OTW December 15, 2005

ABITIBI-CONSOLIDATED INC., Montreal, Quebec, Canada, announced the permanent closure of the Stephenville, Newfoundland and Labrador, and Kenora, Ontario newsprint mills. Today's announcement follows a protracted period of discussions with governments, the unions and other stakeholders.

"We could not find a viable long-term solution to return the two mills to profitability," said John Weaver, President and CEO. "These decisions are difficult but essential to achieve our objectives. We recognize the hard work of many committed people but after much effort, we simply could not overcome the inherent challenges facing these operations," added Weaver.

These decisions have resulted in the permanent removal of 344,000 metric tons of capacity, in addition to 90,000 metric tons previously announced. In the fourth quarter of 2005, Abitibi-Consolidated will, on a pre-tax basis, record asset write downs of approximately C$ 155 million and incur mill closure costs of approximately C$ 50 million, of which C$ 35 million is cash. The Company is proceeding with necessary notifications, severance payments owing and will work in concert with the local communities, unions and governments to provide support services to affected workers.

CASCADES, Kingsey Falls, Quebec, Canada, as part of the ongoing optimization of its various activities, has announced a restructuring of its folding carton facility in Montreal. Éric Laflamme, President and Chief Operating Officer, North America for the Boxboard Group, said, "We will essentially be closing one of our two production lines and maximizing output on the remaining one, which will be equipped with state-of-the-art technology to ensure improved efficiencies. As a result of these upgrades, we expect the plant to remain profitable in 2006, despite a possible reduction in demand." The company expects this reorganization will cost C$ 2 million (US$ 1.7 million), which will in turn be offset by annual savings of approximately C$ 3.5 million (US$ 3 million). This restructuring will result in the elimination of 61 jobs, and 26 workers will be temporarily laid off.

THE DOW CHEMICAL CO., Midland, Michigan, USA announced its major corporate sponsorship of the Alliance to Save Energy's "The Power is in Your Hands" energy efficiency campaign. Led by the Alliance to Save Energy and the American Gas Association, "The Power is in Your Hands" campaign brings together business, industry, utilities, trade associations, federal agencies, and community groups whose common goal is reducing energy use to lower prices in the long run. The coalition's 20-plus members include The Dow Chemical Company, the U.S. Department of Energy, the U.S. Environmental Protection Agency, the National Association of Manufacturers, the American Chemistry Council, the Business Roundtable, the North American Insulation Manufacturers Association, and the Edison Electric Institute, among others. Dow states that with U.S. natural gas prices now the highest in the world, and as American households face heating bills averaging 25% higher than those of last year, the campaign is designed to empower U.S. energy consumers to save money and energy this winter.

DUROPACK AG, Vienna, Austria, a 60%-owned subsidiary of Constantia Packaging AG, has agreed to acquire a 47.6% equity interest in Trakia Papir S.A., Bulgaria. Concurrently, a second 47.6% equity interest in Trakia was acquired by an Austrian financial investor. Duropack AG intends to acquire the majority in Trakia in the medium term. The remaining 4.8% of the shares currently make up the free float and are listed on the Sofia Stock Exchange.

Trakia Papir S.A. produces approximately 55,000 metric tons of corrugated board base paper and 135,000 square meters of corrugated board annually, with around 680 employees. The company recorded EUR 30 million (US$ 35.8 million) in sales. It has 70% market share in Bulgaria and offers expansion potential through exports to Macedonia, southern Romania and northern Greece. For Duropack AG, the acquisition of Trakia Papir S.A. is an important and logical step in its expansion strategy into Southeastern Europe. It follows the previous year's acquisition in Serbia, and thereby strengthens the Group's long-term position. Consolidated results for 2005 will be reported on April 19, 2006.

MEADWESTVACO CORP. (MWV), Stamford, Connecticut, USA announced it has acquired The Design Group (DZN), Los Angeles, California a full service design and marketing company. The acquisition of the studio will enhance MWV's package design capabilities, enabling the company to provide a more competitive and comprehensive set of creative design services. Terms of the transaction were not disclosed. DZN's design capabilities encompass various aspects of packaging, print, broadcast, motion graphics and interactive media. Through the acquisition, MWV will now offer customers a full spectrum of design, printing, pre-press and manufacturing capabilities, helping them to achieve their creative, branding and marketing goals through a single resource.

MERITURN PARTNERS LLC, San Francisco, California, USA and Dunn Paper, a Meriturn Partners company have announced the completion of their acquisition of the assets of Valentine Paper Inc., Lockport, Louisiana. Valentine Paper had been operating in bankruptcy since filing for Chapter 11 protection on June 5, 2005. Meriturn purchased Valentine's senior secured debt from LaSalle Bank on November 10th in order to provide additional Debtor-In-Possession (DIP) financing to the company, which enabled Valentine to continue operating until a sale could take place to Meriturn under its 'stalking horse' bid in the 363 auction process.

