Paper war breaks out as White Birch undercuts Abitibi

Paper war breaks out as White Birch undercuts Abitibi's price discipline
By Andrew Ragsly
http://www.ft.com/cms/s/2/25d563fa-cb97-11dd-ba02-000077b07658,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html

White Birch Paper broke ranks with other newsprint manufacturers this month by slashing prices to capture market share amid dwindling demand, industry sources and two buysiders told Debtwire.

Privately held White Birch is the second largest producer of newsprint in North America with 18% of total market share. The company is flouting attempts by industry leader AbitibiBowater to enforce price discipline by lowering its going contract rate. Abitibi wants to protect pricing in the face of persistent order declines from ailing newspaper publishers, said the sources.

Specifically White Birch cut a deal with Gannett Company this month to supply newsprint through 2009 well-below November's industry-average price point of USD 770 per ton, said two of the industry sources and one of the buysiders. While at a lower price point, the deal is rumoured to boost the volumes White Birch will supply to Gannett year-over-year, one of the sources said.

The pricing war is hitting AbitibiBowater at a particularly inopportune moment. The company faces USD 919m of maturities over the next year, including a USD 347m Libor+ 800bps term loan due 30 March. Management needs to impress lenders with a bullish cash flow story if it hopes to refinance those obligations, said the buysiders.
Spokespersons for White Birch, AbitibiBowater and Gannett declined to comment.

Abitibi's USD 347m Libor+ 800bps term loan was bid at 75 today, down from 82 on 2 December, according to Markit. Bowater's USD 250m 9% traded at 27 on 3 December, down from 45 on 19 November, according to TRACE. White Birch's USD 100m Libor+ 480bps second-lien term loan was bid at 15 today, down from 33 on 10 November. The company's USD 475m Libor+ 275bps first-lien term loan was bid at 48.25 today, down from 59.12 on 24 November, according to Markit.

"AbitibiBowater, as the number one market share player [with 41%], was always going to hold onto prices as long as they could," said one of the industry sources. "It's finally starting to show up now that smaller players are breaking ranks, but White Birch and other companies had been making their undercutting moves since back around September."

AbitibiBowater bowed to pressure from White Birch last week when it rescinded a USD 20 per-ton price increase, according to three of the industry sources. The Canadian-US behemoth also announced last week the removal of 830,000 tons of newsprint capacity.
West Coast paper producers Catalyst Paper (7.8% market share) and Norpac (5%), have already been pricing at a discount to the AbitibiBowater-dominated East Coast market for the better part of a year. West Coast newsprint prices tracked near USD 700 per ton in November, said the sources. An official from Norpac declined to comment, and Catalyst Paper did not return calls.

The pricing conflict is also spreading into the coated free sheet paper market as Gannett is rumoured to have negotiated a USD 1,060 per ton contract with NewPage, down from November's USD 1,100 per ton price point, said one of the buysiders. A spokesperson for NewPage would not comment on specific contracts with its customers, but maintained the company is "holding price just fine".
Similar to newsprint, the coated paper sector has been under pressure to take out capacity in order to offset demand declines and boost pricing. Coated free sheet and newsprint consumption were both down roughly 15% year-to-date, according to a sellside analyst.
NewPage's USD 800m 10% second-lien notes due 2012 were bid at 40.5 on 5 December, down from 56.5 on 24 November, according to TRACE

Analysis: paper

Analysis: paper
Helen Morris, printweek.com, 22 March 2007
http://www.printweek.com/paper/news/645623/Analysis-paper/

Industry braces for yet more increases, with 15% rises on the cards.

Come September, printers could be paying 15% more for paper. March has brought a rise in paper prices of up to 8% and there is no obvious sign of a let-up.

A few years ago, price rises were described as unpredictable, which some say made things worse. Now they’ve become a bi- or even tri-annual event printers have to factor in.


