← 返回

2026.10.07 | TB | Materials | Loparex: Supply Chain & Strategy

原标题：Loparex – Sorting the Supply Chain & Strategy

#materials

Third Bridge · 2026-10-07

Analyst-led • 25 Sep 2026

Companies: BA US, MNDI GB

Frederick F Cazenave III (FFCI) VP, Strategy, Products & Services at Alibrx Inc

Quinton Flore (QF) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

QF [00:00:05]: Welcome to Third Bridge's Interview entitled Loparex – Sorting the Supply Chain & Strategy. I'm Quinton Flore, and I'll be facilitating today's Interview with Mr Frederick F Cazenave III, former SVP, Supply Chain at Loparex.

Frederick, before we start today's Interview, please state either I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

FFCI [00:00:41]: I agree.

QF [00:00:42]: Could you please begin with a brief introduction to your background?

FFCI [00:00:51]: I'm a chemical engineer, started off in the paper industry. I was actually a supplier of Rexam Release, which is a predecessor of Loparex for some lightweight unbleached papers. I ran a business unit or a business for Celanese, which was binders, which was also a supplier into Loparex. Actually had multiple memorandums of invention related to release liners at Celanese. Been a couple of other places, but I came to Loparex in January 2018 initially to run the P&L and run the corporate marketing and strategy piece. I picked up the R&D piece. I ran either the entire P&L or the majority of the P&L for five years. Additionally, over that time, I had the supply chain as well.

Questions

00:01:45] Could you share an overview of Loparex? What is this company, what does it do and how has it ended up where it is today?

FFCI [00:01:51]: Loparex is a dedicated release liner manufacturer, the largest in the merchant market. They're not the largest manufacturer because 3M is the largest manufacturer, but they consume all theirs internally. Release liners are engineered materials. They are a surface. The surface has to be chemically and mechanically compatible with the customer. Almost all the customers customise their PSAs or binders or whatever contact media that comes in contact with the release liner, which means that there's a lot of customisation on the release liner side. Then the material has to process through continuous equipment, so it's web converting. There's some additional physical properties of a release liner that has to match the customers' processing equipment. Loparex itself is dedicated in the space. It is actually an agglomeration of multiple individual companies that came together over time. Most people are aware of the Infiana acquisition, which happened after Loparex was acquired by Pamplona, but actually, prior to that, there are multiple companies, and what's important to understand about Loparex is that all of those companies, particularly in the US, were all targeting the same customer, 3M. You had Daubert, you had Rexam Release, you had Douglas-Hanson, all came together. The reason why you have two plants relatively close in the Midwest, one in Iowa City and one in Wisconsin, is because both of them were targeting the same customer at 3M.

00:03:35] Which end markets does Loparex play in? How have they trended since 2022?

FFCI [00:03:41]: Loparex is one of really two full-service, I call market exposure merchant market producers, Mondi would be the other one. They participate in all of them, graphics, label, hygiene, tape, which is a combination of automotive, building construction, different things, building construction, medtech and electronics and packaging, a few other things. They participate in all of the major markets. One of the challenges really with respect to Loparex, and the market itself is that markets are defined by AWA, which is the trade organisation, and they classify things by customer types, not by end markets, which is a little bit challenging. Tape is a product. It's not a market. Tapes itself splits up actually into automotive and building construction significantly, and then there's some general printing tapes and general use tapes, but it's far more heavily exposed to automotive and what we would call tapes and to building construction, and of course, then you have dedicated markets. Graphics is similarly that way. You have advertising graphics, but you also have automotive graphics. Automotive is an interesting piece because there's three or four different avenues within the merchant release liner market that release liners end up in an automotive demand value chain.

00:05:04] Of the end markets you mentioned, which have hurt Loparex the most in recent years?

FFCI [00:05:16]: Any of them that are finance-driven. If you think about anything where people buy something with debt, so automotive, I'm talking about in volumes, not in terms of prices, which we'll get to later because inflation has obscured some of that on the revenue line, but in terms of volumes where you have finance purchase, a boat or a house or a car or those kind of things. The only exception in any of these markets has really been aerospace, where they supply process liners and certain process liners into that space related to prepreg composites. The only reason is because that market was depressed by COVID, and it didn't rebound as fast due to the problems with Boeing and everything else, but other than that, anything where there's typically a debt or finance purchase, any end value chain that includes that flowed all the way back to release liners.

00:06:13] Would you expect the release liner market to pick up in the near future?

FFCI [00:06:25]: It's going to be tight. You can look at the news yourself. Where do you think the economy is right now? Does it look like it's improving or not improving? The issue to understand with material producers of any kind is that they don't care about how much money Ford Motors makes. They only care about how many cars. This key economy problem that you're seeing in the US is a concern, and no one has an idea of how long that's going to last. As you flow back in the value chains, again, if they're selling trucks for USD 200,000, but they're only selling 100 of them, for a Loparex, it's not as good as selling USD 50,000 cars and selling USD 5m of them. That's the challenge in terms of capitalisation, which is a problem in the market and then overall aggregate demand, in terms of volume.

