RÉSUMÉ September 2012

Transcription

1 RÉSUMÉ September 2012 Sequana to shut three Arjowiggins graphic papers plants Sequana is continuing to deploy its strategy in line with the plan unveiled in July 2012 at the time of the 150 million capital increase that helped to bolster its financial structure. This strategy aims to consolidate the Group's positions by enhancing its production model to bring capacity into line with demand and reduce its cost structure, and by pursuing its development in emerging economies and in growth markets on the distribution side of the business. Consequently, Arjowiggins has presented the social partners and employees with its plans to close the Dalum Papir A/S plant in Denmark (graphic papers), the Ivybridge plant in the UK (papers used for security documents, creative papers) and the Witcel plant in Argentina (creative papers). The particularly tough conditions the paper industry has faced since 2008 have accelerated the fall in demand for graphic papers, with the market contracting by approximately 6% every year. Given the structural decline and overcapacity on the market, and following the shutting down of a machine at the Chartham plant (creative papers) in the UK in August 2012, Arjowiggins has decided to continue to adjust its capacity in line with demand and to close its Dalum Papir A/S, Ivybridge and Witcel plants. These capacity reductions represent a total of 126,000 tonnes (including 103,000 tonnes for Dalum Papir A/S), or around 10% of the group's total production capacity. Thanks to the flexibility of Arjowiggins' production model, all product ranges concerned will be transferred and manufactured at other group plants in France, the UK and Brazil. The closure of the Dalum Papir A/S and Witcel plants should be effective by the end of 2012, and the closure of the Ivybridge plant in the first quarter of Around 430 employees are concerned. Approximately 25 million will be booked in the third quarter of 2012 to reflect these restructuring operations. Around 8 million of this amount will be disbursed in the last three months of 2012 and most of the remaining balance in The restructuring measures will result in full-year net cost savings of around 17 million, the bulk of which will be generated beginning in Furthermore, in line with its development strategy focusing on fast-growing market segments and geographical regions. Antalis acquires two packaging distributors Antalis has finalised two acquisitions of packaging product distributors, in Chile (Abitek) and in the Czech Republic (Branopac). These acquisitions were carried out

2 for an enterprise value of 17 million and will contribute additional full-year sales of around 15 million. These operations follow Antalis' early-2012 acquisitions of Ambassador in the UK and Pack 2000 in Germany in the same sector, helping it to continue building its presence in packaging distribution, a fragmented market currently growing at over 5% annually. All of these acquisitions will provide Antalis with additional expertise and a strong platform for launching its Packaging business development program in Latin America (it is now No. 2 in Chile) and in Eastern Europe in line with its strategy of expanding in emerging economies. German paper traders announce office paper price hikes Several German paper traders have set their sights on higher prices for office paper. Antalis, for example, said that its suppliers announced price increases of 5-8% for all office papers from mid-september. The move was ascribed to continuously rising energy costs. The paper trader now seeks to pass on the full rise in paper prices to its customers from September 24. Papier Union said that it did not manage to fight the price increases announced by its suppliers and was not able to switch to other suppliers, either. "We cannot absorb the higher paper purchasing costs and therefore will raise the prices for our office papers by 6% from October 1," the firm said in a statement. Igepa said the manufacturers of the paper grades it offers announced price increases of 10% due to insufficient cost recovery. Consequently, Igepa plans to lift prices for its graphic papers by 8-10% from September 19. Consolidation and profitability in world uncoated sheet markets Consolidation of industry supply through mergers and acquisitions and mill closures has changed the structure of uncoated freesheet markets over the past decade as mills in North America and Europe struggle to cope with a market in secular decline. In past decades, it was a race to build the newest and biggest machine first in order to capture an increasing share of the growing markets, and this mentality still exists to some degree in markets such as China. But now, producers in mature markets are opting for preemptive mill shuts to match supply with falling demand before mills are forced to shut by a lack of positive cash flow. The trends in industry consolidation for the uncoated freesheet market are shown in Figures 1 and 2. Figure 1 shows the market share trends of the top three producers, and Figure 2 shows the market share trends of the top five producers. Because the definition of the uncoated freesheet market is so broad, and includes a plethora of specialty and converting grades, the market shares are rather low; they would be higher if we were able to separate out just the commodity side of the market.

