Forest, paper and packaging (FPP) CEOs are less confident about revenue growth over the next 12 months than their peers in other sectors, but are more optimistic about their company's revenue prospects in the next three years, according to PwC's 16th Annual Global CEO Survey released recently in Davos, Switzerland.

“The CEOs of forest, paper and packaging companies are a resilient bunch. Recently they've faced challenges such as shifting demand and markets, a bumpy economy, overcapacity, environmental issues and rising costs," said Bruce McIntyre, leader of PwC's Forest, Paper and Packing practice in Canada. “CEOs have identified their top three priorities: enhancing operational effectiveness; investing in innovation and R&D; and developing new business models."

McIntyre says FPP CEOs are intensely focused on trimming any fat from operations. “The survey found 92% of sector CEOs have implemented a cost-reduction initiative in the past 12 months, and 89% are planning to in the coming 12 months. This result is higher than the overall average of 70% of CEOs across all sectors in the PwC survey. Some of the cost reduction reported was through staff cuts, which are expected to continue, with 18% of FPP CEOs reporting plans to cut their workforce by more than 8% this year.”

He continues: “While trends for the FPP sector are very similar in Canada to those found worldwide, there are some notable differences. We don't think staff reductions will be as severe in Canada; in fact we're hearing concern from some Canadian forest products companies about the looming shortfall of qualified labour. If the US housing market rebounds and demand from China continues to grow we could have a labour shortage in Canada."

PwC reports that R&D and innovation are a top priority for 42% of FPP CEOs in the next 12 months—a full 10% higher than the overall average across the entire CEO Survey. Almost three-quarters of the FPP CEOs said they will make changes to increase capacity for innovation and R&D.

Other key findings from the FPP CEO Survey include:

- Every FPP CEO surveyed said that customer service was a key differentiator, the only sector in the full survey where 100% reported that customers influence their strategy.

- Seventy-five per cent of FPP CEOs worry that energy and raw material costs could pose a threat to growth, far more than the average across the overall survey sample.

- Ninety-five per cent reported that supply chain partners are influencing their strategy, and the large majority of CEOs are increasing efforts to engage with them.

- Nearly three quarters (71%) of FPP CEOs plan to increase their company's focus on reducing their environmental footprint, while 18% will continue at their current levels.

For PwC's 16th Annual Global CEO Survey, 1,330 interviews were conducted in 68 countries during the last quarter of 2012, including 38 FPP CEOs in 15 countries.

Alberta's Forest Products Industry Grew in 2012

The value of lumber, pulp, paper, and panelboard manufactured by Alberta Forest Products Association (AFPA) members totaled approximately $2.3 billion for 2012. The value of production was up $184 million or 9% from 2011.

“Our industry has seen sustained growth in production and revenues this year," said AFPA president and CEO Brady Whittaker. “The economics have been positive and that has allowed for further investment in our facilities, forest management and communities.”

The AFPA’s pulp and paper sector production for 2012 was 1.5 million air dried metric tonnes (ADMT) valued at $1.1 billion. Production was up 47,100 ADMT (3.2%) from 2011, but softer prices caused values to weaken by $93 million or 7.8%.

In the lumber sector, AFPA-member companies produced 3 billion board feet of lumber in 2012 with a value of $906 million. Part of this production came from the secondary manufacturing sector. Total production volumes increased 194 million board feet (mmfbm) or 7% from 2011, while values increased $204 million or 29%.

AFPA-member panelboard operators produced 1.1 billion square feet of 7/16 inch equivalent product in 2012 valued at $341 million. Production was down from 2011 by 8 million square feet (0.7%), but higher prices caused values to increase by $73 million (27.1%).

North American Wood Pellet Exports Continue Rapid Growth

Rapid expansion of wood pellet production in both the southern U.S. and British Columbia has dramatically increased pellet exports from North America to Europe the past year, according to the North American Wood Fiber Review. In the third quarter of 2012, total shipments were up 70% year-over-year to a record high of 860,000 tons. The growth is expected to continue with numerous plans for adding capacity, particularly in the U.S. South.

Pellet exports from the U.S. South have skyrocketed the past two years, quadrupling to 485,000 tons in 3Q/12. Canadian exports have also gone up in the past few years, but at a slower pace, notes the Review.

Announced plans for additional pellet plants also emphasize the quickly growing trade relations that are being established between European power utilities and U.S. pellet producers. According to the NAWFR, the most striking announcement came in mid-December when Drax, a United Kingdom power company, stated its intention to build two 450,000 tons pellet plants, one in the state of Louisiana and one in Mississippi. Most other export-oriented pellet plants have investment from European utilities, but are separate US-based entities.

