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Higher prices cause U.S. paper profit surge in 2Q Most U.S. paper and forestry companies posted higher profits in second quarter 2000 from the same period a year ago, as higher prices for printing papers and consumer and industrial packaging materials offset weakness in building products. The industry’s largest producers demonstrated good discipline in managing production even as early signs of economic slowdown appeared. Earnings for most of the 27 public companies surveyed by Pulp & Paper Week improved in the second quarter, with several upside surprises. Total consolidated earnings for the group of companies increased 45% during the quarter, rising to $1.94 billion from $1.34 billion in 1999. Total net sales increased 19.8% to $34.9 billion from $29.1 billion. A substantial amount of production downtime was taken in containerboard, and to a lesser degree in white papers, to avoid a build-up in inventories. But the industry now faces fresh challenges as the U.S. economy shows signs of slower growth in the second half of the year. For now, pricing for coated and uncoated papers, containerboard, and newsprint remain firm, but uncertainty lies ahead. International Paper Co. posted second-quarter earnings nearly three times greater than a year ago. The improvement reflects an increase in pulp prices to $700/mton; higher prices for corrugated boxes and containerboard; and price increases for coated papers and bleached paperboard, said the company. Weyerhaeuser Co. said its second-quarter earnings increased 74% to $285 million, before a special charge of $82 million. Net sales for the second quarter were $4.2 billion, up 38% from $3 billion in the same quarter a year ago. Georgia-Pacific Corp. reported net income of $206 million for the three months ended July 1, compared with net income of $212 million in the second quarter of 1999. As anticipated, improved conditions in the company’s pulp and paper businesses during the quarter offset weaker demand and prices for most of its building products. Within G-P’s pulp and paper businesses, the containerboard and packaging segment reported quarterly operating profits of $141 million, compared with $76 million in last year’s second quarter. The group’s pulp and paper segment, comprised of its pulp, bleached paperboard, communication papers, and tissue businesses, reported operating profits of $148 million versus $26 million in the same quarter last year. G-P’s paper distribution segment, Unisource Worldwide, reported operating profits of $41 million in the quarter.
G-P in $15 billion transformation Georgia-Pacific Corp. in July moved in dramatic fashion to strengthen its presence in the U.S. tissue market through two blockbuster sales and acquisitions. G-P will vault to the number-one spot in world tissue production in an $11 billion deal to acquire Fort James Corp., while simultaneously divesting itself of its timberlands assets. G-P plans to completely divest itself from its U.S. timberlands by selling The Timber Co. to Plum Creek Timber Co. for $4 billion, including $1 billion in debt. Plum Creek will assume an existing 10-year log and pulpwood supply agreement between G-P mills and TGP which manages 4.7 million acres of timberland in the U.S. Following completion of the transaction, Plum Creek would become the second largest private timberland owner in the U.S., after International Paper Co., with more than 7.9 million acres in 19 states. Crown Vantage saved by investors Crown Vantage Inc. is to be rescued from bankruptcy by investors led by Vancouver-based NLK Consultants Inc. for a total of about $415 million, including assumption of bonds and an option for shares in the new company. The acquisition of mid-sized Crown, with capacity of 750,000 tpy of specialty papers at seven mills in the U.S. and two additional mills in Scotland, will occur as a sale of assets under section 363 of the Bankruptcy Code. Crown employs about 2,400. Crown’s key product lines are coated groundwood, where it holds an estimated 5% U.S. market share, uncoated free-sheet, and packaging/industrial papers. The deal calls for $375.9 million in cash, the assumption of approximately $39 million of industrial development bonds, an option to purchase at the closing 10% of the equity of the purchaser, and seven-year warrants to purchase 5% of the equity of the purchaser. Crown Vantage mills in the U.S. include St. Francisville, La., its largest plant, with capacity for more than 425,000 tpy of mostly coated groundwood paper.
