The world's top paper companies face tough year: last year was characterized by geopolitical uncertainty and difficult markets, making life tough for the world's top managers.The world's top 10 paper companies all faced tough market conditions last year. Prices were under pressure across the board and continued economic weakness continued into 2003. But the business of doing business must go on. Interestingly, some companies have managed to exploit their competitors' weaknesses in these difficult times and, as all executives know, it is the tough times that really provide the acid test of whether the management team is up to the task of creating a world-beater or just doing what is required until the market cycle turns in their favor. (The Top 10 list is based on net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of pulp, paper, paperboard and converted products.) 1. International Paper www.internationalpaper.com 400 Atlantic Street Stamford, CT 06921 USA +1 203 541 8000 Chairman and CE0: John T. Dillon John T. Dillon, retired chairman and chief executive officer, president and chief operating officer and executive vice president – packaging of International Paper (paper and forest products). Prior to his appointment as Chairman and CEO, Mr. Pulp, Paper & Converting sales: US$ 25.0 billion Profile: International Paper operates a broad range of pulp, paper, and packaging and converting plants, as well as wood product facilities and specialty chemicals plants. The group is a truly global player and is active in Europe, Asia, Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , and Canada, in addition to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . IP owns significant forestlands in the United States and Brazil, as well as controlling licenses, forest management agreements, and harvesting rights on government-owned timberlands in Canada and Russia. IP has a 50.5% interest in Carter Holt Harvey Carter Holt Harvey is an Australasian forest products company, with significant interests in wood products, pulp, paper and packaging. The company employs approximately 10,500 people across Australasia. , a New Zealand-based forest products company. Products: Given its size, IP covers almost every product line in the business, producing pulp, fluff pulp, a broad range of coated and uncoated printing and writing papers, specialty papers, diapers, sanitary napkins, containerboard, bleached packaging board, etc. Converting and specialty industrial papers also feature on the company's products list. Forestland for·est·land n. A section of land covered with forest or set aside for the cultivation of forests. is a significant part of the group's operations and the group is active in producing wood products such as pine lumber, plywood, engineered wood products, and utility poles. Distribution also forms a major part of the business through IP's xpedx company and other groups its Europe, and while IP operates a number of specialty chemicals plants. Corporate Review: Last year saw IP's sales decline for the third straight year. At US$ 24.98 billion, 2002 sales were down 5.3% on the previous year and close to 1999 levels. It was a tough year for IP on the net earnings side too, as the company showed a loss of US$ 880 million on the year, slightly down from the US$ 1.2 billion loss witnessed in 2001. However, EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). was positive, unlike 2001, and much of the 2002 deficit was attributed to items such as goodwill impairment and restructuring costs. Clearly, capacity reductions and divestments helped cut back sales levels and draw in much-needed cash for the group. But lower prices also played a part in the 2002 loss against the backdrop of a weak economy. IP itself notes that a relatively strong dollar also helped dampen export sales. Given the divestments and restructuring, it appears that IP is making some progress in getting the business back on track after some poor performances in the past. However, the group still Faces some daunting daunt tr.v. daunt·ed, daunt·ing, daunts To abate the courage of; discourage. See Synonyms at dismay. [Middle English daunten, from Old French danter, from Latin challenges on profitability given the size and complexity of the firm and a generally soft world economy is not going to do the group any favors going forward. 