WWW.IBISWORLD.COM Paper Mills in the US May 2017 1
Paper jam: Foreign competition and declining demand for paper will plague industry mills
This report was provided to IBISWorld Staff Member (2127139711) by IBISWorld on 26 October 2017 in accordance with their licence agreement with IBISWorld
IBISWorld Industry Report 32212 Paper Mills in the US May 2017 Anya Cohen
2 About this Industry 17 International Trade 36 Key Statistics 2 Industry Definition 20 Business Locations 36 Industry Data 2 Main Activities 36 Annual Change 2 Similar Industries 22 Competitive Landscape 36 Key Ratios 3 Additional Resources 22 Market Share Concentration 37 Industry Financial Ratios 22 Key Success Factors 4 Industry at a Glance 22 Cost Structure Benchmarks 38 Jargon & Glossary 24 Basis of Competition 5 Industry Performance 25 Barriers to Entry 5 Executive Summary 26 Industry Globalization 5 Key External Drivers 7 Current Performance 28 Major Companies 9 Industry Outlook 28 Verso Corporation 11 Industry Life Cycle 31 Operating Conditions 13 Products & Markets 31 Capital Intensity 13 Supply Chain 32 Technology & Systems 14 Products & Services 33 Revenue Volatility 15 Demand Determinants 34 Regulation & Policy 16 Major Markets 34 Industry Assistance www.ibisworld.com | 1-800-330-3772 | [email protected] WWW.IBISWORLD.COM Paper Mills in the US May 2017 2 About this Industry
Industry Definition The Paper Mills industry manufactures newsprint, packaging material and paper in paper mills from pulp, a household papers. These products are fibrous material derived from wood. sold in bulk to individual consumers, Mill operators may manufacture their businesses and downstream own pulp or purchase it. Industry manufacturers who may further convert products include paper rolls and reams, the industry’s products into specialty including printing and writing paper, paper products.
Main Activities The primary activities of this industry are Manufacturing rolls of printing paper, writing paper, packaging paper and industrial paper from pulp Manufacturing clay-coated paper Manufacturing absorbent sanitary and tissue paper Manufacturing newsprint
The major products and services in this industry are Facial tissue Napkins Newsprint Paper towels Toilet tissue Other sanitary products
Similar Industries 32211 Wood Pulp Mills in the US Industry operators manufacture pulp from woodchips but do not manufacture paper or paperboard.
32213 Paperboard Mills in the US Industry operators manufacture cardboard from pulp and recycled materials.
32222 Coated & Laminated Paper Manufacturing in the US Industry operators purchase paper from mills and treat it by coating and laminating it. The industry also manufactures paper bags and sacks.
32223 Office Stationery Manufacturing in the US Industry operators convert purchased paper and paperboard into office stationery. Some mills may convert their own paper into stationery products.
32229a Sanitary Paper Product Manufacturing in the US Industry operators purchase sanitary paper from mills and convert it into various tissue products. Some mills may convert their own sanitary paper.
32229b Paper Product Manufacturing in the US Industry operators purchase paper from mills and convert it into various paper products.
42411 Paper Wholesaling in the US Industry operators purchase paper rolls from manufacturers and distribute them to retailers or directly to customers. Some large clients may bypass the wholesaler and buy directly from mills.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 3
About this Industry
Similar Industries 42412 Office Stationery Wholesaling in the US continued Industry operators purchase stationery from manufacturers and distribute it to retailers and customers.
Additional Resources For additional information on this industry www.afandpa.org American Forest & Paper Association www.icfpa.org International Council of Forest & Paper Associations www.gonpta.com National Paper Trade Association www.paperage.com PaperAge Magazine www.pulpandpaper.net PulpandPaper.net
IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 4 Industry at a Glance Paper Mills in 2017
Key Statistics Revenue Annual Growth 12-17 Annual Growth 17-22 Snapshot $43.8bn -2.8% -2.5% Profit Exports Businesses $2.1bn $7.6bn 132
Revenue vs. employment growth Demand from paper manufacturing Market Share Verso Corporation 5 6
7.8% 3 0 0
-5 -3
% change % change -6 -10 -9
-15 -12 Year 09 11 13 15 17 19 21 23 Year 10 12 14 16 18 20 22 Revenue Employment SOURCE: WWW.IBISWORLD.COM p. 28 Products and services segmentation (2017)
Key External Drivers 6.9% Napkins Demand from paper 24.4% manufacturing 11.8% Newsprint Corporate profit Facial tissue Price of paper Percentage of services conducted online 14.9% Trade-weighted index Paper towels
21.7% Toilet tissue
p. 5 20.3% Other sanitary products SOURCE:SOURCE: WWW.IBISWORLD.COM WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Decline Regulation Level Heavy Revenue Volatility Low Technology Change Medium Capital Intensity Medium Barriers to Entry High Industry Assistance Medium Industry Globalization Medium Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 36
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 5 Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
Executive The Paper Mills industry has struggled downstream operators to trade up to Summary over the past five years due to high-quality paper, the rising number of competition from foreign paper services conducted online has continued manufacturers and persistently declining to pressure demand for industry goods. demand for paper products. Industry Over the five years to 2017, the operators have toiled with concerns percentage of services conducted online surrounding the increasing popularity of has increased at an annualized rate of online communication, which has 13.4%, which means that more significantly reduced demand for consumers are turning to the internet traditional paper products. Furthermore, than ever before. Due to the increasingly operators in the United States are no digital landscape of the United States, longer the world’s largest producers of fewer consumers are using paper for paper, having been overtaken by Chinese things like advertising or communication. This trend has pressured downstream demand for industry products, and in The rising percentage of services conducted 2017, IBISWorld estimates that industry online continues to prolong the industry’s revenue will decline 0.4%, along with a 4.1% increase in the percentage of gradual decline services conducted online. Over the five years to 2022, the manufacturers, which has caused industry will continue to encounter industry exports to decline. As a result of challenges, particularly as paper these negative trends, IBISWorld purchases from print publishing estimates that revenue for the Paper industries gradually wane. Demand for Mills industry has fallen at an annualized paper products may not change rate of 2.8% over the five years to 2017, significantly, but the increasing presence totaling $43.8 billion. of digital office communication Over the five years to 2017, the platforms will certainly remain a industry has suffered from slowed growing threat to industry revenue going demand from downstream markets amid forward. As a result of this competitive vastly reduced spending on nearly all pressure, IBISWorld expects industry forms of commercial and industrial paper revenue to decline at an annualized rate products. Despite an increase in of 2.5% over the five years to 2022, corporate profit, which has enabled totaling $38.6 billion.
Key External Drivers Demand from paper manufacturing Corporate profit Paper product manufacturing industries Purchases of paper products can vary are significant users of paper mill depending on the level of activity in key products. An increase in activity and downstream markets, such as finance, revenue for these downstream industries advertising and publishing industries. indicates growing demand for paper rolls Corporate profit growth typically and reams, which will positively affect improves business sentiment, mill operators. Demand from paper encourages business expansion and manufacturing is expected to increase in increases demand for the industry’s 2017, representing a potential products. Corporate profit is expected to opportunity for the industry. increase in 2017.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 6
Industry Performance
Key External Drivers Price of paper is expected to increase in 2017, posing a continued Industry revenue largely depends on the potential threat to the industry. retail price of the goods produced. Changes in the domestic prices of Trade-weighted index printing and writing paper cause The trade-weighted index (TWI) measures fluctuations in revenue, with higher the value of the US dollar relative to the prices resulting in growing revenue and currencies of its largest trading partners. If lower prices cutting into the industry’s the TWI decreases, the relative prices of US revenue and profit margins. The price of exports decrease and the prices of imports paper is expected to increase in 2017. increase, benefiting industry exports and decreasing foreign competition. However, Percentage of services conducted online an increase in the TWI can benefit industry The widespread use of online media has players who purchase inputs (e.g. pulp) resulted in a net reduction in from abroad. Since many of the industry’s stationery, letters, business forms, largest paper mills produce their own pulp, envelopes and other paper products. the TWI primarily affects the balance of This trend has reduced downstream trade in the industry’s final products and demand for the Paper Mills industry, therefore has a net negative effect on adversely affecting revenue. The industry revenue. The trade-weighted index percentage of services conducted online is expected to increase in 2017.
Demand from paper manufacturing Corporate profit
6 30
3 20 0
-3 10
% change -6 % change 0 -9
-12 -10 Year 10 12 14 16 18 20 22 Year 10 12 14 16 18 20 22
SOURCE: WWW.IBISWORLD.COM
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 7
Industry Performance
At the end of the previous decade, China Current claimed the United States’ long-held Industry revenue title of world’s largest paper Performance 5 manufacturing industry. Chinese manufacturers have consistently invested in the latest paper 0 manufacturing infrastructure, creating a highly competitive environment for -5
international trade of paper products. % change Over the five years to 2017, the domestic -10 Paper Mills industry continued to battle growing foreign competition and -15 declining domestic demand, which cut Year 09 11 13 15 17 19 21 23 into industry revenue. Furthermore, the increasingly digital landscape of the SOURCE: WWW.IBISWORLD.COM United States further reduced industry demand, as more consumers sourced IBISWorld estimates that industry their reading material online and revenue has declined at an annualized engaged in digital communication. As a rate of 2.8% over the five years to 2017, result of these negative trends, totaling $43.8 billion.
