THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, October 19, 1994 TAG: 9410190405
SECTION: BUSINESS PAGE: D6 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: Medium: 56 lines
James River Corp. is embarking on its third cost-cutting effort in four years, focusing this time on the future of its huge office-paper division.
The division makes business and printing paper, as well as paper used for magazines, catalogs, direct mail and other glossy publications.
The Richmond-based papermaker is considering spinning off part or all of the unit to shareholders, selling a stake of the company and operating it as a joint venture, selling it outright, or keeping it while trying to increase profitability, chief executive Robert C. Williams said.
``We haven't made any decisions as of yet,'' said Williams, 65, a founder of the company. ``But I think the final outcome will leave us with a sharper focus on the consumer products in North America and Europe.''
``The consumer products have traditionally been our strongest business and will continue to provide us with a strong and bright future,'' Williams said. James River's paper towel and tissue products include such brand names as Northern, Brawny and Nice 'n Soft.
Based on industry sales volume, James River is the second-largest U.S. manufacturer of towel and tissue products and paper and plastic food packaging, such as cereal boxes, Dixie brand cups and bowls. Scott Paper Co. and Procter & Gamble Co. are its main rivals.
Selling the office products unit could earn James River $1 billion and wipe away much of the company's debt, but also 15 percent of its worldwide sales, said Michael Beal, an analyst with Davenport & Co. of Virginia Inc.
The difficulty in deciding what to do with the division stems from recent forecasts that the paper office products market is picking up, said Evadna Lynn, an analyst with Dean Witter Reynolds Inc.
``It comes down to a question of timing,'' Lynn said. ``Do you sell or spin off the business now to help reduce debt, or do you wait to get a better price later as the market gets stronger?''
Paper product companies are concentrating more on consumer lines now because they generally have higher profit margins than commodity products, Lynn said.
Behind the company's most recent restructuring plan is a $1 billion increase in consolidated debt incurred this summer when James River, which employs 35,000 people worldwide, bought controlling interest of its European venture, called Jamont. James River took on about $300 million of debt during the transaction and another $700 million that had been run up by Jamont, said John Burke, a spokesman for James River.
The goal of any plan pursued by James River is to reduce the company's debt, now about 55 percent of capitalization. ``Our debt-to-equity ratio is at an uncomfortable level for a lot of people,'' Williams said. ``We would like to bring it down to the low 40s.'' by CNB