3 The uncoated freesheet market is clearly not concentrated on a worldwide basis, and the market shares have been flat over time at about 19% for the top three producers (IP, APP and Domtar) and 24% for the top five producers (adding in UPM and

4 Mondi). The increasing concentration in Europe and North America was offset by the growing presence of producers in Asia, where the market is much less concentrated. The top three producers in Asia (APP, Nippon and Oji) have only a 17% share of Asian capacity, and the top five producers (adding in April and Shandong/Anhui Huatai) have only a 22% share of Asian supply. The picture is quite different in Europe and North America where industry concentration has been rising. The top three producers in North America (IP, Domtar and Boise) have seen their share of the market rise from 51% in 2000 to 65% in 2012, and the top five producers (adding in GP and Glatfelter) have seen their share rise to 80%. When you consider that much of the remaining 20% is small specialty and converting producers, there is not much in the way of commodity cut-size imaging papers made outside of the top producers. The market in Europe is not as concentrated as in North America, and would appear to be headed for more consolidation in the coming years as the market continues to decline. The top three producers (Portucel, Mondi and Stora Enso) have seen their market share grow from 36% in 2000 to only 39% in 2012, while the top five players (adding in UPM and IP) have seen their share rise from 50% in 2000 to 57% in Consolidation among producers has lagged in Europe due to a broader geographic and cultural spread of users and distributors, as well as the more diverse special needs of the regional markets. The translation of industry concentration to profitability is far from perfect. There are so many factors that influence profitability other than industry concentration that it is hard to isolate just the impact of market share. Other factors include exchange rates, imports, cost trends, economic cycles, buyer concentration and the importance of paper to the cost structure of the product or business in which it is used. Nonetheless, there appears to be at least some correlation between the high and rising industry consolidation in North America, and the improved profitability in this region over the past decade (Figure 3).

5 Increased consolidation has enabled producers to practice supply management by preemptively shutting capacity and taking market related downtime to control mill inventories in weak markets. Profitability in North America was hit by the recession in 2001 and continued to slump to a trough in 2005 despite an economic recovery, as supply management was ineffective and reactive rather than preemptive. Preemptive mill shuts started to become more common at that point, and profitability improved markedly and was only slightly impacted by the massive recession in 2008 and 2009 due to supply management. The much lower profitability of European producers stands in contrast to that in North America. With far less industry consolidation in Europe, supply management is much less effective and European mills have been struggling financially for a number of years. Mills shuts have been ongoing, but it is likely that another round of merger and acquisition activity will lead to increasing industry concentration over the coming few years. Pulp inventories at European ports rise again in August Stocks of wood pulp at European ports rose in August, marking the second month of increase in a row. Inventories totaled 1,294,749 tonnes last month, up from 1,120,041 tonnes in July, according to Europulp data. Total stocks in August were, however, lower than the year-earlier period, when they stood at 1,317,653 tonnes in August Stocks of Woodpulp at European Ports (tonnes) Country August 2012 July 2012 August 2011 Netherlands / Belgium 634, , ,417 France 74,855 95,758 92,863 UK 38,931 39,458 28,636 Germany 188, , ,932 Switzerland 4,669 6,019 10,500 Italy 295, , ,376 Spain 56,961 56,813 49,929 TOTAL 1,294,749 1,120,041 1,317,653 Canon support the Two Sides and Print Power campaigns Canon, a world leader in imaging products and solutions for the digital home and office, has become a member of the UK Two Sides organisation and supporter of the

6 Two Sides and Print Power campaigns which promote the sustainability and effectiveness of print media in a multi channel world. The goal of the campaign is to promote the responsible production and use of print and paper, and dispel common environmental misconceptions by providing users with verifiable information on why print and paper is an attractive, practical and sustainable communications medium. Canon brings to the campaign its unique commercial perspective, wide experience and insight into the role of modern print media. This is supported by the findings from Canon s fourth Insight Report, The Bigger Picture, which followed a comprehensive research study of business professionals with responsibility for procuring print. The research was first published at Drupa 2012 and now forms an important part of Canon s marketing strategy. How will the European commercial print sector sustain in the digital advertising age? The commercial printing sector, which includes catalogs, brochures, direct mail, inserts and flyers, and corporate promotional material, has been the fastest growing European end-use market for graphic papers for the last 15 years, reaching about the same market size as the newspaper sector. Graphic paper usage in this segment peaked at 10.7 million tonnes with the dot-com peak in 2000, and dropped around 10% during the two years following the burst of the Internet bubble. The commercial printing sector, like all end use segments, started to rise again in the following five years, peaking at 10.6 million tonnes in 2007, but lost 1.8 million tonnes during This represents an average annual decline of 6.3%, more or less the same percentage decline as in the publishing sector's magazines and newspapers, but higher than in the business papers sector. The total size of the commercial printing market in 2011 was nearly 8.4 million tonnes. Although the commercial printing sector uses all types of graphic paper grades, the dominant grade in 2011 was coated woodfree papers, with a market share of 49% or 4.1 million tonnes, followed by coated mechanical at 28% or 2.3 million tonnes of paper. Uncoated woodfree and mechanical have a share of around 10% each, with a total volume of around 1.7 million tonnes. Only a very small portion of newsprint is used in this end-use sector. From all commercial print media end uses in Europe, inserts and flyers have been one of the fastest growing ones with just over 2.0 million tonnes of paper consumption in Although this category also uses a wide range of different paper grades, it is mainly dominated by uncoated and coated mechanical. Inserts have increasingly been used by advertisers in national and local newspapers as well as in magazines. Inserts and flyers will continue to be the most effective tool for retailers, but this sector will be influenced by many of the same technological and market factors as the direct mail industry, and retailers will increasingly try to reach their target group through non-print media, like smart phones and media tablets.

