SALES & EARNINGS

 

Westvaco, Longview post 2Q results

Westvaco Corp. reported a 21% decline in earnings for the fiscal quarter ended Apr. 30. Second-quarter earnings totaled $27.3 million compared with net income of $34.6 million in 1998. Sales in the quarter were $679.5 million, a decline of 6.2% from $724.2 million in 1998 due to a decline in average selling prices and product mix.

The company continues to refine its capital spending plans and strive for additional cost reductions. Current estimates for 1999 capital spending are about $250 million. Westvaco is well ahead of schedule to meet its cost reduction goal of $100 million, with savings of $70 million already accomplished by the end of the second quarter.

Longview. Longview Fibre Co., based in Longview, Wash., reported net income of $5.2 million for the second quarter ended Apr. 30 compared with a net loss of $4.6 million a year ago. For the six-month year-to-date period, the company had earnings of $4 million versus a net loss of $11.7 million in 1998. Net sales were $350 million for the six months compared with $362 million in 1998.

Operating losses for kraft paper and linerboard decreased to $2.7 million from $6.1 million in the second quarter of 1998. Sales of paper and paperboard increased 33% from a year ago due to increased orders from Asia, but average selling prices declined 7% and 16%, respectively, for paper and paperboard. The corrugated and kraft paper converting plants reduced operating losses to $3.4 million from $13 million in 1998.

All of the company’s operating profits were delivered by the timber harvesting and sawmill operations. Earnings from the timber operations were $22.6 million compared with $21.2 million a year ago. Average log prices were up 1% and lumber prices were up 4%. In an effort to curb costs, capital expenditures are expected to be about $30 million in fiscal 1999, down from $73 million in fiscal 1998.

 

SALES & EARNINGS First-quarter Canadian earnings up 36% Canadian pulp, paper, and forestry companies reported mixed earnings results for the first quarter of 1999. A survey of 21 companies showed total net earnings of C$98 million before special items, representing a 36% gain from C$72 million a year ago. Net sales increased 10.5% to C$7.6 billion from C$6.9 billion. Producers of pulp, newsprint, and containerboard generally had lower earnings or losses, reflecting weak pricing during the first three months of the year. The benefits of recent price increases for market pulp and kraft linerboard won't be seen until the end of the second quarter, analysts say. Weak industry pricing also hurt printing and publication paper producers. Strong demand for lumber and solid wood products, including a recovery in Japanese imports, and cost-cutting efforts bolstered profits for many companies.
CANADIAN PAPER & FOREST PRODUCTS SALES & EARNINGS 1Q 1999 (C$000 )
Company	1Q sales 1999	% change 1999/98	1Q Earnings 1999	% change 1998	1999/98
Abitibi*	C$967,000	3.0	C$9,000	C$52,000	-82.7
Alliance	259,000	-4.1	2,700	6,500	-58.5
Canfor*	421,800	14.6	13,500	(15,400)	n.m.
Cascades*	624,000	0.8	4,000	14,000	-71.4
Doman	195,400	-3.2	(29,600)	(12,200)	n.m.
Domtar	699,000	41.8	15,000	17,000	-11.8
Donohue	585,700	31.0	50,025	46,948	6.6
FCC*	269,500	n.m.	2,900	(23,100)	n.m.
Harmac*	56,200	9.3	(4,800)	(5,500)	n.m.
MB*	1,014,000	2.4	33,000	9,000	266.7
Millar Western	48,100	3.4	(3,500)	(7,200)	n.m.
Nexfor	575,000	0.7	8,000	0	n.m.
Norampac	200,271	-7.1	(5,373)	(3,911)	n.m.
Paperboard	195,894	-1.7	(4,942)	3,429	n.m.
Perkins	69,446	24.0	5,329	5,058	5.4
Repap	162,700	-0.4	(800)	(7,300)	n.m.
Rolland	168,407	0.1	1,622	6,129	-73.5
Slocan	251,600	13.2	12,700	(15,400)	n.m.
Tembec	361,500	7.4	(21,000)	7,400	n.m.
Uniforet	64,332	-10.6	(3,963)	(6,544)	n.m.
West Fraser	443,900	9.4	14,200	1,100	1,190.9
Totals	C$7,632,750	10.5%	C$97,998	C$72,009	36.1%
Note: Earnings represent net income after taxes from continuing operations, before nonrecurring and extraordinary items. *Before or after extraordinary item.

