Glatfelter to acquire Mitsubishi plant in Fort Smith, employ 83 by late 2017

The huge Mitsubishi building in Fort Smith designed solely to assemble complex, multi-ton wind turbines will soon employ more than 80 people in the production of a material small and soft enough to be part of a wet wipe.

York, Pa.-based Glatfelter is acquiring the empty 200,000-square-foot Mitsubishi building at Chaffee Crossing and will invest $80 million to transform it into a specialty materials production plant estimated to employ 83 when it opens in late 2017. Average per hour wage is $25, company officials said Tuesday (March 1). The first shipments from the plant are expected in the first quarter of 2018. The company plans to spend up to $45 million in 2016 on the new operation, and the remainder in 2017.

Glatfelter, a publicly traded company (NYSE: GLT), is a global manufacturer of specialty papers and fiber-based engineered materials used in coffee filters, baby wipes, adult diapers, feminine hygiene products, and a wide range of other products.

An announcement of the deal was made Tuesday morning at the Fort Smith Regional Chamber of Commerce, with Gov. Asa Hutchinson (R) attending. The deal remains contingent upon closing on the purchase of the building from Mitsubishi Power Systems.

Sheboygan, Wisc.-based Rockline Industries, which has wet wipe production facilities in Booneville, Russellville and Springdale, could be a customer of the Glatfelter products from the Fort Smith operation.

GLATFELTER MARKET PLANS, FORT SMITH DECISION
Glatfelter announced Dec. 10 it planned to invest $80 million in a new U.S. facility in its Advanced Airlaid Materials division to support U.S. customers. Canada and Germany are now home to the only production plants in the division. Glatfelter, which employs 4,300 worldwide, has 12 production facilities in the United States, Canada, Germany, France, United Kingdom and the Philippines. In the Dec. 10 announcement, Advanced Airlaid Materials President Chris Astley said the plant would be located in “close proximity to several key customers and highly efficient transportation routes in the southern U.S., as well as where we have additional access to a high-quality, skilled workforce.”

Astley continued that theme in Tuesday’s statement.

“Locating here benefits our business in a number of ways. It will enable us to expand our capacity to meet our customers’ growing demand for our advanced airlaid products, provide us with closer proximity to key suppliers and customers, and link us to highly efficient transportation routes across the South. Equally important, it will allow us to tap into the area’s high-quality workforce,” Astley said.

The company plans to work with area educational institutions as it develops its hiring plans for the facility. During a Feb. 9 Glatfelter earnings call with analysts, Glatfelter Chief Financial Officer John Jacunski said Fort Smith start-up costs in addition to plant investment would be $6 million over the two years.

“(T)he $2 million in 2016 and $4 million in 2017 is driven primarily by the need to hire and train a workforce at the new facility and then the actual start-up process. So that’s why there are some costs in 2016. We will need to begin that hiring and training process as we go through the second half of 2016 so that we can meet the start-up timeframe and get folks trained on the operation of the equipment,” Jacunski said during the Feb. 9 call.

Glatfelter Chairman and CEO Dante Parrini said in the call that the product to be made in Fort Smith is “a platform that is serving markets that are growing at 5% per year both in hygiene as well as wipes.” He also said the company would work to “establish centers of excellence” in their Gatineau, Canada plant and in Fort Smith – which at the time he referred to as “the southern U.S. facility.”

“In North America the Airlaid substrate is a form factor of choice for the growing specialty wipes category, and we have strong working relationships with some of the key market makers. And so as we looked at opportunities to invest in organic growth, we saw this as a good opportunity and very timely. And it’s consistent with what we’ve described in the past in terms of how we envision continuing to grow Glatfelter,” Parrini said in the Feb. 9 call about opening a new U.S. plant.

STATE, CHAMBER REACTION
Gov. Hutchinson said the Glatfelter decision will help the Fort Smith area economy and is good for the state’s manufacturing base.

