Displaying items by tag: Mreal Corporation

M-real Corporation, part of Metsäliitto Group, announced on 4 May 2011 in a stock exchange release its plans to divest the Alizay mill in France and the entire Gohrsmühle mill in Germany or, alternatively parts of the Gohrsmühle separately based on a Paper Park concept. It was then announced also that if the divestments do not materialize, M-real plans to start consultation processes proposing to close the operations. M-real also announced plans to discontinue its remaining carbonless paper converting operations at the Reflex mill in Germany.

Consultation process to close the Alizay mill will be commenced

M-real received several offers for the Alizay mill, based on which the negotiations have been carried out to divest the mill. None of the buyer candidates however fulfilled M-real’s conditions for entering into transaction. The main conditions for divestment set by M-real relate to the financial status of the buyer, credibility and capability to implement the presented business plan, ability to take responsibility for the employees and the business risks as well as the financial consequences to M-real of the divestment.

M-real has decided to commence an information and consultation process to close the Alizay paper mill. There are currently approximately 330 employees at Alizay mill.
Despite extensive restructuring measures and also investments implemented at Alizay mill, it loses currently approximately EUR 3 million per month. In this very challenging operating environment that European paper industry faces, it is not possible to turn the heavily loss-making mill profitable. Nor are there any signs of such a turning point in the paper market that would change the situation.
 
In the past years, M-real has tried to divest the Alizay mill and discussed and negotiated with a number of companies, including key industry players with no success. M-real appointed leading industry experts who approached in excess of 80 companies in the most recent process to divest the mill started in May 2011. Out of these 65 declined and 18 showed preliminary interest, received the information memorandum and visited the site. In the last few weeks, there were serious negotiations with two remaining candidates. Also the French State’s Invest in France Agency (AFII) has supported M-real in the sales process. One key point in the negotiations has been the fact that M-real will not sell Alizay mill to a buyer who would fail to turn the mill profitable. Consequently, if the mill would be shut down it could cause an unjustified position for the employees.

Statutory negotiations will be commenced in Speciality Papers to discontinue unprofitable businesses, Chromolux business will be continued

M-real has not been able to find a buyer for its Gohrsmühle mill, whether in parts or as a whole. M-real is planning to discontinue the unprofitable speciality paper businesses as well as the production of uncoated fine paper in Gohrsmühle. M-real will continue the profitable Chromolux business and investigate possibilities to start up a new customer service and logistics center for folding boxboard in Gohrsmühle, including a sheeting facility.

M-real is currently negotiating to divest its Premium Papers business of the Reflex mill.  The carbonless paper converting operations of the Reflex are under negotiations to be discontinued.

There are currently approximately 940 employees at Gohrsmühle and Reflex mills in total. The Chromolux business and the planned cartonboard customer service center would employ approximately 400 persons.  There are approximately 100 employees working for the Reflex Premium Papers business, to be potentially divested.

M-real has in recent years implemented plenty of major profit improvement measures at Gohrsmühle and Reflex mills including headcount reductions, closure of the loss-making coated fine paper production in Gohrsmühle and transfer of the Simpele mill’s speciality paper volumes to Gohrsmühle. Despite heavy improvement measures the Gohrsmühle and Reflex operations have, due to the challenging operating environment of the European paper industry, remained severely unprofitable. Currently the monthly operating loss is approximately EUR 5 million per month. There are no signs that the profitability would materially improve in the future.

M-real has attempted to divest the Gohrsmühle and Reflex operations to many different buyer candidates during the last 5 years. In 2010 M-real successfully divested a part of the Reflex mill to Metsä Tissue. The other attempts to divest the operations have failed due to the major losses of the operations, the European overcapacity in fine and speciality papers and the severe cost inflation.

“We have done lot of work to find buyers for both Alizay and Gohrsmühle mills. We have been ready to accept a heavily negative sales price. Regardless, demands of buyer candidates have on the one hand been unacceptable from the company’s’ perspective, while on the other hand they have not been able to demonstrate capability to turn the unprofitable operations  profitable, thereby guaranteeing the continuation of operations as a responsible owner and employer”, says M-real’s CEO Mikko Helander.

Financial impacts of the planned measures

If the production closure measures are implemented as planned M-real’s annual sales is expected to reduce by approximately EUR 400 million, while the operating result is expected to increase by approximately EUR 70 million based on 2011 first half’s actual performance. Most of the annual financial impact is expected to materialize in 2012 with full impact from 2013 onwards. None of the planned measures will be implemented without consulting the employee representatives in line with applicable legal requirements.

