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Stora Enso enters Pakistan to take advantage of growing packaging demand

By Joe Whitworth , 19-Sep-2012
Last updated on 19-Sep-2012 at 10:59 GMT

Stora Enso has signed a joint venture in Pakistan to produce corrugated and the base materials for consumer board to take advantage of the growing market demand in the country for packaging.

Stora Enso will have a 35% share of the Bulleh Shah Packaging (Private) Limited joint venture with Packages Ltd with the shareholding to be increased to 50% within a year based on certain undisclosed conditions.

The partnership includes the Kasur paper and corrugated mill and the Karachi corrugated mill, both owned by Pakistan-based firm Packages Ltd.

The joint venture will employ about 950 people and its sales are forecast to be US$130m in 2012.

Stora Enso already has a 6.4% shareholding in Packages Ltd.

Satisfy demand

Stora Enso said the Pakistani joint venture was to satisfy the growing demand for packaging products and paperboard, enabling an increase in capacity to serve their customers.

As part of the agreement, both parties are committed to a $135m investment programme during 2013 and 2014 to develop the business further.

This involves investment for the Kasur mill, including a new boiler to enable it to be self-sufficient on heat and energy and increasing capacity from 240,000 to 360,000 tons.

The agreed value for the joint-venture company is $108m on a cash and debt free basis.

The total consideration can be up to $125m including an additional maximum performance compensation based on the financial results of the second half of 2012 and the first half of 2013.

Potential growth market

“The first benefit is there is a big market for growth with the biggest being dairy, as there is a lot of milk used but only five per cent is packaged in hygienic solutions,” Mats Nordlander, executive vice president, renewable packaging business area told FoodProductionDaily.com.

“Both parties have to contribute to a joint venture to produce high quality consumer board products and we bring our global expertise into the venture.

“We believe it will provide us with growth and profitability as we have many brand owners in dairy, food, cigarettes and many other areas.”

The transaction is expected to be completed during the first quarter of 2013, subject to competition and regulatory approval and other customary transaction conditions.

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