00:07:13] Which end markets do you think have held up the best over the downturn of the last four years or so?

FFCI [00:07:22]: Hygiene is one, but it's a low end market. There are certain aspects of labelling and packaging that hold up depending upon value chain partner. The best explanation of that is that if someone used to buy General Mills cereals and now they're buying the cereal from store brand, you may not be in that value chain, aggregate demand is the same, but you're not specifically may not be participating in it. Medtech has held up some. Electronics, again, there's gives and takes in the electronics side, where you might pick up some stuff in some battery applications, but you're losing in terms of TVs, again, finance purchases and things like that, but medtech, but those are small volume markets. Then, I mentioned aerospace already, so prepreg composites. There is some offset in the prepreg composite side related to wind farms and that kind of stuff where they support the building of those facilities because those have been up and down in terms of demand.

00:08:26] How do volumes now compare with levels from four years ago in 2022?

FFCI [00:08:31]: Yes. It really is H1 2022. Depending on the value chain, building construction vs whatever, 20%, and some of them could be down 30-40% in aggregate.

QF [00:08:49]: Where do you think that 20% loss is coming from?

FFCI [00:08:57]: Just pull-through at the retail level, again, people not buying new cars, people not buying new computers, people not buying boats. Look at any of these markets right now where you know that they're already distressed on a volume basis, both in the used and the new market, that's where you're going to see it, but you already had rationalisation, too, in the market. After I left, obviously, the Eden facility at Loparex is gone. It wasn't a huge plant, but in terms of the US footprint production, you have to exclude Malvern because Malvern is a dedicated film plant, but relative to the other plants that used to be part of legacy Loparex, that was more than 10% of output. Again, if you think that in general, you're somewhere 20% with some worse than that. That number lines up.

00:10:01] How do you think the drastic reduction in volumes has impacted customer behaviour, thinking about order frequency, order sizes and lead times?

FFCI [00:10:16]: We'll just talk about the customers for a minute. You've had supply chain problems, too, right, that are an issue as well that have made the cycle times less reliable in terms of precision, but from a customer standpoint, absolutely, they want to go to lower order quantities if they can. Everybody is managing cash. Loparex, they might be B2B to B2C branded, but even 3M doesn't sell direct. It's B2B to B2B, and everybody that's involved in these chains is under duress, is trying to drive order quantities down. They want to have shorter lead times. They don't want to carry working capital, all the same cash management problems that you would have. The challenge is when you get to the merchant market, particularly where you're having to source primary raw materials like paper, is that those cycles at best are maybe six weeks on the short side, but more like 8-10 weeks. It doesn't suit itself for a business like a release liner business that has to operate on a product wheel. The assets have to transition through their portfolio and then go back and start over and things like that. It's a heavy impact to cash, heavy impact to reliability and those things, but there's definitely pressure at every point along the value chain to have the person upstream absorb the cost of the unreliability of the supply chain.

Now, here's the problem. Loparex might be the biggest in the merchant market, but the entirety of the merchant market for release liners is like a small two-wheel cart and a giant freight train because they're dealing with suppliers called International Paper or they're dealing with Dow or they're dealing with BASF, so they don't have a lot of influence on the supplier side either. It's not just Loparex, but all of them have significant problems in terms of they hold no sway over their suppliers either.

00:12:26] What do you expect some of the biggest opportunities to be, moving forwards? Which end markets can you see being the most positive for a player such as Loparex?

FFCI [00:12:39]: You asked the question. There's going to continue to be growth in the energy space. You continue to see growth just in general in the replacement of mechanical fasteners. That's where PSAs got their piece, so in applications where they're going to use adhesives in heated applications under the engine, that kind of stuff, any place where you also see plastics replacing metal, that kind of thing, they lend themselves to things that are sticky as opposed to a bolt. Those areas will continue to grow. The lower-end spaces like hygiene will continue to grow. That's still about Third World adoption and per capita use. Again, there's some potential technological disruptive risks in spaces like aerospace with prepreg composites. If they ever make thermo composites work, they would abandon a significant portion of prepreg. Those volumes are already relatively low, but right now, at least in the next few years, you see that even though retail spending is off, we still see a lot of activity with Airbus and Boeing and all the different airline manufacturers because they're still recovering from COVID. That's one.

General electronics, again, what I would call is the end segment volumes might be off, the aggregate pull has still increased because we keep putting electronics and everything, so there are several different ones there. Then there's some that are just immune to it. Hygiene, like I said, it's going to be more about market partners and value chains. Certain packaging ones will stay there, although packaging itself is off in aggregate, and you have a reference point, which you can point to in the United States since '24, the corrugated packaging guys have reduced aggregate capacity in the United States by over 10%, but they've also increased prices tremendously, so it's an oligopoly there, but the volumes are what matter to someone like Loparex. Onshoring in the US, the same, but of course, Loparex is a global company, so you have to discuss what you're going to do globally, even if you can take advantage of stuff in the US.

