Forestweb Inc. has added Clearwater Paper, the pulp, tissue and bleached board producer spun out from Potlatch Corp. in December, to its U.S. Forest Products Stock Index, replacing Smurfit-Stone Container Corp.
Chip Dillon, an independent forest products and packaging analyst, reports that Clearwater is focused on bleached board packaging and private-label consumer tissue, with major facilities in Arkansas and Idaho. The company’s 2008 sales were $1.1 billion.
According to Forestweb reports and research by Dillon, Smurfit-Stone Container Corp. is the world’s largest producer of containerboard used in corrugated packaging, with 2008 sales of about $7.2 billion. Smurfit-Stone filed for Chapter 11 bankruptcy protection on Jan. 26.
With a Feb. 9 closing price of $11.18, Dillon reports that Spokane, Wash.-based Clearwater had a market capitalization of $125 million -- less than half of its September 2008 book value of $257 million -- and an enterprise value of about $275 million. Dillon further notes that Clearwater was spun out of Potlatch so that Potlatch could focus on its traditionally more stable and higher-return-on-capital timberland business.
According to Dillon, “Smurfit-Stone’s current equity has become nearly worthless, and thus should no longer be included in the index.”
In a recap for Forestweb, Dillon wrote, “With over 7 million tons of containerboard and kraft paper capacity, Smurfit-Stone should re-emerge later this year or in 2010 as a well-capitalized leader in corrugated packaging. Of course, the company’s creditors, holding more than $4 billion in principal debt claims, will end up trading much of this debt for new equity in the company, with the legacy shareholders all but wiped out. Depending upon how much debt is canceled, we see the ‘new and improved’ Smurfit-Stone with perhaps $2 billion to $4 billion in equity market capitalization when it leaves Chapter 11.”
At that size, Dillon expects Smurfit-Stone will rejoin the Forestweb index of the largest North American forest products stocks.
About the U.S. Forest Products Stock Index
The Forestweb U.S. Forest Products Stock Index (forestweb.com) is a comprehensive index containing the stocks of all publicly held forest products-related companies headquartered in the United States that trade on the New York Stock Exchange. The index is calculated using a market capitalization approach similar to the S&P 500 and is updated in real time with a 20-minute delay to reflect the price movement of significant sector participants. The Forestweb Stock Index is available at no charge and e-mailed each day at the close of the market to registered subscribers.
About Industry Intelligence
Forestweb is a sister company of Industry Intelligence Inc. (industryintel.com), a Web-based provider of a suite of information management solutions that gives users the meaning behind the information: who, what, where and why.