Arjo announces pounds 208m expansion in US

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Arjo Wiggins Appleton, the Anglo-French paper group, has announced a pounds 208m programme to expand its US operations. Arjo is paying pounds 38m for a coated-paper mill in New York state and spending a further pounds 170m to expand its existing US operations in Wisconsin.

The Newton Falls mill in New York has capacity of 118,000 tonnes and employs 400 people. Arjo plans to increase production and upgrade the plant.

Cob Stenham, Arjo's chairman, said the investments would give the company a strong position in the growing market for coated, wood-free paper in North America.

The company has already invested pounds 170m in its Wisconsin mills in the past 18 months.

The company has been expanding aggressively. In May, it paid pounds 56m for an Italian paper merchant, Sottrici Distribuzione, and bought a 71 per cent stake in a Hungarian paper mill.

Arjo had been in "white knight" talks with Holvis, the Swiss company that is the target of BBA. It then emerged that Arjo had reached an agreement to buy Holvis's paper distribution side.

In March, Arjo reported near-doubled profits of pounds 217m but warned on the impact of rising pulp paper prices, which were affecting margins. Arjo has found it hard to pass on price rises while customers are cutting back on orders and trying to live off existing stocks.

Alain Soulas, chairman, said the price per tonne of pulp had more than doubled to $825 since the beginning of 1994, and he believed it would exceed $1,000 by September or October.

Before yesterday's announcement, there had been concerns in the City about the company's strategy. It lost out in last year's auction for the American group SD Warren. There has also been bid speculation following rumours that Arjo's 40 per cent shareholder, St Louis, was considering selling its stake.

In March, Arjo reported profits up from pounds 122m to pounds 217m on sales up 7 per cent to pounds 2.9bn. The company has been experiencing strong demand in Europe. There was a threefold increase in profits in the paper machining division.

Last month, the company recruited a finance director after a six-month search when Andrew Shaw joined from the merchant bank J Henry Schroder Wagg. He is the only full-time British director on the board.