“Glatfelter is a world-class company that is making a significant investment in Fort Smith while creating jobs that will improve the lives of many area families,” Gov. Hutchinson said in a statement. “We appreciate Glatfelter’s decision to locate in Arkansas and are proud to add Glatfelter to the growing list of manufacturers that are choosing to do business in the state.”

Tim Allen, president and CEO of the Fort Smith chamber, said the Glatfelter deal required the cooperation of many individuals and groups.

“The cooperation between Glatfelter’s leadership, Gov. Asa Hutchinson, Mike Preston at the Arkansas Economic Development Commission and the City of Fort Smith was nothing short of spectacular. Companies with a global reach value Fort Smith’s location and they want our talent and resources working for their customers,” Allen said.

GLATFELTER FINANCIALS
Glatfelter on Feb. 9 reported unadjusted full year net income of $64.575 million, down from $69.246 million in 2014. Total revenue for the year was $1.666 billion, down from $1.81 billion in 2014. Some of the income loss was the result of unfavorable currency exchange rates related to the company’s overseas business.

“As we enter 2016, we see growth opportunities in food and beverage, feminine hygiene, specialty wipes and electrical markets. At the same time, we remain mindful of weakness in Russia and Ukraine, which continues to impact the nonwoven wallcover market, as well as the effect of a weak Euro,” Parrini said in the Feb. 9 earnings report.

For 2016, total capital expenditures are estimated at $150 million to $170 million, including up to $45 million for the Fort Smith location.

Glatfelter’s other business lines include nonwoven wallcoverings and energy storage, repositionable notes, greeting cards, high-speed inkjet printing papers, high-quality book publishing papers and envelopes. The company also is a production partner with Dreamweaver International, which announced Tuesday a patented technology for the thinnest nonwoven separators used with lithium ion batteries and supercapacitors that power many mobile and tablet devices.

Glatfelter shares closed Monday at $18.37, up 68 cents. During the past 52 weeks the share price has ranged from a $27.58 high to a $14.09 low. The company recently increased its quarterly dividend to 12.5 cents per share, up 4% from the previous rate.

THE MITSUBISHI SAGA
Barring any surprise negative turns, the Glatfelter move will bring to an end an almost 7-year episode that once promised 400 high-paying manufacturing jobs.

Mitsubishi Heavy Industries announced Oct. 16, 2009 plans to build the $100 million, 200,000-square foot wind-turbine manufacturing plant on 90 acres at Fort Chaffee. The plant was expected to employ up to 400 once fully operational, and Mitsubishi officials initially said full production of nacelles for the 2.4MW wind turbine and the 400 jobs could be in place within the first quarter of 2012.

The city of Fort Smith and the Fort Smith chamber in 2010 bet almost $1.8 million in incentives and infrastructure support that Mitsubishi would open and operate a wind-turbine assembly plant at Chaffee Crossing. It was a safe bet at the time when the U.S. wind energy market was on the upswing. But concerns about the plant being operational appeared just a few weeks after the high-profile groundbreaking event that included a governor, two U.S. Senators, and a 3rd District Congressman who would soon be a U.S. Senator.

In December 2009 it was learned that legal and trade disputes between Mitsubishi and GE would delay the opening of the Chaffee Crossing plant. The GE legal dispute, concerns about the long-term availability of a federal tax credit and a slowing economy caused the company to idle the plant before a screw was turned on the assembly floor. The legal dispute was eventually resolved, but the lack of federal production credits and other market factors curtailed production across the industry sector.

Mitsubishi announced April 2, 2012 that the company would mothball the Fort Smith plant. At the time, Mitsubishi officials said they would post a fiscal year 2011 loss of about $240 million (20 billion yen) for the “write-down of wind-turbine inventory and related measures.” The unused 200,000-square-foot Mitsubishi facility was put up for sale in early 2015.

“Since the 2008 banking crisis, demand for wind turbines in the North American market has stagnated, and the commercialization of cheap oil-shale gas and other matters have had a further dampening effect, making it more difficult for MHI to win new contracts,” the company noted in its statement.