Industry Several factors can weaken the global projected to experience a relatively consolidation competitiveness of US paper mills, the modest 0.4% revenue decline. most important of which are the strength As a result of increased competition of the US dollar and the cost of federal and pressured profit, total industry regulatory compliance; in both of these establishments and total industry areas, US producers have struggled to employment have both fallen over the past compete with foreign markets. The US five years. Industry establishments have dollar has strengthened in recent years, declined at an annualized rate of 1.8% but environmental regulations have put over the five years to 2017, totaling 209. US paper products at a disadvantage Similarly, total industry employment has compared with paper products sold at far declined at an annualized rate of 3.0%, to lower wholesale rates among developing 55,437 workers during the same period. economies. As the US dollar appreciates The gradual appreciation of the US dollar against the currencies of its largest is reflected in the declining export volume trading partners, industry products will for the industry. Operators exported $9.5 become comparatively more costly for billion in paper products in 2012. In 2017, foreign countries to purchase. Therefore, however, total exports will only reach an developing economies have directed their estimated $7.6 billion, falling at an focus inward to manufacture comparable annualized rate of 4.3% during the products using lower-paid labor and five-year period. In addition, total imports facing fewer regulatory obstacles. In dropped at an annualized rate of 3.1% over 2017, domestic mills will likely benefit the past five years, falling from $9.1 billion from current rates of exchange and are in 2012 to $7.8 billion in 2017.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 8
Industry Performance
Downstream demand Downstream demand from publishing and paper converting industries is the main Despite rising corporate indicator of demand conditions for paper mills. The majority of paper manufactured profit, operators have in the United States is destined for struggled to generate downstream manufacturing, paper product consistent revenue growth and personal care industries; therefore, revenue prospects for mills will fall when production of paper products, publishing their heavy paper production activities materials and home goods falls. Demand toward additional gloss and specialty for paper is also dictated by economic paper manufacturing. factors, such as business confidence, which The price of paper is an important reflects the use of paper products in measure of industry profitability. business activity. When confidence is IBISWorld estimates that the wholesale down, demand for all products that support index price of paper has slightly businesses will decrease. decreased at an annualized rate of 0.4% Paper in the United States is in the over the five years to 2017. Generally midst of a long-term decline due to weak speaking, selling paper products at a conditions in downstream industries higher price will give industry operators such as commercial printing, stationery greater leeway to spend money on manufacturing and paper product added capital investments and retailing. Paper product manufacturing machinery repairs; in some cases, it experiences fierce competition from the may encourage operators to hire more increasing popularity of electronic labor. Moreover, aggregate corporate communication media. According to profit is also important for industry IBISWorld estimates, the percentage of operators. Total corporate profit serves services conducted online has increased as a general indicator for the strength from 7.9% of all services in 2012 to 14.8% of the US economy; increases in of all services in 2017. Digital media has corporate profit growth generally imply fundamentally shifted the needs of most that there is a higher level of white- US consumers away from physical collar business activity. Since office newspapers, magazines, books and letter affairs depend heavily on paper mail in favor of online news, e-books and products to operate, increasing other tablet-based content. While the corporate profit represents a potential digital age has reduced consumer need growth opportunity for the industry. for these paper-based resources, many However, despite total corporate profit consumers have increased their projected to increase at an annualized purchases of glossed and matte paper for rate of 0.7% over the five years to 2017, digital photography purposes. Paper industry operators have struggled to mills have responded by transitioning generate consistent revenue growth.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 9
Industry Performance
Over the next five years, revenue for the communication will further diminish Industry Paper Mills industry is projected to paper consumption in the United States Outlook decline at an annualized rate of 2.5% to and abroad. This trend could spell $38.6 billion. During the latter half of the long-term decline across many of the period, growing use of electronic industry’s paper product lines.
Brief relief Improvements in corporate profit, the index price of paper and total exports are Growing preference for projected to yield only a 1.6% revenue decline in 2018, which is a slower rate of electronic communication decline than is expected throughout the will continue to hamper rest of the five-year period. Gradual revenue improvements in general economic activity, consumer spending and underlying consumer confidence will likely drive a products will be particularly vulnerable general increase in the manufacturing of not only to digital communications, but nondurables over the next five years. This also to imports, especially from countries factor will also drive greater demand for with lower costs and developing paper packaging products, providing the industry manufacturing capacity, such as China, with small growth opportunities. Indonesia and Mexico. Paper mills in the However, growing consumer United States will be forced to emphasize preference for electronic communication higher-quality gloss paper products and document archival will continue to instead of bulk paper reams, which hamper industry revenue. In particular, typically account for the majority of sales to print media publishers, which industry revenue. Gloss paper products currently represent the majority of the are still essential for photography, cards industry’s total revenue, are expected to and other materials in which fall over the five years to 2022. These presentation is essential.
Restructuring and While revenue is expected to gradually due to intensifying import competition. profit decline, industry profit fluctuations have Overall, profit is not expected to suffer not been particularly severe since 2012. immensely over the five years to 2022, However, major bankruptcies and provided that mills continue their trend restructuring efforts occurred over the of merger and acquisition activity. past five years, leading to industry profit IBISWorld projects industry profit will dipping to a low 3.9% in 2015. There is fall only slightly to 4.5% by the end of potential for operators to achieve higher the period. profit over the next five years, as Some restructuring efforts may unprofitable operators continue to leave continue among operators over the next the industry at a steady rate. Paper mills five years, although the previous wave of will likely experience stable input costs major bankruptcies seems to have due to fairly consistent supplies of pulp subsided. Nevertheless, continued material. However, there will be declines in both the number of increasing pressure on mills to maintain establishments and total employment or reduce prices for industry products, will persist as the industry becomes
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 10
Industry Performance
Restructuring and leaner and as digital platforms gradually decline at an annualized rate of 3.1% profit continued reduce the industry’s overall presence. during the period to total 47,285 workers Industry establishments are expected to over the next five years. Moreover, decline at an annualized rate of 3.7% to unexpected increases in competition 173 over the five years to 2022. Similarly, from foreign timber industries may total employment is anticipated to accelerate this decline.
Trade There remains some uncertainty over the strength of the US dollar going forward. The decreasing value of IBISWorld estimates that the dollar will marginally depreciate in value on the the dollar will likely cause foreign exchange market, declining at a imports to continue to slow annualized rate of 0.3% over the five decline years to 2022. The decreasing value of the dollar will likely cause imports to continue to decline, as the weaker currency will projected to continue fading during the allow for fewer paper purchases per dollar. period, falling at an annualized rate of 0.4% Over the five years to 2022, IBISWorld to $7.4 billion. In 2022, IBISWorld estimates that total industry imports will estimates that exports will constitute 19.2% decline at an annualized rate of 1.7%, of revenue, while imports will account for totaling $7.1 billion. Exports are also 18.6% of total domestic demand.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 11
Industry Performance Life Cycle Stage Industry value added is declining, while the economy as a whole is growing The number of industry operators is declining Bulk paper purchases are declining due to reduced print publishing
20 Maturity Quality Growth Key Features of a Decline Industry Company High growth in economic consolidation; importance; weaker companies Revenue grows slower than economy level of economic close down; developed Falling company numbers; large fi rms dominate importance stable technology and markets Little technology & process change Declining per capita consumption of goods 15 Stable & clearly segmented products & brands % Growth in share of economy in share % Growth
10
Quantity Growth Many new companies; minor growth in economic importance; substantial 5 technology change
0 Paperboard Mills Wood Pulp Mills Electric Power Transmission
Printing -5 Paper Mills Decline Newspaper Publishing Shrinking economic importance
-10 -10 -5 0 5 10 15 20 % Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 12
Industry Performance
Industry Life Cycle The Paper Mills industry is in the decline The emergence of electronic document stage of its life cycle. IBISWorld forecasts distribution and the economic growth that industry value added, which of the internet have put pressure on This industry measures the industry’s contribution to paper mills by giving consumers a new is Declining the overall economy, will decline at an way to interact with content. annualized rate of 3.1% over the 10 years Additionally, publishing and paper to 2022. By contrast, GDP is forecast to converting industries have also entered grow an annualized 2.0% during the a decline stage of their economic life same period. Industry value added has cycle, creating weak demand conditions been falling consistently for over 10 for the paper manufacturing industry. years. In addition, the industry has Paper varieties and grades consumed experienced chronic declines in total by other manufacturing industries have revenue, total enterprises, industry not changed much over the years, with employment, exports and wages paid. some improvements in the quality, Per capita consumption of paper in the durability and gloss additives. However, United States has fallen due to declining the overall use of paper has remained demand across nearly all downstream unchanged, limiting market expansion paper product manufacturing industries. for companies.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 13 Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES 32222 Coated & Laminated Paper Manufacturing in the US Paper manufacturers purchase paper that is then treated and laminated into various paper products. 32223 Office Stationery Manufacturing in the US Stationery manufacturers purchase paper processed by mills for paper stationery goods, including envelopes, schoolbooks, calendars, letterpress paper and embossed paper. 32229a Sanitary Paper Product Manufacturing in the US Sanitary paper product manufacturers purchase absorbent tissue paper that is then converted into sanitary paper products. 32229b Paper Product Manufacturing in the US Paper product manufacturers purchase paper to convert into labels and various other paper products. 32311 Printing in the US Printing companies purchase paper rolls or stationery for bulk printing. 42411 Paper Wholesaling in the US Paper wholesalers purchase paper rolls for distribution to enterprise customers and the retail sector. 51111 Newspaper Publishing in the US Newspaper publishers purchase newsprint to produce newspapers. 51113 Book Publishing in the US Book publishers purchase paper to be used in the production of books. 51114 Database & Directory Publishing in the US Database and directory publishers purchase uncoated ground paper to be used in publishing.
