The joint venture would produce cigarette paper and porous plug wrap in partnership with the China National Tobacco Corporation (CNTC), which is the principal operating company under China's State Tobacco Monopoly Administration (STMA). CNTC and a wholly-owned subsidiary of Schweitzer-Mauduit would each own fifty per cent of the joint venture. The joint venture is subject to obtaining project financing and various governmental approvals.
The joint venture would build a new state-of-the-art paper mill, with two paper machines having total annual production capacity of approximately 18,000 tonnes. The new mill would be located near Jiangmen, Guangdong province, with construction expected to take approximately two years following receipt of governmental approvals. Project spending, including capital expenditures and working capital requirements, is expected to total approximately US$ 100 million. Papeteries de Mauduit (PDM), a French subsidiary of Schweitzer- Mauduit, would provide technical support and project management.
Schweitzer-Mauduit, through PDM, has been selling tobacco-related papers in China for approximately 20 years. The joint venture demonstrates Schweitzer-Mauduit's increased commitment to service the Chinese cigarette market, which represents roughly 30 per cent of the world's cigarette consumption. The new production facility would focus on high quality cigarette paper and porous plug wrap, which would support STMA's move to lower tar delivery levels in cigarettes for the Chinese market.
According to Wayne H. Deitrich, chairman of the board and chief executive officer of Schweitzer-Mauduit, the joint venture is consistent with Schweitzer-Mauduit's strategy to increase its manufacturing presence in Asia and follows the establishment of paper manufacturing operations by the company in Indonesia in February 2004 and in the Philippines in June 2005. (ci)