Consolidation changes the shape of the Top 150

by Rhiannon James, Caroline Jewitt, Laura Galasso and Genevieve Fortemps

Tables (gold access ) The Million Tonners’ club Top 150 by corporate size Top 150 in alphabetical order Top 150 by region The Top 150

The results from this year's Top 150 paint a clear picture of the changing face of the global pulp and paper industry. Merger and acquisition (M&A) activity has removed some of the usual names from the list and served to boost other producers even higher up the ranking. International Paper (IP) takes the golden crown once again and hangs on firmly to first place on the list, but there are new faces in the #2 and #3 positions. Georgia-Pacific (G-P) has shot up from tenth to second place, and that is even before the company's figures are combined with those of Fort James. It is worth noting, though, that a hefty chunk of G-P's income in 2000 came from its acquisition of Unisource Worldwide. Before the deal with G-P in mid-1999, Unisource was North America's largest independent distributor of printing paper.

The other newcomer to the three-tier podium, and also a newcomer to the Top 150, is Procter & Gamble (P&G). G-P and P&G may have claimed sliver and bronze in the Top 150 prize giving, but one glance at the figures reveals that there is still plenty of ground to make up before either company can present any real threat to IP's reign.

The introduction of newcomers this year has delighted many players and added a few gray hairs to some heads among the PPI team. Familiar names such as Donohue, Champion International and Fletcher Paper have disappeared over the past 12 months. The year 2001 will see the loss of more well-known competitors, for example, Zanders Feinpapiere and Soporcel, as well as Haindl and Pacifica Papers, assuming the deals gain approval all round.

The number of pulp and paper producers has shrunk dramatically over the past few years following consolidation moves and 2000 was no exception. The Top 150 net has been widened to find companies that may have been excluded in previous years. Last year, the player occupying the #150 spot, Mercer International, recorded total net sales of $125.6 million. This year, the company that just made it before the gates closed is Venezuela's Venepal with sales of $113.2 million.

The removal and inclusion of companies has also led to a landscape change in the geographical portrait of this year's Top 150. The number of North American companies has fallen from 46 to just 43, following consolidation moves across the region. But the 43 companies left in the running still managed to pull in higher sales than the 46 companies represented last year. Consolidation moves also appear to have affected the paper and board output figures in this year's Top 150. Many suppliers opted to cut back production levels last year in an attempt to stabilize market conditions. Companies such as Smurfit-Stone Container (SSCC), IP and Abibiti-Consolidated are just a few of the big names that took considerable downtime last year.

The effect of the global cutbacks combined with consolidation moves has also exerted a push-pull force on this year's list of companies in the Million Tonners' Club. For example, through its acquisition of various European woodfree mills, Lecta has jumped straight in to the club with a paper and board output comparable to production at P&G or Gaylord Container. Other notable alterations due to consolidation include the arrival of the newly merged entity, Nippon Unipac Holding near the top of the list. The link-up between Nippon Paper Industries and Daishowa Paper has helped to push SSCC further down the rankings in the Million Tonners' Club. But in SSCC's defense, the company has proved itself to be an industry leader when it comes to taking significant downtime to stop the scourge of overcapacity.

One aspect of the Top 150 that was definitely not on a downward trend last year was earnings. Consolidated net earnings soared to reach $20,287.2 million in 2000. Total sales from the Top 150 companies' pulp, paper and converting operations also pulled in $257,821.1 million. Sky-high pulp prices throughout most of the year have made an obvious contribution to market pulp producers' earnings. Canfor and Södra are just a few of the lucky suppliers to benefit from the pulp upswing.

All in all, 2000 was a prosperous year for many pulp and paper players. But just how the current economic slowdown situation will affect this year's results remains to be seen. All is not lost, though. Every producer has a trump card to play, and at the moment that card is stamped with the letters "M&A".