KEY SELLING INDUSTRIES 22112 Electric Power Transmission in the US Electricity is necessary for paper mills to perform manufacturing activities. 32211 Wood Pulp Mills in the US Since pulp is the major raw material used for papermaking, wood pulp mills are an essential resource for paper mills. 32518 Inorganic Chemical Manufacturing in the US Some mill operators manufacture their own pulp and coated paper; thus, operators may require inorganic chemicals to aid the pulp production process. 32519 Organic Chemical Manufacturing in the US Papermaking requires chemicals, particularly organic chemicals used to coat the paper, during the production process. 42383 Industrial Machinery & Equipment Wholesaling in the US Papermaking requires heavy machinery, which is usually purchased from wholesalers and sometimes purchased directly from manufacturers. 56292 Recycling Facilities in the US Recycled paper can be used to produce pulp and paper and is purchased from recycling facilities.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 14
Products & Markets
Products & Services Products and services segmentation (2017)
6.9% Napkins 11.8% 24.4% Facial tissue Newsprint
14.9% Paper towels
21.7% 20.3% Toilet tissue Other sanitary products
Total $43.8bn SOURCE: WWW.IBISWORLD.COM
Communication papers IBISWorld estimate that this segment The communication papers category represents 24.4% of industry revenue. consists of a wide range of coated and uncoated printing and writing papers that Personal care products are typically used for both private and Personal care products are an important commercial use. Printing and writing part of the industry’s product lineup and, papers are used for commercial printing, depending on the product, are commonly stationery, office and business printing, made by fluffing and bleaching high business forms, envelopes and newspaper quantities of pulp. This category includes and trade book publishing. Other papers bathroom tissue, paper towels, facial accounted for in this product group tissues and other sanitary tissue include bristol papers, which are a heavy- products. Additionally, disposable duty alternative to traditional paper and diapers, training pants, sanitary napkins, are typically used to make greeting cards feminine care products and incontinence and book covers. Newsprint, which is pads are included in this product line. typically made using a low-cost, uncoated Due to the noncyclical demand for and very light grade of paper, is also consumer staples produced within the manufactured by paper mills. Due to the segment, revenue for household and continued transition toward digital media sanitary papers has increased over the and communication, printing and writing past five years. As revenue from papers have declined slightly as a share of traditional office paper products wanes, revenue over the past five years. personal care products will continue to This segment also includes sales of increase as a share of industry revenue coated paper, which is made by applying going forward. In 2017, IBISWorld a thin layer of matte, semi-matte or estimates that toilet tissue will represent gloss sheen to the paper. Coated paper is the largest share of personal care commonly used for magazines, labels, products, at 21.7% of total industry tabs and books. Demand for coated revenue, followed by paper towels with paper remains high for gloss printing 14.9%, facial tissue at 11.8% and napkins purposes, although digital media with 6.9%. All other personal care continues to erode this segment at an products are estimated to account for increasingly fast rate. In 2017, 20.3% of total industry revenue in 2017.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 15
Products & Markets
Demand Paper rolls produced by the industry are years, with lower tariffs, free trade Determinants intermediate products that are vertically agreements and fluctuating dollar integrated into the products of other strength all contributing to the industry’s paper converting, publishing and uncertain market foothold. This trend manufacturing industries. Demand for has resulted in an increasing number of the industry’s paper products strongly operators offshoring production to take depends on downstream demand from advantage of lower manufacturing costs, these industries, as well as demand from thereby reducing manufacturing activity overseas manufacturing industries that at the domestic level. As long as require many of the industry’s other offshoring practices and import levels intermediate products. continue to increase within paper conversion and publishing processes, Domestic manufacturing activity demand for domestic paper rolls will The majority of the paper produced in continue to suffer regardless of overall the United States is processed into market conditions. converted paper products for publishing newspapers, books, magazines, Foreign manufacturing activity directories and greeting cards. The level The United States is currently the of activity in these downstream industries second-largest paper producer in the will generally dictate demand for paper world, next to China. As a result, sudden rolls. Demand among downstream shocks to the global economy that impact industries is influenced by paper consumption abroad will have a macroeconomic factors, including the significant impact on the success of overall strength of business activity in the domestic paper mills. Demand for paper United States, consumer and business products depends on manufacturing sentiment and the level of import activity in the destination country and penetration in each respective the value of the destination country’s downstream industry. Demand for end currency relative to the dollar. products such as office stationery, packaging, high-quality imaging paper, Consumer preferences magazines and books increases during The paper industry has experienced some periods of economic expansion, which controversy in the past. The production benefits manufacturers of these products. process of paper, from start to finish, has However, this trend can be offset by attracted criticism among the overall level of import penetration. environmentalists for the toxic chemicals When import competition in downstream used and the upstream methods through manufacturing industries increases, which industry operators collect timber. domestic manufacturers may no longer High quantities of water, energy and produce their products at the same chemicals are needed to produce sheet quantities. This will ultimately reduce paper, while vast stretches of natural domestic manufacturing demand for timber are required to produce paper inputs such as paper. When the US dollar products. Environmental movements appreciates relative to foreign currencies, have protested the use of chemical imports become relatively cheaper and bleaching agents in paper products as will lead to increased demand for well as the industry’s lack of self-policing imported products instead of domestic in terms of reforestation efforts. products. Paper manufacturing in the The overall impact of environmental United States has experienced intense protests has been minimal, but the competition from foreign markets for decreasing use of paper products has
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 16
Products & Markets
Demand indirectly served to reduce the amount of production no longer possesses the same Determinants chemicals used and the quantity of reputation as being inherently destructive continued natural timber gathered during the along the supply chain. production process. Although only some Aside from environmental concerns, companies engage in reforestation efforts other consumer preferences have and create “natural” paper products that affected demand for paper over the do not use chemical bleaches and dyes, past 10 years. The transition toward paper recycling has become a major digital communication and online opportunity for industry operators. In cloud storage has significantly reduced 2016, 67.2% of all US paper was demand for office stationery and recovered to be used for future paper newspapers over the past five years. products, according to the latest data However, demand for high-quality from the American Forest and Paper imaging paper has increased alongside Association. Paper scraps are frequently the growing popularity and wider use used and its fibers are extracted to of jet-printers. The overall effect has produce a variety of pulp and paper been a decline in demand for inputs. Similarly, the paper industry in traditional paper products such as the United States is closely monitored on envelopes, business forms and the federal level by the Environmental application forms, but a steady Protection Agency (EPA) ensuring that increase in demand for technology- any resources used in production are supporting products such as clay strictly controlled. As a result, paper coated printing and converting papers.
Major Markets Major market segmentation (2017)
17.3% Exports 43.0% Print publishers and other end users
39.7% Wholesalers and brokers
Total $43.8bn SOURCE: WWW.IBISWORLD.COM
Print publishers and other end users offices and have the scale to buy direct Large publishers of books, newspapers, from industry operators. Downstream journals, magazines and directories demand from printing industries depends represent the majority of the industry’s on the level of consumer demand for demand. The Paper Mills industry also reading materials and prevailing levels of receives direct demand from other large competition from online substitutes. end users that require paper in their Additionally, demand from other end
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 17
Products & Markets
Major Markets users that buy directly from paper mills printing companies and other continued depends on fluctuations in corporate manufacturers before the finished profit and the percentage of services product is sent to the final customer. conducted online. Consolidation in However, new forms of online ordering publishing industries and other and order tracking software systems have downstream businesses increases demand made it increasingly cost-effective for from this market segment, as only large larger customers to buy directly from consumers are sizable enough to bypass manufacturers, bypassing the wholesaler. wholesalers and buy paper directly from As a result, the proportion of paper mills mills. Over the five years to 2017, this that sell directly to wholesalers has segment has somewhat increased as a declined over the past five years. share of revenue, as consolidation in downstream industries has allowed Exports publishers to buy paper directly from An estimated 17.3% of the industry’s total paper mills. IBISWorld estimates that revenue is generated through export sales. print publishers and other end users make While the industry has been very up the largest market in 2017, with 43.0% globalized for decades, the waning use of of total industry demand. paper in publishing industries throughout much of the developed world has reduced Wholesalers and brokers overall international trade of the Wholesalers and brokers also makeup a industry’s products. Exports represented significant share of industry revenue in 18.7% of the industry’s total revenue in 2017, with 39.7% of total demand. 2012, but this level has fallen over the past Wholesalers are a convenient distribution five years as paper mills throughout the system for paper mills; bulk shipments globe narrow their focus toward their are delivered to publishers, commercial respective domestic markets.
