MeadWestvaco To Invest $480 Million In BRazilian Expansion

MeadWestvaco MWV announced it will invest $480 million to expand its Brazilian packaging business, Rigesa. MWV plans to add a new 300,000 ton per year linerboard machine at its Tres Barras mill in southern Brazil, which would double the capacity of the mill. MWV expects the net capacity increase to be 135,000-150,000 tons per year, as MWV will rationalize one of its higher cost corrugated medium machines. Construction of the new machine will begin in January 2011 and is expected to be completed by mid-2012. The acquisition will be financed through cash on hand in Brazil and locally financed debt. Goldman Sachs views MWV's expansion in Brazil positively, given the strong economic growth in Brazil and rising per capita income, which is driving strong packaging demand. MWV's Rigesa business has been experiencing volume growth of 6%-7%. The GS Global ECS Research team forecasts Brazil GDP will grow 7.5% and 4.8% in 2010 and 2011, respectively, which should translate into strong packaging demand growth in 2011. MWV is trading higher at $25.91