00:14:59] You've mentioned a few times that Loparex cares about volumes rather than profit for its customers, noting the example of Ford making 50,000 cheap cars vs a smaller number of more expensive cars. In a situation such as this, how much pricing power does Loparex have when its customers are making fewer units of something but charging more for it?

FFCI [00:15:27]: It depends on interchangeability. There's a spectrum of the products that are made in release liners, period. Remember, they're customised to some extent because the customers, they're formulating. For people who produce pressure-sensitive adhesive, that's what PSA stands for. There's only five or six major, what I'll call is core chemical suppliers in that space, a type of chemical binder. Celanese, when I worked there, we made those, but everybody formulates. Then there are five or six silicone suppliers, but everybody has to formulate silicone. You have to be chemically compatible with whatever they've done, and so this thing around more or less depends on the interchangeability of your product, and that varies dramatically by application. Like medtech, nobody wants to fool with that. The qualification requirements, in some cases, you've got 40-year chemistry going on there, so as medtech grows, even though the volumes are small, nobody cares about pricing, security of supply and consistency of the product and not getting them in trouble with any of the regulatory bodies.

Same thing right now with the composite side, which is the aerospace piece. Boeing and Airbus are not the problem. It's the FAA. When an aircraft's certified, you get certified down to even things like the chemicals used in the release liner, nobody wants to have to go back and recertify an entire aircraft based upon a release liner, so no one cares about the price there, but in other places, which are large volume like labels or hygiene, anything that's got Procter & Gamble involved in it, there's no pricing in it. That's different issues and things like that. It really depends on which market you're in. The largest volume markets are the ones that are the most interchangeable. The smallest volume markets are the ones that are the least interchangeable, and there's gradient in between.

00:17:28] Could you share a rough breakdown of where Loparex's revenue comes from across the end markets that we've discussed so far?

FFCI [00:17:36]: After the combination with Infiana, who is heavily exposed into hygiene into a different part of building construction, if you look at what they'll tell you, so you'll hear tapes, but tapes is a mix, come back to that. You'll hear graphics. Tapes and graphics will be the two largest in terms of volumes and possibly revenue. Building construction is also significant volumes in revenue. Those would be the three, but if you start parsing out tapes, you add more to building construction and more to automotive. If you parse up graphics, there's a significant portion that goes to automotive, those kind of things. Those are the big three, but where their biggest unit margins come from are medtech and composites.

00:18:24] Let's talk about input costs and paper sourcing. To what extent is Loparex not owning its own paper production hurting the company?

FFCI [00:18:35]: It depends on the point of time when you ask because there's no one release liner paper. I get asked about this all the time. There is no such thing as release liner paper. There are different paper grades that have other applications. For them, what's hurt the most has been the consolidation in the source. In some cases, so glassine paper as an example, there's not a paper machine in the United States that makes glassine. Matter of fact, there's only 1.5-2 in Europe that make it, and yet you still have release liners that are spec-ed to glassine paper. That's a bit of a problem. Felix Schoeller is a competitor who's vertical, and they originally were making what we would call graphical paper for like photographic applications and photographic brands, and that's the paper they make. They can supply their own paper, but their paper isn't the best choice in all cases for the solution, so they make that work, but they can also take less margins. You have Mondi who is technically vertically integrated, but again, their paper isn't widely used either, so where they can use it, they can, and that's part of the reason why Mondi has been trying to get out of the business. Does it hurt? Yes.

The biggest hurt has been the consolidation, the pricing power from an oligopoly standpoint on the paper side and then the fact that they've had to endure multiple times, but definitely the one long strike from the Finnish situation where UPM went on strike. Ahlstrom is vertical. Again, they make a particular set of paper. They also manage their exposure to the release liner market relative to their paper, but once you own a paper machine, it's capital-intensive, high operating costs, high fixed cost, high sustaining maintenance costs and things like that. It drives the behaviour to the other, so in some ways, it makes it more flexible, but when things go bad, obviously, Loparex feels it for sure. They're not getting a beneficial price from anybody. Ahlstrom isn't helping them compete against themselves. That's how it works when they have to use Ahlstrom paper.

Then IP has been consolidating. They split the company up, but a lot of the assets, they lost the Georgetown mill, which was a supply for one of the significant sets of products that they had. I remember touring the mill, and I knew the mill was going to get shut down before too long anyway. I have 20 years in paper industry and knew exactly what was going to happen. It did happen, and they've moved products around, things like that. They can't trust that situation, even the spin-off. Sylvamo had some mills, but they were still dependent upon IP, and IP is the one that owned the Georgetown mill and it impacted (? 21.40) price.

00:21:41] What share of a release liner's cost typically sits in the base paper?

