Resurrecting a bankrupt mill, Lincoln Paper and Tissue has grown by focusing carefully on costs, customers and efficiency. It has also very rapidly added a third tissue machine to serve its growing market for parent rolls.
Hugh O’Brian
The mill which is today Lincoln Paper and Tissue can trace its roots back more than 120 years to the start of a pulp and paper mill there in Lincoln, Maine, USA, in 1888. Even before that time, dating from the 1850s, there was a sawmill on the site. But the recent history of the plant is perhaps the most important as the mill nearly died in 2004 due to financial difficulties.
The mill, which was then known as Eastern Pulp & Paper, had struggled for several years and had been in what is called Chapter 11 bankruptcy protection from 2000 until late 2003. However, when the creditors and owners could not agree on the best way forward, financing was cut off and the mill was shut down and closed in January 2004.
This is a very drastic measure for any pulp or paper mill, and even more threatening to the Lincoln facility since it is an integrated pulp and paper mill located in the cold climate of Maine. If the mill was not properly heated and maintained during the winter, there was a very big risk that machinery, pipes and pumps and other components would freeze and be destroyed. This would be a deadly blow which most probably would mean that the mill would never restart.
GOVERNOR STEPS IN. Realizing the seriousness of the situation and the potential permanent job losses, the governor of Maine, John Baldacci, stepped in and mobilized resources and people to maintain the mill. At around the same time, the now President & CEO of Lincoln Paper and Tissue, Keith Van Scotter and the present CFO John Wissmann were hatching a plan to buy the mill.
Both Van Scotter and Wissmann were very experienced veterans from the pulp and paper industry, each bringing different skills to the project. Wissmann had been brought in to the Lincoln situation on behalf of the mill’s creditors. Before long, Wissmann got Van Scotter involved and they began pondering the idea of buying the mill.
Before coming to Lincoln, Van Scotter had held operational, vice-president level positions with Mead Paper and Fraser Papers, and prior to that, he had worked at Boise Cascade, Union Camp and Weyerhaeuser. Wissmann had a particular focus on financial management, corporate development and consulting. He had previously headed the management consultant team at Fisher International, and before that he led the US operations for Jaakko Poyry Consulting, the global consulting firm specializing in the forest products industry.
Thus, working quickly, by late May 2004 they had arranged financing and closed the deal in a $26.5 million package that included purchase of assets and assumption of debt. A cooperative attitude on the part of the labor unions working at Lincoln, says Van Scotter, also helped the company to work out a realistic staffing level that was crucial to regaining competitiveness of the operation. So with the financing and labor details worked out, the mill was restarted. Lincoln Paper and Tissue was born.
“We had a positive feeling about the operations and felt that if we did things right, and paid very close attention to the efficiency of the operation as well as the needs of our customers, we could turn the mill around,” explains Van Scotter.
“It was certainly a very difficult and challenging time and we had to move very quickly to make sure we were bringing cash in faster than it was going out. It was very intense but after four months in business, we felt we had made it through the dip and we were on our way to making Lincoln profitable.”
BIG PARTY – BIG NEW PROJECT. To mark the milestone that they had passed the low point and were on their way out of the toughest times, says Van Scotter, the company threw a big party in September 2004 to celebrate that fact that all the hard work was beginning to pay off.
Shortly thereafter the management team decided to do something even bigger – install a new tissue machine in a capital project costing around $40 million. The group had been thinking about a third tissue machine but something happened that made them speed up the timetable considerably. Van Scotter describes the events.
“From the time that we became involved in Lincoln, we were thinking that a third tissue machine could be a wise investment. We had extra pulp capacity and we also had the existing infrastructure on this mill site so we had those things in our favor. As the day to day operation at the mill got settled down, we started looking more at that idea.”
PARENT ROLLS IN SHORT SUPPLY. “However, the process got speeded up when we visited the Tissue World show in Miami in late 2004. We were surprised by how many converters were asking us for parent rolls. It was clear that jumbos were in short supply and we realized that we had to move quickly. Although it was a big investment for a very young company, the input we got in Miami gave us confidence that it was the right decision.”
Even though the management team was already moving at a fast pace, the speed was increased even further as the team worked to evaluate and plan the project, choose suppliers and arrange financing. A $69.5 million financing package was created which combined the original money used to buy the company as well as the additional funding for the new tissue machine and associated buildings and infrastructure.
With this worked out, by August 2005 a contract was signed with Metso for the new machine and exactly one year later in August 2006 it was up and running. The decision to go ahead with the third tissue machine, says Van Scotter, has been a good one. “Today, we are sure it was definitely the right decision to build it. The parent roll market is very strong and we are in a good business. And while there have been some other tissue machines started up in the USA in the past year or two, the capacity comes on stream in much smaller chunks than in the paper or board business, so the market can digest it better.”
He says that they were able to install the machine so rapidly, in just one year, based on the very good experience of the Lincoln team as well as the machinery suppliers and the construction company, Spirit Construction, that was managing the project.
INTEGRATED WITH KRAFT MILL. The mill is a bit unique in the tissue business because of the fact that it is an integrated kraft pulp mill which feeds three tissue machines and two paper machines. The paper machines make high bulk printing papers that are typically used for reply cards in magazines, or index cards or other similar applications.
Total pulp production from the mill’s two pulping lines is around 150,000 tons per year with the raw material evenly split 50/50 between mixed hardwood and softwood sawdust.
Tissue machines 6 and 7, which were installed in the mid 1960s and early 1970s respectively, each make around 17,000 tons per year. TM 8, started up in August 2006, is a very modern Advantage DCT100 crescent former from Metso. The 2.7 m wide machine makes around 36,000 annual tons of mainly towel grades. Total employment at the company is today about 400 people.
The company has no converting facilities, and does not plan to get into converting, preferring instead to dedicate its efforts to parent roll sales to converters in the US and Canada, ranging as far west as the upper Mid West of the USA and down to the Mid South East states. Van Scotter says Lincoln has a very important niche in the production of deep dyed specialty napkin stock and is the largest producer in the US of these grades which are used for highly decorative napkins.
NEVER LET UP. “Today I would say that the mill is doing well,” concludes Van Scotter. “We think we have what it takes to survive and are cautiously optimistic that we will continue to increase profitability. Our aim is to stay highly focused on productivity, cost control, and efficiency, as well as to serve our customers well. We are pleased with the turnaround here but, at the same time, we remain very aware that in a capital intense business like this one, you can never really let up.”