pulp industry consolidation - what next?
TRANSCRIPT
A.I.A.C. ASSOCIAZIONE ITALIANA AGENTI CELLULOSA
Teija Konttori
8th of June, 2017
Pulp Industry Consolidation- What next?
Agenda
2
1 Most Industries Progress Through Clear Consolidation Life Cycle
2
3
There are Great Examples of Consolidation Within Pulp Industry
What Next?
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Agenda
6
1 Most Industries Progress Through Clear Consolidation Life Cycle
2
3
There are Great Examples of Consolidation Within Pulp Industry
What Next?
0
10
20
30
40
50
60
70
80
90
100
-10 -5 0 5 10 15 20 25
Most Industries Progress Through Clear Consolidation Life Cycle
7
Time
(Years)
Source: Winning the Merger Endgame by Graeme Deans, Fritz Kroeger, and Stefan Zeisel: A.T. Kearney analysis
Industry Concentration
1989-2001 (CR3)
Railroad
Telecom
Banks
Insurance
Airlines
Utilities
Diversified
chemicals
Food retail
Integrated steel producers
Restaurant and fast food
Soft drinks
Pulp &Paper
Defense electrical
Tobacco
Confectionery
Ship-
building
Integrated
oil and gas
Distiller
Truck and trailer
manufacturers
Aluminum
producers
Automotive suppliers
Drugs
Brewers
Automotive manufacturers
Diversified food
Rubber
and tire
Sport Shoe
0
10
20
30
40
50
60
70
80
90
100
-10 -5 0 5 10 15 20 25
Four Stages in Life Cycle That Every Company go Trough…
8
Time
(Years)
Source: Winning the Merger Endgame by Graeme Deans, Fritz Kroeger, and Stefan Zeisel: A.T. Kearney analysis
Industry Concentration
1989-2001 (CR3)
Railroad
Telecom
Banks
Insurance
Airlines
Utilities
Diversified
chemicals
Food retail
Integrated steel producers
Restaurant and fast food
Soft drinks
Pulp &Paper
Defense electrical
Tobacco
Confectionery
Ship-
building
Integrated
oil and gas
Distiller
Truck and trailer
manufacturers
Aluminum
producers
Automotive suppliers
Drugs
Brewers
from 100%
to 30-10%15 to 45% 35% to 70% 70 to 90%
Automotive manufacturers
Diversified food
Rubber
and tire
Sport Shoe
Stage 1 Stage 2 Stage 3 Stage 4
0
10
20
30
40
50
60
70
80
90
100
-10 -5 0 5 10 15 20 25
….And Four Different Strategies
9
Time
(Years)
Source: Winning the Merger Endgame by Graeme Deans, Fritz Kroeger, and Stefan Zeisel: A.T. Kearney analysis
Industry Concentration
1989-2001 (CR3)
Railroad
Telecom
Banks
Insurance
Airlines
Utilities
Diversified
chemicals
Food retail
Integrated steel producers
Restaurant and fast food
Soft drinks
Pulp &Paper
Defense electrical
Tobacco
Confectionery
Ship-
building
Integrated
oil and gas
Distiller
Truck and trailer
manufacturers
Aluminum
producers
Automotive suppliers
Drugs
Brewers
Opening and
Defend
Build and
Scale up
Focus and
Profitability
Alliances and
Balance
Automotive manufacturers
Diversified food
Rubber
and tire
Sport Shoe
Stage 1 Stage 2 Stage 3 Stage 4
Agenda
10
1
2
3
Most Industries Progress Through Clear Consolidation Life Cycle
There are Great Examples of Consolidation Within Pulp Industry
What Next?
Consolidation in Pulp Industry
11
36%
54%
0% 20% 40% 60% 80% 100%
Top 3
Top 5
BHKP
34%
50%
0% 20% 40% 60% 80% 100%
Top 3
Top 5
Dissolving Pulp
21%
35%
0% 20% 40% 60% 80% 100%
Top 3
Top 5
BSKP
79%
87%
0% 20% 40% 60% 80% 100%
Top 3
Top 5
Fluff
Driver for Consolidation in Pulp Industry is a Shareholder Value…
12
Raw Material Availability Competitiveness
Balance Sheet vs. Capital Intensity of Growth Expertise
Fibria – Votorantim Acquire the Aracruz
13
Driver: Competitiveness and
Balance Sheet vs. Capacity Intensity0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
1992 2002 2009 2017Aracruz VCP Fibria
1996 New Pulp line at Jacareí
2002 Start-up Line C Aracruz
2003 Acquisition of Riocell
2000/2003 Acquisition of stakes in Veracel Project
2005 Start-up of Veracel
2007 Luiz Antonio swap for TL
2008 Conpacel
2009 Guaiba Unit divestment
2009 TL start-up
2009 Votorantim acquire the Aracruz
2010 Conpacel and KSR divestment
2012 divestment of Losango forestry assets
2011 Divestment of Piracicaba paper unit
2016 Sales Alliance with Klabin
2017 TL II start-up
Stage 2
+ =
Stora Enso – Veracel and Montes del Plata
14
Driver: Raw Material and
Competitiveness
Stage 2
Veracel 2005
SE 50%/50% Fibria
Capacity: 1.1 Mt
Captive pulp for
Europe and China
Montes del Plata 2014
SE 50%/50% Arauco
Capacity: 1.3 Mt
Growth generator of
Biomaterials BU
Skutskär
Capacity: 540 kt
Fluff Pulp
Further Expansion
Enocell
Capacity: 460 kt
Dissolving pulp
Since 2012
Sunila
Capacity: 370 kt
CMPC – Acquisition of Guaiba Mill
15
Driver: Competitiveness
Stage 20
500
1.000
1.500
2.000
2.500
3.000
2006 2009 2015
1959 Laja Mill
1991 Pacifico mill
1997 Acquisition of 100% share of Pacifico and
Santa Fe
2009 Acquisition Of Guaiba
2015 Expansion of Guaíba
0
500
1.000
1.500
2.000
2.500
3.000
IP Weyerhouser IP +Weyerhaeuser
International Paper Acquire Weyerhaeuser
16
38%
21%
17%
Drivers: Raw Material Availability,
Competitiveness and Expertise
Stage 3
+
Market
Share
Agenda
17
1
2
3
Most Industries Progress Through Clear Consolidation Life Cycle
There are Great Examples of Consolidation Within Pulp Industry
What Next?
Company Ways to Grow are…
18
Economies of scale
Competitive edge
Company value creation
Winning competition
Strategic competition
Stage 2Organic Growth
Acquisition
Joint Forces
Innovation
…But Who will Be Among Players in Stage 3?
19
Acquisition
Expertise
Joint Forces
Scale and competitive edge
Expertise
Knowledge transfer
Entry barrier
Winning concept
Stage 2Stage 3Stage 2
Decades of Natural Fibres
Pulp industry development is in hot sopot of this front!
Key Take Aways
20
1
2
3
4
5
Consolidation is driven by raw material availability, competitiveness,
company balance sheet vs. capital intensity and expertise
Understanding where in life cycle is an industry is a cornerstone of
company’s long-term strategy
To be among winners actions needed from the current players
Consolidation drives the growth and success!
TEIJA KONTTORI
Vision Hunters Ltd OyDirector
Tel. +358 40 533 5312
Email: [email protected]
21
Thank You!