Paper tiger.

The Bowater Inc. that Arnold M. Nemirow joined as president and COO in September 1994 was a very different firm than exists today. Poorly organized and bloated with costs, the fourth-largest maker of newsprint and other papers in North America had emerged from one of the worst downturns in the paper industry laden with debt. "The debt-capital ratio was more than 50 percent, which, in a cyclical business is pretty dangerous," notes Nemirow, who came to Bowater from the CEO post at Wausau Paper Mills, where he led that company to a strong performance during a time of tumbling paper prices and a shrinking newsprint market.

Although paper prices rebounded shortly after he joined Bowater, the company itself still struggled on a number of fronts. "There were clearly lots of people around who were not gainfully employed," recalls Nemirow, who wasted no time in taking action, launching in January 1995 an initiative that would sell off non-core assets and slash both the staff and the debt. "I did that sequence more or less intuitively, because I didn't have a checklist," he says. "I took a cup of coffee and then a few stiffer beverages, and then said, 'We've got some problems here.'"

Nemirow trimmed headcount from 5,500 at year end 1995 to 5,000 by the end of 1996 and divested Bowater's forms business to focus on primary markets - newsprint, coated papers, and pulp. Next, he began a program to buy back 10 percent of common stock. He retired $300 million of the company's $1.1 billion of long-term debt in that first year, as well as $100 million of preferred stock. Bolstered also by a fortuitous paper price hike, Bowater enjoyed record revenues and profits during 1995, with sales climbing to $2 billion, a 26.4 percent hike from their level when Nemirow joined the company. Profits also rebounded, leaping to $246.9 million from a loss of $4.8 million in 1994.

The Bowater board promptly rewarded this success by promoting Nemirow to chief executive in March of 1995 and to chairman a year later. Peer recognition followed, with PaperAge, a trade magazine, naming him Papermaker of the Year in 1996 - the first to be so honored twice; he'd also won in 1994 while at Wausau.

By 1996, Bowater was well-positioned to weather the storm when prices began to slip again, causing sales last year to drop to $1.72 billion, with profits of $200 million. Despite the downturn, Bowater is holding strong - winning a rash of recommendations from Wall Street last fall. In the first quarter of 1997, the company 14 million shares, completing the buyback program launched in 1995. Long-term debt now stands at $460 million, for a debt-to-equity ratio of 37 percent. "In this business, you have no control over price, so you work on what you can control, such as costs, debt structuring, and capital investment," says Nemirow.

Looking back, Nemirow sees these changes easing the company toward the economic value added (EVA) program it plans to adopt in 1998. "The cultural change we're going through now is that management is becoming more focused on ROI," he explains. "In 1996, we tied our management bonus to returns on new capital projects and achieved returns in excess of 20 percent - well above the cost of capital.

"EVA will institutionalize the things we're doing and get them away from just my program to a well-tested, successful program that's run by a lot of companies," explains Nemirow, "and frankly, one more sophisticated than what we've been doing."

A former division manager at Great Northern Nekoosa Corp., which later merged with Great Northern Paper, Nemirow has also fragmented Bowater's organization to more closely resemble the division management structure of GNN, a move he refers to as "traumatic, but necessary." "Part of the divisionalization is getting out there and staying tuned to the market," he asserts, noting that as a commodity business, the paper industry makes customer focus a necessity. "You can lose business for being a dollar off, unless you have some value added."

Although he's been in the paper chase for more than 20 years, Nemirow came into the industry through a side door. Trained as a lawyer, he joined the legal staff of Great Northern in 1974, where he climbed the ranks from within. "As the corporate lawyer, I knew everybody's secrets, so they had to make me a manager," he jokes.

Drawing from his lengthy tenure in the paper industry, Nemirow shrugs off Bowater's first quarter 1997 losses of 8 cents per share as the tail end of last year's cyclical shift, saying, "We think we hit the bottom of the cycle in the first quarter."

This year, with a strong balance sheet and paper prices expected to rise, he is looking overseas for growth. "We opened an office in Singapore in order to look into the opportunities we see in Asia," he says. "There's a good chance that we will be in a joint venture there by year-end."

PROFILE

ARNOLD M. NEMIROW Chairman, President and CEO BOWATER INC.

Age: 54

Birthplace: Hartford, CT

Family: Wife; Sharon; four children: Matthew, 27; Adam, 24; Kathryn, 19, and Robert, 17.

Education: BA, Harvard, 1966; JD, University of Michigan Law School, 1969.

Leadership Style: "I like to form a consensus, but if it doesn't form deeply enough or soon enough, I make a decision. Management by committee is not a recipe for success."

First Job: Digging ditches for the state highway commission. "We were measured by how far we thew the dirt from the shovel. It was a real motivator - it taught me that I really wanted to stay in school and have a profession."

Leisure Time: Downhill skiing.