This month’s increase has been blamed on a fall in capacity following the closures of loss-making mills and equally rising energy and pulp costs, which have conspired to drive manufacturers to raise prices.


Many in the industry feel that the price increases will continue this year. Freddie Kienzler, managing director of Essex-based commercial printer Formara, says paper costs are certainly an important factor for any print business. He cites as an example his firm, which has already had two increases this year on business papers and one on other stocks. Kienzler adds that printers are also being warned of further increases later this year. He says: “That is potentially a 15% rise during 2007. I don’t know of any printer that can pass that 15% on to their customers.”

Prepared for worse
Alasdair Browne, managing director of trade stationery printer Abbot Print in Hemel Hempstead, agrees. He says that day-to-day, he needs to deal with the reality of the situation, and believes the price rises will continue year on year. Those tied into contracts to print a particular product over a period of time need to have put a caveat in place. “It needs to say they can then pass on the cost of a paper increase. Those that have not got this, or are unable to make their customer appreciate this, are going to suffer.”

Many believe that mills are just reacting to a decline in the market and shutting operations and switching capacity.

Browne says mills need to work at marketing and advertising paper. “We all hear of the paperless office, but nothing is being done to promote paper to the end-user and reverse this trend.”


For example, he says that carbonless is a far cheaper and quicker way of producing month-end statements for a medium-sized company than reams of blank A4 and loads of ink cartridges and this should be promoted.

Cost-effective
He adds that he believes there is no concerted effort to respond and suggest that pre-printed is actually more cost effective and better quality. “They have something to sell, so sell it. Carbonless should be a good news story. At the very least, the mills should promote the particular product.”


Kienzler says that stability is a another issue that needs to be addressed. “How about customers who are willing to pay a little more for a service that offers something a cut above the usual. Now, that would make a change.”

But there could be light at the end of the tunnel.

One commercial printer thinks the number of increases cannot continue in the next couple of years, blaming the mills for creating an artificial shortage in order to boost prices. He says: “If they go up too much, then Far Eastern mills will all of a sudden be interested in supplying Europe again and the prices will have to fall.”


Browne says the simple answer is to help the mills pass on the costs. He would be happier with a price increase if it was part of a broader strategy that in­cluded marketing what printers and mills sell. He says: “Unfortunately, the reality is that mills will reactively cut costs and increase prices in a downturn, not proactively spend on marketing to reverse it. How many other industries have this approach and survive?”

Tumut pulp mill expansion gets planning green light

Tumut pulp mill expansion gets planning green light
http://www.abc.net.au/news/newsitems/200705/s1913138.htm

Planning approval has been given for the $450 million expansion of a pulp and paper mill at Tumut, in southern New South Wales, but there is still doubt about the project because local roads will need to be upgraded.

Visy plans to more than double the capacity of its mill is expected to create 900 jobs, 400 of them ongoing.

But a company spokesman, Tony Gray, says $24 million is needed to bring local roads up to scratch.

"The issue of roads and transport management is definitely one of the major stumbling blocks to definitely proceeding with the mill," he said.

"We have already put a lot of work into the traffic plan and we'll be attempting to minimise the number of truck movements wherever possible."

Tumut Mayor Gene Vanzella says he is also concerned about roads.

He says the expansion will put a lot of pressure on local resources.

"Last time when they built the stage one, accommodation was booked out as far as Wagga. There was buses coming in with guys from Wagga, Gundagai, Adelong, Batlow, Tumbarumba - even Talbingo was heavily booked," he said.

Ahead of the Bell: MeadWestvaco

Ahead of the Bell: MeadWestvaco
http://news.moneycentral.msn.com/printarticle.aspx?feed=AP&date=20070430&id=6813627

NEW YORK (AP) - Packaging company MeadWestvaco Corp. holds a meeting for shareholders on Monday, ahead of first-quarter results on Wednesday.

Analysts expect MeadWestvaco to report earnings 3 cents per share on sales of $1.55 billion, according to a Thomson Financial poll.

