Neenah Paper, Inc. (NYSE:NP)

CAPS Rating: 4 out of 5

The Company is a producer of premium fine papers and technical products. It also produces bleached kraft market pulp in Canada. and its three primary operations are: fine paper business, technical products business & pulp business.

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Player Avatar NetscribeManufac (67.18) Submitted: 12/15/2006 8:58:30 AM : Outperform Start Price: $29.30 NP Score: +39.31

Following the spin-off by Kimberly-Clark Corporation in 2004, Neenah Paper primarily manufactures and distributes a range of premium and specialty paper grades and pulp. The company’s fine paper division is a leading producer of premium writing, text, cover and specialty papers. It is equally supported by its technical products division that produces saturated and coated base papers.

Neenah Paper has undergone a major transition, downsizing its pulp exposure while simultaneously increasing its specialty fine paper and technical products business. The purchase of FiberMark’s German-based technical products seems to be a nice strategic fit as it expands Neenah’s footprint in the technical products arena.

Demand for paper products has witnessed a strong momentum recently. Though uncoated free sheet usage has been eroding, coated paper demand appears somewhat more favorable. Pulp prices have risen recently, and it is well anticipated that they will remain elevated in coming quarters due to a recent cut in industry’s capacities.

Neenah Paper has seen a relatively steady growth in its top-line. But going ahead, a positive operating environment is being anticipated with the FiberMark acquisition giving a boost to the company’s revenues. We expect margins at Neenah to widen significantly with the divestiture of the Terrace Bay pulp businesses and its focus on niche markets and specialty products.

With a strong cash build-up amid recent acquisitions, the company has a significant scope to enhance shareholder value, thereby giving the stock an ample room to prove a point.

Member Avatar NetscribeManufac (67.18) Submitted: 5/16/2007 8:12:51 AM
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Neenah Paper has successfully completed the acquisition of Fox River Paper for $55.1 million in cash. The acquisition of Fox River strengthens its fine paper business by providing added scale and the ability to offer a broader array of premium branded products and better service to customers. The company plans to close permanently Housatonic mill which was one of the fine paper plants acquired in the recent purchase of Fox River Paper. The Housatonic mill has annual production capacity of approximately 15,000 tons per year and is not profitable due to its small size, cost structure and pricing of many of the grades made there.

For first quarter, net sales improved by 69% to 224.7 million and operating income increased by 176% to 27.6 million. The witnessed such growth primarily due to increased volume in paper businesses due to the acquisitions of Neenah Germany and Fox River coupled with significant improvement in pulp operations resulting from higher selling prices and improved costs, a more favorable pricing environment in paper segments, and growth in Technical Products.

After major transition which company had undergone in its previous years, it is witnessing terrific growth in sales, as well as margins. It has gained a momentum which looks as if here to stay with company for longer span of period. Demand for paper product is increasing and operating environment seems to be getting better and better. Pulp prices have continued to strengthen and would help further in posting better results in future.

Earnings are expected to reach a higher level due to the FiberMark and Fox River acquisitions. Moreover, with a 6.3 price-to-earning ratio, which is way below industry’s, indicates a scope of upward growth potential for the company stock price.

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