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Building a New Paper Mill In Alabama Can It Be Done

2. Overview. What Are The Issues At Play?Where Are We?Industry PerformanceCapacity Issues Industry OutlookGrades' Outlook -- Grade-By-GradeWhat Are The New PM Potentials?Summary

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Building a New Paper Mill In Alabama Can It Be Done

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    1. Building a New Paper Mill In Alabama – Can It Be Done? – Jim McNutt -- Center for Paper Business and Industry Studies (CPBIS) -- May 2004

    2. 2 Overview What Are The Issues At Play? Where Are We? Industry Performance Capacity Issues Industry Outlook Grades’ Outlook -- Grade-By-Grade What Are The New PM Potentials? Summary & Wrap-up

    3. 3

    4. 4 The Key Issues – Macro – Domestic/Global Where Is The Domestic/Global Industry? How Has The Industry Been Performing? What has This Meant For Domestic Capacity? Where is The Domestic Industry Headed? What Does This Mean For Domestic Grades? What Do These Key Issues Mean For Potential of a New Paper Mill in Alabama?

    5. 5 The Key Issues – Local/Alabama Alabama’s Relationship to The Domestic & Global Industry Local Production/Competitive Factors Availability of Fiber, Labor, Water, Sites . . . Factors of Production Costs – Labor, Fiber, Taxes, Energy . . . Domestic/Global Cost Competitiveness . . . Unique Competitive Advantages . . . Other Key Alabama Factors Infrastructure & Location To Attractive Markets Environmental Permitting – State & Federal Alabama Legal Environment Political & Public Attitudes & Opinions Economic Development Support & Needs . . . Competition for Resources (Land, Energy, Water . . .) Other . . .

    6. 6

    7. 7 What Are North America’s? – Stakeholders’ Perspectives Has Persistent Flaws in the Eyes of Many Capital Intensive, fragmented, technology based – monolithic & slow to adapt Focus is more on what it does instead of figuring out what it should be doing Key into lower costs, economies of scale, market share, marginal returns Very open information flows Highly insular

    8. 8 What Is North America’s – Market Perspective?

    9. 9 What Is North America’s – Market Perspective?

    10. 10 What Is North America’s – Market Perspective?

    11. 11 What Is North America’s – Market Perspective?

    12. 12 What Are North America’s – Current Realities? North America’s Paper Industry Pressures Continue CEOs remain under the microscope Performance continues to lag – but seeming to stabilize some Excess Capacity & older/inefficient technology being addressed Substitution (imports & alternative products to meet consumers needs) = persistent issue Balance sheets still out of balance – with moves to improve Reinvestment in revenue generation steps continues to lag Competitive landscape remains Intense – some order emerging

    13. 13

    14. 14 Industry Performance – ROTC Vs. Cost of Capital

    15. 15 Industry Performance – Debt Levels

    16. 16 Industry Performance – Capital Spending Level – Real USD

    17. 17

    18. 18 Industry Performance – Profitability

    19. 19 Industry Performance – Capital Turnover

    20. 20 Industry Performance – Capital Spending/Depreciation

    21. 21

    22. 22 Capacity Issues – Major Trend Change U.S. Shipments Off 14% In 2003 From 1999 Peak

    23. 23 Capacity Issues – Declining NA Share Slide 5 min Section 5 min Tot: 63 minSlide 5 min Section 5 min Tot: 63 min

    24. 24 Capacity Issues – Growth Outside NA Slide 5 min Section 5 min Tot: 63 minSlide 5 min Section 5 min Tot: 63 min

    25. 25 Capacity Issues – NA PM Changes

    26. 26 Capacity Issues – PM Age Distribution -- North America vs. Europe Slide 5 min Section 5 min Tot: 63 minSlide 5 min Section 5 min Tot: 63 min

    27. 27

    28. 28 Industry Outlook – Market Overview

    29. 29 Industry Outlook – The Economy

    30. 30 Industry Outlook – The Drivers

    31. 31 Industry Outlook – Performance Direction

    32. 32 Industry Outlook – Price & Volume

    33. 33 Industry Outlook – NA Capacity

    34. 34 Industry Outlook – Global Capacity Changes Slide 5 min Section 5 min Tot: 63 minSlide 5 min Section 5 min Tot: 63 min

