PORTLAND, Maine — Verso Corp. will lay off 190 workers from its Jay mill early next year as it idles another paper machine, cutting total production capacity almost in half.
The layoff represents about one-third of the Androscoggin Mill’s workforce of roughly 560, which was dealt a cut of 300 positions last year.
The company announced that the latest rounds of layoffs are temporary, but they could become permanent if the mill does not find sufficient customers for products coming off the No. 3 machine, which produces coated paper used in magazines and other glossy publications.
“Verso anticipates that if the machine is not restarted, the capacity reduction will result in the elimination of those jobs,” the company said in its release.
The decision, announced in a regulatory filing early Tuesday, follows Verso’s $1.4 billion purchase of its larger competitor NewPage.
Verso borrowed heavily for the acquisition, contributing to its Chapter 11 bankruptcy reorganization, which it completed in July after selling off four hydropower plants. The combined company produced roughly half of the country’s coated freesheet papers at the time of the merger.
Michael Weinhold, a senior vice president of the company, said in the news release that the market for coated paper continues to pose challenges as demand falls.
During its bankruptcy case, Verso pointed to industry sources to show that U.S. coated paper demand dropped 16 percent from 2010 to 2014, a time when imports also put pressure on domestic producers of coated paper.
“Challenging market conditions have made these types of actions far too frequent in recent years, and they are never easy,” Weinhold said.
As part of the bankruptcy proceedings, the company told investors it would need to improve its earnings margins at the Androscoggin Mill, ranking it last among all of its mills by earnings margin in 2015. The company projected the Androscoggin Mill would rank third in 2016, after idling its No. 2 paper machine and laying off 300 employees.
The company attributed that shut down, in part, to high energy costs, in a presentation to investors.
The company said Tuesday that it could restart the No. 3 machine, if market conditions allow in 2017.
The workforce cut helps to make the mill more efficient, Weinhold said, as it shifts toward speciality papers. The bankruptcy freed up the company’s No. 5 paper machine from a contract with the Wisconsin-based Expera Specialty Solutions, allowing the Jay mill to release its own line of grease-resistant products for food applications.
“At the same time, we are positioning the mill for future success by optimizing equipment, enhancing process efficiency and expanding production for the growing specialty papers market,” Weinhold said.
The Professional Logging Contractors of Maine also lamented the announcement, saying it expected a reduction of 200,000 tons of coated paper production to cut demand for raw fiber by about 500,000 tons per year. That adds to significant cuts already that have put a severe dent in the market for the state’s logging operations.
“Verso’s Jay mill is a major purchaser of wood fiber, and this news will affect hundreds of logging jobs in our state,” said Dana Doran, executive director of the group, adding that the logging industry is “at a critical point right now because of the loss of so many markets.”