International Trade China overtook the US as the world’s largest producer of paper during the Industry trade balance previous decade. Global competition 15 Level & Trend within the Paper Mills industry has Exports in the intensified in the years since, with the 10
industry are rapid development of paper industries in 5 Medium and developing countries creating additional 0 Decreasing competition among the world’s largest industrialized exporters. Although the $ billion -5 Imports in the United States has historically played a industry are dual role as an importer and exporter of -10 Medium and paper products, the strengthening of the -15 US dollar has led to declines in industry Year 09 11 13 15 17 19 21 23 Decreasing exports over the past five years. Exports Imports Balance SOURCE: WWW.IBISWORLD.COM Imports The value of industry imports is domestic demand have similarly declined estimated to decrease at an annualized from 18.7% to a projected 17.3% over the rate of 3.1% between 2012 and 2017, five years to 2017. Although the US dollar totaling $7.7 billion. Imports as a share of has performed well in recent years,
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 18
Products & Markets
International Trade overall demand for paper products has The top four importers to the United continued gradually waned in response to the States are Canada, Finland, Germany and increasing number of services conducted Korea. Imports from these countries through the internet. Declines among account for a respective 48.3%, 8.9%, downstream publishing industries have 8.8% and 4.4% of the industry’s total weakened overall demand for paper imports. Canada’s close proximity to the manufacturing, as consumers across the United States affords both countries a world transition from print newspapers long-standing trading relationship, which and magazines toward digital has been strengthened by continued alternatives. These factors resulted in bipartisan trade efforts such as the North lower demand for imported industry American Free Trade Agreement products. Additionally, the US initiated (NAFTA). Many US companies have also anti-dumping protection against coated taken advantage of Canada’s vast timber paper imports, which prevents industry resources, causing several major mills to operators from selling paper outputs at a headquarter operations in the country. cheaper price in foreign markets than Canadian imports have declined on they would normally charge in the average since 2012, falling from 55.0% domestic market. market share to 48.3% during the period. In 2015, the US Department of Korea recently replaced Japan as the Commerce reaffirmed its continued world’s fourth largest importer of imposition of countervailing duties on American paper mill products, having certain manufactured paper products established a 4.4% market share in 2017. from China and Indonesia to offset the government subsidies that each country Exports introduced through their own subsidized The value of exports is expected to manufacturing activities. Countervailing decrease over the five years to 2017, duties were imposed in accordance with falling at an annualized rate of 4.3%. the World Trade Organization (WTO), IBISWorld estimates that the industry which has a strict sanctions policy will derive 17.3% of its revenue from the against foreign attempts to engage in export of goods during 2017, decreasing dumping practices. The US International from 18.7% in 2012. The rising cost of US Trade Commission approved punitive goods on the international market has duties on Chinese and Indonesian reduced global demand for industry exports of specialty paper to the United products, and greater industrialization States. The ruling set in place margins of among foreign paper mills has reduced up to 193.3% against Chinese coated overall need for US paper products. paper products and 51.8% for Canada and Mexico are by far the most Indonesian exports to the United significant export destinations for US States. These duties are to remain in paper manufacturers, accounting for place for several years and will likely 20.7% and 18.5% of total exports in 2017, decrease the two countries’ import respectively. As NAFTA members and penetration into the United States. The geographic neighbors, these two introduction of anti-dumping countries have an extremely measures and countervailing duties advantageous position for industry trade. has been responsible for the slight China and Japan are the next largest decline in industry imports over the markets, making up a respective 8.0% five years to 2017. and 6.1% of total industry exports.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 19
Products & Markets
International Trade continued
Exports To... Imports From... 4.4% 8.8% Korea 6.1% Germany 8.0% Japan China 8.9% Finland 46.7% 18.5% Other 48.3% Mexico Canada
20.7% Canada 29.6% Other
Year: 2017 Total $7.6bn Total $7.8bn SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 20
Products & Markets
Business Locations 2017
est AK 3.7 e a d
ME M d 4.1 reat t a t c 1 2 akes NY 3 WA ND 9.0 4 MT 0.0 5 4.1 0.0 MN 2.4 WI ock 11.0 MI PA 6 SDP a s 4.1 3.3 OR 0.4 7 2.9 Mou ta s ID IA OH 9 8 0.4 WY 0.4 2.4 0.0 IN VA NE IL 0.4 WV 0.4 2.0 0.0 1.3 KY est NV 2.0 0.0 NC UT MO 2.9 1.3 CO KS 0.4 0.4 0.4 TN 2.4 SC CA 4.1 6.2 OK AR out east 2.0 0.8 GA AL 3.7 AZ MS 2.5 2.0 NM 0.4 0.0 out est LA TX 0.4 FL 2.0 3.7
est HI 0.0 Additional States (as marked on map) Establishments (%) 1 VT 2 NH 3 MA 4 RI Less than 3% 0.8 1.6 3.7 0.0 3% to less than 10% 10% to less than 20% 5 CT 6 NJ 7 DE 8 MD 9 DC 1.6 1.6 0.0 1.3 0.0 20% or more
SOURCE: WWW.IBISWORLD.COM
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 21
Products & Markets
The Southeast region has recently Business Locations Distribution of establishments vs. population become the largest section of the industry, with an estimated 24.0% of 30 paper mills located in the area. Paper mills are dispersed fairly evenly across all
states within this region, with South 20 Carolina leading the region with 4.2% of
industry establishments. The Southeast % region has traditionally been a major 10 pulp and papermaking area, due to close access to raw materials and large markets in the eastern United States. However, its 0 share of establishments has been West decreasing at a faster rate compared with Plains Southeast the industry as a whole, as some of the Southwest Great Lakes Mid-Atlantic large corporations have been cutting New England
their capacity due to lower demand Establishments Rocky Mountains throughout the area. Population The Great Lakes is typically one of the SOURCE: WWW.IBISWORLD.COM largest paper manufacturing regions of the United States. Over the five years to area’s forest land is protected by 2017, however, the region has declined conservation measures that limit paper slightly to 19.9% of industry mills. milling and logging activity in the region. Wisconsin remains the largest state for Both the West and Southwest are the industry and alone is home to 11.0% expected to lose their share of the total of the nation’s paper mills. With its close number of mills, with greater resources proximity to large Canadian timber attracting producers to other areas in the stocks, establishments in this region have eastern United States. While the West greater opportunities to expand, which has easier access to the Pacific export has attracted companies to the area. market, timber resources and access to The Mid-Atlantic contains an Canadian exports are greater elsewhere estimated 15.1% of establishments, most in the United States. In 2017, IBISWorld of which are concentrated in New York estimates that the West holds 16.8% of and Pennsylvania. This region is total industry locations. attractive to paper mill investors The number of establishments in because of convenient access to New England has held steady over the customers from major metropolitan past five years at 11.8%. The Plains and cities as well as its major highway routes Rocky Mountains are estimated to to the Canadian timber market. The account for 4.3% and 2.0% of industry region has maintained a relatively establishments in 2017, respectively. consistent share of establishments since These regions are not heavily populated 2012, with New York comprising 9.0% of and lack the infrastructure and industry establishments. connectivity to key markets and ports, Paper manufacturing in the West is resulting in a low concentration of minimal, partly because much of the paper mills.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 22 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
Market Share Market share concentration within the International Paper, MeadWestvaco, Concentration Paper Mills industry is low, with the top Weyerhaeuser Company, NewPage, four companies estimated to hold 17.2% Verso, Stora Enso North America and of total industry revenue. The majority Domtar have consolidated and Level of the industry’s operators are medium- diversified business functions, resulting Concentration in sized companies with less than 5.0% in MeadWestvaco, Weyerhaeuser and this industry is Low market share. However, market share Stora Enso to either leave the industry concentration has increased slightly over or come under the scope of other the past five years as the industry’s companies. In 2015, Verso acquired largest players continue to acquire NewPage, the latter of which has smaller and largely unprofitable historically been one of the industry’s competitors. Following this heavy largest manufacturers. The overall effect merger and acquisition activity over the has been a slight reduction in the past decade, the industry’s largest number of companies operating in the companies have begun to diversify their industry alongside a greater decline in portfolios to provide more than paper the overall presence of the industry’s and pulp products. Large players such as largest companies.
Key Success Factors Guaranteed supply of key inputs cost compared with smaller mills, Contracts for the supply of wood pulp thereby allowing them to be more will ensure that a paper producer has competitive against domestic and IBISWorld identifies access to the raw materials required to foreign producers. 250 Key Success manufacture paper. Factors for a Having contacts within key markets business. The most Automation – reduces costs, particularly Links with downstream industries important for this those associated with labor are essential to ensuring Installation of modern technology to continuous demand for industry are: improve plant efficiency and reduce costs paper products. will not only give a producer a financial advantage but also a marketing advantage Undertaking technical research through the use of clean technology. and development Research and development will Economies of scale maximize the possibility of developing Large mills can manufacture paper higher quality products with faster products at a fraction of the per-unit production schedules.
Cost Structure Profit five years, average profit margins have Benchmarks The Paper Mills industry’s profit margins marginally increased from 4.3% in 2012. have historically been low due to a high Margins have slightly expanded within the share of purchases and relatively low industry as many unprofitable companies value-added products sold in the industry. have either exited the industry or merged In 2017, the industry is projected to with large, profitable operators over the experience average profit margins of 4.8%, past five years. measured as earnings before interest and Profit margins for smaller companies, taxes as a share of revenue. Over the past which lack significant negotiating power
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 23
Competitive Landscape
Cost Structure in procurement, have been pressured to be a systemic cost among large Benchmarks over the past five years. Since smaller industry players, profit will continue to continued operators make up the majority of the remain low. industry’s revenue, lower profit margins among these companies Purchases weighed down the average profit Purchases represent the largest cost for margin for the entire industry. Larger industry operators, accounting for an companies can potentially have greater estimated 59.7% of revenue in 2017. One profit margins as a result of greater of the industry’s largest expenses is the economies of scale, vertical integration cost of wood pulp. Over the five years to and diversified portfolios across other 2017, the global price of wood pulp has paper manufacturing industries. increased. In 2012, it cost $762.85 per However, there has been substantial metric ton of wood pulp, and in 2017 the restructuring activity by major players price is anticipated to reach $875.00. over the past five years following Industry operators have been forced to several instances of bankruptcy. increase prices to adjust to rising input Domtar Corporation, one of the costs, which have proven increasingly industry’s largest companies, shut difficult amid a period of decreasing down paper machines in Arkansas, demand for paper products. North Carolina, California and Michigan as a result of a dwindling Wages capacity utilization across its largest Paper mills have a low labor dependency plants. Until restructuring efforts cease compared with similar paper product
Sector vs. Industry Costs
Average Costs of all Industries in Industry Costs sector (2017) (2017) 100 4.8 n P r o fi t 7.5 n 9.4 Wages 12.3 n Purchases 80 n Depreciation n Marketing n Rent & Utilities n Other 60 59.7 54.6
40 Percentage of revenue Percentage
2.5 2.3 0.5 20 2.3 0.5 4.3 19.8 19.0
0 SOURCE: WWW.IBISWORLD.COM
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 24
Competitive Landscape
Cost Structure manufacturing industries due to a high required to power paper mills’ Benchmarks degree of mechanization in the industry. production. Due to consolidation continued As a result, wages as a percentage of among larger companies and slow but revenue are generally low, estimated at steady increases in rent costs, rent and 9.4% in 2017. Employees will earn an utilities have increased as a share of estimated average wage of $73,944 per total industry revenue since 2012. year, which is partly skewed by the high average wages of skilled industrial Other expenses production managers and industry Remaining industry costs account for engineers. Over the past five years, wages 21.8% of the industry’s total activity. as a share of revenue have decreased Other expenses include sales and slightly from 9.7% of revenue. marketing, interest expenses, administrative costs, restructuring Rent and utilities activities, insurance costs, research and Rent and utilities account for 4.3% of development, goodwill impairments and industry revenue in 2017. Rent and others. There has been a reduction in utilities are slightly higher than other general expenses since 2012 due to paper-based industries due to the large developments in online ordering systems, square footage necessary to house which have reduced administration work paper mills and the substantial and streamlined inflow and outflow of quantities of water, fuel and electricity pulp and paper products.
