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Currencies lift Europeans up the Solutions! Top 10 list.

The paper industry's global Top 10 highlights some recurring themes, but optimism is high that 2004 will prove to be the turnaround year.

Weak demand featured prominently in the Annual Reports for 2003. Around the world, the picture was much the same as pulp and paper companies struggled with weak demand and softening prices, although some dealt with the situation better than others as restructuring and cost-cutting proved to be the order of the day.

Currency movements also made an impact as the U.S. dollar weakened, particularly against the Euro. Several groups reported some positive effects as the lower dollar rate helped reduce the competitiveness of imports into the United States, but the result was less good for European multinationals reporting in Euros, who saw their North American revenues dropping over the year.

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The top three remained the same as last year: International Paper (1), Georgia-Pacific (2) and Weyerhaeuser (3) all reported improved profits for the year. Although Stora Enso's (4) turnover declined in Euro terms in 2003, the result in dollar terms pushed the group into fourth place above Kimberly-Clark (5). UPM-Kymmene (6) and SCA (7) also climbed up the league table from last year on the back of a stronger Euro, while the top two Japanese companies, Oji Paper (8) and Nippon Unipac (9) maintained similar positions to the previous year.

A reorganization of Proctor & Gamble's (10) business segments made it even harder to calculate a figure that sensibly reflects true pulp, paper and converting sales, since several major brands moved to different divisions. However, it is interesting to note that the strengthening Euro pushed another European company a little closer to the Top 10 list. Even with the currency effect of a stronger Euro, M-real is still a little off the running. But the Finnish pulp and paper group's parent company, Metsaliitto, would add Botnia, Metsa Tissue and FinnForest's results to the total mix, which would put Metsaliitto at the number 8 spot in the Top 10. Editor's Note: The Top 10 list is based on net sales of pulp, paper, paperboard and converted products. Any use of $ sign stands for U.S. currency unless otherwise noted. Conversions to U.S. dollars are as of May 7, 2004.

1. International Paper

www.InternationalPaper.com

400 Atlantic Street

Stamford, Connecticut 06921 USA

Telephone: +1 203 541-8000

Chairman and CEO: John Faraci

Pulp, Paper & Converting Sales: $25.2 billion

Profile: International Paper is the largest company in the global paper industry operating a wide range of pulp, paper and packaging and converting plants, as well as merchanting companies, wood product facilities and specialty chemicals plants. The group is active in practically every part of the forest products supply chain, boasting a presence across Europe, Asia, Latin America, South America and Canada in addition to the USA. International Paper (IP) owns, manages, or has harvesting rights to some 19 million acres of forestland around the globe, including approximately 10 million acres outside the United States.

Products: IP's output stretches across a broad range of product lines, including pulp, fluff pulp, coated and uncoated printing and writing papers, specialty papers, diapers, sanitary napkins, containerboard, bleached packaging board, converting and specialty industrial papers. Lumber and other forest products account for a major part of the product mix alongside, distribution and specialty chemicals.

Corporate Review: John Faraci took over the chairman's role in November 2003 on the retirement of John Dillon. In his first year presenting the group's 2003 annual report, he was able to announce the company's first profitable year since 2000, citing a net profit of $302 million after the previous year's loss of $880 million. Underlying profit showed a slight decline though, as earnings before income tax, minorities and extraordinary items registered at $346 million versus $371 million the previous year. Sales remained roughly stable at $25.18 billion, compared to $24.98 billion in 2002.

According to Faraci, weak demand and lower prices combined with higher energy and raw material costs to blunt the effect of the company's restructuring plans, which are designed to boost efficiency going forward.

The chairman has also stated that the company is aiming for further growth in the emerging markets of Eastern Europe, Latin America and Asia, noting that North America will decline as a proportion of the group's sales.

Faraci also believes that 2004 should offer some better prospects in terms of demand, while a weaker U.S. dollar should help boost exports and restrict competition from imports.

