Dollar hammers forestry industry
Each cent increase is a $150M hit
The Gazette
Wednesday, June 06, 2007
The rising value of the Canadian dollar is cutting deeply into the lifeline of Quebec forestry companies, according to the industry's council, which estimates that every penny increase takes out at least $150 million a year in industry revenue.
The currency crunch comes amid dismal market conditions and growing concerns that another round of mill closings are coming, Guy Chevrette, president of the Quebec Forest Industry Council, said yesterday.
The average Quebec sawmill has lost an estimated $1.5 million since the beginning of the year, Chevrette said in a statement. "For a pulp and paper plant of 300,000 tonnes, that (loss) is close to $20 million."
Late Friday, Tembec Inc. announced that it would shutter its coated-paper mill in St. Francisville, La., for an indefinite period
The shutdown, due July 31, will affect about 540 employees.
The company, which cited "challenging market conditions in terms of both price and demand," noted that attempts had been made to improve the overall financial performance of the mill.
Yesterday, the president of Canada's largest forestry union took a swipe at forestry companies at a labour convention in New Brunswick.
"Employers, especially in the forestry sector, have deliberately taken the money they have earned from our publicly owned natural resources and invested them elsewhere in the world," Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada, told convention delegates.
He was responding to news that the UPM Kymmene paper and ground wood mills in Miramichi, N.B., will shut down for nine to 12 months, and that four more mills in Quebec are facing temporary shutdown.
"These communities are a microcosm of what is going on in more than four dozen communities from coast to coast to coast," he said, noting that in the past three years, more than 12,000 pulp, paper and sawmill workers have been put on the street across Canada.
"Forest companies are investing those good Canadian dollars in places where workers can most easily be exploited. And then they have the nerve to say Canadian workers can't compete."
lmoore@thegazette.canwest.com
Thursday, June 07, 2007
UPM to Shut Miramichi Paper Mill for One Year
UPM to Shut Miramichi Paper Mill for One Year
June 5, 2007 - UPM said that it will close its Miramichi mill operations in August for up to one year. The paper mill is scheduled to close late in August for 9 to 12 months. The nearby groundwood mill will also shut down.
About 600 employees will be impacted by the closure, UPM said.
The Miramichi mill, located in New Brunswick, Canada, has two machines, producing lightweight coated paper, with an annual capacity of 450,000 tonnes.
Despite best efforts, Miramichi has not been able to turn its exports to the U.S. profitable. The mill is suffering from unprecedented strength of the Canadian dollar. Also, market prices for the coated magazine paper have been decreasing in North America. Demand for magazine grades in North America has been stable, but globally, there continues to be overcapacity in magazine paper, suppressing the sales price, UPM explained.
In Europe, UPM has permanently ceased production of 530,000 tonnes of coated magazine paper during 2006-2007 to reduce the structural overcapacity and improve profitability of the business. The Voikkaa mill in Finland was permanently closed and a production line in Jämsänkoski, Finland, was converted to another business area. UPM also closed 150,000 tonnes of coated fine paper capacity at its Kymi mill, Finland last year.
"UPM's target is to improve the long-term profitability of the coated paper business. With today's decision, UPM leaves all options open for Miramichi. We will continue to explore solutions for Miramichi during the shutdown but realize that there needs to be material changes in the business environment for the mill to start up again,” said Jyrki Ovaska, president of UPM's Magazine Paper Division.
"The Miramichi management and employees have succeeded in steadily improving the efficiency of the mill," Ovaska said. "Unfortunately, their efforts could not overcome the challenges in the business environment."
Ovaska said UPM's North American magazine paper customers will continue to be served by the company's other coated groundwood paper mills in North America and Europe during the Miramichi shutdown.
A decision on restarting Miramichi will be made in 2008, based on market conditions, the company added.
SOURCE: UPM
June 5, 2007 - UPM said that it will close its Miramichi mill operations in August for up to one year. The paper mill is scheduled to close late in August for 9 to 12 months. The nearby groundwood mill will also shut down.
About 600 employees will be impacted by the closure, UPM said.
The Miramichi mill, located in New Brunswick, Canada, has two machines, producing lightweight coated paper, with an annual capacity of 450,000 tonnes.
Despite best efforts, Miramichi has not been able to turn its exports to the U.S. profitable. The mill is suffering from unprecedented strength of the Canadian dollar. Also, market prices for the coated magazine paper have been decreasing in North America. Demand for magazine grades in North America has been stable, but globally, there continues to be overcapacity in magazine paper, suppressing the sales price, UPM explained.
In Europe, UPM has permanently ceased production of 530,000 tonnes of coated magazine paper during 2006-2007 to reduce the structural overcapacity and improve profitability of the business. The Voikkaa mill in Finland was permanently closed and a production line in Jämsänkoski, Finland, was converted to another business area. UPM also closed 150,000 tonnes of coated fine paper capacity at its Kymi mill, Finland last year.
"UPM's target is to improve the long-term profitability of the coated paper business. With today's decision, UPM leaves all options open for Miramichi. We will continue to explore solutions for Miramichi during the shutdown but realize that there needs to be material changes in the business environment for the mill to start up again,” said Jyrki Ovaska, president of UPM's Magazine Paper Division.
"The Miramichi management and employees have succeeded in steadily improving the efficiency of the mill," Ovaska said. "Unfortunately, their efforts could not overcome the challenges in the business environment."
