Poor demand, strong dollar mean weak 2Q

The vast majority of U.S. paper and forestry companies reported sharply lower earnings in the second quarter compared to 2000. The main reasons for the downturn were: weak demand for pulp, paper, and packaging materials; slumping market prices; and one-time charges for plant closings. The strong U.S. dollar also dragged on earnings as U.S. paper exports were hurt by the relative strength of the U.S. dollar versus foreign currencies. For the first five months of the year, for example, newsprint exports fell 20%; printing and writing papers tumbled 6%; and kraft linerboard exports were down 24%. Total industry shipments were off approximately 7% from a year ago. Adding to the industry's plight, the U.S. economy grew at an annual rate of just 0.7% in the second quarter, its lowest in eight years. But spending by consumers - the key to demand for many paper and packaging products - grew 2.1% in the second quarter. That figure was down from 3% in the first quarter.

Weyerhaeuser, Stora report weak earnings

Two giants of the paper and forestry industry - Weyerhaeuser Co. and Stora Enso Oyj - reported second quarter results that point to continued weakness in worldwide pulp and paper markets. Weyerhaeuser Co. said its earnings were down for the second consecutive quarter. Weyerhaeuser earned $171 million, or $0.78/share, in the second quarter, compared with $203 million, or $0.89/share, during the same period last year, which included an $82 million after-tax charge. This year's figures include several one-time items, including a change in the Canadian corporate income tax rate and the transition to a new shipping fleet. Without those items, Weyerhaeuser earned $162 million, or $0.74/share, compared with $285 million, or $1.25/share (before nonrecurring items), in the second quarter of last year. Stora Enso Oyj, the world's second-largest paper company after International Paper, reported sharply lower second-quarter earnings, particularly for its fine paper operations in Europe and North America. The company said that paper markets remained difficult and prices were under pressure. Second-quarter pre-tax profit fell 42% from the first quarter to 248.3 million euros ($219 million). The North American operations showed a six-month operating loss of $3 million versus a year-ago profit of $87 million.

Weyco, Willamette to continue battle

Willamette Industries Inc. said it would continue to fight a hostile $7.2 billion takeover bid by larger rival Weyerhaeuser Co., despite losing a closely contested election to fill three seats on its board of directors. The results of a shareholder vote held June 7 and announced on July 2 show Weyerhaeuser's three nominees won the support of 48.35 million shares, or 44.1% of the proxy votes cast. Willamette said that because Weyer-haeuser failed to win a majority of the votes cast, there was no clear-cut mandate to accept Weyerhaeuser's $50/share tender offer.

G-P submits resigna-tion to AF&PA

Georgia-Pacific Corp. (G-P), the second largest papermaker in the U.S., submitted its resignation notice to the American Forest & Paper Assn. (AF&PA) in May. Last year, G-P withdrew its membership from the Coalition for Fair Lumber Imports - the lobbying group for U.S. producers opposed to Canadian lumber imports - at the same time the Canadian Softwood Lumber Agreement neared expiry. Although unconfirmed, one source noted that the association membership requirement that members participate in SFI on-product labeling may have factored in G-P's decision to withdraw from the AF&PA. G-P plans to formally leave the AF&PA in January.

Weyco pays off Cedar River debt

Weyerhaeuser Co. plans to pay off about $300 million in debt acquired in its buyout of Cedar River Paper Co.'s 720,000-tpy recycled linerboard and corrugating medium mill in Cedar Rapids, Iowa, by selling $840 million in investment-grade bonds. Weyerhaeuser already had a 50% equity stake in the Cedar Rapids mill. It purchased the other half ownership from BE&K, a Birmingham, Ala., engineering firm. With 100% recycled content containerboard, Cedar River is said to be a low-cost operation. It is Weyerhaeuser's first 100% recycled operation.

Potlatch sells bonds in refinancing effort

Potlatch Corp. is selling $250 million of sr. subordinate notes as part of the company's refinancing program for its nearly $1.1 billion dollar debt. Potlatch has struggled with debt service because its net earnings from 1998 to 2000 averaged out at a loss of $37 million per year. The notes will mature in 10 years, according to Morgan Stanley Dean Witter.

