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Holmen to Cut 180 Jobs and Output on Weak Demand, Strong Krona

March 19 (Bloomberg) -- Holmen AB, which delivers the pink paper to the Financial Times, said it will stop making newsprint at a paper machine at its Braaviken, Sweden mill and cut 180 jobs, citing falling demand and the strong krona.

Newsprint production will be cut by an annual 200,000 metric tons as the machine is shut down during the third quarter, Stockholm-based Holmen said today in a statement. The company will book an impairment loss of 100 million kronor ($16 million) in the first quarter and a restructuring-cost provision of 40 million kronor, it said.

Demand for newsprint is falling as newspaper and magazines increasingly move online and computers, smartphones and tablets become readers’ main sources of information. Profitability at Holmen also faces a second headwind as 85 percent of its output is exported, almost all of it to Europe, where the euro area is mired by recession. The krona has appreciated about 5 percent against the euro since Dec. 14 and 9 percent since mid May.

“We’re forced to shut down parts of our newsprint production,” Henrik Sjolund, head of Holmen Paper, said in the statement. “It’s extremely regrettable that it has to affect so many of our employees.”

The strong krona is putting pressure on companies with production mainly based in Sweden, Holmen’s Chief Executive Officer Magnus Hall said in the annual report, published yesterday. It requires initiatives with “deeper impact” in terms of cost savings and efficiency-improving measures to retain competitiveness, he said.

Real Tools

Swedish companies must become even better at rationalizing and developing products to keep market share, Minister for Financial Markets Peter Norman said in an interview March 15. Companies need to understand they have to compete with real tools rather than the “imaginary tool” that the exchange rate is, he said.

Today’s job cuts follow a September program, when Holmen said it would cut 100 jobs at its Iggesund paperboard mill, citing cost pressure. In October, Holmen announced about 230 employees would be made redundant as one paper machine at the Hallsta mill was mothballed due to overcapacity.

To counter falling demand for newsprint, Holmen is focusing on related paper products, such as for catalogs. They can be produced on the same machines and compete with other grades on lower purchase and mailing costs due to fewer production chemicals and lighter weight.

To contact the reporter on this story: Janina Pfalzer in Stockholm at jpfalzer@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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