UPM-Kymmene plans to be an active player in the consolidation of a paper and packaging industry struggling to slash costs and close excess capacity, its chief executive told Reuters.
“Definitely this industry needs to consolidate. Our role will be of an active player,” Jussi Pesonen, chief executive of the world’s third largest firm in the sector by capacity, said at the Paper and Packaging Summit.
“There will be swaps or share deals. We most probably won’t see any cash deals in this industry for the next year or two,” Pesonen said at the summit, held at the Reuters News bureau in Helsinki. “We will participate only in those kinds of opportunities that create value for our shareholders and the company.”
The paper industry has tried for the best part of a decade to emerge from a slump, hit by overcapacity and soft demand, which have kept earnings poor and held prices down – driving efforts at consolidation. So far, however, only a handful of larger deals have been completed.
“In the short term (the focus is on) restructuring, cost savings and balancing demand-supply,” Pesonen said. “This is a cost game. The lowest cost producer will always be better positioned.”
Bio Opportunities
Pesonen said UPM was well positioned to tap growing demand for bio fuels, which will play a greater role in the company’s business in the years to come, because of its large position in the energy sector and its pulp-making technology.
“Biomass, biofuels are definitely areas where there will be opportunities,” he said. “A big pulp mill is already a big biomass based refinery.”
Up to now, biofuels have largely been based on food crops such as maize. But second-generation research aims to produce them from bio-waste, including farmwaste such as straw andwaste wood.
“Definitely in the futurewe will be one of the leading companies in the newforest industry, and that includes biofuels,” Pesonen said.
Source: Reuters
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