Finch Paper LLC – Q3 Review 2011
Joseph F. Raccuia, President and Chief Executive
Finch Paper LLC – Q2 Review 2011
Joseph F. Raccuia, President and Chief Executive
Finch Paper LLC (“Finch” or the “Company”) is a leading producer of premium uncoated printing papers. Finch is an integrated mill utilizing on-site sustainable energy sources, including biomass and hydroelectric power. Finch also manages more than 160,000 acres of Adirondack forests for The Nature Conservancy.
With the ongoing focus of all Finch employees, the Company has seen strong improvements in safety metrics during Q2 2011. It continues to engage in procedures to achieve its five-year plan for world-class safety performance.
Finch volume remained strong despite the continued weakness in the uncoated free sheet market. However, the soft market environment and escalating raw material costs placed pressure on margins throughout the quarter. This pressure was exacerbated by a short-term increase in fixed costs necessary to support key initiatives at Finch: our manufacturing information system migration and our transition to high-performance work systems. We have confidence that these expenditures are positioning Finch for increased profitability in future quarters.
In addition to process standardization (high-performance work systems) and continuous improvement efforts, Finch has implemented a companywide cost reduction program. We anticipate significant reductions to Finch’s fixed and variable costs during the remainder of 2011. Finch also will continue to focus on safety improvements, increased productivity and strategic sourcing initiatives during the second half of 2011.
Finch Paper LLC – Q1 Review 2011
Joseph F. Raccuia, President and Chief Executive
Finch Paper LLC continues to work diligently toward improving safety performance. As we have begun the second year of a five-year safety plan, all Finch employees, including the Senior Leadership Team, are engaged in procedures to ensure Finch will achieve our goal of meeting and sustaining world-class safety.
Industry shipments of uncoated free sheet were down year-over-year in Q1. Finch’s overall volume has remained strong, including growth in our value-added segments, despite overall market weakness. Market pricing continues to be challenged due to excess capacity, yet Finch’s average net selling price per ton increased in Q1.
Production in the paper mill and pulp mill was exceptional in Q1. Finished production during the quarter arguably was the best performance in the Mill’s history, considering the industry trend toward lower basis weights. This efficiency gain is a direct result of process standardization and continuous improvement implemented across our entire facility.
We remain optimistic about the remainder of 2011 despite secular decline in our industry. Finch will be focused on implementing and executing several initiatives that we believe will drive additional improvements in safety, productivity, product mix, strategic sourcing, go-to-market strategies and cost reduction.
Finch Paper LLC – Q3 Review 2010
Joseph F. Raccuia, President and Chief Executive
Finch is well on its way to achieving its safety goals for 2010. As we approach the end of year one of a five-year plan for world-class safety performance, Finch has instituted several procedures, including hands-on participation by all members of the Senior Leadership Team, daily crew huddles in all departments and mill-wide safety meetings. Achieving and maintaining world- class safety performance, as measured by our Recordable Incident Rate (currently at 1.0) and Lost Time Days Away rate (currently below .5), will require the full engagement and participation of all Finch employees.
Overall demand for uncoated free-sheet showed signs of softening as Q3 progressed, but prices remained at their highs for the year. As the quarter closed, an oversupply of imports reduced domestic machine backlogs, although overall pricing remained above forecast entering Q4.
The Company recorded strong Adjusted EBITDA for Q3 2010. Shipments during Q3 were average and net selling prices were above average. Finch reduced the volume of natural gas consumed in the facility by 28% during Q3 compared to the same period the prior year, resulting in a net savings. Finch also posted the strongest paper mill production rate of the year during Q3. Finch’s pulp mill also continued its strong production rate throughout the quarter.
We anticipate that Finch will sustain its recent improvements in productivity and product mix and will achieve its business plan in Q4 2010. We also expect our market share to continue to grow in all focus categories. Cost increases in some commodity areas will be offset by our strategic sourcing initiatives.
Finch Paper LLC – Q2 Review 2010
Joseph F. Raccuia, President and Chief Executive Officer
Finch Paper LLC is a leading producer of premium uncoated printing papers, manufacturing more than 250,000 tons per year from its integrated pulp and paper mill. Founded in 1865 in Glens Falls, New York, Finch’s uncoated free sheet paper is used in financial printing, annual reports, brochures, books, direct mail and other applications that demand high levels of print quality. Finch also manages approximately 161,000 acres of Adirondack forestland owned by The Nature Conservancy. All of the company’s products utilize a percentage of Adirondack forest-derived wood fiber. Finch papers have earned the most respected responsible forestry certifications from the world’s forestry certification groups.
