EUROPE

 

Fort James plans new PM in Europe

US-based company, Fort James, is to install a new tissue machine at one of its western European facilities. The company is looking at three potential sites for the 60,000 ton/yr PM, but said it cannot disclose the possible locations yet as discussions are ongoing with local governments and unions. Startup is penciled in for 2001.

The project will be financed largely through existing capital budgets. The new machine is to replace some of the capacity which will be lost through the closure of the company's Larne mill in Northern Ireland.

The Larne closure is part of the company's rationalization program in Europe and the USA. The moves aim to make the units more efficient by replacing older equipment. As part of the program, Fort James has also turned the spotlight on other operations, which may result in further closures of some European units.

 

NORWAY

 

Norske Skog shakes up company structure

Norske Skog is set to restructure its business into three main sectors - European, International and Fiber. The move is part of a five-year drive to improve the company's financial performance.

Under the scheme, Norske Skog aims to concentrate on its core activities - the production and sale of newsprint and magazine paper, according to a company source.

As part of the reshuffle, Norske Skog is selling off two of its non-core assets. The first business to go is Union Eiendomsutvikling, a real estate subsidiary within the Union group. The second company to get the chop is Fibo-Trespo, whose products include bathroom paneling.

FINLAND

 

Stora Enso sets out its new growth strategy

Stora Enso has announced a new growth and globalization strategy that reaches far into the group's businesses worldwide. As part of the program, the company will sell off some of its power assets, worth Euro 2 billion ($2.1 billion), and focus on its three core businesses - publication papers, fine papers and packaging board. Other non-core assets will either be divested or run for cash and then closed.

The company explained that its primary task is to ensure that its ongoing business generates shareholder value and profitability. Stora Enso plans to seek permission from its shareholders to buy back up to 5% of company shares. The proposal will be put forward at the next annual general meeting in the first quarter of 2000. Stora Enso has also targeted synergies, productivity programs and investments to help it achieve its goal of becoming the world leader.

Shopping spree: Stora Enso also looks set to jump back onto the consolidation bandwagon, with its announcement that expansion will be achieved through mergers and acquisitions. These would be financed through cash flow and divestitures. The company believes the need for further consolidation is particularly great within the fine paper sector and expects European restructuring to continue.

Stora Enso is studying opportunities for participation in the consolidation process in both Europe and Asia. Stora Enso has targeted Asia as a key area for growth in fine paper consumption. The Asian market is an attractive option due to the benefits from rapid economic and population growth, as well as reasonably priced and fast-growing raw materials, according to one company source.

 

SCA moves in on Metsä

SCA has made another move to raise its stake in Finland's Metsä Tissue. The Swedish company has increased its stake from 11.7% to 19.3%. But the Finnish tissue producer's majority owner, Metsä-Serla, countered the move by acquiring 1.9 million shares in Metsä Tissue. The purchase takes Metsä-Serla's stake from 59.2% to 65.5%. Metsä-Serla reiterated that it has no intention of selling the tissue business or its shares.

 

Ahlstrom and Kvaerner pull merger plans

Ahlstrom and Kvaerner have withdrawn the merger application that they submitted to the European Union (EU) competition authorities. But the two pulping machinery suppliers are already preparing a second application that they hope will be approved by the Brussels bureaucracy. The merging companies said they were committed to taking the appropriate steps to ensure the proposal is approved the second time round. Ahlstrom's CEO, Tuomo Ronkko, said, "We were unable to complete the work necessary to satisfy the requirements put forward by the EU within the strict time limits set for the process. It has been necessary to withdraw the application for procedural reasons. A new application will now be submitted. Whilst this means an unfortunate delay in the process, we are determined to pull this merger through."

The decision to terminate the first application seems to have come just in time as the EC would have blocked the merger anyway, it has emerged. One EC source said, "The operation raised very serious competition concerns in a number of markets related to the engineering and supply of equipment for chemical pulping mills. Had the companies not withdrawn the notification, [competition] commissioner Van Miert would have proposed a prohibition decision in line with the position taken by member states at the advisory committee."

 

Stora Enso chooses Imatra supplier

Stora Enso has chosen Ahlstrom Machinery to supply the main equipment for its new fiber line at the Imatra mill in Finland. The contract is valued at $35 million and includes screening and bleaching plants. The new line will have a capacity of 570,000 tons/yr of bleached pulp.

Startup is scheduled for the second quarter of 2000. The investment is aimed at improving the efficiency and environmental aspects of the mill.

