Company Reports - Howe Sound Pulp and Paper
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Howe Sound Pulp and Paper
Ready for change
Written by Militza Richard & Produced by Cory Challoner
Located on the scenic Sunshine Coast in Port Mellon, British Columbia, Howe Sound Pulp and Paper follows a long local tradition of paper making. There has been a paper mill on the site since 1909, and the mill produced the first paper from wood in BC. The current ownership, a partnership between Canfor Corporation of Canada and Oji Paper Company of Japan, has been in place since 1988.
Howe Sound is exceptionally proud of its heritage, but long traditions make change difficult, and in today's shrinking newsprint market, change is what is called for.
"This is an organization that is going through change, and it will be an aggressive organization," says CEO Mac Palmiere. "We are and will continue to be more competitive in the market place. We supply great products, and we strongly believe in a very tight relationship with our customers. We are there to help them, and they can help us. But at the end of the day, we need to know their business so that we can properly service them with the products they want or need. We're fast to respond to issues and we don't leave customers out to dry."
In March 2008, Palmiere took the CEO position at Howe Sound with the goal of reinventing the company. "Howe Sound was struggling, so they asked me if I would run it and do my best to turn it around," he explains. With a background in engineering and years of experience in both pulp and paper and lumber manufacturing, Palmiere had the skill set for the job. But, it was not an easy task.
"The culture here was very ingrained," he says. "It was like an iceberg; it takes a lot to move it. But when times are changing as fast as they have been, you have to adapt." This was especially important because the company's Japanese market for newsprint had disintegrated. This meant that the company had to quickly start producing paper for the North American market at a time when that market was in decline. "It was a very steep learning curve," says Palmiere.
"The newsprint market in North America is an utter disaster," says Palmiere. As more and more people get their news from the internet, there is less and less demand for newsprint. Palmiere admits that even he gets national news from the internet. "I buy the local papers; that news is harder to find online. Plus, we put some of the paper into those local papers," he says.
This means that many of their customers need less paper. "We do have some customers who are very successful, but they are the ones who reinvented themselves back when they saw this change coming. They've got a product people can't replace easily in the digital world, and they do very well."
This kind of innovation is key for the paper industry. That's why Howe Sound plans to expand itself from just a newsprint producer to a paper producer. Their newsprint is consistently ranked number one or two in quality by their customers, and they have strong customer technical support. But Palmiere knows that this may not be enough, and they already have the technology in place to make several different grades of high quality paper. "Our machine is arguably one of the top three or four machines in North America," says Palmiere. "It's a Ferrari, and it's been run in third gear. We still have two more gears to go."
By increasing productivity and manufacturing a more diverse product, Palmiere plans to come out of the storm with a strong position. "Our machine is running at 580 tons a day, but it is easily capable of 650. By just increasing output, we will cut costs. We are also going to make some higher grades to separate ourselves out from the masses. We hope to be a one-stop shop, and we have the machine to do it," he says.
The company has brought in new management with experience in multiple grades, and they already have two new grades perfected. They are currently working on a third and plan to have a fourth by the fall. This will allow them to provide customers with a much more diversified portfolio next year, including brighter paper, insert grade and directory grade.
In addition to newsprint, Howe Sound also produces several grades of Kraft pulp. "We make a very good softwood pulp. We have a good customer base for it, and will continue selling to strategic sections of the market that fit our fiber," says Palmiere. However, the company does plan to lower costs. "Work was being done that didn't need to be done," says Palmiere. "We're getting rid of that and becoming a lean organization. We have trimmed aggressively in the past 12 months."
The mill is also looking into power generation as a source of revenue. "We have power generation capabilities," says Palmiere. "We are looking for an agreement with the provincial utility where we could be a producer. We would be pulp, paper and power."
From Palmiere's perspective, the future is hopeful. "The people have not had a lot of change, but they know they have to, and now we are working our way through it. I see a result now, and I am really pleased. The change that we put them through is immense, and they are responding to it well," he says. With support from the community and shareholders as well as an excellent management team, Palmiere believes Howe Sound will emerge stronger. "We are going to be well positioned after the storm," he says. "It makes the fight worthwhile."