Moscow-based Segezha Group is a forest industry powerhouse counting about 13,000 employees and operations in 11 countries, producing plywood, timber, pulp and paper, plus also now cross-laminated timber (CLT). It can trace its origins back to 2006, with key assets in the western part of Russia and in Europe and exporting to over 100 countries worldwide. It is owned by one of the largest companies in Russia – Sistema PJSFC.
Segezha effectively performs a full cycle of operations from logging to advanced wood processing.
Despite the pandemic it has posted excellent full-year financial results for 2020 and has been expanding its plywood operations and launching its ClearPly product on international markets on a large scale.
BUSINESS EXPANSION DESPITE COVID-19
Segezha’s 2020 financial highlights show a 17.9% rise in revenue to RUB69bn (€750m) while OIBDA (operating income before depreciation and amortisation) grew by 24.5% to RUB17.5bn (€190m).
Mikhail Shamolin, president and chairman of Segezha’s management board, described the performance as another “successful” year despite global economic slowdown, particularly in the construction industry.
“Despite the external challenges, Segezha Group grew revenue across all business segments in 2020, thanks to increased sales and production volumes, as well as higher prices for some products,” said Mr Shamolin.
“Significant OIBDA growth was driven by higher sales of sawn timber and by an increase in prices for both sawn timber and plywood. Our financial results were further supported by exchange rate movements, as the euro advanced by an average of 14% and the US dollar by an average of 11% against the rouble over the period.”
Capital expenditure projects in 2020 totalled RUB15.3bn, with an investment strategy focusing on high-value-added products. “Despite the difficulties posed by the Covid-19 pandemic, the Group’s efficient response ensured that the Group’s subsidiaries adapted to minimise the impact on operations throughout 2020, while observing enhanced health and safety measures to prevent the spread of Covid-19,” said Mr Shamolin.
“Despite weaker demand in key markets, the company was able to increase production volumes across almost all product types, and even increase prices in some markets. Our flexible approach to market selection and our diversified business model, both in terms of products and sales regions, played a key role in the company’s success.”
PLYWOOD PRODUCTION GROWTH
Segezha Group currently has two plywood manufacturing plants in Vyatsky and Vyatka, both in Kirov region. It is building a third plant in Galich, Kostroma with an aim to increase group-wide birch plywood production capacity further in 2021.
The company produces cross-grained and long-grained plywoods and is currently rated No 5 in Russia and the world’s No 7 for large sized birch plywood production.
Vyatsky plywood mill produces birch plywood (FSF and FOF) of various formats and thickness of 6 – 40mm, as well as dry process fibreboard with thickness of 3.2 – 7mm and fuel briquettes RUF. It is heavily weighted towards export to markets (80%) across more than 50 countries including in the CIS, Europe, Asia, US and Japan. Annual plywood production capacity is 192,000m3.
Last year the mill improved the quality of plywood produced with its €1m investment project to replace laminating press platens.
Its existing 4x8ft and 5x10ft board laminating line was put into operation in 2007 but had reached near the end of its life. An upgrade was required to prevent the potential diminishing of film adhesion to veneer sheet surfaces and to maintain the high quality of product specifications.
After the project completion, Alexey Stepanov, executive director of Vyatksy plywood mill said the upgrade would result in products with a better appearance and increased laminated layer density.
“This will allow the company not only to retain its clients but possibly to expand its client base,” he said. “Keeping product specifications at a sustainably high level is particularly important, when operating on the key markets in Europe and the US.”
Vyatsky plywood mill won the award of the inter-regional competition “Exporter of 2019”.
The Vyatka plywood mill, also in Kirov, has a 180,000m3 capacity of large-format plywood, and an estimated fibreboard capacity of 85,000m3.
It also boosted production efficiency and quality in 2020 by implementing methods of lean production and efficiency improvement.
Working groups were established to identify production-related problems and ways to tackle them.
The working group in the longitudinal ply shop was tasked with counteracting a critical defect in high grade veneer, known as “pinhole” in the surface layer of finished products.
