Wood Business

Industry News Markets
CEOs foresee a bumpy year ahead

Forest, paper and packaging CEOs are less confident about revenue growth over the next 12 months than their peers in other sectors, according to PwC's 16th Annual Global CEO Survey.


March 11, 2013
By CNW

But they are more optimistic about their company’s revenue prospects in the next three years, says the report.

“The CEOs of forest, paper and packaging companies are a resilient bunch. Recently they’ve faced challenges such as shifting demand and markets, a bumpy economy, overcapacity, environmental issues and rising costs,” said Bruce McIntyre, Leader of PwC’s Forest, Paper and Packing practice in Canada. “CEOs have identified their top three priorities: enhancing operational effectiveness; investing in innovation and R&D; and developing new business models.”

Improving operational effectiveness and investing in R&D
McIntyre says, “Forest, paper and packaging (FPP) CEOs are intensely focused on trimming any fat from operations.” The survey found 92% of sector CEOs have implemented a cost-reduction initiative in the past 12 months, and 89% are planning to in the coming 12 months. This result is higher than the overall average of 70% of CEOs across all sectors in the PwC survey. Some of the cost reduction reported was through staff cuts, which are expected to continue, with 18% of FPP CEOs reporting plans to cut their workforce by more than 8% this year.

R&D and innovation is a top priority for 42% of FPP CEOs in the next 12 months—a full 10% higher than the overall average across the entire CEO Survey. Almost three-quarters of the FPP CEOs said they will make changes to increase capacity for innovation and R&D.

Advertisment

Targeting pockets of opportunity
Half of the FPP CEOs surveyed have entered into a new strategic alliance or joint venture in the past year, 34% completed a cross-border M&A and 32% completed a domestic M&A. “The high degree of transactions and partnerships reflects the broadening uses being found for fibre such as bioproducts, biofuels, and textiles.”

CEOs reported plans to conduct even more deals in the coming 12 months, with 58% contemplating a strategic alliance or joint venture, 47% a cross-border M&A, and 34% a domestic M&A.

Other key findings from the FPP CEO Survey include:

• Every FPP CEO surveyed said that customer service was a key differentiator, the only sector in the full survey where 100% reported that customers influence their strategy.
• Seventy-five per cent of FPP CEOs worry that energy and raw material costs could pose a threat to growth, far more than the average across the overall survey sample.
• Ninety-five per cent reported that supply chain partners are influencing their strategy, and the large majority of CEOs are increasing efforts to engage with them.
• Nearly three quarters (71%) of FPP CEOs plan to increase their company’s focus on reducing their environmental footprint, while 18% will continue at their current levels.

McIntyre concludes: “While trends for the FPP sector are very similar in Canada to those found worldwide, there are some notable differences. We don’t think staff reductions will be as severe in Canada; in fact we’re hearing concern from some Canadian forest products companies about the looming shortfall of qualified labour. If the US housing market rebounds and demand from China continues to grow we could have a labour shortage in Canada.”

Click here to download the full report.