 

TISSUE

 

Oconto Falls adding second tissue PM

PCDI Oconto Falls Tissue LLC is installing a second Voith Sulzer Crescent former at its mill in Oconto Falls, Wis. The company’s first paper machine began production at the former Kimberly-Clark Corp. deinked pulp mill in July 1998.

The new PM will trim at 108 in. with a design speed of 5,000 ft/min and design capacity of 82 tpd. The PM will be able to make super crepe tissue grades. Project cost is $26 million with start-up scheduled for October 1999. The new Voith Sulzer PM replaces the company’s earlier plans to install a smaller 10,000 tpy PM to produce super crepe grades.

Fiber for the new PM will be partially supplied from the former EcoFibre Inc. market deinked pulp (DIP) mill in DePere, Wis. Oconto Falls Tissue purchased the mill from Riverside Paper Corp. in December 1998. Approximately 60 tpd of bleached DIP will be used at Oconto Falls and the tissue mill may also use some virgin market pulp. The remaining fiber will be used at the Re-Box Paper Inc. mill to be built in DePere.

 

Perkins proceeds with new tissue PM

Perkins Papers Ltd. is proceeding with its previously announced plan to install a new tissue machine at its mill in Rockingham, N.C. The new Voith Sulzer machine will have an annual capacity of 30,000 tons of bathroom tissue, paper towels, and other specialty products, and will allow Perkins to better serve the growing market for jumbo rolls. Final approval for this project is conditional upon obtaining financial assistance from local government authorities.

The total cost, which includes modifications to the deinking equipment and the addition of a warehouse, is estimated at $25 million. The expansion will create 25 direct and indirect jobs in addition to the 100 existing jobs at the Rockingham plant. Construction and installation of the new machine is expected to be completed during first half 2000.

 

Edwards Paper plans third tissue mill

Edwards Paper Co. Inc. is exploring options to build a third tissue mill in the upper Midwest. Areas being mentioned are Detroit, Mich.; Pittsburgh, Penn.; Cleveland and Toledo, Ohio; and northern Indiana. The company is currently building its second recycled fiber-based tissue mill in Tucson, Ariz., with start-up of the 15,000 tpy mill scheduled for February 2000. The company’s first mill began production in Miami, Fla., in January 1998.

 

SPECIALTY PAPERS

 

Upgrade planned at Rhinelander mill

Wausau-Mosinee Paper Corp. approved $45 million in capital improvements at the company’s specialty paper mill in Rhinelander, Wis. The capital improvement project will focus on upgrading the mill’s production process for pressure-sensitive release liners to improve operating efficiencies, while at the same time improving the company’s product mix. The capital improvements are expected to be fully implemented by third-quarter 2000. The project is not expected to raise production levels.

The Rhinelander mill has capacity of 165,000 tpy of production on four paper machines. Unlike commodity paper mills, Rhinelander serves a number of specialty markets, mostly label release liners as well as food packaging converting papers and medical packaging grades.

 

CONTAINERBOARD

 

St. Laurent to make white-top linerboard

St. Laurent Paperboard Inc. plans to spend C$37 million at the La Tuque, Que., mill on producing lightly coated white-top linerboard and renovating the mill’s sawdust and wood residue screening system. Coating preparation and application, soft-nip calendering, and drying equipment will be installed over the next several months on the No. 3 machine. The company announced plans for the project in early 1999.

