TTJ: Earlier this year Stora Enso chief executive Jouko Karvinen announced a restructuring programme in response to demanding economic conditions and continuing poor profitability in parts of the business. This includes job cuts and €30m of savings in the company’s Building and Living division, which incorporates timber. How are market conditions now and what impact will these planned developments have?
Howard Sidney-Wilmot: General trading has been challenging and the industry has also faced increases in raw materials, energy and other costs. However, recently demand and supply have come more into balance. The primary objective of reshaping our structure and processes is to improve efficiency and cost- effectiveness and enhance product and service offerings. The restructuring will streamline processes across the business and focus mills on their strengths and the products they make most cost-effectively. For instance, our Gruvön mill, which was solely whitewood, now also produces quality redwood. Also, some production is being transferred from mills in Austria [Sollenau] and Germany [Pfarrkirchen] to our lower cost Czech Republic facility. At the same time, we’re continuing sawmill investment and maintaining our mill total across Europe at 23 and production of 6 million m³ per year.
TTJ: But what changes will customers see as a result of this programme?
HSW: The strategy is also aimed at finding new ways to improve customer service and focus, with back office functions and overall administration strengthened and streamlined and a greater emphasis on logistics and delivery efficiency. Capacities are unaffected.
TTJ: How has Stora Enso’s export business developed recently and are new markets emerging?
HSW: We were already a global business, with operations in 33 countries but, while European business has been flat, wider overseas demand is increasing, with prices starting to accelerate as a result. The US continues to improve each month. The Middle East and North Africa have been growing and Australia and South-east Asia have been particularly busy. China and Vietnam are also showing excellent potential.
TTJ: And how has business been more recently in the UK?
HSW: Of course, UK construction is experiencing a prolonged tough period, but there’s steady demand for RMI products. Opportunities exist if you’re prepared to look hard enough and persevere. Our strategy here has been to focus on helping customers in this demanding environment by providing specific, innovative solutions to develop and differentiate their business.
TTJ: Is this effectively a bespoke service?
HSW: To a degree, as we can work with our mills to meet a customer’s particular requirements. For instance, we advised one that they could improve their business efficiency, yield and profitability by switching to a higher grade, but they said they couldn’t afford it. We worked with them to come up with a grade outwith the norm that would achieve similar results, but also meet their cost constraints.
TTJ: But with Stora Enso trading on an ever more global basis, is the UK retaining its significance for you?
HSW: Yes and more so! We sell significant volumes here and it remains a key market within Europe. It tends to take a wider range of grades and sizes than other markets and is, of course, supported by superb shipping routes. It is also seen as having potential to develop further.
Underlining its significance, it is almost unique in Europe for Stora Enso in having a terminal operation, in Hull, where we have five to seven vessels arriving a month. Our only other one is in France. We stock around 20,000m³ which provides a versatile supply service, often delivering a mix of grades and sizes to customers. We can undertake treatment on a sub-contracted basis and also have the option of direct delivery from mills.
We’ve recently relocated the terminal operation to a new 100,000ft² warehouse just outside the dock area, with an additional 10,000m³ racked external capacity. This is about the same size as our previous facility, but has a large surrounding area for expansion.
TTJ: What have been the trends in terms of products selling in the UK?
HSW: Key sellers remain joinery redwood and whitewood, and constructional whitewood, particularly TR26 and CLS. We’ve also been bringing on new ranges, including further processed and engineered products. Following recent success with thermowood, we’re close to commercialisation on several new wood modification solutions for joinery, external and even structural use. We’ve invested in our finger-jointing and press capacity to serve component customers, we’re working on composite material and continue to develop our cross-laminated timber (CLT) range, which is supplied direct by our CLT operation.
TTJ: Stora Enso hit the headlines with its supply of prefabricated CLT panels for Bridport House, the UK’s joint tallest timber building. How has this business developed since?
HSW: Since Bridport the aim has been to position Stora Enso Building and Living as CLT market leader. Our UK sales manager Wayne Probert has been working with the construction industry to identify its positive values, which has created growth for other suppliers too. CLT is now being specified in all building sectors: private and social residential, including mid to high-rise, education and health.
TTJ: What is the company’s market outlook – are you finally seeing a light at the end of the recession tunnel?
HSW: We see global timber demand now continuing to improve, particularly in the US and South-east Asia, and this will have a stabilising effect on price. Indications are that European demand will remain at current levels. However, in the UK general house building does seem to be improving, in fact this year we’ve been exceptionally busy, and we see opportunities to develop by continuing to be flexible and working ever more closely with customers.
