March Proved Harsh for Paper & Forest Products
A number of major suppliers announced cost-saving measures and lowered expectations.
By Staff -- graphic arts online, 4/1/2003
Mid-March proved to be a high-activity period for the paper and forest products industry, although unfortunately many of the reports were about cutbacks and mill closings.
Boise Cascade Corporation announced that it plans to eliminate approximately 700 staff positions, freeze salaries, severely restrict the hiring of salaried and hourly employees, and reduce discretionary spending at all levels of the company. It hopes to reduce operating costs by approximately $45 million in 2003 and to hold the year's capital expenditures to approximately $245 million before acquisitions.
The company says it is undertaking these measures as its first-quarter 2003 operating results are expected to decline sharply from its Q4 2002 results. Based on lower average product prices, weaker margins, and increased costs due to pensions and energy- and weather-related disruptions, Boise Cascade expects to lose between 28 and 38 cents per share in the first quarter of the year.
Bowater Inc. revealed its intention to lay off 500 people as well as sell 240,000 acres of timberland and four Canadian sawmills as part of its previously announced cost-reduction plan. Say company officials, Bowater expects that these measures will result in an annual savings of $75 million in 2003, and will remove about 100,000 metric tons of annual newsprint capacity.
This month, MeadWestvaco Corporation announced, it plans to lay off 75 people and close its 200,000-square-foot consumer packaging plant in Newark, Del. Officials say that these measures, which will result in a $6 million pretax charge, are being taken because MeadWestvaco lost a contract with a frozen food maker, its largest client there, which represented at least 75% of the 41-year-old plant's business.
"The plant would still be operating if we had that business," reports Robert Laundon, vice president and general manager for MeadWestvaco in Richmond, Va., adding that the company had been unsuccessful in finding new clientele to replace the lost business.
Another blow to the paper industry came from a big consumer, Spiegel, Inc., publisher of Spiegel and Newport News catalogs, which announced last month that it was filing for bankruptcy protection.
Meanwhile, John T. Dillon, chairman and chief executive of International Paper, told investors in March that the company, in narrowing its business focus solely on paper, packaging, and forest products, had divested $3 billion in noncore operations.
