Anyone who’s kept a watching brief on Finnforest over the last year or so will be aware of one thing. It’s not a company that hides its ambition under a bushel. It’s invested heavily in new facilities and product development. It’s rebranded its extensive timber and wood products range and most recently bought its Norwegian counterpart Moelven – a move which should boost turnover to around €2bn. And it’s been corporate strategy to be completely upfront and open about this hive of activity.
‘We want to convey that we’re a serious player and to demonstrate, through investment and development programmes, that we’re committed to customers long term,’ said Finnforest chief executive officer Ari Martonen. ‘We want to be number one in the European mechanical wood products market and we’ve now firmly laid the foundations to achieve this.’
Finnforest’s character seems closely reflected in that of its boss. Mr Martonen is an ebullient personality – hugely enthusiastic about the business and the timber industry generally. He demonstrated this on a whistle-stop tour of the company’s UK operations. He believes communication, with both customers and employees, is the essence of a successful business and visited all the company’s sites, addressing the whole 750-strong Finnforest UK team on development plans, in just three days.
He opted to talk to TTJ at the revamped stadium of the Atlantis football club near Helsinki, a showcase for Finnforest’s Building Products division. The development had already seen the construction of a modular stand in Finnforest’s ‘Silva’ range, for which it supplies the design format, as well as the materials. The structure was finished in six weeks, and features massive beams and pillars in the company’s Kerto laminated veneer lumber (LVL), plus staging and seating in its plywood and ThermoWood heat-processed timber. Another two Silva stands will make the finished stadium a 5,000-seater.
Mr Martonen was actually taking a few days’ break and cycled to the ground on his son’s bike! After our chat he stopped to talk to the stadium manager to discuss Atlantis’ progress. Finnforest is also the team’s main sponsor and stays closely involved. ‘They’ve done very well,’ beamed Mr Martonen. ‘After promotion last season, they’re now fifth in the Finnish premier.’
If you had to choose a word to sum up Finnforest’s strategy, it would probably be focus. The operation has been formed from the various timber and engineered wood companies within Finnish forestry giant Metsäliitto over the last couple of years. The aim was to bring a unified approach across mechanical wood operations. The result, by the start of 2001, was a business with sales of €1.2bn and a workforce of 4,000. It had 25 production sites, most of them in Finland, but including a sawmill in Estonia and a blockboard plant in Romania. It was further focused into product divisions; ‘Solid Wood’, with 12 mills and capacity of 2.35 million m³; ‘Engineered Wood’, with three sites and annual output of 750,000m³; and ‘Plywood’, with its two mills, Punkaharju and Suolahti producing 320,000m³ birch and softwood plywood a year.
Tying up the whole package is the wholesale and distribution arm. This has bases world-wide, with its leading markets being the US, Germany and the UK, where Finnforest operates from sites in Runcorn, King’s Lynn, Leven, Tilbury, Newport and Boston.
The company delineated its operations more closely still by defining its markets into three strategic business areas; ‘Industry’ supplying the furniture, joinery, packaging and transport sectors; ‘Trade and Consumer Solutions’,which concentrates on the DIY, merchant and garden products markets; and ‘Building Systems’ which offers integrated families of Finnforest construction products.
‘Our aim has been to understand customers’ needs better and supply them with total solutions, not just products,’ said Mr Martonen. ‘We’re adding value and improving service – we don’t want to be seen only as a bulk trader.’
Alongside these developments, Finnforest has reviewed its customer base, concentrating on businesses with which it can have long-term, profitable partnerships. In the UK, it’s gone from 3,500 accounts to 700.
Finnforest has also developed a clearer identity to go with its more focused market approach. The plan is for all products to carry the Finnforest name and logo by the year end. Previously it had over 40 different brands. This, it felt, created customer confusion and dissipated its marketing energies.
While pursuing organic growth, Finnforest has been looking to expand through acquisition and collaborative ventures. To date, the main outcome of this strategy has been the purchase of Moelven, a business with 40 production sites, a workforce of 3,500 and activities covering sawn timber and a range of engineered wood products, principally ‘module-based’ timber buildings and ‘wood based office interiors’.
Finnforest clearly sees the Norwegian business as the perfect partner, particularly in engineered wood products.
‘We reviewed the performance of the 12 top mechanical wood businesses in Europe, but Moelven was always our number one target,’ said Mr Martonen. ‘It gives us an additional 80,000m³ of glulam and NKr600m annual sales in building systems. It also brings us a wall and floor systems operation with the same annual turnover. Our markets are complementary too, as Moelven trades mainly in Sweden and Norway.
‘Overall, we believe the acquisition saves us two to three years of organic growth.’
Finnforest has continued to develop its existing facilities too. The biggest single development is under way at its Punkaharju plywood mill where a e60m Kerto LVL is under construction which will boost its annual output of the material to 170,000m³. The plywood facility is also being expanded.
The original Kerto LVL factory has itself been upgraded, and at the Suolahti birch plywood plant Finnforest has spent e18.5m to boost annual output by over 65% to 100,000m³.
There has been major investment in solid wood too, with the biggest outlay (€14.5m) at the Kaskinen site. New sawmill and diy product lines are up and running; ThermoWood facilities and a line to make building-system products for Japan and window components will follow.
Prior to its acquisition of Moelven, earlier this year Finnforest also secured a foothold in the glulam market with the acquisition of Finnish producer Kuningaspalkki Oy.
The company is developing its presence in key export markets too. Following the success of its Tilbury distribution base, similar operations are being established in France, and Germany.
The UK has also seen considerable recent investment – a total of £20m in three years. Spending has been ongoing at the Boston and Grangemouth machining operations and, in June, the company opened its new ‘Timber Academy’ at the Lincolnshire site. This will provide training and be used to showcase Finnforest building products.
In the latest development, Finnforest announced the construction of a £3m I-beam factory on the former Stantons Timber site in King’s Lynn which could have eventual capacity of 25 million linear metres. Originally slated for Bremen, the factory was switched to the UK partly due to Germany’s construction slowdown.
‘But it’s also because the UK is one of the most developed markets for I-beams in Europe with very good growth prospects,’ said Mr Martonen. ‘In fact I believe demand for engineered wood products and timber building systems will grow much more rapidly than anyone has so far predicted.’
No-one at Finnforest pretends that the current international market is easy.
‘There are substantial surpluses of sawn timber in the market and we’re facing very high Finnish log prices,’ said Mr Martonen.
Underlining the seriousness of its commitment ‘to return stability to the market’, Finnforest is trimming second half timber production by 12%.
But tight trading conditions are not dampening the company’s enthusiasm for the longer term. ‘We predicted this difficult period,’ said Mr Martonen. ‘Now we predict that the situation will start to improve early next year and that Finnforest will continue to move ahead from the very strong platform we’ve established.’
