IP seeks to increase profitability

Published 12:00 am Monday, July 12, 1999

A new $100 million boiler is just one project that may be nixed as International Paper’s Natchez mill redoubles efforts to increase its profitability.

In response to soft market conditions, employees at International Paper’s Natchez mill are studying ways to increase the plant’s return on investments, said Lillie DeShields, plant spokesperson.

The employees are focusing on reducing capital investments, developing new markets and new products, and making the mill more cost-effective.

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&uot;The goal is to help us develop a plan to meet that long-term goal of 12 percent return on investment,&uot; she said.

That 12 percent figure – which is a company-wide benchmark – is based on the ratio between a plant’s profits and the amount spent on capital investments.

The 49-year-old Natchez mill, which produces dissolving pulp, did not meet the 12 percent ROI goal last year, DeShields said. She would not elaborate on profitability or financial data, saying that it was proprietary information which could impact the company’s competitive edge.

However, management shut down the mill for three weeks in April 1998 and extended its planned one-week shutdown in September 1998 to more than two weeks. A 16-day market-related shutdown on the No. 2 unit begins April 18.

Mill management has said the troubled Asian financial markets, along with declining prices on paper pulp, are at the heart of the shutdowns.

In addition, the mill lost a significant customer earlier this year when Acordis announced plans to shut down its Mobile, Ala., plant, which used the mill’s pulp product for manufacturing the material Tencel.

DeShields said three teams of employees will study the mill’s current options and report back to mill management at the end of April. Ultimately, the company’s senior management team, including its board of directors, will have final say on which strategies, if any, the 850-employee mill will take.

&uot;We should be able to report that back during the second quarter, probably sometime in June,&uot; she said.

The capital investments option may hold the greatest opportunity for altering the mill’s return on investment ratio, DeShields said.

&uot;The new boiler that we announced would add another $100 million to that denominator,&uot; she said. &uot;We’re working on several different capital options. The boiler is just the largest of them.&uot;

The company announced in December 1998 that it planned to add the $100 million recovery boiler by the end of the year 2000. The boiler, which would replace boilers Nos. four, five and six, all of which need repair, would increase productivity, management said.

&uot;There’s a yellow light on it right now,&uot; she said. &uot;That doesn’t mean we aren’t going to do it.&uot;

Other options being reviewed include finding new uses or customers for the mill’s high-end dissolving pulp or increasing the cost-effectiveness by reducing the inventory of supplies and raw materials kept on-hand.

DeShields would not say how many, if any, jobs would be affected in any of the options being considered.

&uot;We just have no way of knowing that,&uot; she said.

International Paper’s Natchez mill, which opened in 1940, has an annual payroll of $35 million. Six union locals are represented at the mill, and their collective bargaining agreements are set to be renegotiated in 2000.