Consumables
Orchids Announces New Paper Machine And Converting Line Projects
Monday 02. December 2013 - Orchids Paper Products Company (NYSE MKT: TIS) today announced its plans to invest $30.4MM to upgrade its paper making and converting assets in Pryor, Oklahoma.
The paper mill project will replace two existing paper machines and start-up in approximately 20 months. The new paper machine will be supplied by Recard, S.p.A, providing the following advantages:
— Improved quality and manufacturing flexibility. The new paper machine
will be capable of producing a broader range of paper grades that are
utilized in value and premium tier products. It will replace two paper
machines that produce paper utilized only in value tier products. This
provides greater flexibility to the operation and allows for maximizing
production output across all paper machines.
— Increased capacity and lower production costs. The project is expected
to increase the annual capacity of Orchids’ paper mill from 57,000 tons
to over 70,000 tons. Completion of the project will provide Orchids
with sufficient paper to produce approximately 11 million cases of
converted products annually. The new machine offers higher production
rates and improved energy efficiency, thereby resulting in significantly
lower production costs than the two machines being replaced.
— Return to the shareholders. The combination of lower production costs
and increased capacity is expected to increase annual EBITDA by
approximately $6 million to $8 million once the project is complete.
The converting line project is an upgrade to an existing asset and will improve manufacturing flexibility and capacity with a lower cost structure. This project is expected to be completed by the end of 2014 and to generate an additional annual EBITDA of $2.8 million to 3.4 million when fully utilized.
Mr. Jeff Schoen, the Company’s President and Chief Executive Officer, said, “Orchids is implementing an “upgrade and debottleneck” strategy that improves our manufacturing flexibility, capacity, and cost structure. These projects increase our ability to produce higher quality grades of value and premium products supporting our vision of being recognized as a 100% retailer-focused, national supplier of high quality consumer tissue products in the value, premium, and ultra-premium product categories.”
“We are pleased to further our relationship with Recard. Due to the success of our previous paper machine project with them, we believe they are an excellent choice as the supplier for this next phase in improving our paper making capabilities.”
Mr. Schoen also stated, “Furthermore, we anticipate the increased production capacity and reduced operating costs associated with this plan will create long-term value for our stockholders. We do not expect this level of capital investment and associated leverage to impede our ability to return excess cash to our shareholders.”