20th Feb 2006 10:44
Smith (DS) PLC20 February 2006 20 February 2006 DS Smith Proposes Closure of its Sudbrook Paper Mill As indicated at the Interim Results in December, a number of the Group'soperations are under close scrutiny as a result of the difficult tradingenvironment and high energy costs. DS Smith's UK Paper division, St Regis, hastoday announced the proposed closure of its Sudbrook Mill in Monmouthshire,which produces approximately 150,000 tonnes per annum of semi-chemical flutingpaper, a speciality form of corrugated case material (CCM). It is proposed thatthe closure will be implemented by the end of May 2006. Sudbrook Mill is the most energy-intensive production operation within the Groupand its annual energy costs have approximately doubled over the last threeyears. St Regis has been unable to pass this increase on to its customers andthe mill is now making annualised operating losses of approximately £3 million.The decision to propose the closure of the mill has also been made in thecontext of demand for the mill's speciality product continuing to fall ascustomers switch to alternative lower-cost types of paper. Consultations have commenced with the mill's 135 employees and theirrepresentatives, with a view to reducing and mitigating the effects of theproposed closure. If the closure is confirmed following the consultation, everyeffort will be made to assist employees in finding alternative positions withinthe Group or with other employers in the area. It is estimated that the proposed closure will result in an exceptional chargeto the profit and loss account in the financial year 2005/06 of the order of £22million; approximately one third will arise from redundancy costs and other cashcosts, and the remainder will be the write down of assets. It is anticipatedthat the cash outflow, which will occur in the financial year 2006/07, will belargely offset by asset sales and the realisation of working capital. The proposed closure of Sudbrook Mill is an important step towards raising thereturns of the Group's UK Paper and Corrugated Packaging operations. Followingthe proposed closure of Sudbrook Mill, St Regis' principal mill at Kemsley willrepresent approximately 60% of the division's output of over 900,000 tonnes perannum; Kemsley Mill is ranked in the top quartile of European CCM mills in termsof cost competitiveness. Enquiries DS Smith Plc 020 7932 5000Peter Aubusson, Group Communications Manager Financial Dynamics 020 7269 7291Richard Mountain/Susanne Walker NOTES TO EDITORS St Regis Paper Company DS Smith's UK Paper division, St Regis, currently has six mills and is theleading UK producer of recycled paper. 75% of its output is used in theconstruction of corrugated boxes and trays. The semi-chemical fluting producedat Sudbrook Mill is a speciality corrugated packaging paper; its raw material isa mixture of fibre obtained from recycled paper and wood pulp. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Smith (DS)