Graphic Packaging to close Michigan paperboard mill

Graphic Packaging Holding Co., a provider of packaging solutions based in Atlanta, has announced plans to close its coated recycled board (CRB) mill in White Pigeon, Michigan. 

According to a news release from Graphic Packaging on its earnings report, the White Pigeon mill consumed about 70,000 tons per year of CRB (or paperboard). Graphic Packaging had acquired the White Pigeon mill in July 2019, along with two Artistic Carton plants in Indiana and Illinois. 

Graphic Packaging reports that it plans to close the White Pigeon mill on June 30 “due to the operational strength of the company’s overall CRB mill network and a CRB supply agreement” with Delaware, Ohio-based Greif Inc. Graphic Packaging had acquired seven folding carton plants from Greif in March for $85 million, including a long-term supply agreement with Greif for 90,000 tons per year of CRB from Greif’s three mills. 

However, in September 2019, the company had also announced plans to invest $600 million in a new CRB machine at its mill in Kalamazoo, Michigan, that is expected to have an annual capacity of about 500,000 tons. That machine is expected to ramp up in 2022. 

Graphic Packaging has also announced that it is closing a PM1 containerboard machine in West Monroe, Louisiana, on June 30, reflecting the company’s long-term confidence in the strength of its coated unbleached kraft (CUK) global beverage packaging platform. The company is also delaying its planned maintenance outage at the West Monroe mill from the second quarter of 2020 to the third quarter of 2020 due to increased near-term demand for CUK and contractor work-related implications associated with the COVID-19 crisis. 

Update on Q1 2020 earnings 

Graphic Packaging has also released its first-quarter 2020 earnings report. The company reported a net loss for the first quarter of 2020, according to the earnings report. The company’s net income for the first quarter of 2020 was $12.7 million compared with $57.9 million in the prior year period. According to Graphic Packaging, the loss includes the previously announced net $89.7 million noncash charge related to the settlement of a U.S. pension plan. 

In the first quarter of 2020, net sales increased 6.2 percent to $1,599.1 million compared with $1,505.9 million in the first quarter of 2019. According to the company, the increase was driven by $14.1 million of higher pricing and $89.0 million of improved volume and mix related to acquisitions and conversions to the company’s paperboard packaging solutions. However, the company reports these benefits were partially offset by $9.9 million of “unfavorable foreign exchange.” 

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $294.8 million compared with $259.7 million in the first quarter of 2019. Graphic Packaging reports that the increase in adjusted EBITDA was driven by positive net organic volume growth of 5 percent and solid productivity.

“We had a very strong start to 2020 with positive net organic volume growth of 5 percent and solid productivity driving meaningful improvement to our key financial metrics,” says Michael Doss, president and CEO of Graphic Packaging. “To date, we have successfully met the increased and changing needs of our customers, while effectively keeping our employees safe and healthy. I am exceptionally proud of the work our teams around the world are doing to meet the essential packaging needs of our customers.

“Importantly, we are also taking decisive actions today to accelerate our strategic agenda to meet the paperboard packaging needs of the consumer, balance supply and demand to optimize cash flow, all while positioning our business to capture profitable growth consistent with the goals we established in our Vision 2025,” he continues. “I am also pleased that our board of directors has reviewed and remains committed to the existing return of capital to stakeholders through dividends and distributions. Separately, we have decided to suspend our annual adjusted EBITDA and cash flow guidance to allow time to assess potential shifts in consumer behavior and spending patterns related to the COVID-19 crisis. At Graphic Packaging, we are committed to continued leadership as we provide best-in-class quality and service to customers, a safe working environment for our employees and long-term returns for stakeholders.”