2. Georgia-Pacific Corp. www.gp.com 133 Peachtree Street Peachtree Street is the main north-south street of Atlanta, Georgia. The city grew up around this one street, and many of its historical and municipal buildings are or were located along it. Atlanta, GA 30303 USA +1 404 652 4000 Chairman 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. : Pete Correll Pulp, Paper & Converting Sales: US$ 23.3 billion Profile: Georgia-Pacific's four principal businesses are broken down into six operating segments--North America consumer products, international consumer products, packaging, bleached pulp and paper, building products manufacturing, and building products distribution. Georgia-Pacific is one of the foremost producers of tissue paper products, disposable tableware, structural wood panels, and industrial wood panels in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . It also has leading market positions in wood bonding and industrial thermosetting resins, gypsum gypsum (jĭp`səm), mineral composed of calcium sulfate (calcium, sulfur, and oxygen) with two molecules of water, CaSO4·2H2O. It is the most common sulfate mineral, occurring in many places in a variety of forms. wallboard, lumber products, containerboard, corrugated cor·ru·gate v. cor·ru·gat·ed, cor·ru·gat·ing, cor·ru·gates v.tr. To shape into folds or parallel and alternating ridges and grooves. v.intr. packaging, market pulp, and paper (uncoated free-sheet). G-P G-P Gel'fand - Pinsker (channel code) is heavily involved in the building products distribution business as a leading wholesale supplier in the United States, as well as producing paper chemicals and tall oil-based chemicals. Products: The company's business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets cover a wide range of products, with the manufacture of tissue products such as bath tissue, paper towels, and napkins featuring strongly. Disposable tabletop products such as cups, plates, and cutlery represent another significant segment. G-P is also heavily involved in the containerboard and packaging markets, and produces bleached pulp and paper products such as market and fluff pulp, paper, kraft, and bleached board. The group manufactures and distributes building products such as plywood, oriented strand board Oriented strand board, or OSB, or waferboard, or Sterling board (UK), is an engineered wood product formed by layering strands (flakes) of wood in specific orientations. , and various other industrial wood products, as well as softwood and hardwood lumber. Nonwood products--including gypsum board, chemicals, and other products--also feature in the group's product portfolio. Corporate Review: As for many others, 2002 was a troubled year for G E A serious debt problem, asbestos liabilities, and weak cash flows all contributed to the company's difficulties. The group sold off its 60% controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail in Unisource to an affiliate of Bain Capital Bain Capital LLC is a Boston, Massachusetts-based private equity firm founded in 1984 by Mitt Romney, the former Governor of Massachusetts, and two other partners from the consulting firm Bain & Company: T. Coleman Andrews III and Eric Kriss. , but a plan to split the company in two had to be abandoned after disappointing operating results in G-P's two principal businesses and because of market worries over the group's asbestos liability exposure. The group took a US$ 350 million charge to earnings in 2002 alone in relation to its potential asbestos exposure. Over the course of the year, G-P's shares crashed by more than 40%, hitting even more disastrous lows along the way. However, the group did manage to get away a bond offering at the beginning of this year, slightly easing liquidity concerns among investors. Needless to say, the group's current focus is on cost cutting and debt reduction and G-P has very limited room for strategic maneuvering. 3. Weyerhaeuser Co. www.weyerhaeuser.com P.O. Box 9777 Federal Way, WA 98063-9777 USA +1 253 924 2345 President and CEO: Steven Rogel Pulp, Paper & Converting Sales: US$18.5 billion Profile: Weyerhaeuser Co. is primarily a North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. group with just 18% of its sales derived from outside the United States. The main elements of the business involve growing and harvesting timber and manufacturing and distributing forest products, but the group has sizeable interests in real estate development and construction. Products: The company manages some 8 million acres of commercial forestland and has further long-term licenses on almost 35 million acres of forestland located in five provinces throughout Canada. Weyerhaeuser's wood products businesses produce and sell softwood and hardwood lumber, plywood, veneer, oriented strand board, panels, engineered lumber products, and treated products. The pulp and paper businesses cover pulp, coated and uncoated papers, business forms, and bleached board. In addition, Weyerhaeuser produces a wide range of containerboard and other packaging and operates an extensive wastepaper waste·pa·per n. Discarded