1001 Tillman Street
Company Perspectives:
Buckeye Technologies has been a leading manufacturer and worldwide marketer of value-added cellulose products for more than 80 years. The company uses its expertise in polymer chemistry and its state-of-the-art manufacturing facilities to develop and produce innovative and proprietary products for customers in a broad range of technically demanding niche markets. These proprietary products combined with the company's commitment to customer technical service give it a distinct competitive advantage.
Buckeye Technologies, Inc. manufactures and processes cotton linter pulp and wood pulp used by other manufacturers for a variety of consumer products. With Procter & Gamble as its largest customer, Buckeye produces and processes absorbent materials for use in the manufacturing of diapers, feminine hygiene products, and other absorbent products. Chemical cellulose products are used to make a variety of plastics as well as rayon fabric and acetate films. Buckeye also produces specialty pulp for fine paper products.
Supplying Raw Materials for Procter & Gamble: 1901
Buckeye Technologies originated as Buckeye Cotton Oil Company, a behind-the-scenes subsidiary of Procter & Gamble (P&G) which provided raw materials for certain products. P&G started Buckeye in 1901, leasing a cottonseed crushing mill in Greenwood, Mississippi, to maintain a steady supply of cottonseed oil for the manufacture of Ivory soap and the then new White Naphtha laundry soap. Competition for cottonseed oil had increased with demand for consumer products which used the oil, including lard and soaps. By 1905, Buckeye owned and operated eight mills throughout the cotton-producing South, having bought three mills and built five.
P&G also sold cottonseed oil as a salad oil to hotels, restaurants, hospitals, and other bulk users. By removing the stearine from cottonseed oil, P&G had refined a "winter oil" that maintained its liquid consistency at cool temperatures. P&G did not distribute the oil to the consumer market because of costly implementation and insufficient testing for appropriate use, the latter of which P&G assumed its institutional buyers had conducted.
In 1907 P&G began to work on developing a shortening made from vegetable oil to compete with lard, butter, and other cooking fats. By chance a German chemist, E.C. Kayser, wrote to P&G about a process he developed to transform liquid oil into a solid. He visited P&G's research facilities in Ivorydale, Ohio, and showed the research staff his new hydrogenation process. P&G bought the rights to the process and P&G's research staff applied that knowledge to create Crisco shortening, a blend of liquid cottonseed oil and solid, partially hydrogenated cottonseed oil. P&G introduced Crisco, the first all vegetable shortening, in 1910, becoming the largest consumer of cottonseed oil worldwide.
With P&G as a parent company, Buckeye Cotton Oil Company operated with a plentiful outlet for its products. An infestation of boll weevils nearly destroyed cotton crops in 1911, leading to a temporary shortage just as Crisco shortening was becoming known among consumers. But the company generally operated successfully, supplying raw material for P&G's popular soap brands, including Lava bar soap, and Oxydol and Duz laundry soaps, as well as for Crisco shortening. Also, Buckeye found practical and profitable uses for its cottonseed waste. The cotton lint removed from cotton seeds before milling was transformed into sheets of pulp and sold to paper manufacturers under the brand Tuff-Fluff. In 1921 Buckeye constructed the largest cotton linter plant in the world in Memphis at a cost of $1 million. By 1930 the company operated 14 cottonseed crushing mills, supplying raw materials for P&G products and paper pulp.
During the Great Depression, the well-being of Buckeye depended on the success of P&G product sales. Despite the economic difficulties of the 1930s, P&G maintained public visibility with consistent advertising. Buckeye benefited from increased sales of the products which required cottonseed oil to be produced. Sales of Crisco tripled between 1933 and 1939, while sales of Ivory soap and flakes doubled; sales of other soaps increased as much as 50 percent. With so much demand for its products, Buckeye acquired the Cotton Oil Refining Company in Portsmouth, Virginia, in 1937. That company produced shortening, cooking, and salad oils from soybean and cottonseed oil for bulk use.
During World War II, Buckeye converted the Memphis cotton linter plant to the production of cellulose for smokeless powder. Buckeye treated the cellulose with nitric and sulfuric acid to produce gun cotton. One bale of lint produced enough smokeless powder for 100,000 bullets.
