Boise to Cut Pulp, Paper Capacity at St. Helens Mill

Nov. 18, 2008 - Boise Inc. announced that it will restructure its paper mill in St. Helens, Oregon, permanently halting pulp production at the plant and reducing annual paper production capacity by 200,000 tons. The company said the move will allow the company to increase operating margins, better match production levels to demand for its products, and discontinue production of its least profitable papers.

Boise expects restructuring to be complete no later than January 16, 2009.

Boise will permanently cease paper production on machines #1 and #4 at the mill. Paper machine #2 at St. Helens will continue to operate, primarily manufacturing lightweight opaque and flexible packaging papers, as will the #3 machine, which is owned by Cascades Tissue Group.

The company expects the restructuring to enable it to better adjust pulp and paper production to market demand, while reducing exposure to Pacific Northwest energy and fiber price fluctuations, enhance EBITDA margins, and improve its balance sheet. It will also reduce the company's dependence on export market pulp sales, increase the rate of internal consumption of its pulp production, and lower dependence on high-cost residual wood chips.

"This is an extremely difficult but necessary decision to improve the financial performance of the company, while executing our strategic shift to packaging grades," said Alexander Toeldte, president and CEO of Boise Inc.

"Our St. Helens team has achieved some incredible accomplishments since we first declared our need to significantly improve the financial performance of the mill two years ago. Unfortunately, despite the team's extraordinary innovation and commitment, the decision was primarily a function of declining product demand coupled with continuing high costs, which made it impossible to meet the company's long-term financial objectives. We will work closely with our customers and suppliers to ensure a smooth transition," Toeldte said.

The permanent capacity reductions will result in a loss of approximately 300 jobs at the St. Helens mill and 25 jobs in related sales, marketing, and logistics functions elsewhere in the company. Eligible salaried employees will be offered severance packages and outplacement assistance. Closure agreement negotiations will be scheduled with the AWPPW Local 1 to determine the impact for union employees, Boise said.

The company expects to employ approximately 170 employees at the mill after restructuring.

Headquartered in Boise, Idaho, Boise Inc. manufactures packaging products and communications papers including corrugated containers, containerboard, label and release and flexible packaging papers, imaging papers for the office and home, printing and converting papers, newsprint, and market pulp.

SOURCE: Boise Inc.

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