paper. collection system. Corporate Review: The big news for Weyerhaeuser last year was the completion of the Willamette Industries acquisition. This helped push consolidated net sales up to US$ 18.5 billion--an increase of 27% on 2001. (Note: the real estate division contributed US$ 1.75 billion to net sales.) The company's operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 5.7% in 2002, up from 5.2% in 2001, but the company did report weaker selling prices for many products for the year. As such, net earnings in 2002 stood at US$ 241 million. The Willamette acquisition generated a sizeable jump in interest expense, so debt reduction is likely to remain the company's priority for the medium term. Added to that, 2002 results are studded with charges relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the deal and for a number of plant closures. However, the group did make a significant gain on the sale of 115,000 acres of timberlands in western Washington
Western Washington is a region of the United States defined as that part of Washington west of the Cascade Mountains. . In the pulp and paper segment, gross margins were down from 10.4% to 8.3% reflecting the tough business environment. In addition, box prices declined and OCC OCC See: Options Clearing Corporation OCC See Options Clearing Corporation (OCC). prices climbed in 2002. Weyerhaeuser made strides in productivity and, long term, the company will almost certainly make steady progress. But there is no doubt a weak market for many of its products and that means the group faces another tough, competitive environment in 2003. 4. Kimberly-Clark Corp. www.kimberly-clark.com 351 Phelps Drive Phelps Drive is a street in the city of Brampton, Ontario. Next to it is Major William Sharpe Park. It also intersects with multiple streets, Burgby Avenue, Worth Avenue, and Fincham Avenue. Irving, TX 75038 USA Chairman and CEO: Thomas Falk Pulp, Paper & Converting Sales: USS USS abbr. 1. United States Senate 2. United States ship USS abbr (= United States Ship) → Namensteil von Schiffen der Kriegsmarine 13.6 billion Profile: Kimberly-Clark is one of the largest hygiene products groups in the world. It is organized into three business segments personal care, consumer tissue, and business-to-business. Personal care accounted for some 37% of consolidated net sales in 2002, while the consumer tissue segment represented another 37% and business-to-business the remainder. The group and its equity companies have manufacturing facilities in 42 countries and their products are sold in more than 150 countries. Kimberly-Clark's sales are mainly derived from the North American market (63%), but Europe is also an important market (18%). Asia, Latin America, and others make up the remaining sales total. Products: Among other things, the personal care division manufactures and markets disposable diapers, training and youth pants, feminine and incontinence care products, and related products. Products in this segment are primarily for household use and are sold under a variety of brand names, including Huggies, Pull-Ups, Kotex, Lightdays, and Depend. Kimberly-Clark's consumer tissue segment manufactures and markets facial and bathroom tissue, paper towels and napkins for household use, wet wipes, and related products. Brand names include Kleenex, Scott, Cottonelle, Viva, Andrex, and Scottex. The business-to-business unit manufactures and markets facial and bathroom tissue, paper towels, wipes, and napkins for the away-from-home market. Healthcare products such as surgical gowns, drapes drape v. draped, drap·ing, drapes v.tr. 1. To cover, dress, or hang with or as if with cloth in loose folds: draped the coffin with a flag; a robe that draped her figure. , infection control products, and sterilization sterilization Any surgical procedure intended to end fertility permanently (see contraception). Such operations remove or interrupt the anatomical pathways through which the cells involved in fertilization travel (see reproductive system). wraps are part of this division, which is also responsible for printing, business, and specialty papers. Corporate Review: In June 2002, the corporation exercised an option to purchase the remaining 45% of Kimberly-Clark Australia from Amcor in a US$ 390 million deal, extending the group's global position. The move helped contribute to the 5% gain seen in sales volumes in 2002. However, net selling prices decreased some 2%, primarily due to higher promotional spending in North America in the personal care and consumer tissue segments. As a result, net sales rose just 2.1% on 2001. Within the business segments, personal care sales were down 1.1%, despite volume growth of over 3% as competition grew fiercer across the sector. The recession in Argentina hit this part of the business, although Asia did better. In consumer tissue products, sales rose 5.7% as volumes climbed sharply with the Scott towels, Cottonelle, and Scott bathroom brands doing well. In business-to-business net sales grew by 1.4% and volumes increased by nearly 3%, with healthcare and professional businesses doing well. A weak US economy did hit the North American printing and technical paper businesses though. Clearly, Kimberly-Clark has some great brands, but it remains very. much a North American player. It will be interesting to see whether the new chairman goes for greater geographic diversity in the future. 5. Stora Enso