Export pellet facilities which are under construction, conversion or redesign will add an additional 1.7 million tons of capacity during 2013, as reported in the NAWFR.

COMPANY NEWS

Biomass Power Benefits Both Mill and Town

A new biopower plant at the Metsä Board Kyro mill in Finland is a joint venture between the boardmaker and two Finnish energy companies. The switch to a biomass boiler will improve the carbon footprint of three Metsä Board products – Carta Elega and Avanta Prima folding boxboards, and the Cresta wallpaper base family.

“We have been working on improving energy efficiency and sustainability of our mills. The new biopower plant will help us in these efforts, as well as meeting our target of cutting CO2 emissions by 30% across operations by 2020 compared to 2009 levels,” says Mikko Helander, CEO of Metsä Board.

The Kyro mill is now able to replace the use of natural gas with CO2-neutral woody biomass or wood-based fuel. This is predominantly bark and other biomass from industrial side streams, as well as logging residuals and chips from thinnings.

The EUR 50 million biopower facility (operating as Hämeenkyrö Voima Oy) will produce electricity and heat for Metsä Board Kyro, and also provide heat for the neighboring district of Hämeenkyrö. The use of biomass-based power is expected to reduce CO2 emissions from the plant by approximately 100,000 t/y, to about one quarter of previous levels.

Fuel delivery was the biggest challenge. Hämeenkyrö Voima is owned jointly by Pohjolan Voima Oy, Leppäkosken Sähkö Oy and Metsä Board. It provides 12 MW electricity, 55 MW of district heat, and steam to the paper mill. The boiler strated-up in the fall of 2012, using a combination of woody biomass and peat.

The design and installation of the power plant were particularly challenging because the boiler will be in close proximity to a residential area.

The biomass is delivered by truck, already chipped or crushed. To avoid having trucks running during the night, deliveries are organized so that 20 trucks per day deliver during a 15-hour window. This is a just-in-time operation; the silos hold enough biomass to get through the night, but not enough to carry the mill for 24 hours.

Because this new biomass boiler replaced an older unit, the project required no new tie-ins to the mill, explains Juha Kouki, a specialist in bioenergy with co-owner Pohjolan Voima. The existing turbine and cooling water system were retained. The biggest challenge was the fuel receiving system, which was constrained by the congested space and the nearby residences.

The fuel handling system was supplied by Raumaster. To minimize dust, the trucks are unloaded in a closed room equipped with a dust collection system. Belt conveyors were chosen because of their lower noise and other operational benefits.

The biomass is dried by the supplier prior to delivery. Seppo Hulkkonen, Andritz’s technology director, bioenergy systems, notes that the biomass generally measures 50% moisture when fed into the boiler. Peat going to the boiler has 40% moisture.

The boiler is an EcoFluid bubbling fluidized bed boiler, supplied by Andritz. It can provide steam flow up to 105/115 t/h, at a pressure of 84 bar(g) and temperature of 510 °C. Andritz delivered the boiler island and auxiliaries, flue gas cleaning with bag filter, field instrumentation and electrification.

According to Andritz, the advantage of a bubbling fluidized bed (BFB) boiler is its fuel flexibility. They are commonly used for wood waste and sludge, for example, or agricultural waste plus wood waste.

BFBs allow fuel moisture content variation, have high combustion efficiency and low emissions. They also typically have high availability and long operating times, which are important for industrial applications because processes can depend on the steam generated by the boiler.

At the Hämeenkyrö Voima site, the steam produced by the boiler goes first to a back-pressure turbine for electricity production, then to the mill for process uses, and to the town for district heating.

Andritz’s Hulkkonen comments that for biomass boilers in this size range, there are not many competing suppliers because the combustion technology requires dedicated knowledge. Also, “this is industrial scale, so environmental regulations are much more stringent.”

For this project, the “driving force was to eliminate natural gas” says Kouki. Natural gas prices are rising and taxation is high on natural gas, he explains. Overall, says Kouki, the trend in Finland is for wood-based fuels to replace natural gas. Biomass prices are considered more stable and predictable.

Pohjolan Voima has been involved with 15 biomass power plants in last 20 years; the field is the subject of a huge investment program for the company. In the majority of cases, says Kouki, forest industry companies are part-owners.

“Fibre is no longer the only source of income for mills. They generate a lot of money selling power to the grid,” states Henrik Eneberg, director sales and marketing, recovery and power division, Andritz.

