SALES & EARNINGS

 

U.S. companies report improved 3Q results

U.S. paper and forest products companies turned in their best quarterly performance of the year during the third quarter. The strong surge in sales volume and profits matched the hot performance of the U.S. economy, which grew at a brisk 4.8% annual rate in the July-September period.

Net earnings jumped 55% for a group of 30 companies surveyed by Pulp & Paper. These companies tallied $1.7 billion of profits from ongoing operations, compared with $1.1 billion in the third quarter of 1998. Net sales increased 11% to $33.8 billion from $30.5 billion.

Rising prices for pulp, paper and paperboard products pushed profits forward for the vast majority of companies. The average selling price of uncoated free-sheet printing paper, for example, has risen 30% to $750/ton from $580/ton a year ago. In packaging, kraft linerboard prices have risen 20% to $425/ton from $355/ton a year ago. Even newsprint prices, which have been in the doldrums most of the year, began to firm up in the third quarter, setting in motion a $50/mton price increase in October.

U.S. PAPER INDUSTRY SALES & EARNINGS—3rd-QUARTER 1999 ($000)
Company	3Q sales	% change	3Q net inc	3Q net inc	% chg.
	1999	1999/98	1999	1998	1999/98
Boise Cascade*	$1,789,237	9.1%	$49,048	$12,400	295.5%
Bowater*	511,000	–11.4	(16,500)	29,500	n.m.
Buckeye Cellulose	153,400	–1.8	13,355	13,383	–0.2
Caraustar	241,292	28.0	10,055	12,793	–21.4
Champion Intl.	1,344,400	–1.0	75,100	31,300	139.9
Chesapeake*	350,200	34.3	14,100	13,200	6.8
Consolidated Papers	471,431	8.3	19,442	17,179	13.2
Crown Vantage	166,329	–21.5	(23,472)	(6,992)	n.m.
FiberMark	81,866	11.9	3,538	3,318	6.6
Fort James	1,739,300	1.5	110,200	144,900	–23.9
Gaylord Container	241,800	13.1	(4,000)	(11,100)	n.m.
Georgia-Pacific*	5,481,000	62.8	230,000	54,000	325.9
Glatfelter	170,030	1.7	6,400	6,608	–3.1
International Paper*	6,300,000	3.3	192,000	81,000	137.0
Kimberly-Clark*	3,307,500	6.7	403,000	343,000	17.5
Longview Fibre	197,593	1.7	3,958	3,989	0.8
Mead*	982,200	–2.7	50,800	35,400	43.5
Pkg. Corp. of America	443,500	8.9	14,200	18,400	–22.8
Pope & Talbot	127,745	22.5	7,160	(6,753)	n.m.
Potlatch	446,591	10.4	22,589	12,547	80.0
Rayonier	255,400	–1.3	17,100	12,900	32.6
Rock-Tenn	357,778	8.7	12,214	11,757	3.9
Schweitzer-Mauduit	125,500	–6.6	7,600	6,800	11.8
Smurfit-Stone*	1,792,000	–13.0	(16,000)	8,000	n.m.
Sonoco Products	620,027	2.1	45,267	39,739	13.9
Temple-Inland*	963,400	14.5	60,000	25,900	131.7
Wausau-Mosinee	245,825	1.7	11,788	19,611	–39.9
Westvaco	700,202	–3.8	34,986	31,674	10.5
Weyerhaeuser	3,120,000	14.0	273,000	110,000	148.2
Willamette*	1,087,899	13.7	91,958	35,735	157.3
Totals	$33,814,445	10.8%	$1,718,886	$1,110,188	54.8
Note: Earnings represent net income after taxes from continuing operations, before nonrecurring and extraordinary items. All companies have 3rd quarter ending Sept 30, except Longview Fibre and Westvaco with quarter ending July 31. ( ) = loss, n.m. = not meaningful due to loss. * Includes special adjustments, gain, or change.

 

MERGERS/ACQUISITIONS

 

MB approves sale to Weyerhaeuser

The sale of MacMillan Bloedel Ltd. (MB) to Weyerhaeuser Co. was approved by a substantial majority of shareholders at an emotional meeting held Oct. 28 in Vancouver. The final vote tally was not available at press time, but the chairman of MB’s board of directors, Richard Haskayne, said the motion to sell was approved by a majority vote well over the two-thirds necessary. On Oct. 29, the Supreme Court of British Columbia granted final approval to the $2.45 billion stock transaction.