    35. 35 Industry Outlook – The NA Grades

    36. 36 Industry Outlook – Offshore Capacity

    37. 37 Industry Outlook – Competitiveness North America Does Not Enjoy Low Cost Producer Status On Most Grades – Which Clouds The Outlook Period

    38. 38 Industry Outlook – Competitiveness High Volume NA Grades Have Significant Substitution Threats -- Which Clouds The Outlook Period --

    39. 39

    40. 40 North American Grades’ Outlook -- Grade-by-Grade -- Newsprint Printing & Writing Papers Packaging & Industrial Containerboard Market Pulp Tissue

    41. 41 Grade Outlook – Newsprint

    42. 42 Grade Outlook – Newsprint

    43. 43 Grade Outlook – Newsprint

    44. 44 Grade Outlook – Newsprint

    45. 45 Grade Outlook – P&W Papers

    46. 46 Grade Outlook – P&W Papers

    47. 47 Grade Outlook – P&W Papers

    48. 48 Grade Outlook – P&W Papers

    49. 49 Grade Outlook – P&W Papers

    50. 50 Grade Outlook – P&W Papers

    51. 51 Grade Outlook – Packaging & Industrial

    52. 52 Grade Outlook – Packaging & Industrial

    53. 53 Grade Outlook – Packaging & Industrial

    54. 54 Grade Outlook – Packaging & Industrial

    55. 55 Grade Outlook – Containerboard

    56. 56 Grade Outlook – Containerboard

    57. 57 Grade Outlook – Containerboard

    58. 58 Grade Outlook – Containerboard

    59. 59 Grade Outlook – Market Pulp

    60. 60 Grade Outlook – Market Pulp

    61. 61 Grade Outlook – Market Pulp

    62. 62 Grade Outlook – Market Pulp

    63. 63 Grade Outlook – Tissue

    64. 64 Grade Outlook – Tissue

    65. 65 Grade Outlook – Tissue

    66. 66

    67. 67 New Paper Mill Potentials – North America

    68. 68 New Paper Mill Potentials – North America Investors’ Attitudes – Can current perceptions be overcome? Environmental Perceptions and Permitting Issues – Can they be overcome as well? Can we become more capital intelligent? Best new/innovative mill format & technology? Wise mill design/construction concepts? Can Economic Development help be marshaled? What Political Support can be brought to play . . .

    69. 69 New Paper Mill Potentials – North America Newsprint – Not on The Horizon Printing & Writing Papers – Selected Grades Possible Industrial Packaging – Not on The Horizon Containerboard – Longer Term Potential Exists Market Kraft Pulp – Not on The Horizon Tissue – New Paper Mills Will Be Built in North America

    70. 70 New Paper Mill Potentials – Alabama Printing & Writing Papers – Uncoated Freesheet – Potentially Specialty Grades -- Possible Containerboard – Longer Term Potential Exists Due to the Presence of Surplus Southern Pine Tissue – New Paper Mills Will Be Built in North America – Driven By Local Markets Needs & The US South has Strong Population & Economic Growth What are the Keys? – Time, Wisdom, Focus & Political and Societal Support & Help

    71. 71

    72. 72 We Must Understand – Paper Is Still Essential To Society Paper Is an Essential Building Block of Society – Permeating Modern Civilization’s Social Fabric Meets a Cornucopia of Mankind’s Needs From Books and photocopies . . . Tissue and sanitary products . . . And newspapers, magazines . . . To packaging products and on and on . . . Even in surgical gowns, gas mask filters, ice cream, toothpaste, and . . . .

    73. 73 And – There Are Four Important Points about North America . . . The US is The World’s Largest Pulp, Paper & Paperboard Market. The US -- and especially the Southern US -- is Home to an Abundant/Needed Softwood Fiber Base The US still has the world’s best and most resilient political, economic & infrastructure to be exploited US Workers’ imagination, initiative & work ethic – especially in the US South – have been world leading . . . So Let’s . . .

    74. 74 And Think About This . . . .

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