FFCI [00:21:48]: A lot more it used to be. Maybe that's something to understand, too, that has changed. This is a bit, I think, jumping ahead, but release liners, particularly ones that use paper, first of all, the number of release liners that are what we call direct coat, where you put silicone directly to paper is not that high. Remember, you need to have a surface is what you have is a lot of poly-coated paper, either one-sided or two-sided, and that would be better described as fibre reinforced film, but you can't use the film. You have to have the paper. There's a physical requirement of the release liner process through the customers' equipment and things like that. The issue is that when these products were designed 40 years ago, just release liners in general were designed, the highest-concern cost was the silicone, and paper was inexpensive. Paper is now oligopoly, and they have significant pricing capacity control, which they are exercising.

Now, what you have is a situation where the papers that are available to you are not sufficiently smooth enough to run through the equipment that you built for products from 40 years ago. In order to start breaking that trend where paper is growing, growing, growing, growing, growing, growing, growing, in terms of its percentage of your cost, is that you have to radically redesign not just your equipment, but the products that you're making in order to offset with either more poly or more silicone to get to the same performance. Percentage on a paper or a substrate standpoint, it depends on the paper, but it can be pretty high. It's not 50%, but it can be pretty high.

QF [00:23:35]: When you say not 50%, are we talking about perhaps 30-40%?

FFCI [00:23:42]: Yes. It has to do with mix and things like that. On a given day, the number might be slightly different than other. It depends on who you're supplying.

QF [00:23:52]: How does that compare with when it was very different? You mentioned that it's got a lot higher recently. How long ago was it significantly lower, and how much lower was it?

FFCI [00:24:05]: We'll call it the stupidity of the paper industry ended at in the global financial crisis period. They stopped paying too much to buy each other. Consolidation picked up. You started seeing a sunsetting of mills. It has accelerated. COVID accelerated that, too. You can go see through all the different folks that have been involved with it at different times at some of these mills. That's been the bigger issues like mills like the mill in Jay, Maine was a supplying mill. It's permanently shut down. The mill in Georgetown, South Carolina, is permanently shut down, and there's the list goes on and on, and so as that's happened, the relative price of sourcing the paper has gone up.

00:24:59] How well does Loparex pass through increased input costs to customers?

FFCI [00:25:05]: When I was there, we were pretty good. Where they're at right now, again, I'd have to have details that I shouldn't, so I can't really speak to that, but what I would say is this, is that there was a need to be aggressive in that regard, obviously, for cash reasons and things like that. The market was somewhat conditioned over 30 or 40 years, but why are you raising prices and stuff? The concept of raising prices just because the market will accept it was never well taken, but the input cost part has been understood. Again, pricing means something on the majority of the volume, but not on all the volume. That's something else you have to keep in mind.

00:25:56] Do you think Loparex has more room to raise prices? It sounds as if the company has been on the relatively low side. How would you evaluate the company's current ability to raise prices?

FFCI [00:26:10]: The problem for them has been the issue of quality and security of supply or their service situation in multiple facilities. You drive someone long enough where they have to go qualify even though that's painful and expensive, they will do so. I think that's been the bigger issue. The other thing, again, back to quality and operations is that your pricing might be fine. The problem is your shrinkage may be too high in terms of you've got a cost component that your other competitors are not absorbing. You can't price yourself completely out of the market. Again, you'll get replaced even if it's difficult to replace, and so there are limits to how much you can move the price.

00:27:01] What else is squeezing margins beyond paper input costs?

FFCI [00:27:09]: The labour situation, which we think has improved, but you're back to geography. It doesn't matter that there's labour available if you're not near it, and so like the Hammond, Wisconsin facility is in the middle of nowhere. It was originally staffed with kids off the farm, where there are no kids on the farm now. Replacing these folks is tough. It's industrial. People don't want to work there if they've got another option. The situation is industrial in the sense that there's significant focus and concerns on safety. Staff capacity, the loss of an individual, depending upon if they're an operator or not and what type of equipment they're qualified to operate, cannot be undone like in a week. Lead times in some of the plants are six months before that person can contribute to capacity, and so they got grey wave issues, they got different things and stuff like that.

Again, it manages a flow business, and what happens is this is that, "Oh, we're going to operate and produce however many million square feet or whatever in this plant this month, and a person doesn't show up on the night shift for a critical piece of equipment that's critical path and your capacity just went down 20%." Fixed costs are still there. You don't output and your ability to catch up on that is pretty hard, and so in some cases, that just has gone. It's just gone, and you get enough of those where you're susceptible to a single person lost or whatever, which they are, it's hard to overcome that.

00:29:01] Why do you think Loparex's issues are more acute than those faced by the rest of this industry?