In related news, Weyerhaeuser Canada Ltd. announced it would move its headquarters to Vancouver, B.C., after 35 years in the interior British Columbia city of Kamloops. The move will occur over the next 16 months.

NEWSPRINT

 

Abitibi shuts mill; local control sought

Abitibi-Consolidated Inc.’s struggle with its high-cost Gaspesia Pulp and Paper Ltd. newsprint mill in Chandler, Que., ended recently when the company announced it would permanently close the two-machine operation.

The mill has not been running since June when Abitibi indefinitely idled PM No. 1 after plans to create a joint venture with Groupe Cedrico of Quebec hit a roadblock. PM No. 2, which has capacity to produce 110,000 mtpy, was permanently shut in January. The permanent closure of PM No. 1 removes 140,000 mtpy of newsprint capacity and is the fourth newsprint machine permanently closed by Abitibi in 1999.

“Unfortunately, market conditions and excess North American capacity make it uneconomical to carry out the project being developed with Groupe Cedrico and with the government’s support and the collaboration of many other stakeholders,” said Claude Janelle, executive vice president of North American operations for Abitibi.

The union representing workers at the mill voiced its objection to the closure and said it will try to meet with Quebec Premier Lucien Bouchard and Abitibi CEO John Weaver. “What we are asking now is that Abitibi-Consolidated turn the Gaspesia plant over to the Chandler community,” said Clement L’Heureux, an executive vice president with the Communications, Energy and Paperworkers Union of Canada (CEP).

 

Bowater cuts jobs at Tennessee mill

Bowater Inc. said it will eliminate 190 positions at its Calhoun, Tenn., mill as a result of a two-year project aimed at reducing operating costs. The projects, which included installation of a thermomechanical pulp (TMP) line, “have reduced the need for labor-intensive procedures,” explained a company spokesperson.

The company said 70 positions already have been cut through retirements and about 75 positions have been eliminated through layoffs. Of those 75 jobs, about 50 were temporary employees who were told they would be laid off when they were hired, Bowater said. The mill employed 1,200 people at the end of June.

 

CONTAINERBOARD

 

Simpson may sell Tacoma mill

Simpson Paper Co. might sell its 472,000 tpy pulp, linerboard, and kraft paper mill in Tacoma, Wash., and has hired an investment bank to recommend options for the operation. Warburg Dillon Read LLC will explore possibilities including outright sale of the mill; a joint venture with another company; or doing nothing.

Simpson Investment Co. president Ray Tennison said that the mill remains a small player in the U.S. linerboard business, and that the company was moving away from the pulp and paper business in favor of wood manufacturing and timberlands operations. Over the last several years, Simpson has sold almost all its pulp and paper mills. Tennison said there was no intention of permanently shutting the kraft mill, which operates as Simpson Tacoma Kraft Co. and is the largest producer of mottled white linerboard on the West Coast.

 

Florida Coast Paper plans reorganization

Stone Container Corp., a subsidiary of Smurfit-Stone Container Corp. expects to wipe out a lawsuit and eliminate bankruptcy problems involving the Florida Coast Paper Co. LLC linerboard mill in Port St. Joe, Fla., based on a plan announced in October.

Both Stone Container and Four M Corp. said they supported the proposed reorganization plan. Under the plan, Stone Container expects to pay $95 million to $100 million in cash and become the full owner of the mill. (In 1996, Stone Container and Four M paid $185 million to each gain 50% shares in Florida Coast Paper.)

For the reorganization plan to go forward, a judge in the Delaware bankruptcy court handling the Florida Coast case must approve the deal. The companies expected approval of the agreement by year-end.

The Florida Coast mill has been shut since August 1998. In April 1999, Florida Coast Paper filed for reorganization under Chapter 11 of the bankruptcy protection act. In addition, a group of investors in the mill filed a lawsuit in May against Stone Container and Four M executives, claiming they didn’t follow through on a contract for purchasing tonnage from the mill and keeping the mill running.

If the reorganization goes through as planned, Smurfit-Stone indicated that the company would “evaluate the mill’s viability in the same way that we looked at” the company mills after Jefferson Smurfit Corp. acquired Stone Container in November 1998.

 

TISSUE

 

G-P Tissue cancels greenfield mill plans

Georgia-Pacific Tissue LLC, the newly formed joint venture between Georgia-Pacific Corp. (G-P) and Wisconsin Tissue Co., a subsidiary of Chesapeake Corp., has canceled plans to build a greenfield tissue mill in Weldon, N.C. G-P paid $755 million to Chesapeake and holds a 95% ownership stake in the new joint venture, with Chesapeake holding the remaining 5%.