Ovaska said UPM's North American magazine paper customers will continue to be served by the company's other coated groundwood paper mills in North America and Europe during the Miramichi shutdown.
A decision on restarting Miramichi will be made in 2008, based on market conditions, the company added.
SOURCE: UPM
Monday, June 04, 2007
John Faraci has whacked billions from International Paper's U.S. operations
Paper Cuts
Evan Hessel 06.18.07
John Faraci has whacked billions from International Paper's U.S. operations. Can he succeed abroad?
International Paper chief executive John V. Faraci kicked off the board meeting in early May by loading his nine directors into the company's corporate jet. After three flights and 11 hours in the air, the weary group set foot in Svetogorsk, Russia (pop: 16,000), a gritty industrial burg of cement apartment towers on the Karelian Isthmus, near the border with Finland, surrounded by thick pine forest.
The next day Faraci took his companions on tour of IP's 1,600-acre pulp-and- paper mill. He showed off the massive new machine that bleaches wood pulp in a slurry of caustic chemicals. He boasted about slashing energy consumption at its natural gas and biomass power plant. And he walked the group along a recently renovated football-field-length paper machine that pumps out 40 tons of white paper an hour. Thanks to cheaper labor and abundant pulp supplies, paper costs on average 13% less to produce here than in the U.S.
Why drag these folks halfway across the world, instead of subjecting them to a snappy PowerPoint presentation? Faraci has a lot to prove--to the board, to long-suffering investors, to skeptics who see a dying industry ground up in the jaws of overcapacity and shrinking demand. Svetogorsk, he believes, represents one of a handful of new investments abroad--a $2 billion bet in Russia, China and Brazil on basically two commodities: white printing paper and heavy-paper packaging. That gamble could help the 109-year-old Memphis, Tenn. company become the most cost-efficient producer--or break it. The board of directors, Faraci figured, have to like Svetogorsk in order to sign off on the $1 billion or so he wants to spend in a 50-50 joint venture with Ilim Holding, Russia's largest pulp producer.
Paper is a lousy business. Any brief spurt of profitability is inevitably followed by a mad frenzy of plant additions, and then by another round of overcapacity and depressed prices. During the current depression, which stretches back over four years, the industry's return on capital has averaged 5% a year. Companies have faced stark choices: Abitibi-Consolidated and Bowater merged; Weyerhaeuser decided to chuck paper and focus on real estate and building materials; Temple-Inland, squeezed by Carl Icahn, carved itself into three companies.
Faraci has spent the last couple of years wielding a massive ax. He has shuttered four mills in North America, canning 25,000 employees, 22% of the total. That move and some cost-cutting are supposed to add $1.2 billion to the bottom line through 2008. Last year he engineered the largest U.S. land sale since the Louisiana Purchase, selling 6 million acres of forest in the South, Midwest and Northeast, raising $6.6 billion. IP is a smaller but more profitable operation since he took over: In 2006 it netted $635 million on $22 billion in sales, versus $382 million on revenue of $25.2 billion in 2003. Long-term debt is down from $13.5 billion to $6.5 billion. But the $39 stock has barely budged, despite ip's spending $3 billion over 2006 and 2007 to repurchase shares.
An IP lifer, Faraci joined the company as a financial analyst in 1974 after earning an M.B.A. from the University of Michigan. What he loved about the company was its vast acreage, which reminded him of his boyhood summers, spent going to camp, hiking and fishing in New Hampshire's White Mountains. For 15 years he cycled through jobs managing forests in Oregon, operating sawmills and running the company's construction materials subsidiary. He moved to New Zealand in 1995 to run papermaker Carter Holt Harvey, in which IP held a 51% stake. Four years later Faraci was recalled to headquarters as chief financial officer.
IP was at a critical point. In 1999 and 2000 Faraci helped John Dillon, then chief executive, buy Union Camp, Shorewood Packaging and Champion International for a total of $19 billion. The expansion couldn't have come at a worse time. Just as paper demand was lagging, IP was adding production capacity. The acquisitions piled on $5 billion in debt. "In hindsight," Faraci concedes, "we overpaid."
That became clear soon after Dillon stepped down. Faraci began exploring what new shape IP might take. One option: unloading its prized asset--its forests. Timberland appreciates 4% a year simply from tree growth: Relying on sustainable methods, IP could cut 4% of its standing timber each year to sell to its own paper and sawmills or to those of its competitors. "The forests had been our security blanket," Faraci says, adding with a dash of emotion, "The trees were the whole reason I got into this business."
In 2005 IP's forest resources division carved up the forest into 66,000 plots and conducted title searches for each one. Faraci signed deals in April 2006 selling 4.2 million acres of forest to Resource Management Services for $5 billion in cash and notes and another 900,000 acres in Louisiana, Texas and Arkansas for $1.1 billion to TimberStar, a unit of the REIT Istar Financial. Small timber outfits, individuals and environmentalists bought the remaining 562,000 acres for $520 million. (IP still owns 500,000 acres in the U.S.)
Faraci also sold his wood products division for $562 million. While a cyclical business, lumber can be hugely profitable during housing booms. Sales of 13 lumber mills to West Frasier Timber of Canada generated another $325 million; five plywood-and-lumber processors brought in another $240 million from Georgia-Pacific.
