Curtis 1000 Europe AG

July/29/2008

- Insolvency filing unavoidable because of increasing energy and raw material prices

- Negotiations with possible new investors and energy supplier failed

- Core business of Curtis Group is not affected by insolvency

- Focus on profitable core business and divesture from energy-intensive paper production

- Curtis Group has no connections with insolvent paper mill Curtis Fine Papers based in St. Andrews (Scotland)

High energy costs prevent future of Papierfabrik Hermes  

Düsseldorf / Neuwied, 29 July 2008 – Papierfabrik Hermes GmbH & Cie. KG Düsseldorf, a producer of recycled paper and fully owned subsidiary of Curtis 1000 Europe AG filed for insolvency at the district court of Düsseldorf today. Mainly external factors, such as price increases for energy and raw materials and the low dollar exchange rate combined with decreasing sales prices stressed Hermes’ sales and profits in the last year. Parent company Curtis 1000 Europe AG subsequently completed a successful repositioning and considered a sale of the paper mill in the course of focusing on the core business. Papierfabrik Hermes is based in Düsseldorf since 1911 and is producing premium print and copy paper from waste paper with 100 employees.

With drastic energy price increases, Hermes remained under pressure after the successful repositioning in the last months. Curtis Group thus forced intensive and promising negotiations with a possible new investor over the sale of Papierfabrik Hermes. Discussions between the investor and the local energy supplier, with the aim to agree on calculable energy prices, unfortunately failed definitely this Monday. An economic continuation of the paper mill was not possible because of the considerable higher price demand of the energy supplier. This, even though the investor agreed on a modest price increase of the already extremely high energy prices.

Rising energy prices since many years are the reason for the financial difficulties of the well-established paper mill in Düsseldorf. Energy costs have doubled since 2004 and exceed wages by far. Insolvency cannot be avoided despite substantial restructuring, a strategic realignment of the production program and energy-saving measures. The production already discontinued. Continuation of business through the liquidator will only be possible when the energy supplier is willing to negotiate further.

“We did everything in the last weeks and days to find a solution for the company and conducted negotiations with new investors”, said Carsten Lemke, CEO of Papierfabrik Hermes GmbH & Cie. KG. “Lack of willingness of our energy supplier, to supply a well-established paper mill in Düsseldorf with energy for calculable and stable prices, discouraged potential new owners. This insolvency presents a clear cut. There is well-grounded hope that the liquidator can save jobs at Hermes”, Lemke said. 

“Curtis 1000 Europe AG bought Hermes five years ago from RWE Umwelt and trimmed the well-established paper mill for the future. Our aim was to lead the company to a safe future together with the management of Hermes. At the end, the company could not stem against the horrendous energy prices nor did it have sufficient access to debt capital”, Ingo Hafner, CEO of Curtis 1000 Europe AG said. “Despite proceedings, only insolvency remained as solution for Hermes. We had to go this way to avoid negative effects for the whole Curtis Group and its core business”, said Hafner. 

The insolvency filing is unavoidable and responsible, because it ensures financial stability and competitiveness of the whole Curtis Group. The core business of the Curtis Group is still profitable and is strengthened by this decision. Therefore, Curtis Group plans a complete divesture from the energy-intensive paper production.  

The insolvency of Papierfabrik Hermes GmbH & Cie. KG will burden Curtis 1000 Europe AG’s consolidated financial statements in 2008 with a sum of EUR 18.5 million. Through this, the positive outcome effect from the first consolidation of Papierfabrik Hermes GmbH & Cie. KG in 2003 is neutralized. Curtis 1000 Europe AG’s individual financial statement in 2008 may be burdened with approx. EUR 4.7 million. The outcome effect for the individual financial statement of Curtis 1000 Europe AG does not lead to a loss of half the capital stock. 

On 24 July 2008, Curtis Fine Papers based in St. Andrews (Scotland), another long-established paper mill, filed for insolvency. Curtis Fine Papers is not member of the German Curtis Group and does not share any connection with Curtis Group. 

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