Nature’s Flame and Red Stag Timber [Timber Manufacturing Sector]
Wood for the world made palatable
by Kristina Koveshnikova [NBR]
When dozens of timber manufacturers were being forced out of business during the financial downturn, some were flourishing, massively expanding their operations.
The plummeting demand for timber, mainly due to a drop-off in building and housing activity, separated those who had exclusive innovative products, which opened doors to large export markets, from those who didn’t.
According to surveys conducted by business strategy and consulting firm New River, the timber manufacturing sector is truly one of extremes. While 52% of respondents rated business either very difficult or difficult due to the building and economic downturn, 18% said their business was very buoyant.
Solid Energy New Zealand’s Nature’s Flame, along with Red Stag Timber, have been named as top companies in the timber manufacturing sector in the National Business Review’s monthly Exciting Companies series. Both received a rating of 65.8 in surveys conducted by New River. Solid Energy was the first New Zealand company to enter a promising global niche market for wood pellets in 2003, setting up Nature’s Flame, which to date remains the country’s only exporter of the product.
Current world demand for wood pellets exceeds 11 million tonnes a year and this figure is expected to skyrocket, with Japan and Europe looking to replace some coal usage with the more environmentally friendly alternative. Europe burns more than 50 million tonnes of coal a year and Japan 100 million — and about 4% of that could be replaced with wood pellets.
“There is a lot of demand in the market. We are quite excited about the potential,” said Solid Energy New Zealand general manager, renewable energy, Andy Matheson who also heads Nature’s Flame. The company, which has factories in Rotorua and Rolleston, near Christchurch, opened a new facility in Taupo in March 2010 to support its vastly expanding business. The Taupo plant alone produces 40,000 tonnes of pellets a year.
“Twelve months from now it will be running at a rate of 90,000 tonnes per year and 180,000 tonnes in two years,” Mr Matheson said.
Nature’s Flame plans to expand the plant’s production up to 300,000 tonnes a year over the next three to four years.
While the company, which employs 30 people, is still a small player, it says it has advantages over the industry’s main suppliers - the US and Canada. Mr Matheson said very good quality wood and a low carbon foot print separated their product from the rest.
To meet European specifications, its wood pellets are made from renewable pine sourced from the country’s extensive plantation forestry sector and the timber processing industry.
The ash from the company’s wood pellets is certified by BioGro as organic, so it can be used as a garden fertilizer.
Red Stag Timber, which shares the top spot with Nature’s Flame, is an independent, privately owned company based in Rotorua. It expanded its annual turnover to more than $120 million in the past seven years. A father and son team - Marty and Phillip Verry - bought the company, the Waipa Mill, in 2003. It was established by the government in 1939 and privatized in 1996. In 2003 the mill, which was producing 180,000 cubic metres each year, was facing the prospect of closure after two years of the Central North Island Forestry Partnership’s receivership.
The duo, neither of whom had a forestry background, has almost doubled the company’s annual production since buying it to 350,000cu m, with ambitious plans to produce 420,000cu m a year by 2012. This will make Waipa the largest wood manufacturing site in Australasia, a position it had 65 years ago after WWII.
“Early on we set the vision for Red Stag Timber; having faced the prospect of closure ... that vision was simply to unleash Waipa Mill’s potential as a standalone business and survive, against the odds,” said Marty Verry, who used to work as a project management; his father was a chartered accountant.
In 2005 the Verry team mapped out a five-year pathway to turn the business around. It involved a “rigorous” analysis of investment steps, following years of under-investment by previous owners.
“Fortuitously at that time Carter Holt Harvey (CHH) bought Tenon’s structural mills and Red Stag was well positioned to capitalize on the opportunity to become the other nationwide supplier.
“We needed to invest $12 million in a new planer and kiln to reach the scale sought by our customers, who were eager to diversify supply risk away from CHH. To its credit, ANZ stepped up to support the company. This was a turning point.”
The business stays ahead by investing in the latest technology, which means fewer staff are needed. It also pays for courses for its employees and has a bonus scheme to encourage learning.
While Red Stag Timber’s main market continues to be New Zealand (60%), it also exports to Asia/Middle East (20%), Australia (15%) and Pacific Islands (5%).
Top 10 Timber Manufacturing companies
Rank / Company / Excitement index
1 Nature’s Flame 65.8
1= Red Stag Timber 65.8
2 Structural Timber Innovation Company 65.7
3 Timbershade Blinds 64.0
4= Mastercraft Kitchens 58.4
4= NZWood 58.4
5= Goodwood Industries 58.0
5= Greenmount Manufacturing 58.0
5= Woodform Design 58.0
6 Croft Pole & Timber 57.4
7 Rosvall Sawmill 57.0
8 Jenkin Timber 55.0
9 Lumberworx 52.6
10= Timspec 52.4
10=Tuakau Timber Treatment 52.4
SECTOR STATS
$3.5 billion - Exports of solid wood timber products from NZ in 2009
3rd - Solid wood timber products make up the third largest export product in NZ
Greater than 10% of New Zealand's exports by value are based on Forestry [logs, processed wood, pulp etc.]
1% - Fall in wood manufacturing sales in 2010 June quarter compared to June 2006