SAPPI'S European cornerstone: astute acquisitions have made Sappi the world leader in coated paper, and Europe is a key to this strategy.

Sappi Fine Paper Europe has grown from humble beginnings to be the leading producer of coated fine paper in North America, Europe, and Africa. The acquisition of Hannover Papier in 1992--Germany's then leading producer of coated woodfree paper-was the beginning of building a large European market share. As a result, Sappi became the No. 3 producer in Europe of coated woodfree paper.

A major North American deal came next. Outgoing sappi chairman and chief executive officer Eugene Van As noted that buying 75% of S.D. Warren in the United States from Scott Paper in 1994 was "probably the biggest step we ever made." After finalizing the acquisition, Sappi next purchased Europe's KNP Leykam in 1997. That organization was the largest producer of coated woodfree paper in Europe. Today that accolade belongs to Sappi Fine Paper.

Consider the legacy of KNP Leykam and Hannover Papier to Sappi. The mills included in these acquisitions are the cornerstone of Sappi Fine Paper's growth in Europe. The Gratkorn mill, in Austria, came from KNP while the Alfeld and Ehingen mills, both in Germany, came with the purchase of Hannover Papier.

In January 1998, the purchase of Gratkorn enabled Sappi to almost double its offshore shareholders. As part of the sale, the packaging and paper group NV Koninklijke KNP BT received a 20% stake of Sappi. This increased offshore holdings to almost 40%. This was merely a technical aspect of wheeling and dealing. The true prize was PM 11-the Largest production unit for coated woodfree paper in the world.

Just three years after start up, the mill embarked on a major debottlenecking program for PM 11 that resulted in a capacity increase of 100,000 metric tons/year. This boosted the capacity of PM 11 to 570,000 metric tons/year. The primary areas involved were the press and drying sections of PM 11.

The compact nature of the production line also called for transport and logistics improvements--particularly after the extra capacity came on line. Automated transporters now move the 135 metric ton jumbo reels safely to the calendering and winder area where up to 1600 reels can be processed per day.

DOMINO EFFECT?

When upgrading a mill, a possible danger is "the domino effect." This simply means a bottleneck develops down the line. To avoid this, new high rack storage was erected. In principle, the project was simply an expansion in capacity of the existing equipment. The original suppliers implemented most adaptations. All alterations were completed within the planned 16-day closure. Saleable paper was being produced within six hours of PM 11's restart. Three years after this major upgrade the mill has continued to "tweak" the machine to maintain high standards. Between it and PM 9, which makes paper with a lower basis weight, the two paper machines can produce 820,000 metric tons/year. It' the contribution of Gratkorn is the premier production of top grade paper from an impressive production line, what about the Alfeld and Ehingen mills acquired with the purchase of Hannover Papier?

JUDICIOUS INVESTMENT

The Alfeld mill adds a historical context to the Sappi portfolio of mills with a papermaking history that traces from 1706. The mill produces a range of coated graphic paper and a range of speciality papers for packaging and labels. The mill is integrated and uses peroxide bleaching technology to produce 110,000 metric tons of totally chlorine-free sulfite pulp. Of the five paper machines, PM 1 and 2-make graphic papers; PM 3, 4 and 5 produce speciality papers. The speciality papers are glazed on one side and are produced on paper machines with a Yankee cylinder. PM 3 and 4 also have in-line coaters. Two off-line coaters and numerous reel and sheet cutters form the remainder of the production installations. Paper production totals approximately 345,000 metric tons/year.

The most recent upgrade involves PM 2 where a major investment increased the production of high-quality graphic papers. The total output of the paper machine is now 180,000 metric tons/year. Flexibility has always been the watchword at Alfeld. The upgrade focused on increased integration with the pulp mill--an increase in the use of the mill's own pulp. The refining plant can now vary furnishes and rapidly change grades.

Sappi's European mills are supported by an integrated pulp production capacity of over 600,000 metric tons/year. When the company announced its second quarter results, van As commented, "In Europe, price erosion has continued despite largely successful price increases in southern Europe. Advertising spending, an important driver of coated paper demand, remained mixed, with increases in the United States off a low base, but no sustained increase in Europe. Against this tough background, we managed to achieve a reasonable performance. Our leadership position across the major markets, supported by our excellent distribution systems and pulp integration strategy, left us better positioned than many of our competitors."