All told, IP swept up $11 billion. Faraci used $6.2 billion to pay down debt and $1 billion to fund pension obligations. Those two moves have freed up $500 million a year.
What's left? Paper packaging, the stuff of corrugated cardboard and cereal boxes, and so-called uncoated freesheet paper, used for office and business forms, envelopes, printing and so forth. These are not especially profitable businesses, with Ebit margins of, respectively, 9.7% and 7%. (By contrast forest products, most of them sold off, had margins as high as 36%.) So Faraci has to be hyperefficient. In the U.S. he's counting on various moves--layoffs, flexible labor contracts, heat-recovery devices to lower energy bills, new software for ordering and logistics--to lower costs. But he must also be in markets where people are clamoring for paper. That's why Faraci is betting on plants overseas.
In Latin America demand is growing at 3.6% a year, capacity at only 1%. Since 1960 IP has been in Brazil, where access to eucalyptus trees--which grow in 7-year cycles, compared with 26 years for southern U.S. pine--provide a cheap source of pulp. But in February Faraci shifted gears, swapping a pulp mill in the state of Mato Grosso do Sul for an integrated white paper mill in Luis San Antonio in the state of São Paolo. IP is already increasing capacity there, 130% by 2009, to 1 million tons of white paper a year, convinced that Brazil can soak up the additional output and thereby push up prices. Operations there now generate 3% of revenue, but 10% of net profits.
Faraci's biggest wager to date: Russia. If he persuades his board and the Russian Federal Antimonopoly Service to approve a pending deal, IP would spend $400 million to buy a 50% stake in two mills in Siberia and two in the west that together produce 2.5 million tons of pulp, as well as white paper and containerboard. In addition, over three years IP and its partner would invest $1.2 billion in new capital equipment, with the idea of increasing production by 40% and introducing new products. Faraci sees Siberia as a gateway to Asia, where the mills now export 45% of their pulp and where the market is expanding 7% a year.
Still, there's risk. Despite IP's goodwill efforts in Svetogorsk, where it has created jobs for unemployed paper workers and built an orphanage, the Kremlin could insist on tough terms--as it has for Western energy giants. As Credit Suisse analyst Mark W. Connelly says, it could be years before an investment in Ilim pays off.
China poses even greater potential obstacles. In March 2006 IP put up $140 million in a joint venture with Shandong Sun Paper, that nation's fifth-largest paper-and-packaging company. The deal includes two coated-paperboard machines producing packaging for toiletries and cigarettes; a third comes onstream later this year. This comes on top of investments in nine corrugated-box plants in China.
Faraci vows to lift IP Asian sales from an expected $250 million this year to $1.6 billion in 2009. But that assumes he will consummate an as yet uncompleted deal for a white paper plant (IP declines to name where it is). And that China's paper industry, backed by $24 billion from the State Development & Planning Commission, doesn't overbuild and overproduce. New Chinese mills already make and ship paper for less than any U.S. manufacturer, and they wouldn't hesitate to dump supplies within their own borders to keep the business chugging. "The Chinese care more about jobs than profits," concedes Michael Bruner, IP's manager at the Courtland, Ala. plant, who has toured Chinese paper mills.
Faraci acknowledges the coming fight. "I know we don't have this market staked out," he says. "We have very strong competitors pulling all the levers they can. You gotta run fast just to stay even."
By the Numbers
Paper Tiger
China is a fast-growing competitor.
$54 billion Asia's paper and forestry sales last year, vs. $127 billion for U.S.
42 Number of new Chinese mills to be built by 2010; the U.S. has closed 35 since 2005.
$547China's cost per ton of white paper produced, compared with $481 in the U.S.
Sources: RISI; PricewaterhouseCoopers; Center for Paper Business & Industry Studies at Georgia Tech.
Evan Hessel 06.18.07
John Faraci has whacked billions from International Paper's U.S. operations. Can he succeed abroad?
International Paper chief executive John V. Faraci kicked off the board meeting in early May by loading his nine directors into the company's corporate jet. After three flights and 11 hours in the air, the weary group set foot in Svetogorsk, Russia (pop: 16,000), a gritty industrial burg of cement apartment towers on the Karelian Isthmus, near the border with Finland, surrounded by thick pine forest.
The next day Faraci took his companions on tour of IP's 1,600-acre pulp-and- paper mill. He showed off the massive new machine that bleaches wood pulp in a slurry of caustic chemicals. He boasted about slashing energy consumption at its natural gas and biomass power plant. And he walked the group along a recently renovated football-field-length paper machine that pumps out 40 tons of white paper an hour. Thanks to cheaper labor and abundant pulp supplies, paper costs on average 13% less to produce here than in the U.S.
Why drag these folks halfway across the world, instead of subjecting them to a snappy PowerPoint presentation? Faraci has a lot to prove--to the board, to long-suffering investors, to skeptics who see a dying industry ground up in the jaws of overcapacity and shrinking demand. Svetogorsk, he believes, represents one of a handful of new investments abroad--a $2 billion bet in Russia, China and Brazil on basically two commodities: white printing paper and heavy-paper packaging. That gamble could help the 109-year-old Memphis, Tenn. company become the most cost-efficient producer--or break it. The board of directors, Faraci figured, have to like Svetogorsk in order to sign off on the $1 billion or so he wants to spend in a 50-50 joint venture with Ilim Holding, Russia's largest pulp producer.
