IP's Ticonderoga mill to be part of corporate spin-off

TICONDEROGA | International Paper's Ticonderoga mill will be part of a new publicly traded spin-off company that will focus on printing papers, the global corporation said in an announcement that surprised local workers at the plant, which is a key part of the Essex County economy. The news comes amid declining demand for office paper in particular, as more people in 2020 have been working from home. The Ti mill employs more than 600 people, according to the company website. Workers were notified of the transition, expected to be completed late in the third quarter of 2021, in a letter from Mill Manager Tim Stocker. "Today's company announcement brings a lot of unknowns for all of us, myself included," Stocker wrote. "I recognize that change can be scary, and change is uncomfortable. Change can also be exciting." Under the new company, which is going by the name SpinCo, "we will be well-positioned to succeed as an advantaged global papers business," Stocker wrote. "We will be the largest paper company in the world. The business will operate eight competitive, low-cost mills across key geographies. In addition to its scale, as a standalone company, it will have the focus, talent, capabilities, and low-cost positions to pursue its strategy and succeed." International Paper meanwhile will focus 85% of its efforts on the manufacture of cardboard, with 15% of its business devoted to absorbent cellulose fibers used in products including diapers and paper towels. The products to be spun off include copy and printer papers, as well as commercial printing and specialty papers. IP produces a number of nationally recognized brands, including Hammermill. Morningstar stock analyst Charles Gross, who follows IP, said from a shareholder perspective he's neutral on the move. "We're just breaking the same assets into two functioning businesses, with the same owners before and after. I don't see it as significantly positive or negative for IP shareholders," he said in an email. But the move does likely reflect declining sales volumes in printing papers across the board. From the Ti plant's perspective, Gross said splitting off the paper segment potentially makes SpinCo an acquisition target, most logically for the global giant Domtar, which merged with Weyerhaeuser in 2006. "I think (from a worker's perspective) the worst-case scenario is that International Paper hopes Domtar will acquire the spun-off business to help consolidate the paper industry, which continues to see sales volume decline," Gross said. "However, even in that case, I don't think the Ticonderoga mill would necessarily be at risk of closure." Domtar's closest mill to Ticonderoga is in Johnsonburg, Pa., Gross said, which likely serves a separate set of end-markets. That means consolidating the two mills would incur expensive delivery costs, making such a move less likely. Stocker in his letter said "it is too early to know how this affects everyone. As answers to questions become available, we will share that information. In the meantime, we need to continue with business as usual while staying safe and staying positive. We have to focus on what we can control, not what is uncontrollable." Already on the decline, printing paper has been hit hard by the coronavirus pandemic, according to the International Data Corporation. Total page volume is estimated to decline by nearly 14% in 2020, and while some bounceback can be expected as the pandemic eases, it's still expected to drop nearly 5% a year through 2024. "The dramatic and sudden transition to work from home in many of the world's largest economies had a direct impact on office device print volumes," said Ilona Stankeova, IDC senior research director. Survival in the industry will likely depend on who can produce the best product at the lowest cost. "Although it's never the most comforting to hear, the best thing paper industry workers can do is maintain a sharp focus on efficiency," Gross said. "Keeping costs low is the most effective way to stay ahead of the competition when product demand is weakening."

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IP's Ticonderoga mill to be part of corporate spin-off

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