 

UPM-Kymmene buys back shares

UPM-Kymmene has started buying back company shares. The company aims to adjust its equity ratio and lower capital costs through the buy-back program. UPM-Kymmene said its cash flow currently exceeds its investment needs in the short term. The original aim behind the move was to help ease future acquisitions or stock exchange listings.

 

 

GERMANY

 

Drewsen buys new PM

Drewsen Spezialpapiere is to install a new specialty paper machine at its mill in Lachendorf, northern Germany. Valmet will provide mill engineering and supply the complete production line, including the PM and stock preparation unit. Startup is scheduled for late 2000. The machine will have a reel width of 4.8 m and produce paper in a basis weight range of 50-120 g/m‰.

 

Varel upgrades board PM

Varel of Germany has restarted BM 3 at its mill in Niedersachsen after a major rebuild. The upgrade increased the machine's capacity by 20%, taking it to almost 80,000 tons/yr. PM 3 produces gray, brown and coated white boards.

Work was carried out on the press section, drying section and film press as part of the rebuild. The main suppliers were Voith Sulzer, Jagenberg and another German firm, Nyblad.

 

UPM-Kymmene boosts Nordland machine

UPM-Kymmene has restarted PM 4 at its Nordland Papier mill in Germany after carrying out a major overhaul. The machine's wet end was revamped with the installation of a new Valmet headbox, wire section and press section.

The modernization raised PM 4's capacity from 330,000 tons/yr to 450,000 tons/yr. The machine's speed also increased to 1,350-1,400 m/min. The machine has a trim width of 9.5 m and produces mainly base paper for coating in a range of 50-80 g/m‰.

PM 4 currently produces 400,000 tons/yr. The next stage of the scheme involves optimizing production to reach the machine's new 450,000 ton/yr design capacity. Nordland expects PM 4 will hit maximum output next year.

The upgrade cost a total of Euro 23 million ($24 million) and PM 4 was closed for five weeks while the rebuild took place.

 

FRANCE

 

Greenfield refinances

French market pulp producer, Greenfield, plans to inject further funds into its mill in Chateau-Thierry near Paris. The company has secured a new financing deal that will enable it to improve pulp quality and become more competitive. The company's mill has been producing pulp from wastepaper for two years, but the plant has not yet hit its full design capacity. The new funds will be used to increase pulp production to 151,000 tons/yr. The financing has been arranged by Greenfield's banking syndicate, led by Chase Manhattan, and the mill's construction and technology partner, Kvaerner.

Greenfield said the increase in quality and capacity will enable the company to expand its market penetration into Asia, Africa, India and Australasia. The mill will continue to operate while the work is carried out and should be running at design levels by the second quarter of 2000.

 

Emin-Leydier restarts fire-struck PM

Emin-Leydier has restarted PM 5 at its Champblain mill in France after a fire took the machine out of action at the beginning of May. The blaze destroyed the testliner machine's press and dryer sections. Repair work was carried out over 14 weeks. The company reports that PM 5 is running well and producing some 400 tons/day of testliner. At full speed the machine can produce 420 tons/day.

An investigation was unable to determine the cause of the fire. But Emin-Leydier has installed a new security system on PM 5 to detect abnormal temperatures on the machine. The mill's PMs 3 and 6 were unaffected by the fire.

 

 

PORTUGAL

 

Portucel reveals packaging plans

Portucel has unveiled further details of its plans to privatize the Gescartão packaging group. The privatization will be carried out in three steps. The first phase involves selling off a 65% stake in the company which amounts to 12.99 million Gescartão shares. The second step will involve the public sale of 25% of the company. In the final phase of the program, the remaining 10% of Gescartão shares will be sold off to employees and small investors.

Fapajal sale completed: Portucel has sold its 99% stake in the tissue company, Fabrica de Papel do Tojal (Fapajal) for Euro 4.1 million ($4.4 million) to Portuguese investment company, Dinamis.

 

 

SWEDEN

 

MoDo set for startup

MoDo has restarted the rebuilt PM 7 at its Husum mill in Sweden. The upgrade was mainly aimed at improving product quality, but uncoated woodfree capacity also increased by 10,000 tons/yr to 185,000 tons/yr. The rebuild involved the installation of a Voith Sulzer headbox and former, along with a Küsters/Beloit two-nip soft calender. Project costs totaled SEK 370 million ($44 million).

 

MoDo Paper picks head

MoDo and SCA have confirmed that the president of SCA Fine Paper, Jan Åström, will head up the new operation formed by the merger of the two companies' fine paper and merchanting units. The new company, Modo Paper, will be organized into six group staff areas including finance, technology, strategic purchasing and investor relations. Modo Paper will have four business sectors centered on commercial print, office paper, pulp/packaging and merchants.