2. Georgia-Pacific Corp.

www.GP.com

133 Peachtree Street

Atlanta, Georgia 30303 USA

Telephone: +1 404 652-4000

Chairman and CEO: Pete Correll

Pulp, Paper & Converting Sales: $20.2 billion

Profile: G-P is among the largest producers of tissue products in North America, in addition to holding significant positions in markets in Europe and elsewhere. The group is also a major player in the North American containerboard market, as well as operating large-scale businesses producing and distributing building products.

Products: Georgia-Pacific operates across four principal business areas: tissue and disposable tabletop products such as toilet tissue, napkins, paper plates etc; container-board and packaging; bleached pulp and paper; and the production and distribution of building products, including various industrial wood products, lumber and gypsum board.

Corporate Review: Last year saw Georgia-Pacific continue to face up to some serious challenges, with indebtedness and asbestos issues at the forefront of management's agenda. The group headed off a liquidity crisis with a bond offering and sold off pulp mills in Mississippi and Georgia. However, markets were still sluggish, U.S. commercial construction was slow and energy and wastepaper costs were higher. On the other hand, structural wood products saw soaring prices in 2003 due to supply shortage as residential housing starts climbed.

The 2002 sell-off of G-P's 60% stake in Unisource meant that group sales were lower in 2003. But after some debt restructuring, the company managed to turn in a positive result in terms of net profit at $254 million versus a $735 million loss the previous year.

G-P's North American Consumer Products division saw sales and profits dip as some machines were shut, but the International division reported higher sales and profits, much of which can be attributed to currency effects.

Packaging is set to face further challenges this year through a combination of higher energy and raw materials costs, but sales prices could be looking up and the prospects for bleached pulp and paper look better after showing losses in 2003. Building Products reported a much better year, particularly with plywood and OSB price rises, and the Building Distribution unit also fared better. Needless to say, the group's focus remains on cost cutting and debt reduction and G-P will be watching interest rates closely.

3. Weyerhaeuser Corp.

www.Weyerhaeuser.com

PO Box 9777

Federal Way, WA 98063-9777 USA

Telephone: +1 253 924-2345

Chairman, President and CEO: Steven Rogel

Pulp, Paper & Converting Sales: $19.9 billion

Profile: Weyerhaeuser is one of the largest pulp and paper companies in North America. The group owns or leases more than 42 million acres of forestland, the majority of which is located in Canada. As well as growing, harvesting and distributing forest products, the company controls some 2.9 million metric tons of pulp capacity and almost 10 million metric tons of paper and containerboard capacity.

Products: 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 collection system.

Corporate Review: Weyerhaeuser's sales climbed by 7% to $19.9 billion in 2003. The company spent much of last year digesting the Willamette acquisition and trying to reduce the company's debt burden, both of which were successful, according to Chairman Steven Rogel. The group reported synergy gains of $300 million on the Willamette acquisition and managed to pay down more than $1 billion in debt over the year with various restructuring and asset disposals, including the sale of 444,000 acres of timberlands and the closure of 12 manufacturing facilities.

The company reported better demand and prices for pulp in 2003, and a weaker dollar helped the group's competitiveness. However, uncoated freesheet remained sluggish and with softer demand for boxes, significant market-related downtime was a continuing feature throughout the year. The combination produced an operating loss of $82 million for the pulp & paper unit against a numerically similar profit in 2002. Containerboard, Packaging and Recycling also saw lower sales prices in 2003. On a positive note, timber demand remained strong in 2003 and OSB produced a healthy contribution to the group's net profits.

4. Stora Enso

www.StoraEnso.com

PO Box 309

FIN-00101

Kanavaranta 1, Helsinki, Finland

Telephone: +358 2046 131

CEO: Jukka Harmala

Pulp, Paper & Converting Sales: Euro 12.2 billion ($14.5 billion)

Profile: According to recent figures, Stora Enso is now the world's largest paper and paperboard producer by capacity. The integrated forest products group has employees in more than 40 countries spread across five continents and boasts over 15.7 million metric tons/yr of paper and board production capacity. Stora Enso's main market is still Europe, but North America, Latin America and Asia are all in the group's portfolio.

