MWV making multimillion-dollar investments in North Charleston plant

Charleston Regional Business Journal
Scott Miller
September 8, 2008

Although it sold its North Charleston paper mill, MeadWestvaco Corp. wants everyone to know it not only remains in the Lowcountry, it’s all around.

Products made by the Specialty Chemicals division of the newly branded MWV are likely in the cars you drive, and possibly the roads on which you travel.

In the water filter on your kitchen sink.

The magazines on the coffee table.

The heating pads you place on a sore back.

They might even have played a role in the wine you sip at night.

“In the wake of the mill sale, we’re kind of in a period of establishing a new identity for MWV in the Lowcountry,” said Bob Beckler, president of MWV Specialty Chemicals. “The chemical division has really lived in the shadow of the mill.”

MWV sold the paper mill for $485 million to KapStone Paper and Packaging Corp. in July but kept the adjacent chemical plant as part of the Specialty Chemicals Division, which has been around for a century.

With four U.S. plants — including North Charleston, where the division is based — and two overseas, MWV Chemicals has big growth plans.

“We don’t think of growth as 10%,” Beckler said. “We think in terms of doubling our business.”

Not so fast
Not everyone is so sure. Petroleum costs are pushing up MWV’s expenses and forcing the company to increase the prices of its products.

Standard & Poor’s recently downgraded the company’s short-term outlook from “stable” to “negative,” saying it didn’t expect earnings to increase as much as MeadWestvaco anticipated, given the current economic climate.

Some of MWV’s chemical products, for example, are tied to auto sales: The company supplies the activated carbon used on emissions controls installed in newer vehicles. MWV also produces asphalt additives used in road construction, which governments have struggled to fund.

But Beckler points out that the S&P debt rating likely is more a reflection of MeadWestvaco’s packaging business than of MWV Specialty Chemicals.

“Our division is about $550 million in sales out of $6 billion (corporatewide),” he said.

Profits nearly doubled in the second quarter to $56 million, or 33 cents a share, for the parent company, up from 17 cents a share, according to an earnings report filed with the Securities and Exchange Commission.

The chemicals division, meanwhile, posted sales of $146 million in the second quarter and a profit of $11 million. For the first six months of the year, profits at the chemical division are up more than 50% to $23 million.

Much of the sales gain was attributed to demand outside the United States; countries are trying to catch up to environmental regulations that are becoming common in the United States.

Nearly 35% of MWV’s products are exported.

Going green
MWV is part of the business world’s push to be green. MWV products are made from pinewood, a renewable resource.

In some cases, the products themselves promote environmental friendliness. One of its latest products, Evotherm, lowers the temperature required to produce asphalt, effectively reducing emissions as well as the energy required to pave roads.

MWV sees this as a major growth opportunity, with several state departments of transportation recommending the product, as well as some foreign countries.

And that’s just one of the company’s products.

From the pine, MWV extracts sap to make chemicals used in detergents, printing ink, clothing dyes, asphalt, paints and other products. The company also produces activated carbon used in filters. Some sink water filters, for example, contain MWV carbon. And some winemakers use MWV products to give their beverages consistent color.

Many vehicles — from Toyota, Honda, General Motors and Ford — use filters with MWV carbon to help cut auto emissions, which are being regulated more and more by states and creating a growth engine for MWV.

“We can’t make enough of it right now,” Beckler said of the company’s various pine-based products.

Continued investment
That demand has led to investment. MWV recently bought Eastman Chemical Co.’s pine business, for example.

In the past two years, MWV has invested nearly $10 million to increase capacity at its North Charleston facility, Beckler said. That could continue for another two years, he said, though significant job growth is not expected.

“There’s been some incremental job growth that’s come with that,” Beckler said. “But we’re not growing in terms of headcount specifically. We’ve got really talented people to execute our growth plans.”

About 350 people work at the MWV headquarters off Virginia Avenue near the Don Holt Bridge. That number has been fairly stable, Beckler said. Of the 350, 170 work at the plant, 80 are chemists or engineers and 100 work in administrative offices.

The division employs 850 people worldwide. In addition to the North Charleston headquarters, MWV has plants in Louisiana, Virginia and Kentucky. It has launched a venture in Brazil and a joint venture in China and is considering a venture in India.

Those foreign plants give MWV a footprint in emerging markets, said Tom McPartland, vice president of carbon technologies for the Specialty Chemicals Division.

Partnering with KapStone
Closer to home, MWV is continuing its partnership with the mill.

KapStone essentially just took over the business, and made few, if any, changes, said spokesman Larry Cobb, a former MeadWestvaco employee.

The paper mill’s former employees still work there, but their paychecks now say KapStone instead of MeadWestvaco, he said.

The mill also remains a key partner with MWV Chemical. MWV buys the scrap from KapStone’s mill to extract sap, said Marty Heyne, MWV’s vice president of operations.

KapStone is one of many suppliers MWV uses.

“We can’t run our facility without that mill there,” he said. “We don’t generate steam, so we buy from them. They have wastewater treatment; we don’t.”

Back To The Top