March 19, 2018 | last updated March 21, 2018 12:03 pm
Biz Money

Verso foresees better sales in 2018 amid plans to restart paper machine in Jay

File Photo / Amber Waterman
File Photo / Amber Waterman
Verso Corp. aims to restart its No. 3 paper machine at the Androscoggin Mill in Jay later this year.

Verso Corp. (NYSE: VRS) expects sales to improve in 2018 as it gears up to restart the idled No. 3 paper machine at its Androscoggin Mill in Jay later this year and continues to explore strategic alternatives.

The Miamisburg, Ohio-based paper company updated investors on its strategy March 8 after posting fourth-quarter and full-year results for 2017.

Revenue for the year came to $2.46 billion, down from $2.64 billion a year earlier, as the company slightly narrowed its net loss to $30 million from $32 million. Graphic papers accounted for 71% of 2017 revenue, followed by 23% for specialty papers and 6% for graphic papers.

Verso shares were trading at $17.21 on March 12, putting its market value at around $592.6 million. Shares are up 147% over a year ago.

After a rough start to 2017 when Verso cut its inventory and faced rising prices, it rebounded in the second half with better liquidity and lower debt.

"Verso delivered a dramatic turnaround during the last six months of 2017," CEO Chris DiSantis said in a statement. "Our 2017 cash flow, bolstered by aggressive working capital management and growing price realization, was exceptional."

"We believe these solid run-rate results and positive momentum across the enterprise position the company well for continued financial performance improvement and value creation for our stockholders," he added.

In a call with investors after the results announcement, DiSantis said the company is entering 2018 with strong order books and pricing momentum, but also higher maintenance costs due to a seasonal outage at mills in Michigan and Maryland, as well as widespread inflation that needs to be managed in a variety of cost categories.

As for its overall strategy in 2018, Verso aims to remain the leader in graphic papers, grow its specialty business through new products and diversify in low-risk ways into packaging grades.

That's the strategy behind upgrading the Androscoggin Mill in Jay, in which Verso is restarting its No. 3 paper machine and will invest $17 million to transition to linerboard to satisfy global demand for virgin fiber, creating 120 jobs in the process.

The company told investors it anticipates a start-up in the third quarter, and that it expects to spend $8 million on start-up costs and be "run-rate profitable" in the fourth quarter.

Verso projects 2018 net sales to be greater than 2017, citing a strong order book and price inflation.

While the company did not give any guidance on earnings, CFO Allen Campbell would only say that "tailwinds are obviously stronger than the headwinds."

Verso also said it will continue to move forward with its review of strategic alternatives, reportedly prompted by activist shareholder Murdick Capital Management LP selling down its stake.

Editor's note: The headline for this Biz Money column has been updated to clarify that Verso is restarting the No. 3 paper machine at the Androscoggin Mill in Jay, and not the mill itself, which continued to operate after that paper machine was shut down in July 2017.


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