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Wood Processing - From Concrete… to Ice Cream

The Norwegian wood processing industry has dreamed up one of the most effective methods possible of communicating the hidden diversity of what its members do. A picture of a quartet of young girls gleefully attacking their store-bought ice cream cones helped deliver a surprising and memorable message: not only are the box the cones came in and the special wrappers produced from pulp and paper, but even the ice cream's flavouring owes its origins to vanillin created by wood processing.

The Norwegian Pulp and Paper Industry (TFB) joined forces with Norway's metallurgic, chemical and packaging industries to create the Federation of Norwegian Process Industries (PIL) in 1992. The wood processing industry could then boast of stronger growth than Norwegian industry on the whole, but recent years have not been as kind.


Norwegian-based production peaked in 1995, and the sector entered a decade marked by restructuring and rethinking. At home, investment declined and businesses had to learn to cope with low paper prices, high energy costs and transport complications. But certain companies have coped, succeeding by adopting different strategies, and the sector has begun to recover as attention turns to building up the country's land-based economy in preparation for the eventual deceleration of the petroleum age.


wood400x283.jpg (83442 bytes)Norske Skog's Skogn mill is the largest producer of newsprint in Norway, and one of the largest newsprint mills in Europe.











Restructuring & Business Basics

The Peterson Group, a fibre-based Norwegian packaging group owned by M. Peterson & Søn, is a typical example. The company, which produces specialist paper and packaging, has a turnover of about NOK 3 billion, with 70% of this from international sales. In 2003 the company strengthened its market position but posted poor results after a fall in paper prices and one-off restructuring costs. In total, prospects seem good but caution rules until the future bears this out.


Norway's flagship in the industry, Norske Skog, is the world's second-largest producer of publication paper, with 23 wholly and partly-owned mills in 15 countries on five continents. From 1992 through 2003, the company's operating revenue rose from NOK 7.6 billion to NOK 24.1 billion, and its market capitalization grew from NOK 1.8 billion to NOK 16.9 billion.


Despite increased production, profits fell in 2003, largely due to an all-too-strong Norwegian crown, but Chairman Lars Wilhelm Grøholt states that the company's margins were still better than their competitors. Additionally, Norske Skog had begun responding to the emerging challenges facing the industry already in the 1990s.


A comprehensive restructuring programme called Improvement 2003 is on course to achieve its target of saving NOK 2 billion by the end of 2004. Norske Skog has also concentrated fully on its core areas, divesting other units and focusing nearly 100 percent on publication paper.


In the 1990s Norske Skog created a strong European presence before turning to globalization in the new millennium, with the establishment of operations in North and South America, Asia and Oceania. The company established footholds in Australasia and South America, including the Hebei newsprint mill project near Beijing due to open in 2005, giving themselves a competitive advantage in the regions that are most likely to grow in coming years. Operations in China are particularly exciting, with this market expected to expand by nearly eight percent a year until 2010.


Norske Skog's combination of cost-cutting, concentration on core business and attention to technical customer service is a recipe reminiscent of other industrial turnarounds that have re-established companies like IBM and Ericsson as powers after turbulent years.


Something from Nothing
Another major Norwegian success story in the industry is Borregaard. Like many of Norway's wood processing companies, Borregaard can trace its roots back to the 19th century paper and pulp mills. Borregaard merged with Orkla Industries in 1986 and has concentrated on chemicals from wood processing since the 1990s.


Borregaard has 20 production plants in 13 countries and develops and supplies innovative and speciality products such as speciality cellulose, lignin-based binding and dispersing agents, yeast and yeast extracts, ethanol and vanillin. Borregaard LignoTech has 12 production facilities in 11 countries and is the world leader in lignin products, a remarkable material. 


One of the most quintessentially Norwegian things in the world is its unique "brown cheese", a sweet, slightly waxy block that the natives feel is a vital part of their national identity. It is not a true cheese at all, but made from something most people throw away, whey. Lignin, a co-product of cellulose production, is only considered an energy source by most cellulose producers, and is burned. Now, with a little inventive thinking, it is a valuable raw material for a wide range of products, and has a great potential for future development.


Lignin production at Borregaard has increased by three-four times since 1989. Half of all the concrete produced in the world today is treated with lignin, which increases its fluidity and strength. Lignin products are also used in textile dyes, agrochemicals, batteries and ceramic products, and as binding agents in animal feed and briquettes. Lignin products are also increasingly used in connection with oil drilling.


The full range of uses from timber is neatly illustrated here, with an impressive range of products, and energy extracted - almost nothing goes to waste.
wood400x241.gif (23091 bytes)












Research & Tradition
Borregaard displays typical Norwegian business vigilance, and invests NOK 100 million a year in R&D to develop new uses for lignin and wood-based chemicals, searching for new niche markets - just in case.


A number of institutes work to keep the Norwegian wood processing industry dynamic. The PFI (Paper and Fibre Institute) became a commercial, internationally oriented research company this year and joined forces with Swedish counterpart STFI-Packforsk. Norske Skog, Borregaard and M. Peterson & Søn each have a 1% share in the PFI. The PFI works in close cooperation with the NTNU (Norwegian University of Science and Technology) in Trondheim.


The SSFF, an association of forestry and industry research groups, coordinates research in forestry, and the wood and wood processing industries. The organization includes Skogforsk (Norwegian Forest Research Institute), the Norwegian Institute of Wood Technology (NTI) and the PFI.


While there are clear advantages to being large enough to have the options of internationalization and massive investment, some small companies manage to find a niche where they can flourish.


Little Skjærdalens Brug in Tyristrand in Buskerud County thrives on old-fashioned production methods and attention to quality and customer demands. Skjærdalen exports crepe paper to China and has clients in 40 countries for its coloured tissue and wrapping paper. A special process to create bleed-resistant paper and the ability to produce customer-ordered colours and sizes keeps the nearly 90-year-old company successful. The time-honoured strategy of specialization and service will always have its place in Norwegian business.

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