Kruger diversifying operations at Quebec paper mills

Kruger Inc.
September 08, 2017
By Kruger Inc.
Sept. 8, 2017 - Kruger Inc. is announcing today a $377.6-million transaction to diversify operations at its Brompton and Wayagamack Mills into specialty niches, such as flexible food packaging, labelling and digital printing.

This major project, undertaken in partnership with the Government of Québec, will help to maintain more than 500 jobs in the Mauricie and Estrie regions. The announcement was made today in the presence of Philippe Couillard, Premier of Québec; Dominique Anglade, Minister of Economy, Science and Innovation and Minister responsible for the Digital Strategy; and Joseph Kruger II, Chairman and Chief Executive Officer of Kruger, as well as Ministers Luc Blanchette, Julie Boulet, and Luc Fortin.

Kruger and the Government of Québec have formed a partnership by which Investissement Québec, acting as the government's agent, will grant loans and a loan guarantee totalling $59.8 million and acquire an equity participation of 37.5%, or $44.6 million, in the new entity Kruger Specialty Papers Holding L.P. The new entity comprises the assets of the Brompton and Wayagamack Mills, as well as the Biomass Cogeneration Plant adjacent to the Brompton Mill.

To carry out this diversification project, Kruger Specialty Papers Holding L.P. will invest $107.5 million over the next three years to enable the Brompton and Wayagamack Mills to gradually reduce the production of some publication paper products that are in decline, such as newsprint and magazine paper, while accessing new markets that are on the rise around the world. Investments will be distributed as follows:

Wayagamack Mill: $32.9 million;
Brompton Mill: $47.5 million;
Trois-Rivières Mill: $22.3 million; and
Biomass Cogeneration Plant (Brompton): $4.8 million.

The project's other significant benefits include an additional 100,000 metric tonnes of wood chips procured annually, which will have a direct positive impact on Québec's sawmill sector.

Maximizing operational complementarity
The Mills' diversification strategy is based on the complementarity of the Company's various operations, which is why the project calls for investments in the Biomass Cogeneration Plant next to the Brompton Mill and in the Thermo-mechanical Pulp Mill at the Trois-Rivières Mill, which will supply the Brompton and Wayagamack Mills with raw material.

The amounts invested will be used to acquire new production equipment, modify existing equipment, make technical improvements to boost productivity, and for various energy efficiency measures.

Adjusting to changing markets
The new Kruger Specialty Papers entity will supply products that are in high demand due to changing market trends around the world, specifically increased demand for sustainable packaging and the growing popularity of e-commerce. New specialty products include food packaging paper, labelling products (backing paper) and coated paper for digital inkjet web presses to print mass-circulation catalogues and flyers that can be customized for targeted mailings.

By the end of the project, the Brompton Mill will focus exclusively on specialty products and therefore will no longer manufacture 200,000 metric tonnes of newsprint annually.

Green technology and innovation
The innovative specialty papers developed by Kruger will offer several competitive advantages, including the use of cellulose filaments (CF). This new-generation biomaterial is Kruger's proprietary strengthening additive that is manufactured at the world's first CF plant built by Kruger in Trois-Rivières in 2014. Tests conducted by the Company have shown that adding CF helps to make products stronger, lighter and more sustainable.

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