The new company was due to begin operating from 1 October 1999.  

 

ROMANIA

 

Mucart back on block

The Mucart mill in Cluj is up for sale again after the Italian owner that bid for a 51% share of the mill when it was privatized in March failed to pay for the stake. The Italian company reportedly purchased the majority share of the Romanian mill for Lei 6.5 billion ($400,000) just six months ago. But the cardboard producer has been returned to the portfolio of the State Ownership Fund (SOF) since the deal went sour.

Mucart goes back to join another mill still in the SOF sell-off stable - the paper and board producer, Hartia. The Italian papermaker, Cartonificio Biondi, confirmed that it has pulled out of the bidding for the Romanian mill. Biondi had been interested in buying the 77.5% share held by the state-controlled privatization group. But the company eventually pulled out of the bidding, citing the lengthy process involved as their main reason for withdrawing.

 

 

BOSNIA

 

Natron hopes to join up with Gascogne

The Bosnian company, Natron Maglaj, is still locked in negotiations with the Gascogne group of France as it searches for a strategic partner. Natron previously announced that it was also conducting talks with AssiDomän. But the Swedish outfit denied all knowledge of any interest in buying the company. Natron recently said AssiDomän was no longer interested in becoming its strategic partner.

A spokesperson for Gascogne commented, "I wouldn't say yes or no for Natron for the simple reason that the companies wouldn't want us to talk about them. Nor would our shareholders, until a deal is signed or terminated." But Gascogne did confirm that it is still looking at certain companies in the eastern European area and will continue to do so until it succeeds in making an acquisition.

 

 

RUSSIA

 

Arkhangelsk looks set to reopen PM

Arkhangelsk Pulp and Paper Mill is to restart its mothballed PM 6 at Arkhangelsk in Russia. The machine has been shut down for some time due to a lack of orders, but a company spokesman said that the company is now able to restart the PM as orders have picked up. PM 6 will produce 50 tons/day of one-side MG (machine-glazed) paper.

The mill's PM 5 is also out of action, but Arkhangelsk has no plans to restart this machine as yet.

 

 

KOREA

 

Hansol snaps up Concordia

Hansol Paper of Korea has finalized a deal to buy Concordia Paper's board mill in Hong Kong. The mill has two coated duplex board machines with a total capacity of 250,000 tons/yr. The PMs are not running at the moment, but Hansol is gearing up to restart one of the machines. Given the current market situation in Hong Kong and China, the new owners have no immediate plans to start up the second PM.

The $12.5 million transaction was arranged directly between Hansol and Concordia's creditors. Under the deal, Hansol did not take over any of Concordia's debt.

 

 

INDONESIA

 

April to invest in 450,000 ton/yr pulp line

Asia Pacific Resources International (APRIL) has announced a change in its plan to raise pulp production to two million tons/yr. The new proposal is to increase Riaupulp's capacity in two steps. Initially APRIL will build a second line with a 450,000 ton/yr capacity of bleached hardwood kraft pulp - the project will be known as PL#2A. At a later unspecified date, the capacity of pulp line #2 will be boosted to 1.1 million tons/yr. But the company must still secure $350 million to move ahead with the project.

 

 

THAILAND

 

Siam Pulp and Paper to sell businesses

Siam Pulp and Paper (SPP) is on the look-out for a partner to take a majority stake in its pulp and printing/writing businesses in a bid to become a leading regional player. The business units included in the transaction are:

• Siam Cellulose - produces bleached short fiber chemical pulp from eucalyptus

• Banpong Pulp - produces bleached short fiber chemical pulp from bagasse

• Thai Paper - produces uncoated and coated printing/writing paper

• Siam Eucalyptus - promotes contract farmers to plant eucalyptus trees and sell them back to the company.

The Thai group appointed Salomon Smith Barney (SSB) as financial advisor to find a partner. SSB has contacted more than 20 potential partners in Europe, the USA and Asia since the beginning of August. A decision is expected by the end of the year. If a suitable partner is found for these businesses, SPP will concentrate on developing its industrial paper and packaging units.

 

 

MALAYSIA

 

Malaysia and China sign mill deal

Malaysian and Chinese state officials have signed an agreement to build a joint venture pulp and paper mill in Sabah state, Malaysia. Malaysia's prime minister, Mahathir Mohamad, signed the contract during a recent state visit to China. The terms of the agreement have not been disclosed.