FFCI [00:29:08]: One is, of course, they're the biggest. They're fully exposed to everything. Let's say that there were 12 submarkets that you were focused on, and six of them are bad, Loparex got six of them bad. Not every participates in everything. The other thing was what we described about their history, how they came together. You would never have purpose-built Loparex. If you understand what I mean, you wouldn't have built it like it is. It just evolved to that. You wouldn't have the arrangement that you have up in Hammond or the situation you have in Iowa City or whatever. You just wouldn't have those situations like you have now. You would have thought about it differently in terms of participation in terms of markets based upon things like long-term concerns around strategic sourcing and all that. That's not how that came together. They have exposure to everything. They have global exposure, which means they're exposed to everything, and they weren't purpose-built. Inefficiencies inherently built that have occurred as the company has grown through acquisition.

00:30:18] We've talked about weakened demand, which is down by as much as 20% in some end markets. How are competitors responding to this?

FFCI [00:30:30]: It depends on what they're exposed to. If you're somebody who's supplying to Procter & Gamble, Kimberly-Clark, Essity in Europe and stuff like that, probably not a whole lot. Mativ ended up with a very focused release liner producer, and so that they were only really participating in low end, but including a lot of hygiene, and so they're probably okay. The Loparex facility in India, it's principally focused on hygiene, and it's okay. It's really going to depend on where and who and what in terms of those markets.

00:31:24] You alluded to Mondi attempting to sell its release liner business. What's your read of that?

FFCI [00:31:39]: Mondi's been trying to get out of it. They've changed their commercial staff, even when I was involved, at least three times from 2018 to 2023. It was an idea good on paper. They've tried several different things. It's one of those things where it's not sufficiently a pull-through to warrant carrying it to support the paper operations, so they just want to get rid of it. That's where they are. Again, the natural integration of businesses is typically not downward. You typically can't buy enough once you're already upstream to fully integrate downstream. That's the problem. Loparex is one benefit to all the rest like Mondi is, is that they're not there to support any significantly capital-intensive investment. They're vertical to film, but they're not making plastic. They just have blown film lines. Those aren't super expensive and stuff like that. Whereas Mondi's got paper machines they got to worry about.

00:33:07] How does Loparex compare to the rest of the industry on KPIs such as quality, reliability and delivery times?

FFCI [00:33:15]: Again, it depends on the market and who you're dealing with. Like silicone anchorage is really great in the PET space. Loparex doesn't make PET, they buy it, and so they convert it. In terms of converting, depending upon which plant you're talking about, it's okay, but on the whole, the problem is an issue of exposure. What are its principal value propositions, because it's not price, out in the market? It is the ability to supply full portfolio for the global businesses to be able to supply globally. It is the breadth of knowledge, although that's been decimated, unfortunately, that they had in terms of technical expertise with history of how these things came about and how to modify them and adjust them and things like that. The R&D guys basically and the product development guys, things like that, is that that's where the value had been historically, and so the problem is that a lot of those things are gone, and you have these issues of quality and supply and everything else. There have been certain facilities that have been in bad shape for a long time, which is well-documented.

There was a challenge when the ERP went in for Loparex. The issues that got blamed on the ERP were really operational issues. The problem with ERP is the visibility was going at least initially to see all of it, but you had two things came together at the same time, a loss of some visibility to the way material was moving through the plants and some of these labour things I was talking about, people not showing up and all of a sudden losing capacity overnight that you couldn't recapture and things like that. Loparex is just exposed all over.

There's still some strength in the company in certain places. Obviously, the guys that are in Forchheim in Germany were pretty solid about staying on top of their customers and things like that, but it's a film facility, which is a little different than the other ones, and their product portfolio wasn't nearly as broad as the remainder of the network. The guys in Asia have done a pretty good job, too, of holding up, and of course, the simplest of the facilities is the one in India, and it does make money. It makes bottom-basement prices, it makes really good EBITDA, but it's so small. It's like throwing a quarter on top of the pile.

00:36:18] What does it look like when a customer switches release liner suppliers? How difficult is it? What has to go wrong from Loparex's perspective to have a customer switch?

FFCI [00:36:36]: Some of them are already multi-qualified, so that doesn't take any work at all. The ones that you fear are medtech, aerospace, electronics would be one, maybe some building construction stuff. The reason is that that's not a, "Hey, we lost it, we'll get it back next year," kind of thing. That's a multi-year loss, but it's hard to make those changes. Any of those that are multi-year loss or… Now, we haven't gotten to this yet, but you're talking about where to go, what strategy and everything else. You got to make a lot of changes. This was stuff I was working on while I was still there, and nobody wants to hear that, is that you need to move out of Hammond, Wisconsin, and you need to move out of Iowa City, Iowa, but the problem is that in order to do that, you're going to have to go ask people who are currently locked in under management of change to qualify something new. As soon as you open it up for that, what do you think they're going to do?

