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Paper & Paper Products |
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| + | The Paper and Paper Products Industry makes everything from printing paper, to “peel to stick” labels, to cardboard boxes. A look at a grocery store can see how the industry has influence over daily life: the items on the shelves were transported in corrugated boxes from the producer to the store, the cereal is in a paperboard box made from wood pulp, the “on sale” sign is made from a coated specialty paper, the price sticker is a “peel to stick” label, and the receipt is a thin rolled material. The industry provides a diversified line of products that are essential to industries like [[Food & Beverage]], [[Apparel Stores]], and [[Trucking]]. | ||
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| + | Despite the natural high demand for the industries products, the companies also face many challenges. The industry is full of large companies with a diversified line of products and smaller narrowly focused companies. For example, the industry leader [[International Paper Company (IP)]] makes paper, packaging products, and even has its own distribution service, whereas the smaller [[Neenah Paper (NP)]] makes only writing paper. In addition to the steep competition, companies are also facing rising [[energy]] and [[commodities prices]], which are driving up production costs and cutting into profit margins. For example, operating margins for [[Avery Dennison (AVY)]] fell from 7.8% in 2006 to 5.9% in 2007.<ref>[http://finance.google.com/finance?fstype=ii&q=NYSE:AVY Google Finance: AVY Financial Statements]</ref> In addition, a [[U.S. Economic Cycles| slowing US economy]] is decreasing the demand on general consumer goods like toys and certain foods. This adversely affects the paper and paper products industry because when spending on these goods goes down the revenues of companies that make packaging products also goes down. | ||
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| ==Subsets of the Paper and Paper Products Industry== | ==Subsets of the Paper and Paper Products Industry== | ||
Revision as of 14:07, August 25, 2008
The Paper and Paper Products Industry makes everything from printing paper, to “peel to stick” labels, to cardboard boxes. A look at a grocery store can see how the industry has influence over daily life: the items on the shelves were transported in corrugated boxes from the producer to the store, the cereal is in a paperboard box made from wood pulp, the “on sale” sign is made from a coated specialty paper, the price sticker is a “peel to stick” label, and the receipt is a thin rolled material. The industry provides a diversified line of products that are essential to industries like Food & Beverage, Apparel Stores, and Trucking.
Despite the natural high demand for the industries products, the companies also face many challenges. The industry is full of large companies with a diversified line of products and smaller narrowly focused companies. For example, the industry leader International Paper Company (IP) makes paper, packaging products, and even has its own distribution service, whereas the smaller Neenah Paper (NP) makes only writing paper. In addition to the steep competition, companies are also facing rising energy and commodities prices, which are driving up production costs and cutting into profit margins. For example, operating margins for Avery Dennison (AVY) fell from 7.8% in 2006 to 5.9% in 2007.[1] In addition, a slowing US economy is decreasing the demand on general consumer goods like toys and certain foods. This adversely affects the paper and paper products industry because when spending on these goods goes down the revenues of companies that make packaging products also goes down.
Contents |
Subsets of the Paper and Paper Products Industry
Paper
The paper subset is the staple of the paper and paper products industry. This subset consists of the production of uncoated writing and printing papers by industry giants such as International Paper Company (IP) and Domtar (UFS) as well as the production of specialty papers. Specialty paper ranges from the production of the coated paper that greeting cards are made of, by companies like Nashua (NSHA), to the production of pressure-sensitive material, by Avery Dennison (AVY) used by other corporations to make labels.
Uncoated Paper:
- International Paper Company (IP): International Paper is the world’s leading producers of printing and writing paper. The company also does business making products for consumer and industrial packaging and even has its own distribution business. In 2007, the company generated $21.9B in net sales. [2]
- Domtar (UFS): Domtar is the second largest producer of uncoated freesheet paper in the world. The company also produces specialty paper, pulp, and has commercial printing and publication business. In 2007, the company generated $6.2B in net sales. [3]
- Neenah Paper (NP): Neenah’s main business is making premium writing, text, and cover paper. The company also makes specialty paper, filtration media (used in tape and premask), and kraft pulp. In 2007, the company generated $990M in net sales. [4]
Specialty Paper:
- Avery Dennison (AVY): Avery’s main business is the production of pressure-sensitive materials and adhesives which are used by other corporations to make labels. Avery also does business making office supplies and has a retail information services business that makes barcodes, price tags, and security devices. In 2007, the company generated $6.3B in net sales. [5]
- Glatfelter (GLT): Glatfelter makes specialty paper for markets such as book publishing, credit card receipts, multi-part forms, and shopping bags. The company also has a composite fibers business which makes paper for tea bags and the labeling of bottles. In 2007, the company generated $1.1B in net sales. [6]
- Wausau-Mosinee Paper (WPP): Wausau’s main specialty paper business deals with the production of the backing paper from which “peel and stick” labels are dispensed. Wausau also makes printing and writing paper as well as tissues and towels. In 2007, the company generated $1.2B in net sales. [7]
- Schweitzer-Mauduit International (SWM): Schweitzer is the world’s largest supplier of fine papers to the tobacco industry. Its paper is used to make cigarette paper, binders for cigars, and cigarette packaging. In 2007, the company generated $715M in net sales. [8]
Consumer and Industrial Packaging
All items need to be packaged when going from point A to point B in order to protect the item. Consumer goods such as food and cosmetics need to be packaged not only when going from the producer to the distributor, but also need to be packaged by unit to be put on store shelves. Industrial goods like machines and machine parts need to be safely packaged before ending up at its final destination. Packaging can be broken down into two items: paperboard and corrugated fiberboard. Paperboard is a thin cardboard (think cereal box) that can be used as folding cartons and set-up boxes. Corrugated fiberboard (fancy name for a box) is made out of containerboard, which is just multiple layers of paperboard. The multiple layers of paperboard give the corrugated packaging its strength and allow for big and heavy items to be packaged in it.
