UPM Raflatac is planning to reduce labelstock production capacity in Europe, South-Africa and Australia to secure cost competitiveness and profitability in low-growth markets. The planned actions are estimated to result in annual cost savings of about EUR 12 million starting from the beginning of 2014.

According to the plan, the labelstock factory in Martigny, Switzerland, the coating operations in Melbourne, Australia and Durban, South Africa as well as the slitting and distribution terminal in Johannesburg would be closed. In addition, working time and shift changes and reductions are planned in France, Spain and the UK. The product range, service and deliveries offered to customers will not be impacted by these plans.

If all plans will be implemented, the estimated total impact would be maximum 170 positions in the affected countries. Decisions will be taken after consultation and negotiations with the employees in the relevant countries. Most of the restructuring is estimated to be complete by the end of 2013.

“The economy in Western Europe has been weak for a long time and we don’t expect the situation to improve in foreseeable future. Simultaneously, the demands of our customers for cost-efficient labeling solutions continue to increase all over the world. In order to secure our customers’ and our own profitability in the long run, we need to ensure that our manufacturing operations continue to be the most cost competitive in the industry. Unfortunately the planned restructuring would also mean that we will lose a significant number of dedicated employees,” says Jussi Vanhanen, president of UPM Engineered Materials.

“We will continue investing in growing markets in line with our strategy. In the past couple of years, we have strongly enhanced our service and operations network in Asia, Latin America and Eastern Europe. Capacity adjustments are taking place in areas, where the demand situation is not in line with our production capacity,” Vanhanen adds.

In Q3/2013 UPM will book a EUR 3 million write-off in fixed assets and make a provision for restructuring costs for EUR 11 million. The actions are not expected to impact the sales of the Label Business Area.