Paper is a lousy business. Any brief spurt of profitability is inevitably followed by a mad frenzy of plant additions, and then by another round of overcapacity and depressed prices. During the current depression, which stretches back over four years, the industry's return on capital has averaged 5% a year. Companies have faced stark choices: Abitibi-Consolidated and Bowater merged; Weyerhaeuser decided to chuck paper and focus on real estate and building materials; Temple-Inland, squeezed by Carl Icahn, carved itself into three companies.
Faraci has spent the last couple of years wielding a massive ax. He has shuttered four mills in North America, canning 25,000 employees, 22% of the total. That move and some cost-cutting are supposed to add $1.2 billion to the bottom line through 2008. Last year he engineered the largest U.S. land sale since the Louisiana Purchase, selling 6 million acres of forest in the South, Midwest and Northeast, raising $6.6 billion. IP is a smaller but more profitable operation since he took over: In 2006 it netted $635 million on $22 billion in sales, versus $382 million on revenue of $25.2 billion in 2003. Long-term debt is down from $13.5 billion to $6.5 billion. But the $39 stock has barely budged, despite ip's spending $3 billion over 2006 and 2007 to repurchase shares.
An IP lifer, Faraci joined the company as a financial analyst in 1974 after earning an M.B.A. from the University of Michigan. What he loved about the company was its vast acreage, which reminded him of his boyhood summers, spent going to camp, hiking and fishing in New Hampshire's White Mountains. For 15 years he cycled through jobs managing forests in Oregon, operating sawmills and running the company's construction materials subsidiary. He moved to New Zealand in 1995 to run papermaker Carter Holt Harvey, in which IP held a 51% stake. Four years later Faraci was recalled to headquarters as chief financial officer.
IP was at a critical point. In 1999 and 2000 Faraci helped John Dillon, then chief executive, buy Union Camp, Shorewood Packaging and Champion International for a total of $19 billion. The expansion couldn't have come at a worse time. Just as paper demand was lagging, IP was adding production capacity. The acquisitions piled on $5 billion in debt. "In hindsight," Faraci concedes, "we overpaid."
That became clear soon after Dillon stepped down. Faraci began exploring what new shape IP might take. One option: unloading its prized asset--its forests. Timberland appreciates 4% a year simply from tree growth: Relying on sustainable methods, IP could cut 4% of its standing timber each year to sell to its own paper and sawmills or to those of its competitors. "The forests had been our security blanket," Faraci says, adding with a dash of emotion, "The trees were the whole reason I got into this business."
In 2005 IP's forest resources division carved up the forest into 66,000 plots and conducted title searches for each one. Faraci signed deals in April 2006 selling 4.2 million acres of forest to Resource Management Services for $5 billion in cash and notes and another 900,000 acres in Louisiana, Texas and Arkansas for $1.1 billion to TimberStar, a unit of the REIT Istar Financial. Small timber outfits, individuals and environmentalists bought the remaining 562,000 acres for $520 million. (IP still owns 500,000 acres in the U.S.)
Faraci also sold his wood products division for $562 million. While a cyclical business, lumber can be hugely profitable during housing booms. Sales of 13 lumber mills to West Frasier Timber of Canada generated another $325 million; five plywood-and-lumber processors brought in another $240 million from Georgia-Pacific.
All told, IP swept up $11 billion. Faraci used $6.2 billion to pay down debt and $1 billion to fund pension obligations. Those two moves have freed up $500 million a year.
What's left? Paper packaging, the stuff of corrugated cardboard and cereal boxes, and so-called uncoated freesheet paper, used for office and business forms, envelopes, printing and so forth. These are not especially profitable businesses, with Ebit margins of, respectively, 9.7% and 7%. (By contrast forest products, most of them sold off, had margins as high as 36%.) So Faraci has to be hyperefficient. In the U.S. he's counting on various moves--layoffs, flexible labor contracts, heat-recovery devices to lower energy bills, new software for ordering and logistics--to lower costs. But he must also be in markets where people are clamoring for paper. That's why Faraci is betting on plants overseas.
In Latin America demand is growing at 3.6% a year, capacity at only 1%. Since 1960 IP has been in Brazil, where access to eucalyptus trees--which grow in 7-year cycles, compared with 26 years for southern U.S. pine--provide a cheap source of pulp. But in February Faraci shifted gears, swapping a pulp mill in the state of Mato Grosso do Sul for an integrated white paper mill in Luis San Antonio in the state of São Paolo. IP is already increasing capacity there, 130% by 2009, to 1 million tons of white paper a year, convinced that Brazil can soak up the additional output and thereby push up prices. Operations there now generate 3% of revenue, but 10% of net profits.
Faraci's biggest wager to date: Russia. If he persuades his board and the Russian Federal Antimonopoly Service to approve a pending deal, IP would spend $400 million to buy a 50% stake in two mills in Siberia and two in the west that together produce 2.5 million tons of pulp, as well as white paper and containerboard. In addition, over three years IP and its partner would invest $1.2 billion in new capital equipment, with the idea of increasing production by 40% and introducing new products. Faraci sees Siberia as a gateway to Asia, where the mills now export 45% of their pulp and where the market is expanding 7% a year.
Still, there's risk. Despite IP's goodwill efforts in Svetogorsk, where it has created jobs for unemployed paper workers and built an orphanage, the Kremlin could insist on tough terms--as it has for Western energy giants. As Credit Suisse analyst Mark W. Connelly says, it could be years before an investment in Ilim pays off.
