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PacWest Conference: Rising to the Challenge


July 1, 2002
By Pulp & Paper Canada

One of the greatest challenges facing the PacWest 2002 organizers this year was to present a positive view of an industry trying to regain its foothold in the marketplace. This challenge was well met …

One of the greatest challenges facing the PacWest 2002 organizers this year was to present a positive view of an industry trying to regain its foothold in the marketplace. This challenge was well met at the Conference Forum, featuring top industry managers and analysts who described an industry that was so rooted in both Canadian trade and psyche that bouncing back from difficulties was almost routine.

David Bonvie, chairman of the conference, spoke of the incredible changes of the past year, due to the tragedy of 9-11 and the economic impact of the Enron affair. Despite these dramatic events, he said, the number one personal worry, according to a national poll, was for job security.

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“Leadership has a great responsibility to influence this insecurity,” he stated, indicating that there were people in the audience who could address this issue with their employees. “After all, the number one resource of the industry consists of the people in it.”

Unfortunately, an inordinate amount of money was spent on other resources instead, without sufficient positive outcome. This was one of the reasons that he and his co-chair, Terry Hesketh, had decided to look at the state of the industry as a glass that was half-full instead of half-empty.

After all, Bonvie said, if you ever listen to a golfer’s account of a game, notice that he rarely focuses on the mistakes but dwells more on the great plays.

Bonvie ended with saying that while it is a shame that the number of attendees was not as high as in previous years, the quality was there and, therefore, the ability to change the outlook for the future.

Next to speak was the program chair, Arvind Thakore, who stated that the conference continued to be a valuable source of information because of the authors and volunteers who worked so hard to make it successful.

Search for positives

It was great to be back in Jasper after approximately 10 years, said moderator Russell Horner, president of NorskeCanada and a PacWest veteran. He introduced an excellent panel of speakers, mentioning one unfortunately missing, Avrim Lazar, president and CEO of the Forest Products Association of Canada, who had been called to Ottawa because of issues related to the softwood lumber dispute with the United States.

“Well,” summed up Horner, “I have bad news and good news. The bad news is that we are at the bottom of the cycle.

“But the good news,” he continued, “is also that we are at the bottom of the cycle.” That meant, he explained, there was nowhere to go but up.

Should anyone become overwhelmed by emotion, he added, good quality tissue had been provided at each table. In fact, it was suggested that everyone should use up the supply in order to bolster the industry.

First to speak from the panel was Doug Eamer, vice-president, Canadian Pulp Operations, Pope & Talbot. Eamer greeted the audience and claimed to be surprised at being chosen as one of the speakers since he was not known for a cheerful assessment of the state of the industry. Given the positive theme of the conference, he said that he had decided to meet what he called facetiously the “outrageous” challenge and launched into his presentation on The Joys of Pulp Making on the West Coast.

Eamer conceded that there are rewards for those involved in the industry. Much of the optimistic outlook he still had was due to the Pope & Talbot philosophy which showed the importance of getting back to basics. Throughout its 150-year history, P&T realized the importance of supplying the right mix for the consumer and, when deciding to embrace the risks of the highly-cyclical business of pulp and paper, it focussed on lumber and pulp.

The simple philosophy for P&T was to be a low-cost producer and streamline for efficiency. It was important to cultivate long-term relationships with customers, some of which had been with P&T for over 40 years, even through the most difficult markets.

Some of the ways in which these aims were accomplished were to look for acquisitions that fit and were complementary to support existing divisions. Overall, however, the best defence was to concentrate on reducing costs by maximizing cost efficiency.

Since the price of pulp continues to decrease, it is necessary to re-evaluate what has been done and grow from there. The most important way to do this, said Eamer, is to look after the people. This can be done by recruiting for quality, ensuring work safety by giving employees the proper tools and instruments. Inform them of their contributions, provide them with training and, in return, expect a lot. The best way to ensure job security is by trying to be cost efficient but, if reductions have to be made, they should be done compassionately and not by head count.

Another important step is to look after mill, advised Eamer. Do not expect major expenditure to save the mill. Tighten specs and improve quality while deciding on product specialization. Stick with your customers through thick and thin.

Get the most out of your product by maximizing the use of the facilities. Reduce costs each year by the amount of inflation and relentlessly pursue cost reduction.

“None of this is rocket science,” admitted Eamer. “We are all doing this and the results are showing it.”

A study of the BC market pulp industry cost performance improvement (over 1995-2000) by PricewaterhouseCooper showed some interesting statistics. Among them, total maintenance costs were -14%, chemical costs were -11%, salaries were -23%. Eamer pointed out one item to be concerned about: the energy/fuel cost which, at +27%, was a very serious issue to address. With depreciation at -16%, lack of capital spending was also an important issue.

However, with an hourly cost of production (manhours over tonne) having fallen by 23%, there was, according to Eamer, “some room for celebration.”

