The North American business of packaging and paper company Sappi has approved a $418m capital project for its Somerset Mill in Skowhegan, Maine, US.

The company will convert Paper Machine No 2 at the mill for capacity increase and the production of solid bleached sulfate board (SBS) products.

Sappi said that the project would be funded from free cash flow.

Sappi North America president and CEO Mike Haws said: “This move complements our long-term Thrive25 strategy, which focuses on growing our portfolio in packaging and speciality papers, pulp and biomaterials.

“By investing in our business to pursue growing demand areas, we can remain profitable and competitive in the global marketplace.”

The investment comes amid the rising demand for packaging and speciality papers in North America and as customers look to increase their volumes with Sappi North America.

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Considered a more environmentally sustainable alternative to plastic, SBS is used in packaging for the cosmetics and perfume sectors, healthcare and beauty, confectionery and luxury drinks, as well as consumer electronics and others.

The material is also used in making plates, dishes and cups for the foodservice market.

Haws added: “Somerset’s existing world-class infrastructure and success in producing high-quality SBS products, together with its talented workforce, make the mill an excellent and obvious choice for this investment.

“Increasing our flexibility and expanding the paper mill’s capability and capacity will ensure that we continue to make superior products at Somerset for years to come.”

The project at the Somerset Mill in Maine is scheduled to be operational by early 2025.

In a separate development, Sappi reported that its packaging and speciality papers’ segmental year-on-year (YoY) sales volumes increased by 3% in its fourth quarter and full-year financial results for fiscal 2022.

In September, Sappi entered an agreement with the multi-asset manager group Aurelius Investment Lux One Sàrl (Aurelius) to sell three graphic paper mills in Europe.