Appleton and VCP win 2005 Company of the Year Award.

While Appleton and Votorantim Celulose e Papel have similar annual sales volumes (close to US$ 1 billion each) they represent two very different, and very intriguing aspects of the pulp and paper industry.

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Appleton is based in Appleton, Wisconsin, USA and operates in four business segments: coated solutions; thermal and advanced technical products; security products; and performance packaging. While Appleton retains its traditional carbonless paper business, it is developing new paper products and products outside the traditional paper industry. It is also owned by its employees.

Appleton operates a pulp and paper mill at Roaring Spring, Pennsylvania, a paper mill with recycling operations at West Carrollton, Ohio; a converting plant at Appleton and a capsule plant at Portage, Wisconsin. Appleton has four wholly-owned subsidiaries. C & H Packaging and American Plastics are in Merrill and Rhinelander, Wisconsin, respectively. New England Extrusion has operations in Turners Falls, Massachusetts, and Milton, Wisconsin. BemroseBooth is in Derby, England, and has manufacturing sites in Derby, Hull, and Teesside.

Votorantim Celulose e Papel (VCP), Sao Paulo, Brazil has relentlessly pursued growth in its primary business, market pulp, while maintaining progressive environmental and social policies that help create a better future for its workers and Brazilian society. VCP's new mills produce pulp on a massive and highly economic scale. It is re-writing the rules of the market pulp industry and building a highly competitive business structure based in the latest pulping technology and equipment.

VCP is owned by Grupo Votorantim--one of the largest private industrial groups in Latin America. The Company has integrated operations and produces wood from its own eucalyptus forests for both cellulose and paper production. Its pulp mills are located in Jacarei and Luiz Antonio, and its paper mills in Piracicaba and Mogi das Cruzes. All of the mills are in the State of Sao Paulo, Brazil.

These are some of the reasons why these two outstanding companies have been named co-winners of the Solutions! Magazine 2005 Company of the Year Award. (Editor's Note: the Company of the Year Award is determined by a vote of the Solutions! Editorial Board. The ballot for Company of the Year is determined by nominations by individual members of the Solutions! Editorial Board.)

WITH CORE MARKETS IN DECLINE, APPLETON REINVENTS ITSELF

The following is an interview with Bill Van Den Brandt, manager, corporate communications for Appleton.

SOLUTIONS! What are the prospects for Appleton's carbonless segment?

VAN DEN BRANDT: Carbonless paper is an extraordinary product that Appleton helped introduce in 1954. What started as a niche product transformed the business forms industry. Fifty-one years later, carbonless paper continues to play an important role in communicating business information. But just as carbonless paper used revolutionary technology to improve the processing of business information, new and competing technologies such as laser, inkjet, thermal, voice and data that do not use impact printing to create images have decreased market demand for carbonless paper over the past 10 years. We estimate that the U.S. carbonless paper market declined by approximately 10% in 2000 and by approximately 8% percent annually from 2001 through 2004, and will decline at a compound annual rate of approximately 9% between 2005 and 2009.

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However, the long-predicted arrival of the paperless office has not materialized. There have always been good reasons to use carbonless paper. It's convenient, clean, confidential, mobile, recyclable and cost effective. One of the reasons carbonless paper continues to play a role in communicating business information is that we have adapted it to new applications such as an array of digital and electronic equipment. Digital carbonless paper is ideally suited to produce on-demand multipart forms such as medical forms, credit applications, invoices, routing and packaging slips, and purchase orders via high-speed digital and laser printers.

There are many people who simply prefer the look, feel, convenience, mobility and security of a printed carbonless form.

SOLUTIONS! What are the prospects for the "new products" segment, such as security products?

VAN DEN BRANDT: We are focused on serving customer needs in all four of our business segments. We are the world's largest producer of carbonless paper and North America's largest thermal product producer. While demand for carbonless products continues its expected decline, our thermal business is growing due to accounts gains, our new product developments and general economic growth.

