UPDATE 1-Tembec shuts Louisiana paper mill, 540 jobs cut

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CALGARY, Alberta, June 1 (Reuters) - Tembec Inc. TBC.TO said on Friday it will shut its coated-paper mill in St. Francisville, Louisiana, at the end of July, cutting 540 jobs.

The Canadian paper maker said high costs and inconsistent production at the mill, and what it called "challenging market conditions in terms of both price and demand," provoked the closure.

The shutdown is the latest of a series of facility closures by Tembec over the past year. The company has been cutting capacity and looking to boost margins at its operations.

In a statement, Tembec chief executive James Lopez said the company had unsuccessfully attempted to boost the profitability of its only coated-paper mill last year by lowering costs and changing its product mix.

"Despite these changes this facility continues to be hampered by high energy costs, low machine productivity and difficult market conditions," the statement said.

Tembec said it is reviewing alternatives for the St. Francisville operation but offered no other details.

The mill has a capacity of 325,000 tons of coated and specialty papers used in catalogues, magazines and for cover stock.

Tembec shares were unchanged at C$1.18 on Friday on the Toronto Stock Exchange. The stock has dropped 22 percent over the past 12 months.

($1=$1.06 Canadian)

((Reporting by Scott Haggett, editing by Peter Galloway; scott.haggett@reuters.com; Reuters Messaging: scott.haggett.reuters.com@reuters.net; +1 403 531-1622)) Keywords: TEMBEC/CLOSURE

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