www.storaenso.com Stora Enso Oy P0 8ox 309, FIN-00101 Kanavaranta 1, Helsinki Finland +358 2046 131 CEO: Jukka Harmala Pulp, Paper & Converting Sales: US$ 13.4 billion Profile: Store Enso is an integrated forest products company with employees in more than 40 countries spread across five continents and some 15 million metric tons/yr of paper and board production capacity. Stora Enso's main market is Europe, which accounts for 70% of sales, followed by North America (19%) and Asia Pacific (8%). Products: The company produces a broad range of magazine papers, newsprint, fine papers, packaging boards, and wood products, but publication and fine papers make up the majority of the group's sales. Most of the production capacity is located in the Nordic countries and Europe, although North America now accounts for a sizeable 18% of global capacity. Corporate Review: Store Enso's markets were plagued by weak demand and geopolitica] uncertainty throughout 2002. As a result, competitive pressures forced the company into production curtailments to avoid excessive inventories. Impairment charges in North America, t weakening U.S. dollar, and divestments all contributed o a fall in return on capital employed Return on capital employed (ROCE) Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). from 10.8% to 7.1% in 2002 (before non-recurring items). Net sales were down 5.4% in 2002 at EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 12.783 billion as average prices decreased across all product areas, although sales volumes increased slightly in most product areas, except newsprint and, to a lesser extent, in fine paper. As a result, operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. (excluding nonrecurring items) stood at EUR 926 million--a decrease of 38% on the previous year. The group's net loss for the year was EUR 222 million as the company's North American unit was bit by well over 1 billion euros worth of impairment charges. The outlook for this year is a little better. Demand for advertising-driven papers in Europe is stable, although at low levels. However, prices are still under some pressure due to oversupply o·ver·sup·ply n. pl. o·ver·sup·plies A supply in excess of what is appropriate or required. tr.v. o·ver·sup·plied, o·ver·sup·ply·ing, o·ver·sup·plies . Office papers look slightly better and packaging boards and wood products are expected to remain relatively stable, but prospects in he company's North American business may offer some hope of a more positive outlook. Global geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. uncertainty remains a worry for the group though. 6. Procter & Gamble www.pg.com One Procter & Gamble Plaza Cincinnati, OH 45202 USA +1 513 983 1100 Chairman and CEO: Alan Lafley Pulp, Paper & Converting Sales: US$ l1.9 billion Profile: Procter & Gamble is one of the world's powerhouses in terms of fast-moving consumer goods consumer goods Any tangible commodity purchased by households to satisfy their wants and needs. Consumer goods may be durable or nondurable. Durable goods (e.g., autos, furniture, and appliances) have a significant life span, often defined as three years or more, and . The company achieved record consolidated sales of US$ 40.2 billion around the globe in 2002, up 3% on the previous year. The company is reasonably well diversified globally with sales in North America (57%), Europe, Middle East and Africa (26% altogether), Asia (10%), and Latin America (7%). Products: For the purposes of this study, we have concentrated on P&G's baby, feminine, and family care business segment, which covers diapers, wipes, tampons, pads, liners, and tissue/towel, among other products. Within the paper industry, P&G controls some major brands in the hygiene sector, including Bounty, Charmin, Always, and Pampers Pampers is a brand of disposable diaper (or nappy) marketed by Procter & Gamble worldwide. Product information Diapers Pampers Diapers come in sizes going all the way up to Size 7. . Corporate Review: After tough times at the turn