Basis of Competition The Paper Mills industry has a high competitive advantage within their degree of competition. For the average industry. Conversely, quality can exceed Level & Trend industry paper mill, competition comes price in terms of importance, particularly from other industry operators and from with respect to magazine and periodical Competition in this substitutes for paper products, especially publishing companies that demand glossy, industry is High and digital replacements for printed material, strong paper materials. Product quality is the trend is Steady substitute packaging materials and immensely important for industries in imported products. which the paper product is used for presentation and marketing purposes. Internal competition It is also essential that manufacturers Industry operators compete heavily on in this industry have sufficient price and quality of materials. Price is one inventory to meet the immediate of the most important factors, since the demands of downstream producers and majority of industry products are distributors. Companies must indistinguishable inputs that are sold in consistently deliver high-quality bulk to downstream industries. Wholesale products and provide exceptional buyers of industry products are mainly service in order to communicate any concerned with keeping input costs as low changes and delays. The location of a as possible to maximize profit margins. manufacturing facility and its proximity Industry producers that possess significant to key customers is important with economies of scale and sufficient regard to meeting delivery deadlines purchasing power can negotiate wood pulp and reducing transportation costs. It is and chemical prices at lower costs, thereby also critical to have skilled sales staff allowing them to produce lower-cost that are capable of negotiating products that offer industry operators a wholesale prices that accurately reflect
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 25
Competitive Landscape
Basis of Competition changing timber prices. Doing so to the market without incurring continued preserves client bases and encourages substantial transportation costs. repeat sales for industry operators. Additionally, China has been a For an industry that relies heavily on significant competitor in the domestic natural resources, access to raw materials market due to its inexpensive (i.e. hardwood timber, softwood timber products, aided in part by its and varieties of woodchips) is an depreciated currency. Countervailing important source of competition. Since duties on coated paper from China timber is a protected resource, paper have slightly reduced the level of mills must compete with one another for import competition from China in access to raw materials. Environmental recent years. However, other varieties awareness can also be a competitive of paper remain free of tariffs. advantage. The use of recycled materials Furthermore, paper industries in in newsprint and packaging materials developing countries have developed and the energy efficiency of the rapidly over the past 10 years, manufacturing plant are all factors that improving the quality of foreign help give a paper manufacturer an products substantially. As a result, improved image when compared with the higher-value paper product imports industry as a whole. These factors may from China and other developing help future sales to downstream countries are increasing the level of industries that use environmental competition in the United States. initiatives as a marketing tool. Paper mills also experience external competition from digital platforms. External competition Competition from the internet has Imports pose a threat to the Paper Mills intensified significantly, reducing paper industry, particularly through price- circulation for newspapers, magazines, based competition. The cost of selling books, stationery and other paper foreign products in the US market is tied products. The upside is that new paper with transportation costs. Therefore, products have been introduced to Canada and Mexico are poised to complement new technologies such as introduce competitively priced products high-resolution printing paper.
Barriers to Entry The Paper Mills industry has high barriers to entry, given the substantial Barriers to Entry checklist Level & Trend cost of starting up a mill and the many Competition High government regulations that must be Barriers to Entry Concentration Low carefully followed during various in this industry are Life Cycle Stage Decline manufacturing processes. Papermaking Capital Intensity Medium High and Steady and equipment can be very costly, Technology Change Medium particularly among those who utilize the Regulation & Policy Heavy latest machinery. New entrants will need Industry Assistance Medium
to secure a large plant for operation, which will require large investments in SOURCE: WWW.IBISWORLD.COM physical and human capital. Stringent environmental protection state and local governments will create guidelines imposed by the EPA as well as very high costs for new operators, additional regulations established by thereby slowing the process of entering
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 26
Competitive Landscape
Barriers to Entry the industry. New operators need to Accessing low-priced wood pulp can be continued comply with numerous emissions very difficult for new companies, since requirements before beginning major players develop supply contracts operations, which increases the cost of with pulp manufacturers to ensure opening a business. Regulations relating consistent flows of paper and pulp supply. to the extraction of wood from protected Considering the size of operations forests limit the available supply of wood and preestablished distribution pulp. There have been some slight channels for larger players, entrants technological advancements in alternative will likely be larger companies already fiber technology, though the costs of operating in a similar industry, such as purchasing the equipment necessary to pulp manufacturing. It is far easier for perform these fiber processes are often far major companies to use preexisting too high to justify the marginal economies of scale to expand improvement that the technology delivers. operations into the Paper Mills Companies must also obtain and industry, rather than start an enterprise potentially train employees who purely on invested capital. In fact, this understand papermaking, electrical has been the trend among major engineering, chemical engineering and players in the industry over the five various compliance standards. years to 2017. Mergers and corporate Competition for access to distribution restructuring has resulted in the channels can pose a major barrier to industry’s three largest companies prospective operators, since downstream absorbing smaller players and contracts and business relationships diversifying their business activities to preexist among industry players. maximize economies of scale.
Industry The Paper Mills industry has a medium developing countries. Total exports have Globalization level of globalization, due to a mostly similarly declined as a result of the equal level of import and export activity strengthening US dollar. Trade between within the industry. Major companies in Canada and the US represents the Level & Trend the industry are based in the United majority of the industry’s international Globalization in States, with the exception of Domtar activity, and these two countries have this industry is Corporation, which is a Canadian historically represented a key trade Medium and the company. However, all major paper mill alliance due to the ease with which trend is Steady companies have international operations, operators can import and export which contribute to the globalized nature industry goods. Considering that paper of the industry. Offshoring activity is industries in developing countries are expected to continue, as major players growing at an impressive speed, the increasingly take advantage of less penetration of paper products saturated markets abroad and developing manufacturing in foreign countries is economies establish domestic paper likely to increase its global presence. manufacturing industries. While this factor will result in lower The Paper Mills industry is also sales opportunities for domestic exposed to a moderate level of trade. producers, companies that own Total exports have fallen over the past operations in developing countries will decade, although this is the result of far benefit from the industry’s penetration greater paper production among into new markets.
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Competitive Landscape
Industry Globalization continued
International trade is a Trade Globalization Going Global: Paper Mills 2007-2017 major determinant of an industry’s level of 200 Export Global 200 Export Global globalization. Exports offer growth opportunities for fi rms. 150 150 However there are legal, economic and political risks 100 100 associated with dealing in foreign countries. Exports/Revenue Import competition can Exports/Revenue 50 50 bring a greater risk for Paper Mills 2017 2007 companies as foreign 0 Local Import 0 Local Import producers satisfy domestic 0 40 80 120 160 0 40 80 120 160 demand that local fi rms Imports/Domestic Demand Imports/Domestic Demand would otherwise supply. SOURCE: WWW.IBISWORLD.COM
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 28 Major Companies Verso Corporation | Other Companies
Major players (Market share) 92.2% Other
Verso Corporation 7.8% SOURCE: WWW.IBISWORLD.COM
Player Performance Verso Corporation is a Delaware forward. In addition, Verso announced a corporation formed through Apollo major acquisition of leading Global Management LLC’s acquisition of manufacturer NewPage Holdings in a Verso Corporation International Paper’s coated and $1.4 billion deal. The deal was finalized in Market share: 7.8% supercalendered papers division. Today, January 2015 and contributed Verso is a leading producer of coated significantly to the company’s substantial papers for use in catalog and magazine revenue increase of 140.7% that year. publishing. Additionally, the company manufactures market kraft pulp, a type of Financial performance wood pulp that is created by blending Verso’s revenue has increased at an wood chips with sodium hydroxide and annualized rate of 18.4% to $3.4 billion sodium sulfide additives. Verso conducts over the five years to 2017, although operations through eight US mills, with a nearly all of this growth is the result of combined capacity of 3.2 million tons of surging revenue in 2015. Significant coated and supercalendered paper declines in industry demand for paper annually. In 2016, Verso took in total products and stronger import penetration company revenue of $2.6 billion. as a result of the growing strength of the In 2012, Verso completed a $45.0 US dollar have somewhat hurt the million renewable energy project at its company since its acquisition of NewPage Michigan mill; the company hopes that in 2015. The NewPage acquisition, which the plant will generate energy savings initially was intended to help stabilize the and potentially help Verso attract company’s waning performance, has environmentally conscious clients going been met with lukewarm reception from
Verso Corporation - fi nancial performance* Revenue Operating Income Year ($ million) (% change) ($ million) (% change) 2012 1,475.0 N/C -32.0 N/C 2013 1,389.0 -5.8 34.0 206.3 2014 1,297.0 -6.6 -175.0 -614.7 2015 3,122.0 140.7 -155.0 11.4 2016 2,641.0 -15.4 -156.0 -0.6 2017 3,435.2 30.1 -136.8 12.3
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 29
Major Companies
Player Performance investors and did not prevent the with total industry-relevant revenue continued company from ultimately filing for expected to rise in 2017. Profit has yet to chapter 11 bankruptcy protection in fully recover, however, and in 2017, January 2016. However, Verso has IBISWorld estimates that the company successfully emerged from bankruptcy, will operate at a loss.