They're not going to just open it up to you. They're going to want to see if they can get a better deal from someone else, and so their core business that they've been able to retain because management of change is so expensive and so costly and concerning is the one that comes at risk to fix the systemic problems that they have. The other thing is this is that now your competitors aren't sitting back and doing nothing. We didn't get into this, but there's solvent and non-solvent versions of silicone that get used. This is an area that's been a quiet piece of what we'll call is protected business in the United States since nobody wants to build typically anything that uses solvent and the legacy facilities already had solvent capability, but the New York facility that Felix Schoeller put in, that they put an asset in there that is solvent and solventless, and that was almost directly placed with the thought process of taking some of the 3M/Solventum solvent business.

QF [00:39:03]: That's an interesting point. Do you have a sense for how that's gone so far?

FFCI [00:39:08]: Not specifically, but they're definitely heavily motivated. This is the funny thing about it, is that it may not be an issue of qualification. It just may have been the issue of being able to produce the solvent, and so if it's not overly burdensome, like it's not in medtech or it's not something that's heavily regulated under management of change, they could switch tomorrow if they've got a solvent capability over there. They just have to formulate to match.

QF [00:39:34]: What investment do you think it would take to really do that well?

FFCI [00:39:41]: They already built the asset, so it doesn't really matter. It's there. It's an incremental asset and capacity in North America that's in that New York facility. For them, if they've got solvent business, particularly with legacy 3M, that's immediately accessible to that facility with probably minimal management of change issues.

QF [00:40:14]: Which markets do you think that opens up? How advantageous could that be to Loparex?

FFCI [00:40:22]: They're not growing markets. To be fair, nobody wants to use solvent if they can help it. What it does is, it's not that there isn't some CAGR in them. It's just no one designs new products that way. What you're talking about is legacy products and things like that in places where water can't be present, so it could be in certain packaging and some other things like that. There's a reason why they built an asset that could do both. In many cases, there are solvents used even in non-management of change markets where they've just not gone to the solventless because they just didn't want to invest in it. What you've got now with that asset that Felix Schoeller, at least where their paper is applicable, is that they can go ahead and provide the solvent. Then when they transition to solventless, they just stay on the same machine. Again, no one would build a dedicated solvent unit. Let me make it simpler. No one would build a dedicated solvent silicone coater now, and they didn't. They just built one that could run solvent, and so that opens them up to the markets that are currently defended by assets that Loparex has that run solvent and then they are already staged to transition to solventless on the same asset.

00:41:46] Loparex announced its recapitalisation plans in September 2026, which should lighten the debt load significantly. Which of the company’s problems might not be fixed by the recapitalisation?

FFCI [00:41:59]: It's not going to fix the fact that your product design is no longer viable. The 40-year design philosophy isn't going to work because your suppliers own you now. You have no options of really moving around a lot, and in particular on the paper side, that's true. It's not going to change where your plants are located and your labour problems. It's not going to change the fact that some of your equipment is incredibly old, but interestingly enough, all three of those are part of a stool. It's an asset strategy stool, which is one of the things I worked on and actually have continued to work on related to that particular market that has to happen. The question is, how do you finance it and all those things. Again, the fact that they are still essentially exposed to multiple oligopolies on the supply side, the fact that to make any changes opens them up to anything that's currently defended under management of change or difficulty to change, opens them up to competitors taking that business if they have to push that, so there's a strategy, which is not just simply what, but when and how that has to be built together. That strategy isn't a 3-5-year deal. It's going to take longer than that, and it's going to be sailing, not motorboating, if you understand what I mean.

I know where I got to get to, but the straight path is guaranteed to kill me. It's like I'm going to have to go back and forth a little bit and validate some of those things and check the market. There are certain things that you want to do at the last that you just don't want to put certain markets or certain products at risk. Again, Iowa City, the whole thing, Hammond, is a piece for sure, but it all centres in the United States around that Iowa City facility, which is the most capable facility in the world, but it's also the highest cost, got old equipment. When I say highest capability, it's the highest capability facility in the entirety of release liners. They can make everything, not all of it well, but they can make everything, but they can't make it efficiently or at good cost and they have labour issues and all that, and that's where a lot of your management of change is there. There's a lot of stuff that, again, systemically, there is a challenge there.

Again, when Pamplona purchased Loparex and then Infiana, there was a consolidation thesis, which may have had some viability to it maybe, but that just got blown up and that window has passed, and the problem is that the consolidation exercises upstream are now affecting the merchant release liner market, so you have to rethink that whole thing, like having to use different paper.

00:45:11] You mentioned that the potential path we're discussing could take over 3-5 years. Where do you think that would start for Loparex? If some fresh capital were to become available, where do you think that first investment would go?

FFCI [00:45:30]: First, you have to do a survey. I've done some of this stuff before. My first thing would be is, how do I finance a new facility or how do I justify a new facility? You can never justify anything on cost, but it just is what it is. I need the space where I know that I'm going to have access to labour. I don't mean cheap labour. That's a different issue, labour period, because I can start making a move, let's use Hammond as an example. I can start trying to move what makes sense out of Hammond to create the site or location where I would also land some of this Iowa City stuff, but I don't want to start touching the Iowa City stuff until I know that I'm solid in that first move.

