BUSINESS

Cascades to invest $35 million to expand tissue production capacity in Oregon

09/19/2013 12:43 EDT | Updated 11/19/2013 05:12 EST
MONTREAL - Recycled paper and packaging producer Cascades Inc. is looking to grow its West Coast tissue sales by spending $35 million to expand its plant in St. Helens, Ore. with the purchase of a paper machine, previously run by Boise in the same facility.

The machine for recycled paper will be converted to produce 55,000 tons of tissue paper annually to make hand towels and napkins.

The project will increase the plant's capacity to 120,000 tons and add 29 jobs to the existing workforce of 59. Start-up is planned for the fourth quarter of 2014.

"The addition of this machine combined with other ongoing projects will further strengthen Cascades growing position in the North American tissue market," stated Cascades CEO Mario Plourde.

The company (TSX:CAS) said buying the machine will add capacity at lower cost and more quickly than building a new one.

Analyst Pierre Lacroix of Desjardins Capital Markets said the project is "an attractive opportunity for Cascades" and "mild positive" for the Quebec-based company.

It will be financed within the company's annual capital expenditure budget over two years and should generate about $8 million to $10 million in pre-tax operating earnings (EBITDA) in 2015, he wrote in a report.

Boise's decision to idle the machine last year culminated in about 340,000 tons of industry capacity being removed by various companies from the West Coast market over two to three years.

Lacroix said closures by Kimberley-Clark in Washington, Blue Heron in Oregon and Kruger in British Columbia have opened some market space for Cascades.

The project will cost about $635 per ton, compared to about $2,000 per ton for a new machine, he said.

Cascades Tissue Group is the fourth-largest manufacturer of tissue paper in North America. Founded in 1964, Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibre. It employs more than 12,000 workers at some 100 locations in North America and Europe.