Company profile: P.H. Glatfelter: Returns to growth after losing key customer

Pulp & Paper, Dec 1996 by Finchem, Kirk

In 1864, PH. Glatfelter founded the company that still bears his name. From its original mill in Spring Grove, Pa., the specialty paper company has grown into a three-mill system with 1995 sales of nearly $625 million.After several difficult years, company chairman, president, and CEO TC. Norris characterized 1995's performance as "gratifying"

The mills in Spring Grove, Pa., Neenah,Wis., and Pisgah Forest, N.C., specialize in serving niche marketsspecifically, book publishing paper (40% of company capacity), cigarette and other thin papers (18%), and technical specialty papers (14%)-where their small but flexible paper machines provide a competitive advantage in filling diversified orders. The balance of Glatfelter's production is converting (25% of company capacity) and commercial printing papers (5%). The company began diversifying in 1918 with the founding of Glatfelter Pulp Wood Co., a whollyowned subsidiary created to ensure an adequate future supply of pulpwood to the Spring Grove mill. In 1979, the company expanded further by purchasing Neenah-based Bergstrom Paper Co., the largest U.S. mill producing printing papers from 100% wastepaper. With the 1987 acquisition of Ecusta Corp., headquartered in Pisgah Forest, N.C., Glatfelter became the owner of the first U.S. mill designed specifically to manufacture paper for the tobacco industry In late 1992, Glatfelter unexpectedly lost its largest domestic tobacco papers account, Philip Morris Co. Since then, the company has replaced much of the lost volume, but with somewhat less profitable business. During the fourthquarter of 1994, the company took a one-time, $128 million charge to "writedown assets related to its Phillip Morris Co. business.

THREE STRONG NICHE MILLS.

Glatfelter's three mills have a total capacity of about 558,000 tpy. Two of the mills, Spring Grove and Neenah, produce free-sheet and recycled papers used in book publishing and envelopes. The Pisgah Forest mill focuses on cigarette and thin specialty papers.

The Spring Grove and Neenah mills' combined capacity make Glatfelter the largest supplier of paper for book publishing in the U.S.-roughly 30% of the market, including a 40% share of uncoated freesheet book publishing paper. While Glatfelter remains the largest single producer in the book pubfishing paper market, Willamette Industries' recent capacity increase at its Johnsonburg, Pa., facility could dramatically increase competition in this sector

The Spring Grove mill's seven paper machines can produce 296,000 tpy of free-sheet papers. Three of the mill's machines are very small, with a total capacity of roughly 13,000 tpy.The four remaining machines range in capacity from 12,000 to 95,000 tpy.

Of the papers produced at Spring Grove, roughly 40% are used for book publishing, 35% for converted products including envelopes, 20% for technical specialties, and 5% for other commercial printing. With a $15.5-million investment in 1989 that included rebuilding the existing supercalendar and installing a second supercalendar, 48,000 tpy of Spring Grove's output can now be finished.

In 1994, Glatfelter completed its environmental modernization of Spring Grove's pulp mill. The $170-million upgrade included a new recovery boiler equipment for reduced odor from the kraft pulp mill, an oxygen delignification system, a new chlorine dioxide generation plant, an upgrade of the digester screening and washing system, and $3.6 million for paper machine improvements. The project also increased pulp capacity at the mill by 10%, to about 230,000 tpy.The capacity improvement, given the mill's current papermaking capacity, allows Spring Grove to meet 90% of its own pulp needs.

The principal fiber source at Spring Grove is pulpwood. Although Glatfelter owns about 110,000 acres of timberland in the Middle Atlantic Region through Glatfelter Pulp Wood Co., companyowned land provided only about 22% of the mill's pulpwood requirements in 1995. Currently, Glatfelter is acquiring woodlands, particularly softwood, to provide for the mill's future softwood requirements.

RECYCLED PRODUCTION. The Neenah mill entered production as Bergstrom Paper in 1904, and is the largest single U.S. producer of recycled printing/writing paper. The mill has an annual production capacity of 163,000 tons of paper.As at Spring Grove, the mill's machines are relatively small-two can produce 30,000 to 40,000 tpy, and a third can produce 70,000 to 80,000 tpy.

Neenah's deinking facility, with a capacity of 130,000 tpy of deinked pulp, makes the mill 85 to 90% fiber self-sufficent.The mill also buys about 20,000 tpy of northern bleached softwood pulp.

Of the papers produced at Neenah, 75% are used for book publishing, 12% for converted products including envelopes, 8% for technical specialties, and 5% for other commercial printing.

SPECIALTY GRADES. Glatfelter entered the tobacco papers market with the 1987 purchase of the Pisgah Forestbased Ecusta mill for $149 million in cash and the assumption of $67 million in debt.The mill produces 99,000 tpy of cigarette and thin specialty papers.All of the company's light weight printing papers used in financial and religious publications are produced at Ecusta, which is home for 12 machines. Nine of the machines are virtually identical. The three newer machines have custom design specifications based on product requirements.