In this case, for Metsä Board, the benefits are numerous. The biomass power plant provides a more stable cost structure, and it furthers the company’s sustainability goals, as well as providing a “green” marketing edge for its products.

Domtar Begins Lignin Production with Metso Lignoboost Process

Domtar Corp. has successfully started-up a commercial-scale lignin separation plant at its Plymouth, North Carolina mill. The production of BioChoice™ lignin began in February, with a targeted rate of 75 tons a day, destined for a wide range of industrial applications as a bio-based alternative to the use of petroleum and other fossil fuels.

The successful installation of commercial-scale lignin removal capacity at the Plymouth Mill is the culmination of a research and engineering project launched by Domtar in 2010. This project was further boosted when the U.S. Department of Agriculture and the U.S. Department of Energy awarded the company a grant through the Biomass Research and Development Initiative.

The lignin-separation technology installed at Plymouth is the LignoBoost system supplied by Metso.

“Our vision is to be a global leader in fiber-based innovation," said Bruno Marcoccia, Domtar's director of research and development. “A big part of this is our focus on partnering with best-in class collaborators to develop new products and markets for a wide portfolio of initiatives, like BioChoice."

“The possibilities for making a real difference in terms of offering manufacturers a bio-based alternative to the use of petro-chemicals is truly exciting," said Hasan Jameel, a professor in North Carolina State University's Department of Forest Biomaterials. “This is a big win for sustainability on two counts: Domtar improves the efficiency of its pulp-making process, and at the same time the market gets a reliable, high-quality source of this underused material with so much potential."

A wide range of potential applications for BioChoice lignin exists, including fuels, resins and thermoplastics. Domtar believes this facility is the first commercial source of lignin to enter the market in about 25 years.

Speaking at a lignin conference last June, Marcoccia explained that the Plymouth mill was uniquely suited for the lignin project because it has been recovery-boiler limited for several years. He expected the LignoBoost process would cost effectively remove lignin from the black liquor stream, and reduce loading on the recovery boiler. That, in turn, could permit higher pulp production.

Domtar Corporation manufactures and markets a wide variety of fiber-based products including pulp, papers and adult incontinence products.

Catalyst Paper Aims For Latin American Market with Lighter Newsprint

Catalyst Paper has introduced a high-performing newsprint grade with an industry-leading basis weight of only 40 grams per square metre (gsm). The company says the lighter grade, Marathon Lite, will be a major step forward in its Latin American market development strategy.

“Latin America is a market of 500 million people which makes it very attractive. We have long-standing relationships with major publishers in the region and the demand for reliable supply of high quality papers is trending up," says Catalyst president and CEO Kevin J. Clarke. He will be meeting with several key customers in the region in April, including publishers in Peru and Colombia.

Catalyst cites a growing middle class and less high-speed Internet penetration than Canada and the U.S. as reasons for its interest in the region. According to the company, Central and South American newspapers are still the most popular vehicle for information. Growth in middle-class disposable income also means advertisers want space in those popular papers.

Marathon Lite “reinforces our focus on innovation in every part of our business including in newsprint, a product that we've been manufacturing for 100 years," Clarke adds.

Hugo Holmann, owner of the Nicaraguan publisher La Prensa, says readers and advertisers have noticed an improvement in the printing quality of our newspaper since the company switched to Catalyst. “We also see a great opportunity of improvement with the 40-gsm sheet. This brings more efficiency to our distribution chain all the way to the very end, allowing our street vendors to carry less weight, without affecting our production efficiency."

Catalyst Paper manufactures diverse specialty mechanical printing papers, newsprint and pulp at three mills in British Columbia.

Prince Albert Mill Delays Start-Up, May Produce Paper Pulp

The Prince Albert Pulp Mill is producing green power, but start-up of pulp production is still 12 to 18 months away, a representative recently told a local gathering.

Dale Paterson, vice-president of operations for Paper Excellence, which owns the Prince Albert mill, provided an update on the mill’s status recently. Based on that presentation, the Prince Albert Daily Herald reported Mar. 29 that Paper Excellence is investing in a technology that is less costly and will allow the refurbished mill to produce both traditional paper pulp and dissolving pulp. The capital expenditure on this new technology is expected to be between $85 and $90 million less than the company previously anticipated, Paterson said.

When Paper Excellence purchased the operation in 2011, the plan was to produce dissolving pulp at the site by the fall of 2013. Now, with dissolving pulp prices considerably lower than at that time, the company is exploring the production of market pulp.

