapacity in the industry.
UPM-Kymmene Corp., the world-leading producer of magazine paper, said it will ax 1,600 jobs in 2009 and 2010, and close mills in Finland. Another Finland-based company, Stora Enso Oyj, announced production cuts and 1,700 layoffs, including 600 workers in Germany and 400 in Russia.
Both companies gave profit warnings in June and cautioned they would announce new cost-cutting measures on top of earlier moves that axed thousands of jobs, shut paper and pulp mills and cut production.
The companies' shares jumped on market expectations of the announcements.
In Helsinki, Stora stock closed up more than 5 percent at euro8.00 (US$11.28), and UPM closed up 4.7 percent at euro12.78 (US$18.01).
Stora, one of the world's top forest products groups, said it also plans to transfer 1,450 employees in 2009 to a joint venture with Swiss-Swedish electrical engineering company ABB Ltd., and invest euro135 million (US$190 million) to improve efficiency. UPM said it plans streamlining measures that would save euro70 million (US$100 million) in fixed costs.
Analysts had expected more.
"This is just a sticking plaster, it's not a big enough bandage," said Olli Joutsimo from Glitnir Bank. "They are such big movers globally in the field that we could expect similar announcements elsewhere too."
Finland's Union of Salaried Employees demanded the government step in and take countermeasures to safeguard jobs in the Nordic country.
"This is a black day for the Finnish forest industry," union president Antti Rinne said, but stopped short of calling strikes or other industrial action. In 2005, the industry lost more than euro1 billion (US$1.4 billion) because of strikes that were called to protest layoffs and cutbacks.
Prime Minister Matti Vanhanen said he called a special Cabinet meeting to discuss the layoffs and problems faced by the forest industry, which provides work for 10 percent of the country's labor force and accounts for 20 percent of exports.
"I had actually expected even bigger cuts," Vanhanen told reporters. "Some of the solutions are, of course, related to structural problems within the industry and we just have to manage and get through them."
Finance Minister Jyrki Katainen said the government had set aside emergency funds to deal with such crises.
"As in the past, we have money to deal with structural changes but have made no concrete decisions yet," Katainen said.
Earlier this year, Finnish wood products companies reported plunging profits and sales caused by high raw material costs, a strong euro and a global economic downturn. Also, the world's largest paper maker, U.S.-based International Paper, cautioned it expects "continued input cost pressures."
"We're only doing what I and the board see as necessary," Stora CEO Jouko Karvinen said. "We are not doing it because we want to, but because we want to safeguard the future of the majority of workers and the company."
UPM chief executive Jussi Pesonen said competition was tough.
"It's the sum of several factors when we have to take such drastic measures," Pesonen said. "In Finland, wood prices have increased to such a high level that profitable operation of all our units is no longer possible. Markets are slowing down, and there is overcapacity."
Stora and UPM have both said that paper deliveries will be down in 2008, partly caused by hikes in wood export tariffs by Russia, a major supplier for companies in Finland and elsewhere in Europe.
Finland depends on imported Russian wood for its paper and pulp industries, and over the last 15 years Finnish companies have invested about euro1 billion ($1.4 billion) in the Russian forest sector.
Karvinen said that Stora, which has been the largest importer of Russian timber in Finland, had taken steps to be able to "function effectively" without Russian wood.
According to Russian media reports, Moscow intends to increase the tax on wood exports to euro15 (US$21) per cubic meter _ up from euro10 (US$14) per cubic meter.
Stora Enso is one of the world's largest forest product companies making magazine paper, newsprint, fine paper, pulp and packaging boards. It employs 36,000 people in more than 40 countries.
UPM has production plants in 14 countries with 170 sales and distribution companies worldwide. It employs some 27,000 people, down from 29,000 a year ago.
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