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Basch Report
Jax Daily Record Thursday, Apr. 15, 202105:10 AM EST

Rayonier AM shrinking, sales slipping

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The company is shedding units to focus on its cellulose specialties core.
by: Mark Basch Contributing Writer

Rayonier Advanced Materials Inc. more than doubled in size and briefly entered the Fortune 1000 in 2019 after acquiring Montreal-based Tembec Inc. in late 2017.

However, the Jacksonville-based company is getting smaller as it sheds some of the Canadian operations acquired from Tembec to focus on its core cellulose specialties products.

Rayonier AM announced a deal April 12 to sell six lumber mills and one newsprint mill in Canada to Vancouver-based GreenFirst Forest Products Inc. for $214 million.

That deal follows a 2019 sale of a pulp mill in Quebec to South Africa-based Sappi Ltd. for $175 million.

After acquiring Tembec, Rayonier AM’s revenue jumped from $961 million in 2017 to $2.13 billion in 2018, vaulting the company into 951st place on Fortune magazine’s annual list of the 1,000 largest U.S. companies.

However, the pulp mill sold in 2019 produced $177 million of those sales.

Rayonier AM sales have continued to drop since then, largely because of weakness in its core cellulose specialties market. 

The company reported 2020 sales of $1.74 billion, which included $392 million in forest products sales from the six lumber mills being sold to GreenFirst, and $47 million from the newsprint plant included in the deal.

The forest products segment was particularly strong in 2020 because of rising lumber prices, sending sales in the business up 31%.

So Rayonier AM will continue to shrink in size when the deal is completed later this year, but it is hoping the cash from the sale will help it improve operations. 

GreenFirst is paying about 85% of the $214 million sales price in cash and the rest in the company’s stock, which is publicly traded.

“The sale of the lumber and newsprint businesses allows us to divest non-core assets at an attractive valuation and positions Rayonier Advanced Materials to further invest in the earnings growth of our core High Purity Cellulose assets and its biofuture while also reducing overall debt,” CEO Paul Boynton said in a news release.

International Baler may go private

International Baler Corp. has been an under-the-radar company for years but has remained publicly traded.

That soon may change as its controlling shareholder has offered to buy the shares of the Jacksonville-based company that is does not already own.

According to a Securities and Exchange Commission filing last week, Avis Industrial Corp., which owns 81.1% of International Baler’s shares, has offered to acquire the remaining stock.

Indiana-based Avis owns several competitors that make balers, which are used by businesses to bundle waste for disposal and recycling.

Avis is owned by the estate of Leland Boren, its former CEO who died in 2018.

Boren and his wife began buying shares of International Baler, then known as Waste Technology Corp., in 2005 and became the majority stockholder by 2007, according to SEC filings

Boren’s accumulation of stock left few shares available for trading. Avis’ 81.1% stake represents about 4.2 million of the 5.18 million International Baler shares outstanding.

The stock was trading at $1.32 but jumped above $2 last week after the SEC filing revealed Avis’ offer. Terms were not disclosed in the filing.

International Baler said in the filing its board of directors formed a special committee to evaluate the offer, but no timetable has been set to complete the process.

International Baler operates from a 62,000-square-foot building it owns at 5400 Rio Grande Ave. on the Northside. 

It reported 49 full-time employees at the end of fiscal 2020.

The company’s most recent financial filing showed revenue of $2.35 million and net income of $489,389 for its first quarter ended Jan. 31.

 CSX-Pan Am deal termed ‘significant’

It turns out that CSX Corp.’s proposed acquisition of Pan Am Systems Inc. is a big deal after all, according to federal railroad regulators.

Jacksonville-based CSX’s application with the U.S. Surface Transportation Board asked the regulators to classify the deal as a “minor” transaction, but the federal agency said in a March 25 ruling that it considers the deal to be “significant.”

The acquisition of Massachusetts-based Pan Am’s 1,800-mile rail network would expand the company’s operations in New England.

CSX said in its application that if the deal was deemed significant, it would add 75 more days to the regulatory process than if the deal was classified as minor.

The regulatory board has three categories for evaluating mergers: minor, significant and major.

The board said in a news release that CSX is a Class I railroad and Pan Am is Class II, and only mergers between Class I railroads are considered as major.

“The demarcation between ‘significant’ and ‘minor’ turns upon whether the transaction would have ‘regional or national transportation significance,’” it said.

The board decided the Pan Am acquisition would be significant because “several shippers on affected lines might lose competitive access to two railroads” and “certain short line railroads might connect with a single railroad network, as opposed to having multiple connections,” it said.

“The Board’s decision to treat the proposed CSXT-Pan Am transaction as ‘significant’ – as opposed to ‘minor’ – provides a greater opportunity to develop a more complete record upon which to consider the transaction’s competitive implications and the public interest in meeting significant transportation needs,” board Chairman Martin Oberman said in the news release.

The board said the final application for the merger must be filed by June 25 and it could take up to 10 months to review the application.

JinkoSolar earnings tumble

JinkoSolar Holding Co. Ltd. reported disappointing fourth-quarter earnings last week, but the China-based company expressed optimism about its U.S. solar manufacturing operations moving forward.

The company serves the U.S. market through a solar panel manufacturing plant in AllianceFlorida at Cecil Commerce Center in West Jacksonville that opened in 2019 as JinkoSolar’s first plant outside of Asia.

JinkoSolar said fourth-quarter adjusted earnings dropped 92% to $5.1 million, or 11 cents a share. That was 25 cents a share lower than the consensus forecast of analysts, according to Thomson Reuters.

“The solar industry showed a tenacious volatility in the midst of the pandemic’s doom and gloom atmosphere and economic contraction,” Chief Marketing Officer Gener Miao said in a conference call with analysts.

However, Miao said an economic recovery and “accelerating decarbonization of the U.S. energy system” will continue to make solar power attractive.

“Compared with other renewable energy sources, the price of solar power in the U.S. is very competitive and market competition is more rational because of this unique supply-demand relationship and market entry route,” he said.

“We are confident about maintaining our leading position in the U.S. market with stable supply capability, excellent customer service, and high-quality product advantage.”

Despite the company’s optimism, Roth Capital Partners analyst Philip Shen downgraded JinkoSolar’s stock April 12 from “buy” to “neutral,” saying the company provided “weak” guidance for first-quarter results.

“Although headline 2021 shipment guidance was in line, management redefined the terms to include wafer, cell, and module shipments as opposed to just module shipments, implying a weaker-than-expected outlook for module shipments,” Roth said in his research note.

“Look for the stock to be weak until the outlook for volume and margins improves, and it’s unclear when that will happen,” he said. 

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