China poses even greater potential obstacles. In March 2006 IP put up $140 million in a joint venture with Shandong Sun Paper, that nation's fifth-largest paper-and-packaging company. The deal includes two coated-paperboard machines producing packaging for toiletries and cigarettes; a third comes onstream later this year. This comes on top of investments in nine corrugated-box plants in China.
Faraci vows to lift IP Asian sales from an expected $250 million this year to $1.6 billion in 2009. But that assumes he will consummate an as yet uncompleted deal for a white paper plant (IP declines to name where it is). And that China's paper industry, backed by $24 billion from the State Development & Planning Commission, doesn't overbuild and overproduce. New Chinese mills already make and ship paper for less than any U.S. manufacturer, and they wouldn't hesitate to dump supplies within their own borders to keep the business chugging. "The Chinese care more about jobs than profits," concedes Michael Bruner, IP's manager at the Courtland, Ala. plant, who has toured Chinese paper mills.
Faraci acknowledges the coming fight. "I know we don't have this market staked out," he says. "We have very strong competitors pulling all the levers they can. You gotta run fast just to stay even."
By the Numbers
Paper Tiger
China is a fast-growing competitor.
$54 billion Asia's paper and forestry sales last year, vs. $127 billion for U.S.
42 Number of new Chinese mills to be built by 2010; the U.S. has closed 35 since 2005.
$547China's cost per ton of white paper produced, compared with $481 in the U.S.
Sources: RISI; PricewaterhouseCoopers; Center for Paper Business & Industry Studies at Georgia Tech.
Tembec to idle its coated paper mill located in St. Francisville, Louisiana
Tembec to idle its coated paper mill located in St. Francisville, Louisiana
Temiscaming, Quebec, June 1, 2007 – Tembec today announced that its coated paper mill located in St. Francisville, Louisiana will be indefinitely idled, with a target date for idling of July 31, 2007. It will affect approximately 540 employees.
The St. Francisville mill has a capacity of 325,000 short tons of coated and specialty papers, primarily used in catalogues, magazines and cover stock. Tembec acquired the facility in June 2001 by way of a Chapter 11 bankruptcy proceeding involving the mill’s former owner, Crown Paper Co.
A number of factors have combined to make this decision necessary, according to Dan Alexander, Executive Vice President and President, Paper Group. “The effect of challenging market conditions in terms of both price and demand, the inconsistent performance of the mill in terms of production, the increased cost of purchased energy, and the high manufacturing costs at this site have resulted in a situation that could not be sustained. While there has been progress during the past year, the overall financial performance of this site has been and continues to be unacceptable,” said Mr. Alexander.
The decision to idle St. Francisville is consistent with the recovery plan that was announced last year by Tembec President and CEO, James Lopez. Margin improvement at all manufacturing locations is central to this plan and the Company had indicated that, where no long-term solutions could be identified and implemented to achieve this goal, necessary action would be taken.
“Significant steps were taken in 2006 to lower the operating costs of this facility and upgrade the product mix. Despite these changes, this facility continues to be hampered by high energy costs, low machine productivity and difficult market conditions. The Company will continue to evaluate options to improve the profitability of this site and will take all available steps to ensure its customers will not experience supply interruptions,” said Mr. Lopez.
Tembec indicated that it is reviewing the full range of alternatives for this site. The Company would not speculate on the outcome of this review process.
“Decisions of this nature are never easy to make, and Tembec regrets the impact of today’s announcement on employees, their families and the St. Francisville community,” concluded Mr. Alexander.
Tembec is a large, diversified and integrated forest products company. With operations principally located in North America and in France, the Company employs approximately 9,000 people. Tembec’s common shares are listed on the Toronto Stock Exchange under the symbol TBC. Additional information on Tembec is available on its website at www.tembec.com
Temiscaming, Quebec, June 1, 2007 – Tembec today announced that its coated paper mill located in St. Francisville, Louisiana will be indefinitely idled, with a target date for idling of July 31, 2007. It will affect approximately 540 employees.
The St. Francisville mill has a capacity of 325,000 short tons of coated and specialty papers, primarily used in catalogues, magazines and cover stock. Tembec acquired the facility in June 2001 by way of a Chapter 11 bankruptcy proceeding involving the mill’s former owner, Crown Paper Co.
A number of factors have combined to make this decision necessary, according to Dan Alexander, Executive Vice President and President, Paper Group. “The effect of challenging market conditions in terms of both price and demand, the inconsistent performance of the mill in terms of production, the increased cost of purchased energy, and the high manufacturing costs at this site have resulted in a situation that could not be sustained. While there has been progress during the past year, the overall financial performance of this site has been and continues to be unacceptable,” said Mr. Alexander.
The decision to idle St. Francisville is consistent with the recovery plan that was announced last year by Tembec President and CEO, James Lopez. Margin improvement at all manufacturing locations is central to this plan and the Company had indicated that, where no long-term solutions could be identified and implemented to achieve this goal, necessary action would be taken.
“Significant steps were taken in 2006 to lower the operating costs of this facility and upgrade the product mix. Despite these changes, this facility continues to be hampered by high energy costs, low machine productivity and difficult market conditions. The Company will continue to evaluate options to improve the profitability of this site and will take all available steps to ensure its customers will not experience supply interruptions,” said Mr. Lopez.
