Champion International: $5.5-billion expansion prepares for

Pulp & Paper, Apr 1994

Today's Champion International is the result of a number of mergers, acquisitions, and divestitures since the company's founding back in the 1890s, when Champion Coated Paper Co. started up in Hamilton, Ohio. In 1906, the Champion Fibre Co. was established to manufacture pulp to supply the initial company. The two companies merged in 1935, and the resulting Champion Papers Inc. further merged with United States Plywood Corp. in 1967, and the Champion International name was adopted in 1972. Containerboard and corrugated box producer Hoerner Waldorf was acquired in 1977.

Then in 1984, early in the era of hostile takeovers, Champion played a white knight role in purchasing St. Regis. The company then closed or divested a major portion of its wood products business, and in 1986, sold most of its container. board and packaging operations to Stone Container Corp. During that same year, Champion bought a green. field 750-tpd bleached hardwood kraft market pulp mill online in Quinnesec, Mich.

An eight-year, $5.5-billion expansion program concluded last year with the startup of a new 240,000-tpy uncoated free-sheet paper machine at Courtland, Ala., that came in under its $400-million budget, and a $300-million environmental overhaul of the Canton, N.C., mill.

Previously included in this program was the 1990 addition of a 265,000-tpy coated free-sheet paper machine at Quinnesec. Already by 1992, paper-related products accounted for 78% of the company's sales, compared with 43% in 1984. With the startup of the Courtland machine, the entire program gave the company's total capacity a 30% boost and reduced cash cost per ton of its North American pulp and paper operations by 12% below 1986 cost levels (in constant 1986 dollars).

The new PM No. 35 at Courtland allowed further optimization for an additional 50,000 tpy of production for a total 290,000-tpy boost, raising company-wide capacity to 1.47 million tpy. This makes Champion the third largest uncoated free-sheet producer in North America, behind International Paper Co. (2.3 million tpy) and Georgia-Pacific Corp. (2.24 million tpy).

Announcing the completion of the capital improvement program, Andrew Sigler, chairman and chief executive, said the program is expected to generate free cash flow to help bring down company debt. Last fall, Champion agreed to sell 867,000 acres of timberland in Montana to Plum Creek Timber Co. for $260 million, further shoring up its cash flow.

Printing/writing operations. Champion is the second largest domestic producer of printing/writing papers, with capacity to produce about 3 million tpy at nine U.S. mills. A Brazilian subsidiary has capacity to produce another 365,000 tpy. Printing/writing operations are divided into two groups: printing/writing papers and publication papers.

The publication papers group makes paper for consumer magazines, direct mail catalogs, directories, textbooks, and coupons. The company is the largest single producer of paper for the magazine industry, and anticipates aggressively pursuing growth in lightweight coated papers.

The printing/writing papers group makes uncoated business papers and communications paper used in xerographic copiers and impact and nonimpact (laser) printers, as well as coated and uncoated free-sheet papers used for commercial printing of brochures, catalogs, annual reports, envelopes, and school supplies.

In southern Brazil, Champion operates Champion Papel e Celulose Ltda. (CPC), a major producer of printing/writing papers with a mill at Moji Guacu. CPC's 365,000-tpy capacity accounts for about 14% of the Brazilian uncoated free-sheet market. Nearly half of its production is exported to approximately 50 countries.

Newsprint. The two Texas mills (Sheldon and Lufkin) produce Champion's newsprint. In 1992, their combined seven machines operated close to capacity for an output of 875,000 tons, or 12.4% of total U.S. production. The Sheldon mill is the third largest newsprint mill in the U.S., and in 1990, two of its three machines were upgraded to twin-wire operation at a cost of $76 million. Last year, the mill started up an $85-million 145,000-tpy deinking plant, with plans to produce a 28%-average-recycled-content sheet.

Bleached linerboard. The Canton mill's bleached board machine, producing most of the company's liner. board, made a "relatively smooth" conversion from acid to alkaline papermaking in 1992. Champion reports that its DairyPak liquid packaging is a particularly strong competitor in the U.S. milk carton market with roughly one-third of the market, and that it is the second largest producer of juice cartons.

Kraft. Champion has significantly withdrawn from the packaging business, and tentative plans to convert the remaining linerboard kraft papers facility in Roanoke Rapids, N.C., to white papers have been indefinitely shelved because of reductions in Champion's capital spending budget. Roanoke has instead targeted higher-value niches such as mottled white and high-performance linerboards.