of 2000, P&G as a whole has been clawing its way back up across its markets in recent times, easily outperforming the S&P500 over the past two years. The baby, feminine, and family care division delivered strong earnings last year, driven by volume growth and extensive cost reductions. Family care and baby care accounted for a 3% increase in unit volumes, although net sales for the year were down 1% to US$ 11.88 billion. This was partly a result of exchange rates, although price declines were a factor in a very competitive market. The best news for the division was that net earnings rose 11% to US$ 1.17 billion on the back of a restructuring program targeting product and overhead cost reductions. On the family care side, volumes were even better--up 7%--as the North American Bounty and Charmin businesses did well. 7. UPM-Kymmene www.upm-kymmene.com UPM-Kymmene Group Etelaesplanadi 2 PO Box 380, FIN-00101 Helsinki Finland +358 204 15 111 President and CE0: Juha Niemela Pulp, Paper & Converting Sales: US$ 11.0 billion Profile: UPM-Kymmene is a global pulp and paper producer with production facilities active in 17 countries and a network of over 170 sales and distribution companies. Products: The company focuses on magazine papers, newsprint, fine and specialty papers, converting materials, and wood products. Magazine and fine papers account for 54% of turnover (sales), with newsprint, converting, and wood products taking near equal shares of the remainder. Corporate Review: Like its peers, UPM-Kymmene was confronted by weak market conditions in 2002 and price pressure across the board. The group took significant downtime as paper mills operated at less than 90% of capacity. There was a slight uptick in demand in the second half of the year, but the company is not at all optimistic that conditions will improve sufficiently to spark a revival in the economy as a whole, or in the crucial area of print advertising. UPM-Kymmene increased sales, but earnings were down by more than 40%. The acquisition of four paper mills from the German company Haindl at the end of 2001 helped boost sales. The company is expected to focus on reducing its 76% debt-to-equity ratio debt-to-equity ratio The relationship between long-term funds provided by creditors and funds provided by owners. A firm's debt-to-equity ratio is calculated by dividing long-term debt by owners' equity. Both items are shown on the balance sheet. (at year end 2002) and strengthen its balance sheet. UPM-Kymmene was in the news recently after U.S. authorities tried to block the US$ 420 million acquisition of the pressure-sensitive materials business, MACtac. The company has vowed to tight the decision. Recent investment projects include the expansion of the Pietarsaari pulp mill A pulp mill is a manufacturing facility that converts wood chips or other plant fiber source into a thick fiber board which can be shipped to a paper mill for further processing. , a new deinking plant for Shotton, and modernizations of Rauma's LWC LWC Lindsey Wilson College (Kentucky) LWC Liquid Water Content LWC Lightweight Coated paper LWC Language of Wider Communication LWC Lincoln-Way Central LWC Lost Workday Case LWC Leave Word Calling LWC Light Weight Concrete machine (PM 1) and Jamsankoski's label paper machine (PM 3). The company has also decided to build a new paper machine at the Changshu fine paper mill in China. In the medium term, the company faces subdued markets and overcapacity in several main product grades. The general outlook remains stable. Editors Note: Profile and analysis for the following companies is online at www.tappi.org. Click on Solutions! and go to Online Exclusives, June 2003. Click on "Top 10." 8. Nippon Unipac Holding www.nipponunipac.com/e 1-12-1 Yuraku-cho, Chiyoda-ku, Tokyo, Japan President and CE0: Takahiko Miyoshi Pulp, Paper & Converting Sales: US$ 10.2 billion 9. Oji Paper www.ojipaper.co.jp Oji Paper Giza 4-7-5 Chuo Ku Tokyo 104-0061 Japan +81 3 3563 1111 President and CEO: Shoichiro Suzuki Pulp, Paper & Converting Sales: USS 10.1 billion 10. Svenska Cellulosa Aktiebolaget Svenska Cellulosa Aktiebolaget (SCA) is a Swedish pulp and paper manufacturer and consumer goods company. It has approximately 50,000 employees and a turnover of approximately 100 billion SEK (10 billion euro). (SCA (Single Connector Attachment) An 80-pin plug and socket used to connect peripherals. With a SCSI drive, it rolls three cables (power, data channel and ID configuration) into one connector for fast installation and removal. ) www.sca.se SCA Box 7827, SE-103 97 Stockholm, Sweden +46 8 788 51 00 President and CEO: Jan Astrom Pulp, Paper & Converting Sales: US$ 10.1 billion |
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