Segezha mulls selling mills in Europe or turning them into JVs with minority stakes

MOSCOW. Dec 9 (Interfax) - Segezha Group has received and is now studying several offers from potential buyers of its assets in Europe, the Russian forestry group's president, Mikhail Shamolin told reporters.

But the company is also considering the alternative of forming joint ventures based on Segezha Packaging's mills in which it would hold minority stakes, Shamolin said.

Segezha Packaging now has seven paper bag mills in Germany, Denmark, Italy, the Netherlands, the Czech Republic, Turkey, and Romania with combined capacity to produce 769 million bags per year.

"We always saw the European assets not so much as an attribute of EBITDA, profitability, but as a sales channel for our paper on the European market. This channel has now closed, we're forced to redirect our paper volumes to other markets globally, and accordingly, the asset is currently in a kind of limbo," Shamolin said.

"What will happen going forward is difficult to say, we're studying various avenues. Among other things, we have received several offers to sell these assets. We are now considering whether this makes sense or not," he said.

Another possibility is the "creation of joint ventures with our minority stake with other partners who are not restricted by either voluntary or involuntary sanctions," so "we'll see," Shamolin said.

The company's mills in Europe continue to operate, but they are having problems getting raw materials, as well as selling their products, since "customers do not want to work with companies that have Russian roots," he said. The European Union has banned imports of Russian forest products, including packaging paper.

"The situation is far from simple, but it's not tragic taking into account the overall contribution to EBITDA," Shamolin said.

Segezha is also considering opening paper packaging mills in other parts of the world, he said, without providing specifics.

Segezha opened a trading division in Singapore in October 2021 to sell its products in the Asia-Pacific region. This year the company said it might open a representative office in China.

Shamolin listed the regions that Segezha is studying in terms of opening new paper packaging production facilities to replace European mills during a conference call with analysts on Friday. "We're looking closely at Turkey as one example. We're looking closely at Egypt. There's a fairly large paper production hub there. We're looking at South Africa, we're looking at Malaysia, we're looking at Vietnam, we're looking at China, we're looking at Mexico. There is a whole number of geographical spreads where investments in converting capacity make good sense. It's early now to talk about specific deals, but we have a team that is currently studying all this closely," Shamolin said. The company has received three bids for its European mills from potential buyers, he said.