“Addressing continued efforts like this can rejuvenate the industry,” he stated. “There’s a lot more to do. I wish you the best and may you find rewards.”

Question from the moderator

A question posed by Russ Horner concerned the vintage of BC mills. How long does the industry have, he asked, before it has to choose between fading away or taking the plunge into renovations by making some huge investments? No one was able to answer.

Catching up on tomorrow

Bill Hunter, president and COO, Alberta-Pacific Forest Industries, started his presentation by showing his enthusiasm for the industry.

“I have had trouble sleeping because I can hardly wait until tomorrow,” he confessed. “I want to make a difference.”

He recounted his interview with staff concerning what to say at the conference. They suggested a slightly different title: Catching up on the Past because, while everyday goals are reached, overall goals are not, giving a skewed indication of progress.

There were many challenges, he said but change is constant. The Tokyo-based owners of the mill have moved from management to shared responsibility leadership — this had resulted in a change from reacting to directing events.

“In dealing with many issues,” said Hunter, “showing up was half the battle. Some call it risk management, I call it necessary.”

To get where the industry wants to go, indicated Hunter, we need to create a driving force of long-term thinkers, ensure a stable supply of timber. This will enable the industry to capitalize on opportunities to enhance the business.

Tomorrow’s tools include doing more with less and getting better with analysis. It is necessary, affirmed Hunter, to create a new culture based on the development of multi-layered business plans with targets and strategies at all levels. Included in this should be the required training, consultants and database, along with a quarterly review.

The foreseeable future holds an increasing competition for skilled labour. Shortage especially pronounced in Alberta due to presence of new energy development. Al-Pac has slightly different profile as youngest player in the field but will face the same shortages of personnel, estimated at the retirement of 15% of its workforce (trades, operating, etc.). Despite the
aboriginal communities in the area of Al-Pac creating a pool of potential labour, there were missed business optimization opportunities because of under-investment in education and training.

The key words, said Hunter, were to “share the wealth.” Al-Pac was trying to do this by identifying and creating business opportunities and partnership with the aboriginal communities. A business plan with neighbouring Portage College was providing targeted training. A continuous learning environment would be established in the form of an in-house apprenticeship program, along with an in-house leadership program.

“These programs will not solve all problems but will help create a win-win situation,” said Hunter. Both sides would benefit by gaining essential skills and opportunities.

The goal was profitability and to reach this goal, it is necessary to create value from underdeveloped assets.

Building skills and

partnerships with industry

Bill Persley, president of Portage College and, his introduction added, an enthusiastic golfer, further detailed the business plan that the college has with Al-Pac. He gave a thumbnail sketch of Portage as having 3,000 students, 70% of whom were aboriginals.

“Some of the challenges facing colleges,” Persley identified, “were working with employers, identifying skill shortages and maximizing resources (companies usually have newer technologies).”

The key was in developing training programs that were employment-focussed, with a good chance for job on graduation. Through the use of advisory committees and government support, the college was trying to develop partnerships and work with industry to develop meaningful relationships.

Coordinating resources meant organizing training, through the college; employment, through the industry, with financial support from provincial and federal government.

“We believe there has to be a fit,” said Persley. The Al-Pac and Portage College model was one of the examples of developing a partnership with industry, using energy and passion.

Many steps lead to the partnership with Al-Pac. Informal meetings, memorandum of understanding led to the granting of credentials and the creation of an existing pool of well-trained and educated graduates, providing skills needed by Al-Pac on an on-going basis.

Al-Pac brought experienced professions who shared expertise, employment opportunities, state-of-the-art facilities and industry leadership.

Mutual goals were to create co-operative education, work opportunities and field experience, within a realistic budget. As soon as both federal and provincial governments found out that Al-Pac committed funds, they jumped in.

“There was no question,” said Persley, “about the graduates finding jobs with Al-Pac.” This mutual fulfillment made the pilot project a success.

From the floor

Richard Branion, UBC Chemical Engineering, interjected an unscheduled word of warning to those gathered at the conference. He said that he had attended a recent gathering of students at a conference in Australia and had realized that the view of the pulp and paper industry on a bar chart is barely visible.

“Within the next ten years,” he warned, “a large portion of workforce will retire. Staffing mills from communities is a sensible idea. Something needs to be done to attract more students into these programs.

The problem was that to compete with the “sexiness” of the computer industry, the pulp and paper industry needed to get students excited by staying current while creating customized programs.

It was necessary to get the word out that a Grade 12 education is not enough.

Operating a mill in receivership

Reporting on the positive aspects to a negative situation was Gary Young, senior vice president of KPMG Inc. He was introduced as being, in some respects, “not the guy you want to see knocking on your door”. At the same time, however, he could be a company’s best friend in moments of need.

