::The Center for Paper Business and Industry Studies::

060801 Deutsche Bank Report - COMPANY ALERT - MeadWestvaco

Deutsche Bank - Equity Research

MeadWestvaco {Ticker: MWV.N, Target Price: USD 38, Recommendation: Buy}.

Disappointing. Pointing to = $0.13. DB @ $0.17 and FC @ $0.24.
Comps: 1Q06 = $0.02, 2Q05 = $0.24. Before warning- DB=$0.32.
Pos's: price/mix in pkg, specialty chem's. Neg's: high costs,
performance issues, weak vols in COP. See to stronger H2.

Pkg. Lackluster. EBIT = $88MM, 1Q06 = $60MM, 2Q05 = $96MM. SBS
vol's +3% q/q, -3% y/y reflects machine shuts, CNK vol's +8% q/q,
+3% y/y. Prices: SBS = +$18 y/y, CNK $40/ton price hike coming
slow. Backlogs 3-4 wks & costs are up, but they're struggling on
price? NA Beer pkg is soft spot. Cons. pkg vol's mixed: media is
soft. Charleston op. issues cont, Rigesa impacted by strong Bz
currency.

Cons/Office Prods. Weak. EBIT = $17MM, 1Q06 = $(5)MM, 2Q05 =
$33MM. Floods & later back-to-school ship's hurt vols. July vols
up double-digit %. Despite anti-dumping, lower-end suffering from
imports - - - when will this issue play out? No mention of higher
paper costs.

Specialty Chemicals. Nice Rebound. EBIT = $19MM, 1Q06 = $9MM, 2Q05
= $14MM. Prices catching costs, but margins still well below normal
levels.

Other: (1) Cost savings initiative: Target now $175-200MM/yr by
12/31/07. Current run-rate = $83MM. $90-100MM of costs to achieve
savings. (2) Calmar accretive in '07, CF accretive now.
We're “from Missouri” on links w/ existing cons. pkg, (3) no comment
on asset sales - - -we think Charleston sale is close & that they
are examining land options. Hard to see how COP fits.

View? Unchanged. Maintain “tepid” Buy. Interesting strategy;
operational & financial execution are issues. '06 goes from $1.15
to $0.95 (3Q = $0.42), '07 goes from $1.90 to $1.50.

060731 Deutsche Bank Report - Paper & Forest Products

Deutsche Bank - Equity Research

LUMBER
The Random Lengths composite price slipped another $6/mbf to
$302/mbf last week. The 10-yr cyclical low was a price of $265/mbf
in November of 2002. Avg. variable costs for US mills were about
$270/mbf and most CN mills had variable costs slightly under
$200/mbf. While a rising CN$ would have flattened the NA cost
curve, British Columbia mills are dealing with yrs worth of "beetle
kill" wood and mills across NA continue to focus on using lower-
cost, small diameter logs. One other issue weighing on the market:
uncertainty about the US/CN lumber deal.

MARKET PULP
Still tight. Producers easily implemented July's $30/mton hike on
NBSK. The "list" price is now $750/mton. Prices rose globally and
on all pulp grades. BSK inventories plummeted to 24 days while
hardwood inventories were unchanged at 33 days-both historically
low. World shipments were up 8.2% y/y in May, led by a surge in
shipments outside of North America, particularly on hardwood
grades. On the supply side: 2 more NBSK mills in Canada with 282K
mtpy of capacity will shut this month, a deal for Neenah's shuttered
Terrace Bay mill appears close, and Chile's CMPC suggesting that
start-up of 780K mill expansion will be delayed into Q4.

UNCOATED FREE SHEET
Market remains healthy. However, no one has followed Weyerhaeuser's
recently announced $40-60/ton hike on offset & opaques. By some
estimates, 1.7MM tons of NA capacity has been shut since 2003, with
a good portion of that coming in 2006. While imports are rising,
they are less than 3% of total NA consumption. Global operating
rates are close to 90% and forecasted to rise. We expect some UFS
combination of WY w/ Domtar or Boise 'sometime this summer.'

060731 Deutsche Bank Report - Paper & Packaging

Deutsche Bank - Equity Research

MWV well along in selling big Charleston linerboard mill? We think
PKG is among lead bidders. We believe C'ton mill will fetch $400-
$450MM. It isn't clear what MWV is doing w/ 400,000/acres of low
country timberland.

Why wouldn't they raise prices??? Costs are surging, supplies are
tight & nonintegrated mills are reporting EBITDA breakeven figures.
Yet, no other producer has followed WY's $40-$60/ton hike
announcement on uncoated white paper.

2Q paper & pkg earnings have been modestly positive. C'board
producers are finally getting price. In flexible packaging, BMS &
PTV did well, SEE was disappointing. In containers, BLL had solid
#'s & positive H2 outlook, OI was moderately disappointing. This
coming week: IP, MWV & DTC all report on Tuesday.

060730 Deutsche Bank Report - CSAR's Q2 in 100 Words

Deutsche Bank - Equity Research

Caraustar {Ticker: CSAR.OQ, Closing Price: USD 7.29, Target Price: USD 7.00, Recommendation: Hold}.

