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SCA cuts to hit UK board and tissue sector

Massive cutbacks in operating units and personnel by Swedish paper giant SCA are to hit the UK hard. As yet it remains unclear which of SCA's UK operations will suffer with further details to emerge this autumn.

The company is a major buyer of used cardboard and other grades and mainly manufactures cardboard and tissue products. SCA has long had a link in the UK with Biffa Waste Services and also buys used cardboard from some of the UK's large retailers.

SCA has its UK head office in Aylesford, Kent but has operations across the UK including sites in Alfreton, Atherstone, Nottingham, Durham, Ellesmere Port, Cambridge, Edinburgh and Armagh. The company also has a half share in Aylesford Newsprint but the plant is not involved in today's announcement.

Major redundancies

The announcement of sweeping cost-cutting measures came from SCA chief executive Jan strm. A spokesman for the company said: “The UK is among those countries where we will have major redundancies. The efficiency enhancement programme will severely impact in Germany, the UK, Sweden, the Netherlands and Denmark.”


” Through the closure of several units, SCA's European tissue capacity will be reduced
by 100,000 tons “
– SCA statement on cost-cutting measures

SCA said that the measures would help it regain a favourable level of profitability. “Measures to be implemented include phasing out of 350,000 tons of testliner and 100,000 tons of tissue, corresponding to 17% and 7% of SCA's European capacity respectively.”

The statement added: “Technology-enhancing investments are being made to achieve improved product quality. It is assessed that SCA's market share within corrugated board and tissue products will not be affected. The program, which will affect all business areas and 3,600 employees, is expected to result in annual savings of SEK 1,550 M when fully completed.”

Explaining some of the reasoning behind the programme, the company said that the measures, which primarily affect the European packaging operations, must be seen in part against the background of the
prevailing surplus supply of containerboard and its negative effects on
pricing and profitability.

Converting

As a result, the group's testliner operations “will reduce production capacity by 350,000 tons. Within corrugated board, a number of converting units will be closed and volumes transferred to more competitive units. In addition, investments are carried out to increase capacity and quality, in order to retain market volumes attributable to the converting units that will be closed.

“The number of employees in the business area will be reduced by 2,000. The annual savings are expected to amount to SEK 860 million with full effect as of 2008.”

Retailers

Price pressure from retailers was given as one reason for the company's woe in the tissue sector. SCA said: “In the Hygiene Products business area, measures are focused on the European tissue operations, where excess capacity and increased purchasing pressure from the retail segment have a negative effect on profitability. Through the closure of several units, SCA's European tissue capacity will be reduced
by 100,000 tons, while investments will be made in a new machine with a
capacity of 60,000 tons, and at the same time investments are being made in modern converting lines that result in higher productivity and
improved product quality.”

Some work is to be transferred to Eastern Europe.

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