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Friday, 17 July 2020 08:27

The new Czech owner of Slovenian paper mill Vipap bets on flexibility and a more diverse portfolio.

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More than a quarter of a billion CZK will be invested in expanding the production of food packaging

  • Restructuring of Slovenian paper mill Vipap Videm Krško under the leadership of the new Czech owner RIDG Holding continues, despite the coronavirus circumstances. 
  • A greater production flexibility and a wider range of products should help to make the company more competitive. It will be achieved by a quarter-billion investment in modern technologies for the production of food packaging. On the contrary, the share of newsprint is to fall.
  • The improving prospects of the company are supported by the expected end of sharp fluctuations in the recycled paper market, which is Vipap Videm Krško paper mill's main input raw material.

While until now newsprint and magazine paper accounted for 90% of the production of Slovenian paper mill Vipap Videm Krško, its share will fall by half within three years. As a part of the already started restructuring, the new Czech owner RIDG Holding wants to reorient the company more towards the production of food packaging paper. It invests more than a quarter of a billion Czech crowns in the modern technologies that will enable it.

Vipap also goes the way of greater specialization and flexibility. Unlike the competition will be able to meet clients´ specific demands better. "The correctness of the new strategy with a greater emphasis on food packaging paper was confirmed during the coronavirus crisis, when this segment maintained stable market demand," describes Petr Domin, CEO and Chairman of the Board of Vipap Videm Krško.

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RIDG Holding took over Slovenian paper mill last year and the company under its leadership ended the calendar year with a significantly positive operating profit EBITDA of € 7 million and a positive cash flow. The new owner, in addition to redesigning the company's processes, also immediately started investing in technology modernization and employees development, in order to make the company more flexible. “We see the acquisition of Vipap Videm Krško paper mill as a strategic and long-term matter. That´s why we´ve decided to make structural changes and invest in modern technologies, that will help the company respond better to market development and provide it enough opportunities for sustainable growth,” says Pavel Svoreň, Executive Director of the Portiva Investment Group, which together with the IPIDC Group, the Investment Club and the KRPA Holding Group forms a consortium of RIDG Holding.

One of the key innovations in Vipap paper mill is the expansion of the product range. In addition to newsprint, magazines and advertising leaflets, currently also paper bags, carrier bags and laminated paper is being added. This segment of production is on the rise due to the fact that a number of European countries have decided to replace the plastic packaging with paper. In addition, new technologies will make it possible to bring to the market the food packaging, that is durable and at the same time fully recyclable.

In addition to the expanding product portfolio, the Slovenian government's support programs also helped Vipap Videm Krško to maintain employment during the coronavirus crisis. Like many other countries, including the Czech Republic, it has introduced the so-called kurzarbeit. The extraordinary commitment of employees also played an important role. "Probably as the only newsprint mill in Europe, we have kept production uninterrupted and helped our customers maintain production in difficult times," says Domin.

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According to him, the company also takes advantage of the opportunity to accelerate structural changes, to speed up the setting up of new processes and even more intensively focuses on a team building and the development of key employees. All this despite the fact, that the shortage of recycled paper, which is one of the main raw materials for production, has gradually started in Europe. "What´s not produced and not sold cannot be later collected and recycled. From one extreme, when during January and February it was not even worthy for collectors to carry paper to buyers due to its low price, the market shifted to the opposite situation due to fears of coronavirus infection, where the price rose sharply and recycled paper was temporarily unavailable," describes Domin, according to which the market situation has already improved and the prices and availability of recycled paper are gradually stabilizing. The director of the paper mill expresses a slight optimism about the future development and reckons, that the next four weeks should show the real condition of the market.

Management of Vipap Videm Krško now estimates that in the event of a favorable development, the company could return to pre-crisis level at the end of this year. Completion of the restructuring, which is to direct the paper mill towards long-term competitiveness and growth, is planned for the turn of 2021 and 2022.

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    About Vipap Videm Krško

    The foundation of the company was laid in 1939 by Franc Bonač, who built a pulp mill in the small village of Videm near the Slovenian town of Krško. At that time he employed 180 locals. Today, Vipap Videm Krško is the largest paper mill in Slovenia and an important supplier of newsprint, magazine and flexible packaging papers in Southeastern and Central Europe. Between 1997 and 2015, the company invested more than EUR 150 million to modernize its technology – not only to improve the exquisity of its production, but also to reduce its environmental impact. Today, its annual production exceeds 200,000 tons of paper. In 2019, EBITDA reached EUR 7 million and company had over 350 employees. In November 2019, the sale of the company was completed and the Czech investment holding RIDG took over the paper mill from the Czech Ministry of Finance.

    About RIDG Holding

    The RIDG Holding Group is a consortium of Portiva, the IPDC Group, the Investment Club and KRPA Holding. The owners are long-term and experienced investors in the field of paper production, energy, real estate, development, production and technology with a business history since 1994. The assets of companies associated under the RIDG Holding reach CZK 8 billion.

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