Resolute to Enter Tissue Market by 2017
Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) announced a major decision to build a state-of-the-art facility to manufacture at-home, premium private label tissue paper, including bath and towel.
"This is an important step forward for Resolute as we execute on our growth strategy in a way that maximizes our ability to capture synergies and deliver superior value," said Richard Garneau (photo), president and chief executive officer. "We have been studying this option to diversify into the tissue business for quite some time, and we will continue to look at opportunities to expand our presence in this growing market. Once fully operational, Resolute will produce high-quality products at one of the most competitive and efficient tissue operations. We will work to be a preferred supplier of major private label retailers by being the best at meeting their needs in customer service and the quality promise of their store brands."
Resolute's tissue paper machine and converting operations will be built at the Calhoun mill in Tennessee. This $270 million project represents the largest investment made by Resolute since 2010. At full capacity, the new tissue and converting facilities will produce approximately 60,000 metric tons per year of at-home, premium bath tissue and towel, focused on the growing private label market. With market feasibility studies, technology selection and project engineering nearly complete, construction is expected to begin shortly, with ramp-up expected to start in the first quarter of 2017. The tissue machine will use excess slush pulp over and above the additional dried market pulp capacity associated with the previously announced continuous pulp digester project.
Unlike many other paper products, tissue demand has grown steadily for the past 20 years, and it is expected to continue growing in the future. Today, the at-home segment accounts for the majority of all tissue sold in North America. Over the next ten years, most of the sector's growth is expected to be in the premium quality tier, Resolute's target market.
The decision to enter the tissue market and to build at its existing Calhoun site further capitalizes on Resolute's unique ability to capture synergies by:
integrating Resolute's high-quality, low-cost, excess slush pulp for 100% of the tissue machine's fiber requirement;
utilizing the full capacity of the tissue machine in a state-of-the-art converting operation;
taking advantage of capital expenditure and fixed cost efficiencies by extending existing infrastructure;
having access to an attractive and cost-competitive fiber basket; and
being ideally located to serve Eastern U.S. markets.
The Calhoun mill also benefits from a strong working relationship with local labor unions. This investment will create 105 new jobs at the mill, in addition to the 50 positions associated with the continuous pulp digester.
This investment has also received support under existing business development programs offered by the state of Tennessee, the Tennessee Valley Authority (TVA) and the mill's home community in McMinn County.
The tissue project is in line with Resolute's disciplined and financially attractive capacity-building investments in markets with future growth opportunities, such as: the 2012 acquisition of Fibrek Inc., which added 60% to the company's market pulp capacity; the Calhoun digester project, which will increase market pulp capacity by another 100,000 metric tons per year as of the end of this year; and the sawmill capacity initiatives, including the complete refurbishment of the Ignace, Ontario, sawmill and the construction of a new sawmill in Atikokan, Ontario, which together are expected to add 275 million board feet to the company's annualized lumber capacity.
"We want to thank Resolute for expanding in Tennessee and for the new jobs they're creating in Calhoun and McMinn County," said Governor Bill Haslam. "We think it says a lot when companies like Resolute, who can choose to do business anywhere in the world, continue expanding here, and today's announcement is another step toward our goal of becoming the No. 1 location in the Southeast for high quality jobs."
"Resolute and the jobs they provide make a major impact in Calhoun and McMinn County," stated Randy Boyd, Tennessee Department of Economic and Community Development Commissioner. "They've been a cornerstone of this community since 1954 and this investment is a big vote of confidence in the quality of our state's workforce. We're focused on giving Tennesseans access to quality education so companies like Resolute have a pipeline of talented workers to ensure success for decades to come."
"TVA congratulates Resolute Forest Products on its recent announcement of expansion plans involving major investment and adding more than 100 new jobs in the Calhoun community," said TVA Senior Vice President of Economic Development John Bradley. "We, along with the state of Tennessee and community economic development partners, celebrate Resolute's continuing business success and longstanding commitment to grow in the Tennessee Valley."
"We want to thank Resolute for their continued faith in the McMinn County workforce, made evident by this $270 million investment. We understand they had other options, but they chose us and for that we are humbled and truly grateful," added John Gentry, McMinn County Mayor. "Resolute continues to diversify and pivot with the changing market demands. We are indeed both fortunate and proud they will continue to call McMinn County home for many years to come."
(Resolute Forest Products)