If the measures materialize fully as planned, they are preliminarily expected to result in approximately EUR 180 million negative non-recurring items in total.  In 3Q 2011 Office Papers operating result is expected to include approximately EUR 8 million non-recurring asset impairment and Speciality Papers business area EUR 9 million cost provisions. The  2Q 2011 Speciality Papers operating result included non-recurring impairment and cost provisions in total of EUR -22 million. . Rest of the non-recurring items will be booked in 4Q 2011 and in 1Q 2012. The estimated net cash costs of all planned  measures, taking into consideration change in net working capital from the beginning of May 2011, are approximately EUR 50 million in total. “If implemented, the planned measures will lead to an even stronger transformation of M-real to become a cartonboard company as stated in our strategy. At the same time the profitability of the company will raise to a new improved level,” says Helander.

M-real Corporation, part of Metsäliitto Group, has on 1 September closed the transaction to divest the entire share capital in M-real Hallein GmbH to the Schweighofer Group.

The signing of the transaction was announced on 30 June 2011.

The divestment is expected to reduce M-real’s annual sales by approximately EUR 75 million and improve the operating result by approximately EUR 5 million based on Hallein mill’s actual performance in 2010.

M-real Corporation’s negotiations to divest M-real’s Premium Papers business to a sister company of German Papierwerke Lenk AG have been suspended. M-real, part of Metsäliitto Group, announced in April 2011 the Memorandum of Understanding (MoU) regarding the divestment of the Germany based Reflex mill’s Premium Papers business to a sister company of Papierwerke Lenk AG. Consequently M-real expected to book a negative EUR 12 million non-recurring item in Speciality Papers business area. Transaction was expected to be closed during 2Q 2011.

Parties will evaluate possibilities to continue negotiations later and M-real will also consider other options to divest Premium Papers business. The EUR 12 million negative non-recurring item will not be booked in M-real’s in 2Q 2011 result.

M-real Office Papers will implement a 5-8% price increase for all its woodfree uncoated and recycled paper products across Europe in August. The increase will be done due to increasing costs of key raw materials such as pulp, starch and other chemicals as well as energy.

Despite the price of paper increasing over the last year, the margins for papermakers are still historically low and are insufficient to absorb the rising production costs.

M-real Office Paper’s Marcel Bigler, Senior Vice President, Sales, Marketing and Supply Chain says: “We must put up our prices so we can continue to deliver quality, innovative paper products. Trying to absorb the escalating costs of our key raw materials and energy is no longer an option.”

M-real Oyj, part of Metsäliitto, has signed an agreement to divest the entire share capital in M-real Hallein GmbH to the Schweighofer Group. M-real Hallein GmbH assets consist of the Hallein pulp mill, bioenergy plant, paper mill closed in 2009 and the surrounding estate. The pulp mills annual capacity is approximately 160,000 tonnes of sulphite pulp and the amount of personnel is approximately 200. The debt-free value of the transaction is approximately EUR 34 million and  the positive cash impact for M-real approximately EUR 24 million.

The divestment is expected to reduce M-real’s annual sales by approximately EUR 75 million and improve the operating result by approximately EUR 5 million based on Hallein mill’s actual performance in 2010.

“M-real is focusing on cartonboard business and this transaction is a good example of our work to divest the non-core assets. M-real does not use pulp from Hallein in its own board or paper operations and the profitability of the mill as a market pulp supplier has not met our targets. This is a good solution also for the mill as the new owner is in a better position to develop the operation further”, says Mikko Helander, CEO of M-real.

The transaction is subject to the approval of Austrian competition authorities and it is expected to be closed during 3Q 2011. M-real continues to sell Hallein pulp volumes to the market during 12-15 months following closing until the new owner has established their own sales organization and systems.

As a result of the transaction, M-real will classify Hallein according to IFRS 5 as Asset Held for Sale and recognizes it to its fair value. Market Pulp and Energy business area’s 2Q 2011 operating result is expected to include an approximately EUR 50 million negative non-recurring item.

The Schweighofer Group is a family owned, Austrian based holding company with companies in different branches and countries. The main focus of the group is forest industry.

