SpecialReport

Transcription

SpecialReport
SpecialReport
Authors:
Pöyry Management Consulting, Wood Product Practice:
Cormac O’Carroll, Head of Global Wood Product Practice, [email protected]
Ania Krolak, Consultant, [email protected]
Tomi Hartikainen, Senior Consultant, [email protected]
How to Survive a Double Dip
Recession in Wood-Based Panels?
Tomi Hartikainen, Senior Consultant, Global Wood Product Practice, Poyry Management Consulting
A
double dip recession seems almost
inevitable and its effects will be felt
throughout Europe’s wood-based panels
industry. Furniture manufacturers and their
suppliers are currently working out the best
strategies for avoiding the crunch. Demand
is likely to slow markedly and companies will
need to take action to mitigate the impact.
By 2016, Pöyry Management Consulting
expects to see an industry which will look
very different with clear winners and losers
emerging in the restructuring process.
Unfortunately, the feared double-dip
recession in the Eurozone is very likely to
become a reality. Its impact on the demand
for wood-based panels and consequently,
surfacing materials will be significant but
how big the decline will be is still unclear.
Wood-based panel demand correlates
strongly with construction and furniture
output which are in turn driven by the GDP
growth rate. Based on the latest IMF (April
2012) and OECD (May 2012) updates,
the majority of wood panel producers
are likely to lose volume in 2012. Pöyry
has developed a number of scenarios for
the future of the wood-based panels and
surfacing materials sectors. The most likely
scenario sees Western European panel
demand declining by 2% in 2012. Eastern
European growth will remain positive
albeit at a lower rate than foreseen even
a year ago.
How Pöyry Management Consulting sees
the world in 2016:
Business critical questions for the woodbased value chains are:
•
•
•
Will the demand grow?
When will the industry regain
profitability?
What are the best strategies to weather
hard times?
One of Pöyry’s Thought Leadership
streams analyses the profitability of the
wood panel value chain and addresses the
industry need to find better ways of running
their businesses during difficult times.
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Table 1 Major industry deals, 2011
Acquirer
Target
Deal
Deal value
Munksjö, Sweden
Arjowiggins Decor, France and Germany
decor, abrasives, thin and fine arts papers
EUR 95 m
Yildiz Entegre, Turkey
Masstas Mudurnu, Turkey
particleboard and LPM capacity
not disclosed
Schattdecor, Germany
Tura, Russia
furniture impregnation
not disclosed
Egger, Austria
Gagarinskiy Fanerniy Zavod, Russia
particleboard and LPM capacity
not disclosed
Egger, Austria
Roma Plastik, Romania
edge banding
not disclosed
Kajo Neukirchen, Germany Coveright Surfaces, Germany
impregnation
not disclosed
Source: Pöyry (based on company press releases)
Dr Cormac O’Carroll, Head of Global Wood
Product Practice, Poyry Management Consulting
Demand development will play out
differently depending on surfacing material
and geography. As the Eastern European
wood panel market is forecast to continue
to perform better than its Western European
counterpart, growing on average by 7%/a
during 2012-2016, compared to a more
modest 1.5% in Western Europe, the
surfacing market will be strongly correlated
with this trend.
The fastest growing surfacing material
continues to be LPM which is forecast to
grow at 3%/a CAGR until 2016 in Western
Europe and at 6%/a in Eastern Europe,
increasing its dominant market share
among surfacing materials. The laminates
market in Western Europe will suffer most,
declining by 1%/a over the period. Figure 1
shows the Pöyry medium term outlook for
various panel surfacing materials.
Industry profitability and the
business cycle
The recession has impacted strongly on
EBIT development (Figure 2), but with the
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july / aug 2012
exception of impregnators, capital turnover
has remained reasonably stable which
reflects significant capacity closures and
divestments. Capacity utilisation is a key
profitability driver across the value chain.
The road to recovery in 2010 followed
different pathways depending on the sector.
Position in the value chain continues to play
an important role in determining profitability
and resilience to market downturns. The
recovery for panel producers has been less
robust compared to, for example, decor
printers whose business is less capital
intensive and asset utilisation less critical.