IP plans sale of Fine Papers business In separate announcements made locally around the U.S., International Paper Co. outlined plans to sell its Fine Papers business with mills in Erie, Pa., and Hamilton, Ohio, as part of its previously announced sale of $3 billion in assets. The company also announced the planned closure of a small paper mill in Millers Falls, Mass., and said it will proceed with the sale of another mill in Hamilton owned by the former Champion International Corp. Overall, more than 3,000 workers are affected. An official said the writing and cover text papers mills in Erie and Hamilton have combined capacity for 150,000 tpy and include two converting operations in Ashtabula, Ohio, and Westfield, Mass., and the division headquarters in East Granby, Conn. A total of 1,500 employees will be impacted. Champion had long planned to divest the nearby 150,000 tpy coated paper mill in Hamilton, which employs another 820 workers. The Dayton Street mill in Hamilton has capacity of about 50,000 tpy on three paper machines; the Hammermill Paper mill in Erie has capacity of about 100,000 tpy on four machines. IP said it will permanently close the 97-year-old Millers Falls Strathmore Paper mill in western Massachusetts at the end of August. The mill has estimated capacity of less than 15,000 tpy of text cover and artist papers and employs 120 workers. IP also said it also considering the sale of its of its Chemical Cellulose business, basically a 470,000 tpy specialty market pulp mill in Natchez, Miss., with 750 employees.
Bowater purchases Newsprint South millBowater Inc. completed the acquisition of the Newsprint South Inc. paper mill in Grenada, Miss., from GE Capital Structured Finance Group and shareholders for $370 million and the assumption of $8.9 million in debt. The acquisition of the 250,000 mtpy mill will push Bowater’s global newsprint capacity to over 3 million mtpy—ranking it as the fourth largest producer worldwide behind Abitibi-Consolidated., Stora Enso, and Norske Skog, according to estimates. The company said the Newsprint South mill—which has one of the lowest operating costs in the U.S.—will bolster Bowater’s position in the U.S. Southeast and allow it to expand into Southwest markets. The mill houses one paper machine that was installed in 1989. It has a trim width of 330 in. and runs at 4,350 fpm. Almost all of the mill’s furnish (95%) comes from thermomechanical pulp (TMP), with the remaining 5% being purchased kraft pulp. Bowater said it does not currently have plans to make any major capital investments at the mill. Enron to acquire Garden State Paper Enron North America Corp. announced it will purchase the Garden State Paper Co. mill near New York City from newspaper and media company Media General Inc. for $72 million. The Garfield mill has two paper machines with the capacity to produce 242,000 mtpy, 100% recycled newsprint mill in Garfield, N.J. PM No. 1 has a trim width of 212 in., a speed of 2,700 fpm, was installed in 1961, and rebuilt in 1985. PM No. 2 has a trim width of 240 in. and runs at a speed of 3,400 fpm. It was installed in 1966 and rebuilt in 1974. Media General said it will retain its roughly one-third stake in SP Newsprint Co. Developers scrap Bronx Paper project Citing turmoil in the bond market and the unavailability of tax-exempt bond financing, parties involved in the development of the Bronx Paper Mill in New York City agreed to suspend activities and cease efforts to build the mill. The project, which was announced in May 1994, had been stalled since 1999. The proposed mill was being jointly developed by Morse Diesel International Inc. and Harlem River Yard Ventures Inc., on behalf of Bronx Community Paper Co. (BCPC). The mill, which would have been the largest private-sector manufacturing project to be built in New York City since World War II, was to have been a state-of-the-art, environmentally sensitive plant producing 330,000 mtpy of 100% recycled fiber newsprint, and would have generated 2,200 construction and 400 permanent jobs in the South Bronx. The project was expected to break ground in January of this year, with paper production starting in first-quarter 2002.