M-real Corporation, a part of Metsäliitto Group, has entered into an agreement to divest to UPM-Kymmene Corporation its 35% holding in Myllykoski Paper and the capital loan M-real has granted to Myllykoski Paper. Consequently M-real books in its 2Q 2011 result before taxes a EUR 4 million impairment. M-real will classify the Myllykoski-holding according to IFRS5 as Assets Held for Sale and recognizes it to its fair value. The transaction has a EUR 10.5 million positive cash impact.

This transaction is subject to the closing of UPM’s acquisition of Myllykoski Group and Rhein Papier and requires competition law clearance. The transaction is expected to be closed during the 3Q 2011.

Teerenpeli Single Malt Whisky was launched in stylish packaging early this year. The packaging design is the result of co-operation between Design Foundation Finland and the Lahti Institute of Design. The designers were given a free hand to create an attractive, clear and ecological concept.

The surface material used for the stylish corrugated board packaging is uncoated white-top kraftliner Kemiart Brite from M-real Consumer Packaging. The liner sheets have been offset-printed, hot-foiled and then litho-laminated on single-faced E-flute sheets. The packages are manufactured at Stora Enso Packaging’s Ruovesi plant.

The project was headed by Ville Korhonen, a graphic designer at Design Foundation Finland, who was responsible for both the graphical design and the look and feel of the packaging, as well as putting it into production.

“The packaging production process consists of several stages. We chose Kemiart Brite as the surface material, because its consistent quality gives better control over the process. Uncoated Kemiart Brite conveys the desired message of recyclability and eco-friendliness. The end product requires the packaging to have the strength of a primary-fibre-based liner,” explains Juha Isomäki, head of production at Stora Enso Packaging.

According to Matti Turpeinen, project manager at Design Foundation Finland, “Teerenpeli’s single malt whisky packaging has a unique structure and the concept helps this rare product – Finnish whisky – to stand out from the competition. The packaging clearly displays the stylish bottle and the valuable product - the high-quality whisky that it contains.”

“Teerenpeli’s core values are Finnish roots, ecology and recyclability, which are well portrayed by the packaging. The genuine uniqueness of the packaging appeals to consumers,” concludes Teerenpeli Group’s Managing Director Anssi Pyysing.

M-real completes improvements at Simpele Mill increasing capacity by 80,000 tpa

An additional 80,000 tonnes per annum of folding boxboard, primarily aimed at meeting increased demand from the food industry, is coming on stream following completion of a rebuild at M-real’s Simpele mill in Finland. The rebuild was finished according to schedule on June 1^st 2011.

In addition to Simpele, M-real is increasing capacity at its Äänekoski and Kyro mills, planned for completion in late 2011 and spring 2012 respectively. As a result of the rebuilds, M-real will increase its total folding boxboard capacity to around 935,000 tonnes and further strengthen its position in the market. M-real is also investing at its Kemiart Liners mill and in the construction of a bio power plant at Kyro. In total, investment in the Consumer Packaging business area will exceed EUR 100 million during 2010-2012, Simpele being the first phase of the investment programme.

– Demand for our primary fibre boards has been excellent, due not only to their high performance and sustainability, but also due to rising concern over product safety, says Mika Joukio, Senior Vice President, Head of Consumer Packaging for M-real. – We can now fulfill more orders for Simcote, a pure and lightweight grade ideal for food packaging, as well as other end uses such as pharmaceuticals where safety is paramount.

M-real Simpele is already considered the most efficient cartonboard mill in Europe and Simcote the most efficient board grade as defined by its consistency and yield. The EUR 26 million invested at Simpele will increase production capacity by 80,000 to 300,000 tpa and sheeting capacity by 40,000 to 230,000 tpa.

M-real Corporation, part of Metsäliitto Group, plans to divest the entire Gohrsmühle mill in Germany or alternatively parts of the mill separately based on a Paper Park concept. In case the divestment would turn out to be unsuccessful M-real commences a process to discontinue the uncoated fine and the unprofitable parts of the speciality paper operations at Gohrsmühle mill. Should the closures materialize Gohrsmühle mill would only produce cast coated label and packaging products (Chromolux). M-real is also planning to discontinue its remaining carbonless paper converting operations at Reflex mill in Germany.

M-real has during recent years had several unsuccessful attempts with a number of candidates to divest the Alizay paper mill in France. M-real continues to search for possibilities to divest the mill. M-real invites credible candidates to a public process aiming at a divestment of the Alizay paper mill by the end of September 2011 at the latest. Should M-real fail to find a credible buyer for the mill within the given time frame, Alizay paper mill is planned to be closed.

