Paper mills - still a good place to work

By Graeme Rodden, Executive Editor, Pulp & Paper International magazine

BRUSSELS, Jan. 16, 2012 (RISI) - Although it may be a bit difficult to believe, PPI's annual Mill Management Survey returned an even greater sense of optimism than was conveyed in 2011.

Once again, we had a good return from the industry worldwide with every pulp and paper grade imaginable represented. Responses came from mills that employed anywhere between 100 and 1,200 people. As per last year, experience counts. Most of the respondent had more than 20 years of experience in the pulp and paper industry, although a wide range of experience was represented, from three to more than 30 years. In terms of management, a majority of respondents had more than 10 years' experience. Here too, a wide range was received, anywhere from three to 25 years of management work. Job satisfaction ranked high with more than 90% saying they either "liked" or "strongly liked" their jobs.

As usual, the questionnaire sought opinions on competitiveness, budgets, trends, outlook and labor relations. One of the first questions asked if the person has "adequate input into strategic planning (financial and operational)". Only two people responded in the negative. "The void between standards and business management (commercial) is vast in terms of commercial goals and key performance indicators."

The rest were satisfied with their ability to influence decisions. "But it can always be improved," said one. Another boasted of having a "large influence" on operational and strategic objectives.

Figure 1 - Do you like your job?

The problems

There seemed to be a shift in the main problems faced. Rather than equipment, many focused on what perhaps may be out of their control: markets. Cutbacks in personnel are also having their effect. Among the responses:

• "Too many initiatives and limited resources: too much work."
• "Uncertain markets and wood sources."
• Volatile margins, currency rates."
• Lack of R&D."
• Sudden price increase for waste paper."
• Decisions made by commercial people based on standards and average values instead of actual and marginal values."

However, some did complain of problems that were closer to home.

• "Poor marketing, competition, poor equipment condition, high raw material prices"
• "Accountability of hourly workforce."
• "Change of management."

When asked what the results of industry mergers would be, most (5 to 1 ratio) thought it would increase mill profitability. However, there is also a strong belief (5 to 1 ratio as well) that it would limit new product development. There was an even split on whether or not customer service would improve or worsen.

Figure 2 - What do you think will be the result of industry mergers or private equity taking over pulp and paper companies?

Budgets

The divvying up of the financial pie was well spread. Maintenance accounts for anywhere from 3.4% to 45% of a mill's budget, with most in the 15% range. Operations most often took the lion's share of the budget although answers went from 11% to 80% with most in the 50%+ range. Capital projects accounted for between 2% and 18% with most in the 5% range.

More than 80% of respondents said their companies invested sufficiently in their mill. Of the naysayers, most cited pulping operations as their biggest concern. New product development was also mentioned prominently by those who believed more investment was necessary. This is perhaps an echo of the answer to the effect of merger and acquisition activity.

When asked specifically about the biorefinery concept, just over 40% said their companies were invested in the "bio" area, up from 33% last year. However, another 40% expected their companies to invest in the sector within five years.

Among the projects mentioned in this sector were a BFB boiler, modernized bio-steam boiler, increased use of paper pellets and cogen.

Figure 3 - In what areas will you outsource more?

Outsourcing

For most, if not all mills, strict cost control is way of life. When asked about outsourcing, it was almost an even split when managers were asked if more mill functions would be outsourced. Maintenance and transport were the areas most cited, just over 25% each. Water treatment and woodyard operations were mentioned by 10% of respondents.

Although maintenance is the sector most often cited in any outsourcing poll, it does have some strong defenders by those who think it needs to be kept in-house.

• Specialized maintenance is a strategic corporate knowledge."
• "Maintenance needs to be an integral part of operations and part of the team, to have strong buy-in commitment to reliability."

Other said outsourcing would not be a money saver. "If well managed, costs will be lower in all areas without outsourcing," was one comment while another said that his mill had looked at it and it was discovered that costs would go up.

Despite pessimism in the developed world about paper's staying power and the stagnation in growth, fewer than 5% of respondents said their region would not be competitive in the next 10 years. This optimism crossed virtually all grades of paper. Perhaps it is a reflection of the widespread downsizing that has occurred across the developed world and people believe the industry has nowhere to go but up. At the same times, answers from the developing regions reflect the growth that is expected to continue.

Figure 4 - If you were advising a young employee or student in the pulp and paper industry whose goal was to become a mill manager, which of the following skill sets would you encourage that person to focus on most?

The wish list

Given the money, where would managers put it? "Everywhere." said one. Answers crossed a range of sectors: "best available water treatment", "a new paper machine", "energy" and "process control" were some of the wishes. The bio field does pose an attraction for some with bioenergy and a biofuel steam boiler mentioned while another was much more specific: "lignin extraction, methanol purification and nano-crystalline cellulose."

Back to earth, the next question dealt with the biggest challenge faced by the individual mills. These answers included such things as:

• "Wood costs and supply."
• "Turnover in the workforce; good leadership."
• "Quality."
• "Increased competition from Asia."
• "Controlling union contracts."

Only one answer mentioned the competition from electronic media.

Looking at the "general outlook for 2012 in terms of your mill's products in the marketplace", more than half had a "fair to guarded" view. Another 40% responded either with good or excellent.

About two thirds of respondents said their mills would not be doing any more downsizing in the next five years. One noted that the mill; "was still growing". Another said the mill had already "reached the bottom in terms of manpower" while another noted that the mill was already "very lean".

On the other side, one respondent said downsizing was still an ongoing process while another mentioned that new technology and cross trades work would continue to have an effect.

For those entering the workforce and looking for a place in the pulp and paper industry and with ambitions to become a mill manager, just under 40% said they would recommend that students or young incoming employees focus strongly on engineering/operations. Another 29% said a strong focus on the business/financial end of the industry would be most beneficial. Management/human resources was the choice of 21% while sales/marketing was the least popular option.

With what's gone on in the industry lately, has senior management philosophy changed or is it still a case of getting the most tonnes possible out the door? Last year, it was a 50:50 split. This year, the pendulum seems to be swinging toward targeted production. Just over 55% of respondents said their companies were looking at targeting production in response to market demand.

Looking at labor relations, well over half said relations at their particular mill were better than they were five years ago. Only 5% said they were worse.

Finally, taking another look at merger and acquisitions managers were asked if they see more M&A activity taking place in 2012. It was virtually unanimous that there would be. With the respondents' own companies in mind, about 30% said their companies would be involved. However, only about 15% felt that their companies would be buyers while one said he/she could see the company being involved on both sides of the equation.

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