7 Therefore, we expect paper consumption in inserts and flyers to decline in the coming years. Catalogs represent another big category in the commercial printing segment. The mail order business is well established in Western Europe, particularly in Germany, the UK and France, which comprise the majority of the 2.3 million tonne (as of 2011) market. The main grades used in catalogs are SC, coated mechanical and coated woodfree. Mail order catalogs have long been a traffic driver to the web and will remain the marketing tool and window shop of the retailer, but the trend of general interest catalogs losing market share to highly targeted, special interest catalogs will continue, and more general interest catalogs will migrate to the web, not only the B2C, but also the B2B catalog. In growth markets, new retail stores will fuel consumption of the printed catalog. In Europe, however, we expect paper consumption in catalogs to continue its downward trend, as established mail order companies will increasingly use both print and electronic formats to drive sales. Overall, we expect that, despite the fact that electronic media will continue to erode all print advertising media, the commercial print sector, driven by direct mail, will hold up slightly better than the publishing end-use sectors, newspapers and magazines, over the next 15 years. This implies that the commercial printing sector will become the largest end-use market for graphic paper, surpassing newspapers, despite a drop in paper consumption from 8.4 million tonnes in 2011 to 6.1 million tonnes in This represents an average annual decline of nearly 2% for the next 15 years, which is lower than any of the other end-use segments for graphic paper. During this forecast period we expect the main grade, coated woodfree, to remain its position, while the market share of uncoated mechanical will increase to more than 15%, mainly at the expense of uncoated woodfree.

8 European CWF and UWF deliveries increase in July European coated woodfree (CWF) and uncoated woodfree (UWF) paper shipments accelerated in July, according to data from EURO-GRAPH, the European Association of Graphic Paper Producers. CWF shipments, which already reversed the trend of the past few months and showed a positive development in June, rose again in July. Total European deliveries increased by 4.3% year on year to 597,000 tonnes. Those within Europe grew by 2.6% to 459,000 tonnes, while deliveries to non-european destinations climbed by 10.6% to 138,000 tonnes. Total UWF paper deliveries inched up by 0.2% year on year to 617,000 tonnes in July. While shipments within Europe rose by 2.4% to 529,000 tonnes, exports to non-european countries fell by 11.2% to 88,000 tonnes. European CWF deliveries drop in August, UWF shipments inch up European coated woodfree (CWF) paper deliveries decreased in August, while uncoated woodfree (UWF) paper shipments accelerated slightly, according to data from EURO-GRAPH, the European Association of Graphic Paper Producers. Following increases in June and July, CWF shipments dropped again in August.

9 Total European deliveries crumbled by 2.9% year on year to 609,000 tonnes. Those within Europe slipped by 5.5% to 479,000 tonnes, while deliveries to non-european destinations climbed by 8.1% to 130,000 tonnes. Total UWF paper deliveries inched up by 0.3% year on year to 606,000 tonnes in August. While shipments within Europe dropped by 1.7% to 483,000 tonnes, exports to non-european countries grew by 8.7% to 123,000 tonnes. Sappi to focus on one-sided coated paper at Alfeld mill in Germany In response to strong growth and positive market forecasts for the packaging market, Sappi Fine Paper Europe has begun the process of converting its Sappi Alfeld Mill in Germany to focus exclusively on producing one-sided coated paper for packaging, labels and technical applications. The project will take 12 months to complete. At the same time, Sappi will actively manage its graphic paper capacity by transferring the current coated paper production of the Sappi Alfeld Mill to other Sappi Mills in Europe in close consultation with these customers. This action will further improve Sappi's cost position in coated woodfree paper in Europe and elsewhere. The strong growth and improved margins in this market are due to the growth in the demand for paper packaging and a lack of standardization; high degree of customization; and the long qualification times imposed by customers. Sappi has also been successful in the development of innovative and sustainable solutions for this market in close cooperation with end-use customers and converters.