Other Companies Domtar Corporation International Paper Company Estimated market share: 4.2% Estimated market share: 3.2% Domtar Corporation is the largest International Paper Company was integrated manufacturer and marketer of formed in 1898 and stands today as one uncoated freesheet paper products in the of the largest forest products companies United States. The company, in the United States. The company headquartered in Montreal, Canada, operates across major manufacturing entered the US Paper Mills industry industries in North America, Europe, through acquisitions of Ris Paper and Latin America, Russia, Asia and North subsequent purchases of several Georgia- Africa. International Paper has over Pacific paper mills. Currently, Domtar’s 55,000 employees in about 20 countries. operations mainly center in South International Paper participates in this Carolina. In 2016, Domtar employed industry through its printing papers about 10,000 workers, approximately segment. In 2017, this division is 61.0% of which are in the United States, estimated to make up nearly 20.0% of the and took in $5.1 billion in total revenue. company’s $21.1 billion total revenue. The company operates through two Over the past five years, International business segments: pulp and paper and Paper has engaged in a string of strategic personal care, the second of which divestitures, mergers and acquisitions to manufactures and distributes adult focus on its core paper and packaging hygiene products. Its personal care operations. The company continues to segment was formed following the 2011 operate former competitor acquisition of Attends Healthcare, a Weyerhaeuser’s containerboard, prominent producer of paper-based packaging and recycling business. hygiene products. The company Weyerhaeuser had been one of the generates the majority of its revenue industry’s largest paper manufacturers through its industry-relevant pulp and throughout the 20th century. In 2012, papers segment. Specifically, Domtar International Paper acquired Temple- manufactures uncoated freesheet paper Inland for $4.4 billion, growing its and coated groundwood paper. In total, industrial packaging segment. The Domtar Corporation has 13 integrated company also acquired all remaining pulp and paper mills in operation (nine shares of Orsa International Paper in the United States and four in Embalangens for $127.0 million. Despite Canada), with an annual paper these major purchases, the company has production capacity of 4.1 million tons announced closures of numerous plants, of hardwood pulp. 44.2% of this including locations based in the Florida segment’s industry-relevant production cities of Polk, Cedarburg and Auburndale, capacity is in the United States. In as well as Franklin, VA. These closures 2017, IBISWorld estimates that were undertaken to reduce capacity in Domtar’s industry-relevant revenue will response to recessionary demand total $1.8 billion. declines. In 2012, the company converted
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 30
Major Companies
Other Companies one of its paper facilities to a fluff pulp headquartered in Montreal and is one of continued facility, signaling a change in product the largest publicly traded paper and focus from paper and stationery products forest products companies in North to toiletries. International Paper also America. The company produces closed its Courtland, AL paper mill, newsprint and a range of coated and which led to the elimination of 1,000 specialty papers, market pulp and wood jobs. Due to these closures, IBISWorld products. In 2012, the company changed estimates that industry-relevant revenue its name to Resolute Forest Products has declined to $1.4 billion in 2017. and operates about 40 pulp and paper mills facilities in Canada, the United Resolute Forest Products States, the United Kingdom and South Estimated market share: 2.0% Korea. In 2017, IBISWorld estimates Resolute Forest Products was formed that Resolute will generate $891.7 through the merger of pulp and paper million in industry-relevant revenue producers Bowater and Abitibi from its US production of newsprint, Consolidated. The company is coated and specialty paper.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 31 Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital Intensity The Paper Mills industry has a moderate level of capital intensity. IBISWorld Capital intensity estimates that in 2017, for every $1.00 Capital units per labor unit Level spent on labor, the industry will invest 0.5 The level of capital $0.25 in capital. Capital investments are intensity is Medium often put toward repairs and 0.4 modifications of pulp-mashing 0.3 machinery and papermaking equipment, with wholesale purchases of new 0.2 machinery occurring infrequently. The 0.1 industry’s moderate level of capital 0.0 intensity is due to the significant Economy Manufacturing Paper Mills mechanization required to produce paper
products in mass quantities. Industry Dotted line shows a high level of capital intensity capital intensity has increased over the SOURCE: WWW.IBISWORLD.COM past five years due to growing competition from foreign countries such products are manufactured with new as Japan, Finland and Germany, capital and, in some cases, lower wages. countries in which paper and pulp Industry employment has continually
Tools of the Trade: Growth Strategies for Success
New Age Economy Investment Economy Recreation, Personal Services, Information, Communications, Health and Education. Firms Mining, Finance and Real benefi t from personal wealth so Estate. To increase revenue stable macroeconomic conditions fi rms need superior debt are imperative. Brand awareness management, a stable and niche labor skills are key to macroeconomic environment product differentiation. and a sound investment plan. Capital Intensive
Labor Intensive Paperboard Mills Electric Power Transmission Traditional Service Economy Printing Wood Pulp Mills Old Economy Newspaper Wholesale and Retail. Reliant Publishing Paper Mills Agriculture and Manufacturing. on labor rather than capital to Traded goods can be produced sell goods. Functions cannot using cheap labor abroad. be outsourced therefore fi rms To expand fi rms must merge must use new technology or acquire others to exploit or improve staff training to economies of scale, or specialize increase revenue growth. in niche, high-value products.
Change in Share of the Economy SOURCE: WWW.IBISWORLD.COM
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 32
Operating Conditions
Capital Intensity declined since the late 1990s, as cost- over the five years to 2017, as demand for continued cutting initiatives have reduced the office paper products continues to wane quantity of labor in favor of increasingly amid a major transition to digital efficient pulp and paper manufacturing communication platforms. In 2012, the systems. The decline in demand for industry invested $0.24 for every $1.00 industry services has placed an even spent on labor, compared with $0.25 put greater burden on industry employment toward capital in 2017.
Technology & Systems The Paper Mills industry has a moderate Reducing toxic chemicals level of technological change. Operators The industry has also focused on Level have increasingly invested in newer reducing the amount of harmful chemical machinery, equipment, upgrades and put discharges from mills. Prolonged The level of forth research toward more efficient exposure to toxic chemicals such as Technology Change processes to maintain market presence bleaching agents and sulfurous acid for is Medium amid growing foreign competition. The pulping is extremely hazardous if use of recycled, postconsumer paper handled incorrectly. Reducing the content during production has been a amount of chemicals used in paper prominent research area for the industry product manufacturing helps ensure the in recent years. safety of industry employees, and ultimately it saves paper mills money Increases to efficiency over time. Reductions have been made in Machinery and equipment in this industry effluent discharge from mills that make are becoming increasingly computerized, paper from wood pulp, while the use of which has improved the speed of elemental chlorine-free bleaching agents operations, productivity, efficiency and has increased tremendously over the past reduced human error. Technological 25 years. There have been improvements developments emphasize alternative in alternative pulping technologies as pulp-making technologies and greatly well, owing to the introduction of improve methods through which industry chemical pulping methods that do not operators remove ink from recycled require conventional boiling methods. materials, which has led to increased use Also, many composed plants and grasses of recycled materials in production. can be used as a fiber source for paper Computer-aided manufacturing, faster product making. Standard timber, machines, alternative pulp-making however, is expected to remain the technologies, supply chain management dominant material source due to its and e-commerce, plant power abundance and highly fibrous feel. generation and energy consumption Reducing energy consumption, have all improved through the use of decreasing environmental compliance modern manufacturing equipment. Not costs and using recycled material in only do newer machines consume less manufacturing will be important goals energy, emit less noise and offer for the industry going forward. The improved safety measures, investing in industry hopes to achieve all three of new capital has greatly reduced the these goals through the American Forest industry’s dependency on labor. Going and Paper Association’s Agenda 2020 forward, new machinery will provide a Technology Alliance initiative, an major advantage over relatively labor- industry-led partnership between intensive, older machines. government and academia aimed to
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 33
Operating Conditions
Technology & Systems revive all forest products industries demonstration and deployment of continued through subsidizing research in breakthrough technologies in American processes, materials and markets during timber industries. Agenda 2020’s goal is the period to 2020. The Agenda was to achieve a 35.0% reduction in pulp and initiated in 1994 in partnership with the paper manufacturing costs. A reduction US Department of Energy with a focus on in mill costs would have a positive effect improved energy efficiency, and has on the industry through a fall in the price expanded its scope to accelerate research, of materials.
Revenue Volatility The Paper Mills industry has a low significant shifts in demand. The degree of revenue volatility, largely due industry’s revenue volatility is to the industry’s consistently fading historically low, although revenue Level relevance amid an increasingly paper- fluctuations became increasingly The level of free global economy. During the period, unpredictable amid the industry’s sharp Volatility is Low revenue declined as much as 5.4% in declines in recent years. Despite not 2015 and experienced no change in having any revenue growth over the past revenue in 2013. In general, revenue five years, industry paper mills have at volatility is mainly influenced by major least experienced a higher degree of fluctuations in the exchange rate and stability over the five years to 2017.