Products: The group is divided into three reporting units--forest products, paper, and packaging. The main product groups consist of graphic and office papers, newsprint, packaging boards and wood products. Most of the production capacity is located in the Nordic countries and Europe. North America accounts for 17% of global capacity and with the Veracel pulp project underway, Latin America is likely to have a greater prominence in the future.

Corporate Review: Despite depressed selling prices practically everywhere, Stora Enso managed to increase volumes in each business segment. Net profit was also positive for 2003 at Euro 147 million ($185 million), but operating profit dropped in each segment as weak demand and a sliding dollar hit the results. Currency effects meant that overall Stora Enso's sales declined sharply in Euro terms, hitting Euro 12,172 million in 2003 compared with Euro 12,783 million the previous year. Cash flow hedging helped reduce the impact on profits.

According to the company, demand stayed slack in 2003, hitting results. The group ratcheted up efforts to boost profitability with several strategic investments, including the startup of a new newsprint machine at Langerbrugge in Belgium and a green light for the Veracel pulp mill project in Brazil. Despite cash injections for new projects, more US jobs will be cut as the group aims to reduce its workforce to 5000 by the middle of 2005.

The company forecasts better demand and pricing for its publication and fine paper grades as 2004 progresses. Stora Enso also pleased the markets with news that it planned to disburse half the group's profits in dividends over the business cycle.

5. Kimberly-Clark Corp.

www.Kimberly-Clark.com

351 Phelps Drive

Irving, Texas 75038 USA

Telephone: 800 639-1352

Chairman and CEO: Thomas Falk

Pulp, Paper & Converting Sales: $14.3 billion

Profile: Kimberly-Clark is among the world's largest hygiene products groups, with a raft of internationally recognizable brands in the K-C portfolio.

The company is focused on the hygiene sector and organized into three business segments--personal care, consumer tissue and business-to-business. Personal care accounts for the most profitable segment, with an operating margin in excess of 7.6%, followed by consumer tissue (5.8%) and business-to-business (4.7%). The group and its equity companies have manufacturing facilities in 38 countries, selling products in more than 150 countries.

Products: Kleenex, Huggies, and Kotex feature among a long list of major brands that Kimberly-Clark is responsible for bringing to consumers around the globe. The personal care division manufactures and markets disposable diapers, training and youth pants, feminine and incontinence care products and related ranges. 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, wipers and napkins for the away-from-home market. Healthcare products such as surgical gowns, drapes, infection control products and sterilization wraps are part of this division, which is also responsible for printing, business and specialty papers.

Corporate Review: Wal-Mart became an ever more important customer for Kimberly-Clark as the group increased sales by 6% in 2003 to $14.3 billion. But even as sales were galloping along, operating profit dropped off slightly by 2% over the year. Currency effects helped the group and higher volumes helped offset slightly weaker sales prices, according to the group.

In the personal care segment, volumes and prices remained largely stable at the global level, although the United States performed better than Europe in volume terms. Global consumer tissue sales climbed 4%, while currency movements compounded the effect into a 8.4% gain in sales. Business-to-Business also saw healthy volume increases over the year, leading to a 5.8% jump in sales after some favorable currency effects were added into the numbers.

Kimberly-Clark also consolidated some international positions. The company kicked off the first quarter of 2003 with the acquisition of Klucze Poland. The group followed that by taking up an additional 49% of Kimberly-Clark Peru and the remaining 50% interest in its Brazilian joint venture, Klabin Kimberly.

6. UPM-Kymmene Group

www.UPM-Kymmene.com

Etelaesplanadi 2

PO Box 380

FIN-00101 Helsinki, Finland

Telephone: +358 204 15 0020

President and CEO: Jussi Pesonen

Pulp, Paper & Converting Sales: Euro 9.9 billion ($11.8 billion)

Profile: UPM is a global pulp and paper producer with production facilities active in 16 countries and an extensive sales network comprising more than 170 sales and distribution companies. It is also the world's largest producer of magazine papers by volume. The company recently shortened its name from UPM-Kymmene to UPM.

Products: The company operates five main business areas. Magazine papers accounted for 32% of the company's turnover (sales) in 2003, with fine and specialty papers making up 22% of the total and most of the remainder coming from wood products (15%), converting (13%) and newsprint (12%).

