Paper Outlook — Cutting the Bottom Line

Energy prices have become a key force cited by paper companies as driving the actions they have taken. One of the more dramatic examples was the reported appeal made by Stora Enso to the government of Nova Scotia for lower electricity rates, which it said was a condition for restarting production at its Port Hawkesbury paper mill. This announcement came on the heels of the company having finally reached an agreement with workers that was to end a months-old lockout.

That labor dispute is part of the trend toward increased union activity in the paper sector. Beginning in June, Sappi Fine Paper North America was operating under the threat of a strike after workers at two of its mills voted to authorize an action while those at two other mills voted against that move. This trend continues overseas, as well, with Finnish production having been temporarily shut down earlier this year due to a strike by the Finnish Paper Workers’ Union in protest against personnel reductions.

Internal forces still continue to reshape the North American paper industry despite years of restructuring. In the latest major deal, International Paper (IP) agreed to sell its coated and supercalendered papers business to CMP Holdings, an affiliate of Apollo Management L.P., for approximately $1.4 billion. This business unit operates four paper mills—in Jay, ME; Bucksport, ME; Quinnesec, MI; and Sartell, MN—and generated $1.6 billion in sales in 2005.

NewPage Corp., Dayton, OH, which was borne out of the sale of MeadWestvaco’s paper business in a deal financed by Cerberus Capital Management, floated and then indefinitely postponed an IPO (initial public offering) valued at $300 million. The company cited current “market conditions” as the reason.

Roughly a year after acquiring the Strathmore product line, Mohawk Fine Papers, Cohoes, NY, announced a formal relaunch of the brand. The company reports having done extensive market research that led it to create a portfolio of premium papers for a new generation of users.