releases
Eastern European Markets
NEWS RELEASE
December 28, 2006

Karelia-Upofloor Ltd acquires OOO Focus Wood to launch parquet flooring production in Russia

INVESTMENTS WILL TOTAL 45 TO 50 MILLION EUROS

Karelia-Upofloor has acquired the entire share capital of the Russian company OOO Focus Wood from Puncher Investment Limited. Focus Wood owns a new, almost completed parquet flooring facility in Maloyaroslavets, a town located in Kaluga Oblast some 150 km southwest of Moscow.

Focus Woods is set to launch production of high-quality three-strip parquet flooring in the third quarter of 2007. This will require the completion of the construction of the facility and the installation and commissioning of the parquet factory production machinery and equipment. The machinery and equipment represent the latest in parquet production technologies, and most have already been ordered. Installation work will begin in February 2007. The aim is to reach an annual parquet production capacity of 2.5 million square metres by 2008. Investments will total ¤45–50 million in 2006 to 2008.

Heikki Kokki (47) has been appointed General Director of OOO Focus Wood, Andrei Afonin (46) as Executive Director, and Ilkka Tolonen (39) as Plant Director. By the end of 2007 the number of employees in the company is anticipated to total 200 to 300 persons, with recruitment focusing on Kaluga Oblast.

Russian construction is increasing at an annual rate of 20 to 25 per cent, and growth is expected to remain strong into the coming years. Russia has a long tradition in wood and parquet flooring, and demand is growing considerably every year due to new construction and renovation. The Karelia and Upofloor brands have built a very strong market position in Russia, which is one of the company's most important market areas.

With the investment in the production facility and the related sales organisation Karelia-Upofloor aims to strengthen its position as the market leader in Russia and its neighbouring areas and retain its position as one of the leading manufacturers of parquet and wood flooring in the world. At the same time the establishment of the company’s acquisition organisation in Russia will help secure access to high-quality timber used as raw material by the company’s factories in Finland.

In December 2006 Karelia Corporation launched the start-up of a parquet flooring factory and sawmill in Satulung, Romania. Romanian investments are estimated to reach ¤12–15 million over 2007 and 2008. Annual production capacity is anticipated to reach one million square metres and the number of employees 200 by the end of 2007.

Karelia Corporation
(renamed Karelia-Upofloor Oy on 31 December 2006)

Further information:
Managing Director Markku Rönkkö, phone: +358 50 65851,
e-mail: markku.ronkko@kareliacorporation.com

www.kareliacorporation.com


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