BRUSSELS, April 1, 2014 (PPI Magazine) - When Sweden-based cartonboard manufacturer Korsnäs and paper maker Billerud merged in 2012 it created one of the leading players in the primary fiber-based packaging industry. PPI spoke with CEO Per Lindberg about the company's plans for the future.
The merger between Billerud and Korsnäs heralded a new beginning for both companies. Before the merger, products supplied by both companies were "more complementary than overlapping". Now, as BillerudKorsnäs the company offers, what it terms as "a more balanced company".
The combined company has operations divided into three business areas: packaging paper, (sack paper, kraft paper and pulp), consumer board (liquid packaging board and cartonboard) and containerboard (fluting and liner).
Its key strategy is to create "smarter" packaging solutions around the specific needs of brand owners, converters and packaging partners customers in selected niche segments as well as meeting innovation and sustainability requirements. One of the essential motivators of the merger is to be in a stronger position to initiate actions in growth markets outside Europe.
PPI: You have now completed your first year as the new company since the merger. What have been the greatest challenges regarding in integrating two of the most successful European fiber based packaging companies?
Per Lindberg: The integration is running really well, and there has been great motivation within both companies to make this successful. However, after the first year, honeymoon is in a sense over, and we still need to make changes in how we work and the systems we operate. The greatest challenge is and has been to transparently explain why we are making changes and reasons behind them. Customers won't see most of the changes going on in terms of the company's organization. We'll be twice as large but the industrial structure will largely remain the same.
Together, the two companies can expand their offer of products and solutions and are in a better position to grow and expand internationally. They can also innovate faster, thanks to a greater combined knowledge base. Billerud was previously a little too reliant on cyclical market segments, reducing the predictability of its earnings, whereas Korsnäs would eventually have needed to grow into other segments. The merger addresses both these challenges.
How are you monitoring whether the merger and synergies are being carried out successfully?
We have a Program Management office keeping track of all synergy projects in detail. The key issue is to unify the company's culture. That really begins at the top - and so far, so good. The motivation and commitment to making this work is very high. We are very aware of the potential for problems and we are following a thoughtfully developed integration plan to avoid them. The merger calls for more than 300 on-going activities, or projects, and we follow up on each one weekly. Most of these will be completed during the first 18 months, until mid-2014, with the rest being completed within the first three years.
The company was impacted by production problems at the end of last year. What is the situation with this now? What problems in terms of production do you anticipate you are still facing?
There is rarely a quarter without some type of production disruption in our industry. But the events in Q4 were both significant and unexpected, which is why we highlighted them. The situation is now back to normal.
In your statement at the time of the merger you mentioned that the merger would allow you to enter in to other markets, such as Asia and other emerging areas. How do you feel this will progress over the next couple of years?
We have accelerated our timeline to reach beyond the European market, and the merger has given us both resources and reasons to do so. We are going to be present in more locations, expanding along with our customers into emerging markets. We'll be better positioned to provide great service and collaborate with them to develop smarter packaging solutions.
How do you see the market for containerboard and cartonboard changing over the next five years? What will be the biggest challenges and hurdles?
We expect cartonboard to be stable, and we will challenge incumbents with excellent quality and a very competitive cost base. Our position in the containerboard market is by and large a niche position. We will continue our niche strategy in the light of some increased competition from new capacity and overseas exports.
In response to this what will be the key trends that BillerudKorsnäs will need to address regarding its new product development?
This is one of the key questions for the future, not only for us. This is why we do not make our agenda public. It is clear, however, that we need to better understand consumer trends and needs in our development. We are today in a better position to be innovative with our customers and to address their specific needs, thanks to the combined knowledge of Billerudand Korsnäs. Beyond continuing to focus on innovation and develop our products and solutions, we need to stay competitive with high quality and good service. We're certainly not alone in any of the markets, so we have to stay ahead of our competition.
How does the company plan on competing with its competitors that are operating in the same markets? What will BillerudKorsnäs offer that is different to other companies that are selling products in the same areas?
We will focus on development and efficiency, in order to be better and smarter than the rest. That includes both materials and solutions.
How important has the relationship with your management team been in regarding the synergies achieved so far? Your previous work with vice president and COO Christer Simrén must be very beneficial regarding developing the right charisma to move the new business forward.
It has of course been an advantage for me to know Billerud and significant parts of the Korsnäs management team since before, and of course not the least Christer. I believe this has generated comfort and trust in the management team, which in turn has been vital to integration so far and the generation of synergies.
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