Tembec indicated that it is reviewing the full range of alternatives for this site. The Company would not speculate on the outcome of this review process.
“Decisions of this nature are never easy to make, and Tembec regrets the impact of today’s announcement on employees, their families and the St. Francisville community,” concluded Mr. Alexander.
Tembec is a large, diversified and integrated forest products company. With operations principally located in North America and in France, the Company employs approximately 9,000 people. Tembec’s common shares are listed on the Toronto Stock Exchange under the symbol TBC. Additional information on Tembec is available on its website at www.tembec.com
Catalyst Paper laying off 185 at Port Alberni operation
Catalyst Paper laying off 185 at Port Alberni operation
The company will eliminate another 130 jobs from head office staff
by Gordon Hamilton
Vancouver Sun
Published: Thursday, May 31, 2007
Catalyst Paper said Wednesday it is shutting down one of two paper machines at Port Alberni, laying off 185 people in the Vancouver Island community and eliminating another 130 jobs across the company.
Declining newsprint consumption in North America and the sky-high Canadian dollar forced the money-losing papermaker to make the sweeping restructuring moves, corporate relations vice-president Lyn Brown said Wednesday.
At the same time, Catalyst said it will be moving out of its downtown Vancouver headquarters for cheaper office space in Richmond. Many of the 130 support jobs will be lost in the head office move.
Email to a friend
Printer friendly
Font: ****That's on top of 350 jobs phased out in a cost-cutting move announced only 10 weeks ago.
"These are not easy decisions to make and we recognize they affect people in a very personal way. But at the same time, these are tough times," Brown said, noting that every one cent change in the dollar has a $9 million impact on the company's bottom line.
Catalyst's operating costs are in Canadian dollars but the majority of Catalyst's business is conducted in export markets which pay in U.S. dollars.
Brown said over the last four years the company has achieved $400 million in performance improvements "only to see those gains erased" by higher energy costs and a higher Canadian dollar.
The loss of the Port Alberni paper machine is being viewed by many in the community as a betrayal by the company. Catalyst has lobbied for and received tax breaks from the city.
"We did our thing for them," Port Alberni Mayor Ken McRae said of the tax breaks. "We can't rely on them any more."
An official at the local Communications, Energy and Paperworkers Union blamed New York financial investor Third Avenue Management for the lay-offs. Third Avenue increased its stake in the company to 38 per cent last year and immediately launched a remake of the board of directors and senior management. Rick Hebert, second vice-president of CEP Local 686, said the layoffs will throw people's lives into turmoil and hurt the town's economy.
"But these private equity investors only care about shareholder profit," Hebert said.
When Hebert began working at the mill in 1977, it employed 1,500 people, he said. Once the paper machine shuts down -- Catalyst announced it is an indefinite curtailment starting Aug. 31 -- the remaining operation, a lightweight coated paper machine, will only employ 230 people.
Brown said the restructuring is more a matter of survival for the company.
"The reality is: A 93-cent Canadian dollar makes more acute some of the costs the Port Alberni mill faces," she said.
The Port Alberni machine makes directory paper, which is slightly high in value than newsprint. However, the Port Alberni machine has higher costs than Catalyst's other machines. It's production is to be shifted to the company's Crofton mill north of Victoria, replacing 134,000 tonnes of newsprint production at that plant.
Catalyst operates four pulp and paper mills in resource towns on Vancouver Island and at Powell River on the mainland. It also operates a recycled paper plant on the Lower Mainland.
ghamilton@png.canwest.com
© The Vancouver Sun 2007
The company will eliminate another 130 jobs from head office staff
by Gordon Hamilton
Vancouver Sun
Published: Thursday, May 31, 2007
Catalyst Paper said Wednesday it is shutting down one of two paper machines at Port Alberni, laying off 185 people in the Vancouver Island community and eliminating another 130 jobs across the company.
Declining newsprint consumption in North America and the sky-high Canadian dollar forced the money-losing papermaker to make the sweeping restructuring moves, corporate relations vice-president Lyn Brown said Wednesday.
At the same time, Catalyst said it will be moving out of its downtown Vancouver headquarters for cheaper office space in Richmond. Many of the 130 support jobs will be lost in the head office move.
Email to a friend
Printer friendly
Font: ****That's on top of 350 jobs phased out in a cost-cutting move announced only 10 weeks ago.
"These are not easy decisions to make and we recognize they affect people in a very personal way. But at the same time, these are tough times," Brown said, noting that every one cent change in the dollar has a $9 million impact on the company's bottom line.
Catalyst's operating costs are in Canadian dollars but the majority of Catalyst's business is conducted in export markets which pay in U.S. dollars.
Brown said over the last four years the company has achieved $400 million in performance improvements "only to see those gains erased" by higher energy costs and a higher Canadian dollar.
The loss of the Port Alberni paper machine is being viewed by many in the community as a betrayal by the company. Catalyst has lobbied for and received tax breaks from the city.
"We did our thing for them," Port Alberni Mayor Ken McRae said of the tax breaks. "We can't rely on them any more."
An official at the local Communications, Energy and Paperworkers Union blamed New York financial investor Third Avenue Management for the lay-offs. Third Avenue increased its stake in the company to 38 per cent last year and immediately launched a remake of the board of directors and senior management. Rick Hebert, second vice-president of CEP Local 686, said the layoffs will throw people's lives into turmoil and hurt the town's economy.
