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Voith Paper CEO: Still plenty of life in paper

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Voith Paper CEO: Still plenty of life in paper

December 02, 2012 - 23:00

BRUSSELS, Dec. 3, 2012 (RISI) -The paper industry globally is about as diverse an industry as you can get - in mature regions there are plummeting grades in the shape of graphic papers that fill most producers with horror - whilst in places like India and China growth rates are into double figures. And then there is packaging, speciality papers and tissue, all grades that are showing healthy growth rates virtually everywhere.

So, probably one of the places to go for a take on the health of the global industry is to one of the major suppliers, as these are the people engaged in the day to day battle of making sure they are serving the industry to the best of their ability in all regions and all grades - quite a task.PPIrecently traveled to Heidenheim in Germany where we spoke to Dr Hans-Peter Sollinger, CEO of Voith Paper, a company that supplies the industry across all grades, and all regions, and is one of the largest suppliers to the global industry.

The best place to start this interview is at the graphic papers end, as we in the industry cannot escape the fact that the iPad and e-readers in their various forms and shapes in this electronic age must be having a massive effect on graphic paper consumption. So, has Voith begun to feel any of the consequences yet? Sollinger says: "This has been a major discussion at Voith since we had the Internet, and certainly since 2000 when Steve Jobs of Apple announced that it will develop computers that will ‘make newspapers useless'. Well, 12 years later, I have to tell you that we have not expected the incredible speed of the changes which we have seen in the past months - but we have been expecting this market development for some time, so there is no shock and we have been prepared for the fact that big orders from the graphic side of the market are going to be few and far between."

However, the current situation is not an easy one, admits the CEO of one of the leading graphic paper machine manufacturers. The actual figures still come as a shock to the outsider as the reality of the decline hits home, Sollinger continues: "In the last 12 months we have witnessed the biggest change of all, the business is simply not there anymore. Let me give you an example; in the last 10 years our graphic papers business was stable, around Euro 600 million annually, which included new machines and big rebuilds. There was rarely a drop below Euro 500 million in that decade, even during the bad recession years of 2008/9. Last year, our total revenue from graphic papers machines dropped to Euro 100 million and we believe now that it will continue at this rate going forward."

Not all doom and gloom

Of course a dramatic decline in one of a suppliers' key markets has to be dealt with at a strategic level, and it is something that Voith has acted quickly upon in the shape of restructuring and inevitable job losses. Sollinger says: "Europe has been hit the hardest, as that is where our graphic papers business is based and we have a lot of people working here. But we have been very actively developing machines and technology in other grades and products over the last few years, for instance our offerings in packaging, specialities papers and tissue, all of which are areas of growth. These tough decisions have been the correct ones for us as we have to focus on the areas and regions of growth as that is where the future lies.

"It must also be said that we don't think that graphic papers are dead and gone, not at all. We do not see a major demand for new graphic paper machines but there is a huge installed base worldwide. That is why this grade will still be important and relevant for Voith. Servicing our existing customer base is a vital business area for us and we will continue to develop and provide leading-edge technology for the whole paper industry," adds Sollinger.

So which regions of the world does Voith see as part of its growth strategy for the future? "Well, despite the obvious challenges, all regions are still important. The mature markets of the US and Europe are still producing a sizable amount of paper and are therefore of major importance to us. In fact in the US market we are being called in to carry out more and more conversions as producers look to move into other areas of growth, for instance converting a newsprint machine into a linerboard machine. These conversions, added to the service business, make our US division a sizable business. In terms of Europe we have good growth coming from the eastern area and Turkey is becoming ever more interesting, as well as the service and rebuild market of the more mature markets.

"And of course the emerging nations, Asia, not only China, but South East Asia and North East Asia continue to be exciting for us in terms of new business", continues Sollinger. "India we have always seen as a good market on its own, and then of course there is South America which still has a lot of potential in the area of papermaking."

China is obviously a standalone phenomenon in Asia, what is Sollinger's view on the country's race to build capacity in both graphic papers and ivory board? "There appear to be concerns over the oversupply of woodfree coated paper in China; it seems like graphic paper worldwide is heading for a slow down, but there are more moves by the Chinese government to clamp down further on the smaller less eco friendly mills and close more capacity which might help. On the ivory board front, this is showing much more of a consumption growth trend so the fears of overcapacity there are probably less worrisome."

More challenges make life more interesting

Another potential threat to the European suppliers in Asia is the local competition; there are signs that the Chinese government is behind a plan to make it advantageous for Chinese producers to buy locally. Sollinger says: "There is definitely a challenge emerging, and there are now paper machine manufacturers in China that can produce viable paper machines up to a certain width. But this is relatively ‘old' technology they are using, and, actually, for some of the applications this is enough. So, again, we have another challenge, this time in the shape of local competition which makes it tougher for us. However, we see potential in this "mid size" market and we want to pay even more attention to it. We clearly see our strength in our top technology and customers in this market will benefit from our efficient and resource-saving solutions. Regardless of the width of the machine you are running, you never can afford to waste water, energy or operate your machine in a non-efficient way."

What about the long term future?

After talking to Sollinger for a while, one gets the feeling that yes, it might be challenging being the CEO of a supplier to an industry that is going through sea change, but there is a clear sense of calm at the helm of this Voith ship as the future voyage is plotted over those choppy seas - and there are even a few big bright spots on the horizon.

Sollinger says: "There is still so much more to the paper industry, and we have a world of opportunity in front of us, for instance sustainable paper packaging taking over plastic, increased developments in speciality papers and increased use and improved quality of tissue. These are all areas that Voith is actively engaged in on the R&D front".

And talking of R&D, what part does Voith play in CEPI's Roadmap to 2050 which was launched to the European industry last year? "We are fully behind the Roadmap and we actively supported the launch of the publication last year, as of course did other major suppliers in the industry. One of the things we really like about it is that it focuses fully on the future, and does not dwell on the past at all. And do I believe that an 80% reduction of CO2can happen in the pulp and paper industry by 2050? Of course, with the right Breakthrough Technologies that CEPI is looking for, and the right best available technology put in place, we the suppliers can rise to the challenge.

"In fact we already have a prime example of a Breakthrough Technology with our Atmos Tissue machine," continues Sollinger. "This machine has the capacity to turn out premium quality tissue whilst cutting down on energy use by up to 50% and in addition to that it is possible to use 100% recovered paper. The Breakthrough Technology is all in the extended nip, which cuts down the energy needed in the drying section dramatically.

"Innovations like that will be the driver for a successful paper industry in the years to come. And it fills me with great pride to know that Voith is one of the main suppliers to an industry that has a raw material source that is 100% sustainable, and that more than half of what it produces is recycled and used again. What other industry could claim such an outstanding record on the environment?"