JAY, Maine (From news reports) -- The Verso Corp. plans to invest $120 million in three pulp and paper mills, including significant upgrades to its Androscoggin Mill in Jay.
The company announced the two-year capital plan in a conference call with analysts Thursday
Interim CEO Leslie Lederer said the company wants to make more packaging and specialty papers and reduce its reliance on graphic paper products.
A focus of the plan appears to be major spending on two paper machines at the mill in Jay where roughly 500 people are employed.
"We plan to invest a portion of this allocation in the Androscoggin Mill, which we believe will improve the quality and reduce the cost of our unbleached containerboard and craft paper grades on the No. 3 machine at Androscoggin and to increase capacity of specialty products on our paper machine No. 4," Lederer said.
Adding specialty paper capacity to its mill in Stevens Point, Wisconsin, and improving a recycled fiber packaging operation at its mill in Duluth, Minnesota, are also part of the investment.
Company officials would not provide further details about its capital plan during the Thursday call. A company spokeswoman said she had nothing to add to the earnings call, declining to answer questions about how much was going to be invested in the Jay mill and if new jobs would be created because of the investment.
Verso hopes the changes will reduce its reliance on graphic paper, such as newsprint and writing paper, a market that has contracted sharply in recent years. Instead, it wants to focus on packaging and specialty products.
Last year Verso restarted the No. 3 machine and rehired 120 workers to produce packaging products and upgraded the No. 4 machine to make labels and other adhesive products.
Graphic paper currently makes up about 59 percent of the company's revenue. Verso wants to reduce that to 44 percent through the investment program.
Verso had $602 million in sales in the second quarter of 2019, and ran an operating loss of $112 million, according to its quarterly report. It expects sales to pick up in the third quarter, but estimates they will remain below last year.
Debt repayment last year has freed up cash from operations Verso can use for new investment, Lederer said.
In June Verso announced it had hired an outside firm to explore a possible merger, asset sale, stock repurchase and joint venture, among other strategic alternatives.
Responding to an analyst's observation that Lederer is incentivized to sell the company, the interim CEO said the investment plan was intended to improve performance for shareholders.
The capital plan had been approved by the board and the projects exceeded the minimum return requirement for new investment, Lederer said.
"My incentive is to provide shareholders value, at this point we have not announced any sale of the company, therefore we have to make sure we have options that are available to provide shareholder benefit," Lederer said. "At this point in time, we are focusing on strategic initiatives to improve the company's performance away from graphic products."
The company's stock has been on a slide this year, dropping from a high of more than $34 per share to $13.55 at the close of business Wednesday.