Young himself admitted to having given speeches more often in front of angry creditors. “It’s nice not to have things thrown at me,” he said, before launching into the uneven business history of Celgar Pulp & Paper.

KPMG had been associated with Celgar for a number of years and Gary Young had advised the company through changes in ownership and financial difficulties. He pinpointed one of the major problems as the result of ownership by two different companies with two different concepts. This, he said, resulted in a mill expansion that had seen over $800 million in investment but did not run properly because it lacked another $10 million to integrate the new system. After the mill declared bankruptcy, Young was able to create a business plan, pay creditors and create a working capital. The mill recovered, although by law it still remained under bankruptcy protection. However, the mill was reliable and didn’t have some of the problems faced by other mills. There were still some problems to be worked out, admitted Young, lack of local fibre being one of them, but Celgar was not starved for capital any longer.

The positive aspects for the industry at this time included an improving market, with the beginning of price increases. Young added a few words about the competitiveness of the pulp and paper industry, saying that at times, it was too aggressive, resulting in pulp price fluctuations that were ridiculous since pulp prices come down twice for every price decrease by paper. He himself could have tried to unload some of the Celgar stock at a lower price but closed the mill for two months instead as a healthier option.

On a final note was a warning. “Political correctness is good,” he said, speaking of the need to involve communities and women mentioned by previous speakers. “But the number one goal has got to be profit. Other goals are set by people who don’t have to make payments.

“After all, you don’t want people like me unless you didn’t earn enough profit.”

IN MEMORIAM

Kent W. Milligan

It is with deep sorrow that the pulp and paper community heard of the passing of Kent Milligan on April 3, 2002. As a PAPTAC member since 1989, Kent was well-known for his involvement and contributions to the PACWEST Conference in western Canada. At the same time, the success enjoyed by ChemTex allowed Kent’s father, John Milligan, to retire in 2000, with Kent becoming President.

An avid golfer, hunter, fisherman and skier, Kent also excelled as a football and rugby coach, wine connoisseur, chef and as an author (Grilled Magic — Flavors from the West Coast). He was a dedicated, tireless worker and a source of inspiration, always more than willing to “pitch-in” to supply whatever was required of his many talents. He will be fondly remembered by his family, many friends and colleagues for his dedication, sense of humour and his appreciative exclamation “Life is tremendous!”

Value added by presence

Conference attendance was down despite the fact that technical gatherings such as this one are of enormous value to the industry. Cost-cutting measures set in place as a reaction to the economical downturn forget the long-term benefit to individual companies. Besides the attraction of quality papers, the networking that takes place during such an event results in a very practical and down-to-earth exchange of information. Problems are presented to colleagues who have solutions that could avoid waste and inefficiencies. Ideas are discussed for implementing investment in successful renovations or expansions.

This year in particular, there was the added benefit of focussing on the end of the difficulties being experienced by the industry and the potential for future growth.

In his role as chairman, David Bonvie said, “I wanted to ensure that the conference would deliver a positive message. I believe we did that.”

According to Arvind Thakore, program chair this year and conference chairman in 2003, this year’s success was due to the natural beauty of Jasper, balanced by the high quality of tech papers and the emotional inspiration of the luncheon feature speaker, Ken Larson.

Larson, a gifted speaker and former member of Canada’s Ol
ympic basketball program, with a masters in sports psychology, spoke during the conference feature luncheon. His inspiring speech, the Champion’s Journey, gave a guideline for professional performance and life fulfillment by urging listeners to create their vision of future before it happens. His detailed advice and anecdotes brought moments of laughter and sadness during his talk and a standing ovation at the end.

Technical Sessions and Prizes

At Saturday’s closing dinner, the prestigious ‘Eagle’ (H.R. MacMillan Trophy) was awarded to Dale Bossons, Pope & Talbot, Nanaimo, BC, and Bill Alsip, Alsip Engineering Ltd., Squamish, BC, for their paper Recovery Boiler Upgrade to an Advanced Distributed Control Strategy. Best novice paper was also won by Dale Bossons and Bill Alsip.

First runner-up prize went to Farhad Ein-Mozaffari, Chad P.J. Bennington, Department of Chemical and Biological Engineering; Leonardo C. Kammer, Pulp and Paper Research Institute of Canada; Guy A. Dumont, Dept. of Electrical and Computer Engineering, UBC-Pulp and Paper Centre, Vancouver, BC, for Design Criteria for Dynamic Behaviour of Agitated Pulp Stock Chests.

The winner of the second runner-up prize was Ian Dougall, Tembec of Skookumchuck Operation, BC for Increasing Machine Runnability at Tembec Skookumchuck Operations.

The best supplier paper went to Rob Kelham, EPCOR Water Services, Richmond, BC, for In-Situ Epoxy Lining – A Cost Effective Strategy to Renew your Service Mains.


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