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. Last Updated: 07/27/2016

Papermaker Cuts Work Force by 11%

HELSINKI -- UPM-Kymmene, the world's third-largest papermaker, plans to close factories and cut 3,600 jobs, or 11 percent of its work force, to help bolster profit as prices falter. The stock rose the most in 2 1/2 years.

UPM may shut three Finnish mills and a pulp plant as it slashes production of magazine paper to save 200 million euros ($238 million) annually, the Helsinki-based company said Wednesday.

"They're being more aggressive than I had expected," said Carl-Fredrik Lorenius at Robur in Stockholm, which oversees $44 billion, including UPM stock. "It's clearly positive for the future pricing picture and for the sector."

European paper prices have yet to recover from a 20 percent drop in four years as a rebound in spending on adverts in newspapers and magazines fails to spur demand enough to match oversupply. Higher energy and chemical costs have also made it harder to halt a slide in profit, prompting Stora Enso, the No. 1 paper producer, to eliminate 2,000 jobs and 10 machines.

"This is what we all have been waiting for," said Henri Parkkinen an analyst at Opstock Securities in Helsinki with an "accumulate" rating on UPM shares. "The shutdowns are good for the company and good for the industry."

Shares of UPM rose as much as 1.15 euros, or 6.4 percent, the most since July 7, 2003, to 19.20 euros, the highest since July 11, 2002. They were priced at 19.09 euros at midday in Helsinki for a market value of 10 billion euros ($11.9 billion).