Growth amid Changing Consumer Markets: Post-World War II Era
After World War II P&G considered discontinuing the cellulose pulp operations in order to focus on its consumer products. Yet dissolving pulps such as cellulose ethers, acetates, nitrate, and viscose were in demand for the production of rayon fibers for clothing, and for tire cords, photographic film, and many plastics. P&G and Buckeye researchers found that cellulose of similar qualities could be made from pine pulp, providing strength, transparency, viscosity, and purity, but to continue in that business would require a large investment. P&G had begun construction of a large plant for manufacturing consumer products, and did not have the resources to sustain and update the infrastructure needed at Buckeye.
The start of the Korean War created a new opportunity for Buckeye. The federal government needed cellulose for munitions manufacturing and offered tax incentives for construction of new manufacturing facilities. P&G took advantage of the opportunity. In 1951 P&G purchased two 550,000-acre tracts of land in northern Florida, together almost half the size of Rhode Island, to supply wood for a mill built in Perry, Florida, the largest mill of its kind at the time. Mill construction and land acquisition cost $40 million; P&G funded the project with $30 million in long-term notes.
When the mill opened in 1954, P&G renamed the subsidiary Buckeye Cellulose to reflect its new emphasis on providing a variety of cellulose products. The company opened new research facilities to find new uses for the cellulose it produced, often tailoring cellulose products to the needs of its customers. New products included synthetic sponges, cellophane, floor rugs, and battery components. Customers included Eastman Chemical, which used cellulose acetate for cigarette filter fibers; Hercules, Inc., which used cellulose ethers for sausage casing and other food applications; and Akzo Nobel NV, which purchased rayon filament and cellulose ethers.
Foresters at Buckeye's Florida facilities determined ways to obtain the optimum yield from the company's pine forests based on the annual number of cords per acre. They developed a system of rotating land use for raw material, as well as reseeding and replanting trees for future supply, treating pine trees as a crop for maximum harvest, including application of pest control. Foresters increased tree production by grafting cuttings from trees with a genetic disposition for rapid growth onto mature roots. The seeds produced from the graft carried the trait to new generations of trees.
In addition to providing cellulose to a variety of industries, Buckeye continued to provide substantial raw materials to P&G. P&G wanted to make paper and paper products compatible with its existing consumer products which sold through grocery stores and required regular replenishment. The company needed a softer, more flexible pulp for paper products, however. In 1957 P&G purchased the Charmin Paper Mill in order to learn the business. Also, P&G wanted to produce a softer, more absorbent paper tissue for toilet paper, facial tissues, and paper towels. After five years of research by combined Charmin and Buckeye staff, the company achieved this goal. New products that resulted from the research included White Cloud toilet tissue, Puffs facial tissue, an improved version of Charmin toilet tissue, and Bounty paper towels, the last introduced in 1965.
A significant new product that assured the long-term well-being of the company was Pampers disposable diapers, introduced by P&G in 1962. Although the high price of the diapers dissuaded customers from purchasing Pampers, P&G worked on the product to reduce the price and slowly gained a significant market. By the mid-1970s Pampers sold in more than 70 countries.
Demand for disposable paper products required the company to build several pulp mills, and to search for a supply of long fiber pulp. Buckeye found seven million acres of virgin forest land in Alberta, Canada, which the company leased from the province to supply pulp for disposable diapers. The company constructed a pulp mill in Grande Prairie with a capacity to produce 295,000 metric tons of air-dried pulp per year. Also, by the late 1970s the company's tree farm in Florida produced ten million trees annually through reseeding and replanting of rapidly growing hybrids.
Buckeye relied on new product development from researchers at both P&G and Buckeye to generate new uses for cellulose pulp. In 1972 P&G introduced Bounce, a fabric softener applied to cellulose sheets for use in the dryer. In 1974 P&G introduced Rely tampons, a superabsorbent feminine hygiene product which used polyester and carboxymethycellulose, a wood pulp derivative, instead of cotton. The wood derivative induced toxic shock syndrome in women who used Rely tampons, and P&G discontinued the product in 1980. Later, P&G created the Always brand of sanitary napkins. Research led to the development of surgical drapes and hospital gowns, sold under the Boundary brand. The fabric-like material provided a protective barrier to prevent the spread of infection from germ migration and moisture. Buckeye opened a manufacturing plant in Huntsville, Alabama, in 1980 to produce the material.