The root cause of the defect was analysed and the damage found to be caused by harvesting equipment and rollers of bark peeling machines, as well as by conveyors while being cross-cut and peeled.
Improvements involved adjustment of the program, which controls operations of a log storage conveyor, closure of chain conveyor dents and extension of cross-cutting of the front edge.
In January, before the working group was set up, the pinhole defect reached its peak value of 14.66%. In April-May, the percentage of such defective products dropped down to 0.95%. As a result, the output of high-grade plywood at the mill increased by 9% on average, and the amount of veneer used for patching purposes upon grading and separation of A-grade products dropped by 9%. The so called “percentage of grade compliance” on the patching line increased by 10%.
The fibreboard operation was launched in 2003 and has a plant equipped with German BISON machinery.
THIRD PLYWOOD MILL AT GALICH
A year ago, Segezha Group obtained a license for construction of a plywood mill in Galich, Kostrama region.
The launch of production is scheduled for late 2021, with Raute supplying all machinery and equipment in a €58m order. Raute has previously, in 2006 and 2017, delivered two production processes for the manufacture of birch plywood to the Vyatsky mill.
This order is the biggest single order ever in Raute’s history.
The total investment exceeds RUB10bn (€108m) and the mill design capacity is 125,000m3 of plywood per year. It is planned to release the plywood in a wide range of formats, thicknesses, colours and textures on the basis of 100% birch veneer.
“It will be a hi-tech latest generation production site with modern equipment, automation and excellent output quality,” said Alexander Kreschenko, director-general of the Galich plywood mill.
“The Galich mill will release superior quality plywood which is in high demand in the international market.”
A total area of 31.2 hectares is allotted for construction. Apart from the finished goods warehouses and the office building, the production area will extend to about 48,000m2.
CLEARPLY PROMOTED ON INTERNATIONAL MARKETS
Late 2020 saw Segezha Group launch its domestic plywood product Segezha ClearPly across a wide range of international markets.
The product’s quality and usability have already found a following in North America, Australia, and New Zealand.
ClearPly, originally launched in 2019 by the Vyatsky plywood mill, is offered in two coating options: transparent and semitransparent. The second option features a hint of opal white guaranteed to brighten any interior.
“ClearPly sales jumped in Q2 of last year,” said Larisa Shatrova, head of plywood and boards at Segezha Group.
“Towards the back end of 2020, demand for the product had already built up in the US, Canada, New Zealand, and Australia.”
Segezha ClearPly promoted benefits include durability, with it being used to make furniture or wall plates without additional treatment. Outdoor decoration applications include street cafés, recreational areas and children’s playgrounds.
NEW CLT PRODUCTION
Cross-laminated timber has been growing in recent years and although it does not use composite wood material but solid softwood instead, in some ways it is a natural progression for a lumber and plywood manufacturer like Segezha, tapping value-added and growing market sectors.
In March, a Russian customer received Segezha’s first shipment of CLT panels from the new Sokol CLT plant – Russia’s first CLT production facility. The 3000x9000m (60m3) CLT panels will be used as load-bearing components in the construction of a 250m2 single-family custom home.
The factory is located at Sokol Timber Company JSC, Russia’s leading producer of laminated wooden materials.
Segezha Group has invested over RUB3bn (€32m) in the new manufacturing line, which has a production capacity of 50,000m3 of finished product per year.
The production line is equipped with machine tools from leading European manufacturers including Ledinek, Imeas and SCM Group.
The highly automated line produces panels with a thickness of 8-40cm, widths up to 3.6m, a length up to 16m and weight of around 500kg/m3. It has created 50 new jobs.
“We are currently completing the European certification process in Austria, and have already signed contracts with both European and Russian customers,” said Dmitriy Rudenko, Segezha Group VP and head of house-building division.
“Demand is strong, as is interest in this advanced technology,” he added.
He notes that the company plans to actively work to expand the Russian domestic market, although a large share of Sokol CLT’s products has already been reserved by foreign partners.
Our summary from Segezha’s recent developments is the Group’s continual investment plan and focus on value-added products looks set to continue as it builds its reputation as a large integrated forest products based business.
