An ambitious plan to invest $30.4 million by
Orchids Paper Products Company
), an integrated manufacturer of tissue paper products, failed to
cheer markets as shares remained almost flat. The investment aims
to upgrade Orchids' infrastructure for paper manufacturing and
converting assets in Pryor, Okla., to improve production capacity
and reduce operating costs in order to create long-term value for
Orchids intends to replace two existing paper machines and
start-up in approximately 20 months. Orchids will buy the new
equipment from Italian paper machine manufacturer Recard, S.p.A.
The new paper machine is expected to improve the quality of the
produce and maximize production outputs for increased
manufacturing flexibility by generating a broader range of paper
grades that are utilized in value and premium tier products.
The infrastructure upgrade is likely to raise the annual
production capacity of the paper mills from 57,000 tons to over
70,000 tons. In addition, the new machines are equipped with
superior energy efficiencies to yield higher production rates at
lower operating costs.
Consequently, with the completion of the project, annual
EBITDA is expected to increase by approximately $6 million to $8
million, thereby augmenting shareholder's return on investments.
The upgrade of the converting line project by the end of 2014 is
further expected to yield an additional annual EBITDA of $2.8
million to 3.4 million when fully utilized.
Orchids manufactures bulk tissue paper (known as parent rolls)
and converts parent rolls into finished products, such as paper
towels, bathroom tissue and paper napkins. The company primarily
sells its products to value retailers and discount retail stores
due to their high overall market growth, consistent order
patterns and low number of stock keeping units.
Orchids presently has a Zacks Rank #2 (Buy). Some other players
in the industry worth reckoning include
KapStone Paper and Packaging Corp.
Stora Enso Oyj
), each carrying a Zacks Rank #2 (Buy).
KAPSTONE PAPER (KS): Free Stock Analysis
STORA ENSO -ADR (SEOAY): Get Free Report
ORCHIDS PAPER (TIS): Free Stock Analysis
UPM-KYMMENE ADR (UPMKY): Get Free Report
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