Chesapeake had announced plans in October 1998 to build a 100,000 tpy 100%-recycled tissue mill in Weldon, N.C., to manufacture tissue products for the away-from-home markets. However, this past June, when G-P and Chesapeake announced their intention to form a joint venture combining their consumer tissue operations, plans to build the mill were tabled. With the finalization of the joint venture, the new company has canceled immediate expansion plans.

A company spokesman said, “At this juncture, Georgia-Pacific Tissue has made no determination to expand this joint venture's existing manufacturing capacity. Further, there is no definitive timetable for any future business plans or strategies to be completed or announced by G-P Tissue.”

G-P Tissue has a tissue manufacturing capacity of approximately 350,000 tpy, consisting of paper mills in Gary, Ind., Flagstaff, Ariz., Alsip, Ill., and Menasha, Wis. Including production capacity of the nine converting facilities contributed by the two companies, the new joint venture has a total capacity of 530,000 tpy of tissue for the away-from home tissue markets.

 

MARKET PULP

 

Possible Skeena pulp mill sale progresses

A second Skeena Cellulose Inc. workers group has agreed to a shares transference that would pave the way for Enron Capital & Trade Resources Corp. to buy the British Columbia pulp and sawmill company. Some 75 non-union salaried workers agreed to relinquish their shares in the company in return for restoration of their 10% wage decrease, following the same decision earlier in October by the 35 members of the B.C. Government and Service Employees’ Union local (BCGEU).

Until Oct. 29, Local 4 of the Pulp, Paper and Woodworkers of Canada (PPWC), representing some 600 workers, had a 14-day injunction blocking the sale. That injunction was lifted during a court hearing in October, but the earliest date for further court proceedings would be in late November, said Dan Zadravec, spokesman for Premier Dan Miller.

The province, PPWC, and Enron will be talking “in hopes that we can find some common ground." Miller stressed that the province has "no intention of implementing (the shares transference) without the cooperation of the union.”

 

LABOR

 

Workers occupy idled Ontario mill

About 20 union workers who want to stop Toronto-Dominion Bank from liquidating the assets of Gallaher Thorold Paper Co. entered the facility on Oct. 18 to force a showdown with the mill’s creditors. The sit-in began after Ernst & Young Inc., which is acting as a court appointed receiver for the company’s primary creditor, Toronto-Dominion Bank, indicated that it would liquidate the mill’s assets rather than accept a bid by the employees to purchase the mill, as well as offers from two other unidentified parties. Gallaher Thorold was about $70 million in debt when the company declared bankruptcy and ceased operations on May 25.

“We’ve taken over the plant to bring national attention to the Toronto-Dominion Bank and its unfair treatment of the situation,” said Brian Dobbie, local vice president of the Communications, Energy and Paperworkers Union of Canada. The union represents about 300 production and maintenance workers at the mill, which has been operating in Thorold, Ont., for 97 years.

Following the sit-in, Ernst & Young issued a statement saying it is still reviewing offers with “the primary goal of restarting the mill.”

The mill manufactures a variety of recycled paper products, ranging from envelope papers to directory and coated cover stock and release base papers.

 

PRINTING/WRITING

 

Layoffs at Appleton’s Newton Falls mill

As many as 150 hourly and salaried employees of the Appleton Papers Inc. Newton Falls, N.Y., mill will be laid off as a result of a paper machine shutdown. The layoffs, which an Appleton spokesman said are still being negotiated with the union and would be in a range of 125-150 employees, were expected to begin in mid-December when PM No. 3 and coater are shut.

The shutdown will not affect AWA’s decision to sell the Newton Falls mill and expand coated free-sheet production at the Combined Locks, Wis., mill.

 

SUPPLIERS

 

Beloit for sale; staff buyout possible

Bankrupt Harnischfeger Industries Inc. has hired PricewaterhouseCoopers Securities LLC to help sell its subsidiary Beloit Corp., one of the world’s largest paper machine suppliers. Several parties have shown "unsolicited interest" in all or parts of Beloit, the company said. Any sale would need to be approved by the court handling Harnischfeger’s bankruptcy case and also by the board of directors of the mining and paper equipment maker. Harnischfeger filed for bankruptcy protection in June because of a loss of sales in Asia and a lack of demand for new capacity in the global pulp and paper industry. Harnischfeger owes $1.3 billion to creditors and $750 million under a recent loan from Chase Securities Inc.

