POWR.L Regulatory News (POWR)

29 Feb 2008 07:02

Powerflute Oyj29 February 2008 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 inFinland and manufactures high quality nordic semi-chem fluting, is pleased toannounce that it has agreed to establish a joint venture company with MyllykoskiOyj ("Myllykoski") to manage the parent companies' wood procurement and securesupply as the businesses grow. The new entity will manage wood procurement for Powerflute's Savon Sellu milland for Myllykoski's Finnish mills. The combined demand for fibre wood fromPowerflute and Myllykoski's Finnish mills will be approximately 2.5 millioncubic metres per year. The new joint venture will ensure continuity of supplyfor both parent companies mills in Finland which in turn will benefit from lowercosts and higher efficiencies due to the synergies between the companies, namelycomplementary grades of wood and similar geographies, and a lean organisation. The new entity will procure wood principally from Finland but will also importwood. Subject to certain regulatory approvals, the parties expect the jointventure to be up and running in the course of the summer of 2008. The jointventure company will be responsible for supplying wood for Powerflute at thebeginning of 2010 when Powerflute's current supply agreement with MetsaliittoCo-operative is due to end. Powerflute and Myllykoski have proactively chosen to establish the joint venturedue to current changes in the forestry environment. Wood is a vital andstrategically important raw material for both companies and the new entity willenable both companies to tighten control of their wood procurement arrangementsand to secure supply. The CEO of Powerflute Don Coates said: "In the current operating environment, wood procurement is a strategic issue andwe wanted to develop a viable concept together with Myllykoski. We are confidentthat the establishment of this wood procurement organisation will furtherimprove the efficiency and cost saving measures which we have implemented inSavon Sellu since 2005, as well as provide the opportunity for strategicplanning. Whilst the arrangement will increase Powerflute's need for workingcapital, the project is estimated to have a positive impact on costs once thejoint venture is established. "The continuity of supply which the new entity will provide will be central insupporting our growth aspirations for Powerflute and we look forward to workingwith Myllykoski as we bring a fresh player to the wood market." Myllykoski Oyj's President and CEO Sverre Norrgard says: "A joint procurement venture is a natural and cost-effective alternative in theFinnish forestry. The needs of Myllykoski and Powerflute for wood complementeach other. The Myllykoski mill uses fresh spruce wood as its raw material,while the Sunila pulp mill uses pine pulpwood and sawmill chips. Powerflute'sSavon 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 thewood market which should be beneficial to forest owners and should encouragedomestic harvesting." Ends For additional information please contact: Don Coates, CEO +358 400 132 441 Juha Koukka, CEO of Savon Sellu +358 50 598 9567 Ohman (Certified Adviser of Powerflute) +358 (9)8866 6021 Vesa Heikkila Collins Stewart (Nominated Adviser of +44 (0)20 7523 8350 Powerflute) 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 SavonSellu Oy, operates a 300,000 tonne per annum rated capacity paper mill which isalso called "Savon Sellu". The Mill is located near Kuopio, Finland on theshores of Lake Kallavesi and manufactures a specialised high quality grade ofsemi-chem fluting called nordic semi-chem fluting which is made primarily frombirch wood sourced from Finland and Russia. In accordance with its strategy, theCompany may in the future also acquire and manage complementary companies orassets related to paper and packaging or other forestry derivatives. The Group's key customers comprise corrugated board and packaging manufacturersincluding International Paper Company and Smurfit Kappa Group. The majority ofthe Group's sales are in Western Europe. For the financial period ended 31December 2006 the Group's turnover was €98.3 million and the profit before taxwas €5.4 million. EBITDA for the financial periods ended 31 December 2005 and2006 was €3.7 million and €12.4 million respectively. The Company has publishedon 10 January 2008 a pre-close trading update according to which the EBITDA forthe financial period ended 31 December 2007 on ordinary activities will growapproximately 60 per cent above the EBITDA achieved in the financial periodended 2006. The Company's Certified Advisor on Firsth North is E.Ohman J:orFondkommission AB. About Myllykoski Myllykoski is a family owned international paper group with manufacturing inFinland, Germany, Switzerland and the United States and sales offices around theworld. The Finnish roots of the parent company go back to 1892. The Group'sproducts consist of wood-containing uncoated and coated publication papers,including newsprint. Customers include publishers, printers, and retailersworldwide. Myllykoski is among the largest publication paper producers in theworld. Myllykoski operates nine paper mills with a total annual capacity of 3million tons, including the alliance partner Rhein Papier GmbH of whichPlattling Papier is a part. The Group companies employ 3,000 people. Myllykoskiis known as a pioneer in using new technologies as well as recycled fibres forpaper production. All European mills are certified with the environmentalmanagement System ISO 14000. Myllykoski's vision is to be the premierpublication paper brand recognized forcreativity and positive business solutions. This information is provided by RNS The company news service from the London Stock Exchange