Finch continues to achieve significant improvements in safety performance. The company established a five-year plan to move its Recordable Incident Rate (RIR) and its Lost Time Incident Rate (LTI) to world-class levels of 1.00 and 0.50 respectively, and Finch has already attained these milestones.
While current market activity remains weak in the North American paper industry, recent evidence suggests that the uncoated free sheet market is holding up relatively well, with year-to-date shipments up 1.1% over 2009 levels. The recent price hikes in uncoated free sheet should enable improved performance in the second half of 2010.
Finch’s pulp mill remains a bright spot as it experienced consistent performance improvements through the period. However, operating difficulties in Finch’s paper mill led to lower than anticipated paper production volume for Q2. On the positive side, efforts to reduce energy consumption contributed to a 29% decrease in total energy costs and helped reduce variable cost of production.
The near-term demand outlook for the uncoated market remains flat, with the fall seasonal uptick dependent upon overall economic conditions. We anticipate an increase in net selling price and paper production during the remainder of 2010 as the company continues to focus on improvements in its production process, sourcing of raw materials and product mix.
Finch Paper LLC – Q1 Review 2010
Joseph F. Raccuia, President and Chief Executive Officer
Finch Paper LLC is a leading producer of premium uncoated printing papers, manufacturing more than 250,000 tons per year from its integrated pulp and paper mill in Glens Falls, New York.
Finch has continued to deliver on internal safety and Continuous Improvement Programs under the leadership of President and CEO Joseph Raccuia. The company closed the period ending April 14, 2010 by logging its 60th day in a row without an OSHA recordable injury, 29 days longer than the company’s previous record. Finch also is seeing results from its Continuous Improvement Program in areas including operational efficiency, energy consumption and business systems. In addition, Finch has been active in its community, leading and participating in several Glens Falls-area volunteer organizations in the first quarter.
Uncoated free sheet producers who compete with Finch have remained disciplined about managing capacity. Notwithstanding relatively weak demand, inventories across the industry are at very low levels and price increases are being passed through to customers. Certain cost inputs are rising, primarily pulp and wood fiber, but natural gas prices have remained low and Finch’s margins are at trend levels. While Q1 2010 performance was slightly below plan due to production shortfalls,we remain optimistic that Finch will achieve strong results in 2010 as a result of the consistent and proactive effort by Finch’s management team to improve efficiency, reduce costs and drive sales of higher-margin grades.
Finch Paper LLC – Q4 Review 2009
Joseph F. Raccuia, President and Chief Executive Officer
Finch Paper, a manufacturer of premium uncoated free sheet paper sold throughout North America, experienced a year of significant milestones in 2009.
Among the highlights: Finch welcomed a new chief executive, Joe Raccuia; further broadened its management expertise with the addition of Chief Financial Officer John Kvocka and Vice President of Supply Chain Management Mark McCoy; and introduced a new go-to-market strategy, opening new channels and new markets for its products. Finch’s agility helped it thrive, enabling quick shifts from premium to commodity paper production in response to price fluctuations and customer demand.
Notwithstanding a market-wide 20%+decline in demand for uncoated printing papers, Finch set monthly sales records, increased its operational EBITDA (earnings before interest, taxes, depreciation, and amortization) by 20% and repaid approximately $25 million of debt.
In just seven bargaining sessions, Finch successfully negotiated a new labor contract with the United Steelworkers, reversing a history of tense management-labor relations. Its continuous improvement program resulted in reductions in energy, raw materials and personnel costs. In recognition of its strides in productivity gains, Finch was awarded the 2009 Pulp & Paper International (PPI) Award for efficiency improvements.
In Q4, Finch completed significant reinvestments to improve the efficiency and output of its paper machines. A heightened focus on internal communications through weekly newsletters, all-hands meetings and new television monitors mounted in key areas of the mill helped broaden Finch employees’ knowledge of the company’s direction, strategy and competition and reinforce its performance-based culture.
Roger A. Dziengeleski, Vice President of Continuous Improvement and External Operations, the company’s senior forester and a 33-year employee, was chosen as the incoming President of the 13,000-member Society of American Foresters (SAF), the world’s largest association of professional foresters.
Finch is optimistic about 2010. Market conditions have stabilized through a combination of more consistent demand and capacity closures, leading to modest improvements in product pricing. Finch’s 2010 budget contemplates continued cost reductions and greater efficiencies through a focus on operational planning, energy management, sourcing management and product mix optimization. With a largely unleveraged balance sheet, Finch is well-positioned to take advantage of internal and external opportunities for growth and improvement.