Valentine Paper is a leader in machine finished and latex-saturated papers, and one of the only specialty paper mills in the U.S. able to produce such products as wallpaper, Diazo (architectural), masking, and thermal base papers. The acquisition of Valentine Paper will specifically complement Dunn Paper's Machine Glazed (MG) and online coating and waxing expertise, which, Meriturn says, makes Dunn a market leader in flexible packaging, wet- strength, grease and mold-resistant, and metalized-base papers.

PAPIER MASSON LTEE, Gatineau, Quebec, Canada and WHITE BIRCH PAPER COMPANY, Greenwich, Connecticut, USA jointly announced today that they have reached an agreement for the acquisition of all of the outstanding shares of Papier Masson by an affiliate of White Birch Paper Company. The transaction, which is subject to regulatory approval, is scheduled to close in the first quarter of 2006. Papier Masson is a privately-held corporation. In connection with the transaction, BMO Nesbitt Burns, Inc. acted as financial advisor to Papier Masson and TD Securities and Credit Suisse First Boston acted as financial advisors to White Birch Paper Company.

Papier Masson is a modern, fully integrated, low cost producer of high quality newsprint, with annual production capacity of approximately 234,000 metric tons on one paper machine. Its TMP facility is currently the largest single line facility in the world. The production facilities are located in the Province of Quebec, 40 kilometers northeast of Ottawa, Ontario, on a 130-acre site connected to rail and road links. White Birch Paper Company is one of the largest newsprint producers in North America with annual capacity of approximately 1,000,000 metric tons of newsprint and directory paper and 43,000 metric tons of paperboard.

STANDARD & POOR'S RATING SERVICES (S&P), New York, New York, USA released findings of a poll taken at its Corporate Credit Conference. Almost two-thirds (64%) of executives polled at the conference said they expect shareholder pressure on U.S. companies to adopt shareholder-friendly strategies will increase in 2006.

Standard & Poor's senior credit analysts and industry leaders discussed their perspectives on trends and issues related to the state of corporate credit quality and the outlook for financial markets at the conference, "Managing Financial Complexity In A Dynamic Marketplace," held today in New York. Responses to the opinion poll from 131 buy-side, sell-side, and corporate executives identified the following key economic and business challenges shaping the financial strategies for corporate America in 2006 and beyond:

The majority (54%) of respondents said that high energy and commodity costs will be the greatest economic challenge facing the U.S. in 2006, followed by rising interest rates (19%) and consumer confidence (17%);
Almost half (43%) of poll respondents said that over the next three to five years, pension and health care costs will be the greatest economic challenge, followed by the federal deficit (25%) and high energy and commodity costs (18%). Balance of payments (7%) and terrorism (6%) were not considered major issues;
When asked about the Sarbanes-Oxley Act, 65% of respondents said they favored maintaining it but easing some of its provisions. Just over a quarter of those polled (26%) said they believe the act is worthwhile despite the costs, and only 8% said they believe it should be abandoned;
On the issue of interest rates, there was no clear consensus on the level at which the Fed will stop raising rates. More than one-third of respondents (37%) said the Fed would stop raising interest rates at 4.75%, 35% said 5.00%, 22% said 4.50%, and only 1% said 4.25%; and
According to the poll, corporate America is not committing sufficient resources to talent management (58%) or long-term strategic planning (56%). However, 61% indicated that credit issues (61%) and enterprise risk management (56%) are being adequately resourced.

UPM will cease production of coated magazine papers at its Jämsänkoski mill in Finland. UPM will continue measures to improve its Magazine Paper Division's profitability in accordance with a program launched in August. The paper machine 4 producing matt finished coated magazine papers (MFC) at Jämsänkoski paper mill will cease production in 2006. PM 4 has started up in 1974 and its annual production capacity is 120,000 metric tons. UPM will look for competitive alternative line of production for PM 4 in specialty papers, e.g. label papers which are important for UPM. The other alternative is the permanent closure of the paper production line. The final decisions will be made during the first quarter of 2006. UPM Jämsänkoski mill manufactures printing papers for magazines and specialty papers for self-adhesives. The mill's annual paper production capacity with four machine lines is 870,000 metric tons. Located in Central Finland, the Jämsänkoski mill employs approximately 870 people.

Lifting of Fish Consumption
Dioxin Advisories Downstream of
U.S. Pulp and Paper Mills

Click on graphic for a larger view THE U.S. ENVIRONMENTAL PROTECTION AGENCY (EPA), Washington DC, USA said two more fish consumption advisories downstream of bleached chemical pulp and paper mills were lifted in the United States in 2004. Florida State environmental authorities removed a fish consumption advisory for dioxin along the Fenholloway River, and Washington State environmental authorities rescinded an advisory for Lake Roosevelt. The Alliance for Environmental Technology (AET), Washington DC, stated that of the new dioxin fish consumption advisories posted in the US in 2004, none were downstream of a bleached chemical pulp mill. According to AET, this continuing trend of the lifting of fish advisories and consequent ecosystem recovery over the last 15 years, is credited to the virtual elimination of dioxin discharges resulting from elimination of chlorine in favor of chlorine dioxide in the first stage of chemical pulp bleaching, elemental chlorine-free (ECF). These latest removals of fish consumption advisories brings the total to 27, representing a 90% decline in the total number of these advisories in place downstream of bleached chemical pulp and paper mills at the end of 1990.