I'm solid that 10 years from now or 15 years from now, I'm still going to have Labour because we're talking about more of a 10-year plan than a five-year plan is what I'm talking about. I get there, I get the operations going. It's a strategy. I've got a plan to build to. I know where I'm located. I know where I'm relative to. I'm not worried about customers, even though freight is not a big deal, but freight is a big deal coming in, too. I can try to streamline at least the end of it I can control, which is the sourcing side, if best I can, but get that in place, validate your labour situation, everything like that. Then you start looking not just at the Hammond facility, but you start looking at Iowa City, and basically, it's a cascade plan. What products can move, and it's a risk analysis on putting that business up for bid essentially for re-qualification and all that. What portion of Iowa City is not exposed to that because that can move immediately. Could be the same capability. I'm going to replicate a capability that I have in Iowa City for products that are not exposed to management of change.

Then I'd go down there, and then concurrently with all this moving of stuff, is how do I redesign these products? What paper can I use? What paper is more available to us? Is lightweight kraft unbleached? Can I pitch that as a green thing and all that kind of stuff? That's running concurrently while you're also looking at these facility moves to deal with your staffing and your operating cost and operating stability is this, this product redesign business is that how would we build a piece of equipment to use rougher surface paper? How do we offset that? How do we do it in terms of poly exclusion? Will we use clay-coated? There's a bunch of different questions there, but you have to also get out of this situation where you only have two paper machines making all your stuff in the world. Again, it becomes a spider web of thought processes, but you start staging all those out, and those are the things you got to think about. Basic product design has to be evolved. I got to get out of these locations. How do I migrate out? How do I reduce my risk or exposure to things that are currently protected under management of change, blah, blah, blah, all that.

Then, of course, the next question is how do you finance all that because none of that's free. Even though you don't have any debt, you're talking about putting debt back on. Then that's where I look at it, is release liners actually a global business? It isn't. Make a decision, which parts of this you want to keep and which parts do you not. I don't know how much you get for India. I don't know how much you get for the Asia operations, the stuff in China, but the reality is that if I could get something for them to fund resetting the US, which is clearly the biggest piece of what you do, the bigger question is like what would you do with Europe? I'm not a fan of the Europe operations either. Then that Forchheim business is like a separate company. You know what I mean, is this like, do you want to still be in Europe? Europe's margins will never be as good as the US, or Asia's or India's for that matter. You want to battle with all that kind of stuff, and it's the leading edge of all the regulatory things that will cause you problems in terms of margins and all that, and the business obviously just operates slow.

If it was my money, I would focus what's left of Loparex in the western Hemisphere not necessarily US, but it's all US right now. I would sell those other things, start funding some of the stuff. I wouldn't sell them until I had a plan, but I get the plan to restructure the US operations. Then whether you have onshoring or not, doesn't matter. I would restructure those in order to make myself more competitive and everything like that. I think in aggregate, if you can be cost competitive in supply, the release liners business will have a CAGR. It's just, you got to get there.

00:50:33] If Loparex were to rightsize things down the road with the 10-year plan, at what YoY rate would you expect the secular release liner market to grow?

FFCI [00:50:52]: Right now, I would say on a volumes basis, it's negative. On a revenue basis, it's probably up because of the pass-through on inflation and everything. From a volume standpoint, it is when does the dust settle on all this global macroeconomic thing. Again, I'm a bit of an economist, too, but I would say that if we're going to use the GFC as a global financial crisis as an example, we're very comparable to the 2008 timeframe, and we know that that lasted four years, whether this last four years or not, we've seen some aspects of it, but we've also seen a lot of debt spending in public and in private in order to obfuscate the underpinning problems with respect to volumes and moving material. Let's say, 2-4 years is that volumes might not although you might still see pricing and revenue, and in that case, you're just riding the inflation wave. Then legitimate growth would probably come after that. Essentially general market recovery and things like that would come after that, but again, they're paying people a lot more than me to have ideas on that stuff. That's just my read on it.

00:52:09] In terms of the 10-year plan for Loparex – selling off the Asia assets and focusing on the US or North America more broadly – do you have a sense for how much the company might need to invest in the US to nail this and get everything right?

FFCI [00:52:33]: This is the other question is, are you moving stuff or are you building a new one and replacing something? Not all the assets are worth keeping, to be quite honest with you. There may be one asset in Hammond the number three, that's all in one, but blown film lines and all that stuff. A single asset move, and again, this might be dated a little bit, that could be USD 10m-20m, which is a lot. That's a single asset. Now, I don't think you're going to be replacing assets for assets. This is the other piece about that. You've got quite a few assets in both Hammond, and in Iowa City, and you have substantially less assets if you move both those plants to a third location will be substantially less, and so that helps your labour problem and all that, which means that in most cases, you're just replacing these assets. You're building a new one and you're transitioning the products over time. Again, asset strategy on its own, physical location of the plant, what asset types, how much to do all in line, how much to do split because all-in-one commits you to a narrower space of the market vs what flexibility built in.