With widespread use of Pampers, Luvs disposable diapers (introduced by P&G in 1976), and other brand name pulp products, Buckeye became the largest worldwide producer of cotton linter pulp and the largest manufacturer of wood pulp. P&G renamed the company Procter & Gamble Cellulose Company.
Spinoff of P&G's Cellulose Division: 1993
In an early 1990s restructuring, P&G decided to focus its resources on consumer products and dismantled its Cellulose and Specialties Division, divesting $1.2 billion in pulp mills and timber interests. Madison Dearborn Partners, a group of investors led by former P&G executives Robert Cannon and D.B. Ferraro, acquired the two largest segments of the division, the cotton linter pulp business and mill operations in Florida. In March 1993 the group acquired the cotton linter pulp business, including the 75-acre property in Memphis, the site of company headquarters, research facilities, and the cotton linter pulp plant, which produced more than 85,000 metric tons per year (mtpy). The new owners entered into joint ownership of the Foley plant in Perry, Florida, with P&G, under Buckeye Florida LP, with the intention of obtaining full ownership in the near future. The new company took its former name, Buckeye Cellulose, appointing Cannon as CEO and Ferraro as president.
At this time Buckeye was in transition as emphasis shifted from production of dissolving pulps to specialty paper pulps for use in high quality technical and writing paper, absorbents, and industrial filter paper. In 1991 dissolving pulps accounted for 82.2 percent of revenues; by 1993 they accounted for 69.8 percent of revenues, with the balance in the more expensive specialty paper pulps. The company invested heavily in upgrading for processing specialty paper pulp, spending over $75 million from 1994 to 1996.
In November 1995 Buckeye went public with an initial offering of 7.2 million shares at $18.50 per share. The $132 million in funds raised from the IPO allowed Buckeye to acquire the remaining interest of Buckeye Florida LP for $68.9 million. Buckeye paid a total of $425 million for all of the assets it acquired from P&G. Assets in Florida included 13 acres of real estate and a pulp mill with the capacity to produce 165,000 mtpy of fluff pulp, 180,000 mtpy of dissolving pulp, and 85,000 mtpy of specialty paper pulp and cotton linter pulp.
Full ownership of Buckeye Florida made a significant difference in annual revenues. At the end of fiscal 1994, Buckeye recorded revenues of $79.8 million and net income of $7.9 million; in 1995 the company recorded revenues of $371.5 million and net income of $13 million. P&G remained Buckeye's largest customer, accounting for 39 percent of revenues, with nearly all absorbent pulps being sold to P&G, in accordance with a long term contract. Longtime customers Eastman Chemical, Hercules, and Akzo Nobel accounted for a significant portion of revenues, as well.
Expecting demand for specialty pulp to continue to grow, Buckeye sought to expand its capacity for producing specialty pulps through acquisitions. In May 1996, Buckeye purchased a linter factory, with a capacity for 30,000 mtpy, in Gluckstadt, Germany, near Hamburg, from Peter Demming AG. The acquisition included four paper machines which produced 40,000 mtpy of printing and writing grade pulp. The following September Buckeye purchased Alpha Cellulose Corporation in Lumberton, North Carolina, a manufacturer of high quality specialty pulps.
Buckeye expanded into airlaid nonwoven fabrics with the acquisition of Merfin International of Vancouver in July 1997. The airlaid nonwoven process involved using air to form natural and manmade fibers flexible enough to be shaped as desired. Merfin manufactured airlaid material for use in feminine hygiene and adult incontinence products, obtaining much of its business from P&G. The company operated two manufacturing lines at its Vancouver plant, with a capacity of 30,000 mtpy. Buckeye's $200 million acquisition included a new, $60 million manufacturing facility in Cork, Ireland, generating annual output of 15,000 metric tons on ten lines. A plant in King, North Carolina, produced 12,000 mtpy of airlaid fabric, as well as wet-laid paper for wipes, towels, and tissues for industrial and commercial uses.
