Company to implement a state-of-the-art paper
machine in Québec
SHERBROOKE, QC, Aug. 16, 2018 /CNW Telbec/ - KP Tissue Inc.
("KPT") (TSX: KPT) and Kruger Products L.P. ("Kruger Products or
"KPLP") today announced its plan for a capital investment of
$575 million in the Brompton area of Sherbrooke, Québec, to build a new,
state-of-the-art tissue plant featuring Canada's largest and most modern
through-air-dry (TAD) machine. The project will create more than
180 new jobs in the region. The announcement of this major project,
supported by the Government of Québec, was made in the presence of
Dominique Anglade,
Quebec Deputy Premier, Minister of
Economy, Science and Innovation and Minister of Québec's Digital
Strategy, Luc Fortin, Québec
Minister of Families and Minister Responsible for the Estrie
Region, and Guy Hardy, MNA
for Saint-François, as well as Dino
Bianco, Chief Executive Officer, Kruger Products L.P.,
and Joseph Kruger II,
Chairman and Chief Executive Officer, Kruger Inc.
The new plant, which will be adjacent to an existing facility of
the Kruger Group, will produce at maturity approximately 70,000
metric tonnes per annum of bathroom tissue and paper towels which
will enable Kruger Products to increase its offering of ultra
premium and innovative tissue products under the Cashmere®,
SpongeTowels® and Purex® brands.
The project is supported by the Government of Québec through
Investissement Québec ("IQ"), which has agreed to invest
$105 million by way of a convertible
debenture. The remaining financing for the project is currently
being finalized.
"This project is on an unprecedented scale for Kruger Products
and will give us the additional capacity to continue to grow our
business into the future. This new facility combined with our
Memphis TAD location will allow us to rebalance our ultra premium
tissue capacity to better serve our customers across North America. The Brompton site will also be
part of a critical manufacturing hub in the region, working with
our other locations in Crabtree,
Gatineau and Sherbrooke to produce
great quality tissue products for our company" said Dino Bianco, Chief Executive Officer, Kruger
Products."
State-of-the-art Technology
Through-air-dry (TAD) technology is the world's most advanced
ultra premium tissue products manufacturing technology. It uses
less fibre to obtain a plusher, stronger, exceptionally soft and
more absorbent product.
While Kruger Products has been operating a TAD machine at its
Memphis, Tennessee plant since
2013, its TAD 2 machine will be the first of its kind in
Québec.
Significant Construction Project
Construction of the
project is expected to begin in early 2019, and the plant is slated
to commence production in early 2021. The project will generate
major benefits, including over $250
million in direct expenses in Québec and one million
person-hours for the construction of the new plant.
Anticipated Capital Structure for the Project
The
project is expected to be financed with 40% equity and 60% debt in
a newly-created, wholly-owned indirect subsidiary of KPLP
("TAD2Canco"). The equity is expected to be funded by the IQ
investment of $105 million by way of
subscription to a convertible debenture, and Kruger Products
expects to obtain financing for the remaining equity. Long-term
construction financing for the debt portion is currently being
finalized. The IQ convertible debenture will carry a 3% capitalized
fixed interest rate for a term of 10 years, and will be required to
be redeemed on a monthly basis by KPLP commencing 36 months from
the date of issuance. In the event of a failure to make a monthly
redemption in accordance with the terms of the debenture, IQ will
have a conversion right in respect of the portion of the balance of
the debenture that is not paid on terms of conversion that would
provide IQ with a 48.6% equity interest in TAD2Canco if the
entirety of the debenture were to be converted.
Forward-Looking Statements
Certain statements in this
press release about KPLP's current and future plans, expectations
and intentions, results, levels of activity, performance, goals or
achievements or any other future events or developments constitute
forward-looking statements. Forward-looking statements in this
press release include, but are not limited to, items such as: the
undertaking of the project; the timing of commencement and
commissioning of the project; the capacity of the TAD machine, the
creation of new jobs; the financing structure for the project; and
KPLP's future business strategy. The words "may", "will", "would",
"should", "could", "expects", "plans", "intends", "trends",
"indications", "anticipates", "believes", "estimates", "predicts",
"likely" or "potential" or the negative or other variations of
these words or other comparable words or phrases, are intended to
identify forward-looking statements. The forward-looking statements
are based on certain key expectations and assumptions made by KPLP,
including, but not limited to, expectations and assumptions
concerning the satisfaction of conditions to Investissement
Quebec's underwriting of the debenture and KPLP's ability to secure
sources for the remaining construction debt financing on acceptable
terms. Although KPLP believes that the expectations and assumptions
on which such forward-looking information is based are reasonable,
undue reliance should not be placed on the forward-looking
statements since no assurance can be given that such expectations
and assumptions will prove to be correct.