According to the Daily Herald, the mill faced a higher level of equipment failure than expected, and Paper Excellence will spend an additional $75 million to deal with issues arising from the mill’s five-year shutdown.

In the meantime, the mill’s green power plant is currently exporting about 9.5 MWH to SaskPower, and employs 24 people.

In total, the mill is currently employing 113 people and spending about $1.8 million per month between personnel and materials, the majority of which goes directly back into the local economy, reports the Daily Herald.

Wausau Paper Announces Closure of Brainerd, Minnesota, Mill

Wausau Paper (NYSE:WPP) recently announced the closure of the Company’s technical specialty paper mill in Brainerd, Minnesota, to occur early in the second quarter of 2013. The closure will affect approximately 130 employees.

Pre-tax closure charges are estimated to be $47 million, with non-cash charges, primarily related to the write-down of long-lived assets, accounting for approximately $44 million of the total. First quarter, pre-tax closure charges of approximately $36 million are expected with the remaining charges occurring over the balance of 2013. After considering income tax liabilities and the anticipated reduction in working capital, the cash impact of the closure is expected to be neutral on a cumulative basis.

The Company recently announced its intent to strategically reposition the company to focus on its Tissue business. A range of alternatives for the divestiture of the technical specialty business have been explored. It has become clear that Brainerd will not contribute to those alternatives and the closure will significantly improve the continuing Paper segment operating results.

Hank Newell, president and CEO commented on the closure, "A number of factors, including our accelerated exit from the print business, protracted global economic weakness and recent competitive paper capacity additions in Asia have impacted the viability of the Brainerd operations and created operational losses from the mill that were unsustainable. Our employees and the community of Brainerd have done all we have asked in our efforts to create a long-term viable operation and we thank them for their support.”

Wausau Paper produces and markets a complete line of away-from-home towel and tissue products and technical specialty papers for industrial, commercial and consumer end markets. The company is headquartered in Mosinee, Wisconsin and is listed on the NYSE under the symbol WPP. To learn more about Wausau Paper visit: www.wausaupaper.com.

Tri-Tech Holding Awarded $2.02 M Industrial Liquor Treatment Contract in Canada

Tri-Tech Holding Inc. (Nasdaq: TRIT), which provides turn-key water resources management, water and wastewater treatment, industrial safety and pollution control solutions, announced recently that its subsidiary, Tri-Tech Infrastructure LLC secured a $2.02 million contract to provide a replacement sulfite waste liquid evaporator vessel. Tri-Tech U.S. signed the agreement with AV Cell Inc., a company located in Atholville, New Brunswick, Canada that produces softwood and hardwood pulp for its viscose staple fiber ("VSF") business. AV Cell is a subsidiary of Aditya Birla Group, the world's largest VSF producer.

Under the contract, Tri-Tech U.S. will provide a new evaporator body and accessories to replace an evaporator body from the original 1982 system for the magnesium based sulfite pulp mill operated by AV Cell. The new evaporator body will help to increase the pulp mill's bisulfite black liquor treatment efficiency, improve the evaporator system operation and production of sulfite liquor dry solids in order to restore pulp capacity. Tri-Tech U.S. will supply the equipment and related service for the project.

Tri-Tech U.S. expects to deliver the equipment by the end of August 2013 and complete the operational commissioning of the new equipment by the end of September 2013.

The AV Cell Inc., one of the operations of AV Group which is a member of the pulp and fiber business of the Aditya Birla Group produces good quality softwood / hardwood pulp, a critical input for its VSF business. The pulp mill, whose entire production is exclusively for the AV Group's captive consumption, supplies 119,000 tons of dissolving grade chemical pulp to its VSF units in India, Thailand, Indonesia and China.

Clearwater to Shut Georgia Tissue Facility

Clearwater Paper Corp., which recently began production at a Shelby tissue plant, will close a Thomaston, Ga., paper converting and distribution center, eliminating 150 jobs. Machines from that facility will be moved to the company’s Shelby and Oklahoma City plants.

The $280 million Shelby plant began tissue production in December with 200 employees.

Stora Enso to Close 475,000 Tonnes of Newsprint Capacity on Two PMs

Stora Enso plans to restructure its operations through the permanent shutdown of two newspaper machines in Sweden. Stora Enso also plans efficiency improvements in the Printing and Reading customer service and the Building and Living Business Area. The profitability improvement actions are planned to reduce annual costs by EUR 54 million and reduce the number of employees by approximately 600 altogether.

