St. Laurent Restructures Toward Value-Added Linerboard Grades
St. Laurent Paperboard Inc. is undergoing a major restructuring, that similar to the restructuring announced by P.H. Glatfelter last week, involves the curtailment of highly cyclic market pulp production and employee cutbacks at one of its mills and two of its forest products sites.
Effective Nov. 1, the company will cease market pulp production at its West Point, VA, mill and begin using the available bleached fiber for white top linerboard production. At the same time, value-added, specialty-coated white top linerboard capacity will be added to the company's La Tuque, Que., Mill.
The 856-employee workforce at West Point will be reorganized and reduced by about 23%, or some 200 hourly and salaried employees. Additionally, 21 positions will be eliminated at the company's forest products subsidiary operations at West Point and Keysville, VA (hardwood-dimension lumber), and in Elizabeth City, NC (chip and sawmill).
Early retirement is being offered to eligible salaried employees, and the company will begin discussions immediately with the United Paperworkers International Union on a package for the hourly-waged employees. More than half of the 220 total positions could be eliminated through early retirements. The balance will involve layoffs that will take place on or about November 1.
"This business decision resulting in the elimination of a significant number of jobs is in no way a reflection on our employees, but a necessity dictated by a highly-competitive world market," said Wilson Blackburn, sr. VP for containerboard. "The accomplishments, dedication, and quality work effort of the mill and forest products employees are matched by few sites in this industry. This workforce will rise to the challenge and continue to build a better West Point mill and forestry operation."
Conversions at West Point and La Tuque
Some of the West Point mill's existing kraft linerboard capacity will be converted to white top linerboard, and some existing corrugating medium capacity will shift to linerboard capacity, based on market conditions. The effort, aimed at improving cost-competitiveness, supports the company's long-term business strategy of producing higher-margin, value-added graphic linerboard for the packaging industry. The mill's annual capacity initially will be reduced from 940,000 tons to 800,000 tons with these initiatives.
The strategic restructuring at La Tuque will involve conversion of some 50,000 tons of existing white top capacity to higher value-added, specialty-coated white top linerboard. A partial rebuild of that mill's bleached board machine is scheduled to be completed this September. The mill (741 employees) has an annual production capacity of 463,000 tons of white top linerboard, solid bleached linerboard, and foodboard, produced on two paper machines from 100% virgin fiber.
"St. Laurent Paperboard firmly believes that these moves will improve our position for future growth, as they will significantly increase the company's cost-competitiveness and profitability, optimize its value-added product mix and increase shareholder value,'' said Jay Gurandiano, president and CEO.
West Point Program
A phased $56 million capital expenditure program will be conducted at West Point during the next three years, starting in the fourth quarter of 1998. Most of the expenditures are to be made in the year 2000. The program includes five major initiatives, which will result in annual cost reductions of $21 million and a one-time charge of about $13 million for related restructuring costs that will be incurred in the third quarter of 1998.
The mill's No. 2 paper machine will be converted to produce 280,000 tons/yr. of white top linerboard. The No. 3 machine currently produces 352,000 tons of white top linerboard annually. Modification of the mill's corrugating medium machine to produce both corrugating medium and high-quality, lightweight kraft linerboard from recycled and virgin fiber, to be completed in mid-1999, will not have a significant impact on the company's corrugating medium business. The mill's 1,000-ton/day OCC processing plant will be upgraded in early 1999 to supply both bleached and unbleached recycled fiber to all three paper machines.
With these production changes at the West Point mill, St. Laurent will make adjustments within its forest products subsidiary. A new off-site processing facility will replace the current mill-site chipping operation. The facility will be constructed and operated by a third-party contractor to be selected later this year. It will begin operating in early 2000, under a chip supply agreement. As a result of this initiative, the company will close down its Elizabeth City, NC, chip mill and reduce other forest products operations in the fourth quarter of 1998.
"St. Laurent Paperboard is the leading North American producer of white top linerboard, with a combined annual production capacity of 695,000 tons," Gurandiano said. "This project will allow the company to introduce additional white top capacity as the market grows, and strengthen our market leadership position. It ensures long-term viability of the West Point mill through increased competitiveness in the marketplace, by making West Point the largest producer of higher-margin, value-added white top linerboard in North America. The cost reductions from the project will significantly improve the cost-competitiveness of the mill."
"With this move, St. Laurent Paperboard is focusing its primary production on products that have had historically higher margins and are projected to grow, both in the domestic and export markets,'' Gurandiano added.
St. Laurent Paperboard is a major North American producer, supplier and converter of high quality, value-added paperboard products, serving a diverse customer base in North America and selected international markets. The Company owns and operates four primary mills, located in La Tuque and Matane, Que., and in Thunder Bay, Ont., as well as in West Point, VA. It has a current annual aggregate paperboard production capacity of approximately 1.7 million tons.
The company also owns 11 converting facilities in Canada and the U.S., as well as 919,000 acres of forestland, the largest freehold in Quebec. It currently employs more than 3,600 people.