When Coillte threw its hat into the ring of potential buyers for Weyerhaeuser’s Medite manufacturing facility at Clonmel, Co Tipperary, it created a real stir throughout the country’s forest products industry. The opportunities – and, it’s fair to say, challenges – the proposed acquisition presented, were, without doubt, the main topic of conversation.
When the Competition Authority gave it the green light and Medite Europe Ltd came into the fold on November 27, 2006, Coillte became a e300m turnover company.
Already sole owner of the Smartply OSB business in neighbouring Waterford, the acquisition gave Coillte a e175m turnover presence in the wood based panels sector.
It’s a far cry from 1989 when Coillte was first established and 97% of revenue came from log sales.
In the early 1990s it set up a joint venture with Louisiana-Pacific (LP) to produce OSB. “We had a situation where the quaysides of a number of ports in Ireland were lined with pulpwood being exported, which indicated that there was a need for another major pulpwood-using industry on the island,” said Gerry Egan, group director of corporate affairs.
In 2002, when LP began to consolidate its business in the US, Coillte bumped its 35% share in the Waterford facility to 100% and Smartply Europe Ltd was born.
Smartply’s strong market position in the UK and Ireland provided Coillte with the confidence to take advantage of another result of US consolidation – Weyerhaeuser’s Clonmel MDF facility.
“We were strongly of the view that there was merit in it being in Irish hands,” said Mr Egan. “While Irish sawmills are indigenous, the major panels businesses were multi-national. Rather than look for more inward investment, here was an opportunity to consolidate the indigenous forest products industry.”
The purchase wasn’t universally welcomed, with some concerns expressed by sawmillers who were alarmed at the prospect of their primary log supplier strengthening its grip on another link in the supply chain – the market for wood chips.
“We felt that Coillte’s acquisition of the business would be good for the long-term strategic development of the Irish forest products industry,” said Mr Egan. “It could have been bought by an overseas company which undoubtedly would have been very committed to the Medite business but might not have looked at the bigger picture to the same extent we would. We were disappointed, but not surprised, that not everyone saw it the same way.”
The acquisition process has been pretty gruelling and Coillte is now taking a long, deep breath – of between 6-12 months – before deciding where it goes from here in terms of Smartply and Medite’s individual and/or joint development.
Coillte itself, however, has already implemented an internal reorganisation. The group now consists of three business divisions, each with its own managing director. Coillte Forest Division, headed by Tim Crowley, is the forest management arm while Coillte Enterprise Division is the venture arm. Under the guidance of Gerry Britchfield this division manages the group’s property interests.
An increasingly important issue for this division is that of energy. “On one side of the equation, Coillte is now a major energy user,” said Mr Egan, “but on the other, we have the largest solid biomass resource on the island and we’ve already developed a number of wind farm locations.
The third arm is the Panel Products Division and within that there is, again, a certain hiatus. The incumbent managing director, John Dwyer, who spearheaded the acquisition of Medite, will soon be retiring.
“We’ve advertised internationally, which in itself is a statement of intent and signifies that we want the best possible person to take over John’s role on the basis that it’s now such a substantial part of the overall group business,” said Mr Egan. And he’s resisting the temptation to second-guess what may be around the corner in terms of any manufacturing synergies. “The new managing director will have his or her own views about the best way the combination of businesses should be run.
“The technology in both places is different: there’s a continuous press at Medite and a multi-daylight press at Smartply. They are substantial, well-run businesses in their own right with sophisticated manufacturing processes and any decisions that are taken should be fully informed after having managed them for a period of time,” he said.
One fundamental change that has already been implemented by John Dwyer, however, is the primary customer contact, which has been integrated. Geoff Rhodes, formerly sales and marketing director of Weyerhaeuser, is now marketing and business development director across both brands, while Andrew Macdonald, formerly sales and marketing director at Smartply, is sales director across the two. “We had a situation where nine out of the top 10 customers were customers of both Smartply and Medite,” said Mr Egan. “They wanted to be able to buy more than one panel from us but only have one order process.
“We are now going through the process of sharing and understanding the intricacies of Medite’s MDF and Smartply’s OSB business and familiarising ourselves with all the positive aspects that we can bring to the market,” said Mr Rhodes. “MDF and OSB continue to be attractive and growing components of the international panel products markets, so the combination of these two strong brands brings a really solid supply out of Ireland, all certified by FSC.”
The continuity on the human level has been a real bonus for Coillte. While Smartply and, particularly, Medite have changed ownership more than once in their histories, the key personnel have remained in position, building up a wealth of experience and world-class expertise.
Coillte chief executive David Gunning: “Coillte Panel Products now encompasses two outstanding brands which, from a UK and Ireland point of view, position us right at the top in supply of MDF and OSB”.
“To be able to fulfil our customers’ demand with an outstanding product and to be able to trace it back to a fully certified forest that we own and operate is a unique set of capabilities that we want to leverage as much as we can.
“We’re not short of markets at the moment – everything we produce we sell,” he continued. “What we would like to do is put increasing emphasis on higher value products with higher value propositions to our customers.
“We see growth opportunities for MDF and OSB which, in turn, provides opportunities for our own raw material and for private forestry,” he added. “We need to complete our strategy review process in order to determine our next steps and we will be quite deliberate in taking that time.
“Both Smartply and Medite are well thought of by our customers and they provide us with the fuel for growth.”
