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International Paper To Shut Down Courtland, Alabama Paper Mill

9/11/2013 10:51 AM ET

Packaging products maker International Paper Co. (IP: Quote) said Wednesday that it plans to permanently close its paper mill in Courtland, Alabama, a facility that is part of the company's printing and communications papers business.

The company cited the decline in demand for uncoated freesheet paper products in the U.S. as being the primary reason for its decision to close the mill, which will impact about 1,100 employees.

International Paper noted that the closure of the mill will results in pre-tax charges of about $675 million, which will be recorded during the remainder of 2013 and in 2014.

Memphis, Tennessee-based International Paper said it will shut down the mill in stages, with a full closure expected to be complete by the end of the first quarter of 2014. The closure of the mill will reduce IP's North American uncoated and coated freesheet paper production capacity by 950,000 tons, of which 765,000 is uncoated freesheet.

About 1,100 employees will be impacted by the closure. International Paper noted that salaried employees impacted by these machine shutdowns will be eligible for severance packages and outplacement assistance consistent with company policy. The company added that employee assistance providers will be available to support employee and family needs.

John Faraci, Chairman and CEO of International Paper said, "These decisions are especially difficult because of the impact to long-serving and hard-working employees, their families and the surrounding communities. This decision to permanently close capacity is primarily being driven by demand decline for uncoated freesheet paper products in the United States."

The Courtland Mill produces papers for forms, envelopes, labels, copiers, printers and magazines. However, the demand for uncoated freesheet in North America has been in decline since 1999 and has recently accelerated as consumers continue to switch to electronic alternatives such as online publications and electronic billing and filing.

International Paper estimates that the closure of the mill will result in pre-tax non-cash asset write-off and accelerated depreciation charges of about $550 million as well as pre-tax cash severance and other shutdown charges of about $125 million to be recorded during the remainder of 2013 and in 2014.

While reporting its financial results for the second quarter in late July, International Paper noted that its printing papers business profit was impacted partly by higher annual outage costs in North America and Europe.

International Paper's printing and communications papers business will now consist of four paper mills focused on uncoated freesheet, bristols and specialty papers markets. This includes two uncoated freesheet paper mills, Eastover, South Carolina. and Riverdale, Alabama, as well as two specialty paper mills, Georgetown, South Carolina, and Ticonderoga, New York.

The company said its fluff pulp business will not be impacted by its decision to close the Courtland mill.

In Wednesday's regular trading session, IP is trading at $47.05, down $0.13 or 0.28 percent on a volume of 2.16 million shares.

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by RTT Staff Writer

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