Abitibi to shutter capacity, sell mills Abitibi-Consolidated Inc. said it plans to permanently close its 133,000 mtpy West Tacoma recycled newsprint mill in Steilacoom, Wash., at the end of the year, and its 50,000 mtpy value-added paper machine No. 1 at its Wayagamack mill in Trois-Rivieres, Que., at the beginning of next year. The anticipated closures are part of the company’s stated strategy to idle 400,000 mtpy of groundwood paper capacity in North America following its C$7 billion merger with Donohue Industries Inc. The Wayagamack mill is for sale, the company added. The West Tacoma mill houses two paper machines, one of which was mothballed in mid-1999. The mill employs 186 members of the Assn. of Western Pulp and Paper Workers. When the mill closes, the company plans to possibly dismantle the machine and pulp mill and relocate the equipment to other Abitibi operations. Following the closure of the No. 1 machine at Wayagamack, the mill will be left with capacity for about 130,000 tpy of mostly uncoated groundwood specialties paper on two active machines. The mill currently employs 700 workers. The No. 1 machine was built in 1972 and has a 149-in. trim and speed of 2,300 fpm. In other company news, Abitibi said it signed a letter of intent with a consortium to sell its Chandler, Que., newsprint mill for C$35 million. The consortium is comprised of Canadian Engineering group SNC-Lavalin Inc., investment group le Fonds de Solidarite des Travailleurs du Quebec (FTQ), and businessman Clermont Levasseur, former pres. of Uniforet Inc. The new owners propose a major capital investment of $420 million to convert the mill from newsprint to coated free-sheet paper. The re-opening of the newly reconfigured plant will mean the creation of some 250 jobs at the mill. Details of any assistance from the Quebec government are not being made available, however, an industry source noted that it is likely the Quebec government offered a debt guarantee. SNC-Lavalin has confirmed that personnel have been dispatched to the Chandler site to conduct an environmental audit. The transaction is expected to close in the third quarter. The Chandler mill has two paper machines with the combined capacity to produce 250,000 mtpy of newsprint using purchased de-inked pulp and semi-bleached kraft pulp. Alliance plans $113 million for Coosa Pines Alliance Forest Products Inc. said it will invest $113 million to expand its deinked pulp (DIP) plant at its Coosa Pines, Ala., newsprint and fluff pulp mill. The company said its objective is to eventually produce 100% recycled newsprint at the mill. A company spokesman said switching to 100% recycled content will reduce Alliance’s cost per ton. The new DIP plant, which will replace an existing line, will triple DIP production to about 525,000 tpy from about 175,000 tpy. The use of virgin fiber furnish in newsprint production will cease as DIP replaces the use of mechanical, thermomechanical, and kraft pulps at the mill, part of a company plan to simplify its furnish composition. Also included in the project plan is a second phase that involves increasing the efficiency of the three Beloit newsprint machines already in operation at the mill, PMs No. 1, No. 3, and No. 4, boosting total capacity to about 448,000 mtpy from 393,000 mtpy. According to the spokesman, it is too early in the project to determine the cost of the paper machine upgrades. Approximately 200 positions at the Coosa Pines complex will be eliminated. The company said it expects retirements and normal attrition to account for many of the reductions.
Domtar purchases fine paper distributor Domtar Inc. has reached an agreement to acquire Ris Paper Co., a North American distribution company. The total value of the transaction is $90 million, including the assumption of debt. Ris distributes fine and specialty papers through its 19 distribution branches located throughout the U.S. In 1999, Ris’ sales were approximately $600 million. Domtar produces approximately 1.01 million tpy of fine and specialty papers. In addition, Domtar produces newsprint, market pulp, and containerboard. The company is ranked the seventh largest fine and specialty papers producer in North America. Annual sales exceed $3 billion, according to the company.
Ex-Beloit employees form Paperchine More than 50 former employees of Wisconsin-based paper machine maker Beloit Corp., which was sold off this year as part of the bankruptcy of parent company Harnischfeger Industries Inc., have formed a new company called Paperchine Inc., to provide service to Beloit installed paper machines. Paperchine hired key service and Engineering employees from Beloit. Since opening, Paperchine has been busy trying to fulfill a backlog of orders. The most significant contract currently is the continuation of the assembly of a paper machine for Asia Pulp and Paper being completed in the old Beloit Blackhawk facility. The $1.5 million project will be completed in October.
American Tissue restarts Maine mill American Tissue Corp. reported it is now operating the No. 2 paper machine and is working on restarting the other paper machine, No. 3, at its newly acquired 14,480 tpy tissue, toweling, and napkin paper mill in Augusta, Maine. The company completed the purchase of the former Tree-Free Fiber Co. mill on June 2 and immediately started up paper machine No. 2. Operating under the name American Tissue Mills of Maine LLC, the mill will ship some of its output to converting operations owned by the parent company in other states. Further capital investment in the mill has not been determined, but $10 million in improvements to the existing two paper machines as well as the possible addition of a third paper machine are being considered, according to company officials. The mill uses 100% deinked pulp purchased on the market, as the facility lacks a deinking operation. On opening day, 52 workers were on the mill’s payroll and the company said it expects to hire about 20 more. In other company news, American Tissue Mills of Tennessee LLC has filed a bid in U.S. Bankruptcy Court for the Global Tissue mill assets in Memphis, Tenn. The aggregate purchase price is $40.5 million—$11 million in cash and the balance paid by delivery of a purchase money note, according to court documents. The deal would be “free and clear of all liens, claims and other encumbrances.” Officials at American Tissue could not be reached for comment. Global Tissue filed July 17 for Chapter 11 protection in U.S. Bankruptcy Court in Delaware. The mill has been shut down since May 10 after Kimberly-Clark Corp. terminated its long-term contract to buy scrim reinforced material produced at the mill. The mill has three machines with the capacity to produce 120,000 tpy of tissue.
