Asian CEO of the year

By Annie Zhu, Associate Editor, Pulp & Paper International magazine

BRUSSELS, June 30, 2009 (Viewpoint) - Chen Hongguo, Shandong Chenming's chairman, has been picked by industry analysts as the best CEO in the Asian pulp and paper sector for the second consecutive year.

The decisions are made on the basis of a survey sent to key financial analysts covering the Asian pulp and paper industry. They were asked to pick a winner based on certain criteria including "leadership, vision and strategic accomplishment".

Analysts admitted that almost all pulp and paper companies in Asia suffered from financial crisis last year, but Chenming's financial performance stayed relatively strong and also his strategy - expanding into pulp production was a common theme - is on the right track. One leading analyst said, "We are voting for Mr. Chen Hongguo from Shandong Chenming Paper for his effort to invest heavily in upstream integration, and his commitment to innovation and environmental practices by doing this."

The interview was conducted on through an email required by Chen and his responses are quite cautious compared with the most leaders in the industry in the west. However, Chen's strategy and ambition can still be seen clearly in his words.

Chen Hongguo, CEO of Shandong Chenming

PPI: Can you talk specifically about this last year at Shandong Chenming, and highlight some of the most important strategic decisions that you have made?

Chen Hongguo: We have adjusted our development strategy in time and focused on enhancing our capability of independent innovation and optimizing the product structure to actively meet the challenge in 2008, especially after the outbreak of the international financial crisis. So our company has maintained stable development in 2008. The annual turnover and profit of the year reached RMB 15.53 billion ($ 2.27 billion) and RMB 1.56 billion ($230 million), up 2.41% and 4.43% accordingly compared to the previous year.

How has Shandong Chenming been affected by the financial crisis?

With the ongoing spreading global financial crisis, the paper industry has encountered severe challenges. To be specific, the pulp and paper industry suffers a recession and the company's overall performance is affected mainly due to the fact that market demand has fallen and paper product prices have plummeted. We have implemented a series of measures this year and therefore, our company maintains a stable development.

How have you changed your management style to lead during a downturn?

We have paid more attention to detailed management and also efficiency improvements. Our potential has been explored through these methods.

What are Shandong Chenming's plans for the next few years? Have your investment plans changed due to the financial crisis? Do you have plans for foreign investment?

Faced with the opportunities and challenges of global economic integration, Chenming will focus on further development driven by innovation to vigorously carry out our internationalization strategy over the next few years. We will try to build ourselves up to become one of the most powerful paper enterprises worldwide.

Currently we have no plans for overseas investment.

China lacks upstream resources and relies on pulp imports heavily. I understand Chenming has plans to invest in forest planting and pulp mills. Can you tell us your strategy?

Our company has developed 0.6 million mu of forest in Zhanjiang and 1.02 million mu of forest in Hubei. And for the next stage, we will further accelerate the construction of the raw materials base and try our best to create an integrated industrial chain of forestation, pulp and paper.

What are the major challenges for the company in the near future? And how do you see the long-term future for Shandong Chenming products?

In my opinion, the biggest challenges we will face in the next years include several factors. Firstly, high-quality talent - that can determine the management level of enterprises and whether the enterprise has core competitiveness or not; secondly, market competition competition is becoming more and more fierce.

Compared with products of other companies in this industry, Chenming products have some advantages. Firsly, Chenming's products feature high quality and great variety. Secondly, we have great productivity and can provide continuous and timely goods delivery. Thirdly, we have established up to 10 production subsidiaries in China. What's more, we have sales subsidiaries or offices established in medium and large -sized cities all over China and abroad, with an aim to provide timely service.

What about the pulp and paper industry in China as a whole? Can you dispense any advice, or give an opinion, or air your thoughts as to what the industry could, or should be doing to promote and protect itself going forward.

China has become one of the world's main producers and consumers of pulp and paper. The production and consumption is now at second place in the world. In recent years, the Chinese paper industry has made great progress in terms of development scale, machine supply levels, environmental protection, and also quality standards thanks to improvements and developments in world paper making technology. However, the industry also faces problems. For example, over-supply of some paper grades, a lack of good raw materials, high consumption of resources, and also poor equipment research abilities.

From the second half of last year, many companies in China have seen stockpiling, reduced paper product prices, caused by the international financial crisis. However, generally speaking, the Chinese paper industry is still on the developing track at the moment. The paper industry has started to stabilize, and the upstream raw material price will stay low for some time. The paper product prices will reach a reasonable profit balance point.

As for domestic pulp and paper companies, we should put more focus on the capability of independent innovation, energy saving and emissions reductions with an aim to enhance the core competitiveness. Through these paths, we could develop faster and sounder.

Do you think it necessary to invest in environmental issues in pulp and paper producing? What has Chenming done in the past year to further improve? What do you think the newly launched Discharge Standard of Water Pollutants of Pulp and Paper Industry will bring to China?

Environmental protection is the life of a company. It is the fundamental way and our unshakable responsibility for the pulp and paper companies to realize scientific development and to emphasize environmental protection and the development of the recycling economy. Chenming has always taken pollution control as the "life project" and has heavily promoted clean production technology for many years. We have invested more than RMB 200 million on advanced discharge treatment equipment with an aim to meet the government's standards. Moreover, we have taken the lead to pass the ISO14001 environmental management system certification. Also, we have been selected as the "Environmentally Friendly Enterprise in Shandong".

The implementation of the newly formulated "Discharge Standard of Water Pollutants for the Pulp and Paper Industry" and the new environmental protection policies will accelerate the process of eliminating the small paper enterprises with high energy consumption and serious pollution problems. This will help the pulp and paper industry to be less fragmented and more environmentally friendly and help large companies to grow further.

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