A previously vacant brownfield site in Michigan’s Great Southwest will undergo a $600-million transformation as an Atlanta-based firm installs a massive new coated recycled board machine and invests in an expansion at its Kalamazoo mill site designed to dramatically increase the company’s output.
Graphic Packaging Holding Company, a leading provider of packaging solutions to food, beverage, foodservice, and other consumer products companies, has announced that its Kalamazoo mill will be the location for the new coated recycled board (CRB) machine whose acquisition was first announced last month. The company will invest $600 million in that project, and the machine is expected to have an annual capacity of approximately 500,000 tons.
The Michigan Strategic Fund voted Tuesday to approve a State Essential Services Assessment exemption for up to 15 years to support the Graphic Packaging project, and also concurred with plans by the Kalamazoo County Brownfield Redevelopment Authority providing for local and school tax captures for more than $21-million to the company.
The CRB machine is designed to be the largest and lowest cost producer of CRB in all of North America. Upon completion of the project, the company believes the CRB machine will produce the highest quality coated recycled board product in North America with the lowest-caliper capabilities in the industry. The company expects the investment will be capacity neutral by eliminating higher cost production at other facilities and will deliver an incremental $100 million in annualized EBITDA upon full ramp up in 2022. The investment will be funded from cash flow and existing credit facilities with most of the spending occurring in 2020 and 2021.
Graphic Packaging is “Committed to providing consumer packaging that makes a world of difference.” They are a leading provider of paper-based packaging solutions for a wide variety of products to food, beverage, foodservice, and other consumer products companies. The company operates on a global basis, is one of the largest producers of folding cartons and paper-based foodservice products in the United States, and holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard and solid bleached sulfate paperboard.
In early August, Graphic Packaging had announced that its Board of Directors had approved a $600 million investment in that new coated recycled board (CRB) machine in either Ohio or Michigan, subject to a number of conditions, including environmental permitting and negotiations that were underway relative to government incentives and labor relations. Kalamazoo emerged as the winner following state and local approvals yesterday.
Michael Doss, President & CEO at Graphic Packaging said last month, “We are very pleased to announce our intent to proceed with this significant investment into our integrated CRB platform. This is a unique opportunity to make a highly strategic investment in sustainable packaging, exceptional product quality and an unmatched cost position for producing CRB.” He added, “Increasing consumer preference for sustainable packaging is expected to drive steady, long-term demand for packaging solutions manufactured from 100-percent recycled fiber. We are confident the investment will deliver returns well above our cost of capital, and remain fully committed to executing our balanced approach to capital allocation as we continue to build a growing, highly integrated, low cost paperboard packaging platform.”
The company has scheduled an Investor Day for tomorrow, Thursday, September 26, 2019 in New York City at the New York Stock Exchange where it will discuss the strategic and financial rationale for the investment in more detail, as well as other key strategic and financial priorities.