Proposals for the mill first came to light when the Lion Group of Malaysia and China Pulp & Paper Industry struck a deal with the Sabah state government in 1997. But little progress has been made since then.

The latest signing shows a commitment from both governments to get the project off the ground, a Lion Group spokesperson said. But before the project can progress further, the Sabah state government must provide land for the mill.

Original plans were for a mill with a capacity of 750,000 tons/yr of pulp and 225,000 tons/yr of paper.

 

 

TAIWAN

 

Long Chen sells to P&G

Taiwan's Long Chen Paper has signed a definitive agreement to sell two tissue mills to Procter & Gamble (P&G). The move follows a non-binding letter of intent which the two parties signed in May this year. The whole transaction should be closed this month. The final purchase price increased slightly to $115 million due to the alteration of some contract terms.

Under the deal, P&G will acquire the Ching-sui mill in Taiwan, which has two 50 ton/day tissue machines, and the Suzhou mill in China, which has one 60 ton/day tissue PM. Both plants have on-site converting facilities.

 

 

MEXICO

 

K-C invests in Mexico

Kimberly-Clark de México (KCM) has announced plans to increase capacity by 15-20% over the next year. The company's current tissue capacity stands at 453,200 tons/yr. The investment will center on debottlenecking work on paper machines, introducing water recycling processes and improving the quality of tissue paper produced. Work will be carried out at all of the company's 10 mills, with the majority of improvements taking place at the Morelia and Ecatepec sites. KCM secured financing of $150 million for the project earlier this month by raising fresh debt in the bond market.

A further investment of $200 million is planned for 2000. This will allow the firm to respond better to the 11% increase in sales volume which the company enjoyed in the first half of this year.

 

 

BRAZIL

 

Riocell aims to lift capacity

Riocell in Brazil plans to increase its ECF (elemental chlorine-free) market pulp capacity by 70,000 tons/yr, taking it to 370,000 tons/yr. Debottlenecking work will begin at the Guaíba mill next year once shareholder approval is given.

The work will take 18 months to complete and the total project cost is expected to top $100 million. The company has not yet released the source of the finance. The increased output is to be sold globally and the first tonnage should reach the market by the second half of 2001.

 

 

USA

 

AWA reshuffles in USA

Arjo Wiggins Appleton (AWA) has announced a major restructuring of its US coated woodfree business. The group intends to concentrate its entire US production of coated woodfree paper at the Combined Locks facility in Wiconsin. The mill currently produces around 360,000 tons/yr, which includes 130,000 tons/yr of coated woodfrees and 230,000 tons/yr of base papers.

The group will invest $25 million to convert production on PM 6 at the Locks mill from carbonless base paper to coated woodfree paper. AWA also plans to transfer coated woodfree production from its Newton Falls plant with a view to finding a buyer for the redundant facility.

Under the US restructuring program, the company expects to increase profits by £11 million/yr ($18 million), starting from mid-2000, when the investment should be completed.

 

 

UK

 

UK SCA snaps up

UK tissue producer Sweden's SCA has taken a further step on the expansion path by acquiring the UK tissue company, AM Paper. The move is part of SCA's ongoing acquisition and expansion strategy in the European hygiene sector. The strategy aims to boost SCA's position as a leading supplier of brand-name and private-label products, with a total market share in Europe of at least 20%.

SCA has acquired all the shares in AM Paper for £192 million ($305 million) on a debt-free basis. The purchase price represents seven times the forecast operating profit of AM Paper for 2000. SCA and AM Paper's total sales of hygiene products in the UK are projected to reach almost SEK 5 billion ($600 million) in 2000.

AM Paper is the UK's second-largest supplier of tissue for the private-label market, where SCA has been relatively underrepresented until now, the Swedish company said. AM Paper's share of the UK consumer tissue market totals 14%. The acquisition will take SCA's share of the consumer tissue market in the UK to 28%.

AM Paper has a total tissue capacity of 60,000 tons/yr. Production is based on TAD (through air drying) and conventional technology. The company started up a new 30,000 ton/yr TAD machine at its Skelmersdale mill in January this year. AM Paper also has a converting capacity of some 100,000 tons/yr.

SCA plans to carry out a share issue to fund the AM Paper acquisition. The issue is expected to generate some SEK 4.6 billion. Proceeds will also be used to fund other acquisitions in the hygiene and packaging sectors.

SCA also revealed that negotiations are at an advanced stage regarding the acquisition of two other hygiene companies as well as two packaging companies.

