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Management Side
Upgrade doesn't yield expected savings for Clearwater Paper mill
LEWISTON, Idaho (From news reports) -- Clearwater Paper executives acknowledged Monday they don't expect a $160 million upgrade finished in 2017 at their Lewiston facility to save as much money as they anticipated.

Three years ago, the company replaced 12 batch pulp digesters installed at various times with a single continuous pulp digester and other equipment.

Pulp from the digester feeds Clearwater Paper's tissue and paperboard operations in Lewiston, which employ 1,200 people. The tissue is turned into toilet paper, paper napkins, paper towels and facial tissue sold under store brands. The paperboard is used for paper dishes, as well as packaging for food and other goods.

The project was expected to save Clearwater Paper $30 million a year, but so far it's reduced the company's expenses by $10 million annually.

"While the company expects to continue to explore the optimization of its pulp assets (at the Lewiston plant), it now believes that the pulp optimization project will not produce future incremental financial benefits as previously anticipated," according to a news release issued Monday.

Still, Clearwater Paper has seen "important benefits" from the project, said company spokeswoman Shannon Myers.

"I think it has been successful in some ways," Myers said. "Our Lewiston mill ... has and will continue to be a critical part of our operations."

In 2015, Clearwater Paper executives told elected officials the Lewiston paperboard operation's expenses were the fifth highest in the nation and the improvements would put them in the middle of the pack.

Monday's update follows months of work by Clearwater Paper trying to squeeze more efficiencies out of its investment.

Company officials believed introducing a new catalyst in a polysulfide reactor that was part of the project was going to fix the problem earlier this year. The polysulfide reactor converts sodium sulfide into polysulfide, a chemical compound that protects chips from degradation.

In May, Clearwater Paper President and CEO Arsen S. Kitsch held out hope that the $30 million in annual savings might be achieved.

Kitsch told stock market analysts during a conference call every part of the new system was being examined to see if there was a way to extract additional benefits.

Despite the setback in Lewiston, Clearwater Paper is doing well, according to the news release.

The company believes its adjusted earnings before interest, taxes, depreciation and amortization will be higher than anticipated for its second quarter that runs from April through June.

That measure of the company's performance is expected to be $71 million to $77 million for the quarter, compared with a previous forecast of $45 million to $55 million.

Shipments of Clearwater Paper's tissue were 30 percent higher in April and May compared with 2019 averages, according to the news release.

That follows late March when Clearwater Paper and its competitors raced to meet demand for toilet paper as consumers emptied grocery shelves of the staple amid worries the coronavirus crisis would limit access to the necessity.

"While order pace is starting to normalize in June, we anticipate our production in the second quarter will exceed expectations and match increased demand," Kitch said in the Monday news release. "Our paperboard business is expected to remain stable in the second quarter."

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