690 face the axe at Arjo Wiggins

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The Independent Online

Arjo Wiggins Appleton, one of Europe's biggest paper-making groups, yesterday announced 690 job cuts as it attempts to grapple with the torrid state of the paper market. The redundancies, amounting to 7 per cent of the group's European manufacturing workforce, form part of a previously announced programme to cut costs and capacity.

The cash costs will amount to around pounds 62m, the company said, higher than previous expectations, with the total impact on profits put at over pounds 100m. Analysts put the final cost at between pounds 120m and pounds 130m.

Arjo has seen its shares slide from a high of 288p in July on the deteriorating prospects for paper after widespread destocking by customers as soaring prices flattened last year, culminating in a profit warning in November. But the shares bounced back 3p to 185p yesterday as the latest news was welcomed by the stock market.

Francesca Raleigh of the brokers Panmure Gordon said news of the slightly higher-than-expected provisions "makes you feel they may at last be getting a bit of a grip". Management was doing the right sort of things, she said, but warned that there had been a number of false dawns in the past. "The main question is whether, if they are on the verge of a cyclical downturn, this may only be enough to hold profits."

Over half the job losses will be in Arjo's carbonless and thermal papers operations, which analysts believe may have lost up to pounds 10m last year and have been in decline for some years as the market has moved away from duplicated forms and faxes which use thermal paper. The UK will suffer worst from the job cuts, with 160 going in Lincoln and 80 in Cardiff. The Lincoln plant, involved in coating fax paper, is to be progressively closed over the next year or so, with capacity transferred to Cardiff.

A further 235 jobs are to go in France, where Arjo is getting out of unprofitable commodity papers through the closure of a factory, which will cut capacity by 10 per cent. In Belgium, Arjo is cutting 180 jobs, with another 15 going in Germany, where Weissenstein, a loss-making speciality papers division, is to be divested.

Cob Stenham, chairman, said the rationalisation programme, which is to be implemented progressively over the next 18 months, was expected to produce a "major improvement" in the business's profitability.

The Arjo announcement came on the eve of today's European Commission meeting, which is expected to clear the merger between big paper producers Kimberly-Clark and Scott Paper.