PAPER NEWS

UPM, Helsinki, Finland is developing a new material that makes use of recyclable raw materials from processes of its wood products division and paper converting. The wood plastic composite consists of paper and plastic laminate, clean recycled plastic and wood raw materials from sawmilling operations and plywood industry. UPM contends the composite material, manufactured from laminate edge trim, has proven to be durable and moisture-resistant. It is also suitable for machine-tooling using the same methods as those used for wood. The composite material can be disposed of by incineration or recycling in the production process.

The initial investment required to further develop the concept includes an extruder from Austria that would be suited to product development and small-scale production. The machine will be supplied at the end of December and installed at the wood products division's premises in Lahti at the beginning of January 2006. The goal is to achieve fast growth in production capacity.

PUBLISHED PRICE INCREASES

DUPONT TITANIUM TECHNOLOGIES,Wilmington, Delaware, USA announced price increases for all DuPont(TM) titanium dioxide (TiO2) grades sold in:

Asia Pacific, effective January 1, 2006, by US$ 150 per metric ton;
North American (United States and Canada) prices for all grades will increase by US$ 0.05 per pound, effective January 1, 2006 or as contracts permit;
Other regional increases will be announced directly within the local regions.

LONZA INC., Allendale, New Jersey, USA will increase prices on products sold into the water treatment, wood, household, industrial and institutional, personal care, and functional markets by 5% to 10%, effective January 1, 2006 or as contracts allow. Product lines affected include Halohydantoins and other Hydantoin derivatives, Quats, Amines, Alkyl Chlorides, Surfactants and other specialty biocides and preservatives.

NIP IMPRESSIONS^®: BY JIM THOMPSON

Commentary by Jim Thompson
Contributing Editor
jim.thompson@tappi.org

Simplicity

My stepson and I were having a discussion the other day (he is a junior in high school) that went something like this (his comment): "I don't understand what people do in offices all day, it just seems so stupid." His sister chimed in affirming this viewpoint. Your writer, seldom lost for words, was.

For some reason, I have recently been subjected to many new management theories. I don't want to sound old fashioned or repetitive in this column, but it seems to me that once in a while, we have to go back to basics.

First of all, if your business is in trouble, a new management theory is not likely to fix it, at least not in the time left to save your business from disaster. Sure, serendipitous miracles do occasionally occur and are chronicled with great fanfare, but if one digs beneath the surface, they will find that the miraculous business salvations attributable to such experiences are about as rare as lightning strikes or shark bites.

So, back to the basics. No one has yet invented a management system better than the management system used by military forces and perfected over the last four millennia. Why? Because there is no more difficult job than sending soldiers into battle where they may be maimed or killed. If you can accomplish that-convincing your team to possibly give up their life for your cause-you have accomplished quite a feat. Military management systems know how to do this.

Then, as I often say, everyone's job must be to spin the invoice printer. If the amount coming in does not exceed the amount going out, one will not exist for long. If an employee does not understand this and understand their personal importance in contributing to it, you have a problem. If they and their ilk are not separated from the organization promptly, all you have to wait for is the competitor who has a fully engaged management and workforce who understand the importance of the invoice printer to bury you.

A number of years ago, there was a large company in our industry, a darling of Wall Street, whose whispered internal mantra was that the workforce was going to rise up and save the company. This never happened. The company floundered because there was no firm command and control philosophy at the top. The company tried a merger and then was sold. The logo of that company has just about disappeared.

So back to my stepson's question-how much of what you do each day is worth doing? How much of it is a fad? How much spins the invoice printer? Why do you do the things you do? If you don't contribute to the success of your employer, who will? Can you remember if any of the efforts you exerted as recently as, say, this past September, were of lasting value? Do you even remember what you did in September?

I think many management fads are promulgated by individuals and institutions trying to find something new to sell. They have to come up with a new theory every few years or so in order to have their own sustainable business. The trouble comes when you or your business blindly swallows what they sell-their sustainability contributes to your own lack of same. Be innovative, but be careful and do not lose site of the basics.

For safety this week, I would ask you when was the last time you reviewed and retrained on your CPR expertise? If it has been over one year, it is time for a refresher. Be safe and we will talk next week.

Editor's Note: The opinions expressed in this column are those of the author only, not TAPPI. “Nip Impressions^®” is a registered trademark of Talo Analytic International, Inc.