Corporate Review: Cautiously optimistic is how UPM's new CEO, Jussi Pesonen, describes the outlook for 2004. 2003 was a different story though, characterized by lower sales prices and adverse currency movements. On the plus side, UPM was successful in stripping out costs and with the aid of reasonably strong cash flow, managed to bring down the gearing ratio to 67% from 76% in 2002.

UPM kicked off 2003 with the closure of two paper machines at the Blandin mill in the United States, but followed that up over the year with rebuilds at its Rauma and Miramichi mills and the startup of a new deinking plant at Shotton in the UK. The company has also decided to move ahead with the construction of a new fine paper machine at the Changsu mill in China, where work got underway in the summer.

However, U.S. authorities blocked UPM's proposed acquisition of MACTac's pressure sensitive business.

Editor's Note: Due to space limitations, analysis for the following companies has been moved online at www.tappi.org. Click on Solutions! and go to Online Exclusives, June 2004. Click on "Top 10"

7. Svenska Cellulosa Aktiebolaget (SCA)

www.sca.se

Box 7827, SE-103 97

Stockholm, Sweden

Telephone: +46 8 788 51 00

President and CEO: Jan Astrom

Pulp, Paper & Converting Sales: SEK 85 billion ($11.1 billion)

Profile: SCA is Europe's largest tissue producer. The group produces a broad variety of hygiene products, which account for around half the company's total sales. Packaging solutions and publication papers are also big earners; but the packaging group is the second largest segment, contributing around 35% of turnover. Germany, the UK and the United States are the company's top markets, with France, Sweden and Italy following behind. SCA was Solutions! magazine's Company of the year in 2003 (see June 2003 issue for a profile of SCA).

Products: Consumer items such as handker-chiefs, toilet tissue, feminine hygiene and baby diapers provide the largest proportion of the company's revenues. However, packaging solutions such as specialty packaging generate significant returns in addition to the company's publication papers, including LWC, SC and newsprint. Pulp, solid wood products and timber help make up the remainder of the group's turnover.

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8. Oji Paper

www.ojipaper.co.jp

Giza 4-7-5 Chuo Ku

Tokyo 104-0061 Japan

Telephone: +81 3 3563 1111

President and CEO: Shoichiro Suzuki

Pulp, Paper & Converting Sales: Yen 1,213 billion ($10.8 billion)

Profile: Oji Paper is one of the largest Asian pulp and paper producers. The integrated producer is particularly active in the Japanese market, but it also boasts forest interests totaling 143,000 hectares around the globe and imports some 3.6 million BD tonnes of chips back into Japan.

9. Nippon Unipac Holding

www.nipponunipac.com

1-12-1 Yuraku-cho, Chiyoda-ku,

Tokyo, Japan

President and CEO: Takahiko Miyoshi

Telephone: +81 (0)3-3218-9300

Pulp, Paper & Converting Sales: Yen 1,165 billion ($10.4 billion)

Profile: Nippon Unipac is the holding company created by the integration of Nippon Paper Industries and Daishowa Paper Manufacturing in 2001. It is Japan's largest papermaker and holds large market shares in the domestic market particularly.

10. Procter & Gamble

www.PG.com

One Procter & Gamble Plaza

Cincinnati, Ohio 45202 USA

Telephone: +1 513 983-1100

Chairman and CEO: Alan Lafley

Pulp, Paper & Converting Sales: $9.9 billion

Profile: Procter & Gamble is one of the world's largest and fastest moving consumer goods companies, reporting consolidated sales of $43.4 billion in 2003. The company employs almost 100,000 people in 80 countries around the globe and boasts 13 "billion dollar brands." Its major tissue and towel brands include U.S. market leading Charmin and Bounty.

JIM KENNY, CONTRIBUTING EDITOR

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 +32 2 534 4960, or by email at jim.kenny@dsinow.com.
COPYRIGHT 2004 Paper Industry Management Association
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Title Annotation:Top 10 Paper Companies
Author:Kenny, Jim
Publication:Solutions - for People, Processes and Paper
Geographic Code:1USA
Date:Jun 1, 2004
Words:3040
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