Several analysts said competitors such as Valmet Corp. and Voith Sulzer Paper Technology might be interested in buying Beloit, as could Mitsubishi Heavy Industries Ltd. of Japan, which owns 20% of Beloit stock. Workers at two Beloit plants in Illinois and Wisconsin also might be interested in a buyout.

KPS Special Situations Fund LP of New York has confirmed that it is “exploring the purchase” of Beloit and has signed a confidentiality agreement with Harnischfeger. KPS is a private equity fund that restructures under-performing companies, often in cooperation with employee groups. KPS said the possible Beloit acquisition may or may not involve an employee ownership component, and noted that it is being “strongly encouraged” by one of the Beloit unions-the International Assn. of Machinists and Aerospace Workers (IAMAW). *

 

ENVIRONMENTAL

 

Abitibi reduces odor at Fort Frances

A C$9 million project was completed in September at Abitibi-Consolidated Inc.’s Fort Frances, Ont., mill to reduce odor emissions from the kraft pulping process.

The investment included a rebuild of a condensate steam stripping system (which removes odor-causing compounds), installation of a dedicated incinerator to burn odorous gases, and addition of a scrubber following the incinerator, according to the mill’s environmental director, Gary Rogozinski. Since 1987, the mill has achieved an 85% reduction in odor emissions but mill officials hope to boost it to more than 90% with these additions, Rogozinski said.

 

MARKET PULP

 

Fibreco expanding hardwood BCTMP

Softwood bleached chemithermomechanical pulp (BCTMP) producer Fibreco Pulp in Taylor, B.C., will undergo an approximately C$6 million debottlenecking in connection with a decision to produce quality grades of hardwood pulps. Fibreco will continue making 180,000-190,000 mtpy of softwood and will add 50,000-60,000 mtpy of hardwood pulp to its offerings.

The project, targeted for completion in first-quarter 2000, primarily involves upgrading of the bleaching system so the mill can run economically and reach its capacity of 240,000 mtpy, said Dan Breck, vice president and mill manager. He said that system is the last to be modernized in a project that began in the mid 1990s, when capacity was 180,000 mtpy. Fibreco’s production has remained at that level since then, with Fibreco continuing to produce 70% brightness softwood pulp for customers in Asia.

CONTAINERBOARD

 

 

Solvay liner PM startup in September

Solvay Paperboard LLC began producing high-performance recycled linerboard on Sept. 25 on a new paper machine at its mill in Syracuse, N.Y. Based on a revised schedule, the startup was about a week earlier than expected, said James B. Porter, vice president. Originally, the new Valmet Corp. machine was set to start in August but delays pushed that back to a scheduled timeframe of early October. “Our customers are in urgent demand for additional supply so our startup is timely for them in a tight market,” Porter said.

With the additional 235,000 tpy of capacity from the new machine, Solvay expects to sell about 30,000-50,000 tpy of the mill’s total output on the open market. The rest will go to three independent converters in New York, New Jersey, and Toronto that are partners in the project as well as to trade partners. The output will be made completely out of recovered paper. The $130 million project included installation of a Thermo Black Clawson and Voith Sulzer recycling system.

TISSUE

 

 

Encore completes tissue expansion

Encore Paper Co. recently completed a $25 million investment at its tissue mill in South Glens Falls, N.Y. The company rebuilt its No. 1 and No. 3 (pictured) tissue machines for quality improvements while increasing daily mill capacity from 166 tons to 220 tons. Encore also rebuilt its No. 2 deinking plant to meet the additional fiber needs. Comer supplied equipment for the DIP expansion.

 

 

 

MICHAEL SMURFIT NAMED 1999 GLOBAL CEO

 

INDUSTRY AWARD

Michael W. J. Smurfit, chairman and CEO of Jefferson Smurfit Group plc, has been selected global CEO of the year in the paper and forest products industry by members of the financial community in a survey conducted by Miller Freeman Inc., Pulp & Paper and Pulp & Paper International magazines. Smurfit accepted the award at the Paper/Forest Products Global Outlook Conference Nov. 16 in New York.

The award is given to the chief executive officer who made the greatest contribution to the growth, competitiveness and success of his company based on his corporate and industry leadership, strategic planning and execution.

The merger in 1998 of Jefferson Smurfit Corp. and Stone Container Corp. to form Smurfit-Stone Container Corp. is seen by many members of the financial community as the model for efficient capacity management in the U.S. and has created the dynamic for the restructuring and recovery of the industry. The company has total managed sales of more than $20 billion and 68,000 employees.