29 February 2008
Powerflute Oyj
Joint venture established to manage future wood procurement
Highlights:
• Joint venture company formed with Myllykoski Oyj to manage wood procurement
for both companies
• New entity will procure wood principally from Finland but also from the
Baltic Sea region
• New arrangement secures wood supply as Powerflute grows
• New arrangement will benefit from improved supply chain efficiencies
Powerflute Oyj, (the "Company" or “Powerflute”), which operates a paper mill in
Finland and manufactures high quality nordic semi-chem fluting, is pleased to
announce that it has agreed to establish a joint venture company with
Myllykoski Oyj (“Myllykoski“) to manage the parent companies' wood procurement
and secure supply as the businesses grow.
The new entity will manage wood procurement for Powerflute's Savon Sellu mill
and for Myllykoski's Finnish mills. The combined demand for fibre wood from
Powerflute and Myllykoski's Finnish mills will be approximately 2.5 million
cubic metres per year. The new joint venture will ensure continuity of supply
for both parent companies mills in Finland which in turn will benefit from
lower costs and higher efficiencies due to the synergies between the companies,
namely complementary grades of wood and similar geographies, and a lean
organisation.
The new entity will procure wood principally from Finland but will also import
wood. Subject to certain regulatory approvals, the parties expect the joint
venture to be up and running in the course of the summer of 2008. The joint
venture company will be responsible for supplying wood for Powerflute at the
beginning of 2010 when Powerflute's current supply agreement with Metsäliitto
Co-operative is due to end.
Powerflute and Myllykoski have proactively chosen to establish the joint
venture due to current changes in the forestry environment. Wood is a vital and
strategically important raw material for both companies and the new entity will
enable both companies to tighten control of their wood procurement arrangements
and to secure supply.
The CEO of Powerflute Don Coates said:
“In the current operating environment, wood procurement is a strategic issue
and we wanted to develop a viable concept together with Myllykoski. We are
confident that the establishment of this wood procurement organisation will
further improve the efficiency and cost saving measures which we have
implemented in Savon Sellu since 2005, as well as provide the opportunity for
strategic planning. Whilst the arrangement will increase Powerflute's need for
working capital, the project is estimated to have a positive impact on costs
once the joint venture is established.
“The continuity of supply which the new entity will provide will be central in
supporting our growth aspirations for Powerflute and we look forward to working
with Myllykoski as we bring a fresh player to the wood market.”
Myllykoski Oyj's President and CEO Sverre Norrgård says:
“A joint procurement venture is a natural and cost-effective alternative in the
Finnish forestry. The needs of Myllykoski and Powerflute for wood complement
each other. The Myllykoski mill uses fresh spruce wood as its raw material,
while the Sunila pulp mill uses pine pulpwood and sawmill chips. Powerflute's
Savon Sellu, on the other hand, uses birch wood as its sole wood raw material.
We also believe that a new reliable organisation brings a new dynamic to the
wood market which should be beneficial to forest owners and should encourage
domestic harvesting.”
Ends
For additional information please contact:
Don Coates, CEO, +358 400 132 441
Juha Koukka, CEO of Savon Sellu, +358 50 598 9567
Öhman (Certified Adviser of Powerflute)
Vesa Heikkila, +358 (9)8866 6021
Collins Stewart (Nominated Adviser of Powerflute), +44 (0)20 7523 8350
Nick Ellis
Philip Roe
Financial Dynamics (IR Agency of Poweflute)
Billy Clegg, +44 (0)20 7269 7157
Georgina Bonham, +44 (0)20 7269 7262
Background Information
About Powerflute
Powerflute is a holding company and, through its wholly-owned subsidiary Savon
Sellu Oy, operates a 300,000 tonne per annum rated capacity paper mill which is
also called “Savon Sellu”. The Mill is located near Kuopio, Finland on the
shores of Lake Kallavesi and manufactures a specialised high quality grade of
semi-chem fluting called nordic semi-chem fluting which is made primarily from
birch wood sourced from Finland and Russia. In accordance with its strategy,
the Company may in the future also acquire and manage complementary companies
or assets related to paper and packaging or other forestry derivatives.
The Group's key customers comprise corrugated board and packaging manufacturers
including International Paper Company and Smurfit Kappa Group. The majority of
the Group's sales are in Western Europe. For the financial period ended 31
December 2006 the Group's turnover was €98.3 million and the profit before tax
was €5.4 million. EBITDA for the financial periods ended 31 December 2005 and
2006 was €3.7 million and €12.4 million respectively. The Company has published
on 10 January 2008 a pre-close trading update according to which the EBITDA for
the financial period ended 31 December 2007 on ordinary activities will grow
approximately 60 per cent above the EBITDA achieved in the financial period
ended 2006. The Company's Certified Advisor on Firsth North is E.Öhman J:or
Fondkommission AB.
About Myllykoski
Myllykoski is a family owned international paper group with manufacturing in
Finland, Germany, Switzerland and the United States and sales offices around
the world. The Finnish roots of the parent company go back to 1892. The Group's
products consist of wood-containing uncoated and coated publication papers,
including newsprint. Customers include publishers, printers, and retailers
worldwide. Myllykoski is among the largest publication paper producers in the
world. Myllykoski operates nine paper mills with a total annual capacity of 3
million tons, including the alliance partner Rhein Papier GmbH of which
Plattling Papier is a part. The Group companies employ 3,000 people. Myllykoski
is known as a pioneer in using new technologies as well as recycled fibres for
paper production. All European mills are certified with the environmental
management System ISO 14000. Myllykoski's vision is to be the premier
publication paper brand recognized for
creativity and positive business solutions.
Joint Venture
| Source: Powerflute Oyj