Billerud, a leading producer of paper and packaging materials, has announced a change in direction for its North American operations.
The company's Board of Directors has decided to abandon plans to convert its Escanaba mill in the United States to cartonboard production. Instead, Billerud will pursue a more moderate investment strategy, gradually shifting its product mix towards packaging materials in the North American market.
"After careful consideration, we determined that the projected return on investment for converting the Escanaba mill to cartonboard production wasn't attractive enough to proceed," said Ivar Vatne, President and CEO of Billerud. "Market conditions have changed, and the costs associated with transforming the mill have increased significantly."
Despite this change, Billerud remains committed to North America. "Our North American operations are an essential part of Billerud," Vatne emphasized. "Since acquiring these mills in 2022, we've been impressed by the organizational fit, access to cost-competitive fiber, and the region's financial performance – all exceeding our expectations."
Billerud sees a promising future for paper and packaging materials in North America. "The long-term market outlook is positive," Vatne stated. "The unexpected flexibility of our existing machinery presents a great opportunity to diversify our product portfolio towards packaging grades, which aligns perfectly with our overall strategy."
The company will continue to serve the North American market with its high-quality cartonboard produced in its European mills. The costs associated with the abandoned Escanaba mill conversion program, approximately SEK 200 million, will be reflected in Billerud's second-quarter 2024 results as an item affecting comparability.
This shift in strategy suggests Billerud is prioritizing a more controlled and cost-effective approach to growth in the North American market. By leveraging existing infrastructure and market opportunities in packaging materials, the company aims to capitalize on a promising sector while minimizing investment risks.