Pöyry believes the probability is
increasing that the macro-economic
environment will continue to deteriorate
throughout 2012. Dynamic scenario
planning is the most effective way for
companies to capture this uncertainty in
their strategic planning. Pöyry’s scenario
planning model forecasts demand and
pricing year on year based on the latest
leading economic indicators.
Three ways to survive “a double
dip”
Industry profitability is determined by a
number of factors. Some can be influenced
by industry players directly, others only
partially. An example of the latter is industry
consolidation. A fragmented industry tends
to be inherently less profitable. The wood
panel industry remains fragmented while
the decorative surface materials sector is
relatively more consolidated but neither
can be considered as having an optimum
industry structure.
Increased M&A activity drove some
industry consolidation in 2011 but this
followed a period of relative inactivity as
industry players and financial sponsors
adopted an attitude of “wait and see” due
to the lack of investment capital and a very
difficult financing environment. Although
M&A initiated by an industry leader can
help drive consolidation it is an uncertain
and risky strategy to follow.
Consolidation can also be achieved by
capacity rationalisation which accelerated in
SpecialReport
2010 and continued into 2011. As a result,
some wood panel production capacity
was closed down in Western Europe,
particularly in Germany (e.g. Pfleiderer
shut three sites with a combined capacity
of 800,000 m3 and Kronospan’s closure
of Bischweier resulted in an additional
800,000 m3 taken off the market). The
second largest capacity closures occurred
in Spain but some countries have been
slow to recognise the need for further
rationalisation.
Although the correlation between
capacity reduction and profitability is
clear, it is not entirely within the control of
an individual industry player. Therefore,
the industry as a whole needs to behave
“rationally” if this strategy is to result in
a sustainable improvement of industry
profitability.
About Pöyry Management
Consulting and Pöyry Group
Pöyry Management Consulting is part of
the Pöyry Group and active in strategy and
operations consulting to the wood products
sector globally. The company is one of the
most authoritative sources of knowledge
and thought leadership in the forest industry
value chain.
Pöyry is a global consulting and
engineering company dedicated to balanced
sustainability and responsible business.
With quality and integrity at our core,
Pöyry delivers best-in-class management
consulting, total solutions, and design and
supervision. Pöyry’s in-depth expertise
extends to the fields of energy, industry,
urban & mobility and water & environment.
Pöyry has 7,000 experts and a local office
network in over 50 countries. Pöyry’s net
sales in 2011 were EUR 796 million and the
company’s shares are quoted on NASDAQ
OMX Helsinki (Pöyry PLC: POY1V). For
more information about us, please visit
www.poyry.com.
There are, fortunately, some strategies
which companies can adopt which can
have a direct impact on their profitability
and have proven to be both defendable
and resilient;
• Diversification
Diversification requires both business
foresight as well as courage, especially
when the market environment is tough
and the temptation is to just “batten
down the hatches”. We have seen new
frontiers being developed with bold
decisions to diversify into emerging
markets as well as to adopt new
concepts and technologies (such as
digital printing). In Pöyry’s view, the
key success factors for diversification
are synergies with existing operations,
organisational readiness and alignment,
and product portfolio management.
• Innovation
A good example of innovation is Medite’s
partnership with Accsys Technologies
to develop and commercialise the
first ever Medite Tricoya Extreme
Durable MDF. This could potentially
define the next generation of panel
products and compete with traditional
materials used for exterior and interior
wet applications previously inaccessible to
MDF. However, innovation for innovation’s
sake will not take you far without a detailed
and robust market entry and product
commercialisation strategy.
• Cost optimisation
No matter how lean a business operation,
there is always scope for improvement.
Typically, manufacturing and maintenance
operations are the two lowest hanging fruit
where cost reductions can be achieved.
Operations Excellence programmes run by
Pöyry identify an average saving potential
of 5-10% of the company’s turnover. These
savings are not just one-off but sustainable
year-on-year cost reductions achieved
through optimisation where no capital
investment is required.
The double-dip recession is undoubtedly
going to have a negative impact on the
profitability of wood panel and decorative
surface producers but there are nevertheless
strategies that companies can adopt to
maintain position should the more pessimistic
scenarios prevail.
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