The company plans to begin commercial production of coated white-top linerboard in first-quarter 2000, with the goal of eventually making 50,000 mtpy. The project will not add any capacity to the 331,000 mtpy No. 3 machine.

 

CAPACITY

 

Uncoated free-sheet capacity slows

Approximately 2.8 million metric tons of uncoated free-sheet capacity is scheduled to begin production worldwide from 1999 through 2001, according to a review by Pulp & Paper Project Report. This follows the startup of approximately one million metric tons of new capacity, including six new paper machines, in 1998. The Project Report review summarized known capacity changes worldwide from 1998 forward, including the installation of 17 new paper machines.

In North America, the start of Willamette Industries Inc.’s new 300,000 tpy No. 2 machine in May 1998 will be responsible for the bulk of capacity growth in the U.S. through 2001. The American Forest & Paper Assn. (AF&PA) forecasts uncoated free-sheet growth of only 330,000 tons for the period 1999 to 2001 for a growth rate of only 0.7%.

Asia will continue to be responsible for the lion’s share of capacity growth through 2001, with over 1.9 million metric tons of capacity scheduled to begin production in the period 1999 through 2001, primarily as the result of eight new paper machines in the region.

With the recent financing of the new 400,000 mtpy machine by Soporcel in Portugal, uncoated free-sheet growth in Europe will total an estimated 880,000 mtpy in 1999 through 2001.

 

CAPACITY Canadian Pulp and Paper Annual Capacity, 1998-2001 (000 metric tons)
					Tonnage Change
	>1998	1999	2000	2001	1998-2001
Total Paper & Board	21,207	21,485	22,025	22,197	990
% Change	4.0	1.3	2.5	0.8
Newsprint	9,902	9,874	9,931	9,767	Ð135
Printing & writing papers 1	5,768	5,958	6,336	6,589	821
Other papers 2	1,265	1,300	1,319	1,322	57
Containerboard	3,150	3,204	3,230	3,255	105
Boxboard	1,122	1,149	1,209	1,264	142
Total Market Pulp	11,537	11,233	11,164	11,155	Ð382
% Change	0.5	Ð2.6	Ð0.6	Ð0.1
Blchd softwood kraft	7,652	7,412	7,350	7,343	Ð309
Blchd hardwood kraft	1,821	1,840	1,839	1,834	13
Other chemical grades	99	54	55	55	Ð44
TMP & CTMP	1,965	1,927	1,920	1,923	Ð42
Total Industry	32,744	32,718	33,189	33,352	608
% Annual Change	2.7	Ð0.1	1.4	0.5
1. Includes coated and uncoated groundwood and free-sheet papers. 2. Includes kraft, sanitary and specialty papers. Source: Canadian Pulp and Paper Assn.>

 

RECYCLED PAPERBOARD

 

Joint venture to convert board PM

Caraustar Industries Inc. and Temple-Inland Inc. have agreed to form a new company, Premier Boxboard Limited LLC, to own and operate Temple-Inland’s recycled containerboard mill located in Newport, Ind.

A 14-month, $70 million project to modify the mill to produce gypsum wallboard facing paper has begun. The mill’s single paper machine will be rebuilt, adding multi-ply capabilities and boosting capacity from 280,000 tpy to 300,000 tpy. However, the capacity will be primarily for gypsum facing paper (250,000 tpy), with capacity targeted for corrugating medium and linerboard reduced to only 50,000 tpy, a drop of 230,000 tpy. Project completion is slated for July 2000. Inland will continue to market containerboard produced at Newport, while Caraustar will manage the new operating company and market production of gypsum paperboard.

 

>PULP

 

Boise’s planned pulp increase advances

Boise Cascades Corp.’s long-delayed pulp mill improvement project at International Falls, Minn., cleared a hurdle recently when the state Pollution Control Agency’s citizen board approved a permit for the company to upgrade the No. 2 steam boiler. The approval is subject to a 30-day open comment period.