With cost effective pulp integration in mind, Sappi Alfeld obtained a new wood-yard near the end of 2002 to allow its pulp mill to use beech and spruce logs for mixed pulp production. A new debarking drum, chipper, and screening plant were installed. This gave cost savings in wood, energy, and personnel costs. Pulp production has risen from 106,500 metric tons/year in 1997 to an estimated 112,300 metric tons/year in 2003, primarily due to additional use of beech wood. The flexibility and ability to maximize and develop the resources of the mill made a difference.

A new anaerobic biological prestage o the purification plant at the mill will start operation soon. With this new component, the mill has the best available wastewater treatment technology at its disposal. This will allow it to meet the quality requirements regarding its purified wastewater irrespective of prospective further increases in production. Mill manager Michael Hottman says, "Our mill produces woodfree graphic papers with unique surface properties and quality specialty papers. The combination of regular technical and market-oriented customer contact, innovation, and investment and a sound pricing policy make the difference."

MILL AUTONOMY

Founded in 1938 as a pulp mill, the Ehingen mill of Sappi, in Baden-Wurttemberg, Germany, extended its activities in 1991. A total revitalization included construction of a modern coated paper machine. Since then, the highest standards of technology and process quality have built the Ehingen facility into a modern mill. Specific items were a fully automatic high bay warehouse, introduction of a high consistency hydrogen peroxide bleaching process, installation of the world's first shoe press for woodfree coated paper, a drum debarker, renewal of the S[O.sub.2] scrubber in the power plant, and installation of a new headbox.

When Sappi purchased these three mills, they purchased a "class act." Ongoing investment, a sustained marketing effort, and a good geographic spread has ensured Sappi's success.

SAPPI ALFELD

Paper machine    Width at         Wire      mt/yr
                  reel/mm     width/mm

PM 1                 3300         3680     65,000
PM 2                 4650         5012    170,000
PM 3                 4650         5060     30,000
PM 4                 3340         3710     45,000
PM 5                 4760         5060     35,000

SAPPI EHINGEN
PM6                  5600         6270    225,000

SAPPI GRATKORN
PM9                  6460         9300    250,000
PM 11                8450         9300    570,000

Table 1: Paper machine statistics

Mill and products produced                    Capacity     Capacity
                                               paper         pulp
                                              (mt/yr)      (mt/yr)

ALFELD MILL, GERMANY
Bleached chemical pulp for own consumption
Coated woodfree graphic paper, coated and
uncoated speciality paper                       345,000     110,000

BLACKBURN MILL, UK
Coated woodfree graphic paper                   115,000

EHINGEN MILL, GERMANY
Bleached chemical pulp for own consumption
and market pulp
Coated woodfree graphic paper,
uncoated woodfree paper                         225,000     130,000

GRATKORN MILL, AUSTRIA
Bleached chemical pulp for own consumption
Coated woodfree graphic paper, uncoated
woodfree paper                                  820,000     230,000

LANAKEN MILL, BELGIUM
Bleached chemi-thermo mechanical pulp
for own consumption
Coated mechanical graphic paper                 475,000     140,000

MAASTRICHT MILL, NETHERLANDS
Coated woodfree graphic paper                   325,000

NASH MILL, UNITED KINGDOM
Uncoated business paper                          35,000

NIJMEGEN MILL, NETHERLANDS
Coated woodfree graphic paper                   240,000

SUBTOTAL SAPPI FINE PAPER EUROPE              2,580,000     610,000

Table 2: Pulp and paper capacities

IN THIS ARTICLE, Y0U WILL LEARN

* How Sappi's acquisition of KNP Leykam set the stage for its European operations.

* The role of mill upgrades in boosting coated paper production at Sappi Fine Paper Europe.

* How acquiring the Alfeld mill helped round out Sappi's European strategy.

ADDITIONAL RESOURCES

* "An overview of the South African pulp and paper industry," by Jane Molony TAPPI JOURNAL, April 1999, Vol. 82(4).

* Sappi website: www.sappi.com.

* For articles about Sappi, written by Sappi authors, or news items about Sappi, go to www.tappi.org and type in "Sappi" in the search engine. Choose "entire site."

Jane Molony is a freelance journalist who edits the TAPPSA Journal for the Technical Association of the Pulp and Paper Industry of Southern Africa. She is based in Durban, South Africa and can be contacted by phone at [phone] or email at [e-mail]