 

MoDo improves board

MoDo has begun work on an upgrade of PM 2 and thermomechanical (TMP) pulp line at its Workington mill in the UK. PM 2 will be closed down for two weeks this month when the bulk of the work will be carried out.

The company plans to upgrade the PM's drying section along with several other areas in a move that will boost the mill's total board capacity from some 190,000 tons/yr to 240,000 tons/yr.

The investment also involves adding a new refiner and bleaching plant to the TMP line. The whole project should be completed by mid-2000.

 

 

LITHUANIA

 

Lithuania attacts foreign investors

Lithuania's original plans to build a 500,000 ton/yr pulp mill could be set to expand following interest from big players such as Fletcher Challenge Canada, Southern Paper and Repap New Brunswick. According to sources at the Lithuanian ministry of economy, these major producers are among a number of interested parties that are keen to find out more about the proposed mill. A delegation of consultants from North America, South America and Sweden visited the ministry to assess the scope of the project.

A team of potential US investors presented their own plan to the Lithuanian representatives, which included building a sawmill, thermo-mechanical pulp mill and newsprint mill. The ministry said it would consider the US proposal.

Under the original scheme, the Japan International Cooperation Agency (JICA) was due to conduct a feasibility study in June. The Lithuanian government approved the full-scale study in early 1999, but JICA said the funds would not be available until 2000 when the study will go ahead as planned. The original proposal from the government also envisaged a mill capacity of some 500,000 tons/yr and the total cost of the project was estimated at $800 million. But the latest plans suggest that the mill capacity could be 800,000 tons/yr or more.

 

 

BULGARIA

 

Bulgarians aim for joint integration

The Bulgarian group, Lesilhart, is looking to secure a joint venture partnership with a neighboring bleached pulp producer. Lesilhart refused to say which group it is in talks with, but a source did reveal that the company intends to spend $4-5 million to achieve an increase in paper capacity at the mill if an agreement is signed.

The two companies plan to combine their pulp and papermaking capabilities to produce a total of 50,000 tons/yr of copy paper. Lesilhart already has the cutting and finishing capacities to deal with the output. The joint venture expects to sell 70% of the output in the domestic market with the rest of production going to Turkey and Greece.

Lesilhart produces 30,000 tons/yr of woodfree and woodcontaining papers and 40,000 tons/yr of mechanical pulp.

In partnership: An investment partnership set up between Zveta and Valfin holds a 71% share in Lesilhart and the pair are pursuing other projects in the region as well. For example, Zveta and Valfin bought a 51.8% share in the Pirinhart mill in Razlog in June 1997.

The Pirinhart mill took the first step to increasing kraftliner production by 20,000 tons/yr following a PM rebuild carried out last year. But the company will not reap the full benefit of the upgrade until it has concluded work on debottlenecking the recovery boiler by March 2000. Pirinhart's current capacity is some 120,000 tons/yr of testliner and kraftliner.

Greek deal: Trading as the Balkan Forest Group, Zveta and Valfin have also set their sights on Greece. The duo plans to set up a 25,000 ton/yr corrugating materials plant in Greece through a joint venture with a local convertor, Carton.

A site has already been found outside Athens with equipment to be supplied by Agnati. The two parties hope to sign an agreement by the end of this month and begin production by January 2000. The new output will be sold in the domestic market.

 

 

ISRAEL

 

American Israeli hunts for partner

American Israeli Paper Mills (AIPM) is on the lookout for "cooperation" with a foreign party. The move would allow AIPM to increase its uncoated woodfree paper production and branch out into exports. It is not yet certain what form this cooperation would take, but one possible scenario is for a future partner to take an equity stake in the company's fine paper unit.

AIPM seems to be favoring European companies in its quest for potential partners. A company spokesman said that one of the obvious candidates is Neusiedler. The Austrian company is an important player which is looking to expand and is an export-oriented company. But the spokesman stressed that discussions are at an early stage and Neusiedler is not the only company under consideration. "There are definitely other options…we are scouting around," he added.

AIPM's main problem is that production is spread too thinly across a large range of fine papers. The PM at its Hadera mill currently produces fine paper in a basis weight range of 60-240 g/m‰ which is not economical, the spokesman said. With this in mind, AIPM is keen to find a partner so that it can increase the capacity and size of the PM and focus on the best grammage areas for the machine. Extra uncoated woodfree output from the PM expansion would be exported once a market for the paper was secured.

 

 


 


Source: Morgan Stanley Capital Investment

 



Pulp&Paper International October 1999

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