"But these private equity investors only care about shareholder profit," Hebert said.
When Hebert began working at the mill in 1977, it employed 1,500 people, he said. Once the paper machine shuts down -- Catalyst announced it is an indefinite curtailment starting Aug. 31 -- the remaining operation, a lightweight coated paper machine, will only employ 230 people.
Brown said the restructuring is more a matter of survival for the company.
"The reality is: A 93-cent Canadian dollar makes more acute some of the costs the Port Alberni mill faces," she said.
The Port Alberni machine makes directory paper, which is slightly high in value than newsprint. However, the Port Alberni machine has higher costs than Catalyst's other machines. It's production is to be shifted to the company's Crofton mill north of Victoria, replacing 134,000 tonnes of newsprint production at that plant.
Catalyst operates four pulp and paper mills in resource towns on Vancouver Island and at Powell River on the mainland. It also operates a recycled paper plant on the Lower Mainland.
ghamilton@png.canwest.com
© The Vancouver Sun 2007
Sunday, June 03, 2007
Shutdown feared at Catalyst Paper
Shutdown feared at Catalyst Paper
by Gordon Hamilton
Vancouver Sun
Published: Wednesday, May 30, 2007
Catalyst Paper has called a meeting today with union leaders from its four pulp and paper operations in what is widely believed to be an announcement that it intends to shut down capacity.
"I would say things are not looking too bright at Catalyst," said investment analyst Paul Quinn of Salman Partners. "It's really difficult right now for Canadian producers with the Canadian dollar where it is and fibre costs going up.
"I wouldn't rule out temporarily shutting down some capacity."
Email to a friend
Printer friendly
Font: ****Catalyst has mills at Port Alberni, Powell River, Crofton and Campbell River. It could close one entire mill or several machines at a number of mills. The company lost $25 million in the first quarter of 2007.
Catalyst is the coastal region's prinicipal pulp and paper company, with 3,800 employees. Besides the four paper mills, it runs the province's only plant producing recycled paper.
The meeting with union leaders comes after Catalyst's board of directors met Tuesday in Vancouver. Representatives of the company's largest shareholder, Third Avenue Management of New York, were on hand for the meeting.
Catalyst is being squeezed by poor paper markets and because its operating costs are all in Canadian dollars. But the majority of Catalyst's business is conducted in export markets, so its transactions are for the most part completed in US dollars. As the Canadian dollar climbs versus the greenback, the company's revenue stream is less able to cover its operating costs.
The Canadian dollar closed above 93 cents US on Tuesday.
The last time Catalyst temporarily shut down capacity was in early 2005 when one paper line was closed at Port Alberni. That shutdown lasted for almost two years before the company declared it permanent.
Port Alberni Mayor Ken McRae was prepared for the worst Tuesday, saying he expects the company will announce it is closing further capacity there. Catalyst's Port Alberni mill produces lightweight coated paper and directory paper. Lightweight coated prices are weak and the directory machine has high operating costs.
"We have been hearing so many stories -- that the mill has been sold to someone else, that they are going to shut down another machine. You never know. The machines are old, eh?" said McRae.
"Whatever they do, they will do. And we will just move on."
ghamilton@png.canwest.com
© The Vancouver Sun 2007
by Gordon Hamilton
Vancouver Sun
Published: Wednesday, May 30, 2007
Catalyst Paper has called a meeting today with union leaders from its four pulp and paper operations in what is widely believed to be an announcement that it intends to shut down capacity.
"I would say things are not looking too bright at Catalyst," said investment analyst Paul Quinn of Salman Partners. "It's really difficult right now for Canadian producers with the Canadian dollar where it is and fibre costs going up.
"I wouldn't rule out temporarily shutting down some capacity."
Email to a friend
Printer friendly
Font: ****Catalyst has mills at Port Alberni, Powell River, Crofton and Campbell River. It could close one entire mill or several machines at a number of mills. The company lost $25 million in the first quarter of 2007.
Catalyst is the coastal region's prinicipal pulp and paper company, with 3,800 employees. Besides the four paper mills, it runs the province's only plant producing recycled paper.
The meeting with union leaders comes after Catalyst's board of directors met Tuesday in Vancouver. Representatives of the company's largest shareholder, Third Avenue Management of New York, were on hand for the meeting.
Catalyst is being squeezed by poor paper markets and because its operating costs are all in Canadian dollars. But the majority of Catalyst's business is conducted in export markets, so its transactions are for the most part completed in US dollars. As the Canadian dollar climbs versus the greenback, the company's revenue stream is less able to cover its operating costs.
The Canadian dollar closed above 93 cents US on Tuesday.
The last time Catalyst temporarily shut down capacity was in early 2005 when one paper line was closed at Port Alberni. That shutdown lasted for almost two years before the company declared it permanent.
Port Alberni Mayor Ken McRae was prepared for the worst Tuesday, saying he expects the company will announce it is closing further capacity there. Catalyst's Port Alberni mill produces lightweight coated paper and directory paper. Lightweight coated prices are weak and the directory machine has high operating costs.
"We have been hearing so many stories -- that the mill has been sold to someone else, that they are going to shut down another machine. You never know. The machines are old, eh?" said McRae.