Finch Paper LLC – Q3 Review 2009
Joseph F. Raccuia, President and Chief Executive Officer
Despite a 23% drop in shipments of printing and writing paper at North American mills, Finch Paper continues to buck the industry, reporting a 2% increase in shipments year over year through Q3. Finch’s sales team concentrated earlier in the year on lining up orders to be delivered in the traditionally slow Q3. As a result, Finch had the best July and the second best August in the 144-year history of the Company, in terms of volume shipped.
Finch Paper’s management – led by CEO Joe Raccuia – is fine-tuning Finch’s Continuous Improvement Process (”CIP”) initiatives. With key performance targets posted throughout the mill, employees and management have a crystal clear understanding of what is expected, and they implement plans each day to meet or exceed those targets. As a result of CIP and the teamwork of employees and management, the Company has reduced all of its cash costs every month since the beginning of 2009.
Finch Paper also expects significantly improved production and efficiency from changes to the Company’s onsite pulp mill, which has underperformed throughout 2009. During a recent shutdown, crews located a mechanical problem that they believe was causing the production issues. We are hopeful that the “fix” will drive better performance in the balance of the year.
Consistent with our focus on cash generation, Finch is aggressively managing its inventory levels. Inventory on-hand has been gradually reduced to about 7,500 fewer tons – or about $7 million – since last year at this time.
Finch Paper LLC – Q2 Review 2009
Joseph F. Raccuia, President and Chief Executive Officer
While demand for printing and writing papers in North America has declined by nearly 25% year over year, Finch Paper has continued to outperform its competitors, with year-to-date shipments off just slightly – a testament to the company’s reputation for exceptional customer service, large stocking program and quick delivery.
Finch pressed ahead in Q2 with improvements in its cost structure. The Finch Continuous Improvement program has reduced costs by $8.4 million annualized in six months. The savings include $2.4 million in energy costs from improved detection of energy leaks and other inefficiencies; $4.5 million in improved production and manning efficiencies and reduced production losses; and $1.5 million by improving maintenance productivity, thereby reducing outside contracting costs.
As part of a continuing commitment to improve communication and build partnerships with employees, Finch established a Joint Steering Committee (JSC) consisting of representatives from each of the company’s seven local unions and six members of the management team. The JSC works collaboratively on matters of mutual interest that are essential to the long-term viability of the company. The committee meets regularly and is working on two priority items at this time: a plan to improve communications mill-wide and an initiative encouraging employees to take a more active role in maintaining and improving workplace safety.
The company added a new revenue line, building on its century-long commitment to sustainable forestry practices, by launching a new consulting forestry service to help private and public forest owners manage their lands and maintain healthy forests. Finch’s forestry practices have been certified by both the Forest Stewardship Council and the Sustainable Forestry Initiative.
When Finch Paper sold its 160,000 acres of forestland to The Nature Conservancy in 2007, The Nature Conservancy paid Finch the highest professional compliment — asking Finch to continue to manage those forests. Finch now provides consulting services to The Nature Conservancy and several other private landowners and will seek to expand its customer base.
During Q2, the greater Glens Falls, NY, community gathered to pay tribute to Finch’s long-time President, CEO and Chairman, Richard J. Carota, who retired from his role as President and CEO in February. Mr. Carota was feted for 53 years of service to the company and the community at a community-wide gala in his honor. He continues to contribute his experience as Chairman of the Board of Finch Paper LLC.
Finch Paper LLC – Q1 Review 2009
Joseph F. Raccuia, President and Chief Executive Officer
Even though industry-wide demand for uncoated free sheet paper is down by nearly 20 percent in Q1 compared with Q1 2008, Finch Paper continues to operate at full capacity and ship paper to customers in record volumes. In February, Richard J. Carota, president and chief executive officer of Finch Paper, retired after a 51-year career with this leading manufacturer of uncoated premium paper. Joseph F. Raccuia, former president of SCA Tissue North America, was named to succeed Mr. Carota.
Finch Paper continues to reduce its wood, purchased pulp, fuel, chemical and other materials costs and drive out less efficient manufacturing practices through a mill-wide continuous improvement program. It has increased its sales and marketing efforts and introduced lower-cost alternative products to continue running at full capacity. Finch’s customer-focused go-to-market strategy, along with adopting a low-cost manufacturing platform, has positioned it to take advantage of the economic recovery, whenever it arrives.