Abitibi to invest in Ariz. recycling plant

Abitibi-Consolidated Inc. reportedly plans to buy Valley Recycling Works Inc. of Chandler, Ariz., for an undisclosed amount. Valley Recycling is a major curbside and drop-off recycling facility serving in the Phoenix metro area and would supply Abitibi-Consolidated's Snowflake, Ariz., recycled newsprint mill with old newspapers and old magazines.

IP to sell retail packaging facility

IP has reached an agreement to sell its Thomaston, Ga., retail packaging facility to Pinnacle Packaging Co. The facility produces folding cartons and employs about 150 people. Terms of the agreement were not disclosed.

DOJ seeks info on Bowater/Alliance deal

The U.S. Department of Justice (DOJ) requested more information from Bowater Inc. and Alliance Forest Products Inc. concerning the planned $770 million acquisition of Alliance by Bowater. It is the second request for information from the DOJ's antitrust division concerning the proposed deal. While the second request isn't unusual, industry sources believe the DOJ is carefully looking at the deal because a Bowater/Alliance merger would manage nearly half of the newsprint capacity in the U.S. South. Bowater would own 5 of the 12 newsprint mills in the U.S. South, representing approximately 43% or 1.7 million mtons of the 3.9 million mtons of newsprint capacity in the South. The southern region of the United States accounts for about 67% of total U.S. capacity and 25% of North American newsprint capacity. In addition, a Bowater/Alliance combination, along with Abitibi-Consolidated Inc., would manage 73% of the newsprint capacity in the South.

Abitibi-Consolidated to restart Kenora PMs

Abitibi-Consolidated Inc. confirmed it would restart two idled machines at its Kenora, Ont., newsprint and uncoated specialties mill on Sept. 15. PM Nos. 9 and 10 were idled June 15 for market-related reasons. Original plans called for restarting the machines in early Septem-ber, however, in order to get the workers back on the job, Abitibi-Consolidated settled on the Sept. 15 restart date. An estimated 60,000 mtons of newsprint would be removed from the market if the mach-ines stayed down until Sept. 15. When the machines are restarted, PM No. 9 will be producing value-added papers and PM 10 will continue to produce newsprint. The mill's third machine, No. 8, was permanently idled June 15, removing 80,000 mtpy of newsprint from the market.

Chandler mill nears reopening

A Chandler, Que., mill that was sold by Abitibi-Consolidated Inc. late last year for C$35 million to a company formed by le Fonds de Solidarite des Travailleurs du Quebec (FTQ), a Quebec labor fund, and headed by businessman Clermont Levasseur, may be getting closer to emerging from its current mothballed status. The Canadian federal government provided a C$80-million loan to the new owners of the mill to aid in a conversion project that would allow the mill to be reopened. In addition to the loan from the federal government, the Quebec government will reportedly contribute C$205 million to the project, which would leave approximately C$135 million for Papier Gaspesia Inc., the name of the new company, to either find another investor for or contribute itself. It is expected it will cost the new company approximately U.S. $420 million to convert the mill from newsprint to coated paper production. The conversion is part of an agreement the company made with Abitibi-Consol-idated guaranteeing that the mill would not produce a grade that competes with Abitibi-Consolidated's core grades. End-uses for the type of coated paper that could reportedly be produced at Chandler include glossy magazine paper and high-end advertising inserts. It is still unclear what specific coated grades Papier Gaspesia intends to produce at the mill although sources said the likely grades will be coated papers Nos. 3 and 4.

IP to reopen uncoated free-sheet mill

International Paper Co. (IP) increased production in August and will again in October of this year at its 110,000-tpy uncoated free-sheet mill in Erie, Pa., according to a company press release. The mill produces Hammermill, Spring-hill, and Strathmore brand uncoated free-sheet. The decision to increase production at Erie came after the company rescinded its plan to sell off its fine papers division in May. The Erie mill has been producing uncoated free-sheet on three paper machines on a 10-day on, 4-day off schedule for about two years, according to a mill official. The approximately 85,000 tpy being produced was increased by 15.8% or about 13,400 tpy in late August, when the company began running PM No. 4 on a full schedule. In addition, the company plans to run PM Nos. 2 and 6 to capacity on a regular schedule by the end of October, which will add an additional 20,000 tpy of uncoated free-sheet production. Erie's expansion will create 50 additional jobs.