Printing and Reading plans the permanent shutdown of PM 2 at Hylte Mill in Sweden with annual capacity 205,000 tonnes of newsprint and PM 11 at Kvarnsveden Mill in Sweden with annual capacity 270,000 tonnes of newsprint in the second quarter of 2013. This represents 3.4% of European newsprint capacity. The plans to shut down capacity are due to continuing structural weakening of newsprint demand in Europe.

In addition, Stora Enso plans to create a common platform for all its Printing and Reading sales desk, order handling and logistic services in Europe to improve customer service. These processes currently handled at seven customer service centres, mills and logistic service centres will be centralised into five customer service centres located in Finland, Sweden, Germany, Belgium and the UK. It is planned to establish a separate Logistics Service Centre for overseas business in Gothenburg, Sweden to serve all Stora Enso’s Business Areas.

Newark Group Completes $186 Million Refinancing Transaction

The Newark Group, a leader in the collection of secondary fibers and the manufacturing and converting of 100% recycled paperboard in the US and Canada, announced that it has completed a $186 million refinancing transaction. The company successfully raised debt financing consisting of an undrawn $50 million ABL Revolving Credit Facility, an $80 million 1st Lien Term Loan, and a $56 million 2nd Lien Term Loan. “This is a significant enhancement for the Newark Group. It permits the company to invest in equipment, technology and talent,” said Frank Papa, Newark CEO and president. He added, “The refinancing increases the countless capabilities in paperboard design and functionality that we can offer our customers and vendors.”

Asia Pulp & Paper Bars Suppliers from Cutting Forests

Asia Pulp & Paper Co. (APP), the world's third-largest paper company, said that it is accepting only wood that has been grown on plantations. Last year, it stopped cutting forest on its own land. The pledge adds that restriction to its more than 20 suppliers, who environmentalists say are among the most aggressive clear cutters of forest on the planet.

The company originally planned to give its suppliers until 2015 to stop cutting forest. But it moved the date earlier under pressure from environmental groups that have demanded more protection for Indonesia's last pockets of jungle, which are home to endangered tigers and orangutans.

APP's efforts to convince activists that it has changed its practices and to win back its environmentally conscious customers show how global campaigns are changing the way companies, even those in developing countries, are doing business.

In theory, the pledge means no forest land will be cut to supply APP's mills. The pledge means that at least 100,000 hectares, or about 250,000 acres, of forest that APP and its suppliers have the right to clear will be protected, said Aida Greenbury, the company's managing director of sustainability.

APP said some of its suppliers complained about the burden of complying with the new ban and that it had agreed to compensate some suppliers for lost revenue.

The company, which is part of Sinar Mas Group, decided to go further to clean up its image after palm-oil companies in the group benefited from a similar effort over the last two years.

APP also hopes that its customers return and that its new commitments will give it a competitive edge over other paper companies.

APP plans to ride growing demand in Indonesia, China and elsewhere to become the largest paper company in the world. It says it can do that by improving the yield on its plantations and by expanding into specialized products, such as sticky notes and the thin-yet-sturdy paper used to print the Quran. APP companies generate total revenue of about $6 billion a year. Their production of more than eight million tons a year makes APP the world's third-largest paper producer by volume, behind No. 1 UPM-Kymmene Oyj and Stora Enso Oyj, both of Finland.

EXPANSIONS/ UPGRADES/ MERGERS

Paper Excellence Buys Sixth Canadian Mill: Skookumchuck

Tembec Inc. has reached an agreement to sell its NBSK pulp mill located in Skookumchuck, B.C. to Paper Excellence Canada Holdings Corp. for a purchase price of $89 million.

Skookumchuck was Tembec’s only NBSK asset. President and CEO James Lopez says the deal “supports the continuing transformation of the company and the reshaping of its business portfolio.” Tembec manufactures lumber, pulp, paper and specialty cellulose from operations in Canada and France.

The purchase adds to Paper Excellence’s extensive NBSK operations. In Canada, the privately-held corporation owns Mackenzie Pulp, Howe Sound Pulp & Paper, Meadow Lake Mechanical Pulp, Prince Albert Pulp (non-operating), and Northern Pulp Nova Scotia. With the addition of the Skookumchuck mill (255,000 tonnes of capacity), Paper Excellence’s Canadian capacity for NBSK pulp is 1.2 million tonnes.

The transaction is expected to close in the second quarter of 2013.

Tembec acquired the Skookumchuck pulp mill in 1999 as part of the acquisition of Crestbrook Forest Industries Ltd. The mill started up in 1968, and currently employs 290. Its pulp is shipped to North American and Asian customers primarily for tissue applications.

