NewsWorthy

Georgia-Pacific to Focus on Away-From-Home Market

Proposed sale of building products division to reduce company’s debt

In what may prove to be a beneficial move for distributors, Georgia-Pacific Corp., Atlanta, the largest maker of tissue paper in the United States, has entered into talks with Willamette Industries, Portland, Ore., regarding the intended sale of its building products division. Industry analysts say the sale would significantly aid Georgia-Pacific in reducing its sizable debt and make its away-from-home tissue market more productive.

In 2000, the industry leader purchased Fort James Corp. and became the chief U.S. tissue paper manufacturer, surpassing Kimberly-Clark and Procter & Gamble. The merger has had its drawbacks, however, resulting in debt of more than $12.5 billion at the end of September 2001.

“Georgia-Pacific swallowed a whale when they bought Fort James. They need to integrate Fort James assets and reduce their debt,” says Joshua Zaret, a managing director at ABN Amro, an international wholesale banking group.

Georgia-Pacific already reduced its debt by $3.5 billion at the end of 2001, and stands to recover $3 billion to $4 billion more if Willamette buys its building products division.

According to company representatives, the current meetings with Willamette are part of Georgia-Pacific’s long-term strategy, not a hasty reaction to its immediate financial situation.

“It’s consistent with our ongoing transformation,” says Greg Guest, director of external communications. “We want to be more focused on value-added services. Our objective all along has been to minimize the impact this has on customers and distributors. Throughout, the key objective has been to not damage our internal structure, but to improve upon business.”

The building products division includes structural panels, industrial wood products and lumber industries. Georgia-Pacific predicts that the division will attain revenues of $8 billion this year, a significant percentage of the company’s overall business.

The away-from-home tissue industry is where Georgia-Pacific hopes to continue to make an impact, says Guest. Should Willamette choose to buy the building products division, business interests will be focused on taking control of the tissue paper market.

“Our tissue business is already the largest contributor to our earnings. That is going to be where we place our stake in the ground. There is tremendous potential for us,” says Guest.

Although Georgia-Pacific leads the tissue manufacturing industry in volume, there is stiff competition from Kimberly-Clark and Procter & Gamble, who claim the top name brands in facial and toilet tissue, respectively.

“We should remain very competitive. Our away-from home business has a very diverse range,” says Guest.

High Medical Insurance Costs Shift to Employees

A recent report released by William M. Mercer Inc., Los Angeles, a human resource consulting firm, states that the rising cost of health care continues to burden small business owners.

The average cost of health insurance for small business owners rose by 11.6 percent last year. Employers spent $4,649 per employee.

“We’re hitting the highest inflation rate in health care costs in 10 years. As all other businesses are going up 2 or 3 percent a year, health care costs are going up five times that,” says Kirby Hutson, a consultant with Mercer.

According to the report, health care costs were stable in the mid-1990s, but started to rise sharply at the end of the decade.

Business owners have been trying to compensate for the increase in cost by passing some of the cost on to employees. The Mercer survey found that 40 percent of large employers planned to have employees pay a higher percentage of total costs in 2002.

Congress Votes To Fund Industrial Clean-Up

Federal legislators passed the most powerful environmental bill of the year last month, securing up to $1 billion for states to clean up polluted industrial sites across the nation. The move may directly affect distributors in the jan/san industry, as Republicans and Democrats spent time debating the role the private sector will have in the clean-up, specifically clean-up contractors.

The bill will provide as much as $200 million per year over the course of a five-year program. President Bush’s administration is seeking to protect land developers from having to pay decontamination costs if toxic waste and other corruptible pollution is found on the site after it has been purchased.

The House of Representatives approved the legislation on a voice vote. Legislators decided that a new state grants program for industrial clean-ups should be paid for using a federal wage law, meaning that clean-ups will be federally funded.

The Senate later agreed with the House’s decision, also by voice, although there was much debate for a time about language in the bill that required clean-up contractors to pay to be unionized.

Environmentalists praised the new funding to fight pollution. U.S. Environmental Protection Agency administrator Christie Whitman said the legislation would cut down on legal bureaucracy that often arises between large-scale polluters and smaller developers who are not responsible for previous damage.

“We consider that liability protection a blessing, because it specifically shields innocent purchasers who are trying to do something right with properties that someone else used badly,” says Alan Front, a senior vice president for Trust for Public Land.

News Makers

Foamex International Inc., a manufacturer of carpet and furniture cushioning and protection products, recently announced that it will reduce its workforce by 10 percent. The company will also close eight of its plants in 2002, but expects the moves to result in pre-tax savings of $20 million in 2002 and $30 million in 2003, according to Foamex president Peter W. Johnson.

Procter & Gamble, Cincinnati, has announced that it expects to exceed initial earnings projections made by Wall Street analysts. The commercial and industrial cleaning products manufacturer expects an increase in fourth quarter sales of close to 3 percent.

Sellars Absorbent Materials Inc., Milwaukee, and NASCAR recently formed an exclusive multi-year licensing agreement. The partnership makes Sellars the only NASCAR licensee for all wipes and sorbent markets, including the auto after-market and commercial market.

AMR Research, Boston, has announced that according to its quarterly survey results, U.S. companies will increase overall e-business spending by 7 percent over the next year. In early 2001, the same survey showed that companies planned to increase e-business spending by 18 percent. The results were compiled from 100 interviews with companies that have 1,000 employees or more. Respondents consisted of executives who are directly responsible for e-business budget decisions.

Mergers & Acquisitions

ABC Compounding Co., Inc., Atlanta, has announced the acquisition of the majority of assets of I. Schneid, a 53-year-old Atlanta-based cleaning chemical manufacturer. ABC is a manufacturer and private labeler of Aero cleaning supplies.

Soft Vac Corp., Silver Spring, Md., will provide facility protection covers for American Building Maintenance (ABM) after forming an agreement with Easterday Janitorial Supply. The vacuum covers will be manufactured by Soft Vac and private labeled for ABM. Soft Vac has partnerships with close to 70 different vacuum manufacturers.

Piedmont National Corp., Atlanta, a distributor of packaging supplies, equipment, industrial paper, plastic products and sanitary supplies, has announced the acquisition of American Packaging Systems, Montgomery, Ala. Jerry Milner of American will join Piedmont’s key management team.