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Vapo Timber to start production cutbacks at all its sawmills

There is significant overcapacity in sawn timber production both in Finland and other countries in Europe, which has led to a collapse in profitability both in the domestic market and in exports. In spite of sawn timber sales prices falling by around 5% in the January-September period compared with the same period last year, inventory levels are rising.

Given this situation, Vapo Timber will begin production cutbacks on 7 November 2011 at the Kevätniemi (Lieksa) and Nurmes sawmills in North Karelia, which will go from two shifts to one. Vapo Timber will also shut down production completely at all its sawmills, i.e. Hankasalmi, Kevätniemi (Lieksa) and Nurmes from 23 until 31 December. Provision was made for these production cutbacks at cooperation negotiations held in June. The production cutbacks now decided will cut approximately one entire month of production, i.e. around 50,000 cubic metres, from Vapo Timber’s production this year. Hankasalmi sawmill will not move to one shift in November because the new sawing line commissioned in the summer is still being started up, meaning that production is not yet running at maximum capacity.

According to Juha Hakala, Managing Director of Vapo Timber Oy, the situation has deteriorated rapidly and there is no sign of any improvement in the near future. ”In the first nine months of last year we produced 4% less sawn timber than in the same period this year, but operating profit was almost 5 million euros. This time, on higher production, the operating loss was over 4 million euros. Construction of single family homes in Finland has dropped by a third and in exports demand has suffered from the general economic crisis in Europe and the instability in the Middle East and northern Africa, which are important export destinations for Vapo.”

In addition to the production cutbacks being introduced now, Vapo Timber is launching cooperation negotiations affecting all employee groups, in preparation for possible lay-offs and production cutbacks at all sawmills continuing into the first half of next year. According to Hakala, the entire sector is suffering from profitability problems, and for there to be any improvement sawn timber prices need to increase and also the price of raw timber needs to come down.

For further information please contact:
Juha Hakala, Managing Director, Vapo Timber Oy, tel. +358 20 790 5510
Ahti Martikainen, Director, Communications and Public Affairs, Vapo Oy, tel. +358 20 790 5608