* In-Line

In-line. Reported GAAP EPS of $(0.28). Net of specials, looks like
$0.11. DB @ $0.10 & FC @ $0.11. Comps: 1Q06 = $(0.03) & 2Q05 = 0.10.
Pos: Higher T&C prices, lower energy costs. Neg: Higher fiber costs,
weaker results at PBL.

* Other Issues?

(1) Interest expense in 3Q should fall $2.1MM, based on redemption
of senior sub notes. (2) Energy & freight should be slightly lower
in 3Q, based on hedging. (3) T&C and custom packaging groups
combined into a new converted products group.

* We are reducing our target price on Caraustar from $9 to $7

In connection with this change, we are also cutting our estimate of
Caraustar's Peak EPS from $2.50 to $1.50 and cutting our estimate of
Normalized EPS from $1.50 to $0.90. The primary reasons for these
changes are the recent divestitures of the company's coated recycled
paperboard mills, contract manufacturing operations, and the 50%
interest in the Standard Gypsum joint venture. The rising trend in
recycled fiber costs also hurts the company.

* Valuation/Risk

Our target price assumes that CSAR would trade at 1.8x book, 5.0x
peak P/E, and 7.8x normalized P/E. We use the peak/normalized ratio
because paper & packaging co's are cyclical and this comparison
allows for appropriate valuations throughout the cycle. These ratios
are modestly below group averages, but we think that this is
appropriate given CSAR's high level of financial leverage and the
soft fundamentals in most of CSAR's businesses. Risks: Caraustar's
leveraged balance sheet is an issue. Although we do not see a
default as likely in the foreseeable future, we expect leverage will
pressure the company in lean times.

060727 Deutsche Bank Report - PKG Has Become A Different Story. Is It Still a Good Story?

Deutsche Bank - Equity Research

Packaging Corp {Ticker: PKG.N, Closing Price: USD 22.92, Target Price: USD 27.00, Recommendation: Buy}.

* The investment thesis on PKG has changed.

Is it still interesting? For years after Packaging Corporation of
America went public in 2000, investors were reminded that “we're a
consolidatee, not a consolidator.” However, times have changed and
industry dynamics have shifted. PKG could emerge as a consolidator
in the North American containerboard market. We think well-executed
acquisitions could add a “new leg” to the PKG story.

* Potential acquisitions include "orphan" containerboard mills/box
operations.

Owners of “orphan” assets include Boise, Longview, and MeadWestvaco.
PKG has done an excellent job of managing its cashflow and balance
sheet over time. While a large mill acquisition would mark an
apparent shift in direction, it could prove interesting for
shareholders.

* We think the best looking orphan is MWV's Charleston, SC mill.

We believe the mill is currently being auctioned and that PKG is
among a very limited school of suitors. The intriguing thing about
Charleston is that it is a good asset, stranded within a struggling
company, and being sold at a time when most big competitors are
focused elsewhere.

* Valuation/Risk

The target implies a 5.5X EV/EBITDA multiple based on Peak EBITDA
and 8.1X multiple based on Normalized EBITDA. While these ratios
represent modest premiums to the sector, we feel that the premiums
are justified by the company's low-cost position and strong balance
sheet. Risks include fluctuations in industrial activity and
potential spikes in input costs, such as energy, pulpwood, and
wastepaper costs. Currency exchange rates also pose a risk because
of their impact on trade flows.

060727 Deutsche Bank Report - Bowater's 2Q in 100 words

Deutsche Bank - Equity Research

Bowater {Ticker: BOW.N, Closing Price: USD 20.10, Target Price: USD 20.00, Recommendation: Hold}.

* In-line qtr.

Reported EPS net of special items of $(0.31). DB @ $(0.29), FC @
$(0.31). Comps: 1Q06 = $(0.21), 2Q05 = $(0.05). 2Q benefited from
64% tax rate. 35% rate would have yielded loss of $(0.56). However,
2Q also hit by $30MM of nonrecurring maintenance/conversion/closure
costs as well as a $16MM q/q hit from C$.

* View?

Tough qtr, but it was hit by several non-recurring issues. With
rising prices and far less non-recurring costs, 3Q may (finally) see
positive EPS. Longer-term issues remain: falling newsprint
consumption, strong CN$ & higher input costs. No change to annual
estimates: '06 remains $(0.20) [3Q = $0.07], '07 remains $1.25.

* Lowering target price

We are maintaining our Hold rating but cutting our target price from
$28 to $20. The primary reasons for these changes are the persistent
strength in the CN$ and the rapidly declining trend in newsprint
consumption. The weak lumber market also hurts on the margin.

* Valuation/Risk

Our target price implies 4.3x Peak EV/EBITDA and 5.7x Normalized
EV/EBITDA. These ratios are about in-line with group averages, and
we think this is appropriate. The primary risks involve strength in
the economy, the secular decline of newsprint demand, potential cost
pressures, the US$/CN$ exchange rate, and the high debt level.