Boise announced in 1996 that it planned to increase hardwood pulp production from about 950 tpd to 1,140 tpd, in order to reduce its dependence on market pulp and to improve the energy efficiency of the mill by increasing its cogeneration capacity. The pulp capacity increase would not result in additional papermaking capacity.

 

P&G’s Mehoopany mill down for good

Procter & Gamble Co.’s (P&G) hardwood calcium-base sulfite mill in Mehoopany, Pa., was closed permanently on May 3, and a contractor will dismantle and sell it. The 100,000 tpy mill provided about 30% of P&G’s internal needs at the tissue and towel mill. When P&G announced the planned closure in March 1998, it said the mill no longer fit its long-term strategy because the fiber no longer matched its future needs and the mill no longer had a fiber cost advantage. The company said the Environmental Protection Agency’s Cluster Rules had no impact on the decision to close the mill. Mehoopany was P&G’s last pulp mill.

 

Skeena gets funding to restart pulp mill

Skeena Cellulose Inc. of Vancouver, B.C., has received provincial authorization to proceed with a C$110 million capital expenditure program in connection with the company’s restructuring early last year. The funding will modernize the pulp mill in Prince Rupert, B.C., upgrade equipment, and help meet environmental regulations.

The government is also guaranteeing a C$200 million increase in Skeena’s operating line of credit aimed at restarting the 420,000 mtpy pulp mill’s B line. Skeena has not had the working capital to supply or operate the 120,000 mtpy line, which shut for market reasons in April 1998. The B line could start up again by September or October, though no firm decision has yet been made.

A company executive said the C$110 million authorized would be used to rebuild the mill’s two recovery boilers, replace the chlorine dioxide generator, and install oxygen delignification equipment for improved environmental performance. The news will mean 500 more jobs at the pulp mills, sawmills, and woodlands operations.

 

TRANSPORTATION

 

Mills set for Jun. 1 Conrail carve-up

With the horrors of Union Pacific Corp.’s 1997 integration of Southern Pacific Rail Corp. still fresh in shippers’ minds, all eyes are on the carve-up of Conrail Inc. by Norfolk Southern Corp. (NS) and CSX Corp., which took effect June 1.

Since acquiring the assets of Conrail for $10 billion in 1997, the two companies reportedly have spent more than $1 billion and countless hours to ensure against a repeat performance of the Union Pacific-Southern Pacific disaster, which caused major traffic delays and sparked legislation aimed at reregulating the railroads.

One of the key issues in the carve-up is the resulting change in routing for Conrail customers, and NS and CSX officials have focused much of their attention on this issue. On June 1, Conrail became an invalid routing instruction—CSX or NS must now be included in the waybill route.

“We’ve been working with customers to make changes to their databases specifying the new correct routing,” says Bob Gentzel, an NS market manager for paper, clay, and forest products. “All indications show that to be in hand at this point.” In case of an incorrect routing, Gentzel says, “there will be mechanisms in place to help to identify bad routes before a car begins to move.”

With the June 1 carve-up, NS gained 7,200 route miles and CSX gained 4,400. NS now operates a 21,600-mile system in 22 states plus the District of Columbia and Ontario. The railroad serves 83 paper mills and 73 paper distribution centers. CSX operates a 22,700-mile system across 23 states and the District of Columbia as well as Montreal and Ontario. The railroad serves 72 paper mills.

 

MERGERS/ACQUISITIONS

 

Donohue to buy rest of Finlay from Slocan

Donohue Inc. said it will buy Slocan Forest Products Ltd.’s 49.9% share in Finlay Forest Industries Inc. for C$80 million. Donohue and Slocan purchased Finlay, which includes a newsprint mill and two sawmills, from The Royal Bank of Canada for C$175 million in 1994.The transaction is expected to close by August subject to regulatory approvals.

The Finlay operations are among the northernmost pulp and paper mills in North America and include a one-machine mill with capacity to produce 200,000 mtpy of newsprint and uncoated groundwood specialties. The assets also include two sawmills with a combined annual capacity of 360 million board ft of lumber.