The whole thing has got to be whiteboarded. I've done it a couple of times, but I have to go back and look at it again based upon where the market is, but I put brain cells to all of that quite a bit, but the expense of moving a facility is on par with building a new one, but whatever that price is at any given time is probably it. The trick for you is not to feel like you have to fill both of them is to get out of the one, however you do that, and that's the justification problem on a CAPEX basis that it's very hard to justify CAPEX on cost savings, but if you're switching products and you redesign the products, then you can't do that on the current equipment that adjust itself. Now, it's retention of business CAPEX.

00:54:44] Of the three major issues that seem to keep coming up – labour, old equipment and an oligopoly of suppliers that own input pricing – how much of the current strain on Loparex do you think came from each?

FFCI [00:55:07]: For a while, the labour was more than half because you can't forecast it. When I say labour problems, we're talking about folks who, "Oh, Bob can't show up because things didn't go well at court yesterday." You understand what I mean? Now, Bob was your best, whether they got DUI or meth, whatever the hell it is, that happened to him, he was one of your critical operators on the night shift, and you can't just replace that body. You're 6-12 months, and the assets got to have two people, and so instantaneous loss of capacity, and it's not half. It's more than that depending upon the asset because the assets, if they can't run, they have to be shut down and restarted. That eats into the other shift, and so labour was a big one. The suppliers are a big one, and that's more around the supply chain instability. That has been as much as half in any given time. The old equipment stuff like that, again, yes, it would rear its head from time to time where something would break and then now you're having to work around it and all that, but when you got a 30-year-old piece of equipment, that happens. The challenge is that when you have 40-year-old piece of equipment, just you're going on eBay to find parts. You're laughing. That happens a lot.

QF [00:56:39]: That certainly doesn't sound like the best way to do it. What does that come down to? Is it upgrading existing machines or spending big on CAPEX to get newer machines?

FFCI [00:56:57]: Yes. It just depends. Again, in some cases, you've got consolidation in a lot of the equipment you have. Those companies don't exist anymore. It's an incompatibility. One of the best examples, which was publicly understood is that they built the new extrusion coater in Apeldoorn right around the COVID period of time. All of a sudden, because of COVID or supply chains and all that, you used to be able to get hundreds of those things even in Europe and then you couldn't find one. It was like the Holy Grail. Those are things that you don't plan for.

It's like, this was built by Byzantine Empire and no one makes this thing anymore, so it has to be custom made and blah, blah, blah, and all that. Gearboxes, I mean, everything you can think of. Any decision, anything new is obviously new. The vendor is still around and all that kind of stuff. 20 years from now, you're having the same complaints about the equipment. That's just an issue of the relative age of your… It's funny, relative age is a problem in both the workforce and the equipment.

00:58:40] How expensive do you think it would be to update Loparex's whole portfolio of sites in the US?

FFCI [00:58:52]: You got to get a site and everything else. It could be USD 250m, maybe more than that. I don't know, but here's the thing is, I would never embark on that without a lot of waypoints in there. Your biggest expense would probably be the initial real estate and the initial facility. You could pare back the facility itself because you've got all the permitting, all this [stuff] that goes along with that. The other thing is, too, is that where you're going to put it? It's not just simply an issue of labour. If you're going to retain solvent, your solvent capability, which you probably would want to do is that that thing is going to have to be permitted for solvents, and so new greenfield, there's a lot of discussion that has to go on. Just as we're on the same page, I looked at brownfield options for relocation, ie, placing them in some of these paper mills that have shut down or in paper mills that we were operating that had already shut down significant portions of the facility because the infrastructure is all there and the material handling is almost identical. That was one of the things like Mobile, Alabama, was a place that I was looking at very closely because there used to be five paper mills down there. There's still a couple of paper mills.

Savannah was another one, adjacency to port and all that kind of stuff. Not simply just buying, you could do a brownfield thing, but that's going to take a little bit of work. Again, you got to have somebody knows what they're doing. That could defray it some, but then you're paying rents and all those kind of things. That would be an option. You could have shared site services and things like that, but to just build a new facility and locate it, you have to deal with permitting. If you put on a brownfield site, you have to check their permitting and then help them with the permitting and all that kind of thing, but there's several different ways to get there, but if there's a way, I probably thought of it, but again, the planning aspects of this, even for the initial phases, are going to take some time.

QF [01:01:08]: We will conclude the Interview there. I appreciate the time. This has been an insightful and interesting conversation.

FFCI [01:01:28]: All right. Thanks.

QF [01:01:30]: All right. Thanks. Have a good one.

Transcription ends at 01:01:31 of the recorded material