A higher level of revenue Volatility vs Growth volatility implies greater industry risk. Volatility can 1000 Hazardous Rollercoaster negatively affect long-term strategic decisions, such as 100 the time frame for capital investment. 10 When a fi rm makes poor investment decisions it Paper Mills may face underutilized 1
capacity if demand (%) volatility* Revenue suddenly falls, or capacity 0.1 Stagnant Blue Chip constraints if it rises –30 –10 10 30 50 70 quickly. Five-year annualized revenue growth (%)
* Axis is in logarithmic scale SOURCE: WWW.IBISWORLD.COM
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 34
Operating Conditions
Regulation & Policy The forest products sector makes heavy pollutants. It establishes limits to air use of fossil fuels during production and pollutants such as carbon monoxide, is one of the largest energy consumers nitrous oxides, sulfur oxides and other Level & Trend among US manufacturing sectors. Due to particulate matter. The level of the nature of the papermaking process, The industry is also regulated under Regulation is the US Paper Milling industry is subject the Comprehensive Environmental Heavy and the to environmental regulations for effluent, Response Compensation and Liability trend is Steady air emissions and solid wastes, which add Act (CERCLA) and the Emergency significantly to the administrative and Planning and Community Right-to-Know environmental requirements of Act (EPCRA). The CERCLA authorizes individual producers. The high degree of the EPA to respond and potentially levy regulatory costs must ultimately be fines to companies that release hazardous passed along to downstream consumers, substances that may endanger public which limits competitiveness against health, welfare or the environment. The foreign producers who do not operate EPCRA requires businesses that use, under the same regulatory oversight. manufacture or are in contact with toxic The industry’s manufacturing substances to have open communication operations fall within the oversight of the channels with emergency services. Clean Water Act (CWA), Resource The EPA’s Sector Strategies Program Conservation and Recovery Act (RCRA), works in partnership with the American Safe Drinking Water Act (SDWA), Clean Forest & Paper Association (AF&PA) to Air Act (CAA) and other restrictions on promote environmental management emissions output and noise pollution. systems, overcome regulatory barriers Under the CWA and RCRA, the industry and measure environmental progress in is responsible for ensuring that operators the forest products industry. adhere to protocols pertaining to the AF&PA represents more than 200 appropriate disposal of liquid and solid companies and trade associations that waste. Similarly, the SDWA requires that engage in or represent companies that any dumping of spent water will impose manufacture pulp, paper, paperboard only minimal polluting effects on local and wood products. The association is aquifers and will not have any significant also involved in promoting self- effect on local drinking water. The regulation among its members, through industry is also subject to specific initiatives aimed at increasing provisions relating to airborne pollution environmental awareness. One of the emissions. The CAA is designed to industry’s self-imposed targets is to protect the country’s air from the recover over 70.0% of all paper damaging effect of smog and vaporized consumed in the United States by 2020.
Industry Assistance Tariffs provided by the US government to strategies. This action was prompted by paper manufacturers have gradually suits filed by Appleton Coated LLC, declined over the past 10 years. Imported NewPage Corporation, Sappi Fine Paper Level & Trend paper and paper products are now North American, and United The level of Industry tariff-free, the US Department of Steelworkers. They maintain that Chinese Assistance is Commerce currently imposes preliminary and Indonesian manufacturers benefit Medium and the countervailing duties on coated paper from government subsidies, which enable trend is Decreasing from China and Indonesia as a result of them to produce and sell products at the countries’ predatory pricing prices below manufacturing cost. Below-
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 35
Operating Conditions
Industry Assistance market international pricing damages liquor is a thick, tar-like byproduct of continued import competition for US wood products that occurs commonly in manufacturing companies and employees the Paper Mills industry and was once searching for global clients. The US the most common and most destructive Department of Commerce put pollutant of the industry prior to the countervailing duties against numerous creation of recovery processes in the Chinese and Indonesian paper 1930s. Paper mills are required to recover manufacturers of paper, many of which black liquor emissions, which can also are still in place. serve as a potent alternative fuel source. Professional bodies, such as the Prior to the five-year period to 2017, American Forest & Paper Association and paper companies that converted black The Paper Industry Association Council, liquor into alternative fuel benefited from also provide some assistance to industry the tax cuts. The pulp, paper and participants. They organize trade events paperboard industry received a $0.50 per and serve as a link between the industry gallon credit through the legislation, and various government bodies, such as resulting in significant savings for the the EPA. industry during the period. The credits The industry no longer receives black have since expired, although industry liquor tax credits through the Alternative operators are still required to recover Fuel Mixture tax credit program. Black black liquor byproducts for safe disposal.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 36 Key Statistics
Industry Data Industry Price of Revenue Value Added Establish- Exports Imports Wages Domestic paper ($m) ($m) ments Enterprises Employment ($m) ($m) ($m) Demand (Index) 2008 60,205.5 8,870.9 275 167 78,919 9,237.2 13,252.1 5,860.7 64,220.4 184.3 2009 52,921.3 8,561.5 271 172 74,866 7,747.1 9,993.5 5,439.1 55,167.7 179.6 2010 52,732.0 9,579.6 253 156 70,172 9,106.1 10,067.8 5,255.5 53,693.7 182.1 2011 52,632.3 9,252.5 249 158 68,952 9,828.1 10,064.4 5,094.6 52,868.6 191.3 2012 50,472.4 8,224.4 229 140 64,451 9,455.0 9,078.1 4,893.2 50,095.5 191.7 2013 50,474.3 9,510.9 231 141 64,825 9,320.5 9,060.7 4,917.7 50,214.5 190.8 2014 48,494.2 8,278.9 230 145 61,497 9,010.8 9,099.1 4,593.3 48,582.5 192.7 2015 45,863.4 7,339.7 224 141 58,821 8,351.8 8,488.6 4,358.6 46,000.2 189.9 2016 43,988.5 7,221.6 212 134 56,075 7,740.0 7,862.0 4,142.4 44,110.5 186.4 2017 43,795.6 7,219.9 209 132 55,437 7,573.6 7,770.5 4,099.2 43,992.5 188.3 2018 43,113.9 6,955.5 199 125 53,670 7,561.1 7,669.2 3,975.6 43,222.0 189.4 2019 41,785.6 6,762.0 194 123 52,079 7,530.2 7,625.1 3,844.6 41,880.5 190.4 2020 40,661.2 6,383.0 184 116 50,085 7,507.2 7,405.9 3,695.8 40,559.9 191.9 2021 39,467.2 6,241.6 180 114 48,748 7,482.9 7,300.2 3,584.3 39,284.5 192.5 2022 38,647.5 6,018.1 173 109 47,285 7,416.9 7,120.4 3,475.9 38,351.0 192.4 Sector Rank 29/435 64/434 230/435 257/435 67/435 37/398 60/398 53/435 39/398 N/A Economy Rank 249/1681 412/1562 1322/1681 1346/1681 593/1681 48/524 72/524 419/1681 50/524 N/A
Annual Change Industry Establish- Domestic Price of Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand paper (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 2009 -12.1 -3.5 -1.5 3.0 -5.1 -16.1 -24.6 -7.2 -14.1 -2.6 2010 -0.4 11.9 -6.6 -9.3 -6.3 17.5 0.7 -3.4 -2.7 1.4 2011 -0.2 -3.4 -1.6 1.3 -1.7 7.9 0.0 -3.1 -1.5 5.1 2012 -4.1 -11.1 -8.0 -11.4 -6.5 -3.8 -9.8 -4.0 -5.2 0.2 2013 0.0 15.6 0.9 0.7 0.6 -1.4 -0.2 0.5 0.2 -0.5 2014 -3.9 -13.0 -0.4 2.8 -5.1 -3.3 0.4 -6.6 -3.3 1.0 2015 -5.4 -11.3 -2.6 -2.8 -4.4 -7.3 -6.7 -5.1 -5.3 -1.5 2016 -4.1 -1.6 -5.4 -5.0 -4.7 -7.3 -7.4 -5.0 -4.1 -1.8 2017 -0.4 0.0 -1.4 -1.5 -1.1 -2.1 -1.2 -1.0 -0.3 1.0 2018 -1.6 -3.7 -4.8 -5.3 -3.2 -0.2 -1.3 -3.0 -1.8 0.6 2019 -3.1 -2.8 -2.5 -1.6 -3.0 -0.4 -0.6 -3.3 -3.1 0.5 2020 -2.7 -5.6 -5.2 -5.7 -3.8 -0.3 -2.9 -3.9 -3.2 0.8 2021 -2.9 -2.2 -2.2 -1.7 -2.7 -0.3 -1.4 -3.0 -3.1 0.3 2022 -2.1 -3.6 -3.9 -4.4 -3.0 -0.9 -2.5 -3.0 -2.4 -0.1 Sector Rank 400/435 362/434 396/435 367/435 394/435 324/398 368/398 396/435 378/398 N/A Economy Rank 1593/1681 1372/1562 1561/1681 1481/1681 1576/1681 429/524 478/524 1583/1681 495/524 N/A