MeadWestvaco didn't fare too well in the fourth quarter, as profit declined 34 percent. Although pricing on its high-quality paperboard and productivity at its paperboard mills both improved, hefty restructuring charges offset results.

Elsewhere in the sector, paper company Bowater Inc. recently widened its first-quarter loss and missed Wall Street estimates by a wide margin. Bowater said weakness in newsprint demand and a seasonal slowdown in the coated paper market weighed on profit.

Bowater's results provided further evidence of weakness in newsprint demand and a seasonal slowdown in the coated paper market, analysts said.

Shares of MeadWestvaco declined 16 cents to $33.04 on the New York Stock Exchange on Friday, and are up 33.5 percent since a 52-week low of $24.76, hit in August.


© 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

From Bad To Worse: Newspapers' Circ Declines

From Bad To Worse: Newspapers' Circ Declines
by Erik Sass, Tuesday, May 1, 2007 8:00 AM ET
http://publications.mediapost.com/index.cfm?fuseaction=Articles.san&s=59553&Nid=29924&p=204904


AMERICA'S FLAGSHIP NEWSPAPERS ARE STILL afloat, but their crews may want to don swimsuits soon. The Audit Bureau of Circulations posted numbers Monday showing that in the six months ending March 2007, total daily circulation fell 2.1% to 44,961,066. Sunday circ fell 3.1% to 48,102,437, compared to the same period last year.


The ABC FAS-FAX numbers follow a litany of bad industry news over the last few weeks, including weak first-quarter earnings from leading newspaper companies, and a decline in the housing market, with ominous implications for newspaper classifieds.

This marks the 17th straight year of decline for both weekday and Sunday circs; this is an industry in distress. Indeed, the latest ABC FAS-FAX numbers look almost identical to previous figures, released biannually in what has become a grim drumbeat of contraction. In the September 2006 report, daily circ fell 2.8% as Sunday circ dropped 3.4%; in March 2006 they fell 2.5% and 3.1%, respectively; September 2005, 2.6% and 3.1%; and March 2005, 1.9% and 2.5%.

As in previous years, big metro dailies took some of the biggest hits, with The New York Times down 1.9%, the Los Angeles Times down 4.2% to 815,723, The Washington Post down 3.5% to 699,130, Chicago Tribune down 2.1% to 566,827, Houston Chronicle down 2% to 504,114, Dallas Morning News down 14.3% to 411,919, the San Francisco Chronicle down 2.9%, Long Island's Newsday down 6.9% to 398,231, and The Boston Globe down 3.7% to 382,503.

These figures actually contain (relatively) good news for some of the big titles, as their percentage rate of decline appears to be slowing. In the September 2006 ABC report, the New York Times' daily circ was down 3.5%, Los Angeles Times 8%, San Francisco Chronicle 5.3% and The Boston Globe 6.7%. On the other hand, losses accelerated slightly at the Chicago Tribune and The Washington Post, increasing by about half a percentage point.

In this gloomy environment, publications that hold their own are success stories: USA Today's circ is up 0.5% and The Wall Street Journal grew 0.6%. The biggest standouts were New York City's two daily tabloids, as the New York Daily News grew 1.4% to 718,174, and the New York Post jumped a remarkable 7.6% to 724,748.

In recent weeks, the nation's biggest newspaper companies have posted weak first-quarter results, citing revenue declines due to Internet competition. In the first quarter of 2007, the New York Times Company saw print ad revenue decline 3.4%, compared to the same period last year, as total profit fell 9.9% to $54.5 million. At the Tribune Company, overall operating revenues slipped 4% to $1.2 billion and operating profit was down 16% to $181 million. Gannett saw total revenues decline slightly from $1.88 billion in 2006 to $1.87 billion in 2007, as net income fell from $235.3 million in first quarter 2006 to $210.6 million in 2007, a roughly 10.5% drop.