Resolute Forest Products Inc. (formerly Bowater) on Thursday announced the indefinite idling of pulp and paper operations at its Calhoun, Tn., mill. Tissue manufacturing and converting will continue at the site and the adjacent distribution center will remain in full operation.
The company anticipates that the decision will directly affect 350 hourly and salaried positions at the Calhoun mill.
The facility, which employs a total of 545 people, has an annual capacity of 147,000 metric tons of pulp and 149,000 metric tons of paper as well as 60,000 metric tons of premium tissue.
"We have taken the very difficult decision to indefinitely idle pulp and paper operations at Calhoun knowing how hard this is for the affected employees and their families," said Remi G. Lalonde, president and chief executive officer. "Success has proved elusive at Calhoun's pulp and paper operations, despite the best efforts of our dedicated employees and significant investments of time, energy and resources over the last few years."
The company continues to accumulate significant financial losses at the mill, even with the current strong market conditions for both the pulp and uncoated freesheet paper it manufactures, officials said. On a trailing 12-month basis ending September 30, the pulp and paper operations in Calhoun produced an operating loss of $62 million before corporate expense allocation, including a depreciation expense of $10 million. In addition to these financial losses, the Calhoun mill faced additional significant production upsets in November and December, it was stated.
Once the indefinite idling is completed, the company anticipates an improvement in its overall operating income, of approximately $35 million to $40 million, which reflects the lost pulp integration benefit with its tissue manufacturing of approximately $15 million and approximately $5 million from on-going costs associated with closed site maintenance.
Pulp and paper operations will continue for up to 60 days to ensure an orderly shutdown, to accommodate environmental safeguards and to transition customers. "Our focus now will be to support our employees through this difficult time, to operate for the remaining period with the same degree of focus on safety and quality, and to facilitate a smooth transition for our customers," added Mr. Lalonde. "As business conditions for our tissue operations continue to improve after a challenging 2021, our priorities remain focused on driving performance progress to leverage the full potential of our converting operations and the quality of the paper from the machine, together with the right customer mix, to seize the upside, even as the lost integration benefit will add to pulp costs."
The company will work with union leadership and will apply the mill's collective agreement and applicable federal and state laws as well as provide severance benefits to those directly affected. Resolute will also engage government officials and other local authorities in an effort to mitigate the impact of the indefinite idling.
As a result of the announcement, the company expects to record, in the fourth quarter, non-cash impairment and accelerated depreciation charges of approximately $135 million to reduce the carrying value of the pulp and paper fixed assets to their residual value, as well as a write-down of inventory and a write-off of other assets of approximately $32 million in total. The company also estimates cash closure costs of approximately $45 million, mainly related to decommissioning, severance and other termination benefits, and other costs. Most cash closure costs will be disbursed in 2022.
Bradley County Mayor D. Gary Davis said, "This morning I was saddened to learn that Resolute Paper, formally known as Bowater, will end their production of paper which they have done since 1954. This paper mill has played a vital role in bettering the lives of so many Bradley County families and we as a community are better for all the contributions they have made.
"While there is never a good time for these types of actions to be announced, it is particularly tough during the Christmas season.
"My thoughts and prayers go out to the 350 families that have been impacted by todays announcement.
"Please know that state workforce development will be available to employees that have been affected and will receive retraining and job relocation assistance.
"To each individual that has been impacted by today's announcement please know that I, along with all of Bradley County, share in your pain, but will stand on the belief that better days are ahead for each of you."