USA – Graphic Packaging, an Atlanta-based provider of packaging solutions to food and beverage industry has announced plans to invest US$600 million in expanding production capabilities.
The multi million-dollar investment will be used on a new coated recycled board (CRB) machine in the Midwest with annual capacity of approximately 500,000 tons, to enable the firm meet the increasing demand for sustainable packaging solutions.
Upon the completion of the project, the company expects the investment to deliver US$100 million in annual EBITDA.
Graphic Packaging said that the increase in EBITDA will be driven by cost savings from significantly increased scale production, reduced raw material consumption, and lower fixed costs.
The company believes that the state of the art CRB machine will produce the highest quality coated recycled board product in North America with the lowest caliper capabilities in the industry.
“We are very pleased to announce our intent to proceed with this significant investment into our integrated CRB platform,” says Michael Doss, president and CEO of Graphic Packaging.
“This is a unique opportunity to make a highly strategic investment in sustainable packaging, exceptional product quality and an unmatched cost position for producing CRB.
“Importantly, the investment will be capacity neutral as we expect to reduce production at other higher cost CRB facilities after we ramp up production of this highly productive CRB machine starting in early 2022,”he added.
The company is planning to make the investment in either Ohio or Michigan, subject to a number of conditions, including environmental regulations, and negotiations are currently underway relating to government incentives and labour relations.
“Increasing consumer preference for sustainable packaging is expected to drive steady, long-term demand for packaging solutions manufactured from 100 percent recycled fiber.
“We are confident the investment will deliver returns well above our cost of capital, and remain fully committed to executing our balanced approach to capital allocation as we continue to build a growing, highly integrated, low cost paperboard packaging platform,” Doss added.
Graphic Packaging said that the investment will be funded from cash flow and existing credit facilities with most of the spending occurring in 2020 and 2021.
According to a report by Recycling Today, the company has also scheduled an Investor Day for September in New York City at the New York Stock Exchange where it will discuss the strategic and financial rationale for the investment in more detail, as well as other key strategic and financial priorities.