Our security business produces products with basic security features that make them resistant to forgery and counterfeiting. From that foundation, we are building a portfolio of products that incorporate security technologies including watermarks, taggants, embedded threads and fibers, and machine-readable technologies. We focus on checks, business and government documents, and the brand protection market.

In December 2003, we acquired BemroseBooth, located in the United Kingdom, to gain greater access to international security product markets. BemroseBooth is a leading provider of "mission critical" secure and specialized print services. BemroseBooth's products include security printed vouchers and payment cards, mass transit and car parking tickets, variable data labeling, high-integrity mailing and printed promotional products.

In April 2003, we purchased C & H Packaging (Merrill, Wisconsin) and American Plastics (Rhinelander, Wisconsin) to enter the performance packaging market and leverage our expertise in coating applications and microencapsulation. C & H Packaging prints and converts flexible plastic packaging materials for companies in the food processing, household, and industrial products industries. American Plastics produces high-quality, custom multilayered films and commercial packaging.

In January 2005, we acquired New England Extrusion (Turners Falls, Massachusetts, and Milton, Wisconsin), a company that produces single and multilayer polyethylene films for packaging applications. New England Extrusion's polyethylene films complement the high barrier coextruded films American Plastics produces. By sharing their capabilities, American Plastics and New England Extrusion will be able to expand their abilities to design and produce film products with customer-specified properties.

SOLUTIONS! Appleton is expanding into the relatively new markets of packaging, brand protection, digital products, and labels through development efforts and acquisitions. How important are these new markets to Appleton and how does the company plan to develop them?

VAN DEN BRANDT: Since we expect that demand for our primary product, carbonless paper, will continue to decline, we must use our ideas and resources to serve new markets while continuing to provide the best product quality, service and value to our existing customers. We continue to diversify our business into segments such flexible packaging, security products and an expanding thermal business. We believe that a diverse and growing Appleton is a more reliable long-term supplier to all our customers than a company focused only on a declining product.

Our progress has been encouraging. Net sales for Appleton for fiscal 2004 were US $990 million compared to US $861 million for fiscal 2003. That represents a 15% increase in net sales--a milestone for Appleton since our annual revenue has been declining since 1997 as a result of the declining carbonless business. In 2004, growth from acquisitions as well as increased sales from our existing growth businesses more than offset the decline in our carbonless business.

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SOLUTIONS! Since November 2001, Appleton has been 100% employee-owned (through one of the largest employee buyouts ever). How does this ownership structure affect how the company is operated?

VAN DEN BRANDT: We gained ownership, control, and responsibility for our company's future when we became its owners on November 9, 2001. We bought the company to grow it and increase the value of our investment. So far we have been successful at doing both because we are focused on as serving customers and providing value to them.

The spirit of ownership is not new at Appleton. We were encouraged to think and act like owners long before we actually owned the company. Employee ownership helped bring that commitment to a new level. In the first 100 days of ownership, we focused on helping employees understand that each of our jobs impacts the overall value of our company. What we as employees do on a daily basis affects our company's results. Recognizing that fact and having a line-of-sight to the company's bottom line is an ongoing factor in our success.

SOLUTIONS! Appleton has embraced Customer Focused Quality (CFQ) as a means for meeting or exceeding customer expectations. How does this business approach work in practical terms?

VAN DEN BRANDT: We have had a quality improvement process in place for nearly 20 years. In 1991, we focused the process and branded it as Customer Focused Quality. CFQ is our operating philosophy and it makes all employees responsible for meeting or exceeding customer expectations (both internal and external customers) in all aspects of every transaction with our company. While Appleton has many skills and technologies with which to serve markets, we recognize that CFQ is critical to our business growth because it is a strong and common link to meeting customer needs.

SOLUTIONS! How did the company handle the transition from retiring Chairman, President and CEO Doug Buth to incoming President and CEO Mark Richards?

