New name, new vision for Mondi's office papers: a reorganization of Anglo-American's pulp and paper assets has created a new vehicle within Mondi and adds greater transparency to the paper division.

Anglo-American, one of Europe's major papermakers, now has a new name and a new look as CEO Gunther Hassler is charged with leading the reorganized Mondi Business Paper. The group merges the Neusiedler business headquartered in Austria with Mondi Fine Paper's assets in South Africa--primarily forests, the Richards Bay pulp mill and the Merebank paper mill near Durban.

The changes are part of a broad-based reorganization at Mondi, which has also seen the group's packaging business consolidated into a new group called Mondi Packaging. According to Hassler, the changes make sound business sense. "Principally, the rebranding move was a logical step in the long-term development of the group," he said. "It wasn't done simply because Mondi gained control of 100% of Neusiedler three years ago. It was really more about the fact that we've tripled the turnover (sales) of the company in the last five years. We're now a truly international player and it makes sense to operate under a global umbrella."

As Hassler explained, the groups were already working closely together, sharing innovations, management processes, and so on. As a result, the new organizational structure should help reinforce the positive aspects of the cooperation that was already there. Even so, Neusiedler was a venerable and well-respected brand in itself, so the decision to change could not be taken lightly.

"The reaction from employees and business partners was positive the more they understood where we were coming from, and we've proven the step was right as people can now easily see that we belong to a strong company within a very strong group," Hassler said. "Neusiedler being outside that would not have helped and even though we've changed the name, we have not changed the values--that's the most important message to get across."

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DOWN TO BUSINESS

With the reorganization all but completed, Hassler now has to get on with the business of doing business. Neusiedler had a particularly strong position in Austria and Eastern Europe, but Mondi Business Paper brings together all the group's paper mills and associated assets from Austria, Hungary, Israel, Slovakia, Russia, and South Africa. As a result, Mondi Business Papers has a capacity of approximately 2 million metric tons/yr of office papers.

The group has actively developed these assets. For example, at the Ruzomberok mill, where Mondi owns 50% along with the Slovakian company, Eco-Invest, the group can now count on truly international quality output from the plant. A EUR 240 million investment program was completed at the mill in the autumn of 2004 and PM 18 now has a capacity of 290,000 metric tons/yr of office papers, compared with 100,000 metric tons/yr originally. The 1400 m/min machine boasts a host of new equipment at almost every point, from the headbox through to the slitter-rewinder.

In Russia, too, the group has upgraded the Syktyvkar mill and is looking closely at other options. And according to Hassler, there could well be more expansion to come elsewhere. "I think there is still plenty of organic growth potential. We will add capacity and we will increase our market shares," he said.

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Given that the group is already active in so many international markets, the "obvious" gaps were--until recently--China and the United States. However, that has changed with the opening of sales offices in Shanghai and Norfolk, Virginia. This suggests that the company is certainly interested in looking more closely at these markets, but Hassler would not elaborate about how the group intended to proceed from here.

"In North America, we now have a sales office, but it's a very demanding business environment for them at the moment, especially with the Euro/dollar exchange rate," said Hassler. "China is also very interesting, although of course we're not really going into the commodity sector, but rather we're looking at the specialty paper ranges. In both cases, we're learning a lot more about doing business in those regions, but we don't want to champion anything until all the dynamics of the business environment like sales and distribution are well understood by us."

For the moment, Hassler plans to leverage Mondi BP's organic growth potential and has "quite well defined targets" for those. In addition, he is obviously hoping to investigate good opportunities for further expansion as they come along. "Definitely, staying still is not an option for us. We will be watching closely for new opportunities as they appear, even in Russia and Eastern Europe, although we're quite happy with what we have there already. What we have to see is how we develop our position and we'll look at all our alternatives to expand."

SIMPLE MESSAGE

Clearly, Mondi BP's long term future is likely to see the group expand even further around the globe, but Hassler is also keen to ensure that the company performs in the short term as well. His message sounds straightforward--he says he simply wants to outperform the competition year by year. But in practice, that will mean a lot of tight financial control and keeping a close eye on every strategic investment.

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"We're not focused on any particular growth target like turnover and we have no vision of becoming a 10 million tonne company," he explained. "We're much more interested in qualitative growth as outlined in our new vision, 'Pushing the Limits,' which means we have to have a high regard for the quality of service, people and culture. It's really about doing the very best we can with the asset base that we have."

Internal controls are one thing, but of course, there is very little that Mondi BP can do about international market conditions. Here, the broad consensus seems to be that things may be looking up a little for 2005, but Hassler remains somewhat cautious.

"In principle, I agree that we may enjoy a bit of a better business environment [in 2005], but personally I'm not getting too optimistic, especially in our sector," he said. "The demand might be there, but we're still seeing operating rates of 89-90% and until we get up to 93-94% we won't get the kind of upward price pressures we need."

Hassler also pointed out that, with a strong Euro, imports from South East Asia could also help dampen prices, so the main aim for Mondi BP is to ensure that the group's assets are cost-competitive. "Basically, we're preparing ourselves for another difficult year, concentrating on where we can influence our own costs and if it turns out that demand accelerates and prices move, we'll be in a good position to benefit from that," he explained. So if 2005 does prove to be positive in terms of demand and pricing as several analysts are forecasting, then Year One at Mondi Business Paper could be a sound introduction for the new group.

WHAT YOU WILL LEARN:

* Why Mondi has opted to drop the Neusiedler name.

* How the company is reorganizing the paper and packaging group.

* Where the company is aiming for future growth.

ADDITIONAL RESOURCES:

* www.mondibp.com.

* www.mondi.co.uk.

* www.angloamerican.co.uk.

JIM KENNY, CONTRIBUTING EDITOR, EUROPE

ABOUT THE AUTHOR

Jim Kenny is contributing editor/Europe for Solutions! magazine, and is based in Brussels, Belgium. He is the former vice president of editorial for Paperloop and today heads his own company, DSI. Contact him by phone at [phone], or by email at [e-mail].

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