Willamette continues Kingsport expansion

Willamette Inc. announced that it is moving ahead on a $475 million expansion project at its uncoated free-sheet mill in Kingsport, Tenn. The release from Industrial Information Resources Inc. actually said that the construction started in the first quarter of this year. The Kingsport project is intended to rejuvenate the 85-year-old mill from the "ground up" and will be completed by 2003, according to the release. The modernization includes a new soda pulp mill that will increase production from 400 tpd to 1,200 tpd, an addition of a 2 million lb per day black liquor recovery boiler, a new 1,200-tpd paper machine, and an increase to the mill's onsite power generation capacity. The mill now has 167,000 tpy of uncoated free-sheet capacity.

IP plans Savannah capacity cutback

On the heels of a planned 3,000-workforce reduction, International Paper Co. (IP) said that it would indefinitely shut four paper machines with output of 670,000 tpy. Almost all of the capacity - 610,000 tpy - would be from the shut of three paper machines (Nos. 2, 4, and 6) at the 1.2 million-tpy Savannah, Ga., linerboard and kraft paper mill. The other 60,000 tons would be shut at the Hudson River mill in Corinth, N.Y. The Savannah mill largely supplies linerboard for IP's export business but also makes linerboard for domestic business. Approx-imately 290 jobs will be eliminated at Savannah. Three other machines at the mill will keep running. In total, 655 jobs will be eliminated as a result of the shuts at the mills as well as a reorganization in IP's forest resources business.

Pratt plans for new Valparaiso corrugator

Pratt Industries USA plans to install a second 110-in. BHS corrugator at its Val-paraiso, Ind., plant, sources said. Plans call for starting the corrugator in the fourth quarter. The company - largely known as a regional sheet maker in the U.S. box business - wants to break out and develop a larger customer base, including the addition of national accounts. The first corrugator started up in the first quarter this year on the company's 65-acre site in Val-paraiso. Its chief purpose was to make sheets for customers in Indiana and Ill-inois. Before adding the second corrugator, Pratt said it was integrated at about 75% with its 600,000 tpy of containerboard capacity at the Staten Island, N.Y., and Conyers, Ga., mills.

IP sells Masonite Corp. for $500 million

International Paper Co. (IP) has finally negotiated the sale of its Masonite Corp. hardboard siding and door facing business to Premdor Inc. for approximately $500 million. Under terms of the consent decree, Premdor has agreed to sell Masonite's Towanda, Pa., molded door facing facility after the close of the deal, now expected on Aug. 31. The amended sales agreement reduced the purchase price to $500 million from the original $523 million. Premdor, based in Mississauga, Ont., will purchase the Masonite business for $300 million in cash and $200 million in notes.

Stora Enso ratifies Kimberly contract

Some 800 employees of Stora Enso's 455,000-tpy coated paper mill in Kimberly, Wis., recently ratified a 3 1/2 year contract. The new contract replaces a 6-year contract that expired on Dec. 1. The Kimberly mill produces coated offset and printing paper.

Norampac opens new plant in South

Norampac Inc. opened a micro-flute con-verting plant in the Dallas-Fort Worth, Tex., area in the third quarter. The plant focuses on making E, F, and C micro-flute pack-aging and was established to put Noram-pac closer to some key customers.

Perkins buys 3 tissue mills from Plainwell

Plainwell Inc. will sell its consumer products division consisting of three tissue mills in Eau Claire, Wis., and Ransom, Pa., and a converting mill in Pittston, Pa., to Perkins Papers Ltd. for $64.2 million. The Plainwell tissue mills would add about 100,000 tpy to Perkins' current 260,000 tpy tissue capacity. The combined tonnage will bump Cascades into the No. 4 or No. 5 spot in tissue production in North America, with about a 5% market share.

Fire idles PM at Kruger newsprint mill

A fire in the dryer section of PM No. 6 at Kruger Inc.'s Trois-RiviËres mill in Trois-RiviËres, Que., broke out the night of July 4, temporarily interrupting production on the No. 6 supercalendered machine. There were minor damages to the machine's electrical system, but there was no significant loss of production and the machine was running in "a few hours."

Longview fire scare halts production

Weyerhaeuser Co. temporarily shut down its Longview, Wash., pulp and paper operations July 2 after the east end of a wood trestle about five miles from the mill caught fire, destroying about 800 feet of the structure and threatening a natural gas pipeline that serves the plant site. The gas to the pipeline was shut off and depressurized, and the mill was shut down, primarily as a safety precaution. Natural gas was restored to the mill on July 5, and the entire operation was back online July 8, according to a company official. Weyer-haeuser declined to estimate how much tonnage was lost due to the closure.

