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From the Top: Metso Leaders Talk About the Industry


December 1, 2004
By Pulp & Paper Canada

One of the keys of success is the hard work that makes it appear as a natural result of business conditions.

One of the keys of success is the hard work that makes it appear as a natural result of business conditions.

And so it is with Metso. Not complaisant with recent projects, either North American or international, Jorma Eloranta emphasized his philosophy for continuous effort despite the fact that the company is so successful as a global supplier.

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“We have to create that confidence with the customers every day even though we may have an understanding with them,” he said. “We are clearly number one in certain products but we need to be humble and adapt ourselves to both the customers and to different situations. It is always a challenge.”

With four main business areas (Metso Paper, Metso Minerals, Metso Automation and Metso Ventures), net sales for the company were EUR 4,250 million in 2003. Around the world, there are approximately 23,000 employees in over 50 countries. In North America alone, there are well over 3,000 people on staff. While the structure is basically vertical, in order to be focussed on the particular needs of each customer, Eloranta said that it is practical for the divisions to work together as a single supplier for many projects. “For this reason,” he said, “there is a well-established horizontal co-ordination.”

Eloranta came to his present position in March of this year, having served in a leadership position in a variety of different industries including Kvaerner Masa Yards, Finvest and Jaakko Pyry Group. One of his first moves was to familiarize himself with his new responsibilities before shaping the future of this global enterprise.

Part of this included studying the core values held by the company. Besides high standards and ethical principles, Metso holds a policy of transparency and openness. It also encourages its personnel to participate in community programs and sponsorship, as well as contributing to ecological sustainability in all its activities.

“Those ethical principles have been in place a long time,” said Eloranta. “Before I started, I went through the manuals carefully and had no problem whatsoever in accepting those principles.”

This, in turn, made it easy to take on the new duties of his position. “It’s so easy to run the company when we have such good people,” Eloranta explained. “I think that, having come from outside the company, I can see the fundamental importance of having people who are experienced and dedicated.”

Eloranta also emphasized the importance of the technological background and know-how of the people by explaining the competitiveness of the two major Finnish industries: the mobile communications of Nokia along with the forestry sector. Both of these industries are constantly seeking the top graduates from Finnish universities to keep up the core values of Finnish research and innovation. This is not a new approach for Metso.

“We have been a long time in the industry,” he said. “That is why people keep coming back to us.”

Indeed, the company’s roots reach back to the 18th century with the establishment of a small shipyard in the Viapori fortress on the islands outside of Helsinki, with several other companies forming part of the present corporation dating back to the 19th century. In 1999, a new corporation was approved out of the merger of Rauma and Valmet, although Metso continues to adapt and adopt new assets and new technologies to consolidate its position as a global supplier of process industry machinery and systems, as well as know-how and after market services.

Despite the dramatic drop in investment in new machines in Canada, as well as in the rest of North America, there is still a continuous drive for the mills to be competitive through regular upgrades and improvements.

“Every company has to adapt themselves to the customer, that’s obvious,” said Eloranta, “and we have emphasized our management message very strongly in being closer to the customer.”

Metso has also been forced to become lean in its operations and personnel. A program of business improvement, called Metso 100 and launched in 2003, has seen viable solutions which include restructuring. To reach the targets on the cost-reductions side, streamlining of the company has improved aspects of profitability and cash flow. The management agenda is to still maintain a position at the technological forefront and continue to have a well-based organization. These actions should be finalized by the end of 2006 and a more complete result of these actions will be evident in the bottom line in 12 to 18 months. Eloranta said, “We need to be competitive cost-wise but the point is not only to cut costs but also to adapt to certain regional priorities.”

The reality is that the new installation driven market is centred in two places: South America and Asia. Strong economic growth continues there and the market for chemical and mechanical pulping equipment and lines is good. However, as Eloranta says, “China is important to us and we will continue to grow but it would be foolish to say that we are by any means leaving out Europe and North America since more than half of the pulp and paper business is here. In this area, we are dealing with a more installed-base driven market. In all, about 40% of Metso corporate business comes from after-sales service and process improvement.

“We believe that paper companies are outsourcing,” he added. “This is something we keep as a business potential for us.”

This approach seems to be working. Business for Metso is picking up this year. According to analyst Andreas Willi of JP Morgan, Metso reported robust results for Q3 and is poised to benefit in the forthcoming few quarters from the healthy demand for minerals and a recovery in the pulp and paper markets.

Since more than half the market in North America is in after-market support, that is where Metso Paper is developing its greatest support, focussing on rebuilds, service, maintenance and process improvements.

“The market is clearly picking up,” agreed Bertel Karlstedt, president of Metso Paper. “While capital investment is strongly fluctuating, business [for Metso Paper] is very stable. Looking at the market profiles overall, you can say the service markets are very active.”

Both men have plenty to be positive about. Outside of the brilliant success of Kruger Wayagamack in Quebec with its new LWC line, many of the projects are in improving efficiencies of established mills. Scott’s Crabtree mill in Quebec ordered a new tissue machine. The Irving St. John mill ordered a wet end rebuild on its tissue machine while the Irving Toronto tissue machine ordered both a wet end and dry end rebuild. UPM-Miramichi has a new single drum winder with a 7700 mm trim. With its recently-installed paper machine, Stora Enso’s Port Hawkesbury mill in Nova Scotia set a new world’s speed record for SC papers by running 1800 m/min for a 24-hour period. Now the mill has added a new TMP line from Metso that is designed for 780 ADMT.

And what does the future hold? General development in the industry depends on new technology and new materials that might make even greater advances possible. This was why, Karlstedt claimed, Metso was actively involved in research and establishing networks within academia.

“It’s very important to understand the challenges that the customer is experiencing in everyday life,” he said. “You have to be close to the customer, knowledgeable and aware of the process he is operating.”

According to Karlstedt, volumes are already improving and there is an understanding that there will be an improved outcome next year. One of the signs of this is the increased amount of advertising being published during the last two quarters. This, he stated, was a very strong indicator for the industry overall.

“The prices will go up further in the coming year,” Karlstedt predicted. “The global players will generate a better environment for investment. We want more projects,” he added with a smile, “because every project is a potential success story.”

Karlstedt explained that there are still people who think they can continue to milk the cow, meaning that they don’t want to invest. Bu
t, as he pointed out, if you milk the cow that way, one day it is empty and you have to stop operating. To be able to achieve true efficiency, Eloranta said he strongly believes in the importance of leadership in a company.

Metso, of course, was there to utilize the in-house knowledge to improve customer’s profitability and productivity.

Both agreed on the value of being a preferred customer and remaining at the forefront of technology and operational excellence.

“The key is never to be too confident and proud of yourself,” said Bertel Karlstedt. “The most important thing is to continue to put in the investment in the people.”

“If we have happy customers and happy shareholders,” concluded Jorma Eloranta, “then the rest is a piece of cake.”


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