"Whatever they do, they will do. And we will just move on."
ghamilton@png.canwest.com
© The Vancouver Sun 2007
Friday, June 01, 2007
Pulp mill builders want better guarantees of timber supply
Timber tariffs decrease investors' interest in Russian forest industry
Pulp mill builders want better guarantees of timber supply
Export tariffs imposed by Russia on raw timber are likely to make Finnish forest companies less willing to invest in Russia's forest industry.
The tariffs will cause practical problems for Russia if the "wrong" types of wood harvested during felling cannot be exported.
The export tariffs are to take effect from the beginning of July. Initially the fee will be EUR 10 per cubic metre, and it is to increase by degrees to EUR 50.
The idea behind the tariffs is to force Western companies who want to use Russian raw material to invest in production in Russia.
Finnish experts see the tactic as strange. Most countries who want to attract foreign investment use positive incentives, but Russia is resorting to the threat of punitive measures.
So far, Finns have invested fairly little in the Russian forest sector. A few sawmills, a plywood plant and a cardboard mill have been put up, but pulp and paper projects are still in the planning stages.
The most serious project is a pulp mill planned by Metsä-Botnia in the Vologda region.
Metsä-Botnia CEO Erkki Varis says that sudden administrative moves, such as the export tariffs imposed by Russia, are "always poison" for investors, as they create uncertainty.
The tariffs also pose concrete difficulties for pulp mills operating in Russia.
"No factory exists that would be able to use all of the tree species in a certain area. If a factory produces pulp from coniferous trees, the forest might yield three times as much leafy trees and unusable wood", Varis says.
"There is no use for them in Russia. If tariffs are imposed on them, what are we supposed to do. Burn them?"
Varis says that the Vologda pulp mill is a long-term project that might be implemented in the next decade. He notes that nobody knows what will be happening in Russia at that time.
The greatest risks in the pulp mill project involve the availability of raw material, Varis admits. A promise from the local governor that there will be enough wood is not good enough for an investor.
"We have to be certain that the mill will get 300 truckloads of raw material every day. We need to have enough long-term and permanent felling contracts in our back pockets."
Timo Uronen, head of the forest industry section of the Ernst & Young auditing service, says that the equipment in Russia's forest sector is old and in poor condition. "There is a need for EUR 10 billion in investments", he states.
In Uronen's opinion, Russia has many opportunities, but the risks are considerable. "They apply to wood acquisition and logistics."
"The timber tariffs and the behaviour linked with them will certainly not increase confidence. Hopefully the whole thing will go away, but it does have an impact on the willingness of companies to invest", Uronen says.
Russia has vast forest resources, but they are used inefficiently. Plans are for annual felling of 576 million cubic metres, but currently only 130 million cubic metres are harvested from Russia's forests.
Russia's production of pulp, paper, and cardboard is 10 million tonnes a year, whereas Finland produces 14 million tonnes.
Pulp mill builders want better guarantees of timber supply
Export tariffs imposed by Russia on raw timber are likely to make Finnish forest companies less willing to invest in Russia's forest industry.
The tariffs will cause practical problems for Russia if the "wrong" types of wood harvested during felling cannot be exported.
The export tariffs are to take effect from the beginning of July. Initially the fee will be EUR 10 per cubic metre, and it is to increase by degrees to EUR 50.
The idea behind the tariffs is to force Western companies who want to use Russian raw material to invest in production in Russia.
Finnish experts see the tactic as strange. Most countries who want to attract foreign investment use positive incentives, but Russia is resorting to the threat of punitive measures.
So far, Finns have invested fairly little in the Russian forest sector. A few sawmills, a plywood plant and a cardboard mill have been put up, but pulp and paper projects are still in the planning stages.
The most serious project is a pulp mill planned by Metsä-Botnia in the Vologda region.
Metsä-Botnia CEO Erkki Varis says that sudden administrative moves, such as the export tariffs imposed by Russia, are "always poison" for investors, as they create uncertainty.
The tariffs also pose concrete difficulties for pulp mills operating in Russia.
"No factory exists that would be able to use all of the tree species in a certain area. If a factory produces pulp from coniferous trees, the forest might yield three times as much leafy trees and unusable wood", Varis says.
"There is no use for them in Russia. If tariffs are imposed on them, what are we supposed to do. Burn them?"
Varis says that the Vologda pulp mill is a long-term project that might be implemented in the next decade. He notes that nobody knows what will be happening in Russia at that time.
The greatest risks in the pulp mill project involve the availability of raw material, Varis admits. A promise from the local governor that there will be enough wood is not good enough for an investor.
"We have to be certain that the mill will get 300 truckloads of raw material every day. We need to have enough long-term and permanent felling contracts in our back pockets."
Timo Uronen, head of the forest industry section of the Ernst & Young auditing service, says that the equipment in Russia's forest sector is old and in poor condition. "There is a need for EUR 10 billion in investments", he states.
In Uronen's opinion, Russia has many opportunities, but the risks are considerable. "They apply to wood acquisition and logistics."
"The timber tariffs and the behaviour linked with them will certainly not increase confidence. Hopefully the whole thing will go away, but it does have an impact on the willingness of companies to invest", Uronen says.
Russia has vast forest resources, but they are used inefficiently. Plans are for annual felling of 576 million cubic metres, but currently only 130 million cubic metres are harvested from Russia's forests.
Russia's production of pulp, paper, and cardboard is 10 million tonnes a year, whereas Finland produces 14 million tonnes.
Subscribe to:
Posts (Atom)
