Plantations and competitiveness. Heikki Rissanen, SVP Forest Strategy, Stora Enso Oyj

Transcription

1 Plantations and competitiveness Heikki Rissanen, SVP Forest Strategy, Stora Enso Oyj 1

2 Topics Competitive advantage Wood costs Asia experience Note: The opinions expressed in this presentration are those of the author. They do not necessarily represent the views of Stora Enso. 2

3 On competitive advantage 3

4 Sources of competitive advantage Cost Product * Production Supply chain Sourcing etc. Quality Brand Experience etc. * Product in this context has a wide meaning it can be a physical thing, a service, or a combination of both. It also encompasses the value (financial, emotional, or other) delivered to and/or experienced by the customer. 4

5 Sources of competitive advantage Barriers Cost Product Production Supply chain Sourcing etc. Quality Brand Experience etc. 5

6 Business model strong competitive advantage Combine (weak) barriers stronger barrier Cost Product 6

7 Competitive advantage example Cost Product Low cost raw material Efficient production Close-to-market logistics Quality, service Customer experience Global responsibility Plantation challenge 7

8 On wood costs 8

9 Wood cost structure Example Birch pulpwood in Finland Overhead up to 10% Transport 15 to 25% Harvesting 25 to 30% Stumpage 40 to 50% Based on data compiled from different sources, such as Finnish Forest Research Institute, Metsäteho and Pöyry 9

10 Wood cost structure Finland vs. Brazil Note: Brazilian example does not represent any actual company; rather, it is an illustration of an efficient operation in favourable conditions. 10

11 Wood cost development Notes: This is an illustrative example only which combines data from different sources (Finnish Forest Research Institute, Metsäteho, Pöyry) Nominal figures for solid m3 under bark 11

12 Cost drivers Item Stumpage Harvesting Transport Overhead Comment Pulpwood vs sawlogs in Finland Wood growth in plantations Land cost Tree size Harvesting area size and terrain Technology Distance and simplicity Infrastructure Technology Simplicity Volume Management 12

13 Asia experience 13

14 Plantation operations in Asia China About 70k ha planted in Guangxi province Packaging Board mill construction ongoing Laos Pilot plantation in middle part of Laos 3k ha planted Agroforestry 14

15 Wood cost issues Item China Laos Stumpage Wood growth up over time Land rentals Wood market prices Harvesting Variation in terrain Technology to be developed Transport Infrastructure emerging Technology & contracting Good growth Land rentals Social expenditure Technology to be introduced Human resources Investment into infrastructure Technology & contracting Overhead Regulatory framework Capacity building 15

16 Plantation and the society (1) China experience Challenges Major issues in land leases Conflicting interests amongst stakeholders Business culture & regulatory framework Lessons learned Land tenure matters Involvement in society Role of private vs. public actors 16

17 Plantation and society (2) Laos experience Land acquisition FPIC type process Village Development Funds Bomb clearing Agroforestry 17

18 Agroforestry feeds people Significant impact on food self-sufficiency on our plantation areas Notes: Results are extracted from a socioeconomic impact study carried out at Kacham Village, Ta Oy District, Saravan Province. Village consists of approximately 20 households. The first principle of the recently launched Food and Agriculture Business Principles states: Aim for food security, health and nutrition Stora Enso has participated in the process to design the principles, driven by the UN Global Compact. 18

19 What to make of this? 19

20 Plantation cost advantage? Growth, growth, growth Compact operating area(s) Infrastructure Mature cost structure or productivity improvement potential Balanced sourcing structure Over time, the cost advantage will erode somewhat 20

21 Competitive advantage in the future Cost The best integrated plantations will maintain their advantage, but this will erode to some extent New large-scale projects will not, mostly, have the same advantage Economies of scale getting less attractive Product Increasingly important high value, less resource-intensive Plantation to be tailored to product Expanded concept of responsibility shared value with community No company can succeed in a world that fails. Statement at World Biomarkets, Amsterdam, 2 to 4 March

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