Financial Reports & Markets
Paper and packaging CEOs see tough times ahead
March 12, 2014 By Pulp & Paper Canada
The slow growth expected in developed economies, exchange rate volatility and rising costs have dampened CEOs’ outlook for next year. Only about half of the forest, paper and packaging sector CEOs (54%) expect to see growth in their…
The slow growth expected in developed economies, exchange rate volatility and rising costs have dampened CEOs’ outlook for next year. Only about half of the forest, paper and packaging sector CEOs (54%) expect to see growth in their industry sector over the next 12 months, compared to 68% of CEOs overall, according to PwC’s 17th Annual Global CEO Survey.
“Forest, paper and packaging CEOs in the PwC survey identified a wide range of business risks to manage — 85% are concerned about continued slow or negative growth in developed economies,” said Bruce McIntyre, partner and leader of PwC’s Forest, Paper and Packaging practice in Canada. “Compared to CEOs overall, far more worry about exchange rate volatility, high or volatile energy costs and raw materials prices. Overcapacity is already an issue in some markets, so it was not a surprise that more than half of sector CEOs expressed concern about new market entrants.”
Forest, paper and packaging companies are still very focused on making their operations as efficient as possible, with 77% planning cost reduction initiatives over the next 12 months. More CEOs are also looking to strategic alliances and joint ventures versus planning a merger or acquisition. McIntyre said: “The move towards alliances reflects a continuing trend towards greater cooperation across the value chain.”
When it comes to markets where CEOs expect growth and expansion, China ranked first, selected by 24% of the sector CEOs, with the U.S. close behind at 22%. Canada was also popular, with 12% of forest, paper and packaging CEOs saying it’s one of their growth markets.
The PwC survey found that 81% of forest, paper and packaging CEOs believe that technological advances such as the digital economy, social media, and big data will transform their business over the next five years. This reflects the impact on paper demand of the shift to mobile communications and entertainment, but technology is expected to help the industry as well. However, while 92% of the CEOs acknowledge they need to update technology investment strategies, less than a quarter (23%) report that change programs are underway or completed. On a more positive note, 33% of CEOs indicated that they are innovating in areas such as nanotechnology, genetics, and new products.
Almost half of FPP executives (45%) plan to add staff with just 19% saying that they plan to downsize. McIntyre added: “Forest, paper and packaging company CEOs are also worried about finding people with key skill sets; 77% of those surveyed said they’re concerned. That puts skills high on their list of business risks. Nearly all of them recognize the need to change talent strategies, but only about one-third have begun or completed initiatives.”
For its 17th Annual Global CEO Survey titled ‘Fit for the future: Capitalising on global trends’, PwC surveyed 1,344 business leaders across 68 countries around the world in the last quarter of 2013 and conducted further in-depth interviews with 34 CEOs. For the data presented on the forest, paper and packaging sector, the firm took a closer look at responses from 52 CEO interviews, conducted in 24 countries around the world.
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