Many factors could cause KPLP's actual results, level of
activity, performance or achievements or future events or
developments to differ materially from those expressed or implied
by the forward-looking statements, including, without limitation,
the following factors, which are discussed in greater detail in the
"Risk Factors – Risks Related to KPLP's Business" section of the
KPT Annual Information Form dated March 9,
2018 available on SEDAR at www.sedar.com: Kruger Inc.'s
influence over KPLP; KPLP's reliance on Kruger Inc.; consequences
of an event of insolvency relating to Kruger Inc.; risks associated
with the Memphis TAD machine; operational risks; Gatineau Plant land lease; significant increases
in input costs; reduction in supply of fibre; increased pricing
pressure and intense competition; KPLP's inability to innovate
effectively; adverse economic conditions; dependence on key retail
trade customers; damage to the reputation of KPLP or KPLP's brands;
KPLP's sales being less than anticipated; KPLP's failure to
implement its business and operating strategies; KPLP's obligation
to make regular capital expenditures; KPLP's entering into
unsuccessful acquisitions; KPLP's dependence on key personnel;
KPLP's inability to retain its existing customers or obtain new
customers; KPLP's loss of key suppliers; KPLP's failure to
adequately protect its intellectual property rights; KPLP's
reliance on third party intellectual property licenses; adverse
litigation and other claims affecting KPLP; material expenditures
due to comprehensive environmental regulation affecting KPLP's cash
flow; KPLP's pension obligations are significant and can be
materially higher than predicted if KPLP Management's underlying
assumptions are incorrect; labour disputes adversely affecting
KPLP's cost structure and KPLP's ability to run its plants;
exchange rate and U.S. competitors; KPLP's inability to service all
of its indebtedness; exposure to potential consumer product
liability; covenant compliance; interest rate and refinancing risk;
and risks relating to information technology, cyber-security,
insurance, internal controls, and trade.
Readers should not place undue reliance on forward-looking
statements made herein. The forward-looking information contained
herein is expressly qualified in its entirety by this cautionary
statement. The forward-looking information contained herein is made
as of the date of press release, and KPLP undertakes no obligation
to publicly update such forward-looking information to reflect new
information, subsequent or otherwise, unless required by applicable
securities laws.
About KP Tissue Inc.
KPT was created to acquire, and
its business is limited to holding, a limited partnership interest
in KPLP. KPT currently holds a 15.9% interest in KPLP. For more
information visit www.kptissueinc.com.
About Kruger Products L.P.
Kruger Products L.P. is
Canada's leading manufacturer of
quality tissue products for household, industrial and commercial
use. KPLP serves the Canadian consumer market with such well-known
brands as Cashmere®, Purex®, SpongeTowels® and Scotties®'. In the
U.S., KPLP manufactures the White Cloud® brand, as well as many
private label products. The Away-From-Home division manufactures
and distributes high-quality, cost-effective product solutions to a
wide range of commercial and public entities. KPLP has
approximately 2,500 employees and operates eight FSC®
(FSC® C104904) certified plants in North America. For more information, visit
www.krugerproducts.ca.
About Kruger Inc.
Kruger Inc., the parent company of
Kruger Products L.P., is a third-generation family company
headquartered in Montréal since 1904, the year it was established.
Kruger Inc. is a major producer of tissue products; 100% recycled
containerboard products; corrugated packaging; publication papers;
specialty papers; renewable energy; cellulosic biomaterials; and
wines and spirits. The Company is also a leader in paper and
paperboard recycling in North
America. Kruger Inc. has facilities in Québec, Ontario, British
Columbia, and Newfoundland
and Labrador, as well as in
Tennessee, Maine, New
York, Virginia and
Rhode Island in the United States. (www.kruger.com).
SOURCE Kruger Inc.