IP invests in Russian pulp and paper mill International Paper Co. announced details of stage two of its three-year investment plan at the Svetogorsk AO pulp and paper mill near St. Petersburg, Russia. Svetogorsk makes uncoated free-sheet paper, liquid packaging board, and softwood market pulp. IP took over the mill at the beginning of 1999 and set aside $100 million to upgrade the site by the end of 2001. Svetogorsk’s 250,000 mtpy hardwood pulp line will be fitted with a new washing unit supplied by Valmet Corp. as part of the investment program planned for this year. Valmet is also upgrading the fiber line as part of the project. The overhaul should increase the pulp line’s capacity by 30%, and will be completed by October, according to Valmet. Almost all of the pulp mill’s output is used internally. The Svetogorsk mill’s paperboard machine will also be fitted with new drives during a September shutdown. The 70,000 mtpy machine produces liquid packaging board and white top linerboard. In the finishing section, IP plans to install additional sheeting capacity to increase its cut-size paper capacity. The company will also focus on investments aimed at energy conservation this year. Klabin de Papel buys Riverwood’s Igaras Brazil’s Klabin de Papel e Celulose readied to increase its share in containerboard by signing a definite agreement to buy Riverwood International Corp.’s joint venture subsidiary Igaras Papeis e Embalagens for $510 million, including $112 million in debt. The deal should be completed by October, adding 470,000 mtpy of mostly containerboard capacity to Klabin’s stable. Under the proposed terms, Klabin subsidiary Klabin Argentina acquires Igaras from joint venture partners Riverwood and Cia Suzano de Papel e Cellulose, the largest integrated producer of eucalyptus pulp and printing/writing papers in Brazil. Executives with Riverwood and Suzano said the three Igaras mills and five corrugated plants were sold because they didn’t fit with their company’s core products. With the Igaras plants, Klabin will corner an estimated 30% of the corrugated market in Brazil. Igaras operates three mills in Brazil that can produce 470,000 mtpy of containerboard, coated paper, and bag paper. The majority of the capacity is in kraft linerboard, testliner, and corrugating medium.
• Finch, Pruyn & Co. Privately owned Finch, Pruyn & Co. plans to invest $39 million over four years to upgrade operations at its 240,000 tpy fine uncoated papers mill in Glens Falls, N.Y. The company plans a $5 million upgrade to its largest sheeter this year to increase its ability to produce non-traditional size sheets for digital technology printing applications.
• Uniforet Inc. Montreal-based Uniforet Inc. permanently closed its Trois-Rivieres, Que., uncoated groundwood paper mill, called Tripap, at the end of July. The financially troubled forest products company cited obsolete equipment at the mill and weak paper markets as factors in the decision. About 200 jobs were eliminated. The mill was listed with paper capacity of 200,000 mtpy but its current production rate was not known.
• The Newark Group. The Newark Group has purchased the former Princeton Paper Co. paper mill in Fitchburg, Mass. The mill was auctioned for $15 million on April 4 as a result of Chapter 11 bankruptcy proceedings initiated a year ago by Harnischfeger Industries Inc. The acquisition became final on June 23. A company spokesperson said Newark plans to invest up to $100 million to renovate the historic paper mill, which once anchored the specialty Papermaking operations of James River Corp. The mill is expected to be up and running in 15 months.
• Ahlstrom Paper Group. Ahlstrom Paper Group announced plans to invest $10 million at its filter paper mill in Taylorville, Ill., in order to improve and expand the production process by adding a saturation operation. The saturation unit will become operational in the second half of 2001. The new investment will significantly enhance the mill’s production capacity of approximately 27,000 tpy and improve product capability, and will make the Taylorville mill the only U.S. facility capable of producing the wide variety of products the engine filtration market requires.
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| Pulp & Paper Magazine, September 2000 | CONTENTS | ||
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