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Domtar Corp. of Fort Mill, South Carolina, said Friday that it will permanently close four operations, including its A62 paper machine at Ashdown (Little River County), as part of a plan to cut costs by $200 million by the end of 2021.
The publicly traded company (NYSE: UFS) will lay off about 780 employees, and 109 people will lose their jobs in Ashdown, according to Spokeswoman Tammy Waters. Domtar said previously that it has about 10,000 employees.
The company is shuttering the Ashdown paper machine; uncoated freesheet manufacturing at its mills in Kingsport, Tennessee, and Port Huron, Michigan; and its converting center in Ridgefields, Tennessee. The closures will reduce the company’s annual uncoated freesheet paper capacity by about 721,000 short tons.
The Ashdown and Kingsport operations had been idled since April due to “the unforeseeable business conditions driven by the COVID-19 pandemic.” But both will be converted to support different operations, the company said.
Waters said approximately 550 people will continue to staff the Ashdown mill.
It will be converted to 100% softwood and fluff pulp, which the mill has been producing along with paper.
The conversion is expected to cost $15 million to $20 million and to be completed in 12 to 14 months. The mill’s annual capacity will be about 775,000 tons afterward, the company said in a news release announcing second-quarter financial results.
Until the conversion is completed, the mill will produce additional market hardwood pulp. The conversion is necessary for an eventual expansion into containerboard, according to the company.
“The COVID-19 pandemic and resulting economic slowdown continue to negatively affect demand for communications paper grades. Some recovery in demand for communications paper has occurred as the economy has started to re-open,” Waters said in a statement she emailed to Arkansas Business. “But, unfortunately, Domtar has not seen enough demand recovery to justify restarting operations on the A62 paper machine at the Ashdown Mill. Therefore, we have decided to permanently idle the A62 paper machine to maintain a balance between our production needs and our customer demand. With this line closure, the mill will now solely produce pulp.”
On the layoffs, Waters said the company “will continue to assist and care for our employees and their families during this time.”
“We remain disciplined in our efforts to manage our costs to improve profitability and further strengthen our balance sheet,” President and CEO John Williams said in the news release. “In line with these goals and current market conditions, we are implementing a significant cost-savings program to streamline operations, maximize productivity and improve margins. This program will create a stronger, leaner organization aligned to meet the needs of the business and our customers in a post COVID-19 era.
“This important and necessary step is expected to reduce our annualized costs by more than $200 million, while significantly improving our free cash flow and return on invested capital,” he said. “We have a talented and dedicated workforce at Domtar, and decisions that affect people are never easy. However, we are taking the necessary steps to better position our business for the future.”
Domtar’s Ashdown mill opened in 1968. It became part of Domtar, a paper products company, in 2001. Then it underwent a $160 million project to convert a paper machine to a fluff pulp machine in 2016.