Paperboard:
- Meadwestvaco (MWV): Meadwestvaco primarily makes bleached paperboard – used for high-value consumer products, CNK paperboard – used in multi-pack beverage packaging, and kraft paperboard – used in folding carton applications. The company also provides plastic packaging for DVDs and games as well as office and school supplies. In 2007, the company generated $6.9B in net sales. [9]
- Sonoco Products Company (SON): Sonoco’s largest business is making paperboard tubes and cores which are used for products that range from Pringles to construction material. Sonoco also provides other types of paper and plastic packaging. In 2007, the company generated $4.0B in net sales. [10]
- Rock-Tenn Company (RKT): Rock-Tenn is one of North America’s largest producers of folding cartons which can be used for food, beverages, and just about anything else. The company also makes other kind of paperboard, merchandising displays, and corrugated packaging. In 2007, the company generated $2.3B in net sales. [11]
Corrugated Packaging:
- Temple-Inland (TIN): Temple-Inland primarily makes containerboard and corrugated packaging. The company produces so much containerboard that extra is sold to other companies. In 2007, the company divested away from its timber operations to focus on its corrugated packaging business. In 2007, the company generated $3.9B in net sales. [12]
- Smurfit-Stone Container (SSCC): Smurfit-Stone’s only business is to make containerboard and corrugated packaging. The company also has an integrated reclamation business as well, which collect fiber needed to make containerboard. In 2007, the company generated $7.4B in net sales. [13]
Pulp & Cellulose
Pulp is a dry fibrous material that is used to make paper and can be made chemically or by separating the fibers of wood. Pulp sold in thick sheets and often used at a paper mill is called “market pulp”. Another kind of pulp, “kraft pulp”, is chemically produced pulp using sulfate. Cellulose is a natural fiber from trees and plants that can be used to make a variety of products including paper and packaging products.
Market Pulp:
- Aracruz Celulose S.A. (ARA): Aracruz is the world's largest producer of bleached eucalyptus pulp which is used to make products such as tissue, printing and writing paper, liquid packaging board, and specialty paper. In 2007, the company generated $2.1B in net sales. [14]
- Votorantim Celulose e Papel SA (VCP): Half of Votorantim’s business is devoted to the production of bleached eucalyptus kraft pulp, in which 80% was sold to third parties in 2007. The other half of the company’s business is domestic paper production. In 2007, the company generated $1.3B in net sales. [15]
Kraft Pulp:
- Mercer International (MERC): Mercer is the second largest producer of northern bleached softwood kraft pulp in the world. The company is the sole kraft pulp provider to Germany, which has the largest pulp import in Europe. In 2007, the company generated $1.0B in net sales. [16]
Cellulose:
- Buckeye Technologies (BKI): Buckeye makes cellulose based specialty products. The company focuses on producing specialty cellulose because it is used to make unique chemical and physical characteristics to different products. In 2007, the company generated $769M in net sales. [17]
Timber
The timber business provides forest products, such as wood and pulp, to third party companies. By managing their own timberland, these business are able to make their products straight from the trees they grow. As of 2008, the only major timber based company was Potlatch (PCH). Prior, companies like International Paper Company (IP) and Temple-Inland (TIN) were major competitors in this business, but decided to divest away from the business in 2006-2007.
- Potlatch (PCH): Potlatch is a forest products company that makes commodity wood products and bleached pulp products. The company owns 1.7 million acres of timberland in the US. In 2006, the company went through a restructuring where it became a Real Estate Investment Trust (REIT). In 2007, the company generated $1.7B in net sales. [18]
References
- ↑ Google Finance: AVY Financial Statements
- ↑ IP 2007 Annual Report pg. 10
- ↑ UFS 2007 Annual Report pg. 6
- ↑ NP 2007 Annual Report pg. 7
- ↑ AVY 2007 Annual Report pg. 20
- ↑ GLT 2007 Annual Report pg. 1
- ↑ WPP 2007 Annual Report pg. 21
- ↑ SWM 2007 Annual Report pg. 23
- ↑ MWV 2007 Annual Report pg. 12
- ↑ SON 2007 Annual Report pg. F-3
- ↑ RKT 2007 Annual Report pg. 15
- ↑ TIN 2007 Annual Report pg. 17
- ↑ SSCC 2007 Annual Report pg. 14
- ↑ ARA 2007 Annual Report pg. 6
- ↑ VCP 2007 Annual Report pg. 4
- ↑ MERC 2007 Annual Report pg. 35
- ↑ BKI 2007 Annual Report pg. 16
- ↑ PCH 2007 Annual Report pg. 31
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