 

Champion finds buyer for Deferiet mill

A newly formed holding company that also owns a business forms manufacturer has agreed to buy the Champion Inter-national Corp. paper mill in Deferiet, N.Y. No sale price was disclosed.

The buyer is Crabar Paper & Allied Products Corp. of West Carrollton, Ohio, a privately-owned holding company that owns Crabar Business Systems, a forms maker that operates three plants in Ohio and Texas.

The mill currently produces about 225,000 tpy of coated and uncoated groundwood printing and specialty industrial papers on five machines. Champion put the mill up for sale in 1997 as part of a plan to divest non-strategic assets. The deal was expected to close by the end of June.

The operating company will be named The Deferiet Paper Co. A principal with Crabar Paper, David Paulus, said the new owner plans to keep all the business lines at the Deferiet mill.

 

ENVIRONMENTAL

 

EPA rejects halt to bleached mill permits

A group of environmentalists lost its bid to have the U.S. Environmental Protection Agency (EPA) stop issuing air and water permits to greenfield pulp and paper mills planning to use chlorine-based bleaching. The group had sought the moratorium until phases II and III of the Cluster Rules for the pulp and paper industry are completed. However, at a meeting with EPA in late April, the agency seemed unlikely to grant the request, sources said.

In an Apr. 19 letter to EPA Admin-istrator Carol Browner, a broad coalition of about 120 environmental groups led by the Native Forest Network (NFN) indicated its concern about the environmental effects of chlorine or chlorine derivatives used in pulp bleaching.

An official with the NFN said the letter to EPA was initiated as a result of controversy over permit applications by Wisconsin Tissue Mills Inc., part of Chesapeake Corp., to build a new 100,000 tpy tissue and toweling mill on a 500-acre site in Halifax County, N.C. In the first of four proposed stages, the Greenfield mill would bleach secondary fiber using sodium hypochlorite, a chlorine derivative, in a one-stage bleaching process.

The NFN said that the proposed Halifax County mill would discharge into the Roanoke River, which is a spawning area for various fish, including the striped bass.

Wisconsin Tissue is in “ongoing discussions” on its mill project with the North Carolina Dept. of Natural Resources, and expects to make a decision on how to proceed with the project by July, said Horton. He indicated that “extensive studies” of bleaching secondary fiber with sodium hypochlorite showed no evidence of dioxin or furan formation. He said that the DNR and EPA were provided with samples from other mills that use the process, showing the same results.

 

CORPORATE STRATEGY

 

Bowater has buyer for Great Northern

Though Bowater Inc. originally intended to sell only its Millinocket, Maine, mill, 15 months after putting it on the selling block the company has reached an agreement to sell all its Maine assets to Inexcon Maine Inc. of Trois-Rivieres, Que.

Inexcon Maine, comprised of paper industry veterans Lambert Bedard and Joe Kass, plans to purchase Great Northern Paper Co. (GNP), a wholly owned subsidiary of Bowater, for an undisclosed price. One analyst expects the assets—which include paper mills in Millinocket and East Millinocket, 380,000 acres of timberlands, and the largest privately owned hydroelectric facility in the U.S.—will fetch $200 million to $225 million. The deal is expected to close by July 31, subject to the completion of financing and certain other conditions and regulatory approvals.

The new company, to be headquartered in Millinocket, would retain the Great Northern Paper name but would convert newsprint production to coated and uncoated groundwood production.

The East Millinocket mill has capacity to produce 140,000 mtpy of newsprint on the No. 5 paper machine and 144,000 tpy of directory paper on the No. 6 paper machine. At Millinocket, three fourdrinier machines (Nos. 7, 8, and 10) have capacity to produce 138,000 tpy of lightweight coated papers. One machine at the mill, the No. 11, can produce 128,000 tpy of uncoated groundwood specialties.

Bowater had planned to install a thermomechanical pulp line at East Millinocket; the proposed new owners will not.