Tissue360 - Spring/Summer 2017 - 34
Along with our single ram models,
American Baler now combines an
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our narrow-box two ram baler to create
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SPRING/ SUMMER 2017
3/8/17 1:39 PM
the first with its purchase of Wisconsin Tissue as a consequence of the
G-P/James River deal. The company then decided to expand through
both building a new mill and some smaller acquisitions, but only in
the AfH business. SCA is still not involved in the North American
consumer tissue business, but if it does jump in, it will most likely be
through a major acquisition. Sofidel surprised almost everyone with
its acquisition of Cellynne Corporation in 2012 and has continued its
expansion through both converting acquisitions and new investments.
The company's first new mill, in Circleville, Ohio, with two large PMs
and converting, will likely be only the beginning of Sofidel's path to
an important position in the North American tissue market. Further
growth will certainly follow.
Will any other European tissue companies follow in the tracks of
these two main European players? The next largest European tissue
companies are WEPA of Germany, Metsä Tissue of Finland and ICT
(Tronchetti) of Italy, in that order. Of these, it would be hard to believe
that the Finnish Metsä Tissue, with its strict focus on its Nordic and
Central and Central-Eastern European operations, would seriously
think about expansion into North America, particularly considering
the ownership of the company. ICT is a cautious and deliberate company, with a good sense for how to succeed; a North American entry
would be risky, but not impossible. However, acquisitions have never
been a key target in ICT's strategy.
But what about the third-largest European-based player, WEPA? The
company's management is known to be interested in growth, and as
an almost totally private label-oriented company, its North American
expansion potential is certainly interesting. The company is not very
strong financially, although that has been improving recently; WEPA
currently relies heavily on high-yield bonds, which might also be
available for further expansion. The latest information available is
that the company is actively searching for a CEO for North America.
However, we do not know any further details of this plan, such as if
the company would like to have somebody for a potential acquisition
or for establishing converting and/or tissue mill building activities.
The news has come from several sources, in North American and
elsewhere, so while it can't yet be confirmed, it does seem to be more
than just rumor.
But the question remains: Why is the industry developing in a
completely different direction from before? The answer is actually
very simple. Companies are well aware of where money can be made
more easily and where higher margins are likely. For the past 10-15
years, or probably even longer, this has been in North America rather
than Europe. Furthermore, the European market is rather mature as
population growth is minimal and product penetration levels are high,
and it may never reach the average US level of consumption because
of different cultural habits.
However, North America is now getting very crowded with new
projects, and it is unclear how all the new competition and supply
will affect the average price level and margins. For any further new
movements, we do not see the North American market offering any
handsome opportunities for new companies, as this year and next
will see tighter competition in spite of the likely more-than-expected
demand growth seen in 2016.
Esko Uutela, principal, tissue, is the author of RISI's regular publications
Outlook for World Tissue Business, World Tissue Business Monitor,
and US Tissue Monthly Data. He can be reached at: firstname.lastname@example.org.