Stora Enso plans closure of Kitee sawmill

Forest company Stora Enso on Thursday announced plans to consolidate the Finnish spruce (whitewood) production to Varkaus sawmill. The plan includes a permanent closure of Kitee sawmill and production increase to Varkaus, said the company in a press release.

The objective is to improve profitability and competitiveness by creating a fully integrated sawmill for spruce production in Varkaus, optimising the synergies from the existing LVL (Laminated Veneer Lumber), pulp and board mills.

The consolidation plan is part of Stora Enso’s profit protection programme of EUR 120 million targeting reductions in variable and fixed costs. The possible consolidation is subject to completion of the co-determination negotiations at Kitee sawmill which will start in August. The production at Kitee sawmill is planned to be stopped gradually until the end of 2019.

“The planned consolidation would enable us to optimise the full potential of Varkaus mill as an integrated mill, delivering a variety of value added wood products such as further processed sawn wood and LVL. This would provide us possibilities for improved product mix, stronger R&D and innovation as well as opportunities for efficient and automatised production. In Varkaus we also see strong synergies with Stora Enso’s pulp and board mills when it comes to shared raw material, logistics, infrastructure and energy usage. This consolidation would further enhance Stora Enso’s position as a global provider of high quality wood products and innovative wood-based solutions”, said Jari Suominen, Head of Stora Enso’s Wood Products division.

At Kitee sawmill the planned closure would result in a reduction of maximum 85 FTEs (full-time equivalents). Varkaus sawmill and LVL mill currently employ a total of 105 people. An increased production in Varkaus would require an additional 20 FTEs. Decisions regarding the planned consolidation, closure and employee reduction will be taken after the co-determination negotiations have been concluded.

Stora Enso will record restructuring related costs and write-downs of EUR 11 million as an item affecting comparability (IAC) in the second quarter 2019 results. Approximately EUR 5 million of the provisions will have a cash impact.

The planned closure would not have a significant impact on Group sales or operational EBIT this year.