Pöyry to Provide EPCM Services for CMPC's Guaiba Pulp Mill in Brazil

Pöyry has been awarded an assignment by CMPC Celulose Riograndense for the expansion of the company's Guaiba pulp mill in Rio Grande do Sul state, Brazil. The assignment consists of Engineering, Procurement and Construction Management (EPCM) services for the Balance of Plant (BOP) and involves integrating the different processes of the mill. These engineering and project management services will start immediately. The parties have agreed that the value of the assignment is not disclosed. The project will be included in the Industry Business Group's first quarter 2013 order stock.

The capacity of the new state-of-the-art pulp mill is 1.3 million tonnes per year and the startup of the mill is planned for the first quarter of 2015. The bleached eucalyptus pulp production line is the largest investment in the CMPC history.

Pöyry has been involved in the project since October, 2010 when CMPC awarded Pöyry an assignment for feasibility studies and basic engineering. The company was also awarded a preparatory work for the mill infrastructure. Now Pöyry will be responsible for overseeing that the different parts of the plant will be efficiently developed and connected together.

Smurfit Kappa Announces Major Investment Package and Upgrades at Yate Plant, UK

Smurfit Kappa the European leader in innovative paper based packaging has announced a major investment package consisting of a six-colour flexographic, rotary die-cut press, an enhanced material handling system and corrugator upgrades for its Yate, Bristol plant.

The main investment is part of Smurfit Kappa's continuing development of its High-Quality Post Print (HQPP) service at the BRC and AIB certified site. Supplying a wide range of customers in the South of England, as well as major national brands and Pan-European customers, Smurfit Kappa Yate has drawn from the knowledge and experience of award winning HQPP, six-colour printing expertise at other Smurfit Kappa UK plants. As part of the development process, John Wroot has moved to become Operations Director at Yate from Smurfit Kappa's Chelmsford plant, one of Europe's foremost and award winning HQPP plants.

Beyond the new machine outlay Smurfit Kappa Yate is upgrading the plant's material handling system to give greater accuracy and reliability, and when combined with modular enhancements on the corrugator will drive additional improvements in quality and service at the high volumesite.

Clive Bowers, CEO Smurfit Kappa UK, explains what the investment is designed to deliver and why it has been undertaken; "We listen continuously to our customers and ask how we can help them achieve their future business objectives. The decorative corrugated market continues to outperform the general market and our customers and potential customers have asked us to leverage our skills in print into the wider corrugated market. Our investment at Yate will allow our customers to source the highest quality post print, flexographic packaging and differentiate their products from their competitors in an increasingly competitive marketplace."

Terry McGivern, Regional Director for Smurfit Kappa South, comments; "Our long-standing expertise of producing award winning HQPP in the UK gives us a unique advantage when working with demanding print requirements on corrugated. Moreover, Yate has had an excellent year in quality and service with complaints per million items produced running at less than one in a million, and On time in Full delivery (OTIF) exceeding 98%. These three investments will help us to improve our industry-leading statistics and provide a compelling case for any customer who needs to source the highest quality, combined with superior service and superb printed corrugated, to look no further than Smurfit Kappa Yate."

Anhui Shanying to Merger with Jian Paper in China

Anhui provincial authorities have greenlit Anhui Shanying Paper Industry’s restructuring plan in terms of the transactions of state-owned shares, and hence its eventual merger with Jian Paper. The merger will boost Anhui Shanying’s total paper and board capacity to 3.67 million tonnes/yr, making it possibly the third largest recycled containerboard producer in China after Nine Dragons Paper (Holdings) and Lee & Man Paper Manufacturing.

According to Anhui Shanying, the provincial government allowed its major shareholder, the Anhui Shanying Group, to sell the 7.5% share it holds in the firm to Fujian Taison, Jian Paper’s major shareholder, at a price of more than RMB 261.76 million ($41.57 million). This is part of Anhui Shanying’s grand restructuring plan to merge with Fujian Taison and Jian Paper.

According to the plan, besides the 7.5% stake sale, Anhui Shanying will buy a 100% stake in Jian Paper via a private placement.

And an estimated 1.64 billion Anhui Shanying shares with a total value of around RMB 3.05 billion will be issued to Jian Paper’s 25 shareholders, including Fujian Taison, which holds a

72.50% stake in Jian Paper.

McIlvaine Company

Northfield, IL 60093-2743

Tel: 847-784-0012 Fax: 847-784-0061

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