Major cost cutting resumes

Major restructuring news hit the wires this week. Nordea (OMXS: NDA, OMXH: NDA1V) started to prepare for tightening global banking regulations in advance and announced on Monday that it is initiating negotiations with unions on staff cost reductions. The action is a part of Nordea’s “new normal” plan that has been hinted at several times before. Nordea is aiming to reach 15% ROE and will announce additional measures towards that end.

The negotiations in four Nordic countries are anticipated to result in over 5% cut in total workforce as up to 2000 jobs are at risk. The cuts are relatively even between Denmark, Finland and Sweden at 500 to 650 and a couple hundred in Norway. Nordea also released economic outlook statement titled ominously as “signs of crisis”.

UPM-Kymmene (OMX: UPM1V) acted quickly and decisively after Myllykoski acquisitions and said today it plans to reduce 1.3 million tonnes of paper capacity in Europe (1.2 million tonnes of magazine paper in Finland, Germany and France plus 110 tonnes of newsprint capacity in Germany). This will be done through closure of Myllykoski mill in Kouvola, Finland, Albbruck mill in Germany and paper machine 3 at the Ettringen mill in Germany, meaning a near 1200 reduction in headcount.

Björn Wahlroos is the Chairman of the Board in Both UPM-Kymmene and Nordea. Union leaders are fuming in national media, even going as far as saying that personal assets should be frozen when leaders make such decisions, hinting at Wahlroos. Investors have welcomed the announcements. Nordea is up nicely for the week and the entire pulp & paper sector gained strongly today also aided by the fact that UPM’s estimate of the annual synergy benefits from Myllykoski & Rhein Papier GmbH deal was doubled to approximately 200 million Euro.