MICHIGAN (From news reports) -- Swedish pulp and paper company Billerud announced it's investing in upgrades worth 1.4 billion Swedish kronor, about $127 million, at its U.S.-based production facilities. The majority, worth about $109 million, will go toward its graphic paper mill in Escanaba, Michigan, where earlier this year the company canceled a project to convert the plant into a cartonboard production facility.

The company said the Escanaba investment and an approximately $18 million investment in its pulp and paper mill in Quinnesec, Michigan, will enable it to transition to paperboard production in North America.

Billerud also announced new financial targets as part of its updated "Way Forward" strategy. They include a return on capital employed greater than 11% and cash conversion greater than 80%.

The previous plan to spend more than $1 billion to convert the Escanaba plant into a cartonboard production facility, which Billerud announced in December 2021, also aligns with the packaging materials production goal. That project would have created Billerud's first U.S. packaging site. The company cited changing economic conditions and return on investment analyses for the course reversal.

Billerud acquired the Escanaba facility when its purchase of Verso closed in March 2022. In addition to the two Michigan production facilities, Billerud also has a paper converting facility in Wisconsin Rapids, Wisconsin.

The newly announced investments at the Michigan mills will be carried out in phases, according to the company. The upgrades will align with scheduled maintenance outages to minimize production disruptions. Upgrades to the wood yard at Escanaba will begin immediately, but most of the work is slated for the second half of 2025.

Billerud's total investments in 2024 are expected to reach about $227 million, and that number is expected to grow to about $309 million next year.

EARLER NEWS RELEASE

The packaging company Billerud will present new financial targets and an investment program in North America in connection with the Capital Markets Day in Stockholm. This is stated in a press release.

Billerud's updated strategy, "Way Forward", reflects the company's ambition to continue to be a leader in high-performance paper and packaging materials. It aims to move towards paperboard while remaining dedicated to graphic and specialty papers in the North America region, and to strengthen performance in the Europe region.

- Going forward, we will prioritize profitability over growth and drive performance. We will capitalize on the growing demand for fiber-based packaging and Billerud's attractive niche positions, solid manufacturing capabilities and flexible production systems. Successful delivery of our plans will enable a strong and competitive Billerud. We aim to achieve an EBITDA of more than SEK 6 billion through our strategic initiatives," says Ivar Vatne, President and CEO of Billerud.

The new financial targets are as follows:
* Return on capital employed (roce) exceeding 11 percent
* ebitda margin exceeding 15 percent
* Cash flow generation exceeding 80 percent

Billerud's previous financial targets were net sales growth of 3-4 percent per year, and an ebitda margin of over 17 percent.

The targets for debt and dividend remain unchanged:
* Net interest-bearing debt to ebitda ratio of no more than 2.5 times
* Dividend of at least 50% of net income

- The conditions for producing pulp, paper and packaging in Europe have changed since the beginning of 2022. As the strained European wood market and high fiber costs are a structural change, we are revising the ebitda margin target from 17% to 15%. At the same time, we are reintroducing a return on capital employed (ROCE) target and introducing a cash flow generation target," says Ivar Vatne

"Billerud is determined to maintain its leading positions in the North American graphic paper and specialty label paper markets, and to gradually move towards packaging materials to optimize capacity utilization.

Billerud's Board of Directors has decided on a strategic investment program of SEK 1.2 billion in the Escanaba mill and SEK 0.2 billion in the Quinnesec mill. These investments will enable the transition towards paperboard production.

Billerud's total investments in 2024 will amount to SEK 2.5 billion. In 2025, total investments are expected to amount to SEK 3.4 billion, of which SEK 1.2 billion are strategic investments.

The annual maintenance investments for the mills, so-called "bascapex", are estimated to amount to SEK 2.2 billion in the years 2025-2027.