VAN DEN BRANDT: Mark Richards joined Appleton as president and chief executive officer on April 4. Doug Buth continued as chairman of the board until his retirement on May 31. In his role as chairman, Doug actively supported the board of directors, Richards and the company's management team to ensure a smooth transition and continued focus on our customer service and growth objectives. Mark brings a broad range of experience with multinational businesses, a proven record for launching new products and achieving business growth, and strong financial management skills. He is a great team builder with a passion for helping employees and customers succeed.

VCP SAYS "SIM" TO EUCALYPTUS, "SIM" TO SOCIAL RESPONSIBILITY

The following is an interview with Jose Luciano Duarte Penido, CEO of VCP.

SOLUTIONS! VCP had record 2004 revenue of US$ 1 billion, up 23% from 2003, including a 43% increase in pulp exports for the 4th quarter '04. What are the factors behind this strong growth trend?

LUCIANO DUARTE PENIDO: The year 2004 was a period of consolidation and maturation for VCP's recent capital investments, totaling approximately US$ 1.4 billion over the past four years, including the acquisition of a stake in Aracruz Celulose S.A. in 2001. VCP has been improving in both scale and productivity by running modern industrial units, increasing wood production, and alternating its product mix. These factors have enabled the Company to strike a balance between the various segments of the domestic and export markets, in addition to generating earnings and maintaining a solid financial position.

The world's macroeconomic scenario suggests that demand for eucalyptus pulp will grow, meaning that our plants will be operating at full capacity. Because Brazilian eucalyptus pulp producers are cost efficient, our participation in the global market should also increase as the pulp and paper industry undergoes a process of consolidation.

This performance is also made possible by VCP's flexibility in responding to shifting market requirements. The ability to alternate positions depending on the level of demand from domestic and offshore customers continues to prove that VCP can neutralize potential cyclical effects that might negatively affect a specific segment, market or currency.

In its 15 years of existence, VCP has laid a foundation for sustainable growth through:

* Solid financial position

* Leading products

* Modern plants with new technology

* Competitive costs

* Investments in R & D (forestry, pulp & paper)

* Liquidity in the capital market

* Good corporate governance practices

* Integrated Management System

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SOLUTIONS! What are the goals of VCP's investment program, including the rebuild of the Jacarei mill completed in 2003, and the joint acquisition with Suzano Papel e Cellulose of Ripasa S/A?

LUCIANO DUARTE PENIDO: For the first time in VCP's history, the Company has prepared a strategic plan for a relatively long period of 15 years, or two eucalyptus growth cycles. We call this VCP Vision 2020. This plan came out of the development of VCP's management model and is based on four main pillars: Knowledge Management, Talents, Leadership, and Benchmarking. SIG--our Integrated Management System--is aligned with the values of the Votorantim Group (VCP's parent company) and with the new guidelines for sustainable growth, social responsibility, and value generation.

To sustain VCP's future growth in pulp production, the Company has approved capital investments in forestry assets, including land acquisition, planting of eucalyptus forests close to our mills in the State of Sao Paulo, and the implementation of a new VCP forest reserve in the south of Rio Grande do Sul (possibly including the north of Uruguay), where the Company already has 61,000 hectares of property. Also, after the rebuild of the Jacarei mill, completed in 2003, new capital expenditures are already planned to optimize it. This should expand the mill's annual capacity to 1.1 million metric tons of pulp by 2007 while producing production cost savings and environmental improvements.

VCP and Suzano's acquisition of a controlling stake in Ripasa S/A Celulose e Papel, completed on March 31, 2005, has the following aims:

* Management and corporate governance of Ripasa

* Stockholding restructuring

* Development of a consortium-based model

* Operational synergies

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This transaction is an important step for VCP's consolidation in the world pulp and paper market. It confirms our leadership position in the domestic market for papers and increases our competitiveness as one of the lowest-cost producers of pulp.

SOLUTIONS! VCP's forestry operations have has been certified by Forest Stewardship Council (FSC) and VCP has an ISO 14000 certification for its environmental program. VCP has also worked closely with environmental organizations at the Jacarei mill. Why has VCP chosen to exceed (not just meet) its environmental goals?