If the measures are implemented as planned M-real’s annual sales is expected to reduce by about EUR 390 million and the operating result to increase by about EUR 60 million based on 2010 actual performances. Most of the annual financial impact is expected to be seen in 2012, full impact from 2013 onwards.

As a result from the planned measures M-real’s annual paper production capacity would reduce by about 500 000 tonnes of which about 430 000 tonnes would be uncoated fine paper and 70 000 tonnes coated specialty papers. None of these planned measures would be implemented without consulting the employee representatives in line with applicable legal requirements.

Both Gohrsmühle and Reflex mills have been heavily loss-making for a long time. If the divestment turns out to be unsuccessful M-real plans to continue the Chromolux-production at paper machine 2 and to discontinue all other production operations at Gohrsmühle. At the same time, Reflex carbonless paper converting is planned to be discontinued. If the closures would materialize the personnel reduction at Gohrsmühle and Reflex would be in total about 480 people. The planned measures have no impact on the previously announced plan to divest Reflex mill’s Premium Papers business. In total there are about 880 employees at Gohrsmühle and Reflex mills excluding the personnel included in the earlier announced Premium Papers divestment plan.

Also Alizay mill has been heavily loss-making for a long time. M-real has during last years implemented significant internal result improvement measures in Alizay, but as the operating environment has become more difficult the mill’s financial performance and outlook have remained very poor. Currently there are about 330 employees at Alizay mill.

”M-real has implemented extensive restructuring and development actions at Alizay and Gohrsmühle mills during recent years. Despite these actions M-real is not able to improve the mills’ profitability to satisfactory level due to the European overcapacity situation and the increased production costs. M-real has actively tried to divest Alizay and Gohrsmühle mills. In Alizay M-real will commence a public process lasting until the end of September 2011 to accelerate the divestment. M-real continues to try to find a buyer also for the entire Gohrsmühle mill or alternatively for the different parts of the mill. If the divestments of Alizay and Gohrsmühle are unsuccessful M-real considers to close Alizay mill and to discontinue the unprofitable businesses in Gohrsmühle. These planned measures are necessary to raise the company’s profitability to the target level,” says M-real’s CEO Mikko Helander.

Implementations of any measures are subject to the completion of statutory consultation processes with employees based on applicable local legislation. Also other future alternatives than closures will be investigated as part of the consultation processes. The consultations will be started at Gohrsmühle and Reflex as soon as possible. Concerning Alizay the information and consultation process relating to possible closure will be commenced in case the divestment process turns out unsuccessful. M-real will be proactive in the mitigation of the planned measures’ social impacts for the employees.

In total the planned measures are preliminarily expected to result in approximately EUR 170 million negative non-recurring result impacts. The estimated net cash costs are approximately EUR 50 million. Based on the planned measures Speciality Papers 2Q 2011 result is expected to include approximately EUR 20 million non-recurring impairments and cost provisions. Above estimates of the non-recurring financial impacts are preliminary and they will be further determined when the final decisions for the planned measures are taken.

”The planned measures are a major step in M-real’s transformation to a packaging board focused company. Despite the significant negative non-recurring result impact the planned measures are well justified from shareholder value point of view,” says Chairman of M-real’s Board of Directors Kari Jordan.

M-real Corporation, part of Metsäliitto Group, has signed a Memorandum of Understanding (MoU) regarding a divestment of the Premium Paper business to a sister company of Papierwerke Lenk AG. The divestment would include the complete Premium Paper business and related assets as well as about 100 M-real’s employees.

Premium Paper products are used in high quality graphical end-uses, such as letterhead, brochures, books, calendars and envelopes. M-real will continue the carbonless business at the Reflex mill.

If the transaction is consummated as planned M-real books a negative EUR 12 million non-recurring item in Speciality Papers business area. Cash impact would be approximately EUR 1 million negative. The planned divestment does not have a material impact on M-real’s operating result. The transaction is expected to be closed during the 2Q 2011.

“The planned divestment of the Premium Papers is a natural step in M-real’s strategy and a proof of M-real’s capability to divest its non-core paper business consistently. We are satisfied with the good solution in which the Premium Paper business will be transferred to the new owner who can focus to develop this segment successfully in the future,” says Mikko Helander, CEO of M-real.

In October 2010, M-real sold the paper machine 5 and some related assets at the Reflex site to Metsä Tissue.
Papierwerke Lenk AG is a German Black Forest based paper producer with sales of approximately 35.000 tonnes of specialty papers (www.lenk.de).