“The decision to reduce production capacity is driven by the accelerated decline in graphic paper demand resulting from the COVID-19 pandemic,” Verso said in a statement. “The stay-at-home orders have significantly reduced the use of print advertising in various industries, including retail, sports, entertainment and tourism.”
The company says that its North American printing and writing demand fell by 38% year-over-year in April.
“It is critical that we maintain a healthy balance sheet and focus on cash flow, while balancing our supply of products and our customers’ demand,” says Adam St. John, Verso president/CEO. “We expect the idling of these facilities to improve our free cash flow. The sell through of inventory is expected to offset the cash costs of idling the mills.”
While the paper mills are idling, Verso said it will explore viable and sustainable alternatives for both mills whether that is restarting if market conditions improve, marketing for sale or closing permanently. Verso expects to idle the Duluth Mill by the end of June and the Wisconsin Rapids Mill by the end of July.
The Wisconsin Paper Council says that Verso’s decision “is disappointing news for our entire industry.”