By PPI Special Report
ATLANTA, GA,
Aug. 19, 2009
(RISI) -
Bill Rainville, CEO of Kadant Inc. (NYSE:KAI), a leading supplier to the global pulp and paper industry, was recently interviewed by PPI regarding "a way out" of the current economic downturn. Rainville played a central role in launching Kadant in 1991, and acquiring companies, which fit the model. Rainville believes that the acquisition of The Johnson Corporation, now Kadant Johnson, brought depth of capability in drying and energy efficiency, as well as marketing and infrastructure know-how.
PPI: Describe the global pulp and paper market, compared to just a few years ago.
Bill Rainville: In my entire career I have never seen this degree of fundamental change. The universal theme is "down." Over the past few months numerous capital projects have been postponed due to market conditions or a lack of financing.
The global economic climate has resulted in a significant drag on paper demand and paper machine operating rates. In every major industrial region across the globe, reports of temporary and permanently idled machines reflect the dismal nature of the current economy.
Although abnormally low current operating rates have been reported in every region of the world, we believe this to be a temporary occurrence, and the market will eventually return to more traditional levels of 92 to 96%. The medium to long-term trends in the paper industry are still positive, particularly in emerging markets where low per capita consumption and urbanization will stimulate demand in the coming years.
What are your thoughts on the prospects for a recovery? What will be the long-term effects on your industry or your company?
We are hopeful that the global economy recovers quickly. There are some early indications that business activity is becoming more active - particularly in the number of requests for quotes and general inquiries regarding our products. We believe that Kadant is well positioned to capitalize on the economic recovery. We have structured our businesses to be ready to respond to increases in business activity, and have continued to invest in R&D to ensure our products and technologies meet our customers' needs.
How have you adapted your strategy during tough times?
First of all, our business strategy is built around what we believe our customers want and need. Simply stated, we provide cost-effective products and services that help our customers run their operations more efficiently. Our commitment to a high level of R&D investment - even now - has served customers well.
Products designed to increase yield and improve energy utilization provide a compelling reason to invest in Kadant. In addition, our large installed base provides us with a fairly consistent spare parts business. Since we were pioneers in expanding our product offerings to all places where pulp and paper are made, we have the manufacturing capabilities and infrastructure make us a leading supplier. Our global structure provides efficiency and a comfort level for customers, and allows us to respond quickly to customer requests and project opportunities.
How does Kadant make a difference with fiber?
Better yield of recovered fiber can make a mill profitable on its own. For example, our Helisoft turbine has a proven 25-30% savings in operational efficiency for repulping, as well as offering potential for capacity increase. We have customers who see this offering as ‘green' high performance - being both high in fiber efficiency and saving energy.
For deinking applications, strong friction effect enables efficient ink detachment. The low speed of the turbine does not induce contaminant fractionation, which facilitates the removal of fragile contaminants. I don't mean to be overly technical, but my own career began as a chief engineer at a paper mill. I saw the value of quality, reliable systems to minimize raw material and energy costs. I can't help but think in terms of saving pulp and papermakers money, and meeting the needs of printers and converters in terms of properties in the sheet.
How would you describe your company's relationship with customers from a broad perspective?
Kadant's ability to help enhance fiber processing and energy efficiency positions us well across the entire pulp and paper process. When you contribute to higher operating efficiency and quality, you tend to have a partnership relationship, which allows for innovation not otherwise possible.
With our fiber processing solutions, forming systems, and filtration products, we are the heart and kidney of the papermaking process, among other things. We are the steam masters, which is integral to every aspect of the process. We are the fiber misers, allowing even so-called poor fiber to work well at lower basis weights.
Can you give some examples of what Kadant supplies to help customers maximize energy efficiency.
Johnson joints, siphons and thermocompressors are real workhorses for any papermaker seeking efficiency of the dryer section. Add to that studies of a papermaker's actual conditions at our R&D Center, combined with what we call the DMS (Dryer Management Systems), and you have the potential to save yourself into prosperity.
Another benefit we provide is the ability to more efficiently recycle process water using our line of filtration products - including the PETAX system. Less need to heat water is an obvious plus. Even doctor blade systems with less friction against the roll means energy savings, especially in the dryer section.
Can you comment on the outlook for Kadant for late 2009 and early 2010.
Looking ahead to the coming months, we expect to see a moderate increase in business activity in all of our business units late in 2009 and into 2010. The level of quote activity we are currently experiencing, coupled with the restrained consumables spending, lead us to believe that spending will improve later this year with consumables leading the recovery. What's more, we believe the weakness in paper and board shipments is unsustainable. These conditions further reinforce our belief that buying patterns of our customers will begin to return to more normal levels as we work through these tough times.
Kadant's range of products and services focus around improving efficiency and quality in pulp and paper production.
which includes fiber processing and approach flow systems, shower and filtration systems, doctor systems, and steam and condensate systems and equipment. Pioneers in globalization for more than fifty years, it has operations in place in all pulp and papermaking centers of the world.