Sonoco to purchase U.S. Paper Mills

Sonoco Products Co. signed a definitive agreement to purchase U.S. Paper Mills Corp., a privately held recycled paperboard packaging company headquartered in De Pere, Wis. U.S. Paper Mills' principal business is the production of lightweight paperboard for conversion into cores, composite cans and tubes, and the production of paper cores. The company is the North American market leader in the production of paper cores for tissue and towel products. The purchase price was not disclosed, but Sonoco ex-pects the all-cash purchase to be slightly accretive to earnings in the first year. The purchase is subject to regulatory approval and is expected to close in the third quarter. U.S. Paper has mills at De Pere, Wis., which has a 40,000-tpy fourdrinier wire machine, and at Menasha, Wis., which has a nine-cylinder machine and a fourdrinier machine with combined capacity of 130,000 tpy. In addition, U.S. Paper has core and tube converting facilities at De Pere, Wis.; Oakdale, Minn.; and Jacksonville, Ill. n

Congressional group opposes trade duties

A group of 17 Congressional members - 4 Senators and 13 representatives - sent a letter to President Bush asking him to oppose a proposal for 78% duties on softwood lumber coming into the United States from Canada. In fact, the group asked that the president oppose trade restraints on Canadian softwood lumber imports into the U.S. The Congressional leaders oppose new trade restraints on Canadian softwood lumber because of potential impacts on U.S. housing costs. The U.S. Dept. of Commerce and the Inter-national Trade Commission are reviewing anti-dumping and countervailing duty petitions, including the 78% proposal.

K-C to dismantle woodyard/pulp mill

Kimberly-Clark Corp. (K-C) announced plans to dismantle its 2,000-tpd pulp mill and woodyard in Mobile, Ala. According to a company press release, K-C has contracted with R. Baker & Son of Red Bank, N.J., for the job. The mill equipment will be auctioned off on Sept. 12.

Temple-Inland to sell 78,000 acres

Temple-Inland Inc. entered an agreement to sell about 78,000 acres of fee and leased timberland in the U.S. South to Virginia Forest Industries LLC for $56 million or about $718/acre, the company said. Temple-Inland, which has Inland Paperboard and Packaging Inc. as a subsidiary, expects to close the deal by year-end and receive an after-tax gain of about $13 million. The company also identified about 160,000 acres in Georgia that will be "converted over time to higher value use than the production of fiber." These efforts come on the heels of the company's review of its 600,000 acres of timberland in Georgia and Alabama.

AF&PA close on releasing SFI label

The American Forest & Paper Assn. (AF&PA) is "moving quickly" toward the release of its on-product Sustainable Forestry Initiative (SFI) label in coming months, a strategic move opposed by anti-logging groups. Once certified, some of the nation's largest lumber manufacturers will reportedly commence shipping 100% labeled products, regardless of customer preference. Already enlisting leadership from The Conservation Fund, Isaac Walton League of America, Conservation International, The Conservation Fund, in May, The Sustainable Forestry Board (SFB), which manages the standards for SFI, elected Steve McCormick, president and CEO of The Nature Conservancy to the 15th and final position on its Board of Directors.

SFRA report on forest use sees delay

The release of a first-of-its-kind federal report assessing the forestry business and timber land use in the U.S. South has been delayed from June to mid-September as certain chapters remain in peer review, according to the report's authors. The report, called the Southern Forest Re-source Assessment (SFRA), promises to inspire competing interpretations of whether the South's forests can meet ever-growing domestic demand. The USDA Forest Service, in partnership with the U.S. Environmental Protection Agency, U.S. Fish and Wildlife Service, Tennessee Valley Authority, and southern state forestry agencies, is developing the first SFRA, an exhaustive report on various resources found in the 214 million acres of forests across the 13 southern states.

Schweitzer-Mauduit cuts Brazil operations

Specialty papermaker Schweitzer-Mauduit International Inc. is exiting the printing/writing papers market in Brazil due to a slowdown in the Brazilian printing papers market as well as higher-value business taxes and energy costs. The Alpharetta, Ga.-based company said a new electricity rationing program in Brazil has required production curtailments and energy conservation measures at its 68,000 mtpy paper mill near Rio de Janeiro.