International Paper Co. (IP) is investing $83 million to reopen part of a closed mill in Virginia's Isle of Wight County, creating more than 210 jobs.
The plant had been engaged in lumber and paper manufacturing for over a century till it was closed down in April last year due to the global recession that hit the demand for paper and paperboard products. The company had laid off around 1,100 people.
A part of the facility will now be turned into a fluff pulp mill with an expected annual production of 270,000 metric tons of fluff pulp. The product is an absorbent pulp used in diapers, feminine care and adult hygiene products. The mill’s current assets, transportation options and proximity to the Port of Virginia for product export, along with availability of U.S. southern pine in the region, which is ideal for producing high-quality fluff pulp, all speak unanimously for such a decision. The state of Virginia has approved a $350,000 grant for the deal, and the state will add money for recruitment and training.
International Paper took proactive measures to combat the economic downturn by curtailing and closing capacities, further reducing costs and preserving cash. These actions helped the company to reduce fixed costs and bring down payroll costs. Annual savings from these actions are expected to be around $650 million. Last year was a transition year for International Paper with fiscal 2010 EPS more than doubling that of 2009. The momentum was maintained in the first quarter 2011 as well. Aggressive cost management has been key in improving International Paper’s results and will continue to be part of the company’s strategy going forward.
We expect International Paper to continue utilizing its sound cash flow by investing in capital projects, indulging in acquisitions and reducing its total debt. Its high debt levels and underfunded pension liability remain concerns as it curbs the company’s ability to ramp up its capital expenditure.
Memphis, Tennessee-based International Paper Company is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia and North Africa. International Paper conducts its businesses through five segments: Printing Papers, Industrial Packaging, Consumer Packaging, Distribution (Xpedx) and Forest Products. International Paper competes with MeadWestvaco Corporation (MWV) and Weyerhaeuser Co. (WY).
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