Graphic Packaging to invest $20m in US folding carton plant

02-Mar-2016 - Last updated on 02-Mar-2016 at 14:05 GMT

Graphic Packaging International will invest $20m to expand its manufacturing facility in the City of Staunton, Virginia, US, creating 43 jobs.

The folding carton plant is strategically important for the company said Michael Doss, president/CEO and will ‘significantly bolster our manufacturing capabilities to serve existing and new customers’.

Rose City Packaging and Cascades' Norampac paperboard

Graphic Packaging, based in Atlanta, Georgia, announced its Q4 and Full Year 2015 earnings last month. The company is one of the largest producers of folding cartons and coated-unbleached kraft and coated-recycled board.

Doss said the firm delivered a strong quarter in the face of difficult end markets. Sales increased 2.4%, adjusted EBITDA increased 5.2% and adjusted EBITDA margin increased 40 basis points to 17.6%.

“Despite sluggish US markets and currency headwinds, we are executing against our three strategic priorities to drive growth and increase shareholder value. These are: invest in our core business to drive organic growth and lower cost,” he added.

“Second, make strategic acquisitions to enhance growth and expand channels. And third, return capital to shareholders to drive long-term shareholder value.”

As part of the first priority, the business has invested $244m in capital projects and delivered $74m of performance improvements in 2015.

It completed three acquisitions in 2015, and closed the fourth in the first week of January and has announced two additional acquisitions.

Volumes in its Paperboard Packaging business increased 4.6% in Q4 driven by growth in Europe and Rose City Packaging and Cascades' Norampac paperboard acquisitions.

“The global beverage markets continue to steadily grow, led by specialty drinks and craft beer, and our volume was solid in the quarter,” added Doss.

Specialty and craft beer markets

“We have increased our exposure to both the specialty and craft beer markets through targeted acquisitions and investments over the past several years driving net volume growth globally.

“Food and consumer markets were mixed in the quarter. As reported by A.C. Nielsen, industry volumes for frozen pizza products were up low single digits, while markets for dry cereal, frozen foods and facial tissues were all down low-to-mid single digits in the fourth quarter.”

According to Doss, the internalization of Graphic Packaging’s US-produced SUS paperboard remains central to its strategy in Europe.

“The European marketplace remains highly fragmented, and now we have a low cost, scalable platform to build upon. With the European integration nearly complete, we will look for additional opportunities to invest in the region, further leveraging our vertically integrated model,” he said.

“In North America, the integrations of Rose City Packaging and Cascades' Norampac paperboard business are nearly complete. We continue to target 20,000 tons to 25,000 tons of SUS integration in these businesses within two years of the acquisitions and are tracking towards this goal.

G-Box Mexico

"Both Rose City and Cascades were important tuck-under acquisitions for Graphic Packaging. Rose City broadened our regional exposure to the craft beer market, allowed us to optimize our West Coast manufacturing footprint by consolidating volumes from three facilities into two and added a talented new leadership team to our organization.

“The Cascades acquisition extended our relationship with many of our large US food and beverage customers in Canada, allowed us to optimize our CRB paperboard network and provided us access to a market where we did not previously have converting assets.”

He added the integration of G-Box in Mexico and Carded Graphics in Virginia, two acquisitions it completed over the last four months, ‘is well underway’.

“Both of these are strategic tuck-under acquisitions that supplement growth and improve our positioning by expanding our geographic footprint, manufacturing capabilities, customer base and range of products,” said Doss.

“G-Box gives us a stronger platform in Mexico from which to build upon, where Carded Graphics allows us to serve new and existing customers, particularly fast-growing craft beer markets.

“We continue to expect the acquisitions to generate approximately $15m in EBITDA in 2016, with combined EBITDA increasing to $20m to $25m in 2017 as we integrate paperboard in growing markets like craft beer and geographically in Mexico.”