KapStone Paper and Packaging Corporation
) Board of Directors has granted its approval for an investment of
$29 million in the company's North Charleston, South Carolina Paper
Mill. The investment is expected to boost the production of Ultra
High Performance (UPL) lightweight linerboard by replacing the
press section. KapStone targets to install the new press section
during first quarter of 2014 and plans to start engineering and
construction work over the next 18 months.
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With this investment, KapStone will perk up both the capability and
efficiency of No. 3 Paper Machine to produce UPL lightweight
linerboard grades. It would replace the old press section and the
new press section would be supplied by Paper Machinery Technology
The investment, apart from increasing the efficiency and capability
of No. 3 Paper Machine, also takes care of projects related to
fiber and utility areas to support the production of the
strategically important grades.
Moreover, the move will help KapStone in countering the growing
threats from the leading paper companies like
International Paper Company
) which are taking away its potential customers.
KapStone has a strong balance sheet and healthy cash flows to
invest in the growth opportunities. During the second quarter of
2012, the company repaid loans that helped it to reduce the
KapStone's adjusted earnings went up 4% year over year to 42 cents
per share in the second quarter, but missed the Zacks Consensus
Estimate of 45 cents. Including special items, earnings in the
quarter stood at 39 cents per share, up 3% from 38 cents registered
a year ago.
Revenues rose 43% to $306 million from $214.8 million in the
year-ago quarter but fell behind the Zacks Consensus Estimate of
$308 million. The growth in the top line can be attributed to $92.7
million of incremental sales from the acquisition of U.S.
Based in Northbrook, Illinois, KapStone is a leading North American
producer of unbleached kraft paper and corrugated products. It is
the parent company of KapStone Kraft Paper Corporation which
includes three paper mills and 14 converting plants across the
eastern and midwestern U.S.
The company retains a short-term Zacks #3 Rank (Hold). We have a
long-term Neutral recommendation on the stock.