LUCIANO DUARTE PENIDO: VCP understands that FSC and ISO 14001 are complementary certificates for forestry operations: ISO 14001 is used to organize environmental management efforts, while the FSC seal--which was specifically created for this business activity--regulates the entire process of forest management, in addition to ensuring that VCP will honor its commitments with the communities adjacent to its forestlands. Furthermore, VCP will continue to achieve standards of excellence higher than those required for FSC and ISO 14001 certification because our survival depends on environmental and social responsibility.

SOLUTIONS! Institutional Investor ranks VCP as the top Latin American forest products company. How does the company achieve strong growth and remain focused on its financial goals?

LUCIANO DUARTE PENIDO: We are trying to reduce costs, boost productivity, develop risk management, foster innovation and consolidate customer relationships, while also investing more in our staff and in research & development. In other words, VCP is preparing for new opportunities. The goal is to generate more value for VCP's stockholders by expanding the business, achieving excellence in performance and profitability, and improving the company's technological capabilities and products while ensuring a minimum return of 3% to 4% above the weighted average cost of capital (WACC).

SOLUTIONS! VCP has the "More Life Program" to promote health and life quality for all VCP employees and their families. How does this program work and what have been the results?

LUCIANO DUARTE PENIDO: We are fully aware that working in large corporations within a highly competitive and globalized environment contributes to a significant increase in stress levels. As professionals take on extra responsibilities, submit to more demands, and lead an excessively sedentary life, they increase their risk of cardiovascular disease, diabetes and high blood pressure. VCP has developed +Vida [+Life], a program designed to protect the health and improve the quality of life of its professionals.

+Vida (More Life: +Vida is intended to enhance the agility, effectiveness, and productivity of our organization, while reducing the costs of medical care and improving the atmosphere in the workplace based on a more wholesome family environment. It is expected to contribute to a favorable corporate image among other benefits.

+Vida has become an umbrella term for a variety of initiatives segregated into the following subprograms:

+Saude [+Health]: This subprogram focuses on prevention and on efforts to determine what it takes to be healthy. It includes particular actions for specific campaigns, such as: biochemical testing and individual lifestyle analysis, campaigns against AIDS, cancer, breakbone fever, malnutrition, stress, influenza, etc.

+Familia [+Family]: The focus here is on family participation because a person's wellbeing depends largely on the well-being of those who are part of his or her life. +Familia includes educational events for the employees' children and family members, e.g. the talk titled "Quality of Financial Life."

+Cultura [+Culture]: +Cultura encourages the practice of cultural activities through partnerships with museums, theaters and other entities. VCP believes that knowledge is a personal asset and cultural activities are effective stress relievers.

+Movimento [+Movement]: Activities such as physical exercise at work, sports, leisure and other options can add vitality to our everyday lives. In a week dedicated to this program, suggestions are made to help employees change their routines, which may lead to long-term health benefits.

The result of all these efforts is measured through a KPI named Health Performance Indicator that considers three factors: Coronary Risk Factor, Physical Activity Index, and Body Mass Index.

WHAT YOU WILL LEARN

* Why Appleton and VCP have been chosen co-winners of the 2005 Solutions! Company of the Year Award.

* How Appleton is expanding beyond the traditional confines of the pulp and paper industry.

* Why VCP has matched its relentless drive for scale in pulp production with an equally impressive commitment to environmental performance and social responsibility.

ADDITIONAL RESOURCES

* Articles on past winners of the Company of the Year Award: Stora Enso, 2004; SCA, 2003:

* "Stora Enso looks forward to a resurgent 2004," by Jim Kenny, Solutions!, June 2004. To access this article, type the following Product Code into the search field on www.tappi.org 04JUNSO31.

* "Solutions! Company of the Year: SCA," by Jim Kenny, Solutions!, June 2003. Product Code: 03JUNSO30.