SWEDISH PAPER, packaging and personal care group SCA has agreed to sell its Irish and UK corrugated packaging businesses to a Spanish paper and packaging company for €125 million.

The sale will include the SCA plant in Warrenpoint, Co Down, which employs approximately 160 people, and its Dublin plant, which employs about 33 people. The sale will not affect a smaller plant in Co Cork, which is involved in value-added activity, the company said.

The Irish and UK businesses are being bought by Saica, a privately owned Spanish business. SCA is a publicly quoted Swedish company with annual sales of €11.4 billion in 2007.

The businesses being sold to Saica had annual sales of approximately €300 million. “After the divestiture, SCA will focus on specialised packaging in its operations in the UK and Ireland,” the company said.

“The European packaging market is in great need of consolidation,” said Jan Johansson, president and chief executive of SCA.

“SCA’s focus is on increasing value-added parts of the packaging business and also on creating growth in the eastern part of Europe, while consolidating our existing operations in western Europe. We carry through today’s deal as the investment required to rebuild a competitive position in the segments we divest is not justified, given our chosen strategy.”

The company also yesterday announced it was closing a containerboard mill in New Hythe, in Kent, because its new focus did not require local paper production.

“SCA will retain ownership of and continue to develop the specialised value-added packaging operations in the UK and Ireland. They show good profitability and strengthen the SCA overriding strategy, focusing on higher value added,” Mr Johansson said.

“These operations have a turnover of approximately €163 million with about 1,400 people employed.”

Saica has a turnover of approximately €1.6 billion and operates paper mills and corrugated facilities in a number of European countries, including the UK.

In a note issued earlier yesterday, NCB said it was maintaining its “hold” rating for SCA peer Smurfit Kappa because of ongoing cost pressures in the sector. It noted profit warnings issued by Stora-Enso and UPM-Kymmene and said these highlighted the “severe cost pressures” being faced in the paper industry generally.

It also noted pressure from US competitors, who had a currency advantage.