Buckeye planned to combine its knowledge of pulp fiber with airlaid technology to create products with greater absorbency than others on the market. In August 1998 Buckeye Technologies—the name it had adopted the previous year to better reflect a more diversified set of products and services—announced its plans to build a pilot plant to speed the development of new airlaid nonwoven products. Located at Buckeye's Research and Development Center in Memphis, the plant utilized advanced technologies to process a combination of speciality fibers, superabsorbent polymers, and other material to create a compact yet highly absorbent material for multiple uses.
By 1999 Buckeye was ready to construct the largest airlaid nonwovens machine in the world, with a capacity to produce 50,000 mtpy of airlaid products. The company began to scout a location for the facility in Memphis and the mid-South region. This led to the September 2000 acquisition of Walkisoft from UPM-Kymmene Corporation, a Finnish forestry group, for $120 million. Walkisoft operated a 380,000-square-foot plant in Mt. Holly, North Carolina, with a 40,000 mtpy capacity. Buckeye began to upgrade the facility with new manufacturing technology, a $100 million investment. The acquisition of Walkisoft included a plant in Steinfurt, Germany, a research and engineering operation in Kotka, Finland, and a dismantled airlaid machine in Denmark. Also, Buckeye purchased a proprietary packaging technology for efficient, compact shipping of airlaid materials from Stac-Pac Technologies, Inc. for $25 million.
To insure a supply of slash pine, Buckeye signed a long-term agreement with Foley Timber & Lumber, which owned 553,000 acres of forest land formerly owned by P&G and which was adjacent to Buckeye's Florida property. The contract increased the existing supply agreement by 50 percent through 2010.
As the company already obtained a significant portion of revenue from foreign companies, international expansion continued to be a priority. Of $712.8 million in revenues in fiscal 2000, 37 percent originated in Europe; 36 percent in North America; 15 percent in Asia; 7 percent in South America; and 5 percent in other regions. In June 2000 Buckeye invested an additional $12 million to build another airlaid nonwoven machine in Cork, bringing annual plant capacity to 30,000 metric tons. The company acquired the cotton cellulose operations from Brazil Fibria AS for $35 million in August. The operation continued to provide textile fibers for Fibria's rayon producing business.
In December Buckeye introduced a new airlaid absorbent product called "Unicore." The single-ply nonwoven material provided better absorption, distribution, and storage for feminine hygiene products. The company also introduced "Duocore," a two-layer product which used Unicore for the top layer and Bizorb for the bottom.
While Buckeye had remained profitable through fluctuations in pulp prices in the 1990s, the company began to cut costs in the spring of 2001 as pulp prices declined. While strong sales in 2000 had yielded an impressive $59.1 million in net income, the decrease in pulp prices in 2001 meant lower revenues and lower profits. Buckeye began to reduce expenses by eliminating tasks in administration and in research and development, doing some tasks in-house rather than outsourcing, and by cutting executive bonuses.
The good news for 2001 involved a non-detect rating for dioxin effluence at the Perry pulp mill. Buckeye and the Environmental Protection Agency had been working to eliminate dioxin since 1993 when Buckeye was bought from P&G; Buckeye spent $60 million on the project.
Principal Subsidiaries: Buckeye Florida Corporation; Buckeye Foley Corporation; Buckeye Lumberton, Inc.; Buckeye Canada, Inc.; Buckeye Technologies Ireland Ltd.; Merfin Systems, Inc.; BKI International, Inc.; Buckeye Finland OY; Buckeye Holdings GmbH (Germany).
Principal Divisions: Absorbent Products; Specialty Cellulose.
Principal Competitors: BBA Nonwovens; E.I. du Pont de Nemours & Company; Honshu Paper Co., Ltd.; International Paper Company; Polymer Group, Inc.; Rayonier Inc.; Southern Cellulose Products, Inc.; Western Pulp LP; Weyerhaeuser Company.
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