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UPM to reduce labelstock production capacity in Europe, South Africa and Australia

Global pressure sensitive label materials supplier UPM Raflatac has announced plans to reduce labelstock production capacity in Europe, South Africa and Australia in a bid to secure profitability in low-growth markets.

According to the company, its decision is expected to result in annual cost savings of about €12m from the beginning of 2014.

The company’s 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 shut-down as per the plans.

UPM Engineered Materials president Jussi Vanhanen said the company needs to ensure that its manufacturing operations continue to be cost competitive in the industry, to secure its customers as well as its own profitability in the long run.

"We will continue investing in growing markets in line with our strategy," Vanhanen said.

The company improved its service and operations network in Asia, Latin America and Eastern Europe in the past couple of years. It is also making capacity adjustments in areas where the demand situation is not in line with its production capacity.

UPM, which plans to complete most of the restructuring by the end of 2013, will book a €3m write-off in fixed assets in third quarter of 2013 and make a provision for restructuring costs for €11m.

The sales of the company’s Label Business Area will not have any impact with these actions.