The Parent Roll Merchant Business

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2 2017 The Parent Roll Merchant Business Creating a More Efficient Marketplace Scott Griffin, Director of Tissue Sales Central National Gottesman Inc.

3 A leader in the pulp, paper and forest product industry for more than 131 years 2,500 Professionals around the world to serve a range of clients in the forest products industry Focused on our core businesses: pulp, paper, packaging, tissue and plywood PRIVATELY OWNED and operated by the fifth generation of our founding family BILLION Sales of more than $5.5 billion and more than 5 million tons of pulp and paper products annually COMMITTED to the strength and future growth of our industry

4 4 Global Reach Represented across North America, Latin America, Asia and Europe with sales into over 100 countries Local Presence Offices in 29 global locations and in 48 cities across North America, with agents and affiliates in an additional 75 locations Who We Are Strong Market Knowledge We understand what drives your business, no matter where you are located We re a global company with offices in 29 countries and a commercial presence in more than 100 countries worldwide, building on long-standing relationships with both customers and suppliers Relationship Driven Our people are at the center of our relationships with customers and suppliers around the globe

5 How We Operate 5 Our three divisions specialize in the global sales of Tissue, Pulp, Paper, Packaging, and Plywood, as well as Paper Distribution and Publication Papers Central National Division Pulp Paper Packaging Tissue Plywood North American Distribution Division Coated and uncoated papers Packaging Digital substrates Board grades Sign & Display North American Publication Division Books Magazines Catalogs Retail Direct Mail

6 Unwinding The Parent Roll Trade The Fundamentals: What Do Parent Roll Merchants Do? Transaction Structures: How Are Transactions Made? Trends: What s Going on in the Market? Path Forward: Creating Efficiencies in the Supply Chain

7 7 1 The Fundamentals

8 The Parent Roll Merchant C o r e S e r v i c e O f f e r i n g s 8 Sales & Marketing Product Development Logistics & Supply Chain Technical Guidance Credit Protection Trade & Working Capital Finance

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10 10 Central National Parent Roll Tissue Business W h e r e d o w e p l a y? Forest Tissue Mill Converting Consumers We Operate Here Pulp Mill, Recycled Fiber Parent Tissue Roll Retail & Distribution

11 The Merchant s Customers W h o a r e w e s e l l i n g t o? 11 Tissue Mill Converting Integrated Converters Retail or Away-from-Home Parent Tissue Roll Independent Converters

12 Retail Channels Economy/Value 12 Made of Mostly Recycled Fiber Quality Tiers for Parent Rolls in North America Premium Blended Recycled/Pulp or 100% Virgin Merchant insight into the distribution channels and quality tiers is essential when sourcing product for their customers that achieve the correct price/value relationship Ultra Premium 100% Structured Tissue

13 Away-from-Home Channels Good Made of Mostly Recycled Fiber 13 Quality Tiers for Parent Rolls in North America Better Blended Recycled/Pulp or 100% Virgin Light Dry Crepe/Wet Crepe Companies today are doing more business with fewer resources, and the merchant s role is to help bridge that gap for their clients Best 100% Structured Tissue or High Quality Light Dry Crepe

14 14 Expand Market Capabilities Protect Market Share Why Source Parent Rolls Externally? Prepare for New Machine Reduce Raw Material Costs and Improve Efficiencies

15 15 2 Transaction Structures

16 Spot Transactions 16 Immediate and unplanned need to purchase or sell product Usually little or no advanced notice Supply or demand is typically not recurring Immediate confirmation, usually within a day

17 Medium-Term Transactions Proactive production and sales plan outlining upcoming need More notice from the supplier or customer regarding requirement Fixed supply or demand period: 3, 6 or 12 months Business confirmation within 14 days

18 Long-Term Agency Agreements 18 Comprehensive review of sales and marketing plans, capital requirements, forecasting, technical development and workflow process Carefully planned distribution arrangement between mill management and parent roll merchant Long-term planning with 1- to 2-years lead time Distribution channels identified and extremely well defined Supply is ongoing

19 19 3 Trends

20 Parent Roll Trade Europe & Asia 20 Capacity Tightness with Ocean Containers in Some Instances General freight rate increases for certain trade lanes 300% increase Europe to Asia this year Chinese Mills Acting as Incubators for Independent Converters Chongquing Industrial Park Asian Suppliers to North America Continual interest by many to enter North America, but only select few understand what s required price, service & quality Europe Role of Merchant Limited Some exceptions China Converter Demand for Higher Quality Parent Rolls Local Partnering in Europe Mill and Converter: Lines can be blurred

21 Parent roll sales are often an afterthought or stop gap to keep paper machines running Highly competitive business influenced by regional supply and demand 21 Parent Roll Trade North America Independent converters look to their relationships with merchants to help ensure consistency of supply Logistics are critical Freight may account for up to 20% of the overall landed price Short lead times common due to market fluidity and changing needs Longer Supply Chains require more variables to manage Spot Parent Roll Suppliers Regular Parent Roll Suppliers Independent Converters

22 Parent Roll Trade Global Insights 22 Increasing need for customization Majority of new machine announcements in North America are TAD and/or NTT Mills rely on merchants to help sell full trim of the paper machine Merchants must be well versed in the production capabilities of the mill and the converter Increasing interest in alternative fibers such as Bamboo, Wheat Straw, Bagasse

23 23 4 Path Forward

24 Looking Ahead 24 Merchants will have more product categories to manage as differentiation continues Increased demand for merchant services with new market entrants More long-term agreements with merchants offering services beyond Sales and Marketing, including Logistics, Trade Services, Technical Guidance and Finance

25 Thank You