Key Ratios Imports/ Exports/ Revenue per Share of the IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy (%) (%) (%) ($’000) (%) per Est. ($) (%) 2008 14.73 20.64 15.34 762.88 9.73 286.98 74,262.22 0.06 2009 16.18 18.11 14.64 706.88 10.28 276.26 72,651.14 0.06 2010 18.17 18.75 17.27 751.47 9.97 277.36 74,894.54 0.06 2011 17.58 19.04 18.67 763.32 9.68 276.92 73,886.18 0.06 2012 16.29 18.12 18.73 783.11 9.69 281.45 75,921.24 0.05 2013 18.84 18.04 18.47 778.62 9.74 280.63 75,861.16 0.06 2014 17.07 18.73 18.58 788.56 9.47 267.38 74,691.45 0.05 2015 16.00 18.45 18.21 779.71 9.50 262.59 74,099.39 0.04 2016 16.42 17.82 17.60 784.46 9.42 264.50 73,872.49 0.04 2017 16.49 17.66 17.29 790.01 9.36 265.25 73,943.40 0.04 2018 16.13 17.74 17.54 803.31 9.22 269.70 74,074.90 0.04 2019 16.18 18.21 18.02 802.35 9.20 268.45 73,822.46 0.04 2020 15.70 18.26 18.46 811.84 9.09 272.20 73,790.56 0.04 2021 15.81 18.58 18.96 809.62 9.08 270.82 73,527.12 0.03 2022 15.57 18.57 19.19 817.33 8.99 273.32 73,509.57 0.03 Sector Rank 395/434 238/398 182/398 80/435 309/435 11/435 68/435 64/434 Economy Rank 1387/1562 306/524 243/524 259/1681 1319/1681 29/1681 368/1681 412/1562
Figures are in inflation-adjusted 2017 dollars. Rank refers to 2017 data. SOURCE: WWW.IBISWORLD.COM Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 37
Industry Financial Ratios Apr 2015 - Mar 2016 by company revenue Apr 2012 - Apr 2013 - Apr 2014 - Apr 2015 - Small Medium Large Mar 2013 Mar 2014 Mar 2015 Mar 2016 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios Current Ratio 1.7 2.1 1.6 1.6 n/a 2.0 1.5 Quick Ratio 0.7 0.9 0.8 0.8 n/a 1.0 0.6 Sales / Receivables (Trade Receivables Turnover) 12.0 11.6 13.0 11.4 n/a 10.4 12.5 Days’ Receivables 30.4 31.5 28.1 32.0 n/a 35.1 29.2 Cost of Sales / Inventory (Inventory Turnover) 8.2 7.8 8.5 9.0 n/a 9.5 6.8 Days’ Inventory 44.5 46.8 42.9 40.6 n/a 38.4 53.7 Cost of Sales / Payables (Payables Turnover) 14.0 14.4 13.0 12.2 n/a 12.4 10.9 Days’ Payables 26.1 25.3 28.1 29.9 n/a 29.4 33.5 Sales / Working Capital 10.9 7.9 14.6 13.0 n/a 7.8 14.9
Coverage Ratios Earnings Before Interest & Taxes (EBIT) / Interest 6.9 3.3 4.2 6.4 n/a 5.2 6.5 Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 2.9 1.8 1.9 2.7 n/a n/a 2.4
Leverage Ratios Fixed Assets / Net Worth 1.1 0.9 1.2 1.2 n/a 0.4 1.6 Debt / Net Worth 1.6 1.9 2.2 1.7 n/a 1.4 2.3 Tangible Net Worth 37.5 34.3 26.5 35.1 n/a 45.6 29.3
Operating Ratios Profit before Taxes / Net Worth, % 21.1 11.2 16.0 24.1 n/a 12.4 29.1 Profit before Taxes / Total Assets, % 8.1 4.4 5.7 7.2 n/a 4.6 9.7 Sales / Net Fixed Assets 6.2 6.5 6.4 6.8 n/a 16.0 6.0 Sales / Total Assets (Asset Turnover) 1.9 2.0 2.1 2.1 n/a 1.9 2.0
Cash Flow & Debt Service Ratios (% of sales) Cash from Trading 23.4 19.3 17.9 19.9 n/a 24.5 16.0 Cash after Operations 7.2 4.9 5.9 7.9 n/a 6.0 8.4 Net Cash after Operations 5.9 4.0 5.5 6.2 n/a 5.4 6.5 Cash after Debt Amortization 1.8 0.1 1.8 1.1 n/a 0.5 2.5 Debt Service P&I Coverage 3.0 1.7 2.2 2.9 n/a n/a 3.0 Interest Coverage (Operating Cash) 8.9 2.9 8.0 6.7 n/a n/a 8.4
Assets, % Cash & Equivalents 6.4 8.0 5.1 6.3 n/a 9.5 3.7 Trade Receivables (net) 18.4 19.0 20.2 21.1 n/a 21.3 17.5 Inventory 23.9 25.2 23.6 23.0 n/a 21.4 26.0 All Other Current Assets 2.8 2.4 2.2 1.6 n/a 1.7 2.1 Total Current Assets 51.5 54.6 51.1 52.1 n/a 54.0 49.2 Fixed Assets (net) 38.3 32.5 36.4 33.4 n/a 31.7 37.3 Intangibles (net) 3.5 3.9 7.9 7.5 n/a 5.7 8.2 All Other Non-Current Assets 6.7 9.0 4.6 7.0 n/a 8.7 5.2 Total Assets 100.0 100.0 100.0 100.0 n/a 100.0 100.0 Total Assets ($m) 2,553.5 2,483.2 3,709.2 3,360.3 14.6 300.5 3,045.2
Liabilities, % Notes Payable-Short Term 6.3 6.8 6.9 4.3 n/a 2.7 5.5 Current Maturities L/T/D 4.0 4.0 4.2 3.5 n/a 3.5 2.9 Trade Payables 13.7 12.2 15.5 15.7 n/a 13.9 17.3 Income Taxes Payable 0.5 0.1 0.2 0.2 n/a 0.3 0.1 All Other Current Liabilities 6.5 5.7 6.6 8.8 n/a 7.2 7.9 Total Current Liabilities 31.1 28.8 33.4 32.5 n/a 27.6 33.7 Long Term Debt 17.1 22.1 23.1 17.0 n/a 15.0 18.8 Deferred Taxes 2.4 1.6 1.3 2.0 n/a 2.4 1.8 All Other Non-Current Liabilities 8.4 9.3 7.8 5.8 n/a 3.8 8.2 Net Worth 41.0 38.2 34.4 42.6 n/a 51.3 37.5 Total Liabilities & Net Worth ($m) 2,553.5 2,483.2 3,709.2 3,360.3 14.6 300.5 3,045.2
Maximum Number of Statements Used 45 53 68 54 8 16 30
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 38
Jargon & Glossary
Industry Jargon BRISTOL PAPER A heavyweight paper made by layering UNBLEACHED KRAFT PAPER A strong and relatively or laminating papers together to the desired thickness. coarse paper produced by the kraft process from wood COATED PAPER A paper that has been coated by a pulp. compound to impart certain qualities to it. UNCOATED FREESHEET PAPER A paper made with NEWSPRINT A low-cost, nonarchival paper that is most chemical pulps and occasional additions of up to 10.0% commonly used to print newspapers, other publications mechanical fiber. and advertising material.
IBISWorld Glossary BARRIERS TO ENTRY High barriers to entry mean that INDUSTRY CONCENTRATION An indicator of the new companies struggle to enter an industry, while low dominance of the top four players in an industry. barriers mean it is easy for new companies to enter an Concentration is considered high if the top players industry. account for more than 70% of industry revenue. CAPITAL INTENSITY Compares the amount of money Medium is 40% to 70% of industry revenue. Low is less spent on capital (plant, machinery and equipment) with than 40%. that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUE The total sales of industry goods depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies High capital intensity is more than $0.333 of capital to on production; all other operating income from outside $1 of labor; medium is $0.125 to $0.333 of capital to $1 the firm (such as commission income, repair and service of labor; low is less than $0.125 of capital for every $1 of income, and rent, leasing and hiring income); and labor. capital work done by rental or lease. Receipts from CONSTANT PRICES The dollar figures in the Key interest royalties, dividends and the sale of fixed Statistics table, including forecasts, are adjusted for tangible assets are excluded. inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDED (IVA) The market value of the base year. This removes the impact of changes in goods and services produced by the industry minus the the purchasing power of the dollar, leaving only the cost of goods and services used in production. IVA is “real” growth or decline in industry metrics. The inflation also described as the industry’s contribution to GDP, or adjustments in IBISWorld’s reports are made using the profit plus wages and depreciation. US Bureau of Economic Analysis’ implicit GDP price INTERNATIONAL TRADE The level of international deflator. trade is determined by ratios of exports to revenue and DOMESTIC DEMAND Spending on industry goods and imports to domestic demand. For exports/revenue: low is services within the United States, regardless of their less than 5%, medium is 5% to 20%, and high is more country of origin. It is derived by adding imports to than 20%. Imports/domestic demand: low is less than industry revenue, and then subtracting exports. 5%, medium is 5% to 35%, and high is more than EMPLOYMENT The number of permanent, part-time, 35%. temporary and seasonal employees, working proprietors, LIFE CYCLE All industries go through periods of growth, partners, managers and executives within the industry. maturity and decline. IBISWorld determines an ENTERPRISE A division that is separately managed and industry’s life cycle by considering its growth rate keeps management accounts. Each enterprise consists (measured by IVA) compared with GDP; the growth rate of one or more establishments that are under common of the number of establishments; the amount of change ownership or control. the industry’s products are undergoing; the rate of technological change; and the level of customer ESTABLISHMENT The smallest type of accounting unit acceptance of industry products and services. within an enterprise, an establishment is a single physical location where business is conducted or where NONEMPLOYING ESTABLISHMENT Businesses with services or industrial operations are performed. Multiple no paid employment or payroll, also known as establishments under common control make up an nonemployers. These are mostly set up by self-employed enterprise. individuals. EXPORTS Total value of industry goods and services sold PROFIT IBISWorld uses earnings before interest and tax by US companies to customers abroad. (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding IMPORTS Total value of industry goods and services interest and tax. brought in from foreign countries to be sold in the United States.
Provided to: IBISWorld Staff Member (2127139711) | 26 October 2017 WWW.IBISWORLD.COM Paper Mills in the US May 2017 39
Jargon & Glossary
IBISWorld Glossary VOLATILITY The level of volatility is determined by WAGES The gross total wages and salaries of all averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also continued past five years. Volatility levels: very high is more than included in this figure. ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
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