Global Forest, Paper CEOs List Key Industry Issues in Study

August 25, 2006 - Increasing cost pressures, supply chain efficiency, greater customer focus and improved long-term sustainability top the list of key concerns for CEOs in the forest, paper and packaging industry, according to the results of a new survey released [Aug. 24] by PricewaterhouseCoopers (PwC).

'CEO Perspectives – Viewpoints of CEOs in the forest, paper & packaging industry worldwide' comprises the observations of CEOs of companies from around the world with a combined sales total of US$70 billion. The survey examines their thoughts on the state of the industry, the key issues it faces and its future direction.

“The profit squeeze on the industry means that executives are determined to improve supply chains, address competition from emerging markets, improve sustainability performance and place a stronger focus on the customer—not easy challenges to overcome,” said Bruce McIntyre, leader of PwC’s Forest, Paper and Packaging industry practice in Canada.

The CEOs surveyed are looking towards the emerging markets—either as a new customer base or for their advantageous conditions—but not all are looking in the same direction. Demand is shifting towards Asia-Pacific while fibre supply is shifting towards South America. While some CEOs see most opportunity in China and elsewhere in Asia, others view Russia as the next global giant in terms of low-cost fibre supply and close proximity to high-growth consumer markets.

Most executives reported the need to achieve better balance to allow for profitable operations through ensuring higher growth emerging markets are developed while offsetting production in existing mature markets.

Although there was optimism about growing demand for, and the long-term viability of the sector’s products, most CEOs voiced major concern over the increasing pressure on the cost structure of the industry over the short term. Various measures are being taken to focus on building short-term profitability, including reducing capacity to restore a better equilibrium between supply and demand in mature markets. However, there was a view that strong leadership is needed to break the cycle of low return expectations within the industry.

Knowing their customers and the markets in which a company operates is also a prime concern for most CEOs interviewed, as companies refocus on this area to both strengthen existing customer relationships and in the search for new markets.

McIntyre added: “PwC’s survey also found that environmental sustainability rated high on the list of priorities for CEOs, particularly in terms of good forest management and product certification. Opinions differed as to which certification schemes were appropriate and the importance of certification in ensuring marketplace acceptance for products and company competitiveness.”

Most CEOs reported the need to focus on improving returns, especially in the markets for paper products, where some segments are growing strongly while others are declining. All CEOs agreed that further industry consolidation is essential for producers to generate consistently acceptable returns.

A total of 17 CEOs of forest, paper and packaging companies in North America, South America, Europe, Russia, China, India and South Africa were interviewed by PwC for this survey. Data was collected in person and by telephone on the topics of general economics, global competition, emerging markets, mergers and acquisitions, sustainability, strategy and supply chain.

To arrange an interview to discuss the findings of this survey please contact Jim Nelson at PricewaterhouseCoopers via telephone at (604) 806-7047, or via email: jim.nelson@ca.pwc.com.

'CEO Perspectives' is available to download in PDF format beginning August 24 at www.pwc.com/fpp.

(Note: Unless otherwise indicated, “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, Canada, an Ontario limited liability partnership. PricewaterhouseCoopers LLP, Canada, is a member firm of PricewaterhouseCoopers International Limited.)

SOURCE: PricewaterhouseCoopers LLP

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