Limited wood supply demands innovative thinking, CEO says.Before, when a forestry company wanted to increase its profitability, it simply went out and cut more logs. That might have been the case years ago, but now it is a completely different story, says Tembec president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Frank Dottori. That is why Tembec is hoping to move forward with a plan to switch its Kenogami mill from a regular sawmill sawmill, installation or facility in which cut logs are sawed into standard-sized boards and timbers. The saws used in such an installation are generally of three types: the circular saw, which consists of a disk with teeth around its edge; the band saw, which to a finger-joint mill. That is, as soon as there is some resolution to the current softwood softwood Timber obtained from coniferous trees (mainly of the pine and fir families). With the exception of bald cypress, tamarack, and larch, softwood trees are evergreens. lumber lumber, term for timber that has been cut into boards for use as a building material. The major steps in producing lumber involve logging (the felling and preparation of timber for shipment to sawmills), sawing the logs into boards, grading the boards according to issue-an issue that has to date cost Tember $150 million in duties paid to the American Department of Commerce. "We're trying to get maximum value out of every tree because there is only a limited amount of wood that's available," says Dottori. "You've heard me say over the past 10 years there has to be a reduction in the business on the sawmill side because there are just too many sawmills and not enough logs." It is a simple question of mathematics, he says. While 100 per cent of the value of wood might have come strictly from milling lumber, that value is likely to drop as the amount of available wood begins to drop. As a result, the company in the future might be receiving 90 per cent or less value from lumber; the best way to make up the difference is through a "value-added" approach. "How do you do that? You have to make new value-added products," he says. "For instance, 'shorts' are sold at a discount. Well, if you can finger-joint them and put them together, you've created a value-added product. The problem is, in Northern Ontario Northern Ontario is the part of the province of Ontario which lies north of Lake Huron (including Georgian Bay), the French River and Lake Nipissing. Northern Ontario has a land area of 802,000 km² (310,000 mi²) and constitutes 87% of the land area of Ontario, although it , everyone wants a finger-joint plant and there's only room for one or two. The single best place in this region to put it is in Kenogami, partly because it addresses a social issue (jobs). At the same time, the facilities are there and it is a central location to get all these 'shorts' from this region." Finger joints have the advantage in being an "engineered" product since every piece of finger-jointed lumber would have to be stress tested before it goes to market. It is also straighter and is a "better product" because the joints are often stronger, says Dottori, and the wood is less prone to bending. "We think it's a good project. It's just a question of having the money to go forward," he says. He estimates going to finger-joint production in Kenogami would cost between $5 million and $7 million. The project has been worked on for the last three years with a business plan already developed and contracts signed with suppliers. [ILLUSTRATION OMITTED] The plan was originally to curtail cur·tail tr.v. cur·tailed, cur·tail·ing, cur·tails To cut short or reduce. See Synonyms at shorten. [Middle English curtailen, to restrict the milling operations and go into finger-joint production. The curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. of operations in August of 2002, due in part to market restrictions brought on by the softwood lumber issue and a lack of financing to begin finger-joint production, created a "big political issue" and the milling operation has since been restructured and started up. "There is not enough wood to maintain the mill," says Dottori. "The long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. goal is to maintain the jobs there by moving into finger-joint or other products so we can maintain those jobs." He says current high lumber prices have made operating Kenogami at least a breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations operation and the goal is to try to maintain the 40 milling jobs there for at least another year. But the company is hoping to move into the value-added sector as soon as possible, which would employ about 50 or 60 people at the mill. Dottori says the company would also like to make an investment in modernizing its Chapleau operation to increase its productivity and decrease its costs. The company has some strategic meetings planned for the second week of May that should result in some decisions by the fall. Of course, the industry would like to see resolution of the softwood lumber dispute first. "If this thing (softwood lumber issue) would disappear and we could get an agreement, then we could start making plans for the future," says Dottori. "In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , we're being very cautious and not doing very much." www.tembec.ca By ANDREW WAREING Northern Ontario Business Northern Ontario Business is a Canadian magazine, which publishes monthly in Greater Sudbury, Ontario. The magazine covers business news and issues in Northern Ontario. |
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