EMBRACING CHANGE IS KEY TO SUCCESS IN FOREST, PAPER & PACKAGING INDUSTRY

Increasing cost pressures, supply chain efficiency, greater customer focus and improved long-term sustainability top the list of key concerns for CEOs in the forest, paper and packaging industry. This is according to the results of a new survey just released by PricewaterhouseCoopers.

‘CEO Perspectives – Viewpoints of CEOs in the forest, paper & packaging industry worldwide’ comprises the views of CEOs from companies across the world with a combined sales total of US$70 billion. The survey explores their views on the state of the industry, the key issues it faces and its future direction and is the result of interviews with leading CEOs conducted by PricewaterhouseCoopers. Robert Barnden, Global Forest, Paper & Packaging leader, PricewaterhouseCoopers said: “Our main observation from the interviews we conducted is the range of different concerns among CEOs. The profit squeeze on the industry means that executives are juggling their approaches to make supply chains better and towards the emerging markets, sustainability and a stronger focus on the consumer – not easy challenges.” Among the CEOs, customer retention and defending a strong market share were seen as key priorities. All CEOs questioned are looking towards the emerging markets – either as a new customer base or for their advantageous conditions – but not all are looking in the same direction. Demand is shifting towards Asia-Pacific while fibre supply is shifting towards South America. While some CEOs see most opportunity in China and Asia, others view markets such as Russia as the next global giant in terms of low-cost fibre supply and close proximity to high-growth consumer markets like China. Most executives reported the need to achieve better balance to allow for profitable operations through ensuring higher growth emerging markets are developed while offsetting production in existing mature markets. For most, although there was optimism about growing demand for, and the long-term viability of the sector’s products, there is major concern over the increasing pressure on the cost structure of the industry over the short term. CEOs are taking various measures to focus on building short-term profitability, including reducing capacity to restore a better equilibrium between supply and demand in mature markets. However, there was a view that strong leadership is needed to break the cycle of low return expectations within the industry. Knowing their customers and the markets in which a company operates is a prime concern for most CEOs interviewed, as companies refocus on this area to both strengthen existing customer relationships and in the search for new markets. Robert Barnden, Global Forest, Paper & Packaging leader, PricewaterhouseCoopers said: “Many companies have recognised the need to think innovatively about the solutions to their headache concerns. But it is those who will also act to deliver their strategies who are most likely to come out on top. “Strategies should be aimed towards genuine innovation in the supply chain through, for example, new types of efficient supply agreements. This period of change needs to see companies being both cautious with their existing successes but brave in the face of innovation, all with a focus on the customer.” Most CEOs reported the need to focus on improving returns, especially in the markets for paper products, where some segments are growing strongly while others are declining. All CEOs agreed that further industry consolidation is essential for producers to generate consistently acceptable returns. Environmental sustainability rated high on the list of priorities for CEOs, particularly in terms of good forest management and product certification. Opinions differed however as to which certification schemes were necessary or appropriate and the importance of certification in ensuring marketplace acceptance for products and company competitiveness. CONTACT: Robert Barnden, PricewaterhouseCoopers Tel: +46 709 29 30 16, Email: robert.barnden@se.pwc.com OR: Michael Cracknell, PricewaterhouseCoopers LLP Tel: +44 (0)20 7213 1737, Email: michael.cracknell@uk.pwc.com ENDS 1.‘CEO Perspectives – Viewpoints of CEOs in the forest, paper and packaging industry worldwide’ is available to download in PDF format from 24 August July at www.pwc.com/fpp 2.A total of 17 CEOs of forest, paper and packaging companies in North America, South America, Europe, Russia, China, India and South Africa were interviewed by PricewaterhouseCoopers for this survey. Data was collected in person and by telephone on the topics of general economics, global competition, emerging markets, mergers and acquisitions, sustainability, strategy and supply chain. 3.PricewaterhouseCoopers (www.pwc.com) is the world’s largest professional services organisation. Drawing on the knowledge and skills of more than 130,000 people in 148 countries, we build relationships by providing services based on quality and integrity. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.