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SLOVAK PAPER MILL SCP TO BE THE RECIPIENT OF A MASSIVE CASH INJECTION AS AUSTRIAN OWNER ANGLES FOR CENTRAL EUROPEAN MARKET

Neusiedler announces over $200 million investment

AUSTRIAN paper manufacturer Neusiedler has announced a massive investment in Slovak pulp and paper mill SCP Ružomberok over the next two years, part of the firm's strategy of increasing production in its eastern European factories.
Since Neusiedler's acquisition of a 50 per cent stake in SCP two years ago, investments have grown from Sk290 million ($6.2 million) in 2000 to Sk1.43 billion ($30.4 million) in 2001. This past month Neusiedler said it would invest an additional 238 million euro ($214 million) over the next two years to almost quadruple production.


SCP last year produced 309,000 tons of paper, mostly for export.
photo: TASR

AUSTRIAN paper manufacturer Neusiedler has announced a massive investment in Slovak pulp and paper mill SCP Ružomberok over the next two years, part of the firm's strategy of increasing production in its eastern European factories.

Since Neusiedler's acquisition of a 50 per cent stake in SCP two years ago, investments have grown from Sk290 million ($6.2 million) in 2000 to Sk1.43 billion ($30.4 million) in 2001. This past month Neusiedler said it would invest an additional 238 million euro ($214 million) over the next two years to almost quadruple production.

Coupled with the March 2002 acquisition by Neusiedler parent firm Mondi Europe of an additional 68.5 per cent stake in Russian forest company Syktyvkar Forest Enterprise, the promised SCP investment will almost double Neusiedler's paper production capacity.

While the two firms released press statements in early April, Štefan Kuča, head of SCP's press agency, said he could not comment on the company's strategy. Neusiedler officials were also unavailable for comment.

However, Štefan Boháček, general director of Slovak Pulp and Paper Research Institute, described Neusiedler's decision to raise its SCP investment as sensible given the costs of transporting logs from Slovakia for processing in Austria.

"Neusiedler very correctly realised that Slovakia has lots of wood, and that this wood is not being used or processed very efficiently. Nor is it economical to transport lower quality wood [for use in paper production] back to Austria," Boháček said.

Neusiedler has been on an expansion drive since 1995, acquiring the Hungarian Szolnok and Dunaujvaros factories as well as the Israeli Hadera.

"Consumption [of paper] in central Europe is increasing significantly, and Neusiedler wants this growing market. The main goal of the production increase is to grab the regional market," said Vladimír Dohnal, chief analyst at the Symsite Research intelligence group.

Paper production at SCP has risen from 277,000 tons in 2000 to around 309,000 tons in 2001; the new investment projects annual production of 450,000 tonnes. Meanwhile, pulp production, which increased by 14 per cent in 2001 to about 258,000 tons, is to grow by another 100,000, according to Neusiedler's April press release.

As part of the project, SCP Ružomberok plans to reconstruct high performance paper machinery in 2003, which the company predicts will increase production capacity to 400,000 tons of uncoated wood-free graphic paper - the type used in laser and offset printers, photocopiers and fax machines.

Revenues at SCP rose Sk2.6 billion in 2001 to Sk13.8 billion, a total the company expects to increase as exports rise partly on the back of increased use of wood supplies.

"Wood extraction in Slovakia is planned in accordance with demand. Slovakia extracts 5.6 to 5.7 million cubic metres of wood annually, but it is not fully processed. Given that Slovakia could easily produce 10 million cubic metres of wood a year, approximately 4 million cubic meters of the wood that could be cut is left standing," said Boháček.

Neusiedler's contribution to increasing Slovak exports, a role which won SCP the Economy Ministry's prize for Best Exporter in 2001, has already been noted.

While Slovakia's trade deficit reached a record Sk103.2 billion last year, SCP head Jan Líška estimated SCP Ružomberok had increased its total exports by 21 per cent, achieving a value of Sk10.5 billion.

Boháček added: "The most important factor in Neusiedler's investment is that they're bringing in new technologies and increasing production levels, thus improving Slovakia's trade deficit.

"Exports account for 76 per cent of SCP's total production, and if Neusiedler fulfils its investment plans for the Ružomberok plant, there will be a further contribution [to export growth] of Sk5 to Sk6 billion," he said.

The Slovak Pulp and Paper Research Institute estimates that Slovakia still needs investments of more than Sk45 million into the wood processing sector, of which Sk30 million should go to the furniture industry.

These investments, said Boháček, could improve other industrial sectors in Slovakia.

"In Europe, every new position in the wood industry creates the basis for eight new jobs in other sectors. Investing and enlarging prodution to meet capacities in Slovakia could altogether create 10,000 to 15,000 job positions."

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