The Papresa paper mill, located in Errenteria (Guipuzkoa) and with a centuries-old tradition of manufacturing newsprint, has underway a book conversion, worthy of being explained in business schools: the drop in the sale of newspapers due to new media of reading becomes an opportunity to manufacture brown paper for boxes and bags of the growing electronic commerce. The digital world sinks the analog and then rescues it.
With this business idea, the industrial investment fund Quantum Capital Partners (QCP) acquired Papresa last October from the American venture capital fund KKR, which had been managing the company for six years. In addition, it led Miguel Sánchez, a manager related to the German QCP fund who had presided over the transformation of the Barcelona paper mill Cartonboard until 2018.
The history of this company dates back to 1896 as Papelera Vasco-Belga to become, years later, Papelera Española and in 1993 called Papresa. Once again, covid-19 has been a catalyst for this change in its activity, although turnover was falling earlier due to lower demand for newspapers. The president and CEO, Miguel Sánchez, explains that they have gone from an ebitda (operating profit) of 20 million euros in the years prior to the health crisis to a drop of 10 million euros in 2020, “due to that loss of the demand that also forced to stop one of the three machines of production of newsprint ”. Gone were the 140 million euros invoiced in 2019.
To this was also added the fall in the middle of the pandemic and due to changes in consumer habits, of the printing of advertising brochures (usually from supermarkets), which also use this medium of newsprint. Currently, the company employs 222 workers and they hope that with this conversion towards packaging they will be able to maintain jobs and increase them in the future. Last April they inaugurated a new quality laboratory
The transformation of the company includes the investment of 50 million euros “throughout this year so that between January and February 2022 everything is already in operation and sales of paper for electronic commerce begin”, explains Sánchez. And he adds: “to carry out this important investment, traditional bank credit has been used and the project has been well received by financial institutions. Papresa had no debt, so we only start with this debt figure ”, he concludes.
Of the three machines it has at its facilities in Errentería (Guipuzkoa), one will continue to manufacture newsprint (newsprint) and the other two machines will be used for the production of wrapping paper (packaging) given the growing demand for electronic commerce that increases annually at a rate between 9% and 10%. It is a matter of changing the white paper of the newspapers for another of brown color, also recycled such as that of the press, as well as the paper pulps necessary for its production. A change for which the German mechanical engineering firm Voith has been chosen.
In the new strategy of the company, it will stop exporting newsprint to distant countries and will focus on the closest ones such as France, Italy and Portugal. Regarding the new line of wrapping paper, they want to focus first on getting and loyalty customers in the domestic market. “Our sales focus, at first, will be the national market and later we will go in search of the Asian market, which is very active in terms of paper used for electronic commerce. Of course, Papresa is a company with an export tradition that we do not want to lose, since 65% of its production left outside our borders ”, explains Miguel Sánchez.
The objective of this reorientation of the paper business is to increase turnover in 2022 between 30% and 35%, in line with the growth of production capacity. The production capacity with the two paper machines packaging at full capacity it will be around 200,000 tons per year, which together with the newsprint machine will mean a capacity of 375,000 tons per year. Figures that are key to achieving future sales and profit targets. The chief executive of Papresa explains that margins by type of paper are not so important in this business, but rather the volumes that can be produced.
The final product that Papresa will offer of its brown paper will be used in the manufacture of cardboard boxes – “we do not manufacture the cardboard or the box, but the paper that protects it”, Sánchez clarifies – as well as any other paper for, for example, the elaboration of bags in electronic commerce. “It is a totally recycled product and it is also recyclable. We have never worked with pasta that comes directly from the trees, but all of our production has been based on continuous recycling ”, says Miguel Sánchez.
Biogas and environment
The Papresa factory in Errentería is currently located on Avenida de Navarra number 6 in the center of this town. Over the years, the farm has been surrounded by homes and other facilities. “Our location leads us to a strong environmental commitment, since we are in the middle of the population,” explains Sánchez.
One of the characteristics of the paper industries is that they are very intensive in energy consumption and that they are also very polluting. Papresa has a treatment plant that also allows energy production. For this, wastewater receives an anaerobic treatment that consists of a process carried out by specific bacterial groups that, in the absence of oxygen, transform organic matter into a mixture of gases, mainly methane and CO2, known as biogas. “We estimate that 15% of the gas we consume will be obtained this way, which represents a significant saving for our accounts,” says Miguel Sánchez.